Stock Advice From a Broke Genius
Lately it seems as if all you hear about is the stock market, the stock market, the stock market. It's enough to make you pray for a steady stream of Cuban kids heading for the U.S. on rafts just so we have something different to hear about for a change.
If you're like most people, you wouldn't know a bull market from a china shop, though chances are you know enough to realize the two don't mix. But since you're determined not to be the last person on your block to throw every spare dollar you have into the stock market, you might as well learn something about it before you take the plunge. And who better to answer your stock market questions than someone who doesn't own stock, doesn't have enough money to buy a can of chicken stock, and is only doing this because he hopes a lot of newspapers will run it, meaning he'll be able to corner the market in Larry Linville memorial Beanie Babies. Yes, me. So let the questions begin!
What is stock?
A stock is a piece of paper that says you own a little teeny tiny piece of a company. The more stock you have, the more of the company you own. Of course this is all make believe since no one ever sees that piece of paper, so for all you know it may not exist, much like the imaginary friend you had as a child except stocks don't talk to you and tell you to put pinholes in daddy's condoms.
So how do I make money with stocks?
If you're like most people, you don't.
But I'm not like most people.
That's what most people say.
Why do stock prices fluctuate?
If a lot of people want a particular stock they offer to pay more money for it, which raises the price, much like what happens on eBay when you try to buy a Margaret Keene slipcover for the couch. On the other hand, if no one wants a stock the price drops, which means you have worthless pieces of imaginary paper filling your safe deposit box so you'll have to sell your house and move in with the in-laws. In reality, a lot of other factors come into play, including news about the economy, whether Alan Greenspan farted and it sounded like "I think I'll raise interest rates", and how the planets are aligned.
Who is this Alan Greenspan and why does the market do whatever he says?
He's the chief of the Federal Reserve Bank. To people who invest in the stock market that makes him God. This, of course, pisses the real God off, who as retribution causes the market to fluctuate wildly. Think of it as the eleventh plague.
Why is a person you buy stock from called a broker?
This is what we call irony. Since a stock broker receives a commission each time you buy or sell, they make money even when you're losing all yours. This means that in the long run you're the one who's actually broker. But the stock market's steeped in tradition, like the way they ring a school bell which no one can hear to signal the close of the market and how stocks are priced in Celsius instead of using decimals. Brokers have had that name for years so it continues, much like their calling investors suckers.
What's a bull market?
This is when the market keeps going up and up, making people think it will never go down. It got this name because those who aren't caught up in the frenzy are the only ones who know this concept is bull.
And a bear market?
When stocks are on a downward trend it's called a bear market. This is because most people, having believed in the bull market, bought stock on margin, so once prices go south they have to fork over money they don't have, or money they can't bear to lose.
How can I find a good stock?
Through meticulous research, scouring stock histories, watching the Financial News Network as much as possible, and above all, looking for an Internet company that has a name beginning with 'i', 'e', or "my" and ending in dot-com, especially if their business plan doesn't mention the word profit.
And a bad one?
There's no such thing as a bad stock, only a misunderstood one.
I only have a few thousand dollars in the market and it makes me crazy when it goes down. How does someone like Bill Gates handle losing billions of dollars in a day?
Contrary to what most people think, Bill Gates is just like you and I only infinitely richer and more cut-throat. A bad day in the market is as difficult for him as it is for you, he just has different ways of handling the stress. You go home and kick the dog; he puts out another buggy version of Windows that crashes every five minutes. At the end of the day you both feel much better.
What's buying on margin? Can I do that?
Sure. You can flush your money down the toilet too.
I've been hearing a lot about day trading. What is that?
The Internet has brought many improvements to our life, including e-mail, online auctions, and the ability to look at porn without having to go into a store and take the chance that someone you know will see you buy it. It also made it possible for people to sit at home and trade stocks 24-hours a day in the hope that they'll be the 1 in 100,000 who actually makes money doing it.
If they do it all night, why is it called day trading?
Because they trade their day for the opportunity to stare at a computer screen and eat Maalox.
I know about the Dow Jones Average, but what's this Standard & Poor thing I keep hearing about?
It's an endearing term professional stock traders use to describe the average person who invests in the stock market.
What are IPOs?
Idiots Purchasing Overpriced Stocks.
Can I do that?
If the shoe fits ...
A friend told me penny stocks were a good buy but when I asked my broker to recommended some he tried to sell me ones that cost four bucks! What gives?
Your broker's cheating you. Just kidding. Well, not really, but in this particular case he isn't. These days any stock under five bucks is called a penny stock. Face it, you can't buy anything for a penny anymore. Penny candy costs a dime, penny arcades charge a quarter a play, and Penny down the street charges, well, let's just say the days of all you can eat for $10.95 are history.
I put my life savings in the stock market and lost it all. For future reference, isn't there a more fun way to lose my money?
Go to Las Vegas. You'll lose all your money there too but at least you'll get to hear Wayne Newton, see showgirls who look like RuPaul, eat 99-cent shrimp cocktails, and pretend you're in the mafia.
I love car racing and wanted to invest in NASDAQ. My buddies at the body shop where I work laughed. Why?
NASCAR is car racing, NASDAQ is an acronym for the National Association of Securities Dealers Automated Quotations, which is a stock exchange very much like the New York Stock Exchange and the American Stock Exchange. Of course, this has nothing to do with why your buds were laughing. That was because they know you don't have any money left to invest once you pay child support to both your sisters.
I have some stocks that were doing well until the market took a nosedive a while back. They've come back up since then but I'm not sure at what point I should jump out the window.
Now's as good a time as any.
Will you catch me?
No. If you wanted a safety net you should have bought government bonds in the first place.
If you're so smart, why aren't you rich?
The world already has enough rich people, what we really need is more smart ones. Now that you know all about the stock market you'll be able to join the ranks of either the rich or the smart. If you're real lucky you can be like Ben Stein and be both. Now run along. Don't you have a flabby stock option to exercise or something?