Meaningful Returns

It’s no secret, at least not now that I’m publishing this on the Internets, that Craigslist is far and away my favorite website. Maybe Atlantis doesn’t exist (I don’t know maybe it does?), but we have Craigslist, and honestly I think that’s way better.

Craigslist is a great place to find things to buy. Some of these things are junky things that should honestly not get sold at all and just be burned in a dumpster fire. Some of these things are actually really nice things that you would like to have that are incredibly overpriced. And some things are good things at decent prices. And some things are great things at great prices. I could just say, there is a wide spectrum of value and prices.

In this way, Craigslist is akin to the stock market. The assets involved are very, very different (all analogies break down at some point), but the idea of there being a spectrum of value and price and a medium of exchange–this is a pretty good way to think about the stock market. If you’re an expert at Craigslist like I am (not shy about this), you know pretty well how to stay on the portion of the spectrum which is best, somewhere between good things at decent prices and great things at great prices. I’ve purchase a number of vehicles in this manner, as well as golf clubs and several pieces of furniture.

But you know what? It’s nearly impossible to find Toyota Tacomas on Craigslist that are in good shape for anywhere approaching a decent price. And this is because the Toyota Tacoma is generally considered by people in the know to be the greatest possible value in used cars. And since so many people know this, to find a great truck at a great price has at least as much to do with luck as it does skill.

And this is where the analogy is most strong, because for some reason many of this country’s brightest minds go to work each day looking at financial assets (stocks and bonds, broadly) and identifying not only the Toyota Tacomas of the market (maybe this is like an IBM–(this is not investment advice)), but also the junky things that maybe should be burnt but that they instead buy thinking things will change and the junky thing can be sold to someone else for a profit. And because they are spending all day doing careful research on all sorts of things about these companies and their financial assets–just like there are people who spend all day on Craigslist–it becomes harder and harder to figure out how to consistently buy and sell the right things at the right time for the right price.

So, while I will continue to think Craigslist is the best website in existence, I don’t think the stock market is a place where most people can consistently make good decisions about buying and selling individual financial assets. Low-cost, broad-based, index-tracking funds that are held for long periods of time is the way to go for most people.