The Lie That Is “Diversification”
The Lie That Is "Diversification"
I listened religiously to the conventional wisdom that was rammed down the average American’s throat that “diversification is the only free lunch.” What a lie! After watching my hard earned, frugally preserved money filched away by the fraudulent excesses of corporate governance and oligopolistic collusion, I learned that “diversification… as is taught and applied in the mainstream is at best a hurtful half truth and at worst an insidious cabal by evil banksters, politicians, and brokers set on ruling the world (maniacal laugh). Here is my new found truth.
“Diversification is a lie because self determination (pursuit of happiness) is only possible with individual control and diversification inherently diminishes one’s ability to control its diverse elements.” For every degree that diversification increases, one’s ability to control those elements decreases. This decrease in your ability to control inherently undermines your ability to choose how that ownership satisfies your will defeating the purpose of having ownership. Inability to control also inherently diminishes your ability to specialize and achieve excellence in whatever it is you do. From economics 101, we learned that it is this specialization that provides competitive advantage.
What the hell does it mean?
-It means when I exhibit influence on publicly listed companies by voting the shares of stock I own it’s for board members I don’t know, auditors I don’t trust, and policy decisions I deem irrelevant to my future dividend.
-It means I don’t exhibit any corporate governance or control over any of the S&P 500 companies that I supposedly own within an index ETF when votes on employee pay take place or what investments the company makes or policies the company adopts.
-It means my proxy’s in mutual funds and index funds are non vocal or worse easily bribed and coerced to believe bullshit like “preserving top talent” to detriment of those whose interest they are hired to represent (sound like congress?). Being low level management in many organizations I’ve found that ownership is defined best by ability to control. If I don’t control I don’t really own and am subject to other people’s will.
-It means we Americans have over diversified our “ownership” and not only diminished any theoretical mathematical benefit of decreasing downside risk by sacrificing a smaller upside potential but in fact ensured the downside potential. As our “ownership” is diminished through diversification so too have we diminished our ability to control.
-It means that I don’t want to own part of a company with slacker owners. You could be allowing our mutual interest to be trumped if your ownership stake is being voted by a silent or bribed third party like a mutual fund. Since I don’t have the buying power to compete with funds and billionaires and only by unifying can our ends be achieved if you are slacking then I should NOT own part of that company with you.
-It means I can’t trust the market.
-It means I can’t trust the government (no links necessary).
-It means society breaks down when individuals stop taking responsibility. The popularized version of diversification has made it nearly impossible for responsibility in the stock, commodities, derivatives, bond markets to be taken.
[email protected]#$ it, I’m moving my ownership off the grid.
The truth of diversification.
Diversification can be effective, if you can ensure these following factors exist,
-Ownership [you have ability to control/influence the business and its management/execution… good luck finding an individual stock where shareholder interest hasn’t been marginalized—let me know if you do]
-Free/fair market [enforced regulations and justice system that diminish fraud and protect ownership rights—now that’s not NYSE]
-Skills sets & diversity of thought [Consilience is the unity of knowledge and diverse knowledge and skills is generally accretive]
My new diverse & controlled portfolio focuses on diversifying within my span of control.
-businesses/jobs I own with diverse customer bases
-rental properties I own across geographies, social stratum, and purpose
-Individual stocks I can own to a large enough degree to influence [Can you effectively exercise ownership of more than five/]
-learning skills & knowledge to handle a monetary collapse, an energy crisis, or complete disillusionment of the tin foil cap sort
I’m on the fence with fiat foreign/domestic sovereign debt and secured loans tied to identifiable assets with people I trust using a trustworthy form of payment since loans inherently divest one of direct control and I don’t feel I can trust debt based fiat currency where markets and monetary supply are manipulated to the degree we see. If you can’t trust treasuries then we have bigger problems to deal with than return on investment (ROI). Are US treasuries secured by the US government’s ability to tax a bankrupt society secured enough for you? I think we have bigger problems to deal with than ROI.
You can’t achieve the benefits of true diversification unless you are willing to accept the responsibility of controlling your ownership stake.
Own your shares, own your politicians, own your money, own your life. There are two types of people in this world—Those who own and those who are owned. Be the owner, debt is slavery.
mcafeejs – wow! Great post.
Unfortunately, many have assets in 401-k’s, IRA’s (not self-directed) and trusts that often stipulate against departure from "conventional wisdom" and acceptable "portfolio ratios."
jerrydon10 suggested: (in another thread)
It is quite legal to hold any asset in a trust including physical gold. The only exception is when qualified money (IRAs, 401ks, etc.) interact with a trust.
Assuming there are no retirement accounts that need to be stretched, physical gold is fine. If retirement accounts are involved and you wish to stretch them for your daughter, then only an IRS approved storage facility may hold the gold.
You will comply with fiduciary duty so long as your actions are to benefit the beneficiary rather than yourself. The latter is called "self dealing" and could get you in trouble. Is the gold being held to benefit your daughter rather than yourself? Then you are not self dealing and fiduciary duty is in compliance.
Thanks, this type of conversation is most welcome.