by Dariusz Gentek
My Eureka moment came several years ago after I had been pursuing the secret to investing money.
My efforts in the pursuit of financial wisdom began in two thousand and eight while observing the heights of the financial crisis.
Like many people I was riveted to my television set watching and listening to headlines of financial meltdown and the imminent collapse of civilization.
There is something riveting about war and destruction and the financial crisis of two thousand and eight was indeed about destruction. The destruction of fifteen trillion dollars of value from bank ledgers and people’s pockets. The daily headlines were full of gloom and doom of how companies whose stock was once valued in hundreds of dollars per share were now begging governments for money just to stay lucrative and afloat.
How did it happen I wondered and will the business world collapse? I was enthralled by the magnitude of the whole thing. Each day the situation and predictions seemed more dire. Blue chip stocks like IBM and Goldman Sachs were at all-time lows while gold and silver were going through the roof. This compelled my interest even more.
I began to research stocks and the stock market on the internet. Consuming all the information from the best sources on markets and finance I could find. I searched for YouTube videos with Warren Buffet. Read the Educated Investor by Benjamin Graham. Searched out all the postings on stocks and finance on Facebook. Looked to see what the biggest minds in finance were buying and selling. I had become a finance junkie.
Each morning I would wake up and first listen to the radio and find out how the stock market was doing. Next, with my cup of coffee, I would turn on my computer put on my Facebook feed and see what the experts were saying about the economy, gold and the financial crisis. Afterwords I would go to YouTube and search out any new noteworthy name I had come upon to see if I could gleam any words of wisdom and expertise from them there.
My appetite for all things related to finance was growing more and more. I was consumed by the markets and the crisis. I signed up for courses on finance and read all that I could find about the crisis. It’s, causes and its possible ramifications. How the great financial crisis was affecting the average person. What it was doing to their portfolios, their jobs, their everyday life, their retirement savings and plans. I was a true financial crisis junkie.
At the end of each day I would watch the evening news and the story day after day that would lead the news was the financial crisis. Pictures of brokers with their hands covering their heads. Panicked traders talking breathlessly on telephones while watching their computer screens. Headlines of stock market crash, record high gold prices.
I took it all in with an avid zeal. This was a momentous occurrence I thought. As big as the crash that caused the great depression. This was something to watch and learn from. Something not to be missed. How could they let something like this happen I thought, how could such a catastrophe be allowed? I had to do more research. I needed more information, more experts, more knowledge.
The next few months I spent at least a few hours a day reading about Wall St. and its history. It’s biggest names as well as the biggest names in finance. I read and listened and watched about the best traders. I researched hard to find videos about Wall St. geniuses. Hard to find research about what goes on behind closed doors within Wall St. Firms. What makes someone a success on Wall St.[G1]
At least three to four of my hours each day for a few months were spent on my new passion, The great financial crisis. At times, I was awed by the people and figures I studied. They were astronomical to a person like me. How can anyone deal with these types of figures I wondered. They would frighten and stagger the average man. These men who handle such mountains of money must have nerves of steel[G2] and the minds of geniuses I thought.[G3]
I read books like the Alchemy of Finance by George Soros. A book whose main thesis I only now vaguely understand. Alchemy was indeed a proper title for the book since most of it is language only perhaps a linguist could love.[G4] [G5]
Benjamin Grahm’s book was a little simpler to understand although a bore to read through the whole thing. I read theories on how markets worked. Technical data that many times tried to convince the reader that the author knew what would happen next month or next year since the chart he plotted out was exactly the pattern that occurred in the past before such and such an event happened.
Many others made a claim that they have the answer and know exactly how markets work. Only a few brave souls dared to tell the truth and admit that no one knows how the markets work and what would happen the next day let alone the next year. I was slowly but surely coming to my eureka moment. My moment of realization that most of what is said and written about stocks, markets, and finance are lucky guesses dressed up in fancy language so as to enthrall and mesmerize the masses.[G6]
This was the real Alchemy of Finance. Convincing the average person that you the speaker or author is a financial genius unlike any other in history. That [G7] you know all there is to know about money and the stock market and that you are the person that every other person, their fellow man, should trust with their money.[G8]
There are indeed a few honest people in the business of finance who will tell you the truth about money and the markets. People like Warren Buffet who himself said that he tells people the way to invest money all the time but they don’t listen. People like John Bogle who present documented researched evidence that the majority of people who invest in the stock market lose money and that the only tried and proven method to invest is to put money in low cost and low turnover securities and leave it there.[G9]
Most others whose ideas and propositions I listened to were in the final analysis either con men or people who for reasons of luck had been in the right place at the right time and picked a one-time winner that brought them riches and fame and were now sought out by all the talk shows to share their genius and secrets for all the world to see.
Most of their genius lies in the fact and act of being able to parade around all the reporters and accept acknowledgment of their genius status furthering, even more, their own fan base and therefore wealth.[G10] [G11] [G12]
My eureka moment allowed me to see more clearly what a magic tool of deception television could be when used by men who sought to cloud people’s judgments and prey upon their greed and lust for overnight riches and easy money.
My eureka moment allowed me to see how easily people, most of who, worked very hard for their money, put their trust in men with striped suits believing them to be competent and professional money managers. How that trust was what these men of deception traded on.
There are trillions of dollars that people put aside for retirement funds and other worthwhile goals. Most of us believe, for one reason or another, that this money is taken care of by professionals. Professionals who are to be trusted because they hold degrees from well-known institutions like Harvard or MIT. Professionals who we believe know the business of investing like the back of their hands.
Very few of us know that many of these so-called professionals have track records in the investment field that are probably far worse than the track record of the average working person in their own field.
We, the average investors, choose to trust investing professionals until something horrendous occurs. Something like the two thousand and eight crash. Then some of us choose to look further into the investing business. We choose to research it and try to see what happened and to find the facts.
Some of us, after having thoroughly researched the relevant facts, come to our eureka moments. Moments when we say. So that’s what they do, or that’s how they do it, or that’s why they do it. After our eureka moments we are no longer mesmerized by the magic language that they use, or terrified by the lofty heights that they inhabit.
After our eureka moments we understand. We understand what goes on and we understand our own foolish past assumptions.