Nivine Richie, Ph.D., CFA is an Associate Professor of Finance at the University of North Carolina Wilmington. She teaches courses in corporate financial management, derivatives, fixed income, and commercial bank management. Her research interests include cost of capital, banking, and derivatives. She has published studies in the Journal of Economics and Finance, Journal of Futures Markets, Review of Futures Markets, and Journal of Trading, among others.
Over 4,000 banks have failed in the U.S. since 1934, with many recorded during the Great Depression, many more during the Savings & Loan crisis, and most recently during the credit crisis. The number of bank failures has slowed down significantly, but even in 2017, there have been three recorded events to date.
This video pulls back the curtain on the FDIC seizure of a bank and offers us a glimpse into the process by which a bank is closed. The FDIC takes great care to protect the secrecy of the operation to prevent a run on the bank.
Many American's approaching retirement have very little saved. With the myRA plan through the U.S. Treasury, more workers who do not have access to employer-sponsored retirement account can get started saving for retirement.
Source: U.S. Treasury
"It's hard to love money unless you have it."
In this video interview with Morgan Stanley CEO, James Gorman, explains why there is a problem with the image of Wall Street.
In your opinion, what is the average citizen's impression of Wall Street? Should the financial services industry work to improve the image? Why or why not? How could the image improve?
Muriel Siebert is the "Woman who kicked down Wall Street's doors." From the Time article:
On her first trip away from her home in Ohio, in the early 1950s, a teenaged Muriel Siebert visited the New York Stock Exchange. Later, in her autobiography, she would recall the trading floor, seen from above, as a “sea of men in dark suits,” resounding with the “clamorous human buzz of... thousands of deals.” She declared to her friends that one day she’d come back there and ask for a job. Why not? The souvenir in her hand was a piece of ticker tape with her name printed on it, along with the words: “Welcome to the NYSE.” She held on to it throughout her career, clearly relishing the irony. Nobody made Muriel “Mickie” Siebert welcome on Wall Street. Every door that opened for her was one she kicked down for herself.
Read more here
This video from Harvard Business Review explains how Cirque du Soleil was able to generate tremendous revenues in the declining circus industry. They took advantage of a "blue ocean" strategy, rather than try to compete in the existing "red ocean."
What other blue ocean strategies can you identify that have generated significant revenues and profits for their owners?
One day you may be in a position to launch your own business. When that day comes, you'll also be in a position to decide how you will raise money to get started. Will you bring in a partner or will you borrow the money? Each method has its one benefits and limitations.
For example, when you bring in partners, you are forced to share the profits AND you're forced to share the decision making. Not always ideal. But when you borrow the money, you are forced to repay the loan whether or not you generate revenues.
Can you think of any other benefits and limitations to debt versus equity financing?
In a traditional mortgage, the homeowner receives a lump sum of money at the beginning of the loan, and then makes level payments every period until the loan is fully repaid. At maturity the value of the loan (i.e. the "future value") is zero because the loan is paid in full.
In a reverse mortgage, rather than make mortgage payments, the homeowner receives monthly payments based on the value of the home. When the homeowner moves out of the home, the loan is repaid from the proceeds of the sale of the home.
From the Federal Trade Commission:
If you’re 62 or older – and want money to pay off your mortgage, supplement your income, or pay for healthcare expenses – you may consider a reverse mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. But take your time: a reverse mortgage can be complicated and might not be right for you. A reverse mortgage can use up the equity in your home, which means fewer assets for you and your heirs. If you do decide to look for one, review the different types of reverse mortgages, and comparison shop before you decide on a particular company.
This video explains a little more what is involved in a reverse mortgage:
What are the pros and cons of reverse mortgages? Would you advise a family member to take out a reverse mortgage?
Financial Technology or "FinTech" is the use of technology to perform financial functions. According to this article from Wharton:
FinTech companies cover a wide range of sub-industries, from crowdfunding (Kickstarter) and peer-to-peer lending (Lending Club) to algorithmic asset management (WealthFront) and thematic investing (Motif Investing). FinTech companies also operate in payments (Xoom), data collection (2iQ Research), credit scoring (ZestFinance), education lending (CommonBond), digital currency (Coinbase), exchanges (SecondMarket), working capital management (Tesorio), cyber security (iDGate) and even quantum computing (QxBranch).
In this video from the Atlanta Fed, NYU professor Thomas Philippon, explains the different types of fintech, or digital tools available for your financial transactions.
Capital Gains are the profit on the sale of an asset that you own. The infographic below explains capital gains in more detail:
Filed at Infographicsposters.com in Business Infographics
The financial markets after the end of the Civil War were characterized by a series of panics. The panic of 1907 and the fallout that followed led to the establishment of the Federal Reserve in 1913.
The video below describes the creation of the Federal Reserve and the functioning of a central bank.
1. What are clearinghouses and how does the Fed play a role in check clearing?
2. What is the role of the lender of last resort?
3. What role does the Fed play in financial stability?
Investors in Tesla are buying a "money-losing, cash flow burning company that does not make the car that might ultimately deliver us value. It's all about belief."
Watch this interview that discusses the value of Tesla stock.
For discussion: would you buy this stock? Why or why not?
Exchange-Traded Funds or ETFs are pools of investments like mutual finds but, unlike mutual funds, ETFs trade on an exchange. That means they can be bought or sold all day long and an investor can go long or short.
This video from the Financial Times explains more:
What are the benefits and limitations of ETFs?
Three quarters of trades are coming from machines rather than humans. The average holding period for a stock on Wall Street is a mere 22 seconds.
This TedX talk explains algorithmic trading and its importance to Wall Street.
1. What are the major changes that have shaped Wall Street today
2. In what ways are algorithms driving Wall Street?
From the website of the Richmond Fed:
The Federal Open Market Committee (FOMC) is the monetary policymaking body of the Federal Reserve System. The FOMC is composed of 12 members--the seven members of the Board of Governors and five of the 12 Reserve Bank presidents. The Chairman of the Board of Governors serves as the Chairman of the FOMC; the president of the Federal Reserve Bank of New York is a permanent member of the Committee and serves as the Vice Chairman of the Committee. The presidents of the other Reserve Banks fill the remaining four voting positions on the FOMC on a rotating basis. All of the Reserve Bank presidents, including those who are not voting members, attend FOMC meetings, participate in the discussions, and contribute to the assessment of the economy and policy options.
source: the Chicago Fed
This infographic shows the "Terminal Decline of Blackberry" from its heyday as "crackberry" to its lackluster, even dismal, sales today.
Things haven't gotten any better. In 2015, this Seeking Alpha article said of Blackberry:
The turnaround, on which many long-term investors pin their hopes, remains, after four full quarters under CEO John Chen, elusive. BlackBerry (NASDAQ:BBRY) is still faced with dramatically shrinking hard and software revenues, while new monetization concepts are not appearing to provide the much needed income streams to keep the cash balance - upheld by a $1.25 billion loan, asset sales, lay-offs and tax-benefit collections - at current levels for much longer. The business is contracting further instead, and most substantial cost-cutting options have already been executed to the point of endangering the company's operability for growth. It is not unlikely that Chen already contemplates divestment of BlackBerry's hardware business for lack of other options.
You will find more statistics at Statista
What does the future hold for this company? What would you advise management to do to create value?
The Hunt brothers started trading silver in 1973, and by 1979 had amassed a fortune in silver. This video tells the story of Nelson Bunker Hunt, and how they tried to corner the market.
1. Who were the Hunt brothers, and what was their role in the silver markets in the 1970s and 80s?
2. What does it mean to "corner" the market? What does it mean to "squeeze" the market?
3. How did their involvement in silver come to an end?
Will robo-advisers replace humans in the financial advisory industry? Probably not. But that doesn't mean that robo-advisers won't take a chunk of the market share away from traditional financial advisers.
Banks are watching wealthy clients flirt with robo-advisers, and that’s one reason the lenders are racing to release their own versions of the automated investing technology this year, according to a consultant.
Millennials and small investors aren’t the only ones using robo-advisers, a group that includes pioneers Wealthfront Inc. and Betterment LLC and services provided by mutual-fund giants, said Kendra Thompson, an Accenture Plc managing director. At Charles Schwab Corp., about 15 percent of those in automated portfolios have at least $1 million at the company.
“It’s real money moving,” Thompson said in an interview. “You’re seeing experimentation from people with much larger portfolios, where they’re taking a portion of their money and putting them in these offerings to try them out.”