Dear Diary,
And so… fast away the old year passes. In a few hours, it will be gone.
And then what?
Another one is born, without so much as a moment’s delay.
Better? Worse? Who can say?
We are watching the year die in the waiting room of the Department of Motor Vehicles in Delray Beach, renewing a driver’s license.
This has nothing to do with our mission at the Diary, which is trying to connect the dots in the world of money. But it’s an experience!
“What’s your number?” asked a fellow condemned man.
“268.”
“Well, you got 50 people ahead of you. They just called 218. I’ve been here two hours… and there are still 30 people ahead of me.
“I don’t understand why they can’t do this by Internet. You can order a pizza or watch a movie. Why can’t you get a damned driver’s license?”
We didn’t have a good answer. But our companion was not looking for answers. Just conversation. Mostly, his own.
“I moved down to Florida 10 years ago. To tell you the truth, I’m thinking about going back to Cincinnati. Too many old people around here. I’m one of them. But you put too many old people together in one place and it begins to smell funny. ”
He laughed heartily.
Honor Roll
Yesterday, Mark Hulbert of the Hulbert Financial Digest newsletter reported the latest results.
Since March 2000, he has been tracking the investment advice given by a group of 78 independent newsletters, including a few published by our company.
We are proud to report that two of our investment services, once again, made Mark’s “Honor Roll” of the investment advisories with the best returns and the least risk: Byron King’s Outstanding Investments and Alex Green’s The Oxford Communiqué.
But here is the interesting thing. Both Byron and Alex have been analyzing stocks, full time, for many years. They are among the best in the business, according to Hulbert.
What is their average annualized rate of return?
About 8% a year.
Even the top performer on Hulbert’s 14-year list has done no better.
Consumer price inflation has averaged about 3% a year so far this century. So this turns an annual nominal 8% return into a 5% real rate of return.
If this is the best you can get from the best-performing investment services in the nation, what do most investors get?
Not much.
How to Get Rich
We have been talking about value investing as a sensible and proven approach to making profits.
We want to back up a bit and warn readers that investment gains are not guaranteed, no matter what technique you use.
The untutored, inexperienced investor faces long odds. Mr. Market is a tough competitor. Even most full-time professionals cannot keep up with him. And the best only beat him by a hair.
Owning and controlling a business is a much better way to make money.
As a general rule, the closer you are to the source of earnings, the more you are likely to get. When you control a business, you make sure you get your share of the profits. When someone else controls the business, he often makes sure you don’t.
Owning your own business brings you more than just the annual profits. You also can get employment, use of company cars and real estate, and a business credit card to cover some of your expenses. You get invited to the company holiday party, too.
And if you pay attention, you understand how the business works and what it is worth.
This is different from the passive owner of a few publicly traded shares.
He is at the mercy of the insiders, the managers, and the honchos. Unless he does his homework, he is unlikely to understand either the source of the company’s profits… or the disposition of them.
When a business goes public, the entrepreneurs, insiders, managers and venture capitalists who backed it in childhood and adolescence sell it off to total strangers.
Why?
Maybe they need the money. Or maybe they just believe it’s not worth as much as buyers are willing to pay.
Maybe they want to retire. Maybe they’ve had enough. For whatever reason, the shares change hands – from those who know them well to those who don’t.
More to come in 2015…
Regards,
Bill
10 Market Surprises for 2015
It’s the last Diary of 2014…
Instead of your regular Market Insight, here are 10 possible market surprises to look out for in 2015.
This is NOT a list of predictions. Nobody knows what the future holds. It’s simply a list of 10 unlikely, but possible, events that might catch investors off-guard next year.
1) Oil prices hit $40 a barrel on weakening global growth and continued production pressure from OPEC. Russian energy companies default on their debt. European banks require a bailout from the ECB, sending panic through international financial markets.
2) Gold falls below $1,000 an ounce, as global QE fails to lift consumer price inflation.
3) Greece becomes the best-performing stock market of 2015, as newly elected left-wing prime minister Alexis Tsipras agrees to a compromise agreement with the country’s creditors.
4) Stock markets in Brazil and Argentina become top performers, as foreign investors start to warm to newly elected governments there.
5) Mario Draghi quits as head of the ECB after Germany blocs the central bank from launching a large-scale QE program of its own. French, German, Italian and Spanish shares slump.
6) The Fed puts off raising interest rates due to concerns over weakening global growth. The S&P 500 hits 2,250 as speculators continue to pile on.
7) The yield on the 10-year Treasury bond falls to 0.5%, as investors search for yield. Ten-year yields in Germany and Japan fall below 0.3%.
8) Chinese economic growth falls below 5%, triggering another round of massive credit easing from the People’s Bank of China. Chinese stocks continue to rally.
9) The Supreme Court overturns Obamacare. The US stock market rallies on the news.
10) North Korean hackers attack the New York Stock Exchange. The S&P 500 drops 5% in a day and then recovers. The US responds by cutting off North Korea’s Internet for a month.