FREE LEARN ANY LESSON WITH VIDEO: Finance and capital markets

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Interest and debt

Compound interest basics

Interest is the basis of modern capital markets. Depending on whether you are lending or borrowing, it can be viewed as a return on an asset (lending) or the cost of capital (borrowing). This tutorial gives an introduction to this fundamental concept, including what it means to compound. It also gives a rule of thumb that might make it easy to do some rough interest calculations in your head.

Interest basics

This is a good introduction to the basic concept of interest. We will warn you that it is an older video so Sal's sound and handwriting weren't quite up to snuff then.

Credit cards and loans

Most of us have borrowed to buy something. Credit cards, in particular, can be quite convenient (but dangerous if not used in moderation). This tutorial explains credit card interest, how credit card companies make money and a far more silly way of borrowing money called "payday" loans.

Continuous compound interest and e

This is an older tutorial (notice the low-res, bad handwriting) about one of the coolest numbers in reality and how it falls out of our innate desire to compound interest continuously.

Present value

If you gladly pay for a hamburger on Tuesday for a hamburger today, is it equivalent to paying for it today? A reasonable argument can be made that most everything in finance really boils down to "present value". So pay attention to this tutorial.

Personal bankruptcy

Back in the day (like medieval Europe), you would actually be thrown in jail if you couldn't pay your debts (debtor's prison). That seemed like a pretty awful thing to do (not to mention that lenders are much less likely to be paid by someone rotting in prison), so governments created an "out" called bankruptcy (which, as you'll see, is a pseudo-painful "reset" button on your finances).

Personal Bankruptcy: Chapters 7 and 13

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Housing

Home equity and personal balance sheets

This old and badly drawn tutorial covers a topic essential to anyone planning to not live in the woods -- your personal balance sheet. Since homes are usually the biggest part of these personal balance sheets, we cover that too.

Mortgages

Most people buying a home need a mortgage to do so. This tutorial explains what a mortgage is and then actually does some math to figure out what your payments are (the last video is quite mathy so consider it optional).

Renting vs. buying a home

Is it always better to buy than rent? What if home prices go up dramatically and rents don't? How can we compare home prices to rents to figure out what to do. This older tutorial (low-res, bad handwriting) walks us through this. It is about housing but similar thinking can be applied to any rent-vs-buy decision (spoiler alert, Sal did eventually buy a home).

Housing price conundrum

Back before the 2008 credit crisis, Sal was perplexed by why housing prices were going up so fast and theorized that it was a bubble forming (he was right). These pre-2008 videos are fun from a historical point-of-view since they were made before all the poo poo hit the fan.

Credit Crisis

This tutorial talks about how the housing-bubble-induced credit crisis unfolded with a focus on the derivative securities that helped pump the bubble.

Paulson Bailout

In the fall of 2008, it became clear that a cascade of bank failures was happening because of shoddy loans and exotic securities (both which fueled a now popping housing bubble). In an attempt to avoid a depression, the Treasury Secretary (Hank Paulson) wanted to pour $1 Trillion into the same banks that had created the mess. This tutorial walks us through the beginnings of the mess and possible solutions. Historical note: it was created as the crisis was unfolding.

Investment and consumption

When are you using capital to create more things (investment) vs. for consumption (we all need to consume a bit to be happy). When you do invest, how do you compare risk to return? Can capital include human abilities? This tutorial hodge-podge covers it all.

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Inflation

Inflation basics

$1 went a lot further in 1900 than today (you could probably buy a good meal for the family for $1 back then). Why? And how to we measure how-more-expensive-things-have-gotten (i.e., inflation)?

Inflation scenarios

You know about inflation, but now want to look at how thing might play out in different scenarios. This tutorial focuses on when inflation is "acceptable" and when it isn't (and the causes and repercussions).

Real and nominal return

If the value of money is constantly changing, can we compare investment return in the future or past to that earned in the present? This tutorial focuses on how to do this (another good tutorial to watch is the one on "present value").

Capacity utilization and inflation

This tutorial starts with a very "micro" view of when firms decide to raise (or lower prices). It then jumps back to the macro view to discuss how capacity utilization can impact prices.

Deflation

Prices don't always go up. They often go down. This might seem like a good thing, but it could be disastrous for a modern economy is it goes too far. This tutorial explains what deflation is, how it happens and what the effects of it might be.

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Taxes

Personal taxes

Benjamin Franklin (and several other writers/philosophers) tells us that "In this world nothing can be said to be certain, except death and taxes." He's right. This tutorial focus on personal income tax. Very important to watch if you ever plan on earning money (some of which the government will take for itself).

Corporate taxation

In exchange for being treated as a person-like-legal entity (and the limited liability this gives for its owners), most corporations pay taxes. This tutorial focuses on what corporations are, "double taxation" and a few ways that multinationals might try to get out of paying taxes.

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Accounting and financial statements

Cash versus accrual accounting

Just keeping track of cash that goes in and out of a business doesn't always reflect what's going on. This tutorial compares cash and accrual accounting. Very valuable if you ever plan on starting or investing in any type of business (you might also discover a nascent passion for accounting)!

Three core financial statements

Corporations use three financial statements to report what's going on: balance sheets, cash flow statements and income statements. They can be derived from each other and each give a valuable lens on the operations and condition of a business. After you know the basics of accrual accounting (available in another tutorial), this tutorial will give you tools you need to responsibly understand any business.

Depreciation and amortization

How do you account for things that get "used up" or a cost that should be spread over time. This tutorial has your answer. Depreciation and amortization might sound fancy, but you'll hopefully find them to be quite understandable.

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Stocks and bonds

Introduction to stocks

Many people own stocks, but, unfortunately, most of them don't really understand what they own. This tutorial will keep you from being one of those people (not keep you from owning stock, but keep you from being ignorant about your investments).

Shorting stock

Can you sell something that you borrowed from someone else? Why, yes, you can and it is called "shorting". Why would you do this? Well, you can now make money if the price goes down. Is this bad? This tutorial has your answers.

Understanding company statements and capital structure

If you understand what a stock is (also a good idea to look at the topic on accounting and financial statements), then you're ready to dig in a bit on a company's actual financials. This tutorial does this to help you understand what the price of a company really is.

Corporate metrics and valuation

Life is full of people who will try to convince you that something is a good or bad idea by spouting technical jargon. Most of them have no idea what they are talking about. Don't be one of those people or their victims when it comes to stocks. From P/E rations to EV/EBITDA, we've got your back!

Life of a company--from birth to death

This is an old set of videos, but if you put up with Sal's messy handwriting (it has since improved) and spotty sound, there is a lot to be learned here. In particular, this tutorial walks through starting, financing and taking public a company (and even talks about what happens if it has trouble paying its debts).

Dilution

When companies issue new shares, many people consider this a share "dilution"--implying that the value of each share has been "watered down" a bit. This tutorial walks through the mechanics and why--assuming management isn't doing something stupid--the shares might not be diluted at all.

Stock Dilution

Mergers and acquisitions

Companies often buy or merge with other companies using shares (which is sometimes less intuitive than when they use cash). This tutorial walks through the mechanics of how this happens and details what is likely to happen in the public markets because of the transaction (including opportunities for arbitrage).

Leveraged buy-outs

Private equity firms often borrow money (use leverage) to buy companies. This tutorial explains how they do it and pay the debt.

Basic Leveraged Buyout (LBO)

Bonds

Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy.

Corporate bankruptcy

Anybody or anything (you can decide if a corporation is a person) can have trouble paying its debts. This tutorial walks through what happens to a corporation in these circumstances.

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Investment vehicles, insurance and retirement

Mutual funds and ETFs

If we're not in the mood to research and pick our own stocks, mutual funds and/or ETFs might be a good option. This tutorial explains what they are and how they are different.

Retirement accounts: IRAs and 401ks

The government apparently wants us to save for retirement (not always obvious because it also wants us to spend as much as possible to pump the economy going into the next election cycle). To encourage this, it has created some ways to save that avoid or defer taxes: IRAs and 401ks.

Life insurance

It is a bit of a downer to think about, but we are all going to die. Do we care what happens to our loved ones (if they really are "loved" than the answer is obvious). This tutorial walks us through the options to insure our families against losing us. The reason why we stuck it in the "investment vehicles" topic is because it can also be an investment that we can use before we die.

Hedge funds

Hedge funds have absolutely nothing to do with shrubbery. Their name comes from the fact that early hedge funds (and some current ones) tried to "hedge" their exposure to the market (so they could, in theory, do well in an "up" or "down" market as long as they were good at picking the good companies). Today, hedge funds represent a huge class investment funds. They are far less regulated than, say, mutual funds. In exchange for this, they aren't allowed to market or take investments from "unsophisticated" investors. Some use their flexibility to mitigate risk, other use it to amplify it.

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Money, banking and central banks

Banking and Money

We all use money and most of us use banks. Despite this, the actual working of the banking system is a bit of a mystery to most (especially fractional reserve banking). This older tutorial (bad handwriting and resolution) starts from a basic society looking to do more than barter and incrementally builds to a modern society with fraction reserve banking. Through this process, you will hopefully gain a deep understanding of how money and banking works in our modern world.

Quantative easing

You know that the Federal Reserve (or central banks in general) controls the money supply and short-term interest rates. But how exactly do they do this. Even more, how is "quantitative easing" different than regular open market operations. This tutorial explains it all in the context of the Federal Reserves attempts to stave off deflation during the 2008-2012 recession.

2008 Bank bailout

In 2008, the entire financial system was at a potential breaking point because of a popping housing bubble. This tutorial breaks down how the government attempted to address this (historical note: Sal made these videos as the crisis was unfolding).

Geithner Plan

The poop really started to hit the fan in the fall of 2008. When the new administration took office in early 2009, the poop was still there. This is tutorial explains an attempt--probably not a well thought out one--to clean the poop and slow the fan. Videos on the Geithner Plan to solve the continuing banking crisis in early 2009.

Foreign exchange and trade

This tutorial walks through how China's undervaluing of its currency impacts trade and prices (which also fuels cheap borrowing for the U.S.).

Chinese currency and U.S. debt

This tutorial contains short videos that explain how China and the United States are intertwined through currency and debt. This is key for understanding the current global macro picture.

2011-2012 Greek Debt Crisis

The Greek government incurred debt beyond its means but didn't have control over its own currency to inflate away its obligations. From austerity, to a bailout, to leaving the Eurozone, none of the options looked great. In this tutorial, Sal walks through the situation Greece was in and its options (these videos were made as the crisis was unfolding).

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Options, swaps, futures, MBSs, CDOs and other derivatives

Put and call options

Options allow investors and speculators to hedge downside (or upside). It allows them to trade on a belief that prices will change a lot--just not clear about direction. It allows them to benefit in any market (with leverage) if they speculate correctly. This tutorial walks through option basics and even goes into some fairly sophisticated option mechanics.

Discussions of economic topics and how they relate to current events.

Unemployment

Unemployment is a key metric for judging the health of an economy (and even political stability). This tutorial is a primer on what it is and how it's measured (which you might find surprising).

Thursday, 25 April 2013

Finance and capital markets

Finance and capital markets

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