Too Important Not to Share

no more moneyOccasionally I run into some comment that makes too much sense to keep to myself. Such a comment is this one I read on

I don’t mean to be any more of an alarmist than necessary; but it’s getting pretty dicey; and, the huge gulps of money we’re needing to borrow in the short term, just to pay the expense of running the government look to be the last gasps of healthy capitalism in this country.

I know I said  I was going to take a break…and I am. But you need to read this and find a way to run our politicians out of Washington and back to fiscal kindergarten!

It Finally Happened!

magicwandmoneyThe Herald, South Florida’s major newspaper, headlined the unthinkable this past week: Jackson Halts Dialysis of Poor Patients .  One of the nation’s top-rated hospitals, Miami’s Jackson Health System had to adopt a policy that would deprive some 175 indigent patients of critical, life-saving care because it could no longer afford to provide it.

Hardly a decision taken lightly by the hospital administration, the financially strapped institution finally had to draw the line on life. Fortunately for those patients , some of the other area hospitals volunteered to take up the slack for all but about 4o. These would have to seek care in the city’s emergency rooms, where the law requires the hospitals to provide critical care regardless of the financial condition of the patient—or the hospital!

This, to me, is a tragic and stunning case in point that illustrates a simple fact: no matter how humane and compassionate the issue, the ultimate truth is that there simply ain’t no free lunch. As much as we would like to characterize medical care as a right rather than a privilege, without the funds to provide it, it vanishes.

Reminder: Join me on Take Stock with Ellis Traub, This evening (Thursday) at 7:30PM Eastern (6:30PM Central). Call (347) 857-3608 to listen. Dial “1” to join the conversation. This evening’s topic will be unfunded mandates.

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“Backbone of Our Economy Indeed!

entrepreneursI just wanted to take quick note of a comment that I heard on a talk show as I was surfing the stations while driving. Unfortunately I don’t even remember the fellow’s name or the position he held—not even the station I was listening to.

The purpose of my doing so is not to suggest that this is the position of our government. It’s only to take issue with the remark and suggest that anyone who thinks this way is wrong-headed.

In any case, the offending phrase was that the financial industry is the backbone of our economy!

There are far too many people who don’t really understand what the “backbone of our economy” really is. This parallels the notion that investing in diamonds, bonds, art, etc. is productive when it’s not. The “backbone of our economy” is truly anything that adds value or creates something of value out of something that had less value before. Continue reading

A Portfolio with a “Porpoise”

Click to see video.Did you ever watch a school of dolphin or porpoise as they follow closely beside a boat? Of course, no single one can stay two feet in the air all the time; but, each rises from the water, arches gracefully above it for as far as he can propel himself, and then knifes back into the sea. Shortly after the first emerges, another does the same, and then another. And so on. The effect is that, at any one moment, a number of the graceful animals are above the surface, glistening in the sun, and there is a constant presence there.

We buy shares of quality companies to hold until we want or need the money. The “rule of five” tells us that, of every five companies we select, we can expect four to do as well or better than expected, but one is likely to disappoint us. And, occasionally, the herd will bid up the price of one or another of our companies to a point where we can no longer expect as healthy a return going forward as we did because we have already enjoyed much of the appreciation. In any of those cases, we will need to replace our companies with others that will better meet our requirements.

Our portfolios are something like those schools of porpoises. Few of the companies you acquire will last forever. When you replace one, the rule of five still will apply and, sooner or later, you’ll have to replace another and another. And so it goes. You can never expect to achieve a perfect portfolio that will last without change forever.

What counts is that you constantly maintain a portfolio of good companies and maintain that status. The individual companies may come and go, but what remains “on the surface” will be a sight to behold!

Benchmarks and Brags

humility.gifA couple of posts back, I made some comments that ignited a challenge to me to come up with some kind of measurable evidence that our system really works.

The beauty of this investment methodology is that it’s not one that’s so doctrinaire that, given the same set of circumstances, everyone could be relied upon to do exactly the same thing. The variables are simply too many and too subjective. Therefore, you can’t put together a control group whose performance you can empirically measure against a benchmark.

Believe me, if I could make my point without seeming to brag, I would. What I buy, when, and for how much, and how my portfolio performs is my own business. So, I’ve tried to avoid talking about my own case and relied on the logic and common sense of this approach to impress people with its validity.

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Are they out there?

The next generationOver this past holiday weekend, my family and I were talking about about “today.” And “attitude.”

The thrust of our conversation was why no one out there seems to have any interest in investing at all! It wasn’t that long ago when NAIC volunteers, looking to build attendance for an annual investors’ fair, could find plenty of folks who wanted to find out what it was all about and learn how they, too, could make a buck in common stocks. Not so today!

I suggested that it might be a generational thing. The world is evolving and our youth are moving into active adulthood. And it’s they, not we, who set the attitude for “the world out there.”

I also suggested that the same kind of disinterest shows up in the schools. Few are in it for the education; more are in it for the credentials so they can “get a good job.” (I’ll leave the definition of a “good job” for another day.)

Could it be that those of us who are financially well off have been so successful and intent on making sure our kids “don’t have to go through what we had to go through” that we’ve stripped them of the need, the urgency—and the ambition and the satisfaction—that comes with doing it themselves?

For all these months, I’ve been trying awfully hard to arouse some interest in making money with one’s money, to no avail! What am I missing?

Any ideas?

A Time for Giving

gold_wrapped_gift-thumb-600x422Whether you celebrate Christmas, Hanakkuh, Kwanzaa, or whatever, there’s an almost universal commonality among faiths—and non-faiths—that this is the season to give.

In that spirit, I’ve spent some time putting together as concise a summary of our investment approach as I could. And, because it’s so simple, I’ve been able to cram everything I think anyone needs to know about investing into my thirty-minute broadcast on Take Stock with Ellis Traub this evening at 7:30PM Eastern (6:30PM Central).

As you know, my intent is to separate as many folks from “the herd” as I can; and I’m hopeful that this offering might help them to understand why our way works and the herd’s doesn’t. Continue reading

Are We There Yet?

crowd_hands_447x324Has the market yet fully recovered from the beating it took? Everyone who cares, raise your hand!

Now look around. Everyone whose hand is up is a member of the herd!

“Well, I care if the stocks I own haven’t yet recovered,” you might say. But why should that even make a difference? Unless you have a need to sell them right now for some personal reason, you need only to wait a little longer—provided those underlying companies meet the standards for high quality we’ve talked about. And, if they do, you might even consider buying some more!

We’ve just been experiencing a “market correction”; and, as with any “correction,” something that was wrong is made right. Generally, as is the case today, the “wrong” is that stock has been in the hands of those who don’t have a clue as to its real value, expecting someone else to pay more for it than they did.

What’s “right” is that the shares of the well-managed companies are now being gathered up by those who know their real value. And the prices of shares in those companies are rising nicely to regain their true, rational value.

Because there are relatively few companies that meet our high standards, the market average continues to languish. And, as happens in most down markets, it will continue to do so for some time while the quality companies recover smartly.

Are we there yet? Heck, “we” business owners ain’t never left!

But it might be a while yet before “they” come back.

Here’s the Result

surveyI’d like to thank those of you who took the time to answer my question.

The results are in and were helpful. I think we can do a better job going forward.

Here‘s a graph showing how much interest you have, collectively, in each of the categories I mentioned.

And here’s a graph showing what percentage of you were interested in each of those categories.

Reminder: Join me on Take Stock with Ellis Traub, this evening (Thursday) at 7:30PM Eastern (6:30PM Central). Call (347) 857-3608 to listen. Dial “1” to join the conversation. This evening we’ll talk about what companies/industries in the health care sector will benefit and which will suffer if health care reform should be enacted into law.

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Your Turn!

listeningFor nearly a year, I’ve been experimenting with content for this blog.

Yes, we’re bound together by an interest in investing. More specifically, we’re interested in “real investing” —not the kind of gambling the securities industry has led us to believe is the real thing for all these years.

Along the way, we’ve added commentary about current events, especially how they affect our economic interests or how they might affect our ability to invest wisely in common stocks. And, I’ve sometimes simply indulged myself, either for humor or for some other issue I’ve felt strongly about and thought might have some value for you—or I’ve just felt the urge to mouth off about.

Please give me some feedback to help guide the way this site develops in the coming year. I want to hit the ground running after the holidays and focus on information and opinion that you feel would be valuable enough to pass on to others.

Please take just a moment to answer this question.