Speculator or Investor?


#1

The popular media and the government types, and consequently the general public, portray an investor as a semi-legitimate businessman, and a speculator as the most vile of the commercial community. But then, the

aforementioned hardly get anything right.

It has been said that an investor is a person who invests 100% in order to make 10%, and that the speculator will risk 10% for a 100% profit. Neither approach is incorrect nor indeed immoral; both are legitimate approaches in the pursuit of profit. The difference between the two seems to me to be the term for the expected profit. The “flipper” has a very short term for his high expectation of gain. A land/home package investor makes, say, 20% consistently as long as he nurtures his nest egg. A speculator, on the other hand, “looks” at the long term future of his market. He takes his time to investigate the fundamentals of his contemplated venture. He carefully researches the past, evaluates the present condition, and extrapolates the future consequences. He diligently and unemotionally tries to identify the trend of a specific market: he invests in the trend! He hopes to make a large profit in the long term–patience is his virtue.

If we examine the trend in commodities for the last 5 years, say food, oil, lumber, metals, etc., and compare it with the trend of the purchasing power of the dollar, we can readily see that the cost of the commodities is in a continuous upward mode while the dollar’s value has a distinct downward trend. We all know that pronounced trends do not change direction abruptly but are rather slow to change. This characteristic tries the patience of the average investor, possibly making him complacent, but is the life-blood of the speculator. Time. Patience.

In our business, the M.H. is composed of raw commodities with the use of energy and highly efficient construction techniques. As the supply of these “used” homes diminishes, it would be reasonable to assume that demand for them will eventually exceed supply. A speculator, whom I envy because I am not one, would probably try to buy every good home he could, today. If such a person will make large profits in the future, should he be considered immoral, a social pariah, or worse, the cause of high prices?