Another post from the archives. Originally posted August 4, 2018 as a follow up to the Colgate post. Enjoy.
Tell me what you believe and I shall buy that stock.
You might be wondering why I own so much Colgate stock when I don't even use Colgate toothpaste. Or any toothpaste for that matter.
Isn't that weird?
Doesn't that go against one of the top rules of investing to buy stock in companies whose products you like and believe in?
Yes.
But in this case, it's not about what I believe or encourage others to believe that matters. It only matters what most people believe.
I will probably never buy toothpaste from Colgate. I know it's unnecessary. But as long as most people believe that their toothpaste is required for healthy teeth, and their dentist tells them, they will use it, buy more when it runs out, and I will profit off of their belief.
My dividend is safe as long as they don't get it.
My dividend is safe as long as they keep blindly believing "expert" authority figures that advise them to use Colgate and similar toothpastes.
My dividend is safe as long as they don't think for themselves, or do that dreaded thing called “do their own research.”
If they did, hooo boy. My portfolio could be in all kinds of trouble.
Not just toothpaste
There are many other companies in my portfolio whose products I would never recommend you to use. In fact, I believe that a great deal of them cause more harm than they do good.
WTF? Why would you support companies like that?
People have called me out on this before. Like leather jacket wearing vegans protesting my choice of lunch.
I'm in the stock market to make money, not to save the world. To be fair, I tell people all the time what I have learned, and why I don't use toothpaste, but most people don't listen to me. I can even SHOW my teeth, and TELL the story of how I went to the dentist after three years and she said, “Wow, your teeth are probably the cleanest I’ve ever seen,” yet people default to thinking my teeth are rotting. I just don’t know it yet lol, one day it’ll all catch up. Meanwhile, they brush every day and just got back from getting a cavity filled.
They would rather listen to their dentists.
Can't blame them for that, though. I am certainly not a dentist.
It is my desire to stop people's self-inflicted suffering. But I seem to have no ability to do that. It’s up to them. In the meantime, I don't see why I shouldn't take advantage of the social situation.
The Avian Flu scare
In 2012, I stumbled across NVAX, a company that "creates tomorrow's vaccines today." I put it on my watch list.
It piqued my interested because there was a lot of news around Avian Flu spreading fast in Asian countries, how dangerous and deadly it was, and how it could spread and become a worldwide epidemic - and these guys were developing a vaccine for it.
Twice before, NVAX seemed to have reacted to news of large outbreaks of the flu. Following news that a massive outbreak may be possible, NVAX shot up like clockwork.
I figured that if it had happened so many times before, why not this time?
I was making this prediction based only on how I thought people would react to the news about Avian Flu. I knew nothing about the company's financials, leadership, products - all things that an investor should look in to. I was speculating based on how I thought people would react to the news.
I mean, check out some of these headlines and excerpts. Sounds kinda scary, right?
Uh oh, flu season is upon us. We better start getting our flu shots.
Yikes, those are some high numbers in the strain codename.
Wait, what? That's not good...
Uh oh, it's starting... I sure hope those experimental vaccines work out.
Nice! Looks like the seasonal flu vaccine works after all!
Now take a look at the NVAX chart. The horizontal line crosses the vertical line at May 6, 2013, the day I wrote the post in the Learning Markets group. NVAX closed at $2.16 that day.
The stock climbed steadily until January 2015, essentially doubling when news of an outbreak in Taiwan started hitting the markets. Then it fell, fell, and kept falling until it was below the post date.
Isn't that amazing? It's almost like the price of this things was entirely driven by how people were feeling, or how scared they were about the Avian Flu, instead of rational investment decision-making. Then, the company fundamentals brought investors to realize that the company wasn’t worth the hype.
But would I take NVAX’s Avian Flu Vaccine? Nope. No way Jose.
Gardasil
Merck has done wonderfully as well. What they are doing with Gardasil is ingenious. Essentially, they have been slowly increasing the market size for their best-selling product Gardasil by influencing public health recommendations.
When Merck first introduced Gardasil, their target market was limited to adolescent girls who were starting to become sexually active. They lobbied a little bit, and now public health officials recommend that both adolescent girls and boys get the vaccine. This essentially doubled the revenue generation potential for an existing product, meaning no additional R&D spend.
Now, Merk is asking the FDA to approve Gardasil for adults as well!
Again, this would more than double the potential revenue generation at very little cost to the company. If they can pull it off, that would be amazing, for the shareholders; the people that believe “expert official guidance” will lose.
This strategy works because it goes deep inside the minds of their customers, speaking directly to their greatest fear: their child becoming sick and dying. What sort of careless parent would risk their child's life? And why not get it themselves for additional protection as adults? Can’t be too safe, right?
One thing's for sure. I'm sure as hell not going to my doctor to ask for the world's most popular HPV vaccine, but I will be watching for the FDA's decision in October.
Maybe I'll even buy some more MRK before then.
Your belief has value
It does not matter what I believe. I'm just one person.
It does matter what my neighbor believes.
It does matter what my friends and colleagues believe.
It does matter what you believe.
It's not what I believe that will keep sales of toothpaste, Gardasil, or the flu vaccine strong. It's what the masses believe.
Of course, I'm doing my part to tell people not to fall for these things that are doing more harm than good, but until they decide to figure it out for themselves, I'm happy being just one of the guys collecting a dividend.
What else can I do?
By the way, this is one of the happenings this story is based on:
I Feel a Need, a Need for Need
You are a director of a company that provides a much needed and highly regarded service to your clients. But sales are sliding. You need to find a way to maintain shareholder value, and fast. But developing a new product can take years. What will you do?
2023 Update
I hope you enjoyed this post. I can’t remember if I actually bought NVAX or not. I didn’t actually buy Colgate either. I found it hard to bring myself to do these things because of what I knew about the products being sold. Betting against humanity did not seem like a very smart thing to do. But it would have been very good for me financially. These posts are written from the perspective of a free market speculator, such like George Soros, who explains that’s how he operates his business in his 60 Minutes Interview.
Ever since I was introduced to Information Warfare in high school and saw its deadly effects, I have been struggling with that question, “What else can I do?”
I still do not know the answer, but I keep coming back to the logical reasoning that more people need to know this or that proper information. My success rate with that has been very low. As mentioned in the post, most people will ignore what I say because I’m not credentialed. So the thought then becomes: Get credentialed.
Then I see many credentialed people sharing information that get ridiculed and/or de-credentialed because what they say does not align with the marketing. Some people even go as far as becoming physically eliminated. So then the thought becomes: Get power.1 And this is what G. Edward Griffin Suggests.
I hope you enjoy his wonderful presentation, An Idea Whose Time Has Come.2
-Arjun
PS: You may have heard in your mind, as you read this, “Power corrupts, and absolute power corrupts absolutely.” If you put that into practical application, it means that people in power will always be corrupt, and the little guy will always get stamped on. The little guy, who believes this saying, though acutely aware of the atrocities of corruption, rejects power so as to not become the stamper of the little people. He remains powerless, nothing changes, and the little guy is stamped to death.
At least his salvation is safe, right?
Well, I shall paraphrase the wisdom of Jesus:
“The man who knows the problem and does nothing will receive a greater punishment than those who do not know they are creating the problem.”
—Luke 12:35-47
If the link is broken, message me and I’ll update with a new one.
Thanks, Arjun, for always asking "What else can I do?"