What is the reality of the stock market, commodities, forex, the financial economy?
Where is the growth in the stock market, forex, commodities in the financial economy?
If you have these questions in mind you are probably in the right direction and will get the clue very soon.
As you can see above an approximation of the amount of money in the stock market, commodities, forex in the financial economy, runs in the trillions.
There is about 5 to 12 times more money in the financial markets, the stock market, commodities and forex than in the Real Economy. The Real Economy accounts for only 20% of all trade. The rest is the stock market, commodities and forex in the financial markets. That means a lot of money is not put to any good real work. The Worst part is that when the markets fall, a lot of wealth is also lost.
Ask the question.....Didn't this occur in the 2008 financial crisis? In the Real Economy you will still have your house or land or farm or office or factory … something solid to hold on to. In the stock market, commodities, forex of the Financial Economy you only have that piece of paper that promised you that you were going to be a crorepati . Is it good to trust your dreams and goals on a piece of paper?
Let us understand this with an example:
We have 2 dozen Mango basket and 25 people are already waiting to buy this basket from you... it would be easy. Now imagine there are 100 people willing to buy it and NOW try selling. Initially if 15 baskets are sold quickly; then those who didn’t manage to buy the Mango basket will buy it at a higher price from those who had already bought them... as they don’t want to miss out on the taste of Mango's. The price of mangoes keeps climbing. They think that they are making money but it is the same mango going around. That is what happens in the stock markets, commodities, forex of the financial economy. We trust our Mutual funds, Pension funds (Insurance Company) to this for us? There is no real growth. As long as people are happy circulating the same mangoes, or shares, at higher and higher prices everything is fine and there is a false sense of growth.
It is just a mirage. Now if someone suddenly decide that the mangoes are spoilt (or company shares are not really that good) and shouts loudly about it then the price of mangoes collapses. It is still the same 2 dozen MANGOES basket but the last few buyers lost a lot of money, holding dud shares … mangoes. Didn’t this occur during the 2008 financial crisis? It is a zero sum game.
Over a period of time......the amount won + the amount lost = zero …. Always
So how does it seem to be growing, this thing called the stock market or share market or financial economy?
Well, those who are making money shout and dance over their winnings (media news) and attract more and more people to join in to buy the same mangoes. Sounds like a news media driven Ponzi scheme (also known as operator)? As more people enter the market the price of the same mangoes go up but there is no real growth. Prices increase without growth. There are a lot of similarities to a Ponzi scheme where return on investments or growth comes from more people entering the market. Once the fund managers, find it difficult to attract more people into their funds they go overseas to get more people to buy the same oranges. It is when people wake up from this dreamy mirage that they leave the market, and then the markets dry up.
The Financial Economy has become too big to fail. “Money never sleeps”? The world has moved from 8 hour trading to 24 hour trading. This is true for commodities and forex and we wonder if it will occur in the stock market. Human beings can’t keep awake for most of that time, let alone concentrate on the task at hand, so we have put computers in place of humans to do the trading. Unfortunately, computers don’t know if there is crop in the field or not, sales are genuine or not, company has got some raw material problem which means that the markets are not real markets anymore.
The only true growth in the financial markets is when companies pay out dividends to their shareholders. Just like you getting one free mango for every 5 mangoes you own. Invest in the company and not in its shares.
Please don’t misunderstand me; we need capital markets for companies to raise funds. As for fund managers, once they realise that the stock market, commodities, forex in the financial economy is a zero sum game then they will understand that someone has to lose for them to make money. It is normally the guy who is listening to rumors that loses most. Those with advanced predictive models will be way ahead of the others and will end up making all the money – creaming the markets.
Come Join hands with us and step ahead of this game plan ...stay in control and we a winner in & out completely.
Regards
Learn n Earn Team.
