The Democracy of Capitalism

Use capitalism to your benefit, and don’t let it use you. It’s mostly up to you. You can do anything.

I won’t say life and business are a level-playing field, they are anything but. However, you always have a choice.

For those that have access to the financial markets and have a starting amount of capital, the world is your oyster.

Many will tell you that you can’t beat the markets – so why bother? They will tell you that individual stock picking is like throwing dice – random.

They will tell you that the stock market is nothing more than gambling. They feel sure of what they are saying because they themselves gambled and lost! I say gambled because they literally did no research before putting their money on a stock. Actually, they put their money on the most hot and speculative stock at the time – because that is what attracts amateurs, and later paid the price for it. 

In fact they are so badly hurt from this experience that they can’t stand to see anyone else make money from investments. Because they themselves used the financial markets to gamble, they believe everything is a gamble too. Don’t let them influence you, make your own choices.

Their world-view is skewed towards uninformed and uneducated beliefs – and so they will tell you that the big institutions and the smart money have better information than you and that you don’t stand a chance. They will throw in the conversation buzz words like algos and quants which manipulate the market and never let you make money. That’s the word, manipulate.

There are people out there who manipulate and control markets so strongly and persistently that you could never invest intelligently in securities. Does that sound reasonable to you?

You can believe what you like, you can blindly follow the talking heads and market commentators that spread fear and greed every chance they get. But the truth is no one is forcing you to make these unforced errors, that’s all on you.

You can do your own research and vote whatever you want with your money. This is why capitalism and the financial markets are democratic – you can do what you want.

The truth is, anyone can invest. Information is freely available nowadays.

You don’t need to have graduated from an Ivy League school, you don’t need an amazing CV. A 5-year stint at an investment bank doesn’t really mean anything. You can teach yourself to invest, no one can stop you.

The paradox is that most of the people around you will never believe that you can find good investment opportunities in the market. People seem to have a very mystical view of the stock market. 

There are endless stories of young investors starting out on their own with nothing but the willingness and motivation to become good investors.

In their path to investment greatness they had to endure through cynics, critics and ridicule by the non-believers, the smart guys, the gamblers

Until one day through sheer persistence, patience and hard work, those critics faded in the background with nothing but silent envy and bitterness. 

They will tell themselves that they couldn’t see the opportunity. They couldn’t believe that a young but hard-working investor would succeed so greatly because he did not possess the trappings of success – because basically he wasn’t successful yet.

They couldn’t believe that a company with a $100 million market capitalization would hit $3 billion one day. They couldn’t believe that the piece of commercial property down the road from their house could triple in price. They couldn’t believe that capital could be compounded at such high rates for such long periods of time.

Of course they couldn’t see the opportunity, they did not put in the required work to understand and see the opportunity. That’s why it’s democratic!

It is apparent that we are going through a period of financial repression. Yields are at historical lows and we are clearly going through a period of global currency debasement. The stock market has been rallying for a decade and anyone with a blind eye can see that the stock market is at “very high levels”. 

Everyone is just waiting for that depression to hit and the market to crash by 50%. The thing is, there are good companies out there selling for good prices. What does the general level of the stock market have to do with buying a good business at an undervalued price?  More about this concept here.

Make no mistake, there is always something to worry about. The time will never be just right.

You can sit there losing money over time, looking for “safe” places to park your capital for insufficient yields while taking risks that could one day unwind violently. Or you can jump to the plate and find ways to intelligently invest in productive assets and earn a much better return on your capital. It’s entirely up to you.

If you are going to go down the latter path – the one of seeking to invest in productive assets (e.g. equities), then be prepared to go through periods of large volatility and misvaluation when markets hit a roadblock. 

This is what most investors are afraid of, and that sometimes causes them to make the wrong decisions. They don’t want to see volatility, they don’t want to see their holdings ever being in the red. 

But isn’t that one of the reasons why equity investors get rewarded so handsomely? You get paid by the markets when you have the appetite and willingness to accept volatility and use it to your benefit.