(Tia describes the working of the stock market in its simplest terms as we explore what happens to an investment once it is made. The explanation covers the loss of money that can occur when a company goes under.) 

---

Tia: so, okay, where do I start?

Skip: I don’t know, where do you want to start tonight?

Tia: where do you think I should start Russ?

Russ: well I think you should start with our weird stock market lately.

Tia: yes, yes, yes, weird stock market hmmm, why is it doing what it’s doing? Well it’s fluctuating up and down, up and down. Now first of all point of interest, there has never been a crash in the summer or the spring, it always happens in the fall or early winter. To look at why your stock market is doing what it’s doing is to look at external influences. For example, let us look in Asia. Well the Japanese market is doing some very interesting things. The actual one that’s doing some very weird dropping is the Hang Seng in Hong Kong. I seem to remember at the start of the year it was at around 10,000. At the moment it is in the mid 7,000's. That is approximately a quarter of its value, 25%, history, gone....poof. Of course it was also highly overvalued as well. The Japanese market is also doing some wild fluctuations. They’re trying to enact certain fiscal problems……..enact certain fiscal policies to counter fiscal problems which can be traced right back to the mid to late '80s when they went through their phase of buying everything, everything and anything. Now looking at those two markets you can see a certain effect occurring because as you track across the globe from where the Asian flu……..let’s call it the Asian flu as that seems to be a good catchphrase and one that I heard the other day………the Asian flu starts in Asia, it is now affecting the European markets and from time to time your market. Now if a market can lose 25% of its value in less than seven months, what does that hold for your market that is already lost……well actually it gained back some of its loss………it had lost 10% of its value, it’s now 9%? It’s only 15% to go……well 16% to go until it has lost a quarter of its value or a quarter of what it has made which would be about 2,500 points. It’s already lost at one point 800 points on its value. So what is going on? Well, there is numerous factors contributing to this problem, not least is wild spending. Investing in other countries where the currencies are shaky. Now, the ruble in Russia has been devalued, symptom of the Asian flu. The fact that investors rushed into the Soviet……the former Soviet Union after there was problems in Asia and pulled out and they helped to depress the markets in Asia. In turn, they’re now depressing the markets in Eastern Europe. It’s only a matter of time before they start to pull out of markets in Europe. Once this happens there is only one market left or one major, major market left that the investors have left go. My opinion is that the market will climb again. It won’t get up to 9,300 mark where it held its record but it will climb again until late in the autumn or the fall. Then is the time to watch, people are already talking about that the bull market is turning to a bear market, these rumors are spreading. Now, if there is signs of inflation, the Federal Reserve will increase the interest rate which will help to depress the market further. Okay, that’s the market, that’s what's happening from Wall Street to Hades Base. Okay, we got questions.

Russ: yeah, as far as the market's concerned….

Tia: uh-huh.

Russ: if I put in a thousand dollars in the market, the market drops by a point I lose my thousand dollars, where does the thousand dollars go?

Tia: disappears.

Russ: what do you mean it disappears? How does it disappear, where does it go to? Somebody’s got a thousand dollars right?

Tia: no, it’s like if you buy a car……let’s say you buy a car that’s worth a thousand dollars.

Russ: uh-huh.

Tia: right? And depreciation of that car is one dollar a day right? In a thousand days that means that that car is worth nothing. Where did your thousand dollars go?

Russ: well it went to whoever wants to buy it for a thousand dollars.

Tia: uh-huh.

Russ: if I can’t find anybody who wants to buy it for a thousand dollars, then I can’t quite sell it.

Tia: that’s correct, you can’t turn around and sell it.

Russ: but I still hold onto that car, the car is still there.

Tia: uh-huh.

Russ: but if my stock drops off the map…..

Tia: you still have the piece of paper.

Russ: so the stock comes back up again?

Tia: uh-huh.

Russ: then it’s worth something.

Tia: correct, unless of course the company that owns that stock ceases to be. Next question........anyone?

Russ: I’m still trying to grasp the concept of stocks and losing money like that.

Skip: well you’re invested into a company and what you get in return for your investment is a piece of paper that says you invested so much money.

Russ: yeah the company’s getting my money.

Skip: do what?

Russ: did the company get my money?

Skip: no, well yeah they do…..

Tia: uh-huh.

Skip: they do, yeah you’re correct……..

Tia: yes they do.

Skip: they do get your money but what happens if…..let me see if I can give you a for example. Say I’m in business and I set up a stock exchange invested into my business.

Russ: uh-huh.

Skip: I get a hundred people to invest a thousand dollars, that’s $100,000.

Russ: uh-huh.

Skip: my business goes to the point of where it’s costing me more to operate it than I'm making profit out of it. My business goes belly up and I go bankrupt, the people lose all their money. They got the piece of paper but they still lose all their money.

Russ: yeah, so the money does go somewhere, it goes to the business.

Tia: uh-huh.

Skip: yeah.

Russ: oh that’s okay.

Skip: yeah but if the business does not profit then you do not see any return on your money.

Russ: uh-huh.

Tia: you’ve got to remember that running costs and everything have to be taken out.

Russ: oh.

Tia: okay?

Russ: okay.