The stock market is a bore


#1

I wonder how many people actually understand how the stock market works? I turn on my TV, and I haven’t had cable in such a long time… All I see is the same thing that I stopped watching five years ago! These annoying reports of the stock market going up and down every five minutes and profiles of absolutely boring sports pros who get paid to ride down mountains on bikes and sail-surf…

Anyway, here is the stock market in a nutshell: the rich sell when the shares are topping their value. Thus, the stock market drops because the rich know when to take their profits, and their sell-offs are massive, thus triggering price declines which may or may not be related to the actual performance of companies… Then the middle of the road stock holders lose a lot of money because they have no idea when to sell until it is too late, and so, they are “slow” compared to the sudden and large effects of the bowel movements enacted by the big buyers/sellers… It is all bullshit. Once the price bottoms out, the same rich pricks who sold out a hell of a lot of shares at the top just step in and buy the shares back from the average-joe losers. It is so simple that you don’t ever have to read or watch the business news ever again!

haaahhaaaa !


#2

Dear Popo,

 It must have been a bad day for you. First the stock market, then possibly gay western men with Asian women. Anyway, I'll try to give you a breakdown on the stock market, how it works, and an excellent website for the small investor. 

 The stock market in the US has outperformed all other asset classes in the US since about 1900-1920, when they started keeping track. It's made up of about 7,000 companies now. Most people only know the large name companies or those who have excellent PR depts. Surprisingly, a lot of famous brands are own by companies with names you would not recognize. I really could careless for the Dow Jones industrial index or NASDAQ. I do have my Roth IRA in the S&P 500 though. Lately I've been getting killed, but I'm in this for at least another 30+ years. To actually pick and invest in individual companies requires research and not reading what the PR dept and newscasts(particularly CNBC) tell you. They are getting paid and are in the business of hyping a stock or making money on it. You can make money in the stock market and let me explain how.

 There are 2 ways to make money in the stock market. You can either have a long or a short position. 

 A long position is where you buy a stock to sell in the future, in the meantime you could possibly collect a dividend. Most large name companies pay dividends 1(Disney and McDonalds) or 4(most other companies) times a year. When you sell a stock you either breakeven, lose money(capital lose) or gain money(capital gain). People who own stocks for a long period of time tend to do better than those who trade frequently and have a high turnover. Hence why in any given year 70-95% of all mutual funds under perform the S&P 500. 

 There is also a short position. This is where you sell a stock in the belief that the price of the stock will go down and when you buy it back at a cheaper price you make money. I hope to someday be a successful short seller. Here's why, you have to really know you stuff and be very good at research to be a short seller. Visiting factories and going through 10 years of financial statements with a fine tooth comb are not unheard of activities for a successful short seller. It's a very contrarian position and before you ever go long on a stock, read what the short sellers are saying about it because they usually have the best research. They specialize in finding companies that do any or all of the following: commit fraud, allow acct. receivables(amount of money owed to the company) to skyrocket, over-hyped stocks, dodgy practices and a host of other interesting things. Short sellers are hated by a lot of people such as Asian govts(particularly Japan), CEOs of companies that are shorted and irrational owners of the stock being shorted. Hence short sellers face the following problems ostracized(not really, the guy who called Enron is a hero to some people), hate mail, govt policy affecting short sales(Japan wrote the book on this one), and the occasional death threat(I'm not kidding). Short sales are less than 1% of all stock sales made, but they get an overwhelming amount of bad press for it. 

 Options for you in the stock market and investing are the following; Invest in a mutual fund(I'm a big fan of index funds), invest in individual companies, invest in bonds, CD's, money markets, and/or savings accts. You can go to [www.netstockdirect.com](http://www.netstockdirect.com). They have outlines on almost every available plan. I was invested in 5 DRIP

#3

My point was that it is a waste of time and money to invest in the stock market at all UNLESS you are a multi-millionaire to begin with since only they can cover all the bases and control the up and downswings of the market. Small and medium investors always lose if they stay in the market for the longer term. The only way you could possibly win is to make one good investment (by luck or having got some good information) and then selling it off at the right time… Then quit the stock market all together… It is statistically proven that medium and small players – even stock brokers – who play the markets for a long time do not tend to make money, but merely break even, as their losses catch up with their gains. It is statistically impossible to make money on the stock market over the long-term unless you are already a multi-millionaire. That is my point, nothing more. However, thank you for replying in detail, I appreciate it: I will reread your post again, but I will not watch those tediously boring stock market reports on television – EVER…

As to whether I had a bad day, not really… I was just thinking of some girls I know… I did lose some money on the stock market years ago, ha, ha, and a friend of mine did lose a lot in America, too…

Finally, I really think that if you are playing the stock market and make a significant gain, there is only one logical thing to do: take at least half of your profits and put it into a long-term BANK account, and use only what remains for reinvestment, this way, if you lose on the next investment, you can still come out ahead. Always stash a goodly portion of your profits in hard currency. Never re-invest all your hard cash, because that is how dummies get burned!


#4

Okami, I’m going to hire you as my personal investment consultant. I suck at investing. I made money between 1997 and 1999 in the market, but when things started going south in 2000, I got out. I’m just not interested or savvy enough to keep abreast of the changes and find stocks that are still earning. I keep my fundage in low-interest accounts now, but I know I should do something better with them.

I’ll never forget the 50sih retirees I know who have had to go back to work after losing much of their retirement fund value in the market in the past few years. One guy had 2 million socked away in mutual funds. Within eight months, he had $800,000 and had to go back to work. In the words of one of my friends, it sucketh.


#5

Popo, please read www.fool.com. It will make you understand the errors of what you write. You seem not to have read or understood what I wrote. Liberal types tend to have trouble with investing and money matters.

Your point about multimillionaires is unsubstantiated. A lot of people were financially slaughtered by the bursting of the tech bubble. A lot of them were multimillionaires. It was misappropriation of assets. Have you ever read what Warren Buffet wrote about it? There were people out there who could see the writing on the wall quite clearly. I made money and escaped unscathed. I’m not a multimillionaire, I just know when things look bad. You can’t time the market successfully, but you can always get out of it. You might be surprised to learn that financial literacy is being pushed to be taught in high school. This is a positive note along with the continuing efforts to educate individual investors. If we were discussing poetry or art, I would listen to what you said, do my own research, then respond. I think you should follow my example in financial matters.

Your reasoning of making one good investment is the same line used to sucker people into the options market. Your logic is faulty. People become wealthy by slowing saving and accumulating their money. You become wealthy by spending less than you make and investing the difference. Only 20% of Americans are employed by large corporations the other 80% work for small and medium sized companies. People own these companies and run them. Where are you citing the statistics that it is imposssible to make money in the stock market and under what conditions?

The logical thing to do with your savings is as follows:

  1. Run a budget and figure out where your money goes and for what. Make sure you spend less than you earn. Seems like a no-brainer, but you’d be surprised.

  2. Have an emergency fund of 6-12 months living expenses in a highly liquid interest bearing acct(short term CD’s and money market funds)

  3. Clear out all oustanding interest charging accts/debts(i.e. credit cards, loans not related to your house or above the value of your house, consumer debt), because every extra dollar you pay pays the same interest rate as they charge you immediately. An example, You do not put money in a money market fund paying 4.5% interest when you have a credit card with a $2000 balance charging you 18.5% interest. You lose 14.5% of your money for every dollar you put in the money market fund versus paying down your credit card debt. I’m not advocating getting rid of credit cards, just pointing out a financial effect of misappropriation of your capital. I will always have at least 2 credit cards.

  4. Max out all retirement plans as the tax advantages are well worth it. This means contribute the maximum to your 403b, 401k, and any IRAs you are eligible for. Surprisingly a lot of smart people miss this one out of laziness.

  5. With money you will not need for at least another 5 years invest in a mutual fund if you are no good at picking stocks or lack the time for research. You have to research your mutual fund though. I am a big advocate of index funds with low turnover(trading costs money) and low expense ratios. Index funds often handily beat the other mutual funds in their categories. Vanguard is the best of these. If you are good at picking stocks, then do your research, read what the shorts have to say about the stock, buy a stock and hold it till your reasons for holding it are not being met by you or the company. Cut your losers early and let your winners run, most people do the opposite by cashing out winners early and keeping losers so they won’t have to admit losses(this is Japan’s major problem in a nutshell).

  6. Read Warren Buffet, when he speaks people listen, well except during the tech bubble. You can go to www.berkshirehathaway.com and read his shareholder letters. He’s not called the Oracle of Omaha for nothing. He actually has companies come to him to get bought by him. Berkshire Hathaway is one of only 7-9 US corporations with a AAA credit rating. Right now that means Japan, Taiwan, Suadi Arabia and a long list of other companies are more likely to go bankrupt than they are.

This is the short list, it only gets more advanced. I would caution people away from the options, currencies and commodities markets. If someone says something is stupid ask them why and see what their reasoning is. People love to talk about themselves.

CYA
Okami


#6
  1. How does a multi-millionaire 'control" a multi-trillion dollar market? He’s only 0.0001% of the market capitalisation.

  2. Many/most/all of the biggest funds (multi-billion) are for either retail investors (e.g. Fidelity’s funds) or for pensions (e.g. Calpers…) So, actually, the huge “players” are individual savers and professional retirement schemes.

Yes, there is insider trading - but then that is illegal. Accounting scandals, too, are an “insider problem.” But it does not destroy the rationale for investing in stocks, particularly in the long-term.

Wrong. Even if you define the long term as just 3 years, the average return over most 3-year periods this century has beaten the return on bonds. If you lengthen “long-term” to 5 or 10 years, then it makes even more sense to invest in equities.

People get burnt trying to trade in and out over the short term.

Wrong again. The stockmarket of any properly functioning market economy must over the long term grow in line with the profits of the listed companies. This is the theory. In the US, it is also the practice. Statistically, too, it is also the case.

However, Popo, you have a point. The catch in the above analysis, and in Okami’s replies (which I have not read in full, so apologies if he has already stated this) is that the stockmarket in Taiwan is not like that of the US.

Despite the recent accounting scandals, that the US stockmarket has actually been relatively kind to the small investor. In the Taiwan market, the minority shareholder is treated with disdain. Thus the Taiwan market has not been a long-term winner - the companies find a way to spirit corporate cash away into unlisted companies or to disregard the interests of minority shareholders in a myriad of other ways.

Because Taiwan’s mutual fund industry is relatively underdeveloped, the small guys here are on their own - their money is not pooled into the big investment and pension funds that you see in the US market and that are controlled by professionals who are aware of all the issues of corporate governance. Many listed companies are simply not trustworthy enough to invest in over the long term.

This leaves many investors on the sidelines, because the long-term strategy is no good here. The market then becomes the playground of insiders, short-term speculators, and gamblers. Then, Popo’s arguments to the effect of “no-one can beat the house” ring quite true.


#7

How could I be wrong again? If you were constantly MAKING money on the market, then you would already be a multi-millionaire instead of one in the making… I still believe that the big players control the larger up and down swings of the market, aside from the obvious spending or lack of spending, employment and unemployment factors…

I thank you for you advice even so, Okami. However, I have usually made more money than I have spent, and have saved most from simple labor and work, not any other way… (Have you ever heard about the distinction between Work and Labor that is drawn throuh the analyses of thinkers, probably since Morgan, up through Marx and Weber and finally Arendt? I read them all and none of them ever mentioned or worried about the stock market…) However, I am getting tired of labor and work now… As everyday passes, I resent, more and more the idea of giving my time to rich people who do not compensate me adequately for the work I do.

( A tangent: I have written a lot of poetry and fiction that was not published because of the socialized repression of free expression back in Canada – perhaps more aptly named: class condescension…? Anyway, I cannot seem to get it together enough to create any opportunity to “SELL” the fruits of my real talents – which is art, pure and simple… People want plastic pulp and bulk bags… Oh sure, I try again every few years or so, in case the bigots have died off – but they haven’t yet, alas, ha, ha… They’re still jacking off at the small presses, looking down at me from their Catholic, Yale and Presbyterian towers… It isn’t good when someone migrates to Canada – unless you are fresh-off-the-boat – and I was third generation… Now, I’ve been away from “home” about ten years, maybe I could re-emigrate and pretend that I am fresh-off-the-boat-enough to get a refugee grant, like all those nice little Indian boys who have made it so big… What a laugh: “Give Ondanjte a publisher, 'cause he won’t be able to get a job from that f–king Orangeman, Jackie!” )

But since this is about financial security; since I am not interested in the stock market, and since I cannot be permitted to succeed as an artist, even though I am an artist, nothing more – then I should think that if I don’t want to work for the rich man’s company any longer – illegal activity…!?

Perhaps heroin smuggling shall yield me my country cabin in the hills? Perhaps not… I do have some investments in classic sci-fi paperbacks that may pay-off twenty years from now, not to mention some early editions of Rimbaud and Lowry, but not much else… But the truth is, I don’t want to accumulate much money at all… I already have enough…

Two Sticks

two sticks, three, four then five
six sticks and some stringy old glue
here’s a head made of paper -
two dimensions of you!
flat and callow,
we feel nothing’s new.
a leaf in the stream
or a feather on air:
life arrives like a dream…
and we won’t remember,
when it’s over,
the dream all dreamt…


#8

It depends how much you start with. Let’s say a 10% p.a. return each year (on the high side). After 10 years, that would give you 2.6 dollars for every 1 dollar invested. So, if you started with 100,000, you would have 260,000. So, no, not a multimillionaire.

And the big players include retail investment trusts and pension funds in the US. (Though even they are just multi-billionaires in a multi-trillion dollar market.) So, really, even their size cannot manipulate the market. Just look what happened to LTCM, a huge hedge fund, when the market realised what positions it held. Other (much smaller players) just refused to buy their deteriorating positions and LTCM collapsed. (Its actually hard to manipulate the market through sheer size of funds - the whole market is a bunch of greedy capitalists and no one is going to do you a favour!)

Your arguments are more about the “insider deals” among the wealthy elite and their disregard for the minority shareholders. This is a lot easier to get away with in Taiwan. Here, the average knowledge of the individual shareholder is low (very good on the latest tech products and every blip in the price of semiconductors but poor on financial knowledge). And also, the investment trust companies have always had links to the big industrial groups that run the listed companiues - hardly independent.

With the recent takeover of investment trust companies by foreign houses, there is some hope that this will change.

So, you have some good points to make - but your criticisms apply more to Taiwan than to stockmarkets in general and the arguments you make to back up your points are not (quite) the right ones.


#9

[quote=“Popo”]Two Sticks

two sticks, three, four then five
six sticks and some stringy old glue
here’s a head made of paper -
two dimensions of you!
flat and callow,
we feel nothing’s new.
a leaf in the stream
or a feather on air:
life arrives like a dream…
and we won’t remember,
when it’s over,
the dream all dreamt…[/quote]

Did anyone else find this mildly depressing? I mean, I’m no literary critic, but it was pretty decent - just depressing.

Popo, you got any up-beat, happy stuff?

Sort-of-like Atomic Kitten-style poetry…???


#10

the twisted tattoo girl

beats back her reflection
in the mirror of his entreaty,
as together they stare past the fuck:

unravelling from prisms,
their jugular schisms rise up,
then writhing,
fall beneath that orgasmic web
of ivory enchained by shadowy flame,
their limbs woven,
with easy ecstasy…

version 2 copyright march 24, 2003 by nonamefirebrand

P.S.: Please Please do not be afraid of your emotions – they are the only thing you have to decide whether or not you are human or beast!!! Read poetry to delve deeply into your highs, lows, limitations, hopes – test your dreams and be more real for it! Of course, I like writing happy and reflective poetry. But I am not really a very serious or worried person; poetry is a sort of release mechanism – a way to express being alive and all its implications… Perhaps it is analogic to the idea of the stock market being a replacement for real work, a pseudoey-image for the civil society we would make – if we could accomplish anything new, and make progress equal peace…


#11

I’m not, I just prefer to dwell on the happier ones. The above porno-poetry is much better, thanks very much.

Well, I prefer intoxicating substances for this, but, hell, I’ll give it a go…

Can’t let this one go - the stockmarket is there to improve the allocation of capital. By and large, it has done a decent but not perfect job in the west. Though there is not much spadework involved, let’s not be too hard on those poor misunderstood investment bankers.


#12

The stock market improves the allocation of capital? That would be a good theme for a satire… You must be an American, huh? I know that it is considered illegal in America to delve “deeply” into the full gamut of emotions, (you can still be put in jail for crossing the state-line with hookers, and for sodomy, too!) …and we have seen this lighten-up-or-else trend has been perpetually on the rise since the blissy musical displaced the tragic dramatic play on Broadway years ago; also, the advertised prosperity of the 1950s tended to make O’Neill and his followers, like arty Miller, seem like the last gasp of the full rainbow-man, before your culture fully effaced the FULL emotional spectrum of the human constitution with the consumption of enforced pleasantries and idiocies like war-in-the-name-of-nominal-democracy… So, I really have to grin when you suggest that the stock market helps to maintain and improve the allocation of capital! What a divine presumption! That would be easy to believe if the capital were not continually being further and MORE concentrated among fewer and FEWER BIG corporations: only ten or fifteen years ago there were something like twenty big media companies in America, and now, there are only something like about 5, or was it 7, two years ago…? Do you not see the end of it all? I will try to be optimisitic, just for you! So, hopefully, we can engage a positive anarchy that will finally activate the fullest semblance of particapatory democracy; but first, we need to get by all our well-educated prejudices, nasty religious hang-ups and several other strictly enforced, officially-sanctioned rules for correct cultural order… Do you think I am cynical? I am not, but am too, only partially writing in jest, and I would have you realize that I am trying to speak without any guile; so, I am quite serious when I say that the stock market doesn’t actually accomplish anything like the optimal use of resources that you want to make believe that it does! But in fact, make-believe has become big business in America, just ask the ghost of Walt Disney, and that dangerous radical, Mickey, “the Lefty” Mouse!!!

At last, a real, squeeling monkey for my magnet !


#13

Popo, you’re a fool and if you were wise you would just give me all of your money.

If you invest in a broad base of assets (such as the S&P 500) on a regular basis (it’s called dollar cost averaging) you can expect to earn about 11% per year over the lifetime of the investment (say 40 years). No, it won’t make you a millionaire overnight, but it will make you a millionaire by the time you retire. I recommend this approach for everybody, whether you consider yourself well-versed in the markets or an idiot like you demonstrate yourself to be.

Some individual investors (like myself) also invest in individual stocks. In Taiwan blue chips such as TSMC and UMC are good long-term winners and attractive at these levels. No, I don’t have inside information. But if you read industry press and believe the utilization rates of those two companies will rise later this year with a rebound in semiconductor demand then those two companies would be places to consider putting money. I would estimate between 30% to 50% is possible in a 12-month time frame.


#14

Well, plenty of people would argue as you have done. And indeed, its imperfections are all too obvious. Keynes likened it to a casino. But it does a better job than, say, government-run banks lending to political cronies. The stockmarket, properly functioning, can be a good check on corporate use of capital. That’s why China is trying to develop its own equity market. I think we would agree on many criticisms of the stockmarket, but don’t throw away baby and bathwater - Okami had some decent points, too.

Never even been.

I can think of more repressed places… the americans appear to be all for this “express yourself” stuff. Its just that my personal philosophy is “accentuate the positive.” If I am going to go to all the effort to pick up something and read it, I don’t want it to make me feel bad. I have Cake’s posts for that.

Got me, I liked Moulin Rouge immensely.

Lost me, completely.

Aaaah, J.K.Galbraith’s famous hypothesis. Unfortunately, its wrong. Actually the % share of GDP held by small companies has remained remarkably stable over the long term - its been on the rise recently.

Yeah…no…errr…lost me again.

Still, it was a fun read. You are not boring.

I did not realise that monkeys are magnetic.

I can see why your chosen form is poetry - as you seem to be unaware of an invention called the paragraph.