Today on Trend Following Radio Michael Covel discusses scams and what can be learned from them. Any scam that takes place today, we have seen before. In the early 2000’s Enron was at the height of its game. Turns out they had a fake trading floor set up just to convince Wall Street they were real. At Enron’s peak, their company was trading at $90 a share. When it crashed, their stock traded around $0.50 a share. And that story brings us up to current day with the latest Enron.
Michael continues to read more feedback, but this time from a listener of his podcast seguing him into the current blowup of the pharmaceutical company, Valeant. Valeant’s share prices went from $250 to $30 in short order. Even as the stock was crashing people were buying the hype and false fundamental information. Michael reads from sources such as Jim Cramer, Morgan Stanley, and Valeant themselves. He then connects articles from Enron’s press releases back in 2001 before their crash and press releases from Valeant in 2016. Quotes from both companies CEO’s have strikingly similar comments on their companies as events led up to their falling apart.
Bottom line, if you are in a stock that goes from $250 to $30…You screwed up. There is no reason for that except you. When the numbers say exit, you exit. Ego must be left out of your trading. Michael ends with excerpts by Steve Sjuggerud. Check your ego at the door, have a stop loss, and stick to your plan.
In this episode of Trend Following Radio:
- Ponzi schemes and scams
- The Enron scandal
- Valeant meltdown
- Ego in trading
“Limit the impact of your bad decisions to small loses. Limit your downside and don’t ever make an excuse that you are smarter in ‘just this one trade.’ There is no excuse.” – Dr. Steve Sjuggerud
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