Paul-
I disagree with your assessment that "the stock market is a form of gambling"- unless you consider life in general to be a gamble. I don't think it's necessarily more of a gamble than any other pursuit in life that has a sought-after payoff. The gambler in Las Vegas owns nothing- his is a pure spin of the roulette wheel, so to speak. I, as an investor, own part of a corporation. I hope I will profit from my investment, but I must realize there are risks associated with owning a business. Still, owning a business is a far cry from going though life hoping "lucky numbers" will bail you out of financial difficulty.
Investing in common stocks is part of the process of capital formation and is part and parcel of the greatest wealth producing engine devised by man. Stock markets are a very public manifestation of free minds and free spirits at work. It is no more a gamble than, say, bettering oneself by obtaining an education for, say, an engineering degree. This latter activity, I dare say, you would probably not disparage even if it were debt financed. Remember, for a given individual, tuition at M.I.T. may also be money down the drain, although I suspect we both agree that overall it is money well spent!
Let me also point out that the gambling casinos are a zero-sum game. Investing the labors of free minds and free markets is not. Some participants will flourish, some will fail, but the net effect is the creation of wealth. Las Vegas cannot make a similar claim. (I'm hoping you won't ask me about the futures market, where I am considering opening a managed account!).
As for buying stock on margin- how is that any different from borrowing money to open a business (or expanding an existing one)? Of course, one should be prudent in how one handles debt, and different people have different risk tolerances. I must admit, however, you are following the precepts of the late great Benjamin Graham who counseled individual investors to avoid margin, so I don't mean to be critical of your decision to avoid margin. I simply want to point out that it is a breed apart from the gaming tables which are purely a matter of luck. And debt, properly managed, can be a creative instrument in the production of wealth (if you doubt the creative nature of debt, check out its troubled history in Christendom, or its current pariah status in the Moslem world!).
Regards,
Larry |
