Director Notes for “Taking the Plunge”
What are the effects of online investing?
As a writer, director, and producer, it is my job to deceive you. Elements of my writing have been crafted with the sole intention of creating a false world where I can craft the truth to meet my demands. This is necessary in order to tell the story. A story about a man who has been sucked into a world where he has no control over his circumstances, and where he is the pawn of forces beyond his control. Without being about to fabricate, at least to a small degree, a story, the play is boring, and you would have no desire to read it. So I am forced to concentrate on key negative points and ignore positive points. In these director’s notes, I will privy you to the actual hard data, so that you, the reader, can make your own decision. It is my belief that the effects of online investing are negative, and, at the very least, can result in a loss of money.
Based on the data that I have found, it is very easy to support this point of view. The most important point to keep in mind is that day trading is something that has only recently come into the hands of the average investor. Now a typical person is given the power that a professional stock broker, such as an employee of Dean-Martin-Singer, would have. Does this mean that the door to limitless monetary success has been opened? In my opinion, the answer is no. I have long been a believer in the stupidity of the mankind. This is why I have so few friends. How can impulsive people control themselves in a situation where they are given infinite power? They can’t. Look no further than the IPO craze for proof.
An IPO is an Initial Public Offering. It is when a company first creates stock for itself. In and of itself, this event has no harm. Respectable companies due it all the time (in fact, UPS, a major shipping company, just recently held its IPO). However, technology stocks such as eBay have added an unfortunate twist to this mundane business happening. A buying craze for anything with “.com” in its name has thrown the system out of balance. P/E ratios (the ration of a company’s stock price to its earnings) increase dramatically. This means that a stock is overvalued. Consequentially, the stock value is susceptible to a dramatic decrease at any time. This is where the average investor can lose a significant amount of money.
Another danger area for the online investor is the lack of a central source of information that a stock broker provides. Merrill Lynch, the country’s largest full-service brokerage, provides its client with a wealth of information about potential stocks, and can allow the client to have human interaction with a broker. Also, a large firm provides other useful services such as paying interest on deposits and extending loans that an online investing site just can’t match. An investor can use these tools afforded to him to make more knowledgable buying decisions. The Internet, however, is plagued by IPO rumors and false stock stories. A stock purchaser can make stock trades so quickly that he has little time to know what he is acutally buying.
Day trading and technical stocks are too concepts that often go hand-in-hand, as I explain in my play. Those who day trade usually buy tech stocks because the value of tech stocks fluctuates so much. Technical stocks are a very risk proposition. They follow economic laws that would make absolutely no sense to the investor of yesterday. Tech companies are actually appluaded when they lose money in a quarter because that shows that they are spending sufficient capital to help their business grow, rather than turn a profit. This can be viewed as somewhat backwards. Tech stocks, in general, make NO profit, which, in turn, raises the P/E ratio. Often, these companies are dealing in a market which has yet to prove itself, such as e-commerce. Has Amazon.com sufficient proof that people are interested in buying books and other merchandise online? The likely answer is no. Yet they are willing to pursue their goals. This can be viewed as either entrepreneurial vigor or financial suicide. Either way, the online investor is in for a wild, and perhaps devastating, ride.
Contrary to popular public opinion, day trading can require a humongous initial investment. And it comes from a source few people would expect: computer equipment. Yes, the sticking point of internet trading is just that : the internet. A capable computer for rapid web browsing and financial software can cost at least $3000. Of course, to keep up with the most recent stock prices, an investor would want a fast internet connection, whichc costs at least $40 a month for cable or DSL internet access. And to get these “streaming prices” (accurate-to-the-second), an investor must subscribe to a quote service such as DBC’s eSignal, which costs $1000 annually. Day trading is not nearly as inexpensive as you would be lead to believe.
Online investing often as a darker, sinister side that most advertisements neglect to tell you about. Day trading is often an addiction for those who involve themselves in it. A person who makes $1000 or more in a day (which is not terribly rare in this technological, or “new” economy) is immediately overwhelmed with a sense of easy money. Who would not be enticed by these winnings? Not many, which is why many people, once they earn a small amount of money, continue to go back for more. And more. Eventually, before people even notice it, they have become addicted to this system. This is like any other addiction, be it gambling or alcohol. Those affected can become detached from family members and loved ones. This is a “closet addiction” of the ultimate kind. In our society, we laud those who adopting this new technology. Any new technology is the best technology. Is it any wonder then that this new addiction has received little to no attention in the press? In the summer of 1999, Mark Barton, a day trader, went crazy and killed his co-workers in Atlanta. He had lost significant money by investing online. It is easy to draw the link between these two events. Day trading is addictive and is something our society is not prepared with at this time.
You will see these themes acted out in my play. It is my sincere belief that day trading is a negative thing. Those $8.95 trades advertised on TV carry a significant hidden cost. If you are dedicated to trading stocks, the best way to do so is through a full-service broker.