[Harsh Reality] The recovery probability of stock prices that fell more than 70% is only...
Hello, this is Kudō Yammo (Shōzan? — context shows "Kudou Yasumi"?). However, the name is typically rendered as "Shōzan" in romaji; please confirm if a specific romanization is needed.
Recently, due to the coronavirus
people working from home,
people leaving the company earlier than usual,
and I think this increase has been happening.
From April 1,
the "excessive overtime limits" under the revised Labor Standards Act
have come to apply to small- and medium-sized enterprises as well,
so, regardless of COVID-19, many people are being told to leave the office early.
This is a regulation that could even incur imprisonment if violated.
Waking up early to go to work and continue working late at night,
this way of working seems to be becoming unacceptable in this era.
For employees, what would you think about these changes?
Recently, I had a chance to talk with a friend who works at a car manufacturer,
and when I asked him,he said,
“Overtime is no longer allowed, and that’s fine,
but if overtime pay disappears, my salary will drop quite a bit
and life will become hard.”
He grumbled.
“It’s not like I’m cheering just because I can go home early.”
It didn’t seem that way.
Listening to this made me think that
we can no longer rely on companies and need to develop the ability to earn money ourselves—a skill that is increasingly required.
In particular, with earthquakes, heavy rains, viruses spreading,
and other emergencies that could suddenly change the world,
it is an era where even the strongest companies’ survival is uncertain.
In fact recently, Marubeni
announced that it would cut its full-year earnings forecast by 390 billion yen
and large companies have been revising forecasts downward.
Many people are probably feeling the risk of relying entirely on a company, but as a risk hedge
it is increasingly important to find ways to earn money on your own.
By the way, I live in Tokyo,
and recently my lifestyle has basically not changed.
Whether or not there are self-restraint requests related to COVID-19,
I don’t even need to go to the office,
I can play games and read manga
and continue living a stable life.
The reason I can live like this
is that I can earn profits from stock trading.
Most of you reading this email newsletter
probably think,
“If I can earn from stock trading and
live a carefree life not being tossed about by the coronavirus,”
you imagine,
and today I’ll share another hint with you.
Since this is a free newsletter,
I cannot share everything, but
I will still give you as many hints as possible.
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The most important rule in stock trading
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With that said, let’s move to the main topic,
and in stock trading,
what is the one thing you must not do?
People’s opinions differ, of course...
but what I always feel
is that many people focus too much on “profit.”
They do not pay attention to “loss.”
Already at that point, it’s game over.
When you take a position,
you think, “If the stock price reaches this level, I can earn this much (^^) ♪”
and you become carefree,
but you haven’t considered, “What if there is a loss?”
There are many people who haven’t thought about it.
Even after the recent big crashes, I hear stories like
“When it moved against me, I hadn’t thought about what to do.”
That’s all I hear.
To reiterate,
the first step in stock trading is to think
about what you would do if prices moved unfavorably.”
But no matter how well you understand this in your head,
when it comes to real trading,
your blood rushes and your mind becomes all about profit again,
and many people can’t think straight.
For such people, today I will introduce one thing,
a very serious data point.
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Probability that a stock plunging more than 70% will recover
back to its previous level
＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝＝“After a stock falls 70% or more,
how many never recover to their previous price?”
This was studied by JPMorgan in the United States.
The period was from 1980 to 2014.
I’d like you to predict what percentage that is yourself,
but here is the answer.
↓
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"When looking at how often a stock has
what we call a “catastrophic decline”—
falling 70% or more and never recovering—
we see that 40% of all stocks suffer this fate
at some time in their history."
『The Agony and the Ecstasy』
https://www.jpmorgan.com/cm/BlobServer/Eye_on_the_Market_September_2014_-_Executive_Summary.pdf?blobkey=id&blobwhere=1320684901654&blobheader=application/pdf&blobheadername1=Cache-Control&blobheadervalue1=private&blobcol=urldata&blobtable=MungoBlobs
Quoted from
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It might be hard to understand in English, but
“Of the stocks that fell by 70% or more,
about 40% did not recover their stock price afterward.”
This means nearly half of the stocks remained in a collapsed state.
Even for stocks that fell by more than 70%,
which is the meaning.
(Results for Japanese stocks may differ.)
How you interpret this number is up to you,
but for the wise, just one wrong decision can lead to irreparable losses,
and you will strongly feel this.
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Surviving in a world where one wrong decision can cost you everything
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Continuing to cautiously and steadily increase profitsthrough stock trading
even as you trade stock,
there is a possibility that with one wrong decision you could lose everything,
that is the world of stock trading.
However, it is absolutely impossible to always make correct judgments.
Since you cannot read the future of the market,
there will inevitably be times when you make a wrong judgment.
That is why, in advance,
it is important to prepare recovery strategies
in case you make a wrong decision.
And I myself will be teaching those strategies at the Stock Academy.
A strategy designed to profit no matter how the market moves.
Of course, it has properly dealt with recent crashes as well.
If you want to learn the basics of that strategy,
please take a look at this invitation,
but
↓
http://naminori99.com/surfing_stock_school/
Either way,
avoid huge losses at all costs,
so please keep this in mind as you trade stock.
With that, please enjoy the rest of today’s reading.
Thank you for reading until the end.
Keizo Kudō
