FINANCIAL MARKETS
THE STOCK MARKET -
WHAT IS A SHARE OF STOCK?
WHY DO PEOPLE BUY STOCKS?
WHY DOES THE STOCK MARKET FLUCTUATE?
WHY DO STOCKS GO UP (OR DOWN)?
WHY DO THEY REPORT THE STOCK MARKET EVERY WEEKDAY ON THE EVENING NEWS?
WHO INVESTS IN THE STOCK MARKET?
WHAT MACRO ECONOMIC ISSUES IMPACT THE STOCK MARKET?
INTEREST RATES
WHY?
COMPETITION FOR INVESTMENT DOLLARS
IMPACT ON SOME BUSINESSES - HOUSING, AUTO SALES
GOVERNMENT POLICY
CURRENCY CHANGES
INFLATION RATES WHY? - EFFECT ON INTEREST RATES
UNEMPLOYMENT RATES
CONSUMER AND BUSINESS CONFIDENCE
INTERNATIONAL EVENTS
WHAT EFFECTS INDIVIDUAL STOCK PERFORMANCE
EARNINGS - CURRENT AND FUTURE
BOOK VALUE
STOCK MARKET AS A WHOLE
COMPANY MANAGEMENT
COMPANY PRODUCT
IS IT A HOT PRODUCT - INTERNET
IS THE PRICE OF THE PRODUCT INCREASING OR DECREASING
HOW MUCH COMPETITION IS THERE IN THE FIELD?
WHAT ARE THE COMPETITORS DOING?
WHAT IS THE BOND MARKET?
WHY DO PEOPLE TRADE BONDS (BUY AND SELL)?
WHAT EFFECTS THE BOND MARKET
THE FEDERAL RESERVE
INFLATION RATES
CURRENCY EXCHANGE RATES
CONSUMER AND BUSINESS CONFIDENCE
GOVERNMENT POLICY
WHAT EFFECTS INDIVIDUAL BOND PERFORMANCE
GOVERNMENT - POLICY, CREDIT RATING, INFLATION, SUPPLY VS DEMAND
CORPORATE - CREDIT RATING, COMPANY PROSPECTS, LARGER MARKET
STREAM OF KNOWLEDGE
CORPORATE INSIDERS
WALL STREET INSIDERS - FLOOR TRADERS, CORPORATE TAKEOVER SPECIALIST, SOME PRO INVESTORS
STOCK MARKET ANAYLIST, MOST PRO INVESTORS, SOME MUTUAL FUND MANAGERS, SOME STOCK MARKET ADVISORS
MOST MUTUAL FUND MANAGERS, MOST STOCK MARKET ADVISORS, FINANCIAL PRESS - BARRONS, WALL STREET WEEK
STOCKBROKERS
PUBLIC PRESS - NEWSWEEK, WASH. POST, BALT SUN.
THE GENERAL PUBLIC
TO BUY - FIGURE OUT WHAT CORPORATE INSIDERS ARE BUYING OR FIGURE OUT WHAT GENERAL PUBLIC IS SELLING
TO SELL - FIGURE OUT WHAT CORPORATE INSIDERS ARE SELLING OR FIGURE OUT WHAT GENERAL PUBLIC IS BUYING
GENERAL RULE - BUY WHEN IT FEELS MOST UNCOMFORTABLE - SELL WHEN IT FEELS MOST UNCOMFORTABLE
BUY WHEN YOU FEEL LIKE CRYING SELL WHEN YOU FEEL LIKE YELLING
THE FINANCIAL MARKETS HAVE PERIODS OF EXTREME FEAR, EXTREME GREED, FOLLOWED BY LONG PERIODS OF BOREDOM AND APATHY.
TUCSON ELECTRIC POWER IS A PERFECT EXAMPLE OF THE CYCLE OF EXTREME FEAR, TERROR THEN APATHY
COMPANY INVESTED IN REAL ESTATE SPECULATION IN LATE 1980'S AND LOST ALOT OF MONEY.
IN 1991 COMPANY CAME CLOSE TO DECLARING BANKRUPTCY
THIS YEAR, 12 CORPORATE OFFICERS HAVE BEGUN BUYING THE STOCK.
WHEN TO BUY
1. WHEN OUTLOOK IS MOST GLOOMY -
A. POPULAR MAGAZINES TEND TO PINPOINT BOTTOMS IN INDUSTRIES OR STOCK MARKET WITH LEAD ARTICLES.
BOTH TIME AND NEWSWEEK HAD BEARS ON COVERS OF MAGAZINES
B. WHEN ANALYSTS ARE UNANIMOUS IN DECLARING THE STOCK OR STOCK MARKET HAS TO GO DOWN FROM HERE.
C. WHEN CHART SHOWS THE STOCK PRICE AS BEING FLAT OR
WHEN CHART SHOWS THE STOCK PRICE IMPROVING IN THE FACE OF "BAD" NEWS
WHEN CHART SHOWS A SELLING CLIMAX - HUGH VOLUME ON SHARP DECLINE FOLLOWED BY A RISE IN STOCK PRICE
D. WHEN "INSIDERS" ARE BUYING THE STOCK
E. WHEN IT FEELS SCARING TO BUY
WHEN TO SELL
1. WHEN OUTLOOK IS MOST OPTIMISTIC
2. WHEN POPULAR PRESS FEATURES ARTICLES LIKE "DOW 4000" EXTREMELY BULLISH ARTICLES
3. WHEN ANALYSTS ARE UNANIMOUS IN SAYING STOCK OR STOCK MARKET HAS NO WHERE TO GO BUT UP
4. WHEN CHART SHOWS EXTENDED UP SWING IN PRICE FOR A CONSIDERABLE PERIOD OF TIME - WHEN PRICE DOUBLES
5. WHEN HUGE VOLUME IS EVIDENT AND STOCK DOES NOT CHANGE MUCH IN PRICE
6. WHEN CORPORATE INSIDERS ARE SELLING THE STOCK
COMMODITIES
FUTURES
COMMODITY EXCHANGE
GRAINS
CORN, OATS, SOYBEANS, WHEAT
LIVESTOCK
CATTLE
HOGS
PORK BELLIES
FIBERS
COTTON
FOOD
COCA
COFFEE
ORANGE JUICE
SUGAR
LUMBER
FUELS
HEATING OIL
LIGHT SWEET CRUDE
NATURAL GAS
UNLEADED GAS
METALS
GOLD
COPPER
PALLADUM
SILVER
FROZEN CONCENTRATED ORANGE JUICE
WHO SELLS IT AND WHY
ADVANTAGES AND DISADVANTAGES
AD - SET PRICE, CASH NOW
DISADV- PRICE MAY RISE, CROP MAY FAIL
WHO BUYS IT AND WHY
AD - SET PRICE, SUPPLY CERTAIN
DISADV - PRICE MAY FALL, CASH OUTLAY
1 CONTRACT = 15,000 POUNDS OF O.J.
PRICE $1.28 PER LB
1 CONTRACT = $19,200
WEEKLY VOLUME = 24,300 OR $4,665,600 PER WEEK
PLAYERS -
ORANGE GROWERS AND CO-OPS
ORANGE JUICE DISTRIBUTORS AND PROCESSORS
PRIVATE INVESTORS
SPECULATORS
PROFESSIONAL COMMODITY FIRMS
HEDGE FUNDS
BOND MARKET
WHAT IS A BOND
AND IOU
GOVERNMENT BOND 30 YEAR, 10 YEAR, 5 YEAR, 2 YEAR - EXEMPT FROM STATE AND LOCAL TAXES
BACKED BY U.S. GOVERNMENT
GOVERNMENT BILL 1 YEAR, 6 MONTHS, 3 MONTHS, 30 DAY
MONEY MARKET
CORPORATE BOND - CREDIT RATING, CORPORATE PROSPECTS 30 YEAR, 10 YEAR , 100 YEAR
LOCAL GOVERNMENT BONDS - TAX EXEMPT - FED, STATE & LOCAL
SELL AT LOWER RATE
A U.S. GOVERNMENT BOND SELL FOR $1,000 FOR 30 YEARS AT A RATE OF
7%
WHAT HAPPENS TO THE VALUE OF THE BOND IF RATES GO UP TO 8%
A. IT GOES UP
B. IT GOES DOWN
C. GOVERNMENT BONDS DO NOT CHANGE IN VALUE
D. UNKNOWN
$1000 DIVIDED BY $70 = .07
NEW RATE 8% = OLD PREMIUM $70 NEW PRICE OF BOND
$70 DIVIDED BY .08 = $875
IF RATES GO DOWN TO 6%
$70 DIVIDED BY .06 = $1,166
BOND PRICES HAVE AN INVERSE RELATION TO INTEREST RATES
AS RATES GO UP BOND PRICES GO DOWN
AS RATES GO DOWN BOND PRICES GO UP
* NOTE A 30 YEAR U.S. GOVERNMENT BOND SELLS FOR $1,000 AT MATURITY.