Teachers, please help me with this article ♡

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Hi, teachers ?.?

I started to read almost the first financial article written in English in my life, and I need your help T.t

This one consists of 10 paragraphs and below is the first three.

The source is “The Economist”!

The inflation bug

The complex relationship between inflation and (1)equity returns

IN PLACES WHERE it has been (2)long absent, it is hard to remember what a curse inflation is. In other places, it is hard to forget it. Take Zimbabwe. In 2008 it suffered an inflation rate in the squillions. Prices doubled every few weeks, then every few days. Banknotes were so much confetti. Some people turned to equities as a store of value. (3)A share purchased on Monday might be sold on Friday. Harare’s stock exchange was almost like a cash machine.

In principle, (4)equities are a good hedge against inflation. Business revenues should track consumer prices; and shares are claims on that revenue. In some cases, they may be the only available hedge. Iran, for instance, has had one of the better performing stockmarkets, because locals have sought protection from inflation. Sanctions make it dangerous to keep money offshore.

Rich-country investors have a different sort of headache. Though the immediate outlook is for inflation to stay low, it could plausibly pick up later on. If it does, edge cases like Zimbabwe or Iran are a bad guide. The link between inflation and equity returns is not straightforward. Stocks are a decent inflation hedge in the long run. But over shorter horizons, there is an inverse relationship. Rising inflation is associated with falling stock prices, and vice versa.

(…)

(1)

I have heard the word “equity” so many times, but I don’t know what it exactly means. It makes me more confused that it has several different meanings. Is it the word that includes both “stocks” and “bonds”?

(2)

Isn’t an adverb generally used between “has” and “p.p.” when put for the perfect tense in a sentence? Can I use one freely?

(3)

I have no idea what this sentence means teacher T.t Does it mean “People in Zimbabwe would put their money into stock markets against inflation, but they didn’t leave it there for a long haul since the economy was unstable”? Please explain what the sentence implies?

(4)

Are “equities” and “shares” synonyms?

Teachers, thank you so much for reading my post! ?.?

I hope to receive your reply

Anonymous · Accepted Answer

ANNE202I have heard the word “equity” so many times, but I don’t know what it exactly means. It makes me more confused that it has several different meanings. Is it the word that includes both “stocks” and “bonds”?

There does seem to be a lot of bad information about all this on the Internet. Investopedia.com seems to have the clearest definitions. Equity is "typically referred to as shareholder equity (also known as shareholders' equity), or owners equity (for privately held companies), which represents the amount of money that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company's debt was paid off." It's like the equity in your mortgaged house, the difference between what you owe on it and what it is worth.

Stocks are equity securities. They are traded on a stock market. Bonds are different. They are referred to as debt securities and are traded on a bond market.

ANNE202Isn’t an adverb generally used between “has” and “p.p.” when put for the perfect tense in a sentence?

Yes.

ANNE202Can I use one freely?

Not really. This writer wanted "long absent", but he sacrificed literal sense a bit to get it. What he did was well within reasonable license and is unremarkable, but upon close examination it becomes apparent that inflation has not been that, but rather it has been that for a long time. There are probably contexts where this logical hiccup becomes a problem, but not here.

ANNE202I have no idea what this sentence means teacher T.t Does it mean “People in Zimbabwe would put their money into stock markets against inflation, but they didn’t leave it there for a long haul since the economy was unstable”? Please explain what the sentence implies?

Tricky. With runaway inflation, if you just hold onto cash, it loses value at the rate dictated by the inflation. If you buy something of value that can be liquidated readily, when you sell it later, you get more money than you paid for it, and even though that money is worth less, and the value is probably less, too, it is still more than you would have had if you had just sat on the cash. The instability of the economy is not what makes you sell. You buy the stocks in the first place just to protect your cash, the cash you need to live day to day.

ANNE202Are “equities” and “shares” synonyms?

Pretty much. Be aware that I am not a financial wizard, and I do not play one on TV.

GPY · Answer

ANNE202(1) I have heard the word “equity” so many times, but I don’t know what it exactly means. It makes me more confused that it has several different meanings. Is it the word that includes both “stocks” and “bonds”?

"equities" means stocks/shares but not bonds. In this article, "equity" (uncountable) refers collectively to stocks/shares. More generally, "equity" refers to the net amount of value in something (e.g. a company or a house), or the net amount that one owns of something.

ANNE202(2) Isn’t an adverb generally used between “has” and “p.p.” when put for the perfect tense in a sentence? Can I use one freely?

In this case, "has long been absent" seems more logical than "has been long absent". This is because "long" more logically refers to the extent of "has been", rather than modifying "absent" . Compare e.g. "he's been especially quiet", which is correct because "especially" modifies "quiet". Having said this, "has been long absent" would probably not be noticed as an error in normal reading.

ANNE202(3) I have no idea what this sentence means teacher T.t Does it mean “People in Zimbabwe would put their money into stock markets against inflation

They would buy shares rather than retaining cash, because, unlike cash, the shares did not very rapidly lose their value due to inflation.

ANNE202but they didn’t leave it there for a long haul since the economy was unstable”?

No, it doesn't say that this was the reason. They weren't really investing in the shares, as people normally do, but just using them as a temporary alternative to cash. When they wanted/needed actual cash, they would sell the shares.

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The inflation bug

The complex relationship between inflation and (1)equity returns

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