Dear Diary,
Call in the quacks! The shrink. The counselor. Get the voodoo man on the line. The Rogue Economist is going soft and mushy… analyzing his own feelings and motivations… his own relationship with money.
It begins with a note from a dear reader:
What a pile of garbage. There is no correlation between happiness and money. None.
Oh yeah?
Half the world works just to survive. But the other half works to get ahead. It aims to get richer. Why so much effort if there is no connection – none at all – to happiness?
And why are so many people investing their money, if not in the hope that it will be fructified… making them wealthier?
Yesterday, neither the Dow nor the price of gold budged. You can interpret that any way you want.
There was no follow through on Wednesday’s big drop in stock prices. But there was no rebound either.
Mr. Market, are you listening? We await further instructions.
More Money, More Honey?
Meanwhile, we have been making the case that the link between money and happiness isn’t as straight and sure as: More Money = More Happiness.
And it can be the other way around: More Money = Less Happiness.
There are three key decisions you make in life; having money doesn’t keep you from botching them up.
In fact, money can make the wrong choice more readily available to you. Neither high-toned hookers nor highly paid stock brokers make their calls in poor neighborhoods.
We grew up poor… but not unhappy. We took from our childhood that happiness was independent of wealth. We drew our happiness from the home and the family.
And with this base of our contentment secure, we could go out into the world and face whatever challenges and hardships might come our way… confident that no matter what happened, our happiness was safe at home.
We began this series with an insight: If you want to get rich, you had better learn to like poverty first.
A man who measures his worth in material success may not be able to bear the risk of failure. In our case, we were largely indifferent to it. Money didn’t really matter much. So we could afford to take chances.
After law school, instead of taking the safe route – billing clients for nasty divorces or slick tax schemes – we started a business.
The Only Sure Route to Success
No matter what you do, it is hard to put your hands on serious money.
When you come of age, someone else already owns all of the money in the world. Its custodians and guardians will not turn it over to you readily.
Starting out, you won’t know what you have to do to make your business succeed. Most likely your business will fail; you don’t want to take it too hard.
Instead, you want to take advantage of it. Since you can’t know in advance what will succeed, eliminating failures is the only sure route to success.
The challenge is to fail early and often enough so you still have your nerve and your wits when you finally stumble onto something that works.
Even if you are able to separate yourself (again in a deep, emotional way) from material success, it still plays a role in your life. As we explained in this series, we want more wealth for a reason, even if we don’t know what the reason is.
When we undertake to get it we get a sense of satisfaction and delight when we succeed. It is not necessarily the money that satisfies us though; it may just be like the satisfaction you get from choosing the fastest line at the checkout counter… or cutting someone off in traffic.
Life is competitive. We want to win. And money is one way of keeping score.
The typical man has a job where he is told, more or less, what to do. He may earn a high salary or a low one. He may like what he does. Or he may suffer it, as he suffers a tax audit or a colonoscopy. But it will probably not get him any serious wealth or satisfaction.
You do not get either by going along with the flow. You get it by disrupting it. Like disruptive technology, you must change the way money is earned… and spent… altering the capital landscape of the planet. If you are to get more, relatively, others must have less.
This gives the competitive moneymaker a deep sense of reward even before he is successful. He is not necessarily the richest of men, but he is probably among the happiest.
Beethoven referred to him as the “free artist.” He does what he likes with no overseer laying the lash on his back and no Wall Street banker holding a million-dollar bonus in his face.
He would do his work even if it didn’t pay. For he is a builder remaking the world… not in his own image exactly, but at least with his fingerprints on it.
Regards,
Bill
Use This “Trick” to Find Great Stocks
Today, I want to share with you one of the best “tricks” I know for finding great stock market investments.
If you’ve been investing in stocks for a while, this “trick” may be familiar to you… on the surface anyway.
You may have read what others have written about it. You may have seen the column where Barron’s (a major weekly financial publication) covers it.
But I’m going to take you beneath the surface.
I want to show you some of the details of the right way to use this “trick” to find great investment opportunities…
A few years ago, I wrote an investment advisory called Inside Strategist for Stansberry & Associates. You may even be familiar with it. Every week I researched and wrote about a new company for subscribers.
If you happened to be a subscriber, you may have earned some of the exceptional returns the strategy I used in the letter generated. Those returns are why I’m convinced the approach I’m about to explain is so useful.
It’s a terrific means of finding great stock investments you might never discover otherwise.
As the title suggests, my mission at Inside Strategist was to follow the investment activity ofcompany insiders.
In this context, “insiders” are a specific group of people legally defined by the Securities and Exchange Commission. The SEC defines them as the directors or senior officers of a company, and any person or fund that owns more than 10% of a company’s voting shares.
Any time such insiders buy or sell stock, they have to file a public notice with the SEC. It includes certain details like the date, price, amount of shares purchased, and total holdings. Anyone is able to review those details.
When I was writing Inside Strategist, this is what I would do each week to find a new company. I still do it.
But…
You don’t approach this strategy like you might expect.
You don’t simply look through these notices for “big” insider buys and conclude these are signals for good investments.
It’s about more than size. Size is relative. For example…
You’ll rarely find chief executive officer (CEO) buys that are useful signals.
After all, CEOs are the highest paid of all the insiders. Their top priority is to promote their company. And after they do that, it makes for a nice parting shot to be able to say, “… and I’ve put my own money where my mouth is.”
There is at least one exception to this. If a CEO buys an amount of his company’s stock that is at least one to two times his annual salary, you might want to take a closer look.
You especially want to look closer if a CEO makes such a buy on the heels of some extremely strong, positive words about company prospects in a recent quarterly conference call.
You also want to take note of chief financial officer (CFO) buys. To me, these carry far more weight than CEO buys…
For one, a company’s CFO lives, eats and breathes his company’s finances. The CFO is responsible for making sure the company follows its financial plan so it can execute its business plan.
Every day, he’s looking at the numbers to understand exactly what’s happening.
Also, CFO salaries are generally much lower than CEO salaries. In 2013, according to Salary.com, average CEO pay was $760,000. Average CFO pay was less than half of that: $309,000.
Knowing such a discrepancy exists, it stands to reason that a CFO buy is potentially far more meaningful than a CEO buy.
When you learn a CFO is buying shares of a company, take a second to check it out. It can pay to do the legwork.
For similar reasons, also pay careful attention when other senior executives are buying shares of their company. That an executive vice president of sales is buying his company’s stock, for example, may serve as great confirmation that company “talk” about the potential of a new product or market is more than just talk.
Finally, purchases made by independent members of the board of directors can also be great signals.
They can also be meaningless. Sometimes board members have agreed in advance to use their board fees to buy company stock. Or the company might even be compensating them in stock directly. (You can learn the specifics of such arrangements by digging into public company filings.)
Other times, independent director purchases warrant a closer look because it’s clear the independent director is freely investing his own money in the shares.
I followed these insider buy signals at Verifone Systems, the credit card reader manufacturer. Verifone shares rallied to become a 104% net gain.
With results like these, you can see why monitoring insider buying activity is a part of my routine each week. And it’s what led me to the little-known stock that lets you “skim” money from millions of banking transactions. For full details, read on here.