Friday, June 13, 2014

Investment Advice

Charles Hugh Smith, author at oftwominds neatly encapsulates the problems of the little guy investing in today's environment with this post.  Too much capital chasing past performance.

Traditional thinking is that there are three major "sinks" large enough to absorb global liquidity:
  • Commercial/residential real-estate
  • The Stock markets
  • The Bond markets
They all have "issues".


Residential real-estate is speculative because it relies on "a greater fool" coming along who will pay more than you did.  It takes money out of your pocket (taxes, maintenance costs).  It does not put money into it.

Commercial real-estate is grossly overbuilt.  Law of supply-and-demand suggests that we are overbuilt by 50%-to-400%.  It may take thirty years for the slow heat-death to subsume the overhang.

The final impediment of real-estate is liquidity.  While it is possible to use one's home as collateral for a line of revolving credit there  is no certainty that it is wise to do so.  The selling price of one's residence is only discovered after they buyer signs the closing documents.

The Stock Market

There is nothing I can add to Charles Hugh Smith's brilliant analysis.

The Bond Market

You cannot fight City Hall.  In effect, you are attempting to beat "City Hall" when you seek yields that beat inflation.  Ain't gonna happen.  Inflation is a tax on wealth, pure and simple.  Sovereign nations will never walk away from that revenue stream.

A modest proposal

Fix something.

Or learn a skill.

We have enough "stuff" to last us three years, even if we stopped buying junk today.  We have boats and welders and computers and programs....and some of us have orchards.  Bend it to a useful end.

Before.  This is my dad's orchard...about two acres in North-West Eaton County, Michigan.
After.  A $139 mower and 45 minutes of elbow grease.
After.  Another 45 minutes.
Another 45 minutes.  You get the picture.  Massive amounts of Poison Ivy on right side of picture.  I was wearing shorts.  I washed afterward and tossed my socks and tee shirt.  I will let you know how it turns out.
38% of working age Americans are not in the labor market.  There is much we can do.  It is harder for you working stiffs.  But you can plant a few trees or make a few other long term, infrastructure investments in anticipation of when you have more time.

This orchard needed mowing, herbicide sprayed beneath the trees (done yesterday), and about 150 lbs of N per acre.  It also needs the dead wood cut and dragged out of it (as seen in the first two pictures).  The holes, the dead trees, need to be replaced.

Perhaps we have forgotten that the "traditional investment venues" are abstractions of an abstractions.  That is, they are proxies (abstractions) of money (another abstraction).  As such, they are susceptible  to gaming and manipulation.  I guarantee you that they will never be gamed to the little guy's advantage.

We forget that there are many primary production enterprises that are accessible to the individual.  I am a tree guy, so that is what first comes to my mind.

But it could be a skill like cooking (See Home on the Range in the sidebar), or writing a blog, or taking care of little tykes or seniors (Pawpaw, that would be you), or repairing automobiles, or driving sand-point shallow wells.  Without getting too religious, I believe we are all commissioned with specific missions and that we are satisfied, gratified, and as we discover and then fill those missions.

The only time you are trapped is after you give the master's permission to control your thoughts.


  1. Thank you Joe. I can fly as PIC, 7 different jets, have two doctorates and lots of work accolades, and honestly, I'm more proud of the fact that my daughter thinks my chocolate chip cookies are the BEST, than any of that. Family and making sure they are cared for and loved is SO much more important.

    Thanks for the mention. Partner, Abby and I send our regards.

  2. Hello Brigid:

    Thanks for reading and thank-you, especially for taking the time to comment.

    I have often thought that chocolate chip cookies are the ideal medium for teaching the principles of science. Variables, interactions.....all of that stuff. CCC make it very REAL.

    Keep writing.