We All Love a Good Deal
My investor education started in my grandma’s kitchen. Unpacking groceries, she would say: “It doesn’t have to be the cheapest thing you find, but it has to be good value.” I think we all instinctively know a good value in our everyday life, but we somehow forget it when it comes to investing our precious savings.
I recently saw a beautiful shiny luxury sports car parked in front of an outlet mall in Miami. Megan and I made a quick trip to run a few errands and buy some essentials. The sight of an expensive car in front of a bargain shopping destination made me think that we all really love a good deal. It’s not just me, a value-conscious shopper and investor, but everyone enjoys a good deal, even an owner of a luxury sports car.
Miami has its charm. I like that it’s on the water; it looks stunning from the sky. It has its high rises and neighborhoods. It’s not New York City, though many New Yorkers have found refuge and opportunity there for years, and especially the last 12 months, including some of our friends, who make us feel at home.
On one of those occasions, a few years ago, I was one of the keynote speakers at a family office conference in downtown Miami. At the time, we got to visit the Art Basel and try some tacos in trendy Wynwood, where you can see colorful street murals by artists from around the globe.
Outlet malls must be an American invention; I don’t remember anything like it growing up and studying in Europe. They seem to be a perfect place to shape the minds and instincts of value-conscious investors. You can find there the finest brands but at much lower prices. That’s exactly what we try to do when we buy stocks. We know well what kind of businesses we like, but we are very price-sensitive when it comes to purchases. We want to take the lowest risk with the highest possible reward. The lower the price we pay, and the higher the quality, the better, we believe, the odds of our investment turning into a success.
A shopper doesn’t want to overpay for the same pair of shoes or pants only to find out about a better deal from a friend over lunch or dinner another day. We somehow instinctively know how much a particular item is worth to us and how much we are willing to pay. Some stock market enthusiasts may be well-trained outlet mall shoppers, but when it comes to buying stocks, they seem to believe the higher the price, the better. How come the logic, the principles, the discipline get lost the minute we walk out of a store?
Every shoe store and luxury sports car dealership dream of the day when their shoes or cars sell like hot stocks. The higher, the quicker the price rises, the more buyers want the goods. It doesn’t happen, though. What if, instead of selling actual shoes and cars, they’d sell digital records of those shoes and cars. Silly right? But that’s what we are seeing these days in the investment world. If you overpay for shoes, at least you have something to wear on your next outlet trip. The digital asset itself, though, may prove to have no value or utility. If you buy and overpay for such an asset, the only way to get your money back is to find another gullible buyer.
This visit to Miami felt different. Masks, hand sanitizer, social distancing rule the day. A lot has changed, but one thing definitely remains the same – we all still like a good deal! I never got to meet these value-conscious, price-sensitive mystery luxury sports car owners with a true affinity for outlet mall deal shopping. I wish I had; I’d have a question or two. I certainly hope their stock portfolio matches their shopping habits. My grandma’s grocery shopping trips remind me that in outlet malls and investing, value is all that matters, and finally — not buying something is also always an option.
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