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FEBRUARY 29, 2020
STOCKS: MSFT, AAPL, ACAD, V, MA, NFLX, TSLA
MACRO: SPY
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT, AAPL, MA, V, NFLX, ACAD, TSLA
It was a horrible week for anyone invested in the stock market, even for guys like myself, who have been through events like this time and time again. It does get tiring watching a few month’s worths of gains get wiped out in a matter of days. The market always falls much faster than it rises, that will never change.
Speed
The speed of the declines has changed dramatically, due to the advent of technology and changes in regulations. It makes the moves more violent and faster. It could take weeks in the past to see the S&P 500 fall from peak to trough; now, it literally can take days. I couldn’t imagine how fast the tech bubble would have unfolded in today’s environment or the financial crisis.
Algo’s ETF, leverage, and the absence of market makers due to limitations on risk-taking are some of the problems today. It means faster declines and negative feedback loops. With Algos searching for the buyers, all chasing each lower, ETF dumping stocks out of their basket to remain in balance.
My Tricks
Anyway, it’s unsettling, and a little trick I do to get myself through the storm is pretty simple and basic. I review my portfolio holdings each morning before the carnage begins and ask myself how the current scenario will affect the long-term health of the company. Will the company be different because of this event in the next 1, 3, and 5 years? If the answer is “no,” then my decision is simple; there is nothing for me to do.
Companies like Apple, Microsoft, Visa, Mastercard, and Tesla, which are all some of my largest holding by weightings, may see struggles in the short-term, six months or so, but are likely to rebound over the longer-term. With Microsoft, delivering the needed software and architecture for the cloud, Apple the services and hardware we have all learned to love, Visa, and Mastercard, which are the backbone for eCommerce. Acadia Pharmaceuticals another long-term holding for me, has nothing to do with the troubles at hand with its drug Nuplazid.
Anyway, doing this has given me the ability to sleep at night, and with no leverage, I don’t have to make any bad sales. There is nothing for me to do at this point, but ride it out and wait. If you are a short-term trader, levered up, or in speculative positions, then moving to the sidelines is where I would have been the last few days waiting for the storm to pass.
My Rules
My rule with investing is to let the dust settle, whether it be when stocks or markets plunge or rise sharply. Right now, the markets are repricing, and they are more likely to overshoot to the downside in this price discovery period.
So as I have been telling my members all week, it may be tempting, but sometimes sitting on your hands or walking away is the best option. There are several great Netflix shows to watch during the market turmoil. Sometimes the best trade made is the trade not made at all.
I have told my clients this week, I have made no changes to the portfolio. Invest In Our Strategy
History
All of us are here today because we had a parent or grandparent that somehow managed to survive the Spanish Flu, WWI, the 1929 crash, the great depression, polio, WWII, the Korean War, the Cuban Missile Crisis, the Vietnam war, the watergate scandal, raging inflation, the 1987 stock market crash, the dot.com bubble, the financial crisis, and whole slew of other things. Premium content – How I’m Feeling After A Horrible Day
Somehow the US GDP has managed to do this:
Meanwhile, stocks have endured, and if you look really hard, you can see the little pink circle. To make it easier, I drew in a line so you can see where you are today.
Is the world coming to an end? Probably not.
-Mike
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.