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Principles of Finance Videos 166 videos

Principles of Finance: Unit 1, Company Formation, Structure, Inception
97 Views

How is a company... born? Can it be performed via C-section? Is there a midwife present? Do its parents get in a fight over what to name it? In thi...

Principles of Finance: Unit 1, Intro: Company Formation, Structure, and Inception: Unit Intro
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Company Formation, Structure, and Inception: Unit Intro. Sorry, Leo DiCaprio fans—we're not going to be breaking down the plot of Inception. We'r...

Principles of Finance: Unit 1, Alex, That’s Finance Potpourri for $500
67 Views

Okay, so you want to be a company financial manager. It's basically up to you to make money for the shareholders. It would also be swell if you mad...

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Principles of Finance: Unit 2, The Government’s Job / Non-Job 6 Views


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Description:

What is the government's job? What is their... non-job? And are they going to find a way to tax us for both? (Short answer: yes, probably).

Language:
English Language

Transcript

00:00

principles of finance a la shmoop the government's job and non job so what

00:07

is the government's job when it comes to helping us manage our finances or even

00:12

think about finance or set up the laws you know set the table for the way we

00:17

govern ourselves as it relates to finance well is it their job to guide us

00:23

into what stock we should buy yourself no definitely not [Uncle Sam putting up wooden sign]

00:27

is it their job to make a level playing field so that everyone gets treated

00:32

equally ish yeah more or less and that's at least the goal even though it doesn't

00:37

happen in real life well we have to start by looking back for our country's [black hole of money]

00:40

long and sordid history as it relates to financial dealings

00:44

well after myriad screwing Sauveur of innocent to mostly farmer types trying [unhappy farmers]

00:49

to invest like the well-educated and rare at the time anyway college

00:54

graduates of the early 20th century America the government stepped in [happy college graduates]

00:58

through various means trying to shelter the average citizen from doing stupid

01:03

things with their money and there are ethical questions here right is it the

01:06

government's job to prevent people from doing stupid things with their own money [man makes a suit out of money]

01:11

mmm well people smoke people drive 98 miles an hour in the highway people

01:16

don't wear a helmet when they're driving on the motorcycle they watch hours of

01:21

reality TV shows well the government allows smoking why isn't crazy investing

01:25

in that category as well hmm and for that matter why don't we ban the lottery

01:30

as well that's just about the dumbest quote investment decision unquote one [lottery tickets]

01:35

can make but in fact the government doesn't try to prevent those kinds of

01:39

stupid things rather it's the job of the regulator's of the government to require [bottles of alcoholic drinks]

01:43

disclosure of risks hopefully so that they're understandable for more or less

01:48

everyone when investment opportunities come along it is not the government's

01:52

job to prevent the doing of stupid things yeah smokers know that cigarettes

01:56

are bad for them the badness is disclosed the same goes for investing

02:01

risks ie on page 14 of whatever investing prospectus well it'll probably

02:06

say something like the company believes that the chemicals will make the cows [pages flipping in book]

02:10

fart Chanel number five instead of producing ozone destroying methane [highlighted passages in book]

02:15

however it may also make them nuclear reactive in which case well good luck

02:21

for all of us tiny little mushroom clouds horns even [explosion]

02:24

if a bunch of farms get nuked the badness then was disclosed so you know

02:30

lawyers go away well the key distinction between public

02:33

and private investing is that public investing carries much more of the

02:38

weight of government regulators behind it the hurdles companies must jump

02:42

through in order to be listed on the New York Stock Exchange our high hurdles [woman jumps through hurdles]

02:47

long periods of audited financials deep disclosures of the business practices of [writing on white board]

02:52

the company the management what they did and whether that arrest in Rio really

02:57

was about heroin and meth dealing and then what about the board of directors

03:01

what's their history do they know finance or do they just know baseball

03:05

and football like Bo hundreds of audit requirements the list goes on and on and

03:09

on well this set of strictures applies to

03:11

publicly traded stocks and bonds and here are the regulations for private

03:16

investments ie when Arsenio Q public decides to invest in hedge funds R Us

03:22

yeah pretty much nothing why mmm alright we're thinking well what about investing

03:26

in another kind of private fund like you know a hedge fund

03:29

it's like private equity hedge fund venture capital what about them well now

03:33

most hedge funds required that the investor declare that they have a net [writing on white board]

03:36

worth of over n millions of dollars or income levels above 250 grand 500 grand

03:42

something like that or that they are a self-proclaimed financial expert in one

03:47

form or another and they can demonstrate it and it doesn't mean they just took

03:50

this crappy yet remote finance course but that's it relatively no regulations [tumble weeds roll through town]

03:55

applied a private investing other than that investors must live by a more or

03:59

less whatever is written in a contract that they've signed that indenture thing

04:03

yeah that matters so then a bunch of journalists who clearly never took this

04:07

crappy all right it's not so crappy finance course right endlessly about how

04:11

unfair it is to the common man that they didn't get to invest half their

04:16

hard-earned savings in the original round of Google that these private

04:20

venture capital funds are only for the rich and generally not very famous well

04:25

the reality is 99% of venture capital funds are awful

04:30

they're awful investments like you put in a million dollars and all you get

04:33

back is a mug that says thank you for playing come again about a third of [a mug next to a pile of money]

04:37

those funds don't even return half of the money put into them and another [pie charts]

04:41

third are lucky to return all the original principal capital invested

04:45

still another 30% do worse than a typical growth index mutual fund and in

04:50

which pretty much anyone with $250 or more can invest and buy so should we

04:56

keep people from buying venture capital funds when we know they'll lose most of

05:00

their money it's basically one flavor or another of the lottery yeah should we [lottery tickets]

05:04

protect that kind of common man well in general the attitude of the government

05:07

has been that if private wealthy people want to take a lot of risk trying to

05:11

find a lottery ticket well then they shouldn't have to be protected in the

05:15

same way the government protects the average honest farmer saving six

05:19

thousand dollars a year to hopefully put his kid through college so they don't

05:23

have to be farmers well ultimately this is a question without an answer some

05:26

people will forever argue that the government should get more involved in

05:30

the world of finance regulated heavily while others will argue that the feds

05:33

should you know keep their hands out and let the money do the talking either way

05:37

it's a balancing act on one hand trying to protect the little guy and on the

05:40

other hand trying not to overburden businesses and corporations with

05:44

government intervention so yeah like walking a tightrope across

05:47

shark-infested waters it's always Shark Week around here it's month [Uncle Sam walking a tight rope above sharks]

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