The other day I attended a presentation by Dan Sanders who is the CEO of Executive Wealth Management on general economic conditions. Mr. Sander had very insightful comments.
How do you explain the Dow Jones Industrial Average to ten and twelve year olds?
The Dow Jones Industrial Average is a general psychological statistical indicator of wealth in the United States. It’s a tracking scorecard of the of what people believe will be the future monetary value of thirty prominent companies. Some of these prominent companies include Walt Disney, McDonalds, Wal-Mart, Coca-Cola and Caterpillar. The Dow Jones Industrial Average measures their wealth by the daily common stock price value of these companies which trade every business day in the stock markets. When you hear people talk about the stock market they are usually referring to the Dow Jones Industrial Average.
Common stock is where a person owns a financial interest in a company similar to owning a video game. For example, you can trade your ownership or your financial interest in a video game at GameStop by buying or selling a particular game. The market demand for a video game will determine how much money you pay or receive. Notice how the newest and innovative games are much more expensive as people are willing to pay more for these games rather than for older games where people don’t see much playing value. Game values are always changing depending how people perceive the value of the game.
You may hear people talk about bulls and bears. A person who is a bull or bullish believes stock prices will rise. A person who is a bear or bearish believes stock prices will fall. The stock market goes through cycles. When prices rise it is called a bull market. When prices decline it is called a bear market. Below is a graph showing the value of the Dow from 1900 through 2004 similar to the one presented by Dan Sanders. The red indicates bear market conditions and the green indicates a bull market. Notice how the price value increases and remember our discussions on money supply growth.
Dad believes the policies, vision and optimism of Ronald Reagan led to the greatest bull market sometimes referred to as the Reagan Bull market from 1982 until 2000 when stock values increased 1,214%. This period saw the greatest economic, technological and productivity expansion in human history. It was achieved by limiting government, cutting taxes, and allowing individuals freedom to create. This period taught us there is no limit to what we can achieve.
Below is a short video clip of President Reagan who is not often spoken about in your classes talking about government..
[Credit on graph to http://www.ritholtz.com/blog/2005/12/100-year-dow-jones-industrials-chart/, video post by ThePoliticalEagle]
How do you explain the Dow Jones Industrial Average to ten and twelve year olds?
The Dow Jones Industrial Average is a general psychological statistical indicator of wealth in the United States. It’s a tracking scorecard of the of what people believe will be the future monetary value of thirty prominent companies. Some of these prominent companies include Walt Disney, McDonalds, Wal-Mart, Coca-Cola and Caterpillar. The Dow Jones Industrial Average measures their wealth by the daily common stock price value of these companies which trade every business day in the stock markets. When you hear people talk about the stock market they are usually referring to the Dow Jones Industrial Average.
Common stock is where a person owns a financial interest in a company similar to owning a video game. For example, you can trade your ownership or your financial interest in a video game at GameStop by buying or selling a particular game. The market demand for a video game will determine how much money you pay or receive. Notice how the newest and innovative games are much more expensive as people are willing to pay more for these games rather than for older games where people don’t see much playing value. Game values are always changing depending how people perceive the value of the game.
You may hear people talk about bulls and bears. A person who is a bull or bullish believes stock prices will rise. A person who is a bear or bearish believes stock prices will fall. The stock market goes through cycles. When prices rise it is called a bull market. When prices decline it is called a bear market. Below is a graph showing the value of the Dow from 1900 through 2004 similar to the one presented by Dan Sanders. The red indicates bear market conditions and the green indicates a bull market. Notice how the price value increases and remember our discussions on money supply growth.
Dad believes the policies, vision and optimism of Ronald Reagan led to the greatest bull market sometimes referred to as the Reagan Bull market from 1982 until 2000 when stock values increased 1,214%. This period saw the greatest economic, technological and productivity expansion in human history. It was achieved by limiting government, cutting taxes, and allowing individuals freedom to create. This period taught us there is no limit to what we can achieve.
Below is a short video clip of President Reagan who is not often spoken about in your classes talking about government..
[Credit on graph to http://www.ritholtz.com/blog/2005/12/100-year-dow-jones-industrials-chart/, video post by ThePoliticalEagle]
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