Investing, Then and Now and Always
It sometimes seems that the old-fashioned art of “investing”—putting money into a specific business with the goal of sharing in its profits—has been superseded by sheer financial speculation, often of a rampant and irresponsible sort. Most accounts of profit-seeking activity today dwell on activities on its margins in the form of complex and often incomprehensible financial instruments known as derivatives. In the 15 years preceding the 2008 financial meltdown, the minute-by-minute discussion of stock prices seemed aimed at stimulating day traders, who buy a stock in the morning only to sell it in the afternoon. At the same time, computer programs were set up to take advantage of tiny changes in a company’s position during any given day, thus turning the act of buying and selling stock into something very nearly beyond human agency.
Whatever happened to the commonsense wisdom displayed by, say, Benjamin Graham (1894-1976), the Columbia Business School professor whose name became synonymous with a simple, straightforward, look-for-undervalued-companies-and-hold-them approach?
About the Author
John Steele Gordon writes frequently on economic subjects for Commentary and our blog. A revised version of his book Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt was released recently by Walker and Company.