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Some more free advice from The Motley Fool:
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10 Really Simple Financial Lessons to Live By
By Morgan Housel | December 6, 2010 |
If you liked The Black Swan, you'll love Nassim Nicholas Taleb's latest book, The Bed of Procrustes.
Unlike Taleb's previous books, there's no storytelling in this one. There are no predictions of future meltdowns. No warnings to idiot bankers. The entire book is simply a collection of hundreds of "philosophical and practical aphorisms" -- pithy one-line quotes full of meaning and importance.
I've selected 10 of those quotes that struck me as financial lessons. Few were meant as such -- these are broad aphorisms not meant to be confined to finance -- but all provide at least some lesson that can help make you a better investor. Enjoy.
1. Education makes the wise slightly wiser, but it makes the fool vastly more dangerous.
Fellow Fool Bill Mann calls this "Harvard stupid." Harvard stupid, he says, "comes from thinking that you're smarter than everyone, without recognizing that you still might not be smart enough to control the evil your creations threaten to unleash." We're looking at you, Goldman Sachs (NYSE: GS).
2. To bankrupt a fool, give him information.
I haven't seen the study, but I'm willing to bet there's a perfect inverse relationship between investing results and time spent watching CNBC.
3. "Wealthy" is meaningless and has no robust absolute measure; use instead the subtractive measure "unwealth," that is, the difference, at any point in time, between what you have and what you would like to have.
Plenty of those making $30,000 have ample savings. Plenty of those making $1 million a year live paycheck-to-paycheck and are buried in debt. Wealth is completely relative. As Chris Rock says, "If Bill Gates woke up with Oprah's money, he'd jump out the window."
4. What I learned on my own I still remember.
They teach about financial risk in school. If you still remember those equations, you're either a finance professor or devoid of a life.
Learning something because you experienced it is the most valuable form of education. Late in the housing boom, I invested in Beazer Homes (NYSE: BZH) and Citigroup (NYSE: C) because they looked cheap. I didn't realize that the way they made money made Russian Roulette look conservative. Losing money on those two is a lesson I'll never forget.
5. The calamity of the information age is that the toxicity of data increases much faster than its benefits.
As the blog The Reformed Broker put it: "The four most dangerous words in investing are 'It's the Lightning Round!'"
6. The sucker's trap is when you focus on what you know and what others don't know, rather than the reverse.
If you find a cheap stock and you can't explain why it's cheap, there's a good chance you're missing something that others see. To quote Buffett: "If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy."
Take Annaly Capital (NYSE: NLY). There may be good reasons to own this stock right now. But trust me, Annaly's dividend isn't huge because it's a hidden gem that only you know about. If you're not aware why the dividend is so high right now -- because the yield curve is about as wide as it gets, and destined to fall -- you'll be taken for a ride as the economy recovers and that curve flattens. Others are aware of this. Just make sure you are, too.
7. Knowledge is subtractive, not additive -- what we subtract (reduction by what does not work, what not to do), not what we add (what to do).
A young child once asked Berkshire Hathaway (NYSE: BRK-B) vice-chairman Charlie Munger what advice he could give to ensure success in life. "Don't do cocaine, don't race trains to the track, and avoid all AIDS situations," he replied. What he meant, I'll presume, is that what you don't do is just as important as what you do.
8. A prophet is not someone with special visions, just someone blind to most of what others see.
Same as above. You'll win by default if you simply avoid the mistakes others make. Those who made a fortune betting against housing didn't have special insider knowledge. They simply didn't believe that housing prices could go up forever.
9. The best test of whether someone is extremely stupid (or extremely wise) is whether financial and political news makes sense to him.
One of the biggest disservices the media cranks out are daily market roundups that begin, "Markets fell/rose today on news that …" followed by a random and usually meaningless datapoint. Markets go up. Markets go down. Get over it and stop trying to connect the dots.
10. What they call "risk" I call opportunity; but what they call "low risk" opportunity I call a sucker problem.
The past three years, explained in one line.
Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Berkshire Hathaway is a Motley Fool Inside Value selection. Berkshire Hathaway is a Motley Fool Stock Advisor pick. The Fool owns shares of Annaly Capital Management, and Berkshire Hathaway.
I just read on the Motley Fool web site, another great Warren Buffet quote, from his 20's:
Be fearful when others are greedy, and greedy when others are fearful
Yep, too bad we didn't get the 0.0003 close! Here is a post from darbyflier about PCF*:
This one I had dumb luck on. Got it in the .000s and left it for dead in the account.
Yes, looking great! Thanks for the chart.
Well, we've hit 0.0003, thank goodness, and on good volume---
58 Million traded!
Grow CNEX!! We're got the GOLD for sure!
It would be a nice close. Come on 0.0003s!!!!! Let's GO!!
Yes it is! Hope Monday shapes up to be a good day for our investments here! Go CNEX!
Yes, it would rock! Remember Anything [very good] can happen in Pinky Land!!!
Back in 2006, I was fortunate to have some shares of an Ecuadorian explorer that discovered a massive deposit. In the span of 9 months, the shares went from 68 cents to more than $40. They were deep in the jungles of SE Ecuador and probably a billion dollars, or so, away from becoming a mine. There were also massive political hurdles to navigate and are as yet still unresolved. Still, an intermediate sized mining concern thought their project was worth over a billion dollars and forked over the cash in early 2008. Who was the intermediate sized company that bought this tiny jungle-bound explorer with all of these unresolved issues? It was the guys who are digging giant holes in the ground just to our west. KGC
A Quote From AGBugg, on Another Mining Board!
A Quote from Gump90, posted recently on another Mining Board: The BIG BIG BIG win comes if you go all the way yourself into production. This is the Canadian way. This old J V J V J V is the poor boys' way out.
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We are number 39 on Most Read Boards today! Go PCFG!!!
Good morning Sunday, Trapper and fellow-CNEXers!!
Spot gold has a bid of $1414.50 and an ask of $1415.50 and Dow futures are up 3 points, as of Friday. The overseas markets haven't opened yet today.
I'll have to try it sometime! We are turning in for the night soon, so I'll say good night! Have a great rest of your evening!
I love it on Xmas eve, when on the nightly late news they track Santa's route across the world, on radar!
I've heard Wii gives you quite a workout, too! Enjoy! A friend of mine does that as well with kids. We just ordered some Xmas gifts online, at REI!
We will! I just finished jumping around silliness, to Xmas carols on 'Pandora', on the computer! It felt good to get my blood circulating! We're now listening to "It's beginning to look a lot like Xmas...."
Yes, it does! Stay warm yourself in this COLD weather! Enjoy your holidays and a little time off!
It is really cold here too---so cold we're not going walking outside, but instead are going to exercise in our living room! We're thinking of turning one room of the house into a dedicated exercise and weights room soon!
Merry Christmas to you and your family!!
GROW CNEX!!
It's Cold in Ohio, eh? Yes, it is bitter cold here in Missouri too, with lots of winds blowing today. We're making hot vegetable soup and cheese sandwiches together, which should warm us up though! Stay warm indoors!
I like(d) quarter slots too. However, I think the worst curse I have ever had is when I suddenly discovered there were numerous local casinos in Missouri! Luckily, I have gone on to "undiscover" them, before catastrophy struck. They can be as harmful and addictive to people, as drugs, all IMO!
Hope your Saturday is going well. We are sorting old stuff in our house, and getting rid of lots of items, via recycling today!
GROW CNEX!!!!!!!!!!!!!
Claude-----Best wishes on your admirable goal to fully retire in 2 years! I agree, IMO, the first four stocks you mentioned could indeed be in the dollars range, within a few/couple years. I do wish I owned more of PCF*, but I have what I have! Good luck to you and thanks for your post!
Yes, I am glad my days with high risk slot machines are over.
But now I am following 2 great penny stocks, CNEX and PCF*, owning both, with the hopes that one of them will hit a home run within 16 years, OR LESS!!! :)
It's worth a shot, the DD on both has been done, and remember "anything [VERY GOOD] can happen!"
I have liked to gamble in the past and have won good money by pulling the handle. But, these days I prefer to invest some monies in penny stocks and take my chances there, as a modified, slightly more controlled form of gambling, too!
Do you mean there's a lot of outstanding shares, or authorized shares existing?
And you CAN retire rich... Thye say you only have to invest in 1 or 2 great investments in your whole lifetime to hit it bigtime, it's just a matter of choosing the right one(s). Or, you can be conservative and diversify across a larger number of investments (horses) if you feel you don't know which horses (ones) will "win" long term. Either way, can get you there!
Gotta love it---buys hugely outnumbering sells on CNEX!!! We have a long term winner here!!!! Have a good evening!
By the time we go to retire.....which for me is in about 16 years---or less, hopefully speaking!
I like GOLD rising in price steadily too! We are going to be rich, we have to believe that!
Thanks for letting me know about SAE*. Glad you had a good day in the markets and at work today. Gold closed at 1405!!!! Yeah!!! Grow CNEX!!
Hi Trapper!
Do you hold any SAE* gold stock by any chance?
How was your day/week in the stocks of choice that you hold now?
Too sharp an increase in the price of gold, not given the proper causes, is the vanguard to catastrophic financial times.
Thank you! I borrow from only the Best Posters!
GROW CNEX, a "for real" company!
Here is another great quote which shows CNEX is a "real" company, struggling with "real", current issues, and is not just a scam! Real junior mining companies like PCF* (and CNEX), struggle with obtaining financing in this market, need to obtain permits, have to prove up resources, get more financing to further production etc.
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Scam companies just put out fake pr's, make ridiculous claims and create a feeding frenzy. Sooner or later, all scams come to an end.
Trapper--I have great faith in the property too, like you do, plus a LOT of faith in the price of GOLD going much higher from here!
IMO, It is just a matter of time with CNEX. We are like a junior junior junior PCF*, and we have to earn our stripes/higher PPS, through exploration and IPs and hopefully, some more PRs!
I'll 'call' and throw my 0.0002 cents in, too!
GO CNEX!!!!!!!
REDEMPTIVE posted this today on the PCF* board. Good news!
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With China buying much more gold, all exploration companies will be HOT stocks. PPL are buying gold too. Only so much available and more needs to be mined.
You are most welcome!
Up 3%!! YEAH!! Thanks for the update.
Thanks for your tip about buying physical silver and gold bars!
Thanks, Trapper, for your reply and for saying you'll be here.
Patience is the key, and also the hardest thing to master. If I'd had patience with two other stocks I've owned in the past, I'd have had a 2X play and a 3.5X play. I guess I am holding out now, for a significantly larger X play! Let's hope it can happen!