It feels less awful…and it works
By Daniel M. Ryan
Unlike Bertrand Russell and mathematics, no famous speculator has ever dared to say: "I like stock speculation because it is inhuman." Perhaps because, unlike math, stock speculation is too closely tied to how us humans tick. Also, there's a saving certainty in mathematical results once the techniques are mastered. I need hardly explain that said certainty is utterly lacking in stock speculation, or even in investing. Last six months' gyrations should be enough ipse dixit for that point to carry. Not to mention the various bad names hurled at anyone who really puts brain to grindstone in this field.
Back in the audlen days, those names were easy to laugh off. Many even internalized them. What made it easy was the difficulty in learning the ropes: many of the greats came in as naïfs themselves. Thus, the ostensibly crookish remarks involving sheep and slaughters really were the result of a kind of hazing. The guys who chuckled over the fate of the "new mutton" had been shorn themselves – and some had seen their portfolios outright slaughtered. The "bad boy" culture was largely composed of old hands who, at some point in their careers, had let their wallets get too close to the grindstone.
Nowadays, though, there's a complication that's making for a real taint – one that might be harder to laugh away. Many of the recent gains that have been wrested from the stock market – in specific securities – have been directly or indirectly caused by government rescue plans. I'm not trying to insinuate that government efforts have made for easy profits; that's been far from the case. Anyone who leapt into First Solar right around Obama's inauguration day would have gotten in at around $140, and would be barely breaking even right now. Anyone betting on Ford would have been in a profit position right now, but only after a gut-emptier that saw the stock sunk close to 50% below its price as of December 12th. Obama stimulus-betters who went with a less exotic issue like U.S. Steel on Inauguration Day would still be sitting on a loss. So would the buyer of a bank-stock ETF. The rescues/stimuluses may very well have been corporate welfare, but "speculator welfare" they were not. The February "Geithner spill" made this lack very clear.
Some astute traders, though, have made quick profits. Many strong-stomached investors might very well make large longer-term profits from taxpayer-assisted rescue/stimulus/boodle initiatives. Despite the well-worn rep of speculators as inhuman, there's some guilt beginning to show around the edges. Case in point, from last October: a trader who made lotsa quick money by betting on J.P. Morgan Chase when it shot up higher than it is now. This fellow felt so guilty over his score, he said he would donate the profits to charity. His self-remonstrance is here.
Despite stereotypes of "American greed," I have yet to see a similar case of any of my fellow Canadians doing the same thing. Poking through this website will unearth share-aiding boondoggles like this one. The stock in question hasn't done all that well since the deal's announcement, but a quick trader would be sitting on a profit right now – one got in co-operation with the Canadian taxpayer. It's ironic that the Canadian punter, but not the American, would be red-blooded enough to say: "stick it – I pay taxes too!"
Nevertheless, these trends tend to slowly seep over the border. It's foreseeable that an anguished Canadian might do the same thing: guiltily confess a profit garnered from tax money applied, and remorsefully vow to donate the profits to a worthy charity like a homeless shelter or the Liberal Party.
Rather than endure that anguish, there's a better solution which'll redden bloods on both sides of the border. Speculation, and even investment, requires a necessary detachment from the warp and woof of everyday politico-economic life. That's why so many investment professionals are sized up as shifty (and politically vulnerable.) This detachment, as hinted at above, is usually learned the hard way: it's harder to feel through a scar.
Thankfully, in this post-modern world, there's no further need to face the hard choice of herd-recklessness versus callousness. It's never been easier for a Canadian such as me to plop money into U.S. stocks, and vice versa for any American.
Why feel guilty when betting on your country's bailout, when you can take advantage of the legislative lurchings of a nearby neighbor country? A Canadian like me – provided that said Canadian can pull it off – could merrily clip the U.S. stock market when Washington is readying deployment of U.S. tax funds. The same thing goes for a U.S. investor and our various legislatures. Rather than feel guilty, or the need to deliver the standard "I'm a steward of capital" monologue, just brush those feelings off with "mulcting the taxpayers? I don't even have a vote there. How could I even begin to pull it off?" Instead of carefully explaining the need for an investment professional to be disinterested, a simple "I'm coining money from the other country's guys" will suffice. With this mindset, it's even possible to be a full-throated patriot when the occasion demands.
Disclosure: I might as well 'fess up to my own "disinterest." I don't own any U.S. stocks, and I've even put my fantasy-game punts on hold.