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The Stock Market continues to Rally

Posted on December 3, 2010 by admin

The stock market may be a little volatile in recent years, but we are finally seeing it improve enough that individuals are beginning to invest in various stocks again. It is true the stock market can be down one day and up the next; however, it is holding steady over 10000 on the DOW Jones. It is climbing more towards 12000 each week. It may be a slow progression, but the DOW has held onto 11000 for the last month.

The question is, what affects the stock market enough to have it lowering below the 11000 mark? There are sometimes when it has done this in past weeks, even after finally making it above the next mark. In part the stock market is affected by the news released. Certain news stories can send the stocks plummeting, whereas others will send it up again. However, in recent weeks the stock market DOW has increased mostly as a result of a better economy. Consumers and business owners are starting to get their faith back.

Though some news has worried about another recession, it seems that many consumers and other investors would rather this did not happen. With Christmas just around the corner there is also optimism of a better year for 2011.

Other things can affect the DOW as well, such as new products to hit the market. Apple is a good example and how their stock increased with the announcement of the Apple iPad. Netflix has been another stock to climb very high this year. It is likely to continue, but the greatest jumps for the stock have most likely occurred in the past six months.

Anyone who wants to invest a little of their savings into the stock market will need to look at the upcoming year, what new products might be released, and the overall feelings of the economy for the next year. It is important that anyone investing in the stock market do so with savings rather than taking out a loan.

In the past some individuals have taken equity out of their home to invest in the stock market. Others have looked for discount payday loans to get them started. This kind of practice can end up hurting you and your investments because if you lose you still have to pay the loans back, only now you do not have the prospects of being able to pay it immediately.

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Qualifications: Competition and property rights

Posted on October 5, 2010 by admin

Our focus so far has been on markets where rival firms can freely enter and exit, and private-property rights are clearly defined and enforced. The efficiency of market organization is, in fact, dependent on these two things: (1)competitive markets and (2)well-defined and enforced private-property rights.
Competition, the great regulator, can protect both buyer and seller. It protects consumers from sellers who would charge a price substantially above the cost of production or withhold a vital resource for an exorbitant amount of money. Similarly, it protects employees (sellers of their labor) from the power of any single employer (the buyers of labor). Competition equalizes the bargaining power between buyers and sellers.
When property rights are well defined, secure, and tradable, suppliers of goods and services have to pay resource owners for their use. They will not be permitted to seize and use scarce resources without compensating the owners. Neither will they be permitted to use violence (for example, to attack or invade the property of another) to get what they want. The efficiency of markets hinges on the presence of property rights – after all, people can’t easily exchange or compete for things they don’t have or can’t get property rights to. Without well-defined property rights, markets simply cannot function effectively.

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Economic Functions of Financial Markets

Posted on September 3, 2010 by admin

The two primary economic functions of financial assets were already dis- cussed. Financial markets provide three additional economic functions.
First, the interactions of buyers and sellers in a financial market determine the price of the traded asset; or, equivalently, the required return on a financial asset is determined. The inducement for firms to acquire funds depends on the required return that investors demand, and this feature of financial markets signals how the funds in the economy should be allocated among financial assets. It is called the price discovery process. Whether these signals are correct is an issue that we discuss when we examine the question of the efficiency of financial markets.
Second, financial markets provide a mechanism for an investor to sell a financial asset. This feature offers liquidity in financial markets, an attractive characteristic when circumstances either force or motivate an investor to sell. In the absence of liquidity, the owner must hold a debt instrument until it matures and an equity instrument until the company either voluntarily or involuntarily liquidates. Although all financial markets provide some form of liquidity, the degree of liquidity is one of the factors that differentiates various markets.
The third economic function of a financial market reduces the search and information costs of transacting. Search costs represent explicit costs, such as the money spent to advertise the desire to sell or purchase a financial asset, and implicit costs, such as the value of time spent in locating a counterparty. The presence of some form of organized financial market reduces search costs. Information costs are incurred in assessing the investment merits of a financial asset, that is, the amount and the likelihood of the cash flow expected to be generated. In an efficient market, prices reflect the aggregate information collected by all market participants.

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