RSS FeedA Guide To Investing In Recession
In January 2008, I began investing in the stock market.
I was asked to by my good friend – and fellow LawIsCool contributor – Lawrence Gridin, and I just couldn’t say no.
Except for ECON101 and a couple of books by Sachs and Krugman, I have no education in economics or finance. I understand the principles of supply and demand, elasticity, inflation, and comparative advantage. With enough effort, I can summon and apply these principles to elementary models involving apples and small integers.
But when it comes to the stock market, I tend to gravitate to those anecdotes of dart-throwing monkeys outperforming experienced stockbrokers.
In addition to my lack of training, I am not a gambling man.
I went to a casino for the first time a few months ago. In one night I lost $10 on a 5¢ slot machine. I still rue my loss to that noisy one-armed bandit.
At the time Lawrence asked me to begin investing, I had been following the sub-prime mortgage crisis closely. I am still fascinated by it.
The modern economy can express the folly of myopic greed so beautifully and measurably. A law student might even claim that it does more than reify our sins, but that it also dispenses justice, if it were not for the fact that not only the greedy now suffer.
Since January 2008, the stock market has plunged.
The S&P 500 is an index of the prices of five hundred large, publicly-traded companies in the United States. It is considered a bellwether for the American economy. It has fallen from 1468 points to a recent low of 682, or -54%.
So it was that at one of the worst times in history to invest in the stock market, I invested in the stock market.
Believe it or not, I have lost nothing.
More incredibly, ranked against 66,000 avid stock traders — the type who research, trade daily, and actually try to make money off it – I am in the 97th percentile. I beat virtually all of them. What have I gained? Since all that Lawrence asked me to invest was a bit of my time on a popular stock prediction website, I have gained nothing but a better view of the American consumer.
How did I, an uninformed novice, beat the vast majority of enthusiast traders in one of the worst markets ever? I focused on what I did know about the American economy and consumer.
I knew enough about the sub-prime mortgage crisis that it would probably infect the broader credit market. I knew that this would deepen the already existing recession by decreasing consumer spending which, in turn, would generally lower demand in the economy. I thought to myself, what do American consumers nonetheless demand when times are tough, when they’re stressed and unemployed, when property crime is increasing, when their house is foreclosed, and when uncertain political change is fast approaching ?
Answer: guns, drugs, beer, and cigarettes.
So that’s exactly what I invested in. My picks included Sturm, Ruger & Company, Smith & Wesson Holding Corp, Johnson & Johnson, Molson Coors Brewing Company, Anheuser-Busch, Reynolds American, and Altria Group.
It turns out my sardonic hunch was dead on; these companies and their ilk have defied the recession and done incredibly well over the past year, as demand for their products surges.
Will I start investing real money in my hunches? Since my conscience prohibits me from lending money to gun and cigarette makers, I’ll have to wait for now…
You can sign up at The Motley Fool – Caps to view my performance and make your own predictions. My username is ilovetogamble.
“If you don’t follow the stock market, you are missing some amazing drama.”
- Mark Cuban, American billionaire
Battle Over A Bottle, Beer: A Serious Thing In Canada…Eh
First posted on Commercial Law International on Feb 18, 2009.
If you didn’t know already Canadians take their beer very seriously. And I don’t just mean on the consumption side.
Brewing in Canada is a very serious business indeed.
This is where the story of Dead Frog Brewery and Sleeman Breweries Ltd. comes in. It is a litigation story of David vs. Goliath, where David might just lose this time – it is a litigation story after all. It is a suit centered on the intellectual property.
The David in this story, Dead Frog, is a micro-brewery – oh sorry, craft brewery to use industry speak – from Aldergroove, British Columbia (B.C.). This pint sized – pun well intended – member of the industry is showing no signs of capitulating, if anything Dead Frog is showing signs that it is sporting for a fight.
The Goliath in this story, Sleeman, is an industry giant – though admittedly not the largest – from Guelph, Ontario. The keg sized – here again, well intended – is the one that initiated the suit and seems dead set on defending what it sees as its rights. And what is it all about?
It is a battle over a bottle.
The thing is both Dead Frog and Sleeman use clear glass bottles for their beers. However, Sleeman, the more established brewery, is well known for its clear glass bottles. Sleeman initiated suit last June in B.C. alleging that Dead Frog is illegally using its clear glass bottle design.
Dead Frog for its part has responded with a statement of defence and counterclaim and as far as it is concerned Sleeman does not have a monopoly on clear glass bottles. Moreover, the beer loving public is highly unlikely to get the two designs confused as the logos embossed on the bottles are very different – a dead frog vs. a beaver – also given the prominence of the Dead Frog name and slogan on its bottles there should be no confusion.
Now I wasn’t going to comment on the merits of the case but given the above differences and the images I saw at Great Canadian Pubs and Beer of the two bottles side by side, I think I need to. What is Sleeman doing? The embossed dead frog is in no way close to their beaver design.
Even if Sleeman had a strong case – which I don’t see how it does – litigation could be a poor business decision. As this case progress’s it will no doubt pick up more press and Sleemans could, even if it is in the right legally, be seen as a bully. Although beer drinkers are well known for their brand loyalty, they are also well know for their sense of beer justice and they could sentence Sleemans to a period of isolation. Why, oh why, in these tough economic times would any one want, or even provoke the potential, for such a thing?
I must admit that I have never tied Dead Frog, in fact I had never even heard of it until this suit but I am sure it is a fine brew. However, how else do you explain a 300% growth rate while only in its second year of operation. It must be a fine brew indeed – at least some beer drinkers think so. Sleeman on the other had I am fully acquainted and fully enjoy – honey brown.
This suit is a lose, lose, lose situation. Even if Sleeman wins on the legal merits it will lose by being labeled a bully. Even if Dead Frog wins on the legal merits it will lose – the price of defending the case will come at the expense of continuing its fantastic growth rates. And no matter whom the winner is the beer drinker will be the ultimate loser.
