Today, I am going to talk about myself a bit and my experience in investing.  I have been doing at least a little bit of investing for 15 years.  It has consisted of stocks, mutual funds, commodities, options, money market funds, and probably other things that I can’t think of right now.

When I look back at the big picture, there are really only two investment strategies that have paid off.  One is in the permanent portfolio (mutual fund or otherwise) that was advocated in Harry Browne’s book Fail Safe Investing.  The other investment that has done well is commodities.  This would be mostly gold and silver related investments, but also a little bit in energy.

When it comes to options or just trading individual stocks, I can’t really say that I’ve done that well.  I’ve certainly had some winners, but I’ve also had some losers.  When I consider that these things almost offset each other over time, I probably would have been better off paying down my mortgage or putting more into the permanent portfolio setup.

I am guessing that I am not alone in this analysis.  There are very few people who make it big in investing.  Even most people who spend a significant amount of time studying the investment markets do not make out big, unless they are trading other people’s money for a fee.  In that case, it is really their job or career.

The problem is that many people feel they need to spend a lot of time doing their homework and watching CNBC for the latest stock tips.  If they only understood the monetary system and understood the power of the permanent portfolio, it would save them a lot of time and headache.  They could spend just a few minutes setting up their portfolio and then basically forget about it, except for rebalancing.

When it comes to speculating on stocks or any other investments, I am probably slightly better than average.  Yet, I still acknowledge that it is usually a crap shoot and that it is impossible to time the markets.  I cannot compete with Warren Buffett at his own game.  Overall, playing the stock market is almost equivalent to playing blackjack in Las Vegas.  In the case of the stock market, the big financial institutions and the government are the “house”.  They collect the most money in trading fees and taxes.

It can be fun to speculate in stocks, just like it is fun to play the lottery.  But it really isn’t that fun once you realize that you’ve lost.  So my recommendation to most people is to save their money and be conservative with it.  Pay down your debts.  Invest in something similar to the permanent portfolio.  Then take some money and pay down your mortgage.  If you want to get ambitious, then buy an inexpensive investment property that will generate positive cash flow.  After many years, you will be thankful that you were conservative with your money.  You work hard for it, so you should watch over it carefully.  If you want to speculate, then just set aside a small percentage of your savings as “play money”.

Facebook, the extremely popular social networking site, went public recently and made big news.  Its IPO (initial public offering) price was $38.  On the first day of trading, the stock went up above $40, but then retreated back before the day was over.  Since then, the stock has taken a big hit, losing about $10 per share, which is well over 25%.

Investors are suing Morgan Stanley, Goldman Sachs, and JP Morgan, alleging they were misled in their purchase of the stock.  This is because the banks didn’t reveal lower revenue estimates before the shares started selling.

As a libertarian, I don’t have much sympathy for the big banks.  They are mostly in cahoots with the federal government.  They get protection from the FDIC and the Federal Reserve.  They get to take big risks and make a lot of money, but then when the tides turn, they will get bailed out.  The big banks in America are not free enterprise institutions.  They rely on cronyism.

With that said, I think these lawsuits are bogus.  It just shows that people will sue over anything.  The reason I am not that sympathetic to investors is because they are acting just like the banks they are suing.  They think they should get all of the upside of a winning stock.  But then when it doesn’t pan out, then they are all of a sudden suing and using the force of government to intervene.  They don’t want to take responsibility for their actions.

When I heard that Facebook’s initial public offering would value the company at about $100 billion, I knew to stay away.  I am not one of those people who is negative on Facebook.  A lot of people think the company is a joke and can’t understand how a website that doesn’t really sell anything can be of any value.  These people are wrong.  Facebook will probably have a billion users soon.  Take the entire population of the United States and triple it, and that is the approximate number of Facebook users.  With that volume, the company makes money and is going to continue to make some money, even if it is just from Google ads.

However, I think a $100 billion or more valuation seems quite high.  I could have been wrong.  The stock could have gone up quickly, particularly with people wanting to get in on the action.  But I thought it was a huge risk and I stayed away.  Nobody forced me to invest in it.  Nobody threatened me to buy some shares.  I can continue to use Facebook and pay nothing and not own a single share.

These investors who are suing knew the risk they were taking.  Any time you buy shares in a single company, you are taking a significant amount of risk.  But now that the investors are losing money on what was supposed to be a winning stock (at least to them), they are blaming others and using the courts to try to settle the score.  While I’m not exactly cheering for the big banks, I hope the investors lose in this battle.

As far as the banks, the market should be allowed to work.  Unfortunately, we don’t live in a free market world right now.  The big bankers are part of the establishment.  In a free market environment, the market would determine if these banks did anything wrong in not disclosing revenue estimates.  Customers and investors would not continue to do business with these firms in a free market environment, if they thought the banks were doing something wrong.  This is a situation where the markets should decide and not the courts.