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The markets

14.8.2018, , Zdroj: Verlag Dashöfer

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The markets

Edward Thomas

1. A MULTI-MARKET WORLD

You thought there was just one type of market? The one for stocks and shares? Think again! There are many. Have a look at the list below and match the market name with its definition.


1) Stock (equities) A) Where short term debt financing and investment activities happen.
2) Bonds B) Where basic products, such as copper, oil, and coffee, are traded.
3) Futures C) Where dealing in and issuing of company shares happens. Where investors can get a share in a company and share in its profits through dividends.
4) Derivatives D) Where different national currencies are traded.
5) Insurance E) Where a wide variety of indirect trading instruments are bought and sold.
6) Commodities F) Where debt securities are traded in which the issuer owes the buyer a certain amount of money to be paid after a certain time.
7) Money G) Where what is traded are agreements to buy in the future for a fixed price.
8) Currency H) Where risk is transferred from one party to another, associated with underwriting.

Correct answers are here1

2. LANGUAGE AUDIT

A great way to learn words is to learn the different forms of the word that you know. You should remember that sometimes a word may have only a couple of forms. Here we will look at the words mainly from a financial point of view; you could easily meet with them in another context. „---” indicates that, in this context at least, there is no useful form of the word.

Where there is a gap without „---”, you should guess, or find out, the forms to complete the list.


Verb Noun Personal Noun Adjective/ Past participle
sell i)                              seller saleable/ sold
capitalise ii)                               capitalist capitalised
iii)                               value / valuation valuer valuable / valued
deal deal / dealing iv)                               dealable / dealt
offer offer offerer / offeree v)                              
share shares vi)                               shareable /shared
vii)                               investment viii)                               investable /invested
iv)                               speculation speculator ---
yield x)                               --- yielded
xi)                               swap --- swapped / swapable
opt xii)                               --- optioned

Correct answers are here2

Now try these sentences, which occur in the order of the exercise above and require you to choose the right form of the words:

a) It's a ……………………………'s market.

b) We need to …………………………… on our success.

c) The …………………………… or estimated market capitalisation of this company is €6bn.

d) All kinds of commodities are …………………………….

e) Our final …………………………… is €5.5bn.

f) ……………………………s are to meet to discuss the board's decision.

g) ……………………………s are nervous about entering the market at the moment.

h) ……………………………s are blamed for the currency crisis.

i) Our shares have …………………………… very well over the last five years.

j) The banks are working on a securities …………………………….

k) After 5 years you can …………………………… to convert your bonds into cash.

Correct answers are here3

Think about the use of the words above - word order and function - as it can help you learn! You might want to make your own list and examples in a similar way.

3. BULLS AND BEARS, SUPPLY AND DEMAND, HARD AND SOFT COMMODITIES

Look at the definitions below - which ones belong to which of the above pairs of words? Which of the highlighted sections connect to which word above?

„This is where i) how much a thing is wanted changes over time, and ii) how much there is of the thing changes to match it- in an ideal world”.

„Where iii) a market is rising fast, all the traders try to make money by selecting the winners- where it is iv) falling for a time, they try to understand the falls and where the shares or securities recover value they can make their money”.

„v) Things that are renewable may change because of a wider range of factors than things which are not and whose vi) quanties are more fixed”.

Now read the text below and fill in the gaps with the words in the box


A) driven .B) price-to-earnings ratio C) bottomed out D) stable E) a safe haven F) an investment bubble G) undervalued. H) liabilities I) peak. J) correction K) rebound L) bubble bursts M) slumped

„Shares move into bearmarket: what are the prospects?”

As everyone knows, bearmarkets are dangerous markets- share prices are of course falling and money is leaving the system.

There are great opportunities even in a bear market, of course. You can buy shares when they have fallen a long way, and make money when they 1. …………………………… (go back up suddenly). One problem: how do you know when they have stopped falling, when the share value has 2. ……………………………?

In a bull market it's perhaps easier- you look for companies with a low 3. ……………………………, or basically strong dividends with a relatively low price for their stock, and you buy!

In a bear market first of all you must be realistic- the definition of a bear market is that a market must fall by 20% from its 4. ……………………………. We're at that point now, so it should be clear that a lot of companies who have had big falls in their stock prices only because of market feeling have shares which are 5. …………………………….

The goal has to be to find companies where the earnings will at minimum stay 6. ……………………………. My advice is to look for companies with low 7. ……………………………, creditors rather than debtors, and plenty of liquid assets, with their main business involvement outside property.

So what about commodities? Looking at hard commodities, there are clearly high oil prices and great prices for metals, but there are even high prices for soft commodities like corn or rice.

The problem with these is that prices are partly 8. …………………………… by speculation. Certainly demand is higher than before - the rise of China and India has had a definite effect - but how much is difficult to tell. From the experiences of investors who thought it was 9. …………………………… (secure place in hard times) but have lost money when commodities suddenly 10. ……………………………, we know that it is in fact 11. …………………………….

As there is less liquidity in the market, demand for commodities usually falls, and so there could be a major 12. …………………………… in prices before long.

Meanwhile supply is rising as farmer, miners and oilmen are attracted to increase production as they see good demand at higher prices. If that 13. ……………………………, it begins to look like there is nowhere safe for money to go...”

Correct answers are here4

4. DESCRIBING THE MARKET

a) driving b) price-to-earnings ratio, c) bottomed out, d) stable, e) safe haven f) an investment bubble g) overvalued, h) liabilities, i) peak, j) price corrections, k) rebounding, l) bubble bursts, m) slump, n) bears, o)bulls, p) hard commodities, q) soft commodities, r) supply, s) demand,

Complete the exercise below with the words in the box above. A few letters are given to help you.

Describing the market

1) After a long time when it was …………………………… at very low levels the market in rice seems to be ……………………………5.

2) The bank's ……………………………6 are just so serious its share price has gone into a …………………………….

3) We won't know if the market has …………………………… ……………………………7 until we hear about a lot of large companies with positive …………………………… …………………………….

4) These …………………………… ……………………………8 will continue until the …………………………… (the negative traders) are completely tired and the …………………………… (the positive ones) have rested fully. We've had the profits, now we have to face the bad times.

5) When the market crashes, gold could be the only …………………………… …………………………… for investors who want security for their investments.

6) The market has fallen 40% from its …………………………….

7) ……………………………9 is still too great for the strength of ……………………………, so I think shares in agrobusinesses are not good value- they are …………………………….

8) At the moment an …………………………… …………………………… is still growing in both …………………………… ……………………………10 and …………………………… ……………………………. This never lasts for too long - it's only a matter of time until the …………………………… ……………………………. Demand isn't …………………………… this, speculation is.

Correct answers are here11

5. THE COMMODITIES MAN

Look at the graph below which shows approximate gold prices in US$ over a ten year period up to 2008.

Graph showing approximate gold prices in US$ 98-08

Read what the Commodities Man has to say about the price of gold over the last ten years:

„As you can see, the price of gold 1) fell slightly between 1998 and 1999- all the measurement points were made in August by the way. After that it was 2) fairly stable for the next two years- taking us to August 2001. In fact what this graph doesn't show is that the values in 1998-9 were at 3) a twenty year low for the market in gold

Now, what you will notice is that the price had 4) increased significantly by August of the following year, 5) rising sharply above 300US$. It will not surprise you to hear that I think this was because of worries among investors after Sept 11 2001.

In the subsequent years, 6) a modest rise was followed by 7) a rather steep one. In the years between August 2003 and August 2005 the price of gold 8) rose steadily. This 9) relentless rise took gold above 400US$.

And now the fireworks begin! In 2006 the price of gold 10) surged dramatically to around 600US$, the kind of rise not seen since the late 1970's. In 2007 that growth 11) slowed a little, but the still 12) went up substantially to around 650$.

At the same time, the economic situation was 13) deteriorating rapidly. Previous 14) sharp rises could be linked with conflicts such as the Iraq war and the problems with Iran. Now, these problems came together with a crisis in housing and banking.

That's why in 2008 the price of gold 15) rocketed upwards, with no real sign yet that 16) a peak has been reached. The market 17) shot up by around 300US$ to $950 per ounce of gold. This 18) towering rise must mean a lot of investors are scared of shares and bonds, and prefer solid assets.

One final note- although gold is now at 19) an historic peak, it may not 20) come down much in the future. It may 21) slip slightly back, but don't imagine that it will 22) plunge dramatically or 23) fall a lot from where it is - commodities are more difficult to find and the world's nations are asking for more and more of them. Gold at high levels is here to stay.”

Look at the highlighted words and phrases in the talk given by the commodities man. Put them into the chart below in the two categories „up” and „down” (if it is neutral, put it in the „down” column. To give you an example, a phrase like „an amazing fall” would go into the „down” category.

Answers:

Up Down
                                              
                                             
                                             
                                            
                                             
                                             
                                             
                                             
                                              
                                             
                                             
                                            
                                             
                                             
                                             
                                             

Correct answers are here12

6. THE ADVERBS, THE ADJECTIVES

It is clear that when we describe trends we sometimes need to add more detail. Look at the following examples:

1) „house prices have risen significantly in the last two years”

2) „There has been a noticeable drop in mortgage approvals”

Which sentence focusses on a noun?

Which includes an adverb?

Which focusses on a verb?

Which includes an adjective?

General rule: adverbs go with verbs, adjectives with nouns - but, NB, adverbs can add to adjectives, for example, „a surprisingly large drop”, and, NB, words like „a lot” and „much”, „downward” and „upward”, as well as „up” and „down” can all be adverbs.

Now look at the following phrases taken from the commodity man's talk. Put NA beside them if they use a noun-adjective combination, VA if they use verb-adverb. One sentence has contains two examples. There are ten in all.

a) the price of gold fell slightly

b) the values in 1998-9 were at a twenty year low

c) the price had increased significantly

d) a modest rise was followed by a rather steep one.

e) this relentless rise took gold above 400US$.

f) growth slowed a little,

g) the price of gold rocketed upwards

h) it may not come down much,

I) It may slip slightly back

Correct answers are here13

7. PHRASES ANALYSED

Now look at the following field of words and phrases taken from exercise The Commodities Man. Can you put them into the chart below them which divides into two sides- noun qualifiers and verb qualifiers? Each of these has three sections- strong, moderate and weak. You only need to think about the qualifiers in the context of exercise The Commodities Man - some could have other uses (eg. much) in other contexts.


slightly, stable, twenty year (low), significantly, a little, rapidly, much, slightly, dramatically, a lot, sharply, modest, steep, steadily, sharp, up, towering, historic, gently, a touch, noticeably, gradually, slight, gentle
Noun qualifiers Verb qualifiers
strong strong
                                              
                                             
                                             
                                            
                                             
                                             
                                             
                                            
                                              
                                             
                                             
                                            
                                             
                                             
                                             
                                             
moderate moderate
                                              
                                             
                                             
                                            
                                             
                                     
                                             
                                          
                                              
                                             
                                             
                                            
                                             
                                  
                                             
                                          
weak weak
                                              
                                             
                                             
                                            
                                             
                                             
                                             
                                            
                                              
                                             
                                             
                                            
                                             
                                             
                                             
                                          

Correct answers are here14

Correct answers are here15

You will notice that there are some sections that don't contain many words, so here are some suggestions:

Moderate (adjectives): moderate, reasonable, average, steady, adequate,

Weak (adjectives): slight, weak, low-level, gentle, mild, slow

Weak (adverbs): slowly, weakly, gently, a bit, a touch, a smidgeon

You can add them to the table above if you like :-).

 
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