US Trade Deficit

The US Trade Deficit is when the total goods and services the U.S. imports is greater than the total it exports. In other words is the excess of imports over exports. When the amount of imports exceeds the amount of exports, the country or the economy faces deficit.

The United States trade deficit shrank in December 2007 for the first time in five years. It went down because the country was importing more goods than exporting, which lead to losing money. On that particular month, the country imported around $203.08 billion and exported around $144.32 billion. This lead to the import exceeding the export by $58.76 billion.

The value of the US dollar has to do with the trade deficit falling because due to the downfall of the US dollar, it lead to people being more interested in buying cheaper products from US, which is what cause an increase of exports of US products.

I think that a large trade deficit is bad for the economy because not does it only have a negative result in the country, but it also leads to the country losing money. With the country having more imports than exports, it will most of the time lead to falling into a trade deficit; making the US depend on other countries products. Therefore, if it was the opposite, exporting more than importing would be better causing the economy to trade surplus.

Opportunity Costs

What economists mean when they talk about opportunity costs is sort of basically giving up something to get something else done, but after all you gave up that, in order to get something else that you wanted. In other words is losing something, but yet you know you will gain something else instead of that and probably it could be better since you chose to gave up the first thing in place. Opportunity cost is the cost of pursuing one choice instead of another. Every action has an opportunity cost. For example, someone who invests $10,000 in a stock denies oneself the interest that one can easily earn by leaving the $10,000 dollars in a bank account instead. Another example is the decision of attending college after finishing high school or just working. If you only work you will make money for yourself, but yet if you decide to work and use that money to pay for college, after you graduate and work on what you major on you will earn more money. You gave up only working and making money for yourself, for something that will pay off more at the end.

An example from my own life is being on a team. I gave up the opportunity of having a job and earning money for my own needs, but yet being on that team will look better on my college application and have better opportunities to go to a college of my choice. I gave up the opportunity to earn money for a better chance of going to a college that I want, which once am in the college I wanted, I can look for a job and find something that I like and maybe even earn more money.

My Investment Strategy

At the beginning I didn't have an initial investment strategy, but in order to decide on what different stocks I was going to invest, I first went to newyorktimes.org and searched different companies by the first letter symbol and went on alphabetically. From there on I chose and took a look at companies that I have heard before and that I thought would be worth investing on. But sometimes not even because a company is well known means that at some point is worth investing in it. Some of the basics that I took in consideration before investing on the stocks were the cost per share, the different price history at different times, for example how the company has either lost or gain in 5 days, 2 months, and even a year.

I picked my first 5 initial stocks because as I checked the price history in different times I saw that in most of the times there was growth, yet that didn't mean that it could go down. Since the US economy is not doing so good, I thought it will be better to invest on companies that are actually making money during this downfall of the economy. This shows that they are able to progress even when the economy is not doing so good. Not only that, also they were very well known. I tried to invest at least in one different stock of a different kind to have a variety and see how it works out, for example a cell phone company stock, a brand of clothes stock, and others.

Intro. to the Stock Market

• What exactly is a stock and why do companies sell stock in the first place?

A= In financial markets, stock is the capital raised by a corporation through the issuance and distribution of shares. Companies sell stock in the first place because the owners of a company may want additional capital to invest in new projects within the company. They may also simply wish to reduce their holding, freeing up capital for their own private use.

• What is the difference between a public and a private company?

A= The difference between a public and a private company is that a public company is one whose stock is traded by the public, e.g., listed on an exchange such as the New York Stock Exchange or NASDAQ. Therefore, it probably has hundreds or thousands of co-owners.

A private company is one whose stock is generally held by one shareholder or a small group of shareholders. Its owners don't have to reveal much about their business, and most of us can't invest in it.

• What is the Dow Jones Industrial Average?

A= The Dow Jones Industrial Average (also called the DJIA, Dow 30, or informally the Dow Jones or The Dow) is one of several stock market indices created by nineteenth century Wall Street Journal editor Charles Dow. It is the oldest continuing U.S. market index. This is the best known U.S. index of stocks. It contains 30 stocks that trade on the New York Stock Exchange. The Dow, is a barometer of how shares of the largest U.S. companies are performing.

• What is a blue chip stock?

A= A blue chip stock is the stock of a well-established company having stable earnings and no extensive liabilities. Most blue chip stocks pay regular dividends, even when business is faring worse than usual. Many blue chips are components of popular indices, such as the Dow Jones Industrial Average and the S&P 500.

• What is the New York Stock Exchange and the NASDAQ?

A= The New York Stock Exchange (NYSE), nicknamed the "Big Board," is a New York City based stock exchange. It is the oldest and largest stock exchange in the world by dollar volume. The New York Stock Exchange provides an efficient method for buyers and sellers to trade shares of stock in companies registered for public trading.

The NASDAQ is the largest electronic screen-based trading market in the United States. With approximately 3,200 companies, it lists more companies and on average trades more shares per day than any other U.S. market. It was founded in 1971 by the National Association of Securities Dealers (NASD). It is owned and operated by The NASDAQ Stock Market, and is monitored by the Securities and Exchange Commission (SEC).

• What is a mutual fund?

A= Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace.

• What are some of the biggest companies on the stock market, how much is their stock?

A= Some of the biggest companies on the stock market and their stock (in billion) are the following:

• Chevron= $207.2
• Toyota Motor= $205.5
• Bank of America= $122.6
• AT&T= $104.5
• Honda Motor= $95.1
  

• What is the PE ratio of a stock?

A= The PE ratio of a stock is a valuation ratio of a company's current share price compared to its per-share earnings. A higher P/E ratio means that investors are paying more for each unit of income.

• What is a stock dividend?

A= A stock dividend is payments made by a company to its shareholders. When a company earns a profit, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders of the company as a dividend.