The World Bank claims that some two billion of the world’s citizens live on $1 per day or less! That fact absolutely traumatized me. With this statistic in mind it becomes significant to focus on all of the things that have helped as money over the history of civilization. Aztecs used Cocoa beans, Norwegians used Butter and dried cod, many Indian tribes used animal skins and some of the former colonists used grains. It’s worth thinking about this the next time you pick up your paycheck. The word “salary” is derived from the word SALT, which is what was the key currency of the North Africans for hundreds of years. SALT was a key commodity substance used for preserving food.
A butter and dried cod banking system? Reconciling your monthly bank statement must have been very messy! .
I’ll take bear markets for $100 please Alec! .
Anybody want to imagine how we came to describe and define a BEAR market? Well, there is a argumentation on this one as most citizenries sense that when a Bear makes a killing its claws go from up to down. However, bear markets are bone-chilling experiences. Markets always return much faster than they rise! Anyway, the word “arctic” is derived from “arktos” which just so happens to be the Greek word for “BEAR!” And that is how it is believed that the word BEAR came to depict a declining market. Brrrrrrrrrrr. .
Now you know! .
Ok, why the heck do they call it Wall Street anyway? .
It was the Dutch you see. They had just travelled to Manhattan and had nowhere to construct a dyke, so instead they constructed a wall. This was in 1653, and it wasn’t meant to keep water out, but was made to keep out the British and Indians. Easy enough for the Dutch, just a 12 foot high wood stockade that ran from river to river.
Then in 1685 they laid out Wall Street along the line of the stockade.
Now you know.
These days the modal volume on the New York Stock Exchange is several hundred million shares. We have even seen numerous days when the volume exceeded over one billion shares. To give you an idea of how far we have come, the last date on record when the New York Stock Exchange traded in less than one million shares was October 10, 1953. The very first day that the BIG BOARD traded over one million shares was December 15, 1886. On Black Tuesday, the BIG CRASH on 10 29 29 the market launched Record volume of 16 million shares! .
Now you know.
Gosh! One Billion Shares a day…. that’s a great deal of dried cod! .
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For weeks, no, months we have been bombed with nothing but damaging news about the economy generally and thousands of individual companies. The stock market has dropped down thousands of details and more than $8 trillion in paper assets have disappeared.
Note I said paper assets because until you turn it into spendable money these numbers are but a figure on a piece of paper. Sure that doesn’t make you experience any better when you bought Lucent at $80 and have seen it go to 80 cents. You could have protected you profits or reduced your loss if you have put an exposed stop-loss order with your broker. Brokers hate this, but YOU must protect you working capital because he is not going to.
This past 2 weeks the tough news has continued to be shoveled out by the news media, but instead of making the market go down it has rallied about 1,000 points. Having been a floor trader for many years my experience with this kind of reaction tells me what is going on. The market is ignoring the bad stuff and has decided to go UP. Hooray! The traders are grasping at anything that looks bullish and not giving any attention to the negatives.
The market had become so oversold that almost anything will cause it to advance. Now you want to know if this is “the Bottom”. No one can know for sure because the long – term trend remains down and is still in place. The voice of the market is now clearly saying, “I don’t want to go down for a while”. It might even allow the stock prices to remain to rise. How far and for how long – don’t ask. No one knows. The stock market remains an enigma wrapped in a mystery. A few very astute (or lucky) folks are able to understand market language and make profits whether it goes up or down. Mr. Average Broker (also Mr. Average Financial Planner) has no idea what the market is saying. They have not taken the time to read their trade.
Many times what is actually bad news makes the market go up. Here is one example. The weekly unemployment figure comes out to show there were 30,000 fewer jobs. That isn’t good news. The DOW startles up 100 points. Huh? The Wall Street mavens were predicting job losses of 55,000 so this number is a blessing. See what I mean? It is not the actual news, but the difference in what was expected and what actually went on. You can apply this to almost every statistic put out by important government and private ways. The same applies to good news that does not move the market up. What you think you see is not always what you get. Before you hold on any figure as either bullish or bearish find out what number was expected and wait for the response to it. Bad news can be good news and visa versa.
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Among the largest forces that strike stock prices are inflation, interest rates, bonds, commodities and currencies. At times the stock market on the spur of the moment reverses itself followed typically by published explanations phrased to suggest that the writer’s keen observation let him to predict the market turn. Such circumstances leave investors somewhat awed and astounded at the infinite amount of going along factual input and infallible interpretation needed to avoid going against the market. While there are continuing sources of input that one needs in order to invest successfully in the stock market, they are finite. If you contact me at my web site, I’ll be happy to share some with you. What is more important though is to have a robust model for interpreting any new information that comes along. The model should take into account human nature, as well as, major market forces. The following is a personal working cyclical model that is neither perfect nor comprehensive. It is simply a lens through which sector rotation, industry behavior and altering market opinion can be viewed.
As always, any intellect of markets begins with the familiar human traits of greed and fear along with perceptions of supply, demand, risk and value. The stress is on perceptions where group and individual perceptions usually differ. Investors can be depended upon to seek the largest return for the least amount of risk. Markets, representing group behavior, can be depended upon to over react to almost any new information. The subsequent price rebound or relaxation makes it seem that initial responses are much to do about nothing. But no, group perceptions simply oscillate between extremes and prices follow. It is clear that the general market, as reflected in the major averages, impacts more than half of a stock’s price, while earnings account for most of the rest.
With this in mind, stock prices should rise with going down interest rates because it becomes cheaper for companies to finance projects and operations that are funded through borrowing. Lower borrowing costs allow higher earnings which increase the perceived value of a stock. In a low interest rate environment, companies can borrow by issuing corporate bonds, offering rates more or less above the average Treasury rate without incurring excessive borrowing costs. Existing bond holders hang on to their bonds in a falling interest rate environment because the rate of return they are receiving exceeds anything being offered in newly issued bonds. Stocks, commodities and existing bond prices tend to rise in a falling interest rate environment. Borrowing rates, including mortgages, are closely tied to the 10 year Treasury interest rate. When rates are low, borrowing steps up, effectively putting more money into circulation with more dollars chasing after a relatively fixed quantity of stocks, bonds and commodities.
Bond traders continually compare interest rate yields for bonds with those for stocks. Stock yield is computed from the mutual P E ratio of a stock. Earnings divided by price gives earning yield. The assumption here is that the price of a stock will go to reflect its earnings. If stock yields for the S&P 500 as a whole are the same as bond yields, investors prefer the safety of bonds. Bond prices then rise and stock prices wane as a result of money movement. As bond prices trade higher, due to their popularity, the effective yield for a given bond will decrease because its face value at maturity is fixated. As effective bond yields decline further, bond prices top out and stocks begin to look more attractive, although at a higher risk. There is a natural oscillatory inverse relationship between stock prices and bond prices. In a rising stock market, equilibrium has been reached when stock yields appear higher than corporate bond yields which are higher than Treasury bond yields which are higher than savings account rates. Longer term interest rates are naturally higher than short term rates.
That is, until the introduction of higher prices and inflation. Having an increased supply of money in circulation in the economy, due to increased borrowing under low interest rate incentives, causes commodity prices to rise. Commodity price modifications permeate throughout the economy to affect all hard goods. The Federal Reserve, seeing higher inflation, raises interest rates to absent excess money from circulation to hopefully reduce prices once again. Borrowing costs rise, making it to a greater extent hard for companies to raise capital. Stock investors, perceiving the effects of higher interest rates on company profits, begin to lower their expectations of earnings and stock prices fall. Long term bond holders keep an eye on rising prices because the real rate of return on a bond is equal to the bond yield minus the expected rate of inflation. Therefore, rising inflation makes previously issued bonds less attractive. The Treasury Department has to then increase the coupon or interest rate on newly issued bonds in order to make them attractive to new bond investors. With higher rates on newly issued bonds, the price of existing fixed coupon bonds falls, causing their effective interest rates to increase, as well. So both stock and bond prices fall in an inflationary environment, mostly because of the anticipated rise in interest rates. Domestic stock investors and existing bond holders find rising interest rates bearish. Fixated return investments are most attractive when interest rates are falling.
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Over the last few decades, small scale stocks called “penny stocks” have slowly won a spoiled reputation. While there are hundreds of fly by night companies and shell companies that many unscrupulous business people have used to make money off of the uninitiated, there are thousands of great, small companies that qualify under the recording label “penny stocks”.
The current term “penny stock” usually refers any publicly traded stock that is currently trading under $5 per share. A bulk of these is traded either on the OTC Bulletin Board, Nasdaq or the Pink Sheets. Most investors are familiar with Nasdaq. The Bulletin Board and Pink Sheet markets are “Over-The-Counter” (OTC) quote systems which brokers use to trade stocks between themselves and for their clients. The old term “Over-The-Counter” is just a traditional way of describing trading that is not done on a major exchange and is traded between individuals linked up by telephone or computer networks.
There are three principal reasons why companies will be listed on these OTC markets:
1. The company is new or little and unable to get together the initial listing requirements of the NASDAQ or NYSE. In many cases, companies will decide to have their stock traded here as a way to advance to the larger markets later.
2. The company has been delisted from a major interchange. Sometimes, companies cannot meet the filing demands, run into financial trouble, or are near bankruptcy.
3. The company has made up one’s mind that it is not worth the time, effort and expense to join a major exchange. One of the most familiar examples is Nestle. While it is listed overseas, Nestle has decided that it is not worth the expense to join an exchange like the NYSE.
As you can see from the last example, not being listed on a major exchange does not mean that a company traded OTC is any less worthy of your consideration. Several very large companies, including JDS Unit phase are considered “penny stocks”, but almost no one would call them small or fly-by-nigh. These little stocks tend to be more volatile than their bigger brothers. As they are smaller companies, the growth rates tend to be higher, and the stocks themselves tend to travel at a faster pace. In fact, for many years now, smaller stocks have out gained the larger companies in functioning. To take advantage of good companies in this arena, you will need information. As these stocks are not usually followed by more than a few research firms, and may not have the finances to hire an investor relations firm, information is key to finding these stocks before everyone else does. Prince Boris is one of the leading internet investment coaches and information gurus. He has helped thousands of investors across the entire globe with their investing determinations. His success in plunking money-making penny and small cap stocks has created a loyal following who subscribe to his website.
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The benefits of online stock trading are countless. The certainty of the matter is that online stock trading is partially gainful because you can do it from your own home computer and make some cash off of it. A lot of elderly and disabled stock traders simply cannot get out to see a stockbroker at Edward Jones for instance. The broker can be helpful with guidance and extra set of eyes on an issue, but you can’t always afford the time and the effort required to go have a lengthy and analytical chat of your portfolio with them.
You simply don’t have as many extra maintaining fees with an online service as you do with your everyday stockbroker or financial analyst. The financial analyst has a right to make their money, but it is much easier on your pocket book if you are just getting a flat per trade fee with an online service. Countless stockbrokers out there also charge you in order to close your account with them, many individuals tend to view this as some sort of parting shot. There are many online brokers who let the user close their account for free. This is a favorable thing in my estimation because it lets individuals come and go as they please.
If you are being charged two hundred dollars just to close your account, it can make you apprehensive to even do so. The user should not be afraid to close their account at anytime due to fees and with many online brokers, you don’t have to feel this way.
The most crucial for me when it comes to the conflict between online trading and the normal brokerage system is the fact that you have autonomy. You can do your own research and make your own choices without feeling pressure from another direction. Stockbrokers can not pull you in the wrong direction with online trading.
You have the ultimate veto power when it comes to working with a broker as well, but sometimes the pressure they place upon you can over whelm your better instincts. It is your money that is being dealt with and you should hold the key. You can sleep at night knowing the choices that you made were your own and you can take complete responsibility for those choices. This does not mean that you shouldn’t consult other individuals before making a final decision on a bulky stock trade, but the power truly is yours.
Currency/stock trading and personal finance compliment each other very well. Even those who don’t trade their own money are most likely having it traded by a big company if it’s in a retirement fund.
Stock trading has been around for a while, and it has defined the lives of many people over the years. Many people have gained fortunes in stock trading, and many people have lost fortunes in stock trading.
I used to believe that I wanted to be a stock broker as my job. I would even watch Jim cramer and pretend that I was using my own money to trade stocks. I would watch the price movement of the stocks I bought from day to day to see if they had gone up or down. It was very exciting to me and I loved doing it. It’s thrilling to gamble your money away.
It can be argued though that stock trading is not gambling, and this is true for the traders who actually know what they’re doing. To the general public it’s still a gambling game though. This is simply because most people don’t have the knowledge to make good stock market trades, so they really might as well be gambling.
Recently the currency trading, or “forex”, market has become very popular. There are many various reasons that it’s becoming so popular. One of them is that the forex market is open 24 hours a day, 5 and a half days a week. This allows people who have day jobs to be able to trade whenever they want to. It allows them more freedom as to when they want to trade.
The stock market isn’t open 24 hours a day so they don’t get as much freedom as to when they want to trade the market. This is just one of the advantages to forex though. It’s a very good advantage.
If you have ever considered investing in the stock market but have no previous experience, you should look into basic stock market training. It is crucial to keep in mind that this is not a “hobby”. It is a business and should be treated that way.
Countless books and resources can assist with stock market training to help you prepare and become more knowledgeable for the complicated environment of the stock market. In addition, basic terms should be learned and known by you as a component of your stock market training.
A “Bull Market” is what occurs when the economy is doing extremely well, jobs are easy to find and investors are comfortable to invest in the market. On the opposite side of the spectrum, the “Bear Market” is experienced during a depressed economy, unemployment is high and people are just not investing in the stock market
Making your first foray into the stock market can be a humbling experience. Using a solid investment management software program will help you with stock market training and point you in the direction of sensible investment choices. It can also help you to keep tabs on losses, profits, the cost of your trades or any other costs you expend for your investments. One should also know the basic principals of accounting, how to read and understand an annual report and some of the history of the stock market as part of stock market training. You also need basic knowledge of asset allocation.
Build a solid foundation of stock market training by reading as much material as you can. Read information that you can find that is about corporate finance, investment theories, economics and the basics of getting started. A really good investment service can be an invaluable tool as well. Some are free, some are paid, but they will keep you up to date on every development of the market.
The software that is now available is considerably confusing to most people. The knowledge needed to make selections on whether to make use of automated forex forex trading software program robots can also be limited. So we first need to know how these seemingly complicated robots work and even the so called skilled sellers would possibly find them useful.
The foreign exchange market is a speedy and always changing market. Especially when it comes to market situations and currency pair rates. This is due to the differing inside and external market situations within the numerous countries. In a climate like this anyone buying and selling in forex must have an intensive knowledge of the modifications out there actions and currency pairs.
Because of the numerous transactions occurring at anyone time on the earth and the volumes of money involved. Fairly numerous complex multiplying factors and variables have to be studied in depth with a view to acquire most revenue on investment. This is where an automatic forex forex buying and selling software robot is available in to help with funding decisions.
The software robotic analyzes advanced foreign exchange variables and monitors the rise and fall available in the market in detail and quickens the evaluation work. They supply immediate entry to market variations, work 24 hours and seven days a week. They help you access the data a lot faster and you can use the software program from home. All it’s essential have is a PC and an Web; this is making them very popular amongst forex traders.
The most important advantage an automatic foreign exchange forex buying and selling software program robotic has is its potential to calculate and predict when the most favorable time to speculate is. Most individuals dealing in forex normally fail as a result of they cannot predict when the most favorable time to speculate is. The forex software program robot enormously reduces the time for choice making and maximizes on ideally suited profit conditions.
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In part one of my primer course on stocks, I informed you that companies divide stocks into shares, and that each share represents a portion of ownership. I let you know that shares may come with different ownership rules, privileges, or share values. I also told you about the two forms of stock: common stock and preferred stock. Now we’ll talk about shareholders.
A shareholder is a person or company that legally owns one or more shares of stock in a joint stock company. Shareholders get special privileges that depend on the class of the stock. Privileges include: the right to vote on matters like elections to the board of directors, the right to share in distributions of the company’s income, the right to buy new shares that are issued by the company, and the right to a company’s assets when a company liquidates. Directors and officers of a company are bound by fiduciary duties to act in the best interest of the shareholders.
Owners of a company may sell shares to build additional capital for investing in new projects within the company, or to reduce their holding so they have more capital freed for their own private use. When you purchase a share you are literally sharing in the ownership of the company, a portion of the decision making power, and potentially, a portion of the profits.
Because there could potentially be thousands of shareholders in a large publicly traded corporation, shareholders will use their shares as votes in the election of members of the board of directors of the company.
Usually, each share equals one vote. Corporations might issue different classes of shares though, which may have different voting rights. Because shares are proportional to votes, owning the majority of the shares allows other shareholders to be out voted, which is how original owners of a large company will often still have control of the business. To Be Continued In Part Three.
In parts one and two of my primer course on stocks, I let you know that the stock of a business represents the original amount of money that went into founding it. Businesses divide stocks into shares, and each share represents a fraction of ownership. I wrote about shareholders, who are people that own one or more shares of stock in a joint stock company and “share ownership” of the company. I told you that they have special privileges depending on the class of stock they own, and that they will use their shares as votes in the election of members of the board of directors of the company.
Let’s say for the sake of example that you are a shareholder for a company and own a large amount of its shares. Even if you owned fifty percent of a company’s shares and therefore own fifty percent of a company, you don’t have the right to use a company’s equipment, materials, building, or other property. This is due to the fact that the company is considered a legal person that owns all of its assets itself.
Despite the fact that owning shares means part ownership of a company, it doesn’t mean responsibility for liabilities. If a business goes under and has to default on loans, the shareholders will not be held liable in any way. However, when it comes time to repay loans and debts, the creditors must be paid first, often leaving shareholders with nothing.
Shares of a business have the ability to be transferred from shareholders to other parties by selling, and stock markets have been established for trading shares and other stock derivatives. Even though there are various methods of buying and financing stocks, investors will usually be represented by stock brokers, people who buy and sell shares of a wide range of companies.
Stock brokers can be full service, or discount. Full service brokers will charge more per trade, but offer advice when it comes to investment or personal finance. Discount brokers will offer little or no advice but charge less for trades. A third type of broker would be a bank or credit union. Another way to buy stock is to purchase the stock directly from the company itself. If you own at least one stock, most businesses will allow you to buy shares directly from the company. To Be Continued In Part 4.