Friday, May 24, 2013

Currency speculators....

From Expeditors International of Washington’s latest 8-K (after they had also quoted from Ben Stein’s book How To Really Ruin Your Financial Life and Portfolio):
Currency speculators seem to be very much like your neighbor who makes frequent trips to Las Vegas. One soon learns that the correct inquiry of your neighbor upon his or her return is not 'How much did you win?' If they won, they tell you about it. If they lose, you might see a “For Sale” sign on the BMW in the driveway…and in extreme cases…a realtor's sign in front of the house, soon to be followed by a large moving van blocking your drive way. As we all know, everyone wins in Las Vegas…and it's the winning most people talk about. Unfortunately (or fortunately if you are a casino owner), everyone who gambles in Las Vegas also loses in Las Vegas…and the existence of all those marvelous edifices in the desert are ample proof that what's lost in Las Vegas stays in Las Vegas….and obviously your neighbor and other visitors lose more than they win. Most gamblers/speculators in either Las Vegas or in the currency markets who win big are more lucky than they are good in most instances. Granted the odds may be better if you are speculating on currencies in some manner…as you have the option to bet on governments to do something stupid…but that said, and to Stein's complexity point, there are enough times when governments do something smart when you are expecting them to do something stupid (or they can even do something less stupid than the other governments impacting the currency markets) that you can really get burned without even lighting the fire yourself. Big financial institutions do a lot of currency speculation. But with them, if they win, like your gambling next door neighbor, they tell everyone about it. If they lose, they don't talk about it…and if they lose a lot, unlike your gambling neighbor who just had to move, their own governments (We the People in other words), who they might well have even bet against, bail them out. Nice work if you can get it…and can still look yourself in the mirror in the morning. 
If one were to equate our philosophy on currency exposure to personalities in Las Vegas, we'd be the person who feels a hankering for an after-dinner drink and so throws a couple of coins in a nickel slot and stands around in the casino on the way back to their hotel room just long enough to get a couple of free drinks, the cost of which, had they been paid for, would have been much more than anything put in the slot machine. Better to get a few free drinks while losing a little money…with the possibility of winning a little on occasion, than getting a lot of free drinks that the big wagers get, while losing your spouse's car and maybe your house in the hopes you'll find out that you have become more lucky than good.