• The (Time) Value of Starting Early

    You've heard it all before. Start saving early. Waiting to put money away for retirement will be costly. Starting at age 25 will allow you to save significantly more than if you start at age 35 or age 45.

    Take a look at this infographic from Bankrate below. Just $50 per month saved starting at age 25 could provide over $78,000 by retirement. However, waiting just 10 years to begin saving leads to substantially less at over to $40,000.

  • What is Private Equity Investing?

    This video explains what it means to invest in a private equity fund. You can use this video and the NPR article here to answer these questions:

    1. What is a private equity fund and how does one work?

    2. What is the role of leverage in the returns earned by investors in private equity funds?

    3. Why were private equity funds called "corporate raiders" in the past?

  • Netflix Announces 7-for-1 Stock Split

    Netflix (NFLX) has announced its plans to issue a 7-for-1 stock split to make its stock attractive to retail investors.  A 7-for-1 stock split is unusual, but it was done recently by Apple and was successful. And preliminary evidence suggests that investors are optimistic it will be successful for Netflix too as the stock trades for around $650 per share.

    For discussion:

    What is a stock split and how does it work?

    Why do some believe that the total market value of the company's equity should be same before and after a stock split? Why do some believe that the total market value should be higher after a stock split?

  • Dealing with Credit Card Debt

    Credit card debt has a way of sneaking up on you. What starts as a simple convenience can easily turn into a monster that holds you hostage. Credit cards are necessary if you travel or want to buy something online, but because they're out of sight, a borrower can lose track of how much money is owed and end up with a debt burden that will take years, maybe decades, to overcome.

    From the Federal Trade Commission's website, here is some advice for handling credit card debt:

    If you've maxed out your credit cards and are getting deeper in debt, chances are you're feeling overwhelmed. How are you ever going to pay down the debt? Now imagine hearing about a company that promises to reduce – or even erase – your debt for pennies on the dollar. Sounds like the answer to your problems, right?

    The Federal Trade Commission (FTC), the nation's consumer protection agency, says slow down, and consider how you can get out of the red without spending a whole lot of green.

    Follow this link to go to the FTC website

    The FTC gives advice and warnings for handling debt settlement companies that promise to fix your financial troubles.

    Rather than get into the situation that calls for drastic measures, consider the advice found in the infographic below from Bankrate.

  • Integrity on Wall Street

    July marks the anniversary of the Dodd-Frank act, but many question whether Wall Street has learned its lesson.

    A CBS News article (Kennedy, 19 May 2015) entitled "Wall Street Ethics still an oxymoron" describes a recent survey of financial services professionals, and reports this:

    Nearly half of those surveyed said it was likely their competitors engaged in illegal or unethical behavior to gain an business edge, and close to 20 percent felt it was sometimes necessary for people in their profession to engage in illegal or unethical activities to succeed.

    About one-third of those polled felt company compensation structures or bonus plans put pressure on financial service employees to bend or break the rules, while 27 percent disagreed with the notion that their industry puts the interest of their clients first.

    Twenty-two percent said they've seen or have first-hand knowledge of actual workplace wrongdoing. And around 25 percent said they'd probably take part in insider trading if it would net them $10 million and they had no chance of being arrested.

    Alan Greenspan, former Fed Chairman, was asked in the interview below, "Does that surprise you?" His answer: yes and no.

    For discussion:

    According to the CBS article, what are the issues surrounding whistleblower policies?

    In your opinion, is "Wall Street ethics still an oxymoron?"

  • Notable American Woman to Join $10 Bill

    The 10 dollar bill is getting a face lift. #TheNew10 will carry the face of a woman, and the decision of which woman will be made by the American people.


    From the Treasury's website:


    United States currency — and the images of great leaders and landmarks they depict — has long been a way to honor our past and express our values. In 2013, we selected the $10 note for redesign based on a number of factors.

    The next generation of currency will revolve around the theme of democracy. The first note, the new $10, will feature a notable woman. In keeping with that theme, it’s important that you make your voice heard. Use #TheNew10 to tell us your ideas, symbols, designs or any other feedback that can inform the Secretary as he considers options for the $10 redesign.


    Find out more and join the discussion here.


  • The Government Battles Fraud: From The Civil War to Today

    Where government contracts exist, profit potential exists. And where profit exists, fraud potential exists.

    That was the story during the Civil War and that is the story today.

    During the Civil War, people complained that merchants sold shoddy supplies to soldiers. These merchants were accused of taking advantage of government contracts, but the war-strapped government was powerless to stop the fraud. So they enacted a law that rewarded employees for blowing the whistle on their employers.

    That law was largely forgotten after the war, but the False Claims Act returned to the spotlight in the 1980s to battle fraud once again.

    This short NPR program tells the story of the "golden age of the whistleblower."


  • Investors Love Chicken

    Chicken fast food chains are all the rage with investors. Chicken wing chain Wing Fling just launched a successful IPO as did others.

    For discussion:

    What are the trends that are leading to investor interest in these stocks?

  • Dark Pools For Goldman Sachs

    What a difference a day makes.

    Goldman Sachs, the largest equity trading firm in terms of revenue, once called for reforms in Dark Pools. But now, the investment bank is said to be investing in building its dark pool.

    Dark pools are trading platforms where orders are not made public until after they are completed. These are great for customers who want to buy or sell without other market participants buying or selling ahead of them. However, the controversy comes when high-frequency traders use the same dark pools, and end up competing with customers.

    From CNN Money (29 July 2014):

    Dark pools got their name because orders routed through them aren't listed on exchanges until the order is done, so the public is kept in the dark.

    Institutional investors such as mutual funds, hedge funds and pensions like them because it's less likely that parts of their large orders will get picked off before they're fully executed.

    If a high frequency trading firm sees the order ahead of time, it could potentially jump in and buy a stock before the mutual fund, raising the costs to the mutual fund.

    For discussion:

    Why is Goldman Sachs investing in its dark pool? What competition are they facing?

  • Stock Buybacks On the Rise

    April was a big month for stock buybacks with $141 billion in announcements.

    From this NY Times article (Morgenson, 5 June 2015)

    The best buybacks occur at companies that have concluded--after careful analysis--that their stocks are cheap and that purchasing the is a wise use of their capital. But veteran investors warn that companies must combine stock repurchases with other steps if they want to unlock value in their operations.

    But stock buybacks are not always what they're cracked up to be. From a recent Barron's article (Salzman, 6 June 2015):

    While buybacks have the salutary effect of lifting earnings per share, and thus propelling stock prices, a growing chorus of critics has called the practice wasteful, if not a dangerous substitute for business investment. As Laurence Fink, the CEO of BlackRock (ticker: BLK), the nation’s largest money manager, wrote in April, in a letter sent to every S&P 500 CEO, “with interest rates approaching zero, returning excessive amounts of capital to investors—who will enjoy comparatively meager benefits from it in this environment—sends a discouraging message about a company’s ability to use its resources wisely and develop a coherent plan to create value over the long term.”

    For discussion:

    According to the two articles cited above, whey might stock buybacks not be great news for investors?

  • How to Buy a Business

    stock image a sticky marker on a contract document highlighting where the sign and date

    image by stockmedia.cc / stockarch.com is licensed under aCreative Commons Attribution 3.0 Unported License

    Buying a business means answering two questions:

    (1) Which business, and

    (2) How to pay for it

    The first decision is the capital budgeting question--which asset should we invest our capital in? In other words, which assets should we place on the left hand side of our balance sheet? The second decision is how to find the capital to invest? In other words, what mix of debt or equity should we use on the right hand side of the balance sheet so that it balances?

    According to Entrepreneur magazine, choosing a business involves the following:

    If the business still looks promising after your preliminary analysis, your acquisition team should start examining the business's potential returns and its asking price. Whatever method you use to determine the fair market price of the business, your assessment of the business's value should take into account such issues as the business's financial health, its earnings history and its growth potential, as well as its intangible assets (for example, brand name and market position).

    [read the full article here]

    And according to Inc magazine, financing an acquisition may involve borrowing from friends, family, banks. It could also involve using your savings or bringing in a partner. [read the full article here]

    For discussion:

    What are the factors to consider when choosing a business to buy?

    What are the factors to consider when deciding how to finance the purchase?

  • What Kind of Life Insurance is Right For You?

    Life insurance is one of those financial products that many need, but few understand. This infographic presents the language of life insurance and can help you answer questions like:

    (1) Do I need it?

    (2) How much should I buy?

    (3) What kind should I get?



    Source: Bankrate