Just an update: I am a bear now and have been a bear since July of this year. I still think market will come crashing down once this fake and unrealistic rally since March end. Market will revisit March 2009 low at some point in 2010.
This article is all about investment in stock market. I think many investors nowadays forget or rather don't know when and why stock market was created for. Almost every country has its own stock exchange and some has more than 1.
If i am not mistaken, stock market was created in the 13th century in Europe for debt trading. It helps company to manage their debt and risk.
Then stock market evolved to a place for public to buy and sell shares as secondary market. Company who wanted to raise money and capital can sell shares to public through stock market and public can join the ownership by buying company's share. During that time, investment and stock market were becoming one. Buying and selling shares was called investment.
However, stock market today has evolved to a strange place. People no longer look at share as a ownership of a company. They look at it as a product. Stock market is no longer a place to invest in good company, but rather become a place to arbitrage their products.
Yes Arbitrage. Since more than 90% of people trading shares is looking for a profit by arbitrage (sell at higher price for profit) and not ownership of a company. So, shares of Jp Morgan Chase and Bank of Yesterday (US smallest bank by asset) have no different. They are just financial products. People will threat them the same as long as both can generate arbitrage profit. This is why share analysis report by financial institution always provide target price for you to sell.
This is also why we can't have more "Warren Buffett" in stock market. The answer is very simple: very few people nowadays invest in company share to become a shareholders. Many analysis has been done to explain why we can't have second "Warren Buffett", for me the answer is simple, nobody wants to hold share of company forever as part owner, they only wants to sell it when it has good value.
So next time when you wanna buy / sell something like Bank of Yesterday, you are becoming its owner!
1 comment:
This is one of the best blogs Ive ever read. Youve got some mad skill here, man. I just hope that you dont lose your style because youre definitely one of the coolest bloggers out there.
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