Fisher Investments on Financials

CHAPTER 1

FINANCIALS BASICS

Trends within the Financials sector are often topics of heated debate, and for good reason—not only is it the largest sector in most broad equity indexes globally, but it revolves around one of the things most hold very dear: money. Money is transferred, multiplied, protected and placed at risk in the Financials sector. The sector is considered the lifeblood of the global economy—and while a properly working Financials sector can be a boon, its going haywire can have unfortunate consequences.

Many of this sector’s products and services are relatively simple, like making a cash deposit at a bank or using a charge card for your morning cup of coffee. And many are quite complex, like making a leveraged bet in a synthetic collateralized debt obligation. Financial innovation has transformed the sector from its simple roots into an incredibly complex system—so complex that, at times, it can engender great fear.

Globally, governments are well aware of the complexity and importance of the Financials sector, making it one of the world’s most highly regulated sectors. From central banks to financial services authorities to consumer protection agencies—the government’s hand in the Financials sector is a core concern, capable of promoting prosperity or driving disaster in the sector and economy as a whole.

This book’s intention is not to provide detailed instruction on complex financial structures’ construction, focus on the 2008 financial panic (as many other books ...