Wednesday, August 5, 2020

What I Am Worrying About With My EPJ Daily Alert Subscribers

Yesterday, I received this email from an EPJ Daily Alert subscriber:
I just wanted to thank you for your stock market advice.  Based on your recommendation, I bought warrants on SPAQ.  I just sold them for only (lol!) a 350% gain.  I rolled the money into call options for GDX.  I also plan to add to the GDX options and buy call options on SLV. 
I am getting a lot of emails like this. It scares the hell out of me.

In the ALERT,  I advised going ALL IN within 48 hours of the COVID-19 stock market bottom.

I also advised going heavily into gold and silver and really started pushing gold and silver aggressively just before the recent massive upside move in both.

This is a headline MarketWatch is running:

"Even"? Few understand how gold and the stock market can be going up at the same time.  ALERT subscribers do.

Then there was that SPAQ warrant call. (By the way, in the ALERT portfolio there is another warrant where the same thing could happen).

I would imagine most of my subscribers are doing very well but this makes me very nervous. We are witnessing a run of a lifetime in the markets and we caught it at the very bottom.

It is natural to think this is easy money and that it is going to continue but this was my response in the ALERT  to the subscriber with the 350% SPAQ warrants profit:
That's great but don't get too carried away. Options are a very leveraged position and if something goes wrong you could lose everything. In addition, there could be technical corrections that will scare you out of your pants. At such a time, your thinking will be "Should I get out now to save what I have or ride out the downturn that will reverse?"

We are in one of the most unique market periods ever but be careful, especially if you are highly leveraged. Make sure a sudden reversal doesn't wipe you out. As I pointed out, at best we have 3 to 6 month visibility, that is not a lot. Some unexpected development could rattle current positions. I do not think this will happen but you need to know it can.

It is really a time to be humble about taking advantage of the future. Most people (including investors and investment advisers) really have no clue as to what is going on. Proper application of Austrian school economics gives us a major advantage but the Austrian school also teaches we can't know everything about the future.
I am generally recommending stocks and ETFs not options. I mention options infrequently but I understand the temptation right now to go for the big hit. Things have developed just as I expected and I am watching things very closely so I think I will sense any trouble developing before it does but I am an Austrian school economist who knows that the future can not be seen with certainty.

We are in a remarkable period for investing that hardly anyone understands. That gives those of us who apply Austrian school economics a big edge bute, and I am pounding this point with my subscribers: Things have turned out very well but don't get carried away, this is a period of major macro moves and if something occurs that I haven't spotted then things could turn bad quickly. I don't think this will occur but please be careful that you aren't getting too aggressive and leveraged.


Past spectacular calls do not necessarily mean future spectacular calls.


  1. Don't worry Bob. I for one, am an adult, and realize that there is a time to reap and a time to sow.
    Get while the gettin' is good.
    Thanks for the great advice, but checkin' every 1:00 PM or so to bail!!


    Capn' Mike