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The Information I Would Want If Our Roles Were Reversed
This is Porter’s Daily Journal, a free e-letter from Porter & Co. that provides unfiltered insights on markets, the economy, and life to help readers become better investors. It includes weekday editions and two weekend editions… and is free to all subscribers.
Capital efficiency… Selling puts… Discounted bonds… Shorting a stock in a bear market… P&C insurance… McDonald’s, Coke, Hershey… It’s never too late to start… Recession is already here… Berkshire buys GOOG… |
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I’m going to give you the one, big secret. It’s the only real, true secret of finance. And once you understand it, you won’t need us (or anyone else) ever again.
As longtime readers must be tired of hearing me say… I feel a huge responsibility to tell you what I would want to know if our roles were reversed. Some of you have paid us to help you make decisions about investing your hard-earned savings. We aren’t fiduciaries. We don’t offer any personalized investment advice, nor do we manage anyone’s money. But this doesn’t absolve us of responsibility to you. You deserve our best.
Over the years, I’ve explained a lot of Wall Street’s “secrets” – like how to manage risk, for example. And why “junk” bonds (high-yield corporate bonds) are sometimes vastly better investments than stocks. (For proof of that, just look at the track record of Marty Fridson’s Distressed Investing. Its recommendations are always among the top positions in the Top 10 Positions reported at the end of each Daily Journal.)
Likewise, we’ve covered why selling naked puts is almost always safer and more profitable than buying stocks outright – something I’d wager your broker would never explain.
Even more contrarian is our opinion that selling stocks short is a great way to reduce risk in your portfolio. This strategy has protected us in past bear markets, and we recently produced Porter’s Guide To Shorting A Stock for our paid-up Complete Investor subscribers.
And then, there are the basics we’ve covered dozens of times – like how important it is to be able to value a security before you buy it. The nominal price of a stock or the nominal coupon of a bond is completely useless as an indicator of value. If you don’t understand exactly why this is so, please… do yourself a favor… don’t own any securities. You should never own anything you don’t understand.