Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too
240
Laughing at Wall Street: How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too
240eBook
Available on Compatible NOOK devices, the free NOOK App and in My Digital Library.
Related collections and offers
Overview
$20,000 to $2 million in only three years— the greatest stock-picker you never heard of tells you how you can do it too
Chris Camillo is not a stockbroker, financial analyst, or hedge fund manager. He is an ordinary person with a knack for identifying trends and discovering great investments hidden in everyday life. In early 2007, he invested $20,000 in the stock market, and in three years it grew to just over $2 million.
With Laughing at Wall Street, you'll see:
•How Facebook friends helped a young parent invest in the wildly successful children's show, Chuggington—and saw her stock values climb 50%
•How an everyday trip to 7-Eleven alerted a teenager to short Snapple stock—and tripled his money in seven days
•How $1000 invested consecutively in Uggs, True Religion jeans, and Crocs over five years grew to $750,000
•How Michelle Obama caused J. Crew's stock to soar 186%, and Wall Street only caught up four months later!
Engaging, narratively-driven, and without complicated financial analysis, Camillo's stock picking methodology proves that you do not need large sums of money or fancy market data to become a successful investor.
Product Details
| ISBN-13: | 9781429989664 |
|---|---|
| Publisher: | St. Martin's Publishing Group |
| Publication date: | 11/08/2011 |
| Sold by: | Macmillan |
| Format: | eBook |
| Pages: | 240 |
| Sales rank: | 132,802 |
| File size: | 392 KB |
About the Author
CHRIS CAMILLO is one of one of the world's top performing amateur investors. Most recently a market research executive, his jobs over the years have included washing and selling cars, delivering pizza, and folding clothes at The Gap. He lives in Texas with his family.
Chris Camillo is one of one of the world’s top performing amateur investors. Most recently a market research executive, his jobs over the years have included washing and selling cars, delivering pizza, and folding clothes at The Gap. He is the author of Laughing at Wall Street. He lives in Texas with his family.
Read an Excerpt
CHAPTER 1
"EENY, MEENY, MINEY, MO"
Investments of a Twelve-year-old
"Dad, Dad, Dad! I'm going to be rich!" I screamed as I burst uninvited into my parents' bathroom waving a copy of The Wall Street Journal in the air.
I was twelve years old and, like a lot of other boys growing up on Long Island, usually spent most of what little money I had on baseball cards. That was until that morning, when I came to the realization that, for years, I had been throwing my allowance away on a mass-produced pseudo-investment that would likely never substantially increase in value. Much of my adolescence had been spent analyzing baseball player stats and negotiating card trades with friends and fellow collectors at swap meets — and for what? Even my prized 1984 baseball card set had barely appreciated in value for two years! I had mistaken a hobby for investing. When I realized this, I swore that the industry would never get another dime of my hard-earned money. I decided it was time I graduated to the big leagues of investing.
Hopping atop my parents' bathroom vanity that early December morning, I ripped open The Wall Street Journal to enlighten my father on my groundbreaking discovery.
Amid pages of micro-type stock quotes I had encircled the stock symbol for Toys"R"Us.
"Twenty-two days till Christmas!" I announced. "Just think of all the Christmas and Hanukkah toys parents will be buying in the next few weeks! I'm telling you, Dad, this is a sure thing!"
I then handed my father a fist-size roll of $1 and $5 bills — representing months of hoarding my allowance and birthday cash — and urged him to help me facilitate the purchase of stock in Toys"R"Us. "Quick, Dad! Call your broker!"
My father, a lawyer, had limited investing experience, but he was wise enough not to take my money. Instead, he taught me an important lesson in stock investing I would never forget. He explained that the price of Toys"R"Us stock already reflected all widely known information about the company including past, present, and anticipated future sales. I learned that the price of the company's stock, much like the stock price of other companies that benefit from holiday sales, does not go up in value each holiday season — as investors already anticipate that the company will sell more toys at that time of year. A decade later I would relearn this lesson while studying the "efficient markets theory" in business school. The theory asserts that it is not possible for a person to achieve investment returns greater than average market returns, given the information publicly available at the time of the investment.
"But then how do you know," I asked my father, "when to buy a company's stock?"
"That depends," he replied. "The very best time to buy a company's stock is when you think you know something about that company that others don't. Otherwise, picking stocks at random gives you as good a chance of picking winners as any stock-picking strategy. Never let anyone tell you different."
I had heard all I needed to hear. I had a wad of cash burning a hole in my pocket and I was eager to get in the big-money game of investing. So, with my eyes closed, and chanting, "Eeeny, meeny, miney, mo," I picked my first-ever stock investment. And as dumb luck would have it, just a few months later the small energy company whose stock I purchased at random from the paper that day was acquired at a stock price nearly double what I'd paid. Little did I know at the time that I would go on to spend the greater part of my teen years trying to repeat that initial investing success.
EASY COME, EASY GO
In the months and years that followed that first investment, I would learn that easy money can be as much a curse as a blessing. Perhaps you have heard stories about lottery winners losing their multimillion-dollar fortunes just a few years after hitting the big jackpot. For me it was the same story, just with a smaller pot. I might have had only a few hundred dollars of made money to lose, but that represented all the money I had in the world.
My dad had explicitly warned me not to let "beginner's luck" go to my head. "Lightning," he said, "rarely strikes twice in the same spot." But not surprisingly, being an almost-teenage know-it-all, I wasn't listening to what I didn't want to hear. What did he know, anyway? My dad was a lot of things, but a risk taker was not one of them. Neither he nor my mom believed in shortcuts.
Dad was born and raised in the South Bronx and studied very hard to earn a full-ride scholarship to Fordham University, where he graduated number one in his class. He then spent twenty-two years as a corporate attorney at JCPenney, where he slowly worked his way up the ladder to become the company's head of litigation, and eventually executive vice president and general counsel of its life insurance division.
My mother received her master's degree in education, and after many years working endless hours as a teacher and school administrator, she became principal of a small Catholic school in a low-income Hispanic neighborhood — an often difficult yet gratifying job she thoroughly enjoyed. The straight-and-narrow path of hard work and patience paid off for both my parents, providing them with the financial means to raise me and my three siblings in upper-class neighborhoods.
Yet, while we were far from poor, my parents were solely reliant on compensation from their careers as a means to building wealth. Investing just wasn't something they did. My dad had a stockbroker only out of necessity, to process the corporate stock grants he occasionally received from his company.
My parents' lack of income diversity made them slaves to their employers. In 1988, when JCPenney suddenly announced it was relocating the company's headquarters from Manhattan to a plot of uninhabited farmland on the border of Texas and Oklahoma, we were left with no other option than to leave our extended family and friends to start a new life two thousand miles away from everything we had ever known. The move tore my large close-knit family in half, both physically and emotionally; we had lived in close proximity for generations.
I was in eighth grade at the time and was forced to change schools mid-year. It was not an easy transition. I was an Italian American kid with a thick "Noo Yawk" accent who had grown up in an ethnic melting pot in the predominantly Jewish neighborhood of Great Neck, Long Island. The people and terrain of Texas were as unfamiliar to me as China would have been.
At that first dreaded cafeteria school lunch west of the Mississippi, I reluctantly took a seat next to a group of my new classmates, some of whom were sporting Field & Stream or Ducks Unlimited baseball caps and chewing tobacco. A note was passed to me from across the table. It read, "Interstate 35 North — Go Home, Yankee."
It would be a full year before I adjusted my wristwatch from Eastern to Central Standard Time. I refused to accept my new life as permanent. I was intent on getting my old life back, and if I could find a shortcut to doing so, all the better. My parents taught us to believe that the fruits of success came only with hard work. But look where all that hard work had gotten us. I might have been only thirteen at the time, but I had tasted the fruits of success in the stock market and I wanted more of it. A lot more! I knew that with enough of it, I could buy my old life back — and never again be at the mercy of others.
WASH AND REPEAT
As a result of that first stock investment, in just a few months I had doubled my savings to nearly $1,000. The stock market would be my ticket out of the hell that was my new life. But I knew it would take a lot more than $1,000 to convince my dad to quit his job and move the family back home to New York. I calculated that if I could just repeat my last investment success and double my $1,000 ten times in a row, I would have a million dollars — easy enough to achieve. So with the newspaper's Business section in hand, eyes closed, I yet again picked a stock at random and proceeded with the next phase of my investment experiment.
I don't remember the name of my second, third, or fourth stock picks. Needless to say, my father was right. That first stock pick had been just blind luck after all. Clearly I couldn't just "will" myself to fortune with wishful thinking. Don't get me wrong. I still believed the stock market to be my golden ticket, but I realized that I would have to step up my investing strategy.
LEARNING THE HARD WAY
I became obsessed. I read all the investing books, and soon knew every Wall Street Journal and Barron's columnist by name. There wasn't an investment type (stocks, bonds, commodities) or trading strategy (growth, value, momentum) I didn't try.
I recall riding my BMX bike home one summer afternoon from the Dallas commodities exchange while balancing a one-hundred-ounce bar of silver bullion on the handlebars. I had just finished reading a book about the Hunts, one of the world's wealthiest families. They tried to corner the global silver market in the 1970s by amassing more than two hundred million ounces of the metal, equivalent to half the world's deliverable supply.
Unfortunately, my own silver experiment was ultimately more of a novelty than an investment. My $500 silver bar appreciated only $12 in eight months, and if I had held onto it, my investment would have been worth roughly the same amount ten years later. Unless you are seeking an investment that could also serve as the world's most interesting and expensive paperweight, I would leave commodities to the professional speculators.
By the time I turned sixteen, CNBC had become my MTV, and "money honey" finance anchor Maria Bartiromo was my Pamela Anderson. I had become a human sponge for all things financial. If I learned anything worth remembering about investing during those teenage years, it was what drove other people to buy and sell stocks. It was this insight into Wall Street's investing behavior that would eventually empower me to crack the black box of investing success for myself.
CHAPTER 2
IF IT'S BROKEN, FIX IT
"The error of the past is the wisdom of the future."
— DALE TURNER
Think of the last car you purchased. Now think about the factors in your decision to purchase that particular car. Was it the car's styling? Or was it passenger capacity, or affordability, or gas mileage, or the number of cup holders? Ask six different people that question and you might get six different answers.
But on Wall Street, two long-established methodologies drive nearly 100 percent of all investment decisions:
1. Technical analysis: the study of past market data to forecast the future direction of stock price; and
2. Fundamental analysis: the study of the health, financial statements, market, management, and competitors of a company to determine the company's stock value.
Here's what I learned about each:
TECHNICAL ANALYSIS
HISTORY DOES NOT REPEAT ITSELF IN PREDICTABLE PATTERNS
If you ever hear someone tell you "the trend is your friend," beware! You are likely listening to someone who has been brainwashed by the pseudoscience that is technical analysis.
I've tried my hand at it — as does nearly every new-to-the-game self-directed investor (as you can judge by the sheer number of investment books that attempt to decipher and promote this age-old investment strategy) — and I found that experimenting with technical analysis is kind of like ordering calf fries (translation for non-Texans: cow testicles) at a restaurant. You know it's a bad idea, but you do it anyway to learn firsthand what you are not missing. The legendary self-made billionaire and investor Warren Buffett has said, "I realized technical analysis didn't work when I turned the charts upside down and didn't get a different answer." He also noted, "If past history was all there was to the game, the richest people would be librarians."
Still, the lure of making money simply by observing past peaks and valleys on stock charts is seductive for any potential investor looking to turn a quick profit with minimal effort. Unfortunately, in the case of technical analysis, what seems too good to be true is all too great a temptation for the newbie investor to resist.
The principals of technical analysis have evolved through the observation of financial markets over hundreds of years. Technicians (or "chartists") search to exploit repeatable patterns that are either directly or indirectly related to a stock's price or volume. Technicians purchase stocks that are "trending up" and sell stocks that are "trending down," based on their analysis. Sounds simple, right?
The problem is that stocks, much like the people who buy and sell them, are not as predictable as they appear to be. And when money is at stake, the behavior of crowds trying to profit from the perceived ebb and flow of stock price fluctuations quickly tends to neutralize any price patterns that do exist.
For example, at one time there existed a phenomenon in the stock market known as the "January effect." Every year, more often than not, the stock prices of smaller companies tended to go up more than average during the month of January. The effect is now thought to have been related to end-of-year tax-motivated selling and eventual repurchasing by individual investors.
Once investors began to observe this trend, it disappeared as quickly as it had emerged, because investors sought to purchase stocks ahead of the expected January rise, giving birth to a new phenomenon of buying in the month of December known as the annual "Santa Claus rally." Not surprisingly, as investors chased the Santa Claus rally, it began to appear earlier and earlier in the month, until it, too, evaporated.
As a result of this type of self-correcting market bias, technical trading models have become increasingly cryptic and proprietary over the years, making it more and more difficult for investors on or off Wall Street to keep up with the evolving rules of the so-called science. Conveniently, this serves to protect the perceived value and excessive compensation of the computer engineer voodoo wizards who have become Wall Street's modern-day technical analysts.
Sadly, no matter how many millions are spent and no matter how many MIT computer engineers Wall Street employs to push the limits of technical analysis — Wall Street trading firms now spend countless dollars to employ computers and software that can make millions of trades each second, striving for that little edge — the strategy over the long term has proven to be little better than picking stocks at random ("eeny, meeny, miney, mo").
A 322-page study of the field of technical analysis conducted in 2003 by Amsterdam economist Gerwin Griffioen concluded that technical trading for the U.S., Japanese, and Western European stock markets showed no statistically significant forecasting power when you took into account the costs of buying and selling stocks.
Of course, the latest movement in technical analysis leverages computer-assisted techniques to apply complex algorithms in the simulation and decoding of artificial neural networks, completely removing the need for human interpretation of charts. Is your head spinning yet? If Wall Street is great at one thing, it is their ability to repackage, in ways that are indecipherably new and complex, investment strategies proven to be ineffective, to "sell" prospective clients. If we have learned anything from the financial debacle of 2008 it is "garbage in, garbage out." Indeed, now anyone with $299 and a computer can purchase technical charting software off an infomercial that will tell them exactly when to buy and sell nearly any stock in the world.
That's great! As if thirty years of underperformance by overpaid Wall Street technical chartists weren't bad enough, now Uncle Jim Bob can slowly erode the family's retirement savings all by himself, in the comfort of his living room, using the same tea-leaf-reading software as the pros on Wall Street!
Even with the vast amount of published evidence disproving the validity of technical analysis, the super-size interactive charts used by modern-day technical analysts generate too much entertainment value and on-screen color to be ignored by the financial media. Watch any financial news network long enough and you are sure to find a technician lending his or her expertise to providing an interpretation of the day's stock market action. Such analysts have a captivating answer for every question, and those answers are always delivered with absolute confidence. Why did Microsoft's stock go down today? "Well," the analyst will say, "it was clearly coming off a 'head-and-shoulders top' formation and was overdue for a price correction." When asked what a specific stock is going to do tomorrow or next week, the answers become a bit vaguer. Usually the technician will provide two or more possible scenarios in order to produce a technical explanation for any conceivable future price movement. Convenient, right? Technical analysts are perhaps the greatest showmen on Wall Street, and they are highly skilled at masking the shortfalls of their craft. I highly recommend you turn on CNBC or Fox Business and witness their theatrics for yourself. I always find them quite amusing.
(Continues…)
Excerpted from "Laughing at Wall Street"
by .
Copyright © 2011 Chris Camillo.
Excerpted by permission of St. Martin's Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Title Page,
Dedication,
Preface,
Introduction,
1. "Eeny, Meeny, Miney, Mo" Investments of a Twelve-year-old,
2. If It's Broken, Fix It,
3. Nobody Knows Anything Zoning Out the Financial "Experts" and "Professionals",
4. Other People's Money Trading a Life of Financial Mediocrity for Financial Prosperity,
5. See It, Believe It! How to View Your World Through Investor's Glasses,
6. Zero Financial Literacy Required Investigative Due Diligence for the Math and Finance Impaired,
7. You Know Something They Don't Outsmarting Wall Street's Brightest,
8. You Have People, Too! Monetizing Your Virtual Network,
9. Fake It Till You Make It! How Stock Options Can "Super-Size" Your Investment Returns,
10. Life with Investor's Glasses,
11. Success Stories Appendix: An Invitation to Wall Street's Underworld,
Acknowledgments,
Notes,
About the Author,
Copyright,
What People are Saying About This
“You don’t need Wall Street to be a successful investor. In fact, Chris Camillo’s inspirational approach to creating wealth shows that you know more than the suits on Wall Street —and that knowledge can make you millions.” —T. Harv Eker, Author of #1 NY Times Bestseller Secrets of the Millionaire Mind "Chris Camillo shows the power that self-directed investors today have to transcend the advice of Wall Street gurus."—Perry Blacher, CEO of Covestor-the world's largest portfolio verification service “In Laughing at Wall Street, Chris Camillo's personal story, engaging anecdotes, and practical common sense explanations show the novice and amateur investor what works and what doesn't. I'm intrigued. And inspired.” —Erin Chase, Author of The $5 Dollar Dinner Mom Cookbook "Chris Camillo's Laughing at Wall Street is a fun, practical guide for the novice investor on how to use tools at their disposal such as social media and observation of everyday shopping patterns to become a successful investor. Readers can benefit from Camillo's personal experiences of investing success to create their own winning portfolios!" — Jordan E. Goodman, personal finance expert and author of Fast Profits in Hard Times “It’s time to beat the “Street” like Chris did. If that intrigues, excites and inspires you, read his compelling book!” —Mark Victor Hansen, co-creator of Chicken Soup for the Soul “Laughing At Wall Street is a terrific way to create a financially fit future” —Denise Austin, America's Favorite Fitness Expert and bestselling author of Pilates for Every Body and Fit and Fabulous After 40