Investing 102

[JKnight]

We also have to wonder, how much of the decline today is profit-taking by those that got shares at, or just above, the IPO price? I'm not defending the stock, couldn't care less about it, but that would be an explanation that could make today's movement "seem" like more of a buying opportunity than a sign of impending doom.

Edit: Upon further review...it looks like the banks issued more shares. So the decline is likely created by the dilution of the additional shares. Greg's point still holds true though, for whatever fundamental reason, how willing are you to stomach these day-to-day swings?

[GregWeld]

Originally Posted by JKnight

We also have to wonder, how much of the decline today is profit-taking by those that got shares at, or just above, the IPO price? I'm not defending the stock, couldn't care less about it, but that would be an explanation that could make today's movement "seem" like more of a buying opportunity than a sign of impending doom.

Edit: Upon further review...it looks like the banks issued more shares. So the decline is likely created by the dilution of the additional shares. Greg's point still holds true though, for whatever fundamental reason, how willing are you to stomach these day-to-day swings?

Totally agree Jeff.

[glassman]

Greg, speaking of this Alibaba stock.

Question #1, whats the difference with a foreign stock and a foreign market like say the Nikkei (did i spell that right?)

#2 so would Coke do a public stock overseas, like on the nikkei?

Or is it a global ipo and i'm not quite understanding the flow of money?


thanx, Mike

[GregWeld]

After reading this TWICE -- I still have no idea what you're asking.

Originally Posted by glassman

Greg, speaking of this Alibaba stock.

Question #1, whats the difference with a foreign stock and a foreign market like say the Nikkei (did i spell that right?)

#2 so would Coke do a public stock overseas, like on the nikkei?

Or is it a global ipo and i'm not quite understanding the flow of money?


thanx, Mike

[Sieg]

It will be interesting to see the impact of war on the market.

Strategic portfolio adjustments in times of war?

Opportunities?

[glassman]

Originally Posted by GregWeld

After reading this TWICE -- I still have no idea what you're asking.

I guess the Dow, Nikkei, Nasdaq are all just measurement/averageing devices. My question was/is, How is the "Alibaba" traded? i guess the same goes for Sony, Toyota etc...I've nver really thought about it before.

Who handles the purchase of the actual stock? A bank?, if this is waaaay back in the thread, well, i guess i'll reread...

Sorry for not being clear, my brain's weird.

[Woody]

Originally Posted by glassman

I guess the Dow, Nikkei, Nasdaq are all just measurement/averageing devices. My question was/is, How is the "Alibaba" traded? i guess the same goes for Sony, Toyota etc...I've nver really thought about it before.

Who handles the purchase of the actual stock? A bank?, if this is waaaay back in the thread, well, i guess i'll reread...

Sorry for not being clear, my brain's weird.

Alibaba is traded on the New York Stock Exchange. It is traded just like any other stock listed on the New York Stock Exchange. The Nikkei is an index which is made up of top 225 Japanese Stocks on the Tokyo Stock Exchange.

[GregWeld]

Originally Posted by glassman

I guess the Dow, Nikkei, Nasdaq are all just measurement/averaging devices. My question was/is, How is the "Alibaba" traded? i guess the same goes for Sony, Toyota etc...I've never really thought about it before.

Who handles the purchase of the actual stock? A bank?, if this is waaaay back in the thread, well, i guess i'll reread...

Sorry for not being clear, my brain's weird.

The DOW -- is a "weighted average" of 30 stocks... each having a divisor assigned to it's stock that accounts for when stocks pay dividends or splits etc.

The Nikkei is the Japanese stock market - Actually called the Tokyo Stock Exchange - and is their "average" similar to our DOW.

The NASDAQ is ONE stock market here - the other is the NYSE aka: The New York Stock Exchange.

It used to be that the NASDAQ was electronically handled trades -- and the NYSE was actual people or "Designated Market Makers" and "Floor Brokers" that were on the floor handling trades... Now days there are fewer seats on the NYSE and many of the trades are done electronically - but there are still Market Makers... and Floor Brokers that represent the members on the floor. There are also what's known as Liquidity Providers that are members of the NYSE... and now you're getting complicated.

Your actual "trade" is handled by a "cleaning house" much the way a bank clears a check. The biggest I think is known as ICE (Intercontinental Exchange) - which owns the NYSE and the Euronext. You place your trade via a brokerage which is really much like a bank -- it has your money... the trade is either done electronically or via a market maker -- and then the actual paperwork behind the scenes is handled by a cleaning house.

NO MATTER WHAT though -- YOU own the share you buy. Even if the exchange was blown up (god forbid) or your brokerage went broke (hope that's not why they're called BROKErages). The shares are yours not anyone else's. The big boys are just facilitators.

[glassman]

You've answered my question wonderfully. Precisely the answer i was looking for even when not quite asked properly. Thanx

[ErikLS2]

Originally Posted by GregWeld

NO MATTER WHAT though -- YOU own the share you buy. Even if the exchange was blown up (god forbid) or your brokerage went broke (hope that's not why they're called BROKErages). The shares are yours not anyone else's. The big boys are just facilitators.

It's a little tricky with BABA shares, and a bit more risky. Don't ask me to explain it but they're called Variable Interest Entities (VIE). Copied this from wsj.com:

The bigger concern is that, because China's government restricts foreign ownership of Chinese assets, Alibaba shareholders won't actually own the company. Instead, through a so-called variable interest entity (VIE), they will only own shares in a shell company with a contractual claim on Alibaba's profits. Many Western-listed Chinese firms get around Beijing's foreign-ownership rules this way. But Beijing could close this loophole at any time, and it gives shareholders limited recourse against abuses by company founders.

VIE "contracts are only binding and enforceable if Chinese courts are willing to uphold them," warned Congress's U.S.-China Economic and Security Review Commission in June. "For U.S. investors, a major risk is that the Chinese shareholder . . . will steal the entity, ignoring the legal arrangements on which the system is based."

***
As it happens, the most notorious VIE controversy involves Alibaba and Mr. Ma, who in 2011 separated Alipay from the rest of the company without board approval. He said Chinese regulations required him to make the move, but it infuriated Alibaba's minority owners Yahoo YHOO +1.03% and Softbank. 9984.TO -4.24% While a settlement was negotiated, trust between the company and investors was damaged.

Alibaba is thus a microcosm of today's Chinese economy: Hundreds of millions of consumers and businesses are benefiting from rising opportunity, but the commanding heights remain opaque, politicized and shaky. Caveat investor.