Markets are going to crash within the next month, maybe today. October is the month of volatility and big crashes ('29, '88, and many other examples). Politicians are muddling around with salvaging EuroZone, decentralized group disaffection has spread to the US and New York, billionaire hedge funder John Paulson is being harassed, VIX is absurdly high, congress is playing around with crazy ideas about taxing imports from China, the second largest world economy Japan is in a nuclear sink, and the tech sector which has bolstered the economy is slowing down.
I'd keep my money out of exposure to the market's beta for a few weeks.
Update: I was wrong!
I’m very, very good at trading stocks. I do not gamble. I, literally, mathematically, like clockwork, always make money. I have not posted my Year 3 returns yet (I have for Years 1 and 2 ), but they are better than ever. I have surprisingly consistent annual returns in excess of 20%+ in all conditions: both boom times, flat markets, record-breakingly volatile markets, and now deep recessions. I will write about my 2008 returns as soon as I finish my taxes.
Right now, however, I do not have significant excess investment capital outside of my Roth IRA. My Roth IRA I use for long-term investments in which I do not trade in and out frequently. Therefore, I now sometimes see some trades which I may or may not have taken if I did have some capital. I want to share one idea I had today with you.
First, please note that this information is not to be construed as either an endorsement or a recommendation; as investment advice or as an offer to buy or sell securities of any kind. Please consult with your own advisor before using this information.
I read that Amazon just launched an online game trade-in system. Gamestop dropped almost 14% upon the news. I know Amazon. I love Amazon. I have made lots of money off of Amazon recently. But this will not affect GameStop’s sales in the long run. As the analyst in the article notes:
GameStop has previously tested out online trade-ins, but with limited success because of the time consumers had to wait to receive store credit, Sebastian said. The retailer’s trade-in model is successful in part because it gives gamers instant gratification.
The best products have the best design. They make customers fall in love with their simplicity and instant feedback. Amazon’s mail in system offers none of that. Netflix works because, with its queue system, you passively receive new content. Amazon’s system requires quite a bit of active involvement before you receive game credits.
If anything, GameStop will receive extra attention because of Amazon’s offering. It may even grow more quickly. I would buy GameStop right now.
Of coure, I would also hedge against the market by buying a short or double-short (more leverage!) ETF like QID. That way, you can buy into the pure alpha of GameStop, without exposing yourself to the crazy movements of the market as a whole which nobody in the world can predict or even understand. I will write more about this later.