A version of this first appeared on The Street

As investors we spend a lot of time on when and how to buy equities. Always searching for the right price, attempting to “call” a bottom, looking for a deal. Not enough time is spent on why and when to sell these stocks after they’ve been acquired. 

There’s a lot of noise out there for the individual investor. Analyst research, financial pundits, it can be a lot to sift through to come to a conclusion. There is a lot of debate about how buying and holding stocks is either “dead” or a lazy way to handle one’s investments.

Still one wonders what folks who still own Costco (COST) from the 1980’s or Starbucks from the 1990’s think when they read or hear commentary like that. If you’re wondering why you never hear about or read anything about people like this, it’s because they are far too wealthy and are having far too much fun to care to share their thoughts.

Still, even these long time holders would tell you they could have sold  several times along the way and pocketed some gains to put to work at much lower prices. Maybe they did. They might have made what I think is the hardest trade, selling something that appears to be bulletproof. 

Example, I sold some Under Armour (UA) after that earnings pop, but remain long, quite long to be honest. Why? Well, simple common sense would dictate that a stock trading below 64 one week that suddenly is above 85 PROBABLY has some room to pull back. That’s just common sense. In fact I’ve already bought the shares back in the mid and low 70’s.

Did I think the UA valuation was fair at 86? Yes, but it doesn’t matter. I certainly felt validated after their earnings release. I think the stock was overdone to the downside so it would be easy just to sit and do nothing, but why not schnitzel a little and have some cash. 

This is called trading around a core holding. I’m not suggesting this should be done daily, but every few months when stocks are swinging 20-30% why not take a little off? What a lovely problem to have if your stock continues to rise and never falls back below your sale price. (This almost never happens BTW) 

You could also call this strategy buy and hold…some. Here’s another example. Let’s say you bought DIS (DIS) in the fall of 2014 during the “Ebola selloff”. You could have gotten it below $80 and then watched the value of this decades old company rise by over 50% in less than a year. Does that seem normal to you? Clearly, $78 was a great price, but if an alarm isn’t going off when something approaching a $200 Billion market cap might be getting a little ahead of itself, you might want to stick to index funds. 

It can be hard to sell when you have gains, it’s human nature. It’s rarely a good idea to go all in or all out on any given stock on any given day. By selling some after a huge gain, you take a small victory and force yourself to do homework on a core holding which you should be doing regularly anyway.

​Just like buys, the best sales are almost always the hardest. Embrace them in volatile markets.

A version of this post first appeared on The Street

A common refrain from the ranks of service sellers, chartists and all folks who are considered “pros” is that their is some sort of magic or formula to the way the market trades. To their credit, there is, the market trades up, always for all time. Of course the mere utterance of this paints me with the broad brush of being a Perma Bull and certainly this sort of remark falls on some deaf ears on a day like today.

I have been called a Perma Bull on more than one occasion and it drives me a little crazy. Any positive thoughts on any company are met with “Yeah, but you’re a Perma Bull”, There are plenty of individual stocks that I’ve questioned the valuation on. There’s no point to give myself credit here because I didn’t make all the much money from the “short side” which speaks to my larger point to come.

I freely admit that being long on on any single stock forever without following the company is not advised. If the facts change, change your mind, it’s really not that difficult. But as far as the overall market is concerned, it goes up, always, over any time frame that matters to the general population. That’s just a fact. We may be down 2% today but in two years, chances are, the market will be higher if only by a small amount. 

If you invest in an S&P index fund today and reinvest the dividends quarterly you will most likely not double your money in the next two years or even five from these levels. Don’t fall victim to irrational expectations. But I’d be willing to bet that in five years time you’ll have more money. How much more? Who knows? I wouldn’t spend too much time worrying about it to be honest.

Lets say the market averages a 5% return over the next five years. That seems reasonable to me (that’s also below the historical norm). Throw in the current 2% yield and that gets you to 7% (also below normal). Let’s take it a few steps further. Take away quarterly compounding and change it to annual and go out 30 years. If you put $10,000 in an index fund today, contributed just $100 monthly  and it returned 7% on average for 30 years, do you know you’d have close to $200,000? ($197.410.22 to be exact,but with quarterly compounding you’d surpass $200k ).

I don’t know, that sounds like a pretty good deal. If you combine an investing plan like that with an employer sponsored 401k with a company match, it seems like you might have a pretty solid retirement whether social security is around or not. 

Just for kicks let’s take a look at a really boring stock that I happen to own and is widely held, Intel (INTC). Using our 30-year time frame, let’s just say for kicks you bought Intel stock on this day in 1986. The 87’ crash still dead ahead, Asian contagion, dot.com bubble, financial crisis also yet to rear their ugly head. What do you think the gain is in Intel over that time adjusted for splits and dividends? I’ll tell you, it’s 6,527%. The adjusted cost basis on the Intel from  1986…43 cents. I don’t want  to even attempt the math on reinvesting that dividend. Let’s just say you’re rich and end it there.

But let’s be honest, over the past 30 years plenty of companies have turned to goose eggs. I’ve never owned one yet but that day may be coming. A 6,000% return is not something that should be expected. But I would bet over the next 30 years there will be a number of stocks that offer a similar return. If you pick 10 stocks and only one matches boring old Intel, you’d be in pretty good shape wouldn’t you? 

Here are some others that would have turned out more than okay and their adjusted closing price for Feb. 8, 1986.


Coca Cola (KO) .92        General Mills (GIS) 1.68
Nike (NKE) .20        Apple (AAPL) .36
General Electric (GE) 1.32     Disney (DIS) 1.83

You can check the prices today and calculate the gain yourself. Yes, those are prices in “cents” you see. Can you find one of them? I think you can. It seems unlikely to me that any of us will ever get a 6,000% gain in shorting anything no matter how many times we do it. Maybe you can, I know I can’t. 

​But I also know that long term, being a Perma Bull is the only option. To think otherwise would be to suggest that things “will be different this time”. You know, another go-to by the pros. It won’t be different this time. 

​I am long GE and INTC at the time of this post.

This post originally appeared on The Street

Explaining technical analysis to a casual investor is a lot like explaining  fishing to a random guy who’s hanging out on the dock just to feed the seagulls. They nod, seem to understand, but the truth is they can enjoy their time on the dock just has much without even putting a line in the water.

Let me be clear. I have nothing against technical analysis. To dismiss it as useless is just as foolish as using it as the sole input in your investing process. The next “TA” that appears on the Forbes 500 will be the first, to my knowledge. But in today’s market where algorithmic trading and quant theory abound, it’s just silly to suggest technicals have no input into price. They do, but that doesn’t mean you should rely on them solely for your investing.

I use charts to determine exit (sell) or entry (buy) points. This is probably the best use for the average investor. It doesn’t take a rocket scientist to figure out that no matter how good the fundamentals of a company may be, if it is trading at a 95 RSI (relative strength to the rest of market) and is 10% above its’ 20-day moving average, you’re going to get a better price. 

But beyond that it can be tricky for most people. I’ll try and explain. 

You won’t hear this on TV often or from some technicians, but a chart can often be made to “say” anything you want, based on your bias. Even a good a good looking chart can be made out to be “overbought” or due for a “Fibonacci retracement” Change the timeframe, indicators, type of chart, and voila, you can craft a masterpiece to support your fundamental views.

This is when the problems begin if you enter on technical setup alone. What if it breaks your support which was your entry? I imagine a conversation between two rational people might go something like this.

First amateur TA: “Well, see there’s support right here just a few dollars lower and it’s already getting oversold.” 

Second amateur TA: “Oversold? The RSI is still close to 50.”

First guy: “Oh yeah, but look at the volume, capitulation for sure.” 

Second guy: “But it had larger volume twice last year, why doesn’t that matter? 

First guy, getting annoyed. “I’m focusing on this year, plus see this right here, this is an engulfing candle!” 

You get the idea.

There are technical analysts that can display extreme discipline and act only and solely on what they interpret on any given chart. The tickers are meaningless, just letters labeling a data set. These people are few and far between and if you’re reading this, you’re not one of them.

I’ve seen people that swear by technical analysis one minute then argue something has an inherent value the next. Which is it there Mr. Wizard? The technicals don’t apply to this long because it has “inherent value” or can be “taken out”. You can tell yourself whatever you want.

Don't get me started on some of these names they come up with. Sometimes I can’t decided if they are technical setups or rugby formations. This is bear flag, here’ a wedge, breakout!

Think of it this way, even if we were to accept that a chart can never be wrong, we must then accept that our interpretation of said chart is also correct and that we’ll have the discipline to act when that same chart tells us something different. GOOD….LUCK.

A fundamentalist might say, “I don’t know anyone that has a GPRO or wants one.” A technician might say, “Who cares, look at this rising wedge and MACD cross!” Both will mostly likely be right on different time frames. 

Of course admitting to yourself that you may not be the most skilled technical analysis is only solving one part of the equation.Don’t be quick to accept every person that talks about technicals as a master technician. 

I don’t know about you but I’ve seen pretty skilled doctors miss a thing or two on an x-ray and they just don’t let anyone pass the medical board. It seems possible that even the most skilled TA may miss something here and there. By they way, don’t make a point of pointing mistakes out to TA’s, they REALLY don’t like it. It seems to me that if your view of a stock based on the chart is repeatedly wrong, your process may be flawed, or perhaps the stock has decoupled from classic chart indicators. Maybe you should stop trading on the chart or offering recommendations on it. Just a thought. 

If a person is wrong 40% of the time in investing in individual stocks, they’re one great investor. It seems not only likely but probable that a chart may not be right any more often doesn’t it? 

Technical analysis is not hocus pocus but it can lull one into a false sense of confidence.  Know your limitations. Not being an expert technical analysis is probably one.

This post originally appeared on The Street

1. Trading on Margin

  “But if i can borrow at…” Let me stop you right there. I’m sure fortunes have been made using margin, but I suspect many more have been lost. Ask the geniuses who bought MLP’s on margin on the theory they could merely pocket the spread between the borrow rate and yield of the MLP and still make money. Spoiler alert! It did not go well.


2. Trading Weekly Options

This lovely investment tool has been brought to us since the financial crisis and my theory is that it’s a way for brokers to pocket some cash since they’re getting nothing for the deposits at their institutions. Why not juice fees and commissions? I can’t blame them. It doesn’t mean we need to participate. The next time you run into someone who regularly makes a “killing” trading weekly options, let me know, I”m sure they clean up at caribbean stud poker at the Bellagio in Las Vegas too. I can’t wait to hear all about it.

3. Trading on an Unrealized Gain/Loss

It’s impossible not to know how much you are up and down on a particular stock or investment, but I promise you all of us would be better off not knowing and would make better long term decisions if we were not concerned with the amount of a gain or loss. Remove this from your screen if you can. At lease make yourself work to find it. It’s not where a stock has been, it’s where it’s going after all right?

4. Stepping Outside Your Comfort Zone

My worst trade ever….Vale (VALE).I lost 50%, in an IRA no less. What’s worse, I probably dealt with it with for over a year. The fancy term for this is “opportunity cost”. Whatever, it was a waste of time. Let me now detail for you what I know about iron ore and the Brazilian economy. O.K., I’m done. Let’s move on.

5. Having Fun with Punditry

You know what the 500 in S&P 500 stands for right? There’s no way one person knows everything there is to know about 500 individual stocks, not to mention the countless others outside of that index. It’s entirely possible that you know more about one of your stocks than someone that gets handed a segment breakout a few hours before appearing on TV. Don’t trade off one person saying one thing on TV or noting that it struggles at some meaningful technical level. They may even not be good at reading charts. Do your work, take all information for what it is, information.

6.Not Reinvesting Your Dividends Before Retirement  

I’m sure there’s a good reason to take your dividends in cash from stocks before you reach retirement, but I’ve yet to hear it. “Oh, I’ll just hold on to the cash and wait for a pullback before buying.” Good luck with that. Next you’ll be telling me your timing the market by not reinvesting your index fund dividends and waiting for lower prices. Embrace compounding, it’s the best friend of the long term investor. Don’t overthink this.

7. Being Cash Poor

Inevitably when the market pulls back you hear from the experts “Now is the time to raise cash.” Wasn’t the time to raise cash when prices were higher? The point is you should always be raising cash or have at least 10% of your portfolio in cash. This can be done by periodically selling pieces of positions, rebalancing, or my favorite, saving some cash from your monthly cash flow and building the overall balance of your brokerage account. I’ve done some research on this and you can in fact not spend every dollar you make in any given month. In today’s market I like to have at least 20% in my taxable accounts, at least, so if we get an August 24th situation of last year or action like we had earlier this month, I can pounce.

While you won’t actually die if you fall victim to one of these sins, doing so over and over again will have a negative effect on your returns. I can guarantee you that. Good luck out there.

From the home office outside Houston, Texas, here’s the top 10 tweets you won’t read on Finance Twitter….

1. “Guys, check out how I screwed my subscribers on this trade.”
2.  “I guess all that unusual activity in options for stock X didn’t mean anything.”
3.  “My best ideas come from the world around me and stuff I do on a daily basis.”
4.  “I guess the chart was wrong.” 
5.  “I know I’ve been wrong for 40% but I still like this stock for this reason.”
6.  ‘I have no ideas for Twitter on how to improve their product.”
7.  “My follows are basically people that confirm my own bias.” 
8.  “CNBC’s programming and guest lineup is really on point today.”
9.  “I’m making a fortune trading weekly options.”
10. “Really I’m here to hold myself more accountable and not others.”

We hear it all the time. “The market is pricing in X”. “The market is telling us X.” Enough, over any period of time, the market is not saying much of anything. The market is just as likely to act foolishly as it is wisely. The market is a solid barometer of economic activity and global growth over longer periods of time, just don’t count on it to have any clue on a day-to-day basis.

Case in point. Kinder Morgan reported yesterday. You all remember Kinder Morgan, the pipeline company that was going to grow its dividend forever with no real organic growth. It was hammered for over a month last year and ultimately announced a HUGE dividend cut. Basically, you get the same dividend for the year as what they were promising every quarter previously.

The market had already anticipated this and sold off KMI almost 50% in the course of a few weeks. Smart market, well done. The announcement caused a brief reversal as shorts likely covered on expected news. Ultimately, KMI traded back down and was at an all-time low, or close to it, when it reported yesterday.

Despite the news being known”and covered endlessly, headlines read “Kinder Morgan cuts dividend” and the stock traded down immediately despite the fact the release only confirmed the guidance the company had given last month. How stupid.

KMI rebounded minutes later as actual humans read the release and realized there was no real news. It’s up quite nicely today which makes one wonder how the accounts that sold yesterday feel. The market, who had sold KMI yesterday, apparently loves it today. This happens all too frequently to consider this an outlier.

In after hours trading stocks will move 10% on revenue and EPS beats, yet trade down ultimately on guidance or the discovery of a key metric (i.e. tax rate) that assisted in an EPS beat. This can also happen in reverse. A restaurant stock can trade down on EPS but if revenues are ok and SSS are up nicely, the stock will reverse. 

This morning futures reversed nicely from negative to positive on talk of more central bank stimulus from the ECB, or more accurately, the promise of more stimulus. This spike did not last long and pundits dug in. “The market has already figured out that this is not good”. Pleeeeeease. A couple computers probably pulled the word “dovish” from some article  and bought futures. 

As people started to wonder what might happen to the dollar if the ECB does in fact pull out all the stops come March, oil traded lower and the futures turned. Mr. Market is fairly drunk on oil right now after all.

Sure enough within an hour this morning, indexes turned green…..as oil reversed. Yet, we are suppose to believe that something else matters right now. It’s much like accepting the notion that oil and the overall indexes always trade in lock step despite one being down over 70% from it’s high and the other not even 20%. It’s all very, very stupid and you can make yourself crazy following the daily fluctuations and trying to explain every 1% move up or down. The market is right over time, but never forget that it’s made up of participants, and those participants can act incredibly dumb at any given time. Do not rationalize long term investment decisions on what the market is “telling you” or more importantly, what someone thinks the market is saying at any given time. 

​As a general rule it’s never wise to worship false idols. I read that somewhere once.

Are we having fun yet? 2016 has not been kind to anyone. Even the small percentage of people that are now tooting their own horn about how they “called” this pullback, correction, crash, whatever, very little money has been made even by them. Oh, you think these guys are minting cash? Folks, if these people were putting any kind of real percentage of their net worth at risk with these crash calls they would have gone broke long ago, I assure you. 

Regardless, being a Pollyanna about market volatility today probably won’t help you make any money in the long run and grow your savings. Is it true what many people are saying? Are times like these when the long term saver can benefit? Sure, dollar cost averaging and reinvestment of dividend strategies thrive long term under these conditions but until the pain is over, they remain just words and words offer very little comfort when red is flashing for as far as the screen can see.

It doesn’t hurt to have some real world examples of panics past to see how one could have benefited in the market even while suffering large drawdowns. For the purpose of this I went back and looked at the (adjusted for dividends and splits) closing price of a few stocks we all know on July 15, 2008. Why July 15? Well, it’s sort of in the middle of the peak to trough correction during the financial crisis, but still before imminent disaster seemed well observed. Shorter, there remained a much better time to be a buyer long after July 15.

Imagine the pain one must have felt buying in July, 2008. Let’s take a look of a short list of  widely held names and the price you could have gotten nearly 7 years ago. The closing price Friday is next to it.

Amazon     67.03     570.88       Microsoft    21.57    50.99
Apple        22.56    97.13            Pepsi        52.47    93.93
Netflix        3.96    104.04          Wal-Mart    46.96    61.93
Google    258.30    710.49          McDonalds    45.92    115.21
Starbucks    6.24    57.58           Chipotle    72.34    475.94
Nike        12.93    57.55               AT&T        20.92    33.99
General Mills    25.41    54.74   Intel        16.16    29.76
IBM        105.30    130.03            Boeing    52.70    125.65

​You can calculate the percentages on your own if you care that much. A few things to keep in mind. These selections represent a cross section of sectors that are not terribly difficult to understand. Were these cherry picked and represent a few outliers? Not really, there’s some dogs on hear too. What is the IBM bull case today? Still, if you bought it in the midst of the financial crisis, you’re still ahead! We’re not even going to mention how it traded to over 200 at one point either. Whoops, I just did. McDonalds, Wal-Mart, these two aren’t exactly hyper growth stocks. Pepsi sells sugar water and salty snakes and General Mills makes Cheerios. These aren't’ exactly risky bets. 


Additionally, some of these names pay dividends, some quite large. Reinvesting those dividends over the past six plus years would have added to these gains handsomely. Are their oil companies and banks in which you'd still be down on having bought at this time? Yes, no question, but believe it or not there are a few oil names (the big boys) that are in fact still up even after the disaster of the past 18 months. 


At this point you might thinking, “That’s great, but I could have gotten a much lower price later.” Absolutely true, no doubt. But if you’re still holding these, do you honestly care? Almost all of these were also substantially higher in the past year as well. Good luck grabbing one name at a generation bottom, let alone a list of stocks.  It’s time in the market, not timing the market and finding good companies that are also good stocks. Try not to get bogged down in what a large index is doing at all times and try to find a quality name at a discount. It’s times like these you look to buy again. 


P.S. Gold is up about 10% over this time frame, in case you’re wondering.

Are you scared yet? Are you convinced your life savings are permanently at risk? You must read blogs, be on Finance Twitter or read research by large Wall Street institutions if you are. If you are scared, that’s okay. Part of the fun of the roller coaster is being scared, that slight chance that the harness doesn’t hold, the train jumps the tracks, later you play it cool and gloat to others who were too timid to ride. The market is not all that different. You get scared, but ultimately you get what you came for if you’re willing to hang on. 

Michael Batnick did a good job today of explaining how frequent drawdowns, corrections, gut checks, what have you, are in the marketplace. We can debate Fed policy all day long but I think we would all agree, QE and ZIRP certainly curtailed volatility in the market. It was a nice run. It’s over. Let’s move on.

That’s not to say the market is going to crash here. It could, it might not. I have no idea. Smart people can make clever arguments both directions and many have. There in lies the danger for the average investor. Perhaps we should all beware of “false idols”.

We know the big names that like to make their market forecasts sound as gloomy as possible. I don’t need to run down the laundry list of guys and gals that have made horrendous calls over the year that still somehow seem to find a forum on financial news and other outlets. 

One of the latest “predictions” is a 75% correction from current highs that would take the market BELOW the 2009 lows. I don’t know, I”m not a master technician but I feel like there could be some strong support at the March lows of 2009. Maybe we’ll find out, who knows, but I’m a buyer at S&P 700, I promise you that much. 

These “forecasts” usually include the following phrases: “if”, “could”, “possible”, “eventually”. This is a good way to forecast because you can point to something you “said” needed to happen first that didn’t which negated your bearish few. It’s a somewhat pathetic attempt to save face later when most savvy folks know that you’re merely an attention seeking charlatan. But there is a rub.

Every now and then one of these forecasts plays out. The weatherman who finally predicted the rain after 6 days of sunny skies will be hailed as a hero for having the courage to step out from the norm and suggest stocks are or were at a given time…a risky investment. 

This person or people will be hailed, their newsletter will gain subscribers and revenue will sore all the way to about 1/3 of the gains that the forecaster might have had from merely dollar cost averaging into an index fund over the same time of aforementioned forecast. They will also appear on television and in blogs for years following even after the market recovers having never “rung the bell at the bottom”. (No one does that either)

An average person will see this person on television, quoted in the newspaper, interviewed on the radio and think, “Surely, this person has credibility, why else would they be on TV?” There in lies the danger for some, they are easily persuaded.

Yesterday afternoon one of my college roommate called me. As it often does, the conversation turned to the market. Many friends and family members do bend my ear on occasion on stocks or their investments if for no other reason then they know I follow the news flow of the market on a daily business. 

At the end of the 25-minute conversation we hung up. He is likely buying a stock today we discussed based solely on what I said despite sharing these thoughts with me. “Those aren’t the stocks I usually like to buy and that area isn’t one I know much about but you seem to be saying buy at almost any price. I‘ll buy.”

I found this a little disconcerting. For a moment I thought about our conversation. Have I missed my chance to be a great broker, cold calling people and pushing stock for commission? Was my analysis of this stock to my well being because I already own it? Was it fair? Should I call him back and tell him to make sure he did his own work on it and reiterate that I thought the stock could easily fall another 10%? 

Sometimes I wonder if people that appear on financial TV or peddle there wares on Twitter have these same internal conversations. The fact is I am no more intelligent than my roommate. I have just chosen to apply my intellect to an area that he has not shown as much interest in to date.

When I worked in professional sports I would often be asked, “What is it like to be around so and so everyday? What’s he like?” My response to this was and usually is that it’s entirely possible that playing that particular sport may be the ONLY thing in life that person is better than you and me at. That makes them much more approachable. 

Anyway, these people you see and read, they may not know more than you just because they have an audience. Almost 5,000 people follow me on Twitter. Some might think I must have a certain acumen in investing to garner a following and therefore my thoughts should have more credence then say, your next door neighbor. They shouldn’t. 

If you were to ask me about a particular stock, and I don’t own it or never have, it’s not only possible but extremely likely that you know the stock better then me. I might share my thoughts on it but that shouldn’t throw you off your thesis of what could be an amazing opportunity. 

Someone I respect the other day asked me what my agenda was on Twitter. They said I seem to like to pick fights. I’d say I like to make counter points to arguments I don’t agree with but I can be combative, there’s no point in disputing that. 

I have no newsletter, I have no subscription services, I’m not selling ad space on this blog. I gain very little from writing these posts other then having a creative outlet. I don’t understand why I would have an agenda. I didn’t think it was against the rules to have a counter point to a piece of advice or tweet that I don’t agree with. 

I’ve challenged pundits using their own tweets against them or by reminding them what they said previously. This has been met at times with “You have too much time on your hands, man” Well, if you just go to the search box and type in a symbol and the handle of the person you are speaking to, this sort of information can be unearthed in a matter of moments. 

If it’s on a stock I own or am interested owning, I usually file that information away in my memory bank and the Internet makes it fairly easy to find later. Gee, sorry you were wrong. I just don't understand how people can be so sure of something using the same method they had previously which had turned out to be wrong. “Blank stock looks like death right here guys.” Um, it rallied 10% the last time you said that, is it possible you should analyze your process on that particular stock before letting everyone else in on it? I suppose we only mock “It’s different this time” when digesting Macro arguments. OK. 

The truth is the only guaranteed money in the market is selling research, subscriptions.or collecting ad revenue. “I don’t know”  or calm, nondescript statements do not drive revenues folks. 

The point is that there are many people out there that may know more about investing than you but no one knows your risk tolerance or goals as well as you do. Just keep that in mind the next time you hear the sky is falling. As long as your roof is strong, you’ll probably be okay. 

​Good luck out there.

Morgan Stanley downgraded Under Armour  (UA) today from equal weight to sell. First let’s give  credit where credit is due. Morgan Stanley’s previous target was $103 with an equal weight rating. Removing the ridiculous “rating” that the analyst community has to abide by, their price target pretty much nailed the top. Kudos to them. This is probably why they stock is getting hit so hard today. They’ve been right.

We can debate the value of slashing your PT $40 after it’s already off $30, but I guess that wouldn’t be fair. Also, I find it strange that they are still forecasting revenue growth of 20% for 5 years but slashing their price target so much. I don’t have a long list of stocks on my radar with 20% revenue growth  but I’m always looking for them. Please fire away Morgan Stanley.

MS sights a decrease in market share for UA, especially in women’s where they think the growth is at best decelerating. While I disagree with the overall market share point, I do agree women’s is not taking hold as fast as the men’s business. This is a very legitimate concern and MS is smart to point it out as it will be key to both the short term and long term bull thesis. I’d like to see more Giselle out in the marketing especially as Nike is set debut their new athletic bra line with FlyWire technology. It could be very cool. 

On the other hand, MS cites that North American apparel sales could be peeking. On the men’s side, they could be, but here’s the thing, I think they’re pretty close to Nike here already, the number one player. UA passed Adidas here at home and they’re not looking back….ever. Adidas just seen $300m on James Harden and Harden promptly went into the tank this season. 

Moving on to what actually matters, Europe. MS doesn’t mention this. This tells me they’re not really paying attention to the risks for growth. Adidas remains a very strong player in Europe largely on strength in soccer. UA has had little or no growth in soccer. I don’t see meaningful growth in Europe without taking share from Adidas and I don’t see that without better soccer offerings. I have to assume Kevin Plank is aware of this since he’s done a fairly good job of breaking into new markets for over a decade. But, it’s entirely possible they miss out entirely on soccer, that would be a major problem.

Also, the CFO is departing to become the CFO of Blue Apron in weeks . I found this announcement as a bit odd last year. He’s not leaving to become a CEO, same position, smaller company. The transition seems to be going well. They named a new CFO a few weeks back and both will be with the company for at least a month to help wth the transition. However, this strike me as potentially problematic. No mention by MS. 

MS also points to declining ASPs for shoes as a sign of trouble. This is verging on idiotic. If you were to go to the UA website today, you would see that the new Speedform Gemini has now “dropped”, as the kids like to say. The selling price is $129.99, the same price the original version debuted at last year. 

In a shocking move, Under Armour dropped the price of the original Speedform Gemini weeks before the new one hit as well as other models that are set to refresh. No one has ever discounted the previous version of a product when the new one is about to hit in any industry before. This is sarcasm. This is also why margins will be lower, more shoes mean lower margins. This should not be a surprise. 

They also note that basketball is not gaining as much traction as once hoped. Ummmm, yeah, I’m going to go ahead and disagree with them there. Whenever a new version of the Curry 2 hits, you basically have a week to order it in any size that people actually wear. These shoes are showing up more and more at youth basketball games I attend. It would strike me as odd if my area is the ONLY place this is occurring. But it could be I guess.

Also absent in the MS note is the pending stock split. I have mixed feelings on this only because of the structure, the whole Class A and Class B thing. There will be a small cash distribution when this split occurs, which can be anytime and my take on this is that UA will use the new class of stock to attract athletes going forward. Notice this announcement came right around the same time they locked up Stephen Curry to a long term deal. He’s getting shares in the company, much like the same way Tom Brady did years back, only now Class A shareholders won’t be diluted. This seems rather clever to me, but I could be wrong.

So now you have your spokespeople motivated to A, not go elsewhere and B, tell all their buddies what a great deal they have with UA. Let me tell you something else from experience. There is nothing pro athletes like discussing in the locker room with each other more than what they’re doing with their money. Ok, food is probably first, but money is a close second. If Curry is a shareholder and a major spokesperson, do you think he might try to convince others to come aboard? I don’t know, maybe right?

At this point you might be thinking, Carmine, that’s great but we’ve heard about folks challenging Nike before whether it be Adidas or Reebok, it never worked out. That’s a very fair point, but I would counter that I don’t see UA overtaking Nike, certainly not anytime soon but if you believe that UA can get to 1/2 the size of Nike, that’s a four bagger from this point. I think that’s pretty likely.

Also,I don’t recall Adidas and Reebok ever having the reigning MVP in basically every major sport before and the number one golfer in the world at any one time, but I could be wrong. You realize that Russel Wilson, Cam Newton and Tom Brady are all under the UA umbrella now right? I like the chances of one of them winning the Super Bowl and I think we know who the MVP is. 

Guess what else is this year? Oh, the Olympics. Do you think their might be some hype around Michael Phelps? Yeah, guess who he endorses. I’d also bet $1 that someone we’ve yet to hear of becomes a huge story this summer and is already UA sponsored. But we’ll see.

That brings us to PE. Have you ever invested in something based on PE and tripled your money? I’d love to hear an example(s) of something that was trading at a 15 multiple that tripled within 3 years. I’m all ears. Apple and Gilead were “cheap” at 133 and 120 respectively based on PE, they’re both down like 30% now too. So spare me. 

UA has guided to over $7.5 Billion in sales in 2018. Assuming they meet this, and they’ve never missed on their own guidance, that’s about 2x sales at today’s valuation. MS expects 20% revenue growth for the next 5 years despite their concerns. So in two years I’m going to be holding a company that sells for 2x sales and is growing revenues at 20%. I hope I have this problem with all my stocks. 

​If you’re looking for a winner for the next 6 months, UA is probably not for you, I have no problem saying that. But I do know I’ll never know exactly when the momentum will shift. I just know when moves seem silly in both  directions. Closer to 100 I was a holder and seller of some, down here I’m a holder and buyer of some. We’ll see if the story actually changes and not just numbers in an spreadsheet.

If you’re dumb enough to believe that selling everything in your 401k and going to cash is a smart move right now, read on, because you might be dumb enough to take some free advice from me. Let’s examine what a 401k is before we even address the idiotic notion of attempting to time the market with 100% cash positions at any given time.

Over the years I’ve seen many 401k plans, mine, my wife’s, family, friends, they come in all shapes and sizes and all have their own drawbacks and advantages. Options are limited, fees can be high for the services provided and some folks, if not many, can find the funds offered confusing and hard to understand.

If you’re nodding your head right now, congratulations, you’re probably on the way to a comfortable retirement because you’ve made the effort to becoming aware of all of this already and certainly don’t need any help from me or anyone else for that matter. But let’s continue anyway.

If you’re not contributing to your 401k, start Monday, if your employee will let you, you’re passing up free money. If your employer matches dollar for dollar up to 4%. At the bare minimum you should be contributing 4% or whatever amount gets you that full match. By not “participating” you’re literally setting 4% of your salary on fire. It’s the only free money there is. They’re not going to write you a check for not participating at the end of the year. Plus, you lower your tax burden today as your contribution comes out before income taxes are assessed. That’s quite helpful for a number of reasons, but particularly so if you live in state with income taxes today but live in a state without during retirement. Let that marinate for a moment. Okay, let’s move on.

If you’re into your 50’s now and have followed this sage wisdom for a few decades you probably have quite the tidy sum built up and really don’t like the idea of “giving some back” during a serious market correction. Let me put your mind at ease. You will  before you retire and there’s nothing you can do about it, but you’ll still have more saved than you do today.Feel better? Oh, that’s right, you can go to cash as Brian Kelley of CNBC”s Fast Money has suggested, twice this past week.

I don’t want to be vague about this so I’ll simply say going to 100% cash in your 401k is probably the worst financial decision you can make in your life and really anyone suggesting otherwise is either not invested in a 401k, or is trying to make a name for themselves with a big “market call” using your money. I’m not sure this is has bad as making the bold call of not reinvesting your index fund dividends quarterly as “putting my money where my mouth is” but it’s pretty close.

I’ve debated this with people before. Sometimes I’ll hear, “I’ve had some luck timing the market before.” My response to this rationale counter point is typically, “What’s that word you just said before timing the market.” The discussion usually ends shortly thereafter. 

Here’s a stat I tweeted earlier this week. In 2014, the S&P had a return of 13.7% but if you missed just the top 10 days in the market that year, you would have suffered a loss of 3.1%. I’m sure that can be timed. Go ahead try. If you’re going to say that’s just one year, there’s plenty of other examples just like that one and I’m not even going to address compounding dividends and capital gains. (which add up quite nicely, look at your year end statements over the past 5 years)

One of my favorite books that addresses wealth accumulation is “The Millionaire Next Door.” If you haven’t read it, you should. You may not agree or be persuaded by everything in the book, but if nothing else, it will make you think about your financial goals and savings. I’m not sure anyone can spend too much time on the subject.

The book is basically a study of the habits of millionaires and their findings can be surprising to some. For example, of the millionaires surveyed or spoke to, 95% owned stocks with most having at least 20% of their wealth in publicly traded companies. Strange, that doesn’t really suggest this whole thing is a casino.

The authors then go on to reveal that many millionaires don’t follow the stock market on a day-to-day basis. I guess you would call them passive investors. (I know, that’s code to many of you for lazy, but hang in there.) Thinking that there’s probably another way to make money in stocks, the authors right went to the floor of the NYSE and asked  many stock brokers about this phenomenon and they believe one stated it best. 

“I’d be rich if I’d just keep….(my stocks, but I) can’t help but make trades in my own portfolio. I”m looking at the screen every day.” 

What’s the definition of insanity again? The purpose of this isn’t to discourage trading stocks frequently. You certainly can do well, but I devote a certain percentage of my overall stock market portfolio. That way if I screw up, which happens often, the rest that I have “idiot proofed” can help out my savings. Part of that is regular contributions to retirement accounts and a 529 for my children’s education. 

If you have a trading portfolio, certainly, have some cash on hand. But shouldn’t you always? Otherwise, you’re sort of in a position to be a forced seller at any given time, especially if you use margin. Also stupid. Go find a wealthy person in their 60’s who contribute a majority of their savings to trading on margin for any length of time or timing the market in the 401k. Let me know when you do. I won’t hold my breath.

Do I think the market can go lower? I expect it to. Do I have a fictional number that I’ve come up with as to where a significant bottom can take place? I do not. That seems like a huge waste of time.  I bought Verizon (VZ) and International Paper (IP) last week. The carriers seem to finally be gaining some leverage on the actual smartphone makers now and Verizon is nicely tied to the United States. While Amazon is redefining human history as many like to pontificate on, International Paper makes boxes they ship all this stuff in, seems to me IP should be ok and both pay close to a  5% dividend. 

Sorry, got off track there. Let’s say you have a fictional target your magic chart showed you one night in your sleep and the market hits it at 1:00 p.m. Thursday. So you log into your 401k and buy back everything you had sold when you decided to go to all cash. You know you get the price at the end of the day right? The market could rally significantly from your target and you end up buying in much higher than your magical target. Now what?

But let me tell you what you do guarantee yourself. Fees!!!! Oh, BK didn’t mention that. When you sell in a 401k there are fees involved and, oh by the way, you can freeze yourself from buying back certain funds for up to 60 days after selling them. I hope your magic target isn’t hit during those 60 days. It’s okay, you can wait for the next correction if you miss out on getting back in. Also, please don't confuse a 401k plan with an IRA or RSA that allows you to own individual securities or ETFs which can be bought and sold throughout the day.

In closing, I saw a lot of people saying that it was pretty telling that Kelly was getting harassed so much for being bearish on Twitter and other places. I have no problem with anyone being cautious or bearish at any given time. My problem is telling people to treat a 401k plan like a trading account. That’s dangerous and the fact that the following day they coaxed him into repeating himself on Fast Money in the mere attempt to start a verbal spat or goose ratings. Shameful, Did you notice how Guy Adami just sat there with his mouth shut? Does he ever do that for that long a period of time without offering a sharp quip or pertinent information? My guess is he knows it’s stupid to try to time the market in a 401k so he just kept his mouth shut. This stuff isn’t hard to figure out.

​I know I can’t predict “black swan events” which, put another way, are called “life events”. I do know if you equally distribute compounded savings over a period of decades you’ll probably have a nice retirement. You can thank me later, like 2050.