It's the men's day out. Overall, it's been a pleasant day. This is what retirement is all about. You and the rest of your foursome just completed a leisurely 18 holes of golf. It's time to head to the 19th hole [the men's grill] where great and not-so-great shots are replayed. Your game has never been better, and so you're looking forward to rehashing the drives and putts that made you the day's champion. Bragging rights were about to be served. But as the drinks are poured, the bravado increases and the conversation suddenly turns to the topic du jour: the stock market.
Shoulda - Woulda - Coulda ... Some Did
Suddenly, it seems your three partners have been transformed into investment geniuses. You're not sure if the men sitting across from you aren't Peter Lynch, George Soros, and Warren Buffet. The first one quietly talks about the fortune he made in AOL. Not to be outdone, your second partner in a loud voice, talks about his large holdings in Cisco. Finally, in a booming voice that can be heard across the room, your third partner reveals how he had the insight to buy Qualcomm at $25 on the first trading day of the year. A dead silence fills the room. It's as if E. F. Hutton had entered the grill.
You listen stunned, because you just played golf with these prodigies. These men are no longer your golf buddies, they've become investment icons. Amazed, you thought they were only an engineer, a lawyer and a salesman.
To your chagrin, you listen to one story after another of their investment exploits. They recount their trading moves in and out of the market and the fortunes they've made by buying stocks that doubled, tripled, and quadrupled in value. These are your buddies—ordinary men with ordinary minds. How could you have misjudged them? Investment geniuses were staring you in the face. Up until this past year, their exploits have been largely unknown to the rest of the world. These were great men of foresight. And you thought they were just mortal men.
Another round of drinks is served and you feel compelled to buy just for the privilege of sitting in on their discussion. The stories seem to get bolder and the returns higher with each passing drink. Your day's victory on the links begins to fade away as it seems less important now. Your mind begins to wander. Doubt begins to set in. There is a glimpse of anger and maybe even jealousy that begins to consume you. Your neighbors are getting rich. Again your thoughts wander. Maybe you've set your expectations too low? That's the problem. You should have expected 50 to 100% on your money and nothing less. Aren't you entitled?
One partner leans on the table and whispers in a low voice, "If you're aggressive, you can make even more. All it takes is one IPO. One big enchilada and you'll be on easy street, rolling in the money. It's easy," he says. "All you have to do is simply buy a dot com and the market will take care of the rest." To help you get started, your golf buddies offer several hot tips.
In your ignorance, you ask a few simple questions. What are the earnings prospects? Do they have a lot of debt? Are their sales growing? And, by the way, what do they do? Your partners are horrified by the insult. You realize you've committed a faux pas. You apologize profusely and admit you forgot, "It's a new era." They forgive you and realize it must have been the liquor talking.
Pokemon: The Next Generation of Day Traders?
These kinds of stories are surfacing on golf courses, beauty parlors, gyms, and dinner parties all around the country. Everyone should be a millionaire. We've even got a new television show that confirms the theory. Americans are experiencing a new craze. Investment clubs are springing up faster than convenience markets. Even the kids are doing it. They're learning to become day traders with Pokemon cards.
Everybody is involved and plugged in with the Internet. Investment talk has become fashionable and part of stimulating conversation everywhere. Everyone is an investment analyst, offering opinions on how to make money in the market. And now the television commercials and info-mercials bombard you with how making money has never been easier. There's nothing to it. Just invest.
Personally, I can't remember a time when making money has become so consuming. All around the country television, radio, the Internet, magazines and newspapers are filled with advice on how to acquire wealth. For nearly 20 years now, the stock market has been on the rise. Most investors think there's no reason to believe that it will not be the same for the next twenty years. After all, "The business cycle has been repealed." Don't worry about recessions. Tech stocks will only go up.
And yet, if making money is this easy, it will be the first time in history that it has been so. Making money is never easy. It only appears that way when you're in a mania. If it were otherwise, everyone would be a millionaire.
In the middle of a mania, common folk are transformed into investment sages. From cab drivers to soccer moms, everyone seems to be smitten with investment fever. But, these are not ordinary times, nor are these ordinary markets. Nobody talked like this five years ago before dot com fever. The horrors of bear markets have faded away. The last real bear market of any significance was over 25 years ago! What happened in 1929, 1967, 1974, and 1987 have long been forgotten. Nobody remembers what it was like back then. Reality is what is before us. Most think if the market does fall, it's a buying opportunity. Most investors think that like recessions, bear markets have also been repealed. Stocks only travel in one direction—they can go as high as the sky.
Perhaps it's because of the excitement of dot com glitz and glamour that bear markets have been all but forgotten. In the middle of a mania, it is human emotion that dominates men's minds. Rationality is replaced by the mood of the crowd. Nobody likes to talk about their mistakes, especially when it appears that everyone is getting rich. Greed is good. It is no wonder that the stories at the 19th hole are filled with investment success. Nobody gathers a crowd to talk about a stock that has lost money. Hedge fund losses, Russian debt default, derivative bombshells and IPO implosions are never discussed. To do so would be politically incorrect. Everyone likes to talk about their winners; no one talks about the ones that lost money. All one hears about are IPOs that double and quadruple out of the starting blocks. If Martha Stewart can become a billionaire, then why can't everyone with a great idea become a millionaire?
So, the next time you're playing golf and the conversation turns to investments, just remember that your friends are mortals. Let them tell their stories and enjoy their success.
When they turn to you, feign silence and look reflective. Tell them you're reading Buffet's biography and well, Buffet is mostly in bonds. Then pause, look up towards the sky, and tell them you're building an investment ark in cash. You're even considering shorting the market.
This advice will surely cause your friends to take notice. The mere mention of Buffet may mean you know something. That will puzzle them. Then, gradually mention the fact that you've been reading annual reports and things aren't as rosy as they appear. Look back towards the sky and tell them you sense rain is coming to the financial markets. It may sound bizarre enough to capture their attention. This advice will surely raise your status among your friends. [It must only be given on a day when the market drops several hundred points.] Always appear reflective and at times, even silent.
What you are doing will be so at odds with what they've been told, or what they are doing themselves, you may even begin to take on the status of an investment guru yourself. In fact, it will only enhance your reputation if you grew a beard or started smoking a pipe. You might even start wearing a bow tie. If they ask you where you're putting your money, tell them only this, "If I build the ark, the rains will come."
"If you build it, the rain will come."
Let them talk about their dot coms as you listen reflectively. No one will question your conservatism again. In fact, other members at "The Club" will want you to join their foursome. Your silence has made them think. You won't have to boast about the one stock that made money in the way they do. Let them tell their stories. When it comes to your turn, let silence fill the air. Then, only say these words, "The rain IS COMING." After every game give the same response, "THE RAIN IS COMING!" To enhance the effect, after the conversations end at The 19th Hole, let it be known that you're heading to Home Depot for some lumber and look towards the sky.
In your response, you may have done your friends a favor. Go ahead, cut through the bravado and step out on a limb. Either way, you will give them cause to reflect. They'll never forget your pointing out the folly of today's investment markets. Your friends will see you a little differently. Your silence will be counted as wisdom.
