Over the holidays of 2008 and for the past three weeks of 2009, I consulted my crystal ball (hey, give me a break, my magic 8 ball is in the shop). Guess what it came back and told me?“Now is the time to BUY.”
“Buy what?” I replied?
“BUY” the crystal ball spelled out again.
I guess I would have to figure out what it meant all on my own. Thus I began a three week intellectual odyssey: “what did the crystal ball mean?”
For days and weeks on end, as I made my merry way purchasing bargain real estate and common stocks, my mind would dance around the word ‘buy.’
“What more could I do?” I wondered to myself. “What am I missing here?”
One morning, while re-reading a portion of one of my favorite investing books of all time (Security Analysis by Graham & Dodd), something dawned on me: I wasn’t fully committed enough to ‘buying’ my favorite undervalued asset classes. Although I had written about it and attempted to put it to work in my daily business of investing, I realized that I was still only dipping a portion of my leg in the water - I had not yet ‘jumped in.’
This may seem like a matter of semantics, but it really is not. It’s a matter of night and day.
As I have mentioned in previous posts, back in one of my former lives, I was a competitive weightlifter. Psychology is one of the biggest factors in lifting big weights. Our coach used to teach us: “commit fully to the weight - or your dead!” While this wasn’t exactly the most comforting thought in the world, neither was the thought of 350+ pounds crashing onto your bones! In fact, taking his counsel to heart in this matter bore a lot of fruit (= less injuries). I had seen many lifters move huge weights in preparation for a big lift, only to see them fail because they had not ‘committed themselves to the weight’ when attempting a lift on the platform. Weightlifting is an “all or nothing” sport.
(no, this is not a picture of me)
Sort of like a lot of other things I know.
You see, as an investor and entrepreneur, you are constantly swimming upstream. The negative media attention on the economy and business right now as well as the naysayers can pick apart your psyche. These things can wreak havoc on you quickly or, they can be insidious - slowly growing in the back of your mind. If you aren’t fully committed, both in thought and in action to your investing and business objectives, the insidious creep of doubt will work against you.
What I realized upon my crystal ball reflection was that I still did not have the absolute full strength of my convictions behind me. I realized that I had to put to bed questions like: “what if the market continues to go down.” I simply put the full faith of my judgment behind my decisions - becoming more confident that my framework was solid. I started to think less and less about things like “what would Warren Buffett do? (WWWD)” and realized that he never had a perfect map for success either. He was/is guided by a basic framework that is effective and he sticks to it, through thick and thin.
A great calm came over me as I felt better and better about relying on the strength of my own convictions and faithfully ignoring the rampant pessimism. I realized better what some of the classic investors, like Graham, Heine, Munger and Klarman talk about when they continually emphasize that the psychological aspect of the investors mind is the most important.
Saying that you are ingnoring the crowd and actually ignoring the crowd are two completely different things. I think that I made it past a fork in the road in the begining of our year 2009 and look forward to pushing ahead.
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Speaking of real estate investing, the upcoming Real Estate Investors Association of Macomb (REIA of Macomb) meeting is going to be great. It is the 2 year anniversary of one of the best networking and education focused groups that you may have the pleasure of attending. This Thursday, January 29th and 6:00 Pm at the Royalty House in Warren, MI will be a great event. If you are in the Southeast Michigan area this week, please check it out!
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P.S. I really don’t have a crystal ball.
P.P.S. My Magic 8 ball really is getting fixed (by a gnome somewhere, I think)
Hi! Thank you for this post. Actually, I’m not very familiar with this topic but after reading your post, it’s clear now! Keep up the good posts like this. Take care!
I was kind of hoping that the powerlifter was you!
Nice post, quite inspirational.
Your a local hero.
Thanks, Dylan.
It’s ok to have a comment.
Adam great article. I wish you had a crystal ball that could tell us predictions but no one has the exact answers for future. Now i got idea for your next blog article to chalenge you mind that would be interesting. You are a smart man so here is the question:
Lets say i would give you 400k cash tomorow to your bank account and you know what market we are in. And you have to roads to take to make money from this 400k. One road is that you can invest only in realstate. Other road is to only invest in stocks and commodities. So you would have 10 years to invest. So in year 2019 which is 10 years later which road made you richer? What road did you pick? Which road is safer for next 10 years? The road that you did not pick is it riskier? I know that its good to invest in both roads but for now you can only pick one. Thanks
Mark,
I won’t take any capital less than $1 million. J/k!
Great question. It’s all about intelligent capital allocation. I must admit that I cannot say ’stocks’ vs. ‘real estate’ as I don’t analyze investments according to sector or industry -but rather, I look at the price to value relationship and margin of safety in each individual case (real estate deal, business evaluation, etc.). If I can buy a dollar for $.50 in real estate, I like it. If I can get a dollar for $.50 in a stock, I like it.
Commodities are more economic driven plays that are, admittedly, beyond my scope of comfort in evaluating for successful investment. I am much more confident in my evaluation of an ongoing business that I understand or an income producing real estate deal than I am the oil reserves of the middle east or the wheat harvest of the Midwest. This is not to say that commodities can not be profitable, take a guy like Jim Rogers for example, I am just not in that sphere of comfort.
In short, Mark, my position is to look to the deal. If the price you can get it as is less than value with a significant margin of safety then things will probably be very good over time.
Thanks!
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