Understanding the Stock Market Created by: John W. Foster

Overview Understanding the American Economy Bell Ringer Overview of the Stock Market Terminology associated with the Stock Market

The American Economy My conception of America is a land where men and women walk in ordered freedom in the independent conduct of their occupations; where they may enjoy the advantages of wealth, not concentrated in the hands of the few but spread throughout the lives of all; where a contented and happy people, secure in their liberties, free from poverty and fear, shall have the leisure and impulse to seek a fuller life. – Herbert Hoover Is this a realistic or idealized vision???

Show Me the Money What kinds of jobs have you worked? What were your motives behind it? What do these jobs have in common?

Stock Market

Bell Ringer You will be given 30 seconds to write words that come to your mind when I say the word I want you to think about.

Understanding the S.M. Step by Step S.M is important in operation of the American economic system. Companies sell stock to raise funds for improvements and expansions. Stock Market dramatically illustrates how prices are (almost instantaneously) determined through the interaction of supply and demand in an auction-like environment.

Question of the Day Since 1941, a few tragedies have triggered temporary downturns in the market the day after the United States experienced a major crisis. Name the 1 of the 4 events?? Why does this even have an effect??

Terminology related to the Stock Market Stocks- shares of ownership. Each share of stock represents part of the corporation. Stockholders- people who buy corporate stocks. Dividends- corporation profits paid to stock holders.

Putting it into Practice I need $1 million to set up my business. I sell 10,000 shares of my stock at $ a share. You buy and own one ten-thousandth of my company. When profits are divided each year, you would receive one ten-thousandths of the profits.

How are Stock Companies Organized?

WAIT A MINUTE Who is responsible for the business if it fails and goes into debt????

Survey Says??? Neither the stockholder or the corporation executives are responsible for the corporations debts. If Foster Inc. goes out of business, my assets (property, buildings, and other valuables) are sold. Money raised is used to pay off the debt.

Quick Survey How many think the government should be hands off and let Wall Street run wild? Business regulations issued by the government consists of tens of thousands of pages!!

Differences in Stock Preferred stock- take less risk when they invest their money. If the company makes a profit then you are guaranteed a fixed dividend every year. Common stock- these are your high rollers. They take bigger risks. If the company does well, they can usually sell their stock for higher prices than what they paid for them.

Nuts and Bolts of Stocks Companies issue stock so they can get money for their projects. They could easily ask for money from the bank. HOWEVER, with stock, they can get the money they need without having to make those types of commitments.

When Should I Invest?? Bear Market- stocks have been going down, stocks are undervalued and it is a good time to buy. Bull Market- complete opposite. Stock prices have been going up, so they are overvalued and it is a good time to sell.

Price to Earnings Ratio Essentially what a stock should actually be worth. Stocks become overpriced due to a sudden spike in popularity, media coverage, and other factors Facebook tanked! $100 Billion Dollar stock Started selling stock at $38.00 NO ONE BOUGHT, SHOT UP TO $78.00

Know your LEGAL LIMITS! **If you own a stock, it is a federal offense to talk to people within the company for advice. (MARTHA STUART) Her broker (inside guy) told her that her stock would lose value so she sold over 3,900 stocks. Spent 6 months in prison 6 Months of House arrest She avoided a loss of over $45,000.00

Monopoly *People try to buy up so much of a product that they want to maximize their full profit for their own gain and consumers barely have any options. This is illegal, but people get away!

Review Did you learn anything new? Is filing for bankruptcy necessarily bad? Different types of stocks? Is it a safe bet to invest in other people?