What is the stock market? (2)
PICKUP BRIDGET: My turn again? The sales were so strong that it turned out to be one of the best seasons in its history. Plus! It turns out the company was fully insured against giant badger attacks, so they got money from the insurance company to rebuild. More people than ever wanted to own a piece of the company. Now you could sell your shares for $25 each and people would buy it!
PIPER: But then a 60-foot-tall lizard -- which the company wasn't insured against -- destroyed all the company's delivery trucks. The stock price dropped down to $10 a share.
JED: You are quite the chaos agent. Ok, things looked really bad for the scrappy shoe company. But then, one of the scientists working there figured out why so many humongous creatures kept showing up. It turns out, a new shoe they were developing accidentally gave whoever wore them psychic powers. And one of the kid shoe testers kept calling monstrous animals for. some. reason!
PIPER: (chuckles menacingly)
VISHNU: And then everyone wanted psychic powers, so people started lining up to buy the shoes.
PICKUP BRIDGET: And since the company was the only place where you could get them, everyone believed it was going to be hugely successful for a long time. People were willing to pay like, a thousand dollars apiece for its shares. And I think we're going to have to stop there, because Jed, your marshmallows are on fire!
(SFX - RAGING INFERNO)
JED: It's ok. I prefer it when they're burnt. But um... maybe get the fire extinguisher… Ok, scouts, what have we learned?
VISHNU: Stock prices go up and down based on how people feel about a company and how it's doing.
JED: Very good. Anything else?
PIPER: You should not be in charge of cooking.
JED: Excellent. Merit badges all around. Where's Bridget and that fire extinguisher?
BRIDGET: Heads up!
(SFX - FIRE EXTINGUISHER AND JED EXCLAMATIONS AT BEING SPRAYED)
[INTERSTITIAL]
BRIDGET: All right, gang, looks like we've finished up the Bazillionaire's Bounty -- which is a little surprising. (SFX - RATTLING AN EMPTY CARDBOARD BOX) We brought a lot of ingredients…
JED: (groaning)
VISHNU: What's wrong with Camp Emperor Jed?
PIPER: He ate that entire super-sized smore he made.
JED: (groaning) Ohhh, so many... marshmallows…
PIPER: Looks like he's gonna Bazillionaire blow chunks.
BRIDGET: All right, give him some space.
JED: I'm fine. I'm fine. In fact, I did this on purpose -- to teach you scouts a very important lesson. And that is (BURP) never underestimate something that's a lot bigger than you are.
BRIDGET: (to herself) Yeah, or don't put three bars of chocolate in your mouth at one time…
JED: And to further illustrate my point, I have a story. It involves the stock market. Be warned: it's a little frightening.
VISHNU AND PIPER: Ooh! All right!
JED: It's called “Aurelia and the Bear.”
(MUSIC BEGINS - LIGHTHEARTED)
PICKUP JED: Aurelia was a young woman who was always looking for clever ways to invest.
Aurelia: I've gotta be smart
JED: One day, Aurelia was researching some companies whose stock she was thinking of buying. That's when her big gigantic brain noticed something.
AURELIA: Wait a minute! There's a pattern here. Let me check the records… (SFX BOOKS THUMPING AND PAGES TURNING)
JED: Lots of people who invest in the stock market try to make money by buying shares when prices are low and then selling them when prices go higher. Like if you bought a share for 1 dollar and then it went up to 2 dollars -- and you sold it. You just doubled your money! However, it's really hard to predict what prices are going to do.
AURELIA: Aha!
PICKUP JED: But Aurelia, she saw a pattern in the way stock prices went up and down. It was a pattern no one else saw. And she could use that to buy and sell stocks and make a whole lot of money.
AURELIA: I mean, if I'm right, I'm going to make bank!
JED: So Aurelia started buying shares. And just like she predicted using her method, the prices of the shares she bought soon went up.
AURELIA: I'm a genius! I'm gonna buy a lot more shares. It is looking like a bull market!
VISHNU: A bull? What does that mean?
JED: Well, in the animal kingdom, a bull is a male cow. (SFX BULL BELLOW) But when you're talking about the stock market, a bull market is the nickname stock traders use when more people are buying stocks, and that pushes prices up overall. (SFX DING DING DING) Aurelia put more and more of her money into her favorite stocks because she thought the stock prices would keep going up and up.
AURELIA: Flying cars, sure, I'm bullish on that. Electric sandwiches? Pass. Ooh, but flying electric cars delivering sandwiches? Major super bullish!
JED: Aurelia was making money fast, and she was convinced she'd figured this whole stock thing out. But that was her mistake... the stock market is big and complex with lots of moving parts. She had focused on a few companies' stocks and jumped to a conclusion -- and while she did see a pattern -- it was only part of the bigger picture. It's like she saw thick black hair, two white horns -- and thought, “It's a bull!”
AURELIA: Buy! Buy! Buy!
JED: But you know those illusions where you're looking at something really close, and it looks like one thing, but then when you step back it's something entirely different? If she'd been able to step back and see the bigger picture, she would've realized that the black hair and white horns weren't on a bull. She was, in fact, looking at the fur and teeth of a massive bear.
(SFX BEAR ROAR)
JED: In the stock market, a bear market is the opposite of a bull market. In a bear market - traders think prices are going down and are going to stay down. So lots of people try to sell and sell, and prices overall drop. And markets can turn from bulls to bears pretty quickly - meaning people can lose lots of money real quick.
AURELIA: Wait, what's going on? Why are my stock prices falling? My money!
JED: And this was no baby bear market. Not even a cranky mama bear protecting her cub. No, this was a porridge-too-hot, bed-too-hard, angry Papa Bear-market. And it was bent on ripping into her stocks like they were a picnic basket full of cake.
(SFX BEAR ROARING AND DESTROYING CARS AND WINDOWS)
JED: Prices of stocks everywhere went down -- including Aurelia's, and in the aftermath, Aurelia realized she'd lost everything.
PIPER: What happened to her?
PICKUP JED: She had to start over. And the next time she invested her money, she would do it a little more wisely and a lot more carefully. The end.
(SFX CRACKLING FIRE FOR A SECOND OR TWO)
VISHNU: Why did they choose “bull” and “bear” to represent the stock market?
JED: I don't know. Maybe they just liked animals that start with the letter “B”.
PIPER: They should've picked “barracuda.” That's cooler.
VISHNU: Or “Blue Whale.”
JED: Heh, yeah… What other “B” animals are there?
BRIDGET: Badger.
JED: Badger?!! Where?! Auuugghhh!!! Run for your lives! It's a badger! (SFX - RUNNING AWAY THROUGH THE WOODS)
BRIDGET: Well, he's sleeping in a tree tonight.
---KIDS HAVE A SAY HERE---
BRIDGET: Before we pack up this campsite, here are some final thoughts about what we learned today. Sure, the stock market can SEEM confusing...and sometimes, it is. There are lots of words that are difficult to understand, or jargon. It's not always clear why the stock market acts the way it does.
PICKUP JED: And actually, only about half of Americans even own shares. But it's worth understanding how and why the stock market works. It's a way that some people can grow their money, but you can also lose money - so it's not without risk. So keep on asking those questions about the stock market or anything else. We'll be waiting for them.
---CLOSE---
BRIDGET: Thanks for listening to Million Bazillion -- where we help dollars make more sense. We'll be back next week with an all new episode. If you have an idea for an episode or a question you want answered, email us at Marketplace dot org slash million.
JED: And if you want new episodes of Million Bazillion sent to your email inbox each week...along with bonus content like a tip sheet, a quiz, and cool comics. Sign up Marketplace dot org slash BONUS.
BRIDGET: Special thanks to professor Ashleigh Eldemire Poindexter at the University of Tennessee Knoxville for helping us understand the answer to this question...to our colleagues at Marketplace who offered ideas and insights along the way. And thanks to Kimberly Adams, Marissa Cabrera, Marque Green, Meghan McCarty Carino, Daisy Palacios, Jeff Peters, Lianna Squillace, Vishnu, and Piper,...for lending us their voices for this episode.
JED: Million Bazillion is brought to you by Marketplace in collaboration with Brains On! And American Public Media.
I'm your host, Jed Kim…
The senior producer is my co-host, Bridget Bodnar
Marissa Cabrera is our producer.
Sanden Totten is our editor.
BRIDGET: Chris Julin is our sound designer.
Our theme music was created by Wonderly.
This episode was mixed by Bekah Wineman.
Our digital team includes Erica Phillips and Tony Wagner.
Sitara Nieves is the Executive Director of On Demand at Marketplace.
JED: And special thanks to the people who provided the startup funding for Million Bazillion, and who continue to help keep us going: The Ranzetta Family Charitable Fund and Next Gen Personal Finance, supporting Marketplace's work to make younger audiences smarter about the economy.
BRIDGET: To all the grown-ups listening right now – we hope that you and the kids in your life are having some good conversations about money thanks to Million Bazillion. We created this podcast to help kids get an early start on learning about the economy – and to keep it going, we're counting on your support. Donate today at marketplace-dot-org-slash-givemillion, and thanks for chipping in to make our work possible.
