What I Believe: About Investing 

To be successful at anything, we must begin with the ancient Greek aphorism, “Know thyself.”

With respect to investing, that means understanding your instincts and emotions with regard to fear and greed. Here’s an easy-to-answer question that can shed light on those characteristics right away:

What is more important to you? Becoming richer? Or being sure you won’t become poorer?

If, like me, your fear of getting poorer is greater than your desire to get richer, you must do three things:

* Diversify the assets you invest in.

* Establish a “sell point” when you first invest, in case things go south.

* And size your positions – i.e., regulate how much money you put into each asset class and each particular investment within each asset class.

Alex Green on Making Money in the Stock Market… 

“Jeremy Siegel – a professor of finance at the Wharton School of the University of Pennsylvania and author of Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies – has done a thorough historical study of the returns of different types of assets over the past couple hundred years.

“What he discovered is dramatic: $1 invested in gold in 1802 would have been worth $90.05 at the end of 2021. The same dollar invested in T-bills would have grown to $4,437. A $1 investment in bonds would have been worth $36,390.

“And a single dollar invested in common stocks with dividends reinvested – drumroll, please – would have been worth over $45 million.

“Just look at the massive moves in the graph below…

“Look back through history and start whenever you choose. You’ll find the rolling returns for different asset classes are remarkably consistent.

“And equities win in a landslide. Since 1926, the stock market has generated a positive return in 71 out of 96 years.

“Historically, the odds of making money in the US stock market are 50-50 in one-day periods, 68% in one-year periods, 88% in 10-year periods, and 100% in 20-year periods.

“(That’s something to remember whenever stock prices start wilting like last week’s roses, as they have lately.)”

Worried about your stock portfolio? Here are some facts from Mitch Zacks (by way of JS) that may ease your concerns:

* S&P 500 earnings have been going up while the index has been falling. That means the P/E ratio on the US stock market has moved lower. (That’s a good thing. It means stocks have gotten cheaper relative to corporate earnings.)

* Most analysts expect the US economy and US corporations to grow in 2022. At Zacks Investment Management, the expectation is 7%.

* And since corporate earnings and revenue track GDP growth, Zacks also expect corporations to have a good year.

Click here for a recent interview I did with Charles Mizrahi.

Buying Art as a Financial Strategy 

One of the most important things to know about the supply and demand dynamic of art is very basic: When an artist dies, the supply of his work becomes fixed.

Demand is determined by a host of factors that boil down to the reputation of the artist among the art-buying public.

The “art-buying public” comprises a very large market – i.e., hundreds of millions of people. The great part of that market – like 99% – is involved in buying art whose value is worth exactly what someone is willing to pay for it. And the moment it is sold, its value usually drops by about 70%. Often more.

If you want to collect art as an investor, you must eschew that 99% of the market and focus only on art that has support among the 1%. On a global scale, this part of the market is probably limited to fewer than a million people. And that includes not only private collectors, but institutions, critics, and dealers.

Since we are talking about investing in art, let’s call this the realm of investment-grade art.

What is investment-grade art? 

For a work of art to rise to the level of “investment-grade,” two things must happen.

First, works by the artist have to make their way into the collections of major institutions and influential collectors.

Second, the artist and his/her works must make their way into the pages of respected periodicals and books on art.

The longer a piece has been in such books and collections, the more stable its value is likely to be. Like blue chip stocks, art that has a significant and longstanding reputation for being valuable tends to be a safer bet than art that has a short history – i.e., art that is hot now.

The Takeaway: If you want to start a collection of art that will appreciate in value over time, you must ignore everything you hear about the piece you are considering in terms of aesthetics. Do not even think of it as art. Think of it as a financial asset. Because ultimately, that’s what it is.