Stock market Day 2 Review and next step

Answer the following A stock represents what in a company Ownership OR Debt A company issues stock to the public because… They are required to by law They want money for expansion They want to meet new people Their company is too small to borrow from a bank. Individuals buy stock because They want a safe investment They hope to earn bigger profits than a bank can offer They want a guaranteed rate of return When the average market prices are falling, it is called a bear OR bull market?

Review Questions Continued Which of the following news will cause Dell’s stock price to RISE The very popular President of the company is tragically eaten by a shark in Hawaii HP starts making a computer with the fastest processor on the market Dell’s profits are expected to be a record high this Christmas season. Which of the following events will cause the price of Lockheed Martin (manufacture fighter jets) stock to FALL? 1. The US declares war on Syria A new President is elected in the US who wants to make peace around the world. Lockheed Martin has a record number of orders for new F-19 fighter jets. True or False? Market Crashes happen regularly every few years.

Primary market vs. Secondary Market A primary market is when a company issues stock for the FIRST TIME. The proceeds or money invested by investors goes to the COMPANY. Facebook sold about 485 million shares bringing in about 18.4 billion dollars for the company http://www.forbes.com/pictures/eddk45ghhgk/uber A Secondary market is when investors trade stocks among each other. The company DOES NOT EARN any money from these transactions. It is the INVESTOR who earns or loses money depending on what the selling price is.

Blue Chip Stocks Vs. Penny Stocks Blue Chip stocks are stocks from WELL ESTABLISHED companies who have a long reputation of profits. High quality stocks with proven steady earnings Examples: Kellogg – founded in 1906, just bought Pringles for 2.7 Billion dollars (2012) HJ Heinz – 110 year old company DuPont – Founded in 1802 and worth $46 Billion dollars, famous for products that use Teflon, Lycra, Nylon and also owns Pioneer seed General Mills – Founded 150 Years ago – owns numerous cereal brands, Yoplait, Haagen Dazs and Betty Crocker IBM Coca Cola – Market Value of $168 Billion UPS – Founded 105 years ago – has a fleet of 500 planes, 100,000 vehicles and delivering 16 million packages a day Full List http://www.bluechiplist.com/what-are-blue-chips/

Penny Stocks Company stocks that trade for low prices (Usually less than $1 but sometimes less than $5 is considered a penny stock) Usually these companies are NEW to the market and are considered very risky. Their stock prices fluctuate rapidly but there is real potential for profits here if you pick the right one. EXAMPLE if a penny stock is purchased for $1 a share and the price increases by $.10 you have earned 10% By comparison, if you purchase a blue chip stock for $100, the price would have to go up by $10 to get a 10% return.

Penny Stock success stories Pier 1 Imports – In March 2009, was at $.11 per share. Today’s price is $10.07

Famous penny stocks Sirona Dental Systems– In 2000 was worth $.27 per share. Todays price is $95.98

Penny stock success story Monster Beverage – In 1995, worth $.70. Today $132.40.

What are Commodities Any RAW Material or AGRICULTURAL product Examples Cotton Wheat Corn Sugar Silver Gold Coffee

Insider Trading People feel confident investing in the stock market because they believe that everyone has equal access to information. If company information that will critically change the stock price is available to some people before others then these few people will have a chance to buy or sell stock and earn extra profits. When people who work inside a business take critical information and pass it on to friends or clients they are breaking the law. When people take this information and act to buy or sell stocks to earn a profit they are also breaking the law. Insider trading is illegal and often results in Jail Time. It is a form of WHITE COLLAR Crime.

Examples of Inside Traders who got caught Martha Stewart – 2004 Jail Time 5 months, home confinement, $30,000 fine

Inside Traders get caught Matthew Kluger – 12 year jail sentence – lawyer in charge of mergers and acquisitions. He passed confidential information to Kenneth Robinson who then passed it to a broker named Garrett Bauer. This illegal partnership continued for 17 years earning the 3 men $37 million dollars until they were finally caught. Garrett Bauer got 9 years. Robinson, cooperated early with police and got 27 months in jail.