The Most Volatile Time on Wall Street
If you’re tracking the stock market like I am, which is something that I do every day, all the time — I’m always looking at the market, I’m always looking at our stocks, I’m always looking at news, I’m always looking at rumors, I’m looking at anything that can affect the stock market and our stocks — if you looked at what was going on, you would’ve seen that the market makers and market insiders, who have been doing bumper business selling what I call “brand-name stocks,” like Facebook and Amazon and Google and Apple, to investors at ever-higher prices finally ramped it up high enough where they ran out of buyers, and now our sellers came in.
Market insiders and market makers were able to jam the prices down, and now the same people who were clamoring and wanted to buy all those stocks at very, very high prices now looked to get out at whatever price they could. Market makers and market insiders pushed the prices down, gave them terrible prices, and those sellers would’ve gotten terrible prices having been in the stocks just for very little time.
This is the type of price and market action that you see often in very popular stocks, in stocks that are widely written about, and because of that, they tend to go through these types of wild swings from day to day. These aren’t the stocks that we own in our portfolio; however, the overall action in the stock market does affect our portfolio, and to the extent that the market makers also use the big indices, the Nasdaq market index, to kind of affect sentiment, and to shift sentiment that affects our portfolio.
I expect our stocks to come back, to go up and then to make new highs. However, none of this will happen in a straight line, and nothing will happen in a single day or a single minute. So, our gains will always be filled with both ups and downs, and this is one of the reasons why I tell you all the time that you should try and own as many of the Profits Unlimited stocks as you can. That way, no single stock can really hurt you.
It’s always possible for me to make a mistake, an error, a misjudgment on a single stock, so this is why I often repeat in these podcasts that the single most destructive thing you can do with your money with ideas from Profits Unlimited is to take a single, all-in, “bet the farm” bet on a single stock. Now a single mistake on my part can cause you to lose a lot of money. The goal of Profits Unlimited is to make you money.
The goal of Profits Unlimited is to try and get you rich. The goal of Profits Unlimited is to help you use the stock market to make money. So, please, try and own as many of the Profits Unlimited stocks as you can. And, please, stay away from making all-in, “bet the farm” bets on any single stock, however much you might feel that this is the stock that can deliver astronomic gains for you. You simply can’t know when things change, or if I’ve gotten something wrong.
In addition to that, being that we’ve gone through a day or two of significant volatility where the overall stock market has gone down by about 5% in a very short period of time, our stocks have gone down anywhere between 5% and 10% over the same time period. And I want to remind you of our safeguards, which is that, first of all, we have a small-loss strategy, which is that for every single stock we have a preassigned stop-loss point of between 8% and 12%, and if a stock goes down by that much from its recorded price, we are going to send you an email and tell you to sell.
Second, as I mentioned earlier, I am constantly monitoring the stock market looking at our stocks. I look at everything, from volatility indicators to investor expectations, growth expectations, and, frankly, every bit of news that can help me inform myself about the state of the market and the state of investor expectations and what I believe is going to happen with the stock market. If I believed that the stock market was about to crash, if I believed that we were about to have a significant crisis, we are going to reduce our exposure to the stock market, we are going to eliminate stocks, and we are going to have very tight stops around selling to make sure that we keep our gains and we minimize our losses.
We can’t make money if we are constantly taking losses, and we can’t make money if we are giving up our gains. However, we can’t simply be shaken by the games and manipulations that the market makers play, where they look to square their books. where they are looking to get stocks on the cheap from you that they can then later mark up and sell to make profits for themselves.
There isn’t a lot of stock-specific news going on because it is the summer, and because the earnings season has passed. Also, you need to know that from my experience on Wall Street, the summer tends to be the most volatile time on Wall Street because of the fact that many people are on vacation, and that causes trading volume to go down. It’s the perfect environment in which market makers can use a tiny amount of money to push stocks around for their own benefit. So, please, don’t panic if you see stocks becoming volatile. We will let you know if there is anything that we want you to do by sending you an email.
I’ve been investing for more than 25 years. I started my career on Wall Street in 1991 as an assistant portfolio manager at Bankers Trust. I quickly advanced to prominent positions at Deutsche Bank and ING, managing multimillion-dollar accounts. In 2006, the owners of a $6 billion firm named Kinetics Asset Management recruited me to manage their hedge fund.