Investing–The New Rules: The Godfather Visits InvestoWorld
Calling you a name you can't refuse: Liar!
How is one to navigate the mean streets of InvestoWorld? Rob Bennett has the lowdown on the down-and-dirty in this week’s Investing: The New Rules.
Investing — The New Rules
The Godfather Visits InvestoWorld
#12–July 19, 2010
I don’t know anything about organized crime except what I have picked up from watching television and television is of course not a terribly trustworthy source of information.
But there’s one thing that television shows teach on this topic that rings true to me. It’s the method that they say is used by the crime bosses to insure that those who join up with the mob always remain in the mob.
Before they promote you to too high a level, they have you kill somebody. Once you cross that line, you aren’t likely to tell what you know about anyone else in the family. If they fry, you fry.
It works like that in InvestoWorld too.
I’m always delivering the same two messages. I am always saying that effective investing is easy. And I am always saying that the one thing that makes it seem hard is that most of what The Stock-Selling Industry tells you is likely to steer you wrong. There’s an obvious question that you should be asking in light of my regular reiteration of those two claims — How the heck do they get away with it?
We all want to invest effectively. Investing is easy to understand. Yet 90 percent of the experts are giving bad advice. It doesn’t add up. Why don’t most of us reject what the experts say? Why don’t we demand a better class of experts?
We’re in on it. That’s why.
I place a higher responsibility on the experts because it is their job to get it right. But you, dear middle-class investor, cannot escape all blame. There’s a saying that you cannot con an honest man. If we didn’t want to be tricked, we could easily see through their word games. The experts are really just repeating back to us what we have let them know we very much want to hear.
It starts out innocently enough. We want to push stock prices up just a wee bit above fair value. Stocks remain an outstanding buy at a P/E10 level of 15 or 16 or 17 or even 18. So we take the Get Rich Quick gains that follow from pushing prices above fair value and continue to buy more. No one gets hurt. It’s free money. What’s the problem?
We tell our friends. We tell our neighbors. We tell our co-workers. We “forget” to mention that prices are now higher than when we bought, so the deal is no longer as good. Now we are in deep. It’s planting the idea that valuations don’t matter that is the crime. Once you tell your friends how stocks are just fine even at somewhat high prices, you have killed. You no longer feel comfortable turning in the experts for their much bigger crimes. You’ve done similar things. To object to other people pushing Get Rich Quick after you’ve done it yourself is hypocritical. You know it. So you keep it zipped.
It’s when everyone is in deep that we get to the sorts of price levels we reached in the late 1990s. That’s what causes crashes. And economic crises.
We need a better class of investing expert. Badly.
But we don’t get there by pushing all the blame for what we’ve done to our retirement plans and to our economy on The Stock-Selling Industry. The reason why Get Rich Quick sold so well in the late 1990s is that there were a lot of us on the buying side of the transaction. We’re not dumb. We’re not lacking in common sense. If we want to demand better of those whom we turn to for investing advice, we need to demand better of ourselves as well.
I’m writing a book on investing. I believe that the first line of a book is important for the message it sends to the reader re what the book is about. Many will never make it past the first paragraph if you don’t say something quick letting them know the adventure is going to be worthy of their time. The usual practice is to say something to your reader that gets him or her to like you, something to win him or her over to your side.
You’re a liar.
ALSO at DBKP:
* Investing–The New Rules: Determining Stock Value Using P/E10
* Investing–The New Rules: The Monster That Ate the U.S. Economy
* Investing–The New Rules: Stocks Are Not Worth Buying Today
* Investing–The New Rules: Sarah Palin Will End Economic Crisis
* Investing–The New Rules: Dollar-Cost Averaging is a Loser
* Investing–The New Rules: John Bogle’s Evil Twin?
* Investing–The New Rules: Stock Return Predictor Not a Case of ‘Too Good to be True’
* Investing–The New Rules: The Stock Investor’s Weather Report
* Investing–The New Rules: Harness the Power of The Stock Return Predictor
* Investing–The New Rules: Get the Odds on Your Side
* Stock Investing: Much of Today’s Understanding is Primitive
Those are the first three words of my book. I wouldn’t in ordinary circumstances think it a good idea to insult my readers before they even get a chance to know me well. In this case, however, it makes sense.
If you can accept that you are a liar (we all face temptations to lie every day and give in to them on at least an occasional basis), you can become a highly effective investor. If you cannot bear hearing anything but the most oily forms of flattery, John Bogle is your guy.
The deal that I offer my readers is — I really will make you an effective investor if you are willing to be straight enough with yourself to acknowledge that you are often tempted to lie to yourself and that you sometimes give in to the temptation. Those not honest enough to acknowledge the possibility cannot be helped, in my assessment.
You’re a liar. So am I. So are the experts. So are we all.
Let’s accept it and move on to more interesting and enriching and fun topics. Let’s become better investors in the future than we have ever been in the past.
Are you open to being friends with someone who at least aims to tell the truth about stock investing? If you are, this could be the beginning of a beautiful relationship. But for this to be a true partnership, you need to help me out by telling me when you catch me lying to myself just as I aim to help you out by extending the same kindness in your direction.
Is it a deal, you dirty, no-good, filthy liar?
by Rob Bennett
images: DBKP file; grokdotcom
Rob recently authored a Google Knol entitled “The First Retirement Calculator That Gets the Numbers Right.” His bio is here. And please don’t even think about failing to read these Important Cautionary Words.
[...] This post was mentioned on Twitter by Heath Lackey, A Walker. A Walker said: Investing–The New Rules: The Godfather Visits InvestoWorld http://bit.ly/bo5oqQ [...]
The Market is rigged, probably more so since Obama took office. If you watch the Market on a daily basis, you can see that the ups and downs of the Market make no sense whatsoever. The Market goes up on good news, the Market also goes up on bad news. There is no rhyme or reason. When the Market is up by 40 or 50 points and the inverse ETF’s are also gaining, you know that the Market wants to go down but the manipulation won’t let it.
The whole game in the Market now is that Wall Street is doing all of the steering and if you’re not in the know, you will be wiped out, that’s the whole game.
Reply
Thanks so much for taking time out of your day to share your thoughts with us, Anna. I’m just some guy who posts stuff on the internet, you know? I don’t know everything. I’d feel more comfortable about spouting off my views here if there were a variety of points of view being reflected in the comments.
My personal take is that this one is not Obama’s fault and that the market is not rigged. But I’ve gotten some terribly easy ones wrong from time to time. I voted for Mondale!
Rob
Reply
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