Paul Winkler: Welcome to “The Investor Coaching Show.” Evan Barnard is hanging out with me here. He’s a certified financial planner and an enrolled agent.
The Investor’s Dilemma
There was a workshop that we did years ago on investing and this cycle that we tend to go through. You know how we have the investor’s dilemma?
People have a fear of the future.
They want to predict the future. They look at past performance, they get overloaded with information and then they make emotion-based decisions. They break the rules of investing and then they end up with performance losses. This is a cycle that people tend to go through.
On my website, paulwinkler.com, I walk through that cycle of why investors get lower returns. It explains what is really important to me in investing.
So anyway, you can track this cycle pretty well because it’s very psychological as far as what causes us to have all of these really bad experiences. Well, then what we have is also saving the investor. And the whole idea behind saving the investor is, if we can get investors to do the right stuff with their money and not screw up their retirement plans, and invest more academically, if we can get you to do this stuff right, then what happens is we not only save somebody’s retirement but we can also have an impact on the whole world.
Evan Barnard: Absolutely.
PW: If the investor screws up so badly with their investments and they mess up their retirement, they’ll avoid the stock market. They will say, “Well it’s just a gambling casino. That’s all it is.”
To which I answer, “Oh, do you know anybody who owns a business?” And they’ll go, “Well, yeah.” And I’ll say, “Well do you think every day that they go to work, they feel like they’re gambling?”
Well, no. They own the business. What do you own when you own stocks? You own the businesses.
So what’s the difference? The reality is that a lot of people give up on investing because they think investing in the stock market is bad. It’s just how they approach it.
Capitalize on Capitalism
You look at the older generation that went through the Depression. I mean really, that was bad. They lost so much money.
And then the same thing happened in the 70s. The stock market was dead; it didn’t work anymore. Equities were dead, right? It was the title of the article in Business Week.
EB: The Death of Equities, yeah.
PW: Investors had defected from the stock market, leaving it to older people who hadn’t adjusted to the times. They didn’t have the ability to adjust or make adjustments.
EB: Favorite paragraph of all time.
PW: They’ve been there, they got the T-shirt, they got ripped. They learned the lesson, no question, in the 1930s. So what happens is that these people will make these mistakes and then they just give up on the stock market altogether.
They say, “It just doesn’t work. It’s gambling casinos. There’s no point in doing this.”
What we would teach in the workshop is how you help capitalize on capitalism all around the world.
EB: Right.
PW: What happens when you capitalize these companies that are all around the world? There is an effect where not only you benefit but also the rest of the world benefits. Think about it, what do we want to do as humans?
We want to leave this place a better place than we found it. You can be a person who owns companies and gives capital to companies that are operating in other countries around the world where there’s poverty.
There’s a great video on this that shows how life expectancies are increasing (except in recent periods when we had a lot of depression and had some issues with life expectancies shortening because of that). It’s kind of a weird anomaly recently, but in general, life expectancies and the level of health of people around the world have been increasing or becoming better as time goes on.
The other thing is that people have become wealthier, all around the world.
Business Cooperation
I was watching CNBC the other day, and in an interview, WeWork co-founder and former CEO and Flow founder Adam Neumann said:
“The discussion here, it’s more as a business setting. Everybody’s trying to come together. I’ll tell you one thing that I saw here: I see a lot of different people from different nationalities, from different religions trying to come together. And sometimes business is a place where people can find a common ground.”
I like that line right there. Business is a place where people can come and find a common ground.
Let me come back to that in a second. I’m going to give you the rest of the quote here because I think that’s a key point about what it would take to get a higher level of community in the world.
EB: Cooperation.
PW: Cooperation. I think that’s a good word.
The rest of the quote from Neumann said that finding common ground in business is easier than in a political setting. That’s a key point right there.
Business is a place to get people to come together, and it’s easier than in a political setting.
I’m going to keep going.
Neumann said, “Regarding what you asked me about Israel’s reaction and what it should and shouldn’t do, except for the fact that I know Israel has a right to defend itself and must, I’m not in a position to state what should and shouldn’t happen. I’m not a politician. What I’m doing is my best that I can do as a businessman and as an entrepreneur. And I think it’s up to all of us right now to find our own way that we can do our best.
“But I also think we can be one of two things. Either we’re creators, or we’re destroyers. I choose to be on the creator side.”
I just love that line.
EB: It’s excellent.
PW: As I was listening to Neumann talk right there, my mind was going to this: When you run a business, you’re trying to get cooperation with people all around the world. It’s like Milton Friedman when he did the lesson on the pencil.
Basically, Friedman talked about how a pencil is made — where the lead came from, where the wood came from, where the metal came from for the little thing that wraps and holds the eraser, where the rubber came from, the country that the rubber came from and where the paint came from. And he was talking about all these different countries coming together to create a product that we don’t even think twice about because it’s so stinking common.
You have people from all around the world cooperating to come up with a writing instrument. You can’t be fighting if you’re cooperating to put something together when both of you depend upon its production for your livelihood.
EB: There was the McDonald’s philosophy or the Golden Arches Doctrine or something like that where basically, anywhere that there was a McDonald’s, those countries did not go to war with each other. It kind of illustrates the point that we don’t go to war with trade partners.
PW: That’s right. It makes no sense to fight with somebody that you’re trading with. If I’ve got a customer that I’m working with or a client, I don’t go and generally show disrespect for them and I don’t go and tear them apart. I mean, it just doesn’t make any sense to do that, because then I lose a customer. And then of course everybody loses.
Creating or Destroying
EB: I did like that last line on creator versus destroyer. I think that’s just a brilliant distinction between two groups that makes it nonpartisan and non-socioeconomic. It’s just, “Are they creating or are they destroying?” I really enjoyed that.
PW: I really like that line as well because it applies not only to business, not only in this particular context, but in anything.
When you think about it, what are we doing so often? We’re destroying.
We’re trying to destroy our enemies or somebody that we see as an opponent.
Dr. Dan Boone, president of Trevecca Nazarene University, was talking about this the other day. He was commenting about how the left is entrenched. The right is entrenched.
The middle road is so narrow. There are so few people in that middle lane, so to speak, because people are so entrenched on the right-hand side and on the left-hand side, and they’re not looking at what other people say.
There was this one woman who was a professor over in Seattle, Washington. There’s a mountain range over there, and this professor brought her students over to the other side of the mountain. And on the other side of the mountain was a very conservative group of people.
One of the things that they did was they got into conversations with each other and the people that were very liberal on the west coast side of the mountain range made comments about how they were surprised. They were shocked that their counterparts who had voted on the opposite side of the aisle as they did, the things they were voting on, the things that were important to them, were not the things that they thought that they were voting for.
It was so interesting because they were voting on things on the east side of the mountain range that had everything to do where their economic standing and how they were being told that they could or couldn’t use their land. They had no idea that it wasn’t the social aspects that the other people on the other side thought were so important.
So a lot of times it takes that, just getting together and talking a little bit about that kind of stuff. But that’s what business is. And as investors, that’s what we get to do. Actually, it’s one of the keys to being happy.
EB: That’s right.
The 12 Scariest Things You Can Hear From Your Broker This Halloween
PW: Every Halloween, we do this tradition. Here are the top 12 scariest things you can hear from your broker’s office this Halloween:
No. 12: “We’re sorry, but the number you’ve dialed is no longer in service or has been disconnected.”
No. 11: “We got a government bailout because of our bad investments, but we know exactly how to manage your money.”
No. 10: “You can get stock market returns with no risk in this investment.”
No. 9: “No, we didn’t accidentally leave any zeros off your account statement.”
No. 8: “You stayed in the markets? I got out months ago.”
No. 7: “Congratulations. We’re naming a tech law after you.”
No. 6: “Please sign here. My car payment’s due. Uh, I mean, this is good for you.”
No. 5: “I thought that when you said you wanted to invest in gold, that you wanted me to wear it.”
No. 4: “I don’t understand this, but my manager says it’s a great investment.”
No. 3: “Our firm’s been around for 80 years and has only been bailed out by the government once.”
No. 2: “You didn’t really want to retire this year, did you?”
And finally, the No. 1 scariest thing you can hear from your broker’s office this Halloween: “I’ve got good news and bad news. The good news is that I didn’t put all of your money with Bernie Madoff.”
EB: I love it. So good.
Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.
