Wall Street, Football, and The Great Deception


Watching my beloved New England Patriots barely escape with a victory this Sunday, I was both amused and appalled by the constant T.D. Ameritrade advertisements touting their “great selection of ETFs (Exchange Traded Funds).”

Now while I have a very high regard for the intellectual capacity and market savvy of the typical football fan, these ads did beg the question – “Are football fans, between commercials on Sundays, really out there checking the opening of the Nikkei, gathering market intelligence, and placing their buys and sells before the game action returns?”

And of course its corollary, in the annals of bad ideas, where exactly would such a strategy rank? Alongside the Edsel? New Coke?  Sub-prime mortgage lending?

How about with Decca Recording in 1962 turning the Beatles with this famous line: “We don't like their sound, and guitar music is on the way out."

Let’s take a step back. Now there once was a very special time when everyone made money in the stock market. It was the great golden age of mutual funds, of variable annuities, of the brokerage firm.

It was also the golden age of heavy metal, of Larry Bird and Magic Johnson, and the VCR.

It was known as the 1980’s.

Starting in August 1982, the average annual returns on the Dow were as follows:

1982: 19.61%
1983: 20.27%
1984: -3.74%
1985: 27.66%
1986: 25.58%
1987: 2.26%(!)
1988: 11.85%
1989: 26.96%

Wall Street bankers made billions.

But even better, that Joe Six-Pack investor made money too.

He mostly followed the “buy and hold” principles of Warren Buffet, John Templeton, and Peter Lynch and his portfolio just went up and up.

And in the 90’s, the good times rolled, with the Dow skyrocketing from 777 in August 1982 to 11,028 in September 1999.

But as the century turned, the music stopped. And for the last eleven years it hasn’t played again.

BUT when the music stopped, some got to keep on dancing.

In football, that would be what we call a misdirection, a fake, or even a quarterback sneak.

Or to be more blunt, the reason why Ameritrade focuses their ads on buzzwords like ETF selection is because Wall Street CAN’T talk about any recent track record of investment return for the Main Street investor.

Because there isn’t one.

So they advertise ETF selection. As if that is going to work.

Now, there are MANY better ways:

1). NEVER listen to a brokerage firm advertisement ever again. Or if you love football and must watch, then treat them with the same wariness that we once gave used car salesmen before public and competitive pressure forced them to clean up their act.

2). Start Your Own Business. In the history of humanity, no form of investment has ever approached the return on time and money that investing in one’s own business has.

Easy? Heck no. But when compared to the stock market at least it is a fair fight.

3). Invest in a Portfolio of Startup Businesses. Prediction: portfolio startup investing, either in the form of super-angel funds like Right Side Capital, SoftTech, and Floodgate or incubators like Y Combinator and Tech Stars will be the KEY financial innovation of the next decade.

Like starting a business, not for everyone of course, but many of the best thinkers in academia and entrepreneurship have arrived at it independently and are hitching their wagons to it.

And unlike the public markets it remains human-sized enough to follow investment cause and effect.

And that, of course, is much better than following the herd.

Looking for Opportunities Now?

Each year, Growthink reviews hundreds of startup and emerging company opportunities and selects those with the best management teams, market opportunities, and financial prospects.

To learn more about opportunities we are following now, click here.

To your success,

Jay Turo

Jay Turo

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Posted at 9:24 pm

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