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What I’m going to do today is a show that I promised you a few weeks ago, which is how to compare the stock market to gambling in a way that it’s not an assault, if you will, on the stock market.
I want to be very careful because I don’t want to come across negative. The stock market is what it is. What I want this to be is a tool to encourage you that what you can do is something different, something that you control.
As opposed to just putting down the stock market, I want you to understand that. I just want you to understand the difference between something that’s within your circle of influence that you control like a piece of real estate, and something that’s outside your circle of influence that you have no control over which would be stocks, bonds, mutual funds, and things like that.
Win, Win, Win, Lose Everything
But I want to talk about gambling because what happened was I went to Vegas two weeks ago—I guess it was three weeks ago—and I won the first four days and I lost the last day. I lost everything that I had won and more. I think I described this to you. I consider gambling entertainment. I do not expect to make money; I expect to lose money.
Therefore when I go there, I have a specific amount that I am willing to lose. In this case it was a thousand dollars. I ended up losing 800. I tried to lose the other 200 but failed. I broke even right as we were leaving. But nonetheless that’s my strategy, that’s how it works for me, but I won, won, won, and lost.
And what I did was in my mind I told myself oh, that last night I was drinking too much. It had to have been something weird ‘cause I won four times in a row, four days in a row I was up a hundred, 500, 200, every single day. So it must have been—yeah, it was just—yeah, run of bad luck, drank too much, wasn’t paying attention, blah, blah, blah.
Rationalization
But I want to share with you that that is exactly what’s going on with most people and their savings, their “investments” quote unquote even though they’re not really investments they’re speculative. Their savings programs are just like that. They see themselves win and win and then they lose and they go oh, that’s just a fluke. It will come back. It will come back.
Well, I’m going to talk to you about what happened to me when I got on that cruise ship and started doing a little gambling. And I stopped immediately ‘cause it dawned on me that what was happening to me right there at that table was what is happening to Americans—not just a few of us, but the vast majority of Americans who have money in the stock market and in speculative things like that.
Let’s go back to this scenario—win, win, win, win, lose. I told myself oh, just a fluke; get back in there, stay the course. And I did, and I went right back to those tables when I got on that ship, and I got my clock cleaned. The time is accurate on my clock at this point, but I stopped immediately because man, it just jelled for me at that point what’s going on with Americans.
And here’s why I know it’s true. Bear with me ‘cause you’re going to be going, well, that’s not the same thing in the stock market. It is the exact same thing and here’s why. 95 percent of the top traders, the day traders, these are the psychos, these are the wackos that go out and they study, they meet the CEO, they meet the CFO, they know these people, they know these companies.
If they don’t know them personally, then they’ve got a dossier on them that’s 20-pages thick. They’ve read through it. They know who they are, they know where they graduated from college, they know what their goals are, they know the mission statement of the business, they know these companies inside and out — 95 percent of them lose money.
Yet you think that you’re going to go out there and grab a stock broker, a financial planner, who’s also in the same financial position you are and many of them worse and get their advice, and they’re going to be able to help you win when 95 percent of the pros, the top dogs, lose? Think of it like this—I really think that that point needs to sit for a moment.
And let me go over a friend of mine his name is Doug. Doug came to Lifestyles Unlimited and he chatted with me because he was doing very, very well in the stock market for year after year after year picking stocks. He was a day trader, if you will, that type of level, picking winners.
But it eventually caught up with him. Just like the tables caught up with me in Vegas and on that cruise ship, it’s going to catch up to you. The biggest and hardest sales pitch that needs to go out here today is not to the people who have already gotten slaughtered in the marketplace, it’s to you guys that are doing well in the marketplace.
Let’s go out to Katy and talk to Roth.
STEVE: This is Steve. How are you today?
ROTH: I’m doing great. I hope you had a great vacation.
STEVE: I did. Thank you very much for asking. How can I help?
ROTH: Two-part question. First, in regards to your reading list, if there was one book on there that you had to buy and you could only buy that one, which one would it be?
STEVE: I’d have to say The Richest Man in Babylon by George Clason.
ROTH: Okay.
STEVE: The second one—and the reason I am going to the second one even though your question was about the first, is because we have a community-property copy of that you can have for free that’s part of the reading list. Then it would be Rich Dad Poor Dad by Robert Kiyosaki and that is something you need to buy.
ROTH: Okay. Well, I have both those.
STEVE: Excellent.
ROTH: And the second question is in regards to the investment model of homes between 80 to 120, using those to get a variety of cross-section of people—
STEVE: Right.
ROTH: — which would be the same in a class of apartments to get the same cross-section of people B or C?
STEVE: It’s going to be high C and low B. So that might be a C-class property that you buy at a C-class price but put some money into it to bring it up to B level. And then sometimes you’ll buy a B that’s just a yield play that cash flows from day one and that one’s already right where it should be.
ROTH: Okay, great. Thank you very much.
STEVE: Thank you, Roth. Okay. You know, Roth’s questions were quite advanced, to be honest with you. So if there was something that you didn’t understand in Roth’s question, call me and let me know what you need to know.