I hope that readers will enjoy my musings and perhaps begin to question some of their basic assumptions on the nature of money, the future course of their investments, and almost everything or anything they read, watch, or hear about investing from the mainstream media.
No one is going to accumulate great wealth from reading this monthly column, and I certainly hope no one will be relieved of their excess cash and assets based on anything I might say or suggest. My mission here is to try to blow up some of the myths concerning money, investing, speculating, and trading that seem to be ubiquitous in the popular press and media. I aspire to be the voice of non-reason, the anti-CNBC, the polar opposite of Warren Buffet, and in general the proverbial gadfly who tries to expose the great boondoggles and vapid advice constantly foistered upon the general public.
Since this is my first column, I feel compelled to disclose my background and so-called credentials. I received my undergraduate degree from Columbia, a law degree from NYU, and no formal training whatsoever in economics, monetary policy, or as an investment advisor. I did, however, work for about 18 years for a small, aggressive, and very successful West Coast investment bank (Montgomery Securities), during which time I was fortunate enough to be mentored by some brilliant analysts, strategists, fellow salespeople and traders, and, most significantly, my clients, who were some of the brightest and most successful money managers in the investment community. For the last seven or eight years I have supported myself by trading, speculating, and investing in stocks, options, other financial instruments, precious metals, and commodities. Most of my ideas and points of view are formed from the thoughts of others. I am a very avid reader of investment books, periodicals, and newsletters that run the gamut of investment styles and approaches.
I chose the title “Funny Money” because a major thematic focus of these articles will be on the coming demise of all “fiat currencies.” Fiat currencies include the U.S. dollar, the euro, the yen, the British pound, and (as far as I know) all other major currencies on planet earth. The definition of “fiat currency” is a currency that is not backed by something tangible. In the good old days of sound money, the dollar was backed by either silver or gold. Now the dollar, the pound, the euro, etc., are backed by nothing tangible. As a result, governments are basically free to print as much currency as they choose. In the long run, this guarantees that a fiat currency will at some point “not be worth the paper it is printed on.”
Next month I will spend most of this column considering the history and future of fiat currencies, especially the dollar. I think that the issue of the dissipation of the purchasing power of the dollar is the single and most overwhelming secular trend that investors, speculators, traders, and everyone else must take into consideration in planning his or her personal finances and economic future. Hopefully, we can explore some strategies and tactics that can help us all to cope with this endemic and potentially tragic problem.
Another major theme of these articles is that the nature of markets, just like the nature of ultimate reality, is paradoxical, or non-linear. Earlier I noted that I would attempt to be the voice of “non-reason.” This does not mean that I will be irrational, or that my approach will be anything but reasonable. What it does mean is that to truly grasp the not-so-obvious truths of market ebb and flow, one must understand that underlying trends involve more than just a straight-line analysis of economics or finances. There are other, larger forces at work. There are cyclical influences, psychological influences, and perhaps even esoteric forces that influence markets. All of this falls into the category of “out of the box thinking” or taking an approach in tune with a Gestalt-driven basis of analysis and understanding.With respect to investing and financial planning, the ultimate paradox is dealing with the unique place that history or historic trends play in assessing future trends and probabilities. On the one hand, those who fail to study and learn from the patterns of the past are destined to repeat them. On the other hand, when it comes to predicting the future course of markets, individual stocks, or commodities, extrapolating the future from the past is like driving a car by looking in the rearview mirror instead of focusing on the road ahead.
The third overriding theme of these columns will be the defense of capitalism. I will attempt to demonstrate and prove the fact that free market capitalism does the best job of maximizing the production and allocation of goods and services within an economic system. With more goods and services available, it stands to reason that the average standard of living for the population will do best under capitalism, especially if there is minimal government intervention. This does not mean that capitalism, or free market capitalism, is a perfect system without flaws or faults. In fact, capitalism may accurately be described as a flawed and even corrupt system. However, as one moves away from capitalism toward socialism or totalitarianism, the inevitable result is that those options are far worse than the shortcomings found in the capitalistic system. As George Orwell, the dystopian novelist, noted in Animal Farm, in any totalitarian, communistic system: “All animals are equal, but some animals are more equal than others.”
Finally, it is my goal to try to point out and blow up the many myths, old-fashioned “wisdom,” and boondoggles presented by classic Wall Street types. We will look at why it is not necessarily true that “Stocks always go up over the long term.” One of my goals will be to demonstrate that in the new world in which we live, the old rules of what were prudent and sane often must be turned upside down.
I hope you will enjoy these columns as much as I anticipate enjoying writing them.
I welcome all feedback, especially critical, as it gets me to thinking. Feel free to email me at leno@lisco.com.
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