Is It Time to Take Risks?

The art of business is shrewd anticipation. This is particularly true in a speculative business like betting on the future values of secondhand machine tools, but almost every person who lives, works or invests in the American capitalist economy is forced to place some kind of bet, even if they push their worldly belongings down the street on wheels.

My question today is: WHEN should I place my bet? Playing poker, I’ve always wondered why people make big bets early in a hand as they gaze at only partial information visible to them. The bluff has a residual value in competitive poker, but usually not in business.

I look at my betting options today at Graff-Pinkert & Co. and think I have only three cards in a five-card game. I have a fair idea about what is left in the deck, but I am quite fuzzy about how they will be dealt out.

But like most people who play the game of business for big stakes, I always want to stay in the game, because you never know when a big opportunity–“The Royal Flush”–will suddenly appear.

The obvious cards in the deck today are those being dealt by the jokers in Washington. I think the outcome of the election makes some kind of deal likely by mid 2013. We know the deal, if it comes, will mean higher taxes for most people and some curtailment of Federal spending including military. Normally, this would spell “business slowdown” but not necessarily today because businesses have been extremely cautious for several years. Clarity may bring investment. If you know the rules of the game you are more likely to play and make bigger bets.

I have been intrigued recently by the apparent indifference about the likely expiration of the accelerated depreciation provisions December 31, 2012. If there was a comfort level in the economy, Graff-Pinkert‘s clients would be rushing to buy capital equipment before the end of the year. But they seem to be sitting on their checkbooks.

My father often told me the story about the decision he made in 1949 to liquidate his successful screw machine business. There was a mini-recession in that year and he and his partner Aaron Pinkert, scarred by the Great Depression, wanted to salvage the money they had made. They sold their National Acmes and New Britains for $2000 each. One year later, after the Korean War began, when they were back in the machinery business, they were paying $12,000 each for the same machines. What this story told me was that by the time all of the cards were visible it was too late to make big gains.

I had an interesting talk with a very sharp client of mine recently. He hired an investment advisor for $24,000 a year to feed him ideas about investments. His guy looks for overvalued or undervalued commodities and then proposes bets based on his findings. When I talked to him, his guru felt corn at $8 per bushel was too high and he recommended a sizable bet on a company that would make a lot of money on ethanol if corn fell. So far he has been right.

November 13, 2012. The pace of the poker game is picking up. Cards are being dealt and hands are being played. Most people are kibitzing around the table, but the intrepid ones are betting on imperfect information and intuition. My experience tells me that we are heading for a 16 million car year by 2014. That means good business in the screw machine world I live in. Time to place some bets? Man plans, God laughs.

Question: Is a state lottery evil?

Lloyd Graff is Owner and Chief Space Filler of Today’s Machining World, and Owner and Chief Space-Filler of Graff-Pinkert & Co.

SHARE THIS

Share this post

12 thoughts on “Is It Time to Take Risks?

  1. David Dillion

    The lottery is a volentary tax on the mathematically challenged. I am embarressed that our schools are funded by lotteries and cassinos.

     
  2. Nick Bloom

    One man’s gamble is another man’s free ride. The stock market is fraught with corruption, insider manipulation, and too many variables beyond the typical investor’s control. OPM is the ultimate free ride. That’s why Wall Streeters make millions without creating any value. No matter if you win or lose… they always win… just like the house in Las Vegas. But assessing risk in the world you know about is not a gamble. It’s a matter of applying your experience and cross referencing conditions and investment with potential outcomes. I’ll bet on what I really know every time and leave the wall street risk taking to the gamblers. Is a state lottery evil? Yes. But it’s somewhere on the first ring of hell and far less evil than the fraud (the 8th ring of hell) practiced by wall street

     
  3. Jeff Adamson

    I whole heartedly agree with Nick regarding Wall Street. I participate on Wal St. with my 401K accounts and feel that I am being used so others can make money. On the other hand, I don’t particpate in the lottery because I am not mathematically challenged. However, I do benefit from it because it pays for things in my state that I am not being taxed on.

     
  4. Rick

    Betting – gambling in general – and its success is based on people’s acceptance of losing. With the results of the prior Presidential Election, it’s not difficult to see that at least half the people in this country are not afraid of [continuing to] losing [lose]. The road to Hell is paved with good intentions…along with a few casinos as stops along the way!

     
  5. Keith

    I read somewhere once that the odds of winning the Publishers Clearinghouse Sweepstakes were a bit worse than the odds of being struck by lightning – twice – on the same day. I never play the state lottery by myself. However, I do sometimes play at work due to psychological coercion. When the Powerball jackpot gets high enough, the others in my office all pitch in and buy tickets together. No matter the odds, if I didn’t join in and by some evil miracle everyone I work with got stupid rich and left me to work alone, well… you know. Bang.

     
  6. Ray Frattone

    “The Lottery seems to play most heavily to the people with the least money to play with” “The Lottery and the bottle return are always co-located in the grocery store, for instance.”

     
  7. Steve Horn

    The lottery is a tax on the poor. They play because they see a very dim ray of light that they will never get to. It’s to bad that the gov’t is involved in such a Ponzi sceam.

     
  8. Derek

    I play the powerball when it gets high….someone will win eventually. I don’t feel that’s dumb to play $2-10 on occasion.

     
  9. hanktbd

    State lotteries knowingly sell a product which damages the lives of those who purchase it. It is a subtle form of stealing from the poor or the ignorant. Shame on us as a nation for promoting this kind of junk.

     
  10. John "Jack" Frost

    How much money was dumped into the market place in the last four years. Wall St, Ins Cos.,GMC and GMAC used the U.S. Treasury as a piggy bank to sustain their operations. Will the dollar be devalued in the next couple of years. Possibility. The Obama administration plans to cut back the military by one million spaces. But to off-set that Obamacare law requires the establishment of 159 new bureauacracys, from full blown agencies to standard boards and committees. Staffing is estimated at 200,000 to 300,00o new federal career employees. This takes one helluva of a bite in the tax receipts. Should you invest in inventory, of high value items, only if you are sure that the new secretary of the treasury knows hope to file a tax return and that the rest of the new ones have the maturity to deal with the world as it is and not some product of that utopian eden that seems to emerged in the last four years.

     
  11. Jeff Pfingst

    Yes the lottery is evil. If you hold an apple in front of a starving man, he’s going try for it.
    It’s tax on the poor. Yes, it’s their choice, but the government pushes it and the poor get poorer. Then my taxes go up to take care of them. The USA is gone as we know it. I’m going over to the winning side. I’m going take what I can get, I’m now a socialist.

     

Comments are closed.