Not so abstruse anymore, is it?

Well, if you are looking for an article that helps you to understand as in how to make huge sums of profit in a short period in the colossal oceans of share market, you are in the wrong place. This article does not tell you how to make profits or where to invest but on contrary it breaks down the fact of what the secondary market is and how it works.

Lately, it has been a trend to invest in the secondary market. Everyone invests their money hoping for huge returns believing in what their brokers have to say rather than actually getting to know the true colors of their choices by themselves. Simply put, those who does not have the least bit of knowledge about the Companies in the market, trades with its shares. So, what is the big deal? I’ll tell you what the big deal is… Most of the investors are fickle minded. They can be easily freaked out.

I’ll give you an example. Let us imagine a company that is progressing at a good pace. It makes huge sums of profit every year and its EPS increases on a constant phase. This company has been in existence for almost a century. It has a well established board of members and key personnel. Now, let us say the CEO of the company decides to leave his job. Media, as we know now has hot topic to discuss on. They say the future of the company was clinging on to that CEO as it showed considerable amount of growth when he was in office and his decision to leave the company leads it no where and that the investors are in grave danger. This is more than enough to drive that bunch of fickle minded investors crazy.

First, they don’t know the market. Second, they don’t have any solid reasons for having invested in that company. So, what do they do now? They start selling. Since more are into selling the stock and no. of people ready to buy it keeps falling, the price falls. At times, even crashes. A simple Supply – Demand theory. On contrary who knew about the company, who did their research and those who have solid reasons for their investments does not freak out and that is because they know that the company is going to do well irrespective of who left the company. Actually, they wait for situations like these to buy huge sums of stock at a cheaper rate.

This is how the secondary market works. It is mostly driven by the fickle minded investors. So, when you invest next time, know about your investment ’cause you don’t want to be a part of that fickle minded mob.

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Only reason for its very existence being the parallel economy that is mainly created by drug traffickers, embezzlers, corrupt politicians, mobsters, terrorists and even con artists. Well, the very process of money laundering can be understood by its name. The huge sums of unaccounted money which can attract law enforcement easily is laundered and converted into clean money by a series of steps. Drug traffickers seem to be in serious need for good money laundering systems as they mostly deal only in cash and also because it is quite heavy and here, I mean the value. For instance, 1 kilo of cocaine can be sold up to $30,000.

It is a crucial step in the success of drug trafficking and many other crimes including those white collar crimes and there are also countless organizations trying to get a hold on the problem. The basic money laundering process involves 3 steps.

1. Placement – this is the stage where the launderer inserts dirty money into the financial institutions. It is the most riskiest stage as large amounts of conspicuous cash can easily attract the attention of the government.

2. Layering – it is where the dirty money is sent through various transactions thus making it difficult to follow.

3. Integration – at this stage, the money re-enters the mainstream economy in legitimate looking form – it appears to have come from a legal transaction.

Money laundering is a complex process and it is complex by design, by necessity. So mostly, people with a lot of dirty money hire financial experts to handle the laundering process for them. In 1996, Harvard educated Economist, Franklin Jurado went to prison for cleaning $36 million for Colombial drug lord Jose Santacruz Londono.

The above stated instance is one of many case histories that we have. There are lots of money laundering techniques that authorities know about and plausibly countless others waiting to be uncovered.

Some of the popular ones are as follows:

1. Black market Colombian Peso exchange
2. Structuring Deposits
3. Offshore Banks
4. Shell Companies.

Mostly money laundering schemes are a combination of these methods, although the black market PESO Exchange is more of a one stop shopping system, where the peso broker takes care of it all.

Depending on a census, criminals between $500 billion to $1 trillion dollars every year. Thus, it further encourages the criminals to continue with their activities as the criminal activity actually pays off. It also has a huge brunt when it comes to developing countries. Some impacts are however local and mostly relates to tax evasion at smaller scales compared to those that we discussed earlier.

We have uncovered many cases relating to money laundering but however there are plenty more and as long as it goes – it will lead to more crime and violence.

Basic Understanding of capital market

Money Laundering – the Basics