News And Society
Investors, Speculators and the Stock Market – Part 1
September 20, 2011 | 
Author 
Virtually everything we buy and sell, both wholesale and retail, is auctioned to the highest bidder daily; demand for goods and services are generally satisfied by competitive auction. The foundation of Capitalism is the auction process of exchanging property. The auction is the only manner in which private property and labor can be exchanged for the highest contemporary value. Every owner desiring to sell a product will make it available to all potential buyers and strike a deal with the highest bidder.
The auction format of buying and selling surrounds us. Even our daily purchases at the supermarket or department store are an auction. Buying or not buying different goods causes prices to fluctuate in response to our demands. When we want more of certain goods or services, the asking price is raised until the competition amongst those who want to consume does not increase above the available supply. And similarly if demand falls off, prices will have to fall or potential customers will continue to leave goods on the store shelves. Our willingness to consume or not consume throughout the year is our expression of our bids for goods and services.
A stock market is an auction where representatives (called specialists) of stock brokerage companies meet to buy and sell stocks (corporate equity). Brokerages also have employees and/or self-employed stockbrokers around the country who receive buy and sell orders from their customers, and relay those orders to their exchange broker who alerts the specialist that is responsible for the particular stock that is wanted, or offered for sale. The specialist then proceeds to the area of the exchange where that stock is traded and offers to buy or sell your stock, as the case may be, by dickering with specialists from other brokerages. The buying specialists group together, facing the selling specialists, prices to sell are announced and bids to purchase are made, with each side making some adjustments until trades are made. If you the customer have offered to buy or sell at the best auction price available at that time, your order will be executed and you will receive a written record of that sale.
Originally stocks represented ownership of a company in the sense of equity, wherein the original sale of stock was insured by the collateral of manufacturing facilities and equipment, so that in the event a company went bankrupt, the stockholders would be somewhat compensated by the sale of buildings and equipment. Today, companies expand production or survive slow times by borrowing money from banks or through the sale of bonds, rather than creating and selling new stock. They use company assets as collateral for those loans or bonds, which offers some protection to banks and bondholders and none to stockholders. If the company should fail, outstanding loans and bonds may be repaid out of the sale of equipment and property, if that equipment and property still have economic value.
If a company has assets worth ten million dollars, and one million shares of stock are owned by the public, that stock is protected to a price of ten dollars per share. But if the value of that stock rises to one hundred dollars per share when speculators and investors bid up its price without regard to its equity value, then ninety-percent of that stock’s value is unprotected by company assets and profits. Its price has been inflated in a careless and economically dangerous manner. If bonds are sold to raise ten million dollars for operating capital, then the company’s assets will be used to guarantee those bonds and there will be no equity value in that stock. Bankruptcy for such a company would result in a total loss for stockholders.
Not all players in these markets are long-term investors, or consumers of resources and commodities; many are strictly short-term speculators, betting on price changes. Speculators are people who bid to own, or offer to sell all sorts of stocks, bonds, and commodities, without holding stocks to receive dividends, or holding bonds to maturity, or taking possession of commodities to produce consumable products. Their gains come directly from other peoples’ losses and their every effort is to try and read the markets, to be able to predict the actions of investors and consumers, and buy or sell on their own most favorable terms.
Speculation does not drive or strengthen the economy; it only feeds off the wealth of the economy. Speculators do not provide services and infrastructure. They have become institutionalized in our commercial real estate, bond, stock and commodity markets. Their actions in these markets conspire to create values for the pieces of paper that they buy and sell, which are different from the real market value of the assets represented by stocks, as well as the real market value of the commodities that speculators buy and sell, but never see. Political power is manipulated to regulate these investment markets for the benefit of speculators.
Speculation in stocks and other financial papers has caused the attention of the greedy to focus on the changing values of stocks, rather than on actual corporate earnings and dividends paid to investors. These changes in stock values are brought about more by the activity of speculators than by economic activities of production and consumption. The longevity of investment toward gain, from present and future profits of a company, is giving way to short term buying and selling, based solely on stock price. Speculation often drives many stock values way above or way below real current market values and earning capacity. These variations allow speculators to unduly influence trading in the markets, by encouraging investment for short-term gain through volatility, rather than long term gain via profits from the sales of goods and services. As the markets oscillate, speculators buy and sell to siphon off a portion of the flow of investment dollars coming at the markets. Whenever uncertainty arises, speculators (and investors turned into speculators by their brokers) drive the markets toward economic anarchy.
Many corporations are now more interested in how their stock price is viewed by speculators than by investors. When stock prices get somewhat above one hundred dollars per share, a round lot of one hundred shares would cost over ten thousand dollars. These higher prices tend to discourage speculators, who want to own lower price stocks, which are usually more volatile, allowing them to skim profits off that volatility. High stock prices therefore reduce the exchange activity of a stock (volatility); such that many corporations split their stock two-for-one or three-for-one, dropping the share price to one-half or one-third of its previous price, to encourage increased speculative buying of their stock.
“The market is always right,” investment brokers, referring to the value of stocks, bonds, and commodities often quote this statement to customers; hoping to impress them with a belief that the markets reflect overall attitudes of investors and speculators. But for every buyer of stocks and commodities there is a seller of the same. Therefore, the markets are actually low as far as buyers are concerned, and high as far as sellers are concerned. Neither group thinks the markets are right. The fact is, the markets are always changing. The direction of change is determined when there is a surplus of buyers over sellers (rising market) or vice versa. The market is only right when and if it stagnates with no change.
The greatest challenge to investors and speculators is the legal requirement that dealing in stocks and bonds must be a gamble. Forehand knowledge of information that will affect the value of a stock or bond is illegal, and is called insider trading. The government requires that all potential-players in these markets be equally informed of the present and equally ignorant of the future. Though there is great diversity of opinions about the meaning of corporate data, still all players must have equal access to that data.
It used to be that every stock trade was done face to face and that a particular stock would only be traded at one exchange. Today stocks are traded 24-hours a day; over the phone between customer and broker, via computer between brokerages, and on numerous stock exchanges around the world. When stock trades were made face-to-face, trading was relatively slow even at its most volatile times. Now that brokerages can buy and sell stocks via computer, orders to buy and sell can be processed with lightning speed.
Many speculators automatically offer their stocks for sale if the market should decline a certain amount, while others have standing orders to buy certain stocks if the market is rising. Standing orders to buy or sell at certain price levels tend to exaggerate the volatility of the market. They cause a rising market to rise further, or a declining market to fall further, than they would have without speculative standing orders.
Many investors and speculators buy stocks on margin (partial payment), paying only a portion of the cost. If the market drops far enough that their down-payment equals the loss on their stock, they then must immediately send more money to the brokerage firm that they bought it through. If investors do not respond to the margin call for additional money, their brokerage will sell their stock at any price, without their permission, and send them a bill if the brokerage had to pay the difference between their customers’ down payment and the selling price. In such a case the investor has not only lost their stock or bonds and a chance to recoup their losses when that stock or bond regains market value, they may be saddled with additional debt to pay for losses beyond their control.
While your broker is trying to get you the best deal available, you are actually competing with your broker’s company to buy and sell stocks. Brokerages invest heavily in stocks, bonds and commodities, speculating for their own profit. So if you want to sell a stock that their chief strategists believe is going to go up, they will not necessarily inform you. More likely they will buy your stock from you and be quite happy to have you contribute to their welfare. Likewise, if you want to buy stock that they believe is going down, they will tell you so if they don’t own any, or they will sell you theirs and remain happily silent. The real competition between you and your brokerage firm happens when you both want to buy or sell. In that case your brokerage will sell or buy a number of stock orders through the same specialist at the same relative time, and yours will be the ones with the least gains, making the ones with the most gains their trades. Brokerage firms look out for themselves at everyone’s expense, including their valued customers.
Each stock transaction determines the value of all of the stock for a company. When one trade of 100 shares, usually the minimum amount which can be bought or sold, is made at a price above or below any current price, the value of all of a company’s stock is considered to have risen or fallen by that same amount. And though many investors do not buy or sell on a daily basis, they still watch their stocks and note how their perceived net worth has increased or decreased as their stocks move up or down. The greatest of fallacies is the belief that one’s stocks are worth the prices quoted daily in the paper. Only a small percentage of any company’s stock needs to be placed on the market and sold at any price to wreak havoc in the value of all of that particular stock. A company’s stock is worthless as soon as investors are unwilling to own all of it. By this I mean, if more of its stock is offered than the market can find buyers at any price, the value of all of that company’s stock falls to zero, (no demand, no value).
All stocks are in a false equilibrium day to day. Barring some catastrophe in the world in general, or some segment of our economy in particular, a stock’s equilibrium is established by its previous day’s activity. Each daily close of the markets establishes a new point from which gains or losses are measured. But since it is buyers and sellers who define this equilibrium, the ratio of buyers to sellers is very important to the value of a company’s stock.
If there were an infinite number of buyers and sellers available to a market, it would be fairly stagnant and nearly impossible to crash. But there are only a finite number of buyers and sellers; both sides draw from the same pool of speculators and investors. Whenever the market falls, it is likely that many would-be buyers will become sellers, and many who were on the sidelines will step in to sell their stocks and avoid further losses. If sufficient pressure to sell stocks at any price occurs, even if only in one sector of the market, it can attract cash from other sectors, consume that capital and thereby reduce the cash available to support values in other markets. Pressure to sell for lower prices in one market can produce a downward momentum for all of the markets. As new prices are established at lower levels, equity is lost across the board, both for sellers and for owners who remain on the sideline hoping for stability. With any major loss of equity in one market, those needing to cover their losses may transfer or borrow capital from other areas of the economy to balance account sheets at brokerage firms. The loss of capital to investors in those other markets will cause prices to fall for them as well.
In 1987, many small investors could not get out of the stock market before being wiped out. This was not only a result of it being impossible to get through to your broker by phone, since many thousands of other investors were doing as you were. Your broker’s company had two things to gain by your losses. It could sell its own stock first and consume what little demand may have existed to buy stocks, and it could keep your stock off the market to prevent prices falling even lower. When supply of anything exceeds demand, prices will fall relative to the available surplus and any demand to consume that surplus.
There is a method of selling stocks and commodities in our economy that is called selling-stock-short or short-selling. Short-selling is a way of creating a false surplus of a stock or commodity. In essence we borrow stock from some investor, through a broker, and we sell that stock to a third party because we believe that its price will fall in the future (we are selling short because we are short the amount of stock that we have borrowed and sold). At this point all we have done is sell something that does not belong to us, making neither a gain nor a loss. If our gamble is right and the price of that stock or commodity does fall, we can then buy that stock back from a fourth party at the lower price and return it to the person or brokerage we borrowed it from. Because we do not pay anything to borrow the stocks, our profit is the difference between the higher price we sold and the lower price we paid to have them returned to their original owner.
The history of selling-short is the most calamitous in all of our economic history. One hundred years ago professional stock traders were ruining each other and many sound businesses by selling large amounts of a particular stock short. Then they would put out rumors that caused other investors to also sell that stock, driving the price very low, which would allow them to make large profits by buying back that stock at a lower price and return it to the brokerage they had borrowed it from. Other traders who owned that stock on margin might go bankrupt, unable to cover a sudden and unexpected loss due to unfounded rumors. The company that issued that stock may have other shares held as collateral for expansion loans. If the price of the stock should fall, the loss of price equity would force banks to call for other collateral, or they might seize property, take over a company’s management and possibly liquidate it. If a company had cash assets that would allow it to buy up these short sales as they occurred, it would not only support the price of their stock, but as less and less stock was available for investors to own, the price of a company’s stock could rise. The short-sellers would eventually have to buy stocks to replace those that they had sold short. This would create demand for a reduced supply, causing the price to rise and possibly catastrophic losses for those who had sold short. The Japanese do not allow selling-short in their markets, and for good reason. There have been many stock panics in our history and all of them have been worsened by selling-short.
Consider a long time investor-A that owns stock outright and is as much concerned with dividends as stock prices. If this stock is managed by a brokerage for that investor-A; the brokerage could loan that stock to speculator-B, who would sell it on the market to speculator-C. If investor-A did not want to sell, there would be less stock available to the market and the price would remain higher; forcing speculator-C to offer a higher price to entice an investor to sell some stock. But since speculator-B is borrowing and then selling this stock, he is helping his own gamble by adding this borrowed stock for sale to the market, thereby encouraging a price decrease simply by increasing supply. If the price does fall, speculator-B has made a profit when he buys stock from investor-D (who could actually be investor-A dumping the stock to avoid further loss) and returns it to the brokerage. In essence the brokerage has aided and abetted a loss to one of its investor customers, while helping a speculator customer profit. Selling-short does not increase investor equity; however, it does reduce it by the amount of profit made by the short-seller.
So why do stockbrokers offer short selling? Simply to make money; stockbrokers earn a fee each time stock is traded. They do not like investors who purchase stocks and then hold them for years to earn dividends. They want the fees associated with trades and market volatility, and they are happy to help speculators hurt investors. If they can they will turn all investors into speculators.
There is a big difference between investors and speculators. Investors put surplus money in the stock, bond and commodity markets for the long term. They hold stocks for years to receive dividends as a return on capital investment. They buy bonds and hold them to maturity and receive interest payments. They buy commodities and use them to manufacture goods and provide foodstuffs. While the speculator is a pure gambler, buying and selling stocks, bonds and commodity contracts based on price changes, seldom holding them to receive dividends or interest. Only a speculator would sell a stock or commodity short. Only a speculator would buy or sell a stock index contract, betting that the market as a whole will go up or down. Only a speculator would take an option to buy stocks, or sell stocks, rather than commit fully.
As more money flows through the markets to speculate in price changes rather than dividend or interest returns, the volatility of price changes will increase. When earnings reports are low or below market expectations, many stocks fall in price rapidly and somewhat drastically as speculators dump those stocks knowing that with bad reports other speculators will sell such stocks and others will temporarily choose not to buy. In a non-speculative market a stock would drift lower in price, or stagnate for some time. So speculators will move out early, and even sell the markets short to accelerate a decline brought on by perceived weakness, and reap profits for themselves thereby.
Not everyone in the markets is a speculator. If this were the case we would have daily panics and weekly chaos. But the amount of activity in the markets that is strictly speculation is increasing, and we can see this in the changing relationship between dividends and prices. How can a stock, which returns a 4% quarterly dividend to a market that was expecting 5%, have its price drop 5% or more in one day? In the opposite case, the stock price might rise 5% in one day on a dividend of only 1% above market expectations. Investors would not sell or buy enough stock on this information alone to make any noticeable price changes. Only speculators can do this, because speculators are working a pure gamble, based on near term strength or weakness of companies.
Due to its length this article is being published in two parts. Part_2 is also on this site, or will be shortly.
? June 2009
Craig D. Hanks
By: Craig Hanks
Posted in News And Society | 
Tags: Asking Price, Auction Format, Brokerages, Buy Stocks, Buy Wholesale, Corporate Equity, Department Store, Exchange Broker, Expression, Foundation Of Capitalism, Highest Bidder, Private Property, Property Auction, Speculators, Stock Brokerage Companies, Stock Market, Stockbrokers, Store Shelves, Supermarket, Willingness | 
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Thoughts on Global Recession – Definition and Realization
The word “global recession” has been one of the most uttered words of every person from different parts of the world. According to Wikipedia, “a global recession is a period of global economic slowdown.” Ordinary individuals actually have several misconceptions about this term. As a result, these uneducated people are becoming more scared of its effect in their lives rather than give them more reasons to explore other opportunities.
The Internet has presented several tips on how to survive in today’s recession in economy. Many people have also said their views about it through an interview, a blog post or even in sticky chain email. The wrong impressions have also spread fear to those who do not have the correct thought about it. There are also others that think of it as something that is just happening in another side of the world because they are not directly affected by it. But the reality is that, global recession is, indeed scary if we are not well-informed about it and as its term implies, it’s happening globally but in a certain period of time only.
The term is scary as it also means that huge companies are downsizing their staff, expenses and production. Many firms have laid off hundreds of personnel in just a matter of months. This may be a time of misfortune for some but this season also offers many opportunities. Ordinary individuals should not stop looking and taking other opportunities to survive in this crisis.
For those who have been laid off, it may be hard to think about how to start something anew. However, being optimistic has never been a crime especially if you are looking at a positive and possible way to get out of this misfortune. Yes! The economy is in bad shape today but that should not make us feel reluctant about unleashing the potential of other businesses.
The trick to survive is not about going to the curves of the economy’s bad shape and wait for it to return in its balance. It should always be the other way around. Positive thinking, constant studying and observing are fundamentals to live decently during this time. We can always cut down our expenses, save more money and think of other ways to make it on our budget. But to remain standing is to stay more persistent, aggressive and realistic.
Surviving also means focus. Many factors may affect our objective to stand firm but if we are focused on things that we want to achieve, then those factors are nothing but little destruction. This may be a very ideal opinion but its possibility can be clearly seen if we are to take this season as a good opportunity. It’s all about attitude and self motivation. We should practice it even if it is not the season of global recession.
By: Liza C
Scrap Copper Market
Scrap copper market has definitely been a significant thing these past few decades. It has become one of the most essential metals in the industry and is also hard to acquire like any other metal. And because of its scarcity and its high – demand, copper is the largest selling metal of today, you could even sell recyclable and recycled copper, and for a good price too. So if you are interested in learning even more information about the scrap copper market which is own a dominant player in the industry, you came to the right place. You are a lucky person indeed because you just came to the place in which you would get all the necessary information that you about this subject matter that would definitely fill you in. you don’t have to search for it elsewhere for it is all here. And by that fateful moment when you finish reading this article, you will absolutely learn a lot about this topic which is very essential if you are planning to go with this stuff, selling scrap copper which is one of the most sold things in the planet. All you have to do now is to read this article, that’s all. You simply need to read it. That is all that you have to do.
Why is there a sudden boom on the Scrap copper market? Well, as we all know, copper is indeed a very important material. It is widely used in almost all industry that deals with electronics; automobile, construction and many others. Every day, the number of these products and equipments in production is rising like water on a boiling pot. This creates an outrageously high – demand for copper. The problem is, like any other metal, acquiring copper is not that easy. It is in fact one of the most difficult thing to do. Acquiring sufficient amounts of copper in one go is impossible. This is the reason why most industries turn to recycled copper. Yes, copper has a property that makes it reusable, so no matter where you use it, you can be sure that it could be reused again for another purpose. This is why there is a surge in salvaging copper from thousands of different sources, old sources. Copper is almost everywhere, especially in your homes, it is filled with it.
However, you couldn’t just sell it for a high price just because it is in demand. The Scrap copper market price is definitely monitored by London Metal Exchange. To make sure that you are selling it in a reasonable but you’ll – make both of us happy prices, you could always check the internet for its world market prices and compare it. Prices fluctuates, it changes daily sometimes very hour. You could also search and call your local recyclers or junk shops to know more about the current price of copper in your area. So if you know where to find it, salvage it and sell it.
By: Daniel Lanback
Dave Ramsey, Is it Possible to Ever Really Own Your Own Home?
The American Dream for many is to own your own home. I have a friend that said,”Why should you buy a home, when taxes alone can steal your home?” I had to ponder that thought, and say maybe he is more right than most. Dave Ramsey preaches for homeowners to pay-off their homes and live like no other. I think may be the government even has Dave Ramsey fooled.
For example, you have heard of imminent domain? This is when the government comes in and forces you out when your property is deemed needed not in the best “use.” Often times, one’s property is considered in the way of progress (needed for a highway, shopping mall, or corporate/governmental offices etc.). In the City of Grand Rapids, Michigan, not too many years ago, I remember a man who had refused to sell his house to city developers, because it was his homestead. He had lived there his whole life. Being a somewhat conservative town, the City of Grand Rapids in the end decided to leave the old man alone, but did pave a parking lot around his whole house. I speculate, though, that they raised his taxes to accommodate the change in zoning from residential to commercial. When he died they razed his home.
Years ago, I, too, remember a neighbor who owned a cottage on Higgins Lake who every year complained about his taxes. His taxes on his lake front property would double or triple due to property assessments and/or increases in school millage. He would try and fight the increases, or just kick and whine to his neighbors. He believed that the school district had over reached its boundary by taxing Lake Front Property at higher rates than the town itself. He was probably ahead of his time, but being a staunch Republican saw it as a matter of redistribution of the wealth. Later on, Michigan passed the Headley Amendment. Schools were to be funded through the lottery. Charter schools also popped up to cut costs, because by law they don’t have to follow the same funding rules as the public schools.
Today, I believe that we all may be taxed out of our homes. In the wind, I hear of a National Tax to help pay for this huge deficit spending, new taxes on energy (Cap and Tax), taxing without representation on anything considered a public safety issue, higher property taxes, and health insurance taxes. What happens when retirees on fixed incomes cannot pay all of these taxes? Further, what happens when social security goes bust? Forget pensions, and due to the high unemployment rates many people’s savings have all been depleted.
How many of you have received a ticket lately while driving your automobile? A friend of mine got a ticket, while driving, for having his right rear tire “touch” the solid white line near the shoulder of the road. The policeman shouted at him for not driving in the center of the lane, but did say he could fight the ticket. It was a windy day. The ticket itself cost $40, but other fees and city taxes attached drove the cost of the ticket up to $181.00. We, the public, are told that the police do not have a quota but, on the other hand, if they don’t get enough revenue coming in they will be losing their jobs. Oh, and don’t try to fight the ticket, because the judges pay is also tied directly to these tickets. The point is that you don’t even know that you are being taxed. How creative can these politicians and public officials get?
Let’s now look at Foreclosures. There are about 130 million homes in America. Did you know that about twenty-six million homes are in preforeclosure, foreclosure or upside down. All of these foreclosures are affecting even innocent homeowners who have faithfully been paying down on their mortgages. Their homes have plunged in value, but the assessed values have not dropped to any considerable amount. It is interesting too that several States are demanding that the Lenders who have foreclosed on the properties take care of the lawns and make all repairs needed before renting or selling the homes. That’s probably good, but the lenders are instead deciding to just walk away from all of these vacant properties.
What is a city or state to do with all of these vacant homes? If you think in terms of the big picture and the grand scale of socialism, the government doesn’t believe in private property. Either the homes can be bull dozed down and made into parks, or the homes can be changed into Section 8 homes. The government will just give these homes to low income people with rent subsidies. However, Los Angeles and New York City have run out of section 8 money, because they are bankrupt. So, I guess everyone will be living on the street in the near future. The government seems to want your home and all of your money. If they could tax the air you breathe they would. No joke. Maybe, I will invest in tents.
Wake up America and smell the coffee! It is not that your taxed to death, it’s that you are now being taxed before you are born and have no means of truly owning your own home or castle. This system is possibly corrupt and at any minute the government can and will raise your taxes to tax you out of your home. Are we all to be renters and beggars?
By: Janet R Caldwell
Posted in News And Society | Tags: American Dream, Charter Schools, City Of Grand Rapids Michigan, Conservative Town, Dave Ramsey, Governmental Offices, Grand Rapids Michigan, Higgins Lake, Homestead, Imminent Domain, Lottery, Neighbor, Neighbors, Old Man, Parking Lot, Property Assessments, Redistribution, Republican, Shopping Mall, Whole Life | No Comments »
Can a Switch From Fair Value Save a Depleting Economy?
In this time of economic turmoil and despair Congressmen and financial institution CEOs are trying to figure out a way to dig them out of a recession grave before it is too late. Amidst the 700 billion dollar by out and the collapses of several banks, people are wondering what could have saved us from these dreadful times that we are encountering: maybe a different presidential economic strategy, decreased CEO salaries and bonuses, or more responsible loan and mortgage payments that are American citizens could actually pay off. Maybe all these alternatives are not the problem, maybe we need a switch in the way the books are kept, and maybe it is time move away from Fair Value accounting practices. This article will discuss the good and the bad of Fair Value accounting. It will help inform the readers of why this practice may have caused are economic downturn and the reason behind the government bailout.
Fair Value accounting is the practice of a company marking their assets to current market prices, this is also known as mark to market accounting. During this period of investing inactivity market prices for securities and other assets have declined rapidly this forces financial institutions to write down their assets to these awful market prices. This process raises a problem because it is forcing assets to be valued at lower prices then they should be, which causes the balance sheets of businesses to weaken and losses of millions of dollars to occur. Most financial institutions are going to hold on to these securities till their maturity. During this period of time the market will again become active raising the value of these securities. So this idea raises the question: Why should financial institutions be forced to value their assets at a declining market and lose millions, while in just a few years the market may bounce back raising the market value of the assets? No wonder why financial institutions are calling for a suspension of Fair Value accounting during this recession.
For all the bad Fair Value accounting brings there is also the good side as well. Fair Value accounting helps keep investor confidence high by keeping the valuation of assets of a company consistent with temporary state of the economy. A change from fair value could give top management in a company an excuse to release fictitious values of their assets therefore inflating the balance sheets. After the fraud that led to the collapse of Enron and the loss of so many jobs and shareholders losing everything due to Enron’s incompetence, it is important that investors have reliable information when they invest their money into companies. Fair Value also acted as watchdog over the fledgling economy raising the red flag when the economy started to bust. Without the constant write downs of securities and assets we would have no warning of an economic collapse. So all in all a change from Fair Value accounting to some other form of accounting would favor the management of companies and their bonuses, it would not favor the backbone of the companies which are the investors. Let’s not forget that shareholders of a company are the ones that keep it going so we have to keep investor confidence high to help save the economy from further damage.
Before Fair Value accounting became the appropriate way to value assets and securities, companies used historical cost, but that was eliminated because of the irrelevant values that that method would disclose in corporate financial statements. If fair value accounting is eliminated what are possible alternatives to value assets in the future then? A practice that is commonly brought into the picture is the cash flows that an asset of security will bring to a company that owns it. This component of valuing an asset or security is completely ignored by fair value accounting practices. This seems to be the most effective alternative to fair value accounting, because every asset or security bring in a certain amount cash inflow to a company, how much of this inflow can ultimately determine the value at the present time of an asset. For instance, during this time of economic instability the cash inflows of an asset or security will be extremely low, while during an economic upswing these inflows will be extremely high. This process will give the investor full confidence that a company’s financial statements are disclosed with highest extent of honesty there is.
Is a change from fair value accounting really the answer to saving this economy? It may not be whole answer, but it could be a part to the solution. We have to remember that recessions are part of the economic cycle and every person will go through two or three of them before they die. The best thing to do is take care of your money and keep a close eye on your investments. Anything extra that could help us prevent an economic struggle like changing form fair value accounting is just a bonus.
By: John C Little
Posted in News And Society | Tags: Accounting Practices, American Citizens, Bailout, Balance Sheets, Ceo Salaries, Ceos, Collapses, Congressmen, Current Market, Declining Market, Economic Downturn, Economic Strategy, Economic Turmoil, Fair Value Accounting, Financial Institution, Financial Institutions, Inactivity, Mortgage Payments, Recession, Time Move | No Comments »
Understand Financial Market Structures of Debt and Equity Markets
In this article, we will continue the financial investing series with the discussion of financial market structures known as debt and equity markets in macroeconomics.
I. Debt markets
Fund borrowers can utilize debt instruments like bonds, debentures or mortgages. These financial instruments are legal document that require the borrower to pay lender certain amount of interest payment until a maturity date. The maturity date is the date the bonds expire Interest is paid at stated intervals until the maturity date, whereupon the borrower repays the principal.
A debt instrument can be
a)Short term
Instruments require one year or less for repayment
b) Medium term
It can be repaid between one and ten years.
c) Long term.
It is longer than ten years to repayment.
II. Equity markets
The equity market raises funds by the issue of shares that create ownership in the corporation. There are different types of equities markets
1. Primary markets:
Only sell new issues of a security. Brokerage houses act as intermediaries and underwrite the securities by guaranteeing the price by the corporation or government issuing them. Initial Public Offerings (IPOs) are usually pre-sold and not available to the public.
2. Secondary markets:
Resell securities that have already issued through the primary market and
they are sold in open market without a price guarantee by stockbrokers and dealers.
3. Exchange and over-the-counter markets:
this is the stock markets that arrange for buyers and sellers to interact in one physical location.
4. Over the counter markets (OTC markets):
Dealers hold an inventory of securities that they sell over the counter to anyone willing to accept their prices.
III. Money Markets
Money markets trade securities with short maturity dates, usually of one year or less.
1. Government treasury bills (T-bills):
These are debt instruments purchased by corporations, other governments and consumers to finance federal government deficits.
2. Short term government bonds:
These are bonds that have a maturity date of less than three years and carry a fixed interest rate. They are equal in security to a T-Bill.
3. State and municipal short term notes and bonds:
These carry interest rates that are determined by the credit rating of their issuer.
4. Banker acceptances:
These are bank drafts issued by a firm. They have a stated maturity date, usually 30 to 90 days and can, for a fee, be guaranteed by a bank. They are also virtually risk free.
IV. Capital markets
Capital market instruments include the following:
1. Stocks:
These are equity shares in a corporation.
2. Government bonds:
These are long term debt instruments that have specific maturity dates, interest rate and are highly liquid.
3.Savings Bonds:
These are sold directly to the consumer and always maintain their face value and may be cashed at any time.
4. State or provincial Bonds:
These are issued by a state or provincial government.
5. Municipal Bonds:
Issued by local governments and often used to finance specific projects.
6. Corporate Bonds:
These are used to finance short or long term activities. They have a lower credit rating than government bonds, hence a higher interest rate.
7. Warrants:
Warrants are certificates that give an individual the option to buy a stated number of shares at a specified price for a specified period of time.
V. Foreign exchange market
In the foreign exchange market, currency is bought and sold.
I hope this information will help. If you want more information of the above subject, you can find this series of articles at my home page:
By: Kyle J Norton
Investors, Speculators and the Stock Market – Part 2
Due to its length this article is being published in two parts; Part_1 is available on this same site.
If you find it hard to compare the gambling in Las Vegas with the gambling on the New York Stock Exchange, consider the activities of each. In Las Vegas you enter a gambling casino, exchange dollars for tokens or chips and proceed to wager that certain events will occur according to your predictions. When you put money on a number at Roulette you are predicting (or at the very least hoping) that the marble will stop on your number. When you place bets in a card game you are predicting that your cards count higher than others’ cards, in your game. When you put coin or tokens in a Slot machine you are predicting that the machine’s parts will randomly align themselves in such a way that more money will be returned to you than you will put into the machine. All of these activities are called gambling because you are spending and receiving items of value, money; and because you may only do so legally if you cannot accurately predict the outcome of your wagers. For every winner there is a loser, if the house is the winner then the customer is the loser, and vice versa.
If you choose to place wagers on the New York Stock Exchange, you must also place money at risk and presumably be as ignorant, or at least as deluded, as other players. First you hire a broker and put money into an account, from which your broker can deduct funds when you wish to buy stocks, and into which your brokerage can put your winnings, should you be so lucky. You may contact your broker and tell him or her which stocks you would like to buy, and how much to pay. You now own a piece of some company, and your voice counts in managing your corporation, according to the percentage of ownership in your name. Your bet is that your workers and management team are going to out-produce the competition, make greater profits and return a larger dividend to you. If your corporation does do better you not only win with dividends, but your shares of stock are likely worth more than you paid. Other potential players will see the stronger position of your corporation and some of them will bid more money to buy into your game. If you should decide to sell your stock allowing someone else to take your place and risk, you will receive more money than you paid. This profit is called a capital gain.
If you guessed wrong and your corporation operated inefficiently and lost money, you would not get a dividend, and your stock might drop drastically in value, because more owners may want to sell than there are would-be owners waiting to buy. Sellers are forced to accept less and less for their stocks, potentially resulting in great losses for some. For every one who wins someone else has lost. The big difference in these two gambling industries is the length of time between wagers and the determination of profit or loss.
Brokerages that facilitate stock, bond and commodity trading, operate in a similar manner and purpose to companies that operate gambling casinos. Brokerages do not care if the markets go up or down, so long as trades are being made. The brokerages charge a fee for each trade; the more trades, the more income for brokerages. In gambling casinos the odds of winning slightly favor the casino owners when one bets against the casino; and the casinos charge players a fee for the use of their facilities when players gamble with each other. The casino owners’ interest also lies in the volume of gambling; the greater the activity, the greater the income for the casinos.
Brokerage firms reap their wages and bonuses through fees from the number of stock, bond, or commodity transactions occurring. If the markets are sluggish, with relatively little trading going on, brokerages can buy and sell stocks and bonds with other brokers, kiting stock, bond and commodity values and thereby creating a mirage of investment activity. This practice is very old and is called, “Churning the market”. This is principally done to provide them with cash flow and protect their stock, bond and commodity portfolios, since their net worth (and the value of their own stock) is tied to cash on hand and market value of their investments. This churning hurts on-going investment activity, because it prevents the markets from moving lower and allowing investors an opportunity to purchase stocks, bonds and commodities at a true market value.
In the United States there are three principal markets to buy and sell stock. The New York exchanges are the primary market, and the over the counter exchanges are the secondary market (NASDAQ). There is another exchange market for stocks and bonds that is referred to, as the “Third Market”. The third market is a partial joining of these two markets to facilitate the selling of large blocks of stock. Which if they were offered through an exchange to individual investors would crash that stock’s value, along with its paper equity, and could create large declines in the overall market if not panic and chaos.
The third market is composed of brokerages that will buy large offerings individually, or in concert with other buyers, at a set price and then resell it in small lots in the usual manner. Though the set price for these large sales is determined by prices set at auction in the exchanges, this stock is not being auctioned. It is being sold in a manner contrary to the rules of the exchanges, that all stock sales be offered in public via an auction to let buyers and sellers determine market price and value. The seller of a large block of stock is guaranteed, through the third market, to receive the highest possible price for such stocks or bonds, at the expense of unwary buyers in the regular auction markets. One person’s loss is another person’s gain in these markets. In the public exchange markets, if a large block of stock is offered at a price no buyer is willing to pay, it will then remain unsold or only a portion of it will sell. If it must be sold, then the price must drop until buyers agree that it has dropped to its proper value, according to supply and demand in a free market. The third market is just a creation of a controlled market to allow brokerage firms to protect the value of their own holdings and to prevent investors from profiting when other market-players’ must sell.
The exchanges could have barred the sale of large blocks of stock, or limited the size and timing of all sales, but this would obviously not be a free market with prices determined by supply and demand. So they maintain the illusion of a free market by withholding knowledge and access to participate in sales, such as the third market, from the public. If the third market were a small market, as compared to the exchanges, little harm would be done to investors. But the third market is not small, it is very large and very controlled to maintain higher prices, requiring individual investors to pay more than a free market would require for many stocks and bonds.
Consider a stock market very different from the market that has developed; a new market, where brokers facilitate buying and selling but own no stock themselves. A market where short selling is illegal, and where speculation is suppressed by not permitting a purchased stock to be resold in less than 30 days without a significant penalty tax paid to the federal government. Similarly for bonds, the sale of a bond would be final, until redeemed at maturity, or a penalty greater than its lifetime yield would be assessed. And in the commodity markets only those who produce commodities could sell contracts up to the amount they can produce, and only those companies that process and consume those commodities could buy contracts, up to the amount they have a track record of consuming.
Markets with these restrictions would require different corporate structures. Workers and communities would be the largest and most stable investors in the companies they worked for or the communities they are located in. The raising of capital and investment in production would follow the path of vested interest. Which would require most corporations to be publicly owned and operated, for the benefit of consumption without debt.
Market investments like stocks, bonds and commodities are considered to be barometers, gauging the health of our economy. Market watchers are always trying to forecast future economic activity based on current activity and market trends. Trends and market activity, however, are no better barometers to predict the future than reading tea leaves. Economic activity is much more a barometer of what the markets should do than the other way around. This money circulating in these markets has no direct bearing on general economic activity associated with the production and consumption of goods and services.
Because most stock trades are between one investor and another or one speculator and another, wherein the company that issued the stock is in no way involved, the stock market could go out of business without having a catastrophic economic impact on society in general. Certainly all of the people employed in operating the stock market would be devastated, and the general misunderstanding of how these markets operate would cause psychological panic amongst other industries and the public in general, which could lead to a complete economic collapse. But such a collapse would be as unnecessary as having our whole economy collapse if Las Vegas were put out of business by a major earthquake. Certainly the workers and owners of all of the casinos and related businesses would be financially distressed and have to seek other opportunities. But the rest of society would not need to go into a panic. We deal with catastrophic weather and geological events affecting our lives and economy every year, and we take them in stride. Problems in gambling industries should never be perceived as causing negative economic impacts. A panic in the stock market could only spread to our productive economy if people are ignorant of what the stock market represents and how it operates; but then if people knew how these markets functioned they probably would avoid them altogether.
The stock market is very much a balloon market, because it contains so much air (presumed equity). For example, consider a small stock market with just ten companies. Each company has sold 10,000 shares to the public, and each company’s stock is currently listed at $10.00 per share. Since stocks usually sell in lots of one hundred shares, each lot is worth $1,000.00. Each company’s total shares are worth $100,000.00; making the total value of all ten companies stocks to be $1,000,000.00. If one trader comes into this market and offers $11.00 per share to purchase one hundred shares of Company-A stock, then he or she has paid a total of $1,100.00, but has only increased the real equity of that one lot of one hundred shares by $100.00. The market, however, reports that all 10,000 shares of that company’s stock are up and valued at $11.00 per share. One hundred dollars has created $10,000.00 in presumed equity, for this one company’s ten thousand shares of stock. All of that increased value is a fraud, because the original $100.00 in additional value went to the seller, and is in no way further associated with Stock-A. Now consider that if the seller of stock in Company-A takes the $1,100.00 and invests it in one hundred shares of Company-B, another $10,000.00 in air is created. Continue this from B to C, C to D, etc. until the seller of Company-J’s stock winds up with the $1,100.00 and is out of the market. All ten companies’ stock has gone up ten percent and the $100.00 in additional equity has exited the market. One hundred dollars has created $100,000.00 in paper equity in just ten trades and is out of this market, as is all money invested in stocks, it is always outside the market, the seller has the money, but no stock. Obviously, the real stock markets are much larger, with millions upon millions of stock trades daily. This unreal and presumed equity can certainly be taken out of the market in a similar manner, since so much of what is reported as equity gains is only air.
All stock purchases are transacted by bringing money from outside the market to trade with those who own stocks and would be willing to leave the market, becoming non-owners, if they are paid their price. The sellers exit the market, even if only temporarily, with the money that was never in the market. Trading your current surplus labor for stocks will only net you a gain if in the future someone else is willing to trade you more surplus labor for the right to own your stocks. Your money is not in the stock, bond, or commodity markets; it is in the pocket of the person that sold you stocks, bonds, or commodities. Both today and in the future, the un-inflated value of stocks is the fire-sale value of equity in buildings and equipment and resources that are not collateral for loans and bonds. Everything else is a mirage, appearing as inflated equity created by too much surplus wealth being exchanged (gambled) for control of corporations and their future profits. This “air” in the market is why price changes can be so volatile; small changes up or down on small amounts of a company’s stock are leveraged to effect all of its stock by and because of investor ignorance.
Let me digress a moment to another discussion of money, in the realm of buying and selling as done in the stock market. All money available to purchase any asset is pocket money, in the context of liquidity. It is not invested in stocks and bonds, or real estate, or gems and precious metals, or stamps and rare coins. Money simply moves from one pocket to another (from one bank account to another), in trade for assets or consumption of goods. Those who purchase stocks and bonds, or real estate, etc., take money out of their pockets to effect a purchase, while those who sell stocks and bonds, or real estate, etc., put money into their pockets to effect a sale of those goods. The key to the future value of any commodity, or stock, or piece of land bears directly on the amount (and trade value) of pocket money available at any given future time. These markets are devoid of any value other than future demand to own stocks, bonds, commodities and real estate; and that demand will depend on the mount of pocket money available for investment or speculation. The money is always outside the markets because it only moves from one pocket to another, wherein the last pocket always belongs to someone who is NOT IN THE MARKET.
While investment in the stock market is considered to be a capital investment in our productive economy, it very seldom is. If you are able to purchase new stock directly from a corporation that will use that money to expand their productive capacity, then you are investing capital in our economy. But when a stock is sold the second, third and so on… times, the new owner is not investing in that corporation. The vast majority of stock trades are done between one investor-speculator and another, trading places between would-be owners and those who would rather not be owners. As far as our productive economy is concerned, these dollars serve no useful purpose. They create no jobs, build no factories, nor do they feed or shelter anyone, except stockbrokers and speculators. The taxes paid on gains are offset by the deductions taken on losses. Brokers and the people that keep these markets going are all on capital welfare. They facilitate these gamblers in transferring money and stocks, and charge a fee to do so. But unless they are helping a corporation issue new stock, they are just recording the economically irrelevant bets of their customers. Stockbrokers and Bookmakers (that manage bets on horses, or sporting events, or whatever) are the same animals in twin professions.
Many baby-boomers are being encouraged to invest in personal savings accounts like IRA’s to benefit their uncertain retirement. And many of these IRA’s are invested in the stock market, bringing additional dollars to the New York style gambling industry. This money is simply inflating stock prices and giving the illusion of equity growth. Remember, money put into an IRA or 401K, to buy stocks and bonds, is going into the pockets of the sellers. To reap your reward as a seller when you need retirement money, you are betting there will be more buyers in the future willing to pay more to own your stocks and bonds than was the case when you purchased. Such reasoning is how pyramid schemes operate. The boomers are buying into a pyramid scheme that is shrinking at its base (without exception, all pyramid schemes fail); the following generation will be too small in population and earning capacity to bid up prices and produce a profit for the boomers to retire on. The generations following the Boomers are going to have their income taxed heavily to pay the Social Security and Medicare for the Boomers and thereby will not have the pocket money to buy into IRA’s and 401K’s; causing those markets to fall catastrophically in value and bankrupt many Boomers.
Consider also that most 401K plans are not invested in industrial stocks and bonds; rather they are only speculating on the profitability of a mutual fund company, i.e., the stock you own and will need to sell at a higher price to have retirement income is your investment firm’s stock, and no other. Since your fund managers must buy and sell stocks and bonds, etc. to make a profit, similar to all other mutual funds, you can only come out a winner if other 401K speculators come out losers. The Boomers will either suffer losses that will destroy the value of their retirement investments, or they may be forced to keep their capital tied up in owning stocks and bonds and only receive relatively small dividends, without ever being able to recover and spend their invested capital.
The game of win or lose goes like this. If investor-A buys some stock costing one hundred dollars per share and it rises in value to one hundred ten dollars per share, at which time investor-A sells to investor-B; investor-A has made ten dollars per share profit. If this stock continues to rise to one hundred twenty dollars per share and investor-B sells to investor-C, then investor-B has also made ten dollars per share profit. If this stock falls back to one hundred dollars per share and investor-C sells this stock, then investor-C has suffered a loss exactly equal to the previous gains. Similarly, if this stock had dropped for investor-A & -B but rises for investor-C, the initial losses would equal the final gain. For every gain their will ultimately be an equivalent loss, and for every loss their will be an equivalent gain, the books are always balanced. Brokerage fees, taxes and inflation operate to guarantee that in the long run, less money leaves these markets as investor profits than comes into them as gambling wagers. Over time those who profit from these markets do so only by losses incurred by others. Periodic panics and crashes in these markets balance the books by creating the losses that equal the year over year gains for the years between such panics and crashes.
The featuring by the news media, over the years, of catastrophic losses by certain international banks, or certain brokerage firms, or individual investors, shows the general ignorance of how these gambles work. If we heard news of a poker game wherein three players lost $50,000 each, but a fourth player won $150,000, we would not dwell on the losers and the tragic consequences of their losses, without mentioning the winner. More likely, we would focus on the winner and attempt to associate ourselves with such winners, and generally ignore the losers. In the financial markets losses may be tragic to one person or corporation, but on the principle that gains equal losses, both are irrelevant to the market and to the economy. If governments, market directors or investor-speculators alter their market strategies based on someone’s losses, they are forgetting someone else’s gains, implying that they do not understand these markets and ought not to be in them. Reporting gains and losses in any of the markets is a camouflage of fraud to keep unwary investors in the game. These markets are a zero net sum, so gains and losses are irrelevant for society overall. But since these con-games require continuous inflow of surplus wealth to support brokers and investment bankers, there is an industry of reporting and describing activity in these markets that operates on a foundation of collusion of ignorance and obfuscation of facts. In this ever-changing world investing is nearly dead, so happy speculating.
? June 2009
Craig D. Hanks
By: Craig Hanks
Recession – Its Causes & Effects
It’s been a lot of time we hear of “Recession” going on in US market. Everyone is talking about recession. We cling to newspapers, television news channels, and financial reports only to discover “what next” in recession. Technically, recession means decline in GDP or Gross Domestic Product of a country for two consecutive quarters. Now, this explains recession only as a definition to remember. When we go more deep, we need to first understand the meaning of GDP. Gross Domestic Product is the value of all final goods and services produced in an economy in a given year. These final goods are those goods which are not transformed into other goods. These goods are evaluated as per their market value. It means when the value of all final goods and services produced in a given year declines for two consecutive quarters, the state is referred to as “recession”. It is visible in real GDP, real income, employment, industrial production, and wholesale-retail sales in an economy.
As per NBER (National Bureau of Economic Research), there have been ten recessions since 1945. From mid 1940s till 2007, the average recession lasted 10 months, while the average expansion lasted 57 months, giving us an average business cycle of 67 months or about 5 years and seven months. In this period, the shortest recession lasted only 6 months, from January to July 1980. The two longest recessions during this period lasted 16 months each, one extending from November 1973 to March 1975, and the other from July 1981 to November 1982. There was a noticeable decline in real GDP in both of these periods. The shortest expansion period from the mid-1940s until 2007 lasted only 24 months, from April 1958 to April 1960. The longest expansion continued from March 1991 to March 2001, setting a record of 120 consecutive months of growth. As luck would have it, United States has experienced only two relatively mild recessions and extended periods of expansion over the past 25 years.
There are various factors that flush an economy into the weird state of recession but Inflation is the main factor which contributes more towards the situation. Inflation is a condition of an economy when the prices of goods and services rise immensely over a period of time. The higher the rate of inflation, the smaller the percentage of goods and services that can be purchased with the same amount of money. This may be because of increased production costs, higher energy costs and national debt. When the prices of goods reach their ever higher stage, people tend to cut on overall spending, luxurious spending, restrict them towards basic necessities and thus save more n more. As a result, GDP declines when people begin to cut expenditures in order to cut down costs. This makes the companies to cut their costs as well and they chuck out workers which brings unemployment.
Thereby, following are some of the factors that push an economy into recession…..
- Credit crunch – shortage of finance
- Falling house prices – related to shortage of mortgages and credit crunch
- Cost push inflation squeezing incomes and reducing disposable income
- Collapse in confidence of finance sector causing lower confidence amongst ‘real economy’
Recession brings with itself all major consequences which create mayhem within the economy. One of the major effects of recession is Inflation. Recession comes into effect with inflation while on the other hand; it is one of the after effects of recession. This means the commodities reach their ever highest prices and people generally cut down on costs. Hence, inflation becomes the major effect left out by recession. Lower income is another effect of recession in the economy. As people cut down on costs, they tend to buy less which reduces the income and thereby fewer profits or no profits. The next consequence is the increment in mortgage rates. Lenders increase the mortgage rates in a bid to cover the losses they bear during that time. Employment opportunities are also one of the main targets when the economy is burning under recession. In order to cut down on costs, companies cut down on employment opportunities thereby leading with unemployment in the economy. So when an economy enters into recession, firms experience a decline in profitability. This is because:
1. Tendency for price wars to develop in a recession. Low sales encourage firms to cut prices
2. Falling sales will lead to lower revenues.
By: Dia Bijlani
Future of the Housing Market
Home prices increased from April to May of this year by 1.3 percent, according to the Standard & Poor’s/Case-Shiller 20-city home price index. The credit for this largely goes to the government’s home buyer tax credit, which expired at the end of April.
The general thought out there seems to be that the housing market has been bolstered by the tax credit–which was the point–and now will come tumbling down again. Maybe not, says University of Chicago economist Casey Mulligan. Even the home price index report points out that May is historically a strong month for home sales.
The Home Buyer Tax Credit was part of the American Recovery and Reinvestment Act of 2009, which passed in February of 2009. The tax credit was originally an incentive for first time home buyers, but later was extended to include qualifying home owners purchasing a new home. Reporting on the New York Times Economix blog, Mulligan suggests the math is faulty when it comes to crediting this tax credit for the latest rise in the housing market.
Mulligan cites Internal Revenue Service reports that show that the average home buyer’s tax credit was around $6,000, not much when compared to the price of a home. Also, only $19 billion in tax credits have been claimed so far, which Mulligan considers to be a drop in the housing bucket when compared to the $14 trillion worth of owner-occupied houses in the United States.
Mulligan contends that the impact of the credit isn’t big enough to bolster the housing market. Not as many people took advantage of it as could have and it needs to be evaluated in the context of the larger market. Yet, real estate agents, mortgage lenders and economists are fearing the worst now that the home buyer credit will expire.
It is reported that nationally home prices have risen 5.1 percent from the bottom of the housing bust in April 2009. However, overall house prices are 29 percent lower than the height of the housing bubble in July 2006. While the percentages are vastly different across the county–Las Vegas home prices are still dropping–the housing market seems to be one sector of the economy where steady progress has been made.
Recovery can be agonizingly slow and panic can be easier to feel than patience. But as Mulligan points out, housing is a long term investment. Pinning the hopes of the housing market on the one-time, nominal return of a tax credit may not be realistic. Maybe time will show it to be the tiny jolt the recovering housing market needed, not the sugar high of a falling market.
By: Ki Gray
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