The Unique Property
Three Ways to Look at Investing
Watch on Youtube: https://youtu.be/A12N27Wfz2k
Investing is a precarious enterprise. How did you know that
investing in Amazon in the late nineties was going to turn every
£1,000 into more than two million? In one sense it is easy, and
I'll suggest the easiest way. But as with all of these questions
you have to start with some sort of ground rules.
Even before we get to some rules, let me state what is hopefully
obvious. This is a ten minute blog, not a 500 page text book. I
scratch the surface. If there are particular points in this
brief encounter that you would like me to explore further do let
Rule one is to arrange your affairs so you have money available
to work for you. But this comes with a caveat. You don't want to
put your way of life at risk. You must never get into a
situation where you could be ruined. You need to make sure the
books balance, then you can lose some money but not lose sleep.
The second thing to do is to make sure you use investment's
number one reliable feature: compounding. This means when you
start your investing career, and the earlier you do that the
more wealth you will acquire, you should look to invest in the
basic industries that will go on and on producing money and
raising their dividends. You should be investing in stocks such
as Coca Cola, Johnson and Johnson, Glaxo, and so on. Then forget
about them, and let them build over the decades.
That's one leg of your plan. In the seventies we had a major
crash, followed by a grinding bout of high inflation. However, I
soon learned that crashes were an investor's dream. Welcome to
the second leg of your investment strategy.
The young investor has to learn that a good wham-bang crash can
set you up. You just have to see it coming. There are signs.
I'll go into that specifically in next week's blog, because we
are possibly approaching such a situation right now, but I want
to analyse how we work out what is really going on.
Let's analyse the pros and cons of a market crash.
The downside of such a situation is that those who have invested
in pension plans are going to take a hefty hit. If you are going
to buy shares then dont invest in a pension scheme. Every month
they have money coming in, and so they have to park it
somewhere. It goes into stocks. Pension funds usually can't just
cash out all their positions because they think a crash is
coming, so the obvious problem is that your pension money goes
down with the crash. Dont get caught out that way. Eschew
Now think like a sensible woman. There is a market crash. Prices
maybe halve. What would the average lady do when walking down
the high street? She looks in the shop windows, fancies a
particular coat or skirt, but doesn't like the price. One day
the skirt is on sale at half price. What does she do? Nips in
sharpish and buys it.
Now let's return to the stock-market. You like Company A and
your searches show it to be good value at £100. The dividend
isn't too bad either at 3%. You think there is likely to be a
market crash in the offing. The average guy will, once the
market has crashed, sell everything. You, however, now see
Company A trading for £50. If it was a good deal at £100, then
it must be a steal at £50. And, of course, the dividend is now a
much more interesting 6%. Clearly, it is time to buy.
The High Street has sales. The stock-market has crashes. They
are both signals that it is time to buy. Most people do the
opposite. They wait until a bull market has worked up a head of
steam and then decide to buy. Remember, the ideal rule is buy
low and sell high. Most personal investors do the opposite.
The third leg of our investment advice is to invest in what
might be called the flavour of the decade. When I started
investing, rather a long time ago, I decided that the in-thing
was to sink funds into real estate. This asset had everything
going for it. Mortgages were at last becoming mainstream, which
meant people could afford to pay a lot more for houses than when
they had to stump up either the whole cost price, or a large
proportion of that. That meant house prices were certain to rise
with the ability to pay, and buying a house was also the
socially in-thing to do. I invested in real estate.
The third leg of your scheme is to follow the trends, as
mentioned at the beginning. In the sixties and early seventies
the trend was clearly housing. In the early eighties it was
housing again, and Japanese Unit Trusts. In the early nineties
it was housing again. The crash brought some amazing buys in the
UK market. I was buying properties for rental that had a P/E
ratio of 1. That's insane value, but the idiot banks wouldn't
lend on purchases. That's when I and my friend Gerry started
Buy-to-Let, and when I wrote my first book on the subject, which
no publisher would touch, so I published it myself in 1993.
From 1991 to 2004 if you chose the right part of the UK
you could make money hand over fist in real estate.
You had another market crash in the year 2000, so the obvious
place to be in 2001 was the stock-market. And what was the
in-thing? Going digital. The whole of the nineties was about the
beginning of the digital age. I was busy with both the internet
and real estate all through the nineties, but once we had the
crash I knew it was time to hit digital stocks with a vengeance.
The crash of 2008 was easy to spot. I exhorted my readers to
pretend they were sitting on the top of the housing price chart
in the USA. "Dont you feel seriously giddy?" I asked. How many
people took any notice is another matter, but I got out of
After the crash I should have bought back in, but I didn't,
which was a bit of a mistake, but I was busy with internet
matters, and it wasn't until 2015 that I realised that money was
going digital, and I started following bitcoin. I advised my
readers to buy when the price reached $282. A couple of years
later I hassled my family to start buying quickly before it was
too late. My alert went out as bitcoin hit $800. And (foolishly
in retrospect) I stopped buying when the price hit $1,900.
So now you are probably all asking "What is the in-thing to buy
Find an expert in AI, Biotec, and AltCoins. They are the three
important businesses these days, and all will deliver. You have
to get the right instruments of course, and you need guidance
for that, but I am loathe to suggest who to follow. All I will
say is that if you email me I will tell you who I follow, but
will say no more than that.
I am also investing in SPAC's. That is, Special Purchase
Acquisition Companies. It's the new way to take a company
public. It's early days so I cant point to much in the way of
success just yet, but I'm confident this new market will produce
Next week I'll talk about how I think you should play the coming
market crash that everyone is warning about.