Volatility is the enemy: the difference between an investor and a speculator

Would you go into business with an investor who would only invest in your venture for a few hours- or days?

No. Not just no, but hell no. Business isn’t something that ebbs and flows by the minute, hour, day, week or even month- business is a planned program to make money over a period of years, based on some sound business model. Like- make something that people want, for less than it costs you to make.

Pretty simple stuff. So, if you are wondering why the wheels are falling off the American economy, and affecting the global economy, it’s because the idiots running the zoo decided to allow a legal casino run our financial markets.

Instead of investing in a company because it makes great products that fill a need, and boost human productivity with creative, innovative, distinctive products like Apple, we’ve allowed entire industries to be build on speculation about the rise and fall of share price based on popular opinion and the prevailing wind.

When we stopped using supply and demand to set prices- but instead let speculation about how high or low the price could be based on emotion, instead of fact- we get what we have with the oil futures markets.

Now that the price of fuel, which is directly related to the price of everything else, are on the end of a string attached to yo-yo’s running an emotional betting parlor, we have thrown all standard business models and our economy into the trash, just so people can profiteer from fear instead of intellectual and professional business discipline.

The news of today’s oil sell off sums it up:

Oil price slides as sell-off continues – CNN.com
Perhaps just as significant as the declines is the sudden increase in volatility. Prices whipsawed by more than $10 Tuesday and by more than $7 Wednesday…

The Labor Department said consumer prices shot up 1.1 percent last month, the second fastest pace in 26 years. Rising energy prices accounted for two-thirds of that increase, which was far worse than expected.

We need to put a clamp down on the commodities markets and on the stock market. Unless you are in the business that uses the fuel, you can’t buy futures. No more middle men, no more gambling.

You buy a future- you use the fuel. You sell it, you can’t buy more.

Quick end to this craziness.

In other words- no investing in a business for a minute, hour or day- financial markets are for long term financing, not a bookie’s window.

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1 Response

  1. Greg Hunter July 18, 2008 / 5:41 am
    Unless you are in the business that uses the fuel, you can’t buy futures. No more middle men, no more gambling.

    Geez Dave I need fuel to put in my car to do “business” so I guess I have a right to invest in fuel.

    Lets try another model – If you were one of the people who for saw the innovation of Apple and “bet” on the stock, then you would be in early and when the stock went up past the logical point of its rise you would sell. PS – I sold Apple, because while there products are great the long term reliability of the two Ipods I have are questionable, so at some point I will short this stock. How is a commodity any different?

    I have been saying for years that Oil is worth more than it is currently being sold for in the open market and I made the bet, while the rest of the world is just now learning the lesson. Oil has allowed people to disconnect from the natural world but that pipe dream is coming to an end. Unless the American, Chinese and Indian economies collapse, buy Oil on the dips as a hedge against inflation. Why would you want to take that right away from me?

    If you really think about it the dollar is not backed by gold, but on how much energy “work” you can get from each and every dollar.

    We have already gone over the cliff – you can either relax and enjoy the fall (me) or flap hard (David) to no avail.

    Brilliant or Bozo? Thumb up 0 Thumb down 0

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