077: Confessions of an Artificial Intelligence Hedge Fund Manager: Howard Getson

Why do I advocate investing in real things like real estate and precious metals instead of stocks, bonds, and mutual funds? Because I understand them and they are, for the most part, predictable.

I understand that, when I buy an apartment building, people have to pay me rent. That property might go up and down in value but as long as I’ve got a pretty good margin of safety, the rent and income that I receive on a monthly or yearly basis is pretty predictable.

Apartment buildings are also a pretty good hedge against inflation. Rents go up in an inflationary environment and so does the value of my property.

Similarly, gold is an excellent hedge against inflation. In the Roman times of Christ, an ounce of gold bought you a toga and a nice pair of sandals.

Today, an ounce of gold will buy you a nice suit and a pair of shoes.

Does that mean that I NEVER invest outside of the cash flowing real asset paradigm? I wouldn’t say never.

Again, the reason I like real assets is that I understand them and they are, to a great degree, predictable from my perspective.

But that’s my perspective and someone else may have another perspective that allows them to have a competitive advantage in a different type of investment paradigm.

I don’t begrudge anyone who uses the advantages they have to their own advantage. In fact, when I take a step back at my broader investment philosophy it is this, “invest in things where the cards are stacked in your favor”. By the way, that’s why I love life settlements! ()

Now I’ve never felt that the cards were stacked in my favor when it came to the equity markets. In fact, I really don’t believe they are stacked in any retail investor’s favor. We are all gamblers at the casino and the casino always wins.

UNLESS–you have an “unfair advantage”. I remember watching a documentary a few years back about the MIT blackjack team–basically a bunch of math whizzes who went to Vegas undercover and cleaned house by counting cards and using other computer generated algorithms to win.

I’m not a gambler. But if I could count cards like the MIT Blackjack team I’d be at the casino because, again, the cards would be stacked in my favor.

So how does this pertain to you?

You’ll find out in this week’s Wealth Formula Podcast where I interview Howard Getson, the founder of an artificial intelligence based hedge fund called Capitalogix.

This might be just enough to finally convince you to pull out of the markets!