To make money in stocks …As most people are gamblers and not...

To make money in stocks …

As most people are gamblers and not investors, myself included, I have written some notes on what I believe will be of benefit.

Your chosen stock will need …

An evangelising CEO, a real salesman. Would sell 24hrs all year through. Can feed the media, but not oversaturate. Has the political skin of Nixon.

News. Lots of healthy, speculative news that feeds the rumours that drive the stock.

An unbelievable story that everyone believes. “We are going to build another Sydney!” That’s impossible! Wait though … the CEO is incredibly driven, the media is onside anything that sells a circulation … What a story! There are discussions with companies and contractors, and the money they are promised turns them into public believers, there are placements to ‘Sophisticated Investors’, MOUs, Heads of Agreements, NDAs … so much is going on!

With all the above in place, you get volume and volatility; This attracts :

Speculators
Speculators speculating on speculators
Shorters
Mis-guided ‘investors’
Weirdo chartists
Flash trading algorithms, bots, cappers, shakers, dumpers
Twisted directors of your company, lending shares to be shorted
Demonic investment houses taking substantial positions to short from under you (and themselves, briefly)

From all this you get momentum and plenty of opportunity to make money


The greater the people involved in a fantasy, the more belief they bring to bear. It’s all very self-fulfilling.

At some point in this bubble, a reality nail will be driven in, and the pop is sudden. It can be straight down (with stairs attached) or can be uneven, whip-sawing up-down. Regardless of how the crash, always the crash. Everything, always the crash. Got it? Good. An important point.

Avoid reality companies. These might once have been speculative miners who have proved up a JORC resource, have funding and are about to do a PFS, a DFS or turn the wheel and start their production line. AVOID! Most times these will suck money from every angle. Speculation is driven into the ground and it becomes a terminal game of ‘how many ships left port last week?’ ‘how can we recover costs on labour?’ ‘do you think the price of tin will go up in future?’ You will never see a dividend either.

What about reality companies actually making a product that people want and driving a profit & increasing shareholder wealth over the long term? Yes, you can make great money from these. We are talking Value Investing here. There are probably 10 in the ASX. So time your entry according to whatever macro lunatic issue is playing through, like a GFC / Euro Crisis / China Crisis / War etc. There may also be a once-off issue with the company itself which truly is a once-in-a-decade chance to buy cheaply. You can make sizeable returns waiting for such an entry. Just locate those 10 companies out of whatever 2000. Also see : Graham, Buffet, Lynch.

Most publicly listed companies are there for themselves, not you. They are there because they needed money, your money, to attempt to get to profitability. Most will die a horrible death, be taken out for a pittance, meander through various director and product changes, and forever raise capital in a long winded death rattle. Most treat stock holders as idiots. Unless you are in one of the 10 real companies that earn and increase shareholder wealth, you can forget any kind of dignity, morality, ethics or accountability. ASIC will not help you.


Congratulations! If you’ve sat inside a value stock or had an adventure in any of the others, you’ve purchased low and sold high -> you’ve just made money in the markets!