My Second Most Important Lesson on Wall Street | | Are these dividend traps lurking in your portfolio? High-yield stocks can be attractive, but they often signal danger. The company's dividend might stop growing, or worse, be cut, reducing your income and the stock's value. 5% plus yields might seem like an easy way to boost investment income, but they can be traps. In a world where 10-year treasuries yield 3%-4%, the market rarely offers a free lunch.
Click here to learn more. | | | "I am writing in times of unprecedented economic pessimism." -- Lord Matt Ridley, author, "The Rational Optimist" (2010)
"The world has made spectacular progress in every single measure of human well-being. Almost no one knows about it." -- Harvard psychologist Steven Pinker, author, "Enlightenment Now" (2018)
I'm at FreedomFest today, 7-11 in Vegas! (See my special offer below.)
Last week, I wrote about my #1 most important lesson on Wall Street: "Above all, avoid heavy losses." You can read it here: The Single Most Important Lesson on Wall Street (You Might Be Surprised) -- Mark Skousen
This week, let's talk about the second most important lesson on Wall Street. I was reminded of it after reading the bestselling books by the two top public intellectuals in the United States (Harvard psychologist Steven Pinker) and the UK (Lord Matt Ridley).
Both authors are being interviewed today by Michael Shermer. Excitement is in the air for our 2,000 investors and freedom lovers.
Pinker and Ridley have something in common. Both wrote books on the overemphasis on bad news in the world by the media, academia and people in general, how doomsday books are more popular than books optimistic about the future.
In the media, "If it bleeds, it leads" is an old saying. Pinker has a chart showing how the number of negative stories in the New York Times has been increasing over time. He wrote an earlier bestselling book, "Better Angels of Our Nature," showing chart after chart that violence and war are on the decline.
In his book "Enlightenment Now", Pinker highlights these positive developments:
- Human life spans have never been longer.
- Infant mortality has never been lower.
- Standards of living have never been higher.
- Educational attainment has never been greater.
- War, terrorism and violence -- despite what you see in the media -- are in a long-term cycle of decline.
- Air and water pollution have been improving for decades.
- U.S. household income and net worth are near record levels.
- Novel drugs and medical devices are extending and improving our lives.
- New technologies are making our communications faster, our transportation safer and our working and recreational lives easier.
- The number of democracies around the world is increasing.
- And so is global prosperity.
(I thank Alex Green, chief investment strategist, for this reference.)
Lord Ridley takes a similar approach in his book, "The Rational Optimist," written in 2010 right after the Great Recession in 2008-09. He seeks to debunk the doomsayers who predicted "nuclear war, pollution, overpopulation, famine, disease, violence, grey goo, vengeful technology."
He notes that while some things are getting worse, such as traffic congestion and obesity, most trends are positive (as Pinker notes above). He spends 300 pages arguing that the population explosion is coming to a halt, that energy will not soon run out, that pollution, disease, hunger, war and poverty can all be expected to continue declining if human beings are not impeded from exchanging goods, services and ideas freely. | | Top 20 Living Economist Shares the Largest Position in His Personal IRA Investing legend Dr. Mark Skousen gave a talk to a small group in the heart of Washington, D.C. In it, he revealed the cornerstone of his retirement plan – and the one investment that helped make him a millionaire. Click here to watch Dr. Skousen's presentation. | | | 'Bears Make Headlines, Bulls Make Money'
Neither one of the books has a section on investing, but here too, pessimism reigns. Despite over 200 years of long-term bull markets in American stocks, few investors have the guts to stick it out through thick and thin. If they did, they were richly awarded, as Jeremy Siegel, the Wizard of Wharton, has pointed out in his book "Stocks for the Long Run."
After all, as they say, "Bull markets climb a wall of worry." I can't tell you how many times investors panic when bad news hits the front page of the financial news and media outlets.
We were told in 2022 that the Federal Reserve's policy of raising interest rates to fight inflation would cause a bear market. It did, but for only a year, and those who held on have been immensely rewarded.
The bull market that began in early 2023 and continued into 2024 has been one of the most profitable in modern history. Yet, how many investors got out after reading the first signs of trouble of rising inflation and interest rates?
It reminds me of 1962, when fears of a recession caused the stock market to tumble 30%. Headlines portended doom and gloom: "Black Monday Panic on Wall Street… Investors Lose Billions as Market Breaks… Nation Fears New 1929 Debacle."
Many investors sold in the face of these headlines. Steve Forbes said it best: "Everyone is a disciplined, long-term investor… until the market goes down." (Maxims, p. 135)
At the time, J. Paul Getty, one of America's billionaires, was asked his opinion. He said, "There was nothing basically wrong with the American economy nor the vast majority of companies whose stocks were listed on the New York Stock Exchange." He was a buyer, not a seller, of stocks.
I quote his wise advice in "the Maxims" on p. 136: "The seasoned investor buys his stocks when they are priced low, holds them for the long bull rise and takes in-between dips and slumps in his stride."
On the same page, I add this quote from Getty: "The big profits go to the intelligent, careful and patient investor, not to the reckless and overeager speculator."
Getty warns, "Businessmen can profit handsomely if they will disregard the pessimistic auguries of self-appointed prophets of doom." (p. 110)
It Takes Guts to Be a Long-Term Investor
In the bear market that started in 2000, one of my friends told me he closed his brokerage account and went into cash and bank CDs. He's never been back. What a missed opportunity!
Meanwhile, another friend invested her $25,000 in the year 2000 in a series of long-term investments -- a fund that invested in pre-IPO private placements, a stock index annuity and individual stocks and funds recommended in my newsletter, Forecasts & Strategies.
Last week, she told me that her $25,000 investment is now worth over $1,000,000. Why? Because she followed J. Paul Getty's advice to invest for the long term and take occasional bear markets in stride. | | Where are the record-setting stocks going? Wondering if you should be bullish or bearish on Nvidia for the remainder of the week?
Don't worry about "buying the news" or getting scared into selling when the A.I. can guide your way.
In other words, be rational.
The same A.I. that predicted the banking crisis, housing market crash and Covid crash recently forecasted 2 massively bullish moves for Nvidia.
Join me LIVE to learn how we're trading this ticker and 3 more with this A.I. forecast. | | | This Book Belongs on Your Night Stand
The subtitle of "The Maxims of Wall Street," is appropriate: "Bears make headlines, bulls make money."
In almost every Skousen CAFÉ, I find myself quoting something from "The Maxims of Wall Street," and with good reason. This column is no exception. In its 283 pages there is much wisdom, packed with short stories, proverbs and advice that can make you money, and save you from making some big mistakes in life.
Bert Dohmen writes that "Maxims" is a "beautifully bound collector's item. It should be on every investor's bookshelf and read regularly."
Many of my subscribers do that very thing and have Maxims on their desk at work or at home. As Dennis Gartman, editor of the Gartman Letter, states: "It's amazing the depth of wisdom one can find in just one or two quotes. I have it on my desk and refer to it daily."
Order your copy today. "Maxims" is in its 10th anniversary edition, available at a discount for only $20. Additional copies are only $10 each, and they make a great gift for friends, clients or relatives. If you order an entire box (32 copies), you pay only $300. I autograph and number each copy and mail them to you at no extra charge if you live inside the United States. To order, go to www.skousenbooks.com.
"The Maxims of Wall Street" is truly the "Investment Bible" that will lead you to financial independence and help you avoid making some big mistakes.
Maxims has been an underground bestseller. It's now in its 10th edition and has sold nearly 50,000 copies.
Jim Woods, my colleague at Eagle Publishing, is a big fan.
Jim states, "I've always felt that a collection of wisdom from the best brains in that industry has been most special to me. And on this front, there is no better 'how to' anthology than the one by my friend, fellow Fast Money Alert co-editor and brilliant economist, Dr. Mark Skousen. The 'Maxims of Wall Street' is a collection of some of the greatest wisdom ever to flow from the biggest and brightest names on Wall Street. Great investors such as Jesse Livermore, Baron Rothschild, J.P. Morgan, Benjamin Graham, Warren Buffett, Peter Lynch and John Templeton are just a sneak peek at some of the names you'll discover in this fantastic collection. Then, there is profundity from the likes of Ben Franklin, John D. Rockefeller, Joe Kennedy, Bernard Baruch, John Maynard Keynes, Steve Forbes and numerous other luminaries too copious to mention."
If you don't have an autographed copy of my collection of quotes, stories and wisdom of the world's top traders and investors, please order a copy now.
It has been endorsed by Warren Buffett, Kevin O'Leary, Jack Bogle, Kim Githler, Alex Green, Bert Dohmen, Richard Band and Gene Epstein of Barron's.
Each Copy will be Signed 7-11 Vegas!
I offer the new 10th edition cheaply to my Skousen CAFÉ readers: Only $21 for the first copy, and all additional copies are $11 each (they make a great gift to clients, friends, relatives and your favorite broker or money manager). I will sign each one dated 7-11 in Vegas, then mail it at no extra charge if you live in the United States.
To order, go to www.skousenbooks.com.
Good Investing, AEIOU,
Mark Skousen
Doti-Spogli Endowed Chair of Free Enterprise, Chapman University
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FreedomFest | | Convenience Stores Replace Low-Priced Peanuts with Higher Priced Gourmet Peanuts By Mark Skousen
Editor, Forecasts & Strategies
"Inflation is never neutral." -- Ludwig von Mises
In the January 5, 2024, issue of Skousen CAFE, I mentioned that even peanuts have succumbed to price inflation. Munchie peanuts went from 99 cents per package to $1.29, or higher. See the "You blew it" column at My 37-year-old Prediction Finally Comes True! - Mark Skousen.
In it, I made the point that the government's "easy money" and "big spending" policies resulted in price inflation across the board, as they passed along higher costs with higher prices.
Now I've noticed another change: 7-11 stores, gas stations and other convenience stores have replaced low-priced Munchie peanuts with gourmet peanuts that have higher profit margins. For example, in several gas stations, the Munchie peanut bags have been replaced with more expensive "Nut Harvest" peanuts that cost $2 or more. Granted the Nut Harvest bags have 3.75 ounces of peanuts in their bags versus 3.25 ounces for the Munchie bags... but clearly the profit margins and prices are substantially higher on the Nut Harvest brand.
There is an important lesson here about inflation. Inflation causes significant changes in store policies. Not only do stores raise prices when they can, but they also engage in "shrinkflation," where they sometimes reduce the size of the product...
And now we see them switching to higher-profit margin products, peanuts being the latest example. | | | About Mark Skousen, Ph.D.:
 Mark Skousen is an investment advisor, professional economist, university professor, author of more than 20 books, and founder of the annual FreedomFest conference. For the past 40+ years, Dr. Skousen has been investment director of the award-winning newsletter, Forecasts & Strategies. He also serves as investment director of four trading services: TNT Trader, Five Star Trader, Home Run Trader, and Fast Money Alert. | | | | | |
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