Somewhere in the great beyond, old Henry is smiling. While bankruptcy looms for sister companies General Motors (GM) and Chrysler, Ford's (F) report on Friday of lower-than-expected losses had investors shooting the stock uphill like a 400 horsepower Mustang. At the time of this writing, Ford shares were up more than 15%.Why all the happiness about a $3.7 billion loss? Ford CEO Alan Mulally told reporters that the company is "turning the tide in North America" and also announced that the company plans to increase production by 25% this summer to meet demand -- all without a government bailout. Those are good signs for the bulls with respect to both Ford and the broader economy. In other news, FDIC Chair Sheila Bair told a financial reform conference in Washington, D.C., last week that U.S. banks are past the crisis stage, adding: "We're in the cleanup stage now." Also in Washington yesterday at the meeting of the G20, US Treasury Secretary Timothy Geithner said that the global economic downturn is easing but significant risks remain. Elsewhere in the nation's capital, the Commerce Department reported that new home prices fell .06%, but the new home inventory also fell. Falling home inventories are a signal to some investors that home prices may be nearing a bottom as buyers clear out the number of available homes for sale. All this not-so-bad news sent the Dow, S&P 500 and the Nasdaq Composite indexes higher this morning. On to this week's topic: Compound interest and the rule of 72.
While teaching about investing and our capital markets is one component of the Stock Market Game, another is teaching students how to accumulate money to invest with -- otherwise known as saving. One of the best ways to save is to put your money in an interest-bearing account at an FDIC-insured bank. The rule of 72 tells us that if you divide the number 72 by your interest rate you'll get the number of years it will take you to double your money. For example, if you are earning 4 percent interest in a bank account, you divide 72 by 4 and you get 18. Therefore at 4 percent interest, your money will double in 18 years. If you get eight percent interest, it would double in nine years, and so on. In the Teacher Support Center, there's an excellent lesson on the rule of 72 and compound interest titled "How Does Money Grows Over Time." The lesson clearly demonstrates the importance of saving money early in life and letting compound interest work its magic. Also, as many Stock Market Game sessions near conclusion, it's a good time to get your students thinking about what they've learned. There's another lesson in the Teacher Support Center to help with this called "How Successful Was My Investment Strategy?" The lesson challenges students to create a five minute presentation outlining what worked for them, what didn't, and what they've learned about investing. To access the lessons, log in to the Teacher Support Center with your advisor ID and password. Next click on "Lesson Sequence," then choose "Display a Complete Outline of All Lessons." Both lessons are available in the sequence.