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How to use and not use stop loss orders. The sorry decline in PayPal.

We have an inviolate stop loss rule:

When a stock goes down, you sell it. Immediately, if not sooner.

How far should it go down before you sell. There’s the rub.

There are two measures: It could go down from its peak. It could go down from where you bought it.

My typical figure is 15% from its peak.

You should sell it at that point. No questions asked.

The major problem with inviolate stop loss orders is love.

You fall in love with the stock and keep loving it — even though it’s going down and down.

Companies can be good companies but bad stocks. Companies can be fashionable (and go up). Companies can go out of fashion and drop.

Three pandemic stocks are classic in-and-out of fashion: Zoom and Peloton. Look at what happened to then in the last two years:

I’m long out of Zoom and Peloton.

Which brings me to the painful case of PayPal. Here’s a 10 year chart of PayPal.

Two aspects concern here: First, the very steep rise and the very steep decline. A rise as steep as that was a serious call for taking something off the table. Though sales and profits were rising, they were not rising at the rate of the stock’s rise, which was far faster.

Many of us are victims of falling in love with PayPal. Cramer’s been bemoaning the stock’s recent decline. He’s in love with PayPal. Me, too.

But why? Are sharp ascents always followed by sharp declines? As stockholders seeing daily gains, it’s not a theory we want to address. It’s hard. Selling today might miss tomorrow’s gains.

Was PayPal yet another pandemic stock that had to fall when the pandemic “ended?” Here’s it charted against two fintechs — MasterCard and Visa. They’re following the same up and down pattern. All three are now essentially where they started the year, 2021.

Cramer reported that his chartist thinks PayPal has reached bottom (or soon will). And then it will rise.

, PayPal will report it’s latest quarter’s earnings this evening after the market’s close. They should be good — if only because I’ve been using PayPal to do lots of online shopping recently.

If I didn’t own as many PayPal as I do, would I buy some today in anticipation of those earnings? Probably yes.

The stockmarket, like most everything, is heavy duty, maddening psychology.

New York City is bustling

Tourist shopping is returning to NYC

I was there for a couple of days last week. Here are my favorite retail stores to visit:

+ Uniqlo on Fifth Avenue is crowded with tourists who find Uniqlo’s clothes one-third the price in Europe. The variety will floor you. My personal favorites: the down vests, jackets and parkas.

+ Nike also on Fifth has mega-stuff — from shoes to clothes, and accessories (i.e. stuff).

+ B&H photo is probably the biggest photography store in the world. with more gadgetry than you can imagine. What I like about the place are the worker-bees who have amazing knowledge on what they sell and what you need. Take your dreams to them. They’ll give you sound, honest advice.

+ Saks Fifth Avenue and Nordstrom’s on 57th Street are two big department stores are worth visiting.

+ 47th Street between Fifth and Sixth is the Diamond District. Which includes anything you want in jewelry. I bought my wedding ring there.

+ The Apple store on Fifth Avenue is open 24/7. If you don’t have an Apple store in your hometown, it’s worth a visit. It’s fun to type on the Apple laptops. If you’re going to buy a new phone, do it in an Apple store. They can set most of it up for you. They do the phone and the cell service. They don’t do the apps. They’re your job.

+ The Museum of Modern Art store across from the Museum is worth visiting after you’ve done the Museum.

The lesson of this is twofold: Only visit stores with their own stuff, or their own special expertise. Second, only lease retail space to stores with their own stuff or their own special expertise.

Hence, I don’t invest in retail REITs or shopping malls. That business has been replaced by warehouses stuffed with onliners, like Amazon.

You’ll notice that my list does not include Best Buy, Bed Bath & Beyond, etc. The stuff they sell, I can find easier on Amazon.

Tasteless humor (as usual) 

Early in the morning

It’s 4:00 AM. I woke berating myself for not having sold PayPal earlier. It’s down 26% from its high in the third week of July. I won’t sell it today. I’m crossing my fingers for those earnings. Right now it’s still way overpriced with a P/E of 55.1, compared with 38.50 for Visa and 42.90 for MasterCard. In fact, you could easily argue that all three are overpriced.

Just out: Warren Buffett’s top holdings:

Here’s ten years of American Express. Looks a bit like PayPal.

I’m playing tennis in three hours. Must snatch a little sleep. — Harry Newton