The four seasons of investing

Money flows from financial assets to the economy, back and forth. This is what make investing so special and different from other activities involving money.  Most people work to make money. An investor uses money to work for him or her. You can do four things with money: ·     Spend it ·     Save it ·     Invest it ·     Repeat or Give it back Spending and giving are both a form of consumption.  At first, investing could be seen as a derivative of saving money. That said, while saving is static and expect to receive nothing else than the return of the money, investing is really different in that it is also looking to make money and a return on the money. To save money, you must spend less than you earn. This puts the priorities in the right order: income generation always precedes capital accumulation. Income and capital are what investors are interested in. Capital is nothing else than an accumulation of income and the net present value of future net i

Investing is all about money. As money buys time and time is money, it is about understanding the time value of money and staying on the receiving end of money flows. But what is money? The Ascent of Money by Niall Ferguson is a great book for those who want to learn more about money and the history of money. Money, in its different forms, be it sea shells, precious metals or signed paper bank notes, is a promise: its value based on trust. If I accept to receive as payment a seashell against the mammoth I just killed, it is because I trust that when I need to buy a mammoth myself, the same shell will be accepted and be seen as worth it. In that sense, money is a form of credit. Money is both a means of exchange and a store of value.  In a fiat currency (paper/digital money) system (the current system), the currency in which the investor operates is what is determining his or her purchasing power and the time value of money that will ultimately determine the value of his or

If „a n investor could be defined as someone who forgives a right to consume now with an aim to gain a financial return in the future“ , very little would seem to distinguish between speculative activities and investing endeavours. In most cases, we believe few people make the distinction. Many investors enter into speculations when they make a bet on the direction of currencies or oil prices. Many speculators see themselves as investors when buying stocks of fundamentals ahead of the next quarterly earnings. Even the most value oriented hedge funds speculate, simply because leverage and their short selling activities. And yet, we believe understanding the difference between the two is as critical understanding the difference between price and value. Warren Buffet summarises perfectly: „Price is what you pay, value is what you get“.  Clearly, this distinction should alert on the fact that if the goals of achieving the best annualised return on capital over time is the s

I am Eric Lane and it is my pleasure to welcome you on my new blog page: Four Seasons of Investing (4SOI). I started 4SOI as a personal collection of investment rules, a compendium of the knowledge and experiences accumulated over a 22 years career as sell-side securities analyst and hedge fund investor. We are what we eat. We are what we read. Our output can only be as good as our input. As such, I owe a great debt of gratitude to the hundreds of authors that have shared their experiences and thoughts in the thousands of books and articles that have read over that period on the subject of markets and investing. These heroes of mine helped me survive and thrive during what could be described as one of the most difficult investing periods in world market history. As a result, I felt some of the lessons learned needed to be taught. Spending time on this blog is my way of giving back, of promoting their words of wisdom and my own practical experience and philosophical jour