We're going to tell you this one has to do with sheep and you're going to think we're kidding. But this time we're actually serious.
The term "bellwether" is used in finance to describe a stock or company that can be seen as a representation of the industry as a whole. So Apple might be described as a "tech bellwether" and Amazon might be a "retail bellwether."
Whatever happens to those individuals can be taken as a sign as to what will happen in the industry as a whole. So if Apple reports bad earnings, the stocks of other tech companies might fall in response, as traders assume that disappointing results at the "tech bellwether" suggests that the tech industry in general has reached a rough patch.
You ask: "what does this have to do with sheep? You promised us something to do with sheep?"
We're getting to it.
The term "bellwether" comes from a sheep that leads a flock. A "wether" is a castrated ram. And "bell" comes from an actual bell that shepherds would put on the wether leading the flock. You know, so you can hear it when it walks around. Or moans and groans about being castrated.
So when someone in the financial press refers to Apple as a "tech bellwether," you can smirk and think about the company as a castrated ram with a clanging bell hanging from its neck.
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Finance: What are the NASDAQ and NYSE?74 Views
Finance a la Shmoop. What are the NASDAQ and the NYSE? Nasdaq, yeah it stands for
National Association of Securities Dealers Automated Quotation-systems. And [NASDAQ defined]
yeah, it feels like they got cheated out of an S in there somewhere, like NASDAQ'S.
That's what happens when life's on a budget. So NASDAQ is an electronic
version of the original wall, as in Street, Wall Street, yah that. Where
well-dressed folks would come with cash in hand scream out a stock and a price [stock market in 1900s]
and then trade shares. They would trade for whatever was trending at the time. Like
eyeball massagers, or wooden swimsuits, or motorised surfboards, all real things
by the way. NASDAQ is the much more modern version of its predecessor NYSE.
Is anything but nice when you lose money there. NYSE stands for New York
Stock Exchange and it too was an outgrowth of the well-dressed folks at
the wall. There are two key structural differences in the two trading systems,
the NYSE is an actual physical place, has a physical location, address, etc. and this [NYSE Building]
is what it looks like. NASDAQ is really a concept, a religion, a
network, it's not really a place. At least not a geographic place. The other big
difference is the manner in which shares are traded. The NYSE is an auction-based
system, one individual is a buyer of AMZN at $983.25, he screams electronically
that number and then buys from whoever is willing to sell at that price.
Individuals buy from individuals. That's an auction market. But NASDAQ is a
dealer market, that is somebody deals in the stock. They go out into the market[online stock market]
and buy say a million shares of whatever.com that was bought in the market
conveniently for exactly ten bucks even. That dealer now makes a market in that
stock, ie the dealer is kind of you know, their own individual market. And she
moves with the market to manage the spread in the trades. Like she might have
a narrow spread, where she's a buyer of the stock at $10.02 and a seller of the
stock at $10.07 a share. Or it's a really wild volatile stock, on a wild and [man and woman on rollercoaster]
volatile day, she might be a buyer only at $9.90 and a seller at $10.30, making 40
cents a share trade. Well you could do the fancy math that if she
keeps her inventory steady at a million shares and trades a million shares that
day. Well with that spread she makes 40 cents times a million or 400 grand for
the day's efforts. However after staring at a screen all day she's gonna have to
spend at least some of that money on eye care. [woman in office]
Thank goodness for those eyeball massagers.
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