Sunday, December 3, 2017

As an investor you must be an optimist – bad luck!


If you want to live off your assets - the goal of most investors, then you expect to make more money of your savings than by just keeping it under the mattress or by keeping it in the bank.  These days, I sometimes wonder what the difference is between an old mattress and a bank branch?   O yeah, I remember. A bank is where you pay your outrageous credit card interest while the bankers are not going to jail for charging you outrageous interest rates. Usury, isn’t that what it is called and isn’t that illegal?  Oh, and the federal government has now made rules where it is more difficult to transfer your credit card debt to your mortgage. Ahhh!  They have your best interest at heart!  Right?  The Great Government and Bank Conspiracy isn’t that what it should be called?  Thanks Justin!

But really, if you want to live of your savings, those savings must make money on an after-tax basis AND after inflation.  You can, with few exceptions, only do so when you invest and when you, strangely enough, and really frowned upon by the current government and its crony the central bank, make a profit.  So really, if you expect that tomorrow will be worse than today and you expect the world to go to hell in a hand basket, what else is there than gambling on Bit-Coin?  You can’t win the lottery unless you buy a lottery ticket!  You can not make money unless you invest it and for that you have to believe that tomorrow (or at least the day-after-tomorrow) will be better. You MUST be an optimist.

But if the world, according to you, will go to hell maybe you’d be doing fine if you held just cash or precious metals; if you sold naked call options (but the underlying better don’t go up in price) or buy puts (a bit safer) or sell short (very similar to buying puts but with infinite risk). In general, most investors hope for a better tomorrow though.  Unless you put money into investments, you won’t participate in tomorrow’s profits.

Right now, the market is in one of the longest bull markets in history. Also, just like in 2001 at the end of the 1982-2001 bull market, it is only a small number of stocks that make big profits while the rest is languishing. With things like the Bit-Coin bubble going on, it maybe wiser, even for the most brazen optimists, not to jump into the markets with both feet right now. What’s the use to make 10-15% over the next six months and then lose 40% in the subsequent crash. I don’t like market timing, but neither do I like to buy near a market peak. Like it or not: sooner or later you must believe that tomorrow is going to be better and put your money where your mouth is. You will have to be an optimist.

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