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Which way are we Headed? 12/23/2009

So what’s going on in the world of economics, finance, and investing today?  Lot’s of
rhetoric!  Well, of course we don’t know what’s going to happen next but should we
really care?  I don’t think so.  If all of us pay attention to what we are supposed to be
doing, and do the right things for those we care about, those we work with and for,
and of course for ourselves, then everything should be okay.  Our only real problem is
would then be the other people who want to try to take care of everyone they don’t
know.  They are usually easy to identify since they are busy raising taxes, passing
irrelevant but expensive laws, and confusing reality with their concept of what’s ideal.  
You know who I am talking about, and if it’s you then give it a break.

In doing this, following the concept of taking care of our own little centers of influence,
we must then focus on how to focus.  In the world of investing, finance, and economics
it is important to not be sidetracked by the efforts of those who would have us believe
certain things, namely socialized versions of life.  It’s funny, the same people who
would in once sentence ask us not to generalize will in the next sentence ask us to
socialize almost everything we do.  They would like us to average up or average
down.  They don’t want anyone to lose and nobody to win.  So let’s think about how
this has been applied to our individual investing and savings accounts in a very robust
and ridiculous way.

In the days old, when knights and kings were bold… no, no, no that’s not the old time I
am referring to, I mean the golden days of investing in stocks, land, and business.  
Things have changed a lot since then!  Can you identify those days?  There have
been several good bull markets in each one of those areas and there are likely to be
more, since humans tend to adjust and move forward to the next opportunities.  But let
me remind you have a few things: “When E.F. Hutton talks, people listen”, The Nifty
Fifty, The Technology Boom, Oil Tycoon, The Industrial Age, the Air age, the Internet,
the Space Age, Nuclear age… and on and on and I think you get my drift.  Each time,
if you had invested wisely, and I want to say wisely with a lot of emphasis because
today the socialized version is to invest with no wisdom at all!  None whatsoever.

I was fortunate enough to have joined the end of the Golden age of investing right
after having participated in the end of the birth of it all by working at Xerox during their
peak years.  I transitioned at just the right time, from duplication technology and
growth of the office to technology being applied in the age old field of stock and bond
brokerage.  Yes, I know it was not the end of technology, and really on the beginning
of the “tech bubble”.  That’s okay.  I still learned to focus on the right things which are
value, growth, earnings, and a number of other insightful concepts investors used to
really pay attention to.  In fact, if people had not done so, then the great growth of the
‘90’s would never have happened.  Someone was buying for some reason, and not
everyone lost it all back in the first three yeas of this century.  

So here is my point: Go back to the old way of doing things!  Stop listening to the
news media and quit putting all your hope in someone else managing your account.  
As a firsthand witness I can tell you that I really feel people did much better when they
researched their investments or had someone help them do so, and when they knew
what they owned rather than thinking they owned something in a mutual fund.  We
have no idea what is really in most mutual funds.   Funds and management have been
the great social experiment of late.  Without the funds, fund managers, money
management and all the funny things they can do with your money (yes, your deposits
are your money) it is very unlikely that any of the excesses in leverage and bad
mortgages would have every happened!  I will say it again, without your money and
the money of many other people being pooled together in managed funds and
accounts they would not have been able to cause the Banking Bubble that popped
and left us in this great recession.  Why?  Because they used your money to borrow
infinite amounts of leverage (loans) to build up these great upside down cash pyramid
schemes that crumbled and left the citizens to pay for bonuses, bailouts, and a new
high-dollar executive branch.  We will be paying for a very long time.

Don’t despair!  In fact, the thing to do is go back to our good roots of paying attention
to what we invest in.  Put your money in things you believe in and know something
about, not some stranger who manages other people’s money.  Some mutual funds
and some management is okay, but the real winners are the concentrated positions
that go up greatly in value and not these funds that participate in up and down
markets and don’t move you out of the way.  Yes, getting out of the way could be the
wrong thing to do but there are many good ways to manage your investments to
reduce risk rather than going with the flow, or the lemmings.

Whatever happened to the saying “don’t put all your eggs in one basket”?  When
everyone is in the same pool of money, funds, managed accounts, the S&P 500, but
aren’t they all in the same silly basket?  Most people don’t even realize how the S&P
500 Works.  You should read about it and then think about whether it is smarter to
invest that way or the good old fashion way I think we used to.

At the beginning of this article I asked if we should really care about what happens
next.  My answer is no.  I don’t care what the government does, what the press says,
and what other people do.  I only care about doing the right thing the right way with
money and investing so that I am not stuck wondering about it at all.  What if you had
a choice between putting your money in Walmart or Sears, which would you choose?  
Why would you choose that?  You have reasons and don’t look here to determine
which one you would own.  If you know a little about each you should be able to
choose.  You can look them up on the web, or order research reports.  You could
shop at each place and see what you like best.  But maybe you are a fan of Target or
Home Depot.  The point is that you can probably tell which one is best, at least for
you.  
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