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In an effort to keep my valued clients and investors in the loop about my opinion in what I like to consider “a new economy”, these newsletters and blogs are created to ensure everyone reading this and investing with us clearly understands our investment philosophy. As I always say in the intro of every newsletter I write…”it’s never the investment, it’s always the investor”. This information is written to help inform and educate the investor as to why we focus on specific opportunities that exist in this environment.
While most passive, and likely misinformed, investors begin to focus on the equities market, we continue to sift through non-correlated asset classes to generate maximum gains with maximum control over the asset and the outcome. While most passive investors are logging into their online brokerage accounts and listening to the talking heads on financial television shows, we’re continuing to focus on our core competency and acquire assets that have obvious, controllable value-add elements. While most equities investors and money managers are determining whether Blackberry is a better play today than “Apple”, we are being flooded with “deal flow”. For a while, it’s been like shooting fish in a barrel. The S&P managed to return over 15% in 2012. Our investors/partners earned well in excess of that in the same time period focusing on what the average investor and broker do not…Logical investing, or momentum investing.
In a time of such uncertainty, or should I say certainty, most investors have sat on the sidelines waiting for some good news. In the real estate world I’ve seen investors, developers, and merchant builders sit and wait for global trade to open up… which was likely to happen if the other guy got into the Oval Office. Well, he didn’t. But simply knowing the outcome of an election seems to be enough for virtually every industry to get up and say “O.K., I can still grow my business under this administration” or, “I was given lemons….” well, you know the rest of that phrase. Regardless of your political leanings, growth is inevitable in the United States, but not under the same rock every misinformed investor looks under.
Gramps always said to me…”assess an investment and determine whether it passes the ‘logic test’”. So I ask you this…”Does the equities market today pass the logic test?” Does it make sense that a publicly traded company meets the streets estimates and tanks 5% in the same day? Does it pass the logic test that investors flock to multi-unit housing developments such as apartment buildings and put a value on that asset based upon projection, i.e. future rent growth and cheap government lending platforms? Once again, even seasoned investors get caught up with the idea that this is a tight window of opportunity. The reality is, if one understands how money works and how it really moves, then there is an eternal open window readily available to anyone willing to educate themselves on the misunderstood topic of “money“. Unfortunately, most investors, both novice and seasoned, continue to focus on a specific asset class rather than the definition of wealth creation.
We know anyone can put their own spin on what they know best. A commodities broker has a valid argument as to why the price of gold will continue to rise. A money manager has a valid argument when he touts a growth company is poised for a phenomenal quarter and operators of a REIT can put up a valid argument why the category of real estate they focus on will outperform all other categories. After all, they are all emotionally attached to their industry and their work… just as people in any industry are, since most people spend more time at work than with their family. We all, in a sense, drink the proverbial Kool-Aid. Otherwise we would feel like we are wasting most of our life. All I’m saying is that just because they are buying what they are selling doesn’t mean you should. As a salesman myself (just like most of you), I can make a compelling argument on just about any asset class and prove that it’s the right place to put your money to work.
The point of this rant is to keep your eyes open to opportunities that most investors are too scared to see. They let a money manager sway them into conventional thinking and a “sounds good to me” mentality. The best line that I have ever heard, which is a cliché in the financial services industry is, “Wallstreet is the only place where those that ride in limos are taking advice from those that ride the subway”. STOP DRINKING THE KOOL-AID AND LEARN HOW TO SEPARATE investing logically from EMOTIONALLY DRIVEN INVESTING.
Right now there are billions of dollars pouring back into the equities market because we are nearing the 14,000 mark on the DOW once again. Does anyone recall the last time that happened? Not to say we will have another financial meltdown tomorrow, but it’s that “herd mentality” that has driven a gap between the “have’s'” and the “have not’s” for generations. The misinformed create the opportunities for the informed. It’s sad but true. So rather than crying that it’s not fair and complaining that I was handed a raw deal compared to the guy next door, I conform and adjust to my surroundings and look for the opportunities. You can only do that when you know what you are looking for. Hence the reason I stress the importance of educating yourself as to how MONEY WORKS and not focus so much on how equities investing, options trading, or real estate acquiring and management work.
To inform is my number one priority. The real estate opportunities I present to you are a distant second. More to come, Stay tuned…