“When I was eleven I got the truly dict

My uncle pulled me to the side, and he schooled me quick

Told me some gooey spit:

You can’t get paid in an Earth this big?”

Cam’ron

I found myself in an interesting situation. It happened several months ago. I experienced what some might call, “f*ck you money.” I thought about buying a ticket to Jamaica.

I am now 10 years in the game of markets. I just had the best and worst year of my career. The gains I saw were quick and fleeting. I was humbled beyond what I thought was possible.

Earlier this year, while my portfolio was booming, a good friend said to me, “You’ll return to the average. That’s where we all end up eventually.” I thought that was a great line for the humility and the mathematical truism behind it. I laughed.

I should have taken him seriously.

I took abnormal risk. I had abnormal gains. I had abnormal losses. That’s what happens. But it happens to everyone. In his thirties, Ray Dalio lost everything. He had to sell his car and borrow $4,000 from his dad to get back on his feet.

What I am about to share are 50 things I learned about the market in 2018. I write this down to become a better thinker, a better person, and a better investor. You can find links to lessons learned in previous years at the bottom:

1. If you’re in the market for quick riches, you will lose.
2. The worst thing you can do is talk about your portfolio when it’s up. It becomes a social status rather than a means to savings and self-sufficiency.
3. The next worst thing you can do is act like you’re the genius behind your gains when most likely it’s luck or coincidence or a bull market.
4. But the worst thing you can do, the absolute worst, is take credit for your winners, but not also accept responsibility for your losers. It’s not algos or politics, it’s the decisions you made.
5. 2017 was a reminder of why cash sucks. 2018 was a reminder of why cash rules. One of these is not normal.
6. It’s easy to think in days, hours, and minutes. It’s hard to think in months and years. One of these is more important to your well being.
7. Simplify the noise around you by controlling your devices. Restart your phone to its factory settings, be selective with the apps you add, rework your notifications on email and text.
8. In uptrends, everyone looks to technical analysis. In downtrends, everyone looks to valuations.
9. Quarterly earnings movements are noise. Avoid them at all costs. Stocks move 10%, 15%, 20%, in a few seconds after an earnings report. Don’t ever play in that game.
10. People will research a car or a TV for days, weeks, and maybe months before buying. But they will buy a stock in 30 seconds. I did not make this saying up.
11. If you don’t read one investing book per month you will lose to others who are.
12. You only do dumb things when you don’t have a plan.
13. Systemizing your investment decisions will minimize stupidity. Especially elements of human cognition of which we have no control. Algorithms are your friend.
14. It’s not about the smart people in markets doing smart things, it’s more about the dumb things happening you can’t make any sense of.
15. Anyone who says “institutions” has no idea what they’re talking about.
16. Anyone who says “smart money” has no idea what they’re talking about.
17. The stock market is filled with gimmicky sayings. They’re fun. But they’re dangerous. The quicker you realize that the better off you are.
18. Free cash flow was my favorite metric. Now, it is margins. Control of margins is power. That’s a company you want.
19. If you have strong free cash flows and control over margins, you might have found something.
20. Buybacks after the fact are meaningless. You want to find companies that haven’t yet announced a buyback, but are in a position to do so. Sell your shares back to them.
21. If you have an idea, always remember that’s all it is. An idea.
22. You will be better off having fewer ideas, and more focus on a select few key things.
23. Technical analysis is best used for relativity. For example, the performance of one asset vs. another.
24. Charts paint a picture. They are sentiment. Look for one or two important levels and that’s it. Because if you look long enough, you will find anything you want and that’s dangerous.
25. Relativity is just as powerful in fundamental analysis as it is technical analysis. If you are buying company A, why are you not also buying B, C, and D in a similar field?
26. You can’t time the market, but the market also isn’t going anywhere. It will be here today, and tomorrow. Never rush.
27. You never had the money if you never sold, and took the gains.
28. Directional options trading is designed for huge risk and huge reward. But even with that being said, you should have a ratio. If you own 10 calls, find a way to own 2 or 3 puts.
29. Hedges usually suck, until suddenly they matter.
30. Everyone has had, “big gains” and then missed out on selling at the perfect time. Everyone. That’s part of it. Don’t dwell. Think proactively about what will change in the future to reduce that occurrence.
31. 2018 is a reminder that you can never read anything on the surface and accept it as true. Fact check as much as you can.
32. Anything you read in the news is most likely a PR coordination between multiple parties. Don’t fall for PR.
33. When listening to the news, headlines or “experts” make sure you research their motive and bias. Why would they say that? Why are they saying it now?
34. I used to believe politics don’t matter when it comes to stocks. I was wrong.
35. The volatility of politics can spill into the volatility of markets.
36. Politics create the best shorting opportunities.
37. Politics rarely create great buying opportunities.
38. A great portfolio manager I know told me, “never short on fundamentals, only short on news.” I agree with that.
39. Find the people who did well in bear and choppy markets. Those are the people you want to know and surround yourself with.
40. Write everything down. Put your thoughts on paper. Reflect on them when something good happens whether it’s good or bad.
41. You can’t be a good investor unless your personal life, at work or at home, is also in a good place. If not, they will eventually clash.
42. Never do anything with your portfolio after a long night or not enough sleep.
43. Having a stop loss is good. But having a profit target, a point at which no matter what you will sell for a profit, is more important.
44. Your best positions will always be the ones everyone else hates. And when their pessimism shifts to optimism, you’re onto something.
45. In life, talk is cheap. In markets, talk is expensive.
46. Your desire to learn more about philosophy and history will help you draw parallels to the things happening around you.
47. Money is not the point of investing. If it is, you will naturally gravitate to more risk and bigger swings.
48. Investing is for happiness, community, intellectual pursuit, and the growth of capital markets in your country or the companies you care about.
49. Everything decays over a long enough timeframe. Nothing does not decay. In markets, you are fighting against this natural force. You are playing defense, not offense.
50. Watch more stand-up comedy. They turn the absurd, the difficult, and the hard to comprehend into humor. Now imagine if you could do that with markets.

Thanks for reading.

Remember to follow me on Twitter and StockTwits. Also, you have to sign-up for my email newsletter.

To read my lessons from 2016 and 2017, please go here and scroll down.

See everyone in the new year. I am planning a post in early January about how I will position my portfolio, and what I am looking to accomplish. 

Stay tuned,

Stefan Cheplick

A lot of people have been telling me I’m crazy.

This is not the market you want to be buying dips in, they say. Don’t do it. Run away.

Everyone has done stupid things. I have done many throughout my life. But when I reflect on them, I realize most of the worst decisions share one thing in common:

Me, following the herd and letting the collective consciousness influence my decision-making.

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For the last several years, a good friend of mine has been saying, “this is the most hated bull market of all-time.” I could not agree more. And I agree with him even more as of this writing. People hate this bull run. They are always looking for reasons behind the next big crash. They all want their own movie made after them.

Paul Tudor Jones, the legendary trader, was on TV the other day. Naturally, he rides into town after the market has suffered a 10% drop. Not before, but after. He went on to say, “I think in the next year it will be, from where we are today, at least 10 percent down and 10 percent up; maybe 15 percent either way from where we are right now.”

I appreciate such foresight. But, also: I think we know how he positioned his portfolio in the days before.

Mr. PTJ is now selling to you.

Turn the TV off.

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From November 1 of this year through December 6, online holiday shopping in the United States hit a record high. In this short period of time, people in the US collectively spent $80.3 billion buying things across the Internet. Where was this number last year at this time? $67 billion. No big deal.

I am fascinated with tech and Internet stocks right now. Mostly Apple and its recent plight. It’s down about 30% in two months. You don’t often see orderly drops like this among the biggest companies, especially while the rest of the market is, on a relative basis, outperforming it.

There will be opportunity.

The stock market is the only place in the world where people feel more inclined to buy at higher prices and sell at lower prices. I wait for the day I walk into a store to see everyone rushing to the most expensive items while scoffing at the fire sales.

The stock market is also one of the few places where being optimistic is often more contrarian and more difficult than being pessimistic.

I think the current market correction and also Apple’s entire drop can be traced back to a few key stocks: GE and Facebook. These two have made it into everyone’s portfolio over the years. The other day I was looking over a colleague’s portfolio and even they, somehow, managed to have exposure to GE Corporate Bonds. All thanks to one of those, “we make investing easy” apps.

As GE and FB meltdown, so does everything else. The structural integrity gets weaker. It becomes more natural to salvage your winners and cut back on risk before another Facebook or GE happens to you.

Every time I hear, “FANG” my brain melts a little. There are over 3,000 stocks in this market. The collective market should never focus on just four with such obsession. If you really want to control the direction of the market, you would take control of the biggest names – the heaviest retail stock exposure, forcing a liquidation event in them. That’s more important than any other headline or political event. I don’t care about China. But if you force a sell-off in most widely held names, well, uh-oh.

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I am a wannabe technical analyst.

I have no real certification, but I like to check on trading ranges and overall movements of stocks. But gloomy technical words are a state of reflection on what’s happened with little thought toward what’s going to happen next now that it has happened. I have been in this game for 10 years now. I remember when I thought these words mattered.

To this day, no one has provided conclusive evidence that falling breadth leads to more lows and death crosses lead to more crashes. The best technical analysts I know are actually aware of their limitations and the pseudo-science they perform. Rather than full truths, their analysis is used to weigh trading entries, exits, backtesting, and overall risk management. They don’t let it govern their entire outlook.

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Not long ago, I was traveling Mexico with my number one muchacho from college. He told me he’s salivating at the sight of a major crash. He has been hoarding cash for years waiting for something big.

How much longer will he wait? How many more people are out there like him? Waiting… waiting…

The headlines will tell you otherwise. It is enjoyable to watch such top callers. Especially as their dollar cost averaging strategies are literally, without hesitation, buying all the dips they’re warning everyone else not to buy with every paycheck they get.

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In 2009, the population in the United States was about 305 million. Today, it’s about 326 million. In 2009, there were estimated to be about 210 million people with an internet connection. Today, it’s about 300 million people. That means almost every single American of any age has access to Internet now.

The demographics of America are getting stronger, bigger, and smarter. Millennials are the single biggest age group this country has ever seen. They are also dedicated to technology, its costs savings, efficiency, and how it can improve the lives of everyone around us. Yes, they have some student loans. But yes, they now also have one of the strongest post-war job markets on record.

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In terms of my positions, I’m still holding my core longs, which most of you know. And lately I’ve begun watching both GE and Apple very closely. GE could go bankrupt. But maybe, just maybe, there’s a chance for an underdog turnaround story on par with Benny Rodriguez or Peter La Fleur.

And that leaves me with one final note:

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• What Scares a Legendary Hedge Fund Manager the Most

• How Warren Buffett Thinks Financial Bubbles Grow To Massive Sizes

“Here, if you have a milkshake, and I have a milkshake, and I have a straw.

There it is, it’s a straw, you see? Watch it.

Now my straw reaches across the room and starts to drink your milkshake. I… drink… your… milkshake. I drink it up!” – Daniel Plainview

I am all for free trade. Countries should freely exchange their goods with each other. But that’s only true if the playing field is level for all involved. No one should be taking unfair advantage of the benefits of free trade. When they do, it is no longer free trade.

Today, there is nonstop talk about “tariffs.” You can practically hear Jay-Z from the rafters at the Barclays Center, “I’m not a tariff man, I’m a tariff, man.”

Not long ago, we spoke equally as much about “TPP.” Remember that? Many have forgotten. It stands for the Trans-Pacific Partnership and it was all over the news in 2013, 2014, and 2015. Ironically, what we read about trade wars today are essentially the same thing as TPP. They only have different names. But achieve the same two goals:

1. Level the playing field for other emerging countries in Asia who want to trade and build alongside the US.

2. Slow down aggressions, for example in the South China Sea, and give others a chance act unilaterally.

South East Asia is a remarkable region of the world. I have travelled to several countries there. Walked the streets, ate the food, and mingled with their people. I have seen the boom and economic movements first-hand. In Vietnam, more than half of its population is under the age of 25. That’s 88 million people under 25. I’m not sure any other country has a demographic as exciting as that.

But something is off in the region. And it’s been off for a number of years. It even reaches Japan. Hopefully you can easily see the following image:

I think any sensible person can look at the map above and see something is wrong. It would appear that one person is trying to drink everyone’s milkshake. You cannot forget about Australia, either, which is not far from this drama.

If history has taught one lesson, it’s to be proactive rather than reactive the second something seems wrong. Someone has to step in, at some point, and change the course. Lately, trade has been a method of doing so. One way to do that is to change the direction of trade to favor others while slowing it down against those who you don’t work nicely with. You can’t be a bully on an empty stomach. And you can’t be a bully for long when the other kids start eating steak.

That’s also why I think the “trade war” narrative is fear mongering at its best. As I wrote earlier, this is not a war of any means. It’s a redistribution – let’s do more trading with these parties who agree to free trade and less with this one who is bending the rules.

I’m increasingly interested in emerging South East Asian countries like Vietnam, Thailand, Singapore, and others. As tariffs hit China, competing countries in the area should rush to fill demand. That means infrastructure and a population that will gladly soak up redistributed business. I even think of Mexico. Why do so much trade with China when you can simply turn south, and pose such an opportunity to your neighbor.

I have several companies in mind, but won’t be sharing them until I have a better grasp and timeframe. There’s a link to my email list at the bottom, and perhaps I’ll reveal a few over time. Each of these companies has a significant presence in South East Asia.

A redistrubtion of trade shows bumpy roads for American multinational companies. Apple, for example, may need to change its supply chain and legal departments. The biggest companies may scale back operations and invest in other regions of Asia. But, over time, new opportunity will present itself. I think often about Cambodia – a dangerously poor country that has been through some of the worst civil wars ever recorded. But today, they have a functional government, vast amounts of land, and increasing tourism.

If you look hard enough and push yourself to look deeply into the world events around you, you will find opportunity. This is the route I am heading. I will keep you posted if I find any success. You can join my email list here.

Thank you for reading.

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I have a small amount of money invested across Bitcoin and Ethereum.

I am not a no-coiner.

But I am also not in the crypto new world order preaching about its unstoppable force. The crypto revolution!

I received my first piece of Bitcoin back in 2015. Someone sent me a few slivers of it. It was exciting. I bought more in 2016 and 2017. I have not bought any in 2018.

I can’t boast or brag about impressive gains. The little bit I bought in 2017 has been decimated and the little I got in 2015 is still up, but obviously not nearly as much as it was.

As Bitcoin and Ethereum drop, I am thinking hard about what they mean and why.

The main reason for owning any cryptocurrency is the rare chance something big does happen. You could say it’s a lottery ticket. But most lottery tickets expire worthless. I believe that analogy extends to more things in life than we care to acknowledge. For Bitcoin, it means people on a mass scale use its network to exchange money for goods and services. And they do it constantly. If that happens, Bitcoin is indeed a game changer.

But the odds are stacked against it. The euphoria of late 2017 and early 2018 are a moment of financial mania only seen once or twice in a lifetime. It will be told to grandkids and students for years. The madness swept through towns and cities. It grappled everyone, except for maybe our elders. The wise ones who have, “been there” and “seen that” once or twice.

Bitcoin is a genius idea. But I’m not sold on it being the flat out winner. One coin will not rule them all. Why would we use one coin when it is getting increasingly easy to build our own? For Bitcoin, an Internet age slogan comes to mind, “death by a thousand cuts.”

I think Facebook will be the first company to build their own coin and blockchain while proving a practical and realistic everyday use. I think Square and Twitter will be next. Then it will cascade from company to company. And we will all love it. They will make the financial exchange for goods and services more enjoyable for everyone, but sadly without much mention of Bitcoin.

Some people might say, “well that’s okay because Bitcoin is the next gold. Or maybe even the next Dollar.”

The thing is, Bitcoin will always be debased in Dollars. That’s why they call it King Dollar… because no one dares to debase it. It is the debaser. It is the one who knocks. Ask people in another country: want a Dollar or want a Bitcoin? The Dollar is backed by a large army. It is backed by a huge country focused on growth, creativity, and the flow of money. Owning a Dollar is having the right to access that.

I’m also not convinced Bitcoin is a safe-haven asset to defend against societal collapse. HODL a currency owned by the people. HODL crypto to defend against inflation! If the world comes crashing down and the zombie apocalypse starts, no one is going to approach you looking to trade some food for Bitcoin. They would rather have a shovel. Or a hookah.

My small crypto portfolio is barely hanging on. It’s fun to write this as someone who actually has a stake. I’m not a pundit or an armchair quarterback.

If you know anyone who has been rekt by crypto, the reality is that it’s the price you pay when you join mania. Or when you’re worried about missing out. Those are two very expensive emotions.

As for me, the bits and pieces I have of Bitcoin and Ethereum will stay locked up for some time. I don’t plan on selling. Even after writing this post, the FUD, the pessimism, I still would rather have a small stake in the game. It’s a lottery ticket because maybe, just maybe, I have it all wrong. And if I do, if the opposite of this blog post becomes true, well, whoa – we will remember the day we could have bought the dip.

So perhaps I’m just hedging my ignorance.

This will be fun to look back on in 20 years.

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It happens slowly. It happens over time. And then it happens suddenly.

The things that change slowly rarely bother us. As an investor, I realize there’s something to that. What products or services melt into your life day-to-day, slowly, and over time? The ones you can’t get rid of. The ones that always seem to have this slight tailwind pushing it along an adoption curve.

Slowly, but surely.

I think of cashless payments and card readers like Square and Clover. It’s happened slowly, it’s been happening over time, and then suddenly it will be.

But what is the opposite? What does it mean to not have something that evolves slowly over time? The opposite is loud and it’s right now. The opposite means you must embrace it because if you don’t, well – who cares – it will change you.

Sometimes this works.

Sometimes it does not.

The key is knowing the difference between something that really is a force of disruption at its very conception vs. something that is just an improvement of what’s already been done. There are only a few things that ever do the disrupting. Maybe one every 10 years. And when they do, it is loud.

The iPhone was one of them.

So are avocados. Lol. People joke about avocados and my millennial squad who eat them, but at the end of the day, they’ve changed nutrition and how people think about it. Good cholesterol, healthy fats, and the list of benefits goes on for a $1.50. Very few people were thinking like this before. Now everyone is.

I sometimes go back in time and read reviews of the iPhone when it first came out. There’s dislike, there’s doubt, and there’s a general sense of pessimism. Several editors at big publications ran with harsh criticism. So did Wall Street analysts and your colleague who you sat next to on the 17th floor.

“We don’t need a computer in our pocket! We have one on our desks!”

When I think about Tesla and Elon Musk, I think something similar is happening. A company is telling you sweeping change is coming. And it’s going to happen now. They are telling you that your routine, your gas cars, your daily commute are all wrong.

You are wrong.

That is loud. That disagrees with many people and their being. I think that’s also why so many people have been on the wrong side of the trade. One of the greatest stocks to own since 2013 happens to also be one of the most hated.

I believe in 20 years we will look back and ask ourselves why did we see it any other way? Let’s burn thousand-year-old oil taken from deep beneath the Earth only to release its byproduct of ash and emissions into the open air. Let’s also drill a giant hole in the middle of the ocean. Let’s drill to the earth’s plates, the same ones that move entire continents. Then let’s burn it! Let’s leave that giant hole sitting there!

I find it safe to say that those who are open and forward-thinking will exceed and win more often than those who are not. Holding onto dogmatism is a dangerous path for your portfolio and your leadership.

This post is not saying Tesla will win forever. Or is it a flat out endorsement. What it is saying, however, is that disruptive products are loud and in your face for a reason. And often times your dislike or frustration toward them is because you refuse to embrace it even though deep in your subconscious you know it’s coming.

For Tesla, it’s an iPhone moment for cars. So is the insanity of Tesla and its Tweeting leader. Ah, Twitter and its power.

Would I bet against that? Not a chance.

Am I interested to learn more about loud products like this and their societal impact? Absolutely.

If you get one of those right, whether you’re the creator, founder, early employee, or investor, that’s where the real money is made.

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My grandfather always told me to never say the word “hate.”

“Don’t say hate,” he would say. “Say “dislike” instead.”

Don’t hate, just dislike.

I never got a chance to ask him for the origins or meaning for this advice. But he always reminded me of it whenever he heard me say the word.

My grandfather was born an orphan.

He never had a home or family. He never had any of that.

I think about him a lot. He was dealt such a bad hand. But he kept onward.

He was never adopted, he was never put into a home, and he was never put into an orphanage for a long period of time.

His childhood has no record.

What I do know about his childhood is the few stories he would tell me, and they often included some portion about how, “the animals were my best friends.”

As a kid, I thought that was the coolest thing ever. Friends with the animals! As a grown man, I realize what that really means.

It was true, though. And it stuck with him his entire life. All of my dogs loved him! Same with the outdoor cats we had roaming around my house. When he came to town, everyone was stopping by to say hi. Even the woodpeckers and the blue jays.

Never hate. Just dislike.

I’ve broken his rule a few times in my life. I have tried to live it thoroughly, but sadly I have broken it. I think it would be unfair to think I wouldn’t break it a few times. But I am trying to change that with every instance.

In life, in politics, in career, in sports… Don’t hate it, just dislike it.

His memory keeps me inspired. I think about if I was in his shoes as a child. Could I have done that? Never having anyone to turn to? How would my outlook on life be different had I jumped from home to home to farm to even at times to homelessness? Or seeing another happy family walk by on Saturday while I had nothing? Imagine how hard that was.

But then I imagine the courage of sitting me down as a young boy who had it all, a great family, a great town, the complete opposite of what he had, and telling me to never hate. Instead, if you really must, just dislike. After all those experiences. After a childhood that has no record.

I am reminded of this story because today I find myself living those words as much as I can. Especially as the Holiday season approaches. The opposite is no way to live. It is no way to spend your energy. Remove it from your life in all aspects. Focus on the good.

And if you must, just dislike instead.

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Thanks for reading! I hope you enjoyed it. You can join my email list here. I write about markets, stocks, and the economy. Feel free to send me a message or note in the comments or using the link at the top of this page.