Wednesday, August 27, 2014

Never Make an Investment Just Because There is a Beautiful Tree on the Property

That was the ruling reason behind a property investment Wendy McElroy made that she now regrets

At The Daily Bell, McElroy tells the story of a libertarian-related investment she has made, in Galt's Gulch-Chile, that has gone terribly wrong. She must be commended though for coming forward and warning others about the situation. She is doing this after giving a speech at one of the project events. That's integrity.

She writes now:
I continue to admire the founding fathers of GGC and I do nothing but wish them success. I hope to be part of the resolution. But no one, no one should invest their hard-earned money in this venture before a resolution is clear. I don't want to have you on my conscience.
Investing can be very tricky, especially with a central bank that runs an off and on money printing scheme. It means there are no sound investments that can be counted on at all times. You really just need to split your assets up among different classes. Currently at the EPJ Daily Alert, I am advising that between 25% and 30% of paper assets be held in the form of gold and silver investment vehicles and another roughly 50% in cash. This is, of course, in addition to holding physical gold and silver  It is a very tricky and dangerous time.

Getting back to McElroy's investment, it was an investment in a foreign land, which complicates matters. It is simply very difficult to understand all the laws of the country you live in, never mind in a country like Chile. And it is clear she did not do the homework about the property. There is nothing wrong with not doing major homework on a property that doesn't impact a significant part of your investment portfolio. But it is generally dumb to make an investment just because others are in it that appear to be knowledgeable. This appears to be what she did (besides liking the tree).

I occasionally am invited to speak at investment related events or submit articles to publications that have investment affiliations. I almost always turn them down. It would require too much due diligence on my part to understand the nature of the investments being offered. As the years go by, I am getting stricter on this rule.  I think that speaking at such events does create at minimum a subtle endorsement of the investments being offered.

In the libertarian movement and hard money movement, there are all sorts of deals and investment opportunities being offered. Some of them appear quite solid, others I am not sure about, and others seem to have red flags popping up. In other words, even if there is a libertarian name attached to something, be careful and do your homework.

If something sounds complicated or unusual, stay away. I don't care who in the movement is associated with the investment.

The only person I am comfortable endorsing from am investment perspective is Peter Schiff. I have been on his radio show and he has been on RWS, but I do not really know him that well. That said, it appears that he understands the investment world and I don't see any obvious flags around the investments and investment programs he seems to promote.

I don't think it makes sense to put all your assets with him, but certainly 10% to 20% is fine. His timing may be off from time to time, but he is not going to put you in any totally dishonest or poorly structured investments, from what I can tell.

And, when all is said and done, a lot of the crony, establishment brokers and banks will provide good investment options if you know what to look for. They also sell a lot of junk, but make your broker work for you and they can be helpful.

Your chances of losing all your money are generally with small brokers and investment firms or some unregistered version. They are not all bad (There are some very good ones that I know personally), but that's generally where the big wipeouts occur. Stick with the majors, if you want some technical guidance, when you pick gold stocks, ETFs etc. Or head directly to the major discount brokers if you know exactly what you want. But ALWAYS diversify across investments and especially investment firms, if you are keeping all your investments with one firm you are asking for trouble.


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