Wall Streets Newest Lie


I have a cousin, well I call him my cousin because our parents have known each other for so long and we have grown up together in an odd sort of way, and he is really really smart.

Not smart in a street sense either, although I wouldn’t say he’s lacking in that department. I’m talking, SMART smart. He’s the kid in your class who never showed up and always got A’s. He’s the kid who looks like he’s just flipping through an Encyclopedia,  but in reality he’s just force-feeding his brain knowledge.

Well, a little while back I asked him for some general information on how Wall Street works in his eyes and where the potential goldmines and also pitfalls are. (For those who are interested, a link to help “Conquer Wall Street“)

I’m saddened to say that he couldn’t give me much of an insight. I’m not sure if this is due to his inability to put it into words or if he just didn’t know. The universe must have heard my question. A couple days later, while checking out one of my favorite blogs, I got some answers.

BlogMaverick is the blog that is run by the Dallas Mavericks owner Marc Cuban. He is in a way an inspiration in the sense that, he’s doing what he loves and he’s having fun mixing up the business landscape. In fact, this video is a great piece about his journey to the top.

Getting back to my questions about Wall Street. I wanted an Idiots Guide to Wall Street.

Well I didn’t find the complete guide, but Cuban’s post still left me feeling like I had a better understanding of who’s playing what position, so to speak.

He states that the advice given to normal investors (main street) was always “buy and hold”.

“Of course thats what they told you every chance they got. It’s not what they did.  The holding period for stocks dropped from 8 years in 1960s to 2 years in the 1990s and 8 months in the 2000s.

He goes on to say, if the slogan for Wall Street can no longer be “buy and hold” what slogan are they going to stamp on Main Street to get all the “suckers” back into the market? (FYI: he posted a great link about The Stock Market being for Suckers)

ASSET ALLOCATION. Boom there it is. Cuban states this as the “new lie” that is being spread. I am admittedly not knowledgeable enough about the subject to pass judgement, but his point makes sense to someone like myself.

He says that Diversification is the Buzz Word and he’s not surprised:

“…given all the new funds, REITs and ETFs that have popped up in the last couple years. The more diversification sold to individuals, the more money to buy them all.  Wall Street has to sell what it has doesn’t it   ? It’s just good business for them. But not for you.”

I admit, I had to Google REITs and ETFs. REITs are Real Estate Investment Trusts and ETFs are Exchange Trade Funds. Now I had trouble putting ALL the pieces together but what I did understand was the general principle that Wall Street is trying to sell.

As Cuban states, they (meaning Wall Street) want you to allocate your resources across the board so that you can “be safe” and “hedge your bets”. However the bottom line is that any investment that you make where you know close to nothing about, is most likely a bet you will lose.

There is a ton more information out there about issues like this. I was just glad to stumble across a well written Blogpost about a topic I had little information about. If you are as interested as I was, there is another article by Marc Cuban on his site. (Here)

I’ll end with the advice I got from reading the discussed article.

“Don’t be a sucker. Remember this. It’s better to make less, or next to nothing than to lose everything. Don’t get greedy.  Don’t get desperate. The stock market can’t save your financial future, but it can end it.”

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