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Old September 17th, 2008, 05:48 AM
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Default Financial Acumen

so Kuki pays for all of us to go on the Oasis of the Seas "shake down" cruise

we all meet at one of the new high text public venues and we are sitting around the bar, enjoying a drink and the topic of the economy comes up (since we cannot discuss religion,sex or politics or the size of our cabin)

can some one explain to me what's going on with the financial market today ?where is the government getting the money to lend to AIG ? what happens if AIG defaults ?

how did this country get into this position today and how is the next administration going to steer us out of the crisis?..how does this impact me directly today ?
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Old September 17th, 2008, 07:06 AM
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Default Re: Financial Acumen

Quote:
Originally Posted by venice
so Kuki pays for all of us to go on the Oasis of the Seas "shake down" cruise

we all meet at one of the new high text public venues and we are sitting around the bar, enjoying a drink and the topic of the economy comes up (since we cannot discuss religion,sex or politics or the size of our cabin)

can some one explain to me what's going on with the financial market today ?where is the government getting the money to lend to AIG ? what happens if AIG defaults ?

how did this country get into this position today and how is the next administration going to steer us out of the crisis?..how does this impact me directly today ?
I will attempt to answer this without getting partisan.

If AIG was allowed to fail two days after Lehman Brothers and Merril Lynch went by the wayside, the crash would have been catastrophic, like nothing that our generation had seen. As onerous as government owning a private concern is, the Fed did the right thing.

What has happend is that through deregulation, we not only allowed the fox into the henhouse, we let him run the whole barnyard. Deregulation assumed wrongly that the financial community would run the markets in an altruistic fashion. Wrong!!! They proved to be a greedy group of scoundrels who brought our economy nearly to the brink of ruin. They preyed on the working and middle class and invented financial products that would make a scam artist blush.

The answer is re-regulation, as much as that makes some politicians gag.
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Old September 17th, 2008, 07:45 AM
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will the CEO's of these companies still get their "golden parachutes" ?
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Old September 17th, 2008, 08:12 AM
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What they deserve is a lifetime pass to the Greybar Hotel. :evil:
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Old September 17th, 2008, 10:03 AM
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Companies did home loans at a 110% of the market value of a home with a varible rate. Then the home value dropped (the owner can't refinance the loan) the interest rate goes up, the home owner can't afford it and gets foreclosed. That happens a lot boom things fail. I agree with Doug the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company. They needed to do that because I haven't seen the market fall the fast since September 13, 2001. I didn't hear if the trading curb was implemented on Monday. Tuesday we got the dead cat bounce and the Fed annouced they will cut the interest rate and provide emergency loans to banks. The Stock market is down again today.

BTW is you are now afraid to buy stocks and feel it will never improve this is the perfect time to pick up some shares. In the stock market you always do the opposite of what feels natural. You can buy low now and sell high once everyone is in love with the stock market again.

Trading Curb: If the Dow Jones Industrial Average falls 10%, trading is halted on the New York Stock Exchange for 60 minutes. If the Dow Jones Industrial Average falls 20%, trading is halted on the New York Stock Exchange for two hours. If the Dow Jones Industrial Average falls 30%, trading is halted on the New York Stock Exchange for the day.

Dead Cat Bounce: A pattern where a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that "even a dead cat will bounce if it falls from a great height".
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Old September 17th, 2008, 10:40 AM
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A DEAD WHAT BOUNCE?????
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Old September 17th, 2008, 10:59 AM
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Sorry kitty.
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Old September 17th, 2008, 03:34 PM
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To answer your question... the Awesome and Mighty USA will borrow the money from..... China.
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Old September 17th, 2008, 03:38 PM
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Quote:
Originally Posted by katlady
Sorry kitty.
Her Most Royal Magesty Princess Grace accepts you humble apology.
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Old September 17th, 2008, 11:24 PM
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Quote:
Originally Posted by DougR.
Quote:
Originally Posted by katlady
Sorry kitty.
Her Most Royal Magesty Princess Grace accepts you humble apology.
She is a most gracious princess!!!
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Old September 18th, 2008, 12:43 AM
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Default Re: Financial Acumen

Quote:
Originally Posted by DougR.
Quote:
Originally Posted by venice
so Kuki pays for all of us to go on the Oasis of the Seas "shake down" cruise

we all meet at one of the new high text public venues and we are sitting around the bar, enjoying a drink and the topic of the economy comes up (since we cannot discuss religion,sex or politics or the size of our cabin)

can some one explain to me what's going on with the financial market today ?where is the government getting the money to lend to AIG ? what happens if AIG defaults ?

how did this country get into this position today and how is the next administration going to steer us out of the crisis?..how does this impact me directly today ?
I will attempt to answer this without getting partisan.

If AIG was allowed to fail two days after Lehman Brothers and Merril Lynch went by the wayside, the crash would have been catastrophic, like nothing that our generation had seen. As onerous as government owning a private concern is, the Fed did the right thing.

What has happend is that through deregulation, we not only allowed the fox into the henhouse, we let him run the whole barnyard. Deregulation assumed wrongly that the financial community would run the markets in an altruistic fashion. Wrong!!! They proved to be a greedy group of scoundrels who brought our economy nearly to the brink of ruin. They preyed on the working and middle class and invented financial products that would make a scam artist blush.

The answer is re-regulation, as much as that makes some politicians gag.
The frightening thing is, Doug, that the very idea of regulation is anathema even to moderate Democrats. It is going to take another depression, literally, to make it happen. I know things move in cycles, but regular people are the ones caught in the bloodbath.

The crises started because people could not pay their mortgages, but helping them would have been "welfare". So the banks went bankrupt and had to be bailed out, but this of course isn't "welfare". Eyeroll.

Go figure.

Cheers. Aidan
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Old September 18th, 2008, 09:39 AM
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I ask you this: Why isn't money management and retirement planning a high school requirement. I think a classes on investment and on money management explaining the different types of interest (simple and compound) would help a lot. Maybe these people would not have gotten into these types of home loans. There are stock market simulations where the kids could create their own portfolio of stocks, bonds, ETFs, Mutual funds, futures, and opinons. This would also be an interest way to teach math skills, because ratios are used in stock analysis.
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Old September 18th, 2008, 10:07 AM
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Quote:
Originally Posted by katlady
Quote:
Originally Posted by DougR.
Quote:
Originally Posted by katlady
Sorry kitty.
Her Most Royal Magesty Princess Grace accepts you humble apology.
She is a most gracious princess!!!
She is the personification of the saying that dogs have masters and cats have staff. She is every inch the diva and royal princess. One moment she is being very affectionate and the next she is "Ewwwww don't touch me!!!!!!" My favorite is when she cleans whatever part you had the nerve to pet.

The teaching of those skills have been debated since I was in High School, but so far, no action. We continue to turn out HS grads who have no idea how to job hunt, manage money or plan for the future. I learned the hard way just like most of my contemporaries.

Add some more to the critically ill list. In addition to WaMu now Wachovia is looking for a financial saviour.
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Old September 18th, 2008, 10:32 AM
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!. The cat is beautiful

2. My cruise insurance is through AIG should I be worried?

3. I didn't understand half of what all of you said, but it sounded good.
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Old September 18th, 2008, 10:57 AM
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Quote:
Originally Posted by Luanne Russo
!. The cat is beautiful

2. My cruise insurance is through AIG should I be worried?

3. I didn't understand half of what all of you said, but it sounded good.
See that is why you should have learned it in high school. Women are natural shoppers. The stock market is all about buying things that have value and then waiting for other people to realize it. Then you sell. Selling a stock is much harder then buying one. I wanted to invest at age 18, however, I didn't understand any of the things I just said. So I had to learn, it's actually not hard.

Stocks are ownership in a company, Bonds are lending money to a company, Mutual funds are a group of stocks and/or bonds managed by a portfolio manager,ETF (Exchange Traded Funds) are similar to mutual funds, except they can be traded mid day and you can sell an ETF short, Futures contracts are contracts used for buying commodities at a future date, like cocoa beans if you think the price right now for cocoa beans is low you buy a contract at this price to recieve the commodity in the future (in the future the price is higher and you made money). Futures are very risky because is you don't sell the contract before the delivery date you could end up with a bunch of cocoa beans , Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock at a specified price until the 3rd Friday of their expiration month. This date effects the prices on all stocks.
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Old September 18th, 2008, 12:02 PM
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Doug, Thanks for that picture. It was priceless. Still giggling. It was the only thing I understood in th whole thread. Suze Orman I am NOT!

Laura
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Old September 18th, 2008, 02:30 PM
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Love the picture of the cat! Cute Doug.

I woke up the other night worrying about our country's financial problems. It occured to me that we work hard to manage our own finances and not run up debt. We've been blessed, and I have never woken up nights wondering how we will pay our bills. Now why is it that our government (both parties) can get away with handling the money I and you give them in such a horrible way?

Doug, I agree that a catastrophe has been averted for now. What about the future? You just can't keep doing this without the whole system failing.

Kat, you are one smart cookie.

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Old September 18th, 2008, 05:01 PM
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I totally agree that money management should be taught in highschool!

I had absolutely no idea how a mortgage worked when I moved out of my parents house and starting living on my own. I got my first car loan at 25, but all I knew was that I had a coupon book to send in my payments.

Economics is a VERY boring subject. I took it in college. The professor was terrible and it was BBOOOOORRRIIINNNGGG!

But getting in the stock market is not boring at all, it is great fun. I guess I have mentioned I used to work/write for the financial site Motley Fool before I came here to CruiseMates. I have day-traded and all that, but I don't anymore.

As far as AIG and all that, the truth is that it truly has become too complicated for most people to understand. I don't completely understand it. But in the Fannie Mae and the AIG bailouts, they are not bailing out the share-holders, what they are doing is making sure the services the companies provide (mortgages and insurance) don't go unfunded. I guess that is basically a good thing - but the companies should never have allowed themselves to get spread so thin that they couldn't fund their own services themselves. That is a by-product of deregulation.

I won't say deregulation is inherently bad - you can deregulate, but you still have to keep tabs on what the deregulated companies are dong lest they get into hot water. That is where the trouble started; the overseers weren't watching.
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Old September 18th, 2008, 07:49 PM
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I have a hypothesis about that which, over time, may well have contributed to the current situation.

Has anyone talked lately with the average high school student? Forget about trying to get them to understand mortgages or banking. Many can't read beyond a third grade level and when it comes to writing....well, forget about it. This has been true for over the past decade or two.

The average college student doesn't know beans about World Geography. A couple of years ago I remember seeing on TV something very close if not exactly like the following scenario. A map of the world was spread out and mounted on a wall. Next, average college students from recognized Universities were provided push pins and asked to put them where they thought major cities were located. Paris was being placed in Kansas and New York City ended up in the Caucasus. I'm not making this up folks. But it's long been politically incorrect to lean on such matters for fear of making either the kids feel inferior or upsetting the teacher's unions. I know that "statistics" will demonstrate I don't know what I'm talking about. Nonetheless, I stand by what I'm saying

The sad truth is that while today's kids are really up there when it comes to technological stuff, they literally know less about the world around them not to mention are so deficient in their own language that they lag way behind where the average fourth grader stood in the early half of the last century and I'm not stretching it, either. The situation also isn't the fault of the kids, either. Of course there are hundreds of thousands of exceptions to all of this and that's the only thing that's saved us thus far but that percentage is dwindling.

And we want to teach these kids FINANCE? Maybe it's just my opinion, but I think we'd best be getting back to some very basic of basics. It we were to do so, then possibly we either wouldn't be getting into such horrific economic situations or at least not so frequently. One additional thing; we'd best be getting away from the "I want it and I want it NOW!" syndrome. How do we expect children to make sensible value judgements when so many of their parents can't?

To give you an analogy, when I graduated from High School I was truly a village idiot. Comparing myself then with today's average graduate, I'd probably come away as some kind of scholar. That my friends, is truly frightening!

I know this thread isn't about education but I assure you, that's ultimately where your solution lies...and we have to start somewhere.

Todd
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Old September 18th, 2008, 10:59 PM
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Quote:
As far as AIG and all that, the truth is that it truly has become too complicated for most people to understand. I don't completely understand it. But in the Fannie Mae and the AIG bailouts, they are not bailing out the share-holders, what they are doing is making sure the services the companies provide (mortgages and insurance) don't go unfunded. I guess that is basically a good thing - but the companies should never have allowed themselves to get spread so thin that they couldn't fund their own services themselves. That is a by-product of deregulation.
I worry that Royal Carribean is doing the same things. If your have a huge ship and you can't fill it, due to the economic downturn, what happens? They put a lot of money into the Oasis of the Seas if the ship is not always filled then is it cost efficent to run? Will they find once the newess wears off the ship is not drawing the crowds they expected? It will be interesting to see what happens.
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Old September 18th, 2008, 11:02 PM
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I actually think the entire financial crisis in the U.S. was caused by all the executives of AIG, Lehman Brothers, Merryl Lynch, Fannie Mae, Freddie Mac, etc., etc., etc. who responded to emails from the representatives acting for the ex king of Stuckupyourbottomia and accepted their invitations to to receive the hidden fortunes of Stuckupyourbottomia.

If they didn't, they should have. They couldn't have done any worse than they did.
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Old September 18th, 2008, 11:18 PM
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Todd you would be surprised what teenagers can pick up. This subject would be interesting to them. They would know it was something the will be useful later in life. How often in the "real" world is someone going to hand you a push pin and a map and say find Paris. But everyone of us hopes to retire, buy a home, and pay our bills. If the kids understand what a FICO score is and how much interest they could save having a good one they would be interested. But it's like everything else the teacher would need to be good. There are also great finance books out there like "Make More Than Your Parents."
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Old September 19th, 2008, 01:50 AM
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kids learn money management from their parents..at age 5 I had a savings account and every other friday when my parents went to the bank to deposit their paychecks, I had to deposit $1.00 of my allowance into my savings account and get my passport book stamped..and when we went to church on sunday, i had to tithe..when i got old enough for my first car (a 59 black vw beetle of course), I had to work and save for a 1/3rd of the cost and then my parents helped with the 2/3

I did the same thing with my son..my point teach them young and make it fun and they will remember ..also teach them to live below their means
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Old September 19th, 2008, 01:52 AM
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I agree with Kuki - for the most part (except for 401ks) this is a Wall Street Crisis. All this affected were banks and other financial companies that bought into these Mortgage Backed Securities.

The auto and airline industries are also down - but what's new there? But for the most part, we had economic growth of about 3% this year which is not great, but average. Unemployment is slightly higher.

yes, there are many more foreclosues than ever before - but most people (like me) are not pretty much in the same situation as ever. If you have a job, didn't refi your home at an outrageous rate, etc, then you are not THAT affected.

It is the diversified Wall Street brokerds who took a flier on buying mortgages in bulk that screwed up - especially Fannie Mae, which had no business in that sector of housing since they are supposed to stick the FHA guidelines. And there was a LOT of lobbying going.

Kat - while I understand what you are saying about Royal caribbean - they tend to use financing much more often than Carnival does for new ships - I personally think Oasis is going to be the biggest hit on the high seas ever, Like Star Wars was for 20th Century Fox.

That movie put that studio on the map and made it a darling stock for a year. Right now RCL is trading lower than CCL - I suspect for the reason you mentioned.

But I just think the Oasis nay-sayers have it wrong (sorry Kuki), the ship is beautifully designed and it is not going to feel crowded at all, even with 5400 guests on board. They have done a great job of diversifying the public areas and spreading out the action.
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Old September 19th, 2008, 05:25 AM
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I certainly hope you're right Katlady. It's just that if that is the case, I don't understand how literally millions of Americans could have allowed themselves to initially purchase houses or refinance existing ones at rates that basic common sense should have told them they couldn't afford. Of course common isn't found in a curriculum.

You too have a point Venice. Maybe though, the parents for whatever reason, aren't imparting their knowledge about things financial to their children. More probably, if they aren't exercising common sense, how could they expect their children to do so?

As regards the cruise industry and especially RCI, it's far too soon I believe, to even guess at this point and achieve any degree of accuracy. For those who are feeling a bit of panic, remember that people tend to forget thousands became millionaires simply because they invested when everyone else was getting out. This is definitely the time to buy. The largest conundrum however, is what to buy and how much. I'm just glad we're retired.

Todd
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Old September 19th, 2008, 09:33 AM
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The stock market is in recovery now. Yesterday wasn't a dead cat bounce. When the price of a stock falls, but the value hasn't changed people see it as a buying opportunity. The simple way to understand the stock market is this: When everybody is saying how awful it is you have a buying opportunity; when everybody is saying how great it is you should be thinking about selling. I wonder how many people got stuck in a short squeeze. The prices will probably contuine to go up as people panic out of these position. Paul you were a day trader? You must have "nerves of steel". I would have a nervous break down if I had to watch the stock market that close.
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Old September 19th, 2008, 10:06 AM
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Oh BTW the thing that got me interested in the stock market was an episode of "The Love Boat." My parents like property as a main investment, not the stock market.

Hey, I found the name of the Love Boat espiode "Frugal Pair, The/Doc's Dismissal/The Girl Next Door (1981)." In 1981 I was 12 years old and this episode is what made me interested in the stock market.

"A couple takes a cruise to celebrate its 40th anniversary, but considers breaking up after the husband learns that his wife secretly invested money in the stock market for years. They are now wealthy, but he is furious because he could have retired much sooner." Who says TV rots your brain?
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Old September 19th, 2008, 12:36 PM
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To be a bit serious, I think much of the malady in the situation was caused by the tremendous growth in Hedge Funds and Mutual Funds, and the incredible growth in wealth they created being "packaged", so that the hands of so few held the key to the investments of huge sums of money.

What followed, because of the rules in place, and lack of oversight, that these packaged funds were able to manipulate portions of the market. Greed ruled the actions of the few people who were in control of these huge packs of money. The ugly side of capitalism reared its head and took control of many portions of the market.

When they got caught things began to collapse. If the world banks didn't intervene today to make money available who knows how far the collapse would have gone. Whether this is enough to stablize the markets, and give the gov't time to get proper oversights in place we'll find out later.
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Old September 19th, 2008, 01:08 PM
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I agree on the hedge funds - and short selling. In theory, there is nothing wrong with short selling, but with the hedge funds POUNDING stocks down then for a shareholder like me who barely noticed how far one of my stocks had gone down before I was able to sell it. That stock, 10 years ago, would have gone down, but not to the degree it did.

look at American Airlines - down from 12 to 3 in one day - because of a "mistake" by Google that posted an article from 2002 that said it was going bankrupt.

As far as learning about the economy in school. I think my parents assumed the schools taught us that, and the schools thought our parents told us that.

I did take a class in the stock market in the 8th grade (it was a rare experiment in electives, most of my friends took dumb topics). I admit, it was over my head at that age.

But eventually I learned that the stock market is actually very simple - you open an account (just like a bank account) and you can buy or sell shares in any company at any time online. If it goeds up you make money, if it goes down you lose.
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Old September 19th, 2008, 02:22 PM
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But eventually I learned that the stock market is actually very simple - you open an account (just like a bank account) and you can buy or sell shares in any company at any time online. If it goeds up you make money, if it goes down you lose.
That's truth. You can also do the same thing will ETFs based on an index like the S&P 500 (SPY). I perfer this because it's an easy way to diversify (SP?) your profolio with having to watch a lot of different stocks.
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