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bnashier
June 8th, 2003, 04:27 AM
After reading my post - “Let us talk about money -” some of you asked some suggestions about investing. By the way, thanks to all who read it and to those who made comments. After all, a true education is to share knowledge with fellow beings and that is what I am doing. I shall try to make it simpler than the Wall Street Scoundrels make it for you. Unfortunately, the Wall Street spends most of its time in making this subject complex, and that is how they fool the public. After all, they don’t grow tomatoes to earn their money; they do it by fooling people. By the way, the Wall Street Scoundrels are all the big firms the like of Merrill Lynch, Goldman Sachs, Citigroup, Morgan Stanley, J.P. Morgan & Chase, CSFB, UBS Warburg, etc. etc.

Note: If I just wrote that do this and this for investing, that won’t be of much help to you. In stead let me explain the game. Remember that no one ever succeeds in life by walking on a path one did not understand.

INVESTING. Investing in the stock market means (or should mean) that there is a business that provides service to people and earns money for providing its service. You believe that the business is good and WILL remain good in future and then you buy a part of the company by buying its shares in the open market. Let us take an example: Exxon-Mobil, say. I picked Exxon-Mobil because its business can be easily explained. The company is traded on the New York Stock Exchange under symbol: XOM. XOM produces, refines and sells oil and gas. Its sales are over $200 billion a year and it makes a profit of about 15 billion a year. There are about 6.7 billion shares of XOM outstanding, so profit is a little over 2 dollars a share. The company gives to shareholders 1 dollar in dividend per year per share. XOM shares are selling about 37 dollars a piece at this moment. You decide that 37 dollars a share is a fair price and you buy 1000 shares. Think why did you buy the shares? You thought that 37 a good price today. Tomorrow the price may drop to 33, means that traders don’t want to give you 37. Then you say to yourself: I know that people will need oil and gas and if I hold my 1000 shares for 5 years I will get at least $5000 in dividends alone. In the mean time, people will realize that XOM is a great company and may be they will be willing to pay 50 a share. That is a return of about 10% a year. This thinking is called investing.

GAMBLING. This is the place where the Wall Street Scoundrels have a feast. We can understand the business of Exxon-Mobil, Pepsi Cola, Coca-Cola etc. I said only the business and not the stock prices of these companies - stock price is a different matter to understand. I shall elaborate on this topic in a later post. We all know that we come up with hundreds of ideas every year (try to keep track) and only a few of them are really outstanding. Same way, the historical records show that of all the businesses that get listed on Wall Street every year, less than 5% survive and then only a few of them thrive. Indeed, in the 1920's there were at least a hundred Auto manufactures in US and today there are 2 ½. Ford, GM and Chrysler (part of Daimler). How many Microsofts or Wall-Marts are there? We all know the recent story of dot coms. Wall Street Scoundrels thrive on investors’ ignorance and greed. Keep in mind a stock is worth only as much as someone is willing to pay for it. When you do not look at the business payback (we analyzed XOM case) and just depend on the next guy to bail you out, that is GAMBLING. That is exactly what happened in the internet bubble. Yahoo stock was selling at more than $200 a share because someone was paying in the hope to find the next guy. Then it fell under 10. When the next guy is not found and there is no company profit or payback, you fall in the ground and bruise your account. Many tech stocks that were selling in 3 figures per share just three years ago are gone now. Stock prices go up and down based on emotions and many other factors; however, you recover your investment from only business with profits and paybacks.

We must keep in mind that the Market NEVER loses any real money. This is a paper game played wisely to steal others' money. Think about it. Money is not placed in bags and thrown in the Atlantic Ocean. It simply changes accounts. And the Scoundrels play a marvelous game. First they get public excited. They hire the best Gapodis (called Analysts) to tell tales that people want to hear. Greed gets at its highest point. Investors are almost drunk with greed. When the party is in full swing and investors are rocking in the Wall Street music of deception, the Scoundrels pull the plug. People see their quarterly statements and don’t even want to open them. We ask our family members three times what they will do with the money before we give them even 100 dollars, but we pour thousands without questions simply because a Scoundrel gave a hint - and later said what a fool!

TRADING. Trading is a very sophisticated game. A trader’s fate depends on the stock moves in his favor. Keep in mind that the scoundrels have got the power - they control the news rooms that make stocks move. They know all positions all the time - whether public is overweighted or they are. In the morning, everybody starts with their accounts and the idea is to fatten your account in the end; keeping in mind that the total sum in the evening will be the same. So, someone has to lose for someone else to win. A few really bad moves and a trader can be fried (or his account to be literal). There are so many parameters that can change market sentiments quickly. You cannot point out and write down just a few. Quick trading (so-called day-trading) is a risky game; only about 3% of the starting line survive and even less do great. As Dr. Birbal Singh correctly pointed out that the lives of many people have been ruined by day-trading. I am not discouraging anyone (discouragement is not my vocabulary); however a great caution must be exercised in quick trading. I needed to use a lot more intuition and discipline than I ever used in doing very good original mathematical research. More I have understood the operations of the Scoundrels better I have done. I concentrate on ‘short-selling’ - a game not liked on Wall Street. It is a very dangerous game! Short-selling means that you borrow a stock from your broker and sell it in the market when you believe that the price is too high and return the stock to your broker by buying it when the price falls and you keep the profit. In a down market, the reward is fast and great. But the risks are high in the game, and one must get a feel for one’s move based on whatever derivatives one uses. Very fortunately I have done very well. And what a feeling to understand the Wall Street game!

THE SCOUNDRELS. Keep in mind that the scoundrels don’t grow tomatoes or manufacture cars for you to drive. They live in mansions, ride in their private jets and make you feel stupid when you lose your money to them based on THEIR suggestions. Nice game! Think about it.

In the next post, I shall offer some suggestions about managing your money and some comments on how stock prices are manipulated by Scoundrels. May be you won’t need suggestions if you just understand the INVESTING part above - remember that no one ever succeeds in life by walking on a path one did not understand.

Let me close with two facts.

Fact One. There is $665 billion in genuine US currency in circulation at present.

Fact Two. General Electric, Citigroup and Verizon Communications have a combined debt of about 600 BILLION dollars. Thus, if these corporations are asked to pay back their debt today in cash, most of the US currency in circulation will be used up.

amanpoonia
June 8th, 2003, 11:45 AM
thanz for sharing ur knowledge with us. i hope in the future too we will be sharing ur knowledge.
aman

uday
June 9th, 2003, 10:10 AM
good !! Budh it is reallya nice article.

sanjaychhikara
June 9th, 2003, 12:03 PM
thanks for posting its really good to know some inside information, looking foreward to your next post,

regards,

amitshokeen
June 9th, 2003, 06:51 PM
really nice article. please inforn us aboutmore with this information

shekhar_nehra
June 9th, 2003, 08:28 PM
Thanks for sharing your experiences and insight of subject with us. I found the information as an eye opener. I am looking forward for the next post.

Sir could you suggest some good websites that provide basic information on financial market (terms and definitions ect.) to a novice like me.

parul
June 10th, 2003, 01:06 AM
www.investorwords.com
www.sharekhan.com
HTH
-Parul


Shekhar Nehra (Jun 09, 2003 10:58 a.m.):
Thanks for sharing your experiences and insight of subject with us. I found the information as an eye opener. I am looking forward for the next post.

Sir could you suggest some good websites that provide basic information on financial market (terms and definitions ect.) to a novice like me.

uday
June 10th, 2003, 09:31 AM
some more
http://www.equitymaster.com
http://www.capitalmarket.com
http://money.cnn.com



Parul (Jun 09, 2003 03:36 p.m.):
www.investorwords.com
www.sharekhan.com
HTH
-Parul


Shekhar Nehra (Jun 09, 2003 10:58 a.m.):
Thanks for sharing your experiences and insight of subject with us. I found the information as an eye opener. I am looking forward for the next post.

Sir could you suggest some good websites that provide basic information on financial market (terms and definitions ect.) to a novice like me.

shekhar_nehra
June 10th, 2003, 07:58 PM
Thanks Parul and Uday.

sktomer777
June 21st, 2003, 06:09 PM
Uday Dahiya (Jun 09, 2003 04:40 a.m.):
good !! Budh it is reallya nice article.


thanks for sharing such a wonderful info.Although i m not from finance background but u have written the article in a very simple manner.Hope u will come out with some more info.

shokeen123
June 21st, 2003, 07:26 PM
Wonderful information! Especially the description of the "true nature of scoundrels!" Some of these "analysts" do appear on the reputed, prime time or early morning shows, trying to sway the public psyche...! It is really important to be educated about money, especially for the ones that are willing to gamble!

So then it seems it is safe to invest in XOM?

bnashier
June 22nd, 2003, 09:58 AM
Sujata Ji: Greetings!

XOM was taken just as an example of a business one can explain and that makes money. The bottom line for people who want to invest is to first understand a company and its business, and then if ONE FEELS good about it, one may invest in it. It is always wise for investors to diversify their investments. Then comes the issue of price you want to pay for a stock that you want to buy. Well, these questions have become more complicated than they were some 10 years ago, simply because of recent scandals on Wall Street. I will address some of the points in detail in the very near future. I have been very busy with a bunch of projects and that is why my next post on the subject has not appeared yet. I hope to post it soon.

Regards,