Chapter One, Part One: A Walk to Wealth
Published on September 13, 2004 By Jay Walker In Business
This is a serialized version of an internet book entitled:

“The Brink’s Truck Burst Open On Wall Street! A Holistic Approach to Finding The Easy Money In Common Stocks”

This is Serialization 3. To find Serialization 2, please go Here, while Serialization 4 will be posted Here.

This book will be serialized over a several month period. It will interest people who want to know whether the price of a stock is fair, or priced too high. It will aid you in outperforming the general stock market, by helping you understand what the value is of the company that underlies its stock, and by then relating that to its stock price. However, while many of these types of books are difficult to understand, this one is written in terms that most lay people should be able to understand, rather than using obscure language and difficult to understand terminology.

Insofar as the people go, this is a work of fiction. All names in this publication are fictitious and any resemblance to any person living or dead is coincidental. Copyright 1998 and 2004 by Jay Walker. All rights reserved.

Note that this book is available in its entirety via a pdf file. A comprehensive Excel spreadsheet, beta version, is also available, which performs many of the tedious, but necessary, calculations required to analyze a company and its stock price. This spreadsheet is designed to accompany the book.

The cost is $8 for the book, and $12 for the spreadsheet (USD). Please email me at to order yours.

Chapter One - Part One

A Walk to Wealth

“Hi, Kim.”
“Hi, Jamie.”
“All ready for today’s walk?”
“Yeah, Jamie, let’s go. I’m sure glad we became ‘walking pals’. I’ve learned a lot from talking and walking with you.”
“So have I, Kim. I’ve certainly enjoyed hearing about your experience and outlook on life, especially when they’ve differed from my own.”
“Me too, Jamie. Jamie, I wanted to ask you something, but I don’t want to be rude, so you don’t have to answer if you don’t want to.”
“Fire away, Kim!”
“Well, I’ve heard that you’re a millionaire – is that true?”
“Yes, that’s true, Kim.”
“Can you tell me how it happened?”
“Sure, Kim. You see, as a child, I had a favorite uncle, Uncle Bob. He was one of life’s truly great people. An all around nice guy. And he certainly lived in a better area than my own parents – not a wealthy neighborhood, but a real nice area. Uncle Bob always seemed to have a few extra dollars to spare. It wasn’t until after he was dead that I learned that he was a multi-millionaire.”
“So that’s how you became wealthy then, Jamie? He left you his millions?”
“No, not exactly, Kim. True, he did leave me a little – enough to buy a new car. But it wasn’t enough to get wealthy on, not without something more.”
“What was that, Jamie? A secret formula for investing, or something like that?”
“No, Kim. What Uncle Bob left me with was curiosity. You see, when I got to be about eleven or twelve, I’d look around at something nice in Bob’s home, usually an expensive good-quality item. I’d often comment on how nice it was and Bob would then almost always do something I thought was a little odd.
“He’d wink at me and say “Common stocks, Jamie, that’s where it’s at”. Then we’d move on to discussing the particular item of my fascination. But in the back of my mind, I was always curious about what he meant. Unfortunately, Bob died before I was really old enough to ask him a lot of penetrating questions about it.
“But when Bob left me that money in his will, I decided I wanted to find out exactly what he meant. And when I looked into it, I found out that you can make a lot more money by investing in common stocks than almost any other investment. For instance, Kim, I discovered that inflation has averaged a little over 3.1 per cent annually over the past seven decades. That means that any investment I’d want to look at, would have to beat that rate, just to be able to buy the same amount of goods or services in the future.
“Then I looked at the long term rate offered if I loaned my money to the government, on ‘T-Bills’ and ‘Bonds’. These were at about 3.7 per cent and 5.0 per cent respectively over the past seven decades. Finally, I checked into what kind of return rates common stocks had produced over the same time. For big companies, the rate was about 10.7 per cent annually, and for small companies, about 12.3 per cent annually.
“So now I could see what Uncle Bob was talking about. The rates of return offered from common stocks was much higher than what I could get in a savings account, or in a Certificate of Deposit (CD), or by loaning money to the government by ‘buying’ a government bond. I finally understood why he was winking at me all those years.”
“But, Jamie, isn’t investing in common stocks risky? And what makes the stock market go up anyway?”
“Well, Kim, it’s only risky if you don’t understand what you’re doing. I’ve eliminated as much risk as possible in my own investing, by concentrating on what I call ‘The Easy Money’ in common stocks. And, if you’re interested, I can also show you where ‘The Easy Money’ – and the safest money – is in the stock market.
“What makes the stock market go up over the long-term is pretty simple, but a lot of people don’t understand it. It’s simply because, over the long-term, the companies that comprise ‘the stock market’ make more money every year. In fact, the increase in profits that these companies make every year closely correlates, over the long term, to the increase in ‘the stock market’.
“It’s very straightforward. If you had a little business, Kim, selling lemonade, and one year you made $100 net profit, and the next year you made 12 per cent more, or $12 more, how much do you think your ‘business value’ would have increased by?”
“Uh, by about 12 per cent more?”
“Right, Kim. And that’s all that’s driving the stock market ever upwards. Increasing profits. Logically, investors will pay more when profits are higher. And it’s this trend of increasing profits, followed logically by investors being willing to pay more, that has driven the market ever upwards. Okay, Kim?”
“I see. So is that how you did it, by investing in common stocks? You got lucky and had one of those stocks turn into a big winner?”
“Yes, I became wealthy by investing in common stocks. But luck had very little to do with it. You see, when I got Uncle Bob’s money, I decided not to blow it all on a new car, but to see if I could use this to build a good ‘nest egg’. Of course, the amount Bob left me wasn’t enough to make me a millionaire, so I kept increasing the amount I invested by adding to my investments with my own salary.”

---- Continued in Serialization Four -----

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