TEST 3 Flashcards
(48 cards)
1
Q
1920 Florida Land Boom
- 1920’s
- start of bubble?
A
- prosperity, increasing stock prices, attainable credit
- transport easy, pop growth, nice weather, horse/dog racing, stopped inheritance and income tax, properties auctioned more than once a day
2
Q
1920 Florida Land Boom
- forming bubble
- surfacing
- rupture
A
- claims of doubling values developers mapped out (aladdin city, Miami beach, corral gables)
- 1925 land values reported as speculation, 3 railroads delcared embargo on everything but food and people for 6 months
- prinz valdemar sunk in miami harbour blocking materials shipping, cat. 4 hurricane killed 400, turned back to marsh
3
Q
Japan’s economic boom and bust
- beginning
- creation
- banks role
A
- king of electronics, good economic env., standard of living rose, habit of investing, optimism
- America-sign plaza accord, weakens dollar, yen appreciates, us bond deficit, investors panic and turn to japan
- low int rates, freely lending to firms and indivs, led to spec in stock and real estate, paper value of land assets increased to super high
4
Q
Japan’s econ boom and bust
- POP
- aftermath
A
- govt concerned about asset bubble, banks tighten monetary policy, nikkei stock plunged 50%, investors lost confidence
- lost decade- no econ growth, zombie companies, bailouts, real estate lost 80% of value, nikkei below 15000, unempl 2.1->4.7%, gov spending more than 100% gdp and monetary policy int rates near zero still didn’t help, culturally frugal
5
Q
“It a financial instit is too big to fail it is too big to exist”
A
Japan’s econ boom and bust
bernie sanders
6
Q
Canal Mania
first canal
next big canal
financial impact of canals
A
- bridgewater, coal from worsley to manchester coal rice fell 50%, inspired 4500more miles
- Grand junction canal, shares rose 373%, then approved, 3 years later fell 82%
- first industrial power, moved from country to city, London became financial centre of world
7
Q
Bear Stearns
A
NYC - capital markets, investment banking, wealth mgmt, global clearing services, 15,500 employees worldwide in 07, most “admired”
8
Q
BRE-X
beginning
A
- Calgary based resource mining co., shares worth 30 cent to 6 billion company in 3 years, vice chairman geologist suggests mining Busang indo, promising initial results, estimated 200 mil ounces worth 240 bil today, peak estimates on conference call with jp morgan suggested 13 mil lbs gold, mutual funds invest, lehman bros names “gold discovery of the century”
9
Q
BRE-X
collapse
A
-15% given to freeport, 40 to indo, 45 stayed, freeprort started drilling and found nothing
10
Q
CONFEDERRATION LIFE
A
John MacDonald, 4th largest in canada at time of demise
Pat Burns - pres, ceo, board chairman, average 23% growth per year by investing in risky real estate, 71% more than double other co’s
Halifax trust - renamed confed, quickly deep in debt, recieved 70 mil from confed life
11
Q
Confed life
demise
A
- confed life profit declined 85% after mortgage and bond default
- burns removed, co liquidated, assuris garanteed policyholders
- whistleblower michael mackenzie
12
Q
Crash of 1929
- demise
- effects
A
- with excess capital continued producing at a high rate, industries taking losses, prices still increasing
- great depression, banking failure
13
Q
“There will be no interruption of our perm prosperity”
A
Myron e forbes, 1929 crash
14
Q
ENRON
background and fraud
A
- Houston hq, largest marketer of natural gas and elec in us
- Merged Houston Natural Gas and Internorth
Fraud - used agent and merchant models, mark to market accounting - lower returns on already acounted for income meant more risk taking
- created JEDI - special purpose entity to hide debts and failures decrease earnings 405 mil, increase debt 628 mil
15
Q
ENRON
demise
A
- bankruptcy, jail, civil court cases, demise of arthur anderson, held 19%, PWC 33%
- thousands jobs lost, pensions, 40 bil lawsuit
16
Q
Fiber Optics Boom
A
- Worldcomm said internet traffic doubling every 3-4 months ie growth between 700 and 1500%
- nasdaq index of telecomm stock 198 to 1230 to 136
- Contrarians coffmand and odlyzko only doubling yearly, 70 to 150%
- similar to railroad boom and bust
17
Q
“The miracle of the american model.. for unleashing compet in comm…”
“An unbelievable disasster”
A
FCC chairman William kennard
Michael powell
18
Q
NORTEL
A
- missisauga ON, one of ca’s largest co’s with 25000 emps and 90000 worldwide
- at peak worth 400 bil, 1/3 of TSE
- spec about making a killiing on fibre optic cable, stock up to 120$
19
Q
NORTEL demise
A
- billions in quarterly loss - sell off - stock price down - layoffs
- fraudulent accounting, frank dunn acccused and aquitted
- laid off 60000 worldwide, bankruptcy and was delisted from tsx
20
Q
“Cash conservation is out number 1 priority..Never seen a dowturn this rapid”
A
John Roth Nortel, cashed out for 135 mil
21
Q
Worldcomm players marketshare cfo role effects
A
-Bernard Ebbers CEO,David myers - accounting fraud, Scott Sullivan CFO - driver of misrepresentation (itll balance itself next year)
-29%
scott sullivan - told people to mark operating costs as long term inv 3.85 bil to mak 1.38 net inc
- cynthia cooper whistleblower
- bankruptcy, ebbers jailed, 60000lost jobs
22
Q
“Our goal is not to capture market share or be gloabl, our goal is to be the number one on wall street”
A
CEO WorldComm Ebbers
23
Q
Amaranth
A
Connecticut - multi strat hedge fund
owned 9 bil. lost 6 bil in 6 years
Brian Hunter
Hurricane Katrina
24
Q
“The fundamental law of investing is the uncertainty of the future”
A
Peter Bernstein amaranth
25
ICELAND
- harpa concert hall
- exports, low taxes attract foreign investment, currency up 900%
- banking system held 10x more than GDP
- bank spending spree, harpa, real estate
- stock mkt fell 95%, 60 % bank assets written off, too big to save
26
ICELAND
2.1 from IMF 2.5 from neighbors billions
| jailed bankers, new boards and models, more sustainable
27
kuwaiti
- Souk Al-manakh
- margin financing through post dated cheques
- 29000 cheques for 93 bil
- became third largest mkt behind us and japan
- collapse, started with speculator presenting jassim al-muwata's cheque
28
29000 cheques for 93 bil
Felix pomeranz, kuwaiti
29
"Share prices commonly doubled by the hour, nothing was too high to pay"
edward chancellor, kuwaiti
30
LLOYDS ASBESTOS
- realized losses were coming, suckered in more names by making it easier to be one, Citibank warns insufficient money to ay claims
- 500 mil, 2 bil, 2.3 bil
- plan to make 34000 names pay 1.3 bil, 82% accepted, rest refused
- names fell to 9972
31
MADOFF
-losses totalled 50 bil
32
Societe Generale and the rogue trader
- frances third largest bank
- Jerome kerviel crashed it
- what he did: arbitrage, faked hedging, trading beyond allowed, highly leveraged, closed positions regularly
- scapegoat? maybe
- losses 4.9 bil, fined 4 mil
33
"Rogue trading is probably a daily occurence..."
Nick leeson about societe generale
34
Black wednesday
pound sterling crisis
- european ERM - exchange rate mechanism to reduce variability and create stability in europe
- uk joined, had to stay in 6% trading band
- reunification of german led to high int rates and uk had to do the same
35
Black wednesday
- uk chancellor norman lamont put rates up to 15%, crashed fell 15% against german mark
- 27 bil in foreign currency used to prop up the pound, george soros made a bil
36
Equity funding corp
- accounting fraud, ficticious policies, big iron, 100 employees
- gordon mccormick came up with mutual fund and life ins packaged together
- stanly goldblum (prison 8 years) took over and told people to do sketchy stuff to look better to investors
- sold fakes to reinsurance co's, 1.8 bil from fake policies
37
Winnipeg boom
| -start
- cpr act signed, speculators from the east send people with money to buy
- lots were outside city sold by hbc with only 20% down
- story- 200 for lot worth 1000, drinks other 200, sells for 28000
- spring, more immigration, flood, arson, rain
38
South Sea Co
Robert harley - to improve britains financial situation
debt equity swap - buyers get dividend and profits from trading
-peace of utrecht made trading unprofitble
- queen anne died, new monarchy supported and false infalttion of price with higher divids
-trust fell, bubble burst, 1000 down to 150
39
Barings Bank collapse
- john and francis baring, worlds second oldest merch bank, financed napolean, involved in louisiana purchase
- nick leeson making unapproved gambles, hiding losses in 88888 account with double-up strategy, lost 1.3 bill usd
- tokyo stocks plumet, singapore international money fund scrambled
- integral in implimentation of risk reporting systems
40
IRISH
- housing crash, celtic tiger-rapid econ growth
- eu structural grants, 10% corp tax rate,
- low rate and accessible mortgages
- banks and gov highly relient on housing market, no diversification so when it slowed down banks had huge losses
41
Tulipmania
1- risk taking from plgue and war
| 2- germany lost and princes sold off tulips
42
Weimar republic hyperinflation
-Germany owed the french, made first repartition ayment but couldn't make the second because of inflation, france and belgium occupied the ruhr to tke reparition by force, germans went on strike, rufusing to make goods for the french to take which made it worse -> hyperinflation, workers had to be paid twice a day and given half hour to spend it all, agreed to be paid over 59 years
43
Railway boom
- bank cut int rate,shares bought with only 10% down, affluent middle class from industrial rev.
- great western railway and nascent midland bought at low price and investors lost everything
44
oil price boom and bust
- oil embargo (arab nations on us for supplying israel with weapons) and energy crisis ran up prices, investors got nervous, big losses on nyse, opec restores production, us tries to become less dependent on opec
- energy crisis, oil supply deceased by 4% from iranian rev. , widespread panic, price up to 39.5
45
Price boom gold and silver
hunt brothers cornered silver market
| -6$ to 48.7
46
Price boom agirculture
sugar 5 times
why - increase demand, new uses ie biofuels, pop growth, supply, land retirement, slow prod growth
farmers planted tons when prices high, then lost money and had to borrow, price farmland dropped and banks woulnt take as collateral anymore, farmers on strike
47
Nifty fifty boom and bust
group of one decision stocks, just buy and hold, good stocks but quickly became overvalued, 80 times price to earnings ratio
- ie avon xerox walmart ibm gilette mcdonalds
- oil embargo, everyone sold and they all kinda crahsed
- dow fell 45%
48
Basis Risk
The risk associated with imperect hedging, diff in price between hedged asset and hedger asset
