Einstein Must Have Been A Terrible Investor
Albert Einstein was one of the most influential scientists of all time. His work led to the development of nuclear power, modern electronics, and space travel.
Without his efforts, we probably wouldn’t have developed the atomic bomb ending World War II. We wouldn’t have radios or television. And, we may never have put men on the moon.
Einstein’s revolutionary discoveries propelled the world into the modern age.
But, for all of his amazing achievements, I doubt Einstein had any success investing in the market. Why do I think one of the most brilliant men who ever lived didn’t make a dime in the market?
Well, if you take him at his word, he lacked an important quality that successful investors must have. Here’s a famous quote from the father of modern physics.
“I never think of the future. It comes soon enough.”
Now of course, Einstein was just having a bit of fun with us mere mortals. He certainly thought quite a bit about the future. But, this quote raises an important point for investors.
You have to have a vision of the future in order to consistently make money in the market. And, you have to constantly update your vision as new information becomes available.
You see, the best investments are often made when present conditions are at their worst.
Take last year for example.
The market bottomed in March. At that time, the financial system had narrowly avoided melting down. Hundreds of thousands of workers were losing their jobs every week. And, most experts feared the economy was headed for another Great Depression.
The stock market had fallen to lows not seen in more than a decade. Stock valuations were at levels you might only see once or twice in a lifetime.
Unfortunately, most individual investors didn’t buy stocks at the bottom. In fact, most investors missed out entirely on one of the greatest market rallies in history.
Why did this happen?
After taking heavy losses at the end of 2008, many investors were too afraid to risk losing more money. They allowed themselves to be consumed by negative news and doomsday prognostications.
What they needed was a vision of the future to give them confidence.
There were plenty of signs the market rally was for real. The Fed was pumping liquidity into the financial system to prevent it from seizing up. The U.S. government was bailing out the banks and spending billions to stimulate the economy.
Most importantly, stocks were incredibly cheap on a historical basis.
With my vision for an improving economy and market in hand, I continued making strategic investments in my own account. And, I kept recommending stocks for my subscribers that I believed would skyrocket as the market improved.
For example, in my Penny Speculator service, I recommended a retail stock when economic conditions were still very bleak. In May 2009, I told my subscribers to buy shares of premium denim jeans designer, Joe’s Jeans (NASDAQ: JOEZ).
Make no mistake, it was a gutsy call to recommend a retailer in that economic environment.
Unemployment levels were rising every week. Consumers were putting discretionary cash into savings or paying down debts. And, consumer spending levels were falling rapidly.
But, I had my vision of the future to guide me.
I didn’t think JOEZ was going to go out of business. I believed they made a product that many consumers would continue buying even in a bad economy. And, I felt their business would grow as soon as the economy began stabilizing.
You see, JOEZ has a very strong brand. And, their fundamentals were already showing signs of improving. Revenues were rising… albeit slowly. And, the company was continuing to make money.
At the time, you could have picked up JOEZ for just $0.61 a share. It turns out that was a very good price.
When I finally recommended selling the stock in December 2009, JOEZ was trading at $1.29 a share. Many of my subscribers booked gains of 111% in just seven months’ time.
Now, I’m not trying to brag. (Well, maybe just a little.)
The point is you need to have a vision of the future if you’re going to make serious money in the market. You won’t always be right. But, if you make investments with an eye to what the future holds, you will improve your chances of hitting the big winners when the opportunity arises.
Category: Stocks
