Stock Exchange Speak Decoded

Imagine this scenario:

Fast growing oil prices and huge losses within the financial industry caused by the credit crunch in most parts of the world are blamed for falling stock market prices in US and UK. The Dow Jones index at the new York Stock Exchange was sliding rapidly into a bear market during Friday.

In London, the Stock Exchange was not falling quite so fast but if recent trends are anything to go by, they will follow suit and may find themselves slipping into a bear market faster than economists expected.

We hear terms like ’sub prime market’, oil crisis and bear market everyday but no one really stops to put the whole thing into simple terms. This isn’t an easy job to do. To interpret what is in effect, ‘economist speak’, is not the simplest of things.

We hear news stories like this but no one explains what it means. It’s full of stock exchange ‘speak’.

The term ’sub prime market’ refers to those lenders who were only too keen to lend money for mortgages to people who they know would struggle to keep up repayments. I say ‘were’ because they aren’t too keen any more. It’s a case of ‘once bitten, twice shy’. The companies who lent money to people who are now struggling because of the rapid increase in fuel prices and the associated hike in food prices, have only themselves to blame. The trouble here is that they were falling over themselves to lend money when the going was good and as soon as things looked rocky they wanted it back. It’s just like lending someone an umbrella when the sun is shining and wanting it back as soon as it rains.

The oil crisis needs no explanation and there are many different reasons for this. The thing that concerns us all is that prices are rising again worldwide and demand will soon exceed supply.

All these things combined with media driven panic mongering, push the world’s stock markets into ‘bear markets’.

A bear market on the stock exchange is a period of time when things are depressed and doom and gloom prevails. Investors get edgy and panic that they might lose money on their investments so they sell their shares. When there are a lot of shares on the market, prices drop and so more investors panic and sell, and so it goes on. On a personal level, pensions are hit and investors can no longer live on their money.

Things do not seem to being recovering very fast despite what the media tells us. The proof we all need is see jobs available, reasonable prices in shops and affordable new homes and cars.  I’m afraid it will be a long haul.