Appendix: Additional Background on Stocks and Bonds
In Chapter 4 (on stocks) and Chapter 5 (on bonds), we purposely left out some of the more technical details in order to not interrupt the flow of the chapters. Not everyone wants so much information, and we wanted to focus primarily on the evolving macroeconomic story that will lead us to the coming Aftershock. After all, it is pretty easy these days to look up definitions online or in conventional investment books, but harder to find information about what is really going on, from our non–conventional point of view. We saw no point in giving you yet one more mainstream investment guide.
So here are some of those more technical details we left out of the chapters. This is hardly an exhaustive guide, but it will give you a bit more background on stocks and bonds if you have an interest. For more information than the brief explanations here, we recommend you visit some educational web sites, such as www.investopedia.com and others.
Basically, when you buy a stock, you are making a bet that the future earnings of a company will grow. The company initially sells stock certificates in order to raise capital, and the stockholders then own a part of the company. After the initial offering, company stocks can then be sold and bought on the stock market in a giant trading game, where those who want to bet on more future growth are buyers and those who are done with their bet (at least for the moment) are sellers. Like any investment, ...