Three Reasons why Corrections and Lock Up Expirations Don’t Scare Me

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The sky is falling the sky is falling.  The market is high so a crash must be coming soon! Man shut up. The first thing you have to know about a bubble is that for it to be a bubble you can’t see it coming.  Bubbles happen when even the smartest people in the world think nothing can go wrong.  Until Young Blue Chip starts riding the wave I am not convinced that there is a huge correction coming.  What will happen though, for those who are worried that the sky is falling, is that you will miss out on all this money.  I have two reasons why I am not worried about a correction or the dip that occurs following lock up period expiration, like the one we will see in SNAP soon.  I will discuss those below.

I only have three reasons because I don’t think winning is that complicated.  Being a loser is complicated.  Being a loser requires explanation and analysis and justification via mental gymnastics. Being a winner requires you to do what others wont do. That’s why its easier to explain winning than it is to explain losing.

They have nothing to do with the fundamentals of the company

One thing to look at when you are analyzing a company is insider buying.  Insider buying indicates that the people who know the company best believe that there is an opportunity to be had in their stock.  They might know of an impending product launch or marketing campaign that is going to make the stock win in the near future.

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“Smart” people think that buying and selling occur for the same reason. They believe that if buying indicates strength and confidence that selling must mean the opposite, but this is not always so.  There are a lot of reasons why a person might sell their stock.  SNAP owners likely want to cash in their lottery ticket.  They want to buy that house or boat or Ferrari.  After all, the bulk of their wealth is tied up in stock they were gifted or that they were paid.

What is important about this is that buying a boat and a Ferrari have nothing to do with the strength of the company.  So any dip you see will quickly be bought up by institutional money or by wise investors.  When that happens the stock will run back up.  Don’t fall into the hype guys.  All dips are not created equal.  When there is massive selling you will see a dip in price because of supply and demand (massive selling reduces the price to accommodate buyers) but neither of these relate to sales, revenue or growth, thus the stock WILL correct itself.  Be smart and buy that dip.

A correction is just an opportunity to make more money

People like Gary V and Grant Cardone can’t wait for a market crash.  They are sitting on the sidelines, liquid, chomping at the bit.  I imagine that Warren Buffet is the same.  This is because crashes create once in a lifetime buying opportunities.  I think that as an investor you have to be able to make money if the market rises or falls and that is kind of where I am as an investor right now.  If the market continues to run, we make money.  If the market falls, we are going to scoop up more shares.  I am not worried about a crash.  A crash is just a part of the game.  I don’t think Buffet is afraid of a crash either but I don’t think he is sitting liquid.  He is playing both sides.  He is making money while there is money to be made while also being liquid in the event of a crash.

Fear is a sign to do what you fear

Fear over crashes is what keeps people tied to a 9-5.  9-5ers are more afraid of what could go wrong instead of focusing on what could go right and that is why they stay tied to a desk collecting a low but stable paycheck, as compared to their potential, waiting on a weekend and a week long vacation.

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We are investing to win, not to avoid losing.  While avoiding losses is key we aren’t going to play the game in fear of making moves because we could lose.  That is like going up to bat and standing at the plate afraid to swing because you could strike out.  That is how you end up old and broke.  Playing the dividend game or the safe game or the all cash game is how you miss out on opportunities like what happened when Trump was elected and the market ran up 20%.

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Scared money doesn’t make money.  Crashes are a beautiful time to buy.  Either way you play it, we make money.  Its that simple.  Join the investment club and learn how to invest to win.  Email info@capitaltodd.com to join.

Be great,

Todd Millionaire

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