John Moody. Investment and speculation

John Moody. Investment and speculation

John Moody would have been proud to know that the ratings of his company is still highly valued and can support or knock down both the company and the government. He was born in Jersey City, pcs. New Jersey, and began his career at age 21 as nakleivatel brands and an errand boy with the bank. There he remained for 10 years, gradually moving up, having worked in the accounting department and then the sales department, headed by him, eventually delivered. Aroundthe same time, Moody organized the statistical department. Finally in 1898 he started his own business. Ero goal was to collect statistics on existing securities and the rapidly growing number of stocks and bonds subject as growing numbers of public companies. There was only one problem: he had no initial capital. Therefore, Moody worked at his stats at night and during the day knocked at doors, looking for customers subscribing.

Luckily, managed to gather enough subscriptions to enable it to continue business, and it became a popular pamphlet hit when first introduced in 1900. Unfortunately, the panic in 1907 forced him to give business creditors. But the panic in 1907 also inspired him, in addition to the supply of raw statistics, begin to analyze and evaluate securities. Of such as these terrible moments arose philosophical outlook Moody's on the market: "The notion of unpredictability is strictly applicable to Wall Street. Professional traders make money, not to avoid losses and making profits in excess of losses. Fast willingness to take a loss - OA-but because of their qualities neotemlemyh ".

Moody's interest not only among numbers, and strongly believed that speculation should be dealt with only by professional speculators. "In one sense, - he said - speculation is almost identical to gamble. In another sense - no .... They [speculators] people with broad vision, the ability to assume a good, patient character, sober and remarkable ability to act quickly and decisively. " Moody likened the non-professional gamblers ignorant novice approaching the roulette table. Regarding the definition of what it is investing over speculation, Moody tries to reveal this deceptively difficult subject of "Investing and speculation."



And the word investment, and the word "speculation" is wrong, the terms used. Perhaps, in the English language can not find two other words that are less clearly defined or understood. This fact is true not only in a general sense, but in the sense of belonging to the "Wall Street", there are a lot of inveterate speculators call themselves investors and sincerely thinking that they are investors. On the other hand, we constantly encounter people who are really trying to follow a normal investment practices and at the same time claiming that speculators.

The main reason for the existence of such confusion about the meaning of these terms is particularly applicable to the securities markets is that investment and speculation in both overlap and are so closely related that is between them extremely difficult to draw any border. The vast majority of investment in securities is speculative nature of an element, while a considerable percentage of the securities, which are an integral part of the speculative class, always contains elements of stability and identity, giving them investment cast ...

If we carefully examine the entire field of securities of America, we find that investment and speculation could have been broken, with some degree of accuracy in the coma of various classes. Starting with the highest and most secure of a known type of investment (U.S. government bonds) may proceed under subsection until some arbitrary line of demarcation, where the so-called investment groups, in fact, end in securities in which the real investment items slightly outweigh the speculative elements. And then we proceed down through various degrees of speculative proposals - the so-called speculative investments, or honest speculation, until a low-grade or near-worthless speculative schemes.

It is impossible to carry out certain or distinct line of demarcation between one large group of securities that may be quite rightly classified as an investment, and even larger group, which we would define as speculation. One large group tends to mix with the other. Between them there is always a kind of twilight zone ...

For many years, I expressed the view that, in general, probably more money lost by people trying to invest his money conservatively and wisely, but ignorant than those who enter into outright speculation. The loss of a high percentage of investment capital due to the fact that failed to pay proper attention to a broad fundamental factors, are often so long and continuing influence.

Any person wishing to become a successful investor, must first get acquainted with the general economic conditions and trends in our modern industrial society, he must know something about modern finance and understand the importance of general trends and structural changes that have constant and widespread impact. A man who a dozen years ago, pondered the fact that slowly but surely the world's interest rates were raised and the average cost of living and rising production costs, do not catch on investments in companies such as rail lines, intercity roads and other franchise corporations, whose income is fixed or limited law, although the production or operating costs over time will inevitably grow. Such a person would not buy or hold shares "Interboro Rapid Transit 5." Then they sold for more than 95.

Many people cherish the idea that investing in a partially completed projects or relatively new companies are always more speculative than investing in the old, scared and seasoned securities. However, this theory is in many cases inconsistent. Actually govorz, old and hardened security, if not purchased at the appropriate level and at the proper time (assuming, of course, the fact that it is not just short-term commitment), it is often quite unimportant acquisition.

About people like John D. Rockefeller, Andrew Carnegie and Henry Ford, constantly referred to as personalities. In his youth, they were risky and daring dreamers speculators in their specific areas. Of course, these people provernuli much speculation, came at the risk and not just miraculously escaped disaster. But what is really provided them with success, unlike thousands of others with similar abilities and general intelligence hrabrostyo was their special understanding of some fundamental facts, which originated in the years of their youth. John D. Rockefeller had enough imagination to realize the far-reaching opportunities for the development of the oil industry. The question, he might have at this time to make money on the small oil-producing concern and compete with many others, are not particularly interested him. The secret of his success - his awareness of the Revolution, which will be called in contemporary society recently discovered possibilities of oil. This investment demonstrates his flair.

In Andrew Carnegie had the imagination to foresee the inevitable revolution, caused by Bessemer method of producing steel. Carnegie, perhaps, was the great speculator, when transformed into the capital of their companies, selling them for the incredible amount of Morgan syndicate, but in the days of his youth he was a shrewd investor.

Henry Ford in many years, foresaw a revolution which will inevitably be caused by the development of the car. He had the imagination to understand that the most far-reaching change would be taking the car in millions, rather than a chosen few. So he chose to serve the millions and as a result has become one of the most successful businessmen in the world.

The meaning of the above examples is that these people have understood fully the important basic facts which were developed before their eyes, whereas the mass of mankind has not seen them all.

Finally, to distinguish between reasonable investment and speculation, it is necessary to emphasize again: successful investing involves a lot more attention to the value of the fundamental trends and general economic conditions than the usual speculation. A person who knowingly directing their capital to work for income and real stability of the principal, should be more concerned about the possible changes in the general conditions and general major trade and financial flows, than a man, openly admitting to speculative machinations in order to rapidly increase its capital. Speculator - is almost always someone who is looking for a quick profit. Usually he does not expect and does not intend to keep their capital in any given stock during any period of time. Macroeconomics, of course, affect his position, but if it is reasonable speculation, its power can be so great that compensates for any adverse impact, if any.

The investor, in theory at least, direct their capital to more or less permanent employment. He's not going to change their securities every month or every year. If he buys the bonds or stocks as an investment for a return, his intent - to hold such bonds and shares. It can often switch from one paper to another, without becoming an outspoken speculator. And if suddenly his investment quickly shows him the opportunity to obtain a large profit and he sells just profit from speculative development, which is not anticipated.

This situation, of course, there are thousands of cases, and it is therefore impossible to draw a clear distinction between a group of great investors and great group of speculators. Many people both investors and speculators, many investors are in for one period and then become speculators during another period. Strictly speaking, every investor does not pay proper attention to common underlying fundamentals, risk at any time unknowingly become a speculator. He can buy what he considers an investment-grade, but may soon come a time when, to my surprise, saw that he was the holder of speculative securities.

To summarize, an investor in the clean and simplified form, a person who is under the direction of their capital to work considering and evaluates general and fundamental factors that underlie our modern civilization, as he examines specific issues related to security, management, records of past performance, financial stability and profitability of most securities. It can often be wrong and unjustified to make decisions. He may be misled or misinformed, and his knowledge can be superficial, if it does not look at the big picture and act on the basis of what he sees only a part of it, sooner or later he will experience disappointment.