Vacuum State: Bucky Group 10

Sunday, October 07, 2007

Bucky Group 10 - Pruning

This week, we read a page from Charles Handy's book, "Waiting for the Mountain to Move". In it, it touched on how branches of chestnut trees fall by itself during autumn and kept itself trim. It is nature's way of pruning the tree to keep it lean. Trees that are pruned also tend to be stronger.

Taking a leaf from the pruned tree, we can apply that in our lives. If we prune our lives by living simply and with prudence, we too become stronger.

Discussions

I can't remember how we got to this, but the discussion went from 'pruning' our lives, to investing in the stock market.

Somebody in the discussion, advocated that we should really be 'living in the NOW'. By that, he meant that since property prices are up, stock market indices are up, commodities prices are up, the economy is doing well, ...etc. NOW is the time to invest in assets and reap the harvest next year.

I am rather confused with his comment as if we are to live in the 'NOW', wouldn't we be renting instead of buying a house? This is regardless of whether I think renting or buying is better or not. Living in the 'NOW' would essentially mean living for now and not worry about next year, next month, or for that matter if you are going to be a purist, the next second or next instant. Wouldn't it be contradictory if I want to live in the 'now' and yet have to worry (that my investment will deflate) or to hope (that my investment will inflate)?

The other concern I have is that as stock market, commodity market and property market are zero sum games, wouldn't it mean that for one to win, some (or many) have to lose? So, by investing in these markets, does it mean that we have set our minds to reap profits against those who lose? Expressed more sinisterly, is it to win against the unfortunate ones whom you hope will lose? *grin*

Of course, the market values of the stocks tend to increase in the long run, but do these increased dollar values necessarily reflect an increase in real value of life supporting wealth as propounded by Bucky? Or are they just increases in paper values?

Would anyone actually care about life supporting wealth then?

Some do. For instance, new metal alloys bring more strength per kilogram of metal would be an increase in the value of life supporting wealth, as now we would have the same resources supporting more lives. Another example would be if the electricity grid is to extend beyond souverign boundaries, then it will be possible to supply electricity at cheaper rates to more people, thus supporting more lives.

In contrast, a stock price of a company going up, measured in dollars, may not always bring about an increase in real wealth for the people. For instance, would the billion dollar market value of a social network portal that encourages frivolous activities amounting to its members 'poking' one another add much value to life supporting wealth? I reckon not.

Sure there are companies in the market that add real wealth to the society, but unless you have invested in these companies, you have not added to real life supporting wealth and benefited society. Vasu then added that Warren Buffet invests in the value of companies and that is why he is such a successful investor. In my view, investing otherwise amounts to mere speculation and profiteering.

It is said that in the stock market, 90% of investors lose and 10% win - and win BIG! This 10% tend to be institutional investors with huge capital, research capabilities, clever risk management strategies backed up by clever algorithms, artificial intelligence, statistics, computers and networks. With huge capital, these institutions also hire Ivy league university graduated front line traders/fighters to win.

I have been challenged by the advocateur, mentioned earlier, of "living in the now by investing", that things will be better in a year's time. It sounds too rational to me. In a market economy, when everyone thinks and acts rationally, then the end results will tend to be irrational, therefore benefiting the contrarian. "Then you will have to be contrarian very fast," as Annabelle said. Professional traders have once told me that when taxi drivers and lay people are talking about buying, it would be time for them to sell. While the market is always efficient it is not always rational.

I have been put to task to mark this on the blog that investments made now will yield profits one year from now. I think the advocateur has misunderstood the purpose of this blog. Vacuum State is not created to keep empirical scores (other than visitor counts to this blog) of our financial plans and investments in our lives. Instead, it is set up to be mindful of our daily lives. That means to observe, identify, abstract and reflect on the salient points in our lives.

Specifically in this case, this means truthfully living in the 'NOW' if we say we want to live in the NOW. And for the case of the Bucky Group, to look at Bucky's principles of looking at real wealth and real values instead of being distracted into dollar profits and empirical data.

By all means make your profits whichever way you want, but do spare some time to reflect, for this I believe is the essence of the Bucky Group. Otherwise, we would be no different from the busy people who are working, ~~speculating~~ investing, worrying and perpetually hoping. And by being mindful, it will lead us to a life well pruned.

ps. The above are my opinions only. It is not intended to compel you to change your life. Agreeing is not necessary, but I hope you do enjoy the line of thought. :)

Please feel free to leave comments, but be polite ah!