Taking The Street

  

You "took 'em." Stole from them. Bagged them. You hinted and winked and mumbled about earning $2.12 a share this quarter, so investors bid up your stock to $100 a share...but you actually printed $1.39, tanking the shares down to $50, so all those people who paid $100 last month got their investments cut in half. And they're pissed.

You took 'em. They'll remember.

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Finance: Who Invests in Stocks?141 Views

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Finance a la shmoop. who invest in stocks? and that's not like horton

00:06

hearing who . the answer everyone. almost everyone. fancy-pants

00:13

corporate CEOs, yoga teachers, schoolteachers ,teenagers who mowed the [kid sits in a big chair and smiles]

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lawn for a summer and are already dreaming of owning a home someday.

00:22

yep well the fancy-pants corporate CEOs can likely put more money into stocks, but

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for most normal people even a hundred shares of whatever.com that starts at

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12 bucks and compounds at 10 percent for 20 years ends up being worth a

00:36

meaningful sum. yeah like that. eight grand and change. it's kind of cool. so you

00:42

can buy stocks. it's not hard it won't hurt. much. yeah. stick good ones in water.

00:48

well logistics are simple save a grand or three go down to your local Schwab

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store or log into fidelity .com or a host of others, each raise a good one. set

00:59

up an account and then just click to buy whatever stocks do you think you want to

01:03

own. only you'd then just check your progress or lack thereof by going to

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Google Finance Yahoo Finance e-trade and whoever else provides legit stock price

01:12

info for the masses. that's how most of America does it, and believe it or not [stock prices example shown]

01:16

most of America actually owns stocks. from the whitest white shirted CEO to the

01:22

bluest of blue collar workers. for many union workers stocks represent almost

01:28

all of their net savings whether they realize it or not, and their stock

01:32

ownership has produced some really perverse outcomes. take profit Co vastly

01:38

over staffed. it had an awesome union negotiator who got the corporation's

01:43

weak-kneed CEO to hire twice as many workers as the company actually needed.

01:49

that over employment scenario was great for the fatten happy employees who would

01:55

otherwise be out of work, but it was bad for the company that now had to find the

02:00

financial resources to cut double the number of paychecks. as a result company

02:05

earned 50 cents a share instead of the dollar they would have earned if they

02:09

had right-sized the labor force. but typical union worker in the

02:13

factory had essentially all of her wealth tied up in this company. well as

02:16

part of her pension plan she had been forced to buy the company's stock. about

02:22

five thousand dollars worth of stock every year for decades. well the company

02:27

moved on and grind it away and did reasonably ,well she suddenly found

02:31

herself nearing retirement with a hundred thousand shares in the company [woman nears finish line with a banner called "retirement" above it]

02:36

whose stock was trading at five bucks a share or about ten times earnings. right

02:40

in time and $5 right? well. that's half a million dollars of savings

02:45

fully invested in one stock. our own company .lots of risk owning just one

02:51

stock see our video on diversity if you want to argue. but all that money was

02:55

invested in a stock that pretty much everyone thinks is undervalued and

02:59

underappreciated by Wall Street so it trades at a very low multiple of

03:04

earnings .that's at ten times things. well why only ten times? because the CEO was a

03:09

pushover. well lunatics ran the asylum and now the

03:12

lunatics are suffering under a very low stock price. and many need cash from

03:17

sales of that stock for retirement. you know winnebago home buying and high

03:22

stakes antiquing and golf and stuff. so along comes a new CEO. Tuffy MacTuff who

03:29

wants to fire two-thirds of the union workers and close right-size the company

03:35

deploying robots at the same time. well if Tuffy has his way the company will

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earn $1 a share this year unlikely $2 a share in two years, you know since he

03:46

fixed the bad low profit margin structure of the company by getting rid

03:49

of all those employees .Wall Street he knows will love this and they'll bid up [chart showing stock prices rise]

03:55

the stock. so strangely but logically Peggy in accounting cheers when she is

04:01

actually fired by Tuffy. why? well all her wealth a hundred thousand shares of

04:07

stock she owned has now been bid up big-time shares go from trading at ten

04:13

times earnings of 50 cents to trading at 20 times earnings of the projected $2 a

04:19

share their going to earn in a couple of years or $40 a share and it's a huge

04:24

wealth swing. she went from looking at retiring

04:26

in Prius style on a half a million bucks to shopping for a hot new 23 year old pool

04:32

boy named Bjorn with her 4 million dollars in stock wealth. and it can be

04:37

the same story for Martha the tennis instructor or Barry, the pastry chef or

04:41

Samantha the bed pan maker. to move those things. well their stories might not

04:46

follow the same trajectory but as long as you own shares of a stock you have

04:50

the potential to reap major rewards and suffer major losses. you know so that [people of different occupations line up]

04:55

you've to have a chance to retire in an early age from bed pan making yeah. we

05:02

want to do that.

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