“Why Are we So Clueless about the Stock Market?”: A Book Review

Posted on | February 1, 2010 | 3 Comments

As I read Mariusz Skonieczny’s book, I couldn’t help but think back to my first job out of college. I was hired to make international sales (I was the entire department) on a grant given to this brand new start-up company by the USDA. About midway through my year there (after the one year grant was through they laid me off), I started getting these aggrandized thoughts in my head about the company truly taking off in the next 2-4 years, and me being in at the ground level of it all. In fact, while the company did not have an IPO (Initial Public Offering), they did have private investors, and I remember grumbling to the president one day about the fact that it was a shame that they had an income minimum on who could invest.

Now I am so thankful that I was unable to invest my hard earned $10,000; one of the other six employees was laid off shortly after I was, and their inactive website has finally been deleted off of the internet. Had I read Skonieczny’s book while in this first year of my post-grad employment, I probably would have gotten the idea that a lay-off was around the corner. The troubling signs I witnessed internally and that Skonieczny points out as bad business included too much debt and a very high price to earnings ratio (P/E).

In my case, it was pure dumb luck that I didn’t make that investment. But now that I am older and would like to pick some of my own stocks to invest in, I am glad that I read Skonieczny’s book for a number of reasons.

  • Skonieczny made the connection for me between stocks and the actual companies behind those ticker symbols, something I have failed to do up until now
  • Many times I have looked at the charts showing the rise and decline in the price of a stock, but I have always had the question of when to know you are getting a good deal (i.e. the stock will rise in the future versus sink like a sack of potatoes). Skonieczny shows how to find the value of a stock—admittedly an unwieldy thing to do—in order to determine if there will be future profit
  • He reiterates the idea that you need to buy stocks at a discount in order to make the most profit; this is something that I wholeheartedly took advantage of during the recession in both my IRA and in US Steel, and the profits began coming in several months ago

While I am unsure if after reading this book I will be able to make these calculations on my own (there is still a mental block to the idea of it), knowing that these calculations exist, and knowing some key things to look for when trying to decide whether or not to purchase a stock has truly opened a slit in the curtain for me to reveal the Great Wizard of Wall Street.

Did any of you take advantage of discounted stocks during the Recession?

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Comments

3 Responses to ““Why Are we So Clueless about the Stock Market?”: A Book Review”

  1. Crystal
    February 1st, 2010 @ 11:53 am

    My hubby and I are way better off now than in 2008 simply because we took advantage of discounted mutual funds. We also bought some individual stock.

    We were able to buy shares of our target date mutual funds at half price in my 401k and our Roth IRA. Those have more than bounced back for us.

    Our Scottrade account has just recently broken even since we did not time those individual stock buys very well, but we do own a bunch of solid stocks that pay great dividends now…stocks we weren’t able to afford before the crash.

    Since we are “new” (less than 5 years) to long-term investing, the crash helped.

    We just have to hope the market doesn’t have a huge crash in 20-25 years…we’ll have less in the market by then, but it would still hurt our early retirement plans.

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  2. Amanda L Grossman
    February 1st, 2010 @ 12:20 pm

    Crystal: Hello! I am happy to hear you guys were able to take advantage of some of the great buys. The market is a bit weary again…but maybe another good buying time is coming soon?

    [Reply]

  3. Crystal
    February 1st, 2010 @ 2:24 pm

    The little drop last week has prompted me to buy some more shares in my Roth IRA already. My hubby bought some Pepsi stock as well. We’ll have some more opportunity money saved up in a couple of months to take advantage of any more drops.

    We have 25 years until retirement…buying now just makes sense.

    [Reply]

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