Saw this linked elsewhere: http://www.blogmaverick.com/entry/2252572946170125/ Essentially he says the stock market is an elaborate ponzi scheme.
He should know. He cashed out. (and i tend to agree with him to an extent -- especially regarding stocks that have no intention of paying dividends or other distributions).
Do you have any money in stocks? Just curious. I've tried to move most of the money I do have in individual stocks to ones that pay dividends, mainly cause they can't fake that for long.
Not much. But the better question might be "do you have any money?' I'm not 'against' stocks per se. But have seen, first hand, many of the abuses. (and haven't figured out a way to get on that gravy-train). Note that Amazon and Yahoo are back up to $50. Lucky they repriced all those options! And the market valuations they're suggesting for the potential Google IPO are just plain nuts. Virtually no chance of eaning a decent return from company earnings distributions there. Back when I was studying finance, we used to call that the 'greater fool theory.' Only reason to buy a stock at that price is that you believe there's someone out there who's even a greater fool than you are who'll pay more! Did we learn NOTHING????
Ponzi Scheme Any investment program that offers impossibly high returns and pays these returns to early investors out of the capital contributed by later investors. Named for Carlo Ponzi who promoted such a scheme in the 1920s based on a theoretical arbitrage in international postal reply coupons. Sometimes called a pyramid scheme because the structure must be supported by a broader and broader base of gullible investors as time passes. Also called Pyramid Scheme. google rocks!
It's another name for a pyramid scheme or what Amway does with it's products. Early people pay in, wait for results of ridiculously high returns. Mid people pay in, their money pays for the early people, plus profits for the middle man. Late people pay in, lured by results of early people. No one else gets paid except for the early people in and the middleman. http://www.mark-knutson.com/
Not yet. Tulip Mania lasted for decades. Via historical measures of valuation, the SP500 is still overvalued by 50%.
Was anyone at UT in the Fall of 94 when pyramid schemes were running rampant on campus and they had an article in the Daily Texan about them?
So, when did he sell broadcast.com....before his first quarterly earnings report came out? From what he was saying, they were expecting a loss even though he and his coherts were able to talk up their company for the IPO and sell plenty of shares which, in turn, drove the stock price to ridiculously high levels. Am I understanding correctly in that whomever bought broadcast.com overpaid and bought an over-valued, over-hyped company that was not half of what it was cracked up to be? And, this is how Mark Cuban came to be who he is? Hilarious.
WOW! What an incredible read. Now, I have to read The Number. I must say that everything he said there sounds 100% accurate. But alos have to state.... There are no crystal balls. He bought a stock low, and then shorted it after its value increased. He made a ton doing that. But that stock just as easily could have de-valued, and he coulda lost his shirt. He got lucky. And unless you have insider knowledge, trading (not investing) is almost all luck these days. -- droxford
Believe, me I'm not claiming to be an expert on the stock market at all, but I've been saying that proper evalution of stocks went out the window a long time ago. Most of us (including myself) really don't know how to evaluate a stock properly, and day traders prey off the people who invest in stocks because its the latest craze.
proper evalution of stocks went out the window a long time ago It could be the next big, novel thing in investing!
FYI, Amway is not a pyramid scheme, it is one of a few good, reputable Multi-level-marketing (MLM) businesses. I know quite a few people who have made a ton of money in such businesses. And no, I don't sell Amway, Pre-paid legal, or any vitamins at all.
Mutual funds and 401ks are the bottom of the pyramid scheme, hench trillions of dollars at the bottom, belonging to the top. Unless you have millions to invest, you can never make the returns these guys are getting. If you are really into the know, then you can become an angel investor. Next stage is the 1st round and 2nd round offerings. Unless you have millions to invest, you'll never get in here. Middle men are the people who jump on the train at a very small price (penny stocks .. ect ..). This is a gamble. Everything else is just the bottom of the pyramid. A good bet is to take a new technology, offered by 3 or 4 companies starting out (kind of like the isdn tech), set aside your investment, and split it up between the 3 or 4 companies. Lose all on one, break even on two and have the one explode.
Your right legally it isnt and thats why its still around. Its because there is an actual product being sold rather than the scheme itself as the product.
I'm not sure I'd go so far as to call Amway a "reputable" business. Everybody I've even spoken with about it has really cast it in a bad light with pretty heavy negative connotations. Like KT basically said, it's a pyramid scheme with a token product attached.
well i am day trader. it's my job and to think of it as preying off other people is simply incorrect. not trying to rip you but i just wanted to clear up some misconceptions that people have. there is no way a day trader can prey off of an investor more than they can prey off another day trader if that makes sense. most of the trading in a normal day is not investing, but day traders trading the same stock back and forth to each other over and over again. the good day traders are able to see when things are reaching panic/manic levels or when there is a short squeeze in effect or about to be a short squeeze and take advantage of it while staying away from situations where they are not sure what will happen. there are lots of other things too that go into day trading that are not random and not people getting lucky that others suggest. mostly, it is supply and demand that drives day trading....whether it be how many people you see wanting to buy or sell the stock or whether it is the number of shares availible to the public or a number of other things that will effect supply and demand. there are guys at my job who play off that and are right on their picks 70+% of the time. there is one guy there who is right nearly 85% of the time. that's based on his ability to play the right stocks at the right times and take his profit and then move onto the next one that meets the criteria throughout the day. also, proper evaluation of stocks never left. it has been the same for decades and decades and IT WILL NEVER CHANGE! there are people who will tell you things have changed, but they are wrong. i don't care how many degrees they have or how much they say they know. they are wrong. adding onto that i was just kind of thinking if you meant that proper evaluation of stocks in a different way. kind of like how the mid-range jumper and great passing has left the NBA. maybe you meant that people who are coming into the stock market craze are doing so based on things that are incorrect. if you mean that then maybe you have a point, but generally people who do that lose a whole lot of money real fast...especially if they don't learn how to properly evaluate things. if you want to look at how to properly evaluate investing in stocks then i can help you out with some of the things that people don't talk about which are helpful to investors. further, if you want to invest in a stock it can't be simply because you like the company's product or you like the company then don't invest in them. you have to look at it as a logical process and not an emotional one. you are looking for price appreciation...not a relationship. one of the single most important things that investors should look at is the number of shares availible to the public. that is the supply of shares. the market is supply and demand. less number of shares availible to the public the higher the price will go. look at stocks like TASR and MAGS. low float stocks with good fundamentals. why do stocks split? because there is not enough shares availible to satisfy public demand. TASR split 3 for 1 around $140 a few months back when the float was around 3 million shares (relatively small) which caused the float to grow to 9 million shares (decently small). the price of the stock is right around $100 right now and they announced a 2 for 1 split i believe when the stock was around $80 a share. i forget when the stock is splitting but that will make 18 million shares availible to the public and i guess we will wait and see if that satifies demand. anyhow...i feel looking at that type of stuff is very important for investors and it is a FUNDAMENTAL number...not a technical analysis type number which i have gotten into arguments with a few people here about the value of technical analysis since they think it means nothing. ok well i gotta head out....i hope that stuff makes some sense.
For people not willing to do the considerable amount of work that it takes to build such a business, it does leave a bad taste in the mouth, but the initial "investment" is very small and you do get some products with the initial kit. Everything else that you buy is product, and most of the products are very useful. I understand that you may know some people who had a far less than positive experience, but make no mistake, Amway (like the other legitimate MLMs) is not a "pyramid scheme." The distinguishing point is that when you set down your money, you get some product that is worth the money that you paid. Pyramid and Ponzi schemes ask you to set down money with nothing in return after which you have to go out and find more suckers to plunk down money for nothing.
