Sound Money
Have you ever heard the saying, "Now that's sound money." The saying is meant to convey the thought that the money being earned was done so in a substantial, rational, realistic way as opposed to a speculative manner. The money had substance. But have you ever wondered where the saying originated?
For most of our country's history, the dollar was exchangeable into gold or silver, "Sound" money was the kind that rang when you dropped it on a counter. The United States Coinage Act of 1792 specified that each dollar was to equal the value of the Spanish milled dollar and was to contain 371 and 4/16 grains of pure or 416 grains of standard silver. It was sound money.
But a funny thing happened. In 1971 President Richard Nixon gave a speech which established that dollars could not be exchanged for gold anymore. We were off the gold standard. Now, the dollar is faith based, and there's nothing behind it but Congress.
The problem is that now, not only are the American people losing faith, but the world is too.
Witness, the recent rise in gold. Gold is rising not on account of inflation (there isn't any) . Gold is appreciating in terms of all paper currencies because the world is losing faith in the ability of governments to stand behind their commitments. The United States national debt now stand at around $12 trillion with this year's deficit coming in at around $1.4 trillion.
That sounds a lot more like hollow money than sound money. As a people we have to stop our politicians from spending us and our children into the poor house. Only we can change things.
Fear & Greed
Fear and Greed. Fear and greed are the two most prevalent stock market emotions, and every investor from Warren Buffett to the smallest participant has to contend with these two primary emotions in every investing decisions. Last year when the market lost 38% of its value the predominant emotion was fear, and only a year later, now that the market is up 20% through November, the dominant emotion is greed.
When Warren Buffett was asked how he became so wealthy, his response was "I'm greedy when others are fearful and fearful when others are greedy". But in truth, neither emotion is beneficial to us. The surest way to realize a decline in your personal wealth is to be too fearful or too greedy. That's why a formal investment plan is so necessary to the successful investor.
A well designed investing plan enables you to continue moving towards your goal through all the peaks and valleys of the investing journey. You don't have to be an expert in market timing, and you don't have to be an expert in picking the very best stock or bond. You can tune out all of the investing "noise", being less fearful and less greedy as you move towards your goal. A plan is always better than no plan at all.