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Invest with fortune makers, not tellers

Investing is like reading tea leaves for many people. They try doing it themselves for a while, then decide they do not know how to read tea leaves, so they go to a fortune teller.

Others reverse the process and go to a fortune teller first, decide they see very little correlation between what the fortune teller tells them and pure chance. Now after becoming wiser, they decide they do not need to waste money on a fortune teller, and take up reading their own leaves.

Hopefully, folks do not take fortune tellers seriously and realize there is little science in reading tea leaves -- even though the fortune teller may put on a great show. Unfortunately, investment advisers can be like fortune tellers, and many unwary investors are drawn to a great story.

But who should you believe -- the successful-looking confident acting person dressed in a $5,000 suit, wearing a $10,000 watch, driving a $200,000 automobile and living in a New York city penthouse, or an unassuming average-looking fellow, wearing a worn suit, living in the same average house where he grew up in Omaha, that admits he makes investing mistakes? Bernie Madoff or Warren Buffet? Admit it: You would invest with Bernie!

Unlike fortune tellers, fortune makers (good investment advisers) rely on a combination of good science, fundamental and technical analysis, experience and gut feelings that come from applying the previous components over time and working to put those findings into your portfolio rather than putting money into a couple models. They learn to ride the wins and minimize the losses. And they strive to recognize changes that may become trends.

Some examples:

The ability to extract natural gas and liquid hydrocarbons, such as propane and octane, from shale is a game changer in the world energy markets. It is believed that if properly developed, the U.S. could be a net energy exporter in 10 to 20 years and the LNG (liquefied natural gas) terminals that were planned five years ago so that the U.S. could import gas may need to be reconfigured to export.

If the new hybrid cars that can be recharged on household electricity are successful in penetrating the automobile market, what effect will that have on U.S. electrical energy consumption? What new equipment will be required and which companies will make it? What will that mean for traditional gas stations?

Most of us know that incandescent bulbs are going the way of typewriters and buggy whips, but is it evident that the compact fluorescents that replaced them are already being replaced by LEDs?

More and more movies are being shown in 3D TVs, and while 3D TVs had weaker sales than expected this Christmas, what about next year when the 3D TVs can use the same $2 glasses that the theaters are using instead of the $150 glasses now required? Think of the bandwidth required as more and more folks stream movies to their home theaters via Netflix or its competitor.

What opportunities will this present? Will the governments, U.S. and Europe, use inflation so they can pay off today’s debts with cheaper currencies in the future? How will that affect your cash, pensions and Social Security? How will the real estate market work off its excess inventory?

The fortune tellers will tell some great stories about all the possibilities.

The adviser fortune maker will help identify the trends and sectors that seek to lead these changes and help increase returns based on revenues and profits of companies. They will also assist to identify companies that are slow to change and help reduce exposure.

Is your investment adviser a fortune teller or a fortune maker?

Lea Smith Johnson, a certified financial planner, can be reached at 462-2731.