Generational Investment Opportunity

Written By Nick Hodge

Posted December 16, 2011

Here’s the problem with America as I see it: We try to project ourselves as one thing, while internally we’re something completely different.

I caught a glimpse of a comedy special this past weekend where the comedian said:

“We all feel divided — conservative or liberal. I want everyone to know I’m both, conservative and liberal. When it comes to my daughter I am a staunch conservative who believes in hard-core conservative values. When it comes to your daughter, I’m liberal. She can be as promiscuous as she wants to be.”

Or how about Bill Johnson, the Alabama conservative who ran on a platform against gay marriage only to be found donating sperm to lesbian couples.

Or Nancy Pelosi saying we need to reign in the banks and Wall Street while continually profiting from information only privy to Congress.

And on a more personal level, the friends on Facebook who portray themselves as happy and financially secure when you know they’re anything but.

Or the money manager who recommends you buy certain funds because he’s incentivized, but wouldn’t buy them for himself or family.

Whether for political, financial, or Machiavellian reasons, many of us pretend to be something we’re not.

Instead of doing things because we think it will get us ahead or impress our peers or get people to vote for us, I think the world would be much better off if we didn’t factor others’ perceptions of us into our decision-making process.

Walk Small

Growing up, my grandfather (the American, not the Italian immigrant) always told me to walk small and carry a big stick.

But he wasn’t referring to Roosevelt’s riff on international diplomacy (I know the original says “speak softly”)…

As he taught me to drive a manual-shift 1940s Ford tractor, erect livestock and poultry fences, cut banks with a sickle bar, till land, cut trees, split wood and more, he was trying to teach me how to be the strong, silent type.

Basically, that you don’t have to show off and gloat about the things and skills you have. Enjoy them and keep them to yourself (walk small) and use them precisely when needed (carry a big stick).

This went for boyhood and pubescent scraps as well. Don’t try to fight, don’t start a fight — but certainly be able to finish one.

It’s advice that’s served me well and that I still employ to this day.

Big Stick

Thankfully, I haven’t had to use my “big stick” too much. Put a few wannabe tough guys in their place in high school and college…

But mostly, the thing I carry is put to use to maximize life’s enjoyment in an economic fashion.

I’ve rescued a few stranded drivers, finished my own basement, added a full bathroom, built my own driveway, tend my own garden, dress my own game, and plenty more.

Those mostly derive from learned skills and are physically applied.

But the best part of a well-rounded big stick is something psychologist Robert Sternberg calls “practical intelligence.”

In his book Outliers: The Story of Success, Malcolm Gladwell describes it like this:

It is procedural: it is about knowing how to do something without necessarily knowing why you know it or being able to explain it. It’s practical in nature: that is, it’s not knowledge for its own sake. It’s knowledge that helps you read situations correctly and get what you want. And, critically, it is a kind of intelligence separate from the sort of analytical ability measured by IQ.

To use the technical term, general intelligence and practical intelligence are “orthogonal”: the presence of one doesn’t imply the presence of the other. You can have lots of analytical intelligence and very little practical intelligence, or lots of practical intelligence and not much analytical intelligence, or — as in the lucky case of someone like Robert Oppenheimer [head of the Manhattan Project] — you can have lots of both.

I credit most of my success to “practical intelligence.”

Where does it come from?

It’s a set of skills that have to be learned. It has to come from somewhere, and the place where we seem to get these kinds of attitudes and skills is from our families.

I use it in everyday life but, fortunately, I also use it to read macro trends and profit from them in the stock market.

It’s the same acumen that allowed me to not get caught or punished in my adolescent years while I was doing things as devious, or more so, than the other kids my age.

It’s what allows me to read situations and people in an instant, and decide what to say and how to say it for maximum effect. It’s how to get into a store two minutes after they’ve locked the door and how to get an upgraded hotel room for free just because I feel like it.

When applied to every aspect of life, success is imminent.

Your 1830s Moment

Success isn’t all individual. Much of it comes from external circumstances: war, periods of rapid industrial and technological improvement, etc.

Outliers also ranked the 75 richest people in human history, from pharaohs and monarchs to landowners and barons…

The most interesting part? Nearly 20% of them were born within nine years of each other in the mid-1800s — between 1832 and 1840.

They amassed wealth in the trillions of dollars.

Sure, they were bright and ambitious; but they were also born at precisely the right time to profit from the emerging dominance of railroads and Wall Street in the 1860s and 1870s.

Why am I telling you all this?

Because we have a shot at an 1830s moment, maybe not to become billionaires — but definitely to attain safe and secure wealth.

As Forbes noted last week: “The resolution of global balance sheet imbalances will eventually result in complete panic where we’ll likely see yields of 8%-10% on great stocks. Finally, buy and hold will begin to work again — just when most people abandon stocks altogether.”

I’ve mentioned several times recently that the Dow is trading at the same level it was in 1999.

Forget all the bullshit — politics, the election, “Toddlers & Tiaras,” Facebook (unless you jump in and out of the IPO). If you want to be truly financially free, you have to leave the herd behind.

As the bile that’s accumulated in the system over the past decade is purged, you will have the opportunity to do just this.

Next year won’t be the end of the world, but it will be a major turning point.

The bad assets, loans, and debt are going to come due. The guise of fiat money and printing money will be shed…

And when that happens, we’ll be in a prime position to buy stocks at decade lows with high dividends.

Coil your springs now. When the time comes, you’ll want to buy some of the strongest names in all the sectors — especially energy.

Until then and while it happens, precious metals will be your friends. Gold’s back at $1,600 today.

I’ll keep you updated every step of the way as to how to play this shift with stocks.

But I’m not a gold guy. Greg McCoach is, and he’s actually offering a free seminar on how to invest in gold in the coming years.

In the meantime, continue to hone your practical knowledge and put your success before the opinions of others.

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Nick Hodge

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Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street’s Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor’s page.

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