I’ve been an investor for over thirty years and during my lifetime I’ve seen more scams than you can ever imagine.
But one thing that astonishes me lately is the inability – or hesitation – of intelligent human beings to ask the hard questions.
I understand the desire not to appear stupid in front of your peers or sometimes intellectual giants.
But if everyone is gushing about an investment opportunity that makes no sense to you, ask the hard questions. Why is this so popular? How does it work?
A lack of questions led individuals like retired U.S. Marine Corps four-star General Jim Mattis and former Secretary of State Henry Kissinger to be on the board of Theranos, the most notorious public health scam in Silicon Valley history.
They were fooled by Elizabeth Holmes, a college dropout with no significant medical background in blood testing, into believing she had created a machine that could perform multiple blood tests with one drop of blood from a pricked finger.
And their names brought in loads of other famous investors like Rupert Murdoch and the Walton family that founded Walmart.
This past month, this same scenario played out, only this time with cryptocurrency exchange and hedge fund, FTX. Again, no one asked the hard questions…
For all those who may feel like they’re not the sharpest tool in the financial shed, today’s article is for you. Never be afraid to ask the hard but simple questions. You may end up saving the rest of your “brilliant” peers from a world of hurt…
Too Many Unanswered Questions
Those who have followed me for years know I have never recommended investing in crypto. In fact, I don’t consider crypto any form of investment.
Call me crazy, but it never passed the hard question test for me. The “why” never made sense to me. And I couldn’t track the entire digital “paper trail” of how it worked.
One thing’s for certain that has served me well: I stick to what I know and understand. Sometimes it makes me unpopular. But it never compromises my hard-earned investments.
So contrary to most of the media… When I heard of the news related to the crypto-fraudster Sam Bankman-Fried (SBF), I wasn’t surprised in the least.
Trust But Verify
Sadly, just like Elizabeth Holmes, SBF brought in quite a few well-respected and trusted names who brought in others.
Yes, even Mr. Wonderful, Kevin O’Leary, got a piece of the action. He was paid $15 million to promote FTX. Plain and simple, he was a “shill.”
Source: Twitter @rbradthomas
Now, I don’t blame Mr. Wonderful for cashing in on the million-dollar marketing paycheck. But what I don’t like is the fact that he was fueling the flame for unsuspecting hard-working folks by recommending FTX as an investment.
It has never been an investment in my eyes.
And the fact that Mr. Wonderful stated, after the fall of FTX, that he would back SBF again if he has another crypto venture in the future… It further drives the point home that he can’t yet face the music.
This is why I have no problems calling him a shill. Instead of facing reality, he’s digging his heals into his role as the positive voice for SBF.
I wonder what he’s thinking now that SBF was arrested on Monday. I will be looking to see if Mr. Wonderful changes his tune.
Another Unpopular Opinion
Now why did I call Mr. Wonderful a “shill” of all things? Years ago, I was writing a Forbes article on a real estate investment trust (REIT) called Empire State Realty Trust (ESRT) when someone called me a shill.
At the time, I had no clue what the word meant, so I looked it up. Here’s what it says on Wikipedia:
A shill, also called a plant or a stooge, is a person who publicly helps or gives credibility to a person or organization without disclosing that they have a close relationship with said person or organization.
Not a compliment…
ESRT was a non-publicly traded REIT at the time and there were legacy investors who didn’t want the company to go public. As a result, they were attacking analysts like myself who saw great potential for investors.
My close relationship with the management team was targeted in these attacks, and they ignored the answers to the hard questions that I was asking and providing my readers.
I wasn’t compensated in any fashion for writing on ESRT.
The company did end up going public and listing shares.
And because I knew the answers to all of my questions, I recommended it to my readers in my article on Forbes.
ESRT made money, and most importantly, those who followed my work made money.
Don’t Back Down
My team and I spend countless hours every week meeting with CEOs, CFOs, and CIOs, always looking to gain insight into financials, competition, and shareholder alignment.
And many times what we find is not what people want to hear.
As the legendary investor Benjamin Graham wrote (in The Intelligent Investor):
“You must thoroughly analyze a company, and the soundness of its underlying businesses, before you buy its stock; you must deliberately protect yourself against serious losses; you must aspire to ‘adequate,’ not extraordinary, performance.”
We’re all gamblers at heart. But it’s because of the mistakes in my own life that I was inspired to become an intelligent investor.
And part of being intelligent is humbly accepting when you don’t know something.
If you don’t understand it, don’t go all in on it. And DON’T recommend it.
Sam Bankman-Fried won’t be the last scam artist I’ll write about.
My job at Wide Moat Research is to be the one willing to look stupid and ask the hard questions so that you don’t have to.
And on that note, never hesitate to reach out to our team if there is something in my own recommendations that you don’t understand. You can always contact us here.
Remember we all make mistakes, and even the most intelligent minds can have the wool pulled over our eyes every now and again.
So speak up. Don’t back down. And ask the hard questions.
Happy SWAN (sleep well at night) investing,
Editor, Intelligent Income Daily
P.S. If you’re interested in more of my “unpopular” opinions and want to check out our team’s most recent portfolio picks – on a company where we do ask the hard questions – click here.