The most important thing I do here is to get you to understand the “downside” and how to protect yourself from the downside. And what are the indicators of the downside. And to never ever, ever, ever lose big.

How many times have I said that to you? Several million?

Well I bring that up today for two reasons:

Reason #1: Facebook

As you know, I told you on my radio show, I had no idea how the stock would open because it was just a guess. I told you on this show though, that the valuation was an utter joke. That would have brought it public 25% lower in price and 25% fewer shares. I also told you that, if I had to put a valuation on it, it would be $15. And that’s not a prediction because I have no idea and if the stock starts acting well and things go good for the company, I’ll be looking at it.

The stock was down another 3 to 28.84, which is surprising the heck out of me. This very important, over the top IPO opened at 38.00 and is now 28.84!

Wow! Amazing.

Lesson #1: Valuation matters. Hype doesn’t.

Lesson #2: READ THE NUMBERS! I read to you the numbers on my radio show. I told you the last three quarters earnings were up 83%…up 17% and DOWN 9%. I read to you a $100 billion market cap with less than $4 billion in sales and compared it to the Googles and the others.

But I had no idea, I’d be doing this,

There’s going to be a lot of lawsuits because the losses now are pretty big.

Reason #2 Research In Motion

The stock has now gone from 148 down to 11.23. After the close, Research in Motion announced a huge loss. Estimates I believe were for them to make 40 cents per share for the next quarter. They’re announcing a monstrous loss and they’re now hiring others for “strategic alternatives.”

And what’s lesson here: THINGS CHANGE!

Here is a company that blew it. People loved their Blackberries. They called them “Crackberries.” But they didn’t move with the market. They rested on their laurels. They did not change.

And gotta tell you. I’m not so sure they’re going to remain a going concern. I don’t think you can “put the crap back in the goose” as they say. And they do something like $20 billion in revenues. But last quarter, it was down 25%

Things change. Please stay on top of those two words. We’ve seen it this year in Green Mountain Coffee, Netflix…and how about Hewlett Packard?

Hewlett Packard. The stock’s been toast. That was a great stock for a while.

There a lot of money to lose in the market if you’re not moving with the market.

That’s the memo.

Let these be your lessons:

  1. Price and valuation matters
  2. Watch your stock, because you just never know. The great stocks of yesteryear can be your worst stocks today. We’re dealing with businesses here.

Look at Merck, the greatest drug company of all time. I think it’s down 50% from 2000. That’s a lot of cake. Things change. Value and price matters.

And if you are not in tune with those changes, you are going to get run over.

I want you to say in gear with the market.

Understand that the great names that everybody has to own today, could be the caca next week. It is imperative to watch that stock and how it is acting in the market against its peers vs. the market itself.



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Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.