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Economics 434

Economics 434. Financial Markets Professor Burton University of Virginia Fall 2011. Facts About the Course. Examinations: Two Mid-Terms One Final Exam: Tuesday, Dec 13 th ,2PM Grading: Everyone hates this!. August 23 2011. What kind of material is covered?. Fixed Income Markets

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Economics 434

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  1. Economics 434 Financial Markets Professor Burton University of Virginia Fall 2011

  2. Facts About the Course • Examinations: • Two Mid-Terms • One Final Exam: • Tuesday, Dec 13th,2PM • Grading: Everyone hates this! August 23 2011

  3. What kind of material is covered? • Fixed Income Markets • Modern Portfolio Theory • Leverage and High Yield • Derivatives

  4. Readings? • Malkiel – “Random Walk Down Wall Street” • Burton – “Theory of Financial Markets” • -$ 30 when vailable • -Pickup at VNB Office • -Maybe in 3 weeks • Reinhart & Rogoff – “This Time Is Different: Eight Centuries of Financial Folly”

  5. Industrial Average For Today: A brief history of financial markets… Began on May 26th 1896 at: 40.94

  6. The Early Years

  7. The Great Crash of 1929

  8. The Thirties in Review

  9. Trends 1939-1960

  10. 1966-1981 Trend

  11. 1987 – The “Rip Van Winkle” Year

  12. 1981-2000 Peak in March 2000

  13. Since 2000

  14. Current Financial Market Backdrop • European Debt Crisis • Stagnant Economic Growth in the US • The Rise of Asia

  15. European Debt Crisis • The PIIGS • Portugal, Italy, Ireland, Greece and Spain • Massive sovereign (national) debt relative to GDP • Bailouts • European Union bailouts • Future of the Euro

  16. Stagnant US Economic Growth • GDP under 2% real economic growth • Historically weak economic recovery • Unemployment lingers in the 9% range • Inflation beginning to creep up: > 2.5 % • National Debt Soaring out of Control • State and local government finances in disarray

  17. The Rise of Asia • Other than Japan (3rd largest economy in the world). Japan more like the West (stagflation, high debt load). • China growing at 8 to 9 percent. • India and Russia and Brazil nearly 10% per year growth.

  18. Since July 21:

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