The loneliness of a long-term investor

Wednesday, 3 November 2021 — Gold Coast, Australia

[7 min read]

Dear Reader,

‘Every game in life is actually played on a 6-inch ground — the space between your two ears.’

Martina Navratilova

Our lives are the sum total of the game we play between our ears. And that game never stops.

Should I read this? Do I watch that? Will I have another drink? Do I back that hot tip? If so, with how much money?

Life is a continual process of inclusion and exclusion — some decisions being more important than others — that collectively influence our health, wealth, relationships, and overall well-being.

Our life experiences — good and bad — influence how we play the game of life. This continual process of learning is life’s way of helping us fine-tune our skills…so we can experience full, rich, and rewarding lives.

And what’s fulfilling to you might not suit others…but who cares? It’s your life you’re living, not theirs.

My approach to investing is not everyone’s cup of tea. That’s understandable. We all come to this game with different experiences.

The 1 October 2020 issue of The Gowdie Advisory provided members with an insight into how a lifelong passion has influenced my investment approach.

Here’s an edited extract:

‘In 1959, Alan Sillitoe wrote The Loneliness of the Long Distance Runner.

‘Sillitoe’s short story — about a juvenile offender who is afforded privileges in a youth detention centre due to his athletic prowess — was adapted to the big screen in 1962.

‘The byline in the film’s poster is:

“You can play it by the rules…or you can play it by ear — what counts is that you play it right for you.”

‘As someone who competed in their first cross-country at the age of 10, and has had a passion for distance running and endurance events ever since, the movie title resonates with me.

‘It can get lonely. However, it’s the solitude you crave. Time alone with your thoughts. Somewhere along the way, you unknowingly cross over from the conscious into the subconscious. Problems are solved. Ideas are created. Goals are given life.

‘Running plays an integral role in my investing approach. When you read so much material and listen to videos and podcasts, you need time away to think and process the information. What makes sense? Perhaps that needs a more in-depth look? Is that a valid option? Is it just another con dressed up in fancier clothes? Maybe there’s an opportunity there?

‘Put these questions into the conscious and invariably, the subconscious goes to work. Lessons from the past are recalled. A previous article or interview is remembered. The face of someone who might be able to assist comes to mind.

‘For me, the loneliness of the long-distance runner is entwined with the loneliness of being a passive long-term investor.

‘Every long-term investor must live by the creed of…“What counts is that you play it right for you.”

‘Wealth creation is an ultra-marathon. Not a sprint.

‘Too many people want to make money quickly. A minority succeeds. The majority fail. And, of those that do succeed, is the wealth retained for the long term or is the subconscious wired with an “easy come, easy go” attitude?

‘I’m not against making money quickly. But I recognise it’s more the exception than the rule. And when a windfall does come along, accept it as a win against the odds. Don’t think you’re smarter than the rest. Appreciate the good fortune you’ve been entrusted with. If you don’t, that fortune will pass through your hands for someone else to appreciate and/or enjoy.

‘The first rule in “playing it right for you”, is do not compare yourself with others.

‘Run your own race.
‘The failure to stick to a game plan is why investors invariably rush into the last “hot” investment…tech stocks, cryptos, property, etc.

‘As the pack goes past them, they get a rush of blood to the head and feel compelled to “sprint” to catch up. The sprint cannot last. The whole thing runs out of puff and collapses.

‘The steady-as-she-goes runner has the mental discipline to stick to the game plan. This was a lesson I learnt the hard way when I raced competitively in my youth. Get caught up in the moment. The roar of the crowd. The exhilaration of bursting clear of the pack. Then died in the back straight and had nothing in the tank for the finish.

‘Controlling emotions is crucial to running the best race you can.

‘What running has taught me is that you play the wealth creation and preservation game that’s right for you.

‘Each week I receive many emails — from readers of The Rum Rebellion, The Gowdie Letter, and members of The Gowdie Advisory.

‘My investing “game plan” resonates with some but not all readers. That’s fine.

‘The race I’m running is based on my ability, experience, stage of life, and acquired capital base.

‘The strategy is purposefully simple…it makes maintaining the discipline a whole lot easier.
‘The core tenets are…

‘My focus is on a narrow range of big picture assets…stock indices, REIT (real estate investment trusts), precious metals, and major currencies.

‘When the time is right, there will be more than enough returns on offer from these investment classes to achieve our goal of “winning by not losing”.

‘Which is why when people ask me about other investments…cryptos, individual property markets, option trading, etc…I have very little to offer. I do not spend time looking at them.
‘For me, they are a distraction I have neither the time or inclination for. These are not part of what counts in the way I want to play the long-term, wealth-creation game.

‘Knowing what to exclude is as important as what you include.

‘Accepting the loneliness that comes from a disciplined, patient, boring, and for a large part of the time, contrarian strategy can be a real challenge for people.

‘Which is why they fall prey to all sorts of promises for fast-tracked returns…promises that invariably propel them back towards the start rather than closer to the finish.

‘With markets going up and interest rates going down, it’s tempting to abandon a disciplined approach and look for that inside run. But I’ve looked and there isn’t one…or at least one that has an acceptable risk for the potential reward on offer.

‘From emails I received, I feel your loneliness and the concerns that come from this period of investing solitude.

‘But we are in good shape. Capital is intact. We are not wasting energy worrying about when markets might suddenly collapse. Gradually, we’ll make our way through the pack and be in a position to use our reserves to capitalise on the weakness of fatiguing markets.

‘Run your own race at your own pace and make sure that when you look back you can say…what counts is that you played it right for you.’

Regards,

Vern Gowdie,
Editor, The Rum Rebellion

Vern is also the Editor of The Gowdie Letter and The Gowdie Advisory — investment services designed to help everyday Australians avoid the financial pitfalls of a volatile economy and make informed decisions to grow their wealth for generations to come.

‘Don’t tax you

‘Don’t tax me

‘Tax that fellow

‘Behind the tree’

Former United States Senator Russell B Long

Tax it…borrow it…squander it…

…print up some money to cover it…

…and then inflation comes along and spoils the party.

That’s how we roll!

Over the last 20 years, four of the worst presidents in US history added some US$23 trillion to our debt.

Now, we need to keep up with the debt payments…which means we need to keep interest rates low…

…which means we need to print money to buy bonds (to hold rates low)…and run deficits (to create more bonds)…so that we can continue to fund our boondoggles.

The Biden Administration is doing its part…busily trying to keep the jig up by coming out with a huge spending bill — originally US$3.5 trillion (with an ultimate US$5.5 trillion price tag over 10 years)…

Then, under pressure from its own party, the Biden group decided it didn’t really need to spend US$2 trillion of that…so the proposal was shaved down to US$1.5 trillion (likely to be far more, as the sun never sets on ‘sunset’ provisions).

Tax the billionaires

Everybody is now alert to the danger of rising inflation. So the politicians must pretend to be concerned about both sides of the ledger — both income and outgo.

It was the income side they had in mind when they came up with the ‘billionaire tax’. It allowed them to claim that they would raise trillions in new income without actually taxing ‘you or me’…but by socking it to the ‘fellow behind the tree’.

In this case, the fellows behind the tree are very few. You need to make $100 million a year, for three years in a row, in order to join this club. Not many people do that.

So the political costs are negligible…while the political gains (the favourable reviews from jackass reporters…and the hoorahs from the mob) are substantial.

Everybody knows the rich dodge taxes. This would be a way to make them pay ‘their fair share’.

Tax future gains

Trouble is, they dodge taxes by doing exactly what Congress and the IRS have told them to do.

As investors and card players know from bitter experience, you should never count your winnings until you get up from the table. And the tax law, too, says you pay ‘capital gains’ only when you actually have a capital gain.

The proposal from the Democrat team, however, would insist that billionaires pay tax on the gains they haven’t even made yet. In other words, if the stock is up, the rich guy would have to pay a tax on the gain…even while he was still in the game.

Of course, this would mean that he would have to sell his appreciated shares to pay the tax…or strip the capital out of the business.

The result would be a setback, not just for the super rich, but also the not so rich, including thousands of Reddit gamblers, who would see their own shares go down when the big guys sold.

It would also mean that the most successful entrepreneurs wouldn’t want to ‘go public’ at all…since that would expose them to the tax on unrealised capital gains.

Tax overboard

These thoughts must have crossed the minds of the fantasists on the Biden team. They thought they had a big hit…an Emmy award winner, for sure.

Then reality came their way. And the reality is this: It is much easier to print money than to tax.

Democrats have ‘big guy’ donors, too. And stock market portfolios.

As we’ve previously reported, House Speaker Nancy Pelosi has gained some US$74 million from the feds’ market manipulations since 2004. Senate Majority Leader Mitch McConnell didn’t do too badly, either — with some US$31 million in gains.

Nobody wants to strangle that goose. Not as long as it keeps laying.

So, while yammering on about the ‘pay fors’ and ‘deficit neutral’ provisions, the Democrats quietly threw their own tax proposals over the side.

The billionaire’s tax, for example, was the first to hit the water. It ‘may have died before the ink was dry on its 107-page text,’ says The New York Times.

Pot of gold

But that wasn’t the only tax proposal the Democrats scuttled.

The Washington Post explained it:

‘They’ve not only abandoned many of the new taxes on the rich and on corporations that they once promoted, they can’t even bring themselves to “roll back the Trump tax cuts, which every single Democratic lawmaker opposed in 2017.”

‘So why have Democrats gotten cold feet? The problem is partly that the Democratic voter base has shifted toward the college-educated, professional class, therefore becoming higher-earning. It’s uncomfortable for Democrats to endorse taxes on their own constituents, particularly when those constituents don’t realize that they, too, are technically rich.’

And here’s The Economist with the last word:

‘Joe Biden promised to pay for his big social-spending proposals by raising taxes on the rich and nobody else. Now Democrats are rushing to find a big pot of money without raising headline rates of tax at all. They are making a mess of it.’

Where will they find this ‘pot of money’? At the Federal Reserve, of course.

As we’ve been saying…and saying…and saying…

The two parties — Democrats and Republicans — are in cahoots. They both represent the elite. Not the masses.

They spend. They borrow. They print.

The only tax they will raise is the inflation tax…which will fall most heavily on the public, not on themselves.

Regards,

Bill Bonner,
For The Rum Rebellion