Average Directional Index - ADX

Finance a la shmoop. who invest in stocks? and that's not like horton

hearing who . the answer everyone. almost everyone. fancy-pants

corporate CEOs, yoga teachers, schoolteachers ,teenagers who mowed the [kid sits in a big chair and smiles]

lawn for a summer and are already dreaming of owning a home someday.

yep well the fancy-pants corporate CEOs can likely put more money into stocks, but

for most normal people even a hundred shares of whatever.com that starts at

12 bucks and compounds at 10 percent for 20 years ends up being worth a

meaningful sum. yeah like that. eight grand and change. it's kind of cool. so you

can buy stocks. it's not hard it won't hurt. much. yeah. stick good ones in water.

well logistics are simple save a grand or three go down to your local Schwab

store or log into fidelity .com or a host of others, each raise a good one. set

up an account and then just click to buy whatever stocks do you think you want to

own. only you'd then just check your progress or lack thereof by going to

Google Finance Yahoo Finance e-trade and whoever else provides legit stock price

info for the masses. that's how most of America does it, and believe it or not [stock prices example shown]

most of America actually owns stocks. from the whitest white shirted CEO to the

bluest of blue collar workers. for many union workers stocks represent almost

all of their net savings whether they realize it or not, and their stock

ownership has produced some really perverse outcomes. take profit Co vastly

over staffed. it had an awesome union negotiator who got the corporation's

weak-kneed CEO to hire twice as many workers as the company actually needed.

that over employment scenario was great for the fatten happy employees who would

otherwise be out of work, but it was bad for the company that now had to find the

financial resources to cut double the number of paychecks. as a result company

earned 50 cents a share instead of the dollar they would have earned if they

had right-sized the labor force. but typical union worker in the

factory had essentially all of her wealth tied up in this company. well as

part of her pension plan she had been forced to buy the company's stock. about

five thousand dollars worth of stock every year for decades. well the company

moved on and grind it away and did reasonably ,well she suddenly found

herself nearing retirement with a hundred thousand shares in the company [woman nears finish line with a banner called "retirement" above it]

whose stock was trading at five bucks a share or about ten times earnings. right

in time and $5 right? well. that's half a million dollars of savings

fully invested in one stock. our own company .lots of risk owning just one

stock see our video on diversity if you want to argue. but all that money was

invested in a stock that pretty much everyone thinks is undervalued and

underappreciated by Wall Street so it trades at a very low multiple of

earnings .that's at ten times things. well why only ten times? because the CEO was a

pushover. well lunatics ran the asylum and now the

lunatics are suffering under a very low stock price. and many need cash from

sales of that stock for retirement. you know winnebago home buying and high

stakes antiquing and golf and stuff. so along comes a new CEO. Tuffy MacTuff who

wants to fire two-thirds of the union workers and close right-size the company

deploying robots at the same time. well if Tuffy has his way the company will

earn $1 a share this year unlikely $2 a share in two years, you know since he

fixed the bad low profit margin structure of the company by getting rid

of all those employees .Wall Street he knows will love this and they'll bid up [chart showing stock prices rise]

the stock. so strangely but logically Peggy in accounting cheers when she is

actually fired by Tuffy. why? well all her wealth a hundred thousand shares of

stock she owned has now been bid up big-time shares go from trading at ten

times earnings of 50 cents to trading at 20 times earnings of the projected $2 a

share their going to earn in a couple of years or $40 a share and it's a huge

wealth swing. she went from looking at retiring

in Prius style on a half a million bucks to shopping for a hot new 23 year old pool

boy named Bjorn with her 4 million dollars in stock wealth. and it can be

the same story for Martha the tennis instructor or Barry, the pastry chef or

Samantha the bed pan maker. to move those things. well their stories might not

follow the same trajectory but as long as you own shares of a stock you have

the potential to reap major rewards and suffer major losses. you know so that [people of different occupations line up]

you've to have a chance to retire in an early age from bed pan making yeah. we

want to do that.