Like many boys in the late 80′s and early 90′s, I collected baseball cards. I remember being told (and believing) that baseball cards were solid investments – each year they would rise in value, and some day I’d be able to sell them for a google dollars (this is back when a google was a really big number, and not a company that’s worth a google dollars).
But the baseball cards I bought during that time are now worth about the same as what trash is worth. Their value over the last fifteen years, has gone down and down. I met a card collector, who told me that period from about 88 to 94 is the worst time for baseball card values. So many people were buying, that companies just increased their supply, and now the market is flooded with guys like me trying to sell their Manny Ramirez Upper Deck rookie card on eBay for…$2?
The strange thing is that smart adult investors make a very similar investing mistake. Year after year, bubbles emerge and bubbles burst, and people are left holding onto a product wondering why they’ve lost all of their money. When something becomes popular, we start hearing everyone say, “Oh that’s a smart investment…yeah, you gotta buy a house!” and we believe it. The problem is, when everyone is investing in the same thing, it’s usually a bad investment.
We (humans) never seem to grasp, that nothing is just a good investment, based on what it is. A good investment depends entirely on the price you buy it at. If you pay $200,000 for a house that’s really worth $100,000, that’ s a bad investment in retrospect. But at the time, how could you have known that? The price had gone up 10% per year for the past however many years, so how were you supposed to know that suddenly it would reverse directions?
The same thing happened with the dot com bubble and the tech bubble and every other bubble. Everyone sees the price rise, and rise again, and then you go, “Well that’s where the money is at…” The classic example is the Dutch Tulip bubble of 1637. Tulips were rare, and became very popular and expensive, to the point that people were regularly paying the equivalent of $2500 for one tulip bulb. Not only that, but they felt like they had just made a good investment, and that they could sell in a few months for a profit. When the bubble burst, anyone stuck holding a tulip, was SOL.
All indications are that gold will be the next bubble. I only guess gold because gold is what everyone is talking about now – “You gotta buy gold to stave off inflation” or whatever it is they say. The problem is, gold has already risen in value, from $300 to $1000 per ounce. I’m sure it was a good investment, if you were smart enough to buy it five years ago, when no one was talking about it. But is it actually a good investment right now? Probably not. Warren Buffett is associated with good investing, and also associated with buying where no one else is looking. Is Warren Buffett buying gold right now? Of course not. Does he own gold though? Sure. I’m guessing he was buying gold 5-10 years ago when the price was around $300 per ounce.
Ultimately, the best investments always come where no one else is looking, because that’s where you find the bargains. Therefore, I’ve compiled a list of things that no one else is buying right now, and from this list we should find some great long term investments:
Used Coffee Grinds
Kenny G bootlegs
Stock in the Yellow Pages
Lima Bean Futures
Somalian Land Plots
REO Speedwagon mixed tapes
Old computer monitors
self published paperback books
baseball cards from the early 90′s
Somewhere on this list, you will find some amazing long term investments, and… you’re welcome.