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What I learned — if anything — from my recent huge tech stock losses

We’re all geniuses when the market goes up.

For months I flaunted my genius as Amazon marched up to $2,050 and as Square hit $100, etc.

If I were a real genius I would have sold Amazon at $2,050 and Square at $100, grabbed the cash and taken Susan on the vacation she deserves (for putting up with me for 42 years).

I didn’t sell them until they had fallen and fallen. Heck, I’m still in love with Amazon.

This year in Amazon:

Here are key things I learned:

+ It’s all emotion. And emotion is contagious.

+ You don’t know when the emotion is going to stop.

+ But stop it will. And fast.

+ Then it will go down. And become gruesome fast.

+ You’ll never know why it went up or why it suddenly came down.

My favorite financial guru Todd Kingsley sums it up this way:

When good news is good news and bad news is good news, that’s when you have to start worrying that the market is frothy.

An example: The Fed raises rates. That can be good news. The economy is strong. It can easily handle the higher rates., which are still low.

That can be bad news. The Fed raises rates. It’s going to kill the economy.

I have no idea what soured the world on FANG. Other than Mark Zuckerberg acting a dick.

I thought Amazon was going to $2,500. There are some learned analysts that have issued reports saying it will. And it may. I probably won’t be alive when it does.

There are some old rules:

+ Diversification. I have oodles of real estate syndications, all paying higher dividends that I will earn in 2017 on tech stocks. Friends have contemporary art, planes they rent out, consulting they do, speeches they give, etc.

+ Take some profits. Better to sell too soon, than too late. No one went broke taking a profit. I hate that meaningless expression.

+ Obey your rules. An inviolate 15% Stop Loss Rule should be inviolate. I’ve used it in recent weeks. It’s worked.

+ Don’t believe anyone. They always have an agenda. The hedgies on CNBC say buy, sell, go to cash, it’s all over, etc. Just because they’re richer than you and me doesn’t mean they can predict the future any more accurately. Remarkably, hedge funds have done awful in the last few years.

+ Keep your stock portfolio small — so you can follow the companies, reading their reports, listening to their conference calls, eyeing what they’re doing. You can dump them when their game plan changes.

Todd and I leave you with happy thoughts to ponder for Thanksgiving Day 2018:

Walk out on your street. Go into town. Go to the restaurants. Go to some of the nice stores.

Things haven’t changed.

Stocks have become cheaper. That’s good.

Let’s cross our fingers. Maybe Trump and Xi will fix some of their differences?

Maybe the Fed’s Powell will ease back on interest rate hikes?

I nibbled at Amazon, Apple and LADR (Ladder Capital) today.

All three closed lower than what I paid.

Good job, Harry.

Time to buy apartment buildings

They’ve dropped 10% to 15% in New York City and, I’m sure, elsewhere. Cheap is good.

Alexa is wonderful

You can ask her to make bird, rain forest, dog, and cat sounds She’ll play you music and tell you the time and weather.

But be careful what you ask her for.

She’ll order it for you. You’ll get your wish in two days, and a bill.

Remember Alexa works for Jeff Bezos who works for Amazon who wants to sell you everything and their uncle. But not your daughter. Facebook already did that. (I don’t make this up.)

They may have found my $100,000

But no one is sure. It’s weird.

My bank sent my $100,000 wire twice — once by accident and once as they were meant to.

They asked the receiving bank to please — pretty please — send Harry’s money back.

Meantime, my contact at my bank, the sending bank — one of the largest in the world — emailed me:

Dear Harry,
 
I’m looking into it. As you’re aware, there’s often a disconnect between what the front and back office say is happening.
There is only one lesson here: Normal banking — like paying bills and getting paid — is getting harder and harder. There’s new regulations, new compliance people, and the constant fear that zombies on the Internet will steal all the banks’ and their customers’ money.
My $100,000 wire was meant to go out on Thursday November 8. But my bank held it until the following Tuesday (the day after Veterans Day) because they thought my wiring instructions had been hacked….
When they finally figured out my instructions were correct and that I was livid — super mad — because I missed my Friday November 9 deadline, they got into a dither and sent two wires of $100,000.
It’s now 13 days later. I don’t have the second wire of $100,000 back. I’m told it’s coming.
You don’t want to know how many emails, phone calls. and prostrate beggings this has cost me.
Next time, I send a check.
Online Internet banking is a good idea and will probably work reliably in ten  years. But for now…. yuch!
Meantime, someone in the bowels of my bank owes me a significant apology. Like a $250 dinner gift certificate.
I’m not holding my breath.
I haven’t mentioned the name of my bank deliberately. I’d hate to get them all fired.

HarryNewton
Harry Newton, who lost at tennis this morning, but will do better tomorrow morning.

Tomorrow, I will give thanks for a healthy, happy family.

Since $100,000 seems to be easy come, easy go, maybe it’s time for another family vacation? How about the Galápagos Islands?

Dear Reader, what did you learn from the tech rout of the last few weeks? Send me an email or add your Comment to the bottom of the web page. Maybe we’ll all get smarter. Maybe.

Older posts you may have missed

+ Blood is flowing. Is now the right time to jump back in? Nov 20. Click here.

+ I lied. Not every asset is crashing. Nov 19. Click here. 

+ Another day poorer. But not deeper in debt. Nov 15. Click here.

+Asset prices in free-fall: Stocks. Housing. Commodities. Nov 13, Click here.

+ Too much money. Too many opportunities. Hence today’s stomach-churning investment scene. Nov 8. Click here.

I’m not posting every day. Some days I have nothing to say. Above are my most recent columns.

  • Angry_Dfns_Eng

    Harry, I’ve liked your idea that you have written occasionally about on reducing paper by using Scansnap. Why is it so expensive though? Does it scan super fast? On amazon it is over $400. This is more than a printer scanner. Is it worth it somehow?

  • gerryb

    I found this post from a seasoned investor interesting:
    “I did a lot of reading yest morn before the folks got up and the other folks came over. I don’t like much of what I read as I’m not short…but actually long for a bounce.

    I mentioned oil already. But don’t you find it interesting airlines and cruise lines are no where near their highs with oil getting crushed?

    Don’t you find it interesting that with mortgage rates only at 5pct, housing is falling off the face of the earth both for new and existing houses? article in bloomberg today discusses it.

    Don’t you find it interesting that retail stocks are not acting better with a) lower oil and b)strong employment?

    Don’t you find it interesting that with rates rising and the int rate spread positive that banks have been in a year long downtrend and can’t get out of their own way?

    I can go on and on with these ‘puzzles’…but I’ll just say, forget sentiment, forget fundamentals, forget forecasts, forget what you ‘think you know’ about what next year or the year after looks like..

    Doesn’t this all strike you as obvious new bear market action? it does me, for I think we started it in Oct 2018 and by my reckonings, it will be a nasty one until Jerome goes thru 2.5pct rate decreases back to zero and THEN opens up his check book for another 10-20trillion fiat units…enough to buy all of that sh*tty debt that has been created in this cycle…corporate, govt, municipal.

    I for one am battening the hatches, the Fed,ECB et all just blew up the biggest bubble of them all..the ‘everything’ bubble this time..bonds, stocks, real estate, oil infrastructure.

    Now I have to start laying out shorts or puts in those things that will go down 90 pct..things like NFLX[and other momo favs with 10’s of billions in mkt cap that have, unlike NFLX, never seen a dime of earnings] . I think there’s gonna be few places to hide this time…will gold be one of them? hmmm, maybe..maybe not..for a while as liquidity gets sucked out of assets world wide.

    That’s my view, and I know most here disagree..which is ok. But I survived 2000 and 2008, and profited a little, but this time I want to profit A LOT.

    Net net , I’m working under the assumption the bear has begun and the ONLY thing that will change my mind is price…getting back to and exceeding Oct 2018 highs.

    nothing else will convince me I’m wrong. trade on folks.”

    My takeaway is that now is a good time to be scaling into gold mining etf’s like gdx, gdxj, asa and keeping them for several years.

    •Reply•Share ›

  • gerryb

    “Maybe Trump and Xi will fix some of their differences?” I wouldn’t hold my breath. Here’s an article by Jim Cramer: Factor In Pence’s ‘Containment’ Talk on Any China Exposure
    It may be only a matter of time before the administration tries to shut down trade with China altogether to see if they can break China’s stock market and crack their financial system. This is a Cold War.
    By JIM CRAMER Nov 19, 2018 | 06:46 AM EST
    The market doesn’t know what to do. On the one hand, President Trump makes you feel confident that a trade deal can be done with the Chinese, maybe even as soon as the G-20 at the end of the month.

    On the other hand, Vice President Pence makes you feel that unless the PRC overthrows its current government and installs a capitalist democracy there is nothing to be gained by talking.

    It gets worse. President Trump intimates that there are lists and asks going on behind the scenes that make something magical a possibility. Vice President Pence is trying to contain the Chinese the same way we contained the Soviet Union. The big difference? Th Soviets were rich and powerful and totalitarian enough to be self-funding. Pence makes it clear that we are the ones that have been funding China’s ambitions with our trade — and now it is time to shut all trade down so they don’t have enough money to continue to challenge us technologically, militarily and, yes, imperialistically.

    And we are winning. How do investors know? Because Pence told us in his APEC speech: “China’s largest stock exchange fell by 25% in the first nine months of this year, in large part because of our administration has been standing strong against Beijing’s trade practices.” Yep, Trump has started a Communist Bear Market and now it is time to finish it.

    Now, what Pence leaves out is that he may have started the U.S. bear phase with his Hudson Institute speech calling for containment of the PRC because of its designs for world domination. This APEC speech was more about the need not to take the PRC’s loans as part of its Belt and Road initiative, a multi-trillion dollar lending gambit that is meant to be the world’s largest foreign aid program — but one that comes with strings attached. “As we speak, we’re all aware that some are offering infrastructure loans to governments across the Indo-Pacific and the wider world,” Pence told the APEC audience. “Yet the terms of those loans are often opaque at best. Projects they support are often unsustainable and of poor quality. And too often they come with strings attached and lead to staggering debt.”

    The U.S., on the other hand, offers economic help as well as the help of our nation’s companies, and together we offer a better deal. “We don’t drown our partners in a sea of debt. We don’t coerce or compromise your independence. We do not offer a constricting belt or a one-way road. When you partner with us, we partner with you and we all prosper.”

    And that’s who we are suppose to be a few deal points away from having an agreement with? The rest of the speech is a reiteration of what we heard October 4, that the Chinese violate human rights, including right to religious freedom, while we will fight for the freedom of religious choice and will back our promises with military might.

    If you toggle back to the October 4 speech, you know the real design is not to get better trade terms from the Communists but to topple the regime and get a friendlier one. Oh, sure, you could be naïve and think that what that speech implies is that if we get some concessions, some lowering of tariffs and the ending of sinister joint ventures where trade secrets are stolen as part of the deal to sell in China, we could have a deal.

    You could easily choose to say it is all rhetoric and it’s about getting a last minute deal to keep the tariffs at 10% and not 25%, a level that could solidify our own bear market, especially if the Fed keeps hiking. It’s all part of the Art of the Deal.

    But I have said repeatedly that this isn’t rhetoric, it’s containment — and it may be only a matter of time before the president tries to shut down trade altogether to see if he can break their stock market and crack their financial system. I think that option should be included in any calculus about trading with China.

    So, you can hope that the G-20 yields results. But I would say that Pence’s continuation of the hardline containment policy makes that event much more binary — and the odds increased dramatically this weekend that there will be no deal to be had, just a further extension of the cold war that began October 4 and seems to get hotter every day.

  • Lucky

    I suspect Christmas will be kind to Amazon…I have packages coming tomorrow, Saturday and Monday!
    Happy Thanksgiving Harry.

  • J. Browser

    The tech rout didn’t bother me. I’m playing with house money. My mother invested $10,000 with Warren Buffett in 1966 and it grew to about $235 million over the years. When she died four years ago I inherited the money. So tech routs don’t faze me. I learned from studying Buffett to be fearful when others are greedy and greedy when others were fearful. So I bought last week. And I bought Bitcoin today.