Why I hate investing

Jacob Redding — Tue, 16 Oct 2007 04:20:06 +0000

Investing is one of those great parts of a modern society that fuels its advancement and growth. Capital is funneled to people and businesses and used to fund their ideas and move them from thought and concept to the real world. Without investment many, if not most, of the items, services, and companies we use on a day to day basis wouldn't exist. The stock market has been a tremendous boon to investment as it dramatically reduced the transaction costs for investing and, coupled with modern day technology, has allowed small investors to pool together to invest in big projects.

Of course on the surface that's how it is supposed to work. I believe, wait no I fear that the stock market has had an unintentional side-effect of polluting the reason for investment with short-term greed.

Whole Foods has been in the news a lot lately because its CEO and founder, John Mackey posted negative viewpoints about the company "Wild Oats" on various investment websites. This is unfortunate because, although he is entitled to his opinion, Whole Foods recently purchased Wild Oats and his comments *may* have influenced the purchase price.

Mr. Mackey started Whole Foods in 1980 because he wanted to take the small mom and pop natural food stores and make them mainstream. He wanted to make a change in the way Americans shop for food and the way businesses act. Its become blatantly obvious that Americans wanted this change and, more personally, I wanted this change. Which is why Whole Food is one of the few individual companies that I own stock in.

I shop at Whole Foods and, knowingly, pay a premium for my food because I have faith that they have done the due diligence necessary to source their food as locally as possible and from reputable dealers. Whole Foods also ensures that their food is made with quality ingredients and doesn't contain unnecessary filler. For example I don't need high fructose corn syrup in my corn flakes; they are corn flakes! I also don't need meat with hormones or gluten in my sour cream. They are not a perfect company but, all in all, they are not bad and I support their momentum.

The biggest reason as to why I shop at, and invest in, Whole Foods came to me while I was visiting my Grandmother in King City, California; which is located in the Salinas valley. The city is surrounded by fields of lettuce, potatoes, artichokes, carrots, tomatoes, peppers,etc. You name it, it grows in the Salinas valley and is shipped all over the world. Sadly you wouldn't know this if you shop at the only grocery store in town; Safeway.

I am constantly amazed when I walk into the King City Safeway because I can't buy a locally grown artichoke, bell pepper, orange, head of lettuce, or any other local grown vegetable or fruit. And this is despite the fact that not more than 500 yards out the back of the Safeway is a massive field growing thousands of heads of lettuce and within a 5 mile radius most of the vegetables in their produce aisle are being grown nearly year-round. Sadly I see fruits and vegetables from Australia, New Zealand, China, Mexico and many Central and South American countries. Fruits and Vegetables that were picked before they ripened, placed in container bins pumped full of nitrogen then placed on planes or boats and shipped thousands of miles. All of this is done so that Safeway can centralize their produce purchasing/distribution and buy in massive amounts at the cheapest prices. This saves the company millions and only a few pennies, if anything, to the consumer.

I want the locally grown fruit and vegetables so I will pay the premium. I will shop at Whole Foods. I will shop at a place that *cares* about its local community and about the food it sells and not simply about the "bottom line".

This then brings me back to why I hate investing. Unfortunately despite the fact that Mr. Mackey has spent 27 years creating a great company and helped to bring locally sourced and organic foods into the mainstream some investors don't care. Investors tend to be short-term, fickle and only set their sites on a single item. The stock price.

I came across this article today.

The article starts off praising Mr. Mackey stating that he is a great businessman with high integrity and good family values. Then, after acknowledging that the Board of Directors supports John Mackey, states that he is in favor of firing him because the "scandal" may, emphasis on may, cause bad P.R for the company thus having a negative effect on the stock price. There may even be a lawsuit in which this "scandal" could be brought up.

This is why I hate investing. There are too many investors that only care about the stock price. They don't care about what a company is actually doing or the people behind except for how those actions or reputations would affect the stock price. Investment is supposed to follow a company and its actions not the inverse. In this scenario you have a company that is still producing quality products and service and this investor is reacting to an emotion. He immediately wants to get rid of Mr. Mackey to avoid any *potential* bad P.R that would then affect the stock price. However if P.R has an affect on the stock prices it is based on an emotional reasoning and has nothing to do with reality or the business itself.

People should be investing to encourage the company to move ahead and thus make a good return. The company has to do well first then the return comes after. In this case Whole Foods is still doing great and Mr. Mackey may not have done anything bad at all. If its found out that Mr. Mackey's action were horrific and the company is forced to replace them then the stock price should move as a new CEO may cause a dramatic shift in the company's direction.

Instead people are one-sided investing only for the short-term gain; which is purely emotion-based investing.

I love the American stock market and I truly believe that it was an ingenious device that has pushed the American society and the World forward at a pace that wouldn't be possible without it. I do believe, however, that it needs some serious retooling so that investors are encouraged to look at the company as a whole and reduce this emotion-based investing.