Intelligent Investing and Stock Market Bubbles

At the behest of the Investment Guru of Omaha, I have begun reading “The Intelligent Investor” by Benjamin Graham.  Warren Buffet, the investment Wise Man behind Berkshire-Hathaway, has recommended reading this volume for decades.  It is the farthest thing from a “How To Get Rich Quick” book.  A more appropriate title might be “How to Get Rich Slowly, without Losing Your Ass as s Speculator.

I have only just cracked the first pages of this tome, first written in 2006, or perhaps earlier.  The notion of the “bubble” has been with us for quite some many years.  I will not attempt to offer commentary on the subject of tulips in Holland as the subject precedes my time as an investor by many years.

I do recall, as a potential investor, the allure of charts, published by “big name investing houses, in the mid 1960.s, that suggested strongly that investing in companies such as Mohawk Data and  Core Memories.  Technology know as “core memory” was foreseen as a technological advance in the 1960’s.  It allowed information to be stored on tiny donut-shaped rings of iron.  Then came silicon technology.  It was then that the first bubble of investment in the antique of “cote” technology burst and become “not such a good idea”.  The market value of Mohawk Data and  Core Memories descended rapidly.  They were tech stock dinosaurs.  Hence, Tech Stock Dinosaur Bubble.

Then came the Conglomerate Bubble.  Those were the heady days of Republic Corp., National General Corp., Gulf+Western, and of Harold Geneen over at ITT (International Telegraph & Telephone) holding sway over a room of a thousand or more Vice-Presidents of ITT’s several divisions, demanding that they come forth with a plan to make more profit.  (Gulf+Western scooped up Paramount Pictures in 1966 by peeling off a wad of Gulf+Western convertible subordinated debentures.  The accounting fairy-tail being oft repeated was that theses conglomerates’ earnings-per-share were increasing at phenomenal rate.  The dirty little secret was that the earnings-per-share that were reported were only “per existing shares”, not “per share” if tall the outstanding convertible subordinated debentures were to be converted to actual shares in the conglomerate.  Once the holders of these convertible subordinated debentures began to convert them into real shares in Republic, National General, Gulf+Western, ITT, etc., the bubble burst, and investments went down the drain.  Then, there was the “dot.com Bubble”.

There was a small, independent film made about the “dot.com Bubble” Era.  There came a time when anyone with enough talent to write in HTML, or in other arcane languages, could create a website.  If that website attracted a lot of traffic, it could be monetized.  You could make a deal with Google to get paid (in Googlebucks) for driving traffic to one website or another.  According to the movie, two guys set out to build a website that everyone could use to interact with every small government entity.  In theory, one could pay a traffic fine, make an inquiry as to schedules for pick=up of garbage cans, recycle cans, green waste cans, etc. , pay a bridge toll.  Sounds like a great idea.  At one point, one of the two founders “discovered” another consuming interest, and wanted out.  For his share of the business, he accepted ‘say’ $10 million.  The partner walked, bought a house in Malibu, whatever!  The remaining partner (now full owner) then had the gumption to visit the office of a company that was creating a competing product.  As it turns out, the competitor was quantum leaps ahead in accomplishing its goals.  (Pardon my hyperbolic.)   Long story short. one guy got the gold in the gold mine and the other one got the shaft.  During that time there came into existence eBay, PayPal, etsy, Amazon, Chewy, Google, Fakebook (sp.), OpenDiary,

These Internet-based stocks could,at best, be considered “highly speculative”.  Placing your bet on one throw of the dice could make you a pauper or a thousandaire.  Never a uku-billionaire.

If you are over 80 years of age, investment advice for the long term might seem impractical, but consider that you might live to be 120 years or more.  Forget that your own children have no interest in your Art collection.  You, yourself had little interest in your wife’s auntie Maude’s collection of tea cozies.  You may well live long enough for your collected Art works to become recognized as being valuable.  Don’t count on it!  (The high-stakes world multi-million dollar Art works is almost certainly a playing field for bribery and political pay-offs, but that is the subject for some future entry.

The subject at hand is investment strategy.  It is also about being grounded in reality.  During the Covid episode (dare I say Covid Hoax), someone dear to me (because she was also the mother of a grandchild) became very concerned as to her own fragile health as well as that of her own child and that of her husband.  Her on-line presence (Fakebook) screamed at compliance for COVID restrictions.  We were told to “stay home”, to wear masks when in public, to stay 6 feet away from anyone else.  Fakebook loved this shit because that was what it was told to do by whatever demented idiot was controlling Joe Biden,  She also purchased stock in Novavax.  She had volunteered as one who was a guinea pig for the Novavax.  There were two other competitors: Pfizer and Moderna.  Moderna offered a twin shot that needed to be administered two weeks apart.  For many, this regimen seemed, somehow,more “valid”.

So, everyone stayed home (and watched Netflix), stayed 6 feet away from everyone at the grocery store, stopped attending church, and stopped talking to neighbors,  What a  perfect Orwellian World!!

From what an Orwellian future can you devine?