By ANNA VANLANDINGHAM
© St. Petersburg Times, published February 15, 2001
Editor's note:
Welcome to the St. Petersburg Times' Newspaper in Education page! This year's series is about something we all love and wish we had more of: money. Throughout the school year in this space you will find fun and informational stories about how to earn, keep and save money. Developed by the Florida Council on Economic Education, the series explores such topics as personal finance, business etiquette and ethics, making decisions, managing your time and money and more, all geared toward you, not just your parents! We hope you enjoy this economic adventure.
"Down on Wall Street."
"The Dow is up by 500 points."
"The market has reacted to the Fed's raising interest rates."
These are comments we hear in the news constantly. Do you know what they mean? Welcome to the world of the stock market.
The market is a place where people can buy or sell their interest in companies through something called stocks. A stock is simply a "piece" of ownership in that company, purchased for an amount that changes all the time. For example, if you decide to invest money in a company such as Coca-Cola, you do so by purchasing shares, or units, of stock. This buys you a piece of that company, for which you receive a stock certificate, or "security" as proof of your ownership. If it does well, your stock may be worth more money than you paid for it. If the company performs poorly, your stock may fall in value. Buying and selling stock is done through stock exchanges, marketplaces where actual sales of stock take place.
When stock market trading is mentioned, most often we are referring to the New York Stock Exchange, which is a real place on Wall Street in New York City. There are others, too, such as NASDAQ (National Association of Securities Dealers Automated Quotations system), American Stock Exchange and Chicago Board of Trade. Other countries throughout the world have their own exchanges, too. When you decide to buy or sell a stock, a representative -- called a broker -- will make sure trades are completed for you through one of these exchanges. (The money you pay this broker to do this is called a commission. Alas, nothing is free.)
Because it is the largest exchange in the United States, let's concentrate on the New York Stock Exchange, which is often referred to as the "Big Board." We'll discuss how exchanges operate in more detail next week. But let's take a quick look at what they are by having a little fun with the stock exchange's history.
You've probably seen the popular TV game show, Who Wants to Be a Millionaire. Well, here is our own version, based on the stock market and the New York Stock Exchange.
The following contest questions are valued from $100 to $1-million. Play along and see how much money you can win. Graphics provide subtle hints. The answers are provided at the end of the article. Don't cheat! See how informed you really are about the "Big Board." You may want to visit the New York Stock Exchange Web site, http://www.nyse.com, to brush up on your facts first.
Check your answers and see how much you won. Now you are ready to learn more about the numbers and types of investments associated with the stock market (next week).
1. The Bull and the Bear. The Bull represents a market that is charging forward, with prices increasing. The Bear represents a market that is slowing down, with prices decreasing.
2. Buttonwood Agreement. Twenty-four prominent brokers and merchants gathered on Wall Street to sign this agreement to trade securities on a common commission basis. The Bank of New York was the first stock traded under the Buttonwood tree and the first listed company on the NYSE.
3. The New York Stock & Exchange Board. This formal organization of the New York brokers took place in 1817. They rented rooms at 40 Wall St. and adopted a constitution with rules for the conduct of business.
4. Outbreak of the Civil War.
5. John Fitzgerald Kennedy.
6. Dwight David Eisenhower. Both the president and the market recover quickly.
7. A not-for-profit corporation. The NYSE strives to be an educator and a resource for the investment community.
8. Joseph L. Searles III.
9. 1987. The Dow's 1987 fall also triggered panic selling and similar drops in stock markets worldwide. In searching for the cause of the crash, many analysts found fault with "program" trading by large institutional investing companies. In program trading, computers are programmed to automatically order large stock trades when certain market trends prevail. In response, the New York Stock Exchange (NYSE) restricts some forms of program trading.
10. Vimpel Communications, a leading provider of mobile telecommunications services in Russia.
11. Oct. 24, 1929. On this day stock prices fell sharply, with a record volume of nearly 13-million shares being traded. Five days later, the market crashed, with a volume of more than 16-million shares being traded. This level was not surpassed for 39 years. The date is popularly used to mark the beginning of the Great Depression.
12. Jay Cooke & Co., a prestigious Philadelphia banking firm, failed because of over-speculation in railroad stocks.
13. Panic of 1857. The collapse of the Ohio Life Insurance & Trust Co. begins it.
14. Sell their seats on the Exchange. The most expensive is sold for $1.45-million.
15. World War I. As armed conflict engulfed Europe, securities exchanges around the world suspended operations to stop plunging prices. The NYSE closed its doors on July 31, 1914. This is a turning point for the exchange. America emerged from the war as a creditor rather than a debtor nation, and Wall Street replaced London as the world investment capital. Over the next decade, more than 1,700 foreign issues of stock were offered publicly in the United States.
Anna Vanlandingham is an advanced placement economics teacher at Lake Mary High School in Seminole County. She has been a teacher for 20 years and has won several national and state economic education awards. Chapters on the securities industry have been reviewed by the Florida State Comptroller's Office, which is responsible for protecting consumer rights in the securities industry.
Money Stuff was developed by the Florida Council on Economic Education and project director Fonda Anderson. The council is a statewide non-profit organization founded in 1975 to educate K-12 teachers and students about the free enterprise system and to instill in them an appreciation for a market economy. For more information on the council's programs for teachers and students, please call (813) 289-8489.
The St. Petersburg Times devotes news space to NIE features throughout the year, including this classroom series. The Times' NIE department works with local businesses and individuals to enrich the classroom experience by providing newspapers, supplemental guides and educational services to schools in the Tampa Bay area. To find out how you can become involved in NIE, please call (727) 893-8969 or (800) 333-7505, ext. 8969.