Way OT: the mutual fund and stock market scam

If we all stop believing in democracy then democracy will die.

If we all stop believing in money then the monetary system will die.

If we all stop believing in the police then law and order will die.

If we all stop believing in the schools then the schools will die (no, wait -- that's already happened).

What's your point?

(a) well, duh. The only time Ford got any money from the sale of my car was when the previous owner bought it. Nobody sent them money when _I_ bought it -- unless you did.

(b) Companies can have secondary stock offerings, where the money _does_ go to the company to be used for new products, tools, plants, parties for the CEO, whatever. Because it dilutes the stock it has to be agreed to by the stockholders, but it's done all the time.

(c) Investors look (well, should look) for two things in a company: growing equity (i.e. the company plows every spare dime of profit back into developing more value), or income (i.e. the company pays dividends). When neither of these things happen stock values fall, stockholders get pissed, board members get replaced and heads generally roll. If the various XX0's are cooking the books then it takes longer to find out, but such things do come to light and more heads roll harder when it happens.

Define "considerably less". Don't be afraid -- machinists can do math.

Please back your statements up with some references.

Yea, so? When you buy a house that was built on spec most of the money doesn't go to the developer, it just gets channeled to high-interest loans and outstanding bills. You buy the house because you're getting value for your money, or because you're stupid. You buy IPO stock because you're getting value for your money, or because you're stupid.

In your opinion. Do you have data to back that up? If I'm getting money from people working hard in Malaysia should I care?

Like my car and my house -- but I don't consider myself a fool for buying them. Both of them give me ongoing value, and both of them will give me value when I sell -- I may even make money off of my house, as I did with my last one.

Remove the word "fool" and anyone will agree with you.

(a) 10 of the 13 individual stocks that I own paid dividends last year. How does 77% equal 0?

(b) As well as selling stock, companies can also buy portions of their stock back, thereby returning money to any stockholders willing to sell.

Now you're making statements that just aren't true -- can you cite any hard data to back up your clams, that override my records from my very own stocks?

Aha! Something I can more or less agree with! Yes, one can play all sorts of games if one is willing to cook the books, and stock ownership is so diluted these days that companies can get away with it fairly easily. Fortunately the SEC and the New York attorney general are now paying attention; I hope they continue to do so.

So was this substantive, or just a good troll?

Guess I may as well give up, country is in such a mess.

Regards

Daveb

You forgot

If we all stop believing in politicians then we would uh...have the status quo???

jk

IPO: Initial Proctological Onslaught.

Thank you very much.

(snip)

Scam here seem to mean that others seem less eager to enrich you than you might like.

Mutual funds offer investment management for those who are unable or too busy to manage equity investments. They do have hazards because the objectives of a fund may not match the objectives of the investor. The objective of the managers is to grow the fund, not to enrich the shareholders. A link between these motivations might be assumed since a fund with "good numbers" attacts further investors, but it ain't necessarily so in some markets. This is particularly true as regard tax management of cap gains distributions. Mutuals strive for quarterly numbers because that's what new investors look at. That works well for the investor in an up market but can hurt ya bad in a flat market after a long rise, as in 2000.

It is true that the market is a zero sum game beyond growth of the economy in general, which can vary with market sector. Well, duh! LIfe is a zero sum game. Pick yer pony, take yer ride. There ain't no free lunch.

Which is exactly my point.

The standard Econ101 stock market myth is that this "thing" means a bigger pie for everyone. You put your spare capital into the stock market, the corporations invent new products and build new plants to make them using this money, you receive dividends as your share of the corporations profits, everyone has a job and we all live happily ever after.

Mutual fund salesmen and brokers never ask you to send them your money so *they* can make money, but rather ask you to send them your money so they can make money for you.

You and I appear to agree on the main points, although these are expressed differently. We disagree on the ethics and rationality of putting your savings into the "stock market" and "mutual funds" as these are currently functioning.

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If you don't like the stock market you are free to invest in bonds, real estate, antiques, gold coins, beanie babies... etc...

Your comment about framed stock certificates brought to mind going through great grandpa's trunks of old papers. Among the other stuff were dozens of stock certificates from the early 20th century...all worthless except as pretty pictures to sell to e-bay collectors.

It's easy to look back and note that Gr-Grandpa musta fallen prey to smooth talking stock brokers or similar. Grandpa thought that if he just bought the right one, he might be able to share the wealth with the barons he had grown up hearing about.

So why is it easy to look back and see how Grandpa was gullable to invest in the "joe shmoe oil company" and yet as a society we tend to praise those doing exactly the same thing today ....even to the point of implying that they are "investing in America"?

Greed.

Every one of us wishes he/she were the one to hit the right number on the roulette wheel so we put our blinders on and pretend that it might just work out for the others. It's hard to challenge your own fantasys.

Reality in stocks is a lot like Vegas...some hit it rich, some control their gambles and break even or even come out a little ahead, and some (most?) end up wakling away with an emptier wallet than they came in with. The house is the real winner (brokerages/investment firms in this case).

There's nothing wrong with having a good time in vegas and wishing you were the one to hit that million dollar slot on a quarter, (or buy the next microsoft at 5 bucks a share) Just remember that it IS a dice roll and NOT "Investing". The house always wins in the long run.

Koz

Not true at all...the corporation gets funds any time there is a new issue of stock, it doesn't have to be the "Initial Public Offering" (IPO). It IS true the company doesn't get anything out resales of stock (unless it is stock they've bought back...THAT happens too and wouldn't be a new issue).

Hard to find a charity that doesn't pay out at least 10% to external fund raising organizations. What's your point?

So, only stuff you can touch is a worthwhile use of money? I'd say reducing debt and operating costs and attracting and retaining key people produces value in a company. BTW--venture capitalist do NOT typically loan money, they are purchasing equity in a company (buying stock). Reducing debt improves a company's balance sheet, making it more attractive to investors, better able to withstand economic downturns, and makes it possible to borrow at lower rates in the future.

That is a problem. Of course, some (most?) of it is brought on by unions that have handcuffed companies who wish to automate processes for fear of the elimination of the jobs of 15 bushing oilers. Never mind that it would produce jobs maintaining the automatic bushing oilers, R&D jobs designing the automatic bushing oilers, manufacturing jobs producing the automatic bushing oilers, sales jobs for selling automatic bushing oilers, etc, etc. Unfortunately, this mindset went on too long to the point where we have neither the industrial intrastructure nor municipal infrastructure to be competitive with countries who have either invested in these areas OR are so wretchedly poor that they'll work for 10% of what an American worker needs to lead a decent life.

Even if you're shoveling your money into a bank, this is still how a substantial portion of the profits are being made to pay you interest. Of course, the banks seem to currently be keeping about

11.5% of the spread between what they make on your money and what they give you to entice you into thinking you're getting a good deal.

The market moves a LOT based on perception. Eventually, it seems to correct itself more in line with reality. One DOES need to do his/her homework.

If you want dividends, you should be buying preferred stock. Common stock is far less likely to pay a dividend. Also, many high tech companies re-invest a considerable amount in themselves funding R&D efforts to stay on top.

It is true that a lot of questionable (or downright illegal) actions by some corporate management has been making the news in recent years. I find it difficult to tell if more is being caught or more is happening. I suspect the former is more likely as the possibility of a fast buck has always attracted criminals.

Beanie babies.. damn I hate those things. I remember the day that market crashed, I went and looked at ebay- there was people there who had bid over a thousand bucks for one.

There must be something basic that I don't understand, 'cause I see the stock market as it's been for some years as another beanie baby market..

John

Not a new thing -- ever hear of the tulip bulb bubble in Holland?

Charles Mackay's classic 19th Century book "Extraordinary Popular Madness and the Delusion of Crowds" covered this and the John Law south-sea bubble [dot com anyone?]. This should be required reading in every high school in the country.

see

Dave wrote:

Perhaps so. I assert that it is neither irrational nor unethical to make investments that appreciate in market price while you own them, provided that you don't influence market price by dishonest acts.

It *is* irrational to expect or believe that another (e.g., a broker, corporate management, etc) has your enrichment as a primary motivation any more than their enrichment is your primary motivation.

Do yer homework, pick yer pony, take yer ride.

W.K. Kellogg wisely said "I'll invest my money in people". Although the world was so very different when he made that proclamation but you can't disagree with the results...one of the most recognizable names and brands on the planet.

Yeah, the Tulip Craze.. Crazy..

Cool link, thank you.

)

I like Greenspan, or at least I like his approach to public speaking. I don't understand why the talking heads have to get together to figure out what he says, he just qualifies his statements very well.

John

snipped for brevity

Interesting perpectives on stocks, mutual funds, & investing 'Free Market Investing"

"My Library"

and then "Audio Files", "Video Files", or "Articles"

HTH.

================= Yes. Neat appliction of chaos theory to a "real world" situation. No math required to read and understand. My only adverse observation is the apparent omission of the situations in which the "game" is rigged.

Anybody know of a good book of the basics? I mean the real basics , like how is the par value set when starting a corporation and such.

Say I want to start an Inc. for $2 mil. and I want 60% does that mean that the stock is worth less than half as much before the ink dries?

SW , who has been through the SEC and Corporate attorney stuff before and is still lost. Hope this isn't too OT for WOT.

I would update Gresham's law that bad money drives out good money to state that bad stocks drive out good stocks as these provide "excitement" and apparent higher return [e.g. Enron]