What I'm Reading This Weekend (2/10-2/11)

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Feb 09, 2018
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Investing, Policy, Cryptocurrencies, Student Loans, Podcasts, Current Events

What happened to the 15 months of placid, upward sloping trend lines for all major stock indices that we had grown so accustomed to? Find out what changed with the markets and more in Beth's most excellent curated reads below. 

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The Market (are we talking about anything else this week?)

Did anyone else get whiplash (or perhaps motion sickness) from the roller coaster ride the stock market took this week?  Here are several articles that help put is in perspective.

  • First of all, the 1000+ point drop may have been historic in size, but in percentage terms, not so much.  Remember we started at 26,000.
  • Here is Barry Ritholz' take on what happened on Monday, as well an interpretation from the NY Times.
  • What's the witching hour on stock markets? Did you guess 3PM?  Why? Trading today happens through computers.  For example, mutual fund [read; high volume] sell orders usually go execute at 3PM.  These automatic and algorithmic trading programs don’t necessarily cause a drop like we saw Monday afternoon, but once the market starts trending in one direction, watch out below (or above). 
  • If you have 25 minutes, the February 6 Marketplace podcast podcast with Kai Ryssdal examines market volatility (this is where we are now) in depth.  I learned a lot from it, including more information about the VIX.  While you can’t trade the VIX, Wall Street has created multiple derivatives [aka "weapons of mass destruction" per Warren Buffett] based on this index. Sounds like pure gambling to me…and Bloomberg examines the risk of this market.
  • By the end of the week, the focus of the market conversations was inflation.

Wells Fargo – time to “pay the piper”

  • Hours before the end of her term, Federal Reserve President Janet Yellen made public the deal that was reached with Wells Fargo bank.  The Fed’s goal was to hold the bank accountable for its deceptive actions of the recent past.  

After three weeks of frenzied negotiations, a deal was announced on Friday night that represented a milestone in the evolving relationship between regulators and banks. Wells Fargo, one of the country’s largest banks, was banned from getting bigger until it can convince regulators that it has cleaned up its act.

Student Loans

Politics relating to personal finance

The inspector general is also investigating reports that the Labor Department tried to hush up an internal analysis that found the proposed rule could cost tipped workers billions of dollars a year.

Odds and Ends

  • I hope you got to watch the launch of the SpaceX Falcon Heavy.  I’m not sure what was more exciting, the launch or watching the boosters land!
  • Need a new example of “correlation does not equal causation?” Check this out about mutual fund managers and kindergartners.
  • B Corps are a relatively new thing.  Just what are they?  Crain’s Cleveland Business does a good job answering that question.
  • A Tech start-up called Divvy, if successful, may disrupt the traditional real estate market for housing.  It brings lease-purchase to a whole new level.  Their pilot programs are live in Atlanta and the Cleveland..
  • Its hard to get through a week without saying something about bitcoin.  Now it is “buyer beware!”  

“Cryptocurrencies are almost a perfect vehicle for scams,” said Kevin Werbach, a professor at University of Pennsylvania’s Wharton School. “The combination of credulous buyers and low barriers for scammers were bound to lead to a high level of fraud, if and when the money involved got large. The fact that the money got huge almost overnight, before there were good regulatory or even self-regulatory models in place, made the problem acute.”

Graphic: Putting this week's market action in perspective. 

 

About the Author

Beth Tallman

Beth Tallman entered the working world armed with an M.B.A. in finance and thoroughly enjoyed her first career working in manufacturing and telecommunications, including a stint overseas. She took advantage of an involuntary separation to try teaching high school math, something she had always dreamed of doing. When fate stepped in once again, Beth jumped on the opportunity to combine her passion for numbers, money, and education to develop curriculum and teach personal finance at Oberlin College. Beth now spends her time writing on personal finance and financial education, conducting student workshops, and developing finance curricula and educational content. She is also the Treasurer of Ohio Jump$tart Coalition for Personal Financial Literacy.