Does the level of the Dow Jones index reflect the current state of the economy?
If so, the economy should be considered to be in Great shape. The Dow currently remains to be almost at its all-time high. How can this be possible if the economy is in bad shape?
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1929 Stock Market Crash (Part 1)
The financial memory only lasts about 30 years then analysts, bankers and regulators fall victim to greed and fear. No matter how much they fiddle with interest rates, Bob Marley said it best: “One day the bottom will drop out…”
Dow Jones Stock Trading Chart_ 11/9/2009
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When the stock market falls overnight with bad news, and opens lower the morning where did the money go?
My understanding is that for every share sold there is a share bought. Someone is betting it will go up and some one is betting it will go down. Look at this scenario: Tom sells 100 shares of XYZ at $14.00 per share, Kay buys 100 shares of XYZ at $14.00, this is all on Friday afternoon before the bell. I do suppose the exchange gets a few cents for doing the trade, does any one know how much? The shares that Kay bought at $14.00 I assume had to be sold at $13.95 or so to give the exchange a profit? Is this right?
The next morning before the bell there is bad news out and overseas trading was down while we slept. The whole market opens way down. XYZ is $2.00 dollars down when the opening bell rings. Where did the $2.00 go. Kay had just bought that afternoon 100 shares for $2.00 more than what the share price opened at. Where did this $2.00 go?
What Exactly is a Commodity Anyway?
The word commodity was first noticed in the English language in the 15th century. Its origins are French and come from the word “commodite” meaning to benefit or to profit from. In modern times, a commodity is a good or tangible product where this is a demand in place. The good is supplied, however, without qualitative differentiation. It can be interchanged with another product of the same type. One example of this is petroleum. Petroleum is petroleum and is universally accepted as such. Its price will fluctuate daily only because of changes in global supply and demand. These goods can be bought or sold through futures contracts. Some very common commodities are iron ore, crude oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminum, copper, rice wheat, gold, silver and platinum.
When goods or services lose differentiation this is called commoditization. This often happens when the intellectual capital that is necessary has dwindled and the good or service cannot be produced as efficiently any longer. Examples of this would be pharmaceutical drugs. These drugs are first rolled out and offer their companies premium margins. But what usually happens over a period of time (often after patent runs out) these same drugs become commodities and are offered at a much lower price point.
Risk is one of the reasons that exchange trading of agricultural commodities began. For example, the farmer will risk the cost of producing and farming his product to get ready for market at sometime in the future because he does not know what the selling price will be.
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Related Articles at Investing School:
- The Role of the Securities Investor Protection Corporation (SIPC)
Fibonacci Time Series – A Tale In Time
While not the most popular technical indicators in the chartists toolbox, A Fibonacci Time Series analysis does occasionally provide food for thought. Especially on the two S&P 500 charts shown below.
(click on image for full size)
Investor Sentiment – The Small Retail Investor Is The Last One To Get On The Boat
Once again investor sentiment comes to the forefront as more and more of the small retail investors pile into stocks. Investor sentiment has usually served as a contrarian indicator to the market.
From the Pragmatic Capitalist
The warning flags continue to pop up all over the place and investors continue to run head first into stocks. None of the recent warning flags are as alarming as today’s huge spike in individual investor sentiment. Small investor bullishness surged to 45.3% versus last week as the market continues to melt higher. This has served as a fairly reliable contrarian indicator in the past as small investors tend to pile into stocks near the end of rallies.
Individual investor sentiment has reached levels that have historically been followed by very poor equity returns. A few of the notable periods when investor sentiment was this high include:
- A 50% reading prior to a 3 month 10% sell-off in Q2 2008
- A 45% reading prior to the 2008 market crash
- A 47% reading prior to the 20% sell-off to the March 2009 lows
- A 49% reading prior to the January 2010 sell-off
[…] With institutional investors stacking up on the bullish side of the trade and now individual investors stacking up on the same side you just have to wonder – who is left to buy stocks? Better yet, who are they going to sell to?
There is a nice graph on the Pragmatic Capitalist page showing the investor sentiment.
What happens to your investment when a stock gets delisted from NASDAQ?
So what happens when you buy a stock and it gets delisted from NASDAQ like Spansion? I didn’t buy it. Do you just lose your investment? When it gets delisted it is an OTC stock right? Also lets say you bought it when it ’s an OTC and they go back up to were they were. Can they get put back into NASDAQ? What happens to your investment if that happens?
Sorry SpanKy, but that’s not what delisting means…
Isn’t it sort of an Insult to America that there are only about 4 news companies that control 90% of the news?
When my Dad was a kid there WERE MANY news companies that had their share of the market but not now.There are about 4 that control 90% of the news market. It’s CBS-Owned by general electric MSNBC-Microsoft Fox-news corporation-rupport Murdock CNN-owned by time Warner. Here we have it America’s think tank how free I feel. Bellow are pics of the CEO’s of these companies so they control to a large degree what’s on the news and you though that American people were free thinking?
http://en.wikipedia.org/wiki/Steve_Ballmer
http://en.wikipedia.org/wiki/Jeffrey_R._Immelt
http://static.flickr.com/111/292353427_da2b7ac71a.jpg
http://www.theage.com.au/ffximage/2007/12/01/PM_Murdoch_narrowweb__300×351,0.jpg
Matthews: Can Obama Deal With a Dow Jones Scorecard Every Da
More at msnbc.com February 23, 2009 Where ‘We’ Are I was just watching Chris Matthews explaining how the Dow is President Obama’s “scoreboard” and how people are going to start getting angry at him soon if he’s not able to get the Dow to stabilized and start going up soon. Read more at: www.talkingpointsmemo.com
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