Economics 434 Financial Markets Professor Burton University of Virginia Fall 2011
Examinations: Two Mid-Terms One Final Exam: Tuesday, Dec 13 th,2PM Grading: Everyone hates this! August
What kind of material is covered? Fixed Income Markets Modern Portfolio Theory Leverage and High Yield Derivatives August
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” August
Industrial Average Began on May 26 th 1896 at: For Today: A brief history of financial markets… August
The Early Years August
The Great Crash of 1929 August
The Thirties in Review August
Trends August
Trend August
1987 – The “Rip Van Winkle” Year August
Peak in March 2000 August
Since 2000 August
Current Financial Market Backdrop European Debt Crisis Stagnant Economic Growth in the US The Rise of Asia August
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 August
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 August
Other than Japan (3 rd 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. August
Since July 21:
August