Understanding Investing

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When stock prices are heading down, ”’any”’ explanation as to why they’re heading down seems plausible; when stocks are heading up, ”’any”’ explanation as to why they’re heading up seems plausible. Experienced investors don’t concern themselves so much with the “explanations,” as they do with whether stock prices are moving up or down — as the only reality they need to concern themselves with. Meanwhile, those who have no actual experience in investing, are always very certain about their explanations as to why the markets behave as they do — justifying their rationalizations for never investing in the markets. According to their theories and valuation models, it would never be a good time to invest in the markets.

One of the telltale signposts of whether a person actually understands the concept of “investing” as an investor or only from an “entitlements” perspective is whether they think that one should only invest once there is steady profitability and a stream of hefty dividends assured and guaranteed. The essential concept of investing is that one risks his money on an idea he thinks is worthwhile and that others may eventually also see as worthwhile. Therefore, the true investor will always invest before the profits are apparent — not after that fact is made manifest. That is the delusion of seeing everything with perfect 20/20 hindsight. One often mistakes the effect for the cause, and vice versa. People invest to produce profits — and not that profits must first manifest themselves before one can be this theoretical shrewd, prudent, rational investor.


This is the typical “journalism” one unfortunately sees too much of in the financial press these days — along with just about every other area of journalism — because most of it is being produced/edited by people with journalism degrees, rather than real world experience. Thus this article on the stock market is a compilation of the usual half-baked ideas and common notions about what the market is supposed to do — compounded in today’s world by people with an agenda for propagating misinformation and disinformation that always seems quite plausible. In the general press, you are quite aware that there are interests in today’s society that propagates this class warfare — targeting the “rich,” of which the stock market is its most famous proxy. As a student of these things and writing, I cannot help but have noticed that over past several years, some of the most insidious writing undermining confidence in the stock market, prosperity, progress and well-being takes place under this innocent guise of reinforcing arbitrary rules as to what “should” be happening — as though they knew, or knew those who know.

When you have stocks selling at a price-to earnings ratio of 1 while another is selling at 1,000, to say that stocks must be selling at a price to earnings ratio of 15 is rather presumptuous — and exhibits absolutely no intellectual rigor and understanding that theoretical models are more valid when they conform to the actualities of the experience rather than demanding that all phenomena conform to his expectations of how they ought to behave. Most of these times, knowledgeable readers don’t take these things seriously, and tolerate that people are entitled to their opinions/illusions — because one can’t police the world for all the erroneous misconceptions and fancies they can entertain. I have no problem with those who believe they are entitled to their say/opinion — as their say/opinion; what I find annoying are these people who feel their say/opinion is the truth — because they say so, or presumably know the people who know so.

”’Mike Hu is a resident of Honolulu and can be reached at”’ mailto:humikhu@aol.com