Actually the process is a lot more intricate, but also it is too dry to get into it. What do you know when you know all of that? I have stated on this thread several times that I couldn't make money if I had next week's WSJ. That isn't a frivolous comment in light of the fact I have done 15,000 trades over 30 years.
Do you comprehend 30 years ago? The stock market was nothing like it is today. It was an elitist's boutique, very blue, conservative, and totally anti casino. It wasn't possible to trade with commissions anywhere from 7 to 15 percent, not dollars. Although the houses had wirelines your broker would actually call their rep or $2 broker for a floor give-up to execute an order. In '66 there was a sell-off where a big day was 2 million shares and the DOW went down 10 points to 680. The specialists would write poems or books waiting to execute an order. There was rarely a crowd around a post, and the NASDAQ, the OTC as it was called, was run out of a garbage can outside the AMEX. Even with that level of activity the back offices which were all manually maintained couldn't handle the "heavy" action. They had to suspend trading one day per week to catch up their hand entry ledgers. Because the '29 crash so smashed the business, for 30 years the Street deteriorated and was a pale remnant of the glory days of the Roaring '20s.
The market had seen a similar development following the Panic of 1907. It stagnated until WWI pulled new players out of nowhere. The explosion in railroads, shipping, steel, and oil, to mention a few, sent the country on a dynamic bull run from 1893 until the excesses caught up with it and precipitated the run on the money post on the floor at the NYSE later to be called the Panic of 1907 or Morgan's Day. That period is similar economically to what is happening now, more so than the Roaring '20s, but the price structure is definitively '29 but more extreme. The psychology is identical. The bear lasted 3 years and ushered in one of the most dynamic bull markets of all time. You don't hear about that because the public was busted and couldn't participate. They went bust because greed caused them to go for the big money through margin leverage. When prices revived, the public was marooned. This also happened in 1907, but it was of low psychological impact because the public hadn't learned the game. Industry slowed, but not to the degree of the '30s.
If you want to make money, you have to be right about your vision for a company, you have to resist all sirens and hold, you have to avoid diversification, and you have to be lucky. Get all four and you're sickeningly wealthy. However, you can't control anything and you can do everything right and still lose. That's why you might as well stop paying attention to the march of the alphanumeric soldiers. After all, it is actuarial if you eliminate all psychology and entertainment. |
