TTC Video – Financial Literacy: Finding Your Way in the Financial Markets

Take better advantage of the markets and build your personal wealth with this course that connects the larger world of finance to the everyday investment decisions you engage in.

Lectures:

1: Feeling at Home in the Financial Markets
Sometimes it’s hard to see how the financial markets are connected to the “real” economy. What do financial markets actually do for us? Start to get a handle on how the financial markets operate through an exploration of the societal functions that financial assets perform and the way they’re linked to real assets through contracts.

2: Where the Money Goes
How much are the financial markets worth? Where does the money come from and where does it go? Learn how the stock market’s value compares with other measures of the economy like America’s national debt and GDP. Next, follow how money flows through the market to understand how trillions of dollars of assets are distributed between businesses, governments, and households.

3: Financial Markets Run on Information
There’s one resource in the financial markets that’s even scarcer than money or time: information. Discover the worst problems of asymmetric information and the way lenders build remedies to mitigate risk into the process of writing and trading financial contracts. Also, see how this information gap can work to your advantage.

4: Giving Credit Where Credit Is Due
How can a credit card company preapprove you? How is your credit score calculated? Why do you have to endure a long and drawn-out process to apply for a mortgage? Get answers to these and other questions by taking a close look at the inner workings of credit analysis.

5: The Fine Print
Take some of the fear out of loan contracts by delving into the basic structure of car loans and credit card statements and learning how lenders calculate your monthly charge. Spend time looking at each part of the promissory note, from covenants to enforcement clauses to the security agreement.

6: What Is Special about Banks?
Why does your bank offer free checking? How do banks make money? Discover the advantages banks have in lending to understand why they play such a dominant role in the markets. Learn how banks evolved from goldsmiths’ vaults, how our payment system operates on a clearing house model, and more.

7: Billion-Dollar IOUs-Using Bonds to Borrow
When companies need to borrow enormous sums of money over long periods, they can’t turn to banks, so they issue bonds. Learn what’s involved in issuing these IOUs, the limitations of credit rating agencies that rate bonds, and why the bond market is an increasingly important part of financial markets around the world.

8: The Double Identity of Stocks
Paying dividends isn’t required for stocks. So how do companies issuing stocks repay lenders? And how can stockholders, who pool their resources to share ownership, hold companies to their promise to increase the value of shares? Examine the structure of corporations that issue stock and the potential benefits, rights, and drawbacks inherent with investing in these instruments.

9: The Sell Job
Before companies can get their stocks into the market in an initial public offering, they must register their securities with the Securities and Exchange Commission, which conducts a stringent review. Learn about this process and the system that the financial markets use to sell public and privately held stocks, bonds, and other securities.

10: The Mysterious Money Market
The money market is virtually invisible to most people, yet it forms the financial lifeblood of governments, large banks, and corporations. Differentiate between the money market and the capital market, learn why so many lenders exist, and look closely at three of the most important money market instruments-Treasury bills, commercial paper, and repurchase agreements.

11: Think Globally, Lend … Globally
How do U.S. dollars leave the country? How can companies borrow internationally without having to leave their home country? As you investigate the Eurodollar market and why companies, governments, and individuals choose to borrow and lend globally, see how foreign currencies and exchange rates complicate the process of international investing.

12: Trading Securities
Does the thought of stock trading conjure images of a crowded exchange floor with people yelling “buy!” “sell!” and gesturing wildly? See how technology has changed most securities exchanges around the world (and this popular image) as you learn about the basics of securities trading and how it provides liquidity to the secondary market.

13: Returns and Prices in the Secondary Market
What does it mean when the news reports that the Dow was back above 13,000 or that the 10-year Treasury bond price closed at 92½? Now that you understand how financial instruments are used and the basics of the secondary market, learn how prices are quoted and returns are calculated.

14: The Truth about Pricing
Investors and traders have opinions about what is the right price for the asset they’re trading. But how do they arrive at their values? Compare theories, practical methods, and models that guide market players when pricing assets, including the fundamentals-based approach, the economics-based theory, and the method of comparables, where “like” prices “like.”

15: A Tale of Two Funds
Examine differences between two of the most important types of money management companies or “designated traders”-mutual funds and hedge funds-and contrast the trading strategies they pursue. Learn why index funds are a good investment option, and about the trading technique called a “short sale.” Then consider whether hedge funds have the power to trigger a financial crisis.

16: The Market for Corporate Control
Move on to a market where entire companies are bought and sold, fortunes are made and lost, and yet-frequently-no money changes hands. As you delve into what economists call the market for corporate control, learn what it means to buy and sell corporate control and how mergers, acquisitions, hostile takeovers, and stock swaps operate.

17: What Companies Tell the Markets
From “material information” to CEO compensation packages, which details are publicly held companies required to disclose? Break down what information can be found in the annual and current reports companies file with the SEC, paying particular attention to the importance of the numbers provided on financial balance sheets and income statements.

18: What Moves the Markets
People who can predict market shifts by paying attention to economic indicators have the potential to earn huge profits by buying or selling before everyone else does. But which indicators and price statistics are the most important to follow if you want to understand what’s happening in the financial markets?

19: When Central Banks Talk, Markets Listen
Since the 1950s, central banks such as the U.S. Federal Reserve have become one of the most powerful forces in the financial markets and the global economy. Why are central banks so powerful-and so secretive? How and why do they affect market interest rates so much? Peer inside central banks to find out.

20: Interest Rates as Indicators
Move on to a deeper discussion of how interest rates are connected to each other with a look at benchmark rates such as government bond rates and the controversial LIBOR. Learn how these rates reveal information about the state of the economy, then focus on one of the most important but least understood diagrams in all of finance-the yield curve.

21: Risk Management and Insurance
Even with all the financial tools at our disposal, we can’t completely protect ourselves from risk. Learn about the different types of risks that investors and companies encounter on a daily basis, and the main ways that individuals and companies manage those risks-including the use of financial products such as insurance.

22: Mortgages and Securitization
What happens to your mortgage after you buy a home? Solve this mystery as you investigate the mortgage market and why the securitization process-in the housing market and elsewhere-is attractive for both borrowers and lenders. Learn why mortgage-backed securities exist and how Fannie Mae and Freddie Mac operate.

23: The Whys and Hows of Financial Regulation
Who is in charge of monitoring the financial markets? How are the rules of the “game” enforced? Consider the fundamental reasons that financial institutions require regulation, and learn some of the conflicts that arise between entities charged with this task. Then, see how a cycle of regulation and deregulation began in the 1930s and continued through the financial crisis of 2008 and beyond.

24: The Future of Finance
Big trends are changing the way that financial systems function. Learn what they are, and the opportunities they offer, like peer-to-peer lending. And see why, thanks to these trends, each of us needs to take on much more responsibility for our financial well-being than previous generations did.

About Connel Fullenkamp
Professor Connel Fullenkamp is Professor of the Practice and Director of Undergraduate Studies in the Department of Economics at Duke University. He teaches financial economics courses, such as corporate finance, as well as core courses, such as economic principles. In addition to teaching, he serves as a consultant for the Duke Center for International Development. Prior to joining the Duke faculty in 1999, Professor Fullenkamp was a faculty member in the Department of Finance within the Mendoza College of Business at the University of Notre Dame. Originally from Sioux Falls, South Dakota, Professor Fullenkamp earned his undergraduate degree in Economics from Michigan State University. In addition to receiving the Harry S. Truman Scholarship, he was named one of the university’s Alumni Distinguished Scholars. He earned his master’s and doctorate degrees in Economics from Harvard University, where he was also awarded a National Science Foundation Graduate Research Fellowship. Professor Fullenkamp’s areas of interest include financial market development and regulation, economic policy, and immigrant remittances. His work has appeared in a number of prestigious academic journals, including the Review of Economic Dynamics, The Cato Journal, and the Journal of Banking and Finance. He also does consulting work for the IMF Institute at the International Monetary Fund, training government officials around the world. He is a member of the IMF Institute’s finance team, whose purpose is to train central bankers and other officials in financial market regulation, focusing on derivatives and other new financial instruments. In recognition of his teaching excellence, Professor Fullenkamp has received Duke University’s Alumni Distinguished Undergraduate Teaching Award as well as the University of Notre Dame’s Mendoza College of Business Outstanding Teacher Award. Along with Sunil Sharma, Professor Fullenkamp won the third annual ICFR-Financial Times Research Prize for their paper on international financial regulation.