Chargement
Informations sur le livre
Death of the American Investor: The Emergence of a New Global eShareholder
Actions du livre
Commencer à lireDescription
This shockingly bold revelation of the current and future state of investing in the US stock market is delivered in two distinct parts -- Part One provides the reader with a provocative insight into the aspects of our current society that have contributed to the demise of the average American Investor as we knew him. Everything from the stock market crashes, political and legislative changes to the pathetic parade of financial professionals being indicted for Ponzi schemes. Not only have these events had a critical impact on the day to day trading as well as the overall operation of our stock market but more importantly, it has had a tremendous effect on how Americans view and participate in the market. The clear unveiling of each f these issues or events is presented in a way that every investor will clearly understand how it has specifically affected the market. The reader then moves forward to Part Two, which is comprised of real life strategies and practices that will empower the average investor and encourage his rebirth as a new educated Global eShareholer that can build wealth in any market. This is no longer your grandmother's stock market and you can no longer invest as if it is!"
Actions du livre
Commencer à lireInformations sur le livre
Death of the American Investor: The Emergence of a New Global eShareholder
Description
This shockingly bold revelation of the current and future state of investing in the US stock market is delivered in two distinct parts -- Part One provides the reader with a provocative insight into the aspects of our current society that have contributed to the demise of the average American Investor as we knew him. Everything from the stock market crashes, political and legislative changes to the pathetic parade of financial professionals being indicted for Ponzi schemes. Not only have these events had a critical impact on the day to day trading as well as the overall operation of our stock market but more importantly, it has had a tremendous effect on how Americans view and participate in the market. The clear unveiling of each f these issues or events is presented in a way that every investor will clearly understand how it has specifically affected the market. The reader then moves forward to Part Two, which is comprised of real life strategies and practices that will empower the average investor and encourage his rebirth as a new educated Global eShareholer that can build wealth in any market. This is no longer your grandmother's stock market and you can no longer invest as if it is!"
À propos de l'auteur
NW![]()
Aperçu du livre
Death of the American Investor - Nico R. Willis
matters.
Acknowledgments
Marisa Diaz – thank you to Marisa Diaz for which this book would not be possible without your invaluable writing contribution and your unique ability to translate highly complex financial concepts into a fun way of learning.
Beth McRae – thank you to Beth McRae who called one day and told me I needed to write a book and contributed to the effort.
Elizabeth Day – thank you to Elizabeth Day for her editing contributions.
Laura Bramly – thank you to Laura Bramly, a communications consultant, who contributed her project coordination, writing, and editing skills to the book.
Anthony Tomei – for providing marketing expertise and social media campaign strategies.
1160 Design – thanks to the team at 1106 Design for designing the book’s interior.
Steph Sweet – many thanks for creating the graphs, tables, and other graphic elements in the book.
A&A Printing – many thanks to A&A Printing, who prints in the United States and can be reached at printshopcentral.com.
Mike Pickett – thank you for the valuable insight and expertise in today’s tax environment for investors.
David Dees – thank you to David Dees at deesillustration.com for designing and illustrating the book cover art.
Christian Diaz – thank you to Christian Diaz for helping me to explore beyond what I thought I already knew.
Kevin Steele – thank you to Kevin Steele for a second look at the Federal Reserve Bank.
NetWorth Services – thank you to the entire team at NetWorth Services for their focus and continued commitment, ensuring that the company remains competitive in our business. They gave me the freedom to pursue this book and educate investors in these changing and uncertain times.
INTRODUCTION
The investor of today does not profit from yesterday’s growth.
—Warren Buffett
The literary market is filled with investment books, some good, some bad, most talking about the same old investment strategies. I started my career as an investment broker and then as a vice president at a well-known brokerage firm for many years, which provided me with an up-close-and-personal insider’s view of the operations of the stock market. I read my fair share of those books as an investment professional and as an investor myself. I always felt that the books that were meant for the individual investor were missing much of the underlying information that was critical to actually succeeding in the market.
It was also during this time in my career that I realized that average American Investors are at a disadvantage in calculating their adjusted cost basis for their securities. Investors have always been responsible for reporting their capital gains on the Schedule D correctly, yet they were at a disadvantage by not having access to all of the information needed to properly calculate their cost basis. So in response, I began a software company that markets an automated solution to everyday taxpayers so that they can access the same information the professionals have.
Even though I have been in the brokerage business for some time now, the evolution of the market, the recent financial crisis, and other drastic paradigm shifts inspired me to once again bring the average American Investor on the inside, so I wrote Death of the American Investor.
History can provide us with so much valuable information, but we don’t seem to take advantage of it. Do we just have short memories, or are emotions like greed so strong that they supersede all rational thought and carry us to the brink of disaster, taking all willing parties with us?
Death of the American Investor is also about rebirth. It is about a Phoenix bird rising from the ashes of financial disaster. It is about a world where investors are empowered to take control of their investments and, with technologically advanced tools, make solid, strong, sound decisions that will provide them with prosperous futures.
In this book, we will travel through time and look at the history of the stock market. We will examine the current environment for investors and review the insidious investment scams and Ponzi schemes that have rattled the collective American mindset, not to mention the numerous financial institutional failures. We will take a look at the trend toward a paperless society and investment world and the exciting innovations that lie ahead for investors.
Equally important is an understanding of the elements that make up investments, whether they are stocks, estate planning, retirement, taxes, mutual funds, or bonds. The year 2011 marks the first time cost basis regulations, courtesy of the IRS, will go into effect. There are decisions to be made about all of these things that dramatically impact investors’ outcomes from now on.
And there is the discussion about brokers’ fees. As an investor, if you decide to take more control over your investments, you will want to take these into strong consideration, especially given the conflicts of interest that have surfaced in news reports in the past few years regarding brokerage firms.
Speaking of brokerage firms, we will cover some behind-the-scenes secrets your broker never told you about, lifting the veil of secrecy in the brokerage world. An informed investor is an empowered investor.
What does this all mean? What are you supposed to do about it? Why should you care? It’s your money, that’s why. You don’t have to sit back and be at the mercy of some giant investment firm with a broker who tells you what to do and pushes the buttons for you. There are amazing tools available that are remarkably easy to use and allow you to push the buttons yourself. You control your money and your future, and you don’t have to worry about seeing it go down with the Titanic if and when another financial institution fails.
Controlling your financial destiny and building your wealth—that’s what this book is all about.
—Nico Willis
Author, Death of the American Investor
PART ONE: Death of the American Investor
Chapter One
Ground Hog Day
Those who do not learn from history are doomed to repeat it.
—George Santayana (1863–1952)
This story begins under a clear blue sky of unprecedented prosperity and a forecast of continual economic expansion. As this feeling of euphoria spreads across the economy, it naturally makes its way to lending institutions that happily open their doors of credit and leverage to just about everyone. Mortgages are easily obtained for existing residential real estate as well as construction, resulting in an all-time high for construction starts. As land values steadily climb, so does the credit consumption of borrowers who have no trouble using their land (even unfinished construction) as collateral. Although many people revel in the sunny outlook and seemingly boundless prosperity, in reality, it is the beginning of the dark days of a housing bubble.
Over time, it becomes more and more difficult for people to pay mortgages that were more expensive than they could afford. As a result, a large percentage of homeowners begin to simply walk away from their homes and mortgages. Banks now have a lack of secure assets on their books, and there is a rise in inter-rate lending and increasing numbers of borrowers defaulting on their mortgages. Banks begin to fail in record numbers. This economic crisis ultimately makes its way to the financial markets, creating a panic on Wall Street.
Wall Street is susceptible to this crisis because it has been dabbling in its own version of the credit and leverage game. Complex financial instruments were used in the market to promise an attractive fixed rate of return. As bonds begin to tumble, investors begin to doubt the market and prices start to plummet. A massive panic and a loud crash of the stock market follow—a crash so loud that it is also felt throughout Europe.
As a result, more than 100,000 businesses fail. Building and manufacturing decline, unemployment reaches almost 20%, and food lines appear across the cities.
This is a description of the Housing Bubble and Financial Crisis of 2008, right? If you guessed yes, you would be wrong. What you just read is an accurate description of the Financial Crisis of 1870, which lead to the Panic and Depression of 1873.
To understand our present situation, we must acknowledge and learn from our past. The stock market is consistently cyclical in nature. Every 30–50 years or so, we seem to experience crashes and depressions and challenging economic times, because it takes about that long for a new generation of people to adopt the same old issues associated mainly with greed, and for it to raise its ugly head. Then, when people find out that our present financial situation is like the original black and white movie of the 3-D, high-definition one we’ve been living, we all kind of scratch our heads and wonder who let the same thing happen all over again? (The definition of insanity is to do the exact same thing and expect a different outcome).
The problem is that the past is out of our peripheral view, so most people don’t know about our financial history and therefore do not learn from it. Consistently, whenever there was an overindulgent credit market and over-valuation of assets, it has inevitably lead to instability in our economy of one extreme or another. In addition, the American people have short memories and very little incentive to prevent the crisis from happening again, and we unwittingly go on contributing our small part to the next financial crisis.
The next few chapters will teach you, the American Investor, about the past and current financial crises and important patterns in history. You will study the technological advances that are already shaping how you trade and the returns that you achieve, and you will gain insight into the current market. Once you have examined where you have been, you will be ready to learn about where you are going …
Chapter Two
Back to the Future
Who so desireth to know what will be hereafter, let him think of what is past!
—Sir Walter Raleigh (1552–1618)
With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors’ attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for their children’s education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.
—Warren Buffett
Warren Buffett’s 2001 biography, The Essential Buffet: Timeless Principles for the New Economy, by Robert G. Hagstrom (John Wiley & Sons), begins with the insightful quote above, and his inspiring career is used as a shining example of the American Dream. With only $100 to his name and $100,000 from family and friends, Buffett used that seed money to make sound investment decisions that ultimately created a multi-million-dollar empire. But he didn’t only make smart investments; unlike many of today’s investors, he also weathered the ups and downs of the market with the steadfast resolve of a ship’s captain with long-term goals.
The stock market has a reputation of being a powerful entity that imposes its will upon us, but this perception is not quite accurate. When researching the history of stock markets and the investors’ at-times-tumultuous relationship with the market, one will find that, in the words of economist Thomas Sowell: Markets are as personal as the people in them.
The performance and trends of the stock market are a direct reflection of the concerns, fears, and hopes of the investing public.
Some of the concerns, fears, and hopes of the American Investor could be better tempered if the mathematical causes and effects
of the stock market were better understood. Most everyday investors aren’t aware of the eerie similarities between market activity and investor reaction of the present and the past. These cycles hold an immense amount of valuable information for the American Investor and could help prevent the massive hysteria that plagues our market. So, let’s take a look at our history.
The Opening Bell of the Stock Market
The New York Stock Exchange, which traces its origins back to 1792, was once a very exclusive organization where the members wore top hats and swallowtails. You had to be voted in and pay up to $400 to become a member, and you could easily be thrown out by three member votes.
In the early 1900s, huge fortunes were made on Wall Street. JP Morgan created a billion-dollar merger that resulted in the formation of the U.S. Steel Corporation, and then in 1907, the market experienced the first of many high and low cycles that continue even now. The Panic of 1907 hit Wall Street, and $800 million in securities was unloaded within several months. Stock prices bottomed out, and banks closing were a daily occurrence. JP Morgan convinced the largest banks to forestall closing, and a single banking trust was formed, with JP Morgan owning controlling interest. The US Treasury bought $36 million in government bonds to offset the decline. Within a year or so, stability returned to the market, and within the next couple of decades, there was a promising increase in stocks being traded and an influx of individual investors who wanted their share of the American Dream.
Back in the 1900s, the stock market had a reputation of being exclusively for the savvy, wealthy investor, but over time, more and more everyday people have become a part of that great financial institution. Employee Purchase Plans, online discount brokerage firms, penny stocks, and other investing opportunities are available to the Average Joe.
An even larger number of people are affected by the market as Social Security and Retirement Plans are being privatized and invested. As we have seen throughout modern history, market booms can create unbelievable wealth, and crashes can destroy a family’s financial stability. The ebb and flow of the market is as old as the market itself, but for some reason, investors who find themselves in the midst of one extreme or the other fail to draw on three important lessons of history:
History has taught us that …
1. The market eventually corrects itself.
2. Understanding every aspect of your investment is imperative.
3. The market is greatly affected by emotional decisions, so don’t panic!
~~~*~~~
Your success in investing will depend in part on your character and guts, and in part on your ability to realize at the height of the ebullience and the depth of despair alike, that this too shall pass.
—John Bogle, founder and retired CEO of the Vanguard Group
~~~*~~~
In the history of Wall Street, the most memorable events are, of course, the crashes, but these crashes were preceded by the highest of the high
market gains. There have been at least ten major stock market crashes over the years that have resulted in the loss of billions of dollars followed by the destruction of personal wealth and financial stability, but we will look at the most infamous four. There was the Wall Street Crash of 1929, the Black Monday Crash of 1987, the Dot-com Bubble of 2000, and the recent Housing Bubble and Credit Crisis of 2008. Although not a major crash, most recently there was a Flash Crash
on May 6th of 2010. When you look at the background of each of these crashes, you begin to see the pattern of how they almost feed on themselves. Once destabilization of the stock market occurs, it is usually followed by a series of events that trigger an even larger decline in the market. These events are driven by investor fear, which includes abruptly selling investments and issuing stop-loss orders. Let’s look at the history of these crashes.
The financial crises first labeled as modern day
took place in 1720: the South Sea Bubble in Great Britain and the Mississippi Bubble in France. However, the history of financial crises can be traced back to defaults on public debt—defaults on public debt being the form of crisis prior to the 18th century. Two of the foremost historians on financial crisis, Carmen Reinhart and Kenneth Rogoff, trace inflation (to reduce debt) to the 4th century BC and the Dionysius of Syracuse in their book, This Time is Different: Eight Centuries of Financial Folly (Reinhart & Rogoff 2009). Oddly enough, eight centuries of evidence hasn’t stopped investors from falling right into the same follies that have been repeated throughout history.
The Great Depression – The Crash of 1929
The largest and most famous stock market crash began on October 24, 1929, on what is known as Black Thursday. It was also the beginning of the Great Depression. The First World War had been won, industrialization was producing an unprecedented number of jobs and luxury goods, and everyone was feeling really good about being an American. The stock market was perceived as a world that was risk-free, and you didn’t need a finance degree to participate. Stocks always went up and people became rich; it was that simple. Wall Street publications continually fed people’s excitement about the market by highlighting stories about the everyday shop and factory workers making huge fortunes overnight. So millions of average Americans put all their life savings into stocks and bonds without really understanding the system or even the companies in which they were investing.
There was a 40% drop in the market from its high in September 1929 to the day it crashed, Oct. 24, 1929, known as Black Thursday. When it bottomed out in July 1932, the stock market was
Vous avez atteint la fin de cet aperçu. Inscrivez-vous pour en lire plus !
Page 1 sur 1