Ignoring the Wolf

Stock Market Video

Ignoring the Wolf

This Week’s Fortune Cookie

In Case You Missed It

In this week’s Stock Market, Mike Cintolo talks about the market’s intermediate-term downtrend, which is why he’s cut back on new buying and is holding a good chunk of cash. However, he’s excited about building his watch list for one big reason—many growth stocks have reacted well to earnings in recent days, which means that once this correction ends, there will be plenty of exciting names to buy. Click below to watch the video!

Ignoring the Wolf

I haven’t done a real rant for a while, and I feel one coming on.

This one comes to you courtesy of a quotation from Jordan Belfort that’s been making the rounds. (You remember Jordan Belfort, right? He’s the monster jerk-face about whom the movie The Wolf of Wall Street was made.)

Here’s the quotation: “The only thing standing between you and your goal is the bulls**t story you keep telling yourself as to why you can’t achieve it.”

Now I can see why such a sentiment would appeal to lots of people. I know that the financial world is awash in people whose ambition and competitiveness need constant feeding with this kind of positive-thinking fertilizer. In fact, most self-help books of any stripe are apt to cross the centerline of reason and start pumping out meaningless self-affirmations.

Jordan Belfort got famous (and got a book contract) because he made a lot of money and lived the life of a debauched teenager for several years. And his conviction for securities fraud and money laundering and the 22 months he spent in federal prison apparently did nothing to rob him of his biggest asset, his fame.

He was also ordered to pay back $110 million (of the $200 million he swindled) to the 1,513 clients whose money he stole. That hasn’t been going so well, apparently, as the only money returned to victims has come from Belfort’s auctioned properties, and amounts to less than 10% of the judgment.

My real beef with Jordan Belfort is that he has never really come to grips with the idea that he had any responsibility at all to the people to whom he sold his worthless stocks. And the selling was actually quite easy. He just hired a roomful of young, ambitious salesmen, gave them a cold-calling script and set them loose. When their efforts jacked up the prices of the worthless penny stocks they were pushing, Belfort would unload his huge holdings, collapsing the price and leaving his “clients” with drawers full of worthless paper. It’s classic pump-and-dump fraud.

Almost by definition, the people who were most injured by Belfort’s pump-and-dump schemes were the most vulnerable. Old people, unsophisticated people, desperate people, greedy people, those were the ones who bought.

And when Belfort talks about the “bulls**t story” that’s keeping you from your goal, I keep hearing the stories that taught me that it’s wrong to lie and wrong to steal from people. But then, if it’s only the law that’s keeping you from getting where you want to go, you’d probably rather listen to Jordan Belfort than listen to me.

Beyond mere ethics, morals and laws, however, I have an even bigger gripe about Jordan Belfort, who is now reportedly making his living as a motivational speaker.

(And no, I don’t mean the obvious fact that his idea of what you should do if you’re rolling in money is to buy unlimited quantities of hookers and drugs.)

Here it is. Just about every book written by a successful person about how he (or she) broke away from the pack and grabbed the gold ring is a story of single-minded ambition, hard work and determination. And the implication is that anyone who’s focused enough and willing to pay the price can get the same results.

And that’s bulls**t.

For every person who makes it to the very top of the heap, there are countless others—many of them just as smart, just as ambitious, just as hard-working—who either didn’t quite make it or never even got close. Maybe they ran into someone who’s just better at it than they are. Maybe they don’t have the capital or the taste or the supporting cast. And maybe they just don’t have any luck.

And that’s the case with corporate executives, inventors, rock bands, quarterbacks, tech startups, new restaurants and every other endeavor you can imagine. (If you read the short history of Tesla Motors, for example, you might wonder where the company might be if Elon Musk hadn’t had a vault full of his own money to keep things moving along during the dark days.)

But the only one whose book you’re going to read is the one who actually triumphs. To them, their ascent seems totally logical and inevitable. They believe that the only thing that keeps everyone from following in their footsteps is a lack of discipline, effort and will. After all, they got the job done.

My point is that you have to take every success story with a grain of salt, no matter what field of endeavor it’s about.

Jordan Belfort is peddling a particular kind of snake oil that consists mainly of telling people who are hungry for success that he knows how they can get it. It sounds to me like he’s still in the pump-and-dump business. And what he’s selling is still worthless.

Here’s this week’s Fortune Cookie. Remember, you can always view all previous Fortune Cookies here and Contrary Opinion buttons here.

Tim’s Comment: Battista was a Canadian chemist who wrote 15 books, and whose interest/expertise extended from chemistry to business, life and religion. He made things happen. And when it comes to investing, the wonderful truth is that you too can make things happen—in your own account. No matter what the size of your portfolio, you have the opportunity every day to make decisions that can truly make things happen.

Paul’s Comment: The application of this quotation to investing is almost too obvious. I like to think that Cabot gives investors of all stripes the information they need to make things happen, including how to weather a bear market without getting pummeled. But I know that there will always be people who don’t get into stocks until the market’s at its top and won’t get out until it’s at its bottom. It’s hard (and expensive) to be in the group that doesn’t know what’s going on.

In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.

Cabot Wealth Advisory 2/3/14 — Four Impressive Breakouts

Tim Lutts, head honcho of Cabot Stock of the Month, writes in this issue about why market corrections are good. In part, it’s because a pullback helps to identify leaders. (They’re the ones that resist the bear move. Tim gives four examples.) He also gives the sixth in his series of disruptive stocks. Stock discussed: Tableau Software (DATA).

Cabot Wealth Advisory 2/4/14 — This Chinese Stock Could Take Off Tomorrow

In this issue, I look at how Chinese stocks are way ahead of both emerging and developed market indexes. I also do a little bragging about how well my advisory did in 2014 and point to a Chinese large-cap that might react well to earnings. Stock discussed: BAIDU (BIDU). 

Cabot Wealth Advisory 2/6/14 — The Right Time For REITs?

Nancy Zambell, who heads up Cabot’s Investment Digest and Dividend Digest, looks at the advantages of real estate investment trusts (REITs) in this issue and sees a source of income, diversification and portfolio protection. REIT discussed: Invesco Mortgage Capital (IVR)

Have a good weekend,

Paul Goodwin
Chief Analyst of Cabot China & Emerging Markets Report
 and Editor of Cabot Wealth Advisory


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