While many Americans may be making a trip to the mall next week to spend their stimulus check, we will focus on socially responsible investing (SRI) this week as an alternative in light of Tuesday`s celebration of Earth Day. For many, being `green` means recycling plastic and glass containers and newspapers, limiting the amount of water we use, as well as turning off the lights when we leave the room. For investors, it can also mean investing in companies that do all of this as well as generate a healthy return to your investment. Socially responsible investing or `green` investing, generally refers to investing in public companies whose goals and primary business practices work toward the benefit of society. `Green` companies may position themselves and their investors from the impacts of climate change and take advantage of profitable opportunities to provide goods and services while also adhering to acceptable environmental and human rights standards. SRI can also be driven by religious and political affiliations as well so there can be a debate on what makes a company responsible or an investment acceptable.
How do your Stock Market Game students find more information about companies that adhere to `green` or socially responsible standards? The Street.com`s article, `How to Strike Green Gold` (http://www.thestreet.com/story/10359969/1/how-to-strike-green-gold.html) is a good start as it reminds students that they must first analyze the stock market side, but also the company`s business practices to determine whether they mirror one`s interests. Not only can students invest in individual stocks, but there is a huge variety of `green` mutual funds and ETFs (which we reviewed in last week`s Week in Review) to choose from. As recommended in the Street.com article, www.socialfunds.com is a great site for additional research, news, and information on social investing. Your students may also want to check out www.kld.com. This site provides a `screen` to determine whether or not companies are acting in ways that are consistent with sound progressive standards of corporate conduct i n the areas of climate change and human rights.
To further your students` exposure to SRI or `green` investing, please take a look at the `Going Green` project in the Teacher Support Center. This project introduces students to the concept of `environmentally responsible investing` through activities based on the book, The Lorax, by Dr. Seuss. Students will examine how companies balance their need for raw material with their need to manage those same resources to insure future availability and supply. It is accessible in the `Projects` section of the Teacher Support Center.
Unfortunately trying times continue for the financial sector as Merrill Lynch (NYSE: MER), the world`s largest brokerage house announced on Thursday it would cut another 4,000 jobs. The job cuts come on the heels of a quarter in which the firm reported its third straight quarterly loss and recorded more than $6.5 billion in write-downs on subprime mortgages and other risky assets. According to its CEO, John Thain, the former head of the New York Stock Exchange, things are unlikely to improve in the next couple of quarters. He stated, `This was about as difficult a quarter as I`ve seen in my 30 years on Wall Street.` Citigroup (NYSE: C) also reported a sizeable first-quarter loss of $5.1 billion and plans to cut close to 9,000 jobs. However, the loss was lower than analysts had anticipated. Both Citi`s and Merrill`s shares had moved higher in Friday`s trading at the time of this writing, reflecting investor confidence that the companies will weather the storm.
While we realize this has been a tough semester for Stock Market Game students to see significant gains in their portfolios, students may be interested in checking out the following articles posted recently on theStreet.com, `Investing in China: What You Need To Know` (http://www.thestreet.com/story/10412296/1/investing-in-china-what-you-need-to-know.html) and `How To Make International Plays Without Getting Played` (http://www.thestreet.com/story/10411969/1/how-to-make-international-plays-without-getting-played.html). Both stress the importance of international diversification with a specific focus on China. Also, Chinese construction companies are highlighted in this week`s Business Week as they are expanding and set to build Europe`s tallest building – the 93 story Federation Tower in Moscow.
As discussed in the second Street.com article, you may be interested in introducing your students to ADRs and ETFs. What are they? When a company based overseas wants to sell shares of its stock to investors in the United States, it does so through American Depository Receipts (ADRs), which are available on the major exchanges and through the SMG. International diversification is further enhanced through Exchange Traded Funds (ETFs). ETFs can track a particular index or sector and seeks to replicate its performance by owning the securities that make up the index or sector, no matter how broad or narrow a segment of the market it may be.
For additional information about ETFs, you can view the Stock Talk edition, `Emily & ETF.` The issue also explains how ETFs differ from mutual funds as well as introduces its readers to Spiders, Vipers, and Diamonds.
American Airlines (NYSE: AMR) made business and personal travel on Wednesday a nightmare by cancelling more than 1,000 flights – nearly half its schedule – to fix faulty wiring that could cause a short-circuit or even fire and explosion. The headache continues today as the airline cancelled 595 more flights or 25% of its schedule and stranded tens of thousands of passengers. Over the past three weeks, U.S. carriers have shut down close to 3,700 flights because of inspection issues. It has been the largest wave of cancellations and it will most likely only get worse as federal regulators step up their scrutiny of aircraft inspections after years of more lenient enforcement. Southwest Airlines (NYSE: LUV) was the first airline to experience the tightening of safety measures by the Federal Aviation Administration (FAA) and ultimately faces a $10.2 million fine for missing deadlines to inspect planes for structural flaws during 2006 and 2007.
In other headlines, Frontier Airlines Holdings, Inc. (NASDAQ: FRNT) announced it will join the ranks of ATA Airlines, Skybus, and Aloha Airgroup by filing for Chapter 11 bankruptcy protection. But unlike the other airlines, Frontier plans to keep running while it reorganizes. Even if passengers are able to get off the ground, they will feel the pinch in their wallets as crude oil prices continue to hover around $110/barrel and the cost of jet fuel has nearly doubled since last year. It appears most major U.S. carriers have passed much of the cost onto its passengers and discount seats are dwindling in numbers. Escalating costs have also led to merger talks between Northwest (NYSE: NWA) and Delta (NYSE: DAL) airlines.
In light of the airline mess, it might be a good time to introduce your students to the concept of short selling (while this tends to be a confusing concept for many students, elementary teachers may want to skip this topic). For a great overview of short selling, be sure to check out www.pathtoinvesting.org and enter `short selling` in the search feature. Middle school and high school teachers may also want to review the short selling lesson, One Strategy for a Bear Market located in the `Lesson Sequence` section of the Teacher Support Center.
And last but not least, besides being the month most people associate with the tax man, April is National Financial Literacy Month. To celebrate this important springtime event, the Foundation for Investor Education and the SMG have made available lessons to prepare students for a visit from an industry professional; In the Securities Industry for elementary students and Roles in the Industry for middle and high school students. Both can be found in the Teacher Support Center. Sources for arranging a visit are included in the lessons` Teacher Backgrounds. Teachers are encouraged to provide their students with at least one visit from an industry professional. The experience enriches The Stock Market Game program by providing a `live` connection between what they are doing in The Stock Market Game to the `real world.`
In addition to the industry professionals lessons, a new issue of In the News is available. This issue, The Fed`s Fix looks at the measures the Federal Reserve has taken to invigorate the economy. This lesson can also be found in the `Publications` section of the Teacher Support Center.
Connecticut Stock Market Game
April marks the beginning of earnings season in the financial world and there has been much talk on Wall Street
that the credit crisis sparked by sub-prime loans may be drawing to a
close. Optimism and pessimism along with fear and greed are the primary
emotions among traders and this week the optimists seem to be winning.
Evidence of this can be found in the Dow which had one of its better
weeks in quite some time. The Dow even took a disturbing jobs report in
stride this morning when the government reported that the economy lost
80,000 jobs sending the unemployment rate up to 5.1 percent.
But don`t count the pessimists out. They believe we are not at the
end of the credit crisis and that there will be more pain to follow as
companies report earnings, especially financial companies. More write
downs from banks and brokerages, the pessimists believe, could send
this house-of-cards-rally crashing down.
One of them is to get them to listen to an earnings call which most
companies tape and make available on the Web. For example, Family
Dollar (FDO) has their earnings call from this morning available on
their website (http://www.familydollar.com/news.aspx?p=news&nyo=0).
You can find most earnings podcasts on company websites by looking for
their Investor Relations, Media, or News sections. To find out when a
company is reporting, you can use this earnings calendar http://biz.yahoo.com/research/earncal/today.html)
or go to the company`s website and look for the sections mentioned
above where there is usually a press release letting people know when
the company will report. You can learn more about what to watch for
during earnings season from this helpful collection of insightful
articles (http://www.thestreet.com/story/10410183/1/its-april--ready-for-
earnings-season.html).
Lesson this week
Understanding your account summary.
Strategies in a BEAR market!!
WEEK IN REVIEW 3/28/08
The markets were on the rise this morning after a report showed personal income rose last month. U.S. consumers` confidence had fallen to a 16 year low in March, pointing to a recession according to the Reuters/University of Michigan Surveys of Consumers. A report on the core personal expenditures price index, a key measure of inflation, also released this morning, held steady, suggesting the Federal Reserve can keep cutting interest rates going forward. These reports are somewhat positive as stocks fell the past two days after a weak reading on GDP growth in the fourth quarter. The government confirmed the last quarter of 2007 did, indeed, see a sharp economic slowdown.The technology sector was particularly weak after the world`s third-largest software maker Oracle Corp. (NASDAQ: ORCL) posted worse than expected third-quarter earnings and issued a cautious forecast. Since Oracle`s quarter ends a month ahead of most other large technology companies, investors have been scrutinizing and reacting to its numbers for insights into how the weakened U.S. economy is affecting tech companies. Data suggesting Google Inc.`s (NASDAQ: GOOG) revenue from Internet users` clicks could slow also raised worries about tech stocks as shares of Google fell $14.52 to $443.67 on Wednesday.
In other news, your students may be interested in taking a look at the most recent issue of BusinessWeek as it profiles their top 50 stock picks of the Standard & Poor`s 500-stock index. They analyzed the last 12-month and three-year periods and measured shareholder returns during these time periods. They also factored in net profit margins and long-term earning prospects. Many of the companies profiled are well known (and may currently be present in your students` portfolios), but some of the top five will probably be unfamiliar to your students. Below are the top five:
5. Questar: (NYSE: STR): The company is in the natural gas business distributing to customers in Utah, southwestern Wyoming, and southeastern Idaho.
4. Verizon: (NYSE: VZ): While most telecom companies have had a rough road lately, shares have risen 17% by strong results in wireless.
3. Allegheny Technologies: (NYSE: ATI): The Pittsburgh, PA, based company specializes in titanium used for airplanes and jet engines and is vital to the Boeing 787 Dreamliner.
2. Gilead Sciences: (NASDAQ: GILD): The company is part of the biotech sector and creates treatments for hepatitis, HIV, and infections related to AIDS. Its bottom line was significantly boosted with the creation of Atripla, a drug that combines three potent medicines into one pill.
1. Coach: (NYSE: COH): This luxury brand tops the list thanks to its expansion of higher-cost bags making the brand more desirable while at the same time adding new lines of lower-priced handbags.
WEEK IN REVIEW 3/21/08
READ HAPPY IPO and SWEET STOCK
under "Publications"
Topic: How does money grow over time?
On Tuesday, the buzz on the Street turned to `who`s next?` Fortunately additional investment firms like Lehman Brothers (NYSE: LEH), Goldman Sachs (NYSE: GS), and Morgan Stanley (NYSE: MS) all reported quarterly earnings that were stronger than expected which not only sent the markets soaring, but indicated they are not at risk to suffer the same fate as Bear Stearns. Investors seemed to breathe a sigh of relief as the Dow shot up 420 points on Tuesday, the biggest point gain in more than five years. The Dow also got an extra boost after the Federal Reserve slashed a key interest rate by three-quarters of a point in a battle to halt a spreading credit crisis. The strong Fed action seemed to persuade investors, at least for now, that the central bank plans to do whatever it can to keep the country out of a steep recession.
The other big newsmaker of the week was Visa Inc. (NYSE: V) which raised $17.9 billion late Tuesday to complete the largest initial public offering (IPO) in U.S. history. The world`s largest processor of credit and debit cards sold 406 million shares at $44/share to easily surpass the previous U.S. record IPO of $10.6 billion set by AT&T Wireless in 2000. The deal is anticipated to help prop up the wobbly financial services industry as major Visa stockholders include JPMorgan, Citigroup (NYSE: C), and Bank of America (NYSE: BAC). The proceeds of the deal would bring these firms much needed capital, which could help strengthen their balance sheets.
To review the IPO concept check out the `Happy IPO` and `Sweet Stock` editions of the Stocktalk newsletter. Both issues explain what an IPO is and how the stock market helps companies raise money for their growth. You can find both editions in the `Publications` section
READ 'RECESSIONLAND' under Publications
The Week in Review 3/14/08
The mortgage crisis and credit woes continue to be highlighted in the headlines this week and Wall Street responded to the Labor Department`s unchanged Consumer Price Index (CPI)
released this morning. The CPI, a key inflation reading, showed prices
maintained the levels from the previous month. Economists had expected
a 0.2% rise in this measure after the rise in February left overall
prices 4% above where they were 12 months earlier and down from the
4.3% rise in January. Cheaper energy helped keep overall consumer
prices in check, the Labor Department said. This report boosts the
chance for a big interest rate cut at the Fed`s meeting next week, as
the increase is still a bit above the perceived comfort zone of central
bankers.
We received positive feedback from many teachers for focusing last
week`s `Week in Review` on the energy sector which is performing well
in these trying times. So this week we`re highlighting a few selected
commodities. On Thursday, crude oil hit an all-time high of $111 per
barrel before settling at a record close of $110.33, up 41 cents from
the previous session. Analysts blame oil`s ascent on the weak dollar,
which dropped to yet another low against the euro on Thursday. The
price of a gallon of gas is also following crude`s recent surge and
could rise as high at $3.75 a gallon this spring, analysts predict.
Your students may want to examine refining companies such as Valero (NYSE: VLO), Sunoco (NYSE: SUN), or Frontier (NYSE: FTO), which all specialize in turning crude oil into gas. ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and ConocoPhillips (NYSE: COP), also have refining operations.
Gold has also performed well over the past year and hit a new milestone
on Thursday, rising to $1,000 an ounce before settling at $993.80. This
is great news for investors, but consumers are not likely to find a
bargain as they shop for jewelry. The weak dollar and record-high crude
prices are thought to be the cause of the increased price of gold.
Anglo American (Nasdaq:
AAUK) may be interesting for your students to research. The company is
based in the U.K. and is one of the largest mining companies in the
world. In addition to gold, it is also involved in mining platinum,
coal, and copper, and owns a large portion of the world`s largest
diamond producer, De Beers. Two additional gold companies that have had
great performance over the past year include Kinross Gold (NYSE: KGC) with a 75% return and Yamana Gold (NYSE: AUY), with a 31% return.
With the constant discussing of a possible recession, you may want to
have your students take a look at `Recessionland,` our new issue of
StockTalk which follows up on the interest rate cuts presented in the
most recent issue of In the News. This issue provides readers with an
understanding of `recession` and its impact on the economy. It is
presented as a conversation between a boy and his computer Avatar. To
access this click the Publications link
THIS WEEK LEARN WHAT RISK IS AND HOW MUCH IS COMFORTABLE
The Week in Review 3/8/08
With the upcoming election monopolizing the headlines at the beginning
of the week, the struggling economy again took center stage as the
Labor Department reported this morning there was a net loss of 63,000
jobs, which is the largest decline since March 2003 and weaker than the
revised 22,000 jobs lost in January. The losses were widespread,
reaching beyond the battered construction and manufacturing sectors.
Retailers cut 34,000 jobs, while businesses and professional services
cut 20,000 jobs.
With many Stock Market Game teams already frustrated by the falling
prices of many of their investments, this week will highlight an
industry that is actually performing positively despite the current
overall market headaches: energy. Renewable energy stocks did amazingly
well in 2007 due to record oil prices that lifted the broader energy
sector in general. Solar was the big winner with First Solar (NASDAQ:
FSLR), a company that makes solar-power modules without silicon,
surging 795 percent last year alone. This company claims the industry`s
lowest manufacturing cost per watt and may be a company to watch during
2008. Another company to keep an eye on includes SunPower (NASDAQ:
SPWR), a maker of solar cells and panels used to generate power from
the sun. Analysts feel SunPower is well positioned for bottom line
returns in 2008 due to a drop in silicon prices this year along with
its announcement in January to construct yet another solar power plant in Spain.
Another sector to encourage your students to research is wind. Experts
say the wind sector is the technology of choice for utilities looking
to buy green power. General Electric (NYSE: GE) is the big power player
in the U.S. along with Zoltek (NASDAQ:
ZOLT) which makes carbon fiber used in turbine blades and its stock
rose over 100 percent last year. Big oil companies are also investing
billions developing new wind power projects. `Shell and BP see wind as
an increasingly important part of the energy industry,` says Randall
Swisher, of the American Wind Energy Association. `They want to look
for new opportunities, and wind is clearly in their sights.` Shell,
along with Luminant, a subsidiary of TXU Corp. is currently in the midst of developing a $4 billion wind power project in the Texas Panhandle.
This week we will talk about public and private companies and what is a stock?
The Week in Review 3/1/08
Happy Leap Day!
This extra day is added to the calendar every four years to help
synchronize the calendar year to the astronomical or seasonal year or
the length of time it takes the earth to complete its orbit around the
sun which is approximately 365 ¼ days. While some view this date as
Sadie Hawkins Day with women given the `right` to propose to men today,
most view it as just another work day. Many on Wall Street,
however, wish it was an opportunity for the markets to `adjust`
themselves into positive territory as it was another rough week.
The US dollar dipped further Thursday, reaching a new low against the
euro, after data confirmed the US economy nearly braked to a halt at
the end of last year, limiting the Fed`s options as it tries to steer
through the housing and credit crises. The Commerce Department report
stated the US economy or gross domestic product (GDP) grew at a scant
0.6 percent pace during the October to December quarter, compared with
a much healthier 4.9 percent during the previous quarter. GDP measures
the value of all goods and services produced in the United States and
many believe it is the best barometer of the country`s overall economic
health. Economists anticipated the fourth-quarter GDP would have been
bumped up to a 0.8 percent growth rate, but the housing report looked
even bleaker in the new report. The finding helped push the 15-nation
euro to a record high of $1.5229, while also pushing crude oil prices
to more than $2 a barrel on Thursday.
Concerned the current problems could intensify and further hurt the US economy, Federal Reserve Chairman Ben Bernanke
made it clear again this week he stands ready to lower a key interest
rate once again. In eight days in January, the Fed slashed rates by
1.25 percentage points, but Bernanke remains hopeful the previous rate
reductions and the $168 billion economic aid plan of tax rebates for
individuals and businesses will energize the economy in the second half
of 2008.
For more information about the GDP, have your students check out the
`Jee D. Pea` issue of `In the News.` It explains how the growth of
stock prices over time is related to the long-term growth of the GDP.
And for those students who are having difficulty locating correct
ticker symbols, the `Ticker`s Tale` issue of `Stock Talk` will be
helpful. The issue examines the origin of the ticker symbol and their
value while helping students learn how to locate them. Both newsletters
are accessible in
the Teacher Support Center under `Publications.`
This week we will discuss GDP, and companies and ticker symbols.