In the Sherlock Holmes canon, (the stories Conan Doyle wrote are referred to with this reverential term by Sherlockians world-wide!) there is the story of The Illustrious Client. The story hides a royal benefactor’s identity, but the focus, of course, is on Holmes and his dealings with the villain, Baron Adelbert Gruner, an Austrian. Beside the fact that he collects women for the purpose of ruining or ending their lives, and collects ancient ceramics as if they were Grail objects, he is repeatedly referred by Dr. Watson as a “stock speculator.”
Victorian England had a dubious record on many social and economic fronts, but, if you want to learn about two really BIG things they wrote The Book on, it would be Empires, and Investing. See the link to the episode from Granada TV/BBC/ PBS, starring Jeremy Brett as Holmes.
Courtesy of gelert456
In this episode, as well as other stories in which Ladies and Gentlemen have Incomes, the term “shares” are referred to many times. Baron Gruner does not treat his shares in the same way as the respectable English do. He invests in issues that he expects, through foreknowledge of circumstances, inside information, or outright manipulation, to rise in price, so that he may sell at a substantial profit.
Sounds just like our investment community’s main modus operandi, does it not?
Gambling, as we all know from experience, books or movies, is about calculated risks. And, as as we all know, the odds are always in favor of the House, not the players. So, just who is the House when it comes to gambling as an investment strategy? Your broker, or the next willing buyer of whatever shares you are selling today?
Wait a minute, you say, I am not an investment gambler, and neither is my broker! If you are counting on the prices, that is to say the value, of your investments to rise, you are indeed the very Gambler I describe.
Wait another minute, you say, how am I supposed to grow my retirement nest egg, pay for the expenses of my children’s lives, etc…?
Baron Gruner supports a lavish lifestyle on the “ill-gotten gains” of his stock market speculating. He is not accepted into proper British society because of the source of his wealth. So, what is a proper Victorian to do, to live without working, the very definition of a Gentleman or a Lady?
Victorian shares paid an income, a dividend. Period. The percentage of the profits from any business paid to its investors was the Victorian Era’s socially acceptable form of stock market income.
Well, this all sounds very quaint and old-fashioned, does it not? Quite the contrary, it is now the hottest topic in investing circles.
If you do an online search of the phrase “dividend stock investing” you will get upwards of 21 million hits! Yet, most Americans are still not aware of, much less clear on, why this is such a vital aspect of holding stocks.
In other Holmes stories, there are villains who do their evil deeds for one simple reason; they have been speculating in the stock market. They were called defaulters because they could not cover their losses, losses being shares they had hoped would rise that fell instead, now referred to as options, like puts, calls, short and long sales and purchases. Most of the Holmes stories about this kind of villainy feature relatives of bureaucrats who steal secret documents to sell.
We never really learn, do we? The sun never set on Queen Vic’s Empire, and yet her average citizen was up to the same shenanigans our investing community still views as right and proper.
I do not use the term “Wall Street” to summarize or characterize our investment community. Every person who is involved in financial markets as a profession represents their clients as well as their own company’s interests. Thus Wall Street IS Main Street. In fact, most local branches of major investment houses used to be located on Main Street, until strip malls and sprawl replaced centralized downtown business districts, a trend that is reversing itself a bit lately.
So, what can the average person do to avoid being an investing victim? Here is my opinion.
First, focus on being an owner of the businesses you invest in, not just a shareholder waiting for share prices to rise. Buy shares of companies whose products and services you buy and use. Patronize companies you already own. In investing, it ought to be a combination of, “what would Jesus do? , and “what would Warren Buffett do?” This is exactly what he (small “h for Warren) does.
Second, understand the shifting prices of companies you have deemed solid dividend payers. If their businesses are being superceded in the marketplace, such as Kodak was recently, this is a real danger signal.
The market price of a stock is usually not what it is really worth, it is only what someone is willing to pay for it today.
Thirdly, begin to think of your money in Victorian terms. Staid has got it made! The upper classes and gentry were very risk averse, as they should have been. They were not about making a killing, a fast fortune, or even share price appreciation. They were about having a predictable and reliable income source, based on the dividend payments of established businesses, and ventures based on the exploitation of resources the Empire had taken. Sounds quintessentially American, does it not?
My last posting was about Oil and the Future. It has some relevance here. Oil and gas producers, along with utilities and pipelines, are major dividend payers. They are not all created equal. Some gas producers are “shale frackers”, whose gas wells fill local aquifers with toxins and dissolved natural gas, producing water supplies that poison its users, and can even catch fire! Some utilities rely heavily on nuclear plants, whose spent fuel is usually stored onsite, near a large body of fresh water! (think We Energies!) Socially responsible investors investigate and avoid these companies.
When share prices fluctuate, don’t throw parties when they rise, or reflexively sell when they drop. Everyone who is in a public or private pension system, or has a 401K, or a 403b plan, is part of Wall Street, Main Street, and the 99%. The difference between the 99 and the 1 percent is a matter of degree and size, and, most importantly in power, control, and information, but is is NOT a difference in participation.
Next time, the reasons behind the decline in union participation by American workers…ooohhh…