I receive reader email:
I am 70% short and 50% long.
What should I do?
I am realizing this short has been making my life miserable since March. I need to watch it every day specially because i have Nvidia, Meta and Microsoft as shorts too.
Harry talking: As 2023 opened we all thought it would be a down year. I sold falling shares and bought treasuries. My reader, however, went short.
Then in 2023 this happened. Stocks went up:
And this, showing the last two years:
Investing has its ups and downs. We have to figure how each of us deal with them.
What’s your pain threshold? I just drew this PowerPoint. On the left, if the price of your stock falls, it’s sheer agony for you. Probably best for you to be 100% in treasuries. I have friends who didn’t look at the falling market last year or the rising market this year. That was the Ostrich Strategy.
I have friends all along the spectrum. If you think the market is cratering but your pain threshold is low, then instead of selling stocks short, you should buy Puts. I have friends who don’t predict the market. They keep investing every month. They call it Dollar Cost Averaging. They see a down market not as a way to make money, but a way to buy stocks “on sale.” They believe that in the long run the market rises. It always had.
My psyche is more to the left. I hate for my portfolio to lose and put me into the poor house. When the market fell last year, I sold some shares and bought some treasuries. I didn’t buy puts or sell stocks short. Too hard for me to manage. But my “strategy” did insulate me from the agony of getting poorer every day.
There’s a certain joy in clipping coupons, i.e. seeing dividends from treasuries and funds like JEPI roll in.
In 2023 I’ve made my most money with owning Nvidia. It would have made more money except I sold NVDA at the wrong time (remember that blog?), but fortunately bought all of it back in the following day.
There are rules. The most common is when the stock falls by x% you sell it. The most common “x” is 15%, which I’ve followed. But I have sold quicker — if I saw a bad earnings report or some other quirky reason.
The best talking head (i.e. someone who appears on CNBC, etc) is Josh Brown.
Two days ago he posted a piece: “Today’s market pivots from a funeral to a party as fast as a VFW hall.”
He started with a quote from Barrons writer, Michael Santoli. After the quote, Josh wrote:
What I want you to take away from this exercise (in predicting the market) is the fact that it always goes this way. You can find an old Santoli column (at Barrons) to match virtually any market environment we might experience. His work at Barron’s ended eleven years ago but his impeccable chronicling of the weekly action during his time there still remains relevant for students of stock market history.
And when you go back and read it, you can only come to the following realizations (if you’re being honest with yourself):
1. Stocks and the economy can diverge directionally for a long time.
2. Even if I gave you tomorrow’s headlines today, you still would not be able to guess what the impact of all that news would have on prices, sentiment, valuations or the responses of fiscal and monetary policy makers.
3. Markets can pivot from euphoria to terror back to euphoria again before you can change your clothes.
4. Even if you know what’s going to happen next, can you really feel confident that you know what will then happen next next?
5. The thing that everyone’s talking about is not always the thing that ends up mattering.
6. Oftentimes, the most surprising outcome is the one that happens.
7. If you haven’t arrived here yet, you will or you will not survive – having a framework in place, or a series of rules governing how you will and won’t behave – is not foolproof by any means and it could mean vast periods of pain, envy or regret. But it’s better than nothing.
8. Lastly – and please understand that I have met many of the greatest investors of our time in real life – you need some luck. Deep down, all “legendary” investors admit this to themselves. Some of them say it out loud. Right place, right time. Randomly met someone with a great idea. Accidentally stumbled upon the trade of a lifetime.
Today’s market will pivot and so too will tomorrow’s. There is nothing you can do about it other than to be prepared, financially and mentally. Volatility is timeless and wild swings in sentiment are the rule, not the exception. Don’t spend another moment of your time deluded into believing otherwise.
And if you remain unconvinced, go back and do the reading.
For the entire Josh Brown piece, which explains each of his eight points, click here. Do it. Brown is good. Really good.
This wonderful book will teach you a lot about medicine
This is the remarkable, engrossing story of of a young man’s fight with a rare, but potentially, lethal disease. What you will learn about modern medicine could one day save your own life — like when to change doctors and how to search for drugs that will save your life. I read the book in one sitting, finishing at 5:00 AM this morning. It’s seriously good stuff.
It’s Father’s Day (or was yesterday)
Tips for seniors making love:
+ Wear your glasses to make sure your partner is actually in the bed .
+ Make sure you put 911 on your speed dial before you begin.
+ Use extra polygrip so your teeth don’t end up under the bed.
+ Make all the noise you want… The neighbors are deaf, too.
Useful tips
+ A little bit of an upgrade can go a long way on some flights. Here’s when it’s worth it to shell out a bit extra to go from economy to Premium Economy.” From AFAR, click here.
+ Close your spam email. Your computer is not smart enough to figure what’s important and what’s not. And then you miss important stuff.
+ I can’t unsubscribe from any many sites, especially political ones. I now change my email to harry@harrynewtom.com.
+ JetBlue is having a sale on tickets to Europe. I just bought some to Amsterdam,
The future
Stupid is when you call Fidelity this morning to complain my favorite Active Trader Pro isn’t working.
Only to find it’s Juneteenth. And the stockmarket is closed today. Idiot.
See you tomorrow — Harry Newton
