January 29, 2013 Comments

Today was another decent day in the markets with modest gains in most of our stock picks.

Dow up a half percent. Doomers are still waiting for end of financial world and have missed relatively massive gains since the bottom in March of 2009. I think you subscribers are on average much more intelligent than the average investor. Sure we all have our moments of fear when listening to doomers and talk of currency collapse but for the most part I suspect few or none of you are certified doomers who want to sit close to 100% in Gold and want to avoid all “paper” assets. (Actually I would argue that many “paper” assets are in fact quite real and that some so called real assets are just as much paper as are stocks that represent ownership of real companies with real asset and real earnings power. Ownership of my house is indicated by papers. Gold coins in my safe would admittedly be quite real if I had any. Gold kept by a custodian may be evidenced by paper.

On January 27 I mentioned the topic of unconventional wisdom.

Warren Buffett has pointed out that it is very dangerous to fail with an unconventional strategy. You can be fired or sued often. Filing conventionally or with the crowd is not as dangerous. Because of this not many people will succeed unconventionally because they don’t like the risk of unconventional failure. This is true in all aspects of life.

Buffett said in his 1984 letter:

(Failing conventionally is the route to go; as a group, lemmings may have a rotten image, but no individual lemming has ever received bad press.)

Buffett went on to say that he was willing to risk unconventional failure.

The risk of failing unconventionally is why advisors seldom or never encourage a client to go in too heavily on any given stock or to go all equities. I also try to avoid giving any personal advice to do that. I reveal that I am not running a diversified portfolio but I will not accept the risk of advising any individual to do what I do. My advice is generic. I rate stocks. I show evidence of what running 100% equities has resulted in the past (basically higher returns over the long run but gut-wrenching losses from time to time). You subscribers decide your own asset allocation and exposure to each stock and indeed whether to buy any particular stock. I do not know your particular individual circumstances nor would I want to be responsible for your decisions.

And I should hasten to add that you subscribers as a group have been very mature over the years and with extremely rare exception (like about three people in thirteen years) have never even hinted at blaming InvestorsFriend for any bad outcomes in the market. (There were some additional subscribers who expressed concern about the results from time to time but without hinting that they considered InvestorsFriend or myself in any way responsible for their trade outcomes, much less financially responsible). You subscribers (with the three or so exceptions in thirteen years) have been grown ups and have accepted the risk of your own trades. The requirement to do that is posted on this Site in several places (including the login screen) and you have agreed to that and I am grateful for it. I (technically InvestorsFriend Inc.) could not provide this analysis on any other basis. Our disclaimer of course disclaims any financial responsibility for trades made on the basis of the information provided). There is no possible way that advice purchased for $15 per month or less could come with guarantees even in the event of errors or omission. If anyone happens to disagree with that, please unsubscribe.

I did not intend to get into all of that, it just sort of popped out of my brain as I wrote tonight, but perhaps it is good to point this out from time to time.

For any comments about this, email me at shawn@investorsfriend.com


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