Austrians should invest the only way that anyone should invest: Buy low and sell high!
My advice for beginning investors is to start small and trade what you know. Understand whether you’re peddling or speculating.
A peddler is as a “middleman” who buys things from people who need them less and sells them to people who need them more but neither of which had the time/information/inclination to make the transaction happen. You’re an enabler and you’re getting existing goods from those who need them less to those who need them more and earning a profit for yourself on the way.
Speculating is like peddling over time. You’re buying things now while people demand them less and selling them later when people demand them more (or buying while supply is high and selling when supply is low). This is much more difficult to get right than peddling which is why I recommend that you start by peddling then work your way up to speculating.
Start small and local. Buy/sell on CL. Swap what you have, leverage what you know, learn what will help you make more money buying/selling. If your long-term interest is in commodity trading or stock/commodity speculation, this will be good practice.
The key thing that most new investors miss is: you need to know, from the outset, why you’re going to make a profit. If you don’t know why you’re going to make a profit, then you don’t know what you’re doing and you might as well take a trip to Vegas because you’ll get more bang for your buck there than frittering it away in the NYSE. Buying stocks because someone said so or because the “technicals” look good or because blah blah blah are all bad reasons. Unless you have insider information or conduct corporate espionage or your Dad is a Senator, you probably shouldn’t be buying/selling stocks. This is true of the so-called “professionals” too! Ask yourself why the managed funds can’t beat the S&P?? They’re pros and even they can’t beat the S&P. Ya think that might mean the board members of S&P know something that fund managers - let alone you and me - don’t?
Another investing strategy (less recommended for the US but you might move somewhere where there’s good growth potential and apply this) is dividend-investing, which is closely related to investing in land, as far as the economics of it is concerned. Land speculation might seem to be just speculation and not dividend-investing but it can certainly be dividend-investing. The way to see this is to think about how the public utilities (including roads, powerlines, etc.) act as subsidies of land-owners. So you see that the Buffett investing strategy is really not about just buying “value” but buying heavily subsidized infrastructure, such as railroads. These businesses are not “free market” and will never have dotcom-style growth but they’ll never* go away, either. That is, they’re “plugged-in” to the tax-subsidized infrastructure grid so they’re kind of like an ATM. The government collects the money in taxes, builds roads, powerlines, and so on, and the land and other industrial interests that are connected to this grid are automatically subsidized. By buying into this, you are basically buying shares in government tax revenue. But you have to buy smart and the US is not the place to buy right now - unless you’re Buffett.
Basically all corporations benefit from the tax-subsidized infrastructure but some more so than others. One of the “tricks” I’ve learned from the 2008 collapse is that buying businesses that are synonymous with national identity in countries with reckless monetary policy is a risky but potentially very high-side investment strategy. Governments never want to admit they’ve gone bankrupt. And if the largest private bank in your country with a name like “Bank of America” is teetering on the edge of bankruptcy, you’re likely going to bail it out rather than have newspapers around the world blaring “America Gone Bankrupt!” when Bank of America goes bankrupt. See how this works? It really is that juvenile. But learning how to peer behind the mask of “serious” investing and see the schemes and games being played by the political types is crucial to being able to survive and thrive in the market. It’s not enough to just be a good businessman, you have to outwit the predators unless you want to become prey. Just don’t descend into predation yourself and become a Madoff.
Clayton -
