The Ambergris Factor

In the American whaling industry, which got underway during the eighteenth century, whalers slaughtered the giant Sperm whale for sperm oil, which came from the head and blubber and was important as a fuel for lamps. Another type of oil, called spermaceti from the head, became the chief ingredient in candles. While boiling up the blubber and parts of the Sperm whale, whalers occasionally noticed a very pleasing fragrance. It turns out this was a third oil-like substance, located in the intestines of the whale. Called ambergris, it became the basis for very expensive perfume. The problem was that the whalers found ambergris in very few of the whales they killed; nevertheless, the substance brought them a good income because the perfume manufacturers paid extremely high prices for it. So the whalers killed a lot of Sperm whales looking for those chosen few who had the right stuff.’ – The Fall of 1st Executive, by Gary Schulte
Must Read Puplava: We’re in the Final Phase of Another Market Bubble
Ladies and gentlemen, investing is a lot like whaling. Investors are constantly searching for that whale of a stock with the ‘right stuff’ . . . aka the ‘ambergris factor.’ Indeed, there have been many such ‘whales’ on the Street of Dreams since the Royal Bank of Scotland’s ‘sell everything’ advice at the January/February of 2016 stock market lows. The problem with some of these ‘whales’ is that they have become so large they are going to have a tough time continuing to grow at their previous rate; and, that’s the key, G-R-O-W-T-H. On Wall Street ‘growth’ is the pleasing fragrance that brings in buyers and makes stocks go up and way up! Moreover, growth and growth rates are what legendary investor Peter Lynch looked for in selecting stocks. As he explained in his book One Up On Wall Street, it’s all based on the arithmetic of compound earnings. To wit:

This post was published at FinancialSense on 08/07/2017.