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« Are You A Blogger? | Main | INDC Journal Interviews Michael Berg (Best Of) » June 07, 2004
Dale Franks Makes Economics Fun and Easy!
Posted by Bill Check out Dale's new book, Slackernomics: Basic Economics for People Who Think Economics Is Boring. In many cases, the stock of a company rises so much, that even if the company pays no earnings or dividends, the rise in the price of the stock makes it a very lucrative investment. To use Microsoft as an example again, the price of their stock in December of 1994 was about $7.50 per share. Five years later, the stock was worth about $95.00 per share. So in five years, your original investment would have gained 1,266%! Microsoft pays no dividends and the earnings are only $1.52 per share, but who cares? The price of the stock rose so high and so fast that it more than made up for the lack of earnings and dividends. This high rate of price appreciation can also be matched by a high rate of price depreciation in stocks as well. Stocks can be very volatile, meaning that the price can rise or fall very quickly. If you invest in a company, the price might shoot through the roof when the company releases a new product everyone in the country wants. The price can collapse just as quickly when it is learned that the new product emits some previously unknown type of radiation that makes all male users impotent. Because of this volatility, many investment advisors recommend that you never keep more than 5% of your investments tied up in a single company’s stock. Sure, this will prevent you from making huge gains when the company patents its new breast enlargement pills, but it will also protect you from large losses when Consumers Union learns that the company’s major product line explodes when exposed to children. As Dale's QandO blogmate Jon Henke says, " ... it's a really great read. Entertaining, funny, lucid and written for the layman." Perhaps I should hand out copies at the next ANSWER rally ... Posted by Bill at June 7, 2004 01:00 PM | TrackBack (1) |
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