Hey everyone,
I've posted here once before, but I haven't been making a habit of visiting. Anyway, I need some very serious, very thoughtful advice.
Two problems:
Problem One: How do you deal with doubt in regards to:
1. Gold
2. The direction that this country, this government, this society, and ultimately this global financial system are heading
In other words, how do you cope with the fact that the vast majority of the world thinks that you are crazy?
I know that I can't be the only who, from time to time, asks himself "but what if I'm wrong about all of this!?" Anything that helps set you right, puts you back in place, reaffirms your beliefs, or simply COMFORTS you would be extremely helpful.
My second problem (This is a biggie).
A good friend of mine has a fledling wealth management firm. It is already very successful, and I believe that it is bound for much, much, much greater success in the future. We have been talking recently, and he wants me to come on board.
This is, without a doubt, an amazing opportunity for me, and I have been very excited about joining him. He follows, which I believe is, a very good wealth management/investing philosophy, which is basically focused on avoiding speculation, pursuing high diversification with low risk and good returns. Most of the money is focused in the stock market (very diversified though, global markets, small cap, etc etc.), and some is focused on short term high yield bonds.
Of course, since it is a wealth management firm, they also take care of people's retirement, college, insurance, etc. etc. Basically making sure that all of their finances and investments are taken care of.
I think the business is great, and I would really enjoy it. It would be, in many ways, very fulfiling for me.
There is only one problem...
I have been for some time now a pretty strong proponent of gold. In that sense, I mean that I think it is smart for anyone to possess SOME gold, just in case. In other words, if I am a millionaire, I really don't think putting 2-5% of my assets into physical gold is such a big deal, especially when you look at it as an insurance policy.
2-5% is not really asking for much in my opinion. I am not a huge proponent of survivalism (unless you have a ton of money and you don't mind being lonely). I think people should still invest their money in the market, because nobody really knows when the poo is gonna hit the fan. That being said though, why would you NOT want a little bit of gold that you can take with you in case you need to leave the country and your dollars are truly worthless?
Anyway, I have talked about this a lot with my friend, and he feels that it is fine that I hold the views on gold etc, that I do. HOWEVER, he has told me that I cannot be telling/advising clients about gold, since this is not part of the firm's investment philosophy.
I am very torn. What do you think I should do? Will I make a lot of money? Yes. Will I be (mostly) helping people with their financial safety and future? Yes. Will I feel comfortable knowing that I can't give them all the advice which I believe that they should hear?...I'm not sure...
What would you guys do? Do you have any advice? Please help. I really need someone who thinks similar to me about these issues to help me out.
Thank you
Not really an answer to your questions but this struck me as contradictory:
basically focused on avoiding speculation ... Most of the money is focused in the stock market
Unless solely buy dividend-yielding stock shares, the stock market is a speculative market - it is speculating on the stock share prices of publicly traded companies. And even dividend-yielding stock shares are speculative in that their cost basis fluctuates, as well.
The way to see if something is speculation is whether it follows the simple rule of buying low and selling high. Going to work is not really speculation because you're selling something you don't buy (your labor) at the best price you can get (wages). Shopping at the grocery store is not speculation. Starting a manufacturing business is part speculation and part entrepreneurship. The speculative component regards the bet that the business will be worth more in the future than it is in the present. The entrepreneurial component regards the bet that the manufacturing process will, in fact, sufficiently improve the value of the input goods vis-a-vis the output product so as to leave a profit when all costs have been paid.
Buying commodities, on the other hand, is pure (commodity) speculation, buying common stocks is pure (stock) speculation, and so on. I question the wisdom of getting involved in something like this if you do not have a very facile grasp of the underlying concepts.
Clayton -
This is to address your 1st problem.
I find that it is best to be subtle in regards to what my opinion really is on the important issues. If someone asks me my opinion on politics for instance I wouldn't tell them that I am a market anarchist, I would just say that I find politics boring or something along those lines. It is important in real life to keep your reputation intact and nothing destroys your reputation faster than calling yourself a anarchist, unless you are in the company of other anarchists. You can always point out how Statism screws things up, you just need to avoid actually saying, "Statism is a disease which is killing society!". Internally though I can sympathize, I as I am sure that others have, have found it infuriating seeing people in all seriousness think of my beliefs as insane when I think the same of theirs. In that situation I just like to remind myself that the current education system is horribly flawed, that most people don't understand their own psychological blocks/biases, that people have been propagandized their entire lives, and the fact that people are notoriously irrational. (This serves to convince me that I'm the sane one and that they aren't :)
Clayton,
I'm sorry that I did not specify "speculation" in my post. I wish you would not jump to the conclusion that would lead you to say something like :
"I question the wisdom of getting involved in something like this if you do not have a very facile grasp of the underlying concepts."
Although you might not have meant it to sound as such, it comes off as sounding like a very undermining comment which not only isn't very productive, but does not really answer the question which I posed. Also, it might come off as rude.
But to answer your comment about speculation, many (if not most or all) things in finance are technically speculation, as I'm sure you already know. Anticipating whether the financial system will collapse and whether we need to buy more gold or not is as much speculation as anything else. You are trying to anticipate future events.
Anyhow, I should have specified. Basically the investment approach is to avoid speculating on individual companies etc. Instead the investment is speculating on the market as a whole. I'm simplifying, but for the purpose of finding an example, it would be like...Buying the S&P 500 instead of trying to pick 10 companies which you thought were the best, etc. This is an oversimplification, but you get my point. It's more of an effort to avoid really high risk, and also to damplen volatility.
Anyway, I still hope to get some advice from you all, since as an Anarcho-Capitalist I value many of your opinions.
P.S. Clayton, sorry if that part I wrote in response to you came off as passive aggressive. I've enjoyed reading a lot of your posts, and you have a lot of good stuff to say. It's just that right then you kinda came off as a dick. No offense.
-T. Cross
But to answer your comment about speculation, many (if not most or all) things in finance are technically speculation,
I gave examples of things that are not speculation, per se. Of course, this is not "speculation" in the sense of "action involving any sort of uncertainty regarding eventual outcomes" which characterizes all action.
There is a significant difference between buying something with the aim of selling it at a higher price later without performing improvements upon it (speculation) and other forms of business (production). Nothing wrong with the former, of course, but you just got to be honest about what it is.
as I'm sure you already know. Anticipating whether the financial system will collapse and whether we need to buy more gold or not is as much speculation as anything else. You are trying to anticipate future events.
Gold buying is not simply speculation because gold still has a monetary role, however indirect and subtle. So, buying gold is more like simple cash savings used to be before the Federal Reserve.
Yeah, that's the zeitgeist with these SPDRs and index funds. Most new businesses fail within 3 years. Many of the businesses being traded on the market today will simply go bankrupt. The idea of "buying the market" is ridiculous. While it does provide protection from inflation, there are other, safer ways to shelter your money from inflation without having to throw it away in the world's biggest casino, the NYSE.
you kinda came off as a dick. No offense.
None taken. I'd rather you feel insulted than go broke. I'll repeat my reservations about entering the stock market. I seriously recommend you watch the movie Wall Street with Michael Douglas and Charlie Sheen. My favorite quote from the movie, "Ever wonder why fund managers can't beat the S&P 500? 'Cause they're sheep, and sheep get slaughtered." Hate him all you want, but being Gordon Gekko is the only way to actually make money on Wall Street. If you're not planning to be Gordon Gekko or (better yet) apprentice with someone who is, I recommend you find a safer way to make money.
I would suggest taking the job and following the firm's philosophy.
And why would you suggest this?
"None taken. I'd rather you feel insulted than go broke."
Not insulted. Just disappointed that you didn't really give me an answer to my initial question. This is a choice that will be life changing for me, and I want to hear from you. All of the details of wealth management can be debated later.
"I seriously recommend you watch the movie Wall Street with Michael Douglas and Charlie Sheen. My favorite quote from the movie, "Ever wonder why fund managers can't beat the S&P 500? 'Cause they're sheep, and sheep get slaughtered." Hate him all you want, but being Gordon Gekko is the only way to actually make money on Wall Street. If you're not planning to be Gordon Gekko or (better yet) apprentice with someone who is, I recommend you find a safer way to make money."
This is wealth management I am talking about, not fund management. As much as I find that movie entertaining, it fails to serve as an accurate representation of what a wealth manager does. A wealth manager is not a hedge fund manager, nor is he someone who is trying to "beat the market" or "beat the S&P 500". A wealth manager is someone who makes sure that everything in a person's financial house is in order. That means that a wealth manager (or at least the type that I would be) looks at all of a person's net assets and then listens to that individual to figure out what his or her needs and wants are.
That means that as a wealth manager, we make sure that person such and such has the right standard of living for his or her budget and goals, has a plan for their kid's college, has a plan for retirement, has good insurance, has a will written up (if necessary), etc, etc. The investments are part of this process, but do not consume it. This firm's outlook on investment is more of a wealth preservation/protection/slow growth plan than some sort of fund managing/beat the market/find the next best thing approach.
Anyway Clayton, I would really like to know what you actually THINK about whether I should do this or not, based upon my OP. I value your opinon.
Also, you don't have to be beat the market to be a successful fund manager. They get most of their money from all of the fees related to the funds anyway, regardless of whether the fund does well or not for a particular year.
@TCross: It is my view that the modern idea of hiring someone to "manage your wealth for you" is mistaken at root. I'm not saying it's wrong to be a wealth manager - if someone is willing to pay you to do that and that's what you want to do, go right on ahead. My point is more theoretical - wealth management is what it is to act at all! I recommend you read at least the first 150 pages of Mises's Human Action, it's very accessible, quick and well worth your time. Decision-making is not something that can be "outsourced". There is one simple question that makes this obvious: "Do I stand to lose as much as my clients if I make a mistake in the advice that I give them?"
I've given you my reservations about the stock market and you feel confident that you're not stepping into it naively, which is good. Given that you have this opportunity and you're interested in taking it, perhaps you might also think about how it can serve as a stepping-stone to a more long-term situation where you're operating your own wealth-management/financial advisor business (think Schiff/Euro-Pacific). Specifically, there is clearly a deficiency of "no-nonsense" wealth managers who have the courage to tell their clients "You have to manage your own wealth and here's why! I'm a wealth-manager and I'm telling you this!"
I can envision a strong market demand for financial advisors who help their clients see through the layers and layers of bullshit out there about the true nature of money, government finance and regulation, stocks and bonds, the banks, the financial industry, etc. If you can act as a consultant and teach people how to manage their own money as if they were a hedge fund manager, I think you could potentially earn a lot of money. As far as I can tell, the market is wide open. How many Peter Schiffs are there?
And on the Wall Street movie, I'm glad you've watched it. The point is that Gekko is a man who isn't afraid to get his hands dirty and prudently breaks the rules wherever it suits his purposes. The sterile, civilized picture of Wall Street painted by your local financial advisor couldn't be further from reality. The only right way to think about your wealth is the way Gekko thinks about it - as a mafia empire. Even if you're not interested in expanding into others' turf, you still have to protect your own turf, whether you like it or not. Teaching others to think this way about their wealth would be invaluable to them - the financial mafia Dons are soaking the entire civilized world to the tune of trillions of dollars per year. If you can help your clients escape the global financial pillaging, I'm quite sure they would be willing to pay you for it.
I'd read and watch everything I can get my hands on by Doug Casey, Robert Wenzel, Marc Faber, Peter Schiff, Jim Rogers, James Grant, Hugh Hendry and many others. Faber's my favorite - I could envision him as a financial advisor to Michael Corleone or Tony Soprano. I want to be Marc Faber when I grow up.
T. Cross: [...] has a plan for their kid's college, has a plan for retirement, has good insurance [...]
[...] has a plan for their kid's college, has a plan for retirement, has good insurance [...]
Is all that you would do is make sure that there is plan, or would you also devise the plan? I ask this because how would you decide where to put that money that is being set aside for the child's college education and for retirement? Would you do what's "safe" and put the money into saving bonds; if so, then how is this any different that being a fund manager who is also figuring out what is saf and what isn't?
The investments are part of this process, but do not consume it. This firm's outlook on investment is more of a wealth preservation/protection/slow growth plan than some sort of fund managing/beat the market/find the next best thing approach.
I suppose that this would be your reponse to one of my questions above; however, as Clayton pointed out, "wealth management is what it is to act at all!"
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
@Clayton:
There is one simple question that makes this obvious: "Do I stand to lose as much as my clients if I make a mistake in the advice that I give them?"
Well, ideally a wealth manager who actually had the freedom to choose what to tell his clients would also be investing in the same stuff that he is advising them to invest in. I am speaking in ideals of course, since this is not the situation which I may have to confront.
"perhaps you might also think about how it can serve as a stepping-stone to a more long-term situation where you're operating your own wealth-management/financial advisor business (think Schiff/Euro-Pacific). Specifically, there is clearly a deficiency of "no-nonsense" wealth managers who have the courage to tell their clients "You have to manage your own wealth and here's why! I'm a wealth-manager and I'm telling you this!""
Am I reading you correctly that you think I should go ahead and take the opportunity in order to gain experience, knowledge, reputation, etc., so that then I can go out on my own and acually pursue what I believe to be a better path?
Am I reading you correctly that you think I should go ahead and take the opportunity in order to gain experience, knowledge, reputation, etc., so that then I can go out on my own and acually pursue what I believe to be a better path
I'm not in a position to tell you that one way or the other. It seems to me that before you'll be in a position to put out your own shingle and fly solo, you'll need to have enough experience in the business to at least be able to offer detailed, specific criticisms of it. I'm mostly waving my hands and criticizing the system on a conceptual level but a money-paying client would never be satisfied with that. They want specifics and in order to have specifics, I think you'll have to work for someone else for a while. If you think that financial advising ala Peter Schiff is something you eventually want to do, then this could be a stepping-stone to that. But, personally, I'd rather jump off a skyscraper without a parachute than go into a workaday career as a financial advisor/wealth manager for its own sake. The work looks to me like a combination of the worst aspects of used car sales and accounting.
@Clayton
"But, personally, I'd rather jump off a skyscraper without a parachute than go into a workaday career as a financial advisor/wealth manager for its own sake."
Why? (In more detail)
"The work looks to me like a combination of the worst aspects of used car sales and accounting."
How? + I'm sorry that you feel that way.
Also, I just got off the phone with my friend, who happened to have called me, and I told him about my reservations. He said that he would be willing to sit down with me and go into it in depth, and I told him to give me two weeks to present the best case I possibly can as to why people should at least have some amount of gold within their portfolio. I think that I might just start a new thread in order to get as much advice/resources/guidance/literature as possible that I can cram into a presentation within 2 weeks.
Ancap89:He said that he would be willing to sit down with me and go into it in depth, and I told him to give me two weeks to present the best case I possibly can as to why people should at least have some amount of gold within their portfolio.
For the record, I find it incredibly odd that you would have to do this. It's virtually standard proceedure that everyone should have at least 2%-5% (all the way up to 10%, depending on the advisor) of precious metal in their portfolio "as a hedge against inflation", as they usually put it. I've never heard of anyone who argued against this, let alone needed a presentation to be sold on the idea.
Extremely odd indeed.