Tags: bubble | invest | fun | real

'You're No Fun'

By    |   Wednesday, 19 November 2014 09:55 AM

I was caught off guard recently at a presentation I was giving, when during the question-and-answer period an elderly gentleman stood up and told me simply, "You're no fun."

I hadn't heard that one before, and for a moment I didn't quite know how to respond. But finally I gave him the only honest response I could think of: "You're right."

He is right. My views on where the economy is heading and how investing will work in the future are not much fun at all.

What is fun is bubble investing. Between 1980 and 2000, all anyone had to do to make money in the stock market was throw darts at a board. Picking a random assortment of boring blue chip stocks on the S&P 500, you'd have been up 1,000 percent in those 20 years. That's some pretty impressive return for some very low-risk investments.

And if you had taken a little bit more risk and thrown darts at the Nasdaq board, you would have been up 2,500 percent. We're not talking venture capital returns here, but for investing in a secondary market, having to do no research and make no tough calls, it's hard to beat. And it's a lot of fun.

The S&P 500, 1980-2000: That's what I call a lot of fun.

But real investing — that is, investing in a non-bubble environment — is not much fun. Real investing takes hard work and good judgment. And even after that hard work is finished and good judgment has been exercised, instead of watching the investment explode overnight and then selling for a huge gain, the real investor is happy to collect dependable profits patiently over time. There's plenty of money to be made in real investing, but it's not much fun.

Real investing is the way Henry Ford did it. Ford went bankrupt seven times before achieving success. But after a long, tough slog, his hard work and ingenuity revolutionized an industry, revolutionized manufacturing and revolutionized a country. Compare that with Elon Musk, who's made his fortune by building toys for rich people.

If the hype-driven Tesla model really worked — if it built wealth that could be sustained and move our economy forward — I would be praising it to the heavens.

But real life is not that easy. Like a good physician, I may not tell you what you want to hear, but I tell you what you need to hear in order to preserve your economic health and well-being. Would you rather have a physician who told you there's nothing wrong with eating cupcakes and candy all day?

The investment world has gotten by for a long time eating sweets, and in spite of a couple serious heart attacks in 2000 and 2008, we still haven't learned our lesson.

Soon we will have no choice. In the future, we're going to have to eat our vegetables and do our exercise, meaning we will have to do our due diligence and invest in real assets, and then manage them properly. And if we do it right, that money won't be going to money heaven later.

And that's the key. Real investing may not be fun. But the wealth it creates lasts for generations, and it helps build a real economy, instead of a bubble economy. Come to think of it, an economy built on a rock-solid foundation, in which hard work is rewarded and everybody has a chance to contribute, actually does sound like fun to me.

About the Author: Robert Wiedemer
Robert Wiedemer is a managing director at MacroView Investment Management, a Registered Investment Advisor. He is a regular contributor to the Financial Intelligence Report, the flagship investment newsletter of Newsmax Media.
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I was caught off guard recently at a presentation I was giving, when during the question-and-answer period an elderly gentleman stood up and told me simply, "You're no fun."
bubble, invest, fun, real
Wednesday, 19 November 2014 09:55 AM
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