First Extract from the Book
Investing for Beginners Exposed: Or What Investment Consultants Hide from You
Copyright © 2011 Rokas Lukosius
THE CONTENTS OF THE INVESTMENT BOOK
- First Meeting - Agreement
- Second Meeting - Risk Tolerance
- Third Meeting - Risk
- Fourth Meeting - Time Value of Money
- Fifth Meeting - Asset Classes I
- Sixth Meeting - Asset Classes II
- Seventh Meeting - Portfolio Modeling
- Eighth Meeting - Investment Tactics
- Ninth Meeting - Investment Funds
- Tenth Meeting - Advisors and Valuation
- Eleventh Meeting - Relative Valuation
DON'T BE AFRAID YOUR LIFE WILL END; BE AFRAID THAT IT WILL NEVER BEGIN.
Arthur is a 24-year old bookkeeper who has not yet found his role in life. Thirsty for knowledge, innovative, fond of traveling if the occasion arises. Not a bundle of communication, but capable of association, a pragmatist, unafraid of risk.
Anthony is a 26-year old sales manager (he works only with business customers, a fact of which he is extremely proud) who has lots of friends. Making new contacts comes easily to him. He is frivolous, but he appreciates the real McCoy. He tends to ardor, but is capable of skilled control of emotions.
A tune. I heard a tune. I should not say that it was an unpleasant one, but it sounded somewhat shrill…even, very shrill. Little by little, I began to recollect, that I have chosen this tune myself. I opened my eyes slowly, but it was still dark. The alarm clock kept ringing implacably. Gradually rising, the sound became lou-der and louder. The tune mode is rather fuzzy, but there was nothing better to choose from at the time. I should have gotten up and switched it off, but an invisible force, as if with hands of steel, dragged me back. Yeah, I should have, but I waited a bit more.
At that moment, there was no point in getting up; soon the alarm clock would stop on its own. It rings precisely one minute, so if I do not want to rise immediately, I need only listen for a minute and the ring will stop. That’s what I was doing right now. When the ring stops, I stay in bed for a couple more minutes. I am aware that I will have to get up anyway, but I am in no mood to do so. I have heard it is bad for one’s health to jump from the bed straightaway, until the heart is in a working regime. Who knows where the truth lies, but to be on the safe side, I stayed in bed for awhile longer.
I extended my hand to reach for a switch. Light instantly blinded me. A terribly unpleasant feeling. Why has nobody invented a wake-up chandelier? The chandelier could be like any other, but its bulb might slowly shine stronger and stronger, slowly enough for your eyes to adjust to the light. It would be lovely to have such a chande-lier and, even better, if it started instead of an alarm, allowing me to wake up leisurely – like the sun — only the time would be prese-lected.
My mind getting clearer, I suddenly sensed I’d been staying in bed for well over a quarter of an hour. I had set the alarm-clock for 7:05 a.m. and had to be in the office at 8:00 a.m.; I need at least thirty minutes to get there. It takes me a little while to puzzle out that there were only some ten minutes left for me to get ready. Suddenly, I jumped out of bed, running through the door after a quick shower and having jumped into my suit. For break-fast, I shoved an apple in my pocket.
Alas, I was nearly ten minutes late for the work. Almost as long as it took me to find a place to park the car, but those are my problems, I should say. Being ten minutes late is not much, of course, especially, if you often work long hours. Unfortunately, though overtime re-mains unnoticed at my job, everyone sees you coming in late, even a few minutes. As if to say, “Aha, you are late, we got you this time!”
Do not think I am a complainer. A job is a job, right? It’s just a typical work in the office. I spend most of the day at the computer. But the computer is not the worst part of my work. As a rule, the day goes quickly. Although every day has a few moments when the time stops and I begin to wonder when it will end.
At least today I was completely content about the day coming to an end and work would soon be over. And I would see Anthony this evening. Anthony is one of my few friends left from the old days. The old days are indeed an undefined term. When he was 34, my uncle kept reminding me that until 30 all men are half-baked, only those over 30 are real men. Of course, when he struck 40, the bar was raised – only those in their 50s were real men. The same happened when he struck 50. And you could not contradict him: age, like time, is a relative matter.
I knew Anthony from my school days. We never learned together, but our paths often crossed and, from time to time, I ran into him. I was looking forward to our meeting, as usual. He was probably the only person I could talk to about any issue and he felt the same of me, I guess. At the very least, that helped us to save money on psy-chologists!
In anticipation of the upcoming meeting, the rest of the working day passed incredibly quickly. Quite soon I opened the door of the bar where we agreed to meet. While looking for Anthony, from somewhere behind a table I heard:
“Come here, Arthur! I am here!” I saw Anthony nearby waving to me.
“Hello! How are you doing?” I nearly shout, extending my hand cheerfully.
“You know, nothing in particular. Nothing to complain about, but on the other hand, no place for happiness either.”
So after exchanging our views on recent developments, we had been talking for almost an hour and the second mug was nearly dried. Then Anthony unexpectedly asked me:
“Listen, Arthur. Are you satisfied with your life?”
“I think so, yes. I have a good job, a car, friends, rent quite a decent apartment. I should say I have nothing much to worry about. And you, Anthony, aren’t you content with everything? Why do you ask?”
“You see, me neither. I have nothing to complain about. But the question is whether life is meant only for you to have something to complain about or not? Don’t we need anything to be proud of?”
I was about to reply that I had already mentioned the car, job and all the rest. What else did he expect to hear from me? But Anthony interrupted my considerations.
“Okay, you say, a job. You boast about having a good job. That’s a good one, ha-ha…” he laughed.
“What’s so funny about that?” I replied seriously. “It is a nice job, right?”
“My dear Arthur, I am not referring to your job, my job, or any-body else's job. Even if I was talking about your work, I don’t think it would make you feel any better – both of us know work sucks. I’m talking about work as a whole," Anthony was serious now. “Is a job of real value or is it a form of slavery that sucks everything out of you?"
“I would really prefer my job to slavery,” I said without a hint of doubt.
“Ha-ha, but you do not know what the modern slave-owner would make you do? Maybe he would have you do the same things you do in your office every day, only, most likely, for a bit longer and in a similar regime, like in Asian countries.”
I reflected on this as not the worst option that might happen, but, on the other hand, far from the best. So indeed, what is the difference between slavery and my current job?
“But Anthony!” I replied after a pause. “There is a fundamental difference. Right now, I can stop working at any moment or simply stay home, if I don’t feel like going to work. If I were a slave, I wouldn’t be given this option.”
“Of course, that’s true. But only at first glance. As a matter of fact, psychology is a decisive factor here. May I ask you when you have taken advantage of such an opportunity recently? When was the last time you woke up in the morning and decided that you were not going to go to work?”
By now, Anthony was asking with resolution in his voice; without the slightest doubt that such occasion had never taken a place. And he’s right. I have never exercised such privilege; perhaps owing to fear of losing my stable source of income.
“I am not quite sure at the moment…” I said to Anthony, but he only smiled fixedly, “But I can reassure you it is far from slavery, anyway. Because if you are working somewhere, having to do things you don’t want to do, you are always free to look for an alternative, more acceptable occupation.”
Now it was my friend's turn to ponder. But in a moment he re-vealed an ace up his sleeve.
“Maybe. Ok, work may not be complete slavery, maybe it’s a little more like feudalism. I daresay capitalism is a sheer analogy. While some people are in control of the wealth, others work hard to make money for them. This is the old same story, just different times.”
“How cruel you are, Anthony, even merciless. But, you know, I assume pros and cons can be found everywhere…”
But Anthony interrupted my thoughts.“Yes, indeed, but isn’t it always that some reap the pros while the cons go to the others and, most often, to the cons go to the majority. It is not me who is cruel, but the world, Arthur. Please understand, no matter the political system – slavery, feudalism, nationalism, communism, capitalism – the result is always the same. The majority work to satisfy the inter-ests of the minority. The population that surrenders to the existing political system is obliged to go to work every day, like serfs in bondage, executing the given instructions. So what is the difference between this and present-day work? The truth is, there is absolutely no difference. Open your eyes and look at it in a realistic manner! Doesn’t it just drive you to desperation?”
I said nothing, but my brain started to work. Is it everything as damned as he says? For centuries, people have fought for freedom. Freedom to speak their native language, freedom to live off the land, freedom to do their own thing. Now, it seems, we resign that freedom without resistance. At least, it is rented for a paycheck subscription.
“Well, I can swallow any story.” I utter only after a pause, my third mug having emptied some time ago. “Unfortunately, it is time for us to go. No matter what, tomorrow we have to go to work, one way or another. We can meet in a week to continue the discussion on the matter, can't we?" I suggested to Anthony, although without the slightest expectation we would return to the same conversation. We frequently discussed one issue or another, however, never reverted.
“Yeah, Arthur, surely. We will think about it again.”
“Perfect,” I said and, after saying good-bye, we turned to go our own ways.
Although I believed I would not return to this subject, quite the opposite happened. The thought of going to the bondage did not give me any peace of mind. Pitching in at work used to fall by the wayside until I received a nonsensical assignment and being obliged to per-form it, I again remembered the bondage. Damn, I thought, is life always going to be so wretched? What can I do to change all this?
One or another idea came to mind, but it all came down to one principal matter. I needed to get on the other side. The side where capital is accumulated.
While it seemed simple to do so, I didn’t have the slightest idea of how to do so or even where to start. And then I recalled the promise I’d made to meet Anthony again. So, after giving him a call, I ar-ranged another meeting for the next evening.
Until then, I switched on the TV. For awhile, I watched a talk show mindlessly. Failing to get the gist, I turned to business news, where a discourse was going on about rising market conditions.
Watching TV, I routinely skip the advertisements, but the amount of them frustrates me. However, nothing can be done; either you watch that damn TV or you don’t. If you prefer watching television, watching the ads is required. Alternately, you are free to switch channels every five minutes. But that doesn’t quite work either. Little by little, you turn into a maniac with a remote control in your hand, which at least, gives you an allusion of control. The idea made my hair stand on the back of the neck and I switched off the TV.
Switching the TV off causes gloomy feelings. Strange feelings, as if some significant part of life is gone, sort of like not being in my own home. I attempted to read a book I’d bought a few months ago, but found it difficult to concentrate. The thought struck me that I’d been spoiled by television, because reading a book seemed almost impossible.
Failing to come up with anything better to do, I went to bed. Sleep always is a good pastime. However, I almost never go to bed so early, so falling asleep right away was difficult. Soon thoughts about slaves, slave-owners, capitalists and workers began buzzing in my head.
As agreed, the next day after work, I met up with Anthony, who seemed in high spirits.
“Did you quit your job already?” he asked jokingly.
"Of course, I’ve been thinking about it, like every morning, but, you know, I keep changing my mind at the last minute,” I replied in a similar intonation.
“Yeah, it happens.”
“What have you accomplished since we last talked?”
“Ugh, nothing to be proud of. But, you know, I’ve been thinking about what we talked about last time.”
“What a strange coincidence, I’ve been brooding over it as well,” I babbled to Anthony, though, in fact, I had been chewing the cud in all its gory detail.
“So what are your conclusions from this painful process?”
“Nothing in particular, except one thing. I am absolutely convinced that the system of working itself is really not a bad one. It is far from perfect, but it’s still much better than previous systems. As a wise man once said, ‘Democracy is the worst form of govern-ment except for all those others that have been tried.’ Democracy travels hand-in-hand with capitalism. Capitalism has its weaknesses and strong sides, but, as you said before, the advantages are not avail-able to everyone. Then the main problem comes: Should we infiltrate those who exercise the privilege of taking the fruits? In other words, we must become capitalists. Am I right?”
“Yes, indeed. I share your opinion,” slightly nodding his head, Anthony agreed. “However, I can reassure you that doing so is far from easy. In principal, there is but one way. What do you think is the engine of capitalism that supports and pushes the system for-ward?”
“Money?” I responded, interrupting, though Anthony seemed eager to develop the thought himself.
“Money? I should say money is more the fuel than the engine. The engine is consumption. It moves the entire system. Just think, why do so many people try to build a successful career? Because the more you earn, the more you can spend. Then the question becomes: How much is necessary to spend and how much are you willing to spend?”
This time I fail to intervene and Anthony continued, “Society is doomed for consumption – business sentences it to behave that way. In earlier days, people had a single dream of sleeping comfortably, eating deliciously and to reproducing and most people were content with this. However, some people still wanted a little power and glory. How many people would be content with those simple pleasures now?
“So if you have a place to live, then you want a bigger apartment or a house, if you have a car, you want a larger and more luxurious one. More lavish clothes, exotic voyages in grand hotels. Everything must be better and more convenient than it is now. Society is now doomed because of this. But who has doomed it?
“It is business that employs us. Business exploits human psycho-logy, allocates enormous assets to market formation and models demand. It is business that forms a consumer society for its own needs. In such cases, people want to acquire more, and they need more money to do so. In order to make more money, they need to work more. Work for whom? Work for businesses, so in producing a consumer society, business models not only customers for produc-tion, but also workers. It’s a vicious circle, but capital keeps growing.
Both of us pondered it for awhile and after a short pause, recalling watching television, I uttered:
“You know, I completely agree with you. Wherever you go, there are ads on every corner, enough for anyone to be brain washed. Actu-ally, such brain washing is not complicated at all when you realize that human brain activity is based on associations, so in reality, any freedom of choice for humans is only imaginary. One can only choose between the various programs that are established in a subconscious, which has been mainly shaped by the surrounding environment. A surplus of advertising in one’s surroundings creates a permanent job for human brains to process.”
“How am I to feel when such things are going on? The point is that consumers have very few options. For one, to consume more for the money he has earned or borrowed, he must keep on working until retirement or death. A variant is to renounce consumption and stop working, and the third alternative, as you have said, is to become a capitalist and everybody will be working for you.” Now, Anthony had a slightly devilish smile on his face.
“I am not going to flounder all my life until I collapse at the end in this spiral of work and consumption. We have to do something about it.” I wanted to say what had to be done when I paused in confusion. Anthony also kept silent, so I did my best to continue with the dis-course. “Something is needed to principally reverse the situation. The idea of renouncing consumption sounds good, although it seems to me it would not be an easy way out. I probably could reduce my consumption quite significantly, yet I do not believe that I could completely stop making purchases. I would still have to pay rent for my apartment, I still need to eat. Most likely, it is almost impossible to avoid consumption entirely.”
“I share your opinion, Arthur. Unless you left for an inhabited island and tried to settle there, but, most likely that wouldn’t be very successful. Even a significant reduction in consumption is far from easy. Just imagine your child asking you, ‘Daddy, daddy, why does everybody drive a new car and we clatter along in this rattletrap?’ And you would find it difficult to explain consumption to him, among other matters, and that your rattletrap is a nice car, indeed, if it is still moving.”
“So, what about capitalists? Do you think it is easy to become one? You know, I’ve always thought it would be a good idea to have my own business. I have read that among millionaires, the most prev-alent are those who own private enterprise.”
“This is true, but I am convinced that the portion of business men who are bankrupt, ruined or have committed suicide is equally large, but for some reason, such statistics are not touted.
“See, being a businessman is no longer a profession, it is a life-style that must be liked, in essence. If you want to be a business-man, you should not be afraid to put pressure on your employees, suck their blood. Not too fast, but no mercy either. As a businessman you can get rich, however, you are deprived of holidays, weekends; all your thoughts will be about business, and only business. If you succeed, you may be the one in a thousand who develops a large company. You will achieve great power, money… Whacko! If your undertaking grows really fast, you will be compelled to take especial-ly risky decisions that serve the purpose under favorable conditions, but sooner or later such perilous determinations will recoil on you and BOOM! The business goes bankrupt. What’s then?” Anthony concluded in a slightly menacing tone....
Copyright © 2011 Rokas Lukosius
Read the second extract from the book about investing, Investing for Beginners Exposed (extracts are random and the text is not continued)