INTRODUCTION TO FINANCIAL MARKETS
Niet die boek kenne
Er komen vragen op het examen over de film = unit 11
Geen vragen met meerdere juiste antwoorden
UNIT 1: THE FINANCIAL SYSTEM
SECTION 1: THE ACTORS
2 big groups: globalising all the companies, all the families…
If they want to do things, they need money, this is spread unevenly.
Haves possess capital and can lend it out (lenders).
Havenots have more needs than money and they will have to raise capital
(borrowers)
The whole purpose of the course is how to get the money from the haves to the
havenots, because the haves don’t need it.
1. Just give it = direct transaction = direct financing, because there is a
direct relationship/ connection between have and havenot ; fe parents give
money to children to buy a car.
2. Semi direct financing: selling bonds (piece of paper), there are
intermediaries like the bank. They will search for potential investors.
(Semi) Direct financing = financing through financial markets
Bank: assets and liabilities; the money you have, goes to the liabilities. its a
liability of the bank. =deposits (stortingen).
Current account, savings account, termed deposits: bank can have it for at least
3 months fe.
These are all short term, clients can ask for their deposits when they need it.
Banks finance our economy. We expect banks to grand loans or credits. These are
assets of the bank.
BANKS
ASSETS (activa): loans, credit. These are LT
LIABILITIES (passiva) : Deposits (ST)
Indirect financing = financing through institutions
° mutual fund: attracting money from the haves, they don’t extract deposits, its
less regulated
= shallow banks = non deposits taking institutions
= sort of portfolio you buy; of all kinds of stocks and bonds you might buy (=
diversification)
,Corporates = havenots; they borrow the money
The government = havenot; their debt is very big
the main actor: households
A single household owns a house of 100, but has a remaining mortgage
(hypotheek) debt of 80; its net wealth is 20
= what do you really have
Net wealth = assets – liabilities(fe mortgage loans) (activa – passive)
The household balance sheet gives an overview of the assets and the
liabilities of a single household
( bonds = obligaties)
Consumer loans = you buy a car, new tv and you want to spread it over a few
months.
Kind of assets
An asset is a possession that has value in an exchange transaction
tangible assets = real assets derive value from their physical character
and the utility they generate, from the fact that you can use it
intangible assets derive value from a legal claim to some future benefit
financial assets are intangible assets that represent a claim to future
cash
real versus financial assets
never take for granted that what you see in one country, is the same in another
country
,asset classes
traditional
- common stock
- bonds
- cash (and cash equivalents) fe savings account
alternative
- real estate; you can buy it yourself, or buy a certificate that presents a
whole portfolio of real estate. In that case your buying a financial asset
of which the cashflows comes from the rent.
- Commodities (grondstoffen, goederen); dangerous; think about
volatility of the energy prices
- private equity (privaat vermogen)
- hedge funds (risicodekkingsfondsen) for the wealthy investors
- venture capital (durf/Risico kapitaal) similar to private equity
- currencies (valuta’s)
nowadays people are investing in many more things than just the
traditional assets
liabilities
- mortgage loans
- consumer loans
- tax debt
growth drivers in Net wealth
drivers of the changes in net wealth
balance sheet has actual numbers/ values. The first source of new wealth
comes from a good investment; the value changes.
- value changes in assets and liabilities
- net-income from labour, capital or transfers (pensions, social security
based income)
- inheritances, gifts
with crashes everyone loses money.
, wealth creation
Poor people work really hard: pay for everything and they have nothing left on
the balance sheet
everything you earn gets spent.
Middle class: work, they lock themselves in for a lot of years because they have
to pay off their house
= poor families with a home
they work, they have a bit of leftover. With that they buy a house.
Rich: they don’t work much, maybe they do, but their income isn’t coming from
labour. They put their money in assets, real estate.
A big part of their income is rent, dividends…
big difference between rich and middle, rich can put part of their wealth
into generated assets
Wealth is not uniformly distributed
Wealth inequality
Low inequality in BE, we have a good social insurance system.
Emerging (opkomende) markets are more inequal than developed economies.
Emerging markets like Brazil, India, Peru, Turkey,…
Developed economies like Belgium, US, Austria, …
Final thoughts
Niet die boek kenne
Er komen vragen op het examen over de film = unit 11
Geen vragen met meerdere juiste antwoorden
UNIT 1: THE FINANCIAL SYSTEM
SECTION 1: THE ACTORS
2 big groups: globalising all the companies, all the families…
If they want to do things, they need money, this is spread unevenly.
Haves possess capital and can lend it out (lenders).
Havenots have more needs than money and they will have to raise capital
(borrowers)
The whole purpose of the course is how to get the money from the haves to the
havenots, because the haves don’t need it.
1. Just give it = direct transaction = direct financing, because there is a
direct relationship/ connection between have and havenot ; fe parents give
money to children to buy a car.
2. Semi direct financing: selling bonds (piece of paper), there are
intermediaries like the bank. They will search for potential investors.
(Semi) Direct financing = financing through financial markets
Bank: assets and liabilities; the money you have, goes to the liabilities. its a
liability of the bank. =deposits (stortingen).
Current account, savings account, termed deposits: bank can have it for at least
3 months fe.
These are all short term, clients can ask for their deposits when they need it.
Banks finance our economy. We expect banks to grand loans or credits. These are
assets of the bank.
BANKS
ASSETS (activa): loans, credit. These are LT
LIABILITIES (passiva) : Deposits (ST)
Indirect financing = financing through institutions
° mutual fund: attracting money from the haves, they don’t extract deposits, its
less regulated
= shallow banks = non deposits taking institutions
= sort of portfolio you buy; of all kinds of stocks and bonds you might buy (=
diversification)
,Corporates = havenots; they borrow the money
The government = havenot; their debt is very big
the main actor: households
A single household owns a house of 100, but has a remaining mortgage
(hypotheek) debt of 80; its net wealth is 20
= what do you really have
Net wealth = assets – liabilities(fe mortgage loans) (activa – passive)
The household balance sheet gives an overview of the assets and the
liabilities of a single household
( bonds = obligaties)
Consumer loans = you buy a car, new tv and you want to spread it over a few
months.
Kind of assets
An asset is a possession that has value in an exchange transaction
tangible assets = real assets derive value from their physical character
and the utility they generate, from the fact that you can use it
intangible assets derive value from a legal claim to some future benefit
financial assets are intangible assets that represent a claim to future
cash
real versus financial assets
never take for granted that what you see in one country, is the same in another
country
,asset classes
traditional
- common stock
- bonds
- cash (and cash equivalents) fe savings account
alternative
- real estate; you can buy it yourself, or buy a certificate that presents a
whole portfolio of real estate. In that case your buying a financial asset
of which the cashflows comes from the rent.
- Commodities (grondstoffen, goederen); dangerous; think about
volatility of the energy prices
- private equity (privaat vermogen)
- hedge funds (risicodekkingsfondsen) for the wealthy investors
- venture capital (durf/Risico kapitaal) similar to private equity
- currencies (valuta’s)
nowadays people are investing in many more things than just the
traditional assets
liabilities
- mortgage loans
- consumer loans
- tax debt
growth drivers in Net wealth
drivers of the changes in net wealth
balance sheet has actual numbers/ values. The first source of new wealth
comes from a good investment; the value changes.
- value changes in assets and liabilities
- net-income from labour, capital or transfers (pensions, social security
based income)
- inheritances, gifts
with crashes everyone loses money.
, wealth creation
Poor people work really hard: pay for everything and they have nothing left on
the balance sheet
everything you earn gets spent.
Middle class: work, they lock themselves in for a lot of years because they have
to pay off their house
= poor families with a home
they work, they have a bit of leftover. With that they buy a house.
Rich: they don’t work much, maybe they do, but their income isn’t coming from
labour. They put their money in assets, real estate.
A big part of their income is rent, dividends…
big difference between rich and middle, rich can put part of their wealth
into generated assets
Wealth is not uniformly distributed
Wealth inequality
Low inequality in BE, we have a good social insurance system.
Emerging (opkomende) markets are more inequal than developed economies.
Emerging markets like Brazil, India, Peru, Turkey,…
Developed economies like Belgium, US, Austria, …
Final thoughts
