“What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower.”
— William O’Neil, Founder of Investor’s Business Daily
h/t Jeremy Richards / iStock
“If you want to outperform the crowd, you must do things differently from the crowd.”
— Sir John Templeton
Enjoy a standout Sunday!
Lyft IPO party in Los Angeles, h/t Alex Welsh for the New York Times
“The chief losses to investors come from the purchase of low-quality securities at times of favorable conditions.”
— Benjamin Graham
Friday’s launch of trading in the Lyft IPO (initial public offering) made plenty of news. What it didn’t make was money for those who bought at the open. All those who clambered to get in on the action closed under water.
IPOs can be used as an exit strategy for business owners and early investors.
The ride-hailing company reported losses of $682 million in 2016, $688 million in $2017, and $911 million in 2018. Lyft has cautioned that losses could mount as the company seeks international expansion.
IMO, zip your wallet.
Get where you want to go and enjoy your weekend!
The Palais Garnier, Paris h/t Rindoff / Dufour via Getty Images
“If you have to sit in the balcony, it’s time to head for the exits.”
The adage above is apt admonition for investors eagerly awaiting a slew of IPOs (initial public offerings), as well as those clamoring for Chinese junk bond yield.
Sometimes it’s better to enjoy the show from afar.
“Headlines, in a way, are what mislead you, because bad news is a headline, and gradual improvement is not.”
— Bill Gates
Investing is done over a long time horizon (years). Speculating concerns a short time (days, weeks, months). Our specialty is sensible speculation.
You may find that by the time a market move makes headlines, it’s too late. Look at the character of market price behavior, not what the headline writers make of it. What they say may turn out to be a contrary indicator.
And that can be useful, as well.
h/t Heather Myers, @cbs8
“The stock market depends about as much on stock market analysts as the weather does on weather forecasters.”
There is never certainty in the market, only likelihood. That is why we don’t tell the market what to do.
We listen to the clues market price provides us to its likely path.
Wishing you sunshine and seventies,
Miss Congeniality movie poster
“It is not a case of choosing those [faces] that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.”
— John Maynard Keynes, General Theory of Employment, Interest and Money, 1936
Keynes used an analogy of a fictional beauty contest in a newspaper (picking the six most attractive faces out of a hundred and those selecting the most popular would be eligible for a prize) to describe the actions of rational market participants.
He believed people were pricing shares not based on what they think the value is, but rather on what they think everyone else thinks their value is, or what everybody else would predict the average appraisal of value to be.
While Keynes is referring to professional investors in the early 1900s, a century later, with a wealth of information at nearly all our fingertips, his example is applicable to investors in general. It seems we’re no longer investing in the best companies, and we’re not even investing in the companies that we think everyone else favors — we’re investing in the companies that we think everyone else thinks are the companies that everyone else likes.
If the market is like a beauty contest, as Keynes’ words suggest, then it’s no wonder this market has people shaking their heads.
Find the beauty in life today.
Photo credit: letterberry/Thinkstock
“In investing money, the amount of interest you want should depend on whether you want to eat well or sleep well.”
— J. Kenfield Morley, Some Things I Believe
Return is commensurate with risk. If anyone tells you that you can make a large return with small risk, zip your wallet.
Remembering our great dog, Puka.
When asked why he continued speculating, James R. Keene, a famous speculator, replied, “Why does a dog chase his thousandth rabbit? All life is a speculation. The spirit of speculation is born with men.”
— Bernard Baruch, Baruch: My Own Story
Be sure to understand that speculation differs from investment. Also know the difference between speculation and gambling.
Investing is for longer time horizons and has a generally lower risk for lower expected reward. Gambling involves blind risk-taking.
Speculation is about taking calculated risks to protect against future price fluctuations and profit from price movement.
Now in our 30th year, Options Hotline specializes in the art and science of sensible speculation.
Have a superb Sunday and good luck in your trading.
This one is apropos to our current deregulatory environment.
Be sure to understand the difference between investing and speculating…and the difference between speculating and gambling.
At Options Hotline, we’re all about Superleverage and the art and science of sensible speculation.