economy question about inexperienced stock traders, your thoughts pleasegreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Let me begin by saying that I am not, NOT, a stock expert, economy expert or even a novice. I am a diesel mechanic. Here's the deal, if I go into e-trade's site or ameritrade, they will open up a margin account for me with just a couple of thousand bucks deposited in their account, more or less. I know enough that a margin account means that I can trade stock on credit, right? How many people like myself do you think are going to be taken to the cleaners with the ease in which you can day trade on the net? Do you think this will affect the economy, or will the numbers be so low, of people, that it won't matter? PS, I'm not going to play the market, I think I'll invest in more tools. Just theory here. It looks to me like with all the hype about making a fortune in the market that a lot of folks are gonna get skinned. IMHO
-- dozerdoctor (email@example.com), January 17, 2000
Eventually, Mass Greed will turn to Mass Fear. It is very difficult to determine that event. But when it happens---->
"Greed has limits, but Fear has no Price."
-- Jim (firstname.lastname@example.org), January 17, 2000.
-- TrollStomper (DoomersUnited@TB2000.Net), January 17, 2000.
dozerdoc.....some of the numbers I've seen indicate that a lot of people have borrowed money to put into the market. Buying on margin is one way. Some have even taken out home equity credit lines, so that their house is serving as collateral for their portfolio.
It will matter, because it will mean that a substantial number of people will be broke if the market crashes. We're not talking about just losing money set aside for retirement, but people who are working, bringing in a good income, will suddenly be bankrupt. That impacts their banks and mortgage companies and everyone they do business with.
Worse yet, the talking heads have conditioned the public to "buy the dips" so that many people will look at a 1000 point market drop as an opportunity to rush right out, borrow some more, and try to get rich quick.
Unfortunately, the market doesn't always move in the same direction, so that after the first drop there will be a "dead cat" rebound, and then the plunge that causes the sick feeling in the pit of the stomach. Maybe this dead cat bounce is caused by those investors who don't believe in bears, eh?
By the way, this inevitable rebound usually manages to also wipe out people who have played the short side, too, especially if they've done so by shorting stocks. Options players simply lose their options pony.
Timing, and knowledge of market behavior is everything. Few of us have it [I once watched options, bought 6 months before, miss being in the money by one day :(]
One of the reasons there are jokes about market players jumping out of windows in 1929 is that the same situation existed then. People woke up with a great house, a car, and fine clothes. By late in the day they were broke, and even the dog was being taken by the sheriff's office.
for what it's worth.
-- (email@example.com), January 17, 2000.
If I had money to invest, which I don't, I would put it all in Lottery tickets. Gambling is gambling regardless of whether you call it stocks or Lottery tickets. In either case one can become rich. I think the fast and easy way is the L/tickets. No sweating any rises or falls of the market, whether it is bullish or whatever. YOu know within a short time if you are broke or rich.
-- Notforlong (Fsur@aol.com), January 17, 2000.
I came up with a simple idea for accumulating shares in 1980 but it wasn't practical then, I finally was able to start last year, it worked fine, but I used my capital for Y2K since I figured my idea might be killed by Y2K. Since things have gone rather smoothly I plan on starting up again.
Most people are too concerned with the price of their shares at any one point in time, they fail to understand that what's important is to work out a system for acquiring more and more shares, actually with very low trading costs, it's possible to continuely increase the amount of cash and shares in your account.
How? Let's say I have 1,000 shares of a stock. The stock rises 1/2 point. I can now sell my shares and receive ( ignoring selling cost ) $500 extra. If the stock cost me $10 per share originally then 10.5 x 1,000 = $10,500.
Let's say it's the next day, the stock dips to $9.5 per share. I can retain $200 and repurchase ( 10,300 / 9.5 = 1,084 shares ).
Now I retain, say 40 shares, 1,044 shares x 10.25 = $10,701. I now retain $300 in cash and repurchasing on a smaller dip the next day ( 10,401 / 9.75 = 1,066 shares ).
I hope you can see the cycle. Of course buying and selling costs come into the picture but they are basically a very small factor.
The only real risk is that on your first purchase the stock drops dramatically, even then you could buy and sell once a new level gets established.
Start with the smallest amount possible, as you buy and sell the amounts you are dealing in should increase in a rather exponential fashon.
This is the system I worked out for me. A million shares of anything is a fortune.
-- Stanley Lucas (StanleyLucas@WebTv.net), January 17, 2000.
Trollstomper, I believe you are the troll. I've been here since 1998, mostly reading and lurking because my background is not in computer science. You sir are the troll.
To the others, thanks for the response. I am planning on purchasing stocks in individual companies in the future. But, it will be for the long haul. I agree that the folks that have taken second mortgages on their homes to play the market may be the real losers. It is exciting to know that we have a front row seat to watch this unfold.
I have a personal friend who is a vice president for Bank of the Ozarks. He told me yesterday that he is very worried about the bubble popping soon. Especially the tech stocks.
-- dozerdoctor (firstname.lastname@example.org), January 17, 2000.