Wall Street? Second left and straight to Hell.

Paul’s Financial Report by Three Dead Trolls In A Baggie

Trading got off to a rocky start today as investors got up late, couldn’t get their cars started and were kind of grumpy all day. Things improved in the afternoon as the cute girl across the hallway made eye contact [I think she’s flirting!] Late in the day, the Canadian dollar jumped to US$0.63 following the discovery by foreign investors, that if you make a few simple alterations to the five-dollar bill using a pen, Sir Wilfred Laurier can look just like Spock.

In tha Asian markets, people were buying bakjoy[?] and green tea while in the Canadian markets, there’s a special on toothpaste in aisle 7. Rain fell, the chips are down, 7-up and internationally, Indonesia remains very far away.

The TSE Composite Index was confusing, the Dow Jones Industrial Average means nothing to me and little birds go tweet tweet tweet. The bank rate was 5%, the prime rate stayed at 6.5, Prime Ribs’ on special, a prime number’s 11 and pi held firm at 22/7.

In the bond market, Pierce Brosnan is at an all-time high, Sean Connery is holding steady, Roger Moore took a dip and George Lasenby[?] is nowhere to be found. Silver fell, uranium exploded and gold was taken away pending a drug test. I’m Paul Nader; I won’t be back tomorrow.

From wiki: The phrase “Wall Street” is also used as a metonym to refer to American financial markets and financial institutions as a whole. Interestingly, most New York financial firms are no longer headquartered on Wall Street, but elsewhere in lower or midtown Manhattan, Fairfield County, Connecticut, or New Jersey. JPMorgan Chase, the last major holdout, sold its headquarters tower at 60 Wall Street to Deutsche Bank in November 2001.

The stock market is a fascinating thing, as seen in the movie Pi. Endless figures, fluctuating randomly [or pseudo-randomly maybe, cos there are reasons for the change but no rules to predict the amplitude of the change precisely and accurately], they practically govern the rise and fall of entire industries.

What is the “stock”? It is usually a figure higher than the book value [meaning the amount of money you actually invested to start the business], which represents the market worth of that business, based on its potential for growth [profits], should it ever be sold. The actual owner takes a major portion of the market value and converts it into stock, made up of many many shares, [affordable parts of the stock], which is sold to the public [investors]. So by owning shares in the company [mind you, they don’t usually count in ones or tens or even hundreds to be considered significant], one “owns” part of the company and can affect company decisions, depending on what percentage of the stock you own. Moreover, if the company continues growing and making a profit, he not only gets a share of the profit, the dividend yearly, the value of the shares he owns also increases in market value [should he choose to sell them]. As can be seen, the total value of the stock is considered a measure of the company’s value. On the other hand, the owner himself, in his personal account books, has raised back some of the original money he invested. It’s not essential for the owner/s to sell shares to the public, it CAN be privately held [meaning the owners divide and keep appropriate percentage of the entire stock themselves].

The reason for actually having such a complicated [if it doesn’t seem complicated already, it will be, very soon] system was insecurity on the owner’s part. In the past, when businesses were wholly [NOT largely] owned by the company’s “board” itself, IF the company took a plunge for the worse, and ended up in debt, then the creditors would reclaim their loans by attacking the board members’ personal wealth and property. To prevent this, the concept of a company was formed. Legally, a company is a separate entity; its dealings and the owner’s personal dealings are not considered the same. Which is why you’ll find even the owner of a company must “draw” a salary, instead of eating from the profits. The company is “paying” the owner who set it up, legally speaking. Also, the money from the share sales can help the company to get started on a good footing.

A stock exchange/market is like a supermarket, where you can buy and sell stocks of different companies all in one place. While the concept of an exchange is only an idea, the manifestation is a place where brokers buy and sell in a special way called open outcry OR a virtual one where trades are done online. Buying and selling is not easy; prices aren’t fixed. It’s more like an auction, with bids and ask prices. The numbers we see on TV are possibly the highest amounts that people are willing to pay. As you can see, there’s no maximum or minimum.

There are so many different ones, instead of 1 international one, or 1 per nation cos it’s easier to manage [so MANY companies!]. On that note, you don’t have to be in New York, say, to buy from the NYSE. You can/probably should get a stock broker, who works at established brokerages, which are authorised to deal with NYSE shares, to do it for you.

Most of the stock at a stock exchange are resale stock. When a company first releases its stock to the public, it’s called IPO [Initial Public Offering]. Not all companies can automatically appear in a stock market, there are conditions to be met, usually in terms of financial size. If your company [that includes that hawker stall “business” you just set up] does not qualify for the stock exchange, yet too expensive to maintain under sole proprietership, then you can still have OTC [over the counter] company shares, usually bought up by family or friends.

People who own shares don’t necessarily get a dividend every year [assuming the company is growing]; it’s the company’s choice. It can decide to pay out dividends [income stock], or save up the profits just in case, or invest back into the company [growth stock] or ALL three. However, by not giving out dividends, the company will lose many investors who buy the stock as an additional source of income [via dividends], as opposed to people who deal with stocks as their full-time jobs. Income stock usually is a source of stable income, but investing in growth stock enhances the final payout [when and if you choose to sell the shares].

While this is all convenient and stuff, it poses a problem that causes recessions and inflation and all the economical nightmares of recent times. Since whole industries are inter-dependent on each other, so are their shares. For example, oil prices can affect the cost of electricity and fuel, which in turn affects the electronics and computers industry. Savvy? If one industry starts doing badly, for whatever reason, then many others might take a turn for the worse as well, while giving an advantage to rise for some others…the point is, share prices of many industries falling at the same time is not good, may affect an entire region’s economies, if not the world economy.

Companies are typically registered under specific Exchanges. Industrial averages measure how the companies in that exchange have been doing in general. A rising average indicates a bull market; a falling average indicates a bear market. Companies that deal with buying and selling other stocks are called holdings.

There’re rules to trading in stocks actually. You’ve probably come acroos the illegal act of insider trading, where people working at the company whose shares are in question, invest or sell their shares or inform others who have shares in the company to do so, thanks to intimate knowledge of the company’s prospects. There’s also short-selling which is illegal in some countries. Short-selling is the opposite of the usual behaviour of someone who invests in growth stock. e buys cheap [short] and sells high [long]. A short-seller sells high-priced shares and buys it back when it’s cheaper..let me explain.

You request expensive shares from your brokerage, and it “lends” [monetarily] them to you. It sells the shares on the market and keeps the cash as collateral in a margin account for the shares you borrowed. When the share prices drop, ask the brokerage to “return” the shares. Since your collateral is higher than your buy back price, you’ll have made a profit. However it’s very risky, cos the brokerage may ask for the “loan” of shares back at any time [not necessarily when prices are lower] meaning you can lose more money. Moreover, it’s considered illegal and ethically wrong to invest in a company while “betting” against its success. Which is what short selling really is.

After talking about stocks this long, it is important to note that economies are not made up of the stock market alone. There’re also the bonds and futures markets. In a nutshell, bonds are like loans by an individual to a company or even the government, so they pay you annual interest for the loan given, and your capital back, should you desire your capital back. Both bonds and stocks are securities, in that they’re legal documents. So there’re cases of hybrid securities where an investor is paying for both a share and a bond.

I totally don’t understand the futures market, so somebody explain THAT to me..

We’ll discuss the economy in general and the function of banks and why people curse the government for stock market fluctuations some other time ok? I’m TIRED!

But allow me to shed angst at how complicated humans can get, making infintely complex institutions and artifical constructs, based on a very volatile and equally artificial construct known as money. Marxism rawks.


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