After taking a week off work and ending up sick with my brother-in-law in town, I tried not to watch stocks too much over the past week. The few times I did check in it seemed like I was bleeding out about $50 every day from my account.
Catching up on the latest news and getting ready to go back to work tomorrow morning, I’m seeing a lot of headlines from the G7 summit in France and all of Trump’s tweets about trade and progress.
Then, I flip through the Wall Street Bets subreddit and it’s mostly doom and gloom over there, with the bears outnumbering the bulls by force.
Finally, I checked into futures and as of 10 p.m. PST we’re predicting around a -0.90% drop in the US markets. We’ll see if that holds overnight.
So now I’m sitting here wondering, do I keep letting my stocks bleed out hoping that they’ll catch a bounce and turn green? Or is it time to finally sell?
If I sell do I take a big gamble and buy naked spy puts, or a put vertical spread, to try and win back my account in one fell swoop? But quite frankly, my first mistake is probably checking Reddit Wall Street Bets.
I’m also interested in following GE after all the discussion of fraud kicked off by Harry Markopolos’s claims of fraud (the same guy who outed Bernie Madoff and his ponzi scheme). You can download the report from www.gefraud.com. Can’t wait to see how that all plays out.
Current account value is $1,686, down $187 this past week (-10%).
Today’s Position
Canopy Growth Corp. (CGC): 40 shares @ $24.89
YETI Holdings, Inc. (YETI): 10 shares @ $26.13
Baytex Energy Corporation (BTE): 200 shares @ $1.23
I’m on vacation this week spending a few days with family in town. As I check my positions pre-market I see things looking green. Excited for the day, it seems like my trepidation from Friday was all for nothing.
Then, the market opens.
By an hour after market open, CGC is down between 5 and 6 percent, and is nearing it’s 52 week low. Even though all of my other stocks are green for the day, because CGC makes up the majority of my portfolio I end up down about $40 for the day. (-$62 in CGC, +$21 in everything else)
So once again the debate continues. Sell now to preserve what’s left, or forge on and look for an opportunity to get out later?
YETI Holdings, Inc. (YETI): 10 shares @ $27.69 (2.56%)
Baytex Energy Corporation (BTE): 200 shares @ $1.315 (3.54%)
Microsoft Corp. (MSFT): 1 share @ $136.13 (1.83%)
Robinhood account value is now sitting at $1,850.
Now I’m sitting here after hours wondering if I should sell before the market opens on Monday. What will sentiment be through the weekend? What will the trade/tariff updates be over the weekend? If I sell, will I miss out on a big run up on Monday? Or will I prevent any further losses if Monday is bloody red?
As I mentioned in prior posts, I have been investing time into studying materials on OptionAlpha.com. Last evening, I completed their Beginner’s Course, which I enjoyed a lot and I felt really helped me grow in my understanding of options, volatility, probability, technical analysis, and much more.
There is just about nothing that I hate more than not being good at something. And my prior losses in gambling with options have really challenged me to spend the time studying, taking copious amounts of notes, and better preparing myself for this challenge of actively investing my fun money.
I am planning to move my account balance over to TD Ameritrade, and have been spending my time throughout the course setting up charts and screeners in ThinkorSwim to implement the OptionAlpha strategies. But, I feel like I still have a bit more learning to do before being confident in pulling the trigger with options again. And specifically, with the multi-leg strategies they employ.
So for now, I’ll let my current stocks ride. And we’ll see if my initial deposit can grow on its own back up towards $2,000. Time to start the Intermediate course!
How does a company lose $1 billion in three months? Ask Canopy Growth.
I was thinking just yesterday morning, as the world markets were tumbling, that I view Canopy Growth as a great long term stock that has huge potential. So I did not want to sell out of my position in CGC just due to the short term market roller coaster, in favor of holding out for long term gains.
What a difference a day makes…
After the markets closed yesterday, Canopy Growth Corp. reported their Q1 earnings. Unfortunately for me, the stock absolutely plummeted as a result, dropping 11.7% after the markets were closed. Even after the after-hours session (which I don’t really understand how that is possible, other than to guess that institutional investors get to do things that us individual investors can’t).
EDIT: Okay, I looked it up. If a stock price is continuing to move after the after-hours market closes (which all look like they close by 9pm ET), then it is likely due to orders continuing to be submitted/queued up for when the pre-market opens the following day. The stock’s price will track the midpoint between the bid and ask prices throughout the night, and trades will resume at market open (or pre-market open) near the new bid/ask spread (gapping up or down).
Key numbers from the Earnings Report (in CAD):
Net Revenue down 4% from prior quarter, $90.5M (versus $111M estimated)
Adjusted Net Income was -$1.28B (versus -$1727M estimated)
Gross margins fell to 15% (versus 43% in the same quarter last year)
This was the first earnings report without Bruce Linton, who was fired by Constellation Brands about a month ago. With Constellation taking a 38% stake in Canopy back in October 2018, I can’t help but wonder if this is the same company I was so hopeful for when first purchasing TWMJF over-the-counter at $8.92 per share back in February 2017.
Perhaps one of my lessons to learn is not fall in love with a company/stock. Time changes everything, and I have some more thinking to do to determine if this is still a long term hold.
YETI Holdings, Inc. (YETI): 10 shares @ $27.00 (-3.74%)
Baytex Energy Corporation (BTE): 200 shares @ $1.27 (-0.78%)
Microsoft Corp. (MSFT): 1 share @ $133.68 (-0.22%)
An opening two, brutal days in a row have got me questioning if I’m cut out to play in this market. After two days, my Robinhood account is down from $2,062 to $1,829.
What a day to pick to start my journey of trying to double my fun money. What started as $2,053 has quickly become $1,878.
Markets are absolutely tanking today.
S&P 500: -85.72 (2.93%)
Dow Jones Industrial Average: -800.49 (3.05%)
Coming into the start of this journey, I had a few positions that I have been debating holding or selling off to start “clean.” I had a nice run up yesterday with my account balance running from $2,075 to $2,134, which gave me hope that I could just hold onto these positions and coast out to nice start.
YETI Holdings, Inc. (YETI): 10 shares @ $28.05 (-5.62%)
Baytex Energy Corporation (BTE): 200 shares @ $1.28 (-8.57%)
Microsoft Corp. (MSFT): 1 share @ $133.98 (-3.01%)
So what is happening?
It seems a few different things are causing some real panic across world markets. Most notably, the constant whipsaw of trade posturing between the United States and China and the inversion of the yield curve.
Yield Curve Inversion
What the heck does that mean?
They’ve got a fancy chart over at the New York Times that is interesting to look at, but it appears to boil down to the 2-year Treasury yields trading higher than the 10-year yields. Essentially, long term interest rates have moved below short term interest rates. And historically, this has occurred before each recession.
Ruh roh.
Trade Tweets… (I mean, Talks)
The morning started with this:
“So far, you’ve had Tariffs imposed on 300 Billion Dollars worth of Chinese products, but you can’t tell me that it has hurt our economy…& it really hasn’t led to any kind of serious rise in prices at the consumer level.” @Varneyco@FoxBusiness And we are taking in $Billions!
China’s finance ministry issued a statement that said the US tariff’s were against the consensus that Trump and Xi had agreed to during the June summit in Japan. Then, later in the afternoon we got this:
..deferral to December. It actually helps China more than us, but will be reciprocated. Millions of jobs are being lost in China to other non-Tariffed countries. Thousands of companies are leaving. Of course China wants to make a deal. Let them work humanely with Hong Kong first!
After all that, I’m not sure what to think. Are we headed for a recession? Will tomorrow rebound just like it has the past few down days. I think I’ll keep an eye on futures overnight, wait, and see.
Aahhh Coca-Cola. The second stock I ever purchased.
I remember reading in various books and articles about stock market veterans like Warren Buffett who would decide to buy shares because he found that he really liked going to McDonald’s for lunch (I’m sure, in addition to a litany of other metrics that fit the bill).
When I looked around at companies I patronized near the end of 2016, I found one at the top of the stack was Coca-Cola. In my house growing up, we took our lead from Dad in knowing that Coke was obviously way better than Pepsi. And the tradition of having cans of Coke stocked in the fridge has followed me into adulthood.
Around this time, I had also learned about a new trading platform that was advertising itself as a no-fee options for trading called Robinhood. It seemed like a perfect fit for my fun money investments since I would be starting with such a small amount in my account, I knew $5 or $7 fees on the purchase and sale could easily translate to the loss of 2 or 3% of my account with each trade.
On November 10, 2016, I deposited $500 into Robinhood and without much more research other than knowing Coca-Cola was an extremely stable brand, and Warren Buffett owned a massive number of shares, I brought 12 shares of Coca-Cola for $40.92 per share.
As I held those shares over the following weeks, I started thinking that maybe Coke was not the right investment for my fun money account. I think it is a great long term, stable investment. But in trying to be aggressive, I came to realize that I was really looking for higher risk, higher reward, growth opportunities.
So, I collected $4.20 in dividends on December 15, 2016, and decided to sell those 12 shares for $41.16 per share on January 17, 2017.
I had made a total profit of $7.08!
I ended up transferring that money back out of Robinhood at the end of January so that I could go after something a little more aggressive.
Ah Chipotle, the very first stock I chose to purchase way back in 2016 in my fun money account. Actually, this company single-handedly motivated me to open up a trading account for my fun money in the first place.
From late 2015 to the middle of 2016, Chipotle Mexican Grill, Inc. had sold off from its all time high of just shy of $750 per share, down to around (including dipping blow) $400 per share.
The company was rife with problems. The CDC and FDA had published reports of Chipotle’s restaurants repeatedly infecting patrons with E.coli and norovirus. Then Chipotle’s Chief Marketing and Development Officer was arrested for repeatedly ordering cocaine through a drug delivery service.
But I loved Chipotle. In spite of all the health/news stories, Olivia and I still found ourselves eating there often. And it seemed to me like business was doing fairly well at any of the locations we frequented. I figured it would only be a matter of time before the stock price would rise again. So, I decided to buy in while it was on sale.
I searched around for various brokers to try and find one with low trade fees. I settled on OptionsHouse, which was later acquired by E*TRADE.
I placed my first two orders on October 6, 2016. I bought one share of CMG at $426.39, and then a second share for $421.44. Then a few weeks later, I bought my third share for $412.15 bringing by average price per share to $419.99.
I held onto these shares and checked the price periodically. By the end off October, the shares were trading down below $360 and had me sweating whether or not I’d be able to recoup my investment or if I had caught the proverbial falling knife.
Well, by New Years 2017, CMG had crossed back above the $400 mark, and I was starting to think that I didn’t want to tie that money up any longer waiting and hoping that it would return to its prior heights of $750 per share (or anything in that ballpark).
Finally, in mid-February 2017, CMG had run back up past my break even point! I was starting to think I was on my way to doubling up my investment of $1,275 (after factoring in the $15 in fees). But within a week the price was trending back down towards $400 and I was back to sweating it.
My sentiments were also shifting and I was leaning towards using that money to purchase a new computer. So, when the price bounced back up to $413.56 on March 9, 2017, I decided to sell (paying another $5 fee for the trade).
In the end, I had a net loss of $39.29.
It’s definitely more than a little painful to look back at the chart now a few years later. With hindsight, I can see that holding onto those shares just two more months would have seen the stock hit almost $500 per share.
And even more recently, CMG hit its all time high of $857.90. Holy smokes! If I had the patience to hold on since my purchase in 2016 and been fortunate enough to sell at the peak, my three shares could have netted me over 100% return on investment with a profit of $1,293.70.
That would have produced an annual return over the 3 and 1/2 year holding period of 23%. Quite a bit better than the S&P 500, which had an annual return of approximately 9% over the same period.
That’s why I’m such a believer in Warren Buffett’s advice to stick with low cost index funds for our family’s retirement.
I don’t spend all day combing the internet for all the latest information from every corner of the world and try to piece together exactly how the market is going to move based on a million inputs. Nor do I think I have an advantage that will allow me to perfectly time the peaks and troughs in order to outperform countless money managers who’s track records show they can’t outperform the S&P 500.
But as my wife and I continue to contribute as much as we can towards maxing out our retirement accounts while dollar cost averaging into index funds, I had an increasing desire to grow my knowledge and understanding of the financial markets.
I decided early on that wouldn’t gamble with my wife and I’s shared dollars, since I was really just looking to learn. But, we have factored “fun money” into our budget since shortly after marrying in 2012. Its intended for each of us to spend on whatever we want (clothes, lunch, shopping, gifts for each other, etc.), but I have a tendency to save mine up to buy big ticket items.
So, since I had money just parked in my savings, I figured why not put that money to work trying to better understand stock trading, and hopefully increase my account balance at the same time.
I’d read books like Larry Burkett’s The Complete Financial Guide for Young Couples, Smart Couples Finish Rich by David Bach, and Stock Market Primer by Claude N. Rosenberg, Jr. and wanted to try my hand at picking some winning companies and their stocks.
One thing I’ve always regretted when it comes to my ability to evaluate companies, is that I completely glossed over the portion of my Accounting 240 course that went in depth on how to analyze a financial statements.
I took the course at a college that kept a running total of points you’d earned and the maximum number of points available on the course’s site. The final for the class was in two parts — the first being multiple choice and the second being a handwritten analysis of a financial statement.
When I completed the multiple choice section, the points earned were automatically calculated. So I could easily determine that earning a 0 out of 100, or earning a 100 out of 100, would not impact my grade in the course either up or down. So, I thanked the teacher and took off a few hours early.
In hindsight, I wish I would have spent that time really mastering how to evaluate a company’s statements. Now, I have to relearn those basics, and it is still something on my to-do list.
So, over the past few years I’ve bought shares of various companies, mostly just based on whatever direction the wind was blowing at the time. Similarly, I tended to sell shares just when I decided I wanted to buy something (e.g. a new computer, etc.).
To give you the full backstory to how I got to this point, I will detail my prior missteps.
I guess I better explain what I mean by fun money.
My wife and I found very quickly after getting married that we are complete opposites when it comes to spending and saving.
You see, my wife and I have our budget structured so that we each pay ourselves a bit of pocket money each month. We can choose to do whatever we want with this money, from buying lunches, to going shopping (for me, that usually means saving up for expensive electronics), or buying each other presents.
The Envelope System (Cash Budgets)
It turned out extremely helpful to have read Larry Burkett’s book, “The Complete Financial Guide for Young Couples,” before we got married. Shortly after marriage, we found we were driving each other crazy. I was wincing every month as the balance in our joint checking account dwindled with small purchases, and my wife was getting really tired of hearing me complain about that dwindling balance.
So, we adopted a cash budget using the envelope system. Pioneered by Larry Burkett and popularized today by Dave Ramsey, this method allowed us to set aside money for our obvious bills that did not get automatically deducted from our account each month. We setup our envelopes as Groceries, Entertainment/Restaurants, Gas, Auto Repairs/Maintenance, Hair/Makeup and Gifts. In addition, we set aside a small amount that we paid ourselves in Fun Money.
This greatly helped smooth things over for us. I stopped seeing the small nickel and dime transactions in our joint checking account, and she had the freedom to stop and grab snacks or drinks, or buy small things at Target whenever she wanted. And I started to do what I wanted with my fun money, set goals and start saving for larger purchases!
Variability
The amount of fun money we pay ourselves has ebbed and flowed over the years. When we were first married, we lived off a single income and had nearly $55,000 in student loan debt. We decided we wanted to live as far below our means as we comfortably could, and focus on paying off this debt as fast as possible. But, in order to stay successful at this over the long term, we decided on an initial amount of $80 per month that we each paid ourselves in fun money.
We were diligent and paid down the debt as quickly as possible. To give us a jump start, we sold off some investments we had in a taxable brokerage account. With these two things combined, we paid off our debt in approximately 20 months. Once paid off our debt, we raised our fun money budget to $150.
Fast forward a few years later, we raised it again to $200. Then, shortly after having our son, we trimmed that fun money back to $150 per month. And, a year later, we raised it back up to $200.
Funding my Investment Account
I’ve used my fun money for various purposes over our years of marriage. I’ve purchased my dream guitar (a beautiful Gibson 2014 Les Paul Classic), built a sweet new computer, bought various other electronics, along with a handful of tools.
I like to keep a decent balance in my personal savings that ensures I always have money for upcoming birthdays or Christmas. But after a while, I started getting the itch to invest a portion of my fun money to see if I could grow it even faster (and learn a thing or two about active investing along the way).
So, this is my journey. These posts are partly me tracking my successes and failures, and pressing on through a bit of pain as I learn a few lessons.
My goal is to continue contributing to this fun money investment account at a rate of $100 per month. And hopefully, I’ll end up with positive results year over year as I refine my strategies and become a more knowledgeable investor.
FNMNY 