What Do We Mean by “INVESTOR”?

BUSINESS:

The term investment will be used in contradiction to “speculator”. As far back as 1934, in textbook of Security Analysis, we attempted a precise formulation of the difference between the investment and speculation, as follows:

“An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.”

While we have clung tenaciously to this definition over the 38 years, it is worthwhile noting the radical changes that have occurred in the use of the term “investor” During this period.

After the great market decline of 1929-1932 all common stocks were widely regarded as speculative by nature.( A leading author – stated flatly that only bonds could be bought for investment). Thus we had then to defend our definition against the charge that it gave too wide scope to the concept of investment.

Now our concern is of the opposite sort. We must prevent our readers from accepting the common jargon which applies the term “investor” to anybody and everybody in the stock market

These quotations well illustrate the confusion that has been dominant for many years in the use of the words investment and speculation. Think of our suggested definition of investment given above, and compare it with the sale of a few share of stock by an inexperience member of the public, who  does not even own what  he is selling, and has some largely emotional conviction that he will be able to buy them back at a much lower price.

In a more general sense, the later-used phrase “reckless investor” could be regarded as a laughable contradiction in term s-something like “spendthrift misers”-were this misuse of language not so mischievous.

The newspaper employed the word “investor” in these instances because, in the easy language of Wall Street, everyone who buys or sells a security has become an investor, regardless of what he buys, or for what purpose, or at what price, or whether for cash or on margin.

Compare this with the attitude of the public toward common stocks in 1948,when over 90% of those queried expressed themselves as opposed to the purchase of common stocks .

About half gave as their reason “not safe; gamble,” and about half, the  reason “not familiar with” , it is indeed ironical (thought not surprising) that common-stocks purchases of all kinds were quite generally regarded as highly speculative or risky at a time when they were selling on a most attractive basis, and due soon to begin their greatest advance in history; conversely the very fact they had advance to what were undoubtedly dangerous levels as judged by past experience later transformed them into “investments,” and entire stock-buying public into “investors.”

The distinction between investment and speculation in common stocks has always been  a useful one and its disappearance is a cause for concern. We have often said that Wall Street as an institution would be well advised to reinstate this distinction and to emphasize in its all dealings with the public. Otherwise the stock exchanges may some day be blamed for heavy speculative losses, which those who suffered them had not been properly warned against.

Ironically, once more, much of the recent financial embarrassment of some stock-exchange firms seems to have come from the inclusion of speculative common stocks in their own capital funds.

We trust that the reader will gain a reasonably clear idea of the risks that are inherent in common-stock commitments-risks which are inseparable from the opportunities of profit that they offer, and both of which must be allowed for in the investor’s calculations.

Speculation is beneficial on two levels:

• First, without speculation, untested new companies(like Amazon.com or, in earlier times, the Edison Electric Light Co.) would never be able to raise the necessary capital for expansion. The alluring, long-short chance of a huge gain is the grease that lubricates the machinery of innovation.
• Secondly, risk is exchanged(but never eliminated) every time a stock is bought or sold. The buyer purchases the primary risk that this stock may go down. Meanwhile, the seller still retains a residual risk-the chance that the stock he just sold may go up! A margin account enables you to buy stocks using money you borrow from the brokerage firm. By investing with borrowed money, you make more when your stocks go up – but you can be wiped out when they go down. The collateral for the loan is the value of the investments in your accounts so you must put more money if that value falls below the amount you borrowed.

Tanzania Investment Report 2021

Tanzania is one of the most preferred destinations for foreign investment in Africa (it counts among the 10 biggest recipients of FDI in Africa). According to UNCTAD’s 2021 World Investment Report, – FDI inflows to Tanzania reached USD 1 billion in 2020 and showed an increase from the previous year (USD 991 million), despite the global economic crisis triggered by the Covid-19 pandemic.

The current FDI stock was estimated at USD 16.6 billion in 2020. The mining sector, the oil and gas industry, as well as the primary agricultural products sector (coffee, cashew nuts and tobacco) draw most FDI. The country’s primary investors are China, India, Kenya, United Kingdom, Mauritius, Oman, the United Arab Emirates, Canada, the United States, the Netherlands, South Africa, and Germany.

According to the Doing Business 2020 report published by the World Bank, Tanzania ranked 141st out of 190 countries, gaining three positions compared to the previous report. Investors are drawn to the country’s commitment to implement sound macroeconomic policies, its efficient privatization program and abundant natural resources.

However, low levels of industrial development, environmental concerns, lack of transparency and poor compliance with legislation are barriers to investment. The business environment remains hampered by ineffective regulations.

Labor regulations are not flexible enough to support a dynamic labor market. Foreign investment in land is limited and investment in other sectors can be screened. During John Magufuli’s presidency (2015-2021), investor unfriendly policies have caused a growing mistrust of international investors, damaging the perception of Tanzania’s business climate, which remains restrictive.

In 2017, Tanzania approved new regulations in the mining sector that allows the government to tear up and renegotiate mining contracts, partially nationalize mining companies, introduce higher royalties, enforce local beneficiation of minerals and bring in strict local-content requirements, which undermined investor confidence.

On 19 March 2021, Samia Suluhu Hassan became president of Tanzania following the death of President John Magufuli. In her first months as president, Hassan prioritised economic growth and strengthening Tanzania’s economy through further development of the country’s mining and quarrying sector.

He also stressed the need for Tanzania to increase foreign investment to encourage growth, particularly in helium, gold and nickel mining and oil extraction. In 2016, a large deposit of helium gas was discovered in Tanzania, but its exploration work was postponed. China and Tanzania have embarked on 19 multi-billion dollar projects. Among these projects, are the USD 11 billion port of Bagamoyo, and the 34 km road between Bagamoyo and Mlandizi, connecting the port to Tanzania’s internal rail network and the Zambia Railway.