HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.
I devote a chapter in my book The Physician’s Guide to Investing: A Practical Approach to Building Wealth on how to recognize real opportunities.
I came to two conclusions. First; real opportunities occur only rarely; maybe once every two years, maybe twice a year. Overall, I thought that real opportunities occur about once a year. From this point of view, patience is required. You can’t jump at everything; in fact, you must jump only rarely. The vast majority of “apparent” opportunities are really nothing at all, just non-statistically significant background noise.
The other conclusion I came to is that you must be completely convinced from the beginning; it should be obvious from the start. For me, when I look at something and in 10 seconds say “this is the greatest thing since sliced bread”; these are the winners. I never talk myself into anything. This has the added benefit that I never have to second-guess myself. If something doesn’t work out (rarely now), I just say “so be it”; try to learn from my mistake, and move on.
Often I can state a specific reason for why I don’t think an investment will work. But sometimes I can’t say exactly why, other than “it just didn’t seem right”. I have come to recognize this feeling, and as soon as I have it, I just say no and move on.
What makes me discuss this now is that last month we had several guests out to our recreational land for some fishing, relaxation, and a picnic. I was telling them how we purchased the land in 2006. A friend and I had looked at about a dozen places over the preceding 5 years. Several seemed OK, but I couldn’t pull the trigger. Then we looked at this place; 73 acres, a 35 minute drive from Columbia, a 21 acre lake, hundreds of apple and pear trees, gently rolling with some forest but mostly open, really like a big park, and within several minutes (I am not exaggerating) we both said yes.
One of our guests said you must read the book Blink: The Power of Thinking Without Thinking (Gladwell, Little Brown, 2005). I strongly recommend this book to you.
First, I was relieved to find out that there is an intellectual basis for my observation that real opportunities should be obvious from the beginning; that you should never have to talk yourself into anything, and that sometimes (often) you can’t even state a specific reason other than “things just don’t seem right”. The reason for this feeling is that the computer of your subconscious is just as powerful as the computer that runs your consciousness (In situations requiring snap decisions, it is often more accurate and powerful). You often just have a “gut feeling” or an “impression” because this is how your subconscious communicates with your conscious.
For example, if you are walking down a street in the bad part of town at 1 AM (not very smart in the first place), and two guys with more tattoos than teeth, one carrying a chrome-plated .25 semi-automatic in his hand, start walking toward you, you don’t need to go through some complex decision-making algorithm to figure out it is time to turn around and run as fast as you can.
Gladwell calls this “thin-slicing”, being able to draw conclusions quickly from “apparently” minimal amounts of data. He shows convincingly that very often you can draw just as accurate a conclusion from one glance as from 30 minute of contemplation. He also shows convincingly that your subconscious computer can be trained to make you an even better decision maker in situations requiring snap judgments.
In the last chapter, Gladwell asks “When should we trust our instincts, and when should we consciously think things through? Here is a partial answer. On straightforward choices, deliberate analysis is best (say like picking from one of three possible brands of crackers at the store). When questions of analysis and personal choices start to get complicated—when we have to juggle many different variables—then our unconscious thought processes may be superior…This is exactly opposite to conventional wisdom”.
I believe this book will not only make you a better investor, but will help with your decisiveness as a physician.
RMD
On 8/8/10, there was a post on 321gold by Vasko Kohlmayer from the American Thinker. It gives a stark example of how much the US dollar has depreciated since the inception of the Federal Reserve in 1913.
In 1913, $5 would buy 15 lbs potatoes
10 lbs flour
5 lbs sugar
5 lbs chuck roast
3 lbs round steak
3 lbs rice
2 lbs cheese
2 lbs bacon
1 lbs butter
2 loaves bread
4 qts milk
1 doz eggs
RMD comment: Five paper (intrinsically worthless) Federal Reserve dollars would now buy you about 3 lbs of chicken. Five of the silver dollars in circulation in 1913 would still buy you this and more. A five-dollar gold piece in circulation in 1913 would now buy this and a BarBQ grill to cook the meat on and a case of Budweiser and a couple of bottles of hooch when you had your friends over.
The Federal Reserve was created to free politicians from the discipline of “hard money”, of the gold standard, to allow them to realize their ultimate dream; to print money at will. And that is exactly what they are doing.
The Fed has a target of 1.5-2% inflation per year. This is obscenely perverse. In 20 years your money has lost 50% of its value. There is no incentive to save. It is just spend, spend, spend. Inflation is the cruelest of taxes; subtle and insidious.
Inflation has been especially high since 1971, when Nixon severed the last links with the gold standard. DeGaulle demanded gold in exchange for France’s hoard of quickly-depreciating US Dollars. Treasury Secretary John Connelly famously crowed “It’s our currency and your problem”. Nixon responded by closing the “gold window”. The US Dollar was no longer convertible directly into gold.
RMD comment: Buy some gold. Everyone seems to want it.
$185 in 1971 is $1,000 today. When I graduated high school in 1969, I had saved, by mowing lawns, taking an after-school job of 30+ hours a week as soon as I turned 16, by my own very hard work—$12,800. Considering I saved this money from about 1960-69 (silver coins were minted through 1963, and even in 1969, about one-in-four to on-in-five dimes, quarters and half-dollars were still silver. I would pull out several dollars of silver from the cash register in my 3 hours work every night), it would be worth far more than $100K in today’s money. Do you know any HS kids who have saved $100K on their own?
Lessons from playing Texas Hold’em (this happened to me recently). Blinds were $15/30. I was “on the button” (in the dealer position). It was folded around to me. I had King-Ten suited. I raised to $100 (standard play to try to steal the blinds). Big blind called, but didn’t re-raise. Flop—King, Ten, Ten. Big blind checks. (I flopped a full boat—this does not happen often). I check. The Turn. He checks. I bet. He raises. I re-raise all-in. He calls and turns over a pair of kings. His full house; Kings full of tens, beats my full house; tens full of kings.
RMD comment: In this instance, if I am so worried that he had a pair of tens (giving him quad tens) or a pair of kings in the hole that I folded, I would throw away the winner at least 19 out of 20 times. When you think you have the winner, you can’t be pushed out of it; you have to play. There are some times you are just destined to lose all of your chips.
In Blink, almost an entire chapter is devoted to the significance of recognizing facial expressions. They have been categorized by the Facial Action Coding System (FACS), which includes the specific muscles which contract to make a particular facial expression.
From Paul Ekman, who developed the A.U. system. “Moving one ear at a time is still one of the hardest things to do. I have to really concentrate. It takes everything I’ve got…This is something my daughter always wanted me to do to her friends”.
RMD comment: In third grade, it took me a little while to perfect this, and I can still
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