The Craze of The “Social Investor”

“Human beings are neither good nor bad. They’re merely subject to influence”.
– Bill Bonner

How often do we head to a football game just to get the exhilarating rush of screaming our lungs out in a group of 25,000 elated fans? How many times do we fail to accomplish something on our own and with a little company succeed, later realizing we were able to do it without their help?

The fact is that people embrace human interaction. It’s elating. It’s what makes drag-racing so popular and how Hollywood makes its’ millions.

I always say to buy real things, not borrow virtual promises. I told a friend of mine I liked gold. He asked why. I said “Because its real”. He said “So is Real Estate”. I smiled and said “Yes, but most people don’t own their homes, I own my gold”.

So often people get caught up in the moment. They hear that stocks are the best asset to own on planet earth. They hear that its a real company, with earnings, that embraces capitalism and shareholder interest. They hear that a stock could go up just because others think that the company will do better. They hear that shares are liquid and can be bought and sold in seconds. They hear that if they buy 10,000 shares at 4 cents, and it goes up to just 1 Dollar, they’ll be Millionaires!

Then they hear about real estate. They hear that they don’t have to even buy it with money but can easily get a loan from the bank. Along with that they find out that you can even lower your initial interest payments for the first few years. They hear that there are tax advantages in the sector. They hear that you can even withdraw equity from your home to buy stuff. They hear that prices only go up!

And so on go the speculations. Bond holders believe they are owners of the safest assets on earth, futures traders think they can outsmart the market and never get whipsawed, and owners of collectibles think there will always be another idiot who comes along and pays more for the item than they did.

We live in euphoric times and thus we are called on to recognize that much of the current hoopla is unsustainable. Inflation hurts, P/E ratios reevaluate, home prices fall and speculators get crushed.

The fact is that people want more, in whatever denomination it may be. The problem is that the “more” they seek is only relative to what the market is doing at the time. If its 1980 they want gold, if it’s 1989 they want anything Japanese, if it’s 200 they want Tech stocks, if it’s 2005 they want Real Estate. Come 2007 they’ll take just about anything, as long as it is worth more today than it was yesterday.

We like to buy stuff too, but only if its cheap. If someone offers you a bucket of sand that costs $4 for $2, you take it. If someone offers you a dollar bill that isn’t worth the paper it’s written on, you don’t.

We believe gold, silver and most commodities are cheap but we also can’t see them staying that way. Too many people are beginning to see opportunities and too much money is chasing too few goods. The only thing holding back what may end up being the strongest commodities rally in our time, is the sentiment of the masses. But when that turns, there will be no stopping it.

2 Responses to “”

  1. Anonymous Says:

    Liked this article…!
    (Just recheck for spelling errors)

  2. Admin Says:

    haha. for some reason the computer I was using didn’t catch them. thanks for the feedback!

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