The Long Term Investor

Zukodany and ALL

I DONT see anything new in this situation at all. Having been investing in the 1990's and early 2000's....the dot-com mania and the day trading mania.....what I am seeing now is EXACTLY the same thing. My prediction......the "new generation" that is doing short term trading/gambling.......will end up just like ALL short term traders.....the VAST MAJORITY....will SIGNIFICANTLY LAG the unmanaged averages over the long term (5-10 years). Trading is trading.......the techniques and data and anything else they are doing now is no different than ever. The fact that large numbers of people are gathering in chat rooms and pushing certain stocks was ALSO going on in the 1990's and early 2000's time period.

AS ALWAYS......there will be long term investors and there will be short term traders. I WILL TAKE the bet in favor of the long term investors ALL DAY LONG. It is obvious that the VAST MAJORITY of the young guys trading in these CRAZY stocks today will NOT make money.....they will probably lose money. If they continue to do the same sort of trades over any significant period of time.....they will not make money. The data will be the same as always.

I have seen this sort of thing play out before......back in the late 1990's with a stock XLA.....XCELERA. The stock was recommended by a financial writer and chat room host back than on MSN. It ended up with its own chat room thread of ravenous young guy investors pushing the stock. The thread was called "The XLA Millionaires". The stock BOOMED and drew more and more interest and money as young guys pushed it and invested ALL they had in it.

I was posting.......as a regular.....in a MSN room back than called "Super Models"..........no, not female super models, stock market models. My posting was focused on my long term portfolio model same as now. It was very aware of the XLA Millionaires. SO......I decided to do a really deep dive on the stock XLA. I researched EVERYTHING there was on the company....all financials....all news stories, all data, all chat rooms, etc, etc. I came to the conclusion that......THERE WAS NOTHING THERE......just like the present situation there was NO BASIS for the stock to be going crazy....NONE. ALL of the HYPE and ALL of the CHAT was simply being pushed by company PR and press releases.....it was a classic penny stock that had broken out into the big world.

SO.....I went into the XLA thread and laid it all out.....as a warning. I told them that the stock would be at ZERO in a year and they would ALL lose their money. Of course you know the result.....I was TOTALLY SKEWERED.....I was an idiot, I was a fool, I didnt know anything, it was a new era......blah, blah,blah. They were flying high and many of them were on the way to real wealth.

Well......lucky timing.....nearly a year to the day that I made that post as a warning.....the stock was close to ZERO. I went back to the board to do my......."I TOLD YOU SO".......thing.......and.....it was a ghost town. NO ONE was there anymore....ALL the hundreds or thousands of posters were totally gone. The VAST MAJORITY......did not become XLA MILLIONAIRES.

HERE is some of the story.......the REALITY was far more explosive and MANIAC compared to this bland hindsight article.....it was a very interesting example of HUMAN PSYCHOLOGY. We are seeing the same thing with the current WORTHLESS STOCK GAMBLERS. NOW......I do take their side when it comes to free markets, the brokerage pauses, their rights versus the big boys, etc, etc, etc. I am fully in favor of the little guy versus the BIG ELITES. They should have the freedom to do what they want.

BUT.....over the long term the end result will be FULLY and WITHOUT DOUBT in favor of the long term investors.

Xcelera Denouement
After blowing hundreds of millions of shareholder capital, a mystery called Xcelera finally gets delisted.

https://www.fool.com/investing/small-cap/2004/11/17/xcelera-denouement.aspx

(BOLD is my opinion OR what I consider important content)


"Remember Xcelera (AMEX:XLA)(Pink Sheets: XLACF)? It was one of those controversial comet companies that seemed to come out of nowhere in 1999 to make a few people, for a short period of time, filthy, stinking rich. It quickly descended from whence it came, evaporating hundreds of millions of shareholder speculations. This week, Cayman Islands-based Xcelera received its final blow -- the American Stock Exchange delisted the company.

Xcelera, which claims to be a "European company focused on founding, developing, operating and financing technology companies," was one of the big growth stories of 1999 and 2000. In the course of a few months, Xcelera stock rose from obscurity to become one of the momentum investors' favorite playthings, rocketing to an all-time high of $111 per share (split adjusted) in March 2000. Just eight months prior, in July 1999, it had been trading at less than $1 per share. In the process, the Norwegian-born Vik brothers, Alexander and Gustav, suddenly showed up among some of the richest people in the world -- in 2000 they showed up on Forbes' list of the world's richest people with a combined net worth of $2.9 billion. Xcelera at the time tipped the scales at more than $3.8 billion.

The trouble, of course, was that this was an Internet incubator that didn't seem to do very much. In that hullabaloo year of 2000, the total net income for Xcelera came it at a whopping $300,000. That's right, a price to sales ratio of 12,666. That Xcelera ever attracted this type of attention is baffling. Its predecessor was called The Scandinavia Company and owned real estate, mostly in the Canary Islands. The Vik brothers jettisoned the real estate, changed the name to Xcelera, and used the proceeds to invest in Internet companies.

Three things conspired to give Xcelera the outward patina of believability among those who dearly wanted to believe. First was its acquisition of Mirror Image, an Internet infrastructure company that to this day generates most of the company's revenues and competes -- badly -- with the likes of Akamai (NASDAQ:AKAM). Xcelera claimed Yahoo! (NASDAQ:YHOO) and now-defunct Exodus as customers and partners and got a lift when Akamai held its IPO and suddenly was valued in the market at some $11 billion. You can see the "relative valuation" cogs start to spin. "If Akamai is worth $11 billion, then Mirror Image must be worth..." And since Xcelera had more where that came from, the crowd went wild. Throw on top of this a George Gilder recommendation in his newsletter, and some hot "strong buys" from Paine Webber and Morgan Stanley (NYSE:MWD), and the horses were on the track.

The trouble is, as Akamai claimed (and earnings releases bore out), Mirror Images was more smoke and mirrors than a real competitor. But since Xcelera, as a foreign company, had much looser filing standards with the SEC, its real results were inscrutable. This is a good thing for a company claiming to do lots but actually doing very little.

Naturally, this turned out badly for Xcelera's true believers. But, can you believe it? It didn't turn out so badly for Alexander and Gustav Vik. As Christopher Byron painstakingly spelled out in an August 2001 New York Observer column, their holding company, VBI Corporation, sold more than $400 million of the company stock -- $283 on the way up, another $142 on the way down. And amazingly, Byron notes that two of the brokers doing most of the selling for VBI turned out to be the selfsame companies that strongly recommended Xcelera at the same time.

And now the company is relegated to the Pink Sheets. I'd say that this is sweet justice, yet, given that the central folks in this sham walked away with hundreds of millions of dollars, there is no such thing. No one left behind but the truly gullible."

MY COMMENT

SO......I have seen.....first hand....this sort of MASS EVENT in the past. It was a total disaster for the vast majority of small investors that got caught up in the mania. The current event WILL end the same way......the vast majority of investors in these crazy semi-worthless stocks will end up with a small profit or nothing to show for it at all.

BUT.....I FULLY DEFEND their right to trade as they see fit without being CRUSHED by the ELITES and the financial system.

With the announcement by the SEC today.......I can see where we are headed. Months from now you will.....probably...... see some of the internet board people being prosecuted or fined for illegal coordination. At that point the PROTECTION of the system and the ELITES will be complete. As usual the little guy will get crushed.

HOWEVER.....I do think this little event will take a good length of time to play out. There is NOW an ALAMO MENTALITY.......they are going to fight to the death.....it is now about more than making money. It is now about A CAUSE and a CRUSADE against the powers that be and the ELITES and the SYSTEM.

My intent......I WILL NOT follow whatever is the FAD of the moment. EMOTION is a return killer. I will ABSOLUTELY not get caught up in the short term trading and the short term mania. I will ABSOLUTELY continue to invest for the long term EXACTLY as I have always done.....nothing more nothing less.

 

I will also say.....this event....STILL.......has the capacity to impact the markets in general. It is raising questions and issues that are usually......never discussed. It STILL has the potential to disrupt the markets and cause loss of confidence....over the short term.

I do agree.....with those.....that are saying the RED we are seeing in the mainstream stocks and market in general....ARE....due to holdings being sold to cover losses in the short trades that....up to now.....have EXPLODED in their face.

As a LONG TERM INVESTOR.....this is one of those times that you just have to sit and watch and wait it out. If you get caught up in the emotion and drama and start to make moves......try to trade.....move some money to cash.....sell out......go all in....YOU will be subjecting yourself to the short term disruption...that you are trying to avoid.

This is one of those times that having an.......INVESTING PLAN.....is critical. I will......obviously....stick to my investing plan....my portfolio model and my reasoning to what I have always done. Who knows.....we may even end up in that BUYING OPPORTUNITY that many have been waiting for.....for a long time now.

NOW more than ever.....my opinion.....what is most important for an investor is....quality, quality,quality. That combined with a long term horizan will make this little event IRRELEVANT one or two or three years down the road. It will be like the COLLAPSE of the "portfolio Insurance theory" in the 1987. Very dramatic at the time....and......part of market history....but in REALITY....an event that ONLY lasted for a couple of months.

 

I will also......GUESS......that it is likely that what is going on right now WILL cause a market correction. We may already be in a correction by the classic definition.....a loss of at least 10%. I can see us being down between 10-15% with ALL that is going on.

DO I CARE.......NO. Whatever happens it will simply be media and psychological based psycho-drama....it will NOT be based on FUNDAMENTALS. It will be all about emotion, FEELINGS, and drama. So.....in my world.....absolutely a time period where I will do NOTHING.

ACTUALLY....if I had invest-able money.....I would be looking to BUY into the face of whatever we are going to see over the next months. The economy....the vaccine.....company financial results.....as the economy reopens......are what REALLY COUNTS.

 

I AM NOT posting this to be political.....I am posting it BECAUSE.....it makes me MAD. HERE is your TYPICAL.....the PEOPLES CHAMPION.......and.....SOCIALIST.....Elizabeth Warren defending the big hedge funds and asking the SEC to CLAMP down on the little guys:


"I am writing regarding the recent surge in share prices for the video game retailer GameStop, whose stocks are “up 1,700 percent this month, including Wednesday’s climb of 135 percent” — driven by what one expert called a “flash mob with money.” These wild swings in value of GameStop and other companies that are subject to similar bets by traders are “detached from the factors that traditionally help establish a company’s value to investors,” I am deeply concerned that these casino-like swings in the value of GameStop and other company shares are yet another example of the gamesmanship that interferes with the “fair, orderly, and efficient” function of the market, raising obvious questions about public confidence in the market and those trading in it. I am writing to seek information on how the SEC intends to address these concerns and prevent these and future incidents of potential market manipulation. [Emphasis added]

Although “[f]ederal securities law prohibits market participants from misrepresenting a company’s prospects to artificially affect its share price,” there is a troubling lack of clarity regarding who the major market participants are in this case and the degree to which their activities may be coordinated. With many of these traders “cloaked in anonymity, there is no way of knowing whether messages touting GameStop come from average Joes — or scam artists executing a ‘pump-and-dump’ stock scheme.” [Emphasis added]

The Commission must review recent market activity affecting GameStop and other companies, and act to ensure that markets reflect real value, rather than the highly leveraged bets of wealthy traders or those who seek to inflict financial damage on those traders. To protect and restore public trust in sound securities regulation and enforcement, the Commission must identify gaps in existing securities laws and rules and ways in which the Commission can improve its enforcement capabilities. [Emphasis added]"

MY COMMENT

YES.....exactly as I expect.....the investigations will take place......and.....the people that actually end up being blamed and prosecuted will be.......the Redit guys. WTF.....WTF.

AND.....if you like this......here is what happens when the country sits around as the TECH TYCOONS ban and censure and cancel those that they perceive as a threat with impunity. MEANWHILE most of he country sits MUTE.......some....even cheer.

"Facebook has taken down the popular Wall Street discussion group, Robinhood Stock Traders, in a move that its founder described as backlash for conversations buoying shares of GameStop Corp and other companies this week.

GameStop, AMC Entertainment Holdings Inc and BlackBerry have been at the centre of a market battle as individual investors coordinating on social media including Reddit, and using trading apps such as Robinhood, bought shares and squeezed hedge funds that had bet that those struggling companies would tank.

Allen Tran, a 23-year-old from Chicago who created Robinhood Stock Traders, said he woke up on Wednesday to a notification that Facebook had disabled the 157,000-member group. The notification, seen by Reuters, said without detail that the group violated policies on “adult sexual exploitation”."

WAKE UP PEOPLE.......your time will come.....and there will be NO ONE to defend you.

 

OBVIOUSLY in the RED today. Actually EVERY holding in the RED. PLUS......got beat by the SP500 by .26%.

NOTHING good about this week. The media....the country.....and ALL investors were totally distracted from REALITY by the GameStop situation and the CLUMSY attempts to CANCEL the little people. JUST absolutely DISGUSTING. The GOOD NEWS.......none of this has ANYTHING to do with regular investors or long term investors. YES....it is going to trigger a correction or worse.....but.....at this point most people dont care.

HERE is where we were at the end of last week.....as we were waiting for the big event this week......earnings from the BIG CAP tech companies:

LAST FRIDAY

SP500 for the week +1.94%
SP500 year to date +2.27%

DOW for the week +0.59%
DOW year to date +1.28%

NASDAQ100 for the week +4.39%
NASDAQ100 year to date +3.71%

NASDAQ for the week +4.19%
NASDAQ year to date +5.08%

Here is where we ended the day and the week today........ONE WEEK LATER

SP500 for the week (-3.31%)
SP500 year to date (-1.11%)

DOW for the week (-3.27%)
DOW for the year (-2.04%)

NASDAQ100 for the week (-3.30%)
NASDAQ100 for the year +0.29%

NASDAQ for the week (-3.49%)
NASDAQ for the year +1.42%

 

The solution is simple:

1. BAN naked shorts.
or
2. Let BOTH the longs and shorts trade in a free market without restriction.

WILL either happen......NO.