Introduction

Welcome! This blog is all about Arnold O. Beckman High School's E-Stock Club, where teens discuss aspects of finance and investing to prepare for the real world.

According to the US 2010 Census, there are over 42 million people in the United States alone between the ages of 15-24. How many of those teens are actively planning for the real world?

That's where E-Stock comes in. Andrew Jabara

Founded in September of 2011, E-Stock was created to fill a void caused by the dearth of places to explore and develop interest in finance. Now, our members are not only active in learning about investing and real-world finance, but are also enjoying high school life to its fullest. E-Stock alumni come from all walks of life and have been as well as continue to be involved in Band, Orchestra, Soccer, Water Polo, Track and Field, Swimming, Tennis, AP and Honors Courses at Beckman. They contribute greatly to a diverse and involved campus. 

E-Stock has had and continues to have many great events, including guest speakers, virtual investing, and most recently use of Kiva.org to help out the global economy. Another big part of the club is getting the opportunity to express opinions about economic issues and help other people learn about finance. As a result, a newsletter was created: Beckman Finance. Now, this blog will take on that newsletter's name and mission by opening up these ideas to the entire world.

Take some time to look around this blog. Enjoy!

~Andrew JabaraAndrew JabaraAndrew Jabara
President of the E-$tock Club

New Kiva Loan!

At the last E-Stock meeting, another Kiva Loan was given out to Ozoda from Tajikstan! 

Ozoda is a mother of three who grows potatoes and milks cows for a living. This loan will cover her expenses for seeds, mineral fertilizers and a new cow that Ozoda needs to purchase. 

We wish Ozoda the best in all of her endeavors!

(Ozoda on her farm, located in northern Tajikstan)

The Fed is Tapering in 2014

In the middle of 2013, Ben Bernanke set off a media frenzy with talks of "tapering" the bond-buying program (Quantitative Easing).

What's Quantitative Easing? When the economy is faltering, the federal government needs a way to stimulate the economy. This is often done by purchasing bonds (like U.S. Treasuries) with money that can literally be printed for this purpose. Banks now have access to more money, and because many bonds are being bid up to higher prices more people will see gains in their investments. However, this process suffers from the law of diminishing returns; keep going on with QE, and you will see very little benefit per each extra billion pumped in.

Tapering is the act of stopping bond-buying programs. The first taper is currently $10 billion, bringing down the bond-buying to $75 billion. By gently slowing down QE, the Fed hopes to avoid any major panics. Indeed, Bernanke's decision to start tapering indicates that he perceives a healthy economy to be in place in the US.

Now that it's 2014, Bernanke's time as the Fed chairman is up, with Janet Yellen ascending to the position. She will be the one to deal with the tricky business of tapering.

One thing to expect in 2014 is rising interest rates. As tapering increases and the pressures put on interest rates fades, the artificially low rates that have become the norm in the past few years will also disappear.


(The flow of money from bond-buying programs will slow down in 2014)

Scottrade Seminar

Our Scottrade Seminar on October 29th, 2013 was a great experience! Mr. Kreyche from the Tustin Scottrade branch delivered a short discussion on the basics of mutual funds, enhancing our comprehension of investment basics overall. Thank you very much, Mr. Kreyche, for your continued generosity towards E-Stock!

~Andrew Jabara
President of the E-Stock Club

New Kiva Loan!

Hello Everyone,

We have just made a new Kiva loan to Florinda from Peru.

 

Florinda chose to start her career in making and selling garments from a realization in her previous job; she could make and sell her own designs. With the money she obtains from her Kiva loan, Florinda will be able to buy more fabrics and thread to augment her business.

The "No Deal": How Congressional Gridlock Affects YOU

Though the markets inexplicably rose on the first day of congressional gridlock in Washington, today a drop of 58.56 points on the Dow marks the beginnings of what could be a very long standoff. Instead of diving into who is to blame, let us focus instead on what the government shutdown will do to your financial health.
 
Obviously, major drops in US markets and other financial markets tied to the economic well-being of the US will shrink your investments. What shutdown also does is prevent you from applying for small business loans, applying for Medicare and Social Security benefits (although people already enrolled will continue to receive benefits), and prevent you from visiting national parks, landmarks and monuments. If you had planned a vacation to Yellowstone or DC, you may have to suspend your trip, which can cost hundreds to thousands of dollars in fees from airplane tickets, car rentals and hotels. Fortunately, there is one silver lining; the last time the government shut down (in the 1990s), the markets shot up about 7% once a deal was reached. After a few days, the market will be so jaded with Congress that it will continue as normal or start plummeting down. This can be a great opportunity to buy at lower prices, assuming that Congress manages to save itself in time.
 
The next big battle is on October 17th, when the US runs out of money again. If nothing is done, then the US will default on its loans for the first time in history. Should this happen, financial darkness will fall.
 
~Andrew Jabara
President of the E-Stock Club

The Flash Freeze

Today, another sign of just how vulnerable investment markets are appeared. The NASDAQ shut down for more than three hours, bringing many trades to a halt and hearkening back to the "flash crash" of May 2010, when the Dow fell nearly 1,000 points due to an incorrect shutdown of financial markets. Indeed, not all stocks were completely in lockdown. Some stocks, including Apple (AAPL) continued to trade, albeit in a limited fashion.

What went wrong? NASDAQ blames the outage on an inability for its electronic trading system ARCA to connect with the New York Stock Exchange. Basically, the Security Information Processor (SIP) of one place ostensibly failed to connect with the other, causing a standstill in trading information.

While the NASDAQ has failed in the past (it was brought down by squirrels in 1987 and 1994), standstills of any magnitude greatly worry retail investors, regular people who do not have access to high-speed trading algorithms or legions of expert traders. Failed stock exchanges are always worrisome, but it is important to remain calm and vigilant in the event of any mishap. When the next major freeze occurs, just remember that it isn't the first day the financial markets stood still.

Andrew Jabara
President of the E-$tock Club