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Author: imcharliehm Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35357  
Subject: The Parable of the Talents Date: 6/21/2002 6:14 AM
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Supposedly, this is a Christian-majority country, which means that a significant portion of this board's members are at least familiar with the stories of that wisdom tradition, even if they aren't observant. For the benefit of those raised in other traditions, the parable is repeated below. Frankly, it's a story I've never understood, but it bears directly on current Cap Preservation/Cap Appreciation brouhaha raging in several threads.

(Matthew 25:14-30 NIV) "Again, it will be like a man going on a journey, who called his servants and entrusted his property to them. To one he gave five talents of money, to another two talents, and to another one talent, each according to his ability. Then he went on his journey. The man who had received the five talents went at once and put his money to work and gained five more. So also, the one with the two talents gained two more. But the man who had received the one talent went off, dug a hole in the ground and hid his master's money. "After a long time the master of those servants returned and settled accounts with them. The man who had received the five talents brought the other five. 'Master,' he said, 'you entrusted me with five talents. See, I have gained five more.' "His master replied, 'Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!' "The man with the two talents also came. 'Master,' he said, 'you entrusted me with two talents; see, I have gained two more.' "His master replied, 'Well done, good and faithful servant! You have been faithful with a few things; I will put you in charge of many things. Come and share your master's happiness!' "Then the man who had received the one talent came. 'Master,' he said, 'I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed. So I was afraid and went out and hid your talent in the ground. See, here is what belongs to you.' "His master replied, 'You wicked, lazy servant! So you knew that I harvest where I have not sown and gather where I have not scattered seed? Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest. "'Take the talent from him and give it to the one who has the ten talents. For everyone who has will be given more, and he will have an abundance. Whoever does not have, even what he has will be taken from him. And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.'

A very brutal story, right? The man is known beforehand to be of limited abilities, and he does what he considers to be the prudent thing in the circumstances-- he preserves capital rather than risking a loss in an attempt to appreciate it.

My response still? He suffered a grievous injustice. It is the master who should been beaten and cast aside, because he failed to exercise good judgment. If he wanted a better return on his money than he received from the man to whom he gave one talent, he should have ensured that it would happen by telling the guy what he wanted done. He gave his hot shot trader five talents, because he suspected the guy would do better for him than the bankers – and who is likely a better trader than himself. The master is merely an exploiter, arbitrarily and temporarily in a position of power by devious means as the poorest servant lacks the tact in pointing out. But how would the story have been told had the trader gone bust? Dire punishment, no doubt, for taking foolish risks. In short, a no-win situation over the long haul for the hired help and continued class exploitation by overlords. Not a good situation. But possibly some lessons can be salvaged from the tale.

There's an expression that has come into common language, perhaps from this story. “From those given much, much is expected.” There are gifted traders and investors, people for whom managing risk and making money comes easily, the way there are gifted musicians, mathematician, athletes. But for most, investing/trading are learned skills that depend, less on intelligence than temperament. But anyone, claim those in the business of training investors and traders, can learn to do a creditable job, if they chose to.

The bottom trader was given no choice. He was given no investment instructions, nor opportunity to practice managing risk. (No chance to paper trade, in modern parlance.) He was simply entrusted with property, and he returned it intact.

That isn't the case with the people who come to this board. We are a fortunate group, with sufficient discretionary capital to risk losses, and with sufficient time, education, and opportunity learn to appreciate that capital, if we chose that to be our goal. A fall-back position, and one that I've argued is actually a very aggressive goal, is capital preservation as measured against the erosions of modern day inflation. About that goal there is less choice. It's closer to a do-or-die thing, literally, given the huge correlation between wealth and proper medical care, etc. But, still, one can chose the degree of effort and the degree of wealth.

I think money is an annoying fact of life, but more so, it's a fun game. Were I ever to buy a lottery ticket and win an unimaginable sufficiency, I'd still trade, because financial markets are a laboratory of ideas and of self like no other, totally unprejudiced as to one's origins, status, sex, ethnicity, or even most common disabilities. There are top-notch fund managers who are in wheel chairs or blind. That's opportunity like nothing else in this world I'm aware of, where what you can achieve is totally up to you, your ideas and your courage to execute on them.

I come to this board with enthusiasm for the game, expecting others to bring similar enthusiasms. Why else would one hang out here? How much smarts does it take to buy a CD and how long can one gloat about the trade in the face of demonstrably better opportunities (however “better” is to be measured?) And why does anyone need to defend that choice to anyone else if that is truly the extent of one's talents, interests, or needs? More to the point, why shouldn't each of us be striving to be the best investor/trader we can be, receiving support and applause for insights achieved, risks undertaken, and gains skillfully won?

There's an expression that's apropos:"In the land of the blind, the one-eyed man is king." In a forum such as this, where each of us comes to the forum necessarily lacking parts of the skill set of truly accomplished investors/traders, for the simply reason there is no end of the learning, every single edge or insight that can be offered potentially benefits all. That's why I push the edges of investing/trading—-to learn and to share. That's why I expect others to push the envelope as well, to learn, both for themselves and for me.

Charlie


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