Thursday, December 29, 2005
I actually recorded this podcast about a month ago, but I am just now getting around to posting it on the blog.
“...And somehow people have the idea that they're actually going to have control over this private stock account. Not exactly. I mean, you'll have a couple of choices, but don't think to yourself that you're going to be able to choose any stock that you want...”
Podcast: 12/29/2005 - Taking Stock of Stocks (MP3 - 6.9 MB) | Listen Now!
Thursday, December 22, 2005
Butterfly Effect - The idea that small and seemingly insignificant variations in the initial conditions of a complex system ultimately have the potential to produce large and often radical variations in the final outcome of that system.
While many people assume that stocks increase in value when there are more buyers than sellers, this is actually a common misconception. In reality, the number of buyers and sellers is always the same, because for every person who sells a share of stock, there can be one and only one person who buys that share. In other words, a person cannot buy or sell anything unless there is another person to complete the transaction. So when stock prices go up, it is not necessarily that there are more buyers than sellers, but that buyers are much more willing to buy than sellers are willing to sell. The forces of supply and demand are in constant interaction.
It should be noted that there are a fixed number of shares for each and every publicly traded company. In other words, the supply of shares is fixed. However, the demand for these shares is variable, and changes in demand cause stock prices to rise and fall.
The Baby Boom generation was much larger than its preceding generation, and it is also much larger than its succeeding generation. As members of the Baby Boom generation began investing in the stock market, their collective numbers created a surplus of demand, and this excess demand caused stock prices to increase at a much faster rate than that warranted by normal economic growth. A quick look at a stock chart will reveal that stock prices did not begin to explode in value until members of the Baby Boom generation began careers and started investing en masse.
The stock market functions much like an auction. No matter how many bidders there are for a particular item, there can be only one buyer, and the auction is simply a practical means of figuring out what someone is truly willing to pay for an item. And when there are many potential buyers, sellers can usually demand higher prices.
It is important to realize that while the Baby Boom generation created a surplus of available investors, these investors will soon begin to retire. And when they begin liquidating portfolio assets in order to fund their retirements, they will be selling stock at a rate much faster than the next generation will be able to buy it. There will be a comparative shortage in the supply of investors, and this shortage will create a significant decline in the demand for stocks.
As this decline in demand begins to negatively affect stock prices, people will be less likely to make new investments, and this in turn will create even less demand for stocks. This does not mean that the stock market is headed for a crash. However, there will be several factors working heavily against stock returns in future years, and while there will always be good opportunities for investment in individual companies, overall stock market growth will likely slow quite considerably.
Now is not the time to start investing Social Security assets in the stock market.
Sunday, December 18, 2005
In a previous podcast, I mentioned that while the government has assets such as land and mineral rights, these assets could hardly be considered as collateral for liabilities.
Will we be forced to cut down our national forests to pay back our national debts?
Some people seem to think that the government can just print more money when the national debt becomes otherwise unpayable. But where will we find enough paper?
And when that happens, will our money be worth the paper on which it was printed?
Think about it.
Sunday, December 04, 2005
In this podcast, I start to unleash on the federal government. This is not exactly a place where I wanted to go, but I am starting to realize that politicians have no intent of actually listening to my ideas about Social Security. If I want to make this happen, I'm going to need to take this straight to the American people.
“...If we're so rich, then why are we $8 trillion in debt? You know, yeah, we've got assets. I was reading the budget report. We've got about $800 billion in mineral rights, $600 billion in land. But what are you going to do? Are you going to start logging our national parks? You know, cut down all the trees in Yosemite and some of these other national parks. Are we going to give up the mineral rights to Mount Rushmore? You know, carve up all that granite and cart it away. Or how about melt down the Statue of Liberty for scrap? Copper prices are really high right now...”
Podcast: 12/04/2005 - Unleashed (MP3 - 32.7 MB) | Listen Now!
Sources:
Bureau of the Public Debt - Amount of National Debt to the Penny
FY 2006 Budget - Assets of the United States Government (PDF - page 218)
U.S. Treasury - Major Foreign Holders of Treasury Securities (TXT)
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This is the United States of America. Yes, we've got problems, and yes, we've got challenges. But if you look back over the history of this great nation, there have always been problems; there have always been challenges. Yet together there is no problem we cannot solve; no challenge we cannot overcome. This is the United States of America, and it's time we lived up to our name!
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