What lessons can we learn from Dickens' classic Christmas tale?
I went to watch the latest version of A Christmas Carol last night -- in 3D no less. In short, it was great, but then all the film versions of this story are great. You can't really make a sow's ear from such a silk purse as Dickens' classic tale, which goes right to the heart of human nature -- particularly amongst those of us who invest for a living.
Anyway, you didn't come here to read a film review and I'm certainly not trying to write one. But as I watched the film, it made me think how little things really change. The material world changes around us as technology progresses, but fundamentally, human nature remains the same, making the same mistakes whatever circumstance it finds itself in.
Ebenezer's great mistake
There are some valuable lessons here for investors. Perhaps first and foremost, we should remind ourselves why we do what we do. This of course, was Ebenezer's greatest mistake -- before his spectre-induced epiphany that is. He'd forgotten why he started down the road of frugality. He was continuing to work and save for a future that would never be his; a self-defeating act.
Amassing and protecting his fortune had become the end in itself. This is pure folly. On the plus side, he'd made enough to live on comfortably and enjoy his retirement -- and to treat those around him which, presumably, he went on to do for the rest of his days.
A Foolish dilemma
The dilemma seems to be that the more Foolish people like the main character were in the earlier part of their lives -- the more foolish many now are in continuing to be unnecessarily prudent, long after the absolute necessity has passed. And for the uninitiated, "Foolish" with a capital F translates loosely to being wise with one's money.
As the philosopher Rousseau observed: "The money you have gives you freedom; the money you pursue enslaves you." Hear, hear. The problem, sometimes, is that the pursuit doesn't stop when the freedom is there for the taking.
It should. But the largesse should also start a lot sooner than at retirement. Successful investing doesn't necessitate a penurious approach -- quite the contrary in fact. OK, I'm not suggesting you go out and spend more than you earn; that would be daft. But sharing the wealth through successful investing is true Foolishness in my opinion.
Necessary investment
As Lou Mannheim says to Bud Fox in the film "Wall Street"; "Remember there are no shortcuts, son. Quick buck artists come and go with every bull market, but the steady players make it through the bear market. You're a part of something here, Bud. The money you make for people creates science and research jobs, don't sell that out". You can direct that investment any way you want to.
OK, it's definitely stretching a point to say that investing is altruistic in any way, but at the same time, the society we live in needs investors to progress. Your money is a necessary link in the chain that makes society work.
The stats still tell us, though, that most people do the opposite. According to the Bank of England's figures, each UK household is now carrying an average debt of somewhere around £10,000 -- excluding mortgages. Include mortgages and this figure rises to £61,000.
Don't fear the ghost of Christmas yet to come
It's a question of striking the right balance.
In the 1951 version of a Christmas Carol, Ebenezer says to the last spectre of his long Christmas Eve night: "Spirit of the Future, I fear you more than any spectre I have met tonight! But even in my fear, I must say that I am too old! I cannot change! I cannot!"
We know the rest. It is the sight of his own grave that chills Ebenezer to the bone as he realises he'll be a long time dead and that much of his life and the way he's been living it has been in vain.
Thankfully, he changes and sees that more can be more. In other words, there's no real need to live life in an overly providential way. Don't fear the ghost of Christmas yet to come too much -- just give him some decent respect. There's a happy medium.
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