Posts Tagged Common Sense Investing

I write a blog everyday. I write special reports and newsletters. I have strong opinions hardened by experience about investing. However, let´s be honest. Nobody is right all the time when it comes to investing. Most newsletters and so forth are marketing gimicks and most “reputations” for being a credible guru are fabricated. It´s almost as if to get noticed one has to bang two trash cans together and scream, “This is It! I have the answer!” (Even Bloomberg News and MSNBC are littered with sensational market commentary all day). That´s wonderful if your trying to slam a product or agenda down someones throat or attract attention and move on but the reality of wise long term investing is much less glamorous. I can´t tell you all of the guru´s my clients and prospects that I discuss our services with listen to. “Have you heard of John Know it All?”. It´s as if I answer “No” I´m not really in the know. Sure enough, I google them and go to their website and it´s packed full of yesterday´s web marketing tactics.   All his bad advice from the past is neatly removed.  “He´s predicting the market is going to tank before October. What do you think?” My answer is always the same, “I don´t know, and I don´t care. I think you should take 20 percent of your cash and engage an investment strategy while cost averaging in regardless of what the market does. If it does indeed tank then that´s wonderful because it means we get to buy great assets at cheaper prices.” The temptation to allow greed and fear to guide investment decision is only fed by all of these investment gurus because it drives their reputations and sales agenda which could be anything from managing your money to selling you a tape series or some crackpot newsletter. I constantly find myself appealing to our clients common sense and when they disagree I say “Fine. Let´s go your way but just be prepared to buy your asset if the price falls.” Emerging market hallmark equities are not the only way to make money. Anyone who has been buying gold the last few years can attest to that. I missed that train. I wasn´t buying gold. Then again, there are countless assets that have gone up in price. Fortunes were made on Citibank for those who had the guts to buy it at fifty cents. Again, driving through the rear view mirror and giving into a speculators mentality always ends up in heartache. Believe me. I´ve seen enough of it. The most important thing is to pick a common sensical long term strategy and stake out realistic expectations. Then, stick to it and buy the darn thing if markets pummel your asset and it is cheap. If markets just slowly send your prices up as you slowly cost average in even though you are raising your average price per share, then great. Don´t be greedy. Be grateful your investment strategy is actually working. I think the macroeconomic case for faster growth in big emerging economies is genuinely compelling. I think it is the safer long term bet. I also think market leaders within stable industries however boring are the safer long term bet. I also think because of federal debt and the changing landscape for reserve currencies that the US dollar is in a long term decline regardless of whether it valuated 15% last May and just dropped 15% this month. Can you make money any other way? Of course. In the end, let your common sense decide and whatever you do stick to your plan. Stop listening to the hum of all these half baked commentary out there. They´ll be gone soon enough. If you want to inform yourself, read credible financial journalism such as the Financial Times, The Wall Street Journal, The Economist Magazine, Barron´s. Believe or not, even the New York Times has user friendly investment reporting in Business Day. If you want to get deeper analysis then go to credible blogs of market watchers without an agenda like Buttonwood´s Notebook or the Economist´s blog, Free Exchange. Free Exchange often does the dirty work for you by posting a list of relevant links ( http://www.economist.com/blogs/freeexchange/2010/08/recommended_economics_writing_). It helps to be grounded in macroeconomics to understand the world of investing but don´t be shy to trust your common sense. Muddle through all the tough language to understand the punch line. The punchline is usually clearly stated in the first and last sentences. I´m an economist and a lifelong investment professional who has been admittedly dumbfounded by the breadth and scope of change in financial markets in the last decade. Yet, my common sense tells me we are in a growing world however unstable the growing pains can make it. Banks and Steel and Fossil Fuels are going to keep making the world go around.  Foodstuffs retailers and cars will likely continue to be the outlet for brand new middle class consumers.  All which is especially true in economies that are fiscally fit and growing faster.

www.crinvestmentadvisors.com

Investment Advisers

Part of my daily routine is to review Bloomberg. It appears to be a financial version of ( http://www.theonion.com/content/index ) of the Onion spoof at times. One headliner will declare the end of the recession while the other will declare the doom and all on the same page. The Sector or Industry debate is even more absurd. One Fund manager is buying and the other is selling and they are both “Exclusives”. For serious investors, this is madening at best. This is why we repeat ourselves all day and every day. Focus on slowly building significant positions over the long run, say, five years. Build positions of major stakeholders in the world´s fastest growing economies. It makes common sense. PetroChina and Petrobras. Vale and Anglo American. Banco Itau and Banco Bradesco. These are examples of “stakeholders” in faster growing economies. The headlines imply that it can´t be determined what goes up or down. Slowly buy (especially on dips) over several years into Emerging Market Blue Chips and the story gets clearer. Do not Mind the Headlines.

It´s enough to make one, well, MAD.

www.crinvestmentadvisors.com

Investment Advisers