A double from a crisis trade

It is really an unbelievable journey for this crisis speculation I made early this year. If you have followed my blog, you should know that I did a quite "risky" (at least seemingly) speculation for a turnaround for the deeply troubled stock, Rite Aid (RAD) (see here). Back then, nearly everyone was betting for its bankruptcy but I saw its underlying value. So I did a crisis speculation with its call options. Glad I did so! While most of the time my calls were deeply in the water, all of a sudden, Bomb! It's exploding.... and to the upside. Within a month, RAD is shooting up 120% as its recent earnings were 18 times better than expected (and 90+% up just this week)!! You probably can never guess what has made so much contribution to its great earnings for the quarter: ice scream!!! My wife said their ice cream may be containing cannabis that hooks people into "addiction" 💤👀
Sounds crazy how could all the Street experts so much having mispriced this company, right? So don't listen to the so-called WS analysts but to me . See the RAD one month chart below:

While my timing was not great as I was way too early but I'm still glad to have mad the bold bet with a double by now. Since my calls will expire in Jan, I won't risk anything but took my profit and watch now. I think RAD will still have a great potential after it is cooling off a bit.

Today, I have another idea similar to RAD's crisis. It is about the U.S. Steel (X), which is currently priced for bankruptcy.  Last Friday, the company surprised the Street by updating its fourth-quarter guidance with a significantly bigger projected loss than Wall Street had previously expected. It really sucked and spooked investors! No surprise for the reaction: X fell more than 10% on the day. But the company is currently trading at just 0.3 times price-to-book ("P/B"). At those valuations the company's assets alone  (the book value) should offer a floor to valuations. And even X can not earn as much as expected, the company has no real risk of bankruptcy in the near term, with no debt maturities and significant flexibility around their obligations. So here is the point good investors ought to learn: when a company starts to trade at a significant discount to its assets this tends to serve as a "floor" for valuations. That's kind of crisis speculation all about: something priced in for a bankruptcy but the actual chance is low and even so, its underlying assets can easily cover its liabilities. This kind of hidden value requires some gut to explore but you don't need to bet the farm for a good profit. Of course buying its stock directly is an easy way to do the crisis speculation, although the risk is quite high for sure. But I have an idea that can bet for it for long term with no cost upfront. That's what I'm sharing with my Family for X and more.  

If you are interested, send email to dwmt19@gmail.com

Two doubles in a week

I got two doubles this week, a bit unusual ways. Let me share with you one today and the other one tomorrow.

As you know by now, the Christmas online sales were great, shooting up by 3.4%, a testimony for the red hot booming economy thanks to Trump's super business-friendly policies. By the way, I still hear some pigheaded leftist talking heads claiming that the current US economy booming is due to Obama's economic policies. How laughable, isn't it?! When people got some strong opinions, they would just fool and blind themselves regardless how wrong they are. That's OK with me as long as I won't be fooled!! 😇😎

Of course, when people get more money in their pocket, they spend more. This is especially true in the US. Actually they will spend more in generally for Americans by borrowing more. So it is great news for retailers in generally, but especially for e-commerce like the giant Amazon, which shot up nearly 5% on Thu after the news breaking out. Great for Amazon but the problem for me was I was shorting Amazon with a bearish call spread due for today. Ouch!! I opened this trade last Friday when its TA suggested Amazon could be struggling in the near term. A bad trade indeed to start with. But here is the thing as I have said from time to time: For investing and especially trading, one has to be flexible and change his mind when facts are changing. I was clearly wrong by betting bearish for Amazon with the great sales data just coming out, so why should I stay with my short position like those pigheaded people who never change their mind regardless of the facts? Not me for sure. So I closed my short arm quickly after yesterday's opening. Glad I did so as Amazon was red hot with the news and just kept going up without looking back. After just an hour or so, I locked in a net profit for a double for a trade which would have been a totally loss for me.

Retrospectively I was too nervous and was way too early to lock in the profit! If I just let it run for a while, I could easily make 4 times more money than "just a double". But I have learnt in a hard way many times before that a successful trader should never be too greedy in taking profits, especially for options. No one can consistently buy at the exact bottom and sell at the exact top. For my options expiring in just one day, I could easily see my profit being wiped out if the tidal wave suddenly changed for Amazon and potentially I could see double loss for my trade. That's not the sensible way to speculate in the market. I'm happy with a double for a week although I missed the 4 bagger in hand.


Just for fun, here is the gain I could have made if not locked in too fast, 400% with nearly $20K from the long arm by closing yesterday. And it would have been 600% gain by this morning when AMZN shot another $30 up (although it gave back all and some by closing). Of course this kind of gambling is dangerous and it can quickly wipe out potential gains and turn to big loss easily. Don't feel sorry just because your gain is not at its maximum but be happy as long as you can make some money at least!

春药下的半高潮 （Half climax under aphrodisiac)

They did it! As I hypothesized last time that DEMs as whole were on aphrodisiac to be self stimulating in trying to reach their climax. And finally they did it. The DEMs in the House accomplished their pre-play and collectively masturbated to try to climb to the pinnacle with impeachment. But, unfortunately their climax has been half halted by the old woman who is apparently not satisfied enough with the climax and is trying to prolong the course to get even more highs. OMG! How old is she now? Still so hyped in trying for more intensified climax? I really feel the pain for DEM now. Clinically we all know that half way halted climax is not healthy at all and even worse than no climax at all!😇😋😎

Meanwhile, Senate Majority Leader Mitch McConnell (R-KY) was entirely unmoved by Pelosi's tactics: "I admit, I am not sure what leverage there is in refraining from sending us something we do not want," McConnell said with a wry smile from the Senate floor. "But alas, if they can figure that out, they can explain it. Meanwhile, other House Democrats say they would prefer never to transmit the articles. Fine with me!"  What a fun saga to watch!

In the meantime, cross the pond, something very interesting is also happening.  As I talked about a while ago, the UK Brexit saga would likely end up peacefully and the UK turmoil had likely reached its bottom a few months ago. That's why I called "The worst is likely over"! Indeed, the UK new election has decisively voted to allow the Conservative Party led by Johnson to exit the EU as planned. While the exact date of the Brexit may still be up in the air, the uncertainty that has haunted the UK for 3 years has finally be resolved and eradicated! As the result, my bullish bet for the UK Pound has paid off nicely. But not only that of course. For investors, any decisive resolution is certainly a very positive development and Johnson's election has resolved the uncertainty surrounding Brexit, with which all British assets - the pound, British shares and London real estate - are rebounding very well and will likely continue. Glad I shared a couple of ideas with my Family about these assets prior to the vote and indeed all are moving along well so far.

Apart from investment perspective from the Brexit, I think the election result in the UK is also a big warning for the Leftists here in the US. You see, whether pro- or anti-Brexit, the prospect of Labour victory was terrifying to U.K. businesses. The leader of the Labour Party, Jeremy Corbyn, is a Sanders/Warren-like character. His vision for the Labour Party nothing but left extreme. Under his leadership, the Labour Party's platform included massive tax increases, the nationalization of utilities and the expropriation of landlords by tenants. And now, Brexit or no Brexit, British voters made it clear they had no appetite for Cuban-style socialism. The U.K. economy dodged a fatal political bullet as the result. Good luck for the UK!

 

Using the slogan of Bill Clinton's 1992 election campaign, it is "The economy, stupid!" 

I do hope the DEMs won't be so stupid to endorse the left extreme policies that will surely bring down the US economy to a halt. Most Americans are smart enough to understand this and just as what the UK voters have done, such stupid ideology will be surely left in the dead cradle if it has ever get a chance to surface.   

  

Will Santa Claus still come?

In the past 10 years or so, the Santa Claus is the most reliable guy to come almost always around this special period of the year, from the Christmas eve throughout a few days post New Year's day to end. The trading volume is usually very light as most of the Street traders are gone for the year but still, the Santa Claus wants to send a rally to end the year and celebrate the new year! Even last year was no exception when the market had relentless declined day after day (the exact opposite of what is happening now) to culminate to the abysmal point of the deep 20% decline right on the Christmas eve, Dec 24. The sentiment was so depressed that the world seemed to be ending in front of us. In that week, 47% of AAII respondents were bearish, and only 25% of them were bullish.  And of course nearly no one thought Santa Claus would come. That was the moment that I wrote: "The world will not end" on the Christmas eve last year. Very lonely I predicted the Santa Claus might still come by saying "...don't be surprised for a "rip your face off" kind of rally in the final days of the year". Sure enough, the Santa Claus did not disappoint us and did show up with a strong rally for a 8.5% rebound to finish the year (about 200 points jump for S&P)! 

Well, we are getting into this SC rally time again next week. But the situation has totally changed. Not only the S&P has easily beaten my 20% increase target for 2019 that I made last day of 2018, it is relentless making new highs day after day in the past few weeks. Now it seems the sky is too low for the market and the world is full of roses everywhere. The investors' sentiment is a mirror image of what we saw last December, with more than 44% of investors being bullish and only 20.5% of investors being bearish per the latest AAII survey! If you randomly ask anyone, probably over 90% will tell you the Santa Claus will continue to come with a rally to end the year. How can he not be!! 

I'd also agree for such an almost sacred annual event that the Santa Claus must come religiously. But then I hear another voice warning me the unbelievably low Put/Call ratio around 0.6 now. You see, P/C is consider low already at 0.8 that often triggers a short term market decline. So it is kind of conundrum moment right now with two conflicting indicators flashing loudly. It seems to me that something must give. If we still want to see a strong Santa Claus rally, then the chance is high to see a quick swift market mini crash probably right away. Maybe we will see that moment Monday/Tuesday and followed by a rally? That seems the most logic telling as far as I can see.  

Expect a quick volatility shooting up in the next few sessions!  

It is special day for another milestone!

This is a special day for our family, especially for our son, Lucas! Today is the day for their graduation ceremony at INSEAD, the world top business school based in France. So officially my son has completed his study and earned his MBA today!


Congratulations, son! Another important milestone for you to have reached.


Eight years ago, I posted a note here to summarized his major lifetime milestones till his college graduation (see here). Time has passed so fast. With just a blink of eyes, he is approaching the 而立之年. While he had always been working in the top financial companies, first the top bond company PIMCO and then the top investment bank JP Morgan, he knew the 12 hours a day intensive office work was not what you really enjoyed and he needed a change. That's why he decided to quit his JPM job and pursed a new career path via MBA. As parents, we of course will always be ready to support him whenever he needs us but he didn't ask anything from us. Rather, thanks to the special Whole Life Insurance he has set up for "saving" his earnings over the years, he has fully funded his MBA study by himself by using his policy.  This by itself is a great achievement as it demonstrated he has managed his work, life and personal finance optimally even though we have witnessed how stressful his life had been!


This MBA is a one year program, a very productive and efficient one but also quite intensive one. But Lucas has not only successfully completed his courses, he has even partnered with friends to start a blockchain company, which has successfully got their first funding via seed financing. At the end, he has successfully demonstrated his ability via the summer interim job and has been hired as the VP for Business Strategy for a fintech company. This fits into his dream job profile as he is always excited and wishing for being a diplomat of some sort. This role may be type of a diplomat in finance that may maximize his full potential in life! While Lucas is still young and has a long way to go in his life, we are extremely happy for what he has accomplished so far. As parents, nothing is more important and happier to see our kids to be happy in what they are pursuing in their life!


Son, we are proud of you for what you have achieved to date but don't stop here. There will be more challenges ahead but we know you will, as always, try your best to overcome any difficulties that may arise and to reach to the next top in your life.


GO GO Lucus!!💃💪💪

Boeing's correction may continue

You probably all know that I love Boeing (BA) and it is a great dividend growth stock for DRIP. I first talked about BA 6 years ago when it was going through another nightmare and it was trading hands around $80 or so and no one was interested in it (see here). That was the first time I suggested to buy BA and since then it shot up all the way to about $450 before this nightmare came. Although I have no any concern about its long term fundamentals and this saga is just a noise that will pass sooner or later (although I did feel it would have already passed the worst period by now), I still prefer to buy BA as cheap as possible. The pass two days over 15% crash seems to have pushed it down to the bottom. I was asked if it is a good buy around $330 now? I don't feel so. You see, the initial crash down is often not the only leg down. Most likely, after some attempted bounce back, another leg down will follow, which could be even worse than the initial one. Purely from the TA perspective, indeed BA appears to have further room to drop. I think there is a good chance to see it bottom around $300,which is a very strong support. I don't think BA will decline much from 300 if it indeed goes down that much. At that time, it will be a much better place to do bottom fishing.

For now, it is a better trading opportunity than long term buy for BA.  Of course, one can also consider dollar cost averaging by buying a little now and buying more as BA further declines. In any respect, BA is a great long term investment, especially for DRIP! 

It can be worse

It has never happened to me in the past 20+ years but it occurred two weeks ago. I got a car accident and it was due to my fault! This year, I got 3 car accidents and in the two previous ones I was the victim, hit by someone in the rear (quite mild though). But this time I hit someone from behind and was somewhat more serious for the damage of both cars. Since I started to drive over 20 years ago, I had never hit anyone before but I did it this year. Quite a terrible and depressing experience for me obviously. However, I'm quite grateful for this bad incident for a couple of reasons:

• It could be much worse but at least no body injury was involved although both cars were seriously damaged superficially. So I still could drive back for two hours without any problem instead of being totaled and needed a towing. 
• I was fully covered by my insurance for the damages I caused except the small amount of deductible that I need to pay. More importantly, given my impeccable driving history in the past, I got a forgiveness for this incident, meaning my insurance premium should not increase due to the accident. 
• What is even more beneficial for me is the fact that I was apparently too complacent in my driving after such a long time of no accidents. In hindsight, I was apparently too relaxing while closely following the car in front and could not stop when he suddenly stopped for a yellow light. A big warning sign for me that I really should always be prepared for the worst in my life regardless how comfortable I'm for my current situation. 

This very last point is also very relevant to investing and trading actually and hence the reason I'm sharing this accident with you today. You see, people can become enormously complacent from time to time, especially after a long time of gains again and again, which will make them feel this is the norm of investing and nothing bad could happen. I share the chart below with my group, asking if anyone could tell what it is for. No one could (for all fairness, I couldn't myself without the explanation for it). 

It is called Investment Turkey. Ironically my car accident happened the day after the Thanksgiving when I was driving back home from our vacation home!  It was first described by in Nassim Taleb's bestseller, The Black Swan: The Impact of the Highly Improbable. As Taleb wrote about the life of the Thanksgiving turkey...

Consider a turkey that is fed every day. Every single feeding will firm up the bird's belief that it is the general rule of life to be fed every day by friendly members of the human race "looking out for its best interests," as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.

Imagine you found an investment that generated steady, predictable returns with no drop in the value of your portfolio. (This is the promise that attracted investors to a fraud like Bernie Madoff.)
As it turns out, there are legitimate investment strategies that offer just that... until the day they don't. Then panic will hit and everyone is running for safety but more often than not, most people will suffer due to being too late, just like the turkey to be slaughtered.  

Let me share with you another real story. Heard about Seth M. Golden from Florida? He was a former Target logistics manager and he managed to grow his net worth from $500,000 to $12 million in five years by shorting the CBOE Volatility Index (VIX) using various exchange-traded funds, primarily via XIV, the VelocityShares Daily Inverse VIX Short-Term ETN, which has ceased to exist now.  This was an enormous gain with an annual return nearly 90%. He was so successful year after year that he planned to launch a hedge fund based on this impressive five-year track record. But in hindsight, he was apparently too complacent with his long term incredible success without knowing that his turkey moment was coming. That was on February 5, 2018, XIV lost 15% of its value during regular trading hours and lost an additional 96% in the aftermarkets.  Instantly Golden's five years of gains were wiped out and some more....Golden's "short VIX" trade turned out to be a real-life version of the turkey problem.

Lesson we can all learn from Golden's real life investment turkey? 

As Taleb puts it..."Consider that [the turkey's] feeling of safety reached its maximum when the risk was at the highest!"
Just because what you've been doing has brought positive results for years, don't read that as a guarantee it will continue to do so. Situations change - in an instant, sometimes - and what was working like a well-oiled machine can suddenly become a ticking time bomb. Or a hatchet that turns a well-fed turkey into Thanksgiving dinner.

My car accident has definitely reminded me of this investment turkey risk that we may all face, not only in our daily life but also very well relevant to our investing life. That's why I try to be more bearish when there is widespread euphoria and more bullish when there is abundance of pessimism. As I alluded to yesterday, I'm never solely bearish or bullish in any situation. Even when I'm very bearish for the market, I'm still buying but just very cautiously and selectively. I'm trying all my best to not become an Investment Turkey! Hope you too!!

The easiest way to make money in the market

Anyone can tell me what's the easiest way to make money in the market? I'm pretty sure not many can comfortably tell what is the best way to make money. After all, you will say, it is awfully difficult to make money in the market. Who has the magic for an easy way to make money? I know one and it is 100% surely an easy way to do so: Buying lows and selling highs!!😎😛


Don't you agree this is the easiest way to make money if you can buy something low and then sell it high? Of course, in theory it is but hardly anyone is willing to buy lows these days in the market. That's the most odd thing in the stock market. Normally everyone is interested to buy something cheap for anything else in their daily life. That's why people love to shop at Walmart, Marshall, Dollar Trees etc, which can effectively compete with Amazon. But rarely you will find someone who can tell you that they love to buy stocks cheaply. It seems it is a fashion in the market to chase highs and hardly anyone is looks for bargains, especially those great gems but left dead for months or even years without much buying interest for them. As I have often used as an example, my beloved MSFT had been left for dead for at least 10 years before people suddenly found that it was so easy to make money from it when it was deadly cheap. But I got numerous notes from friends telling me they were sorry that they didn't listen to me to buy when it was in $30s to $50s even when I was pounding the table many times here arguing how great its value was! But now when it is clearly very expensive at $150, it seems everyone is interested to buy it and thinking they can make great money from it regardless. I doubt buying MSFT at this level can truly make good money relatively speaking although I have no doubt MSFT is still and will continue to be a great stock to own. The reason for my suspicion is simple, it is against the easiest money making modus: buying lows and selling highs!


Now the more relevant question is what is really cheap to buy at the moment when the market as a whole is red hot with widespread FOMOs. As you can imagine, I'm not a fan of chasing at all and I love to buy lows. Let me share with you one sector that appears to have a lot of value in it when nearly everyone is hating it, a truly left dead one for now. It is the energy sector. You can hardly find anything that is more hated than energy stocks, not only for this year but for the last 3-4 years. Indeed who wants to touch it when oil and gas have been in a relentless downtrend for years and it is hard to see any light at the end of tunnel, right? But if you believe stock prices should in general follow the earnings, then I can tell you per the current estimates I have seen, the Energy sector is projected to have a an earning growth more than 30% for 2020, nearly double that for the second sector, Industrials. Believe or not, the red hot sectors for now, Information Technology and Healthcare are only projected to grow at around 10% for the next year. So Energy sounds to be really an area for my money to be for next year!


I know I'm a bit to generic as it is not an easy task to find a diamond among pebbles, especially in a dead sector like energy. Well for the fairness for my Family, I cannot talk specifics here but I did share several ideas already with my Family. Some of them have already gone up quite a bit and I have even closed a 50% profit for my calls for one of them. I'm pretty sure there are more profit potential in Energy and I'm planning to share more ideas with my Family. By the way, in the past few months,  I have been labelled as a permabear as if I only wanted to short everything. I can only laugh when I see this kind of laughable note. Just ask my Family members how much I have bought vs shorted. I'm just highly cautious at the moment and extremely selective but I'm never afraid to buy when there are bargains. The energy sector is one of them to buy for long term as well as for trading for me! 


If you are interested to learn more, send email to: dwmt19@gmail.com.

Benefit of playing options

I assume you would agree with me that most people have no idea about stock options, especially how to safely play with it. Generally, people will turn off whenever option is heard. “It is too risky”. This is likely the general reaction about playing options. Indeed, options can be very risky as it can easily go down to zero if the trend and timing are not right. But as a matter of fact, option is designed to reduce risks, not increase them, believe or not!   If you play with it appropriately, it is a great and very safe tool to substantially reduce your trading risk while giving a good leverage power. Here is the real life example I just got.

Over half a year ago, through my connection I got a hint based on their analysis that a small biotech Audentes Therapeutics (BOLD) could fly soon. It is a small gene therapy company that may attract big boys to buy it. From its TA, it seemed ready to break out. So I decided to give it a try. Well, again, timing-wise I was quite early as the stock went sideways for a while and then declined a lot, over 25% at one point. If I had played with the stock itself, I would have been stopped out. Fortunately I didn’t. Rather I played with its calls. The beauty of options is that you can pre-determine the max loss you may incur for a trade and as long as you play within your comfortable zone of the position size, you don’t need to worry too much about stop loss as the cost is usually a fraction of the stock price. In other words, even if I lose 100%, I may still lose much less than the 25% of the stock value if I use a 25% stop loss for protection. Glad I stayed on with it. As you may know, BOLD indeed got bought out by Astellas for a 110% premium. My call options got a moonshot with a 3 times gain as the result. Sure it is a pure luck to hit a MA deal as no one can really predict this kind of outliers but it does help to verify the safety of playing options for risky trades. The key is how to play it appropriately! The problem for most people is that they use option as a leverage tool to bet excessively on something but most of the time buying options (calls or puts) will lose money (purely based on the statistical probability as options are wasting assets) and with that they can easily be killed financially. Don’t be one of them!!

Why focusing on risk is more important for long term success in the market

Apparently it is not only me who stands on the bearish side against the mainstay in the past few weeks. My trading friend forwarded me a note from a very successful trader who makes his living by trading and has retired by age 40. Here is what he said in the context of his bearish view for the market in the past few weeks and being obviously also too early timing-wise:  

“But, being a successful trader over the long run isn’t about maximizing profits. It’s about minimizing risks… Rather than trying to squeeze the last penny out of a profitable trade, traders are usually better off moving to the sidelines when the risk of an adverse move outweighs the potential reward.

Most folks lose money in the stock market because they let their emotions dictate their trades. They buy stocks into overbought conditions because they fear they’re missing out on potential profits. Then they end up selling stocks in a panic when the market falls because they fear the world is ending.” 

As I’ve acknowledged, I was too early for sure this time. I basically started to actively short the market when S&P reached 3030ish as I doubted any gain above that was sustainable. I was wrong of course in terms of timing and S&P kept moving up all the way to 3150. It seems I have not only missed the opportunity completely for the up move but could have lost hefty for my shorts. NOT AT ALL! Here is the note I sent to my Family group Tue:

First of all, it is a great day for me when the market is "plunging" (although just a mini crash so far). As I have said, when I'm looking increasingly foolish by betting for the downside while the market is making new highs every day, I know the turning point is not far away. I have been experiencing this many times before. No difference this time. Yes, I have been too early by many weeks but given my conviction of the downside risk, I was also increasing my short positions when the market kept increasing. So my average cost for the shorts was substantially reducing as well. That's why such kind of fast downside move, even a bit tiny from the overall perspective, is still very meaningful for me, especially I'm playing with options. That's why I'm taking many gains off the table today given the short term nature of my option trades.

Basically I was doing two things in the past few weeks when being “foolishly” betting against the FOMOs: I was adding more and more shorts to have my average costs cut down. This has allowed me to make some good short term gains when the market finally shot down with VIX jumping up about 50% within two days early this week. 

 I was also adding some value dividend stocks for DRIP that have been beaten down but showing a good sign of bottoming. While for such long term DRIP stocks, short term gain is not really what I’m looking for but some of them have also been brought up quite nicely along with the euphoric market. No complaints here as well!

I’m glad that I took off my gains from the short term shorts quickly as the past 3 days of rebound has been enormously strong. I expected there would be a good rebound to climb above 3100 again but I doubted it could straightly make new highs without another leg down first. Oh, boy, today’s frenzy buying was unbelievable! S&P is just a spit distance from its all time high. We are quickly approaching the seasonally bullish period with a Santa Clause Rally brewing. While I’m still not totally convinced about the sustainability of this rally, as a trader, I don’t want to blindly fight against the seasonal trend. Right now the market is driven by two major tailwinds: the very strong jobs report (you really need to thank Trump for his pro-business policies regardless you like him or not) while still no inflation in sight and an olive branch from China by waiving the tariffs on soy beans and pork, which may hint an anxious desire on the China’s part to get the phase one deal done by Dec 15. I’m cautiously playing the long side now betting on some stocks that are seasonally bullish in the next few months. I’m also very selectively betting on the short side on those overbought stocks showing technical weakness. If the market itself goes into extremely overbought condition, I will then also short it outright but this time I want to be patient and don’t want to be too early as I tend to be.  

You can be richer instantly.....

Since this is the Thanksgiving week in which I read a lot beyond investment but very enlightening, I thought to share something which I think may enrich you instantly. Of course, I'm not talking about financial enrichment but in the long run, a better life attitude can indeed enrich us substantially in our finance as well. But we can instantly enrich our life if we can look at the world around us in a more positive way instead of being immersed in negative energy! So here are two pieces.  

By Alex Green (excerpt):

Constantly comparing what you have with what someone else has creates an impoverished state of mind. It makes you feel poorer, even when you aren't.

How can you become richer - instantly? By adopting the opposite mindset.

Dwell on your assets rather than your liabilities, your blessings rather than your grievances, your opportunities rather than your problems.

Even setbacks can be viewed in a positive light if you see them through the lens of gratitude - and ask yourself a few questions:

What can I be thankful about in this situation?
Could it have been worse?
Is there an important lesson to be learned here?
How can I grow from this?

My good friend and Liberty Through Wealth colleague Joel Wade - author, practicing psychologist and life coach - recommends keeping a gratitude journal, one where you take a few minutes each night before retiring to write down the good things - both large and small - that made you thankful that day.

What are the benefits?

Studies show that grateful people have an easier time falling asleep and snooze longer. They enjoy a host of health benefits, including greater resilience and longevity. Gratitude has even been shown to boost your happiness set point - your basic genetically determined level of happiness - by up to 25%.
In short, in order to feel - and be - wealthier, you need only recognize how rich your life already is.


***************************************************

I happen to read something today in the same context and very enlightening. So share with you here as well. Full writing can be find here.  
人生在世，难免遇到不如意的事情，若事事都过于计较，只会让人身心俱疲。
计较的越多，内心就越是痛苦，烦恼缠身，自己中毒就越深，身边再多的福气也会跑掉。
古语云：世上无难事，庸人自扰之。
遇到烦恼之事，常常是因为自己和自己过不去，把时间浪费在没有意义的事情上。
打开自己的胸襟，不去计较，你的命会越来越好。

01
越计较，命越不好。
精明不如厚道，太会算计，费尽心思去占别人便宜的人，往往会失去更多东西。
老子说过，大智若愚，大巧若拙。
真正聪明的人往往都懂得厚道，不计较一时的得失，因为他们懂得，越付出越拥有，越是与人方便，自己的福报会越来越多。
越是计较，人生的路也就越来越窄。
爱出者爱返，福往者福来。

没有人愿意和计较的人做朋友，以一颗宽容之心待人，别人也会以同样的心待你。
人有千算，天则一算。
越是计较，你的福气就会越少，福气越少，你的命就越不好。
人生在世，要懂得吃亏是福。多存善心，与人为善，福报会不请自来。

02
心胸的宽窄，决定命运的格局。
俗话说：常与同好争高下，不与傻瓜论长短。
真正有格局的人，不会与和自己不在同一层次的人计较，因为他们有更重要的事情去做，没必要把时间浪费在这些没用的事情上。
不计较，修一颗宽容之心，不仅是一种修养，更是一种智慧。
古人云：能容小人，方成君子。
大智者必谦和，大善者必宽容，唯有小智者才咄咄逼人，小善者才斤斤计较。
真正有格局的人，必定有包容万物、宽待众生的胸怀。

而胸襟的宽窄，决定了你命运的格局，你能包容多少，就能拥有多少。

03
不计较，是一个人最大的福气。

《菜根谭》里讲：“世亦不尘，海亦不苦。”
人生在世，别活得太累，少去计较不好的方面，福气会越来越多。
一个人过得好不好，就看他是否能看开事情。
凡事懂得放下，不强求，不计较，知足常乐，是一个人最大的福气。
人生本过客，何必千千结。
过于斤斤计较，只能让自己陷于无休止的内耗，最终心力交瘁。
人心是相互的，你对别人好，别人会加倍奉还。你若对别人计较，麻烦也会回到自己身上。
遇到事情之后，越计较，就越是痛苦，越会让自己不顺。
人生没有过不去的坎，看淡一切，计较与不计较，日子不都是一样的过吗?何必让自己痛苦呢？
别抱怨上天对你的不公，自己的命运掌握在自己手中。
人生，计较的越多，痛苦就越多，越是计较，越是贫穷.

学会不计较，就是远离了灾祸，远离了厄运.
人，越计较，命越不好。
命运都是由自己造就的，不与他人计较，你的福气会越来越多。

For those who may be interested.......

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Since I just learnt that they are going to close for new clients soon for this low minimum amount, I thought to post this now, in case anyone is looking for something like that. Just email me at dwmt19@gmail.com and I can provide you with more details. Please just for serious friends.

Happy Thanksgiving

Dear All,

At the eve of THANKSGIVING, I'd like to take the opportunity to thank you, those who have followed me and attended to my writing for all these years! Your interest has motivated me to keep what I love to do. And for that I'd like to thank you. 

I also would like to thank those who don't like me for whatever reasons. From them, like a mirror, I become more clear what I like and I don't like and for what reasons. 

For the next couple of days, forget about investment or trading but more focus on sharing the precious time with the ones you love and like. Love and friendship are way more important than anything else for our life. 

To finish this investment blog, let me just share two thoughts with you at this moment:

• Fear of No Fear! This is a blog I posted a while ago just prior to the Apr correction and I think it is very relevant for the current circumstance. You may also see this blog last year before the Oct plunge.  
• Buying good stocks at good prices, good things will happen for your life!! 

Wishing you all a very happy THANKSGIVING!!

Make some easy money from this aphrodisiac (春药）

This is of course not a porn blog and I’m not telling you anything you may extrapolate from the title. But I think I can at least give some medical “training” if you have no such background and then tell you how we may even make some money from aphrodisiac.  So who usually needs aphrodisiac? You don’t need to be a MD to understand it is mainly for those who may be suffering from low libido and may experience something like impotence for men or low s’xx drive for women. That’s easy to understand. But what aphrodisiac may do for them may not be necessarily easily understood by anyone. Let’s assume the aphrodisiac I’m talking about here is a real one, from which obviously it may likely boost the libido and help those taking it to reach their climax or at least be able to complete their bedroom work. The thing that not necessarily many people understand is the damaging effect from the aphrodisiac frequent uses. Since the initial effect is likely very positive and euphoric for those who are suffering painfully from their inability, they tend to rely on it more and more, which tends to be addictive. But its further positive effect will likely become increasingly diminishing and many will just increase their doses which will eventually to the point of overdosing. You probably have heard some fatal stories of using aphrodisiac which are likely due to overdosing.
So why suddenly I’m talking about aphrodisiac here? Well believe or not, we are witnessing something that cannot have any better analogy better aphrodisiac. That is, what is going on in the Capital Hill in DC! In my mind, the DEM as a whole is suffering from severe depression that has led to libido deficiency. Led by Pelosi👵 and Schiff👴, DEMs on the Hill collectively are experiencing painful impotence or low s’xx drive, so much so that they must find some aphrodisiac. As a physician I totally understand how painful the impotent people are. For them, usually the whole and only thing interesting them is to get out of the impotence and become a real man or woman. So starting from day one of Trump’s presidency, they have done nothing but just used an aphrodisiac to boost their libido, first with the two years of witch hunt: Russian Collusion. Initially it went so well that Schiff almost got out of the severe ED but unfortunately after two years of non-stop repeated use of the aphrodisiac, its effect has eventually waned and miserably failed. So they have to increase its dose by trying something more powerful. So here comes with the Impeachment, the most powerful aphrodisiac for the DEM right now. Every day I’m seeing a very energetic Schiff and apparently the aphrodisiac effect is working again for now. But believe me, this is likely an ill omen for him/Pelosi and the DEM as the overdosing aphrodisiac may very well kill them eventually.💀💀💀
In other words, don’t believe the DEM’s aphrodisiac, Impeachment, at all! What they are doing will not only not help them at all, on the contrary, they may very well help to boost Trump’s libido and substantially increase his chance to be more successful in the next year’s election. It may not just be a simple winning, but likely a landslide winning for Trump and GOP!!💃👊 Of course, you don’t need to believe me. Below is what I saw from a Wall Street insider talking about the prospect of this saga involving Schiff/Pelosi aphrodisiac.

As far as this impeachment is concerned, let's jump straight to the bottom line: None of this impeachment gibberish matters, because it's perfectly clear how this is going to end. Love him or hate him, even if U.S. President Donald Trump is impeached (meaning he has formal charges brought against him by the House), he…Will. Not. Be. Convicted.

So you may ask, it sounds like just a fun talk about politics, nothing to do with investing. Well, here comes the investing part. As I have introduced to you before, there is a betting site called PredictIt that can speculate on virtually anything in the world and the US politics and presidential election are definitely one of the major interests for speculation (see here). If you believe me that the final effect from the DEM’s aphrodisiac will not go well for them, then betting for a Trump’s win for the next year can likely make you good money, Right now, the Schiff/Pelosi’s overdoing aphrodisiac effect is still making them reach and maintained at the orgasm level, which makes a lot of politically naive people think they can truly bring down Trump and prevent him from being re-elected. Don’t be so stupid by believing them! Betting again them is an easy trade with virtually 100% winning rate, if you truly understands how damaging the overdosing aphrodisiac will be for the DEM. I just checked and right now the betting rate for Senate to convict Trump is about 14%, i.e. there are stupid speculators believing there is still a good chance for Trump to be impeached by Senate. If you simply bet against them, I can guarantee you that you will walk away with about 16% gain or $14 for a $86 bet. This will be just a few month time.  This winning rate may be further increased if you wait till the House passes the impeachment motion and probably more stupid speculators will bet for Trump to lose in the Senate. A really laughable and easy money to make, friends!  


Be aware, while I never shy about my opinion on various issues, this is not my political talk but purely a logic medical assessment on the saga with an investing idea!



At your own cost of not believing me!!  😇😎😃

How much you can earn from $10000 within a century?

Since the market is rather boring at the moment, I thought to share with you something important for long term investment.

If your grandpa left you $10000 80 years ago, how much you would have gained from it now? Well, it all depends on how the money was managed, if not wasted along the way. If it had just been left alone and forgot about, you would still have $10000, no penny less than that nominal value but your buying power would have already lost 90%+ in this less than 100 years period. This is called inflation effect and your money’s true value has been inflated away over time. That’s why it is critically important to not just leave your money alone. Even though you always hear “Cash is King”, it is only a wisdom at certain period of time like now. Over time, cash is dumb!

So let’s say your parents were very smart and invested this $10000 for you for the past 80 years. There are two ways of investing: The first was just for growth. Let’s make it easy. Your $10000 was invested in the S&P 500 index for all these years. By 2018, your wealth from this $10000 would have become $431,397! Wow, congratulation. What a great return, right?!! Before you get too excited, see what comes next! How about the same investment for the same time period but you get a return to $2.5 million? Sounds impossible, right? But that’s what is really possible although not many people are willing to believe and are interested to do so! If you have followed me for a while, this is really nothing that should be surprising to you. The very simple but super powerful wealth building strategy is the dividend reinvestment (DRIP) to benefit from the most efficient and safest money making approach via compounding, the world 8^th wonder per Einstein. See the chart below based on the analysis by the Hartford Funds. No need to say, this is something I’m totally convinced and have already implemented with my own money for years. Sure you can do all the fancy trading, but for me, trading is more of a fun to keep myself with enough sanity and sharpness in mind. For the real wealth building for retirement?  Nothing more than DRIP and my unique cash-rich life insurance. To me, nothing has been more safe and powerful than these two, both of which are relying on the magic compounding effect. Literally, both will generate sufficient retirement income for me and my wife while I’m just sleeping. Not much additional work is needed as long as they are set up appropriately and safely.

 

The mother of bubble

First let me do an "IQ test": Can you tell me which company the following chart refers to? No cheating and honestly tell if you really know.

Just over a week ago, it nearly tripled (260% more precisely) overnight to the moon, trigging a phenomenal FOMO on the day. Then immediately within the next few days, it has given back almost all the gains and down to the earth again. What kind of dramatic saga we have just witnessed. If you still don't know what I'm talking about, it is an early stage biotech company, NextCure (NXTC). It jumped simply because some "good" news from its early clinical trial data and then crashed also due to the data which was found to be not so impressive. It's a typical FOMO: chasing highs first, asking later.

We have seen a similar but in a much smaller scale FOMO moment for BIIB, which I'm actively shorting. Be fair,  BIIB dose have more mature data which they claimed to be good enough for submission. But here is the thing. Following their planned submission early next year, the FDA review time even with a fast track will at least take 6 months and for this first ever drug for Alzheimer, I bet the FDA will ask for a public review with an advisory committee. There are simply so many unknowns in between that may go wrong. While I'm not saying BIIB won't succeed in this historical endeavor and actually I do wish they can for the sake of AZ patients without good treatment as of now, I just don't see it can keep at the current inflated level without cooling down first. So far so good for my short for the short term.

Biotech is the unique sector that has full of bubbly stocks that are flying above the moon for incredibly hyped stock prices. Below are the top ones which are at the nose-bleed overbought status based on the RSI: anything above 60 is usually overbought by this indicator. But we are seeing many beyond 80 and even close to 100. Of course, in a mania type of market with FOMOs everywhere, it may not be so surprising to see the extremely overbought stocks go even further overbought. Indeed there is no law prohibiting anyone chasing stocks regardless of valuation and rationale. As one who has seen many bubbles burst to cause enormous pains for many, I'm just advising caution for anyone who are willing to listen: DON'T CHASE HIGHS NOW!   

PS: if you are interested to know more about my inner cycle, DW Family, email me at: dwmt19@gmail.com

        

A slowly cooked frog?

My friend forwarded me the following chart (the upper one), highlighting the FOMO moment currently is heating up. Today's another jump to an all new high will definitely add a lot more euphoria for sure and further push up the FOMO to all new highs as well. You may think FOMO is usually only reserved for retailed or amateur investors. Well, apparently this is not the case. The chart below is actually about what the professional investors are doing and NAAIM stand for fthe National Association of Active Investment Managers. So the chart is showing money managers' exposure to the market. After a dip in August and October, this index is quickly rising as money managers plow money back into the market for FOMO on a year-end rally. It makes sense as they have to show positive return by end of the year. How can they miss the strong rally going on by just sitting on the sidelines? So they are all in.


Of course we have seen similar FOMOs before, two major ones back in late Apr and late Jul, three months apart. Each time, also after grinding highs for weeks, the reckoning moment came eventually and months of the gains virtually evaporated within a couple of weeks. This is typically how a FOMO will end up and when the day comes, it is typically very fast and seemingly out of blue from no where. During the FOMO time, people usually think they are smart enough to get out at the exact top but hardly anyone can do that consistently. The vast majority will have to endure enormous pains as the result, then changing their mood from euphoria to depression. Then the same process starts again and again and again!! That's why for hundreds of years, the market has changed tremendously but the human psycho has never really changed in any way.


I thought to add a S&P chart for this year to highlight the last two FOMO time period what the market was doing (the yellow cycles for both charts). And I shared this for a couple of WeChat groups last evening. A friend immediately spotted something interesting and he added a few lines to my S&P chart. What it looks like now? Yes, a frog and he even gave an extremely interesting and vivid decipher of the chart: 温水煮青蛙！How brilliant it is!! Yes, the flog feels really great initially with the slowly warming up water until it is heated so much that without knowing it, the frog faints and then dies.


So we are in Nov now, also about 3 months from the last FOMO. Will we see the frog going through the slow dying moment again? We will see probably very soon!😏😄😎

What Buffett is telling us?

Not sure how many people noticed the news that the value investment master, Warren Buffett, is seeking to increase his ownership for Bank of America to 10% of the company. I don’t see any major market reaction to this news but I think Buffett is sending an important note to us, which is likely related to what the FED is doing at the moment. If you still don’t know yet, the Fed is effectively doing another round of QE, although Powell denied publically to be doing so. Since the last Fed meeting in Jul, Fed has not only stopped shrinking its balance sheet, it has started to actively buy Treasury again every month, which is in essence of a QE with a slight but important twist. In the past few years of QEs, Fed was buying long term Treasury bonds. But this round, they are buying short term Treasury only. What they are doing is effectively artificially steepening the yield curve, which has inverted recently and triggered a great concern of a recession that may be coming. It may be a clever move by the Fed this time to manually depressing the short term yield by buying short term bonds so that to widen the yield curve. That’s really what we are seeing right now and the market seems quite happy with a reducing chance of an immediate recession. This kind of manipulation is quite beneficial to the banks as they typically borrow money with short term interests and lend out for higher interests for longer term. This is how they make money. As smart as Buffett is, he is certainly knowing this too well and he wants to take the full advantage of this new QE. That’s why he wants to boost his ownership for BoA, a smart move. So I think the banking sector should generally be a good place to put some money in the next year or two as long as the Fed is continuing this type of QE.     

 

There's one thing I'm not sure about is how long lasting the effect will be with this QE manipulation by the Fed. The whole world right now is just like a heroin addict. When he has got too much and used to a large dose, the symptom rebounding effect will be enormous when the dose is cut a bit. That’s what happened late last year after the Fed had shrunk its balance sheet for two years. The problem for addicts is, after a cut back for some time, even a resumption in the large doses may not be enough to quickly end those problems (symptoms). Usually they need more and more doses to curb their addictive symptoms. Unfortunately after more than a decade long of dumping of the cheap money (heroin) to the market that has become so addicted to it, our financial system has become more and more weak and feeble. It is still OK with some increasing amount of heroin dumped to it again. The question is how long the effect can truly last and what will be the ultimate consequence from it! I don't think it will be pretty at all and probably very ugly when the final reckoning day comes. Of course this is a topic we will talk a lot more in the future as by no means it is anything imminent. But the longer the can is kicked down the road, the worse the consequence will be. Enjoy what you can get for now but it will be really wise to be also prudently prepared for the worst to come. It is not if, but just when the final reckoning day will come. The Fed's new QE has probably pushed it further down the road by 1-2 more years but heroin addiction will pay the price eventually regardless what is done! 

I’m even doubtful about myself

Oh, boy, the bullish mood these days is enormous and hard to beat, so much so that I even doubt about myself on my bearish view questioning about the sustainability of this euphoric move. I have encountered many times in my investing life, when the market was persistently either depressing or euphoric and I was persistently wrong for days or even weeks to the point that I was even questioning myself “Are you nuts to be so stubborn to be against the crowd?” But my past experience has taught me that nearly every time I would be among the last ones to laugh in the end. The most recent two times with either extremes were the last Dec when the market was persistently depressed and I also got the same feeling that it seems the world would really come to the end with no hope in sight of any meaningful recovery. That was the time I made a bold call for a 20% upside for S&P (see here). Then in Apr this year when the market was persistently bullish to the point that it seemed nothing could stop it from making new highs again and again. And that was also the time I got the feeling that it didn’t look like anything could bring down the market. But I kept myself up and even wrote a blog " How long can you beat the same drum?" on Apr 22. Of course the market kept going up for one more week to reach its peak at that time at 2945 (a point close to my last year end call of 3000 for this year). Then all the sudden the music stopped playing and the market crashed down to 2750 within a couple of weeks.

So I will stick to my bearish view for now when I also starts to get the same feeling of a seemingly unbreakable uptrend. I don’t mind to get a few more eggs on my face because I know when the turning comes, it can be really brutal for FOMOs! Besides, the eggs have provided me more energy for continuing my bearish call.😉😏😅 
Joking aside, it doesn’t mean I cannot benefit from this market move. While I’m bearish overall for the market, I’m actually quite bullish on a few sectors that have been beaten down so badly in the past few months that I have seen their sign of bottoming. So I talked about a few value stocks to my DW Family and fortunately they seem all behavior quite well these days. The general bullish market are certainly helping them but I think even in a downtrend, the beaten down value stocks should also perform relatively well due to the rotational move of the investor’s money that must find somewhere to go. In addition, there are also some greatly overbought stocks that cannot go up any further even with the very strong market. Betting against them could also make some money regardless what the overall market is doing. Within the DW Family, we did a quick short on MRK, which was fortunate enough to yield a quick 80% gain within days. BIIB is another one looking like to falter soon. Then you all know how badly these days for the precious metals. As I said, I’m shorting gold stocks and fortunately enough it is still going in the direction I’m looking for. By the way, we are probably seeing the next shoe drop for gold/silver and the correction is probably very near its end but just still not yet there. We may see gold down towards 1400 to 1420 range before this correction is over.


PS: if you are interested in my DW Family, send me email here.   

The power of “insider” trading

Don’t get me wrong and I’m fully aware that it is illegal to do real insider trading. So never never try this if you know some actual insider information and act on it for your gains. I have known personally some colleagues over years who were convicted and put in jail for insider trading. It is just not worth it to take this kind of risk. So let’s be very clear about this first!Nevertheless, we may get fairly good “insider information” without actually knowing what it is. Sounds odd, isn’t? Well, I have written this before. Basically, by watching what the real insiders are doing with their own money for their own company stocks, especially with respect to buying stocks, we may get a good leading indicator something positive may be coming for the company and for the stock accordingly. Of course there is no guarantee for sure, especially regarding the time duration when the positive insider positives will be reflected in the stock price. But at least we know those knowing the business insider and out feel good about their stocks and are willing to buy even though outsiders are actively selling. This kind of insider buying, if in enormous amount, could sometimes mean explosive jump for the stock. I have a real example just happened this week.

If you don’t know what happened yet for the biotech giant, Biogen (BIIB), there is the backstory. It faltered sharply a few months ago when it disclosed that their leading candidate for Alzheimer’s disease, aducanumab, had failed the predefined futility analysis. Since this was one of the major hopes for the company from the street that supported its hyped stock prices, it got instant haircut by over 20%. Well, it turned out this is not the end of this story. To everyone’s surprise, the company announced last week that it will submit the NDA application for seeking an approval for the drug that was once already having the death sentence. The stock immediately jumped 20% following the news. Apparently the company has been doing a lot of working by reanalyzing the data and discussing with the FDA and finally they concluded that the result is still good for submission. Considering the FDA was consulted all along during this process, apparently it means the FDA also values the study result, which is a good sign for the drug’s fate. Of course it does not mean any guarantee that it will get the approval as the FDA may still reject after a more thorough review. I bet likely this review will require an Advisory Committee Meeting.

But whether or not it will get an approval is not the point of my discussion here today. What is truly amazing to me is how the real insiders have already sent a very clear signal weeks before that something major and positive may be coming. Weeks ago I got the notification from my sources that there was a huge insider buying for BIIB and the amount for this one was really impressive. We are not talking about a million or something but nearly 30 times more by one important insider, a board member. Though not as much but the CEO was also buying big in million dollars. Here are the two major insiders who were buying the stock like crazy. While no one like me and anyone else outside the company would know what was really going on, it was really a very strong sign that some major development was ongoing for the company that may be great for the stock that was on sales. It turns out this is indeed the case. So next time pay attention to such kind of insider buying. Most often than not, it is positive for the stocks in the weeks or months ahead. This will be one type of information, the legal “insider information”, I will be sharing with my DW Family when I see it or know it. As a matter of fact, I just shared one stock with the major insider buying in the similar scale.

Shorts got burned

I’m seeing this note on the wall everywhere today!

Today is the jobs report day and the market responded to the super strong jobs report with a roaring rally. Regardless you like or not, if you are at least reasonable, you have to agree that the US economy is really strong with a very healthy and strong employment market. Of course Trump’s haters have laughably argued that the strong US economy is due to Obama’s economic policies. In reality, anyone with a sane mind has to agree that it is due to Trump’s very business-friendly economic policies and deregulations with the historical tax-cut. I digress a bit.

No need to say, such a strong rebound and rally in the past two weeks or so is certainly a pain for anyone betting in the wrong direction in general. Since I’m often telegraphing publically about my view of the market, I cannot hide that I’m totally wrong till now about the overall market direction for the past two weeks. No need to sugarcoating! But does that mean those with a wrong betting must get burned? Not at all if you ask me and here is why.

I think the trading master Soros once said “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.” I think this is exactly the key every trader should learn and understand. No one can be always right, not even Buffett (the value investing master) or Soros (the trading master). So no need to feel bad if you are wrong, which is just part of investing and trading. The critically important for every one of us to learn is how to control our risk so that if we are wrong, we won’t lose much but if we are right we can win bigger. That’s really the key to differentiate between winners and losers, not the winning/losing rate. This is the principle I’m trying to follow to avoid being truly burned when I’m wrong. There are few more specific advices I can share based on my experience:

• Don’t ever use margin, which can truly kill you. I personally never use margin to trade regardless how much I’m convinced for a trade! It’s just not worth it for the potentially fatal risk involved.
• Never short anything naked, i.e. directly short stocks or sell call options without hedging. This is in essence using margin with unlimited risk that can potentially fatal. I personally always use hedging to short or use put options to bet for the short side. This way, my total downside risk is always predefined and I know upfront how much max I can lose if I’m wrong. As long as it is within my acceptable limit, there won’t be an excruciating burning moment for me even if I’m completely wrong.
• Bet small, especially for short term speculation, and try to go with a high reward/risk ratio for each trade. This is the key in order to be able to win bigger but lose small. For example, I was shorting IWM (Russell 2000) for this week with the weekly puts. Given the very short duration, my position size is quite small relatively speaking as I was prepared to lose all while betting for a quick double. Well I got it wrong and indeed has lost all. But my loss has been more than enough compensated by another short betting (see below).
• Try to diversify if possible. Even in this roaring bullish market, not everything is bullish. We are still seeing many cracks, especially among those that have been chased up fiercely already. A couple of weeks ago, I told my friends that I started to short NKE after it moonshot following a very strong earnings report. See what has happened for it. After it topped around $97, it has declined all the way down to slightly below $90 as of today. Since I’m using a longer term bearish call spread, my bet is relatively big as the risk reward is something like 3:1 in my favor. It has been a luckily great short in the past two weeks. After such a fast decline, some sort of bouncing is very likely. So I’ve adjusted my short spread to make it more neutral. But I think we will get another chance to short it again if it indeed shoot up with a dead cat bounce. In addition, I’m also holding some puts for MRK and VZ and I think they will turn out to be great shorts as well, given the overall market has been in such an overbought condition and the TA for the two are quite bearish.

No one likes being wrong but it is unavoidable in trading. However, you don’t need to  be burned when wrong! As long as you can manage your risk appropriately, you don’t need to be the burning victim even when you bet on the wrong side. Hope this helps!