1. National Council of Economic Education Carolyn Shirk Vice President 849 Tame Deer Drive Winfield, PA 17889 Cell: 570-975-5149

2. Sponsored By:

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

4. First National Bank Center for Economic Education

6. Stock Market Game Program Stock Market Game Program

7. 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.

8. 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.

9. 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

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

11. What is the Stock Market Game Program (SMGP) ?

12.  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 History of the Game

13.  EconomicsPennsylvania is the licensed distributor of the Stock Market Game Program in PA  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

14. Stock Market Game Interdisciplinary Applications

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

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

17. Stock Market Game Basics

18.  Real-time stock market simulation  Played on the internet from any computer  The game runs for ten weeks in the fall, spring, and late spring. A new whole year game is also available. SMG Basics

19.  Transactions are made at the SMG WorldWide site at: www.smgww.orgwww.smgww.org  Trades are processed in 5 – 20 minutes SMG Rules

20.  Each team begins with a hypothetical $100,000  Teams should have one to five players SMG Basics

21.  Teams may buy, sell, short sell, or short cover their stocks  Invest in common stocks, mutual funds and ETFs traded on the three major exchanges: American, New York, and NASDAQ Stock Exchanges SMG Basics

22.  A 2% brokers fee is charged for each buy or sell – limits day trading issue  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

23.  Stock and cash dividends and splits are automatically computed into team portfolios  Portfolios are updated and available on a daily basis  Rankings are updated every weekend  Teams will not appear in the rankings until a trade is made SMG Rules

24.  2% annual rate of interest is earned on cash balance  7% annual rate of interest is paid on negative cash balances (borrowed money) SMG Rules

25.  Trades are made based on prices at time of order (market order).  Trades entered after 4:00 p.m. will are made at the next day’s opening price.  You may trade only stocks and mutual funds that have traded within the last 7 days.

26.  Portfolios are not liquidated at the end of the game and should not be liquidated at the end of the game  The team with the highest portfolio equity at the end of the game wins  Portfolio equity in the tenth week is used for final rankings SMG Basics

27. How Does the Competition Work?

28. Teams compete within a geographic region and on six levels

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

31. GeneralInformation

32. Buying:  Must be for a minimum of 100 shares  May set a maximum purchase price limit  Called a “Long” position  Ticker symbols are available online General Information

33. Buying:  No “penny” stocks  Must have closing price of at least $5.00 per share  Most brokers will not allow margin purchases of stocks below $5.00 General Information

34. 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

35. Setting a “limit” price  A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock.  you want to buy stock ABC, which is trading at $12, you can set a limit order for $12.50. This guarantees that you will pay no more than $12.50 to buy this stock.  you own stock ABC and it is trading at $15, you could place a limit order to sell it at $14.50. This guarantees that the stock will be sold at a price greater than or equal to $14.50 but not below.  Best for overnight or weekend trades. The limit trade is executed only once.

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

37. 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 General Information

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

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

40.  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. Example: Short Selling and Covering General Information

41. 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 General Information

42. 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 General Information

43. Equity: Total Value of Long and Short Positions + Cash Balance = Equity General Information

44. Buying on Margin:  You may borrow funds using the stock in your portfolio as collateral for the loan  Interest charged at 7% General Information

45. Borrowing on Margin  At the beginning of the game, teams have $200,000 of purchasing power, 50% of which is collateralized by your initial cash portfolio of $100,000  50% of value of long and short position is required as collateral (margin requirement) Initial Margin Requirement = 50%  Margin requirement is subtracted from Equity  Remainder is matched dollar for dollar for total buying power

46. Margin Call:  If the Total Equity in your portfolio falls below 30% of the value of your long + short positions, your team will receive a “margin call”.  SMG will automatically liquidate a portfolio that falls below the 30% rule until the minimum margin requirement of 30% is met.

47. Good Ideas

48. SMG Assessment Ideas:  ARTICLES from web, newspapers or magazines on corporations  NOTES that state why  GLOSSARY of terms with definitions

49.  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:

50.  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

51. 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

52. 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.... Team Roles

53. $ $

54. Team Fees: 10 Week Games: Grades 4-12 $15 College $15 Youth Groups $18 Adult or Yearlong $25 Team Fees: Year Long Game: All groups $25 New Advisor Fee: $25 Eliminated SMG Costs

55. What if I need help during the game?

56. 1-800-722-6708 smgofpa@economicspa.org Pat Schoeniger AVP - Stock Market Game Carolyn Shirk at cshirk@economicspa.orgcshirk@economicspa.org or call 570-975-5149

58. Investment Basics

59. Stock Market IQ Quiz Investment Basics

60. True or False 1.Stocks are items found in the storeroom of a grocery store. 2.Only rich people invest in the stock market. 3.Most stocks on the stock market are sold by the United States Government. 4.If the stock market goes up 30 percent one year, it will fall by 30 percent in the next year. Investment Basics

61. 5.Any stock that goes up in price must eventually come back down. 6.Bears, Bulls, and Pigs are found in the stock market. 7.Stock prices are set by the Securities and Exchange Commission, a regulatory agency of the U.S. government. 8.Stock markets are open on business days around the clock, around the world. Investment Basics

62. 9.Sometimes companies buy their own stocks on the stock market. 10.It is hard to buy a good stock today because all the good ones have already been purchased. 11.Buying stocks is a sure way to make money. 12.Corporations sell new issues of stock on the New York Stock Exchange. Investment Basics

63. 13.“Insider” stock trading means that trading stocks takes place inside a building. 14.People can buy stocks on the internet. 15.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 Investment Basics

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

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

66. 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 & ETFs: You own one portion of a collection of stocks, bonds, or other securities Investment Basics

67. The Three Main Markets: NYSE: NYSE New York Stock Exchange Oldest, largest, best-known stocks NASDAQ: N AS DAQ NASDAQ: ( National Association of Securities Dealers Automated Quotations) Large, mid- sized, and small growth companies AMEX: ASEx American Stock Exchange Mid-sized growth companies Investment Basics

68. Large:  Often have high prices  Low risk of failure  Some pay regular dividends Small:  Potential for growth is greater  Generally prices are lower The Difference Between Large and Small Companies: Investment Basics

69. 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 Investment Basics

70. Over-The-Counter Stocks  A security which is not traded on an exchange, usually due to an inability to meet listing requirements. For such securities, brokers/dealers negotiate directly with one another over computer networks and by phone. The NASD carefully monitors their activities.  Be very wary of some OTC stocks, the OTC:BB (Bulletin Board) stocks are either penny stocks or may hold bad credit records.

71. 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 Investment Basics

72. Mutual funds  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.

73. Gumpper – SMG Open vs Closed-end Funds  An open-end fund issues and redeems shares on demand, whenever investors put money into the fund or take it out. There's no limit to the number of shares the fund can issue. Nor is the value of each individual share affected by the number outstanding, since net asset value (NAV) is determined solely by the change in prices of the stocks or bonds the fund owns, not the size of the fund itself.  For a closed-end fund, the share price is determined not by the total value of the assets it holds, but by investor demand for the fund (like an ETF).

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

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

76. DJIA over last 33+ years: Investment Basics

77. P/E or Price-Earnings Ratio  Trailing P/E: Latest closing price of the stock to the latest available annual earnings per share of the firm.  More earnings per share given stock price results in a lower PE ratio and a better buy.  Forward P/E: based on forecasting net year’s future expected earnings. What stocks should I buy? Investment Basics

78. PE Ratio Example:  ABC Stock – 20 P/E Ratio  Indicates that ABC is selling for 20 times the company’s earnings What stocks should I buy? Investment Basics

79. PE Ratio  So, if more earnings per share given the stock price results in a lower PE ratio and a better buy.  Is Toyota or Apple the better buy?  Apple: Selling at 40 times earnings.  Toyota: Selling at 9 times earnings.

80. Gumpper – SMG Beta = % change in stock return / % change in market return. 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. Positive and negative betas show direction of stock relative to market Beta : a measure of volatility

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

82.  EPS: Earnings per share  P/E Ratio  ROE: Return on Shareholders’ Equity  Beta  5-year Sales and Earnings History  Company Size  Relative Industry Strength Criteria for Selecting Stocks

83. How to Read the Stock Market Page

84. 52 Week High 52 Week Low StockDivYield %P/E Ratio Sales 100s EPS HighLowCloseNet Change 4939ABC1.303.25%203314 2 403940---- 8049BBA.40.53%2673016 2.92 777576+ 1 6638CCI1.201.87%977723 7.11 666364+ 1 1813LLY1.7811.12%713101 2.28 16 ---- 138XYZ---- 0%626.16 10 - 1 Stock Table $2.00 BBA76 /26=$2.92 CCI64 /9=$7.11 LLY16 /7=$2.28 XYZ10 /62=$0.16

85.  Highest and lowest price a share of the stock has sold for in the past 52 weeks.  Example ABC: High was 49  Example ABC: Low was 39 52 Week High/Low

86. Stock  Varies by Newspaper  Either company abbreviation or ticker symbol  In A-Z order

87. Div  Annual Dividend per Share of Stock  Based on the rate of the Last Quarterly Payout  Annualized Data  Example ABC: $1.30 per share  Example: XYZ: $0 per share

88. Yield Percentage  Known as Dividend Yield  A Measure of the Income Produced by the Stock  Is the Amount of the Dividend divided by the Price of the Stock

89. Yield Percentage  Achieved by Dividing the Annual Dividend by the Day’s Closing Price  Example: ABC 1.30/40 =.0325 or as a percentage: 3.25%

90. P/E Ratio  PRICE- EARNINGS RATIO –Ratio: latest closing price of the stock to the latest available annual earnings per share of the firm –Trailing P/E: is what is reported in the financial section of newspapers –Forward P/E: based on forecasting net year’s future expected earnings

91. P/E Ratio  Example: ABC – 20 P/E Ratio –Indicates that ABC is selling for 20 times the company’s earnings Example: XYZ – P/E Ratio is 62 –Indicates that XYZ is selling for 62 times the company’s earnings

92. Sales 100s  This represents the volume of transactions on the trading day  Bought or Sold  Presented in hundreds, simply multiple by 100 Example: ABC – 3314 Indicates that 331,400 shares traded

93. High/Lows  This represents the highest and lowest selling price of the stock for the day.  Example: ABC – high of 40 low of 39

94. Close  This represents the price of the last stock sold for the day  Example: ABC – closed at 40

95. Net Change  This lists the net change between the closing price for the stock for the day and the closing price on the previous trading day  Example: BBA: Today’s Close: 76 Net Change: + 1 Previous Day: 75

96. Earnings per Share  A means of valuing common stock.  Part of a firm’s profit that is allocated to each outstanding share of common stock.  Can be a good indicator of fiscal health

97. Earnings per Share  Many investors carefully watch this number  In general, higher earnings per share means better dividend and overall stock performance.

98. Earnings per Share  Calculated by dividing the closing price on the day being consider by the P/E ratio. Example: Today’s CloseP/E Ratio 40.0020 Earnings per Share: ABC – $2.00

99. Economics and the Stock Market  Micro vs. Macro economics and the Stock Market

100. Microeconomics  Microeconomics studies the behavior of the consumer, household, or firm.  Scarcity and choice How do we allocate our budget, time? How do firms allocate resources to produce goods and services?  Maximizing well being, happiness  Maximizing profit  Efficiency

101. Micro and the Stock Market  Look at one company:  How does this company make its product?  Who buys the product?  Does the company have good managers?  Who supplies the company?  Look at one industry:  How much competition is in the industry?  Is the industry young or old? This is what stock brokers and mutual fund managers get paid to do! Applications: Industry Research BusinessWeek Blog Marketplace Google Finance MAC Vs PC

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

103. Macro and 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 equities and times to sell. Applications: BLS Economagic Fed 101

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

105. 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.

106.  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 Going public

107.  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 Going Public: From a Good Idea to a Corporation Going public

109. Important Points for Students at the End of the Game  Diversification is critical  Size of company, industry, culture and more  Mutual Funds or getting professional advice  Investing is a Long-Term Proposition

110. Gumpper – SMG Stock Market Game Team Registration Online Pre-registration

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

112. www.smgww.org

113. Click on “PREREGISTER NOW” Payment Form

114. Choose this option when you are ready to pre- register your teams.

115. For Free Promo, complete all fields in bold. FREE

116. Gumpper – SMG Pre-registration Reminders  You can print out the payment form (online) to use for obtaining a PO # from your school (there is also one in the packet)  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.  Your teams will earn interest on cash before the game begins  Free adult game as part of new advisor packet.

117. Playing the Stock Market Game Online Demo

118. Login into SMG WORLDWIDE www.smgww.org

119. Inside SMG WORLDWIDE (Team Pages)  The blue Trading tab contains all the functions necessary to compile research and make trades.

120. Account Summary  Check Account Summary and Transaction Notes for the status of your account balance and the trades you have entered. This team has used some of its “margin” “Min Maintenance” is 30% of the team’s long + short value. If the teams total equity were to fall below this number, they would receive a margin call.

121. 140,710 / (281,420 + 0) = 50% 146,560.56 – 140,710 = 5,850.56 84,426 / (281,420 + 0) = 30% The math…..

122. Account Holdings

123. “Short Sell” and “short cover” are the transactions used when taking a “short” position on a stock. A short position earns a positive return when the stock price falls. Enter a Trade