Three More Myths about Wall Street

The last time I wrote dealing with this series I left off by writing that I would take up with the myth that stock brokers are evil day traders that just bang in and bang out of the market, raping the people. This view of this job is false.

Brokers have many investment strategies which vary for each customer according to the risk level a customer is willing to accept with some strategies taking years to reach maturity. Some customers have a low risk tolerance and put their money into annuities. Annuities are guaranteed and insured up to a certain amount of money. The tradeoff is that the annuities pay no dividends. Still they never lose money and pay at least 3 % if used as a savings account ( they can pay zero too depending on which kind though, so investigate). The money must be kept in for the life of the contract though for the highest returns.

Older Americans often put money in low risk stocks that grow too little because the companies the stocks represent hold a significant portion of their market. It’s hard for Microsoft to get bigger. For these stocks to attract investors they pay portions of their profits as dividends; so most of the bail outs did not go for executive bonuses, but to ensure that little old ladies who have money in stocks that pay dividends got paid.

Other Americans put money into bonds which are as good as the government’s ability to make its payments. They're the safest investments for America as they will never go bankrupt though we could see currency devaluation unofficially by money creation.

China hates this: of course because they hold much of our debt and money creation means cheaper dollars paid back to them. On the other hand, no money creation means we don’t buy Chinese anymore so, tough luck China. This is why China complains so loud but it is about all they can do. For a better explanation on government finances see http://www.financialjobbankblog.com/2011/04/is-uncle-sam-broke.html

A second myth that I would like to address is that Wall Street is not Main Street. Really? Your Uncle Max who gives you a hundred dollar bill at Christmas would have no money if he had no local bank. Your local bank would not exist without Wall Street because there has to be a place ultimately for banks to clear their transactions, and these transactions work their way up the food chain to the big banks.

Also, little banks need a line of credit, and they’re not going to get money from the pockets of the Occupy or OWS anarchists, whom I have nothing but contempt for I may add. Anarchy is a political theory that isn’t self-sustaining, goes nowhere and would eat 90% of those who believe in it in the first month, so it's idiotic. And though I am no survivalist, as former military I can guarantee you that I will survive longer than one of these Occupy anarchists in a disaster.

This leads me to myth three which is Wall Street caused the economic collapse. Not true for banks don’t usually make stupid loans. They go broke if they do. But they made stupid loans so the question is why?

It was a scheme forced on banks that made Congressmen rich, banks broke and us poor. And it works as long as you believe the myths. I will explain why next week. The week after that, what exactly is and how to become a stock broker.

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