Questions for economic reasoning and discussion

1. What is the role of the stock market in the economic development and growth?

2. Many economists argue that it is (theoretically) impossible to regularly outperform the stock market, as all available information is already factored into a company’s share price. So analyzing a company’s finances, or trying to discover or predict patterns in price movements, is a waste of time. Which implications does this have for investors?

3. Imagine that you have just come from a secret meeting of a company’s board of directors, which has made a decision that you know will financially ruin some close friends of yours unless they can sell some shares before the board’s decision becomes known. You are having dinner at their home that same evening. Should they expect you to warn them? Should you do so?

4. How can you make money from a falling stock market (when prices are going down)?

Supplementary tasks

Task 1. A. Read and translate the following text.

The Dot.Com Bubble

1.At the height of the high-tech stocks gold rush, private investors were piling money into internet and technology companies. In many cases, these were little known businesses that had been in existence for only a few months. Nevertheless, investors were hungry for stocks, with many buying large holdings simply on the basis of wildly optimistic internet bulletin boards tips.

2. Then in March and April 2000 share prices crashed. A lucky minority had got out in the nick of time, but the majority of dot-com investors suffered substantial paper losses. Looking back at the frenzy that led up to the crash, it now seems amazing that so many were taken in by the glitter of fool's gold, and were willing to part with their cash so readily. Dot-com shares doubtless seemed to many to be a casino where they couldn't lose, but as the old saying goes, “If it seems too good to be true, it probably is.”

3. London Stock Exchange figures show how cheap online share-trading services caused net-based share-dealing to rocket in the months leading up to the crash. The average number of transactions ballooned to 134,000 a day in January, and hit a peak of 157,000 a day in March – just days before the first signs of disaster.

4. Many of the new share-dealing services were struggling to cope with the demand, and some had to close their doors to new customers. There were numerous complaints from investors having to wait on the phone for an hour or more to get through to a broker.

5. Following the crash, high-tech stocks continued to be traded, of course. But many investors, nursing burnt fingers, pulled out of the market altogether. Others scaled down their trading. The result was a dramatic drop in trading volumes. In the May following the crash, transactions were down to around 100,000 a day, with subsequent months mostly seeing further declines in the number of shares changing hands. In other words, there was a full-blown slump.

6. Although the party was over for private investors, online share-dealing services mostly continued to be profitable, with many new companies joining the already crowded market.

7. However, despite the fact that there was still money to be made, shares in the sector fared poorly, and in late 2000 some were standing at just a tenth of their value prior to the crash – comparable losses to those seen by the dotcoms whose shares they had once been trading so frenetically.

8. In the years following one of the most talked-about crashes in recent history, some investors who hung on to their shares have partially recouped their losses, particularly when smaller companies have been bought out by larger ones. In the majority of cases, though, the recovery has been modest, and accompanied by a strong sense of caution in investors. It general it can be said that the bubble has well and truly burst.

B. Choose the definition which is closest to the meaning in the article

1. gold-rush (paragraph 1)

a. lots of people investing b. lots of people making money

2. online bulletin board tips (paragraph 1)

a. advice from internet services b. information about internet services

3. share prices crashed (paragraph 2)

a. share prices fell dramatically b. share prices stopped rising

4. paper losses (paragraph 2)

a. losses of banknotes b. losses of money which never really existed

5. fool's gold (paragraph 2)

a. good profits for stupid people b. something worth much less than many

people believed

C. Find words in the article with the same meaning as the following.

1. only available on the internet (par. 3) n______________-b______________

2. reduced (par. 5) s______________ d______________

3. being bought and sold (par. 5) c______________ h______________

4. taken over (par. 8) b______________ o______________

D. Complete the definitions

1. Investors piled money into the market means that people …

a. invested cautiously b. invested heavily c. invested all their money

2. People parted with their cash readily means that people were…

a. able to spend money b. spending too fast c. happy to spend their money

3. Small investors got their fingers burnt means that small investors…

a. were unhappy b. were cheated c. lost money

4. There was a drop in stock exchange trading volumes means that …

a. fewer shares were traded b. more shares were traded c. many shares went down in value

5. Many investors pulled out of the market altogether means that many investors…

a. sold all their shares b. stopped buying shares c. sold their shares at the same time

6. In financial terms, the party's over means that it's no longer possible to…

a. enjoy making money b. make money easily c. lose more money

7. Investors have partially recouped their losses means that investors have got…

a. all their money back b. most of their money back c. some of their money back

E. These sentences use vocabulary from the article. Write "up" or "down" next to each.

1. share prices rocketed.____________________________________

2. share prices slumped. ____________________________________

3. share prices recovered. ___________________________________

4. share prices hit a new peak. _______________________________

5. share prices soared. ______________________________________

6. share prices dropped dramatically. ___________________________

7. share prices ballooned. ____________________________________

8. share prices crashed. ______________________________________

9. There was a sizeable drop in share prices. ___________________

Task 2. Translate the text into Ukrainian.

1. Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere in the world. Their orders usually end up with a professional at a stock exchange, who executes the order of buying or selling.

Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.

Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place, on a first-come-first-served basis if there are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

2. A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic and investing public's loss of confidence. Often, stock market crashes end speculative economic bubbles.

There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000, and the Stock Market Crash of 2008.

One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 – Black Monday. The crash began in Hong Kong and quickly spread around the world.

Since the early 1990s, many of the largest exchanges have adopted electronic 'matching engines' to bring together buyers and sellers, replacing the open outcry system. Electronic trading now accounts for the majority of trading in many developed countries. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner.

Task 3. Render the text in English.