What to Do When the Market Tumbles?

Stock Market Video

Talk, Talk, Talk!

This Week’s Fortune Cookie

In Case You Missed It

This week’s Stock Market Video is not our usual weekly review. For the first time you’ll hear from Cabot’s President and Cabot Stock of the Month Chief Analyst Tim Lutts. Tim remains optimistic for the prospects of further market gains after this correction is over. Stocks mentioned include 3D Systems (DDD), Stratasys (SSYS), Qihoo 360 (QIHU), Tableau Software (DATA), and many others. Don’t miss Tim’s thoughts on the market and high-potential stocks he’s following. Click below to watch the video!

Talk, Talk, Talk!

When my wife and I moved to New England back when the world was young, the Boston Celtics were just beginning the Big Three era, the period of NBA dominance for Larry Bird, Robert Parish and Kevin McHale. It was all pretty exciting.

But while the basketball itself was excellent, especially Larry Bird’s mastery of the game and his long-running rivalry with Magic Johnson, as a professor of public speaking, I got a special kick out of what we called the Larry Bird School for Sports Communication. It was as if Bird could turn on a river of perfectly apt, but perfectly obvious, post-game comments for the benefits of television interviewers … and just keep it up.

A sample might be: “It was a tough game and we have to give lots of credit to [name of opposing team] they never gave up; basketball is a team game, and this win was a team win and we all had to pull together; we want to thank our fans, they’re the best in the world; we were lucky to pull this one out; our coaches are great, they really had us prepared; we’re going to have to play better next time; [name of opposing star] is a great player and it’s always fun to play against him; my [name of injured body part] was bothering me a little, but I just forgot about it as the game went on; we had some trouble with the [court conditions, refs, obnoxious fans], but that’s just part of the game …” And so on and so forth.

I’ve never heard anyone better at this underappreciated skill than Bird, although some sportscasters come close in their ability to spout meaningless blather to fill airtime.

But I’ve thought a lot about how it might be possible to develop a similar skill in talking about investments. After all, as any long-time reader of Cabot Wealth Advisory knows, investors of all kinds almost always have a string of clichés and platitudes that they can spit out at the right moment.

Here’s what a little interview with an investment advisor might sound like if he/she’d been to the Larry Bird School for Investment Communication.

“Every [month, quarter, year, decade] in the market is tough; With stocks so [high, low, volatile, under/overvalued] there are no easy choices; don’t try to catch a falling knife; if you think it’s a bottom, you’re too early, if you know it’s a bottom, it’s too late; nobody ever went broke taking a profit; bulls make money, bears make money, pigs get slaughtered; the trend is your friend; the only way to make a small fortune in the stock market is to start with a big fortune; buy low, sell high; buy the rumor, sell the news;

The funny thing is that a lot of what I write at Cabot, both as chief analyst of Cabot China & Emerging Markets Report and as editor of Cabot Wealth Advisory consists of either reworking one of those market clichés or applying them to specific cases in a sensible way.

There is, after all, a reason clichés are clichés. If there’s no truth in a truism, it usually just fades away. Only the best can aspire to cliché status.

But when the market takes a tumble, as it did last week, what you need isn’t more clichés and wise sayings. You need advice on what to do.

I think one of the biggest advantages of the Cabot advisories that have a portfolio is that we will actually tell you what to do with your stocks when they come under attack, whether it’s from a major market meltdown, a bad earnings report or some other piece of bad news.

It’s easy to just recommend stocks. Any idiot can do it, and some do.

But Cabot’s advisories take responsibility for the stocks that are recommended. We follow up on them, give you periodic updates on how they’re doing and tell you when to sell them. If a market move is abrupt enough, we’ll even send out a Special Bulletin advising a move to hold or a sell.

We really are not like the cable-news screamers and the pump-and-dump artists and the tipsters who tell you that everything they’ve ever bought has soared to the moon.

Real advice, taking responsibility, staying in touch. That’s what Cabot is all about.

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.

Tim’s Comment: Personally, I’m very good at not completing my income tax until the last minute, but that’s only because I don’t want to give the IRS my money early. It’s not fatiguing but it does occupy mindspace. In the world of investing, however, I’m very good at doing what needs to be done. In fact, over time, I’ve become less attached to individual stocks, and thus it’s become easier to follow the rules.

Paul’s Comment: I’ve always been a world-class procrastinator, relying on deadlines to help me focus and get things done. But leaving losing stocks in your portfolio doesn’t have a deadline, and it can get very tiresome putting off doing the right thing. Losing stocks are hard to sell, but selling them is one of the most important disciplines in growth investing.

In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.

Cabot Wealth Advisory 1/27/14—How Scrabble is Like Investing

In this issue, Tim Lutts of Cabot Stock of the Month writes about how Scrabble, his game of choice, is like stock investing, concluding that the more information you have, the better you can take advantage of the situation. Tim also gives the fifth in his series of disruptive stocks, Cadence Pharmaceuticals (CADX).

Cabot Wealth Advisory 1/28/14—TWTR Covered Call Option 

Jacob Mintz, the Cabot options guru, writes about Twitter the social media phenomenon and the TWTR stock, then offers a trade idea using options for TWTR. His idea is to create yield using options in a covered call, and he takes you step by step through how to execute it.

Cabot Wealth Advisory 1/30/14—What’s in Store for 2014?

Our resident growth expert Mike Cintolo starts off with 10 smart stock-trading resolutions that are sure to make you a better investor in 2014. And what’s in store for 2014? Well, Mike studied the market since 1950 and it turns out that after the market posts a strong year, the odds strongly favor another year of solid gains. Stock discussed: Pandora (P).

Have a great weekend,

Paul Goodwin     
Chif Analyst of Cabot China & Emerging Markets Report  
and Editor of Cabot Wealth Advisory


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