Forum Nexus Finance Class Prof Brian Butlers Lectures Dec Jan 2010

1. Forum-Nexus International Finance Class – Lecture #1 – Spain Dec 2009

2. Brian David Butler Brian Butler is a specialist in international economic analysis, and is founder of the prestigious “GloboTrends“ ( www.globotrends.com ) online economics site, which has been featured as syndicated content on Nouriel Roubini’s RGE Monitor, Emerginvest.com, Business Week Exchange, Wikinvest.com, and other leading news outlets. Brian earned an MBA with distinction from the Thunderbird School of Global Management and he has taught Finance, Economics and Global Trade at Thunderbird’s Global MBA program in Miami. Brian is currently a with Forum-Nexus study abroad He previously worked as financial analyst for the Columbia University Business School and for NextLogics, a boutique investment and consulting firm focused on early stage endeavors with social impact. A global citizen, Brian was born in Canada, raised in Switzerland (where he attended international schools), educated in the U.S., started his career with a Japanese company, moved to New York to work as a financial analyst, married a Brazilian, and has traveled extensively in Latin America, Asia, Europe and North America. [email_address] [email_address] LinkedIn/briandbutler Skype: briandbutler

12. What is “International Finance”?

14. International Financial Markets 1. 2. 3. Foreign Exchange Market Domestic Financial Markets in Other Countries— Short-Term Domestic Financial Markets in Other Countries— Long-Term Deposits, Cash, Forwards, Futures T-Bills, Deposits, Commercial Paper, Money Market Funds Bonds, Stocks, ADRs, Deposits, CMOs Banks, Companies, Brokers Banks, Companies, Brokers Banks, Companies, Brokers MARKET INSTRUMENTS PARTICIPANTS

15. International Financial Markets (cont.) 4. 5. 6. 7. Euro-Currency Market Euro-Bond Market International Monetary System (IMF) The Real Sector Deposits, Euro CP Euroloans Eurobonds, Floating Rate Notes, Euro-Equities SDRs, $US, [Gold], Position in the Fund Banks, Clients Investment Banks Companies, Brokers Central Banks, The Fund Goods & Services Consumers & Firms MARKET INSTRUMENTS PARTICIPANTS

16. Why Study “International Finance”?

18. What are the benefits of “International Finance”?

21. What are the dangers of “International Finance”?

26. As late as 2008, the IMF forecasted growth in 2009

35. Forum-Nexus International Finance Class – Lecture #2- Paris Dec 31 st 2009

53. Forum-Nexus International Finance Class – Lecture #3- Paris Jan 1 st 2010 HAPPY NEW YEAR!!!!!

65. SPEND today!!! (don’t save)

78. Forum-Nexus International Finance Class – Lecture #4- Paris Jan 4 th 2010

103. Size of Finance… Martin Wolf, “Fixing Global Finance”… based on McKinsey “Mapping Global Capital Markets”, 2005

104. Size of Finance… Martin Wolf, “Fixing Global Finance”… based on McKinsey “Mapping Global Capital Markets”, 2005

105. Size of Finance… Martin Wolf, “Fixing Global Finance”… based on McKinsey “Mapping Global Capital Markets”, 2005

106. Size of Finance… Martin Wolf, “Fixing Global Finance”… based on McKinsey “Mapping Global Capital Markets”, 2005

107. Forum-Nexus International Finance Class – Lecture #5- Paris Jan 5 th 2010

116. Series of Crises

147. Forum-Nexus International Finance Class – Lecture #6- Interlaken Jan 7 th 2010 Review for exam

148. Forum-Nexus International Finance Class – Lecture #7- Milan Jan 11 th 2010 Welcome to Italy!!

153. Forum-Nexus International Finance Class – Lecture #8- Milan Jan 12 th 2010

154. International Financial Markets 1. 2. 3. Foreign Exchange Market Domestic Financial Markets in Other Countries— Short-Term Domestic Financial Markets in Other Countries— Long-Term Deposits, Cash, Forwards, Futures T-Bills, Deposits, Commercial Paper, Money Market Funds Bonds, Stocks, ADRs, Deposits, CMOs Banks, Companies, Brokers Banks, Companies, Brokers Banks, Companies, Brokers MARKET INSTRUMENTS PARTICIPANTS

155. International Financial Markets (cont.) 4. 5. 6. 7. Euro-Currency Market Euro-Bond Market International Monetary System (IMF) The Real Sector Deposits, Euro CP Euroloans Eurobonds, Floating Rate Notes, Euro-Equities SDRs, $US, [Gold], Position in the Fund Banks, Clients Investment Banks Companies, Brokers Central Banks, The Fund Goods & Services Consumers & Firms MARKET INSTRUMENTS PARTICIPANTS

156. Question: If you were a US based bank, with dollars to invest for 12 months…..where would you choose to deposit your money (to make the most return)? Note: You can assume you have an account with a bank in London (HSBC, etc)… and its easy to switch from one account to the other (click of a button) International Money Market Rates (Bid Side) United States dollar England sterling Europe euro Switzerland franc Japan yen Eurocurrency Rate LIBOR 12 months 3.2% 6.0% 5.3% 3.2% 1.1%

157. Answer: it DEPENDS not just on the interest rate, but also on the expected change in foreign exchange rate as well. You might be temped to choose the England (sterling) option of 5.99% because it’s the highest…but that currency might be expected to lose value (depreciate) over the next year…wiping out the expected gains. International Money Market Rates (Bid Side) United States dollar England sterling Europe euro Switzerland franc Japan yen Eurocurrency Rate LIBOR 12 months 3% 6.0% 5% 3.5% 1.1% Expected appreciation / depreciation vs. US Dollar to EQUATE choices… x -3% -2% -0.5% +1.9%

166. # = All interest costs are presented as annual percentage rates. The rates would have to be renegotiated annually each year during the project if bank loans were used. Facebook could expect to pay a spread of one percent per year over LIBOR or 1/8% over prime, plus the fees that are one-time, up-front payments on the financing, based on the principal value of the loan. To simplify the analysis, assume that the interest payments take place at the end of the period, if you wish. † = bonds are issued at fixed interest rate for two years. A Eurobond issued at a floating interest rate is called a Floating Rate Note (FRN). k* = Facebook's weighted average cost of capital.

182. Forum-Nexus International Finance Class – Lecture #9- Milan Jan 13 th 2010 Group projects due today! Last day in Milan!

183. Market Exch Rates as of: Sept 2, 2008 Which currencies are expected to appreciate in the future? Which are expected to depreciate? Foreign Currency Exchange Rates (Bid) Canada dollar UK* sterling Europe* euro Switzerland franc Japan yen Spot Rate— (Closing Foreign currency units per US dollar) 1.0625 1.7863 1.4522 1.1090 108.84 Forward Rate—Closing Rates 1 month outright 1.0630 1.7822 1.4498 1.1086 108.652 3 months outright 1.0636 1.7749 1.4454 1.1080 108.281 6 months outright 1.0639 1.7638 1.4391 1.1066 107.716 12 months outright 1.0642 1.7493 1.4283 1.1043 106.453 *(U.S. dollars per foreign currency unit)

184. Market Exch Rates as of: Sept 2, 2008 CDN depreciate UK sterling depreciate Euro depreciate Swiss F appreciate JPN yen appreciate Foreign Currency Exchange Rates (Bid) Canada dollar UK* sterling Europe* euro Switzerland franc Japan yen Spot Rate— (Closing Foreign currency units per US dollar) 1.0625 1.7863 1.4522 1.1090 108.84 Forward Rate—Closing Rates 1 month outright 1.0630 1.7822 1.4498 1.1086 108.652 3 months outright 1.0636 1.7749 1.4454 1.1080 108.281 6 months outright 1.0639 1.7638 1.4391 1.1066 107.716 12 months outright 1.0642 1.7493 1.4283 1.1043 106.453 *(U.S. dollars per foreign currency unit)

192. Forum-Nexus International Finance Class – Lecture #10- Venice Jan 14 th 2010 Welcome to Venice!!

201. Forum-Nexus International Finance Class – Lecture #11- On boat Jan 17 th 2010 Heading to Greece!!

221. Forum-Nexus International Finance Class – Lecture #12- Greece Jan 19 th 2010 Heading to Greece!!