THE ORIGIN OF THE STOCK MARKET PT II

THE ORIGIN OF THE STOCK MARKET PT II

So, when we left off, investing $100 in a piece (or share) of the 10 slave ships grossed a 7,000% return or $700 dollars with minimum risk due to diversification. 3 of the 10 don’t make it back on average and they still had 7 ships with a hundred enslaved Africans being sold at $10 a slave 7 x 100 x $10 = $7,000 x the 10% (.10) that they owned = $700.

And the upside was that their money went in to pay for a piece (or 10% share) of the 10 ships and crew and the person investing could distance themselves from the actual work (and in this case, the horrors) of what was being done.

This is probably where they get the phrase ‘Instead of you working for money, your money works for you’. Their $100 goes in and 6 months later, $700 comes out and the investor hasn’t lifted a finger.

Also keep in mind that when folk talk about the rate of return, they mean yearly, so that turns the 7000% every 6 months into 14000% yearly!

Which brings up the next point of compound interest. What if instead of putting $100 in at the beginning of the year and taking $1,400 dollars out at the end of the year, they just left it in the slavery vending machine?

How long would it take that initial $100 dollars to make say a million? And keep in mind, this is not a million in today’s money but a million in 1600’s money!

$100 x 1400% (14.00 using the trick of moving the decimal two places to the left) = $1400 that 1st year alone.

The 2nd year, the $1400 left in the slavery vending machine generates $1400 x 14 = $19,600.

The 3rd year, the $19,600 turns into 274,400 and 3 more months later it’s a million. And that’s just the dividends!

The 1st year, once folk realize what a cash cow the evil is, everyone wants in, driving the actual stock price up.

So now, 10% of every ship goes from being worth $10 to $20. So the $1400 doubles to $2800.

And the 2nd year the $2800 turns to $39,200 and doubles again to $78,400 because now they’re willing to pay $40 to make $1400 after a year (which is still a steal)!

And now a half year more, $78,400 x 7 becomes 548,000 which doubles again because they’re willing to pay $80 for a stock that gives dividends of $1400 which initially cost $10, turning it into over a million in 2 1/2 years.

Now keep in mind that a million back then was probably like a 10 billion today so a 100 was like a million.

So they divided those shares even further. Now, instead of needing $100 to invest $10 in each of the 10 ships, they only needed $10 ($1 in each ship) to gain a profit of $140.

In today’s dollars, that’s like investing $100,000 and after a year gaining $1,400,000. Plus when the stock doubles that’s the equivalent of $2,800,000. In short, investing the equivalent of $100,000 for half a year would get you $700,000 and with the stock doubling, $1,400,000.

And if the $10 was too rich for their blood, they could invest $1 at 10 cents per each of the ten ships and make $14 at the end of the year.

The equivalent in today’s money would be investing $10,000 and making $140,000 after a year’s time.

To give you an idea of the magnitude, in today’s market a 15% yearly rate of return is considered very good. Do you know how long it takes to make a million from $100 at 15% compounded? 68 years.

There’s a reason why greed is one of the seven deadly - and many would put it at or near the top: pride, greed, lust, envy, gluttony, wrath and sloth.

The goal is not to discourage you by either the numbers (which just takes a little practice) or the temptation, but just to sober you as you’ll be facing the green-eyed monster head on and want to avoid being swallowed whole.