The difficulty in understanding the stock market has it root in not
recognizing exactly what it is.
The stock market is a legal form of gambling. It IS the great game !
Of the gambling casino parlours in the great game.. commodities are the
roulette tables. The players at this table operate similar to a duck hunter
pulling the trigger today at a duck that will fly over months from now,
hoping the duck will fly into the shot pattern. The original purpose of this
parlour was to provide a way for farmers to insure next year's crop, or any
commodity against sudden drop in market price below the cost of production.
Oil speculators turned the crude oil market into a whore's market some 20
years ago when they begin trading crude futures. China got into the game 2
years ago by buying up strategic metals and stuff and such. Few can grasp
they may actually be holding food grains commodity futures hostage.
Wall Street is a private club where membership costs real money and the game
is controlled by the house. A share of stock.. any stock is only worth what
you can sell it for. It used to have some relationship with a company's net
worth and/or assets and keyed to the dividend paid each year. NO MORE.. few
dividends are paid out anymore and the value to the owner of a share is
based on anticipating a share will rise like WalMart did. 25 years ago or a
Google share. In today's world a share has a inverse relationship to the
big buyers of stocks and bonds.. who are they?? pension trusts, insurance
and banking.. but the largest holders of stocks and bonds are the "shadows
people" of the hedge and derivitive outerworld ( similar to the underworld
except no laws are ever made against the shadows)
Little money received from an IPO actually goes into a capital account since
it's another parlour in the great game and the money goes to the promotors
in the form of both appreciation of share price and share set asides for
founders.
It comes as a great shock for Joe citizen to read an actual P&L statement
( nearly impossile to fathom) to learn that a publically held stock
corporation is in debt up to their eyeballs from the sale of BONDS , not
common stock.
It is possible for a corporation to survive for years without ever showing a
profit.. just sell more stock and issue more bonds.
Example.. Krispy Kreme, Starbucks, Home Depot, Lowes. What really surprises
many is WalMart.
Never to ever give a sucker an even break.. GE is the biggest , richest
corporation on earth and a look see into many large corporate structures
show a few "ex-GE" cadre .. like Home Depot.. ever wonder why??
GE morphed from a manufacturer under Jack Welch into a strange new "capital
corporation". Their fingerprints and DNA are across the world and behind the
China trade and WalMart.
Consider Goldman-Sachs and Merrill-Lynch.. when the 1st qtr 2008 reports
were due.. speculation was G-S and M-L and Citi-Bank would look like
Bear-Stearns on paper.... but the guys that print the paper can put
anything on the paper they wish and "BINGO".. G-S et al came up smellling
like roses while Bear Stearns wound up in the tank and fished out by
JPMorgan.
Hmmm.. Now the plot thickens and the really serious poker players are
placing their bets. It's sorta amusing when ya think about it.... It's all
monolopy money to them since they print what they need.
The world's greatest game of all .. If you're big enough, tough enough,
smart enough to buy into the game.. they don't squeeze you out.. but invite
you in.. unless.. unless .. you don't play the game by the rules.. OR.. they
make an example of you.. like Enron.. go straight to jail and do not pass
go... occasionally one of the players must be reprimanded , like Bear
Stearns.. and gets a get outa jail free card but forfeits his cards for the
hand. After all... one cannot be a gentleman and cheat at cards in the great
game.
So if Edmund Storms has difficulty reading the face cards.. it's because he
is a scientist and not a stockbroker. Never play the other man's game.
Fun stuff.. all that money and never enough.. ole Solomon lived the life too
and wrote an amazing book on the subject in his later life. The poor simp
chased his tail and tail to no avail .. grin
Richard