I’m just posting this up on behalf of Giles, all credit goes to him for this series
On a recent weekend I spent the afternoon watching a dramatisation of Charles Dicken’s novel, Little Dorrit. Writing in the mid 19th Century Charles Dickens spoke of an age old problem; namely that of Speculator’s Guilt. The lesson that ‘Speculator’s guilt’ provides can be learnt in one of two ways. The easy way or the hard way. The easy way is to identify it and avoid it, while the hard way is to experience it and vow never to repeat it.
The novel Little Dorrit revolves around the key theme of financial impropriety in 19th Century London. In the book there is a financier called Mr Merdle and he is known as the ‘phenomena of the age’, a financial ‘genius’ who is trumpeted and adored for his financial acumen. His fund is large and grows at a phenomenal rate. In fact, his fame grows so large, that investors from a variety of sources flock to give all their income to the ‘man of the age’. Of course, my trading buddies here know how the rest of this story goes. Mr Merdle becomes overstretched. He makes some errors and, in a bid to hide them, he uses funds from one fund to finance another until it all comes crashing down. (A kind of Ponsi scheme light). The result of course is that many, many people lose all their money.
Then, in a gently probing manner, Dickens explores the question, who is to blame? Is it Mr Merdle for his fraud (yes, of course). Is it the individual firms who invested all their money in Mr Merdle’s fund? (Yes, of course). Is it the people who convinced others to invest on the soundness of the venture? (Arguably,at least partly). And so here we have a myriad of varying parties who all share what can be summarised as, ‘Speculator’s Guilt’. The interesting thing that Dickens draws out is that there is something peculiarly intoxicating about backing one sure fire winner that beguiles all sense. The risking it all for one throw of the dice that is attractive. One hit and I am done. One trade and I solve my financial tight spot. Not only a ‘get rich’ desire, but a solve most of my present problems in one go. One trade and we can buy that house, go to that school, clear that debt, make that phenomenal return etc etc. We saw this in January 2015 when the Swiss National Bank removed their floor on the EUR/CHF pair. EUR/CHF fell 40% in minutes and with it more money than I care to think. Fund crashed, brokers went bust, individuals lost a life changing amount of money. For some people the experience made them. For others it broke them. However all of them stood humbled before the intoxicating power of Speculator’s Guilt.
So, learn this lesson and don’t repeat it:
There is no sure fire winner in financial trading, despite what people may say. The more people stress that this is ‘the investment to make’, be the more alert. Never bet it all on one shot, ever. Even if you think you can rebuild it all again, others around you may not want to hang around and wait. You can lose close family relationships by risking it all with Speculator’s Guilt.
Watch little Dorrit and imbibe this lesson through a decent narrative. By the way, if you just watch for it’s financial lesson, it has a decent love story thrown in (to keep the Mrs happy) , some unforgettable characters, and a financial story that you can enjoy which others may not be even aware is being taught. e.g. it’s not like asking your family to watch Bloomberg news. My good lady can take me talking shop for a maximum of about 90 seconds. ;-). I might share this post with her and see if she comments!