The Best Investment Advice From Rock Stars
I’ve been a rock ‘n’ roll fan my whole life. And we are an opinionated lot.
Of course, when you consider that Laura Nyro, Run-DMC, Public Enemy, ABBA, Donna Summer, N.W.A., Gene Pitney and the Bee Gees are all in the Rock and Roll Hall of Fame and Yes, Steppenwolf, Jethro Tull, The Moody Blues, Dire Straits, Pearl Jam, Roxy Music, The Doobie Brothers, Bad Company and Little Feat are not – well, it’s hard not to get your back up.
(And don’t get me started on how Rolling Stone left “Mississippi Queen” off its list of the 500 Greatest Songs of All Time.
I know, I know. Rock ‘n’ roll and money management don’t generally mix.
After all, these are folks who trash hotel rooms, drive Cadillacs into swimming pools and then wake up one day and ask, “What do you mean I don’t actually own my songs?”
Still, it’s possible to pick up an occasional nugget.
For instance, I recently heard aging rocker Joan Jett discussing one of her greatest financial regrets. At the height of her career, she adopted the highly principled stance that she didn’t take “corporate money.”
(I never knew it spent less well than the noncorporate kind.)
Of course, it isn’t particularly brilliant to turn down a king’s ransom from potential tour sponsor Anheuser-Busch (NYSE: BUD) when three-quarters of your audience is quenching their thirst at the Budweiser tent.
Jett seemed to recognize this in hindsight. In a recent interview she said, “You know, I turned down millions of dollars and yet – in all these years – I’ve never had a fan come up and say, ‘Thanks for not taking all that corporate money, Joan. That really meant a lot to me.’”
Lesson No. 1: An Anti-Corporate Attitude Is Not Conducive to Wealth Accumulation. (Spread the word among Sanders supporters.)
Of course, many people never accumulate wealth because they spend every penny they make, plus whatever else they can jam on their credit cards.
If your outgo exceeds your income, your upkeep becomes your downfall. Rod Stewart recognizes this.
He recently said, “I’ve always loved clothes. I love Zara. I went into one in Rio in Brazil and bought four pairs of trousers, three shirts and a couple of jackets – 220 bucks… My son, right, he goes down to Ralph Lauren and buys a pair of shoes for 600 bucks. I said, ‘Go to Zara, what is wrong with you?’”
(Stewart, incidentally, was endorsing frugality, not Zara. He added that the most attractive look for a man is not a particular line of clothes but fronting a rock band. “Being a singer you could really pull the birds,” he said. “It didn’t matter what you looked like.”)
Lesson No. 2: All Investment Begins With Saving. Live Beneath Your Means.
One rock star with the Midas touch is Sammy Hagar. In addition to the riches he earned as a solo artist and as lead singer for Montrose, Van Halen and Chickenfoot, he is a serial entrepreneur. Hagar has made millions from apartment buildings, a chain of mountain bike shops, a travel agency and a fire sprinkler business.
He also founded the Cabo Wabo restaurant chain, as well as Sammy’s Beach Bar Rum. However, he truly knocked it out of the park with his Cabo Wabo Tequila.
This high-quality brand is made by a family-owned distillery in the Mexican state of Jalisco. It quickly developed an enthusiastic following – Hagar was soon selling 140,000 cases a year – and an investor offered him $10 million for the company.
In his memoir Red: My Uncensored Life in Rock – not for the faint of heart – Hagar agreed that $10 million was a big, round number. However, the company was thriving and he had no compelling reason to sell. To his accountant’s utter dismay, he turned the offer down.
It wasn’t a bad move.
A few years later, Hagar sold an 80% interest in his tequila brand to Gruppo Campari, the world’s sixth-largest spirits company, for $80 million. He later sold the balance for another $11 million.
His total take: $91 million.
Lesson No. 3: Don’t Be in a Hurry to Sell a Good Thing. (In the stock market, this is commonly known as “letting your winners run.”)
Savvy rock stars also do whatever they legally can to minimize their taxes.
As a kid, I was a huge fan of the British Invasion: the Beatles, the Stones, the Kinks, the Who. But as a youngster, I never understood why all these Brits were so-called “tax exiles.”
I should have gotten a hint from George Harrison’s song “Taxman”:
If you drive a car, I’ll tax the street
If you try to sit, I’ll tax your seat
If you get too cold, I’ll tax the heat
If you take a walk, I’ll tax your feet
By the mid-1960s, Britain’s top tax rate was 83%. As Rolling Stones guitarist Keith Richards noted, “There is no difference between a tax rate that high and being told to leave the country.”
So the Stones did, leaving Britain to collect 83% of nothing.
Lesson No. 4: Tax-Manage Your Affairs – and Especially Your Investment Portfolio – to Minimize the Annual Tax Bite.
Follow these simple steps and you may not be a rock star. But then, you won’t spend your golden years playing weddings and bar mitzvahs either.
About Alexander Green
An expert on momentum investing, value investing and investing based on insider activity, Alex worked as an investment advisor, research analyst and portfolio manager on Wall Street for 16 years. He now runs the wildly successful Oxford Communiqué, ranked as one of the top investment newsletters by Hulbert Digest for more than a decade. He is also the author of four national best-sellers: The Gone Fishin’ Portfolio, The Secret of Shelter Island, Beyond Wealth and An Embarrassment of Riches. He shares his wisdom in his free daily e-letter, Liberty Through Wealth.