The Game of Speculating in the Marketplace

1 12 2008

The Natural Course is Up and Down

Authored by:  William Robert Barber

The market; be it equities, commodities, debt instruments, options, or any other tradable tangible or intangible is founded on one premise: A willing buyer matched with a willing seller, commission, tax, and fee obligations aside, the parties have entered a transaction that both believe is fair, equitable, or not; but, clearly to their benefit.

Often the catalyst that prompts market action (a beneficial transaction) is a speculator. This person or entity has discovered a potential positive market possibility and or even a strong probability either in the present or future and has decided to risk capital to gain a position between the willing buyer and seller; or to collaterally gain by participation in the before or aftermath of the transaction. Therefore, by means permissible under the law, this speculator enables a market placed opportunity; this market-action enabling is inherently an at risk of capital endeavor.

Enterprise the germ of all market action, by its inherent definition, is an at risk process. When one speculates in the market one places one’s capital at risk. One does so, theoretically, to gain a premium proportionate to risk. Nevertheless, investing in the market is an action that clearly is an act of enterprise; hence, an at risk proposition; that is ostensibly, executed in the narrow interest of a purported gain.

Salespersons licensed by the SEC have indoctrinated their clients into a fantastic journey of Peter Pan-like panorama; they have established a belief system founded on the premise of spreading the risk over a long-term period as the golden rule of investing. Note the word speculating is never used; a client of these licensed by the SEC never speculate they invest; and these clients do so for the long term in various market supported offerings so to diversify. Diversification and long term being the key ingredients of lowering the client’s risk. The sales pitch of ‘long term’ and ‘diversification’ is so feverishly implied (by the licensed salespersons) the words have invoked an all encompassing belief. Indeed, the sales pitch, is considered by many professional investors, as well as, the layperson, the salient definitive of a sound investment strategy.

Then all hell breaks loose. Guidelines once institutionalized as the essence of truth fall into the abyss, fingers point, investigations propagate, profane words dominate conversations; all are shocked by the money loosing events. Naturally, just about everyone is an innocent; it is the ‘others’ that dealt in the black art of speculation to the detriment of the majority of innocent investors. Everyone cries out for relief and any standing target is assaulted as complicit with the self-serving speculator who have willfully created an investment environment explicitly harmful to the public good and for their narrow economic benefit. Imagine that!

I think not. I believe that the natural course of any market is up and down; I also believe that corruption, dastardly deeds, usurpers of the rational/reasonable, crooks, too much regulation, not enough regulation, the unintended consequences of congress, the greed of the average Joe, and any other negative that one could conjure up is all part of the game of speculating in the marketplace. I also believe that it must be understood that governing regulators cannot; but, should nevertheless, always strive to eliminate unlawful practices within the market.

Life and living is a contesting scheme of never-ending action and counter-action, of contrast, contradiction, hypocrisy, ideals, consequences of cause and effect; as a result, so goes the market.

If one has confidence in the market place your bets if not put the money in your pocket. The finality of finalities regarding the direction of the market is up; either one believes my prediction or not the market does not care. The market will reward winners and penalize losers…The market has no feelings only results.

So stop the whining and the nonsensical resolve to enact more tinkering by governing edicts. Take direct responsibility for making the bet in the first place; suffer the loss or gain and get on with crossing over the next Appalachian because that what us Americans do.

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