FCI Staff Writer Sacramento 
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July 16, 2023,
Legalized gambling.
That is the way a friend describes it, since he lost money twice within it.
Know when to fold ‘em, know when to hold ‘em. Something like that. Know when to buy low, know when to sell high.
Problem is, our friend didn’t know high was high or at least the highest it could go, before it crashed on him and he lost a lot of money.
The wonderful Stock Market (sigh).
Do you feel comfortable with the Stock Market?
A stock market is the aggregation of buyers and sellers of stocks and shares, which represent ownership claims on businesses.
These may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment is usually made with an investment strategy in mind.
Our friend didn’t have a strategy so he hired a broker, who had a strategy, which was to get her commission. She got paid whether our friend earned money or not.
Pretty good strategy.
The total market capitalization of all publicly traded securities worldwide rose from US$2.5 trillion in 1980 to US$93.7 trillion at the end of 2020.
We bring this up, because during our tour of another Nor Cal coffee house, we sat around and talked about investing.
One person said you have choices between the Big Three.
Putting your money in a bank’s CD or saving account.
Investing in the Stock Market.
Investing in Cryptocurrency.
Many of us almost spit our coffee out over the last one.
If you think the Stock Market is legalized gambled, then what the heck is Crypto investing. In some countries it is not even legal.
As of this writing, inflation in the United States has been high. The friend that lost money in the Stock Market has his money in a high yielding bank CD. He realizes that when the rates go down, he won’t get anything in interest but for now, he is riding high with no worries.
Many of us are not sold on the Stock Market.
It goes up and it goes down. How is that not gambling?
One of our friends, who is very well off, invested in real estate early in his life and now has three paid off rental properties. He never put them in a loan longer than ten years. He gets great rental revenue. He never invested in the Stock Market because he felt, people always need a place to live.
Hard to argue with him.
Then there are movies about the Stock Market, and we know the writers and producers want to create drama but virtually every film we have seen about the Stock Market, for the investors, things ended badly.
The Big Short is a 2015 American biographical crime comedy-drama film directed and co-written by Adam McKay.
It is based on the 2010 book The Big Short: Inside the Doomsday Machine by Michael Lewis showing how the 2007–2008 financial crisis was triggered by the United States housing bubble.
The film stars Christian Bale, Steve Carell, Ryan Gosling and Brad Pitt, with John Magaro, Finn Wittrock, Hamish Linklater, Rafe Spall, Jeremy Strong, and Marisa Tomei in supporting roles.
Here is the storyline.
In 2005, eccentric hedge fund manager Michael Burry discovers that the United States housing market, based on high-risk subprime loans, is extremely unstable.
Now here, you have someone with a strategy.
Anticipating the market’s collapse in the second quarter of 2007, as interest rates would rise from adjustable-rate mortgages, he proposes to create a credit default swap market, allowing him to bet against, or short, market-based mortgage-backed securities, for profit.
Do you like the word “bet”. What industry does that remind you of? Hint? Think Las Vegas.
His long-term bet, exceeding $1 billion, is accepted by major investment and commercial banks but requires paying substantial monthly premiums.
This sparks his main client, Lawrence Fields, to accuse him of “wasting” capital while many clients demand that he reverse and sell, but Burry refuses. Under pressure, he eventually restricts withdrawals, angering investors, and Fields sues Burry. Eventually, the market collapses and his fund’s value increases by 489% with an overall profit (even allowing for the massive premiums) of over $2.69 billion, with Fields alone receiving $489 million.
Well, for some that clearly ended well.
For some.
As we know, when the market crashed, millions lost their shirts.
And pants.
And skirts.
We’ll spare you the Enron and Bernie Madoff stories.
Let’s try and look at the bright side. There are some who will tell you that investing in the Stock Market is not white collar voodoo.
We’ll keep an open mind.
Time to walk over to the book store.
Building Wealth in the Stock Market: A Proven Investment Plan for Finding the Best Stocks and Managing Risk 1st Edition
By Colin Nicholson (Author), Alexander Elder (Foreword)
“Building Wealth in the Stock Market provides a complete model for investing successfully and safely in bull and bear markets. Experienced investor and teacher Colin Nicholson shares with readers his very own investment plan — one that has been honed over 40 years and that has seen him consistently beat the market and his target rate of return.
Everything in Nicholson’s investing method is fully disclosed simply and with a minimum of market jargon. The central idea is how to manage risk in order to grow capital and secure a stream of dividends. The various risks to be managed are explained, along with strategies for managing them. Aspects also covered include:
- how to improve your decision-making skills, modelled on the way the best investors think
- what is needed to succeed and why having an investment plan is crucial for success
- how to select stocks, using charting and fundamental ratios in combination to achieve a margin of safety
- how to manage your portfolio — when to buy, how to build a position, when to cut losses and when to take profits.
The methods are brought to life through case studies based on real investments and the sharing of insights gained from years of experience and research. This book will change the way you think about the stock market forever.”
We’ve heard and read much of what is described in this book, simply under another title. But who knows, it might work.
The Stock Market is not for everyone. But it certainly is a high stakes place for many.
Is it for you?
Talk to someone who made a lot of money in it.
Over coffee.
~ ~ ~
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https://en.wikipedia.org/wiki/Stock_market
https://en.wikipedia.org/wiki/The_Big_Short_(film)
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