The Gutman Group

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A Very Long Introduction

It’s no secret that we’ve come a long way since the dawn of man; we went from clubbing our fellow leopard-skin draped brethren over a few scraps of meat to trading Credit Default Swaps while shorting European equity markets.

Gone are the days of hanging out at your local market, trying to find someone stupid enough to trade two goats for your daughter and then another few days of finding someone to trade up your two goats for a cow. Instead, all of this is done in fractions of a second on the Internet with a click of a button or two while banking executives sit in their buildings forged out of platinum and twirl their moustaches as they laugh maniacally atop a throne made entirely out of cash.

Yes, welcome to the 21^st century.

Despite the plethora of things that have changed ranging from technology to the president’s skin color, there is one thing that didn’t change: toilet paper. Come to think of it, there’s one more thing that didn’t change: the world still revolves around money.

People will go to incredible lengths to make more money – and it shows. Stocks, bonds, businesses, corporations, jobs, real estate, Ponzi schemes, derivatives, equity funds, hedge funds and the Slap Chop were all implemented to make people money.

Every day more and more people are finding, altering and adding to methods of making more money. One place that has seen some of the greatest innovations in money-making out of any industry would without a doubt be the financial industry.

Ten years ago you would have sat down with your financial adviser and they would take an hour to inform you about your options when it comes to stocks, bonds and maybe even real estate. Today, you could hold a forty-day marathon of non-stop blabbering and you will get almost nowhere – with Credit Default Swaps, Collateralized Debt Obligations, Real Estate Investment Trusts, Exchange-Traded Funds, puts and calls and you will soon realize that people have gone to great lengths to find new ways to make more money.

Let’s take a look at some visuals to see just how much people really like to make money…

Money makes the world go round

In 2006, the measured economic output (in layman’s terms: the income) of the entire world was $47 trillion.

Sounds like a lot, right?

In case you’re having a hard time envisioning it, here is what one billion dollars looks like (those are stacks of hundred dollar bills):

And here’s what one trillion dollars looks like:

Now imagine 47 of those and that’s what the world’s income looks like! (Thanks goes out to PageTutor.com for the visuals.)

Okay, so the world makes a lot of money – it’s the world after all, with a mass of over 6 billion people and millions of greedy money-making corporations run by greedy little men to whom the phrase “too much money” simply does not imply (a.k.a. myself), but it’s the world after all! Surely there is nothing in this world that can hold more money than the entire world, right? Wrong.

In fact if you were to bet money on such an assumption, you would soon find yourself stripped naked, all of your worldly possessions taken away and your kidneys ripped out of your body in order to be harvested – thankfully you didn’t make any such bets before reading this article…right?

Welcome to the Stock Market!

Remember this place? It is the place that I so highly speak of, where you can take an initial investment large enough to buy a dining room set and make enough money to buy out all of Australia and half of Uganda. Yes, it is a wonderful place indeed.

So, just when you thought that no place could hold more money than the world, I present to you, the stock market with total holdings of $51 trillion, a whole 10% larger than the economic output of the entire world!

And just when you thought that it just can’t get any bigger, I present to you…

Meet the Bonds

These bonds may not by secret spies working for British intelligence nor do they drive Aston Martins but the people who own them certainly do. The world’s bond markets are quite hefty, with a market value of $68 trillion – 50% more than the world’s income!

And now I present to you the Bill Gates of financial vehicles…

The Evil Derivatives

If you thought $47, $51 and even $68 trillion was a lot of money, then you’re in for quite a treat.

For those of you who aren’t too familiar with derivatives, these things are basically contracts derived from or whose value is taken from other securities (such as stocks). All of those fun things that are said to have caused our latest financial catastrophe ranging from Credit Default Swaps to Collateralized Debt Obligations are just examples of derivatives.

Just by looking at their name alone you can probably deduce that these things are more complicated than Paris Hilton’s ascent to fame. So, logically speaking, if derivatives are so complicated and since the vast majority of the world consists of ignoramuses who can’t tell the difference between a cockroach and a dinosaur, you’d think that not many people would make use of derivatives, right? Well, this is exactly why I urge you not to bet your money.

As of 2006, the amount of derivatives outstanding was $473 trillion – ten times the world’s income!

Get in on the action

The belief that the more you work the richer you will get simply isn’t true anymore. The richest people in the world all have their money working for them – be it from stocks, bonds, derivatives or kidney harvesting centers.

Ten years ago you may have never heard of derivatives, ten years from now I’m sure there will be many more things to ponder about. All that is certain is that the world moves quickly, so you’re going to have to keep up with it if you want to be rich enough to afford a petting zoo full of endangered animals covered in gold and precious gems.

One thing you can and should bet on is that people will always find new ways to make more money and more than likely, many of these new ways will come right out of the financial industry – so be prepared for it!

Everyday two trillion dollars is traded on foreign exchange markets (remember that giant pile of cash I showed you earlier?), seven trillion dollars is traded on global stock markets in a single day and every minute of every hour of every week, someone, somewhere is trading their money to make more money – why aren’t you?

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