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1 presents JA Stock Market Challenge!

2 Section 1 - Background Public v. Private Companies The Stock Market What it Does Why it Matters

3 Private & Public Companies Public Private 3

4 Privately Owned ( Held ) Usually owned by fewer people often just one. Expensive to buy or sell typically involving a lawyer. Hard to buy detailed negotiations are necessary. Hard to sell you must find a buyer. Examples: o Local restaurants o Professional services like doctor s offices and law firms 4

5 Private and Public companies Publicly Owned ( Held ) Typically owned by many people (often millions!) Open to anyone buying a share of the company. Minimal legal work required - buy or sell in minutes. Buyer and Seller will probably never meet. Usually bigger companies. Examples: o Walmart, McDonald s, Coca Cola 5

6 Stock Ownership Company ownership measured in shares. Most companies on the stock market have millions of shares. 6

7 What is a Stock Market A Stock Market is also called an Exchange. The Stock Market is where shares of companies are bought and sold (exchanged). A share of stock is ownership of a company. Most companies have millions of shares. 7

8 What is a Stock? There are many Stock Markets world wide. The two largest and most famous: - New York Stock Exchange (NYSE) is largest and most famous, located on Wall Street in New York City - NASDAQ (pronounced Nazz-Dack ) has many hightech companies like Apple and Google 8

9 The New York Stock Exchange 9

10 The New York Stock Exchange The largest is the New York Stock Exchange. Founded in 1792 on Wall Street. Today there are over 2,000 stocks listed. Total worth of stocks is $19.2 Trillion. The first Stock Market in the U.S. was located in Philadelphia. 10

11 Other Stock Exchanges (by size) New York Stock Exchange $19.2 Trillion NASDAQ $6.8 Trillion London Stock Exchange Group $6.1 Trillion Japan Exchange Group $4.4 Trillion Shanghai Stock Exchange $3.9 Trillion Hong Kong Stock Exchange $3.3 Trillion Euronext $3.3 Trillion (Valuation of stocks as of January, 2015) 11

12 Stock Symbols Traders use symbols to refer to companies. The symbol is usually an abbreviation. Examples: o AAPL o MCD o GOOG o MSFT o WMT Apple McDonald s Google Microsoft Walmart 12

13 Why it Matters Not just the rich benefit! Companies can sell stock to raise money. Retirement benefits usually funded by stocks. Insurance companies invest and can charge lower premiums if investments go well. 13

14 Section 2 - Going Public How companies can sell stock Risks of going public Story of Steve Jobs

15 From Privately to Publicly Held Most companies start as privately held. To become publicly held they have an Initial Public Offering (IPO) This is also known as going public. 15

16 Why do companies go public? Raise capital. How else can companies raise money? Growth but that takes time Loans except: o They have to be repaid o Small businesses fail a lot, so hard to get and expensive. o Usually can t get large sums until your business is already well-known and established. 16

17 What are risks to going public? Control others own your business. Expensive legal and reporting requirements requiring hiring a lot more people. Reporting you must share more information, which competitors could use. 17

18 Losing Control Steve Jobs co-founded Apple and in 1980, Apple had their IPO. It generated more capital (money) for the company of any IPO since Ford in It created 300 millionaires overnight, including Steve Jobs. 18

19 Steve Jobs He was a brilliant visionary, but not well-suited to day-to-day operations. At presentations, when investors interrupted him with questions, he got defensive and would often charge them with betrayal and lack of respect. Investors are owners and they didn t like it. 19

20 Steve Jobs leaves Apple In June of 1985, Steve Jobs was relieved of all duties & control and resigned. He sold 6.5 million shares (for $70 million). But there s more 20

21 Steve Jobs his next chapter Steve Jobs acquired a visual effects company (PIXAR) for $5 million, and owned 50.1% He also founded NeXT Inc. that developed operating systems with excellent graphics capabilities - eventually became Mac OS X. 21

22 Steve Jobs Disney shareholder Disney acquired PIXAR in 2006 for an all-stock deal worth $7.4 Billion. Steve Jobs received $3.7 Billion of Disney stock. He became the largest shareholder with 7%. The Disney family only owns 1%. 22

23 Steve Jobs returns to Apple Apple purchased NeXT Inc. (Steve Job s company) for $427 million. Within a year, Steve Jobs was back in charge. He guided Apple through many innovative products, such as the iphone, ipad and ipod. 23

24 In Conclusion Starting companies and the day-to-day running of companies are different skill sets. It is very common for people who start a company to leave (or be asked to leave) after it goes public. Many go on to start other companies. 24

25 Section 3 Making Money Capital Gains Dividends

26 Making Money with Stocks There are two ways to make money on stocks: o Capital Gains o Dividend $ $ 26

27 Making Money: Capital Gains Capital Gain means selling a stock for more than you paid for it - summed up as Buy Low, Sell High. Until a stock is sold, the profit (or loss) is unrealized. This means it is not an actual profit (loss) because the stock value could still change. Only when a stock is sold, is the profit (or loss) realized. 27

28 Making Money: Dividends Dividends are profits the company distributes to its stockholders. Dividends are paid for each share you own. Example: If you own 1,000 shares and there s a dividend of $2 per share, you ll receive $2,000. And you still own the stock. 28

29 Making Money: Dividends Dividend Dates are VERY important. - EX-Dividend Date: the expiration date you MUST own the stock by to qualify for a dividend. If you buy it after this date, you do not get the dividend. - Dividend Date: the date the dividend is paid. You can sell AFTER the Ex-Dividend Date and still receive the dividend. 29

30 Section 4 - Stockbrokers Role Commissions Examples $ $ $ $ $ $$

31 Stockbrokers Buyers and sellers don t go to the Stock Exchange directly they use a broker. A broker can be a person who you meet or call, or a website like etrade. Brokers work for both buyers and sellers and charge a commission or fee for each trade. 31

32 Commissions & Fees You pay a commission or fee for every trade (buying or selling) Fees are usually a flat amount per transaction. Commissions are usually a percentage of the trade amount, usually between 0.5% and 2%. 32

33 Commission Example - Buying Someone buying 100 shares of stock at $20 per share with a 1.5% commission: 100 shares x $20.00 each = $2, $2,000 x 1.5% + $30.00 ======== Total money paid: $2,

34 Commission Example - Selling Someone selling 100 shares of stock at $20 per share with a 1.5% commission: 100 shares x $20.00 each = $2, $2,000 x 1.5% - $30.00 ======== Total money received: $1,

35 Section 5 - Stock Transactions Step by step Sellers - Drew and Monica Buyer - Ariana

36 The Sellers - Drew & Monica Drew and Monica live in New York and bought 500 shares of T-Nine Technologies stock a few years ago. They re happy with the investment, but want to sell so they can put a down payment on a house for their new family. 36

37 The Buyer Ariana Ariana lives in California and just got a big bonus at work. She s used some of her bonus money to pay bills and decided to invest the rest of her bonus money. After researching online, she s decided T-Nine Technologies seems like a good investment. 37

38 The Trade - Brokers Our buyer and seller have decided on a transaction. They don t know each other and will never meet. When they each contact a stock broker, Ariana will soon own Drew and Monica s shares of T-Nine Technologies, and Drew and Monica will have the money for a down payment on a home.. 38

39 Commission Drew and Monica s broker charges a 1.5% commission. This means his $10,000 sale will cost them $150 in commissions. Ariana s broker only charges 1%, which means her $10,000 purchase will cost $

40 Trading on the Market All stock trades take place at the stock exchange where the stocks are listed (sold). The stock exchanges handle an enormous number of trades (called volume ) each day the New York Stock Exchange has traded over 2 BILLION shares in a single day! - and prices change constantly. 40

41 Making a Profit Over Time A few days later, Drew and Monica receive $9,850 ($10,000 commission). They re very pleased they bought the stock a few years ago for $7 a share, and today sold their 500 shares for $20 each! So their $3,500 investment almost tripled in value. 41

42 Stock Transactions - Complete Ariana is also happy. She bought the stock for $20 a share and soon after the stock is selling for $25 per share. She could sell her shares and make almost $2,500 profit! She decides to hold onto the stock for now. She recently read that the company is developing a new type of fiber optic cable, and she s confident the stock value will increase even higher in the future. 42

43 Section 6 Other Investors Institutional Investors Insurance, Banks, Mutual Funds, Pension Funds

44 Institutional Investor In the previous section we looked at individual investors people who researched stocks and purchased for themselves. Another kind of investor is called an institutional investor. This is when a company invests in other companies. Examples: Insurance companies, Banks, Mutual Funds, Pension Funds. 44

45 Insurance Companies Insurance companies collect premiums from people who have insurance. They often invest a portion of this money in the stock market. If they do very well with their investments, they can afford to charge less for insurance. 45

46 Banks Banks also invest to earn additional income. Some money from depositors is invested. Higher investment income allows them to: - Lend more money - Charge lower interest - Expand operations 46

47 Mutual Funds Mutual Funds are how most people invest because it is much easier. Investors don t pick their stocks they have a company do it for them. The company then charges fees (sometimes called loads ) for this service. 47

48 Pension Funds Pension Funds invest money from employees so there will be more money when they retire. They invest money to earn a better return (profits) so there will be more money for retirees. With state and city pension funds, higher returns means less taxpayer money needs to fund the pension saving them money! 48

49 Pension Fund - CalPERS One of the largest pension investors in the world is CalPERS California Public Employee Retirement System They handle pension for state and city employees throughout California, including Police, Fire, and Teachers over 1.7 million people! 49

50 Pension Fund - CalPERS Their portfolio (total value of their stocks) is worth over $148 BILLION. In , they earned $46 BILLION in profit. They own almost 4,000 different stocks. 50

51 Section 7 Retirement Who wants to be a millionaire? Retirement Fund options Social Security

52 Who Wants to be a Millionaire? Assuming a 6% return (not too difficult), how much would you have to invest each month to retire with $1,000,000 if you started at age 23? $400 each month! 52

53 At 23 years old, $400 is hard to find! You re repaying college loans (hopefully!) You re not earning much as you start your career You might need a more reliable car for work You re might be getting your own apartment You can wait just a year or two Right? So what if you started at the age of 25 instead? How much would you need to invest each month to reach $1 million dollars at 6% return? $500 each month! 53

54 At 25 years old, $500 isn t much easier You re still repaying loans if you went college. You re earning a little more, but still not a lot Car payments Rent... Taxes And maybe you ve made someone special It s just not a good time So what if you started at the age of 35 instead? How much would you need to invest each month to reach $1 million dollars at 6% return? $1,000 each month! 54

55 Student loans are gone, and you re making more money but You ve probably got a mortgage, And kids they re not cheap! Car payments (larger car for the kids, right?) Oh and taxes (they ve gone way up!) It s just not a good time So what if you started at the age of 45 instead? How much would you need to invest each month to reach $1 million dollars at 6% return? $2,500 each month! 55

56 Your career is going well good money now! But the kids are heading to college soon Oh and you though taxes were bad before? And $2,500?!? That more than the mortgage! Maybe when the mortgage is paid So what if you started at the age of 53 instead? How much would you need to invest each month to reach $1 million dollars at 6% return? $5,000 each month! 56

57 $5,000 per month at the age of 53? You will not have this. GAME OVER! You blew it. 57

58 Retirement Planning There are many retirement options: - 401(k) - 403(b) - SEP (Simplified Employee Pension) - IRA (Individual Retirement Account) Employer matching they match $1 for every dollar employees put in (up to a limit) 58

59 What about Social Security? Social Security began in It paid 53,000 people about $1.2 million You could collect at age 65, but Life expectancy was only 58 (m), 62 (f) By 2011: $650 BILLION to 50 million people 59

60 Do The Math For years, Social Security collected more than it paid out. That switched in It will go bankrupt by 2029 if nothing changes. A High School senior will retire in Social Security will not be the same. Benefit cuts? Tax increases? Delaying retirement age? All of the above? 60

61 Social Security - The Future Will Social Security exist when you retire? Most Likely Will it be the same as it is now? NO 61

62 Social Security - the Bottom Line Take responsibility for your retirement, or hope the politicians in Washington DC figure it out. And their track record isn t great 62

63 Section 8 Price Impacts Supply & Demand Bears & Bulls Market Environment Company News

64 Supply & Demand When a lot of people want to buy something (demand), the price goes up. When fewer people want to buy something, the price goes down. When there are more buyers, the price rises. When there are more sellers, the price falls. 64

65 Bull & Bear A BULL market is when the overall stock market prices are rising (or expected to rise). A BEAR market is when the overall stock market prices are falling (or expected to fall). 65

66 Good Market Environment Things that are viewed as good for business and the economy can push stock prices up. Examples: - Consumer confidence lots of people buying. - Low interest rates easy to borrow to spend. - Political stability businesses can plan better. 66

67 Bad Market Environment Things that are viewed as bad for business and the economy can push stock prices down. Examples: - Inflation things cost more and cuts into profits. - Unexpected bad news such as an oil shortage. - Unpredictable politics will taxes go up? Could there be a war? 67

68 Good News Good company news can encourage people to buy and/or invest. Sparking demand causes the price to rise. Give an example of good news for a company? Examples: - Strong sales of products - Introduction of new products or services - Things that make a company more profitable 68

69 Bad News Bad company news can encourage people to sell. Decreasing demand causes the price to rise. Can you think of examples of bad news for companies? Examples: - Weak sales - Recall of a product - Lawsuits - Things that cause a company to lose money 69

70 Section 9 - Tips & Strategies General Tips Processing Transactions

71 Tips & Strategies - General Know exactly what you own the stocks, # of shares, and what they re worth. Know how much cash you have on hand, and what stocks you ll sell to raise cash. Watch for news and trades both affect price. Avoiding investing in more stocks than you can manage. Remember you pay commissions on all transactions. Don t panic the first time one of your stocks drops, but 71

72 More Tips & Strategies An underperforming stock costs you not only money, but TIME you only have 60 days! Have an exit strategy when will you bank profits? How much are you willing to lose? Use the stock symbols traders use symbols. If you have more than one transaction, write it down! Traders expect you to be organized. Give the trader SELL orders first. 72

73 Tips - Transactions with Traders Give the trader your transaction in order: - Team Number - Action (BUY / SELL) - Symbol - Amount - Dollars or Shares If you are selling all your shares, tell the trader SELL ALL. 73

74 More Tips & Strategies Buy and sell in even amounts it ll be easier to remember. It s OK to sell in either DOLLARS or SHARES, but you must specify. After your trade, listen for how much money you have. Don t walk away until the trader confirms your trade. 74

75 Take Advantage of Breaks! Catch your breath and visit the restroom if needed. Do you have a current portfolio printout? Get one if needed to review your investments. Did things go smoothly? Was teamwork solid? This is the time to make changes. Is everyone comfortable in their role? Perhaps change assignments, or reassign tasks. You still have time to make a run! 75

76 Final Thoughts The trading floor is a crowded and noisy place. Don t be afraid to use gestures that s what they do at real trading floors. Can t see? Send someone closer to screens. It is OK to use electronic devices to communicate. 76

77 Section 10 Teamwork Handling Conflict Delegating Roles

78 Handling Conflict Expect differences of opinion. How will you deal with conflict? Time is key - only 60 seconds per turn! At one event, a team lost over $100,000 arguing whether to sell while the stock fell. Delegate roles! 78

79 Asset Manager Asset Manager must know (at all times): - How much cash do we have? - What stocks do we own? - How many shares of each do we own? Key traits: - Organized can keep track of all changes - Math skills can quickly do math 79

80 Market Analyst The Market Analyst must be able to make recommendations with a lot of change: Key traits: - News every day what risks and opportunities? - Price changes every 60 seconds - Charts with 15 day trends - Good Multi-tasker can process a lot at once - Market sense understands what drives prices 80

81 Portfolio Manager The Portfolio Manager is like a judge must be able to weigh information and make a decision. Not working solo works with the team Key traits: - Analytical focus on facts, not feelings in deciding - Decisive can make a decision quickly 81

82 Trade Execution Specialist The Trade Execution Specialist initiates the trade and makes sure it is made accurately. Must communicate trade and remember information. Key traits: - Attention to detail must communicate - Assertive must get traders attention 82

83 Section 11 - Event Technology How to Read the Market Trends

84 Front Main Screen Stock Symbol Company Name Current Price Change since yesterday ($ and %) All-time Low News Change in the last 5 days ($ and %) All-time High 84

85 Standings Screen Ranking Ranking Previous Day Team Number & Name Cash On Hand Net Worth Return on Investment Change in Ranking 85

86 Charts Screen Stock Price What day it is 86

87 Section 12 - Reality Check Simulation v. Real Life

88 Stock Market - Introduction Differences were made to make the game more exciting and fast-paced. The real stock market doesn t feature massive gains and losses every day. Most stocks take weeks or months to rise or fall by even 10% This event is an introduction to the Stock Market. 88

89 Investing Strategy Over Time Most investors prefer value investing. They keep their investment for months and years! The premise is if a company remains a good value, you keep it. 89

90 Additional Analysis In the real stock market, investors research A LOT about companies before they choose to invest: - SEC filings - Quarterly and Annual Reports - Industry Newspapers and Magazines This isn t included because it isn t as much fun. 90

91 Too Good To Be True If it sounds too good to be true, it is! NOBODY can guarantee results. NOBODY has a secret formula. Examples include Charles Ponzi, Bernie Madoff, Enron & WorldCom. 91

92 See you on May 2, 2017 for the JA Stock Market Challenge! 92

Short Selling Stocks For Large And Fast Profits. By Jack Carter

Short Selling Stocks For Large And Fast Profits By Jack Carter 2017 Disclaimer: No financial advice is given or implied. Publisher is not registered investment advisor or stockbroker. Information provided