Stocks: The more-or-less complete guide

I'm afraid that I've been misinforming you on the topic of the stock market, so I'm going to write about it again!

First of all, if you don't quite know what a stock is, go here.  Now for the good stuff!

Using Stock Price to Value a Company

As you might know, stocks show the value of a company;  multiplying stock value by the total number of shares shows you how much the company is worth if you were to buy it out this very second.

For example, Coca-Cola (NYSE: KO) is listed as $56.91 per share (share = a single piece of stock).  One share of KO is 1 / 2,310,000,000 of the total company.  So naturally, to find the company's total value, we multiply the share price by 2.31 billion, and get an estimated value of $131,000,000,000.  Of course, if you were to buy them out, you'd have to give them a few billion extra to give
them an incentive to sell.  And they don't accept visa.  (you see?  I
made a joke right there! har har har!)

How Stock Price Fluctuates

Okay, this is a biggie:  There are lots and lots (and lots) of ways that stock prices can change, and many of those are completely uncontrollable and

No Chickens Were Harmed In the Making of This Post

I don't care what the cost is, I'm going to post another.. post.. even if it kills me (see figure 1, left)! Okay, maybe not to that extreme.

Let's talk about banks! No no, don't leave, I promise to try making this fun, really! In fact, just for you, I'll make an analogy that might work better. Just for you!

Let's imagine all the times that you gave people money so that they would pay you back. Now imagine, for the sake of argument, that they actually did pay you back. Tough concept I know, but bear with me here. Then imagine that they were even kind enough to give you something extra for the trouble of giving that fat wad of cash over to them at such short notice. That extra is the interest to your loan. And ta-da, you have more money than before!

That's basically what banks try to do as much of as possible, so that they can get as much interest as possible, and make as much extra money (or profit) as possible. But in order to keep giving out money to people and get back a profit, they need lots and lots of cash (or in fancy economics terms, capital). And where do they get that money from? That's right, your savings account. If you want to get technical, they're using your money to loan yourself money. If that didn't make sense to you don't worry, since it barely makes sense to me either.

And so, that tiny little percentage of interest that you get added by the bank to your savings account is actually another tiny percent of the massive amount of interest that that banks get from loaning out your money. Remember, the profit you make from keeping your money with them is waay smaller than that profit they make from giving out your money.

And just for kicks, here's a drawing I just made to show what I just said. You are at the left, the fat one is the banker (I thought a stereotypic view might be more understandable (they're not all fat..)), and the one who is sideways is the borrower (the person that takes the loan from the bank). Oh, and the + means interest, and the one given back to you is smaller than the one given to the bank. It probably doesn't help, but I really wanted to draw it.

Just an update :)

Hey, remember us?  We used to have a blog... So we've kind of fallen behind in posting, no biggie.  "Personal finance" courses will be available as an elective at certain high schools starting 2011-2012 school year! (yeeah!)  We're working on the curriculum right now, so if any of you have suggestions as to what should be on it, feel free to leave it in the comments.  Otherwise, just make sure to choose it next, next year.  Course outline will be posted as soon as we finish it!

And yeah, we'll try to post more often... that might help our cause a bit ;)

This and that...

DUDE.  Is anyone actually still following/reading this blog?  
Probably not... it's all good though :)


So economic news headlines...

• A former Democratic congressman says his party “set him up” after he opposed health care. His claim was dismissed after everyone realized that to set him up, Democrats would have had to work together.
• Two oldest people in the US died.  No one took out stocks on their lives.  No one made money.
• Canada's budget 2010... should not have taken months to finish.  Pretty basic stuff going on; making lives easier for international investors, making life harder for those with bad teeth and mother earth.  $19 billion in new federal stimulus.  Ooh and we now get plastic money! [insert bad joke here]
• Cisco made a faster internet router.  It now has a market cap of 149.67B... 
• Stocks climbed at midsession Tuesday, following a choppy morning, as investors mulled the latest corporate deal and profit news on the one-year anniversary of the bear market bottom.  Stocks now cost more.

Add your own newsworthy links in the comments!  Or not...

Economics, Day 1 (and 2 and 3)

I'm going to need a lot of pictures to cover up the massive amounts of text.. Just kidding! (or am I?)

So.

Economics itself is basically the study of how we satisfy our endless (especially in the teen years) wants, in a world where nothing is unlimited. Wow, that's a mouthful.

Here are the concepts behind that statement:

-our wants are unlimited. (I mean, I want to get Halo 3, Mass Effect 2, a lifetime supply of cheddar, cheetos.. it never ends!)

-The only problem is that nothing is unlimited here on Earth (the world is only so big..), so we can never really satisfy ourselves.

But it gets worse.. Not only can we never satisfy our needs because of limited materials, those scarce resources that are in demand begin to have value. The less of it there is, the more valuable it is, but only if there's a demand for it. So now we have to give something up in order to get what we want! (think conservation of energy, if that helps at all)

And that brings us to incentives!

Simply put, incentives are the benefits we get from using a product, be they usefulness, happiness, pride, or whatever else you can get from a product (the incentive I have to buy Mass Effect 2 is that it will make me very happy (everyone loves blowing up aliens!)). Those benefits are called utility.

This is getting longer than I hoped, so let's end off with micro- and macroeconomics.

Microeconomics is the stuff you can see that affects the economy, that being of course buying and selling, price fluctuation, etc.

Macroeconomics however, is the really large-scale goings on that you can't really see without the aid of some good old statistics (yaay..) That might include inflation, fiscal policy, international trade, etc.

So there's the summary of my economics class so far, I hope you find it informative!

By the way, if you want to learn some more of the details of these classes, or want to learn more of the financial jargon you might find in the business section, go here! (it'll still be my writing though, so don't get your hopes up..)

Hooray!

Just a quick post to say that after this week, I'll be taking a class in economics which I am, truth be told, TOTALLY PUMPED FOR!! The course goes through both macro- and micro- economics (concepts that will be elaborated upon later, though I suggest you just look it up on wikipedia), and I will be trying to give you as much coverage on the course as I can!

Be warned, however, for this may end up containing more than just personal finance mumbo jumbo, and could be completely irrelevant to your life (foreign trade probably isn't that big of a deal for you guys). So, if Kelly and the school board (sounds like a rock band doesn't it?) approve, I'll be posting some of that too.

That's all for now, I hope it turns out well!

Merry Christmas!

So, on the twelfth day of Christmas  my true love gave me a partrige in a pear tree and a whole wack of other stuff.  But in today's messed up financial situation, what with Monopoly Recession Edition out and everything, where on earth did he get that much money?  

Well, seeing as I don't actually know the answer to that, I'll just completely change the topic now.  Hey, but I do know where that money is now!  See the picture below ((©funnelinc.com))

Back in the good old days, every dollar had it's equal in metal.  What that meant was your money was right there in the vault.  But now, with the digitalization of money, your dollar is everywhere.  Only "the computer" knows how much you actually have.  And simply put, if anything happens to that computer, you're screwed.  (not really though, I'm just half kidding...)

So, what are these almighty computers?  Financially Ill (with help from our buddies at Popsci) has your answers!  Stay tuned to find out!


Happy holidays :)