While I agree with much of what you say, Richard, I don't think stock
trading needs to be gambling. It is too easy to evaluate reality and
choose stocks that always make money, at least for awhile. Its rather
like counting cards in 21, which moves the odds away from chance.
However, in both cases, the count of the cards needs to be faithfully
known and used. Most investors loose the count, so to speak. When this
happens, chance takes over and the house (the big stock traders) always
wins. The concern I raise is that the "count", using the 21 analogy, is
getting very out of contact with reality. When this has happened in the
past, the market has always corrected rapidly. My question was asked to
see if any of you sense the same thing. This is important to anyone who
owns stocks because if such a correction occurs, all stocks, even the
good ones, will go down a lot. Its always better to get out of the game
before the house goes broke and can't buy back the chips.
Ed
R C Macaulay wrote:
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
