Wednesday, September 28, 2016

Conquest of Investing

Let us forget about markets for a moment and consider the following: prior to our age of market economies and capitalism, some other form of ‘capitalism’ existed.
However this capitalism was not based on creating wealth through progress in all spheres of society and the production and distribution of goods and services, but through conquest (the acquisition of territories and wealth by force – so called unfriendly takeovers).
From our schooldays we all remember the incredible military achievements of conquerors such as Cyrus the Great (559-530 BC), Alexander the Great (356-323 BC), Julius Caesar (100-44 BC), Charlemagne (AD 742-814), Umar ibn al-Khattab (586-644), Genghis Khan (1167-1225), and much later, Napoleon Bonaparte (1769-1821).

Their empires were in steep bull trends for a while… but eventually (frequently after the conqueror’s death) toppled like a house of cards… the great conquerors of antiquity were the first ‘businessmen’ to make extensive use of leverage. Their armies never grew much in terms of size, but the territories they controlled expanded almost exponentially. As a result, the acquired empire grew disproportionately per unit of soldier…
But one victor after another led to euphoria, carelessness, and total misjudgement of risks. While most great military leaders were careful not to waste their armies at the beginning of their careers, they later fell victim to their own success and began to neglect the risks associated with the conquest of larger and larger territories (the acquisition of additional assets).Take, for instance, Napoleon. 
The Russian campaign of 1812 was from a risk
 point of view, a complete absurdity (it was an incredibly leveraged, high –risk low-reward transaction, typical of the terminal or climactic phase of an empire’s uptrend)…
Markets are no different from empires. They expand, rise in value, become ever-extended, and eventually collapse. In a modern market economy, conquerors are business leaders (Promoters of Businesses) , successful speculators, adventurous fund managers and leverage buyout artists.
The Army Generals are their immediate subordinates like CEOs & Board members (ambitious junior partners among hedge funds, Fund Managers, research prima donnas, etc) who are all sharing in the profits of their ‘conquerors’ and Business Media houses who makes money by telecasting these conquests . Finally the soldiers are the individual investors – usually uninformed, greedy, and displaying strong crowd behaviour [psychology] and rapid changes of sentiment.

At WealthMills we are committed to protect the interest of Investors with unbiased views on markets.

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