The problem with our industry is not speculation per se; speculation has always been a part of the market and will always be. It is the inability of the investors to distinguish between investment and speculation.The year 2001 has been a very turbulent year for the stock markets. I would like to go to the basics of what investment is all about. It is important to understand how we have deviated from the conventional wisdom of investing.

What is the definition of investment? It is preservation of capital. A reasonable rate of return is assured. Moreover it should be from own funds and not from borrowed funds. Operations not meeting these requirements are speculative. Thus even if one purchases a fixed income security like a bond from borrowed funds it is speculation. If you are an investor your decision to buy or sell is based on the underlying economics of the stock you own. If you are a speculator your decision to buy or sell is based on what you believe about the near term direction of price.

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