A short while ago I wrote about Wall Street, recalling the wonderful song New York, New York. Meanwhile, my next trip, this time to a place less far away, brings thoughts of a stock market.
– Where to, now?
– To Karpacz.
– To Karpacz? What can Karpacz possibly have in common with a stock market?
This last question, as posed by my imaginary speaking partner, does not betray a spark of genius. Every coin and every banknote in Karpacz (as in New York, Warsaw or anywhere else) has a lot more in common with a stock market (possibly more than one) than the holders of the coins and banknotes can imagine. But I digress. In my humble opinion, the connection between Karpacz and a stock market is far more straightforward. Karpacz is hosting the Wall Street Conference, organised by the Association of Individual Investors. So all is clear now. You may have also heard that the Warsaw stock exchange has not been doing terribly well recently. And there are a number of reasons for this. Easy! I’m not crying wolf. The stock market is one of man’s most useful inventions, and change is simply part of its nature. Pardon my less than poetic analogy: salt is salty, sugar is sweet, while markets change. Except that, as a rule, no one blames salt and sugar for being what they are, but if you count on making a fortune quickly and lose money in the process, you begin to tear your hair out. And yet, if markets were predictable, they would cease to exist. Warren Buffet keeps saying that we have to make smart investments. Nothing indicates this advice has ever aged. In his view, while looking for companies to invest in, we should take into account whether, among other things, the company has consistently performer well (compared to other companies in the same sector), avoids excessive debt exposure or how long it has been a listed company, or else been around on the market. Seems simple, seems obvious, but I get a feeling that many investors often forget about these obviously obvious things. Buffet remembers, and thanks to this wisdom in some measure he has dominated the world’s richest people rankings for so long.
Back to earth, or back from America to the banks of the Wisła River, it is hard to deny indeed that the downbeat news from the Warsaw stock exchange does not bode well for coin and banknote holders. In the economy, all roads lead to the market (once they were said to lead to Rome apparently). However, worse things happened! For almost ten years now the economy has given us few reasons to cheer, while most of us also remember the economic shock of the year 2000, when it turned out that the so called new economy was no more than an act in a variety show, straight from Master and Margarita. Yet many investors made tidy fortunes having bought shares in strong companies in the midst of their absurd valuations at PLN 0 by one bank or another (could such valuations have been anything else but the cry to buy?). For how can you take seriously valuations based on a presumption that the companies’ huge wealth had simply vanished into thin air? The bears panicked. The bulls ran wild. When the dust settled, the bears scratched their heads in disbelief. And everything was back to normal. And today? Well, even though the market can be fickle, there are companies that year by year pay out sizable dividends (boasting moment – but why not?). As long as we listen to Warren Buffet’s wise advice, there is no reason to worry.
The market is always a worthy subject for discussion (which is why I’ve come to Karpacz), and it is even more so when the discussion concerns individual investors – shareholders no market or serious company could do without. And it is always worth investing, provided you do it the smart way – something the most successful market players, such as the oft-quoted Warren Buffet here, John C. Bogle or Bill Gross, are only too aware of.
Speaking of companies, it is good to have a market listing in order to gain investors, capital and prestige. A cliché this but it pays to watch the market with a healthy degree of scepticism because bust follows boom and boom follows bust. There is no reason not to do well in both situations. It so happens that there are investors and there are companies for whom there is no such thing as hard times. Contrary to common belief, poker is not a game of chance at all.
– You can’t believe in what you’re saying!
– No, it is not!
– Do you really think so?
– If it is, how can you account for there being good poker players?
For the Wall Street conference page, in particular its twentieth edition, go here:
More about one of the most absurd valuations (article from 2008):
How Warren Buffet approaches investing:
A list of the greatest investors. Will you be surprised if I say that Warren Buffet is on the list? Don’t think so…
Here is some advice from the most successful market players, including John Bogle on how to make the right investments:
In writing about poker, I meant Texas hold’em of course. The game is familiar to many, but here is a link just in case:
One last thought: Polish law lists this type of poker as a game of chance (this doesn’t change a thing when it comes to the nature of the game).