Explained | The Stock Market | FULL EPISODE | Netflix

I always wondered, Why should we listen every night to the state of the stock exchange? 70 stocks are closing at a record high so far … Massive rise in stocks … It set records in initial public shows Investors who rode the wave … When the stock market is booming, They make us believe the economy is booming. 'Record pace' In "America", the stock market was booming in general for about 40 years.

If the stock market collapses, wealth will be lost with it And the prosperity of the American economy. The stock market indicates that we are on our way to prosperity. A skyrocketing stock market would be in everyone's interest. The stock exchange rose nearly $ 3 trillion Since the election. But if we add all the goods and services that are bought and sold in the "United States", The actual economy, It is not growing as fast. The wage rate has barely moved in decades The average net income of the American family It has yet to recover from the Great Recession. What exactly is the exchange measuring then? NETFLIX Documentary Originals The stock market is the measure of "America's" prosperity. Look at the Dow, it's up … The Nasdaq index finally scored 5,000 points. Investors yearn … The quotas! A new kind of gold rush We are all watching this global economic expansion …

We have now entered a historic stage … Stock repurchase … It is a flawed philosophy at its core. "stock market" To understand what the stock exchange measures, It is useful to imagine a very simple institution Like a lemonade stall. Jill is a hit. But I am thinking of a bigger project. I tried to get a loan but the bank said the risk was high. Wealthy investors did not buy. Jill had another choice.

She can establish a public company And it gives all those wishing an opportunity to invest in her company. There is something called an initial public offering. Investors pay a certain amount, a dollar, for example, to own a small portion Or a share in the "generation" company. Jill sells a group of shares. And my lemonade empire is booming! It is true, "Jill" can use the money to open new stalls. Which means more profits. Jill can invest a portion of these profits in developing new goods. It can also return some of that money to the investors.

These are called quotas. She doesn't have to do that But this increases people's enthusiasm about her company And it increases the likelihood that they will buy its shares, Like Sam, who was sick on the day of the premiere but sees that … Jill is the smartest girl in the whole world. I know the lemonade stall issue You will be a hit. He offered to buy some shares from one of those who had invested in the original Double the price she paid for her. – He is thinking … – If you follow "Jill" at the same pace, I can sell these shares for a larger amount later.

This is the stock exchange, people buy and sell Small parts of companies, According to what they think the stock will be worth in the future. Except that, in reality, This happens thousands of times per second all over the world. There are exchanges everywhere But the New York Stock Exchange is the big square. It has been around since 1792 When 24 stockbrokers put on their most beautiful suits and hats They met under a tree on Wall Street in New York. Today, it is the place where shares of major traditional companies are traded Such as "IBM" and "GE". The Nasdaq is like a younger and cooler brother. The Nasdaq Index was born in 1971 and has no specific location. All trades are done electronically. There we find technology companies such as "Apple" and "Facebook". So in America, if you want to know the state of the stock market, You must know the position of these two exchanges. This is where indicators come in.

Indices take a large batch of stock prices and turn them into a clean number. The S&P 500 tracks 500 of the largest companies on the two exchanges The Dow is more exclusive He tracks only 30 companies he considers the most important. In 2015, he quit AT&T. And replace it with "Apple". The Dow and S&P are two large US indices But other countries have their own indicators To measure its stock market. German Stock Index, DAX … London Stock Exchange Index, FTSE 100 … Nikkei index … Shanghai Index … Today, the shares of many of the world's largest companies are traded on the public markets. But this was not always the case. There was one man, and often one man, who made all the decisions. The big companies in the twentieth century, most of them at that time, It had only one shareholder, such as Andrew Carnegie. Andrew Carnegie, steel. And "Vanderbilt", (Cornelius Vanderbilt) Railways And "Rockefeller".

John Rockefeller, oil. They tightly controlled their companies. These things started to change at the beginning of the 20th century. And we started seeing the emergence of companies like "General Motors" And General Electric and RCA. The companies found out what Gil discovered, That is, if it allows the public to buy shares, It can grow more quickly. Shareholders want to earn money. So, if the CEO makes a bad decision, They will start selling their shares, which will cause prices to drop. And vice versa is also true, the probability of future profit It encourages people to take risks and invest in new ideas. This is the idea of ​​the exchange as a positive driver. It drives companies to make sound decisions. To have more money to pay shareholders, More money to grow and create jobs and this is good for everyone. By the middle of the 20th century, The American Public Corporation It has proven itself as one of the most powerful and effective organizations And benefit in the world.

There is a feeling of growing prosperity The telephone company is a grateful participant. In the decades following World War II, The stock market contributed to achieving the height of common American prosperity. The new phase has begun, let's make the system more democratic We grow the flow of capital to finance the business. The foundation was really supposed to be a tool To secure investment opportunities, not only for the owners of huge wealth, It's for ordinary Americans, too. It brings high returns for investors. Don't you think that we should invest, my dear? Millions of safe, well-paying jobs Yielded innovative goods that were sold all over the world. Managers and executives saw themselves as guardians or trustees The large public institutions that were meant to serve Not just the shareholders, But also bondholders Suppliers, employees and society at large. Buick offers goods that suit everyone, men and women. Buick General Manager Evan Wiles intervened. Dupont … Contemporary chemistry and industry are united To serve contemporary "America". These public institutions helped build the American middle class As for those who knew how to deal with the matter, Stock trading could make them rich.

Like this guy. I work on the railway … Popular music is only his hobby, but he's a billionaire investor … Warren Buffett … The biggest giant on Wall Street. The most famous investor in "America". The wealth of investor "Warren Buffett" is 84 billion. Buffett is known for his investment style. Investing by value, careful analysis of the company, Review the budget statement, Audit company business. But if you don't have time to do that, here's advice from the man himself.

Buy a low-priced S&P 500 index fund. An index linked fund puts a little of your money In all index companies. Thus you are linked to the stock exchange as a whole to benefit from it. The second option is to give your money to professional investors Who will try to beat the stock exchange for a fee. Buffett once bet a million-dollar hedge fund that over 10 years, The index fund will make more money, And win the bet. Stock picking is a difficult game But there is a common strategy. This guy is John Maynard Keynes.

You may remember his legendary mustache. He is the one who invented it. Keynes won a Nobel Prize. He was one of the most influential economists of the 20th century. And notice that newspapers do a certain thing. The newspaper was dedicating an entire page For pictures of beautiful faces And she was supposed to choose the most beautiful 6 faces And put it in order Your answer is sent to the newspaper. The newspaper was classifying faces according to the number of votes they got The winner was the one whose choice corresponds to the choice of the largest number of people. Think about this competition. Do I choose what looks most beautiful to me? No, I have to choose what other people find the most beautiful faces. This is what happens in the stock exchange. The actual value of a company is not what drives their share price. It is the most popular story that people believe about these companies. Sometimes, stories are supported by facts. Chipotle's share declined by more than a third of its value. This happened after several casualties Including Escherichia coli, salmonella and norovirus, which have been linked to the chain.

The emissions scandal rocked Volkswagen and drove its share price down dramatically. But sometimes these stories are not true. Internet companies have been the most popular and profitable investments for some time. It raised the value of shares fantastically. "Lycos", "X-cite" and "Yahoo" … Internet stocks continue their shuttle rally. It was the dominant story in the 1990s Is that Internet companies will dominate the market. And that these companies should not try to profit. This is a good story and it is partly true. There are companies such as "Amazon" and "Google". The problem, however, is that no one has succeeded in evaluating the story And determine how high the stock market is. Is it an infinitely high? Has the economy changed forever? You know there are sins when everyone talks about something like this. It's like a bubble. It is a cumulative effect.

It keeps increasing but cannot continue forever. The honeymoon of Internet companies is coming to an end in many parts of the world. Lots of internet companies are facing perdition. 300,000 tech jobs have disappeared. It has been described as being breathtaking. Points retreated in an unprecedented precedent for the American market, It left traders and investors in a state of shock. When the stock market bubble burst, Not only did it hurt investors, it caused havoc throughout the economy. Millions of people could lose their jobs, companies could collapse, And people almost lost their end of service compensation.

But even when the stock market is booming and investors are making money, That could hurt the economy, too. We are heading towards the worst energy shortage crisis Since World War II. Drivers began queuing before dawn, hoping to refuel To spend their day. Are you upset about the high prices? I am so frustrated and disgusted with the whole situation. There was a general feeling of anxiety that something was wrong In the American economy. In the end, the blame was placed on the big public institutions And how to operate and manage it.

Here's Milton Friedman, the engine of the blame. He is a famous economist who has been invited to take part in popular talk shows To help people understand his philosophy. Have you ever doubted capitalism? And if it's okay to work out of greed? Do you know which society is not driven by greed? Remember the hurry? Friedman wasn't a fan of her. In his opinion, it should include one thing, the contributors.

In 1970, he published a study that was very successful. Famous article in The New York Times And he said in it that because the institutions are owned by their shareholders, The only duty of the company was to make profits. Gordon Gekko's character in "Wall Street" Embody Friedman's philosophy. You own the company. That's right, you are the contributors, And all of you have been tricked by these bureaucrats. Greed, if you will, It is a good thing. And the institutions took his advice. They started tying the salary of top executives Performance of the stock price on the stock exchange. If it is 80 percent of the CEO's salary Based on the share price performance in the following year, The manager will definitely make sure that the share price goes up. Even if the results will hurt employees Customers, society and the environment And even the foundation itself in the long run.

Executives invested more money To raise the share price in the short term, Like reducing expenses Or buy back a group of their company shares To reduce shares put on the market and raise prices artificially. Between 2007 and 2016, This is how companies in the S&P 500 did By spending more than half of its revenue. Another 39 percent was spent and paid to its shareholders in the form of shares So that it does not have enough left over to increase wages, expand or develop new products, These are good for the economy in the long run. If you have long-term vision, That after 100 years from now, you still want the company to exist, The company might make something different.

But you will still want to work in the field. So the choices you make Concerning investments, people and capital will be different Than if you want to invest and generate profits within 24 months. In 2012, the Wasaw Paper Company was making an investment To transform its factories from making printing and writing papers To making tissue paper. But a hedge fund bought a bunch of stocks And pay the company to reduce its expenses instead. Their argument was that there was no need to do this. And they prefer to increase the rations. We, as management, objected to that. We made concessions and offered to lower our salaries To keep the door to solutions open. Wasao Paper says it intends to close the Brokaw factory by March 31 … It leaves 450 people without work. This news is tragic, and not just for workers who will lose their jobs It's for the Brokaw community where the paper company started.

December 7th, and I will never forget this day, It was not the history of "Pearl Harbor", I was even burying my father that day. I lost my job the same day. Then the next day, I went to work The chaos was overwhelming. People cry … And they wonder why. It was shocking. My concern is that we have evolved to realize this short-term vision On the rights of shareholders, Against a long-term view of shareholder responsibilities. This trend prevailed for a while And it increased in strength and importance. It has really threatened the resilience of our institutions To pursue projects that lead to long-term institutional sustainability And to economic growth. Firing workers, closing factories and keeping salaries low. These things are bad for the economy in general But it could be remarkable for the company's short-term earnings This is what matters to the stock market.

The stock exchange had an amazing start … A new record today … A historic day on Wall Street … The US economy is leading, and so are Wall Street speculators. This was an important day on Wall Street … The S&P 500 rose to new historic highs. As the stock market grew, so did the salaries of CEOs. In 1973, The average CEO's salary was 22 times that of an average worker. In 2016, he's 271 times more. With the stock market booming, Fewer Americans benefit from it. The share of Americans who invested in the stock market decreased To its lowest level in 20 years, With the withdrawal of the middle class.

It is not surprising that with the rise in the price of shares in the "United States" With him the inequality increased. But things don't have to be this way. An exchange gives people the opportunity to decide which companies deserve success Any ideas are worth betting on. There is an attraction in giving people games to play. We look at successful countries that all have stock markets And the countries that tried to stop it She changed her mind and now re-established. Shareholders can influence the performance of companies And interests it takes into account. Most of us think of the distant future.

We care about our neighbors, our children and our grandchildren. We have values ​​and ethics We want our companies to earn money By doing things that are good for the world Not by hurting people and destroying the world. This is what most shareholders actually want. Translation of "Moriel Daou".

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