Thursday, May 14, 2009

Being a Speculator

There is a difference between speculating and investing. In his book, Enough. True Measures of Money, Business, and Life, John Bogle, the legendary founder of The Vanguard Group, writes that business over the last 75 years has focused "on the gradual accumulation of intrinsic value, derived from the ability of our public owned corporations to produce the goods and services." This he called investing.

We have been speculating, the opposite of investing, more lately. Bogle defines speculating as "short-term trading, not long-term holding of financial instruments-pieces of paper, not businesses-largely focused on the belief that their prices as distinct from their intrinsic valued, will rise." Shorting, betting that the market will go down, is largely what speculators do.

Often times we hear sayings such as "cash is king." When I hear this saying I often wonder which mindset does such a statement derive, from that of a speculator or an investor. While cash may be king it should be about how that cash is gotten to the detriment of what and whom. Speculating often includes shorting the market in the best that stocks will fall. Often times such is the precipitous for their decline.

While short selling is legal, it seems like it also shorts away the actual lives, savings, and retirements of average Americans while they give banks billions in bailouts that speculators short while living large and our beloved country and its average people suffer. People, this is not love of country! It's love of money, power (financial kings in their unwholly kingdoms) and the pure game! The whole thing seems like a big racket!!!

I've been reading the likes of Jesse Livermore and Nicholas Darvas, big time opponents of shorting stocks, for some time now and following the markets closely. Back then there were less players. Now, there are way too many! Bogle is right about the necessity of ethics in these matters and the necessity of investing and not merely speculating! We have had way too much of the latter lately!

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