When working, I listen to Bloomberg Television. Commentators and guests banter in regards to the stock market, the Federal Reserve, interest rates, corporate stock, and national news. The day changes, the news is similar, but never trumpery.
As interesting as every day stock market news is to me, I often wonder if market reports matter when most investors are too busy and distracted to remunerate attention. Investors stay-tuned for the closing market averages; if the market is up, all is right with the world. If the market is down, “I’m in it for the long haul.” If the market cascades unexpectedly, investors second-guess investment decisions.
“Buy! says the Bull” “Sell!”, says the Bear. Who is Right? Stock and bond syndication is a tug-of-war amidst the Bears and the Bulls (similar to the Democrats and the Republicans): one group sees what’s right, the other group sees what’s wrong. Both are opportunists.
If too a heap of become Bulls, the distrustful Bears salivate; when the Bear corrals the Bull, the Bulls know their time is near. Bear traders see the glass half-empty; bull traders see the glass half-full. Together, they make a “market” where stocks, bonds, mutual funds, options, commodities, and derivatives are traded. The Bull and the Bear each get it right, but seldom at the same time; that’s how markets are made.
“Securities markets are a fast-moving, glamorous, complex, multi-billion-dollar business.” The biggest located in New York, London, and Tokyo and and the emergent markets located in Sao Paulo, Karachi, and Jakarta, and they all have a history.
In the 13th century, a little group of investors issued 96 shares of the Bazacle Milling Company in Toulouse, France. Trading paper for grain did not catch French imagination (or anyone’s) until the 18th century and the beginning of the Industrial Revolution.
* The 1700′s brought innovation and advancement: 1712 – Thomas Newcomen patents the atmospheric steam engine.
* 1756 – John Smeaton invents hydraulic cement.
* 1769 – Nicolas Cugnot invents the motorised carriage.
* 1775 – Alexander Cummings invents the flush toilet (thank God).
* 1778 – Oliver Pollock, a New Orleans businessman, gives rise to the $ symbol
* 1798 – Income tax introduced by British parliament (but of course)
New York Stock Exchange investors started “ringing the selling bell” in 1790. A 12 foot high wooden stockade disunited that “trading floor” from the British and the Indians. On May 12th, two years later, 24 traders and merchants met beneath a Buttonwood tree at 68 Wall Street to sign the “Buttonwood Agreement” that empowered them to trade securities for commission. Their agreement is the primary of some for the NYSE.
Essentially, stock market enterprisers sold paper in place of commodities. Trading cows, land, or lumber became too cumbersome. Further, selling a companies “paper” raises capital for the company, and gives ownership to the investor. Farmers harvest the grain, “listed ” companies procedure and investors hope they do it right so they may shop for groceries.
The French voiced what each capitalist from time to time feels: if you can not hold it in your hand, ownership is risky, while local farmers did not like big city highfalutin ideas. Holding a tangible object may be at the root of all risk concerns. Don’t make a promise, take me to the store so I may have “it”.
On Friday afternoons, I would visit my 82 year-old grandfather. Grampa would sit in his sun porch while I asked him questions with regards to his youth. He owned a lumberyard and believed in tangible goods. I was working for Merrill Lynch at the time, and we always talked when it comes to the stock market. One day he said, “The stock market is filled with thieves and hoodlums. It is not as safe and predictable as real estate.”
On his firstborn point, I could not agree; on Grampa’s second point, I would agree that galore folks have more value in their real estate (home) than their stock market portfolio. However, real estate prices are contracting, and the stock market is up today. Further proof you must own a little of both because it’s all when it comes to asset allocation.
He loves them!