Cal-Ban 3000 Grapefruit Diet

Do you remember the Cal-Ban 3000 grapefruit diet? In the 80s and 90s, it was a quick weight loss plan that included taking a pill you could buy for three easy payments of $19.99, eating grapefruit, and “watching the pounds melt away.” The commercials were on late night TV and made outlandish promises. If you remember that, you may recall it was a huge scam, the FDA sanctioned the company, and Cal-Ban went bankrupt. We all know the way to weight loss is to eat a healthy diet, exercise, and live a balanced life. However, no one ever talks about that. Why? It’s not sensational, it doesn’t keep anyone’s attention, and it doesn’t make quick money for the sponsor.

Well, the financial media is virtually the same. The talking heads are on TV “selling” quick ways to make money, including buying this stock and selling that stock. They sound convinced that they know where the market will go tomorrow. Why? Well, it’s similar to the quick weight loss industry—the promise of fast, sensational results simply sells. No one gets on TV and says to diversify, keep costs low, keep taxes low, and stay invested. That television ad would never sell anything because everyone wants a quick fix.

Like weight loss, financial success doesn’t happen overnight either. The media will always sensationalize any news to catch your attention, make you watch TV, and/or scare you. For example, here is a 1979 cover of Business Week. Look familiar? (Business Week – August 1979).

The headlines are similar right now, with words like “raging inflation,” “roller coaster equities,” etc. However, if you’d listened to Business Week in 1979 you would have lost a 40x return. In 1979, the S&P 500 was 100; today, it’s 4000, which means a $100,000 investment, when the media said the markets were “dead,” would be worth $4,000,000 today. Along the way, a lot of bad things have happened, but in the end, practicing sound long-term investment planning and management would have won out.

The same thing will happen (though we don’t know how or when) going forward. Keep in mind that the down markets recently are mostly the result of a tech stock meltdown. We’ve been talking about tech stock valuations for a few years now and how many of the names have prices that defy gravity. At the start of the pandemic, many novice investors decided they would start trading stocks. The markets roared back, and individual investors were making money. The more money they made, the more they invested and gambled. However, all investments have a fundamental value, and that value is now being recognized by the market. As a result, many names are down 50-80%. Some of them, arguably, are still overvalued!

So what should be done? At Bluerock, we’ve maintained a diversified approach for many years, which includes technology, but also includes non-tech stocks that have fared extremely well. We’re “value” investors, meaning we like to purchase parts of the market that are unloved and cheap. The best way to make money is to buy low, of course, but you also don’t want to lose huge amounts of money … which is what many investors are doing right now.

Also, keep in mind our portfolios are down due to general market sentiment, not because we bought a stock (like Rivian) and saw it plummet 90%. We won’t opine on individual stocks, so who knows what will happen to Rivian in particular, but broad market portfolios reduce the risk of losing money permanently, which happens frequently with individual stocks.

As always, we appreciate your trust and patience, and we welcome any questions you may have. Meanwhile, try to ignore the financial media and reduce the number of times you check your long-term portfolio.