Catching Knives

Catching Knives

Catching falling knives (buying distressed assets) is tricky business, even the most seasoned investors get cut badly. The task seems relatively easy, yet perfect execution is a rarity. The challenge of buying on the low revolves around having almost perfect information. That is highly elusive, sometimes illegal, and in a multi-variable world with intense competition vying for any edge, almost impossible.

Investors hoping to scoop up additional alpha should leave the knife catching to the circus. Outfits like Ringling Bros perfected "the spinning wheel of death" so retail investors do not have to literally reinvent the wheel!

Rather, retail investors should consider playing to THEIR advantages over "professional money" like hedge funds, family offices, and AI-trading algo bots. Consider instead a boring, dollar-cost-averaging approach to building a portfolio over a LIFETIME with incremental purchases occurring multiple times a month.

By implementation of a dollar-cost-averaging approach, investors are constantly buying equites (and bonds) over a period of time that will have both highs and lows, and by default, greater position size will be purchased during selloffs and lower position sizes at the highs.

These DCA plans are relatively easy to set-up, and now virtually "free" with zero commissions. The rub of course, is always portfolio allocation...what exactly to buy? Portfolio allocation is critical to success.

Trepidation occurs when a portfolio has been built over some time and perhaps is no longer being built (ie inbound flows have stopped) and the portfolio is now in a "depletion phase," primarily used to pay for cost of living expenses.

The larger and older a portfolio gets, the more it is subject to short-term market forces, and also the temptation to make significant rash moves...this is exactly why this blog is a proponent of building a portfolio like a farm. 

Investors should have multiple "crops" ie baskets of equities whose cash flow can and should weather a financial storm(s). Ultimately most investing boils down to cash flow, so how are you building your cash flow? Do you have a repeatable process in place? Is your cash flow compounding? What companies are consistently raising their dividends? What are the best moats? What is the caliber of leadership in place? Can your portfolio take advantage of a higher Vix?

As previously mentioned, all these factors must be weighed because portfolio allocation is critical to success. This is why putting an emphasis on timing rather than process is dangerous; it skews the thought process from investing to gambling, and there is a significant difference between the two. Investors have odds in their favor, gamblers do not.

Catching knives is tricky business. For investors sitting on ready cash though it is deliciously tempting to go "all-in" after the market stumbles, and even more appealing after a tumble. Indeed, many great fortunes have been made in this manner (ie Rothschild family wealth was built off of perfect information.) If so compelled, have a playbook ready; know what assets you want to buy, at what price, and with what margin of safety this impacts your total portfolio.

AI Agents & Humanoids

AI Agents & Humanoids

The pace of AI Agent and humanoid advancement has accelerated to the point where human worker replacement can now be based simply on a payback cycle.  Many companies are activity "augmenting" their workforces with both AI Agents and humanoids. They are achieving sub-10 week payback cycles according to Rob Garlick, a tech analyst with decades of spotting definitive tech inflection points.

Stacked microprocessors, 3D printing, and battery innovations have all led to AI Agent and humanoid solutions. At this point, both AI Agents and humanoids can handle mundane tasks for hours, but given the exponential growth rate in development, increasingly more complex tasks are right around the corner.

If we look at the current workspace and ask "where are there shortages?" and "what is the remedy?" AI Agents and humanoids are increasingly the answer to both questions...humanoids can do many warehouse functions now, with increasing ability to assemble items. In short order, assembly should lead to construction / destruction activities like shoveling snow, mowing lawns, planting trees, harvesting crops, and building homes for example. AI Agents can already act as full travel agents, salesman, and diagnostic techs. Humanoids are coming online slower...albeit with greater potential impact for physical work.

Obviously there is a form/function relationship that doesn't necessarily dictate that all humanoids strictly resemble mirror images of humans...in fact, task specific robots currently performing niche duties most likely will retain their shapes, but have the added advantage of complex data storage, retrieval, and implementation functionality (think da Vinci surgical robots.)

It is hard to believe humanoid workers will help human workers for long before replacing them though, similar to how many Americans were forced to train their replacements in manufacturing offshoring. With labor costs accounting for the highest cost for most corporations, "hiring' humanoids makes smart corporate economic sense. Plus there is no need for health insurance, vacation, sick leave or the most dreadful of all...discrimination lawsuits which have morphed into a "mansion industry" (for both the attorneys and plaintiffs.)

Now companies can "hire" with assurance that their workers will show up on time, sober, fully qualified, and ready to work without complaint (essentially until they need a recharge or break.)

What industries are most suited to harnessing the power of humanoids? This author would argue that initially positions that require LESS dexterity and more DANGER are ripe for replacement. Along those lines, the global agricultural industry seems ideal for disruption.

Concurrent with the LESS dexterity and more DANGER filters for humanoid replacement of workers, AI should be able to successfully replace workers in positions with limited to no PHYSICAL activity like LAW, MEDICINE, and FINANCE. The one saving grace on these industries is "the human element." 

"The human element," or what Citrini Research describes as "friction with a friendly face," should provide a buffer for some (limited) time against the total replacement of a human worker by either a humanoid or AI Agent, especially if the product or service is humanistic...ie requiring human empathy, lineage, or connection to successfully deliver such services or products.

Without strong human relationships, though, the value proposition of whether an implied result is more important than a relationship will be at the forefront of the buyer, consumer, or patient. And to a lesser extent, the seller, producer or provider. How valuable is that "friction" versus getting the best price, service, or result?

Purchasing Power

Purchasing Power

Arguably the biggest casualty of the Vietnam War was on August 15th, 1971 when Nixon ended the direct convertibility of the dollar to gold. Since the United States abandoned the Gold Standard in 1971, the United States Dollar has lost 98% of its purchasing power. So after 55 years, for every dollar indexed to 1971, the American citizen is left with 2 cents. Hopefully, the United States never removes the penny from circulation...what would be the purchasing power of the dollar then?

Here at Invest Like A Farmer we have long been champions of owning gold, indeed we were among the first to suggest investors consider buying their own gold mines (in the form of gold mining claims.) Why is that? Investing ultimately boils down to cash flow. Cash flow implicitly implies a certain standard of living or purchasing power. Purchasing power over time is paramount, and gold is one of the best stores of wealth (toil) of any asset class. You do not want to have to earn your money twice!

Alan Greenspan once quipped that: "I can guarantee the amount of future Social Security benefits and for how long, but not their purchasing power." That is a very salient comment. At some point, cash flow needs to be tethered to reality, and that reality is purchasing power. Gold is elemental in its ability to store value.

For many Americans outside of the Baby Boomer generation the American Dream remains elusive, if not completely out of reach. It is out of reach because assets of high quality (read real estate) are in high demand with frequent hoarding by both generational wealth and corporation now. The world is awash in cheap goods and services labeled as "free" which collectively siphon off trillions of zinc pennies at a time.

Assets of true value are almost unobtainable for younger generations because: 1) there is an artificial shortage of housing (lack of supply for several reasons), 2) there has been virtually zero real wage growth in 50 years, 3) there has been an utter collapse in the purchasing power of the USD.

Since time immemorial governments have debased currency in the attempt to spend more than the currency can afford; some of the earliest known tricks were to make coins of lower grade gold or silver, make coins smaller, cut edges off, change from gold and silver to silver and copper, change from metals to paper that was redeemable for gold or silver, paper that was redeemable for nothing, and most recently electronic money which can have an infinite supply.

Much of the reason why America grew so quickly was an abundance of land and the California Gold Rush of 1849. The Gold Rush triggered one of the greatest migrations in human history. That also added in today's dollars TRILLIONS in "God's money" aka gold to the financial system. Gold is so powerful FDR actually criminalized the ownership of gold in 1933 via Executive Order 6102!

There has rarely been a better time to purchase or stake a gold mining claim in the United States. With gold trading at $5,000 oz-t. mineral rights on these claims can be worth millions of dollars in gold. Of course one must have sufficient knowledge, capital, and the willingness to work; but the average high school student properly trained, duly equipped and unleashed in gold country stands to make more in a week than an entire summer flipping burgers or mowing lawns.

As the Age of AI dawns upon us, many layers of work will disappear. Vast segments of labor will no longer exist. Promises of utopian society have begun to emerge with Universal Basic Income solving humanity's woes. The reality, however, almost always reverts to basic human nature of self-preservation and survival. Our bet at ILAF is that gold will have a central role in that future of protecting purchasing power.

$1T Land Deal

$1T Land Deal

As President Trump departs for Davos, it is becoming increasingly likely that the United States may purchase Greenland from Denmark with a price tag rumored at $1T. This land deal would mark the largest of the land deals ever completed for the United States.

The two largest previous deals being The Louisiana Purchase in 1803 from France for $15,000,000 (yes the same price in nominal dollars as a flashy Beverly Hills home today) and The Alaska Purchase from the Russian Empire in 1867 for $7.2M which was termed "Seward's Folly" under the belief the United States overpaid for a vast frozen tundra.

Greenland offers the United States, and indeed both Europe and Canada, the opportunity for increased defense against potential adversaries capable of launching intercontinental missiles that would fly over the Article Circle on the shortest flight path into the United States. Contrary to popular belief, this is not the first time the United States has attempted to negotiate for the purchase of Greenland. It is just the latest salvo, this time very public, of the United States trying to shore up its northern defense.

Indeed, the United States has tried to purchase Greenland on three successive occasions before; in 1867 by Seward, in 1910, and most recently in 1946 after World War II. All previous attempts had been rebuffed, with the latest after World War II cementing Denmark's control of a landmass FIFTY (50X) times its size, but 1/120th its population. 1946 was a missed opportunity, especially as the United States aptly entered the Cold War.

Interestingly over the past weekend, 8 NATO countries deployed troops to Greenland on the concern of President Trump's desire to buy Greenland. Yet these same countries for some odd reason have not deployed a single trop to Ukraine for an intense land battle with Russia which is entering its 4th year. Millions injured, hundreds of thousands killed, and complete societal change in Ukraine yet seemingly only Poland has stepped up to the plate.

The dynamics of the European mind are mysterious. Denmark acts like a domain squatter who has allowed use of a war prize from the 1300s to the United States to benefit it and Europe, while refusing to let the protector of Europe (USA) to develop this asset for global security.

Time will tell how the chips fall, but Denmark has the opportunity to cash in on an asset they have long done nothing with and provide the United States, Canada, and Europe with additional defensive resources.

Making Mistakes

Making Mistakes

One of the most unheralded advantages of hiring a professional is that you are paying for mistakes they have ALREADY made, and more importantly, hopefully have learned from...which is kinda disconcerting when professions like medicine and law are termed "practices."

Obviously the financial world is also a practice, one in which when you hire a professional, whether you realize it or not, you are also paying for their past mistakes...mistakes that SHOULD be very lucrative for you to profit from in the future.

Much of the "hustle" of modern retail investing has been a colossal marketing effort, well int the billions, to convince the investing public that: 1) Anyone can invest on their own, and 2) As long as you Index with Low Cost you can "beat the market."

Just like "free" may be the most expensive word in the English language, "Low Cost" has its problems too. Big Problems. But the former point deserves just as much, if not more attention. The combination of "anyone" and "low cost" has created a windfall for behemoth financial institutions like BlackRock (iShares), Vanguard (S&P 500 Index), and Fidelity (Mutual Funds) 

The unkown unknowns. Those are what new investors should be concerned with, along with the known unknowns of course. But what "big money" does not provide for the average retail investor, and what a seasoned professional in finance DOES, are answers and strategies for both of those scenarios.

There is a reason why 100% of large-scale dynastic wealth is professionally managed, and not typically by the heirs themselves with "low cost" solutions. Although paying a higher fee may not garner a higher return, it should most assuredly include "lessons learned" from said advisor(s).

One of the most important questions an investor should ask a portfolio manager he is thinking of hiring is: "What mistakes have you made investing?" Pay attention to that answer, and especially how that PM has learned from those lessons in running the practice.

Execution

 Execution

Execution is everything. For the vast majority of us, even a very successful life and career will be largely lived in obscurity, invisible to the larger world. It will involve grinding out small wins, the proverbial base hits for decades. In time, home runs and even the grand slams will happen, but mastering the craft and even getting on the field, will be paramount for stepping up to those at-bats and swinging at the ball.

The search for excellence, whether in investing, a relationship, or a career also is closely tied to execution. Excellence is found in repeated successful execution of tasks, muscle movements, and ultimately choices. Excellence is a process, a repeatable system with frequent feedback. In the business world, much of that process can be bought via something called marketing.

Marketing helps companies, and increasingly individuals, build their products and brands in the public eye thus helping achieve brand awareness that in the past was accomplished by repeated successful execution and word-of-mouth. The marketing cycle has increasingly been compressed into seconds with short video reels on platforms like TikTok, YouTube, or....Reels.

Andy Warhol once quipped that "...in the future, everyone will be famous for 15 minutes." Not only was he 100% correct, but the time element of viral fame is now as compact as 15 seconds. This leads to the question of whether attention to detail and successful execution even matter in a low-attention society. The answer of course is yes, and the following is why.

One of the best quotes on the subject of execution is: "Watch your thoughts for they become your words, watch your words for they become your actions, watch your actions for they become your character, watch your character for it becomes your destiny." 

Billions of humans are thinking trillions of thoughts and speaking a corresponding number of words, taking a subsequent number of actions, and becoming certain types of people. Not all seek excellence, but as Adam Smith famously theorized, we are all motivated by our own self-interest. This is what drives economic activity and humanity itself.

As we kick off the New Year and resolutions abound, it is important to remind ourselves of the value of owning our actions, mastering our craft, and focusing on successful execution...whether those wins are on the athletic fields, board rooms, or in the living room execution is everything.

Material Gains

 Material Gains

The clanging and clunking heard on New Year's Eve might not be just the celebratory noise of welcoming in the New Year, but rather a gathering of silver flatware, old coins, and inherited jewelry not to one's taste. 2025 saw one of the largest material gains in Gold and Silver prices in a generation. And as usual, the best investment, outside perhaps of Founders' Shares in Private Equity, were owning Gold and Silver.

The proverbial "rip your face off rally" in precious metals hinged on a long-simmering desire by large swarths of the population to own physical currency rather than "rag money." Here at ILAF, we have long championed the value of gold as a store of value and hedge against the stupidity and malfeasance of government. In fact, for some time we have tried to garner support for "The Gold Money Act" but to no avail. It is obviously far more efficient to debase a currency made of paper than gold.

Investors should be thinking long and hard about squirreling away KILOS of gold and silver. Given the run-up in prices though, it becomes increasingly dear to purchase on the open market. Fortunately for American citizens, and those intending to become citizens, there is a wonderful piece of legislation passed over 150 years ago called "The Mining Act of 1872" which shockingly is still in existence.

This law allows for those citizens and individuals wishing to become citizens to "claim" the mineral rights on Federal Land (not the land itself, but rather the gold, silver, lithium, etc) on said land for themselves. You read that correctly. It is virtually unknown outside of California, Nevada, Arizona, and Alaska. But the Mining Act is active in all 50 States. No where else in the world does something like this exist: Individuals can prospect on public land and retain ownership of unlimited found minerals.

Why is this important? Well rather than paying the spot price for Gold, say $4500 USD per troy ounce, you can file a mining claim for a couple hundred dollars and then have the rights to prospect (and keep!) for unlimited minerals on that land. For those who want to work, the gold is there. All it takes is some time to learn how to prospect, some basic equipment, the willingness to work hard.

Trump Accounts

Trump Accounts

The newly formed Trump Accounts offer a generational path forward to ultimately replace Social Security with individual retirement accounts.

Under whatever guise they may be called, we at ILAF have long championed widespread implementation of personal retirement savings accounts that could someday fully replace Social Security in the United States.

The newly formed Trump Accounts offer a viable path forward for generations to come that can offer individuals the opportunity to compound their wealth over time without penalizing workers with the heavy burden of Social Security taxation and misappropriation of said funds by Congress.

Of the many assets in life, time is among and perhaps the most valuable asset of all. The Trump Accounts leverage time by seeding the accounts early in life, in fact before the child is even aware of the account. The first decade then becomes a growth engine.

Assuming the government, billionaires, parents, grandparents, and even friends contribute and gift each child's account over the first 18 years of life a child now has a sizable nest egg at 18 to pursue a variety of either educational goals, buying a business, real estate, etc. or some combination therein including continuing to save and invest.

The time value of money and the power of compounding under the Trump Accounts is truly revolutionary and has been in wide practice for centuries with the nobility and modern day aristocrats who have seeded generational wealth the moment their progeny are born.

The Trump Accounts offer every American child now the opportunity to advance in life with prudent saving and investing over time. The constant drip method of dollar cost averaging over decades is tough to beat.

Just like the GLPs will add millions of life-years to the human population, the Trump Accounts will collectively leapfrog a generation of Americans in better standards of living with better education opportunities and career choices.

Hopefully the newly formed Trump Accounts will be a wake-up call for hundreds of billionaires avoiding just taxation by moving their assets to foundations rather than funding Trump Accounts for millions of American children.

Imagine the impact Warren Buffett could have if he honored his giving pledge by providing $2,000 to each Trump Account rather than positioning $50B with each of HIS kid's "foundations." That would be true impact investing! And Buffett is by no means alone.