National Council of Economic Education Carolyn Shirk Community Resource Manager 123 North Market St Selinsgrove, PA 17870 Cell: 570-975-5149 717-703-4059 570-374-9467

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Welcome & Introductions Who we are…. ECONOMICSPennsylvania at www.economicspa.org NCEE at www.ncee.net SMG Advisors

Omega Bank Center for Economic Education

Stock Market Game Program

Teacher Survey Findings 90% said that students were encouraged to learn more about the curriculum being taught with the SMG Program. 94% agree that the SMG Program helps them teach basic academic skills such as math, language arts, and social studies, in exciting ways.

Teacher Survey Findings 96% agree that the SMG Program increases students’ ability to apply basic skills to life decisions. 98% found that their students’ understanding of the importance of saving and investing improved using the SMG Program.

What Teachers like about SMG generates enthusiasm in hard-to-motivate students helps meet educational standards across many required disciplines combines the spirit of competition with learning promotes cooperation and group autonomy among students creates interest in current events

What Teachers like about SMG teaches economic concepts sharpens skills in mathematics, especially in fractions and basic computations incorporates easily into most classes Is FUN!

What is the Stock Market Game Program (SMGP) ?

History of the Game Started in the late 1970’s by a University of Buffalo professor Over 500,000 students compete nationally each year and over 40,000 students in Pennsylvania compete each year Nationally sponsored by the Foundation for Investor Education

EconomicsPennsylvania is the licensed distributor of the Stock Market Game Program in PA Administrative offices and support of SMGP of PA provided by Temple University Fox School of Business and Management

Stock Market Game Interdisciplinary Applications

SMG Interdisciplinary Benefits Language Arts: Research, Vocabulary, Presentations, Reading Comprehension Social Studies: Current Events, Government Policy, Economic Concepts, Cultural Issues, History of our Economy

SMG Interdisciplinary Benefits Business Education: Consumer Spending, Decision Making, Record Keeping, Financial Planning Mathematics: Fractions, Decimals, Percentages, Ratios, Basic Computation Technology: Spreadsheets, On-line Research, Presentations, Word Processing

Stock Market Game Basics

SMG Basics Real-time stock market simulation Played on the internet from any computer Invest in most stocks and mutual funds traded in the three major US exchanges

SMG Basics The game runs for ten weeks in the Fall and ten weeks in the Spring Each team begins with a hypothetical $100,000 Teams may buy, sell, short sell, or short cover their stocks

SMG Basics Teams should have one to five players Only common stocks listed on the American, New York, and NASDAQ Stock Exchanges may be traded

Mutual funds may be traded Closed-ended funds may be traded just like the stocks traded on the NYSE, NASDAQ and American Stock Exchanges. Open-ended mutual funds can also be traded but cannot be short sold or short covered.

SMG Basics A 2% brokers fee is charged for each transaction Stocks valued at less than $5.00 per share may not be bought Teams may borrow up to $100,000 to purchase stocks on margin -- interest is charged

SMG Basics The team with the highest portfolio equity at the end of the game wins Portfolios are not liquidated at the end of the game Portfolio equity in the tenth week is used for final rankings Game week runs Monday through Friday.

How Does the Competition Work?

Teams compete within a geographic region and on six levels

Grades 4-6 Grades 7-8 Grades 9-12 Post-Secondary Youth Groups Adult SMG Levels Grades 4-6 Grades 7-8 Grades 9-12 Post-Secondary Youth Groups Adult

Rules of the Stock Market Game

Advisors need a working Email address and Internet access to play SMG Rules Advisors need a working Email address and Internet access to play Transactions are made at the SMG WorldWide site at: www.smgww.org or http://stockmarketgame.org/ login.html SMG of PA operates on ‘real time’ trading Trades are processed within 15 – 20 minutes

5% interest is earned on cash balance SMG Rules Stock and cash dividends are automatically computed into team portfolios 5% interest is earned on cash balance Portfolios are updated and available on a daily basis Rankings are updated every weekend Stock ticker symbols are used and can be looked up on the game pages

Trades entered after 4:00 p. m. will be processed at 9:35 a. m Trades entered after 4:00 p.m. will be processed at 9:35 a.m. the following day. ROGUE STOCK RULE – If a stock has not been traded for seven days it will not be accepted and will not be permitted to be traded even though it is on the three major stock exchanges.

General In formation

Buying: Must be for a minimum of 100 shares General Information Buying: Must be for a minimum of 100 shares Must have a closing price of at least $5.00 per share May set a maximum purchase price limit

Selling: Must already own the stock General Information Selling: Must already own the stock Must be for a minimum of 100 shares (unless selling the only remaining shares) ex: If you bought 120 shares, then sold 100, you may then sell the remaining 20. May set a minimum selling price limit

General Information Please Note: For real time trading price limits are generally not needed except for trades entered after the market close.

General Information Short Selling: Short selling starts with borrowing a stock from your broker You sell the borrowed stock hoping to buy it back at a lower price and return (short cover) it to your broker for a profit All rules for buying still apply

Short Covering: Must have already short sold the stock General Information Short Covering: Must have already short sold the stock May set a maximum price limit All other rules for selling apply

Example: Short Selling and Covering General Information Example: Short Selling and Covering I feel that IBM stock is going to go down and want to short sell the stock. I am borrowing the stock from the broker (2% brokerage fee) and selling it. Now I’ve got cash.

Example: Short Selling and Covering General Information Example: Short Selling and Covering When stock price is at its lowest, I short cover by buying the stock back in the stock exchange at the low price and returning it to the broker (2% brokerage fee). I keep what I didn’t spend. I get the difference between the high price and the low price minus the brokerage fees. Note: it’s important to remember that you borrow the stock from a broker and return the stock. You do not give the broker any money.

A Long Position is a stock you own. General Information Long Positions: A Long Position is a stock you own. Ex: If a team owns 100 shares of McDonalds, their long position is 100 shares. = Value of Long Position # of shares X current price per share

A Short Position is a stock you borrowed from the broker and sold General Information Short Positions: A Short Position is a stock you borrowed from the broker and sold # of shares X current price per share = Value of Short Position

= Equity Equity: + Cash Balance Total Value of Long Position General Information Equity: Total Value of Long Position + Cash Balance = Equity

Initial Margin Requirement = 50% General Information Buying on Margin: You may borrow funds using the stock in your portfolio as collateral for the loan Interest charged at 7% Initial Margin Requirement = 50%

Borrowing on Margin 30% of value of long and short position is required as collateral (margin requirement) Purpose to limit the amount borrowed to purchase stocks (risky) and to protect the broker

SMG Assessment Ideas: ARTICLES from web, newspapers or magazines on corporations NOTES that state why GLOSSARY of terms with definitions LETTER to corporations requesting information

SMG Assessment Ideas: HEADLINES with a brief paragraph explaining the impact the story will have on the market JOURNAL of TV coverage of market activities BIBLIOGRAPHY of readings GRAPH showing changes in the value of a stock

SMG Assessment Ideas: BASIC DATA about a corporation 52-week high and low P-E ratio Location Amount of debt Average number of shares trading daily Company plans for the future S&P ranking, etc WORKSHEETS that track the initial purchase, price, broker’s fee, selling price, and profit or loss

Suggested Team Roles Entire Team Research all holdings Identify possible stocks Collect company information Give rationale for making a trade Captain Conduct team meetings Determine consensus Enter transactions on game site

Team Roles Economic Research Coordinator Researches fundamental economic data: current events, overall economy... News about industries Provide reports to team Record Keeper, Transaction Reporter, Charter, and more....

$ SMG Costs

Team Fees: Year Long Game: SMG Costs Team Fees: 10 Week Games: Grades 4-12 $15 College $15 Youth Groups $18 Adult $25 Team Fees: Year Long Game: All groups $25 New Advisor Fee: $25 First time registration only

New advisors receive: Learning From the Market Your Guide to Understanding Investing Market Mechanics CD Rom Classroom materials A free adult team upon request

Investment Basics

Investment Basics Stock Market IQ Quiz

Stocks are items found in the storeroom of a grocery store. Investment Basics True or False Stocks are items found in the storeroom of a grocery store. Only rich people invest in the stock market. Most stocks on the stock market are sold by the United States Government. If the stock market goes up 30 percent one year, it will fall by 30 percent in the next year.

Any stock that goes up in price must eventually come back down. Investment Basics Any stock that goes up in price must eventually come back down. Bears, Bulls, and Pigs are found in the stock market. Stock prices are set by the Securities and Exchange Commission, a regulatory agency of the U.S. government. Stock markets are open on business days around the clock, around the world.

Sometimes companies buy their own stocks on the stock market. Investment Basics Sometimes companies buy their own stocks on the stock market. It is hard to buy a good stock today because all the good ones have already been purchased. Buying stocks is a sure way to make money. Corporations sell new issues of stock on the New York Stock Exchange.

People can buy stocks on the internet. Investment Basics “Insider” stock trading means that trading stocks takes place inside a building. People can buy stocks on the internet. When the stock market goes up, it causes the economy to grow. From Learning from the Market, © National Council on Economic Education, New York, NY

Different Types of Investments: Investment Basics Different Types of Investments: Insured Savings Accounts Savings Bonds Certificates of Deposit Treasury Bonds Corporate Bonds Mutual Funds Stocks Collectibles Commodities

The RISKIER the Investment - The HIGHER the Return Investment Basics The RISK to RETURN Relationship: The RISKIER the Investment - The HIGHER the Return

Investment Basics The Difference Between Stocks, Bonds, and Mutual Funds Stocks: You own a piece of the company You make money if the company does well Bonds: You loan money to a corporation or government You earn the interest Mutual Funds: You own one portion of a collection of stocks, bonds, or other securities

Investment Basics The Three Main Markets: NYSE: New York Stock Exchange Oldest, largest, best-known stocks NASDAQ: Large, mid-sized, and small growth companies AMEX: American Stock Exchange Mid-sized growth companies

The Difference Between Large and Small Companies: Investment Basics The Difference Between Large and Small Companies: Large: Often have high prices Low risk of failure Usually pay regular dividends Small: Potential for growth is greater than for larger companies Generally prices are lower

Pay dividends based on performance of the company Investment Basics Common Stocks: Pay dividends based on performance of the company Have higher risk but may have higher reward Preferred Stocks: Dividend amount is preset Dividends are paid on preferred stocks before common stocks Have lower risk but may limit reward

More shares are created at a lower price per share Investment Basics Stock Splits: More shares are created at a lower price per share Stockholders profit if stocks go up Indicated with an (s) in the paper Ex: Dell $109  $54

Blue Chips the largest and most profitable stocks Investment Basics Other Terminology: Blue Chips the largest and most profitable stocks Bull Market a market that is rising Bear Market a market that is falling

Why long term investing is the best route? Investment Basics Why long term investing is the best route?

DJIA over last 33+ years:

What stocks should I buy? Investment Basics What stocks should I buy? PE Ratio Price-to-earnings ratio. Earnings = earnings per share or firm profit divided by number of shares. More earnings per share given stock price results in a lower PE ratio and a better buy. Find PE ratios in the newspaper.

Where to get more information American Stock Exchange- www.amex.com NASDAQ- www.nasdaq.com NYSE- www.nyse.com CNNfn- www.cnnfn.com Google -http://finance.google.com/finance Database of Corporate Information- www.sec.gov/edgarhp.htm Yahoo! Finance- http://finance.yahoo.com

Economics and the Stock Market Micro vs. Macro economics Going from a good idea to a corporation

Micro vs. Macro Microeconomics Microeconomics studies the behavior of the consumer, household, or firm. Scarcity and choice Utility and profit maximization How do we allocate our budget, time? How do firms allocate resources to produce goods and services? Efficiency

Micro and the Stock Market Micro vs. Macro Micro and the Stock Market Look at one company: How does this company make its product? Who buys this product? Does the company have good managers? Look at one industry: How much competition in the industry? Is the industry young or old? What stock brokers and mutual fund managers get paid to do!

Micro vs. Macro Macroeconomics Macroeconomics studies the economy as a whole or as aggregates and attempts to predict or forecast changes in national output, unemployment, and inflation.

Macro & the Stock Market Micro vs. Macro Macro & the Stock Market Look at the whole economy: Inflation: Producer and Consumer Price Indices (PPI & CPI) Unemployment: Unemployment rate Interest rates: actions of the Fed Productivity Use information to estimate good times to buy and times to sell. Note: an “active” investor thinks about how these indicators will affect the economy in 3 months!

When is the news good? Example: decrease in the unemployment rate: Good: sign of a growing economy  increased consumer spending  increased profits. Bad: indication of future labor shortages  increasing wages  inflation  fed increases interest rates  decrease profits, slow growth.

U.S. Department of Labor Bureau of Labor Statistics “Economy at a Glance” http://www.bls.gov

Going Public: From a Good Idea to a Corporation Product idea: on-line financial services including banking, investments, retirement planning, estate planning, legal services, etc. Need funds to start business - find investors “venture capitalists.” Each investor owns a stake or “share” of the corporation and has limited liability.

Going Public: From a Good Idea to a Corporation Suppose the company is doing well. You need more money - go public, “initial public offering” Going public: investment bank creates a prospectus and buys all shares of stock and resells them at a set price to the public A “tombstone” is the public notice of an IPO

Stock Market Game Team Registration Online Pre-registration

www.smgww.org Login into SMG WORLDWIDE

Click on “PREREGISTER NOW” Payment Form Click on “PREREGISTER NOW”

Choose this option when you are ready to pre-register your teams. SMG WORLDWIDE Pre-Registration SMG WORLDWIDE, The Stock Market Game (SMG) is a national program. Find your local SMG coordinator by clicking on “Pre-Registration Information” at the SMG homepage and then selecting your appropriate Country and Location. Technical requirements for SMG WORLDWIDE include an active Internet connection and email account, the latest version of Microsoft Internet Explorer or Netscape Communicator version 4.7, and the latest version of Adobe Acrobat Reader. DO NOT use Netscape Communicator 6.0 with the SMG WORLDWIDE site. Rules and registration requirements vary from state to state. Contact your local SMG coordinator for clarification about the requirements. Begin the registration process by selecting your Registration Type at the bottom of your coordinator’s Pre-Registration Information page. Click the Pre-Registration Information button to access the information page for your local SMG Coordinator. Make sure you have selected the appropriate country and location for your state. Your local SMG Coordinator’s page includes information about the organization administering the SMG program, session dates, teacher training dates, and other relevant content about your state SMG program.

For Free Promo, complete all fields in bold. The Registration Form Be sure you check the box after the disclaimer. Your registration will not be processed unless you do so. Check that you have selected the desired trading session. Your local coordinator cannot make any changes to the session date once you have submitted your registration. In most cases, to change your session date, will require you to re-register with the desired session date selected. Please inform your local coordinator of any changes you desire. You must enter a valid email address for your registration to be processed. IDs and passwords and other relevant information is sent to you via email. In most cases, registrations with bad email addresses will be deleted. There is a differentiation between Classes and Teams. A Team is usually 3-5 participants or students. Teams usually make up the Class (eg. A class of 25 can be divided into 5 teams). Login IDs and passwords are usually emailed two weeks to a month prior to the start of the trading session. If you have not received your ID and password, please contact your local coordinator immediately. FREE

Pre-registration Reminders You can print out the payment form (www.economicspa.org) to use for obtaining a PO # from your school. If you submit a PO# with your online pre-registration, team #s and passwords will be generated right away, otherwise SMG will wait for the check.

Registering Teams SMG WorldWide Register online at www.smgww.org Complete and mail the payment form (online PDF) to SMG of PA Headquarters

Registering Teams SMG WorldWide Register online at www.smgww.org Complete and mail the payment form (online PDF) to SMG of PA Headquarters

PE Ratio So, is Mattel or Apple the better buy? Price-to-earnings ratio. Earnings = earnings per share or firm profit divided by number of shares. More earnings per share given stock price results in a lower PE ratio and a better buy. So, is Mattel or Apple the better buy?

Apple Inc. Beta = 1 means that the stock and market change by the same percentage. Larger beta means a larger change than the market on any given day. Beta = % change in stock return / % change in market return.

Playing the Stock Market Game Online Demo

Playing SMG Inside SMG WORLDWIDE (Teams) Sample portfolio pages The blue Trading tab contains all the functions necessary to compile research and make trades.

Playing SMG Account Summary Sample portfolio pages New portfolios start with $100,000.

Sample portfolio pages Includes 2% broker’s fee charged for every transaction.

Playing SMG Enter a Trade & Pending Transactions Click one of these four options. It is a good idea to use the Validate Ticker option to ensure you are buying the correct stock.

Sample portfolio pages

Sample portfolio pages

Sortable database of all transactions made This is the actual price of the trade.