Equivocal Investments and an Uncertain Future

An economy has to grow in the US to sustain itself. Everything must be bigger than the day before. When you have 100 dollars sitting in the bank and you pay them to build a house, assuming that that worker was doing nothing to grow the economy, now there are still 100 dollars but a hew house is made and so forth and so forth. This is a very simplistic model, but shows how our economy grows in many ways. What we expect though is that the valuations of these assets will remain the same or go higher for the economy to grow. The economy is less of what is actually is happening that what people feel. If people feel the economy is recovering, the start again to leverage their assets again, hire more people, build more products and again should expect the market valuation of these assets to remain the same. But this is our cycle.

So the future of the markets as we know is uncertain and volatile. Anyone who says they know the direction the market is moving must know some news or know there’s a panic. But today I’m going to talk about a guy named John P. Hansen. He’s fictional so if there is anyone with that name, I guess ignore it.

John P. Hansen is a retail trader.  He is a sales manager at FakeCompany LLC. and has saved up enough cash and wants a higher return on his money than a savings account can provide. John P. Hansen decides to invest in equity securities in his spare time. He has work from 9-5pm so misses many of the foreign markets as well as much of the domestic market. So he swing trades, he sets trailing stops at all the wrong places and first and loses money on price fluctuations. He learns to set them lower than levels of support but thinks he’s smart and plays a volatile stock and the lack of liquidity loses him money. John is confused and decides to buy the stocks everyone buys: the household names brands.

He buys Microsoft. The sideways swinging 10 year lulz stock he knows is secure. The stock loses/gains money over time but he receives his dividends. But the pace is slow and John wants to chase his loses. Company XYZ_TILT is releasing a new product called AVERACAN and John believes the product will do well. John doesn’t limit his market exposure and soon he doesn’t know what the market is anymore. He feels sick to his stomach. The market is this big huge shadowy monster.

A lot of people end up this way, but the market is just a bunch of people staring at the monitor just like you. Play the players, not the market.

Where some people go instead:

I’ll get to writing these next:
Putting money in Hedgefunds: 2/5
Putting money in Mutualfunds: 2/12

Putting money into Private Equity: 2/19


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