Don't Roll the Dice on GameStop

With meme stocks like AMC and GameStop back in the headlines, enjoying meteoric gains of 75% yesterday and pushing yet higher today, it can be tempting to jump on the bandwagon and try to make a few quick bucks before the current frenzy dies.

Especially for those who missed the last rallies in 2021.

But if you leave these stocks alone, you're actually the smart one. As Warren Buffet likes to famously say, "Stick to what you know." His stance is always, "I just need to know how a business makes its money. Once I know that, I can understand the business and determine if it is worth owning."

That's really key when understanding why it is so dangerous to play along in something like these meme stocks. They aren't rallying because these are solid companies making massive profits with strong fundamentals to back up their share prices and the current surges. They are rallying because the same man who fueled the last big surge has resurfaced for a second round of squeezing the shorts.

In other words, the rally won't hold and when the smoke clears the same as it did last time, it will be a swift and strong pullback, and the reality is that most people won't get out soon enough before their money is all gone.

It's gambling, pure and simple. Something that is never appropriate to do in the stock market. 

It's that temptation to wonder, "But what if it jumps another 50% today?" That's the same mentality of someone sitting at a slot machine wondering, "What if the very next pull is the one that hits the jackpot?" 

I'm a bit of a seasoned guy. I feel like I could smartly navigate the rallies and make some money. But it's just a game I refuse to play—because it doesn't make sense. It defies all of the logic I have learned over the years regarding share prices and why stocks move. Or more importantly, why they should move.

If it doesn't make sense, I'm going to leave it alone. 

Granted, some part of it makes sense. For example, we know that the short positions of GameStop were around 24% of the total of outstanding shares. So basically, buyers of the stock are running up the price through a frenzy of buying essentially forcing the short sellers to have their short positions squeezed and forcing them to sell their shorts to cover their positions.

But again, it's an artificial move. There's nothing to back up the share prices. Therefore, the prices are doomed to fall back sharply. The question is exactly when, and no one, even the most seasoned of investors, can time the markets.

I say hold onto your money and continue putting it into long-term investments that make sense. Like I said, it is tempting. Some may experience a sense of FOMO. But it's a fool's game to be sure. And the old saying that a fool and his money will soon be parted holds very much true in this case.

If one is going make a play, you have to consider it in the same way a responsible gambler would consider it. "This is money I can afford to lose and that I am willing to wager knowing I may walk away empty handed."

And, "I'm okay if I walk away empty handed." Because more people will likely walk away with nothing than will cash in on a big prize.

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© 2024 Jim Bauer

This blog post is for informational or entertainment purposes only and does not substitute for seeking advice from a licensed professional before making any investment decisions. 

To the Fed I Say, "Not So Fast"

I am no economist, but I say, "Not so fast," on the idea of the Fed lowering interest rates just yet, even if there are some indications of some minor improvements in both the rate of inflation as well as certain jobs data.

Investors appear hopeful we may see the Fed rate lowered.

While we're closer to the desired 2% inflation rate, we're still much higher than that. Beyond that, what we experienced in this particular inflationary period while interest rates were higher was no real slowdown in consumer spending—something that is aimed for when the Fed raises rates. The idea is, of course, to at least stall the economy.

Part of the reason spending really didn't slow down all that much, I think, was due to a couple of factors, and perhaps a third one.

For one thing, while many jobs were impacted by the pandemic shutdowns, many people—in fact, the majority of workers—remained fully employed and earned paychecks. With less places to spend their earnings, people accumulated money that would have otherwise been spent. That money rested on the sidelines until things finally opened back up.

The second thing was that trillions of dollars were forced into the economy through relief checks to people and businesses. On top of that, unemployment benefits were extended for people impacted by Covid. In other words, while the economy itself had a stall during the pandemic, consumers were still largely cash rich. They were either stockpiling money or they were otherwise shored up by the government.

That left a lot of money on the table to be spent eventually and spend it consumers did when doors were once again open.

The third thing, I think, was a bit of what I am calling a "capitulation," of sorts. During that roughly two-year period it was miserable. No two ways about it. If you were spending, it was only on the essentials. With the lockdowns you couldn't really go anywhere. And even when it came to any shopping you could do there were massive supply chain disruptions which meant shelves were virtually left empty on many of the things we needed and wanted to buy.

Then came massive inflation, and I think people simply said, "Screw it." 

People not only wanted to get out when the economy opened back up for business. They needed to. And they were going to spend their money no matter what because they had the money to spend. Thus, through all of this, even while the Fed tried to slow people down, it just wasn't happening, and inflation continued despite the efforts of the Fed.

I do think we are finally seeing at least some indication that higher interest rates are beginning to take effect and help to reverse course. McDonald's and other fast-food chains recently reported a slowdown in sales for the first time in a long time. Consumer spending overall has slowed a bit.

The thing is, why lower rates now when things are just getting started? Let's get much closer to that 2% and then make a decision.

It's sort of the same reasoning that Biden's passage of the American Rescue Plan at a time when things were already opened back up and people began returning to work was simply wrong. It provided for prolonged issues in the supply chain and lead to massive labor shortages, both of which contributed largely to a lot of the inflation we are experiencing now.

It was simply the wrong time to infuse more money into the economy when it really didn't need it.

It's not to say that even if the Fed lowers the rate nominally, say 25 basis points, that consumers will go wild and return to normal spending levels right away. But I think the better idea is to wait until not only we get to the desired 2%, but we stay there for a little while. Then we lower the rates.

Today we will hear comments from New York Fed President John Williams and Richmond Fed President Tom Barkin that should at least provide for a better idea as to what moves the Fed will make in the near term.

I am hoping they indicate that for now we're going to sit tight.

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After A Stellar Earnings Report, Why Did I Sell Texas Roadhouse?

When you invest in the stock market, there are any number of reasons you make a certain decision. Part of it is experience. Part of it is dependent upon what your strategy or objective was when you bought a particular company.

The reason I sometimes write about what I do in a particular moment regarding stocks is to offer an additional insight for anyone interested in the stock market as to things they may also want to consider as they dig in and learn.

It offers a real time example rather than necessarily gets into the rugged and sometimes confusing details that goes into explaining how things work, what things to look for and so on and so forth.

I sold my entire position in Texas Roadhouse (TXRH) today after it had a better-than-expected stellar earnings report, strong future guidance, and raised its dividend 11% from 55 cents per share to 61 cents per share.

So, why did I do that?

For one thing, Texas Roadhouse was a short-term position for me. I started buying in in July of 2023 and finished my buying in August of 2023. My average cost per share was $111.12.

When it comes to short term positions, I am looking for a 15% return. Generally, I will sell. However, I always think it is important to reevaluate my position when it reaches the return I am looking for. Sometimes I may get a signal to add more shares. Other times I get a signal to hold.

I got a signal to hold, and ultimately, just prior to the February 15th earnings call, my shares were already up 23%. I knew what the analysts were expecting, and nothing was signaling through trading activity that investors were expecting TXRH not to at least meet those expectations. 

The stock remained relatively neutral.

Had I seen an indication of investors expecting a less than acceptable earnings report, I would have expected the shares to fall just before the call.

That did not happen. So, I decided to sit it out a little longer and see what the earnings call brought. Like I said, it turned out to be an excellent earnings report and shortly after the call, the stock began to rally in after-market trading and continued on into the morning's pre-market trading on the 16th.

By 9:30am CST, the stock had jumped another 10% and rose nearly $15 per share. I sold with a hefty gain of 34%.

Here's the thing. I do strongly believe that Texas Roadhouse has more upside, and its next earnings report should support more upward momentum. But when rallies like this happen, and you hit new 52-week highs as TXRH did, it is highly likely that there will be a pullback and a new support level established.

A support level is simply a level at which buyers will tend to enter into a position or add to it. It is a level that, generally speaking, a stock will tend not to drop below. On the flip side, resistance is a level in which buyers tend to avoid a stock.

TXRH broke resistance by a lot, and so, it leaves an investor in a bit of a stuck place. We don't know what the valuation really is at this point. From my perspective, that's a good time to get out and wait until I can better assess what the stock price should be.

Because I think Texas Roadhouse will continue to perform well, it is one of those short-term positions I may very likely consider entering into again. But I need to do more due diligence before I can make that determination.

I will be looking for at least another 15% return, and I won't necessarily enter into a short-term position I do not believe can deliver on that.

In a situation like this one, I was happy to take my profits and move on to the next position I am interested in. I did also solidify some of the gains and put them into two other positions—one a long-term one and the other a short-term one. Realty Income (O) and Kraft Heinz (KHC). I also intend to add shares to another long-term position, Walmart (WMT), after the 3 for 1 split later this month.

Jim Bauer currently holds shares in all stocks mentioned herein except for TXRH. This blog is for entertainment purposes only and not intended to be financial advice. It is important to do your own due diligence or seek the assistance of a professional before making any financial decisions. Like what I write about or the way I write about it? Follow me on Facebook or X to keep up with all the latest writings wherever I may write them.

More Market Commentary from Jim Bauer

Is Walmart a Buying Opportunity?

Why Do I Hold Onto QYLD?

How To Live Off of Dividends

Amazon Continues To Blow It Out of the Park

Take Stock Market News with a Grain of Salt

When it comes to reporting on the goings on in the stock market, the reporting often tries to make what is moving the markets more complicated than it actually is. I mean, if you think about it, it's a 24-hour news cycle anyway regardless of whether it is on television, over the Internet, or in various paper publications.

People need to sell news and you can only sell interesting news.

On top of that, the world of stock market information is chockful of analysts and experts and CEOs and all sorts of people who, let's face it, need to be relevant. And of course, they want to be experts for a reason. Therefore, whenever something happens to move the markets this way or that, someone feels the need to explain it away.

I tend to be one who tries to read between the lines a bit.

It is not to say that all of the news about what's happening in the markets is wrong. It's not to say that it's always over or under stated. It is also not to say that there are usually many reasons for market movements.

The stock market is both simple and complex.

While 2023 was not a stellar year in the markets by any measure, the stock market still performed well enough. People made profits. And toward the end of the year the markets did enjoy a rather extended streak of upward movement. 

2024 has of course, started off with mostly down days. The news is looking for all sorts of reasons why that is happening. What the Fed is doing or is expected to do. Mortgage rates. The CPI and jobs reports. The PPI and inflation data. Gas prices. The Houthis interrupting the supply chain. 

And to be fair, all of these things do influence the markets. But it is the "complicated" story. It's the explanation all the experts are pointing to. 

The thing I always try to say is that if you are the average Joe investor, paying attention to a lot of this hype, and that's primarily what a lot of it is, is futile. These are things that may have a day-to-day impact on something in the markets going this way or that way. But the average Joe investor only needs an eye to one thing.

The future.

And even though past history is not necessarily an indicator of future results, a common catchphrase used in the markets, there is one truth that most people can rely on comfortably. That is, the markets have ultimately only one direction.

Up.

Even when the markets correct or crash, they always rebound, and before the next crash or correction end off higher than where they last left off.

While there are many economic and political influences affecting the markets all the time, I think the start to 2024 is more easily explained than what the news is reporting about it. Again, all of the factors being stated do matter. But the underlying simple factor I think carries more weight and is closer to the real reason 2024 is starting off with less than a bang.

Those profits from 2023.

What else happens when the new year rolls in that is important to consider? Taxes. What happens when people have profits on paper that are realized? They are taxed. When trading reconvened on January 2nd, we of course entered into a new tax year. It would have been smart for any investor, long or short term, to hold onto their gains until a new tax year came into play. And that is what most people did.

The start to 2024 is really nothing more than investors now taking some of those profits since they won't have to worry about paying taxes on them until 2025. On top of that, there's the whole year ahead to make all sorts of strategic plans about offsetting the tax bill to come.

That being said, it is important to pay attention to at least some of what is being reported as factors moving the markets. But ultimately it should be a smaller consideration. When we are investing, we are not investing in the markets, per se. We are investing in companies. And so long as you are paying attention to the fundamentals of the businesses you are investing in, what happens in the day-to-day doesn't matter and should not be a formulation of a basis for determining where the markets are going, or what we should do with the individual businesses we are invested in.

The experts need to be relevant. The reporters need something to turn in to their editors to keep their jobs. The analysts need the same. All we need to do as investors is make money. And if we don't allow these outside influences to impact our decisions, we will make lots of it.

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OTHER MONEY COMMENTARY BY JIM BAUER

Don't Just Blindly Enter the Markets
If there is one thing I talk about all the time wherever I write, it is about the importance of understanding and participating in the stock market. I talk about it as much as I do because I think being in the stock market trumps all other means of income and wealth building, aside from owning your own successful enterprise.

Most People Want More Money But Don't Actually Want More Money
The title, I will admit, seems a bit strange, doesn't it? I mean, one either wants more money or they don't. Doesn't everyone naturally want more money? It would seem like a no-brainer to say, most people want more money.

Why Do I Hold Onto QYLD?
Back in March of 2021 I became interested in an ETF, Global X Nasdaq 100 Covered Call ETF (QYLD) and as I do with any investment, did my due diligence to decide whether or not the ETF fit my investment goals and objectives.

Berkshire Hathaway: A Great Company I Can't Buy

What's not to love and admire about Warren Buffet, affectionately known as The Oracle of Omaha? A man who has been well known in the investment community as the guru of gurus—few people in the investment world fail to perk their ears up when the man speaks.

I listen too, and quite intently.

Several times I have considered buying shares of the company he runs, Berkshire Hathaway, which owns many well-known and profitable businesses like Geico Insurance, See's Candies, Dairy Queen, Pilot Flying J and many others. The company also has major controlling interests in several other businesses like Coca-Cola and others.

It's a pretty long list with lots of familiar names.

And when it comes to diversification, a key element to consider in any successful portfolio, Berkshire Hathaway is as diversified as a company can be, investing in businesses from retail to insurance to logistics, pipelines, rail roads, real estate, and banking. 

Add to that, thanks to the investing genius of Warren Buffet and his sidekick who is just as brilliant as Buffet is, Charlie Munger, it is easy to say it's not only a great company to own. It's extremely well run and profitable as well, having offered investors impressive returns over the years.

So, what's my issue?

For me it's simply that the company is too closely connected to Warren Buffet himself. He's a man who is one unto himself. There have been few like him before, and once he's gone, I am not sure there will be another quite like him.

When it comes to the company he runs, he's the main attraction. His words matter. Investors trust in his judgement. His annual meetings draw in huge crowds of people who want to enjoy the experience and hear what The Oracle of Omaha has to say. 

His annual meetings aren't just about what's happening in the markets, or with the business, or even what his outlook of the economy happens to be. It's an event, done convention style with lots of fun and entertainment thrown in the mix—it's a shareholder's meeting unlike any other.

It's an experience and moment not unlike going to see The Rolling Stones or Metallica. You're going to want to tell your friends. You're going to want to share what happened there.

While Warren Buffet seems healthy and going strong, he's 93. Charlie Munger is 99 and will turn 100 in January. And again, Warren Buffet essentially is Berkshire Hathaway. The man and the company are nearly inseparable when you think of them.

The reality is that no one lives forever. Not even The Oracle. He will pass, as will Munger, and while there is a well-planned successor in place in Gregory Abel, one wonders, despite his being a protégé of sorts, who has been vigorously vetted and groomed for the position to take over the reins when Buffet's gone, whether he has the same intellect and character that Buffet has gifted us with over many decades.

There is no doubt that Berkshire Hathaway will exist long after Warren Buffet and Charlie Munger are no longer with us. But can one expect some changes under Abel? I think that's obvious. And what about Abel's successor? Who takes over if Abel dies or simply decides he doesn't want to do it? What does his succession plan look like? And how careful will his selection be compared to Buffet's?

Think The Tonight Show with Johnny Carson. There was something about that show that just made it Johnny's, even though to be fair, he wasn't the original host of the show. But also, to be fair, Jack Paar was no Johnny Carson. Carson made that show. And no one after him, even Jay Leno, could quite capture the same love and admiration nor audience that Carson could. 

Berkshire Hathaway wasn't always Warren Buffet either. Warren Buffet made the company.

When Johnny Carson bid his farewell and drew himself behind the curtains for the final time, the show may have gone on. But it was not at all the same show, and never has been since.

I think of Berkshire Hathaway this way post Buffet. The company will remain and will probably still be a great company. It may bear the same name. But it will never be the Berkshire Hathaway that makes it so appealing as an investment today.

In other words, will it be the Berkshire Hathaway we know today with Abel in charge where investors will be as excited about it? Will Abel's words have the same interest and appeal as when Buffet speaks?

I don't think so.

And for that reason, while I love and admire Warren Buffet and love and admire the company he built, it's a tough sell for me to buy shares because what you are buying is essentially Warren Buffet when you buy the stock.

And he's on short time.

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©2023 by Jim Bauer. All rights reserved.

Cartoon generated by AI. Caption by Jim Bauer. ©2023 by Jim Bauer. All rights reserved.

The Walmart Absorption Effect

Let's face it. No matter where you spend your money, there is going to be a rather significant portion that is going to ultimately wind up in the cash register at Walmart. Why is that? Because for all the haters, the fact is that most people actually shop at their stores.

This is why it just makes sense to own Walmart stock.

If you eat out at a restaurant, the waitress will likely spend a portion of her income at Walmart. Same goes for the dishwasher, the bus boy, and even the guy who trucks in the supplies and food for the restaurant.

They will all spend a portion of their money at Walmart.

Go to a gas station for a fill up and a Coke? The cashier will likely be spending a portion of their paycheck at Walmart. Spend at The Dollar Tree or Dollar General? I bet the workers there will spend a portion of their paycheck at Walmart.

The fast-food worker? They are going to spend a portion of their paycheck at Walmart too. From food stamps to social security checks? A large portion of that money will also be spent at Walmart.

Everyone shops at Walmart even if they tell you they don't because let's face it as well, Walmart simply offers everything under the sun at a value that even the die-hard haters can't pass up.

Beyond that, one has to admit that despite Walmart being a retailer in the retail sector, it is as diversified as stocks can be when you really get down to it. Because it carries pretty much anything under the sun. Call it an ETF of sorts that holds some sort of value in Unilever, Proctor & Gamble, Georgia-Pacific, Colgate-Palmolive, Kraft Foods, and any number of other companies both public and private.

Owning Walmart stock means you own a piece of every bit of spending happening in their stores. And likely you will shop there as well, meaning every dollar you spend will have a tiny discount attached to it when you get your quarterly dividend check.

Granted, it's not a fantastic yield at 1.47%, or $2.28 per share on an annual basis. But sharing in the profits of the largest retailer in the world that will capture the lion's share of every single paycheck that exists seems to me like a great thing to own, and I think everyone should own at least a few shares.

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Forget Side Gigs: The Path to Financial Freedom Is Investing

Most of the time when people talk about side gigs, what they are talking about is creating more money to spend. Sure, in their mind they may be thinking this will get them ahead. But spending can never do that, and spending—at least at first—should not be the goal.

You need to invest your money if you ever want to create wealth and actually get ahead financially.

Even carrying a simple savings account is typically not enough since most regular savings accounts don't offer much in the way of interest. You should have savings, though. It is always important to have money that is easily and readily available if you have an emergency expense that needs to be paid like a furnace going out or a major car repair.

Typically, one should have at least six months' worth of salary in a savings account for emergency expenses which, by the way, also serves as a cushion if you lose your job.

One savings account I like that gives me a fair amount of access to my cash is from Ally. Because of the Fed interest rate hikes, they are now paying 4% interest, although it has fluctuated mostly between 0.50% and 2.5% over the years I have had the account.

Even when it paid only 0.50%, that was far above the typical interest offered on a regular bank savings account.

But even when it comes to investing, you can't just blindly enter the markets. That's a sure way to lose your hard earned, and even harder saved money. Learning about how to manage your money and invest it may just be one of the most important things in life you will learn.

Why?

Because while money can never buy happiness, what it can buy is freedom. And that's a big deal. Freedom is what gets you ahead and allows you to make decisions you want to, that are in your best interests rather than be forced to make decisions because you have little choice in the process.

Investing also accomplishes something else. It reduces your need to incur debt, which saves you tons of money in the long run. It allows you to better deal with things like inflation, that we are having to deal with now. It gives you room to breathe. It also gives you more time to do the things you want to do, rather than have to constantly chase more money—using your time to do it.

Those side gigs.

We hear all about them. Working in a retail store part time or delivering food through Doordash, walking dogs, renting out unused rooms in your house or your entire house on sites like VRBO. 

These things will create extra new money. But unless you are going to invest what you earn, ultimately these things are worthless, and all they will serve to do is eat up valuable time you could be enjoying doing other more fun things.

Things that can ultimately be paid for via the proceeds from your investments. Which brings me to just one more thing that investing offers. More spending money.

Granted, it's all calculated, right? You can't just spend willy-nilly. But certainly, if your investments are producing additional income, at least some of that additional income can be used to spend on the things you want. To treat yourself. To splurge a bit every once in a while.

Take a recent example from my own situation. I bought a camper to enjoy some time with my wife on weekends and when we can take extended weekends. I didn't pay for the camper. My investments paid for it. And my investments also pay for the trips we take.

My investments pay for dinners out or having dinner delivered when we want to do it. Having saved on the things we need we now have the ability to afford the things we want. We can do more. We have more free time. And it is likely we will retire rather early. We are in our 50's and seriously considering it.

We wouldn't be able to that had we not invested. We certainly couldn't do that if we had to spend our time doing side gigs. Especially if those side gigs were only to pay for things. To spend the money earned from them.

Overall, when you think of making more money, the aim—initially—should never be to spend more money. It should be to save more money. To reap the rewards down the line rather than upfront. 

Many people claim saving requires sacrificing living. It's actually the opposite of that. When you don't save, you sacrifice your life to constantly chasing new money the hard way to replace old money you spent.

Money makes money. And the more money you have, the less work you have to do get more of it.

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Tesla Could Become a Literal Powerhouse, But Not in the Car Market

Ford Motor Company CEO Jim Farley has it right when he says that EV adoption comes down to charging infrastructure, and the deal it sealed with Tesla not only bodes well for Ford and Tesla, but it also bodes well for potential customers who want to consider buying a Ford electric car ultimately.

Granted, there are a lot of asides here. There is much work to be done as well to ensure we have an electric grid that can handle the capacity needed if more adoption occurs, and I think even when it comes to charging stations, the speed at which charging needs to occur has to increase.

We may never get to a point when you can charge your car nearly as fast as you can gas up. But if the time gap can be further closed, which I think technology can advance enough to eventually figure that out, it becomes more of a game changer.

The fact is that among charging technologies, Tesla leads the way and I think they will continue to do so. That makes the Ford deal even more attractive since other automakers may make similar deals with Tesla to convert their chargers to the one that Tesla was using exclusively with its cars.

Ultimately, I think Tesla can become to EV and charging what big oil became to cars.

And certainly, Tesla has the advantage. It has invested the most in the technology as well as adding charging stations across the country.

Elon Musk recently said that he thought autonomous driving was the key to Tesla stock and the company growing. I continue to believe he is wrong about that. I think the driving experience is still at the forefront of car buyer's interests and will remain so. 

People want the experience of driving.

And when it comes to most other automakers, that's the experience they are building into their offerings. Ford, for example, with it's Mach-E Mustang. It's about driving and performance and muscle. Chrysler is doing the same as it electrifies its Chargers and Challengers.

I don't think Tesla will lead in cars, but rather in EV charging. And I think that's a big deal. I also think that alone makes Tesla an attractive company to own right now, which is a major shift for me than the thoughts I had before.

I continue to prefer Ford and Rivian when it comes to automakers, and I have shied from Tesla mainly because I feel Tesla simply appeals to a different kind of car buyer than any of the other automakers appeal to.

Tesla is about technology, and it appeals to those customers interested in that as well as an environmentally conscious crowd. That's a different customer than one who wants to buy a Ford F-150 Lightning or a Rivian R1S. 

The shift to charging is what appeals to me now when it comes to Tesla as an investment. And if it shares its charging stations, it may also eventually share its technology. And that side of Tesla's business, I think, could be far more valuable than the cars it wants to sell. It could literally become an industry on its own which Tesla would likely dominate.

Can I imagine a time when most other cars on the market are adorned with a label much like many computers are, Intel Inside to simply say Powered by Tesla?

Yes. As a matter of fact, I can.

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Don't Just Blindly Enter the Markets

If there is one thing I talk about all the time wherever I write, it is about the importance of understanding and participating in the stock market. I talk about it as much as I do because I think being in the stock market trumps all other means of income and wealth building, aside from owning your own successful enterprise.

But there is a caveat to this that I often do not have the space to dig into more deeply, but it as important as my advice to understand and participate in the stock market, and that's to make sure that you know what you are doing when you decide to invest your money.

It's not unlike many things we do in life. We can't just blindly step into something and expect to have an instant good outcome. Knowledge is everything when it comes to not only saving your money but also investing your money.

The thing to keep in mind is that, generally speaking, the stock market is not all that complicated a place. Granted, some may find it a bit scary. Some may believe that it's rigged against the little guy. Some people think it's not a place to make money, but to lose it.

You can learn it.

A great book to read, if you have not already, which is often considered the Bible of Investing is The Intelligent Investor by Benjamin Graham, the man who was the mentor for Warren Buffet and a lot of the ideas he has about what to look for in a company—and essentially how to invest.

I will contend that it is not an end all be all guide. But it is a great book to get started to get your feet wet.

In order to ever be in the money, you must first be in the know. You need to know, when you pick a stock, why you are picking it, and keep in mind in so doing that you are not investing in a stock, but rather you are investing in a company.

What that means is that stocks do things day to day. The interest is not in what a stock does day to day, but what the company does and the value of the company over the long term. Many people get overly cautious or skeptical when a stock moves—they either get scared and sell at a loss, or they sell too soon if the stock suddenly jumps and lose out on the real future value the shares may generate.

It's not as simple as putting a bunch of company names on a dartboard, blindfolding, and simply start tossing darts. It is important to read balance sheets and understand how a company makes money, and how it will either potentially keep on making money or make more money.

It's important to know how a company manages its debt, how much money it keeps in cash, what the costs of operating the business are and what external factors may drive margins up or down. It's important to understand terms like price to earnings, debt to income, EBITDA, and it is important to understand how to compare companies against their peers or to evaluate companies that are similar.

For example, I invest in both Walmart and Amazon. But I invest in them for different reasons. For one, I don't view Amazon, really, as a total retail company like Walmart is. Amazon is much more about distribution and tech, and I think that separates Amazon. Both have lasting value, just in different ways.

For the same reason I invest in Ford Motor Company and Rivian for different reasons.

Granted, you could probably be relatively safe investing in iconic brands that have stood the test of time and likely will for the foreseeable future like Coca-Cola, Kraft Heinz, McDonald's, Proctor & Gamble and things like that. But there are myriad other businesses just as good, with just as much future potential to rocket, that are worth investing in.

You just have to make sure to know what you are doing and do your homework. Due diligence is a tenet of sound investing, and it is key to generating profits that can not only provide future income, replace current income, and generate wealth—but even change the entire way you view money and its benefits.

I think it is vitally important to point all of this out, because the fear I always have is that if people simply go blindly into the markets and then lose their money because they didn't know what they were doing, it will stop them from ever exploring more and they will likely never get ahead or reap the benefits of what the stock market truly offers. Most importantly, to ordinary working folks like you and me.

When I advise people to get into the stock market, I want them to actually succeed. And unfortunately, I can't always take the time to fully explain what it all means, what to look for, and how to actually do it. I also don't like to make investment suggestions, although sometimes I will, because I also feel it is more important for individuals to seek out information on their own, and to have their own perspective and ideas about why Company X is a good investment or not.

A lot of people get it wrong, including me. And you will get it wrong too. But at least you have the goods to understand what you missed because you did your own research in the first place.

At the same time, a lot of people want to rely on brokers or other so-called experts. They watch certain business news programs and want to trust that guys like Jim Cramer know what they are talking about all the time.

Never invest in a company because someone told you it is a good investment. Invest in a company because that's what your own research tells you. If you aren't sure, don't invest until you are. I can't stress that enough.

At the end of the day, it's your money and every penny is important. You work hard to make it, and you work hard to save it. Blindly investing what you have worked hard for and worked hard to save is as much of a waste of money as walking into a casino and expecting a big win or buying a lottery ticket and expecting a big jackpot.

Even a blind man doesn't simply walk blindly. He has the tools and the knowledge to get where he wants to safely be before he ever walks out the door.

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Don't Rush to Buy These Boycotted Companies' Stock

Not so fast, folks. As I work my rounds around the Facebook and Twitter spheres about this controversy faced by several companies over backlash against Pride stuff—Anheuser-Busch, Kohl's, Target and others—it seems the naysayers and deniers of the effectiveness of the boycotts are quick to simply say, "Thanks for the opportunity to make a lot of money buying shares of stock of these beaten down companies."

Normally I would agree with them. And maybe ultimately, they are right. Eventually these companies will make a comeback and perhaps come back stronger. It is certainly not outside the realm of possibility, and things like this do eventually tend to pretty much go away once the heat dies down.

I will say that being an avid and long-time stock market guy, I will certainly be keeping my eyes on it. I don't want to miss any opportunities to make money either. But I think the time is not now. Not immediately. Because I also think this backlash has legs left yet.

It would be best to sit this one out and wait until the fire dies down, the smoke clears, and the ashes have all been cleaned up.

Because this is a different feeling backlash. It's still quite hot. And I don't think consumers are near done with it yet and may not be for some time. Especially when it comes to Anheuser-Busch. Even just the other day when I went to Casey's to pick up a craft beer to share with my brother-in-law, all of the AB InBev beers were untouched while competing brands like Coors Light and Miller Lite were almost completely gone.

Nobody is buying Budweiser, Busch, Busch Light, Bud Light or any other AB beer. And that's the same story at Walmart, Schnucks and everywhere else I have been.

It's different because the fact is that consumers are just very tired of the whole LGBTQ+ thing. As I have said many times on this blog, they've simply had enough of the forceful spoon-feeding of the rhetoric. Not only that, but there's another interesting element here that needs to be considered.

It's the left's reaction to it.

Suddenly the word snowflake is being hijacked and used to describe conservatives. Suddenly, after the left succeeded in kicking Aunt Jemimah pancake syrup off the shelves, destroying iconic logos like the Land 'o Lakes indian and seeing name changes from Uncle Ben's rice to simply Ben's Original, forcing the Washington Redskins to change their name to The Commanders, the left is signaling a "wah-wah-wah" stance against conservatives over beer, and over our stance against the Pride movement.

Apparently, unless you are on the left, you are not allowed to have a position, take a stand, voice an opinion, or otherwise be offended by anything.

The left also makes a mistake to assert that we, the ones opposed to cancel culture, are now engaging in cancel culture. I have pointed out in my arguments that what we are opposed to when it comes to the Pride movement is in fact, in direct opposition to cancel culture.

Because ultimately the LGBTQ+ thing is trying to cancel gender.

This movement on our side against Pride and the LGBTQ+ movement is something that runs quite a bit deeper than other positions in the past—from both sides, frankly. It is an assault on family values. It aims to clutter the minds of children and influence them to question their identity. It pits normal lines of thinking against a societal fringe. And it is attempting to create bigotry where none exists.

If you disagree, you simply hate. And no one likes to be called a hateful bigot when that's not the case at all.

I simply think that there was a final straw on this issue that broke the camel's back, and it is going to take a lot longer than usual to heal the wounds. And for that reason, I am not so sure those discounts offered today are really discounts at all. I don't think they will bear fruit. And even if they one day do, it's going to be a long time to wait for them.

If you are a lefty thinking a pot of gold has been left on your doorstep, you may want to take careful hold of your britches and wait this one out. Because I think not only have you lost the LGBTQ+ fight to attempt to change the status quo of common culture, the companies who have fallen in your court have also fallen out of favor, and there's no guarantee a comeback is coming.

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Don't Let Your Money Leave You Stranded

WHEN IT COMES TO MANAGING YOUR MONEY, THERE HAS ALWAYS BEEN ONE STATEMENT THAT I HAVE STRONGLY DISAGREED WITH, and that is to just simply save it and forget it. In other words, you will hear a good many people, and even sometimes from certain financial advisors, to not watch the daily nuances of the markets—

Lest you wish to drive yourself completely insane.

The truth is that in order for you to fully reap the rewards of any investments you may have, you really do need to keep a good tabs on what's going on with them. Yes, it can be a painful thing to watch your portfolio in the throes of its ups and downs. It can be particularly painful when there are bad days, or strings of bad days.

If you go into the process of looking daily at what you have with the mindset that this is just the way that the market operates, and if you have done your due diligence and have confidence in what your individual investments hold for the long haul, the daily nuances should not have the agonizing impact that they might otherwise have.

Going it blind, to me, just seems like a foolish way to go about things. Perhaps it is a stupid analogy. But imagine driving a car that has no gas gauge. You simply drive around having some general idea of where you need to be and how much gas is left in the tank to get you there. But you have no idea how much gas is actually in the tank.

At some point or another, or at various points, you are going to find yourself on the side of the road trekking to the nearest gas station, gas can in hand, to make up for the fact that you got it wrong. You'll even be filling up when you don't need to.

That's time, folks. And time is money. And it's a cog in the wheel that can throw your whole day off balance.

In order to manage your finances, you need to know how much gas is in your tank so you can make wise decisions about when you need to fuel up, when it might be a good idea to pour a few extra gallons in the tank, or even when you are safe to drive a little bit longer before doing anything at all.

But it does another thing for you when you are watching the daily nuances. It helps you to also make wise spending decisions. Look, let's be real here. We save money not only for the future. But we also save it to have it when we want it to do things.

Watching the money and knowing exactly where you are at any particular time can help you decide if now is the time to take that vacation, or replace the car, or go out to eat one night. If I see I am up for the week, perhaps I allow myself to take a little bit of that money off the table to take it out of the bottom line and do something I want to with it. Conversely, if I am down, I'm not taking money away from it making a bad situation worse.

Money is not the most important thing in our lives. Obviously. But it can certainly have an impact on the quality of our lives.

Again, going into the process knowing the mechanics of money and markets is key, and helps us even to see a silver lining. Remember when the markets lost half their value in 2009? It was a devastating thing to watch really. But, having an idea that we have been to places like that before, and seeing that we not only gained it all back eventually, and then some, gives you great insight into what you need to be doing in times like those.

You could say that back then, in 2009, the tank was running on empty. The choice would have been unwise to just keep on driving hoping you would still get to your destination. The wise choice would have been to put some gas in the car and drive a little less.

And by comparison...spend a little less.

You don't want to find yourself on the side of the road dead while all the other cars whiz past you. You want to be on the road with them, getting to the places you want to, and need to go. Pressing the gas pedal is intent to move forward. But you're going to need gas to actually make the car go.

If you really want to reach your destination, it is best to avoid guessing whether or not you will actually have what you need to get there, or what you need to do in order to have some influence on whether or not you will ever actually arrive.

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Stock Market Correction No Big Deal

Without a doubt there are more than a few investors clutching at their hair and ripping it out in painful clumps at the sight of the DOW which has plummeted more than 800 points in just two days. And of course other indexes are falling handily as well.

For those who have no hair, they may just be tearing their eyeballs out.

I don't mean to make total light of the situation. It is painful for anyone to watch their portfolios lose hard earned cash. I don't like it anymore than anyone else. But these things are also inevitable, especially since the stock market has done extremely well for at least the last four or more years. At some point things simply have to turn back to a bit of reality. And the reality is that the markets are and were largely overbought.

And really, the selloffs in the markets are really due to panic, not necessarily sound financials. Earnings reports have not been that bad folks.

There is the issue with China devaluing their currency. There is the issue of the recent Greek crisis and the question as to whether or not Greece is really out of the woods. There is unrest with regard to Iran, and the entire Middle East. There is an upcoming potential change of characters in the political world. And there was a recent pull back in jobs data, and of course there is talk of the Fed upping interest rates.

So I get the unease.

But time and time again markets have fallen and risen back up, and then some. And I see no reason why this would not be more of the same. This is normal for the markets to do this, and because it does happen I always say it is a good idea to buy into the upswings in the markets, but leave enough cash behind so that when the markets lose their tailwind you can buy into the panic and cash in on the other end of it.

Investors are on a selling frenzy. As for me, I will be bargain hunting. Now is the time to buy. Not panic. The stock market correction hurts. But really it is no big deal. But it is a potentially big opportunity. Opportunities like this don't come around often. This opportunity has taken four long years to come around. I say pounce on it.

Monster Or Coke?

For some time I have been eyeing the shares of Monster Beverage Corporation since this happens to be one of the fastest growing companies and stocks in the entire beverage industry. When you're thinking about making any investment decision when it comes to beverages—which are usually quite boring—one certainly would be wise to pay particular attention to anyone in this sector who has the ability to make some waves unlike anyone else, and certainly Monster Beverage Corporation is doing that handily.

Until now I had not been able to come to a conclusion as to exactly how I wanted to approach my interest in this company. First, I wanted to take a closer look at other alternatives, and fully decide my best in to this fast growing brand and the company that owns it. And that brought me back around to Coca-Cola's doors.

That's because Coca-Cola is and has certainly been keeping a close watch on this company as well. And despite claims of rumors as much as two years ago that Coca-Cola was not in talks to buy into Monster, those claims have come full circle—and Coca-Cola now owns nearly 17% of the company and has two board members situated there as well.

My suspicion is that somewhere down the road—and it may be years down the road—The Coca-Cola Company will have quite a lot more to do with Monster Beverage Corporation, be it in distribution, new product development, or marketing. In fact, I believe if the popularity of the Monster brand continues, Coca-Cola may well just buy the entire company.

You have to keep in mind that one thing that Coca-Cola is good at, besides making Coca-Cola of course, is recognizing who the next big player is going to be in the market. Coca-Cola may not be as good at copying trends. But it certainly has the money to buy into who happens to be trendy. And that helps to make Coca-Cola a fairly interesting choice when it comes to buying those trends as an investor.

Coca-Cola has done this in the past by buying Glaecau, makers of Vitamin Water, and by buying into Green Mountain Coffee Roasters and the Keurig and K-Cup empire that belongs to GMCR.

It's true that Coke may have fallen short getting into the energy sector with brands like Full Throttle and NOS not having the ability to capture enough market share from Monster and Red Bull to make any real impact on its presence in this part of the industry. But it can make money on the distribution end of a popular brand like Monster (and has been doing so for quite a while), and it can make money by taking on some ownership of the brand portfolio.

So, what else makes Coca-Cola an enticing prospect over Monster?

Even though Monster Beverage Corporation is more than just the Monster energy drink empire, Monster is really the brand that put it on the map. But it also happens to be a trend. Coca-Cola can as easily buy into a growing trend as it can later sell its interest in that trend if consumer tastes change and the entire sector of the industry goes bust. Just owning Monster could allow you to enjoy a fantastic ride up. But if the brand hits a brick wall, it's also going to be one heck of a ride down as well.

Owning shares of Coca-Cola won't entirely insulate you from any negative movements in any given sector of the beverage industry. But it will provide the investor far more insulation than being entirely invested in a company that may have limited ability to recover from a change in trends that would affect its flagship brand.

If you want to enjoy the upward mobility of a company like Monster Beverage Corporation, I say buy shares of Coca-Cola and you'll enjoy the best of both worlds. And if other trends develop in this sector, you can bet Coke will have its eye on it, and will reach into their pockets to let Coke shareholders in on it as well.

A Lesson In The Value of Covered Call Options 2

READ PART ONE TO THIS

The simple truth is that I took a bit of a risk. When I sold the options contracts the stock was trading only within about 60 cents of the strike price. Being that the stock pushed early on past $15, and closed very close to $15 by the end of the expiration of the covered call options contracts I sold with a $15 strike price, this could have forced me to sell my shares and that would have been the end of it. I still would have enjoyed a profit of $2.17 per share for a profit of $2,821, plus the premiums on contracts sold and dividends received, but now I would be out of the stock, and forced to decide whether or not reinvesting considering my $17 valuation would be as lucrative as being in the stock for just $12.83 per share.

My short term thoughts on that are that it would not be likely that I would reinvest. I was convinced that the stock would not trade higher than $15 by the expiration date of the contracts I sold. A less than $2 profit on future shares purchased would simply not be in line with what I expect out of a stock.

The key here is, though, that no matter where I think the stock will go, and no matter where the stock was when I sold the contracts, I did not believe I was wrong that the stock would not trade higher than $15 by February 20th. Selling the contracts to someone who believed I was wrong is also key. He paid me for the right to buy my shares at $15 because he was convinced the stock would be worth more by February 20th.

Again, this is where a little bit of technical analysis helps, and something you will have to discover on your own. To go into the reasons WHY I was so convinced of this is simply too involved to try to explain here.

What did I sell?

In January, based on my opinion that Cypress Semiconductor (CY) would not close higher than $15 by February 20th, I (wrote) sold 13 covered call options contracts for Cypress Semiconductor (CY) with a $15 strike price and with an expiration date of February 20th. I collected approximately $585 in premiums for this. After expenses I received a total of $564.

Again, I fully intended that these contracts would expire worthless, that the stock would not trade above $15 per share, and that I would get to keep both the premiums paid to me AND keep my stock to boot.

Moreover, now that those contracts indeed expired worthless since we only reached $14.95 per share at the expiration, I now get to decide to sell more contracts for March to collect more premiums.

Remember that I think that the stock is worth $17. But resistance is around $15.48 based on the recent high. That is approximately 52 cents shy of $16. It closed on February 20th at $14.95. That is 53 cents short of the high and $1.05 short of $16. Will it push higher in March past $15? I think it will. But, how much higher will it go past the $15.48 high before experiencing a bit of a pull back due to profit taking? I think it will not see $16 by the March 20th expiration date of the next options cycle. I also expect that seeing a new high of $16 or more 30 days from now is unlikely. We are going to push a bit higher, but breaking the high by 52 cents just seems to me a bit of stretch unless some major news comes our way. I do not anticipate that.

Again, based on analysis I will not get into here, I think the stock will see a NEW high through March, but the trading range will be from $14.95 to $15.75 per share.

With that in mind, selling covered call options contracts with a March 20th expiration date and with a $16 strike price is a safe bet. Based on what I see now I do not believe that Cypress Semiconductor will close above $16 by March 20th. It is highly likely that the stock will close lower, and I will again get to collect my premiums for the contracts (written) sold, AND will continue to be able to hold my stock and receive dividends without being forced to sell my shares.

At this time I have not yet made a decision, but I told you I would provide you a real time example of what I am doing here. When I pull the trigger on a March 20th covered call options contract I will let you know how that went.


...to be continued
READ THE FINAL INSTALLMENT

A Lesson In The Value of Covered Call Options

I am going to give you a real time example of how stock options, done right, can make you a significant alternative income. For those of us who invest in the stock market, we call this generating cash on underlying investments that you wish to own, do not wish to sell, but that you wish to continue to earn from.

When I have talked about stock options in the past, I always stress that I do not buy stock options. I sell stock options. Why do I do this? It is simply a matter of this being my strategy. I buy stocks because I believe they are worth more than the price that they are currently trading for.

Pretty simple right?

Therefore I do not wish to sell the stock of a company that I feel is going to continue to make inroads, continue to advance, and continue to provide a great income opportunity over time. You sell your losers. You do not sell your winners. But when you have winners, you make the most out of them. You get every penny out of them that you can. You do not worry about what the rest of the markets are doing, or what the rest of the markets are thinking. You do your homework, you decide a valuation, and you proceed from there. And you keep in mind that everyone invested in a company has a different idea about what the company is doing, what it is going to do, and so this helps to create a vast market of individual investors willing to do all sorts of things depending on where they want to be with the stock.

You will not always be right, but that's okay. That is part of the game.

I said you have to do your homework, and repeat this here because if the idea is that if you do not wish to sell your stock, but want to continue to generate income on your stock, you need to have a good idea where you think the share price is realistically going to go.

I won't get into the math of that. You'll have to figure that out on your own. But there are tons of websites that can provide you valuable information on how to valuate a stock.

I currently own 1,300 shares of Cypress Semiconductor, and that's already great because it is a stock that pays you while you wait. My quarterly dividends on this stock are $143. Even if the stock does nothing at all, I'll earn $572 in a year just because I happen to own it. My cost basis per share is $12.83, and as of the close of today's trading, ($14.95) I am already up $2.12 per share, or have an on paper profit of $2,756.

I have no intention of selling my shares. I think the stock is worth about $17 per share.

But herein lies a part of the fun of this. I do believe I own a $17 stock. I do not believe that my $17 stock is going to trade at $17 within the next 30 days. I made this decision in January. In fact, in January I did not believe the stock would trade much above even $15 within the next 30 days, and moreover, I did not believe that the stock would close trading at $15 or higher 30 days from January.

It did go past $15 briefly. But as I suspected, it did not stick, and the stock took a significant down turn after pushing past $15. The stock broke resistance and people took profits. It's that simple.

Why is this important?

I want to make a monthly income on a stock that is now showing a profit. I want the best of all worlds. I want my $17 stock. I want my dividends. I want to keep on owning it. And I want the other investors in the market who believe the stock is going to go higher sooner to want to buy the right to buy my shares at $15.

I am looking for those individuals who believe in the same valuation I do, but believe that it will reach that valuation before I think it will.

This creates a market of buyers in the options world willing to pay a premium to have the right to buy shares at $15 that they are convinced are worth significantly more. If they can buy an option to buy shares at $15 and the stock goes to $17, they reduce their gain by the amount of the premium they paid for the option, but still win since selling the shares they obtain at $17 still reaps them a good reward.

Remember, the options allow them to buy the shares at $15. In their world, they are up $2 per share minus the premium.

Guys like me love this, and take this to the bank.

The options buyer  says "I can buy the stock, or I can buy the right to buy it at a price that I think is valued less than what I think it is worth. If I buy the stock I lose more than if I buy the right to buy it. If the stock does not do what I think it will do, I am only out what I paid for the right. Not the total loss of buying the stock outright and losing the overall value of my investment."

This is where guys like me come in and make money.

I am more than willing to sell you the right to buy my shares that I have $12.83 invested in that are worth $17 for $15 before they will actually be worth $17. Why? Because I am convinced that my $17 stock will not be worth $17 in the time period you think it will be. You are willing to pay me to buy my shares for less than they are worth thinking they will meet the valuation before I think they will. Even if I am wrong, and the stock does something unpredictable, I still get my premium and sell my shares for more than I paid for them.

Enter charts and technical analysis which is way more than I will get into here, but do your research and you can learn where technical analysis can help to make short term decisions on where a stock is heading based on market sentiment...

And that word I used earlier in this text. Resistance. It is important to know what that is, and how you can decide where to set your strike prices in short term options selling.


...to be continued

READ PART TWO

Ford Will Have A Solid 2015

I have been saying for quite a while that I think that Ford Motor Company is an under appreciated, and certainly an undervalued stock. Nothing has changed my mind about that. The fact is that Ford Motor Company has quite a lot of good things going for it, and I believe this will help to drive the stock price towards the end of 2015 closer to the $20 valuation, where I think the valuation should be.

Among some of the key factors in my belief that Ford Motor Company should do well this year are:

• Quantitative easing in Europe which should help boost European sales and certainly help the European economy.
• Very attractive sales figures already for the new aluminum body Ford F-150.
• 24 new models released last year, which in the short term cost the company a lot, but that should boost bottom lines this year.
• A recent increase in the dividend bringing Ford's overall yield to a little over 4%, which is a sign that Ford is confident it will be profitable and can afford to continue to provide a piece of the pie to their shareholders.
• If gas prices can remain below $4 per gallon, this should also help to boost truck and SUV sales, which are the bread and butter for automakers. With the new F-150 out, I think there is no doubt that Ford will continue to maintain it's #1 position in truck sales, and may even attract a few GM and Dodge lovers over to their corner to check this out.
• Ford has been trading in a range of about $14.00 - $17.00 over the past two years. I think it can break the $17 resistance on strong sales, growth, and other factors, and once it does the stock will take off.

Overall, I think that 2015 will prove to be a very good year for Ford Motor Company investors. Even at today's prices hovering a bit over $15 per share I am a buyer. I will still be a buyer up to around $17 per share.

Disclosure: The author of this article is currently long Ford Motor Company (F) and intends to add shares within the next 30 days.

Watching Cypress Semiconductor (CY)

Back on the 21st I wrote that sometimes you simply root for sideways stock movement, and what I was referring to were stock options, and in this case Cypress Semiconductor (CY) in which I sold some covered call options for with a February 20th expiration date and a strike price of $15.

What was the plan?

Sell the calls and hope for the stock to stay below $15. Then there is always the problem with Murphy's Law, in which, if it happens to be of any interest whatsoever to you, I happen to have a very intimate relationship with.

If I short a stock it goes up. If I go long a stock it goes down. And when I sell a covered call on a stock that has been in a trading range and sell the call above the trading range that I do not wish to sell, but simply wish to generate cash on, it breaks through resistance and goes higher than the strike price.

Ugh!

Not that it bothers me ultimately. I still make money on the calls I sold and I still was already in the money on the underlying stock. Still, once a stock does go in the money I like to try and generate that cash monthly.

At least for a little while anyway.

So I am watching Cypress Semiconductor and keeping my fingers crossed that a) it will drop below the $15 strike, but not go too far below the strike, and b) that in the meantime the buyer of my calls does not decide to exercise his options forcing me to sell my stock.

It is trading today so far at $15.37, which also by the way happens to be a new 52-week high.




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