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Monday, December 29, 2014

Post X-Mas Thoughts & Investing: Stocks vs Roulette Table


Its the last Monday of the year and we're happy to be back..

Hope everyone had a good Christmas..

For myself it was quite minimalist and by design; an experiment to see if the holiday would feel any different (preferably for the better) if I held back buying every on-sale knick knack, paddy whack and deprived my dog a bone..

The answer..  ehh..
Same Christmas whether I had 2 presents to open vs 20 or 200..

The big difference is of course I had much more pennies left in the ole' coffee can by not going crazy with shopping zest n' zeal in the weeks and days before the big holiday we all have 364 days to prepare for but statistically 93% wait until the week before to begin shopping.

The simple life lesson so many tend to forget and which is clearly demonstrated when that January credit card statement arrives is this..

No matter how exciting, magical, delightful, joyous or any other adjective for terrific December 25th was, it is an inarguable Fact that there will be a Dec 26th then 27th followed by 28th..
And barring death, you and everyone else will be alive the days and weeks after

And life still will cost money; no one gets a pass because they were supremely generous during the Christmas season and now are a bit short.

That is a difference between an 'ant' and a 'grasshopper'

An 'ant' does not ever have a "lets have a big party & go out with a bang" moment..  It stores.. it saves.. it lives for today as well as the many tomorrows ahead..
The 'grasshopper' does not think beyond the moment, does not look beyond its nose and is the life of the party until the party ends then as Aesop depicted in his fable, becomes nothing more than a handout seeker.

So many people who think they are smart but are not.

I went to a Christmas evening party that a family member was holding..  And while co-mingling with mostly strangers who were friends of his, I encountered this one chit-chatty little bird of a man who was talking about stocks.

He was seeking my advice of investment (which I don't give) then bragging on his portfolio (which I don't care), but I listened as politely as I could
In particular he was wondering when oil would go up because most of his investment was in BP and he was quite proud of himself that he bought a ton of their shares right when they were environmentally Destroying the planet with their Gulf of Mexico oil spill then getting judicial protection capping how much they could be sued for...

Nonetheless, he bragged he still was making a killing.

Of course as soon as I got home, I investigated BP's share price.
On Dec 23rd, BP was selling at $39.12

On August 25th, a mere four months ago BP was selling at $48.55

That is a loss of $9.43 or approximately 20% the stock's value in 120 days.

So if he owned 500 shares, he lost $4,715

Everyone thinks they are brilliant when it comes to investment and yet so few really are..

Investing is gambling but the players are wearing nicer suits and have better hair cuts than the riff-raff you see in a typical casino
Really you have a far better percentage odd of making money playing a roulette table than buying stocks or commodities.

On a roulette wheel, there are only 37 different options that little white ball will land:  1 to 36 and "0" (some roulette wheels will also include "00" making it 38 possibilities for the ball to land which decrease odds a little bit.)

Because 0 (and 00 on some wheels) are green and not considered part of 1-36, when you bet odd/even, black/red or 1 to 18 vs 19 to 36, you have a 48.6% statistical chance of winning your bet.

That is mathematical fact; you put $10k on 'red' and you have a 48.6% chance that 10-20 seconds later you will have $20k, which obviously is double
Now many would never play such a bet.. too risky

OK, let's look at stocks a moment..

We could use any company as an example but let's say for argument sake you invested $10k in McDonald's and had the brilliance to buy it at its 5 year low; $61.84 a share on Jan 4, 2010

Today the stock is valued at $94.99 as of this writing.
Simple math:  $10,000 divided by $61.84 = 161 shares

161 shares x $94.99 (today's price) = $15,293

So in 5 full years of up and down and up and down, you would be right now at a profit of $5.293 and the money still locked in stocks you could not touch without selling to actually buy things with the $$

And you tell people you 'invest' and somehow get 'respect'
Yet you could have made 100% profit on your investment in 15-20 seconds playing roulette.

And then be looked at as if you're an addict.

Seems to us, keeping your $$ in a market for years and years while diligently daily checking stock quotes is more of an addiction

It's all a matter of perspective, isn't it..