On the weekend I had a good talk with a good friend of mine and I asked, “what’s wrong with the US?” He said, “its easy, we are self-delusional.” I asked, “Really how?” He answered, “I sat down with a guy who was retiring from Ford in five years. He said he will be able to retire and enjoy his life. I thought, really? Good luck with that.”

I have had talks with other American’s and with some there was a blatant amount of self-delusion. I am not just talking about self-delusion to the positive, but also to the negative and on topics that don’t relate to finance. As my friend said, “whatever happened to helping the country?” What I think he is getting at is that people are loosing the big picture.

Here is an example self-delusion and loosing the big picture, Gary Bettman and the NHL. The Phoenix Coyotes are bankrupt (second time) and the RIMM co-CEO wanted to buy the team and move them to Hamilton. The NHL refused and it went to court due to the bankruptcy. In short the NHL won, but the NHL still has a bankrupt team in Phoenix. The first self-delusion is that ice hockey can ever be popular in a desert.  The second self-delusion is that the NHL is the best hockey league in the world.

In the wake of a shocking loss to ZSC Zurich in the Victoria Cup, the Chicago Blackhawks spent the remainder of Tuesday night looking for answers.
Tuesday’s loss, which came in a tight-checking, physical affair, erased all the good feelings engendered by a 9-2 win against HC Davos, the reigning Swiss champions, just 24 hours earlier.

What happened is that the ZSC kicked Chicago ass! And the NHL is shocked that one of *their* teams could be beat by a European team. The ZSC won the first European champion hockey league title, and are no push over.  The third self-delusion is that the NHL believes that they are more important than other events.

Evgeni Malkin and Alex Ovechkin have recently said they are playing in the 2014 Winter Olympics in Sochi, Russia, with or without the NHL’s approval.

"My initial response was, ‘Look at what I started by arranging for us to go to the Olympics in Nagano," Bettman said, joking. "But seriously, the fact is I understand the desire of players to want to play in the Olympics. I understand particularly when the host country is the country they hail from."

What the NHL has to realize is that the world has changed. If this financial collapse did one thing it is the changing of the playing deck. Bye bye sun belt expansion, and hello stick to your crowd. What was is no more, and what is, is the future. If you want to see how some have changed the playing deck?

The competition (Champion League football) attracts a huge television audience, not just in Europe, but throughout the world. The matches are broadcast in over 70 countries in more than 40 languages each year, and some important matches can attract over 200 million TV audience, often considered as one of the most watched sports events on TV

So who is not self-delusional? The NFL! They have done a fantastic job managing the league, and trying to sell American football throughout the world. Head over to the NFL wikipedia page and you see how things are organized.

Traditionally, American high school football games are played on Friday, American college football games are played on Saturday, and most NFL games are played on Sunday. Because the NFL season is longer than the college football season, the NFL schedules Saturday games and Saturday playoff games outside the college football season. The ABC Television network added Monday Night Football in 1970, and Thursday night NFL games were added in the 1980s.

How does all of this affect your investment? Very simple you want to buy NFL or Champion League type companies. Companies that understand where they came from, and what they need to support themselves. Companies that are not self-delusional about future growth and doing things for the sake of doing things. For example, I consider GM a self-delusional company, but Ford an NFL company.

What are the signs of a self-delusional company?

Growth for the sake of growth. To support a share price a company has to grow. There is organic growth and purchased growth. I am not against either one. I am for growth that is based on growing a business in the sense vision. Dell buying Perrot systems is a good example of good growth. The deal might not work, but Dell is trying to grow the bottom line by growing the capabilities of Dell. IBM buying SPSS is an example of good growth since data mining and statistics is where it is at.  Starbucks I feel is self-delusional. Starbucks is the result of the previous epoch, and trying to be anything else is silly. Starbucks has a 29 PE with about 10 to 15% historical revenue growth, but virtually no earnings growth.

I can do everything. This is a company that believes it is indestructible and thinks it can do everything. The best example of a company that falls under this category is Microsoft. They still to this day have not realized that they can’t do everything. On the other hand Apple is an excellent company that believes that it can’t do everything, but what it does do, it does extremely well.

Regular guidelines don’t apply to me. This is what I consider the most dangerous of all self-delusions. I don’t deny that certain companies can do special and out of the box things. But those things need to apply to reality. The best example of companies who believed they were special (and continue to do so) are many financial firms. I never quite understood how many believed that they managed to do away with risk. On the other hand you have people like Warren Buffett who are indeed special, and out of the box, but manage to keep their feet on the floor.

So if you encounter any of these tell-tale signs ask yourself are they self-delusional? If so stay away…