investing · Personal Finance

What Holding Long Can Do

The financial world is replete with articles attempting to preach the virtues of strategies such as value investing, contrarianism, options trading, and growth concentration. Each community maintains a certain level of ideological sway, despite the fact that outcomes are not always grand. In this post I want to consider the notion of holding long using the context of Apple stock, which reveals how sometimes the strategy is not just holding, but holding long enough.

Back in August of 2014, I shelled out the money for some shares of the technological behemoth. This was after its legendary stock split, and opinions diverged as to Apple’s ability to deliver continuously in the future. Over the next nine months, the stock climbed slowly to around $130 per share, and I recall the forecasts suggesting it was time to dump the stock and take profits. My commitment to holding long kept true however, and I did not sell.

A year later, Apple had actually receded to a price of around $90 per share, making my unrealized gain bright and red. Although irritated, I still did not submit the sell order. By the end of 2017, the stock was sitting at $175 per share, and seemed destined to continue rising, so I kept my piece. Apple shot up to over $200 per share the following year, only to get hosed in the December 2018 sell-off, and by January 2019 it hovered in the $157 range. In December of 2019, the stock went above its previous high and rested as neighbors of $270.  

From the tail of July 2020 to this day, Apple has jumped from $380 per share to a whopping $500, bringing my six-year return to over 400 percent. What’s more, the company just announced a stock split which stands to quadruple the number of shares I own. And if that’s not enough, I have been paid a dividend (reinvested of course) for the past half-decade.

Not all holding long stories are like this, and indeed many turn out differently, but it gives one an idea of how the process works. At any time during that long period, I might have decided to take profits, worrying of a later decline or collapse. My failure to be brash resulted in a fat return, albeit over time. This is a theme I will be discussing in a future book on investing. Investments rarely pay off quickly, and oftentimes the jewels take months or years to reveal their shine.

So fire up the brokerage account, be at peace with your choices, and forget about them. It seems to have good outcomes.

investing · Personal Finance

How The Stock Market Works

As some of you surely know, Elon Musk’s lovely contributions to humanity have taken yet another fanciful turn. After a few hard lemonades, he spat this out on the tweet deck:

I’m sure there’s more to the story than meets the eye, though it presents a fascinating look at how markets react in the current age. We have already seen how the Religious Investor approach chucks all principles and guidelines out the window in favor sheer fanboyism, but it’s getting worse. Literally nothing matters except the increasingly-fatter balloon of millennial viral popularity.

 Tesla fans will quickly castigate any skeptics on stock price by appealing to the “technology of the future,” but a mere microemail from their leader is now enough to cut about $15 billion from the market cap. Is the company now fairly valued, still too big, or dirt cheap? No guess exists worth taking.

In fairness to Teslaites, the rest of the stock market is not acting much different, so they can hardly be brought up on charges of cucking against humanity. We just have to sit and wait, or maybe buy bitcoin and hope it goes to $150,000. I mean, come on.

All that’s left to say is this: quality weed matters, Elon.  

investing · Personal Finance

We Can’t Take Rate Cuts Back

Josh Brown said something on CNBC today that I’ve believed for a long time under the Trump Economy: it’s now impossible to walk-back rate cuts.

We all remember the debacle of December 2018, when the Federal Reserve raised rates by a quarter point, from 2.25 percent to 2.5 percent. The result was a devastating market drop of 20 percent.

After the last seven days of Coronavirus fear and loathing, the Fed made an emergency rate CUT to stave off concerns, and the Dow fell by almost 3 percent. I guess it wasn’t enough, but just imagine if they had attempted to RAISE rates.

Much as Religious Investor thinking may help quench queasy market appetites by feeding the “There’s no limit!” mentality of millennial dreamers, fueled by the likes of Tesla and Virgin Galactic, at a certain point the ties which bind may horribly snap.

In that moment, will rates be cut or raised? Will it even begin to matter?

investing · Personal Finance

The Religious Investor

Just how HIGH can it go?”

You’ve probably heard something along those lines in market-based articles. After all, greed and overconfidence are the virtues of constantly churning stock wheels.  It should never stop.

Over the last few years, we have witnessed a rather new phenomenon: the Religious Investor. In this case, it is a person who has no regard for reality or the underlying principles of value. Any outcome, regardless of nature, is an affirmation of their stock’s worth, and skepticism? We simply won’t have it!

The Religious Investor operates much like the Chant Warrior where psychological tropes are concerned. Anything Bad is Good, and anything Good is good. Low polling? That’s because the polls are wrong! Not getting positive attention? Only because of media bias! There is zero possibility of an alternative, because that contradicts the religious narrative.

You probably recognize by now that my target here is Tesla. To be clear, it applies to shareholders in other stocks as well, like Buttondown notes:

One January 29th, 2020, they released a fresh earnings report showcasing the following:

Q4 Non-GAAP EPS of $2.14 beats by $0.38

GAAP EPS of $0.58 misses by $0.26.

Revenue estimate was $7.05 billion, actual was $7.38 billion, beating by $330 million

In reaction, the stock rose from around $570 to $644, roughly 11 percent. This despite relatively poor results in the second half of the year, and a weak track record

Look at how Tesla bulls respond to skepticism:

Comparatively, Apple released the following results not long ago:

Q1 GAAP EPS of $4.99 beats by $0.45.

Revenue of $91.82B (+8.9% Y/Y) beats by $3.41 billion.

Apple’s uptick? About 2 percent. And even in that case, after a long run of success, calling for a sell gets you shredded by the true believers.

So should we all go to cash, or stop being haters and buy?