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Tag Archives: Investment

More Big Gorilla Insights: High-Speed Rail

Is High-Speed Rail A Good “Investment”?

In an earlier post (“Hunt The Big Gorillas: Climate Change, Birthers, and Chocolate“), the Engineering Thinking concept of the Big Gorilla was described.  As stated in the prior post, if you are weighing several factors while trying to make a decision, and happen to spot one that is so large that all the other factors become negligible by comparison, you have found a Big Gorilla. Then, by focusing only on the Big Gorilla factor, you can quickly make a good decision.

The Big Gorilla is helpful when evaluating claims by politicians who want to spend our money on “investments” such as high-speed rail. In my state of Florida, our governor recently decided not to accept federal funds for development of a high-speed rail system, part of the Obama administration’s national rail plan.

The reaction of many ranged from dismay to anger. “How can the governor give up federal money?” was one common lament. One could argue that federal money is not free, since it  comes out of the pockets of taxpayers, and the federal government is already so much in debt that it doesn’t make sense to borrow yet more money. The politicians and special interests, however, find clever ways to counter such arguments, saying in essence that the spending will pay for itself and be a net benefit. This is generally the argument that governments always use to extract money from taxpayers: we (the government) know best how to spend your money wisely for the common good.

So here’s where a Big Gorilla can brashly step in and clear away the brambles of confusion: If high speed rail (or any project) is going to pay for itself, then it’s highly likely a private business will already be there, implementing the project.

One of the major benefits of a capitalist system is, if there is a need that justifies an investment, then it will be automatically provided by a private business.

Naturally, private firms would love to have public funding for “community” projects such as high-speed rail (sports stadiums are another good example). Having you — the taxpayer — providing funds and eliminating financial risk is a no-lose deal for the private firm. It is also a prime example of capitalism being corrupted by an inappropriate deal between politicians and private businesses. Invariably, such firms will provide donations and other forms of support to assist in the reelection of  those politicians who helped secure the public financing.

Bottom line: always look for a financial connection between the politicians who promote a project, and those who implement the project. Corruption is its name.

-Ed Walker

 

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Should You Fire Your Investment Adviser?

In previous posts we’ve described the basic elements of engineering thinking. Properly applied, ET gives you a significant advantage in life, by helping you to avoid emotional blockages and to apply logical thinking.

As mentioned previously, ET does not guarantee the best decisions, but it does greatly improve the odds for very good decisions. For human beings, that’s about as good as it gets. ET can help you avoid potential scams, improve relationships, and even protect your health and your life.

Since we’ve previously established the basic principles of ET, we’re going to provide more practical ET applications. To start, let’s consider investments. The advice below may save you a bundle.

Should You Fire Your Investment Adviser?

If your investment adviser uses charts, graphs, and other “technical indicators” to make investment decisions, you may as well fire him/her and throw darts at a list of stocks in the Wall Street Journal.

Why? Because there is no scientific evidence to support the belief that prior performance (as displayed in graphs) has anything to do with future performance.

There are no sure things. There is no way to absolutely predict success in an investment. All you can do is play the odds, but not random or casino odds. The odds you want to play should be based primarily on the inherent value of the stock, which includes a lot of factors, but not graphs or charts of its prior price.

So if your investment adviser Charlie calls you up and says something like, “You should buy stock XYZ! It’s just experienced a double top point and breakout, which means its price is about to explode, blah blah blah..,” ET recommends: fire him.

-Ed Walker

 

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