Finance and capital markets
Housing
Home equity and personal balance sheets
This old and badly drawn tutorial covers a topic essential to anyone planning to not live in the woods -- your personal balance sheet. Since homes are usually the biggest part of these personal balance sheets, we cover that too.
Mortgages
Most people buying a home need a mortgage to do so. This tutorial explains what a mortgage is and then actually does some math to figure out what your payments are (the last video is quite mathy so consider it optional).
Renting vs. buying a home
Is it always better to buy than rent? What if home prices go up dramatically and rents don't? How can we compare home prices to rents to figure out what to do.
This older tutorial (low-res, bad handwriting) walks us through this. It is about housing but similar thinking can be applied to any rent-vs-buy decision (spoiler alert, Sal did eventually buy a home).
Housing price conundrum
Back before the 2008 credit crisis, Sal was perplexed by why housing prices were going up so fast and theorized that it was a bubble forming (he was right).
These pre-2008 videos are fun from a historical point-of-view since they were made before all the poo poo hit the fan.
Credit Crisis
This tutorial talks about how the housing-bubble-induced credit crisis unfolded with a focus on the derivative securities that helped pump the bubble.
- The housing price conundrum
- Housing price conundrum (part 2)
- Housing Price Conundrum (part 3)
- Housing Conundrum (part 4)
- Mortgage-Backed Securities I
- Mortgage-backed securities II
- Mortgage-backed securities III
- Collateralized Debt Obligation (CDO)
- Credit Default Swaps
- Credit Default Swaps 2
- Wealth Destruction 1
- Wealth Destruction 2
Paulson Bailout
In the fall of 2008, it became clear that a cascade of bank failures was happening because of shoddy loans and exotic securities (both which fueled a now popping housing bubble). In an attempt to avoid a depression, the Treasury Secretary (Hank Paulson) wanted to pour $1 Trillion into the same banks that had created the mess.
This tutorial walks us through the beginnings of the mess and possible solutions. Historical note: it was created as the crisis was unfolding.
- CNN: Understanding the Crisis
- Bailout 1: Liquidity vs. Solvency
- Bailout 2: Book Value
- Bailout 3: Book value vs. market value
- Bailout 4: Mark-to-model vs. mark-to-market
- Bailout 5: Paying off the debt
- Bailout 6: Getting an equity infusion
- Bailout 7: Bank goes into bankruptcy
- Bailout 8: Systemic Risk
- Bailout 9: Paulson's Plan
- Bailout 10: Moral Hazard
- Bailout 11: Why these CDOs could be worth nothing
- Bailout 12: Lone Star Transaction
- Bailout 13: Does the bailout have a chance of working?
- Bailout 14: Possible Solution
- Bailout 15: More on the solution
Investment and consumption
When are you using capital to create more things (investment) vs. for consumption (we all need to consume a bit to be happy). When you do invest, how do you compare risk to return? Can capital include human abilities?
This tutorial hodge-podge covers it all.