Investment Lessons Based on Seinfeld

Humor can be the best teacher!  Have you ever considered the life lessons portrayed in a Seinfeld episode?  Many can be applied to investing. We have highlighted a few notable episodes below.

Next year marks the 25th Anniversary of the pilot episode for Seinfeld.  Like the classic shows that came before it (Cheers, M*A*S*H*, and The Andy Griffith Show), Seinfeld offered countless life lessons throughout its many seasons (180 episodes in all).  This article focuses on investing lessons that can be gleaned from the trove of treasures that is Seinfeld.

The Stock Tip Episode

In this episode, George knows a guy who knows a guy that has a tip about an up-and-coming investment named Sendrax. 

Lesson:  Before you invest in stocks, make sure you can stomach the volatility.  Jerry couldn’t and sold out at the bottom.  George waited it out and did quite well.  Bonus lesson:  Make sure your source isn’t breaking the law by giving you an illegal “scoop”.

The Bottle Deposit (Part I and Part II) Episodes

In these episodes, Newman “discovers” that refunds for bottles and cans are available in some states, and are double in Michigan. Kramer assures Newman that he’s crunched the numbers and it is impossible to get enough cans and bottles so that a trip to Michigan can be profitable. That is until Newman has access to a free U.S. mail truck!  Says Kramer: “A free truck? Oh boy, that completely changes our cost structure. It goes down fifty percent.”

Lesson:  Game changers, like free transportation, can make a big difference.  Today, a game changer may be the shale gas boom.  If the U.S. becomes a net exporter of energy, our energy cost structure could change significantly.  Companies that consume oil and gas in order to operate their business could benefit greatly for many years.

The Yada Yada Episode

In this episode, characters skipped over the details of their stories by saying “yada, yada, yada”.  “She, uh, went shopping for some shoes for the wedding and, yada yada yada, I'll see her in six to eight months.” 

Lesson: When making investment decisions, pay attention to the details. For example, if you are buying a mutual fund, know who is making the investment decisions, how much experience they have, and what type of expenses you will be paying.  Uncovering the details can help you make good investment decisions and avoid bad ones.

The Reverse Peephole Episode

In this episode, Kramer wants his friends and neighbors to feel more welcome by being able to look into his apartment through the peephole and see what he’s doing.

Lesson:  While not suggesting that you reverse your door’s spy hole, it is important to be able to see what your investment managers are doing with your money.  Some of the biggest scams and poorest investments occur when there is a lack of transparency. If transparency is not there, your money may not be either.

The Label Maker Episode

In this episode, Kramer and Newman battle over a game of Risk.  Newman is holding onto his territory in the Ukraine, while Kramer lectures him, saying “Do you know what the Ukraine is? It's a sitting duck -- a road apple, Newman. The Ukraine is weak. It's feeble.” 

Lesson: International stocks are cheap, but not weak.  As the U.S. stock market has rebounded very well over the past 4+ years, international stocks have lagged significantly.  With the European and Chinese economies showing signs of improvement, international stocks might be heading into a period of outperformance.

Summary

When making investment decisions, keep these lessons in mind as they might help you avoid mistakes and identify opportunities.  While these are valuable lessons, there are likely many more.  The next time you watch reruns, perhaps you will find even better examples. And, just as Seinfeld would say: “Not that there’s anything wrong with that.”