My Stock Winners

The Weekend Edition: Rich Families Getting Richer

The numbers of millionaire households globally grew by 14% in 2006 from 2005 and now control a third of the estimated $100 trillion in wealth, a new study by Boston Consulting Group released. These 9.6 million families, comprising 0.7% of world’s households, now control some $33.2 trillion, the BCG study found. About half are located in the United States and Canada, a quarter in Europe and a fifth in the Asia Pacific region. The study, seventh in a series, found that assets held by non-wealthy households (defined as those with less than $100,000 in financial assets) declined slightly from 2001 to 2006. Yet assets held by households with more than $100,000 climbed from $51.4 trillion to $84.5 trillion during the same period.

The study attributed wealth gains mainly to two factors: increased savings and market gains for stocks, bonds and cash, reflecting wealth managers’ long term view that market investments are a key factor in building wealth. The study found that overall global wealth grew 7.5% in 2006 to nearly $100 trillion, the fifth consecutive year of expanding wealth. The study is the latest to quantify a continued widening of the global gap between rich and poor, with the rich getting richer by saving and investing more.

How Successful Traders Think
When Dr. Brett Steenbarger talks with traders, he can often sense within the first few minutes of conversation whether the trader is successful and talented or not. What hits him is identifying, consciously, how he was arrives at that assessment. Here’s a parting thought from Brett Steenbarger: “The really good traders tend to have differentiated market views. Their thinking is of a higher order of complexity. So, for example, they may be bullish on certain themes, bearish on others. They like some stock market sectors, avoid others. They see in range bound terms sometimes, trending on other occasions. The really good traders see a large playing field. If they see a weak dollar, they think about how that affects bonds, metals, energy, and international returns. If they see a breakout from a multiday range, they see a swing move in the making, not just an opportunity to make a few ticks. They see how markets are interconnected. They see how the morning trade relates to the overnight range, and how today’s trade is connected to what we did yesterday.
And the less successful traders? They’re bullish or they’re bearish. That’s it. They think in simple terms of causation: We’re having a housing slump; that means we’ll have a bear market. We’re making new highs; that means we should buy because we’re in an uptrend. The news is good, so we’ll buy. The news is bad, so we should sell. No complexity. Sadly, we see much of that kind of thinking in the financial media. Jean Piaget, a developmental biologist, emphasized that cognitive development occurs through a process of assimilation (taking in new information) and accomodation (integrating that new information with what we already know). Over time, that enables us to develop increasingly complex (and accurate) models of the world. I strongly suspect that process is at work in the development of successful traders.
We often hear advice to the effect that traders should keep things simple. Complexity for its own sake is not helpful in the least. Still, when I talk with successful traders, I am impressed by the relativity of their views: they look at how this is related to that and how they can profit from the relationship. It may be a simple relationship, but it’s not simplistic. The difference is important.”

What to invest?
Short Amazon (AMZN)
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