My Thoughts

Tulip Mania…. The original bubble

If you have ever watched the famous movie Wall Street and remember the main character Gordon Gekko, you probably remember hearing about the Tulip bubble. In order to fully understand this important historical story it’s necessary to understand both the flower itself and the economic environment that was taking place at the time. Let’s explore the flower first.

red purple and yellow tulip fields

There are over 150 species of tulips with over 3,000 different varieties. Tulips are not easy to breed, in fact it can take a decade for a seed to turn into a flower and that flower only lives for up to three years. Each tulip will produce only a few offspring/seeds which will again take ten years to become a Tulip flower. It is possible to make clones of each flower and reproduce a new flower in 3 years instead of ten. All of this work to produce a flower that only blossoms a few weeks out of the year between March and May. Now not only does it take time and effort to make a Tulip but once they bloom you can not move them or they will die, in fact you have to wait till the flower completely recedes into the bulb below ground before you can touch it, then only during the time between June and Autumn can the bulb be moved to be replanted. This means that there is an extremely short period for the bulbs to be sold on the open market. 

close up of tulips


The tulip bulb was first popularized by the Ottoman empire in 1718, this time is actually known as the Tulip period, tulips were cultivated and grown there and seen as a sign of nobility and privilege during a time of economic growth and prosperity. During this time the Dutch were experiencing a period of prosperity as well, one that came to be know as the Dutch Golden Age. This was a time of great importance for the Dutch people and a few major events happened that allowed the Tulip Mania to happen. First the Dutch people won a war against Spain and claimed their independence, this war also left them in control of some very important shipping ports. Second they became huge players in the shipping of goods from the east and this not only brought new products to sell but brought  new merchants and tradesmen to the area in hopes of striking it rich. There was a company formed known as the Dutch East India Company that was actually the first publicly traded company to offer shares to the public, this company was able to establish a monopoly on the Dutch trade with East India and created an extremely prosperous time for traders and shareholders, before the establishment of this company it was hard for anyone other than the ultra wealthy to partake in the business of global trade and even for them it was a very risky venture due to the potential loss of entire shipments as a result of pirates or storms. The huge success of the new trade allowed for the establishment of the Bank of Amsterdam which only served to increase economic growth with the availability of loans to start businesses or invest in others. So we now have a highly sought after flower that is extremely hard to grow and seen as a symbol of wealth coupled with a booming economy and a rising middle class eager to show of their new found wealth. Hmmmm, sounds like a recent event in America with the housing crash, but back to the story. So just how exactly did a flower become so over valued, let’s examine.

red field flowers purple

We now have an environment that is ripe for a bubble, but how did it happen and what caused it to burst? We know that the Dutch merchants began importing Tulips for sale to the growing middle class and that the Tulip became a symbol of prosperity and affluence in the Netherlands just as it had in the East, but that is not what caused the bubble. Bubbles are caused by speculation and easy access to credit, which during this time everyone had. The Dutch people seeing everyone doing so well and spending money freely did just as Americans do and assumed that good times would continue forever. Many started to speculate in stock of the public company and bought shares in hopes of selling to someone else for a profit, the same happened for the tulip. All tulips were highly sought after but some had very rare colors and patterns which were considered even more valuable, ironically we now know that this was actually due to a disease the flowers were suffering from, these flowers were so rare at the time that everyone wanted to own one and that alone drove the prices higher and higher. It reached a point where a gardener who was lucky to produce a patterned tulip could sell that one flower alone for several times the price of the whole cost of the garden itself,  but wait there’s only one problem, remember you can’t actually move the flower or it will die, which makes it worthless, so the gardener would actually sell the right to the future bulb once the flower retreated. This produced the first derivatives in the market as merchants would buy the right to the bulb now but wouldn’t gain access to it until later, they did this knowing that they could sell it for a profit later, however as the market became more and more popular that right to the bulb would trade hands multiple times before the bulb was even ready to be moved. This created a huge problem, people were no longer buying the future right to the flower because they wanted it in their garden, they were buying it in hopes of selling it to someone else at a higher price, this practice became so widespread that everyone wanted in on the action and began taking out loans to participate. At the time it didn’t seem like such a bad idea to take a loan for $25 dollars because you could just sell it for $50 and pay the bank back, unfortunately the flood of debt only caused the prices of bulbs to greatly increase and there could be multiple people holding loans on the same bulb. In fact the prices of flowers eventually exceeded the price of many homes, once again not for the flower but for the hope of making a profit. Unfortunately there is actually a limit to what even the most wealthy people are willing to pay for a flower and that is when and where a bubble is created and all we need for the bubble to POP is for people to give an indication that they are no longer willing to purchase something, then the holders of the loans rush to sell the contract and are willing to take much less just to recover their initial investment, this floods the market, which creates more supply than there is demand, which causes the price to drop even more. Once banks see this they begin to call the loans for repayment which the people are obviously not able to pay, and since the loans are not made against a tangible asset the banks are forced to go after other assets to recover their money, this puts and even further strain on the economy which is felt by the merchants selling other types of good as well. Eventually the whole Tulip market crashed and the prices dropped to a small fraction of what they were.

person holding purple tulips

We have seen this same scenario take place several times, once with real estate as people were buying homes not to live in but simply in hopes of selling them to someone else. I remember while living at the beach during the height of the housing bubble and seeing new condo developments that would have condo units sell multiple times before the building was even finished. We saw another recent example with the popularity of BITCOINS, people began purchasing them not to use as currency but as an investment or speculation. We should all remember the wise words of one of the best investors of our time,

“Be Fearful when others are greedy and greedy when others are fearful.”

Warren Buffett

Thanks for reading,


Understanding America’s National Debt.

Currently America and it’s citizens owe roughly 21.48 trillion dollars, some of this debt is actually owed to itself. How is that you may ask? Well some of our federal agencies actually operate in the black and take in more than they spend, unfortunately since other agencies operate at a loss our government will take the surplus from one agency and use it to cover the short fall of another, this is basically just intra-agency accounting and moving funds around on the books. The other debt is owed to public and private entities. Other foreign governments loan America money and in return get Treasury bonds, the same goes for individual investors/citizens. Currently individual investors as well as large financial institutions such as banks, mutual funds, insurance companies, as well as large public companies hold the majority of the debt. How did the national debt originate?

person signing contract paper

The United States actually began incurring debt before it became a nation, leaders of the colonies borrowed money from France and the Netherlands to fund the Revolutionary War and their independence from Great Britain. The Continental Congress, which would come to be known as the  U.S. Congress, did not have the power to tax citizens so the debt continued to grow. By 1790, it was over $75 million, which represented a 30 percent debt-to-GDP ratio. When Andrew Jackson took office in 1828, the national debt was a massive $58 million,  Jackson called the debt a “national curse.” By selling off federally owned land in the West, Jackson managed to pay off all the national debt, however within a year  an economic recession led the government to start borrowing again and our country has never been debt free since, but how did we get over 21 trillion dollars in debt?

full frame shot of eye


One way to measure debt is to compare it to (GDP) Gross Domestic Product, GDP is the total revenue created within a country, historically America has hovered around the 50% debt to GDP. Only Presidents Andrew Jackson, Martin Van Buren, John Tyler, and Franklin Pierce left office with the debt at 1% or less of GDP.  In percentage terms, Roosevelt increased the national debt more than any other president. He added $236 billion, increasing the debt by over 1,000%, this was largely due to his instituting large government aid programs during tough economic times. Here is a quick list of the recent presidents during my lifetime and the debt that was added during their presidential terms.

man hat usa portrait

Ronald Reagan – $1.8 trillion – 49% of GDP

George H Bush – $1.58 trillion – 62% of GDP

Bill Clinton – $1.396 trillion – 54%  (only recent president to not run country at a budget deficit, left office with a $36 billion surplus)

George W Bush – $5.849 trillion – 77%. of GDP

Barack Obama – $8.335 trillion – 105% of GDP (Added more debt than any president ever)

man person suit united states of america

Donald Trump – Since he is still President we can’t actually say what the debt will be from his presidency. We do know that Trump promised to eliminate the debt in 8 years and actually dropped the national debt by over a $100 billion but since then it has increased. Trump has made some massive tax cuts which has stimulated the economy, this should lower the debt to GDP as a percentage but historically lowering taxes raises federal debt due to less funds coming in to operate the government on.

silhouette of statue near trump building at daytime

So what is the answer to eliminating the National Debt? Well first we need to be able to operate the government without going into debt, the annual cost of running the government is around $4.147 trillion , of which we run close to $700 billion in the red, otherwise known as a budget deficit, meaning we spend $700 billion more per year than we take in and that number keeps rising each year. So what do we spend all that money on, check out my blog post “What does it cost to be the Boss” to get an idea of what America spends your tax dollars on. I say your tax dollars, because the only way the Government has to bring in money to operate is through taxing us it’s citizens. Now taxes aren’t a bad thing as long as we get something out of them, think military and police protection, sewers, highways, public schools, etc…. but the truth is that if you want to get out of debt you have to spend less than you bring in. Just like us as individuals have to make tough decisions everyday about how we spend our money, the officials we elect to represent us need to make some tough decisions on how they spend our money. Tough decisions include what you are willing to live without and what you are willing to sacrifice in the present to be better off in the future. Imagine if America got on the Financial Independence bandwagon and learned to postpone instant gratification…….. 

Thanks for reading, if you liked the article let me know.





Choosing a career

Is college worth the money and time? This is one of the biggest questions I get asked. I get this from young kids in high school to adults looking to move up in their career. I believe that the best investment that anyone can make is in themselves. Deciding to invest in an education and then spending years pursuing that education just to receive a degree is a huge commitment and shows dedication to setting a goal and actually following through on that goal. While certain fields such a medicine and law obviously require advanced degrees as a barrier to entry many other high paying careers do not. That being said there are many ways to invest in oneself other than traditional college. Since experience trumps all I am a big believer in specialized knowledge and the worst thing about college is how broad the study matter is. The people that earn the most money are the ones with a very specialized skill or knowledge. An example would be a brain surgeon compared to a family doctor, the surgeon is paid a great deal more money based off of his ability to be highly skilled and focused on one thing and be an expert in his field. I think that in today’s world where information is at our fingertips with a smartphone in almost everyone’s pocket that a college degree is no longer worth what it was to our parents’ generation. I would recommend going to college if you or your parents are able to pay for it but not at the expense of taking out student loans. I’ve heard it said that it takes 10,000 hours of practice to become a professional, so if you devoted 8 hours a day to practicing your craft it would take 1,250 days or 4.5 years to become great at it, of course if you work 12 hour days, you cut the learning curve drastically. The best form of education is hands on experience coupled with a passion for something. Find what you love and study it until you are an expert at it.

adult business career clean

Choosing the right career in life is one of the biggest decisions people face. I think that the best thing to do is work in as many roles as you can while you are young to get a feel for what you really like. Once you find your passion it is still good to move around within that industry to get different perspectives on how to operate and to build your network. Finding a good company and staying with them for life is a way of the past for both employees and employers. However finding a good mentor that can help you pinpoint what would be a good career fit is invaluable. I started my career in small owner operated companies and loved every minute of it. The experience and insight I received working side by side with the owner was invaluable especially at such a young age. However the one thing I learned was that many of these entrepreneurs were great at some things but not at building a business, in actuality many of them barely made enough money to keep the doors open. This can be very problematic as you grow and begin to work your way up the chain and realize that the glass ceiling is much lower than you originally realized. As I’ve advanced in my career I am very thankful for the lessons I learned from those independent operators who relied on growing sales and controlling cost to not only pay the business’s bills but to feed and support their families.

city people street walking

In contrast working at a large fortune 500 company or corporate America offers a host of benefits as well as some downfalls. One of the best things is the health benefits and the unlimited advancement potential. The company I am with currently offers me a great quality of life as well as many other perks such as a company phone, laptop computer, and an expense card for company related expenses. As I advance the pay and the perks get better with things such as a company car. At the age that I am now I would never leave corporate America to return to an independent owner operated company due to the lack of funds they have. However even with all the great corporate jobs in this country owning a business is still the number one way to gain wealth in America. America was founded on individual freedom for its citizens and that includes the ability to open any type of business we desire. America’s legal system is another part of what makes this country so great. The ability to own a name, logo, land, etc… Is what gives us all the opportunity to prosper? I recommend finding a good job that you can grow with and work it while you are growing your own business. While you are working for someone else remember that you are a product and you need to market yourself to your employer and to other firms that are in the market for people with your skills. How you dress, walk, talk, and act are all part of your personal brand and help others decide how much they perceive you to be worth. It is always good to be known as the person that gets things done. Not only as one who gets all your task done before the deadline but also as the person that helps others get their jobs done and demonstrates that they have a working knowledge of how not only other people’s positions operate but how other departments operate as well.


Mastering Fear

Humans are born with only one fear and that is the fear of falling. However as we grow up we are taught to fear many things. Some are rational fears from a painful experience such as touching a hot stove teaches us to fear fire due to the pain of being burned. Luckily our mind is able to link up that fire or something hot will hurt us and we know to avoid touching a similar item in the future. Other fears we develop are irrational fears like fear of public speaking or fear of failure. Most of these fears stem from our need to be liked and accepted by others. In its most basic form fear is a very helpful, the sense of fear releases the fight or flight response which releases adrenaline through our bodies preparing us to fight or flee from danger. So our sense of fear should be seen as a positive emotion since it was designed to help us preserve life. Unfortunately in modern day most fears are either irrational or from underlying stresses that we can’t kill or flee from. These types of fears often result in long term stress which can be very harmful if not dealt with. These fears usually manifest themselves in a couple ways, one way is through procrastination with is basically us running away from the fear by refusing to take it head on and choosing to not deal with it, the other way is also by avoidance by which we turn to another activity to not have to deal with it. Many of these activities are destructive such as drugs, alcohol, and anger. in my own life I have learned how to deal with these fears and stresses by doing what we were designed to do, face them and beat them into submission. If you have a big deadline looming then instead of wasting time worrying about it take action and start knocking it out, Action always resolves fear.


If you are worried about your future then take massive action and focus on doing what needs to be done to ensure your future is in your control. The feeling of being not in control causes many people to fear the future so make sure you are in control of your life at all times. The more immediate action you take towards something the more you will feel in control. Once you handle the immediate stresses that are causing you to fear something then the final step is to mentally design the type of life you want to live and decide on what types of qualities you would have to have to achieve that life. Once you have done this begin to map out a path to this life by setting short and long term goals that will move you closer to the ultimate life you want. Once you have an action plan and start to make progress you will begin to feel more in control of your life. Your current job will feel like just a means to an end, this means your boss is no longer purely in control but now you are working your master plan and he is just a part of that plan, he is basically working for you now.

man in brown long sleeved button up shirt standing while using gray laptop computer on brown wooden table beside woman in gray long sleeved shirt sitting

This is where the pursuit of F.I.R.E becomes more than just a financial game changer but a complete life changer. There are several milestones in the path to Financial Independence paying off all debts, saving up your first six figures, and hitting lean FIRE, hitting each milestone not only gives us a feeling of accomplishment and increases the momentum towards the next milestone, they also require us to have clear defined goals, when you are working towards those goals you are no longer just an employee working for your boss, you are the boss of your FIRE plan. Just as money compounds, so does hard work, when you get out of debt, you have more money to save each month, when you have a higher savings rate and lower expenses, you are able to get to six figures quicker, when you get to six figures your money begins to grow at a much faster rate, as your money starts to grow and you get to the FU stage, you become more confident in your plan, which helps you work even harder towards it;s attainment. Eventually as your Financial Independence get’s closer to becoming a reality, most of the fears and worries you originally had about money and your financial future seem to melt away, they do this because you set a goal, made a plan to achieve it, and took action.

I hope this advice helps not only eliminate fears but also serves as motivation to begin living the life you dreamed about before you chose to settle for a life of ease and comfort. Thanks for taking the time to read this article and I hope it helps.


The reality of working in the food service industry. Why I love it and why I tell kids to stay away from it.

Nearly 50% of the United States population has worked in the food industry at some point in their life and recent reports show that 1 out of every ten people on average currently works in the food service industry. This shouldn’t come as to much of a surprise though as it’s a well known fact that humans need food to survive. In fact Americans spend around $800 billion a year dining out, at the one million plus locations across the country. Who are these people that work hard day and night to ensure an endless supply of tasty morsels for everyone? The majority tend to be women and minorities but in higher end establishments the kitchen staff are predominately white males, white males also dominate the management jobs, making up the majority of food service managers in America. While salaries vary depending on geographical location and the type of establishment, the median salary for food servers (waiter or waitress) is $9.81 or a little more than $20,000 annually. The average salary for kitchen staff varies but here are some estimates.

Dishwaser –  $8.89 per hour – $18,490 per year

Prep-Cook – $9.77 per hour – $20,320 per year

LIne Cook –  $11.12 per hour – $23,130 per year

Chef –  $21.57 per hour – $44,870 per year

Restaurant Manager – $50,000

man making pizza dough


Obviously this is just the average so some earn less and some earn significantly more. I personally know Chefs and managers that earn over six figures, especially ones that run large scale operations or multi-unit operations. Many of these high paying jobs offer great bonus plans based off of controlling operating cost, sometimes referred to as Prime cost, prime cost are usually considered food, alcohol, and labor cost, they are called Prime cost because they are the largest non-fixed cost and will fluctuate depending on how busy the establishment is. If you as a manager or Chef are able to control your Prime cost there usually is and should be a nice monetary incentive attached,

So what does the normal day of a restaurant employee consist off? Well for a server there is dealing with the general public to start with, but as if that isn’t hard enough, add to it the fact that they are either drunk, or in a hurry to eat. The server is responsible for setting the table, taking the orders, relay orders to the kitchen and the bar staff, delivering food and refilling beverages, busing tables, rolling silverware, and typically cleaning the front of the establishment, and all of this in hopes that the guest will leave a large enough tip to help offset the $2.13 they earn per hour. Most servers have to work nights and weekends as those are the prime times to earn the best tips, so when everyone else is getting off work and preparing to go enjoy themselves, the servers are getting ready to serve them.

woman wearing brown apron standing near table

The average day of a cook can vary widely depending on the type of establishment they work at. Usually their day will start with food prep, food prep consist of cutting the meats and vegetables, making sauces, and anything they will need to have ready for service that night. Just like the servers, cooks usually work nights and weekends as those are the busiest times and will typically pay the highest wages. During the nights there are also busy periods because most of the public eat dinner within a relatively small time frame, so the cooks whole day is a lead up to an extremely difficult and hectic 3-4 hour service where they will prepare a hundred or more dishes in that time. Once the service is over the cook will put away all of his items and clean and sanitize his work area, this includes sweeping and moping. In contrast to the server who has a monetary incentive to work hard and serve as many people as possible because the more people served equals more tips received, the cook has zero incentive to produce a better product or serve more people because regardless of their increased effort, their compensation will not change.

Both the server and kitchen staff will spend 8-12+ hours a day on their feet with almost zero down time, both will receive cuts and burns, with the potential for some serious injuries do to the simple fact of the dangerous environment they work in filled with hot pans, sharp knives, and slippery floors. What makes this so bad is very few can afford health insurance and most if any can afford to miss work for more than a day.

brown and white bear plush toy

I realize that I have made the industry I love sound horrible and nothing like what you see on the food network. Well reality check, becoming a celebrity chef is about as common as becoming a professional athlete. While I am grateful for the new found popularity of chefs, who seem to be hawking every product imaginable, from pots and pans, to cook books and clothing, I am also worried at the influx of people to the industry who think since they love cooking at home and hate being in an office all day, that they should go to culinary school and be a chef. The same goes for the young kid who thinks he will go to culinary school and after graduating, will quickly either own his own restaurant or have a TV show. Sorry to burst anyone’s bubble but the reality is a culinary degree is no guarantee of success, in fact some of the most successful chefs and managers have no degrees at all. Even with a degree, anyone entering the industry should expect years of hard labor for not much more than minimum wage, In fact most employees of the fine dining restaurants can’t afford to actually eat there.

chef preparing vegetable dish on tree slab

However there are some great things about this industry for those that are willing to put in the time and effort to rise to the top. First it is fun and some of my best memories are of being a line cook and hanging out with my coworkers after a long shift, there is a certain bond that is built among food service staff because since they work different hours than the general public, it almost becomes a sort of counter culture. Secondly you are constantly surrounded by great food and beverages that you of course have to taste, most employees eat for free at work, which can be a huge cost savings, I know I used to eat 2-3 meals a day at work. One of the best advantages is the fact that once you work in the industry and deal with a demanding public, some of which will complain no matter what you do, all while dealing with the pressure of working in an extremely fast paced and hot environment, everything else will seem easy. I personally think everyone should work in food service at some point in their life, if every other industry was held up to the standards and expectations of food service the world would be a much more efficient and happier place. Last but not least, once you learn the core foundations of cooking or serving, you can pretty much get a job anywhere in the world just by walking in and asking for employment.

Personally the industry has been good to me and I have been able to raise and support 4 kids and a wife from working in it. I have worked at some of the most beautiful settings in multiple states and meet some of the most amazing people. My kids have come to my work before and thought it was the best job in the world because I got free food for them, some of the jobs I would bring them to see the beautiful marinas, golf courses, and stadiums, they loved it, of course they didn’t see me slaving away in a hot kitchen for the other 5 days a week. So when my kids talk of getting into the food service industry I always try to steer them away, my oldest daughter has worked in fast food, at a local independent restaurant, and at a college as a concierge attendant but I make sure to tell her to study hard in school so she can be the one being served and not the one doing the serving.

Thanks for reading,



The Power of Habits

As humans we are all creatures of habit and tend to continue to do what we are most comfortable with. This can be extremely detrimental to our success because becoming successful requires us to step out of our comfort zones and face unsure circumstances. Luckily we can retrain ourselves to see fearful or uncomfortable situations as positive experiences similar to the way we see the pain of a hard set of squats as a necessary evil for muscle growth. The way we choose to perceive things makes all the difference in how we live our lives. Some people see dieting as an awful experience and focus on their current state of discomfort from being hungry, however others choose to focus on the long term benefits of weight loss and improved health. The contrast between these two perceptions of the same experience is what causes some to never seem to be able to lose weight while others are able easily shed excess weight. The same is true for working out, some hate going to the gym because they are focused on the immediate discomfort while others love it due to the results they receive. The great thing is that we can all decide on how we choose to perceive every experience we have.

action adult athlete blur

Winning in life and at the game of FIRE isn’t only about accumulating a ton of money, it’s about building a life that you enjoy living and not waiting till you are to old to enjoy the benefits of financial independence. It takes 30 days of doing something continuously to embed and new habit in us as humans, However often times with so many external obligations and stresses from work to parenting it is hard to change our schedules unless we purposefully make time to create the new habit. This is where proper nutrition and supplementation play a key role in allowing us to create the life and mental state of mind to ensure that we are successful. We should all make sure that we are consuming enough calories through healthy foods such as lean meats, fruit, and vegetables.  If our incomes are our major path to savings and investing, then our ability to work is paramount, your health is your wealth. Without healthy bodies, we can’t earn the money we need to invest. Without a healthy body we can’t get out and enjoy the world God gave us. If you are looking forward to a nice long retirement, then it is important that you stay as healthy as possible for as long as possible, so that you have plenty of time to enjoy your hard earned money. Any exercise is better than no exercise, but the best type of exercise for health and time are HIIT and weight training. “High Intensity Interval Training” involves short but intense burst of running or some type of cardiovascular exercise, this type of exercising offers better cardio and pulmonary benefits than traditional slow paced running and burns more calories, however the best part is that it takes less than half the time. Weight training or resistance training involves lifting heavy weights to cause our muscles to grow in response to the added weight. Adding muscle to our frames not only burns and displaces fat but also having more muscle burns more fat during normal activities. The best thing about both HIIT and weight training is that you can accomplish both in under an hour per workout and get great results practicing them 4 times a week, that’s only 4 hours a week for better health!!!! In your pursuit of FIRE don’t neglect your body that you have to live in during early retirement and old age. Start now and build some healthy habits that will last a life time and change the way you feel and move during retirement.

Thanks for reading,


Stocks, Stocks, Stocks

In this article we will explore a brief history of the stock market, from it’s origins to it’s current place as America’s number one wealth creator. The East India Company is recognized as the world’s first publicly traded company. The East Indies were a major hub of riches and trade opportunities, merchants sailed there to trade and purchase exotic items that they could return home to sell. Unfortunately, few of these voyages ever made it home. What would usually happen is a merchant would have a great idea to travel to a far off land and purchase exotic items, however since he didn’t have enough money to do it alone, he would seek financing from wealthy individuals who sought to earn a return on their investment. If the ship sank or was taken by pirates the captain might lose his life and the financier would lose his total investment. The wealthy soon saw that it was better to spread their investments out over multiple ships to prevent losing everything, this however was extremely expensive and prevented everyone except the ultra wealthy from entering this business. As a result, a unique corporation was formed in 1600 called “Governor and Company of Merchants of London trading with the East Indies”. This was the famous East India Company and it was the first company to use a limited liability formula. Investors realized that putting all their “eggs into one basket” was not a smart way to approach investment in East Indies trading. This company sold shares in each of it’s ships to many people looking to spread out their risk and earn a profit. The formula proved to be very successful. Within a decade, similar charters had been granted to other businesses throughout England, France, Belgium, and the Netherlands. In 1602, the Dutch East India Company officially became the world’s first publicly traded company when it released shares of the company on the Amsterdam Stock Exchange. Stocks and bonds were issued to investors and each investor was entitled to a fixed percentage of the East India Company’s profits. Unfortunately an Indian uprising ended this company. London actually founded a stock exchange in 1801 but publicly traded companies weren’t legal until 1825 and by 1817 America founded what is still to this day the center of the world’s financial market.

sea landscape water ocean

The NYSE or the New York Stock Exchange founded in 1817 is today the biggest stock exchange in the world, however Contrary to what some people think, the NYSE wasn’t the first stock exchange in the United States. The Philadelphia Stock Exchange was actually the first in America but the NYSE soon became the most powerful stock exchange in the country due to the lack of any type of domestic competition and its positioning at the center of U.S. trade and economics in New York. The NYSE is presently located at 11 Wall Street in 1865.

architecture art clouds landmark

The NYSE was founded 17 May 1792 when 24 stockbrokers signed the Buttonwood Agreement on Wall Street in New York City. Famously, they met beneath a Buttonwood tree and formed a centralized exchange for the rapidly growing securities market in the United States. The agreement eliminated the need for auctioneers who were used frequently for wheat, tobacco and other commodities and set a commission rate. The organisation made the Tontine Coffee House its headquarters and focused on government bonds. Twenty-five years later, on  March 1817, the organisation officially became the New York Stock & Exchange Board, later simplified to the New York Stock Exchange. Throughout the early 1800s, the NYSE expanded beyond government bonds and bank stocks. Advances in telegraphic communication allowed buying and selling through the telegraph. Membership increased and became more exclusive. By the start of the Civil War, securities, commodities and gold, discovered in California, greatly increased participation in the exchange. When the stock market crashed on October 23 1929, causing an 89% drop in share prices, the federal government decided it was time to step in and regulate the stock market. The NYSE subsequently registered with the United States Securities and Exchange Commission. The Securities Act of 1933 required public corporations to register their stock sales and distribution and make regular financial disclosures. The Securities Exchange Act of 1934 created the SEC to regulate exchanges, brokers, and over-the-counter markets, as well as to monitor the required financial disclosures. In 1971, NASDAQ National Association of Securities Dealers, founded its own exchange, NASDAQ, which specialized in electronic trading and eventually became a U.S.-based rival to the NYSE. Today there are a little less than 4,000 publicly traded companies for investors to purchase share in. The stock market to this day still functions much the same way as the original East India company designed it’s business plan. The stock market allows companies to quickly raise money for investments and expansion, while at the same time allows the individual investor to participate in the profit of multiple companies to spread their risk across multiple ventures.

group of people in a meeting

What exactly is a stock? A stock is a small piece of a publicly traded company, so when you purchase a stock you own a small piece of the company and are entitled to a piece of the profit they earn. In the old days investors would try to buy stocks of individual companies and diversify by spreading their purchases across several different sectors of the economy such as, energy, consumer goods, manufacturing, commodities, etc… then came along the mutual fund, which was a single fund, managed by a professional who charged a fee for his management services, these mutual funds provided instant diversification through spreading out their investing across different sectors as well as different investment vehicles. With all investments the best way to track their returns are not just of actual returns but their returns compared to the average of the market, which is basically a function of the national or international economy. If your investment did worse than the average of the market or of the average return of a particular segment then it was considered a dud, if it did better it was considered a good fund and the manager would be able to attract more investors and most likely justify a larger fee, the problem is that few managers beat the average market return and the ones that do usually cancel out the higher returns with the higher fees . Enter the Index Fund……. If you are even slightly involved in the F.I.R.E community, you are probably very familiar with what an Index Fund is, if you are new to the F.I.R.E community, an Index Fund is a fund that tracks a particular index or sector of the market. Two of the more popular within our community are the total stock market index, which tracks all the publicly traded companies and a fortune 500 index fund, which tracks the 500 largest companies based on revenue and market share. The investor gets two great things, instant diversification and a guarantee to get the average return of the market. This is why index funds have become so popular, they offer a great way to invest without requiring a fund manager or constant portfolio maintenance. The great thing about index funds is that they allow the market to do what it is supposed to do. self-cleanse itself by allowing the stronger companies to take market share from the weaker companies, if you owned individual shares, you run the risk of losing everything if the company goes out of business, however in an index fund the losing company is simply replaced by another company. This is great because the economy doesn’t stop demanding goods and services just because a company goes out of business and the employees of the shuttered company will simply find jobs at companies that can afford to pay them. People are what run the economy, they create the demand for good and services and also earn wages to produce them. All over the country people meet in rooms together to devise ways to increase revenues, raise profits, and expand the business, all of this is to provide returns to you the share holder. With an index fund you own a small piece of every company in that index, so essentially you have thousands of very smart men and women working hard to increase your net worth.

Thanks for taking the time to read this and I you liked it.