How Wall Street is Similar to Las Vegas

“Wall Street is a gambling house peopled with dealers, croupiers and touts on one side, and with winners and suckers on the other.”
–Nicholas Darvas, “Wall Street: The Other Las Vegas”

I am in Las Vegas for FreedomFest, “the world’s largest gathering of free minds.” Among our hundred-plus speakers and several thousand attendees are wealthy investors and top-performing money managers and investment writers, including Donald Smith, Alexander Green, Peter Schiff, Bert Dohmen, Chris Versace, David Norcom, Jack Reed and Adrian Day.

Members of the media often portray investing in the stock market as a gamble, like playing roulette, blackjack or poker in Las Vegas. While there are some similarities — top investors are often good poker players — there are plenty of differences.

One important rule every gambler learns is that the longer you play, the more likely you are to lose, or to see a winning hand turn into a losing bet. The odds are against you continuing to win. The casinos weren’t built with winners’ money.

But in the stock market, if you invest in a fundamentally sound company, the longer you hold on, the more likely you are to make money. Sometimes you buy a solid company and it goes down in price, but if you stick with it, it will eventually recover and give you a profit.

As Dick Davis said, “The best way to put odds in your favor is to invest long-term.”

Casinos represent the leisure consumer industry. Based on the rise in casino stocks such as Wynn Resorts, Las Vegas Sands and MGM Resorts, that industry is booming. But most of the stock market is in manufacturing, mining, technology and finance — all part of the capital markets.

You Blew It! Why the Roads are So Shoddy in America

“For a country where everyone drives, America has shoddy roads.” —The Economist, June 28, 2014

The latest issue of the Economist discusses one of the consequences of Keynesian economics: America’s crumbling infrastructure. By stressing consumer spending as the driver of the economy, the government has failed to maintain its capital investment. As a percentage of gross domestic product (GDP), the United States is way behind most other industrial countries in terms of investment in roads. We spend only 0.5% of GDP on roads. Even Russia spends more, percentage-wise.

I’ve traveled the world, and I can tell you that Asia and Europe have much better roads than we do. I defy anyone to find any pot holes in the United Kingdom or Europe.

Meanwhile, back in the United States, our state governments hire only the lowest bidder and only for one year, making it difficult to invest for the long term in roads and highways. In many ways, our highways and airports are “third world.”

The Federal Highway Trust Fund, which funds a quarter of spending by states on infrastructure, is running on empty. As the Government Accountability Office reported, “The problem with the trust fund is that it’s not funded and you can’t trust it.”

Now is the time to rebuild our transportation system. Otherwise, we are going to be left behind. We have great shopping malls, but getting there can be a headache.

In case you missed it, I encourage you to read my e-letter column from last week about Benjamin Franklin’s Independence Day warning. I also invite you to comment in the space provided below.