Only With Money You Can Truly Afford To Lose! July 7, 2021July 6, 2021 But first . . . Inflation? Maybe not, argues Paul London: competition will stop it. And this . . . Kinzinger says he suspects some lawmakers knew what was going to happen on Jan. 6. Shouldn’t we maybe find out? And this, which I meant to post last week . . . And now . . . John Z.: “When you give an update, would you also note whether you think it’s still a good bet for those who didn’t get in when you did? You’ve recently said you’re hanging on to your RECAF. But would you buy it now at the current price?” → It’s such a good question . . . and so hard to answer because RECAF has quadrupled. When I update a stock that’s lower than it was — or about the same or a little higher – like CNF — it’s easy to say: “To my mind, the risk/reward remains excellent, so long as you invest only with money you can truly afford to lose.” But with RECAF? I guess the logical answer is yes: buy it if you can afford 100% loss. But the psycho-logical answer is: I find it hard to buy after things have shot up — or to recommend that you do. Which is why I was too dumb to buy Berkshire Hathaway at $300 (now $415,000). Not to suggest that RECAF is the next Berkshire – obviously. But the irrationality of not being comfortable buying — or suggesting you buy — after having missed a big jump is more or less the same. An exception would be PRKR, up tenfold at last night’s $1.28 close if you paid a dime, or threefold if you paid 35 cents. A triple from here seems more likely in the next 12 months than a wipeout. So it wouldn’t be dumb for someone who missed those lower prices to buy it with money she or he can truly afford to lose. Why the psycho-logical exception? For one thing, the stock was once $50 (long before I knew of it), albeit with fewer shares outstanding; so at $1.28 it doesn’t seem crazy high. For another, I first paid $1.10 for a few shares in 2018; so even though I bought far more at a dime and at 35 cents, I may in some way be desensitized to the fear of having missed the boat. Hocus-pocus, but you asked. Three more: PLSE: My guru says, “Its product has absolutely no value and is being marketed at a price that will get nobody to use it. It will actually cost the doctor more to use this without any benefit to either him or the patient. So it’s definitely gonna go out of business.” On the off chance you own shares . . . sell? Otherwise, unless you’re the kind of sophisticated investor who knows how to size and hedge short positions and can afford the risk Guru is wrong, going short is a terrible idea. Look at all the smart people who shorted GameStop or AMC and have now lost vastly more than they could ever have hoped to make had the trade worked out. The problem with buying PLSE puts, meanwhile — a bet that the stock will fall — is that they’re expensive — and only run six months. If it takes longer for Guru to be proven right (if he is), they’d expire worthless. Of possibly more interest: EVLO. At $13.49 last night, Guru believes it will be $4 before the August puts expire next month. With money I can truly afford to lose, I bought $10 puts for 85 cents and $7.50 puts for 45 cents. If the stock is $10 or higher on August 20, the puts will expire worthless. If it’s $4, I’ll make $6 on each $10 put, $3.50 on each $7.50 put — about seven times my money (shielded from taxes in my IRA). Wish me luck. And beware! Buying options is generally a losing game. Over time, the premiums, spreads, fees, and taxes do not tilt the odds in your favor. I made an exception in buying these puts because Guru is often right . . . and because I’d rather get my blood racing this way than this way. (Thanks, David.) Likewise: MWXRF, which I am entirely unqualified to evaluate but which at 7 cents a share (a $25 million market cap) I was psycho-logically unable to resist. They claim to have a cost-effective way to extract platinum and palladium from tens of millions of discarded catalytic converters. Read all about it (paid for by the company itself). This is a rank, ill-informed speculation, and I’m already having fun with it.