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☕ Up 18% today alone, and you own it (I hope)

Mar 06, 2024

Good morning! 👋

We’ve had a lot of new folks join the 5 with Fitz Family recently so I thought we’d take a moment to revisit some of the underpinnings needed to successfully navigate massive down days like the one we had yesterday.

So grab a cup of coffee or your favorite libation and let’s have at it!

1 – The markets seem a lot more violent these days – am I imagining things?

No.

And that’s a great place to start.

The rapid rise of computerization, dark pools, passive investing, and 0DTE options has dramatically accelerated trading.

Estimates suggest that 80% or more of all trading activity is now driven by computers trading so fast that humans can’t keep up. More tellingly, computers now manage more money than humans.

That scares the heck outta most folks, but here’s the thing.

Computers are very predictable if you know what to look for and when they’re likely to make a move. So, for that matter, are the big traders who use ’em.

2 – Is all the up/down normal?

Not really, but it’s the new normal.

Moves that used to take weeks or months to play out now happen within the space of days or even hours. The computers I’ve just mentioned play a big part in that.

The news cycle makes it worse because of the perceived urgency.

3 – What can I do about it as an individual investor?

That’s actually the easy part.

Believe it or not, individual investors like us have the upper hand.

We can pick the stocks we want to own, when we want to own ‘em, and the prices we want to pay to the penny.

Institutional investors, on the other hand, must keep their money moving. Effectively, they’re like rats on a treadmill which is why volumes have gotten so high and the trading seems non-stop.

We have the luxury of perspective because we are investing to build wealth. We can step back or get on the gas when we want depending on what we want to accomplish.

No doubt you see the pattern here 😊

4 – I don’t have a lot of money

Do NOT let that hold you back.

I didn’t have a lot of money when I started either – very few people do.

In fact, I made some of my very first trades using money I saved up by cutting lawns. Back then, I had to buy whole shares often at quite high prices so the risks were often totally disproportionate to the rewards. I messed up a lot.

These days you’ve got something I didn’t have – fractional shares.

What I would have given back in the day to have gotten my mitts on those!

Fractional shares, in case you’re not familiar with ‘em, are super cost effective, provide greater flexibility and make it easier than ever for anyone with limited funds to get started sooner rather than later.

Speaking of which, the one and only Suze Orman and I are working on something super special that will help in this department - stay tuned!

5 – But the markets could go down again!

Yes, that’s true.

However, the markets have a very pronounced upward bias over time – so it makes sense to play to that.

This catches a lot of folks by surprise.

My research shows that the S&P 500 has spent 83% of the time at or within 10% of all-time highs since 1927. What’s more, the markets have put in roughly 1,300 unique highs over the past century, around 1 per month.

Ergo it’s better to be “long” (meaning you own stocks) than wrong (because you don’t).

Two key takeaways should help alleviate any fear or uncertainty you may be feeling right now:

There are a lot more bulls than bears over time.
Investing in optimism beats cowering in fear every time, over time.

The easiest way to do that is to buy world class companies that “put up the numbers” despite it all, something else you hear me say frequently right here and on TV. Chances are they’ll go up a lot more than they go down over time, not just at moments in time.

Take CrowdStrike (CRWD), for example.

The company just cranked out great quarterly numbers and shares are up 18.36% today alone after stronger guidance. (Read)

It’s a One Bar Ahead® fav as you can imagine.

Shares have returned 35.10% YTD and 173.59% over the past 12 months giving any investor following along an incredible ride. The SPY, by comparison, has returned 7.35% YTD and a super fabulous but dramatically less 28.07% over the past year as I type according to Bloomberg.

The secret to sleeping well at night is to make sure whatever companies you own are backed by what I call the “5Ds- Digitalization, Defense, Distribution, Dislocation and Diffusion.”

What makes that concept so special is that each of the 5Ds is backed by trillions of dollars that will get spent practically no matter what the Fed does next, no matter who wins the elections and no matter how Wall Street tries to hijack markets in their own interest.