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What to know about the stock market (2007)

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Re: What to know about the stock market (2007)

#41

Post by erwincoumans »

sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

You are likely indirectly into the stockmarket, through pension funds or social security. In the USA, a lot of people (especially in big tech) are more directly involved through a 401k, which allows to pick stock/bonds.

It could also be that you prioritize investing money into a house instead?

Re: What to know about the stock market (2007)

#42

Post by hnbad »

pjc50 wrote: post #16
sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Do any of them have private pensions? In the UK almost everyone will have been moved over to a "defined contribution" pension whose value is determined by the stock market, usually in the form of a "stakeholder pension". I don't "do" the stock market but I do have such a pension. And every few months sweep spare cash out of my current account into an index fund. Effectively I pay people to worry about this stuff on m…

Not the parent, but I live in Germany and while the new coalition government is expected to push for moving he public pension system to stock based pensions, the current system consists of a public pension system (that employees pay into via their employer to pay out current recipients who previously paid into it) and a private pension system everyone is strongly encouraged to pay into. As I understand it the private system is not directly tied to the stock market though.

For most people outside the very niche finance and tech investment bubbles stocks are largely understood as a form of gambling and managed funds as a high yield alternative to a savings account with a small risk of losing money (but this requires some disposable income so again this is somewhat self-selecting).

The ordinary Hans Wurst (German Joe Blow) just follows the economy section of the news for a general feeling of if things are going good or bad because line goes down means prices go up and they probably won't get a raise.

Re: What to know about the stock market (2007)

#43

Post by speeder »

erwincoumans wrote: post #34

Just curious: Suppose there is some difference between buying price range and selling price range. The dealer (middle man) could become temporary in-between buyer or seller and take some of the profit due to this price difference. For example this could happen at a stockbroker or at a crypto exchange. Is this behavior regulated, and if so, how?

This is regulated in some senses (doing this as exchange is a big no-no).

Also this is theoretically, the point of High Frequency Trading...

Sadly this is only theoretical, seemly they are quite willing to make the market messy to force this difference to exist so they can profit more, and not many governments so far are bothered by that.

Re: What to know about the stock market (2007)

#44

Post by gpderetta »

erwincoumans wrote: post #34

Just curious: Suppose there is some difference between buying price range and selling price range. The dealer (middle man) could become temporary in-between buyer or seller and take some of the profit due to this price difference. For example this could happen at a stockbroker or at a crypto exchange. Is this behavior regulated, and if so, how?

The order flow is usually public. If a broker were to intercept a client order in flight to pocket the difference, it would be called front running and it is illegal in most places.

Crypto is not regulated, so the order book could be completely fictional and there would be no recourse.

Re: What to know about the stock market (2007)

#45

Post by RandomLensman »

simongray wrote: post #36
llampx wrote: post #27

Earlier quoted context omitted.

I live in Germany and its the same. Not that that's a good thing. People here are old-fashioned and still believe in "Concrete gold." Fact is, as soon as you've got a meaningful amount of wealth, you're going to want to invest it so you can either get income from it or grow the principal. It could be in a home, multiple properties, or the stock market. > People I have known in the past (old people) didn't do stock ma…

> Meanwhile in most European countries, punitive taxation makes it extremely difficult to move up in social class, even from middle class to upper middle class. This is not true. Several of the highest taxed countries in Europe also have the best social mobility in the OECD: https://www.oecd.org/els/soc/1-5%20generations.png It might be the case that Germany is particularly rigid, but that is not transferable to most…

That OECD study is really tricky as it only goes to mean income. The interesting bit would be to really rich and there I am not sure Scandinavia would score so well.

Re: What to know about the stock market (2007)

#46

Post by lordnacho »

Well, that is how a basic orderbook works.

But US markets have some special Reg-NMS rules that glue together things across exchanges. Being from Europe I'm not so familiar with it, but I understand it causes some interesting games to be played.

If you want to actually understand how the market works, there's a fair bit more reading to do.

Re: What to know about the stock market (2007)

#49

Post by erwincoumans »

kqr wrote: post #38
erwincoumans wrote: post #34

Just curious: Suppose there is some difference between buying price range and selling price range. The dealer (middle man) could become temporary in-between buyer or seller and take some of the profit due to this price difference. For example this could happen at a stockbroker or at a crypto exchange. Is this behavior regulated, and if so, how?

I'm not sure what you're saying, but the spread between buying price and selling price is exactly how the temporary middle man gets paid for the risk they take in matching up buyers and sellers. The size of the spread depends on how large the perception of that risk is.

Example to clarify:

Buyer tells the trader to buy for (up to) 140. Seller wants to sell for (at least) 120. Trader gives 120 to seller, gets 140 from buyer, gets to keep 20 for himself.

Re: What to know about the stock market (2007)

#50

Post by pembrook »

sdevonoes wrote: post #11

Am I the only one in HN who is not into the stock market? I live in Western Europe and I would say 75% of my acquaintances don't do stock market. People I have known in the past (old people) didn't do stock market either. They all seem to have lived a normal life (decent jobs, decent house, decent family). Nothing extravagant but they got enough money to be "happy" in life.

Europeans can have the luxury of not worrying about investing since many European countries offer livable pensions (for now…the demographic future for this isn’t looking so good).

However, this isn’t as great as it sounds. While the European model for healthcare and education is better, their pension schemes are arguably a much worse deal than what Americans can have.

In Europe, you’re basically paying the government to take your money and invest it in much too conservative, in fact, negative-yielding! bonds right now due to pension fund mandates.

You can’t take the proper amount of risk given your age (in your 20s-40s you should be almost fully allocated to stocks) because the pension fund needs to constantly be paying out money to old people—they can’t risk huge drawdowns.

There’s a surprisingly large amount of middle class Americans who will retire millionaires just because they are able to save for their pension privately and take the proper amount of risk for their age (eg. Target date funds).

Meanwhile, in Europe, governments shelter people from the harsh realities of how financial markets work, but you have to hope and pray that enough people are born in the coming decades to make up for the conservative pension mandates. And you have to pray that the government allows you to retire sometime before you die (in the nordics, retirement ages are constantly being pushed back and pension benefits are shrinking...due to said demographics).

I predict every country will eventually move to a hybrid private/public pension model like the US over the next 40 years. So you'll have to start caring eventually.

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