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A Native Guide to Investing: Wit and Wisdom About Wall Street

Steve Russell
9/30/14

I didn’t really say everything I said. --Yogi Berra

Taking Mr. Berra’s words as a caution, and throwing primary sources to the breeze for the cheap shelter of the Internet, I’m going to offer some conventional wisdom about the Wall Street Casino as viewed by famous and semi-famous people.

When I think of life lessons, the first place I go is to the Cherokee cowboy philosopher, who always seems to make sense.

Don't gamble. Take all your savings and buy a good stock, and hold it till it goes up, then sell it. If it don't go up, don't buy it. – Will Rogers

Considering that the cowboy spent most of his years as an entertainer, that’s a pretty penetrating analysis of Wall Street and why sensible people should hesitate.

There are two times in a man’s life when he should not speculate--when he can’t afford it and when he can. – Mark Twain

October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February. – Mark Twain

The main purpose of the stock market is to make fools of as many men as possible. – Bernard Baruch

Baruch made a fortune on stocks and commodities trading before he took up advising Presidents and got famous. He was known as “The Lone Wolf of Wall Street” because he would not join any of the brokerage firms clamoring for his services. Of course, much has changed since Baruch’s time. The stock market now makes fools of women as well.

Thinking back to why I wrote this series in spite of the best opinions from some of the smartest people I know, I keep returning to the reality all of us face:

If inflation continues to soar, you’re going to have to work like a dog just to live like one. – George Gobel

All right, Lonesome George is not known for stock picking, but he’s put his finger on the situation that drives a lot of us to Wall Street. Staying with one job long enough to earn a fixed retirement income is a thing of the past, but do we really want to make retirement a thing of the past? When inflation is higher than the interest rate on your savings account, the dangers of the Wall Street Casino begin to look like the danger a Plains Indian faced on his first buffalo hunt as a young man. Real danger, but really necessary if you mean to provide for your family.

Don’t fight the Fed. – Martin E. Zweig

Zweig is known for his stock picking. He’s the hedge fund manager who famously bet millions of dollars of other people’s money that the market was about to crash in 1987, and wound up a hero rather than a goat because he was correct. If the Federal Reserve Bank determined to raise interest rates, he was betting, the fundamentals of the businesses represented by the stock market did not matter, because the market was going down.

More recently, and only because the U.S. Congress could not agree on fiscal policy to fight the Great Recession, the Fed has brought interest rates to an effective zero, making it a great time to expand business (if only you had customers) for the same reason it’s futile to save in a normal savings account or a certificate of deposit.

The key to making money in stocks is not to get scared out of them. – Peter Lynch

Everyone has the brainpower to follow the stock market. If you make it through fifth-grade math, you can do it. – Peter Lynch

Never invest in any idea you cannot illustrate with a crayon. – Peter Lynch

Lynch is a legendary stock-picker, best known for his stewardship of the Magellan Fund between 1977 and 1990, averaging 29 percent for his lucky investors. Now partially retired from Fidelity Investments, he spends most of his time giving away the money he spent the front end of his life making. His primary contribution for us home-gamers is the admonishment to invest in what we know. If you are careful to know what you own, you can’t be flimflammed or fast talked into some decision that benefits only the fast talker.

Never invest emergency savings in the stock market. – Suze Orman

Orman was born to immigrants on the South Side of Chicago and attended the University of Illinois at Urbana Champaign, where she studied social work. Upon graduating, she went to Berkeley and became a waitress. She was in her 30s before she dipped her toes into professional stock-picking, but she started investing for herself pretty early. She’s now a personal finance guru with, as of 2008, a net worth of about $10 million.

Always remember that, in the stock market, you have not gained or lost a cent until you sell. It is not always a good time to sell, and therefore it’s dangerous to tie your savings up where you can’t get to them without taking a big loss. Emergencies happen.

While I endorse her view expressed above, Orman’s life trajectory leads me to wonder if she’s a case of “do what I say and not what I did.”

Operations for profit should be based not on optimism but on arithmetic. – Benjamin Graham

If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume. – Benjamin Graham

In the short run, the market is a voting machine but in the long run it is a weighing machine. – Benjamin Graham

Graham was the father of value investing and the guru for Warren Buffett, who is everybody else’s guru. His books, Security Analysis (with David Dodd, 1934) and The Intelligent Investor (1949) remain classics, and Warren Buffett calls the latter “the best book about investing ever written.”

The market can remain irrational longer than you can remain solvent. – John Maynard Keynes

Trust an economist, practitioner of “the dismal science,” to remind us that there can be a substantial gap between when the market votes and when the market weighs. It does not help you to have a correct analysis if it’s combined with incorrect timing. This is why value investors typically “buy and hold,” and have to be prepared to believe in themselves while they wait for their bet to pan out.

Be fearful when others are greedy and greedy when others are fearful. – Warren Buffett

If I could turn a newbie loose with a brokerage account with only one piece of advice from those who have whipped the market, I would choose the remark above by the Oracle of Omaha. You cannot beat the market by following the market, and if you are not planning to beat the market you should just put your money in a passively managed index fund and be done with it.

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