No Time to Sell

The S&P 500 entered correction territory yesterday.

At the session’s intraday low of $425.86, SPY was -10.3% year-to-date, before ending the session at $429.57.

Blame went to Russia, as usual recently. Barron’s wrote that stocks went “reeling in response to the Russia-Ukraine conflict…” In the short term, probably so, but remember that in the long term geopolitical events exert a negligible impact on the stock market.

That’s all well and good in theory, but when arrows turn red, account balances drop, and media hammer the negative news drum, even investors who had considered themselves rock-ribbed can get queasy.

I want you to know that the letter’s plans are fine. They’ve been through this kind of decline, and far worse, before.

We went into this correction with plenty of buying power that we had hoped to use at lower stock prices. We still hope to do so, on our unfaltering quarterly schedule. Reliability is your friend in turbulent times. The Kelly Letter specializes in it.

If by chance you went into this downdraft with a high stock balance because you didn’t match the letter’s allocation at the beginning of the year, don’t beat yourself up over it.

Just as my advice in the Covid crash—which is to say the system’s advice—was to buy or hold, just do not sell, so it is now. As long as you don’t sell, you’re going to be fine.

On a more general level, yes, you should have followed the letter at the beginning of January, but now is not the time to kick yourself. Now is the time to avoid compounding your problems by locking in a loss. Failing to benefit as much as you could have in a recovery is not as bad as missing the recovery entirely. People who puke in price drops then re-enter at higher prices have no place in the stock market.

Pretty simple directive here: Do not sell.

If you’re feeling the heat, interact with me and other subscribers on the subscriber site, or reply to this email and I’ll get back to you ASAP.

I hope this helps.

We’re in it together. This kind of price cycle is exactly what our plans use to spin long-term profits.

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15 Comments

  1. Tom Vaughan
    Posted February 27, 2022 at 2:17 am | Permalink

    I absolutely lost my discipline and bought some on Wednesday. Basically did a whole extra quarter of buying on 3Sig. Not a habit I want to get into, but that $102 IJR was hard to resist.

    I took great pride in not worrying about TQQQ one bit.

  2. Mike S
    Posted February 25, 2022 at 1:35 am | Permalink

    Jason,

    I only wish I had had your pep talks throughout my investing career. It’s tough to watch but I’m comfortable knowing that I can last through the year before needing to generate any cash and depending on how IncSig works out maybe more.

    Thanks for the note.

  3. Albert E Silberman
    Posted February 25, 2022 at 1:19 am | Permalink

    Even though my last purchases are down and the events in Russia have increased the correction will not make any new purchases now but will wait until the 4/1 rebalance.

  4. Dean Thomas
    Posted February 24, 2022 at 6:35 am | Permalink

    I have started the Income Sig plan. I’m not selling anything. TQQQ is down 30 percent from where I bought in January. It will come back and I will add to the positions. I may not wait for the quarter rebalance date. Like Jason says we don’t time the market. Patience is my friend, but hard to do sometimes.

    • Posted February 24, 2022 at 7:39 am | Permalink

      Good work starting Income Sig, Dean. Over time, it will provide a living. I’m glad to hear you’re not selling anything!

  5. Steve
    Posted February 24, 2022 at 4:08 am | Permalink

    Jason,

    Thank you for the timely message “now is not the time to sell”.

    We are all battered by the deluge of bad news, and of course our primal instincts are telling us to flee the market. As you also indicated, “buy and fight” is another option with some predictive timing risk. History and mathematics work in favor of staying with a strategic plan designed with contingencies to deal with setbacks and difficult times. It is hard to remain steadfast to any plan when bullets are flying but that is in fact the proven best option. There is nothing wrong with turning this into an offensive opportunity as well. The reality we need to keep in mind is the temporary nature of these challenging negative events. Success depends on remaining present and ready to take advantage of the inevitable reversal. Our temporary losses are a small price we as a free people have to pay to stand up against a dangerous bully.

    • Posted February 24, 2022 at 7:36 am | Permalink

      Hear, hear, Steve!

      I would even go beyond the idea that this too shall pass. In the case of the Sig Systems, it’s this too is what creates profit. The plans are designed not to just survive lower-price periods, but take advantage of them by adding money for a bigger payoff in the recovery. To volatility harnessing plans like ours, the down is as essential as the up.

      As far as bullies go, no doubt: the only way to stop them is to push back. From playgrounds to Poland (start of WWII when Nazi Germany invaded in 1939) to Putin, the quicker the push-back the quicker the stand-down.

  6. Kent Lacey
    Posted February 24, 2022 at 2:47 am | Permalink

    Thor: Yes, it appears to be very similar approach.I have a large amount of dividend stocks and coupled with our Social Security I can usually pay all my monthly bills. I use the options to generate extra income. I find the vertical puts to be the best place to work successfully. I gave up on covered calls a long time ago as I don’t want to sell the stock. I do a select few naked puts, but it has to be a stock that I would be happy owning. And more than 50% of the bull puts get rolled multiple times. Just seems when the markets swoon I have to work twice as much as when things are smooth.

    • Posted February 24, 2022 at 7:26 am | Permalink

      Kent,

      I’ll email you and Thor to see if you’d like each other’s email addresses to stay in touch privately, rather than communicating in this public forum. Please watch for my note.

  7. Eric
    Posted February 23, 2022 at 11:14 pm | Permalink

    Is it OK or recommended to buy right now?

    • Posted February 24, 2022 at 7:20 am | Permalink

      Eric,

      The letter will stick with its quarterly schedule, as always.

      If you’re going to take any action now, the correct one is buying. Prices are already cheap. They could get cheaper, but the eventual recovery will move beyond today’s price level as well as any lower ones.

  8. Kent Lacey
    Posted February 23, 2022 at 9:52 pm | Permalink

    Jason,

    Thank you for your timely and wise email. Everyone needs reminding and support when times get disorganized. I have to say that investing and trading (yes some of us trade also) is a lonely enterprise. I know that I sit at my desk for many hours a week and no one else in the house, nor in my circle of friends is a trader. There is no one to talk to, no one to help when help would be welcomed. But I agree with your email’s message. That said I did pick out a few weak stocks that I was planning on exiting, and yesterday I did so (not even aware the market was down again). Some of those funds will be put into better stocks this week, and some of it will remain “dry powder” to take advantage of opportunities as they become obvious.

    While lower markets make humans worry, in every case the markets will recover. Time is our friend, it works for us.

    As markets drop, volatility increases . . . and volatility creates opportunity. Our world is an exciting place and opportunity is everywhere. Thank you for your communication today.

    • Thor Rostock
      Posted February 24, 2022 at 2:07 am | Permalink

      To Jason: I second Kent’s sentiments and thank you for the communication as well.

      To Kent: I am like you in that I trade daily — mostly unsecured puts, bull put spreads, covered calls on positions I have, and rolls of course. It is lonely to not have anyone to talk to. My spouse puts up with it by listening to my babble. My friends don’t really like talking about it since they don’t do it and therefore don’t understand it. I’m conservative (IMHO) and keep some cash and fixed income in the overall nest egg to buffer declines like this. I also use Jason’s plan in a portion of overall strategy so as to not subject myself to gut wrenching drawdowns. Anyway, just thought I’d add my two cents since reading your post made me feel that we are kindred spirits.

      • Posted February 24, 2022 at 7:23 am | Permalink

        You’re welcome, Thor, and thank you for sharing your kindred spirit with Kent!

    • Posted February 24, 2022 at 7:18 am | Permalink

      My pleasure, Kent.

      I agree that our world constantly offers opportunity, and that time is a friend to well-managed investing systems.

      Don’t get too lonely at your desk! Be sure to fill your life with other social activities. In my experience, trading alone within a cone of silence is best because it prevents outside confusion, but living a lonely life for the sake of trading is a bad bargain. Guard your trading mind from noise, but socialize outside the confines of trading. That’s the key.

      I appreciate your comment!



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