Gold Rush

I recently came home to find a leatherbound copy of Louis L’Amour’s book Bendigo Shafter waiting for me. The significance behind this gift is enormous for me. I grew up with my Dad reading many of these books aloud to me…and he had a thing for leatherbound versions…they have feel and smell like no other. We all have our “things” right? In this novel about westward bound pioneers, there is a section about the allure of a nearby gold strike. Suddenly, folks who can barely put enough food on the table and wood in the fire are excited and even distracted from building the homes they came westward for.? It’s jolting as this scene comes directly after a chapter about them living through their first elongated cold snap of sub-zero degree temperatures. This kind of weather so nasty that even animals don’t move and when you are reliant on wild game for your dinner, you simply go without.

I get that this is a novel, but in my research of L’Amour as an author, rarely did he write about something that he hadn’t heard in some form via a former folk tale or story on his own. He wrote from memory and notes of stories he heard first and second hand. If you haven’t read his autobiography Education of a Wandering Man, I highly recommend it.

The reason I bring this up is that this tendency to want something for nothing…to desire the “free lunch,” to simply want to wander into good fortune is still with us. Imaginative power is an incredible thing. It has the power to envision growth and creation positively and yet it also has the power to be captivated by fear, hate, greed and grievance. Yet what I’m addressing here is far more devious. We are using our creative power to imagine something that could be good for us and those around us…that just isn’t so. We have the capacity to deceive ourselves and call it good. Our fallen nature still struggles with the hope that we can gain something from nothing. We understand how value is created conceptually, yet we are tempted to hope against hope that we are going to be the exception to the rule. One of my close mentors growing up used to tell me that the “surest way he knew of to ‘double your money, was to fold it in half and put it back in your pocket.” He said some other things too, but maybe I shouldn’t print all of them!

Why is it that no matter how many examples we have to the contrary, we are all still tempted to believe we could be on the cusp of the next gold rush? Whether it is playing the lottery, investing in a new “currency”, or a stock that is valued at 50x forward earnings or that we will find gold before the next wagon train, the concept remains the same. Incidentally, I’d also add that it is undefeated as well. If I may be so bold, I think where this mentality runs afoul of reality is in that it falls into the trap of viewing our purpose as being in consumption rather than production. If you believe we are put on this earth to serve, tend, protect, preserve, create and flourish, you naturally recoil a bit at the idea of getting something for nothing.

When we at the Bahnsen Group say we are believers in Dividend Growth Investing, it is another way of saying we don’t espouse the “gold rush” mentality. We want to entrust hard-earned client capital with companies who are serving their customers well by creating a superior product, or service, and the evidence of that are healthy balance sheets and growing profits. From those profits, clients are rewarded with a growing dividend which provides them the autonomy and flexibility to live, give and grow. In this case, we reject the idea that the given sentiment of the stock market at any one moment in time, should drive our investment decisions. In contrast, the companies in which we invest have paying customers who are voting with their hard-earned money that the product they are purchasing meets their needs better than someone else!

I bring all this up because I often encounter investors whose guiding philosophy is lacking in practicality and at root is simply based on hope. Hope that either the economy will grow and help their passive investments grow with it. Or hope that someone else will buy their centralized investment in a handful of companies, or heaven forbid, “company”, at a higher price than when they purchased it. If you are reading this and cannot remember a time where you’ve ever wondered if your investment strategy was based on hoping against hope, I salute you. This can mean one of two things…and I’ll leave it to you to decipher into which of those categories you fall!

That’s all for this week. Thank you for reading and supporting Wisdom & Wealth. Please reach out with questions or thoughts as they come up and as always remember that I’m wishing you and your family continued Truth, Beauty and Goodness on the road ahead!

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