Sirwin
Sirwin

Not Just Crypto: Notes On The Stock Market (6th Part)


After the first 5 parts concerning the macro-economy ( GDP, Commodity, Real Estate and Bond (1st)Cycles, Expansion and Recession (2nd)Correlations, Variables and Indicators (3rd) and Inflation, Deflation, Stagflation (4th), How The Federal Reserve Works (5th) ), I would like to make some comments on the stock market and on the main indexes. As you know, it is a trading system for the shares of companies listed on the stock exchange. Basically the value of a company is divided into shares and these are then bought and sold to investors on the stock market. The stock exchange is the market where investors buy and sell financial instruments such as stocks, bonds, derivatives and other securities. It allows companies to raise capital by issuing stocks and bonds, and individual investors to earn money by buying and selling these financial instruments.
In order to be listed on the stock exchange, companies must meet some requirements:

-Stable financial history: companies must have a stable financial history and demonstrate that they can generate profits and growth over time (months/years)

-Size: Companies must have a minimum size in terms of capital and/or revenue. This varies according to the stock market

-Business: they must have a clear business plan, with growth objectives and a clear strategy for the future (a bit like what is called a Whitepaper for cryptocurrencies)

-Financial Control: Companies must be subject to financial controls

-Communication: Companies must have good communication with investors and provide accurate information about their activities

-Regulations: Companies must comply with local laws. For example, some local regulations also impose a minimum market capitalization (such as 150/200 million dollars)

Having established this, it should be emphasized that the price of shares can go up or down depending on the performance of the company, the global economy and other factors. In general, when there is more demand for a stock than there is available supply, the stock price will tend to rise. Conversely, when supply exceeds demand, the stock price will tend to fall.
Obviously, even positive news about the company, an increase in profits or an expansion of the markets, can increase the demand for the company's shares, leading to an increase in the price. Similarly, negative news, such as the loss of a major contract or falling profits, can decrease demand for the stock by driving the price down.
Other factors that can affect the stock price include the global economic situation, interest rates, industry competition, government regulation and many other variables.

 

SEC
Stocks on American soil are regulated by the Securities and Exchange Commission (SEC), the government agency charged with protecting investors, maintaining fairness and order in the financial markets, as well as promoting greater transparency in the market. The SEC is charged with enforcing federal securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934. It has the authority to require companies that have publicly traded stock to provide timely information to investors , to monitor the commercial activities of the companies and to investigate any fraud or manipulation of the financial markets. Some cryptos have been accused of being unregistered securities (this could happen when an ICO is organized and the investor has a profit perspective. The key to not falling under the radar of the SEC is decentralization)


IMPORTANT STOCK
Some of the most traded stocks are Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Facebook (FB), Alphabet (GOOGL), Berkshire Hathaway (BRK.A), Johnson & Johnson (JNJ), Procter & Gamble ( PG), JPMorgan Chase (JPM). Other very important ones to consider are:

-SPDR Gold Shares (GLD): this is an EFT that invests in physical gold, i.e. it increases if the price of gold increases. It is used as an indicator of the gold price trend

-Barrick Gold Corp. (GOLD): Barrick Gold is a global mining company that extracts gold and other precious metals. GOLD shares are an indicator of the trend of the gold market

-Vale SA (VALE): is one of the largest mining companies in the world that produces iron, nickel, lead and other precious metals. VALE shares are an indicator of the performance of the commodity market

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-Freeport-McMoRan Inc. (FCX): This is a mining company that produces copper, gold and other metals. FCX shares are an indicator of the market performance of copper and other commodities

-Simon Property Group Inc. (SPG): Simon Property Group is a real estate investment company that owns and operates shopping malls around the world. SPG shares are an indicator of the performance of the commercial real estate market

-Zillow Group Inc. (Z): This is a real estate technology company that offers property appraisal, purchase, sale, rental and mortgage services. Z shares are an indicator of the trend of the online real estate market

-iShares TIPS Bond ETF (TIP): is an EFT that invests in inflation-linked bonds issued by the US Treasury. It offers a hedge against inflation and its price rises when inflation is rising

-JPMorgan Chase & Co. (JPM): is one of the largest banks in the United States. JPM shares tend to be considered a good indicator of the health of the banking sector in general

-Berkshire Hathaway Inc. (BRK.A): Berkshire Hathaway is a diversified investment firm that owns many companies, including GEICO, Duracell and Dairy Queen. These shares can be regarded as an indication of the stock market as a whole


MAIN INDEXES
The stock market is also divided into various stock market indices that represent the performance of a group of stocks: such as the S&P 500, the Dow Jones, the Nasdaq and the like. The most important indices in terms of market capitalization and trading volumes include:

-S&P 500: this index tracks the performance of 500 American companies with the largest market capitalizations (Apple, Microsoft, Visa, Johnson & Johnson, etc)

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-Dow Jones Industrial Average (DJIA): this index includes 30 large US companies in a variety of sectors (Visa, IBM, Coca Cola, Goldman Sachs, Microsoft, Intel, Boeing, etc)

-Nasdaq Composite: this index includes more than 3,000 high-profile technology companies (Microsoft, Apple, Facebook, Tesla, Cisco, Altera, etc), often used as a reference index for the technology sector (this one had full development in the late 90s , with the famous DotCom bubble)

-FTSE 100: this index includes the 100 largest companies in the UK in terms of market capitalization (Vodafone, Unilever, BP, HSBC, AstraZeneca, Barclays, William Hill, Compass Group, etc)

-Nikkei 225: this index includes 225 companies listed on the Tokyo Stock Exchange and represents the main reference index for the Japanese stock market (Toyota, Sony, Honda, Panasonic, etc)

 

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