Wednesday, August 17, 2016

The Speculator

November 30, 2009 by · Leave a Comment 

By Howard S. Katz, GoldSeek

My first financial newsletter was called “The Speculator.”  My dictionary defines speculate as:

  1. “to engage in thought or reflection;”
  2. “to buy and sell commodities, stocks, etc. in the expectation of a profit through a change in their market value.”
  3. from Latin, speculatus, observed, examined:

I have always liked the word “speculate.”  I enjoy the expectation of a profit made by buying and selling commodities and stocks.  And I understand that such profit can only be made by thought or reflection.

In this I am a minority.  You ask 99 out of 100 people who buy and sell commodities, and they will tell you that speculation is evil.  They do not speculate, they will tell you. They are investors.  However, to invest is “to put (money) to use.”    An investor puts his money to use by placing it somewhere it can earn a return.  That is, the investor is trying to avoid risk and so contents himself with the more modest returns he can get from such instruments as savings, accounts or blue chip stocks.  The speculator is tempted by profit and hence is willing to engage in the thought or reflection necessary to discover whether stocks and commodities are going up or down.  His profit is his reward for doing the intellectual work of discovering the truth.

Unfortunately, most people in the markets want the profits of the speculator, but they are not willing to do the work of searching out the truth.  They call themselves investors, but they act like speculators.  They act like speculators (buying and selling commodities and stocks in expectation of a profit), but they do not want to admit that they are speculators.

Poor fools!  How can you succeed at something when you will not admit to yourself that you are doing it?

We are now coming up to the end of the first decade of the 21st century.  Ten years ago I challenged all the stock mutual funds in the country to a race – the race of the century.  My current financial letter, the One-handed Economist, keeps a Model Conservative Portfolio.  We started out on Jan. 1, 2000 with a theoretical $100,000 (suitable for a person who wanted his money to grow for retirement).  In each issue of the One-handed Economist, I report on the Model Conservative Portfolio and make my recommendations on what to buy, sell or hold.  A subscriber who followed these recommendations faithfully from Jan. 1, 2000 to the present has seen his money grow from $100,000 to $180,000 (or a proportional amount if he started with a different amount of money).

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