July 1

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Why Tell Secrets?

We are currently on our annual family reunion vacation trip. This year, we have 24 attendees, including all immediate and extended family members, with thirteen cousins. They are all becoming lifelong friends, and we feel beyond blessed. We are staying in a house in Bradenton that doubles as a wedding venue. As the cousins begin to get married and have kids, we may eventually have to rent out a motel!

The house is located on the Manatee River, providing ample opportunities for fishing. My son, Alex, even caught a three-foot-long gar. The home also features a pool with a waterfall, a ping-pong table, foosball, a big movie screen, and, unbelievably, a pickleball court! On the first day of our trip, we celebrated my daughter's 18th birthday party.

Aunt Molly hired an ice cream truck, and we all enjoyed paddleboarding, jet skiing, kayaking, and pickleballing. After a couple of hours of herding everyone together, we finally managed to get our official annual family picture. Here is is: via drone!


Everybody has an opinion about which way the market is going to turn. One group of people I take issue with are the prognosticators who say, "Microsoft is a great buy right now. Stay away from Visa; the fundamentals don't look too good."

You see this stuff everywhere—literally. In magazines, newspapers, radio, TV, and, of course, all over the internet. It makes normal people like you say, "This is so complicated. I want to invest, but I have no idea what to do."

This is heartbreaking because this perceived complexity is a lie. Investing is not complicated.

Think about this for a second. Bob and Jenny Jones buy and rent houses for a living. They have become extremely adept at finding good opportunities in the area. One day, Jenny finds a steal. It is an older home that needs a lot of TLC, but it is located in a growing neighborhood, and the price point is perfect for maximizing rent at the lowest cost to her.

Jenny shows Bob excitedly. "Let’s jump on this! Before anyone else finds out."

So Bob goes on his Facebook page and posts: "I’ve found a great rental house. It’s located at 450 Main St., which could be a great investment. I’m going to try to buy it before anyone else. You’d be crazy not to buy this thing. I've been doing this forever. I know the market inside and out. This is priced at least $50,000 below market. Easy money."

Does that make sense? Why would Bob run around telling everyone about this kind of opportunity? Wouldn’t he want to keep it a secret? The more people that know about it, the worse the opportunity becomes.

Why am I telling you this story?

Let’s say a "super fancy Wall St. guy" who works for JP Morgan goes on TV and says, "We have a strong buy rating on Coca-Cola. Our research shows that their new initiatives will increase market share worldwide. We believe this is the best buy of the thousands of stocks we monitor."

Why would they tell us this?!

Why would you go around telling everyone about an opportunity? If these guys think it is so great, why doesn't JP Morgan dump their own money into the stock? They have plenty. Why don’t they keep all this as quiet as possible?

You don’t see Warren Buffett at a news conference and say, "I plan to buy 30% of Heinz’s outstanding stock in a month. It is an incredible value."

You might think, "They are pumping up a stock they own. Maybe they buy the stock and then tell everyone else about it to increase the value?"

That is illegal—very, very illegal. Don’t mess with the SEC on this one. We are talking about long jail sentences. With today's technology, tracking these kinds of shenanigans is very easy.

So maybe these guys are just genuinely trying to help you with information so that you can make better decisions.

Yeah. Right.

All of this is a ploy to, you guessed it- make money.

By getting on TV, these guys get the good reputation they need to attract investors, from which they collect fees. It makes no difference whether or not their predictions come true. Nobody remembers. All they remember is that they saw the guy on TV. He is now "legitimate." He ideas now matter.

The secret is that most of these guys pay to appear on these media outlets. A short interview on CNBC can cost $100,000. That is how important media exposure can be for Wall Street guys.

Not only that, the networks themselves need to fill airtime so they can show more commercials and make more revenue. So it turns into a vicious cycle where the Wall Street guys and networks win. You lose.

You lose because it plants the seed that you don’t know what you are doing. It plants the seed that you should adjust your investments every three minutes. You lose because you end up not investing at all because you fear making a mistake.

Don’t let yourself be manipulated. Put your money into a diversified portfolio of stocks and bonds and invest for the long term. When you see one of these fancy guys wearing a tie on TV, say to yourself, "I’m on to you. You’re not going to trick me anymore. The more I watch you, the worse off I will be."

Be Blessed,

Dave

Please forward this to someone who needs to hear this. I'm not trying to find new clients or sell newsletter subscriptions; I'm just trying to help.

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