Pot calling the kettle black

Steve Coll (The Syrian problem, New Yorker, May 30) may be right about the cruelty of the leaders of Syria and Libya but one should look in the mirror before commenting on how others look. The U.S. has installed and supported in the past, and continues to do so today, worse dictators than Assad and Gaddafi. Mobutu and Pinochet were the creations of CIA and the Chinese rulers have not hesitated in shooting peaceful protestors and uprooting millions of their citizens with little compensation. Not only that, by Coll's own admission CIA continues to "covertly fund" and foment trouble in peaceful countries. With due respect, till the Americans have stopped supporting all dictators and sheikdoms and their government can make sensible laws like medicare stick and can pass a budget that can save the country from eventual bankruptcy, comments like Coll's amount to nothing more than a pot calling the kettle black.

Is stock market a casino?

I spend a lot of my time ‘playing the market’ as some would call it or ‘investing’ as I like to think of it. Several of my close friends have entrusted their retirement funds to me and I feel responsible for their well-being now and in the future. There is no way any responsible person will bet the life’s savings in a casino or on a horse no matter the odds given by a bookmaker. But I have placed whatever was put at my disposal in the common shares of publicly trading companies. I give a lot of thought to the construction of each portfolio and watch the performance almost daily, even when I am on a vacation. My friends expect no less.

The methodology and philosophy behind my ‘investments’ has been described elsewhere. The purpose here is to differentiate stock market with a casino and to point out what can make it like one. The all important difference with betting on a horse or on a roulette table is that buying common shares are NOT an all or nothing gamble. The shares often go down, to be honest almost as often as they go up, but it is rare that they disappear. You live another day even after a major shake down and the possibility of recovery is strong if the initial purchase was based on careful research. My experience over last forty years is that the biggest losers of this year are likely to be the big winners of next year. That is the main argument for buy and hold philosophy advocated by Warren Buffet.

Not to say that stock market can not become a casino. There is the obvious case of trusting your money to a version of now notorious but once admired Madoff who promises the earth and then disappears with your money or loses it altogether on extremely risky ventures and you are left with nothing. Similarly, you could buy an option to buy a stock at a certain price on a certain date and if the price is below your exercise price you have lost all your money. Only slightly better, and most common reason for ‘investors’ losing everything, is to leverage your money, in other words ‘margin’ your account, i.e. borrow from the broker to buy more stock than you have money for. When the market is on an upward tick you are laughing but on the day of a major downward shift you lose it all – all your gains and most of what you had to begin with and are lucky if you don’t end up owing broker some money. Margin accounts are promoted by brokers because they greater generate income: in interest charged on borrowed money as well as bigger commissions on higher trading volumes. Another way to lose most or all of your money: buy shares of a speculative venture recommended by your buddy in the bar and find that the venture never got off the ground and money disappeared as did the promoters.

If you have money but no intention to learn the ‘trade’ of investing on the stock market or in many of the other avenues, your have two options. First, put money in the saving account in a major bank. The interest after tax will not cover the inflation and the money will shrink in value but it will not disappear altogether unless the whole economy collapses. In that case it wouldn’t matter what you did. If you chose this option, please learn from the tragedy of Iceland banks and avoid foreign banks promising unrealistic interest rates. Other and better choice is to find a financial manager you can trust. This person must have been operating for at least a decade to have seen and learnt from the usual ups and downs of the market and should be either someone you know first hand and trust or an associate with a major institution which will cover your losses against dishonest practices. Check on the performance every few months and discuss the results with your advisor. If you are not satisfied, look around for recommendations and move the account to someone else. Doing nothing in such situation could be a recipe for disaster.


Seen on a church post:

When God saw you it was love on first sight.
A cynic's response: There is no accounting for some tastes.



You are getting old

When others enjoy the cool and you shiver.