Lemme see, 5% of $10,000 is 200, right?

Lemme see, 5% of $10,000 is 200, right?

I am back in the classroom after 13 years. I was worried about the cultural divide. I cannot relate to these students and they cannot relate to me. None had been born when Bill Clinton was president. Most were in the second grade when I retired. I am older than their grandparents. My children are older than their parents. My grandchildren are all older than any of them. Tic Tok is one of those windup clocks. I am on no social media sites. I tried to get on X after Elon Musk acquired Twitter, but X rejects any effort I make to create an account and I am not smart enough to figure out why. I must be a Luddite since I can’t even figure out how to use the technology in the classroom. Its almost embarrassing.

I gave a lecture on financial markets. As is my wont I told about the origins of the US stock market and why it was initially denominated in 8ths. I talked about the Spanish dollar divided into 8 reales and that the coin dominated the American colonies even after the US decided to mint its own currencies dominated in 100ths after 1792. In the colonies the Spanish pieces of 8 was divided into bits rather than reales. Remember 2 bits, 4 bits, six bits a dollar, all for UT stand up and holler?

For me this was fun. Not so much for the students who were wondering if they had wandered into the wrong class. Isn’t this a finance class and not a history class? Who really cares why the stock market is denominated in 100ths while the bond market remains denominated in 8ths? I even showed them the narrower margins in the stock market because of this (one penny versus 12.5 cents). The students yawned. Then I said remember in Treasure Island, Long John Silver’s parrot kept barking “Pieces of 8! Pieces of 8!”? The students probably thought that Long John Silver was some fish-selling dude.

I gave them an exam. It was short answer, one problem and three essays. Students had to answer in the spaces provided on the exam and could not use their computers. They complained. They wanted to answer using their laptops. I told them that the computer could not monitor them if they answered on it. They complained that in their four years they had only been tested with multiple choice/true false exams on the computer. Well during my four years at Georgia I only had one multiple choice exam and I refused to take it. So my making them write out their answers was unfair. I also would not let them use a calculator. I told them that they could do the computations in their head and if they used a calculator it meant that they did not understand the concept. The problem involved them being able to compute 5% of $10,000. Over half of them could not do it. When I went over the exam in class, I had to ask ten students what the answer was before one said $500. Again a student complained that the question was unfair and I should have given them the answer because it compared the coupon rate on a bond to its yield to find out if the bond sold at a discount, par or a premium.

I also take off for misspelled words. On the syllabus I toldl the students that I have a zero tolerance for misspelling principal, yield, receive, guarantee and separate. So of course they wrote principle, yeild, recieve, garantee and seperate. Several students also misspelled “usury” even though I spelled it correctly in the question.

These students are passive. I have not been interrupted a single time by students asking questions or for a clarification. Not once! I was talking about Fed policy and changing the fed funds rate by 50 basis points when I realized that some of them didn’t know what a basis point was – and these are finance majors. So I asked “What’s a basis point?” I said that I had wasted the last 30 minutes because they did not know what I was talking about. When I now see a student with dazed eyes I say “Ask me a question.” When they said that they don’t have one, I say “Then make one up.”

These students have had basic economics, introductory finance, financial statements and investments. Yet they cannot draw a supply and demand diagram. They haven’t even heard of net present value. When I asked them about how the market allocates credit, they had no idea. When I introduce a subject I ask them a basic question. Define “interest rates”. They can’t do it. I ask them “Is the minimum wage good or bad.” They say “good” and then I show them it can be both and can create unemployment among those the politicians want to help. I do the same with usury laws. I asked them who holds the most US debt. They all said China. Of course the answer is the Fed and the US government. Even Japan holds more US debt than China. I guess I need to put my lectures on Tik Tok.

Don’t get me wrong. There are some very strong students in this class. Most are smarter than they show. Its that they have not been trained to use their brains and to think how to solve problems. Case in point was a question on the Fed’s Open Market Committee. I said that if inflation were forecast, what actions would the FOMC take to counter it. Half the class said the Fed would buy T-bills and lower interest rates! When I went over the test I asked a student who got it wrong, “If the Fed wanted to slow down the economy, what would happen to interest rates.” He knew that the Fed would raise interest rates. So why did he get the answer to the exam wrong? It was obviously my fault in how I asked the question.

When the semester began I said that I did not want to be the only person in the class having fun. I am actually enjoying being back in the classroom but the student reaction is definitely bimodal. This is messing up my turkey season and I cannot spend a solid week at the farm until spring break. But this is a one off. Seven students dropped when I told them how I tested. Fifteen more did not show up after getting their exam grades. Hopefully the students remaining will be motivated to read the financial press and understand what they are reading. One day they will have to use these skills in the workplace. At least one student said that she has started listening to a financial blog and now understands much of what they are saying.

So maybe there is hope.