Monday, March 19, 2007

Going for Broker

The stock market is up today, braced by the news that Alan Greenspan puts his pants on one leg at a time. Fed Chief Bernake testified under congressional oath that he too puts his pants on one leg at a time. Perception on the street is that this means a drop in short term interest rates. Not far fetched, it is well known that Paul Volcker, former fed chief used to jump off the edge of his mattress into pants that were propped open on a wooden chair. This of course was during the stagflation of the late seventies when a can of Coke was considered an investment vehicle.

This is good news in that no anticipated twelve thousand point single day drop is anticipated as was a few weeks ago after the market's one day four hundred point drop. It should be pointed out that two hundred points of that day's drop was attributed to a computer glitch. Apparently, some automated stock trade programs came across code left over from a game of "Pong." The rest of the plummet came from international uncertainty. A replacement wheel rim was sought but not found in Xin Hua. A Glorious Fourteenth of March car was forcibly left in the garage and the ensuing panic rippled out to financial markets world wide.

It was, of course, one of the more precipitious drops in the history of the market but nothing in comparison with "Black Monday" of October 1987. That day, the market lost fully a quarter of its value when general annoyance at President Reagan for not beginning to bomb in five minutes was reflected in share values.

I once invested in what I'll call armor plated stocks. Once I had bought, they tanked. This is not to say that I've always taken a bath in the market. Sometimes, just a shower, often just a warm, wet spray. But market trends seem to elude me like finding a seat to stretch out on Southwest.

Or a straight and square wall at the knob and tube palace I live in.

Thus far I've had more financial success in real estate. People seem to be more motivated to buy tangible brick, mortar and a roof over their head. Particularly when you are selling in cold, wet weather. Somehow an IPO or prospectus in a snowstorm lacks the allure of central heating.

None of this keeps me out of the stock market though. Like powerball, someone, somewhere out there is making fistfulls. Your job, pick his or her numbers. Now, its not that basic. Stocks represent money that appreciates as a company increases in value. In essence, a firm sells you pieces of itself in the form of stock shares. As the firm grows in value, the individual shares also grow in value. Sadly, the pieces of the firm I keep buying seem to be the employee of the month reserved parking spot which essentially is a value neutral asset.

There are other financial vehicles. Usually double parked or in the wrong lane of traffic. Derivatives are one of these. They predict the value of a commodity such as corn at some future point in time like July 14th 2103 but discount for St. Bastille day and bet that France won't have been laughed out of geopolitical circles by then. Derivatives are involved, complicated and confusing all intentionally so for their first goal is to separate individual investors from money and keep it that way. Investors are returned a promise of future value at an undetermined point of time and usually that time being on a Sunday morning when the banks are closed. However, should the investor pursue independent research and actually determine how the derivative's value is arrived at then the rules are hastily altered and the investment strategy begins anew. That is to say, another value is published, redeemable upon demand, assuming the office is open that day or we're not having a retirement party for Herb in accounts payable.

Of course, there's always the futures market. This predictive investment seeks to determine the future value of a good or commodity, usually something to do with pigs. Pork belly futures, pork shoulder futures or how Emma the Richfield's prize sow will be feeling tomorrow determines the course of millions of dollars who otherwise would have the good sense to move from the midwest to somewhere sunnier.

New Yorkers, back on the big board, are another breed entirely. They actually choose to live and work in that hell hole. Not only that, they further engineer their office hell hole to be even hell holier than most, concentrating staff and business activity in an area so small that someone invariably gets an elbow in the eye at least once a week. And the flinch from that poke can move the market by up to eighteen percent. The only other thing they can do to make the whole thing more horrible is to flood the trading floor with water.

Tried that in '87. Bad results. Greenspan's shoes squeaked and the prime went up a thousand percent.

Somebody made money. Sure as hell wasn't me.

Bunny on.


Blogger Kathryn said...

your last two posts pretty much describe how things work at my job --- we celebrate crappy cold weather on the east coast 'cause it makes the value of our prduct soar (while we live in relative temperate comfort out here on the left coast)

yes, I am aware that we suck

11:00 PM  
Anonymous Anonymous said...

I can't produce coherent thought... two posts in less than a week from Our Favorite Bunny has left me nigh on speechless...

Bunny on, indeed!

12:53 AM  

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