I don’t often write about the stock market because I’m not a registered investment advisor, but I do have a history.
I used to work—back in the late 70s—at the place where when they talked, everybody listened, EF Hutton. Back in those days, computers were just becoming personal and we had Quotron machines on our desks which did much less what an iPhone does today.
My favorite book about the market was rewritten in 1955 by a guy named Fred Schwed and titled, “Where Are the Customers’ Yachts?”. There was no CNBC, there was no Fox Business and we used to have a waiting room where customers could watch the tape as either a recreational or business activity.
It was legal gambling for many folks back in those days because they actually thought there was some kind of system like the ones that rarely work in Vegas casinos.
In my humble opinion, little guys virtually never win because they have little or no discipline.
Here’s an idea that neither business television network I’ve mentions very much.
Why not buy the stock of a company which is well, run, profitable, way under value and just hold it?
Let me give you two:
The first is an investment bank named Monroe Capital in Chicago. They lend to Middle American companies at high but not loan shark rates. They are profitable, experienced and competent. They also had a client go into bankruptcy and that sent their stock down substantially. But not their profitability. It’s in the $11+ range. Oh, yeah—it has a dividend yielding about 13%
The second is the Ford Motor Company. They’ve been making cars and trucks for 115 years, are profitable, well managed and, yet, their stock is in the $8+ range. It also has a yield of about 7% Compare that to electric car maker Tesla which has burned Billions in cash, never made a profit and, yet, sells in the range of just a shade less than $300 a share.
Says a lot for the stock market writ large.
Warren Buffet has made billions in the past by buying stocks in companies which are similar and resisting the loss of discipline.
Back in the day, it cost a bundle in brokerage commissions to buy and sell stock.
Today, through apps on your phone like Robinhood and Stash, you can pay as little as NO commission to buy as few as one share.
So, my question is why you would listen to CNBC and Fox Business cover the market like a horse race when it is a fact that most stock trading is done by computer using some secret sauce algorithm and the big guys make money on the way up and the way down.
Think of conventional brokerage firms as the guys at the MGM Grand Casino in Las Vegas who take the chips off the table after every game. They make money whether or not you do.
Unless you think either of the two companies I just wrote about—and there’s plenty of evidence that they won’t—is going bankrupt, open up a small account with Robinhood and buy 100 shares for NO commission. And, as long as their stock is down, keep buying it as you have the funds. The worst case is that you’ll do really well putting their dividends in the bank.
It’s not as sexy as day-trading.
But, over the long haul, a hell of a lot more profitable.