There Are Some Popular Wall Street Myths That Can Cost You Big

Postcards from the florida republic: An independent and profitable state of mind.

There are only two worlds in our solar system where liquid rain occurs. The first is Earth, of course.

We could really use some water falling from the sky down in the Florida Republic. There’s a rather nasty drought in Lee County right now, and we’ll gladly take all you can send.

The second rainy world we know of is Titan – the largest moon in Saturn’s orbit.

But it doesn’t rain H2O there, it rains… methane. Temperatures are so low, around -292 F°, that methane falls from the sky as liquid.

It gets weirder - or better, if you’re a big-eyed Texas wildcatter…

That rain runs to liquid methane/ethane seas the size of Lake Ontario. In those lakes and seas alone, there exists 300X – three hundred times – Earth’s oil and gas reserves. At the moon’s equator, the frigid “sand dunes” hold more fuel than all the Earth’s coal reserves.

Huh – I always thought that stuff came from dinosaurs…”

If you think back to grade school, a teacher might have told you that all the Earth’s oil came from dinosaur fossils. But I’m sure Jurassic Park wasn’t orbiting Saturn…

Oil didn’t come from dinosaurs; it comes from plankton. But that didn’t stop Sinclair Oil Corporation from using a Brontosaurus as its mascot on its logo.

It’s an old myth. It’s easily disprovable with just a little bit of research. But in a world where gossip and headlines dominate the narratives, it’s easy to find yourself repeating the fable, buying in.

There’s more information out there than most people can keep up with. And when it comes to the markets – noise and misinformation are absolute killers.

Let me explode some expensive mainstream narratives for you…

What’s Actually True?

We’ve swept away the dinosaur oil myth, but before we get to the markets, let’s briefly cover a few things that you might have thought were true… but they’re not.

These Are Some of the Costliest Myths Around

Believing those myths won’t necessarily wreck your finances,

but what about Wall Street myths? What about technical analysis and the way mainstream investors go about understanding value?

What if I told you that using price-to-earnings (PE) ratio to decide if a stock is cheap… is the wrong metric to use?

What if you read an article that says a real estate company is paying a 14% dividend and is a great retirement stock? Buying a double-digit dividend without doing homework on the company paying it can leave you at the mercy of a “dividend trap.” Why? Because shady and/or incompetent management can offer unsustainably high payouts to try and stay a step ahead of onerous debt or a dead business model. That “great dividend” will get cut even faster than the share price declines.

What if a coal producer was trading for less than its book value and looked like a deep discount? Would you buy it? Think twice because you could well be overlooking a government regulatory policy that might cut the future value of the business in half.

Would you sell a stock just because executives also sold the stock? Or would you overlook the fact that one-event selling by executives could be something as simple as the CFO needs to pay for his child’s college.

There are incredible myths out in the market.

  • That “investing is gambling…”
  • That the stock market is just for the rich…
  • That high priced stocks will go down…
  • That bonds are always safe…
  • That higher risk means higher returns…
  • That you should invest in what you know…
  • That private equity-style investment is only for accredited investors…
  • That it’s safer to keep your money in savings…
  • That investing is time consuming…

And every one of them is incorrect, the product of decades of crowd-sourced nonsense that ends up keeping you on the sideline while institutions make money hand over fist.

At the Florida Republic, we love to quantify everything. We are always looking at little-known metrics, technical momentum indicators, valuations, and major macro indicators.

But we also must qualify. We must ask, “Why are we being presented this opportunity today?”

One thing wealthy investors do is look gift horses in the mouth.

In the coming months, you’ll start seeing real on-the-ground insights as I start traveling outside the Florida Republic for some of the best long-term ideas we can bring home.

Don’t believe everything you hear on the surface. Don’t take everything at face value. There’s a lot of homework to do, and we’ll start tackling big ideas as the summer heats up.

 

Stay alert,

Garrett Baldwin

Florida Republic Capital

(Available on Substack)