You are the one that offerered the equity information in the first place. I figured I would genuinely try to help you in real time without charging you a fee. However, we can write about make believe gators and roosters if you want as it doesn't matter to me.
Let me ask you this. What is a reasonable rate of return on your investment? How about on cattle, pigs, grain?? Now index that return with inflation. Ya Ya I know about gold and inflation.
Inflation and the dollar are key. Most people have a different idea of inflation than I do. The feds take a basket of goods and price the goods in regional markets then take an average to calculate the CPI which used to be indexed at 100 in 1967. Besides not including important products or commodities or services, they leave out food and energy. However, inflation to me is when the government prints new money not retiring the outstanding money, thus they increase the money supply. I think of it as a company issuing additional stock, like in a secondary offering, thereby diluting all outstanding shares. With all things being equal, a company will earn less per share when new shares are issued. Therefore, when the governement issues new dollars through new debt instruments, not only do they have to find buyers...they dilute the outstanding dollars. For example, if I have $10K cash saved in a bank since 1980 and it earned an average of 6%, one would normally think the real return may be something like 6% - 3% = 3% after inflation. What they fail to tell us is they also increased the money supply drastically. The $10,000 cash may show a balance of $20,000 but what will $20,000 buy? Very little because of all the new money diluted the older dollars. When the money supply increases, older debt is usually easier to pay back because most of the time the payback occurs with diluted dollars. This is where the trick is...the payback is in diluted dollars.
To answer your question, a reasonable rate of return is a relative term. A group of gators compared to diversified farm animals should bring a reasonable to higher above average return. If you were the only gator farmer in your area your return would most likely go up. If you were to buy out your nearest competitor that owned 10 gators, your return would move up as you either increased volume or moved margins upward.
As you know, cattle, pigs, and grain are commodities. They can usually be shopped which is not good for margins and good for the citizens. The farmers growing these items usually do not make profits but their assets are allowed to skyrocket because of the tax laws. A banker will allow a successful farmer not making money to use assets to buy John Deere machines values at $500K. Put it this way, the normal investment return is gauged upon increases of after tax profit. A farmer shows generally no profit at all. In order to hit these types of returns in the markets, you would obviously would have to hit an occasional 1,000 percent gainer every other year or so.
Again...please explain to me what is wrong with diversification? The one chicken,fish ect.. :roll: .. doesn't fly.
Allow me to put this is make believe land for you. I have $100K I need to invest, and for this example, let us say equities. I place $10K each in 10 equities. Now I am diversified in equities. If one company goes bankrupt like Enron, I still have $90K plus appreciation or depreciation in the 9 remaining equities. Also, if one sector of the economy goes down 20% and the other sectors of the economy move up or are stable, I don't lose my shirt and it softens the blow. Over time, I am supposed to make about 11% per year before inflation and before the dollar dilution after the feds printing new money, and before taxes, and before currency derivatives are calculated, you get the idea. Do you see a pattern? We think we are making 11% but what are we really making?
You have to move large amounts of cash, relatively speaking, in and out of winning investments at the right time to compensate for all the new dollar dilution and the other above items I previously mentioned. Or...if you are a farmer, move into land and not show a profit and hide your assets on the books. It is much easier to move $100K (usually a larger investment) in one equity position, monitory the equity after flying out to the company, inspecting all the company literature, etc. You can spend all your brain cells on one position and make a return to pay for the dollar dilutions. If you are diversified, can you afford to fly to a company to check out their operation? Usually not.
