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If It’s Raining in Brazil, Buy Starbucks by Navarro

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CHAPTER 9WHEN IN DOUBT, GET OUT: RULES TO MANAGE YOUR RISK

On his 30th birthday, Larry Lamb decided to become a day trader. So he quit his job, took out a home equity loan for $50,000 for a trading stake, and marched down to Shearem Securities to make his fortune.

On his first day, he promptly bought 5000 shares of a highly volatile and low-volume Internet stock that had a really cool name. He bought the shares on margin for $100,000 and then licked his chops, as he got ready to scalp a point or two.

At lunchtime, the Federal Reserve announced a new interest rate hike, and his stock started to drop along with the broader market. Larry’s stomach started to churn, and it wasn’t from hunger.

At 1:00 p.m., a rumor hit the street that the company’s ...

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