INTERNET DATA SOURCES

Course Description

The economy stands at a crossroads. The recession may be over, but what does that mean? “Improvement” is not synonymous with “robust recovery.” And what about the Corona virus (COVID 19)? What forces drive the stock market? And what about real estate? And employment? You should know how to use the internet to find the key business and economic data required to answer these questions. That’s the best way to discover breaking developments at the earliest possible moment.

Wouldn't you like to navigate the data on your own so that you could arrive at your own personal conclusion? Better yet, wouldn't you like to have an advance clue about the general direction of the economy, the stock market, real estate, inflation and interest rates before the experts tell you what's happening or - worse yet - what happened? You need not dispense with the experts, but it would be nice to know that your opinion reflects more than what someone else said. You should be able to take a position on the facts, not merely repeat what you heard on TV or radio or read in a newspaper or magazine or on the web or social media.

Internet Data Sources can help. It shows you how to select, comprehend, and use the key statistics generated by the government's "data mill," when and where to locate them on the internet, and how to weave them into a coherent understanding of current business conditions. Why delay? There's no better way to become acquainted with the world of business than to plunge in, get the facts and immediately begin.

Course Overview

What you will learn:

• How to analyze the residential real-estate slump and assess its origins, economic impact and recovery from the slump.
• How to evaluate the Federal Reserve's role in generating the recession as well as evaluate the Fed's ability to drive recovery from recession.
• How to assess the federal government’s economic stimulus package and its ongoing impact on the economy.
• How to use the government’s regular reports on auto sales and consumer credit to judge the strength of demand and whether an economic expansion has staying power.
• How to use the price/earnings ratio as a key stock-market indicator.
• How to evaluate the impact of profits and profit margins on the stock market.
• How to use the government’s regular reports on GDP, industrial production, capacity utilization, labor productivity, employment and producer prices to evaluate business costs, profitability and inflationary pressures.
• How to assess business expenditures on plant, equipment and inventory.
• How to gauge the strength of the U.S. dollar and America’s international transactions.
• How to create a simulated stock portfolio to test your investment prowess.
• How to navigate options and futures and their role in the stock and money markets.
• How to keep abreast of the bond and money markets.

Course Content

The following course description begins with Internet Data Sources's Table of Contents and then introduces each module in detail. You will see that this course is rich in content and illuminatingly thorough. It contains hundreds of pages of explanation and dozens of web links that enable you to update charts (graphs) so you can be your own economist!

Table of Contents

Recession and Recovery

• Housing
• The Federal Reserve and Interest Rates
• The Federal Deficit
• Consumer Demand
• The Stock Market
• Profit and Profit Margins
• Output, Efficiency and Costs
• Business Capital Expenditures
• The Outlook
• The U.S. and the Global Economy
• Your Portfolio of Stocks and Mutual Funds
• Options and Futures
• The Bond and Money Markets

Conclusion

Here is a full description of each module.

Recession and Recovery

This introduction gets you started by providing a road map to the course's table of contents. The road map directs you through the table of contents' topics so that you can see how quickly and easily you can be your own economist.

2. The Federal Reserve and Interest Rates

Provides a thorough grounding in the Federal Reserve's (the Fed's) influence on interest rates - broadly referred to as monetary policy - and interest rates' sway over borrowing and spending's surges and setbacks. Once you understand the Fed's motivations in determining monetary policy, this module will examine how the Fed executes that policy.

In order to stay in touch with the Fed's actions you will:

• Go to the Fed's web site to retrieve the Beige Book as well as Open Market Committee announcements and minutes.
• Use charts to analyze Federal Reserve policy and interest-rate developments.
• Go to the web to retrieve data for private borrowing and interest rates.
• Update charts using the data obtained from the web.
• Use the Web for a general introduction to interest-rate operations.

As the module proceeds you will become familiar with:

• The federal-funds rate -- the outcome of the Fed's open-market operations -- which is the Fed's principal monetary-policy tool.
• The Fed's Open Market Committee - meeting every six weeks -- and how it sets the federal-fund rate.
• The Fed's role in post-WWII monetary policy and the post-WWII economy.
• The relationship of the Fed's monetary policy to inflation, federal deficits and fiscal policy.
• How the transition from Old Economy to New Economy altered monetary policy.
• Monetary policy in the 1990s boom, the 2001 recession and the recovery from recession.
• Current monetary policy and monetary-policy and interest-rate outlook.
• How market interest rates work: the relationship between yield, coupon rate and market price.

3. The Federal Deficit

Everyone is aware that the federal government's tax revenues do not cover its expenditures and that the federal government must borrow funds in order to cover this shortfall. Consequently the federal government has a large outstanding debt.

That raises a number of issues covered by this module.

• How did the federal government get into this jam? How can it get out of it? Should we care?
• What is the deficit's impact on the economy generally, and on employment and inflation in particular?
• What has been the historical interaction between the federal government's fiscal position (surplus or deficit) and the business cycle? Does the deficit cause prosperity or recession, or does recession generate a deficit?

To help answer these questions you will:

• Use the web to obtain federal receipts/expenditures/deficit data.
• Evaluate current fiscal policy and its impact on the economy and inflation in the light of historical experience.

4. Consumer Demand

The recent recession began in residential real estate and spread throughout consumer demand. It hit retail hard and devastated automobile manufacturing. This module will examine the trail that began with the real-estate slump, wound its way through consumer confidence and led to auto sales. In order to investigate consumer demand you will:

• Use charts to identify the most important trends in consumer confidence, auto sales and consumer credit.
• Go to the web and retrieve recent data for these indicators.
• Update the charts using data obtained from the web.
• Learn how to make a reasonable forecast of consumer demand

5. The Stock Market

The stock market is a good measure of the economy because it reflects the value of owning America's businesses. You can be a smarter investor today if you understand the historical forces that drive the market.

The 2003 - 2007 stock-market boom and the 2008 bust hurt many investors. But they were nothing new. The late 1990s dot-com bubble and the 2000 - 2002 crash and recession also provide rich lessons for investors.

This module introduces the forces that drive the stock market. To better understand them you will:

• Analyze the S&P 500, the stock-market average used by most investment professionals.
• Explore the relationship between the S&P 500 and corporate earnings.
• Learn to retrieve from the Web and apply the latest data on stocks, earnings and the P/E - the key ratio between them.
• Investigate the late-1990s stock-market bubble and the 2003 - 2007 stock-market boom and the lessons to be learned from them in order to avoid a repetition of those mistakes today.

6. Profit and Profit Margins

Module 5 dealt with the key role played by earnings per share (EPS) and the price/earnings ratio (P/E). It also showed you how to track these indicators to better understand where the stock market is now and where it's headed.

But, returning to the late 1990s boom and the early 2000s bust, you may ask, "Why did investors drive up the stock market so much more rapidly than the earnings of the companies represented by the market? Could they have known that earnings would disappoint and drag the market down with them? Is there a lesson there for today's investor?"

Yes! Investors could have and should have known. By visiting two easily accessible web sites, investors would have discovered that corporate profits and profit margins had peaked and were heading south. That should have provided the early warning signal to exit the market.

Finally, this module will bring the data up to date in order to investigate the 2003 - 2007 stock-market boom, the 2008 meltdown and the following recovery.

In this module you will:

• Learn how to track profits and profit-margin data on the web so that you can stay ahead of today's and tomorrow's stock-market developments.
• Discover that profit and profit-margin growth halted in 1997 and began to decline even as speculators bid the stock market to new highs.
• See that the bubble burst in 2000 when the stock market could no longer reconcile rising stock-market values and declining corporate earnings.
• Observe that strong profit and profit-margin growth after 2001 led the stock-market's recovery from its early 2000s meltdown.
• Analyze the roll of profits and profit margins in the 2003 - 2007 boom, the 2008 - 2009 bust and the subsequent recovery
• Learn how to ask the right questions regarding profit and profit-margin sustainability.

7. Output, Efficiency and Costs

Module 6 drew your attention to profits' and profit margins' role in the stock market's late 1990s boom and collapse and the market's performance.

You learned that in the late 1990s investors presumed that rising productivity (efficiency) would drive New Economy earnings continuously higher. But profits stalled despite rising productivity because wages rose (due to full employment) faster than output per worker (productivity), squeezing profit margins. The bubble burst in 2000 when the stock market could no longer reconcile its rising values with declining earnings.

Strong profit growth from 2001 through 2006 led the stock-market's recovery from the dot-com debacle. But a new debacle, tied to the real-estate collapse, beset the economy in 2008 - 2009. How did productivity (efficiency) perform during the latest cycle?

This module will direct you to the Web sites required to track output, efficiency and costs so that you can understand the forces shaping profits and profit margins.

In order to accomplish this you will:

• Learn how output changes affect productivity, prices and profits.
• Identify the most important trends in output, efficiency and costs .
• Go to the Web to retrieve recent data for GDP, industrial production, capacity utilization, productivity, unit labor cost and prices .
• Use this data to analyze trends in output, efficiency, costs and prices .
• Discover how the transition from Old Economy to New Economy convinced the New Economy advocates that a golden age of productivity and profit growth and stock-market gains had dawned.
• Learn how to make a reasonable forecast of output, efficiency, cost and price trends.

8. Business Capital Expenditures

This module examines business purchases of plant, equipment and inventory. These acquisitions of structures, machinery and stocks of goods drove the late 1990s boom. Their collapse precipitated the bursting of the dot-com bubble.

Although residential construction drove the recent cycle's boom and bust, you will see that business capital expenditures also played a role.

In the course of your investigation of business capital expenditures you will:

• Learn that business capital expenditures' cyclical role has changed over time.
• Familiarize yourself with the statistical indicator known as "new orders for nondefense capital goods" and its cyclical record.
• Learn why business invests in new capital goods.
• Examine inventories' role in the business cycle.
• Use charts to identify the most important trends in plant and equipment expenditures and inventory accumulation.
• Go to the web and retrieve recent data for these indicators.
• Update the charts using data obtained from the web.
• Learn how to evaluate recent data in order to understand current developments and have a reasonable grasp of possible future developments.

9. The Outlook

This module reviews the modules covered thus far by reviewing the economy's boom and bust cycle over the past decade. It then asks you to make a forecast of business and investment conditions in the near future.

10. The U.S. and the Global Economy

Previous modules introduced the domestic economy. This module acquaints you with America's economic relationship to the rest of the world. As you know from general news accounts, this relationship has two important aspects: America's balance of trade deficit with the rest of the world and America's growing international indebtedness to the rest of the world. The news accounts tell you these aspects are linked, but the connection may not be clear to you. This module should help clarify matters.

Module 10 will show you how to:

• Construct an international account for the U.S. economy.
• Interpret the U.S. International Account.
• Understand the relationship between the U.S. balance of trade deficit and U.S. international indebtedness.
• Understand the relationship between the U.S. dollar's value and the U.S. International Account.
• Interpret changes in the U.S. dollar's value against other currencies.

To help answer these questions you will:

• Use the web to obtain U.S. International Account data.
• Use the web to obtain quotes of the U.S. dollar's value in other currencies.

11. Your Portfolio of Stocks and Mutual Funds

Earnings, and especially growing earnings, drive the stock market. But, as you already know, firms' profitability varies widely. That's why it's best to invest in an industry whose earnings outlook is rosy. If the firm belongs to an industry that's growing quickly and doing well, there's a good chance the firm will also do well. By the same token, it's more difficult to find stars in an industry whose fortunes are waning. Generally speaking, you are better served selecting a stock in a strong industry than a weak one.

But at this point you may doubt whether you have the wisdom and experience to be a stock picker. Perhaps you wonder if you can get into the stock market without purchasing a particular stock.

Mutual funds provide a way to invest in the stock market indirectly. Investment companies establish mutual funds to pool the resources of many investors and thus create a large, shared portfolio of investments. Individuals invest in mutual funds by purchasing shares in the fund from the investment company. These mutual funds are open-ended, which means the investment companies are always willing to sell more shares to the public and to redeem outstanding shares. Therefore, the pool of capital, the number of investors, and the number of shares outstanding can expand or contract.

This module will provide you with tools that will assist your selection of stocks and mutual funds. You will:

• Use the Web to discover which industries' and firms' earnings have grown most rapidly.
• Create your own simulated stock portfolio so that you can compare the performance of stocks you select to the performance of the best-known stock-market averages.
• Use the Web to evaluate mutual-fund performance.
• Select and add mutual funds to your simulated portfolio to compare their performance with the stock-market averages.

12. Options and Futures

Module 11 demonstrated how to establish and track a simulated portfolio of stocks and mutual funds. This module will show you how speculators use options and futures to leverage their investments in stocks, commodities and financial instruments.

If you are confident a stock will rise, you may purchase it and realize your gain if your prediction proves true. But there are a number of ways you can leverage your purchase in order to increase your gain (i.e., you can capture the increase on a larger number of shares of stock than you can currently afford to purchase). Your leverage is the ratio between the value of the shares you control (and from which you will reap a profit) and the amount of capital (money) you have invested. The smaller your investment and the larger the value of the shares you control, the greater your leverage.

Options provide an opportunity to leverage your investment. They give you the right (option) to buy or sell stock at a stated price for future delivery at a premium (cost to buy the option). People do this for the same reason they buy or sell any stock: They think it's going up or down in value. Only in this case, they believe the market price of the stock will be higher or lower than the price at which they agreed to buy or sell it. Investors stand to gain if they can buy a stock below its market price (and can then sell it at the market price), or can sell it above market price (after having purchased it below market price).

Futures are investments in commodities and precious metals, financial instruments and currencies. Since you secure your investment by advancing a small margin that represents only a fraction of the total investment's value, you also secure substantial leverage when investing in futures.

This module's first section will introduce options investing and the second section will introduce futures. In them you will:

• Become acquainted with options and futures.
• Learn how to use the Web to obtain commodity-market and futures-market data.
• Learn how to use the web to select options and futures.
• Select a number of options and commodities on which to simulate an investment in the options and futures markets.
• Decide on whether put or call options best suits your stock-market assessment.
• Decide on whether you wish to go long or short based on work thus far this semester.

13. The Bond and Money Markets

Module 2 introduced you to the bond market and U.S. Treasury securities in the course of its discussion of monetary policy. This module extends that discussion to the markets for corporate and municipal (state and local government) bonds and Treasury bills.

In this module you will:

• Learn the relationship between risk and yield for various maturities and issuers and the possibilities for capital gains and losses for a variety of instruments
• Use the Web to obtain bond-market and money-market data for a variety of issues and maturities.

Conclusion

Are you ready to be your own economist? Can you employ the latest data to decipher the current business and investment outlook?

Have we put the 2008 - 2009 recession behind us? Has real estate recovered? What about corporate earnings and the stock market? Consumer confidence and consumer expenditures? Will capital expenditures break out of their range? And what can we expect from the Federal Reserve, the federal government and the dollar?

This final module provides a list of economic indicators, their web sites and instructions for retrieving the data. Following the economic indicators are questions, taken from the modules, you should now be able to answer. These questions provide a good evaluation of your newly learned skills.

Be Your Own Economist is a registered trademark of Michael B. Lehmann.
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