Posts Tagged ‘stock market’

Lock, Stock & Money

Saturday, March 14th, 2009

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The idea of investing in stocks seemed like a bright prospect a few months back but now it sends shivers down the spines among prospective investors. Share investors have witnessed a tough time over the past six months. Investing in stocks or shares has always been a risky affair, but more so during the past few months as the stock prices went tumbling down, with a steep fall in the economy. Interestingly stock trading is not a new thing and its history can be traced back to the Romans, but the first company to issue stocks was the Dutch East India Company. They pooled in public investment and used it primarily for the building of ships.

Experts in the stock market claim that the one thing that is important for a person trading in stocks is his timing. Investors were quick to realize that they needed to be on the tip of their toes to trade effectively in the stock market. However in the olden days, not everybody had the time to keep a track on the stock prices on a daily basis, and that itself gave rise to a new profession- the Stock Broker. He kept a watch on all your stocks and helped you make a decision on what to buy and what to sell, and charged you a commission (called the brokerage) for his services.

With the advent of technology, the stock markets have seen a radical change over the years. Increasingly sophisticated broking software has not only made it easy for Stock Brokers to trade on the market, it has also meant that a newbie, with a little knowledge about the share markets can take a plunge. The internet has also made it easy for people to trade on stocks sitting at the comfort of their homes, with millions of dollars changing hands in a few milliseconds. Technology has made it possible for algorithmic trading to take place, wherein computer systems are programmed to buy or sell shares when a certain market condition is met.

As with all things related to money, the Stock Market has seen its share of financial scams amounting to millions of dollars. Among the various major scams that have hit the Stock Market hard, the earliest was in 1986 when Barry Minkow claimed to be building a multi-million dollar company and went public with a market cap of $200 million before being discovered that it was a mere scam. However the largest investor fraud ever committed by a single person amounting to a whopping $65 billion was the one orchestrated by Bernard Madoff. He introduced his Ponzi scheme, where instead of investing the money offered to him by his clients it was simply deposited to his business account in Chase Manhattan Bank.

A totally different form of stock scam came into picture in the form of the boiler room. A lot of people have been hit most by boiler room scams, where a smooth talking salesman calls up and tries to peddle worthless shares to unsuspecting customers. Police have called it the biggest threat to households, much bigger than credit card frauds. These are called boiler room scams because the people involved operate out of cramped office spaces with desks and telephones. Police have estimated that there are about 500 boiler rooms operating out of Spain, employing over 400 people. Other favourite Boiler room destinations are USA, Dubai, Berlin and France.

With the economy in recession, investors are thinking twice before plunging into the Stock Market. With statistical figures showing that approximately more than 50% of American households invest in the stock market, it is something that is still considered to be a good investment. It is just a matter of time before the Stock Market hits back with a vengeance. Better hold on to your money until then.

How Much Cash do Americans Keep on Hand?

Thursday, March 5th, 2009

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What’s in your pocket?


Americans are losing faith in banks, period. That goes without saying and no explanation is needed. We all know this. The stock market is falling; banks are going down and receiving money just to keep themselves afloat. What is the average American doing? They are stashing their cash or carrying it with them! In the past year, since gas prices started skyrocketing, Americans have started looking twice at their bank accounts and getting nervous. Even then there was talk of there being a recession. People started withdrawing their money in a frenzy and selling their stocks, starting to stash it at home and carrying large amounts in their wallets. So how much money do Americans carry in their wallets, and how much money is stashed in American homes?

The amount of cash Americans carry on their person is directly affected by the area of the country they live in. People in New York and Los Angeles are going to carry way more money than someone who lives in a smaller town like Lorain, Ohio or El Paso, Texas. Since the cost of living is so different, the cash one carries for basic necessities would be much higher in New York City and way lower in Lorain, Ohio. The demographics on carrying money look like this:
The average purse or wallet in the United States contains about $104.

13% of Americans use a piggy bank.

28% of Americans have a coin jar.

15% if people in the U.S. have a large amount of cash hidden in their houses. Out of these people, half of them have it hidden and the other half hide it in plain sight.

1/3 of Americans keep a small amount of cash on hand for emergencies.

Finally, more than 50% of American’s don’t keep any cash at all in the house.

American’s carry cash so they don’t have to use credit cards, foregoing the interest usually incurred in that way. People carry cash because they don’t trust the banks and they haven’t been able to trust banks for at least a year or more. Some carry cash because that’s what they’ve always done and that’s what they were taught to do. Sure a lot of people go into a bank or through the drive through to cash their paychecks, in return getting their cash for no extra fees. What about those who don’t go to the bank and whose checks are automatically deposited? These people will usually hit up the ATM. It’s difficult if possible at all to not incur a fee when using the ATM so this way of obtaining your cash is costing you money. Is the tradeoff worth it?

Some might argue that we’re becoming a no cash society; using less cash and more and more debit and credit cards. I wonder if these people have taken a look at the economy lately because I think we may be going back to using as little plastic as possible.