Greenback Roulette Playing the Stock Market
To coincide with the online publication of “Investing in Stocks and Shares” – a book about how to buy shares – HowTo.co.uk takes a look at the often confusing world of stocks and shares.
To coincide with the online publication of “Investing in Stocks and Shares” – a book about how to buy shares – HowTo.co.uk takes a look at the often confusing world of stocks and shares.
To the outsider, the stock market appears to be an inexplicable phenomenon, with its own arcane language and seemingly random logic. But for all its perceived complexities, the stock market is essentially where shares in companies are sold in return for investment money or ‘stock’. Sometimes a lot of money is made, sometimes it is lost. There is always a major gambling element. It is true also that what seem to be abstract events going on in the markets actually have enormous social and political impact.
Winners
Anyone who had shares in Exxon last year would have benefited from the company’s $39.5 billion profits – the biggest ever. However, a concomitant of Exxon’s success has been, so critics say, exploitative practices and a flagrant disregard for the environment. For example, Alaska is still feeling the effects of the disastrous 1989 Exxon Valdez oil spill.
It’s not just the big-spenders who have succeeded in the markets. In 2001, Rajesh Pathaka, a struggling Indian tobacconist put $200 into the Mumbai Stock Exchange. Six years later, the market had ‘emerged’ and his return bought him two homes and several motorcycles and allowed him to contribute to his sister’s wedding.
Losers
The Enron corporation, in cahoots with Arthur Andersen, systematically falsified its accounts and deceived the business world in order to artificially boost its stock market value. By the time the scandal had broken in 2005, the value of an Enron share had fallen from $90 to 50 cents. Enron’s shareholders, who were also deceived, have filed a lawsuit against its former executives. Most distressingly, between $5-10 billion of public pension funds were lost. It looks as if only a fraction of that can ever be recovered.
Geraint Anderson, a former city analyst, has recently published a fictionalised expose of life at the front line of City trading. The characters, as you might expect, are oafish boors who are devoted to only 2 things: extreme wealth and what I will term Bogota bug powder. What are supposed to be statutory crimes such as insider dealing in actual fact go on all the time; everybody in the business does it. Faith and guesswork are the biggest factors influencing major market moves. It’s rather a sobering thought that key aspects of our society – our public services, our currency, our housing and so on - are closely wedded to the ‘fun and games’ of the stock market.
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