Saturday, May 30, 2009

Money, Money, Money. - Stephen Green Explains Speculaton and Investing

The inimitable Vodkapundit, Stephen Green, put up a post on investment and speculation yesterday. He makes two very important points:

1. All investment is speculation.
2. The secondary market makes the primary market possible.

The first point is easy. You invest, but there’s risk. The higher the risk, the higher the reward sought. Everybody knows that one. You also should bear in mind that no matter how risky (or safe) an investment might be, you always always always seek to minimize that risk. That’s not just the invisible hand or whatever, that’s human nature. And it’s a good thing.

The second point is a little more subtle, but nothing difficult to understand. And it applies to both stocks and bonds. When you buy a newly-issued bond from GM, you’re the primary market. If I buy that bond from you, I’m the secondary market. And if I didn’t exist, you would never buy bonds from anyone.

He goes on to explain why the markets work the way they do, and why investors expect greater returns for greater risk.

If you have any money in stocks, bonds, mutual funds, pension funds, REITS or any other investment vehicle at all you are a speculator. If you ever buy a lottery ticket, you're a speculator (and not a very smart one).

Our president has taken to demonizing "speculators" and has justified turning established law on its head by depriving investors of their lawful rights to essentially confiscate their lawfully obtained property and redistribute it to his favored political constituencies, namely the United Auto Workers Union. This is a very slippery slope he has started us down and the people you would think would start taking him to task on this our esteemed fifth column fourth estate, the mainstream media are either silent or actively cheerleading for him. Until they decide to do their jobs, he's going to keep getting away with this and soon, we will have no property rights left. And property rights are the foundation of all our other rights.

Go read all of Steve's post.

Share |

No comments: