understanding wall street, fifth edition pdf


When demand is slack and money is freely available, as it is during an economic slowdown or recession, interest rates tend to fall.

Railroads had overbuilt, banks were failing, and unemployment was soaring. But both are clear indications of the ongoing trend in global finance. A young investor, on the other hand, could be less interested in a current dividend return.

Hetty Green once said, “There is no great secret to fortune-making. Each bear market is different. However, because the circumstances are not entirely positive, reverse splits rarely help stocks regain their upside momentum immediately. Because the New York Stock Exchange is the largest exchange, most of these shares were probably traded on the trading floor in New York, but from these figures, the reader cannot be sure. Technical analysts also use the Specialists’ Short-Sale Ratio, which is calculated in almost the same manner. • Every “5 year” since 1905 has been a year of rising stock prices (1915, 1925, 1935, 1945, 1955, 1965, 1975, 1985, 1995, and 2005). The “Statement of Cash Flows,” also called the “Sources and Applications of Funds Statement,” is best described as a bridge between the Income Statement and the Balance Sheet. Investing and the Internet The World Wide Web has become Wall Street’s newest curbstone meeting place. . Also, as a general rule, prices usually drop faster than they rise. INFLATION OR DEFLATION Inflation, the declining value of money as a result of rising prices, is caused, many economists believe, by excessive government spending. In effect, the extraordinary power of the Internet now allows every investor to participate directly in the complete investment process. Because, unlike gold, these paper currencies do not offer a “store of value.” “Gresham’s Law” Investors who are interested in the subject of gold and silver should become familiar with the mone- tary observations of Sir Thomas Gresham during the mid 1500s. When the bond trades in the open market, however, its price is quoted at 1⁄10 of its value. Technology Adobe Systems (ADBE) Cisco Systems (CSCO) Cree Inc. (CREE) Hewlett-Packard (HPQ) Intel Corp. (INTC) International Business Machines (IBM) J2 Global Communications (JCOM) Lockheed Martin (LMT) Microsoft (MSFT) Philips Electronics N.V. (PHG) QUALCOMM Inc. (QCOM) Texas Instruments (TXN) Internet Amazon.com (AMZN) Google (GOOG) Health Care Abbot Labs (ABT) Amgen Inc. (AMGN) Baxter Laboratories (BAX) Becton, Dickinson (BDX) Charles River Labs (CRL) Johnson & Johnson (JNJ) Medtronic, Inc. (MDT) Merck & Company (MRK) Mylan Laboratories (MYL) Pfizer, Inc. (PFE) St. Jude Medical (STJ) SurModics, Inc. (SRDX) GROWTH STOCKS 141 Watson Pharmaceuticals (WPI) Zimmer Holdings (ZMH) Consumer Staples Coca-Cola Co. (KO) Colgate Palmolive (CL) General Foods (GIS) Hershey Co. (HSY) PepsiCo Inc. (PEP) Procter & Gamble (PG) Retail Applebee’s International (APPB) Bed Bath & Beyond (BBBY) Costco (COST) Cracker Barrel Old Country (CBRL) CVS Caremark (CVS) Home Depot (HD) Lowe’s Companies (LOW) P.F. striking price The predetermined exercise price of a stock option. In the early 1870s, Rockefeller and one of his most important partners, Henry Flagler, who later became a developer and railroad tycoon, obtained the support of banks to undertake a major consolidation of oil refiners. That is, if a call writer liquidates a position in a closing transaction, the owner of the call may still exercise it at any time. Beyond the emotions of the day, however, the keys to investment success are often found behind the headlines and between the lines of the financial news stories. Since its postwar reopening in May 1949, the Tokyo Stock Exchange in 228 UNDERSTANDING WALL STREET Tokyo’s Kabutocho financial district has experienced substantial growth. However, the Commodore became more visible to Wall Street when his interests turned to railroads in the 1830s and 1840s. When both return on equity and return on assets are high, the reinvestment rate can be used with greater confidence. .
If the stock returns to that price range again, I’ll buy it!” This is called a “price support” pattern. Early merchants had many interests. To become an investment analyst, it is necessary to meet the requirements of the Financial Industry Regulatory Authority, better known as FINRA. In 1916, the Industrial Average was increased to 20 stocks, and twelve years later, in 1928, it was increased to 30 stocks, the same number used today. Initially, Understanding Wall Street was intended mainly as a “primer,” since the stock market is rarely taught in high school. But from that point on, both stocks began to falter.

There are two kinds of funds that investment companies manage: “open end funds,” also called “mutual funds,” and “closed end funds.” INVESTING AND TRADING 105 An open end fund deals directly with investors and always stands ready to sell or buy its shares at the current net asset value. This activity can apply to equivalent securities trading in different markets, securities with convertible features, or securities involved in mergers, tender offers, recapitalizations, or corporate divestitures. . Its construction is simple and, once understood, a point-and-figure chart is easy to maintain and read. 26th 32.50 30.75 30.75 17,300 Fri. 27th 31.63 30.38 31.50 11,700 A daily bar chart of this price information would appear as follows: Typically, a complete daily chart displays several months (and sometimes more than a year) of daily data. To an analyst, the contrast is striking. Hecla Mining (HL) Hecla Mining, headquartered in Idaho, with production of 8 to 9 million ounces annually, is not even close to being the largest silver producer, but it has a long history. Obviously the stockholders will be watching the company’s earnings progress closely. When this does occur, it is said that the company has “negative working capital.” “Long-term debt” is debt that the company will have to repay sometime beyond twelve months after the date of the Balance Sheet. For example, if the current EPS is $2.00 and the selected P/E ratio is 15 times earnings, the current target price is $30. margin account An account, typically with a brokerage firm, that allows an investor to buy or sell securities on credit. The second table shows an average annual growth rate of “only” 10%. Short-term traders with years of experience are aware that, on balance, Mondays have been “down” days, while Fridays have been “up” days. And even on the college level, investment courses are typically selected only by students with specialized business interests.

2. The term also refers to a bond’s interest rate, and this is the more frequent use of the word today. Many others are still struggling to survive today. When tax problems are encountered, it is advisable to seek the help of a qualified accountant. East Germany, with its 14 million citizens (or 17% of the total), was contributing only 8% of overall economic activity. He was the world’s first billionaire. Any spread that yields a profit, only to have much of it consumed by commissions, is rightfully known as an “alligator” spread.
This investor is also encouraged by the fact that 3M has paid dividends every year, continuously, since 1916. The relationship or expected relationship between the current price of the underlying stock and the option’s strike price 2. These comments are not recommendations. Therefore, anyone entering this arena can afford to be patient and should select and research the situation carefully. During the 1990s and into the twenty-first century, the growth rate of the Chinese economy was about 10% per GLOBAL INVESTING 233 U.S. Dollar Index—(DXY)—daily December 31, 2008 90 88 86 84 82 80 78 76 74 72 70 Mar Apr May Jun Jul year. Nonrelated coincidental factors The indicators explained in the following pages have been fairly reliable in the past. The MACD is displayed as two separate lines that fluctuate above and below a baseline. Today, Japan remains a net exporting country (oil is its main import), and its GDP is roughly $4.5 trillion, second in the world only to the United States. The Elliott Wave Theory Like the Dow Theory, the Elliott Wave Theory uses past 270 UNDERSTANDING WALL STREET chart movements to forecast future price action.

At its low on October 29, the P/E was 10.6 and the yield had climbed to 6.0%. Investing in zero convertibles requires special care for two reasons: 1. debenture An unsecured (without collateral) bond issued on the good word and general credit of the borrower. In general, bond analysts test an issuer’s strength under adverse business conditions with the objective of determining the safety of principal and interest payments. At certain times, the formula can be misleading. An in-the-money call option is said to have “intrinsic value” in the amount that the underlying stock is above the strike price. However, if the stock’s unusual volatility is partly due to its having a small float (i.e., a relatively small number of shares available for trading), the gap can be less reliable as a chart pattern. But, first, the company needs to establish a “track record” before “going public.” Most of the initial $2 million has been contributed in the form of “equity capital” by the venture capitalists. understanding the margin account . Of this, the broker normally receives about 35 to 40%. However, if the underlying stock had had a large move, either up or down, most likely the spread would have ended with the loss of nearly the entire debit. If equity does drop below this level, the account is said to be “undermargined,” and the customer will be asked to put up more margin. Throughout this period, the July 260s were consistently in the money and the July 280s were consistently out of the money. . By this time, the wealthy no longer kept the flowers in their gardens. shares outstanding The number of authorized shares that have been issued and are now in the hands of owners. Most investment counselors and banks have either in-house investment research or, as in most cases, the ability to obtain it elsewhere.

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Investors should carefully review the tax consequences of any hedge beforehand. If management fails to act by entering new markets and developing new products before the company goes into its decline phase, the firm can die. A bond trading below par, or at a “discount,” say $880, would appear as 88.

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