The madness started yesterday as the first to what will be endless articles about which industries and stocks will do best under Trump or Hillary was published. It is a stupid game that is played at your own peril. The President of the US can try to steer policy but his/her hands are tied in many ways. It is also a rare president whose term ends up looking anything like they promised on the campaign trail. If you believed that stuff you would have sold out of stocks entirely when Barrack Obama was elected in 2008 and shorted gun manufacturers as well. You would have lost a fortune. Make your investment decisions based on the company’s condition prospects and, above all, valuation. Unfortunately one of these two will be President for at least the next four years but that fact should not drive your investment decisions.

I see this stuff all the time. While I realize its click bait of the highest order it terrifies me that some folks take it seriously. Stocks to buy for the Super Bowl. For the Daytona 500. Because one party or another won an election. Stocks to buy for summer. Stocks to buy for winter. Stocks to buy because Winter is coming and Game of Thrones is a huge hit. Stocks to buy because of Star Wars. Stocks to buy because McDonalds has breakfast all day. I shudder to think that some less informed investor is out there investing in dire wolf kennel companies or light saber manufacturers based on these content filler articles. In our rush to fill space on the interwebs I think we often do a terrible disservice to investors.

Nassim Taleb gave a commencement speech recently at the American University of Beirut. He told the class that “ I hesitate to give advice because every major single piece of advice I was given turned out to be wrong and I am glad I didn’t follow them.” However he also gave a suggestion that I think is among the best I have ever heard. He told the newly minted college graduates “If something is nonsense, you say it and say it loud. You will be harmed a little but will be antifragile ,in the long run people who need to trust you will trust you.” When you see BS, call BS. You will undoubtedly end up richer and wiser for doing so. Wall Street and the media will toss a lot of crap at you over the years and you need to be smart enough to see it for what it really is and call foul.

One of the biggest, most foul piles of steaming whatever I see in investing is the idea that you need liquidity. If the thought of liquidity enters your mind when making a long term investment decision that money belongs in the bank not the equity markets. Warren Buffett once said that you should be prepared for markets to be closed five years after you buy a stock and he is dead on right. I suppose if you are a speculator you might need liquidity but look in the mirror and at the walls of your office for a hot second. If you do not see at least one advanced math degree and perhaps as a second one in psychology or philosophy hanging on the wall; and the reflection looking back at you in the mirror does not have the nerve of gunslinger and the heart of a stone cold killer you probably won’t make it as a speculator.

Think about this for a second. The man widely acknowledged as one of the greatest speculators ever was not a success as a speculator. Jesse Livermore lost several fortunes in his lifetime and ultimately he killed himself at age 63. His final note said “Things have been bad with me. I am tired of fighting. Can’t carry on any longer. This is the only way out. I am unworthy of your love. I am a failure.” Doesn’t really sound like much of a success to me.

Most of us do not have the exceptionally rare combination if skills need to be a great speculator. That is important because there are no such thing as mediocre or average speculators. You are either great or you lose your money. There not much of a middle ground. Since we have lives, families, outside interest and other obstacles to trading success we do not need short term liquidity in our investments.

Mark Yusco of Morgan Hill Capital recently discussed liquidity on Real Vision Televison. He said most of us would be better off splitting our capital three ways. First you need a pile of cash to fund your lifestyle. He suggest two years spending needs in cash. Then there is a small pile of “gonna get rich” venture capital for things like long shot long term stock picks, venture investing, real estate projects and the like that have the potential for huge payoffs. The bulk of the money is going into the “gonna stay rich” bucket and there he thinks people should think more like endowments with less of a concern on daily liquidity and more on long term total return potential. While I am not quite sure he an di are in complete agreement on building the buckets it is true that endowments take a very long view of their investments. There is a reason private equity firms are always among the highest performing investment. They buy stuff cheap and own it for a very long time.

It’s not just private equity and value types that favor illiquid investments either. Think of venture capital investors. According to AngelBlog.Com “A minimum 'respectable' return for a VC fund is 20% per year. This is set by the expectations of the investors in VC funds, the relative risk levels compared to other investment classes and the performance achieved by other venture capital fund managers.” They are not worried about getting out of their positions today, tomorrow , nest week or even next year. They are thinking about what the company might be worth 5, 10 years of more down the road. Liquidity is the least of their concerns.

I am constantly told that investors are reluctant to invest in community banks because they are not liquid. That’s very true. They can be hard to buy and it has taken me weeks and even months to buy a position at times. They don’t trade often and looking at your portfolio on a regular basis can make watch pint dry an exciting fun filled event. However looking at your account balance at the end of the year can be pretty exciting as has been the first two full years for the Banking on Profits portfolio. Following Mr. Talebs advice your obsession with liquidity in your investment is nonsense. If you need liquidity keep it in the bank. If you are investing it quit worrying about short term concerns.

Now I am off to deal with larger matters. The Orioles have a tough matchup with Toronto tonight, I need to finish the James Rollins Tucker Wayne novel War Haw that I am reading so I can get to my good friend Tim Collins first novel 3 to 1 Quad City that was just released. Next week is recreational reading book paradise with a new Easy Rawlins novel, the latest Grant Blackwood effort to carry on Tom Clancy’s Jack Ryan series, a new Brad Thor, and several other titles I am looking forward to reading.

Cheers,

Tim

Ps- When it comes to the need for liquidity and other stock market nonsense just

https://www.youtube.com/watch?v=kOO8Gzr__zc&index=61&list=PL8F6B0753B2CCA128