While this was originally written in 2011, the underlying message applies today, just as it will for eons to come. In short, minus the comment about how “cheap,” or undervalued, the stock market is (’cause it’s not right now), I encourage you to consider what ultimately drives an “investment” in anything.
Let’s dive in…
One such grounded and practical-thinking investor is Bill Schultheis, editor of the excellent The Coffee House Investor:
“It is a scary time to be an investor, but then it is always a scary time to be an investor if you get caught up in the daily headlines of double-dip recessions, government debt ceilings, and rampant inflation.
“For those of us who are spending more time getting on with our lives and less time on daily headlines, it isn’t so scary.
“In fact, I am more optimistic about the future than I have been in the past 15 years.
“First, the stock market is as cheap as it has been in ages, except for a brief period in early 2009, although some sectors of the market are certainly cheaper than others.
“More importantly, I am bullish on human beings. This past week I connected with three friends from around the world; a corporate securities attorney in Seattle, a businesswoman in Beijing, and a scientist in Germany, all three who were practically giddy with the pace of commerce around them.
“Sure our economy and the global economy has big problems. But don’t forget that the global economy also has billions of people who are working their tail-ends off to provide a better life for their families, their communities, and themselves.
“Are you betting against them? I’m not.”
Bill, needless to say, I’m not either.
Here’s how I told it to our M4 Insider Members…
[ An excerpt ] —
Ron Baron is a self-made investor. Many years ago, he started with nothing as a junior stock analyst. Now he’s a billionaire, with over $19 billion in assets under management.
He’s big on PEOPLE and when he tells his staff that “it’s not inconceivable that their money is going to increase eightfold in about 25 years,” he means it and means it like this:
The right products — i.e., energy, industrial, tech, consumer stables — are always going to be sold… regardless of cost pressures.
The right products, sold by high-quality companies (i.e., Johnson & Johnson, Chevron, IBM, Wal-Mart, etc.) find ways to adapt.
Who runs these companies? People!
A good analyst, like Rob Baron, does due diligence on forward-thinking, ambitious, possibility-minded people who are interested in solving problems through good companies.
In a recent interview, Ron states:
“If you had your money in cash starting in 1958, your lost 4% of your investment each year because of inflation — that’s 90% of your investment gone over 50 years. But if you invested in [select] stocks, you made 25 times your money, and I think the same thing is going to happen again.”
Because regardless of political incompetence, and ill-advised moves on Capitol Hill — or across any other major world economy — the business cycle doesn’t stop.
We humans, as long as we’re around, WANT and NEED new and improved “stuff.”
And somebody — a business — has to make it.
When I hear talk from gold bugs transition into their desires to also allocate money in other tangible hard assets, like home, property, art, fine wine, collectibles, etc., I actually am pleased to see their cognitive abilities expand a bit.
Yet, a majority of those same bugs still can’t grasp their foundational reason to hold the shiny metal in the first place.
Gold is money, not an investment.
About the “money” part, certainly it could still be used as a medium of exchange, but until the day comes when society-at-large no longer wants to have faith in using their debit cards and other digital forms of monetary transactions at WalMart, just accept the fact that GOLD is truly more like ‘backup money,’ not necessarily ideal in this new-tech day and age.
About the “investment” part, gold doesn’t accrue interest, it doesn’t yield dividend. It, again, due to it’s history could be used as universal money. Not necessarily practical money, but…[another lesson for another time]
In short, you don’t buy gold to be rich, you buy gold so as to not be poor. Just like you don’t buy a house to be rich, but to have a roof.
It’s the very reason I posted this Wealth Accumulation…or… Wealth Preservation article.
The information there makes it very clear that being overly-exuberant about gold and other precious metals might as well be equivalent to cavalier gambling.
Yes, you want some; but over time you want more of your grub stake in PEOPLE!
Even the late legendary market observer (and gold bug / stock bear) Richard Russell, who was the editor of the widely popular investment newsletter Dow Theory Letters, told subscribers in January (2011) that they should buy U.S. stocks.
I’ll go so far as to say you should buy stocks that are tied to under-valued companies, no matter where they’re located.
Come to think of it, if inflation in the U.S. goes bananas, the dollar will fall and foreign stocks will act as an automatic hedge as money invested in foreign currencies is translated into more dollars back home.
So, how do you find good companies, being run by good people?
Well, a few years ago, we came up with two very nifty, time-saving software programs to do just that. They’re still listed inside M4 Insider and as valid today as when we first listed them.
Are you in ‘reading-lust’ with this post? Kewl. So, now that we’re kindred spirits, I’ll give you some distant mind-love, if you kindly tap the💚 icon below! A BIG digital ‘Bear Hug’ in advance ;)