(From my Whisper Trader service)
My mother used to tell me to always play by the rules and to be sensible, honest, work hard and good things will happen. She also would say that life is unfair sometimes and not everyone plays by the “rules.” Talk about conflicting information!
Being philosophical, I often wondered what those “rules” were. Were they the rules of the law, he rules of logic, fairness, religion?
What happened if one breaks the rules; more importantly, what if the rules being broken are not written in the law books and therefore don’t have any real consequences other than your own conscience?
For me it was more than a matter of what was written in some law book. If it felt wrong and/or hurt someone, I simply didn’t do it. For Wall Street’s sake, we will use the rules written in our antiquated and often idiotic regulation.
While a good number of those laws do protect us, there are still immeasurable holes in current regulation that allow not so fair (usually very wealthy) people to prosper from the Main Street masses who often are more like sheep than wolves.
Carl Icahn is a brilliant investor who knows the power behind the media and the internet. His “activist” activities and tactics have netted him billions of dollars over the years and made him famous even if he’s only right a portion of the time.
The sad part is that the public’s knowledge of his involvement alone can almost instantly create wealth for him even when he or the company he’s invested in have done nothing to add real intrinsic value.
Today was the perfect example of how big bad Wall Street can follow benign news around like a lost puppy and how a meaningless sentence or two can add billions to a stock’s market cap.
Icahn sent two tweets today announcing “We currently have a large position in Apple. We believe the company to be extremely undervalued,” then later he said he had a “a nice conversation with Tim Cook today,” adding that they “discussed my opinion that a larger buyback should be done now.” Icahn finished with “We plan to speak again shortly.”
These tweets sent Apple’s shares skyrocketing up 5% by the closing bell and are currently trading around $491. (In full disclosure, I am an Apple shareholder)
Even though this trade is making me money, I am bothered by the fact that Icahn can essentially manipulate markets and make stocks do what he wants to do after he’s already positioned comfortably and Wall Street eats it up!
Regulators are chasing after market makers who are trying to squeeze 1/10th of a penny through high speed computers, but yet these sorts of things go unpunished or even addressed.
I’m not saying that Carl Icahn is a bad man; he is simply using modern technology and a flawed regulatory system to gain an edge, all while acting within the law. I do think it’s fair to say that Icahn is good and “putting pressure” on CEO’s to do things that he wants (nice to have that power).
More importantly, I wanted you all to realize that there are still ways in which this market can be exploited even without “inside information.”
Here at Whisper, we are looking for clues for bullish surprises around earnings in a very LEGAL way. I have been able to target stocks that beat earnings over 84% of the time (getting them to rally that much is another story :).
The point is that it’s paramount that you do your homework and be careful not to jump on the headline bandwagons as they can often mislead you or get you into a stock at already elevated values. If something seems to good to be true, it probably is and unless you’re Carl Ichan, you can’t make an non-performing stock jump 5,10 or even 20%.
I have become successful playing by the rules because I know who the players are and what to watch out for in addition to having a sound investment plan(s) that works.
Even the great Cark Icahn has had tremendous failures and only wins a little more than he loses. The difference is that his winners are big and he controls his losses, just as we should.
There will always be flaws in our legal and regulatory system and instead of trying to fix it (which is damn near impossible), let’s learn how NOT to be taken advantage of and stay one step ahead of the flock.
The game isn’t winning all the time; it’s winning more than you lose on a consistent basis.