Investing Outside the Box
As investors contemplate how to slice their pie in 2020, lines have never been more blurred between investments and speculations. Is fine wine investing and Rolex collecting like throwing dollar bills onto a bonfire? Letās settle this once and for all!
Most die-hard investors avoid getting their fingers burnt by following a simple rule of thumb: if it doesnāt produce its own cash flow, itās not an investment! These wise words leave wine hoarders, gold bugs, and crypto crazies in the cold, favoring savers with monthly interest payments, and the buyers of bonds, buildings, and businesses. However, this is an old adage. What if it’s not timeless?
Given risks in the market today, some market players have carried the torch even further by insisting we know the size of those cash flow streams, their schedule, and their risks. If those arenāt obvious from the start, alarm bells start ringing. The problem with this is how severely it shrinks the investment universe. Microsoft and Disney remain in the picture, but stocks like Tesla and Uber don’t cut it, despite offering the most growth! Perhaps, we can learn something from art and wine dealers?
Vintage watch collections and the Salvator Mundi by Da Vinci, a $450 million splash of paint, command higher prices as they become scarcer. However, these are not investments. Itās easy to confuse watches for the business of watches, as at the end of the day, businesspeople remain the key ingredient to wring out āvalueā from those idle objects. We need people to unlock a good old fashioned corporate cash flow from them!
Ultimately then, no universal parameters apply. Different investors enjoy different fortune-telling talents, so some have the edge in semiconductor stocks while others rule the roost in retail. Whatās an investment to you? How far outside the box are you willing to stray in the name of diversification?
