Financial Economics Economics 104

Transcription

1 Financial Economics Economics 104 (c) 2018 Gary R. Evans. This slide set by Gary R. Evans is licensed under a Creative Commons Attribution-NonCommercial- ShareAlike 4.0 Intertational License.

2 About your teacher... Parsons 1261 Office Tue/Wed 1:00-2:30 and appointments Twitter: PITraders My qualifications (later, not today) All course material here:

3 Course Objectives Personal financial preparation Professional preparation Extensive overview of finance markets To encourage entrepreneurship and to discuss means of finance A means of reviewing theory although not substantial theory content in this course... that's in Econ to take care of them?!?

4 Jobs (in my today) and if you care to read about about what these companies do these days, read this blog post recommended by JB:

5 The 1% [10%] issue... Course Objectives... Do you really want to know why 80% of the gains in wealth accrue to only 10% of the population?? Do you think it is because of George Bush, Barack Obama, Hillary Clinton, Donald Trump, immigrants, China, free trade?? Who do you want to scapegoat? What massively innappropriate measures do you want to take fix this, or, umm, make it much, much worse?... buy stocks for capital gains & dividends Borrow $$ at 0%... buy bonds for capital gains... buy real estate for leverage

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7 Well how you all doin'???

8 The relative growth of wealth can partly be explained by discrepencies in income, but also by the avenues for growing wealth after income! Balance Sheet of Households and Nonprofits 2018 Q1 Total personal wealth 116,343 % Tot % Categ Financial Assets (tot) 81,745 Bank and MMMF deposits 11, Bonds, Notes and Bills 4, Stocks 17, Mutual Funds 8, Pension entitlements 23, Other 15, Non-financial assets 34,598 Real estate 28, Other 6, Where the gains can be made by investing 51.2 Source: Federal Reserve Flow of Funds Z.1, June 18, 2017, Tables L.6 and B.1.

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10 General Modular Structure of Econ 104 Module 1 - Introduction to Equities.. markets, indexes, quotations Module 2 - Equity Performance... stock selection, historical market performance, trading Module 3a - Mutual Funds and Retirement Accounts.. structure, portfolios, how traded, fees, 401Ks, IRAs Module 3b Exchange Traded Products.. ETPs. ETFs, and ETNs, how they differ from mutual funds, their advantages, their dangers.

11 Modular Structure (cont). Module 4 - Yield-bearing Financial Assets (Bonds).. Treasuries, corporates, municipals, zero-coupons, yields and prices, mortgage-backed, money market.. Module 5 Put and Call Options (derivatives).. Put and call options, hedging, trading strategies Module 6 - Futures Contracts.. Commodity and futures markets, foreign exchange Module 7 - Real Estate.. Financing, fees, connection to MBS market, strategy Module 8 - Investment Strategy... review Course Outline and discuss grading

12 Reading and other assignments... The general course calendar is found at Lecture slides and HW: The book: There you will see the reading and assignments for this module: [This lecture] Intro to the World of Equities Chapter 1

13 About the reading and homework... All reading is local or internet-based In my book, terms in purple bold must be remembered and may be on exams. Few "homework" assignments are detailed and long, are not collected or graded, but important for the exams (not to mention learning something). Organization, organization, organization!!!

14 Video and attendance you do not have to attend the lectures, BUT this comes with an obligation... Every lecture in this class is video-taped and broadcast to two sources, YouTube and MediaSite, so...

15 ... you are accountable for keeping up and will receive a low grade if you fail to keep up. This will happen to some of you who are now reading this. Still experimental, but find the YouTube version live or archived on this channel.

16 Investment Objectives Intermediate and long-term targets Low double-digit is realistic I do talk a lot about short term trading in this class, but the emphasis is in intermediate and long-term goals. Adjusted by attitude about risk Avoid catastrophic loss Consider tax consequences Diversification Mix equities and YBFAs

17 How much of this is accessible to you? By opening a brokerage account (online recommended), nearly every financial asset discussed in this class is accessible to you, typically easily, conveniently, and at very low transactions costs (if done online). Mutual funds can be easily accessed by opening an account at one or more of the many mutual fund families or through brokerage accounts. Corporate notes and bonds are much harder to buy and sell and fees are higher, and they are not represented well online. On the other hand U.S. Treasury bills, notes, and bonds can be bought and redeemed through Treasury Direct (online). Most online brokers and mutual funds accept very small initial accounts.

18 3,500 3,000 About markets today strong years (the S&P 500) 8/29/ ,500 2,000 1,500 3/24/ The dot.com crash 10/9/ The mortgage meltdown The longest bull market in U.S. history 1, /9/ /9/

19 01/02/18 01/09/18 01/16/18 01/23/18 01/30/18 02/06/18 02/13/18 02/20/18 02/27/18 03/06/18 03/13/18 03/20/18 03/27/18 04/03/18 04/10/18 04/17/18 04/24/18 05/01/18 05/08/18 05/15/18 05/22/18 05/29/18 06/05/18 06/12/18 06/19/18 06/26/18 07/03/18 07/10/18 07/17/18 07/24/18 07/31/18 08/07/18 08/14/18 08/21/18 08/28/ : Started as a volatile year, with corrections but strength at the end 3,000 2,900 The S&P as of Friday. 2,800 2,700 2,600 2,500 2,400