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Bull markets make people lazy

David French | 2/03/2009 11:12:51 AM

This article was originally published as 'Money just a tool, but don't let lazy have its evil way' in The Morning Bulletin on 20th December, 2008. Image sourced from http://www.flickr.com/search/?l=4&w=all&q=fingers+burnt&m=text

Bull markets make people lazy

According to Plato good people don’t need laws to tell them to act responsibly, while bad people will find a way around the laws. I’d add to that that laziness is the root of evil. Laziness is the main reason bad people get their way, or at the very least, bad ideas pedalled by idiots get to see the light of day. The problem is that exercising ones’ brain hurts. We don’t like doing it unless we have to.

Bull markets make people lazy. Investors begin to think gains are easily won and more risks are taken. Issuers of securities get brazen, and regulators get all ivory tower. A frog heated in a saucepan of water does not jump out. It slowly cooks as the water temperature rises.

Investors being burnt through dodgy corporate practices is nothing new – you can look at every boom and bust over the past 400 years to see that. There is no certain “recipe” for investment, only the business cycle. Uncertainty is actually the reason investors are rewarded, yet month after month, companies and individuals market “certain” outcomes, and consumers fall for it.

Consumers think the regulator protects them. But regulators rely on process. “Process” is a mantra in the public service, but it is lazy. The main ingredients in choosing a successful investment include a identifying a sound business plan, a resilient business and management honesty. The absence of any one puts investors at risk, and as Plato suggested, they are not things you can legislate for. Following process does not require much brainpower. Its use is misleading to investors who think that the regulator is providing some sort of meaningful fall back.

It’s Christmas. Hot weather, Five Rocks, fishing at Port Alma, a week on Pumpkin Island and best of all, doing it all with my young family – that’s my Christmas. After such a tough year, it really is time for reflection. Every night I go home my kids are that little bit older. Bitter sweet. They’re growing up. Money is essential, but it’s just a tool. If you let the market dictate your life, one day things more valuable than money might get taken from you. There is no going back from that point. If you recently got a cheque from the Government, spend some of it on service industries – your barber, bar and bistro for example. Spending where labour is a high portion of costs will create the most economic impact, and help shelter our region from recession. Merry Christmas.

The Investment Collective (AFSL 471728) is a non-aligned financial planning and investment firm specialising in providing tailored financial and investment advice for individuals and small business. Capricorn Investment Partners Limited's services include financial planning, share trading, portfolio management, insurance broking and self managed super fund administration. Additional information on services provided by The Investment Collective Limited can be found by following this link. Readers are reminded that this document has been prepared for general information purposes only, and any advice contained herein has been prepared without taking into account your financial objectives, situation or needs. Readers are advised to see their financial advisor prior to acting on any general advice.




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