Post on 01-Jan-2016
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The Queen’s Commerce Trading Competition
General MeetingNovember 3rd 2009
Prize StructureI. Overview
Prize Structure
First 1,000
Second 500
Third 250
Fourth 150
Fifth 100
First Risk Adjusted 250
Top stock pick 200
Best short 200
Best option play 200
Buy and hold winner 200
Gainer of the month 1 150
Gainer of the month 2 150
Gainer of the month 3 150
Gainer of the month 4 150
Trading vs. Investing
Timeframe
Decision making methods
Are you a trader or an investor?
Table of Contents
What is an ETF?
Tracking mechanism: Indices, Commodities, Bonds, Currency
Trades on an exchange
How you can use them: leverage, themes, “safer” interim/long term investments
Table of Contents
Limit Buys and Stop orders
Limit Buys Allows you to purchase shares at a designated price Once stock price reaches your lower limit, order gets
executed
Stop Orders Allows you to sell shares at a designated price Once stock price reaches your upper limit, order gets
executed
Helps limit a loss or lock in profit Especially helpful if you do not monitor your portfolio
regularly
Table of Contents
Introduction to Capital Markets
Dow Jones Industrial Average
Founded by Charles Dow – 1986 Business associate/statistician Edward Jones Now Dow Jones & Company (WSJ, Barron’s etc.)
30 largest and most widely held US public companies Trade on NASDAQ and NYSE
I. Overview
Dow Jones Industrial Average Recent Changes
June 8, 2009 - GM and Citigroup replaced by The Travelers Companies and Cisco Systems (third NASDAQ Company)
September 22, 2008 – AIG replaced by Kraft Foods Calculation
Scaled average Sum of prices / divisor Nov. 2 divisor = 0.132319125
Flaws Frequently quoted Only includes 30 companies Higher price stocks have more weight $1 move in smallest component has same effect as
largest
S&P 500
Managed by Standard and Poor’s – Division of McGraw Hill
500 large-cap common stocks in US Some exceptions
Components selected by a committee Not necessary largest ex. Berkshire Hathaway
(Warren Buffet’s company)
S&P 500
Float Weighted – use shares available for public trading
Larger “Market Cap.” -> larger impact on index
Also uses a divisor to keep index constant with regards to financial actions Recalculated every night after closing value is
reported Updated every 15 seconds during trading
S&P/TSX Composite Index
Largest TSX stocks by market cap 70% of market cap. Of Canadian based companies on
exchange 204 companies (Sept 18) Eligibility
Market Cap – min. 0.05% of index, 3 month average $1 Liquidity – volume greater than 0.025% of all eligible
securities Domicile – on TSX, incorportated under Canadian laws
Companies such as Rogers, BMO, Tim Hortons
NYSE Euronext
NYSE Group merged with Euronext Euronext had Market cap of
$2.9 trillion – 5th largest (2006) NYSE
First traded securities in 1792 Address: 11 Wall Street $10.1 trillion in combined
capitalization
NYSE Euronext
Hybrid Market Can route trades
electronically Can utilise
brokers/traders on the floor
NYSE sells one-year licenses to trade directly on exchange
NASDAQ OMX
NASDAQ and multiple European Exchanges NASQAQ:
Approximately 3800 companies listed Electronic Stock Market Highest per hour trading volume in the world
NASDAQComposite Index Essentially all listings on Exchange
TSX
Largest Exchange in Canada – 8th in the world
TMX Group owns the exchange Most Mining and Oil & Gas companies
listed in the world (Canada has abundant natural resources)
Electronic exchange since 1997 Only Canadian exchange to trade Senior
equities
Other Canadian Exchanges Montreal Exchange – derivatives Vancouver & Alberta Exchange – Canadian
Venture Exchange Junior Equities
What’s going on in the market?
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Gross Domestic Product
Q3 GDP released: 3.5% expansion Beat economists’ consensus of 3.2% Goldman Sachs downgraded forecast day
before
Q4 2008 GDP -6.4%
China Q3 2009 GDP 8.9%
Consumer spending 2/3
Table of Contents
Consumer Confidence
Fell below 50 point mark Went from 53.4 to 47.7
2001 recession lowest 84.9
Distinction between exogenous and endogenous events
Table of Contents
What Market-Watchers Are Saying
Nouriel Roubini: “Asset prices have risen too much, too soon,
too fast” “The mother of all carry trades”
David Rosenberg: “Only economists see the recession as being
over”
Table of Contents
Financial Services Sector
“The Banks never lose”
Financial Services Sector Brief Overview
Financial services sector includes such institutions as retail banks, investment banks, insurance companies etc.
Arguably the most important sector in the North American economy
Nearly half of ‘TARP’ participants in U.S. have 1) paid back money
and 2) have posted multi-billion dollar profits last quarter Canadian Banks (no Government relief) are once again
1) posting profits and 2) seeing capital appreciation S&P TSX Capped Financials Sector Index continues to
rise Recovery is well on it’s way for this sector Overall ‘bullish’ outlook
Table of Contents
Ford Motor Co. – Income Statement
Ford Motor Co. – Credit Reconciliation
Ford Motor Co. – Cash Flow Statement
Apple Inc. – Income Statement
Apple Inc. – Cash Flow Statement
Apple Inc. – Balance Sheet
Earnings Surprises
Apple Inc. (AAPL) Ford Motor Co. (F)
EPS Estimate $1.42 $(0.12)
EPS Actual $1.82 $0.26
Operating Cash Flow
$1.1 billion $1.3 billion
Other Details Substantial Increase in Rev. Cost Cuts / Debt Laden