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Before any of you football fans take this message the wrong way, let me quickly tell you that I don't give a rats rear either way who wins. In fact, I hardly even watch football and can't even name you ten players from both teams combined. Look, football is a great American sport and millions love it. I'm not here to knock the game, but my concern is on the wealth of the players. As some of you know, I had a conference call with the NFL's front office to talk about what we can do to keep rich players from going broke after the final whistle blows. They said we're doing more like working with Suze Orman. I think Mrs. Orman is very talented and that's great if you grew up in a neighborhood where many look like Suze but if you didn't then her level of expertise probably doesn't impress you and in a brutally honest way, it may even offend you. Many of the players ignore the advice of her and professionals like her and resort to investing with people they more easily identify with which often leads to disaster and a life of misery after unprecedented earnings.
So what about everybody else who doesn't take home $45,000 every week after taxes for 18 weeks, you know, the wage earning 401k types? What happens when you make investments with people you know or people you don't? Judging from the number of requests for meetings, phone calls and emails we've gotten, many people just don't understand the fundamentals of how to invest and you need not feel bad about it because you're hardly alone. First of all, investing should be looked at in two ways - long term and short term. Short term is less than 12 months and long term is more. Are you investing for a short term goal or are you looking to build a dream in which case you need a long term strategy. Regardless, you have to understand returns. A good return is inflation plus 3-4% and since inflation is about 3.5 percent then a good return is 7%. That means if you invest $1,000 on January 1st 2009, then by January 1st 2010, if you have a new balance of $1070 that's actually a good return. Ohhh, wow, but isn't that a total bore? That doesn't sound sexy! That's not sophisticated at all, right? Someone is thinking I invested and X and got X plus 200 and I know someone else who invested X and got X plus 500. Yes, I know but remember my circle of influence. Are you having lunch with the CEO of the NASDAQ, wealth managers, Private Equity and Investment Banking elitist? If not, then trust me on this. Stay away from the sexy and hyped up investments like hot stock tips and meetings where people want you to stand up and clap as the supposedly richest of the richest takes the mic to sell you something. Investing money and getting a good return can be as simple as opening up an S&P 500 index account where you now have 500 of the most widely held stocks in the U.S.
Investing has to be like Jiffy Lube - a well oiled machine. Whatever someone told you about how much money they made off an investment should only matter if it's a well oiled machine meaning they can do it over and over and over. Tons of people in growing metropolitan areas thought they were sophisticated investors when they realized their homes were suddenly worth a lot more than they paid even though they had never read or studied anything about investments. They can't do it today because the homes aren't worth as much and people finally see that real estate is not a liquid investment. Before you invest, make people show you balance sheets and income statements. It's also important that you understand exactly how companies make their money. You think McDonalds cares that you chose Chipotle over the Big Mac or Boston Market's ¼ Dark with three sides over a large order of fries? It doesn't matter to them because you're going to either stick the money in their front pocket, wallet or shirt pocket as McDonalds owns all of them. Boston Market was making their money by stiff arming franchise owners with high fees and not so much from the chicken. It doesn't matter now though because they're now safely tucked away under McDonald's wings and "they're lovin it"!
Now back to this football thing. Although I don't really care who wins or losses, I do enjoy watching the highlights. I've also learned enough over the years to realize if I'm going to pick a team to cheer for, it probably won't be the Redskins as they disappoint you all more than anything I've ever seen. But before you Cowboys fans start high fiving, I assure that if I'm going to invest, there's no better team owner to hang with than Daniel Synder as the Redskins may suck on the scoreboards but they're the wealthiest franchise in the league! Thanks Dr. Deskins for helping me realize why these two teams are such arch rivals (cowboys and Indians, like duhhhhh but it never dawned on me). With that, let's blow the whistle on silly investments.
The Investment Forum is coming up on a five year anniversary in January and we're planning to reconvene very soon. Meanwhile, I'm preparing to chat with NBA Commissioner David Stern about how Boston Celtic's Star Antoine Walker blew $110 million partly on "investments".....Jesus, Mary AND Joseph..I know right! We just can't keep doing this.
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