There\u2019s a gland that must be in the body that doctors have never found. But we know
\nit is there. We call it the \u201cgreed gland.\u201d Wikipedia says a gland is an \u201corgan in an
\nanimal’s body that synthesizes a substance for release such as hormones\u2026 often into
\nthe bloodstream or into cavities inside the body or its outer surface.\u201d When we hear that
\nothers are profiting from an investment and getting wealthier and we\u2019 re not, this gland
\nstarts excreting the envy chemical. Envy is an emotion that \u201c occurs when a person lacks
\nanother\u2019s (perceived) superior quality, achievement or possession and either desires it or
\nwishes that the other lacked it.\u201d<\/p>\n
Greed glands were on fire last week when LinkedIn went public. Maybe this was your
\nmental ticker tape: \u201c How could I have gotten in on that action? Why did I miss Linkedin
\nand now Yandex? When Zynga, Facebook and Foursquare IPO how can I get shares?
\nHow about all those Silicon Valley geeks getting rich again and I\u2019m not! Are new social
\nnetworking companies going to become another tech bubble and will I profit from it?
\nAm I going to just sit on my hands? Maybe I\u2019 ll just buy LinkedIn now at $90. It is a
\ngood company. I use it. It will eventually go higher.\u201d<\/p>\n
That\u2019 s the greed gland talking. There\u2019s no doubt that LinkedIn is a fantastic business!
\nThis professional network has over 90 million members will soon have revenues of $400
\nmillion and has a model with all of the wonderful characteristics of a web-based business.
\nBut it is likely not worth anywhere near $9 billion today. Fortunes have been lost buying
\ngreat businesses at the wrong price. Fortunes have been made buying bad businesses at
\ngreat discounts (Warren Buffett called it \u201ccigar-butt\u201d investing).<\/p>\n
The greed grand and its secretion of envy will drive you to buy when you feel you are
\nbeing left behind. Those who fall prey to it become speculators. It might be wise to clip
\nthe following words and read them when your greed gland starts convulsing:<\/p>\n
When you invest or loan your money to companies that operate in our capitalistic system,
\nyou as an owner will be paid. Over the time period that retirement investors care about,
\nsay 20 or so years, that return has been in the 8% – 10% range. Think of capitalism as a
\ntrain. If you get on it, your money will grow just because the system demands a return
\non invested capital. Over the journey, the train will slow down, backtrack, or speed
\nup, but it will keep chugging along. Eighteen years ago in 1993 you could have bought
\nthe S& P 500 in a newly minted product called SPY (the first Exchange Traded Fund)
\nfor $33. Today SPY is worth four times that \u2013 $132. You\u2019 d have made no decisions,
\nclipped some dividends and paid minimal taxes without breaking a sweat. No CNBC, no
\ncommentary, little anxiety. Just by owning your small piece of American capitalism.<\/p>\n
If you get off the train, you become a speculator, thinking you can get farther than the
\nrest of us who are on the train. Speculating is thrilling and it cures the temporary itch of
\nthe greed gland. But there are two problems that few overcome. First, you pay taxes on
\nthe gains so your winnings are automatically cut by one third to one half. You have to
\nrun even harder and faster. And second, all speculators make mistakes. Few investors
\nlike to talk about investment mistakes, but everyone makes them. Every seasoned
\nprofessional investor knows that avoiding and limiting the inevitable mistake is the single
\nmost important characteristic of investment success.<\/p>\n
If you think you have a talent for buying LinkedIn and other IPO shares and sprint ahead
\nof the train, you may get a town or two ahead this year. But sooner or later, you will
\nmake a mistake. You\u2019 ll buy too high on an oversized bet and feel pain as your losses pile
\nup. Like all speculators, the train will pass you or run over you at some point in the next
\n10 or 20 years. Your friends will be having fun on the train and you\u2019 ll be roadkill. So
\nplease, just stay on the train, buy yourself a drink and enjoy the ride.<\/p>\n","protected":false},"excerpt":{"rendered":"
There\u2019s a gland that must be in the body that doctors have never found. But we know it is there. We call it the \u201cgreed gland.\u201d Wikipedia says a gland … Read more