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Trader Tom … Quick 50 on Bear Stearns Stock

Wall Street

Always remember: Smart people make money when times are good. Rich people make money when times are bad.

It’s pretty much all people have been talking about; Bear Stearns, the fifth largest investment bank in the U.S., whose stock was up at $160 last year, got blown out in a firesale deal to JP Morgan for $2 a share.

Playing the Patience Game

A lot of people that get into trading stocks jump in, buy a bunch of stocks, and then sit and watch the ticker hoping for the best. Or, they get into the game because they’re girlfriends’ second cousin’s husband is a trader and gave them a (not so) hot tip.

The smart way to play is to follow some basic “market truths” and exercise the patience you need to jump on the smart opportunities. Here’s a quick list of what to look for:

  • Extreme devaluations on bad news
  • Small caps than can leverage big gains (percentage wise) on good news
  • Kick-butt IPOs
  • Buy while people are selling and the price is dropping
  • Sell while people are still buying, and this is important; before the price peaks because you can’t predict exactly when that will be

So, while everyone was reeling from the talk of a financial system meltdown, my buddy Tom (Trader Tom), jumped on Bear Stearns yesterday like a fat kid on a smartie at $4. This morning, he jumped out at $6 and made a quick 50% on his money. Not bad for a days work.

He could have done better ($8), but greed will kill you in this game. If you’re patient and conservative you will more often than not, make money.

And the best part … he’s buying lunch.

Denouement
 

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