• The Rise of Roku

    The maker of the streaming video service, Roku, issued shares for the first time on September 28, 2017.

    From the Financial Times

    Shares in Roku, the video streaming platform, jumped 67.9 per cent on its trading debut on Thursday, after raising about $219m in an initial public offering which bucked the lull in US tech listings.In a sign of healthy demand, the company sold 15.7m shares at $14 apiece, at the high end of expectations, valuing it at $1.3bn. The shares opened at $15.78 and closed their first day of trading at $23.50.

    Read more here

    This infographics shows the increase in business gained by Roku since its inception:

     You will find more statistics at Statista

  • How The Stock Market Works...Then and Now

    This very old film from 1957 describes how the stock market worked back then. Buying shares of stock meant investing in firms that employ people and produce goods and services. Owners of shares are entitled to any dividends that the company pays and they can also earn a return when the price of a share increases.

    For discussion:

    1. What do you see about investing in 1957 that is the same today?

    2. What do you see that is different?

  • What Is Driving Gold?

    Why is gold so valuable? We can turn to science for part of the answer:

    Of the 118 elements we are now down to just eight contenders: platinum, palladium, rhodium, iridium, osmium and ruthenium, along with the old familiars, gold and silver. These are known as the noble metals, "noble" because they stand apart, barely reacting with the other elements. They are also all pretty rare, another important criterion for a currency. Even if iron didn't rust, it wouldn't make a good basis for money because there's just too much of it around. You would end up having to carry some very big coins about. With all the noble metals except silver and gold, you have the opposite problem. They are so rare that you would have to cast some very tiny coins, which you might easily lose. They are also very hard to extract. The melting point of platinum is 1,768C.

    That leaves just two elements - silver and gold. Both are scarce but not impossibly rare. Both also have a relatively low melting point, and are therefore easy to turn into coins, ingots or jewellery. Silver tarnishes - it reacts with minute amounts of sulphur in the air. That's why we place particular value on gold.

    It turns out then, that the reason gold is precious is precisely that it is so chemically uninteresting. Gold's relative inertness means you can create an elaborate golden jaguar and be confident that 1,000 years later it can be found in a museum display case in central London, still in pristine condition.

    So what does this process of elemental elimination tell us about what makes a good currency?

    First off, it doesn't have to have any intrinsic value. A currency only has value because we, as a society, decide that it does.

    [Read more here]

    The image below shows the price of gold over the last year:

    Source: Bloomberg.com

    This video commentary gives some thought to what is driving the price of gold and how that impacts the economy:

    For discussion:

    What factors are driving the price of gold? What is expected to happen to the price of gold in the near future?

  • What Does The Big Mac Cost Over There?

    The Big Mac Index is published by the Economist magazine, and gives readers a sense of the differences in purchasing power across international markets. The idea is that a good or service will cost the same in different markets, once we account for exchange rates. The image from Statista below shows that the Big Mac has the highest cost in Switzerland at $6.74 and the lowest cost in Ukraine at $1.70.

    Source: Statista

  • How FINRA Spots Market Manipulation

    Market manipulation can happen in two ways:

    1. Information-based manipulation

    2. Transaction-based manipulation

    In information-based manipulation, the unethical behavior involves spreading false, exaggerated, or misleading information about a financial investment. Transaction-based manipulation, on the other hand, involves trades that are designed to drive the price to artificial high and low values.

    The SEC defines manipulation like this:

    Manipulation is intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security. Manipulation can involve a number of techniques to affect the supply of, or demand for, a stock. They include: spreading false or misleading information about a company; improperly limiting the number of publicly-available shares; or rigging quotes, prices or trades to create a false or deceptive picture of the demand for a security. Those who engage in manipulation are subject to various civil and criminal sanctions.

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

  • History of Retail Banks

    Back when the earth was young, banks were traditional brick-and-mortar institutions with many, many restrictions on how and where they could operate. Banks could not operate across state lines and could not pay market interest rates.

    Then came the deregulation of the 1980s.

    Mergers and expanding retail banks created the massive "money center" banks that operated from coast to coast.

    Then came the financial crisis, and changing customer preferences, and everything changed again.

    For discussion:

    In your opinion, will brick and mortar banks exist 20 years from now, or will all banking be electronic?

  • The Meeting That Started the Federal Reserve

    This video from 2011 describes the meeting that took place on Jekyll Island, Georgia where the decentralized Federal Reserve system was mapped out. The controversial meeting had to be held in a remote location like Jekyll Island.

    For discussion

    What issues were financial markets facing at the time that needed to be addressed by the newly created central bank?

    What were the primary features of the Federal Reserve Act that was ultimately passed?

  • Functions of the Federal Reserve

    In the complex financial markets in which we operate, the central bank of the U.S., the Federal Reserve system, faces the great challenge of promoting the stability of the U.S. financial system. This video explains the primary responsibilities of the Federal Reserve and shows what a monumental task it faces

  • What is Risk?

    In this video, Peter Bernstein explains that risk means "more things can happen than will happen." It doesn't necessarily mean we're in danger, just that we're facing uncertainty.

    In finance, many people define risk as the probability of experiencing a loss. However, based on the definition above, risk would include the probability of experiencing an unexpected gain as well.

    For discussion:

    What is risk to an investor? To a company making a decision to accept or reject a project?

    Should investors or companies try to eliminate risk? Why or why not?

  • When Choosing Stocks, Know Why to Buy

    Peter Lynch is the famous portfolio manager who has since retired from running the Magellan Fund for Fidelity Investments. Known for his popular investing book, "One Up On Wall Street," Mr. Lynch became known for the wisdom to "Invest in what you know."

    From the Wall Street Journal (Schoenberger, 2015):

    Following the market still at age 71, he instead explains his philosophy this way: Use your specialized knowledge to home in on stocks you can analyze, study them and then decide if they’re worth owning. The best way to invest is to look at companies competing in the field where you work. Someone with deep restaurant-industry experience would have predicted the success of Panera Bread Co. and Chipotle Mexican Grill Inc., he says: “If you’re in the steel industry and it ever turns around, you’ll see it before I do.”

    What’s wrong with the popular-wisdom version of his ideology, which is usually cited as “invest in what you know”? It leaves out the role of serious fundamental stock research. “People buy a stock and they know nothing about it,” he says. “That’s gambling and it’s not good.”

    This video from the 1990s shows Mr. Lynch offering his famous advice.

    For discussion:

    Do you agree with Mr. Lynch's investment philosophy? Why or Why not?

    If you agree with him, can you describe reasons why following his advice may not always be wise?

  • Why Buy Bonds with Negative Yields?

    Back in the old days, we taught finance assuming that zero was the lowest interest rate possible. Not so any longer. Today, interest rates are negative and investors are putting up with it.

    Why?

    Well, there are several reasons that investors are willing to invest in bonds that offer investors a COST rather than a REWARD.

    Here is an explanation from the Financial Times:

     

  • How Prices are Determined

    The infographic below shows the evolution of the iPhone price.

     You will find more statistics at Statista

    The question is how were these prices determined?

    Answer: supply and demand. The price is whatever the market will bear.

    Here's a short explanation from Chron.com:

    Supply

    Producers want to sell as many units as possible at as high a price as possible. Selling a $5 product for $100 is a great deal for any entrepreneur. However, the lower the final price, the fewer units of product or service a provider will put into circulation. Thus, supply, or the amount of product or service offered, increases as the price increases.

    Demand

    Customers will generally demand more of a product at a lower cost. For example, there are more people who would be willing to pay 50 cents for a big-screen TV than those who would pay $500, and fewer still who would be willing to pay $5,000. In this way, it can be said that the demand for a product falls as the price increases. Investopedia, an investment-research company, notes that "the law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded."

  • The Equifax Hack

    Equifax, the credit reporting agency, reported that millions of customers' personal financial data had been hacked.


    From NPR, here are six steps you can take to protect yourself:

    Find out if your information may have been exposed. You can do this by entering your last name and the last six digits of your Social Security number at Equifax's website. The site will tell you if you've been affected by the data breach.

    You can enroll for a free year of credit monitoring. Whether or not your information was exposed, U.S. Equifax consumers are eligible for year of free credit monitoring and other services. The site will give you a date when you can come back to enroll.

    Contact the nationwide credit reporting companies and review your free credit reports from each of them. You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (Equifax, Experian and TransUnion). You can request a copy from AnnualCreditReport.com.

    Be sure to monitor your accounts for any unusual activity. Accounts on your credit reports that you didn't open, incorrect personal information on your credit reports, and credit inquiries from companies you've never contacted are all potential signs of fraud or identity theft.

    Consider placing a credit freezePlacing a credit freeze on your reports makes it more difficult for a thief to open a new account in your name. Remember that a credit freeze cannot prevent a thief from making changes to your existing accounts.

    Consider setting a fraud alert. This requires creditors to verify your identity before issuing a credit card, opening a new account or increasing a credit limit on an existing account. A fraud alert will not prevent a lender from opening credit in your name the same way a freeze does, but it does require lenders to take additional steps to verify your identity first.

  • What is the IMF?

    From the IMF website:

    About the IMF

    The International Monetary Fund (IMF) is an organization of 189 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

    Created in 1945, the IMF is governed by and accountable to the 189 countries that make up its near-global membership.

    (read more here)

    For discussion:

    What is the purpose of the IMF?

    How does it accomplish its purpose?

  • What is a Real Estate Investment Trust (REIT)?

    Investing in real estate can be very profitable, but it comes with it share of headaches. Along with the monthly rent payments, you get to deal with bad tenants, maintenance issues, and liabilities--and that's just for residential real estate. Commercial real estate can also be an excellent investment, if you can save enough to buy a shopping center or office space and rent it out.

    If you want to own real estate but don't have the patience or the expertise to be a landlord, you might consider investing in Real Estate Investment Trusts or REITs. These are investment companies that own properties or mortgage backed securities, and then sell shares to investors.

    From the SEC:

    A real estate investment trust (“REIT”), generally, is a company that owns – and typically operates – income-producing real estate or real estate-related assets.  REITs provide a way for individual investors to earn a share of the income produced through commercial real estate ownership – without actually having to go out and buy commercial real estate.  The income-producing real estate assets owned by a REIT may include office buildings, shopping malls, apartments, hotels, resorts, self-storage facilities, warehouses, and mortgages or loans.

    Most REITs specialize in a single type of real estate – for example, apartment communities.  There are retail REITs, office REITs, residential REITs, healthcare REITs, and industrial REITs, to name a few.  What distinguishes REITs from other real estate companies is that a REIT must acquire and develop its real estate properties primarily to operate them as part of its own investment portfolio, as opposed to reselling those properties after they have been developed.

    (read more here)

    The infographic below gives some details of Commercial Equity REITS.

    Infographic: Real Estate Investment Trusts (REITS)

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

  • Beware of Financial Fraud

    This video explains how anyone can be swindled. Fraud victims are not exclusively elderly widows--rather, they include doctors, lawyers, educated, and uneducated alike.

    For discussion:

    1. What are some common financial frauds?

    2. What are some warning signs that you are being sold a scam?

    3. How can you check out a potential investment?

  • The Financial Crisis: Ten Years Later

    The last ten years of financial history are quite a blur. First, the rise of borrowing and structured products, followed by the fall of hedge funds and financial credit markets.

    This video from the Financial Times shows the story of financial market history.

    For discussion:

    1. What started it all?

    2. What role did banks play?

    3. In your opinion, what lessons should we learn going forward?

  • Trading the U.S. Treasury Yield Curve

    If we collect the yield-to-maturity of each of the U.S. Treasury notes in a table and put them in order of maturity, we'd have the "Term structure of interest rates." If we go one step further and graph the data, putting the maturities along the horizontal axis and the yields along the vertical axis, we'd have the "Yield curve."

    Traders are VERY interested in the yield curve. Normally, it is upward sloping with long term rates higher than short term rates. From time to time, the curve becomes inverted with short term rates higher than long term rates.

    This video from the CME Group describes the U.S. Treasury and what causes it to shift.

    For discussion:

    What leads to a normal yield curve versus an inverted yield curve?

    What is a curve steepening? A curve flattening?

    How do traders take advantage of yield curve expectations?

  • Shift in Back-To-School Shopping

    Back-to-school shopping trends have shifted recently. The days of dragging kids through the mall trying on jeans and shoes seem to be a thing of the past.

    From Buzzfeed:

    Back-to-college spending is expected to reach $46 billion this season, according to a recent report from the consultancy Deloitte. As mass merchants like Target and off-price retailers like Dollar Store gain traction with consumers, department stores are expected to take a hit. Specialty clothing stores also took a hit.

    "The venues have changed this year," Rod Sides, vice chairman of Deloitte LLP and leader of its US Retail & Distribution practice, told BuzzFeed News. "Our respondents have told us they shop less at department sores, which is a significant market shift and validates a hypothesis of what we've seen play out in subsegments of retail."

    This infographic shows how the shift in back-to-school shopping has been to electronic shopping:

     You will find more statistics at Statista

  • The State of Cybersecurity

    From a recent Forbes article:

    Is the cybersecurity industry keeping up with cybercrime? Absolutely not. Cyberwarfare is at an all-time high, and cybersecurity is just unable—unequipped—to keep up. We’re seeing a convergence of three major vectors—devices, data, and a shortage of talent—coming to a head. That’s causing an explosion of what I’ll refer to as “cybercrime opportunity.”

    Let me elaborate on those three vectors.

    Devices: There’s an exponential proliferation of devices. If you go back thirty years, to the start of my career, I think there were probably about 750 million network devices around the world. In 2012 there were maybe 10 times that. With the advent of smartphones, it’s projected that by 2020 there will about 75 billion network devices around the world. So, we have more devices available to infiltrate.

    Data: With that mountain of devices, comes an avalanche of data. There’s a huge proliferation of data today, and it’s only growing with the increasing number of people who use smartphones, sensors, the internet of things, etc. The more data, the more difficult it becomes to ensure that all of it is protected.

    Lastly, we have a severe shortage of skilled workers in the cybersecurity industry. There just aren’t enough properly trained minds working on securing information. There are currently well over a million open positions for cybersecurity professionals. Realistically, we won’t be able to train enough people to fill those roles in time, much less keep up with growing demand.

    Infographic: Cybersecurity and the Financial Industry

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

  • Currency Trading Today

    In the video below, currency trading is described as the "Wild West" of financial markets. There's been a shift in the industry, and many former traders have changed jobs. Still, it is a busy and active market:

    Here's a look at a day in the life of a young currency trader in London. You can read more on this blog post here.

    The most memorable day…
    It was the day after the EU referendum vote. I knew it was going to be a busy day but I got up in the middle of the night, which is very unlike me, and I saw that the FTSE was down. I was shocked. So I put on the news, saw the likely result was that the UK would vote out, and jumped into a taxi and was in the office by 5.15am. There were already a number of people in the office. Our office opened at 6am that day and until about midday it was non-stop. Since I started to work at World First I have experienced first-hand the results of the Greek Debt Crisis, the General Election and the Scottish referendum – but this was very different. We had a whole range of conversations with our clients that day and helped them understand the impact on their business. It was interesting to feel the effects of Brexit with such immediacy.


    The young man in the blog post may soon be outnumbered by robots. Computerized trading has risen, and has a significant impact on the industry.

    For discussion:

    Can traders be replaced by computers? What are the benefits and what are the limitations associated with this shift in the industry?

  • Imagine a World Without Cash

    Can you imagine a world without cash? It's not hard. Already, we rely on our debit cards, credit cards, PayPal and other forms of electronic payments. You can probably go days, weeks, maybe even months without using any cash at all.

    Today, governments are working to eliminate cash altogether. The upside: reduced crime and money laundering. However, the downside is greater risk for identify theft and other forms of cyber crime.

    For discussion:

    Should we try to eliminate cash altogether? Why or why not?