Re: Extropian Investing questions

James Rogers (
Tue, 16 Sep 1997 22:55:47 -0700

At 12:42 PM 9/15/97 -0700, Ray Peck wrote:
>Paul Hughes writes:
>>I heard in passing recently, that you can now buy and trade stocks,
>>bonds, t-bills, and gold WITHOUT A MIDDLEMAN. To me this would be
>>absolutely ideal!
>You can buy t-bills directly from the Treasury department. The only way
>I know of to buy stocks without a broker is with a Super-DRIP. A number
>of campanies have set up these programs so that you can buy stock
>directly from the company.
>I believe that the American Association of Independant Investors (I
>*think* that's the name) can point you in the right direction.

I looked into investing directly not too long ago.

In general, anyone with a clean background can get the licenses necessary to
trade directly. *However*, the SEC will not give you the licenses unless
you can
essentially guarantee the SEC that you (or your group) can attract a
significant amount investment capital. The
exact amount is fuzzy, but I am told that it is generally in the $10
million range.

Therefore, it would theoretically be possible for several modestly wealthy
individuals to pool enough investment
capital to convince the SEC to let them trade as equals with the brokerage
firms under some arbitrary nomer.

>>Also, is there a way (even in the works) of buying and selling in very
>>small chunks? In other words, wouldn't it make more sense if the
>>economy wuld allow invesment in increments of penny's? For example, I
>>want to invest $2.36 in Microsoft. But, as I understand things, you
>>have to pay at least in blocks of $140 (the price its currently
>>selling at) or not at all. This seems to be a very inefficent and
>>non-fluid restriction and one that favors the rich investor over the
>>poor one.
>There is no way that I know of to buy sub-shares.

Merrill-Lynch used to let you buy sub-shares (in units of 1/10000 sh.) a
long time back, but they
ended the program several years ago. Probably wasn't profitable for them.

>The phenomenon you mention is exactly why stocks tend to rise after they
>split: the split causes greater liquidity.

My personal opinion is that the sudden growth in perceived value is
partially due to the fact that
the cheaper price creates an illusion of "a good deal". Similar to the
"$19.95" vs. "$20" phenomenon in stores.
The small surge in demand for the "good deal" drives real value up.

Also, some investors, especially amateurs, confuse "stock price" with
"stock value". Shares are infinitely divisible and the only implicit value
they have is with respect to the total shares currently issued.

-James Rogers