Jake 🇺🇸

Killing Lions
2020-12-19 18:58:49 (UTC)

My thoughts on the Stock Market

So. I'm super passionate about trading so I decided I should write something about the stock market. It'll be interesting what my opinion of this is next year.

This year was my best year yet for income. In march I had about $24,000 invested in the stock market. As this was deep in the pandemic everyone was scared. However, the fed decided to come to the rescue and announced they'd allow inflation to go above 2% for the first time in decades. They also approved huge spending bills and unlimited quantitative easing. I stuck my $1,200 stimulus check into a couple tech companies and knew the market was going to go straight up and to the right.

My bets: $TSLA, $QQQ, $SQ, $NVTA, $AAPL, $NIO

$TSLA and $NIO ended up multiplying my money by 5. As of today, my net worth is at about $110,000, up from $30,000 at the beginning of the year. For 2021 I'm betting big on Bitcoin. I have about $10,000 invested. I expect to make about $30,000 from this by the end of the year. The fed also stated that they would continue to print money and would allow the inflation to keep staying above 2% until 2024. This means that the next 3 years will be huge for the stock market. Particularly tech stocks like Apple, Tesla, Square, AMD, Nvidia, Google, Skyworks to name a few.

The first thing that concerns the average person about the stock market is that it's a huge casino. And they're partially right. There's no telling what's going to happen tomorrow. A major institution may decide to dump a company, the stock price will plummet and you'll see a huge red number. I've seen daily losses as large as $10,000. In a SINGLE day. And... I had no idea why.

Why?

Well, the stock price of a company is based on future predictions. The price of a company isn't based on the company today, it is based on analysts best prediction of what they think the company will be worth in the future. This is why a single news story can easily cause a company's worth to decline by 30% in a single day. If a textile company claims that they've invented a method that can cut the price of their products by half and plan to implement it in 6 months, that extra profit will allow shareholders to be paid handsomely. Thus, the stock will shoot upwards as more people buy into that company hoping to share some of that profit. When there are more buyers than sellers, the stock will go up. If there are more sellers than buyers, the stock price will decline.

So... how does this work?

There's two ways that companies pay their shareholders. 1) Through dividends. Suppose a company reports a quarterly profit of $100m. If there are 100 million shares, that would mean that each share that you'd own would get paid $1. If you own 1000 shares, you'd get paid $1000 for one quarter (3 months). These stocks are known as value companies.

2) The second way companies pay their shareholders is through stock buybacks. These stocks are known as growth stocks. Instead of directly paying shareholders, a company will buy back stock of their own company. By buying shares the shares will go up in value because of supply and demand.

So is Jeff Bezos really worth $200 billion? Not really. On paper he is, but if he were to ever attempt to sell that many shares the stock would decline so much that by the time he finished selling he might only get 100 billion. And... he'd wreck his whole company.

I think a lot of people get upset about billionaires because they think it's unfair. This is a very human thing to do. If you get paid $100 to do a quick errand that takes 30 min, you'd be super happy since that's basically $200/hr. But, if you found out that the guy you're helping got paid $1000 then you'd get angry. It makes no logical sense, but people simply like to look over at the other person and they get jealous.

The stock market allows people to invest in companies, the money helps that company succeed. It allows institutions to earn money on good bets, but also, it filters out the bad companies since institutions don't want to invest in a worthless company. This allows the best ideas to win. A good idea helps not just the shareholders, the company executives, all the new jobs giving a livelihood to workers but also it helps every single person who buys products from that company. Think about the computer or phone you have. The company that made that product was the result of an amazing chain of engineering and thousands of companies all working together to give you the best humanity can produce. The reason it'll only get better is that there are other companies that are trying to make a better product to gain more market share. This competition produces yet even better products that we as the buyers enjoy. The same is with literally everything from getting a haircut to being able to purchase a delicious meal for $8.

I think one of the biggest honors you can have is to be able to give someone a job. I mean, that's literally the best thing there is! You are giving that person a livelihood. They can now support a family. So, thank a CEO for giving you your job. And, if you hate your job, ask yourself: "Would I rather not have a job at all?"

My main concern right now has to do with inequality. A lot of people get swept under the rug. If you own $100 today, it'll only be worth $97 next year. Money is being devalued. However, if you owned stock, that $100 would be worth probably $112 next year if you invested it in the S&P500. This is why so many people lose out since they don't invest. Extend this for 10 years: If you put aside $10,000 and didn't invest it, with a 2.5% inflation rate by 2030 you'd have like $7,500. If you invested it in the S&P500 ($SPY) you'd have $28,000. It seems crazy that almost half of people do not invest. It's stupid.

People claim that they are living pay check to pay check and cannot save. Well. That's bs. I know this because there are people who literally make minimum wage and yet manage to save money. The trick is to manage your money well and cut unnecessary costs (even if that means living with your parents when you're 30 years old). I make about $24,000 per year as a grad student. Yet, I've managed to grow my wealth to $110,000 in 3 years by just not wasting money and cutting costs when I could. Guess what? If I'm a smart investor and manage a 20% return (with 30% capital gains taxes) and keep putting in $5,000 each year, by the time I'm 42, I'll be a millionaire. By the time I'm 60, I'll have $100 million and be gaining 14 million every year.

This is how billionaires are made.

In fact, ALL billionaires get there because they own significant percentage of a company that they helped start. There's a podcast that I've recently become obsessed with. It's called the "all-in podcast" and it's basically a bunch of billionaires hanging out and talking about their life. One thing that I've noticed is that they all became rich because of making deals early with companies. They're extremely aware of current events and politics. They use this knowledge to time markets and buy into something that grows to be huge.

My uncle is a millionaire. I always wondered how he made so much money since he was a school teacher. I found out that he only makes about 5% of his income from his job. All the rest came from investing.

Wow.

I've always thought that I will become some top engineer for a company and make $150,000/year and have a great life. But now that I think about it, this may not be the best way to make money. That $150,000 per year doesn't go up much. However, imagine getting a 20% pay check increase EVERY year? The more money you have the more money you can make if you are an investor. This is how people get insanely rich. Most people earn a fixed income. They work and receive a small paycheck for what they do. Investors don't do anything. They make money while they're sleeping. I've literally woken up and noticed my portfolio up thousands of dollars just that morning.

Uhhh I could continue to talk about this for literally hours. I could talk about why each of the my investments are going to return money in the long run. Sometimes I'll scour the market and look for good "deals", if I find a solid company where their stock has recently gone down, but the reason seems minor or not important then I'll buy for a quick buck. I bought $BABA on the news that China's president disliked some of the company CEO's statements. The stock fell 15%. I bought. Unfortunately, it hasn't gone up much. It's been flat. But I'm still hopefully it'll trend upwards. The company is still a solid company and nothing worth 15% really changed. Another example was bitcoin, over thanksgiving it dipped 10%, the next day it went back up 8%. Unfortuantely, I missed that opportunity because I was with family and just didn't spend the effort to make the trade.

Another choice I made was dumping my $NIO stock. Nio is the best Chinese electric car company. There was rumor's that Trump was going to add more restrictions to China trade before he leaves office, this would hurt pretty much any chinese stock. So I dumped. Well, the next week Trump makes statements that are exactly in line with this. Nio's stock falls.

Another example is Tesla. Tesla recently got inducted into the S&P500 meaning that institutions are forced to buy 120 million shares in the last 5 minutes of Friday's trading time. I was closely watching the volume of shares traded and noticed that only about 30 million had been traded. Thus, I knew the stock HAD to go up. I bought some calls expiring the same day (10 minutes later), they cost about $500 each. As I predicted, the stock shot up 20% as all these big funds had to buy the stock. The stock hit $695 at the closing bell. The options were now worth $2000. Easy 4x gain in 5 minutes.

Another strategy is that I sold about $20,000 of Tesla stock after hours because I predict next week the stock will crash after the S&P500 inclusion. I guess we shall see if I avoided losing a lot of money!!!

Let's seee... another good trade I made was the Q2 earnings report of Tesla. Elon Musk seemed really happy and his twitter was making fun of all the people betting against him. So. I was pretty sure the companies earnings would be huge. So I bought $14,000 tesla stock on margin (so I basically took out a loan to make the purchase), well... guess what? Earnings were huge! So I made a quick $1,500 after selling back the shares.

Uh. What else? I also bought Bitcoin when it was $10,000/coin. It's now $24,000/coin. I predict it'll be $100,000 by the end of next year. So yeah. I'm buying. But... it's also really expensive right now so I'm waiting for a dip in the price, then I'll buy like crazy. The problem is that it keeps going up lol. But I can't complain since I'm making so much money. This week bitcoin is up 25%!!!! I'm holding. I'll sell MAYBE at $90,000, but I'll just have to see what the news brings and how warm institutions get. But I think I'll be buying bitcoin periodically at least until it's $50,000. Then I'll hold. But again, I'll keep close attention to the news. Bitcoin is rather odd since there is a huge amount of whale retail investors that hold huge amount of bitcoin and could easily just dump it without news or anything lol. I guess that's why I have 10,000 in cash right now and I'm looking for opportunities like that. If bitcoin falls, just like a sniper, I'll probably buy a little. But only a little. I think the price could crash back to $15000 easily.




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