Tuesday, June 09, 1998

Mysteries of the Wise
By George Runkle ([email protected])

After a couple years in Fooldom, I find it harder and harder to understand the Wise. Let me list some of the things that baffle me and why:

"Amateur Investors" -- Often the Wise refer to those of us who decide how to invest our own money as "amateurs." Ahem, I guess I could look up amateur in Webster's, but that's rather trite. I thought an amateur was somebody who did something for free and for fun, and a professional did it for pay. Now, I am a "Professional Engineer" (according to my license). I'm not sure about this; if I didn't get paid, let's say I was retired and did some engineering for a charitable organization. Would I be an "Amateur Engineer" or would I still be a Professional Engineer as long as I didn't enjoy doing it? As for investing, I make and lose money with my investments. Doesn't that make me a "Professional Investor"? Or is there a license I have to get? Am I an "Amateur Investor" because I enjoy doing it? Go figure.

"They Haven't Seen A Bear Market" -- This one is leveled at guys like Tom and David, who are young enough that I could have earned extra money babysitting them when I was in high school. Why is this important? Supposedly if they were in a bear market, they would be better guys in some way or another. Just like a general should have been through at least one World War before leading troops. Of course that would mean our generals would all be well over 75 by now, but it's the same logic. If we entered a bear market like the seventies, what will those guys who were in that bear market tell us? "Yep, we're losing money on the market alright. I can tell; I lost money before in the Seventies. Usually you can tell that when your stock prices drop it means you're losing money!" I think we all can figure THAT out.

"Your Financial Advisor" -- Everything you buy in investments, according to the Wise, should be through a financial advisor, usually with a lot of commissions. What makes somebody a financial advisor? Is it a long program of education, mixed with testing, and references? Since you are helping people prepare for the future, that's pretty important. You would expect the process to be quite rigorous to get there. Well, sometimes it is. Sometimes it isn't. First, what's a financial advisor? Is it a stockbroker? A financial planner with "CFP" after his or her name, showing a certain level of education and knowledge? An insurance salesman who sells annuities? Is it a guy selling mutual funds through a multi-level marketing scheme? Yes, it's all of those. Why does one become a financial advisor? Is it because he or she loves the stock market, investing, and really feels good about helping people prepare for future financial needs? Or is it because he or she sees selling investments as just another commissioned sales job that pays more than selling microwave ovens? Yes to both. Sadly, it is often more risky than picking stocks when choosing a financial advisor.

"Internet Hype" -- We've all seen this in the print media, and sometimes stock brokers will throw this at you, too. The vision is of chat rooms and message boards full of inexperienced investors suckering out for penny stocks. Or, legitimate companies who have their stock prices blown completely out of proportion to their worth and poor individual "amateur" investors suckering out for them. Of course you need the Wise to prevent this from happening to you. I'm a little puzzled by this, because if you look through many different on-line forums, the discussion seems quite sophisticated. Through the Internet I can look up the financial data on any stock in seconds, and I have access to SEC filings for just about every publicly traded company. While the old fashioned media (print, TV, radio) has some good stuff, too, there are also penny stock newsletters, false rumors published, and of course there used to be Dan (ugh!) Dorfman. I won't even mention the "experts" who regularly appear on CNBC and other old-time media with their outlandish predictions that never come true.

There are other things confusing about the Wise, but I only have so much space to write. Perhaps these fit in with the Mysteries of the Universe, such as what happened before there was time, why we exist, and why we never see baby pigeons. Some things are never meant to be solved.

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