“Where are the customers’ yachts?”
- “Six decades ago, Fred Schwed wrote a book called Where Are the Customers’ Yachts? The title came from a story about a visitor in New York more than a century ago. After admiring yachts Wall Street bought with money earned giving financial advice to customers, he wondered where the customers’ yachts were.” From the Motley Fool.
So do your investments have you feeling a little dumb after the last few days? Don’t feel bad, it happens to the best of us. Me, I have followed the stock market since I was thirteen, watching Wall Street Week on Friday nights. I bought silver SLV calls in March of 2011 and by April 28th ran $2500 to $100,000. I shorted Mannkind down from $2 to sixty eight cents. But in each case, I left too much money on the table by not taking money off the table. As the saying goes, bulls make money, bears make money, and hogs get slaughtered.
The market can make anyone seem like a genius for a period of time, but to paraphrase Mike Tyson, “Everyone thinks they are a market guru until they get a margin call”. And why not think that you are a genius? This has been the second longest bull market in history, teenagers are making millions trading in Bitcoin, and Etrade makes you feel like a girlie man if you have not made a billion by your 30th birthday.
But let’s take a beat and think about the beatings that some of the “smartest guys in the room” have taken. Bill Miller, who as a Legg Mason fund manager, has a record for consecutively beating the S&P for fifteen years. Recently, he had 50% of his new fund’s holdings in Bitcoin, as it raced to $20,000/coin. On 2/6, Bitcoin was worth about $7,000, down over close to 70%. Bill Ackman of Pershing Capital hedge fund fame, lost billions betting on Valeant Pharmaceuticals; he could have learned that it was a fraud with a little digging into readily available news items. And Bill Gross, billionaire of PIMCO fame is reported to have taken a major hit to his holdings when the market dropped 1200 points recently.
So what can the average joe do to make a small fortune? Well, you could start with a large fortune and invest in pork bellies-actually I don’t know if you still can. Or you can follow the advice of the third richest man in America, Warren Buffett, and invest like mad in S&P funds over forty years. Or you can find something you are passionate about, do it better than anyone else, and get paid well for it, a la Floyd Mayweather, Kim Kardashian, or Jeff Bezos. Just remember when you do make your fortune, stock brokers still have a hard time pointing out their customers yachts.