Understand finances and investments: More than money and greed

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Text comes from: Mehr als Geld und Gier: Kostolanys Notizbuch (2016) from André Kostolany, published by Münchener Verlagsgruppe (MVG), Reprints by friendly permission of the publisher.
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History has seen many speculative bubbles, economic crises and stock market crashes. Anyone who wants to understand the nature of the financial markets has to look behind the mechanism.

Understand finances and investments: More than money and greed

Here writes for you:


André Bartholomew Kostolany was a well-known stock market and financial expert.


From the author:




Just a collection of ideas and notes?

Often friends ask me how I have time to read books and Article to write, to hold seminars and to give lectures in front of banks when I am constantly on the move. However, that is not a problem, because what I have to do, that is, think and consider, I can do it anywhere, on the plane or train, in the bathroom or rocking chair and especially while listening to music. The only important thing is that I write down my ideas immediately before they fly on. The motto here could be: "That's the way it is, that's the way it is, no one's master, no one's servant!"

So this text is a collection of records on dozens of paper slips, restaurant bills, paper napkins, the back of tickets, etc., thoughts, ideas that suddenly pop through my head. You often have to do with money, with economic and political problems, because I constantly analyze what is happening in the world and weigh the pros and cons.

And who is the author? I don't know myself how to introduce myself and where my place is. It is very difficult for me to give an exact answer. I was born in a feudal country. There I also studied philosophy and art history at the University of Budapest. My first practice in finance was in the country of capitalism in the 19th century, on the Paris stock exchange. I completed my higher education on Wall Street, the stronghold of modern capitalism. My status is also a bit complex. I was born a Hungarian, a citizen of the United States, a Knight of the French Legion of Honor, and today I live in ten cities.

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Look at the story

I speak different languages: Hungarian with God, French with my friends, German with my students and readers, English with the bankers and the floral language with the ladies. My father was an industrialist in Budapest (would be 120 years old today), my mother was very musical, a real esthete: she might have had a talent for painting and writing if she hadn't devoted herself exclusively to her children. I have brothers, a sister, cousins ​​and cousins ​​all over the world with whom I am in more or less close contact. Where is my seat? For the stock market professionals, I'm a journalist, so I'm just an outsider on the stock market, in the best case a nut. Maybe (!), But so far a pretty good weirdo. At the age of eleven, I was already a foreign exchange dealer in the chaotic times after the collapse of the Austro-Hungarian monarchy, when the successor states continuously stamped, re-stamped and re-stamped their inherited currencies and banknotes. It was in this confusion that I had my first experiences. So my life has been closely linked to the stock market for 60 years.

I weathered earthquakes and floods in the financial markets and, thanks to the stock market, could - if I wanted - retire comfortably. (Then this book would not be in your hands today.) For my colleagues, however, I will remain a journalist and not a stock market professional. And I'm proud of that too; because I think journalism is the best job. The press establishment, on the other hand, never accepted me as one of their own, at most as a "guest worker". Although I have millions of readers and fight with word and pen for the free economic system, against its pests and sharks, I have not received a price for it. Well, at least 25 years ago General de Gaulle made me Knight of the Legion of Honor for my "journalistic activities". At the time I was a foreign policy commentator for the big daily Paris Presse.

The bankers, for their part, look at me curiously, I don't mince my words when I'm convinced that the general interest is being harmed. Nonetheless, they invite me to lectures that the audience flocks to. The Professoren smile at my statements and theses, but still listen carefully, not to mention the thousands of interested parties who attended my seminars or the students for whom I gave lectures at numerous universities. I admit that I never studied economics at university, but all the more so in the jungle, where I had to pay a lot more tuition fees. Lucky (!), Because I always remained completely impartial in the case of objective analyzes. Entrepreneurs and business people have to take stock once a year. I'll take stock of my life and ask myself: "Kosto, what did you do right, what did you do wrong?"

From stock market professional to traveling preacher

If I had only remained a stock market pro, today I would be sitting in the elegant office of a Wall Street skyscraper, surrounded by a dozen telephones and computers, and would have to spend hours at the disposal of nervous customers and watch the prices jump up or down a quarter, and could therefore in such a tumult have no clear view of the burning problems. If I had become a journalist right after graduation, a job that I appreciate so much and that was actually my dream, I would not have the experiences that are worth tons of pure gold to me today. I would sit in an editorial office and report on topics that only marginally interest me or of which I don't understand anything. If I had chosen a university career, I might have been pinned to a chair in a small town instead of racing around the world and meeting millions of people. My world is New York, London, Paris, Munich, the Riviera and even Budapest. If I were a so-called economics expert, I would have to tremble whether a company would make higher profits thanks to my advice.

No! I would rather be a hippie, a kind of traveling preacher, completely independent, who can write and say anything he thinks is right, even if he sometimes has to kick someone's corns. "That is the way it is, that is the way it is, no one's master, no one's servant!" For many, I am a clown because I have the courage to tell truths - even with a joke - which prominent experts do not trust themselves. Only one internal wound hurts me: that I am not a trained musician, but only a music fool, when the passion for music and art has often helped me in my considerations about the economy and even the stock market. My notes and remarks are intended to serve as a vademecum for the young stock market professionals, money changers and similar »rascals«. You should heed the advice of an old colleague, one of the last of the Mohicans on the international trading floor. And they are supposed to entertain all of my readers, even if they have nothing to do with the stock market, in a pleasant way and give them some insights that have accumulated in my notebook over the years.

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The portrait of Dorian Gray

"But let's be very frugal with it" Colleagues often ask me with a smile what I do with the "lots" of money when they find out my fees for various activities. Strangely, nobody asks me what I can do with the money from lucky speculation when I might win ten times (but not earn). Money earned through work doesn’t seem very safe to them. I remember an authentic comment from an old friend. He was a wealthy man, kind of old playboy. As a passionate fencer, he met a young man at a sports meeting, whose fencing skills caught his eye. He asked him if he would like to come to his house for a little fencing practice. "For example on Mondays?" - "No." "Tuesday, Wednesday or Thursday?" "No, not either."

"Why?" Was the astonished question. "I'm working, Herr Hauptmann." That can't be very good, ”replied my friend. The captain was a clever but funny guy. One day when he offered a young fencer out of sportiness the "you", the young man's reply was: "Thank you, Herr Hauptmann." To which the old man immediately remarked: "But let's be very economical with it." Cogito, ergo sum ... "Cogito, ergo sum homo speculator." I am a speculator. Is that a job? No, it's a fate. By chance, I parachuted onto a large exchange, the Parisian BOURSE. Coincidence or destiny? My sponsor on the stock exchange: Monsieur Alexander K. My father met a former school colleague from Budapest, Monsieur Alexander K., in Paris in the early 20s, who was not only a multimillionaire but also a very big maker on the Parisian financial market. During their conversations about the old days, my father talked about his family and reported that his youngest boy, little André, was still studying philosophy at the university in Budapest. “What nonsense,” was Alexander's reaction, “does he perhaps want to become a poet? Send him to me in Paris, that will be a better school for him. "

The main thing is to get into debt

And with that, Alexander gave my father the second big tip. The first was of a completely different nature: speculation on the fall of the French franc. A surefire thing in the opinion of all well-informed financial circles. Today I can say with the greatest certainty that the second tip was the good one. But the first tip is also worthy of a more detailed explanation; 20 years later, the events surrounding this gigantic franc speculation in the 55s could be a living example for me, my students and my readers of how speculators imagine the course of events and how they actually come about: black clouds moved at that time over all of Central Europe, the German Reich and all neighboring states of the Austro-Hungarian Monarchy, which fell into chaos after the lost World War.

Inflation without production, poverty, unemployment, queues in front of the grocery stores ..., the printing press ran day and night, the currencies were in the basement, the prices rose by the hour: a pair of pants that had cost 50000 marks that morning was already there in the afternoon awarded for 100000. I was on a study trip in Germany, toured numerous cities and lived on a dollar a day, because the dollar was king. Everything revolved around the American currency and in Budapest there was only one talk of the day: the exchange rate of the dollar. Some inflation speculators made millions, even billions (in paper money, of course!) Because they bought everything, rows of houses or ten wagons of toothbrushes, as long as they could be bought on credit. Going into debt was the command for anyone who was just a little enterprising. What came after is worthy of a pragmatic study of history. One could discuss the reasons and the responsibility for hours, the consequences led to the greatest catastrophe in world history: Hitler.

The Castiglioni – Mannheimer tandem

But let's stay in the 20s. After the fall of the currencies of the central powers, speculators smelled a new roast: the collapse of the French franc. As I said, a surefire thing. France had won the war but was bleeding to death in the process: millions of dead, numerous devastated cities, state finances in total chaos. A daring German speculator, the Stuttgart Dr. Fritz Mannheimer, at that time the largest banker in Europe, head of the House of Mendelsohn and Co. in Amsterdam and partner of the old Berlin patrician company Mendelsohn and Co. He was in Vienna for a big party from the king of inflation speculators, Camillo Castiglioni, the 'Austrian Stinnes, ”as he was called.

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Castiglioni (son of the Trieste chief rabbi and former salesman at the tire company Semperit) now had the fixed idea after billions in profits from the Austrian inflation that the French franc had to be like the mark and the currencies of the Austro-Hungarian monarchy , also plunge into the basement. He managed to convince Fritz Mannheimer of the correctness of his view and to form a syndicate with him and a few other bankers and speculators from Vienna and Amsterdam in order to discredit and attack the French franc in all financial centers with the help of the specialist press.

How to survive a stock market crash

The rate of the franc kept falling ... What does it mean to attack a currency? Obtaining huge loans in the relevant currency and then offering these amounts in all financial centers such as London, Zurich, Amsterdam etc. - if possible with a lot of fanfare, newspaper articles, word of mouth etc. ...? The currency is initially (only) slowly sliding down, the decline spreads pessimism among the public. And through a chain reaction it is seized with fear and - as in this case - throws its franc balances overboard. The debtors can then, with the help of the panic that is caused, buy in the francs owed at a low rate. Exactly the same approach, or one could say the same tactic, as in the late 70s and early 80s under the weak Carter administration with regard to the dollar. The Castiglioni – Mannheimer tandem was extremely successful. The franc fell steadily, accompanied by the franc sales of all speculators in Europe, and Castiglioni grew richer. To also say something good about the former Semperit salesman, I would like to say that he did a lot for cultural life. He financed, for example, Max Reinhardt, the greatest theater man of the time and founder of the Salzburg Festival. (The inflation wounds of that time have now healed well, but the festival is still flourishing.) Well, the franc slipped lower and lower because the French government did its part to completely lose confidence in its own currency. One government after another fell, and with them the franc. I still remember the atmosphere in France as if it was yesterday.

In 1926 the left-wing coalition under Eduard Herriot, the pro-German politician, mayor and Lyon, music and Beethoven researcher, won the elections. His finance minister Anatole de Monzie, a brilliant intellectual (whom I later knew very well), began his speech in Parliament with the following words: "Gentlemen, the coffers are empty ..." Great shock in Parliament and throughout the country. The franc fell to a new low, and with it the government. Demonstrations against the parliament, great hatred of foreigners (as is so often the case in French history): "The strangers come and eat our bread," that is an old song. The tourist buses were pelted with stones and the windows of the cinemas showing foreign films were smashed. The panic was there and the franc was dying.

Poincaré, the savior

And suddenly something happened that all currency dealers, whom I like to call "currency freaks", should always keep in mind. The news came from the Élysée Palace: Raymond Poincaré accepted to become Prime Minister and Minister of Finance at the same time. The trend in the foreign exchange market changed from one minute to the next, because Poincaré had become a symbol of French patriotism and all virtues. He was certainly not an overly clever man, a dry lawyer, but with integrity, puritanical and ardent patriot, incidentally stubborn like any Lorraine. He was the President of the Republic during the World War, a passionate enemy of Germany (that was one of the French virtues at the time), and, more importantly, he immediately got approval for a loan from the New York banking house John P. Morgan $ 100 million.

As if under a magic wand, everything was transformed in an instant. This time the bear speculators panicked and wanted to buy back the owed francs quickly, because everyone owed as much francs as they could. (One of my friends owed millions on a porcelain factory. Why? Because this factory was available on credit.) The franc climbed higher and higher and on the stock exchange you could buy foreign stocks (gold mines, oil stocks, etc.) because of the massive sales orders no longer write down. There were only sales orders, since all speculators - small or large - from all over Europe had bought foreign securities for francs on credit. And now everyone wanted to get rid of them.

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Thousands of speculators went bankrupt and even some large French companies (department stores, exporters ...) got into financial difficulties because they owed hundreds of millions of francs. The French franc rose by 100 percent within a year and the French central bank even had to keep the exchange rate artificially "low" for export considerations. In French financial history this episode was remembered as the "Marne Battle of the French Franc". All of Vienna, half of Prague and Budapest as well as Amsterdam were bankrupt. My father also had to pocket losses, but these were, as I reported, amply compensated by the second tip. I came to Paris as an apprentice to Alexander and to the stock exchange, where I spent my crucial years of apprenticeship.

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