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May 2, 2019 | Good Thing We Weren’t ‘Insiders’

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Sometimes we’re blessed not to possess insider information. Several pointed examples surfaced in the last few days. If we had known, for instance, that Fed Chairman Powell would tell the world on Wednesday that the U.S. economy is holding steady as a rock and that no changes are contemplated in monetary policy, we’d have jumped on call options a day earlier. Lo, the Dow began a 500-point plunge the moment he began to speak, turning our would-be call options into dross. Go figure.

And then there was Yeti, a terrific young company based in Austin, TX, that makes some of the best cooler chests and thermoses we’ve ever owned. On Thursday they announced their first profitable quarter, reflecting a swing from $3.3 million in losses a year ago to a $2.2 million profit in Q1. The results beat analysts forecasts, and yet the stock got sacked, down nearly 10% intraday and fully 18% from a 36.60 peak recorded earlier in the week. Can you imagine how you might have reacted if someone had whispered in your ear a week ago that Yeti was going to report its best quarter ever.  The May 35 calls were trading for around 2.50 at the time and would have seemed an easy bet to double. Instead, they lost more than 99% of their value, trading down to 0.02 before day’s end.

TSLA Rallies, But Why?

Finally there was Tesla, which announced it would try to raise $2.3 billion by selling stocks and bonds. Founder Musk had insisted earlier that money-raising would not be necessary, but he changed his tune after the company reported one of its worst quarterly losses in history. Sell the stock short just ahead of the news? Not on your life. The stock was up as much as $16 on Thursday, acting as though the company, glutted with spare cash, had announced a share buyback.

Buy the rumor, sell the news, as the old saying goes. Next time someone has a hot tip, tell him to get lost. It’s not facts and figures that move stocks one way or the other, but how the information is perceived by investors. Sometimes, it would seem, they are a lot stupider than we might imagine.

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May 2nd, 2019

Posted In: Rick's Picks

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