What happened to the 15 months of placid, upward sloping trend lines for all major stock indices that we had grown so accustomed to? Find out what changed with the markets and more in Beth's most excellent curated reads below. 

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The Market (are we talking about anything else this week?)

Did anyone else get whiplash (or perhaps motion sickness) from the roller coaster ride the stock market took this week?  Here are several articles that help put is in perspective.

• First of all, the 1000+ point drop may have been historic in size, but in percentage terms, not so much.  Remember we started at 26,000.
  • Check out NGPF's Question of the Day that gets them thinking about percentages. 
• Here is Barry Ritholz' take on what happened on Monday, as well an interpretation from the NY Times.
• What's the witching hour on stock markets? Did you guess 3PM?  Why? Trading today happens through computers.  For example, mutual fund [read; high volume] sell orders usually go execute at 3PM.  These automatic and algorithmic trading programs don’t necessarily cause a drop like we saw Monday afternoon, but once the market starts trending in one direction, watch out below (or above). 
• If you have 25 minutes, the February 6 Marketplace podcast podcast with Kai Ryssdal examines market volatility (this is where we are now) in depth.  I learned a lot from it, including more information about the VIX.  While you can’t trade the VIX, Wall Street has created multiple derivatives [aka "weapons of mass destruction" per Warren Buffett] based on this index. Sounds like pure gambling to me…and Bloomberg examines the risk of this market.
• By the end of the week, the focus of the market conversations was inflation.

Wells Fargo – time to “pay the piper”

• Hours before the end of her term, Federal Reserve President Janet Yellen made public the deal that was reached with Wells Fargo bank.  The Fed’s goal was to hold the bank accountable for its deceptive actions of the recent past.  

After three weeks of frenzied negotiations, a deal was announced on Friday night that represented a milestone in the evolving relationship between regulators and banks. Wells Fargo, one of the country’s largest banks, was banned from getting bigger until it can convince regulators that it has cleaned up its act.

Student Loans

• The Federal Student Loan program had been a money-maker for the government since its inception (1979).  It isn’t any more.   In fact, they are anticipating a $36 billion loss this year.  Forgiveness programs and income-based repayment are to blame.
• If you haven’t yet heard of PROSPER, the GOP overhaul of higher education financing that passed though the House committee late last year, it’s not too late to learn what is in the proposed legislation.
• We can probably all agree with The Hill’s conclusion: Financial Literacy is an Essential Link in the Chain of Student Success.

Politics relating to personal finance

• CFPB holds back on regulating payday lenders.
• Read NPR’s assessment of the Trump administration’s controversial proposal  giving more control over tip income to restaurant and bar owners.  Here is one tidbit:

The inspector general is also investigating reports that the Labor Department tried to hush up an internal analysis that found the proposed rule could cost tipped workers billions of dollars a year.

Odds and Ends

• I hope you got to watch the launch of the SpaceX Falcon Heavy.  I’m not sure what was more exciting, the launch or watching the boosters land!
• Need a new example of “correlation does not equal causation?” Check this out about mutual fund managers and kindergartners.
• B Corps are a relatively new thing.  Just what are they?  Crain’s Cleveland Business does a good job answering that question.
• A Tech start-up called Divvy, if successful, may disrupt the traditional real estate market for housing.  It brings lease-purchase to a whole new level.  Their pilot programs are live in Atlanta and the Cleveland..
• Its hard to get through a week without saying something about bitcoin.  Now it is “buyer beware!”  

“Cryptocurrencies are almost a perfect vehicle for scams,” said Kevin Werbach, a professor at University of Pennsylvania’s Wharton School. “The combination of credulous buyers and low barriers for scammers were bound to lead to a high level of fraud, if and when the money involved got large. The fact that the money got huge almost overnight, before there were good regulatory or even self-regulatory models in place, made the problem acute.”

• Just for fun—if you won the lottery, how far would you go to protect your privacy?

Graphic: Putting this week's market action in perspective. 

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