Investing Lessons on the Way to Grandpa's Funeral

My brother kept asking questions... Investing lessons on the way to Grandpa's funeral... What I shared about how to invest today... Match your time horizon with your idea... The most meaningful lesson...

I've had to attend two funerals in the past month alone...

First, there was the one for my mother-in-law. It happened just about a month ago.

I (Corey McLaughlin) know a lot of people make tongue-in-cheek comments about their spouse's mother... or literally run the other way when she shows up.

But that wasn't the case for me at all... not even close.

Despite battling progressive multiple sclerosis for 40 years and being bedridden for the past five years or so, my wife's mom was the strongest and most positive woman I've ever known. I could write a book about everything I learned from her since we met.

"Don't waste the day away," was one of the first lessons I remember her teaching me... so simple, yet so true. She also had a magnet with a quote from Winston Churchill on the mini-fridge in her room at the assisted-living facility. It read... "Never, never, never give up."

Her mind was still sharp until the end, but her body finally got too tired from fighting the disease. She was 68.

Two weeks later, my grandfather passed away...

My grandfather – or "Nanu," as I called him – was 91 and lived a long, full life before passing due to complications of cancer.

He spent an incredible 67 years with the fire department near the town in New York where I grew up. He was the fire chief in the 1960s and a commissioner after that.

As a younger man, my grandfather owned a gas station... and he served as a mechanic to the very end. His backyard is still filled with snowblowers and other machines that people discarded over the years... only for him to fix up and sell for a few bucks.

He grew up working on my great-grandfather's farm, never graduated high school, and married my grandmother when he was just 17 years old. I could write a book about him, too.

But this related ode will have to do for now (and I promise the investing tie-ins are coming shortly)...

After my grandfather's passing, my older brother and I drove together to New York for the services...

We spent the first hour or so of the trip catching up on life, talking about things like how both of us have been working at home for months... what our children have been doing... and how pathetically bad the New York Jets still are at football.

Eventually, though, the conversation turned to investing...

"You think things are going to crash?" my brother asked.

Now, we had something – besides our grandfather, families, and sports – to talk about for the rest of the ride...

'I'm just worried all this fake money will catch up with us,' my brother said...

I nearly drove off the New Jersey Turnpike right then and there. Before I go any further, there's something you should know about my brother...

He doesn't follow the economy or markets closely at all. And he certainly doesn't read the Digest. But like everyone, he's interested in money at some level... And he's not oblivious to what's going on in the financial world.

So to hear my brother say that about "fake money" definitely caught my attention. And as I responded to him, I knew I could eventually share this same message with you here in the Digest...

This was as pure of an example of our founder Porter Stansberry's guiding ethos of "what I would want if our roles were reversed" as I could imagine.

Some of what I shared might be old hat to experienced investors, but my brother is a casual investor... He picks stocks he likes – often ones that his day-trading friend tells him to go ahead and take a chance on – but he is frequently as confounded when the price of a stock goes up as when it goes down.

And like a lot of smart, curious, well-meaning folks, he wonders... Why?

Now, that might be the best question ever asked because – from novices to self-professed experts – the wisest investing minds that I've ever heard say that things often happen in the market that don't make sense.

Maybe it's just the crazy circumstances we're living in today, but my brother kept asking questions...

We've never had a conversation like this.

Frankly, we're not terribly close. We're seven years apart... We've lived in different states for a decade... And we have different personalities. But on this particular car ride, we found common ground on the topic at hand...

My brother kept inquiring on topics that our editors often write about and we share every day... They're the types of questions that I think are on a lot of freethinking people's minds today.

"I've made more money in the last six months than ever before," he said. "I just don't get it."

He was talking about how stocks have kept going up while our economy is in the worst recession, statistically speaking, since the Great Depression.

Of course, this is a frequently asked question today... And in response, I shared a concept that True Wealth editor Dr. Steve Sjuggerud often talks about with his subscribers...

Stocks are forward-looking. Economic data are backward-looking.

Back in mid-May, as stocks continued their recovery from March's bottom while the economy still slumped along, Steve wrote in his free DailyWealth e-letter...

There's an important truth you need to understand. It's simple and perfectly explains what's happened in recent weeks...

The U.S. stock market operates on a different time cycle than the U.S. economy.

Stocks tend to move much faster than the economic environment. They anticipate what's coming. That means stocks are the first to fall during tough times... And they often rally before the economy even begins to recover.

But my brother was hungry for more...

At this point, I didn't really know how concerned he was about making the most of his 401(k) and his stock-trading "play account"... But it became clear pretty quick.

Even as a semi-casual market observer and participant, he senses something is inherently messed up with today's economy and the market... that "sound money" has long gone off the rails.

At the very least, my brother doesn't understand some big moving parts of the market... And he doesn't really know what he can or should do about it.

So I shared what I could...

Even two hours didn't give us enough time to cover every point worth talking about today, but we did hit a few big ones...

I told my brother about a lot of what we've said here in the Digest throughout the year. We covered topics like...

1) Why every investor should at least be aware of technical analysis

This might be a surprising first piece of advice to some people, but experienced investors know what I'm talking about.

We can get into the weeds of technical analysis another day... But in short, it helps many folks make sense – of any market – and understand the key supply and demand levels of a particular sector or stock.

This brand of analysis is particularly essential knowledge for short-term traders. Without it, trading is simply not a fair fight. Steve just talked about this in his "State of the 'Melt Up" event last night...

One thing most people don't know – which I learned on Wall Street – is that ordinary investors are never going to be able to compete with the data and computing power available to institutional traders.

Big institutions spend literally tens of millions of dollars to build computer systems that the average person just simply can't compete with.

Steve and his research team spent several years and more than $1 million building their own system, which takes many technical indicators into account.

This is also the area of expertise for Ten Stock Trader editor Greg Diamond, DailyWealth Trader editors Ben Morris and Drew McConnell, and Stansberry NewsWire analyst Mark Putrino. If you haven't checked out their work before, we highly recommend it.

2) To 'always make money,' you need to make more interest than you're paying – or make more than inflation is eating out of your net worth

With rock-bottom interest rates all over the world and "safe" investments yielding next to nothing, how do you beat inflation or make a decent yield on your capital?

It's hard. Bonds are like cash today. The value of a dollar keeps weakening as it has for decades... This is the macro picture today.

You need to get creative. Not a lot of folks know about it, but you can earn 8% interest or more on certain cryptocurrencies (not without risk, of course). It's something to think about.

3) Why we love high-quality, capital-efficient businesses so much

I did my best to pass along Porter's advice of why buying shares of high-quality, capital-efficient companies is "the only sure way to get rich in stocks." But I can just quote Porter himself here today...

When a company can maintain its prices and profit margins because of the value placed on its product by the purchaser rather than its production cost... that business can produce excess returns – returns that aren't explainable by rational economics.

Those, my friend, are exactly the kind of companies you want to own.

And... you especially want to own these stocks during inflationary periods. As things get more and more expensive in the coming years, capital-efficient companies will have to buy less than other companies, on average.

The result will be that inflation tends to lift their profits, rather than reduce them. In the inflationary crisis I see ahead, this is the single best way for stock investors to grow wealth rather than lose it.

Buying shares of the companies Porter was writing about feels like the last bastion of investing sanity to me. There's nothing better than receiving a significant dividend for your decision to be a shareholder of a good company.

"Yeah," my brother said, but...

'It seems like you shouldn't even invest in fundamentals anymore,' he said...

Why does the price of a "good," high-quality company like Starbucks (SBUX) – which I mentioned in our chat – go down, while the price of a "bad" company like Nikola (NKLA), for example, takes off?

In other words, he asked... what's the point of investing in the good company if I can make more in the bad?

Well, on the surface, that's a fair question. But then, I stopped him and asked if he had made money in Nikola.

"No," he said, "And it sounds like it was a scam anyway."

I laughed... Our friends Whitney Tilson and Enrique Abeyta over at Empire Financial Research have covered that story well.

Eventually, I summoned what I've learned from my relatively short time in the financial-newsletter industry and an incredible year here at Stansberry Research. And then, I told my brother to think about his question in a different way...

Why are you investing your money in the first place?

He was surprised at first... This really isn't a technical question about stocks, but a more general question that could apply to anything. It's one of the best kinds of questions, though.

And addressing this idea gets to the heart of one of the most important lessons all experienced investors are fortunate enough to realize sooner rather than later...

In short, it's a hard world out there for any number of reasons. But I've found a sense of calm wash over me when I think about why my investments even exist in the first place... instead of primarily, "How do I beat the market today?"

These are not mutually exclusive ideas, anyway.

In fact, I'd argue that knowing why you are investing in the first place gives you more confidence to take smart chances that limit your losses and maximize your gains... which I know a lot of Digest readers are interested in doing.

I'm not talking about pie-in-the-sky or Pollyanna "reasons"... like you want to make enough money to buy world peace or happiness. (Good luck with that, anyway.) I'm talking about the very practical reasons for why we hit "buy" and "sell" in our brokerage accounts.

This is advice Retirement Millionaire editor Dr. David "Doc" Eifrig often shares. And I've also heard it through the grapevine from legendary investor Paul Tudor Jones. It's simple, short, and powerful...

The best investors and traders have a time horizon that matches their idea horizon.

Thinking of this idea offers a solution to pretty much every investor's dilemma...

Pick a question.

What do I do with my cash?

Well, how much do you need... and what do you think cash is going to be worth when you need it? Maybe you want to put that cash in something else, if needed.

Should I be investing in bitcoin or blockchain-related stocks?

Well, are you in those ideas for the long term or not? If so, you can bear some volatility in the short term... even steep drops.

Today, as I write, this actually, reminds me of something else Steve just said in his Melt Up event last night. (Watch a replay for free right here if you missed it.) He shared another piece of guidance that Jones once called "the most important rule of trading"...

Every day I assume every position I have is wrong, and I know where my stop risk points are going to be.

Let's be clear...

Jones is a legendary Wall Street trader. He started his career way back in 1976 on the New York Cotton Exchange. Today, he's a billionaire and manages billions of other people's money. He was featured in Jack Schwager's great Market Wizards series of books.

And Jones is often a contrarian... Just today, for instance, he suggested on financial-news network CNBC that folks buy some bitcoin as an inflation hedge. He's one of the few Wall Street types to say so. I'd argue that he makes these calls primarily because he knows what he wants out of each investment he makes.

I don't want to make it sound like I'm a market wizard at any level. I'm not, but I'm practicing the ideas I preach here...

As I told my brother, I didn't buy shares of Starbucks in March (disclosure) thinking I'd sell them in June. No, I wanted to buy shares near the stock's relative lows and compound the heck out of that stock so long as the idea of people being addicted to coffee is true. (I'm betting that's my entire life, so this is a long-term play.)

This makes any single "down" day that inevitably happens easier to reason with... and the human emotion we all deal with a little easier to handle.

Conversely, if I was involved in an uneducated short-term earnings-related options trade on Take-Your-Pick Company, I would be terrified by short-term swings. That'd be true especially if I were betting with long-term money. But everyone is different.

"I've never thought about it that way," my brother said. "But that makes sense."

A little while later, we arrived at our destination.

The next day, I was reminded of a few related, but more meaningful lessons...

At both my grandfather's and my mother-in-law's funerals, I didn't hear anyone give a eulogy about money, investments, or stocks. All I heard were stories about the lives they both lived.

They were both fantastic people – the type I will talk to my children about. Of course, I'm going to tie this observation back to investing now, though...

In a way, these two funerals and the two great people they were for represented a different interpretation of Jones' advice: What do we want to do with our time here while we have it?

More than 1,000 people watched my mother-in-law's funeral online. (I was one of the 25 fortunate ones to be able to attend the socially-distanced service in person.)

It's hard to describe the impact she had on people, even from her bed, and what she did for so many... But I'll simply say that she was strong, and her joy was infectious.

Similarly, my grandfather lived a life worthy of honor...

As my mother started making final plans for his funeral, she got news that the current fire chief of the town that my grandfather served had called my uncle, who is also a firefighter, with an unusual idea...

The chief had remembered that my grandfather said he'd like to be laid out for services at the firehouse.

Six decades after he joined the department, he had still been going to the firehouse every morning for free breakfast. So I think my grandfather mentioned this idea... or was asked about it... during one of these meals with the younger generation of men and women there.

It took some debate among the fire chiefs council of a few surrounding towns (with COVID-19 restrictions and this needing to be indoors), but the plans were made. It would be the first time this fire department ever did something like this, pandemic or not.

My grandfather's wake at the firehouse on Thursday night drew hundreds of firefighters. Men and women dressed in blue uniforms saluted my grandfather in a humbling service, the kind reserved for fallen heroes.

The next day, part of two towns basically shut down for my grandfather's procession... It went for five miles from the firehouse to the church for his service. A restored fire engine that my grandfather actually drove to fires decades ago carried his casket.

Here's what the scene looked like as we left the firehouse...

As we drove behind the old truck, I felt proud. I saw people wonder what was going on from the sidewalk. It was pretty incredible. Behind us, a line of fire trucks were lit up with their flashing lights going down Main Street.

I saw a guy I went to high school with looking on in amazement. A hair salon worker did the same. I later heard from others who were watching... and didn't know what it was all about.

If only they knew...

Maybe that's the point of all this, really, and what I've been writing about today.

We can get caught up in work, the daily noise of politics, stock performance, and other distracting news... or keeping up with our families at weddings and funerals... or any number of other events in our daily lives.

But at some point, it's useful to stop ourselves, take a breath, and ask "Why?" – no matter what subject follows. And we need to never quit doing it...

When it comes to your investments, why are you making them at all? How long do you plan to be in the trade or investment? What do you hope to accomplish? How much are you willing to risk? And does your timeline for a particular investment align with the answers to these questions?

You may not have the answers just yet, and that's OK... Or maybe you do. That's great. Either way, just asking the right questions should lead you on a successful path.

For instance, on the practical topics that my brother and I discussed somewhere in New Jersey, here's a few...

What do the technicals say about the trade you are about to make? Check out all the updates from Greg, Ben, Drew, and Mark to see what I mean.

If you're seeking income, are your investments going to keep up – or hopefully beat – inflation and do you any good in a world of negative "real" yield? If you're concerned, I suggest you give Doc's services a try.

And if you're investing money for the long term, do you have high-quality, capital-efficient stocks in your portfolio? For some great ones, I encourage you to try our flagship Stansberry's Investment Advisory newsletter.

Longtime Digest readers likely already have all this covered. If you do, that's fantastic... That means we've done our job. It also means I might have wasted a lot of your time today, so I'm sorry for that.

But if you've never thought about these questions and you're still reading, that's fantastic, too... That means that more than just my brother is listening this time – and most important, you're ready to take the next step on your own investing journey.

Welcome... We'll do everything we can to help you along the way.

New 52-week highs (as of 10/21/20): Autohome (ATHM), Curaleaf (CURLF), Calibre Mining (CXB.TO), New Oriental Education & Technology (EDU), Green Thumb Industries (GTBIF), MarketAxess (MKTX), and Southern Copper (SCCO).

In today's mailbag, yet more feedback for Dan Ferris and his most-recent Friday Digest. Also, we heard from a few folks who had trouble accessing Steve's "State of the 'Melt Up'" event last night. If you're still interested in watching Steve's event, you can watch a replay for free right here. And as always, if you have a comment or question, please send your notes to feedback@stansberryresearch.com.

"Regarding Dan Ferris' recent essay and subsequent comments and replies to other readers:

"Thank you for the reminder that governments do not grant us basic human rights; they only seek to limit, suppress and steal them. Even the Bill of Rights only attempted to preserve what was already ours by codifying it into the law of the land; it did not give us the right to free speech, free assembly, free belief, or self-defense. Very wise, our founding fathers." – Paid-up subscriber Michael D.

"Dan, What a great essay on the current situation, where truth and liberty to express that truth are being extinguished daily.

"Thank you for putting my own views far more eloquently than I can do myself.

"'Speak up, tell the truth and don't let them win,' should be our rallying cry." – Paid-up subscriber Valerie E.

All the best,

Corey McLaughlin
Baltimore, Maryland
October 22, 2020