An Important Investing Lesson Most Will Ignore


Dear Reader,

Port Phillip Publishing is closed for the holidays from 25 December until 1 January. After a well-deserved break, the team will be back at work on 2 January to deliver you their unique take on the financial markets and global events. 2015 looks set to be one of the most interesting years in Aussie history, and we look forward to bringing you all the news you won’t read anywhere else.

For the holiday period we’ve collected some of the best articles of 2014, taken from all of our free e-letters: Money Morning, The Daily Reckoning, Pursuit of Happiness, and Tech Insider. Some of the articles were chosen because of their insight, others because they were so darned controversial we just had to print them again. For the next week and a half, we hope you enjoy your trip down Memory Lane with these classic ‘best-of’ editions of our free daily newsletters.

Wishing you a Merry Christmas and Happy New Year,

Bernd Struben,
Managing Editor, Port Phillip Publishing


An Important Lesson Most Will Ignore

Kris Sayce, Melbourne, Australia,
Originally Published 4 November in Port Phillip Insider

I’m cheating with today’s Port Phillip Insider.

Tuesday is a public holiday in Melbourne. You know why. It’s Melbourne Cup Day.

Normally I write Port Phillip Insider on the day of publication. That way it ensures you get the most timely, useful and topical advice.

But I wrote this issue on Saturday morning, before heading out with the family on a weekend away to the Victorian Gippsland coast.

But that’s OK. I could have written today’s issue two weeks ago, a month ago, or even last year.

Today’s issue is timeless. It’s valuable advice that every investor needs to know every day of their investing life. It’s the type of advice that you need to be familiar with all the time, even if you already know it.

Now, I know that as soon as I get into the details of today’s Insider, most readers will turn off. They’ll say that they already know what I’m about to explain, that they don’t want someone preaching to them…all they want is a stock tip and for me to shut the heck up about everything else.

That’s fine. I get that. Hopefully I can convince those readers otherwise.

Let me start by saying that most investors are terrible investors.

That’s not all their own fault. But it is partly their own fault.

Most investors are terrible at it because they don’t take the time to learn or think about investing.

They think that all they need to do is save a few thousand dollars, open up a stockbroking account, take some advice from a broker or an investment newsletter and that’s it…they’re on the road to riches.

But that’s not how investing works.

It takes time to become a good investor. You need to read, and read, and read.

Don’t think that just having money and a stockbroking account will guarantee you riches. If that were true then all people who became wealthy would stay wealthy.

Don’t let your fortunes turn to dust

Without the right education and attention to what it takes to grow and preserve wealth, fortunes can soon turn into dust.

Take the American National Football League (NFL). Some of the world’s highest paid sports stars play in the NFL. Sure, the average time in the league for an NFL player is only three years.

But if a player can make it out of their rookie contract into what they call free agency, they can mint a multi-million-dollar deal.

And yet, according to the Bleacher Report, even that doesn’t guarantee long term financial wealth:

When Raghib "Rocket" Ismail signed the richest contract in football history, he thought he was set for life. But as he told Sports Illustrated, Ismail’s then-unheard-of $4.55 million salary disappeared almost as fast as he earned it. "I looked at my bank statement," he said, "and I just went, ‘What the…?’"

It seems impossible for multimillionaire athletes to go broke. However, Sports Illustrated found that after two years of retirement, 78 percent of NFL players are bankrupt or under financial stress. How can that be possible?

There are many contributing factors to the suddenly wealthy becoming suddenly living hand-to-mouth again. Horrific spending habits, bad investments, generosity and child support can put the wealthiest athlete into the poor house.

The most outrageous story of an athlete going broke doesn’t come from the NFL. The NBA’s Antoine Walker earned over $100 million during his career, but was arrested in 2009 for writing bad checks. What happened to his nine-figure fortune?

He spent it all.

It’s not money that makes you wealthy, it’s knowing how to make it and how to keep it that makes you wealthy.

That’s the trouble. No one learns investing at school. And once someone has enough money to invest, they don’t have the patience to learn.

I know this is true because we get emails from people all the time admitting exactly that. Those emails are always the same: ‘I’ve got $5,000 to invest in your tips but I don’t know anything about stocks, what should I do?’

The answer is simple: read, read, and read.

You won’t learn about investing by burying your head in an iPhone app about fruit or zombies. And you won’t learn about investing by spending half your day looking at text messages or instant messaging services, or by taking photos of your breakfast and posting it online.

You learn about investing by reading.

In a way, this is what we try to do at Port Phillip Publishing. If it were all about stock tips, we would just send you an email with the words buy or sell, and a stock symbol.

Any clown can do that — and many do. But not everyone can give you in-depth reasoning for a stock. Not everyone can give you historical context behind a market, a company, or why something is happening in the economy…and how this will affect stock prices.

This is how things really are

Not everyone can peel back the layers of conventional wisdom and say, ‘What the mainstream is telling you isn’t right, this is how things really are.’

Not everyone likes that, and many people don’t want to learn. Most people think they already know it all. When our analysts send detailed 4,000 word investment reports recommending a stock, invariably we’ll get emails telling us to cut to the chase.

When we send promotional videos that put forward our case for why a particular investment advisory is worth your attention — due to the ideas presented by the analyst — again, folks will write in telling us to get to the point.

What they don’t know is that the type of investor who doesn’t want to understand or learn something is the type of investor who will fail…time and again.

If they can’t find the time to read a 4,000 word investment report then they will never be a successful investor.

But someone who listen to a 20 or 40-minute video that takes you through megatrend investing or technology revolutions, will ultimately be a successful investor.

They have weighed up the complete story. They have gained a grasp of the potential. They understand what could happen if things don’t go the way the analyst expects.

By the way, if you haven’t already checked out the great work Sam is doing at Revolutionary Tech Investor you can do so now, by clicking here. And don’t worry, it’s not a video!

It’s the same with the monthly reports. The reader who skips the 4,000-word reasoning for the investment idea and just looks for the ticker, will be the first to complain if things don’t go well.

That’s because they haven’t bothered to understand the risks. They thought that all they needed to do was buy that five-cent stock and it would triple in a month. They didn’t read the risk section that said the stock could halve if it doesn’t sign the right contracts, strike oil, or grow profits less than expected for a range of other reasons.

You have to learn. Investing is no different than any other activity.

You can’t expect to master the back nine at Augusta if you can’t be bothered swinging the clubs on the practice range for hours, days, months, and years in advance.

You can’t just turn up to the MCG with a pair of muddy boots saying that you’re ready to play full forward if you haven’t trained and learned the game for years.

To be a successful investor, you have to learn. Even if the first stock you back goes up 1,000%, just remember, it’s probably luck. So, keep learning. Our analysts try to teach you as much as they can. And I try to fill you in with as much information as possible here in Port Phillip Insider.

I know the message won’t get through to everyone. Barely 250 words into today’s Port Phillip Insider many readers will have closed this email, called me an idiot and moved on to something else — probably checking that mobile phone, in case they’ve missed a text message!

Anyway, for those of you who’ve taken the time to read this far, I hope you’ve gotten something out of this. You can never stop learning about stocks. Remember, the money you invest is your money. It’s up to you to take care of it, use it sensibly, and think about your investments before you pile in on a whim.

The job of our analysts is to provide you with investment ideas. But just because you read about them, doesn’t mean you have to follow the advice.

If you don’t think a particular recommendation is your cup of tea, then give it a miss. Wait for the next idea. With the amount of ideas our analysts generate every month, you can be sure you won’t have to wait long for the one that’s right for you.

For today, lesson over. Drop me a line at with your feedback.

It will never end

What did I tell you last week? I told you that money printing would never end.

The simple reason? That’s what central banks do. They print money. They’ve always printed money. That’s why there has been persistent inflation for the past 60-plus years.

Without the constraints of a gold-backed currency, there is no limit — and I mean, no limit — on the amount of money a central bank can print.

The moment the US Federal Reserve announced the end of money printing last week, the Bank of Japan decided it was its turn to crank up the printing presses.

As the New York Times reports:

Two days after the Federal Reserve ended its program of quantitative easing, the Bank of Japan has doubled down on the strategy with a surprise expansion of its program, in which it will now buy 80 trillion yen ($721 billion) worth of Japanese bonds each year with newly created money. If you’re keeping score, the era of central bank money printing is over (for now) in the United States and Britain, very much alive in Japan, and maybe-possibly-on-the-verge of arriving in the eurozone.

Barely a few weeks after commentators started screaming about the markets crashing, the Dow Jones Industrial Average and S&P 500 indices are back at new record highs (based on Friday’s close. Remember, I’m writing this on Saturday morning).

I don’t know how many more times I can say it — money printing will never end. Make the most of it.

$250 million in savings per day

Finally, another word on the falling oil price and the impact it will have on markets and the consumer. As I predicted, US gasoline prices are falling. As Forbes notes:

For the first time in nearly four years, the national average price of gas is set to drop below $3.00 per gallon, according to American Automobile Association. At that rate, the AAA estimates the lower prices are helping consumers save $250 million per day compared to the days of summer when prices averaged a hefty $3.68 per gallon.

I’ve shared this theme with Tactical Wealth subscribers in recent weeks. (We expect to open the door on new memberships for Tactical Wealth within a few weeks. Stay tuned.)

The short story is that as the oil price falls and stays low, US consumers in particular will feel as though they’ve gotten a pay rise.

This is important because US wages growth has been zero for about 30 years. A higher level of disposable income will make consumers more likely to borrow and spend.

As I told Tactical Wealth readers last week, I’m not saying that’s necessarily a long term positive. What I am saying is that this is how markets move in boom and bust cycles.

Most of the talk among commentators has been about the prospect for the markets to crash. They’re wrong, and events are proving them wrong. For over a year, I’ve said that the market is barely at the beginning of a multi-year boom.

You need to invest in that boom. Read up. Learn. Understand the consequences. Then, and only if you’re comfortable with all the risks, you need to invest in the market that can give you the best returns as the market booms. And that means investing in stocks.

Kris Sayce
Publisher, Port Phillip Publishing

Kris Sayce
Kris Sayce, dubbed the ‘Jeremy Clarkson of Australian finance’, began as a London finance broker specialising in small-cap stock analysis on London’s Alternative Investment Market (AIM). Kris then spent several years at one of Australia's leading wealth management firms. A fully accredited advisor in shares, options, warrants and foreign-exchange investments, Kris was instrumental in helping to establish the Australian version of the Daily Reckoning e-newsletter in 2005. He is currently the Publisher, Investment Director and Editor in Chief of Australia's most outspoken financial news service — Money Morning.

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