Taking Stock

1. Taking Stock World History

2. Describe your understanding of the stock market. Write in complete sentences. Preview

3. List the type of goods or services that each of the thirty companies offer Taking Stock Organizer

4. The stock market is an addition to a company’s business. In this presentation it will show you how the stock market works, and why it is so risky. Stock Market

5. Stock market index found by Charles Dow • Includes the performance of the industrial components of America’s stock market • Includes 30 of the largest and most highly held public US companies (blue chip stocks) • AT&T, McDonald’s, Microsoft • Boeing and Verizon Communication • Coca-Cola and Wal-Mart • Exon, Mobile, and Walt Disne Dow Jones Industrial Average

6. The most common used index is NYSE. It is the largest stock market • Stock market index covering all common stocks listed on the New York Stock Exchange • Includes over 2000 stocks • Over 1600 are US Corporations • Over 350 are Foreign Corporations • “Up” or “Down” • https://nyse.nyx.com/ New York Stock Exchange

7. Entrepreneurs – business opportunities that requires risk • Business Model – an innovative plan for producing profits • FOCUS QUESTION on video: • What was the Dutch spice merchants’ entrepreneurial business model in the late 17th century? Birth of the Stock Market http://www.pbs.org/wnet/ascentofmoney/lessons/taking-stock/video-segments/73/

8. FOCUS QUESTION: Why did Dutch spice traders find it necessary to pool their resources and form partnerships companies? • FOCUS QUESTION: How did the world’s first true stock market come into existence?

9. If the owner of a private company feels the need to sell stocks, the company announces that they will go public; this is pretty self-explanatory. The company’s power will be distributed to the people. IPO – Initial Public Offering

10. Whenever someone buys a share, the company gets those proceeds. This adds to the company’s value, making the price of each stock rise a little. When people sell their stock, the price per share goes down a little, contrary to people buying shares. How Stocks Works

11. When you own 1 share of a company(which has 500 shares total), you own .002 (.2%) of that company. That may not sound very big, but if that company is strong enough, that can be a lot of money! If the company is worth $500,000, and there are 500 shares, each share is worth $1,000; and that’s a lot of money! • Stocks are ownership shares of a company sold by that company Ownership in Stock

12. In the Stock Market, companies sell shares to the public. That means that the companies are actually selling power of the company to the public. If you buy 250 shares of a company with 500 separate shares, you own 50% of the company! When you own such a percentage of the company, you have a say in how the company is ran.

13. A share holder can sell his/her stock at any time. The owner gets however much money the shares were worth when s/he sold them Selling Stock

14. The thirty companies’ (activity) performance is used as a benchmark for determining the relative health of the stock exchange as a whole and the economy more generally

15. How did Ferguson (video) refer to supply and demand in the video? • Economic model which concludes that in a competitive market, price fluctuates to equalize the quantity demanded by consumers and supplied by producers, resulting in an economic equilibrium Supply and Demand

16. Do you think that supply and demand guarantees a stable market? • FOCUS QUESTION: Who coined the term “irrational exuberance” and what does it mean? Shock Market http://www.pbs.org/wnet/ascentofmoney/lessons/taking-stock/video-segments/73/

17. Investors seek to profit from a strong – or “bull” market – often ignore signs that the stock they are buying have become overvalued • “Bull” or “Bear” Market • “Buy Low and Sell High” “Bull” or “Bear” Market

18. Assemble your own collection of investments-or “portfolio”-from some combination of the four imaginary stocks offered • “News Flash” – learn about the market changes • Funds in bank at 4% interest instead of purchasing stock • Increase the value of your portfolio as much as possible • http://www.pbs.org/wgbh/nova/stockmarket/virtual.html Activity – “Play the Market”

19. Which group performed the best and why? • Which group performed the worst and why? • Would any group have been better off keeping all their money in the bank? Final Evaluation

20. 2008 – financial crisis based on overvalued real estate investments • 1929 – Great Depression • The stock market fluctuates minute to minute and day to day, broad trends can be discerned over time Stock Market Crash http://www.youtube.com/watch?v=RJpLMvgUXe8

21. What general trend can be discerned? • Can anyone make a correlation between a major event or period in history and significant gains or losses in the market? Dow Jones Industrial Average Timeline http://www.stockcharts.com/charts/historical/images2/DJIA1900.gif

22. Write a research report on one of the companies listed on the “Taking Stock” organizer. Important questions to be addressed should include: • What was the original business model of the company’s entrepreneurial founders? • How much time passed from the company’s creation to its IPO, and why was an IPO necessary? • When was it chosen to become on the thirty companies which determine the Dow Jones Industrial Average? • How has the company’s stock performed throughout its history? • Has it been affected by current events in the past ten years? • Submit into www.turnitin.com Assessment

24. What is insurance? • All types of insurance are essentially contracts—a promise from the insurer of compensation for specific potential future losses (of life, health, property, or almost anything else) in exchange for a periodic payment from the insured. It is a calculation of risk on behalf of both parties. How Insurance Has Shaped Our World

25. Focus Question - What are the three options Ferguson suggests for who should bear the risks of the future? • http://www.pbs.org/wnet/ascentofmoney/lessons/how-insurance-has-shaped-our-world/video-segments/61/ Who Bears the Risk?

26. Student Organizer • which ones do you feel should be 1) paid for by the individual, 2) paid through charity, or 3) paid for by the government. “Who Should Pay?”

27. Disagreement about how various types of insurance should be paid for is one of the defining aspects of the political landscape both within the United States and the world at large. • Those who tend to favor Option 1 probably regard insurance as a privilege to be purchased like any other service. • Those who tend to favor Option 3 probably regard insurance as a right of citizenship—if not a right of humanity itself.

28. What do you do or should do to prepare for your future financial needs? • Savings is the oldest method of providing for the future…..and is still a basic element • FOCUS QUESTION - How did Robert Wallace’s and Alexander Webster’s Scottish Ministers’ Widows and Orphans Fund work? http://www.pbs.org/wnet/ascentofmoney/lessons/how-insurance-has-shaped-our-world/video-segments/61/

29. All types of insurance are essentially contracts—promises from the insurer of compensation for future losses (of life, health, property, or almost anything else) in exchange for a periodic payment (or “premium”) from the insured. • Insurance can also be described as a type of gamble—a calculation of risk and probability in which both parties bet against each other: the insured weighs the possibility (or relative imminence) of possible losses against the certainty of paying premiums over time, while the insurer makes exactly the opposite wager.

30. FOCUS QUESTION - What does Professor Ferguson mean when he says that “size matters” in determining insurance risk? Origin of the modern life insurance fund

31. http://shazam.econ.ubc.ca/flip/ • What the statistical probability of a flipped coin landing heads up is. • Each student flip 10 coins • Now, flip 100 coins • Law of averages: • It is more than a game of nickels and dimes—it’s a fundamental principle of the entire world’s insurance economy. “Ken White’s Coin Flipping Page”

32. What possible problems they might detect in a premiums-based system of private insurance such as Wallace and Webster’s Scottish Ministers’ Widows and Orphans Fund. • FOCUS QUESTION: How did Japan address the issue of insurance affordability, and why? • FOCUS QUESTION: What economic lesson did the Japanese and other exhausted combatants draw from the wreckage of WWII? “From the Cradle to the Grave” http://www.pbs.org/wnet/ascentofmoney/lessons/how-insurance-has-shaped-our-world/video-segments/61/

33. FOCUS QUESTION - What does Professor Ferguson believe was the fatal flaw of the modern welfare state? • The result was “stagflation”—low growth combined with high inflation—while welfare states’ treasuries were steadily drained by “entitlement” payments to citizens who had come to expect government insurance as a right.

34. FOCUS QUESTION - What was Friedman’s economic advice for Chile’s new leader, General Augusto Pinochet? • FOCUS QUESTION - How did Friedman’s Chilean protégé Jose Panera take Friedman’s principle of smaller government even further? “Trickle Down Economics” http://www.pbs.org/wnet/ascentofmoney/lessons/how-insurance-has-shaped-our-world/video-segments/61

35. Professor Ferguson doesn’t consider modern Chile’s lack of universal pensions to be a major problem; like Friedman and Panera, he believes that Chile’s rapidly growing economy—largely driven by private retirement pensions—ultimately benefits everyone. • This “free market” economic philosophy of smaller government and greater privatization of services and industry was embraced by conservatives in other nations, notably Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States. • Modern economic conservatism came to be defined in the 1980s by the notion that “a rising tide floats all boats” (i.e. a strong economy benefits both rich and poor), and its corollary of “trickle-down economics” (in which the prosperity of the wealthy “trickles down” to benefit the middle class and the poor).

36. Other economists argue that this free-market philosophy is fundamentally unjust—widening the disparity between rich and poor and failing to provide what they regard as basic socioeconomic rights of citizenship. They also argue that the market is an unreliable guarantor of pensions, health care, and other forms of social insurance

37. Which economic philosophy they agree with: 1) the “small government,” free market, anti-welfare state approach that regards pensions, health care, and other types of “social security” as privileges to be paid for by the individual, or 2) the “big government,” regulated welfare state approach that regards pensions, health care, and other types of social security as basic rights of citizenship? Free Market vs. Big Government

38. each group (four) log on to “The Uninsured in America: The U.S. vs. Other Nations” website. Assign each group one of five nations featured on the site—Canada, China, Japan, Mexico, or the United Kingdom. • http://www.pbs.org/newshour/indepth_coverage/health/uninsured/international.html “The Uninsured in America”

39. Write a brief report comparing and contrasting the relative strengths and weaknesses of the insurance model of their assigned nation with that of the United States. • Present the group findings to the rest of the class on the pros and cons of each system. Assessment

40. Based on the “Who Should Pay” organizer, which of the five national systems that we have been looking at most closely resembles your own collective attitudes to insurance? • Ask if anyone would now respond differently to the Student Organizer based on what you have learned in this lesson? If so, why?

41. Which system do you consider the most “free market?” • Which is the most nationalized? • What might the nature of a nation’s health care system say about that nation’s culture and society as a whole? • Class vote on which nation’s system of insurance they consider the best. Why?