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The Scottish poet and journalist Charles Mackay wrote 180 years ago about the “popular delusions and the madness of crowds” — how “whole communities suddenly fix their minds upon one object, and go mad in its pursuit” when significant profits are on the line.
In his seminal work, Mackay discussed the South Sea Company, the Mississippi Company and the Dutch tulip mania.
If he were around today, I’m certain he’d add at least a chapter or two about money-losing technology IPOs, “meme stocks” and — in the latest iteration of the “Reddit rebellion” — the precious metal silver.
Why? Because retail investors have been rampaging through various and sundry stocks and commodities … becoming “simultaneously impressed with one delusion … [until] their attention is caught by some new folly more captivating than the first.”
I won’t argue with some of their objects of fancy. For instance, I’ve been a strong believer in the bull market for gold, silver and mining shares since the second half of 2018.
Safe Money Report subscribers have been reaping major profits in precious metals as a result. That includes recent open gains of more than 57% on one silver exchange-traded fund (ETF) in just over a year.
(You can get details on that pick — and the rest of the model portfolio — by clicking here or by calling 1-877-934-7778.)
But I’m sorry ... I just can’t get on board with buying shares of near-bankrupt movie theater operators. Nor will I buy any of a never-ending list of “me-too” initial public offerings by startups that are losing money hand over fist. And I’ll avoid mall-based video game and console retailers left behind by evolving technologies and more nimble competitors.
Those are the kinds of flash-in-the-pan speculations that can be red-hot one day, ice-cold the next. Indeed, today, the online crowd seems to have moved on — or they’ve been rolled back by entrenched forces.
I’d much rather stick with, say, higher-yielding, higher-rated, “Safe Money” plays in sectors like precious metals, infrastructure, utilities, clean energy or even cannabis.
These are the kinds of names spinning off generous income. They’re the ones set to ride a tidal wave of federal stimulus and subsidy money.
They’re not just going to rack up some quick points before giving them all back again. They’re benefitting from longer-term megatrends that aren’t going away — in 2021 or beyond.
Plus, brokerage firms like Robinhood aren’t slapping trading restrictions on them. It’s a “come one, come all” situation.
So, if you’re looking to avoid getting swept away by the madness of crowds, my advice is simple: Be a “Safe Money” investor rather than a message-board speculator.
I’m confident your portfolio will benefit.
Until next time,
Mike Larson
