• Best Financial Advice is Available For Free

    In this video, this blogger claims that the best financial advice fits on a single index card and is available for free.

    So what is on the index card?

    • Spend only what you need to spend
    • Save for retirement
    • Invest properly

  • The End of Open Outcry Trading

    The day of the trading pit with the shouting came to an end in 2015 when open outcry was replaced by electronic trading. We've all seen videos of the "old days," but this video below gives a brief picture of what that style of trading used to look like:

    For more on the end of open outcry trading, see this prior blog post here.

    For discussion:

    Have  you ever attended a public auction? If so, describe the atmosphere and the bidding process. What "information" could you glean by watching the bidding process go on around you?

    If the open outcry system is similar to the public auction, what are some benefits and limitations of open outcry trading? What about electronic trading?

  • Black Swan Events in Recent History

    According to Nassim Taleb, people had always believed that swans were white. That is, until the discovery of Australia, when the first black swan was sighted. Taleb uses the metaphor of the bird to describe events that are so improbably, no one would ever expect such a “Black Swan Event.”


    From his book, The Black Swan (2007, p. xxii), he describes a Black Swan event as having three characteristics:


    First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact (unlike the bird). Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.


    The infographic below identifies nine events that can be considered by some to be Black Swan events.




    Courtesy of: Visual Capitalist
  • Trading Corn Futures and Options

    Corn is grown all over the world and is an important crop for consumers and producers. The supply and demand for corn can push prices to unexpected highs and lows, and so this price risk or volatility needs to be managed by those who rely on the price of corn to manage their businesses.

    A futures contract is a standardized contract to buy or sell a specified amount and type of corn on a future date at the price determined today. The price, though determined today, will not be paid until the future settlement when delivery is made. A producer of corn is at risk that the price will drop by the time the corn is ready for sale, so a producer is likely to be a seller of the futures contract, thereby locking in the sale price today for future delivery. A consumer of corn is at risk that the price will rise by the time the corn is needed, so a consumer is likely to be a buyer of the futures contract, locking in the purchase price today for future delivery.

    An exchange is simply the venue or marketplace where buyers and sellers of corn transact these futures contracts. The contract details, or "specifications," are dictated by the exchange and can be found on a website like this one at the CME.

    This video shows what factors go into the pricing of a corn futures contract.

    For discussion:

    If a futures price allows a consumer or producer to guarantee the future price of corn, then what is the downside of buying and selling futures contracts?

  • Meet Janet Yellen, Chair of the U.S. Central Bank

    Janet Yellen is the first woman to hold the critical role of chair of the Federal Reserve. This Bloomberg video gives a very brief overview of her interesting and impressive background.

    From the Federal Reserve's website, Dr. Yellen's profile:

    Janet L. Yellen took office as Chair of the Board of Governors of the Federal Reserve System on February 3, 2014, for a four-year term ending February 3, 2018. Dr. Yellen also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body. Prior to her appointment as Chair, Dr. Yellen served as Vice Chair of the Board of Governors, taking office in October 2010, when she simultaneously began a 14-year term as a member of the Board that will expire January 31, 2024.

    Dr. Yellen is Professor Emeritus at the University of California at Berkeley where she was the Eugene E. and Catherine M. Trefethen Professor of Business and Professor of Economics and has been a faculty member since 1980.

    Dr. Yellen took leave from Berkeley for five years starting August 1994. She served as a member of the Board of Governors of the Federal Reserve System through February 1997, and then left the Federal Reserve to become chair of the Council of Economic Advisers through August 1999. She also chaired the Economic Policy Committee of the Organization for Economic Cooperation and Development from 1997 to 1999. She also served as President and Chief Executive Officer of the Federal Reserve Bank of San Francisco from 2004 to 2010.

    Dr. Yellen is a member of both the Council on Foreign Relations and the American Academy of Arts and Sciences. She has served as President of the Western Economic Association, Vice President of the American Economic Association and a Fellow of the Yale Corporation.

    Dr. Yellen graduated summa *** laude from Brown University with a degree in economics in 1967, and received her Ph.D. in Economics from Yale University in 1971. She received the Wilbur Cross Medal from Yale in 1997, an honorary doctor of laws degree from Brown in 1998, and an honorary doctor of humane letters from Bard College in 2000.

    An Assistant Professor at Harvard University from 1971 to 1976, Dr. Yellen served as an Economist with the Federal Reserve's Board of Governors in 1977 and 1978, and on the faculty of the London School of Economics and Political Science from 1978 to 1980.

    Dr. Yellen has written on a wide variety of macroeconomic issues, while specializing in the causes, mechanisms, and implications of unemployment.

    Dr. Yellen is married and has an adult son.

  • Common Sense Investing

    Many financial mistakes can be avoided if we just use some common sense. From this article, some sound financial advice includes:

    1. Expect some volatility in your investment account

    2. Diversify diversify diversify

    Sounds like common sense, doesn't it? In addition to managing your expectations when it comes to sound investing, the video below from the SEC lists more tips:

    For discussion:

    What other tips can you offer investors to help them make wise choices?

  • Are You Financially Literate?

    What is financial literacy?

    According to one source:

    The President's Advisory Council on Financial Literacy defines personal financial literacy as "the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being." (2008 Annual Report to the President)

    Personal financial literacy is more than just being able to balance a checkbook, compare prices or get a job. It also includes skills like long-term vision and planning for the future, and the discipline to use those skills every day.

    From "The Investing Mindset," this quiz can help you determine whether you are financially literate.

    • Do you know your net worth?
    • Do you know how much debt you owe?
    • Do you know your monthly expenses?
    • Do you know how much you spend on monthly expenses?
    • Do you check your credit record and know your credit score?
    • Do you have a retirement savings plan in place?

    If you answered each of these questions "yes," then you are likely financially literate.

    Infographic: Financial Literacy Levels

    Source: ©2017 FINRA. All rights reserved. FINRA is a registered trademark of the Financial Industry Regulatory Authority, Inc. Reprinted with permission from FINRA

  • Investor Expectations Already Reflected in the Market: The Case of Amazon

    Modern Portfolio Theory teaches that financial markets are efficient in that all information about a company is immediately and fully reflected in the stock price. We can argue this all day. Some point to the fact that investors can consistently beat the market if they look for certain patterns as evidence that markets are not as efficient as we think. Others say that although some investors beat the market some of the time, no one beats the market all of the time. On average, everyone is average. Hence markets are efficient.

    In this video, an analyst discusses several tech stocks and what is expected in terms of earnings. Companies will be announcing their "guidance" on what investors can expect. This earnings guidance is an example of the information described above; guidance that is lower than the consensus expectation should be bad news. But according to the video, not for Amazon.

    Take a look:

    For discussion:

    What types of information do these analysts take into account as they form their expectations of the stock performance.

  • Do You Know What You Need for Retirement?

    A recent survey found that 60% of respondents are confident they can retire comfortably, but only about 40% have crunched the numbers necessary.

    So what do you need to know?

    1. The types of accounts that are available to you

    2. How much you need to save in order to have enough for retirement

    3. What to do if you leave your job

    For discussion:

    What are the consequences of taking out your retirement money too early?

    Why are people more confident that they'll have enough money for retirement?

    What advice can you offer savers?

  • Struggling to Make Ends Meet

    Everyone knows that to lose weight, we need to move more and eat less. No mystery there.

    Likewise, to save money, we need to spend less than we earn. Again, no mystery to that either.

    The infographic below shows that one in five Americans spends more than he/she earns, and another 36 percent spend everything they earn. No savings can lead to all sorts of financial distress, and that in turn can lead to interpersonal and health-related distress too.

    According to Bankrate.com, the seven secrets to creating a successful budget include:

    1. Track your spending

    2. Make savings contributions automatically

    3. Define your priorities

    4. Pay with cash

    5. Pay down expensive debt first

    6. Build a safety net

    7. Live within your means

    Infographic: Making Ends Meet

    ©2017 FINRA. All rights reserved. FINRA is a registered trademark of the Financial Industry Regulatory Authority, Inc. Reprinted with permission from FINRA

  • The Coming Retirement Crisis

    Today, several factors contribute to the coming crisis in retirement systems:

    1. People are living longer

    2. We have smaller workforces to support retirees

    3. Individual savings are lower than they should be

    4. Individuals are not equipped to make financial decisions associated with defined contribution plans

    For discussion:

    What is the difference between a "defined benefit" and a "defined contribution" retirement plan?

    What are other factors that contribute to the coming crisis?

    What are the consequences of not solving the coming retirement crisis?

    How can governments help protect savers?