Due to dumb luck, or maybe some talent, I am not sure which, I have been a reasonable success at ICU Lottery Ticket Speculation.
ICU Lottery Ticket Speculation means investing in almost dead stocks or stocks which have fallen significantly from their highs.
They were once flourishing companies, but due to some turn of fortune and change in business conditions they ended up in the ICU.
Just like for a human, there are only two outcomes for a stock in the ICU:
Death or Recovery.
This is a risky and extremely complicated method of speculation.
The odds of success even among the most sophisticated of ICU Lottery Ticket speculators is less than 15%.
But if even one of that 15% clicks, you can make more than 10+ times your money when the stock recovers.
My success rate in ICU Lottery Ticket Speculation has been more than 40% in the USA, but because of my mistakes in not following Jesse Livermore’s rules and my addendum rule I have mentioned above all my gains have disappeared.
So, I have only one ICU Lottery Ticket now.
In the biggest Wall Street Pimp whose collapse caused worldwide turmoil in 2008 – Lehman Brothers.
Hopefully, it should pay off by late 2021 and even if it goes bust, I have learned my lessons from my previous mistakes and have only invested money I can afford to lose.
As a rule, never invest in stocks that have already declared bankruptcy. Most likely 99 times out of hundred, they will be declared worthless and cancelled or diluted to infinity.
Invest in stocks which are in the ICU – they are not bankrupt yet and there is a possibility of recovery. If stocks declare bankruptcy that means they are already dead.
My Principles of ICU Lottery Ticket Speculation
- The first principle of ICU Lottery Ticket Speculation is extreme patience.
It sometimes takes as much as two years to see at least 2X returns and in the meanwhile the stock could at the worst decline by 60% or even 80% and at the best could remain flat and go nowhere.
In those two years you probably would have made more money in a USA savings account (it is only 0.5% interest in the USA compared to 4% in any Bharatiya savings account).
Some of you may think that if a stock declines by 60% it is going to fail.
There are conditions to this decline.
If it is a sudden fall on huge volume, then better to get out.
But if it is a gradual fall on very low volume, then this is the best time to accumulate in 45 – 70 day intervals.
Start to accumulate only when the trend has flattened out or begins to turn upwards. Never accumulate in a downward trend or falling knife.
To spot a trend change in the stock follow the money flow in the Webull app for at least two months.
Webull is doing a valuable service to humanity by providing such valuable information for free in its extremely useful app.
Volumes in such stocks are extremely low and illiquid so that is why I say only risk money you can afford to lose.
Some of you may think that you can keep your money in a savings account and then invest just before the stock is going to go up.
This is a very difficult thing to do and can only be done if you have insider knowledge and it is illegal to trade based on insider knowledge.
Martha Stewart who was almost a billionaire, sold a stock when informed by an insider, to avoid a loss of less than $50,000.
This cost her 6 months in jail and a 2-year house arrest.
Same was the case with Rajat Gupta.
He never even made a penny from the insider information he leaked, but it cost him two years in the big house.
This sort of punishment is very rare in Bharat.
Here, even a world class fraud POS like the King of Good Times still remains a member of Parliament, walks free and probably will still be left with his overseas holdings which are enough for his generations.
- The second principle of ICU Lottery Ticket Speculation is that you must be prepared to lose money but cut your losses by strictly setting a limit on how much you can lose and sell at all costs when you lose more than the limit you set.
Never hope it will go back up, just sell if your limits are broken.
If it starts to go back up, then buy it again after it starts going back up.
Also set sliding limits as you make profits. As your investment moves up, raise the sell limit so that what little profit you make is banked if the investment falls below your limit. Keep raising your sell price limit as the investment goes up.
Do not at any cost maintain your sell limit at your original buying price. Bank whatever profit you get if your sliding sell limit is broken.
- The third principle of ICU Lottery Ticket Speculation is that you must let your profits run.
If you follow the above principal of sliding limits you should have a good chance of letting your profits run.
- The fourth principle of ICU Lottery Ticket Speculation is that you should not put more than 10% or a maximum of 15% of your capital in any single stock and in that you should cut your losses if the stock declines by more than 15%.
- The fifth principle and this is most important is to figure out which stock is down due to bad business strategy and which stock is down due to the dubious morals of the management.
I lost a good bit of money because I was not familiar with the morals of the management of the companies listed in the stock market in Bharat.
But in the USA, my strike rate was more than 50%, some of the huge wins I made was Healthsouth and Calpine (before it went bankrupt). Incidentally Lehman Brothers shorted Calpine into bankruptcy.
In the USA most stocks go bankrupt because of high debt and aggressive expansion and also because of shady and dubious morals of the professional management who have no stake in the company and leave all the risk to the shareholders in pursuit of their bonuses and stock options.
In Bharat most stocks mainly go bankrupt because of the shady and dubious morals of the management and promoters of these companies.
They are most willing to milk the company dry to enhance their personal fortunes.
- The sixth principle is that the most exciting time to invest in an ICU lottery ticket stock is when it is doing nothing for at least 8-12 months and has crossed it all time low over at least 8-12 months. So, you must watch these stocks for a long time.
- The seventh principle is to never catch a falling knife. It is only very rarely that stocks that have fallen sharply bounce back in a fast time. Most of the stocks that fall sharply either go bankrupt or reach their all-time lows in about 12-18 months after beginning of the collapse of the stock.
- The eight principle is to keep your powder dry. Do not invest just for the sake of investing or because you have money to invest. Wait for the right opportunity. Always keep your investing money liquid in a liquid daily dividend fund which you can deploy in two or three days. Do not keep it in a bank deposit. Liquid daily dividend funds give more returns and since they are dividends, they are tax free.
- The ninth principle is do not jump blindly into the pool. First dip your toes into it and use the steps to descend into the pool. Never invest all at once in a stock. Always do so in instalments, may be a week, month or even six months depending on the volatility of a stock. The more volatile the stock is, then take even more time of at least 2-3 months between each investment. Do not make short term investments in volatile stocks unless you are prepared to watch them and trade them frequently in a daily basis.
- Little drops of water make the ocean. Forget about huge 1000% gains in a one-time big investment. Instead invest in little drops to make a good ocean which rises and fills slowly with every drop.
But remember oceans once formed, lift all boats, and even destroy not only boats, but entire cities if there is too much tide. So, learn to ride the oceans, and always float above the tides.
The moment the tide gets too rough, get off the boat (liquidate your investment) and head to safe dry land (keep the money in liquid daily dividend funds till the next opportunity comes up.)
- Thoroughly study past economic bubbles and crashes for upto 300 years.
- Take the Kondratiev Wave seriously. This calls for even more patience, but if you can follow the Kondratiev Wave, even one trading period of a few months in your lifetime will change your family for generations.
Knowing when to jump onto the next technological breakthrough and jumping out when you see the end of the cycle can change your family for generations.
- And finally, the last and most important principle of ICU lottery ticket speculation:
Find a regular job, work hard and smart and with devotion and learn from your job experience and then start a business in what you are good at and invest most of your money in what you are good at.
Even in what you are good at do not invest more than 15-20% of your net worth.
- Just use money you can afford to lose in ICU lottery ticket speculation.
That is what you do if you are a sensible lottery player, you only gamble what you can afford to lose.
Do not mortgage your grandfather’s house and wife’s jewelry to do ICU lottery ticket speculation, because there is a very good chance you will no longer have the winning ICU lottery tickets, grandfather’s house and even your wife.
This publication is for informational purposes only, it should not be considered Financial or Legal Advice.
Investments are subject to market risks and you could lose all or a significant portion of your investment.
Consult a financial professional before making any major financial decisions.
Before you take their advice, make sure the financial professional has a significant portion of their own, and if possible also their children’s net worth, in the investments that they are recommending to you, just like I have done, and publicly displayed at www.artofrealwealth.com.
The Art and Science of Real Wealth 