REALITY CHECK: Of AMD, and life. (It’s all about expectations)

Nicholas told me to buy AMD because he was sure their coming product was a blockbuster and the stock would “rally big”. I don’t know a thing about AMD, can’t even spell it. But I cautioned him, “Based upon where the stock currently is (highs), and the run it has taken, I bet it goes down on the news.” He told me I was wrong. Out of respect, I bought the 500 shares he asked me to buy for him.
AMD reported earnings results last night and they were “AS EXPECTED”…(hold that thought)…and the stock is looking down 13% and over 30% from “our entry price”.
it’s not the facts, it’s the REALITY vs. EXPECTATION that matters.
 
Remember I asked you exactly this… “What part of what you are telling me about the coming new AMD product that others don’t know? Is it going to be better than what the press and internet sites say?”
With stocks, it’s always, “What do I know that others DO NOT?”
And importantly, “What is PRICED IN?”
It’s “the edge”.
Another lesson that is equally important…the best TRADES are often SMALL LOSSES!
Nicky, no worries, I cut back 80% of the AMD almost immediately after I bought it at $15.06…because it didn’t “act right”. That means, no matter he thought good news was coming, it was reflected in the price action…and alas, it was.
So, I sold the small remainder that I had after that (the part I call, “respect for my son” amount) because it still acted poorly.  So there is zero damage from today’s sell off…except YOUR ego!
If you take this email and staple it to your forehead, take it to heart, and learn from it, it could be the single most important lesson in investing you will ever get. I mean that…and It’S FREE!!!
As once again you learn, “your dinosaur dad may not know much, but what he DOES know…” 
Oh, and even if I still owned it, and lost $$$, I’d STILL LOVE YOU just as much!
As Zedo taught me, “Lessons will keep coming… just try and keep the tuition to a minimum.”
 
Finally, from the “applied dad file”… it’s not just stocks, it’s life. How YOU view outcomes is often dependent upon YOUR expectations. If you maintain an even keel and keep emotions in check, your chances of “upside surprise” are greater. Measured and thoughtful are always in vogue.
And Boo Boo my son, one final VERY important question: Down at THESE prices today, is the “bad news” priced in?
Hugs,
Dad

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