Looking for a book introducing the origin and development of stocks

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The origin and development of stocks (a must-read for novices)

As an investor, it is necessary to understand Where did stocks come from? To this day, many people still don't know where stocks come from, and they don't even care to ask. Here I will tell you about the history of stocks, so that investors can see the nature of the stock market clearly.

Let’s get back to the subject. First of all, I want to say that if you are a finance major, your understanding of the origin of the stock market is wrong. The teacher told you the history of the origin of stocks: 400 years ago, when Europe was undergoing industrialization, companies in capitalist countries ran out of money for expansion, so they created stock exchanges to allow companies to raise funds through this platform. In fact, this is not the essence of the origin of the stock market. Let me tell you the real reason.

It is true that stocks have a history of more than 400 years. 400 years ago in China, it was the late Ming Dynasty and the early Qing Dynasty, and Huang Taiji had just come to power. However, in far away Europe, in Amsterdam, the Netherlands, a company appeared in the annals of history. The company's name is "East India Company". It is a state-owned enterprise and an asset of the government. On the surface, this company appears to be engaged in maritime trade, but it is actually a pirate. Their job is to plunder spices and other supplies from various countries. Don’t think that being a pirate is easy. It is definitely a high-risk industry, because before each expedition, a large amount of money needs to be spent to replenish ammunition and food. After the spices are plundered, the ammunition will be deducted. In fact, the expenditure on food is only a small profit. So these pirates racked their brains all day long to think about how to solve this high expense, and their hard work paid off. They finally came up with a plan, which was to involve the people of their country. They asked the common people to invest money, thus collecting a large amount of funds to replenish ammunition and food. When they returned with a full load, the pirates returned the money to the common people, and also distributed some looted materials and gold to the common people. This was called dividends. But these pirates know that not every time they can plunder a large amount of materials, what if they can't pay the people? So they took precautions and created a trading market. Ordinary people invest money into the pirates, and the pirates give them a note. This note is the proof of your investment, with the amount of money you invested written on it. If you want to get your money back midway, you don't have to look for it at all. Indian companies can go to the trading market with their certificates and sell them to other people. Of course, you can also hold them for a long time, because as long as the pirates can return home with a full load every time, your certificates will appreciate in value.

Having said this, I think you already know that this certificate is the current stock, and the trading market is the securities trading market. The East India Company was the world's first joint stock company, and this is the history of the dark origins of stocks. Through history, everyone should know how to make money. The common people are the shareholders, and the East India Company is a money-making enterprise. Their costs are ammunition and grain, their income is the plundered spices, and their profit is the income from spices minus the cost of purchasing ammunition and grain. If the people wanted to make money, they had to count on the East India Company to plunder a large amount of spices and other supplies.

Let’s talk about the stock market:

The stock market is the abbreviation of the stock market, also known as the secondary market or secondary market. It is a place where stocks are issued and circulated. It can also be said to refer to The place where issued shares are bought, sold and transferred. Stocks are traded through the stock market. Generally speaking, the stock market can be divided into primary and secondary markets. The primary market is also called the stock issuance market, and the secondary market is also called the stock trading market.

The stock market is one of the main ways for listed companies to raise funds. With the development of the commodity economy, the scale of companies is getting larger and larger, requiring a large amount of long-term capital. However, it is difficult to meet the needs of production development by relying solely on the company's own capital accumulation, so funds must be raised from outside. There are generally three ways for companies to raise long-term capital: first, borrowing from banks; second, issuing corporate bonds; and third, issuing stocks. The first two methods have higher interest rates and are time-limited, which not only increases the company's operating costs, but also makes it difficult to stabilize the company's capital, so it has great limitations. When raising funds by issuing stocks, there is no need to repay principal and interest, and only a portion of the profits is allocated to pay dividends. Comprehensive comparison of these three financing methods, the method of issuing shares is undoubtedly the most economical principle and the most beneficial to the company. Therefore, issuing stocks to raise capital has become an important form of developing the economy of large enterprises, and stock trading therefore occupies a very important position in the entire securities trading.

Changes in the stock market are closely related to the development of the entire market economy. The stock market has always played a role as a barometer of economic conditions in the market economy. The so-called "bull market", also known as the bull market, refers to a generally bullish market that lasts for a long time. The so-called "bear market", also known as the short market, refers to a generally bearish market that lasts for a relatively long period of time.

The stock market is in the adjustment stage

my country's Shanghai and Shenzhen stock markets have developed from a local stock market to a national stock market. When it officially opened for business in December 1990, there were only a few listed stocks, and their scale was very small. Most of the listed stocks were local stocks in Shanghai or Shenzhen. For example, there was only one old eight-share stock in Shanghai. It is a foreign stock.

In the subsequent development of the stock market, due to the lack of strategic considerations, the expansion of funds and the expansion of stocks were out of sync. In particular, the expansion of funds was much faster than the expansion of stocks. In the five years from 1991 to 1996, the number of stock trading departments expanded from dozens to nearly 3,000 now, and the capital invested in the market increased from more than 1 billion yuan to more than 300 billion yuan now. However, the listed companies only grew from nearly 1 billion yuan that year. The number has increased from 20 to more than 400 now, and only 30 billion shares are listed and circulated. The supply and demand relationship in the stock market is extremely imbalanced, which caused the stock price to skyrocket in the first two years.

The Shanghai stock market started counting points in December 1990, and it rose to 780 points by the end of 1992, with an average annual increase of 179%; the Shenzhen stock market started counting points in April 1991, and it also rose to 780 points by the end of 1992. 241 points, with an average annual increase of 68.5%.

As the stock price rose excessively in the first two years, along with the expansion of the stock, after the stock price reached a historic height in the first half of 1993, the stock price stopped moving forward, and the Shanghai and Shenzhen stock markets entered a difficult adjustment. stage. In 1993, the closing indexes of Shanghai and Shenzhen stock markets were 833 points and 238 points respectively, in 1994 they were 647 and 140 points, and in 1995 they were 555 points and 113 points respectively. Based on the rising speed of foreign stock indexes and the actual situation in our country, this adjustment of our country's stock market is expected to take quite some time. If the country does not experience relatively serious inflation, it will probably take more than five years for the Shanghai Composite Index to stabilize at 1,000 points.

The origin of the stock market? At the end of the Middle Ages, several Italian city-states began to issue tradable government securities. Venice began buying and selling government securities at the Rialto from the mid-13th century. A wave of speculation also emerged: in 1351, the relevant authorities passed a decree prohibiting the spread of rumors and suppressing the price of government funds; in 1390, 1404 and 1410, attempts were made to ban the government from selling bond futures; Congress also sought to ban "insider trading." Florence, Pisa, Verenna and Genoa also had trading markets for government bonds in the 14th century. Italian city-states outsourced the power to collect taxes to the Monti, and the share capital of these companies was divided into shares (Luoghi) that could be bought and sold. These early joint-stock companies were very similar to the guilds of Roman times.

Due to the religious wars, the Dutch Rebellion and the bankruptcies of many city-states, the development of capital markets in France and Flanders stalled in the second half of the 16th century. Lyon 155 The regular trade fairs in Northern Europe originated from the forum (fora) and Dionysia celebrations in the ancient Roman era. Only at this time can many medieval restrictions on trading and finance be abandoned. In fact, they were the prototype of the stock market. At the Leipzig Fair in the 15th century, stocks in German mines could be bought and sold; at the Saint Germain Fair, held near Paris, which opened after Lent, municipal stocks could also be bought and sold. Bonds, certificates of deposit and lotteries. Antwerp's spring and autumn trade fairs are very long, and open to free trade throughout the year, it is also known as the "year-round trade fair." In the mid-16th century, Antwerp officially established a clearing house (bourse). The reason why it was named after this group of traders gathered at the Bourse Hotel near Bruges (Bruges).

From the mid-16th century, detailed evidence describing speculative market conditions became increasingly available. Financial markets have developed a concept of credit, with bond prices reflecting expectations of future events, such as the inability to repay a debt. Market manipulation began in the 1530s, when a group formed by Ducy deliberately suppressed share prices in the Lyon market (today known as a short squeeze). In the mid-1550s, another wave of speculation about royal bonds started in the Antwerp and Lyon markets. However, the wave of speculation was suddenly interrupted when King Henry II of France announced in 1557 that he would stop repaying debts.

The Spanish army captured Antwerp in 1585, and the latter's clearing house declined from then on. Amsterdam rose to prominence as thousands of Puritan and Jewish refugees fled Spain and arrived in the Netherlands, bringing with them money and trading skills. The shock these immigrants brought to the Netherlands was called the "economic miracle" of the Netherlands in the 1590s by historians. By the beginning of the 17th century, the Dutch Republic was the most developed and dynamic economy in Europe.

Although the Dutch did not invent the capitalist financial systems including banks, creditor and debit bookkeeping systems, joint ventures, certificates of deposit and the stock market, the Dutch did it in a country where the purpose was to make money. Integrate and establish these systems on a stable basis within the mercantilist economic system. The United East India Company was established in 1602. It was the first joint venture company to receive a government charter, giving it exclusive access to trade with the Eastern world. Nineteen years later, the Dutch West India Company was founded to expand business opportunities in the Americas. The first central bank in Europe was Wisselbank in Amsterdam, founded in 1609 as Casa San Giorgio in Genoa. By the early 17th century, money was pouring from across Europe into Dutch financial assets of all kinds, from real estate to annuities, municipal bonds, certificates of deposit and medium-term loans.

Amsterdam was not only an important transshipment port, but also the financial capital of the world at that time.

A wide range of financial goods and services are traded on the Amsterdam Exchange (a new exchange established in 1610): "bulk supplies, foreign exchange, equity, marine insurance... (it is) a money market , financial market, (also) a stock market. "

In 1792, 24 New York brokers signed an agreement under a sycamore tree on Wall Street in New York, agreeing to trade stocks and other securities here every day. transaction. In 1817, this trading market became increasingly active, and participants formed the New York Stock Exchange Management Office. In 1863, it was officially renamed the New York Stock Exchange. This is the origin of the American stock market.

In 1882, Dow and his friend Jones founded Dow Jones & Company at 15 Wall Street, close to the New York Stock Exchange. In 1884, Dow first began to try to calculate the stock price change index. At that time, the samples were all railroad companies, which later became the Dow Jones Transportation Industry Average (DJIA). In 1889, Dow personally founded the Wall Street Journal. On May 26, 1896, the Dow calculated and announced the Dow Jones Industrial Average (DJIA) for the first time. The index on that day was 40.94. In 1929, the Dow Jones Utility Average DJUA index was born. In 1992, the Dow Jones Composite Average (DJCA) was born. In recent years, Dow Jones has created more than 3,000 relatively independent stock price indexes across the world, collectively known as the Dow Jones Global Index (DJGI). However, among all the above-mentioned Dow Jones stock price indexes, only the Dow Jones Industrial Average is the most important. It is not only the most important stock price index in the United States today, but also the most influential stock price index in the world. Therefore, it is a barometer of both the U.S. economy and the world economy. People generally refer to the Dow Jones Industrial Average as the Dow Jones Index (hereinafter referred to as the "Dow Index"), and determine May 26, 1896 as the "birthday" of the Dow Jones Index

In 1720, some British businessmen They established a South China Sea Company with nobles. They obtained many privileges in overseas trade and distribution of national debt through illegal means such as bribing members of Congress, causing the company's stock price to rise rapidly from 228.5 pounds per share at the beginning of the year to 1,000 pounds in July. But the good times did not last long. The inside story of their bribery of members of Congress was soon revealed. The company's credibility and operating conditions plummeted. The stock price fell to 125 pounds per share by the end of the year. The majority of the investing public who were fooled and deceived suffered serious losses. Some even lost their families; and because those company insiders knew the inside story and sold their stocks in a timely manner, they not only suffered no losses, but also made a fortune. Since there were no relevant regulations on stock trading in the UK at that time, the above-mentioned insider traders could not be punished. As a result, more and more speculators followed the example of the Nanhai Company and used various means to plunder and rob. A large number of stock investors were deceived and exploited, and some even lost their money. When desperate, they committed murder, looting, and robbery. The chaos in the stock market has made the entire social order turbulent. The development of the situation shocked the British government and the public. After investigation, the British House of Commons pointed out that fanatical stock speculation is tantamount to disguised robbery, and stock trading must be governed by law. . As a result, the world's first securities trading regulation, the "Soap Bubble Act", was born in the United Kingdom in 1721. Later, in 1812, the British government promulgated the "Securities Trading Regulations"