Daily Speculations
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James Sogi
Philosopher, Juris Doctor, surfer, trader, investor, musician, black belt, sailor, semi-centenarian. He lives on the mountain in Kona, Hawaii, with his family. |
8/30/2005
Speculators Provide a Valuable Service, by
Jim Sogi
Speculators perform an indispensable service for the country and the world financial system. In times of panic, disruption or disaster, when many are looking for or need cash at any price, speculators provide the liquidity and take the merchandise. Cash money is worth more in times of panic or disaster when the funds are needed for other than capital projects. For this valuable and indispensable service, they are paid a higher rate of return to compensate for the valuable nature of their service. For the speculator, the service aspect can be as rewarding as the profits.
A friend commented that trading is very painful and stressful and a mistake can result in serious loss. Other professions are no less painful nor less stressful.. A mistake in any field will result in serious loss, even loss of life, or loss of the job. The stress is as great as are the length of hours or years spent mastering and performing the skills. Practice develops the mental and physical toughness to perform the daily task in any area.
Kim Zussman adds:
However the visibility of results in most trading reveals and drives home errors most unambiguously.
Less liquid forms of investing, such as real estate, do not provide moment-to-moment updates on the value of holdings. Consequently, there is less temptation to "cut the pain" when the disease destined to cause the pain is yet unrevealed and undiagnosed.
In health care professions there are many scenarios which result in pain and stress for patients and doctors. Since these reactions are emotions, good practitioners learn how to manage them to the benefit of all parties. Bad outcomes can be understood and endured with honesty and compassion.
I wish that worked for the cold-hearted numerical death spirals of markets.
c
Jim Sogi, May 2005
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