JMrosenb (85.39)

A letter to a friend (Investing Advice)

October 24, 2009 – Comments (6) | RELATED TICKERS: DOG , SH

Stephen,

Just got back from the environmental evening event.  I had some thoughts as I sat there.  Be patient, and realize that you're a better man than I (so take the insults light mmk?)

1.  You had no sense of fear when you invested all your hard-earned assets in real estate because everyone said that it was the right thing to do.  Consequently, a generational bubble was what you took part in, and you don't feel bad because you didn't do "anything" "wrong".  You didn't listen to yourself, you didn't reflect, or form an opinion.  You did it because "that is what you have always done".  Consequently you lost a lot of wealth (it could have been much worse!!).

2. This time you feel that you are right.  Intellectually and emotionally You have reflected; you own a business; you have an edge.  You haven't lost money nor made risky bets.  You are sitting pretty, you have an opinion, many think that you are wrong (and most smart individuals feel that you are right -  the market is indeed overvalued and we will double-dip.  You are afraid this time because there's no platitude to rest upon: if you are wrong, you lost cash.  You were wrong because despite your best efforts you were wrong; scary.

It is hard to think of something that others do not.  It is harder still when the thought or belief you have is considered negative or evil.  Do you want to know evil?  Investors who bring massive valuations to companies that bring real evil into this world: oil companies that scar the earth, timber producers that destroy once-on-a-planet rainforests, chemical companies that dump in the rivers, the producers of beauty products that cause cancer in the woman who use them . . .

These things are never called evil, and you'll never be called evil for "supporting" them because "everyone" is, or because "you have to go with the trend" blah blah blah.  Evil is also investing in houses that hurt the land and enact a large cost in terms of the natural resources as well as the unnatural materials required to adhere them.  

In the long and short run, unless you're lucky, you won't ever make money by doing what feels good.  You didn't make crap in the greatest rally of your entire life because you "emotionally" had to "keep assets aside" unless "your business required it".   You were probably positioned as well personally and financially as about 5% of the population and yet you didn't make money because you were afraid.  Ever wonder why it is so hard to make money in stocks, look to the other 95%.

Short the market.  Do you feel that?  The fear that you might actually lose your money if you do it?  That feeling is your only chance to actually make money.  Fight it and you may win.

Lotta love.  Keep it light.