Interviews worth listening to.
Events that impacted our lives
The Ascent of Money Series
Steve Jobs: The Lost Interview
For everyone interested in the drive that builds not just a new business but a whole new industry, this is a must watch.
In 1976 two men, Steve Jobs and Steve Wozniak, founded a company that would go on to create a whole new industry: the personal computer (PC). The PC in turn would make possible such things as the internet, which makes this web site possible. Few people can claim to have created an entire industry, but these two Steves can.
When watching the videos below, keep in mind that liquidity is the ease of converting one asset (i.e. stock) into another (i.e. cash) and vice versa. Lack of liquidity generally means there aren't enough buyers.
The Great Depression
1929 Stock Market Crash and the Great Depression
The Great Depression started in the United States after a major fall in stock prices that began around September 4, 1929, and became worldwide news with the stock market crash of October 29, 1929, (known as Black Tuesday). Between 1929 and 1932, worldwide gross domestic product (GDP) fell by an estimated 15%. By comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession.
One of the most important issues in Economics and Finance is that of risk and risk management. Here the narrator takes a look at the issue of insurance and how man has tried to manage risk, and often failed.
Black Monday on October 19, 1987
The Dow Jones Industirals Average dropped 508 points in one day. The S&P 500 and Wilshire 5000 indices each declined more than 18 percent, and the S&P 500 futures contract declined 29 percent. Total trading volume was so large that the computer and communications systems in place at the time were overwhelmed, leaving orders unfilled for an hour or more.
Long-Term Capital Management L.P.
LTCM was founded in 1994 by John Meriwether, the former vice-chairman and head of bond trading at Salomon Brothers. Members of LTCM's board of directors included Myron S. Scholes and Robert C. Merton, who shared the 1997 Nobel Memorial Prize in Economic Sciences for a "new method to determine the value of derivatives".
Initially successful with annualized return of over 21% (after fees) in its first year, 43% in the second year and 41% in the third year, in 1998 it lost $4.6 billion in less than four months due to a combination of high leverage and exposure to the 1997 Asian financial crisis and 1998 Russian financial crisis. The master hedge fund, Long-Term Capital Portfolio L.P., collapsed in the late 1990s, leading to an agreement on September 23, 1998, among 14 financial institutions—which included Bankers Trust, Barclays, Chase Manhattan Bank, Credit Agricole, Credit Suisse First Boston, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley, Paribas, Salomon Smith Barney, Societe Generale, and UBS—for a $3.6 billion recapitalization under the supervision of the Federal Reserve. The fund liquidated and dissolved in early 2000
The Great Recession
The Great Recession is the name for the financial crisis that started in the last quarter of 2007 and continued until 2009. This HBO movie on the crisis gives us an understanding, however minimal, of the chain of events that led to the crisis and the resulting recession. It also highlights the difficulty in dealing with consequences of a tightly integrated financail market where each event has several downstream consequences.
During the Great Recession, or leading up to it, someone realized what was going on in the economy and bet against it (the economy). Doing so is called a short: where you borrow an asset, sell it expecting its price to fall and being able to buy it back at the lower price to return to its original owner. The above short video gives a nice explanation of how that worked in 2007-2009. The book is in the TCI library.