How is the stock market important to America's financial system?
350684
I just learned about this in class today. \n\nAn example would be the Great Depression. When the stock market was first 'invented', everyone put their money into the stock market because it just kept going on up. It was almost like a 'gravy train'. Because people didn't have a whole bunch of money, they would put things like their houses up for collateral for the banks. Even the banks put money into the Stock Market.As the prices rose, more and more people sold their stocks but this caused a panic because other people thought that there was something wrong with the stocks so they sold them too and asked for their money back from the banks. But since the banks had invested in the Stock Market, their stocks were losing money because no one wanted to buy them. In order to recoup their loses, the bank's called for all the collateral and loans back whick closed down factories which put people out of work and made them go to the banks to call for more loans. This pushed the banks into further debt whih caused the Great Depression. All because this little thing called the stock market came along.\n\n I don't know if that helped but I hope it did.
934747
I think tranactions reports of gains/losses always important See GAAP,,general accounting principles. Depends on which fiscal period they have been reported.
1039908
I think you need to do some basic research on stocks before you jump in.  You can easily lose your 4k if you're not careful.  The things you listed are indexes and markets.  The NYSE is a stock exchange.  It is a private company who has a stock (NYX).  The S&P 500 is an index comprising the 500 largest companies in America.  The NASDAQ is a market and also an index.  The NASDAQ contains "mostly" newer companies and tech companies.\n\nDo your research.
682471
They are critically important as an indicator of price to value.  That said, like any accounting based indicator, they are only as good as the quality of the numbers and in some cases the timing of the numbers (such as at the end of a business cycle).\n\nYou are confusing two distinct phenomena. First you are looking at the end of the chain with a "winning stock."  Imagine you are looking at the "hottest stock," for any trailing twelve month period.  By definition it has appreciated greatly in price, but earnings are unlikely to have moved as signficantly.  So, had you known at the beginning of the run which stock that was, you may have purchased a stock at PE of 5 and found it won at a PE of 45.  When you are looking at the end of the run, the PE must be high because it has appreciated.\n\nBut if you look at the beginning of the run, the PE was likely low.  It certainly had to be lower, assuming nothing unusual with the earnings, because PE rises in almost direct proportion to price increases.\n\nAdditionally, if you go outside the realm of the winning stock to the market as a whole, low PE stocks outperform all other categories in most time periods usually by around 2%, other things constant.\n\nFinally, you have another phenomena at work that you are ignoring.  Prices are Cauchy distributed, as such, you get extreme winners and losers at a higher frequency than you would expect in a normal distribution.  This is important because you have around 8000 public firms plus foreign firms.  Random movements alone should send some stocks through the roof in error just by chance.\n\nI do an exercise in my class where I auction off Snoopy Alphabet Flash Cards.  The cards are worth 1 dollar per period, but on a roll of a 1 on a 6 sided dice, they become worthless.  Any card still around at the end of round 10 is worth an additional $5.\n\nUsing simple present value analysis, each card has a very definite present value, yet many often trade above that value and hence are the "winners," and many trade below their value and are losers.  Yet, except for the letter on the card, they are identical in all respects.  Each one has a different PE and the more you pay the less it is worth over time, but the winners at any static moment are the ones with the highest price.  But the winners in future static moments tend to be the ones purchased at the lowest PE in this static time.\n\nThere are all kinds of measurement issues with PE outside the scope of this question, but adjusting for them, PE is a critical measure along with P to NAV, P/B, P/S and so forth.  They are crude estimates of price to value and are reasonable proxies for discounted cash flows in the normal circumstance.
365706
Finance is the management of money and other assets.
289912
Good question. First off, depending on who you talk with, US stocks have had a fairly strong bull run from late 2002. There are several schools of thought as to the current market trend. My view is that leading US stocks that drove this rally (GOOG, EBAY, YHOO, APPL, etc.) are being distributed, if this continues, the general market is probably going lower. Could change at any time.\n\nThe US and western Europe have the best developed, most liquid equity markets. Other markets have excellent potential, however there is more risk as well. For the most part, financial statements released by US companies are reliable. Other countires may not be as rigorous. There may be other risks in less developed markets as well.\n\nThere are so many different ways to invest in stocks, it's very hard to determine if you should start now.\n\nYou need to learn about the market and develop the skills to decide what is best for you.\n\nWarren Buffett and William O'Neil are examples of people very successful investing in stocks. They share some similar views, but are very different investors. Search them on Yahoo! O'Neil's book "How to Make Money in Stocks," is excellent.\n\nTaking a position in a stock or market takes research, planning and courage. Mutual funds, ETFs and hedge funds are excellent alternatives.
1166230
property AND it's more relaible. (if something happens to it you're not at loss, you have insurance)\n\nstocks=== they can go down in value, or the corporation can fail: ie enron.\n\nmutual funds===as reliable as stocks, income is never certain, and the chance of loss is there.
1085292
Effects of cat population of United States on stock market.
510758
It is when the dollar assumes status of primary reserve currency in the international financial architecture.  It prevents exporting nations from spending domestic dollars they earn from the U.S. trade deficit and forces them to finance U.S. capital surplus.  This sends wealth to the U.S. in exchange for the privelege of financing U.S. debt to further develop the U.S. economy.\n\nThanks for asking this, had never heard of it so I learned something new today!  I just had to look it up when I read it, make sure you weren't making something up.  :)  No offense intended.
636616
once the US decides it is more important than oil, christianity or the stock market
98294
THe NASDAQ originally meanr,National Association of Securities Dealers Automated Quotation.  Its a computerized trading system.  In other words there isnt a physical place, a building like the New York Stock Exchange.  The number you see quoted is a composite of around 5,000 stocks traded on the computerized system.\n\nThe S&P 500 is an index of 500 stocks. It is 500 of the most widely held U.S.-based common stocks, chosen by the S&P Index Committee for market size, liquidity, and sector representation.  The only reason a company is deleted from the index is if it goes bankrupt or it merges with another company.  The S&P 500 accounts for 70 percent of all capitalization of the US equity markets\n\nThe Dow Jones Industrial Average is a price-weighted average of 30  stocks traded on the New York Stock Exchange and the Nasdaq.  The average consists of 30 of the largest and most widely held public companies in the United States. The Dow Jones averages are computed by summing the prices of the stocks in the average and then dividing by a constant called the divisor. The divisor for the Dow Jones Industrial Average is adjusted periodically to reflect splits in the stocks making up the average.  Since it is price weighted a $1 increase in a lower-priced stock can be negated by a $1 decrease in a  higher-priced stock, even though the lower priced stock had a larger percentage change
234631
The stock market will go up in the next few months.\nThe stock market will go down in the next few months.\n\nThe key is to make money regardless of the markets direction.\n\nJ
426382
No, that led to all kinds of perversions of market forces in the past. Liquidity is also an issue. \n\nIf it ain't broke, don't fix it.
97544
The dollar is not directly linked to the stock market. It is a strong currency in that many developing countries, including China, stockpile dollars to give them some "hard currency" strength. The danger is really the longer-term decline of the dollar versus other "hard currencies" such as the euro and yen. The dollar is also strengthened by its ties to various commodities, such as oil, which is denominated in dollars. If Russia and the Middle East countries begin selling oil to Europe or China for euros or gold dinars in a big way, then the dollar would lose more of that stability. Inflation and investors' currency speculation are additional variables. But it is unlikely that the dollar would crash overnight, because those that you might think would benefit from this (such as China) would actually lose billions and billions overnight if all their dollar holdings lost huge value. Longterm erosion in the dollar value is much more likely.
698662
I read a story that there as many Republican as Democratic stockbrokers.\n\nWall Street's biggest care is about money. If they see a better opportunity, they will take it.
248355
I am not sure there is an easy answer for it. It is projected that US growth this year will be weaker than the last two years. Also, it is projected that the US currency is likely to depreciate in 2006. If you want to invest in the stock market outside the US, then you should go for it.
780600
National debt, well, for substantial countries like the US, is often a good refuge for money when the economy stinks.  If business is generally bad, then people more interested in wealth preservation will bid up government debt because the other investments are perceived to be too risky.\n\nRemember, market capitalization is a pretty bogus store of value (multipy a company's outstanding shares by the most recent price of the shares on a public exchange).  A market crash, supposedly, erases enormous amounts of "value".  The government bonds, meanwhile, have two values: a similar market value, and the face value.  If held to maturity, the investor knows how much he will get (plus interest for the intervening period, assume they aren't those stripped of coupons or are notes, wherein the price discount to the face determines the "yield").  The stocks have per share equity (book value) numbers, but that is if the company is liquidated--which almost never happens and when it does the value is often virtually nothing.  \n\nA large national debt means there is room for many to buy-in to the debt when abandoning the stock market.  But then, a large national debt means that there needs to be a heavier tax burden to pay for it (or at least a maintenance service of it).  Heavy tax burdens can have a dampening effect on the economy and a depressing effect on stocks.