Tuesday, September 27, 2022 Sep 27, 2022
77° F Dallas, TX


By Tim Rogers |

Wick attended the funeral yesterday. I hope to get a recap from him sometime today. And I said I’d post Hoffman’s dining review from this magazine that he wrote in 1975. But I reread it and decided that this is a better selection. It’s an intro to a piece we ran suggesting to readers where they should invest $10,000:

Concerning Your Investments, A Few Suggestions

By Robert Hoffman, from January 1975

If you’re confused about what to do with your money in this day of topsyturvy stagflation, don’t let it get you down. Gerald Ford is confused, and he’s the President of the United States. Alan Greenspan is confused, and he’s smart. And with an unprecedented amount of institutional money in cash or cash equivalent liquid reserves, you can bet the institutional money managers–the guys who are really supposed to know–are just as confused as everybody else. When the big dollars are sitting in cash reserves, it’s a sure sign that the “professionals” are cracking open their fortune cookies and finding advice like, “Tomorrow may bring everything you’ve always wanted. Then again, it may not.”

It is in times of uncertainty that real fortunes are made. When the traditional risk/reward quotient goes awry, the shrewd investor’s chances to make a big killing increase. In shaky times, when folks are unloading right and left, there are inevitably just as many unpolished diamonds dumped as worthless hunks of coal. If you can spot the diamonds, and pick them up for the price of coal, you might–in spite of all that is going on around you–find yourself in the luxurious position of being able to fret more about the oil depletion allowance than the price of gasoline.

Because there is so much uncertainty these days, and hence, so much opportunity, we have asked a diverse group of financial experts to recommend some courses of action you might consider. The guinea pig amount is $10,000, but the suggestions apply to smaller and larger amounts of discretionary funds. You will note that the recommendations are not exactly unanimous. And while, in most cases, our experts don’t seem confused at all, don’t take their words for it without first reflecting on your own attitudes toward risk, by playing the following game:

First, let’s accept that no one is totally indifferent to risk. You are either risk-averse or a gambling man, or someplace in between. Suppose someone will flip a coin and give you $1 if it’s heads, and nothing if it’s tails. How much would you be willing to pay for the opportunity to play? It is, of course, mathematically illogical to put up more than 50 cents (since the heads-tails odds are 50-50), but some gambling types have been known to offer as much as 70 cents for a shot at the $1. Most of my laboratory subjects have been willing to pay somewhere between 35 cents and 45 cents. However, as the stakes are raised from $1 to $10 to $100 to $1,000 and finally to $10,000, most people seem to offer proportionately less and less to play. The guy who risks 45 cents to win $1 is rarely willing to risk $4,500 to win $10,000, since he probably would not be able to afford the loss if the coin came up tails.

And that’s just what a lot of professionals are saying today: They are too scared to pay $4,500 for the chance to win $10,000. If you feel similarly, then you will no doubt sleep much better with your money in a savings account than in frozen pork bellies. If, on the other hand, you feel comfortable rolling the dice, now might be just the time to dive headlong into the stock market, or into a raw land deal. In other words, now may be the best time to choose the right game with the exact odds you have been waiting for all your life. Then again, it may not be.