“You have to buy the right stock in the right way at the right time.”
— Larry Williams
In my “Financial Economics” class here at Chapman University, I asked students the following question:
Which of the following markets offers the average investor the best way to make money fast?
- Penny mining stocks
- Stock options
- Non-dividend-paying growth stocks
- Commodity futures
- Emerging markets
- Playing the lottery
The answer is “B,” stock options. Since they began trading on the Chicago Board Options Exchange in 1973, stock options have been the most popular way to make money fast.
In my monthly investment newsletter, Forecasts & Strategies, I take a long-term approach to investing. As Jesse Livermore said, “To make money you need time, not timing.”
But in my short-term trading services, timing is everything.
Even though this electric car company is heavily in debt and has lost money year after year, the stock came alive after beating Street forecasts in its most recent quarter. It also appears to be turning the corner financially.
It was a smart move. In 10 days, the stock skyrocketed after Ron Baron, CEO of the Baron Partners Fund, which has a major position in Tesla, said that Tesla could achieve $1 trillion in revenue in 10 years, not counting any revenues from Tesla’s battery business and other activities.
In addition, Catherine Wood, CEO of the Ark Innovation Fund, predicted that Tesla stock could cost $7,000 a share by 2024.
As short sellers had a huge position in Tesla, they no doubt had to cover their positions over the past couple of days.
All these factors pushed the stock price sharply higher. We gradually sold our position as the stock climbed and got out completely when speculators took profits yesterday.
In the end, we made more than 50% in the stock and an average of 181% in the call options I had recommended — all in only 10 days. The last quarter of the options were sold for a 365% gain! It was quite a ride.
A few investors did even better. Apparently, a number of option traders bought the $1,000 out of the money call options due in 2021 for two cents each. Then, at one point, they were selling for $1.98. This is nearly a 10,000% return. A $10,000 investment in those call options was able to turn itself into nearly a $1 million profit! It was like winning the lottery.
Is Wall Street Another Vegas?
I asked my Chapman students another question: “Is Wall Street another Las Vegas, a gambling casino?” Then, I pointed out many differences between the stock market and a casino. For one thing, the longer you play the slot machines or blackjack, the more likely you will lose. But in the stock market, the longer you invest, the more likely you will win.
Still, the stock market can be played like a Vegas-style gamble. In fact, Wall Street gives you much better odds than playing the lottery or taking your chances in Vegas.
The Tesla story reminds me of a couple of great quotes from my classic book, “The Maxims of Wall Street.”
“The difference between a rich investor and a poor investor is the quality — and timeliness — of his information.”
— Bernard Baruch
“Success rides on the hour of decision. If you can’t be the first, be the second.”
— Jesse Livermore (I didn’t recommend Tesla at the bottom, but we got in early enough to make big profits.)
“Never mind telling me what stocks to buy; tell me when to buy them.” — Humphrey Neill
New 7th Edition of ‘Maxims’ Now on Sale
Good news! I’m happy to announce that the new 7th edition of “The Maxims of Wall Street” is now available at a discount. In honor of the 40th anniversary of my newsletter, Forecasts & Strategies, I have issued a special new edition that is numbered and autographed. It includes dozens of new quotes that will make you a better investor — I guarantee it.
Dennis Gartman said it best, “It is amazing the depth of wisdom one can find in just one or two lines from your book. I refer to it every day.”
If you want a copy inscribed with your favorite number, order a copy today at www.skousenbooks.com, or call Harold at Ensign Publishing, 1-866-254-2057.
The price is only $20, and I pay the postage (to mail outside the United States, call Harold for additional mailing charges).
All additional copies are $10 each — they make a great gift to friends, clients and brokers. If you buy an entire box of 32 copies, the price is only $300 postpaid.
“Maxims of Wall Street” has been endorsed by Warren Buffett, Charles Schwab, Kevin O’Leary, Jack Bogle, Alex Green and many others.
Meanwhile, I look forward to seeing many of you at the Orlando MoneyShow this weekend at the Omni Orlando Resort at ChampionsGate.
On Feb. 7, I will talk at 5:30 p.m. about The Best Offense Is a Good Defense: How to Beat the Market with My Five Favorite ‘War’ Stocks! Other investment experts who will be speaking include Bob Carlson, Hilary Kramer and Bryan Perry. Register by clicking here or call 1-800-970-4355 and mention my priority code of 049278.
Plus, I will be speaking at a special session on Saturday morning, Feb. 8, 9-10 a.m., in the ChampionsGate room for my subscribers who come to the Orlando MoneyShow. The title of my presentation is “The Growing China Threat: What the Military and Economic Build Up Means to Investors.”
Good investing, AEIOU,
You Blew It!
The Breach of Etiquette on Capitol Hill
At the president’s State of the Union address on Tuesday night, I witnessed something I’d never seen before in politics: the leaders of the two major political parties disrespecting each other.
It is a long-standing tradition for the president to present a copy of the State of the Union Address to both the vice president and the Speaker of the House and then to shake hands.
But this year, for the first time, President Donald Trump refused to accept the hand of Speaker Nancy Pelosi, who had initiated the impeachment proceedings against him. Apparently miffed, Speaker Pelosi tore up President Trump’s speech in front of millions of viewers at the end of his address. She even refused to stand to honor Rush Limbaugh, the conservative talk show host who has been diagnosed with advanced lung cancer. During the address, President Trump presented him with the Medal of Freedom.
There’s a lot of bad blood between two leaders after the Democrats impeached the president to try to force him out of office on some pretty weak grounds. Maybe he should have been censured, but impeachment? Give me a break.
If you want to impeach and convict a president, it should be George W. Bush for getting us into Iraq under false pretenses. This venture has cost us much blood and treasure and we’re still paying the price.
Fortunately, President Trump was acquitted last night in the Senate. The whole affair was pretty much partisan even though the Founding Fathers made it clear that impeachment was supposed to be a non-partisan decision.
I find it ironic that the presidents who often engage in immoral and undiplomatic behavior turn out to be great presidents for growing the economy (Bill Clinton and Donald Trump come to mind) but those who are morally sanctimonious turn out to be lousy presidents (Jimmy Carter, George H. W. Bush and Barack Obama). And presidents who have experienced war firsthand (Dwight D. Eisenhower) do a better job of keeping us out of war than those who avoided the draft (George W. Bush, for example).
Sic gloria transit mundi. (“Thus passes the glory of the world.”)
Speaking of etiquette, I’m happy to announce that Candace Smith and her husband, the Nobel Prize-winning economist Vernon Smith, will be speaking at this year’s FreedomFest 2020 on the vital subject, “Consensual Rules, Etiquette and The Free Society.”
Vernon Smith will also speak on Adam Smith and experiment economics, the topic that won him the Nobel Prize. This is their first appearance at FreedomFest.
For more information, go to www.freedomfest.com.