Co/nversations Podcast
Join hosts Sam DiFiore and Aaron Staley for a conversation with Tim Eriksen, founder and President of Eriksen Capital Management LLC. In this episode Tim shares knowledge, lessons and takeaways he has learned throughout his investment career.
This month Tim also presented his current best investment idea on Lunch at the Club, our monthly investor presentation. Click here to sign up for a Co/Investor Club Premium Membership to watch Tim’s presentation and attend future Lunch at the Club’s.
Anxious
“The funny thing is that anxiety motivates people to take a risk. You’d think that anxiety would make them risk averse—but it doesn’t. They’re more risk averse when they have more to protect.” —Peter Bernstein
Down we go again. The S&P 500 fell slightly over 2% on the week the Nasdaq fell about 2.7%. For the month, the S&P 500 is down over 5.5%, and the Nasdaq is down over 6.5%. While still off the lows reached earlier this year, the S&P 500 is now down over 19% on the year, and the Nasdaq is again back down over 30% year-to-date.
In the book Bull!, Maggie Mahar describes some of the fear that was used to entice the baby boom generation to save and invest more in the 1990s. They were told Social Security would run out, inflation would increase, and, as a result, they wouldn’t have enough money. So they needed to earn higher returns and take more risk by putting more money in the stock market. As Mahar wrote:
In the early nineties, Wall Street bombarded the boomers with seemingly authoritative projections. The problem was that the charts and tables made assumptions about inflation, future stock market returns, and future bond market returns that were, at best, guesses—at worst predictions designed to stampede investors into taking more and more risk.
Without question, Americans needed to save more, but very few could afford to increase their savings tenfold. In fact, the majority lacked the discretionary income needed to triple their savings. Those who did have the money lacked the desire. Ideally, the invention of tax-deferred retirement plans like the 401(k) would have spurred investors to tuck more money away, but it did not have that effect. In the nineties, Americans spent more and saved less. Their only hope, it seemed to many, was to chase ever higher returns.
Rinse and repeat. We’ve seen the same headlines with the younger generations during the last few years. They’ve been told it’ll be harder for them to retire comfortably. They’ve been told it's harder to get ahead and pay off expensive student loan debt. They’ve been told they can’t rely on Social Security. They’ve been told they need to earn higher returns, which they’ve tried to do by speculating on growth stocks and crypto and other things they don’t understand but that they’ve heard might go up a lot.
When economic and market booms end, fraud tends to get exposed—which has been happening recently. And, also, those that have dabbled in the world of unintelligent speculation tend to re-learn the lessons of thrift, discipline, and long-term planning. How deep and widespread these lessons will be felt is still a story left untold. But it’s a story that seems far from over.
“There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.” —John Kenneth Galbraith
“The rule will often be here reiterated: financial genius is before the fall.” —John Kenneth Galbraith
Watch List Update
Evergreen Gaming Corporation (OTC:EVGEF) was added to our watch list on August 31st, 2022 at $0.51 per share. At the time, we believed that the shares were undervalued and offered a good opportunity for a larger player in the space to acquire the company. After a few months of different entities bidding to purchase Evergreen, shareholders have agreed to a purchase price of $0.65 per share in cash by Maverick Gaming LLC.
We update our Watch List monthly on the Premium Membership website. Sign up here for $100/year to have access to our watch list!
Tweets of the Week
In Case You Missed it…
Capital Allocation: Results, Analysis, and Assessment
The World According to Boyar Podcast: Tom Gayner, Co-CEO of Markel
Going Deep on Cloudflare and Datadog
The Knowledge Project Podcast: #154 Emily Balcetis: Setting and Achieving Goals
3 Things (with Ric Elias) Podcast: Competitive Character (Brad Stevens)
If you have not already upgraded your membership…
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