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Understand the economy and you can see stock prices.
From basic concepts to the expert eye that reads the market on its own. Build up economics and financial statements step by step with pictures and charts.
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Lesson 1 · Understand the economy and you can see stock prices
If you're new, start with Lesson 1.
Where should you start?
It's fine to start wherever fits your goal.
New here?
Read in order from Part 1, "Getting comfortable with the economy". It starts with why stock prices and the economy are connected.
Go to Part 1If the news is hard to follow
Look at Part 2 (inflation) and Part 3 (interest rates) first. You will see why CPI and FOMC news shake stock prices.
Go to Part 2If you're picking stocks
Learn how to check with numbers whether a company is sturdy, in the Reading Financial Statements course.
To the financial statements courseCourses
Learn through two courses.
Economics for reading the whole market, and financial statements for reading a single company.
Economics for Investors: From Basics to Expert
From the basics of economics to interest rates, inflation, exchange rates and employment, and how they connect to stocks. Build up step by step and develop the eye of an expert who can read the market on your own.
Reading Financial Statements: Fundamental Investing by the Numbers
From finding disclosures to the balance sheet, income statement, cash flow statement, and warning signs. Build the basics of fundamental investing: judging value from a company's numbers.
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All 80 lessons are open. If you're new, start from Lesson 1; if a topic interests you, jump straight to that lesson.
Know the economy and you can see stock prices
Stock price = earnings × multiple (P/E). The economy shakes both of these knobs.
Read✓ ReadThe economy is a big circle of money
See in a diagram how four agents (households, businesses, government and the rest of the world) exchange money and goods.
Read✓ ReadPrices are set by supply and demand
Learn how prices move through supply and demand curves and the memory chip price cycle.
Read✓ ReadGDP is the report card of a nation's economy
Read nominal and real GDP, growth rates, and the breakdown into consumption, investment, government spending and net exports.
Read✓ ReadThe economy has four seasons too
See the business cycle of recovery → expansion → slowdown → recession over real data.
Read✓ ReadThere are indicators that tell you about the economy in advance
Learn about leading, coincident and lagging indicators and what a PMI of 50 means.
Read✓ ReadInflation: the same money buys less
Rising prices mean a decline in the purchasing power of money. Calculate what KRW 10,000 will be worth in 10 years.
Read✓ ReadHow to read CPI: headline and core
Learn YoY vs. MoM, core inflation, and how to compare with forecasts.
Read✓ ReadPCE and PPI: the inflation gauge the Fed prefers
The Fed's 2% target is based on PCE. PPI is the cost-side inflation that companies feel.
Read✓ ReadDeflation and stagflation
Compare an economy where prices keep falling with one where prices rise amid a recession.
Read✓ ReadWhich assets hold up when prices rise?
Use the 2022 energy sector case to see which assets are strong or weak against inflation.
Read✓ ReadAn interest rate is the price of borrowing money
See deposit and loan interest, and why borrowing gets harder as interest rates rise.
Read✓ ReadWhy do central banks raise and cut interest rates?
Learn about the Bank of Korea's Monetary Policy Board and the US FOMC, and the two goals of price stability and employment.
Read✓ ReadThe policy rate and market interest rates are different
See how KTB and US 10-year yields price in future policy rates ahead of time.
Read✓ ReadBond prices and interest rates are a seesaw
For bonds already issued, prices fall when rates rise and rise when rates fall.
Read✓ ReadTerm spread: the traffic light of the economy
See what it means, and where it falls short, when short-term rates rise above long-term rates (an inversion).
Read✓ ReadWhy do growth stocks hurt more when rates rise?
Calculate with discount rates and present value why earnings far in the future are more sensitive to interest rates.
Read✓ ReadInterest rates and sectors: why do banks and insurers differ?
Sort out with cards which sectors smile and which cry when rates are rising.
Read✓ ReadEmployment indicators: nonfarm payrolls and the unemployment rate
Learn how to read the number of jobs added and the unemployment rate in the US jobs report.
Read✓ ReadThe market reacts to the gap from 'expectations'
Consensus and surprise. A good number becomes bad news if it is worse than expected.
Read✓ ReadWhen bad news becomes good news
Compare when weak employment leads to rate-cut expectations and when it leads to recession fears.
Read✓ ReadConsumption and business investment: the engines of the economy
Read the state of the economy's engine through retail sales, consumer sentiment and capital expenditure.
Read✓ ReadWhat is an exchange rate? What USD/KRW at 1,400 means
Sort out the confusing expression that a higher exchange rate = a weaker won.
Read✓ ReadWhy do exchange rates move?
See the Korea–US rate differential, the trade balance, and the rush into dollars during crises.
Read✓ ReadWho benefits from a weak won?
Weigh on a scale the mixed gains and losses of exporters and companies that import raw materials.
Read✓ ReadExports are the heart of the Korean stock market
See how the monthly trade statistics released on the 1st and KOSPI have moved together.
Read✓ ReadForeign investors and the exchange rate
See how expectations of a stronger won lead to foreign investor buying.
Read✓ ReadOverseas stocks and exchange rates: FX exposure and currency hedging
Overseas stock returns = stock price return + currency effect. Learn what a currency-hedged ETF means.
Read✓ ReadOil is the blood of the economy
See the chain from oil → inflation → interest rates and the impact on refining, airline and chemical sectors.
Read✓ ReadWhy does gold rise when people are anxious?
See the relationship between gold, an asset that pays no interest, and real interest rates and the dollar.
Read✓ ReadCopper and chip prices: the thermometer of the economy
Read the economy and the semiconductor cycle through Dr. Copper and DRAM prices.
Read✓ ReadWhen the US sneezes, Korea catches a cold
See how the US stock market, the Fed and the dollar affect KOSPI.
Read✓ ReadChina's economy and Korean companies
See how the cosmetics, steel and chemical sectors relate to Chinese consumption and the property cycle.
Read✓ ReadStock prices move before the economy does
See, through the 2020 case, why stock prices price in the economy several months ahead.
Read✓ ReadDifferent sectors are strong in different seasons of the economy
Sort out the strong sectors in each phase with the sector rotation clock.
Read✓ ReadReading the sector map through interest rates, exchange rates and oil
Read the Macro Map's impact map and macro environment scores yourself.
Read✓ ReadP/E and P/B: rulers for measuring expensive vs. cheap
See price relative to earnings, price relative to assets, and how interest rates relate to a fair P/E.
Read✓ ReadLiquidity: when money is released, assets rise
Learn about the money supply (M2), quantitative easing and tightening, and liquidity-driven rallies.
Read✓ ReadReading investor sentiment: VIX and margin loan balance
Read the signals of overheating and fear through the fear index and investing with borrowed money.
Read✓ ReadPractice interpreting economic news headlines
Practice breaking a headline down into cause → reaction → impact.
Read✓ ReadLearning from crisis history: 2008, 2020 and 2022
Compare the causes, policy responses and recovery times of three crises.
Read✓ ReadRespond rather than predict: how to use your economics knowledge in investing
See how diversification, DCA and rebalancing help you hold up even when your outlook is wrong.
Read✓ ReadGraduation: your own weekly economic checklist
Build seven indicators to check every week and a 10-minute Monday morning routine.
Read✓ ReadFinancial statements are a company's health checkup
Summarizes the balance sheet, income statement, cash flow statement, statement of changes in equity, and notes on a single page.
Read✓ ReadDART is the official bulletin board for companies
The Financial Supervisory Service's electronic disclosure system, where the official documents listed companies must file by law are gathered.
Read✓ ReadHow to find a company on DART and open its report
Follow step by step how to search by company name, filter by period and report type, and navigate the table of contents.
Read✓ ReadWhen do annual, half-year, and quarterly reports come out?
See a one-year disclosure calendar for December fiscal-year companies as a timeline.
Read✓ ReadAnnual report map: where to start?
Learn the order for skimming a thick business report in 10 minutes.
Read✓ ReadThe balance sheet is a company's list of belongings
Assets = liabilities (other people's money) + equity (your own money). A snapshot as of a specific date.
Read✓ ReadAssets: cash, inventory, and the factory
Distinguish current assets that turn into cash within a year from non-current assets used for a long time.
Read✓ ReadLiabilities: debts come in different kinds
Distinguish interest-bearing borrowings from trade payables and advances received that arise in the course of business.
Read✓ ReadEquity: Shareholders' stake and capital impairment
Look at share capital, retained earnings, and capital impairment, which arises when losses pile up.
Read✓ ReadGauging safety with debt and liquidity ratios
Calculate the debt ratio and the current ratio and see why the benchmarks differ by industry.
Read✓ ReadConsolidated and separate financial statements
See the difference between consolidated statements, which include subsidiaries, and separate statements, which look at one company alone.
Read✓ ReadThe income statement is a report card for a year of business
See the staircase of sales → gross profit → operating profit → net income in a diagram.
Read✓ ReadRevenue and cost of sales
Read the tug-of-war between raw material prices and selling prices through the gross margin.
Read✓ ReadOperating profit: the core business's true ability
Look at core-business profit left after subtracting selling and administrative expenses, and at the operating margin.
Read✓ ReadWhy net income differs from operating profit
Separate interest expense, FX gains and losses, and one-off gains and losses.
Read✓ ReadEPS and P/E: What one share earns
Calculate EPS = net income ÷ number of shares and P/E = share price ÷ EPS yourself.
Read✓ ReadReading quarterly results: year-over-year and seasonality
Learn how to read QoQ and YoY and preliminary earnings disclosures.
Read✓ ReadThe cash flow statement is the real bank record
See the difference between book profit and the cash that actually came in and went out.
Read✓ ReadReading operating, investing, and financing activities in three columns
Infer the company type from the +/− combination of the three columns.
Read✓ ReadFree cash flow (FCF): the money that's really left over
FCF = operating cash flow − capital expenditure. The source of dividends and debt repayment.
Read✓ ReadWhy do profitable companies fail? Bankruptcy despite profits
When receivables and inventory pile up, cash can dry up even when the company makes a profit.
Read✓ ReadChecking earnings quality
Build the habit of looking at operating profit and operating cash flow together over three or more years.
Read✓ ReadROE: how much does it earn with shareholders' money?
Break ROE down into profit margin × turnover × leverage.
Read✓ ReadPBR and BPS: share price relative to assets
Look at BPS, PBR, and what a PBR below 1x means.
Read✓ ReadDividend metrics: payout ratio and dividend yield
Learn the payout ratio and dividend yield, and how to read dividend decision disclosures.
Read✓ ReadCompare within the same industry
See why normal ranges differ by industry and how to compare against the industry average.
Read✓ ReadLook at 3–5 year trends, not a single year
Pick out consistent companies using a five-year view of sales, operating profit, and ROE.
Read✓ ReadFinding how a company makes money in the Business Overview
Look up revenue share by product, order backlog, and raw material prices.
Read✓ ReadNotes: What's behind the financial statements
Find contingent liabilities such as related party transactions, collateral and guarantees, and lawsuits.
Read✓ ReadAudit opinion: anything other than unqualified is a warning sign
Look at the unqualified, qualified, adverse, and disclaimer opinions and going-concern uncertainty wording.
Read✓ ReadPaid-in capital increases, convertible bonds (CB) and treasury stock disclosures
Calculate funding disclosures and ownership dilution.
Read✓ ReadLargest shareholder and 5% stake disclosures
Read largest-shareholder changes, large shareholding reports, and trading disclosures by officers and major shareholders.
Read✓ ReadPreliminary results and correction disclosures
See the preliminary results that come out before the business report, and the correction disclosures that keep recurring.
Read✓ Read10 warning-sign checklist
Check for signs to avoid, such as consecutive losses, capital impairment, and frequent CB issuance.
Read✓ ReadPractice: a sturdy company vs. a risky company
Compare Robin Bakery's and Dark Cloud Electronics' financial statements side by side.
Read✓ ReadPractice: reading a real business report together
Read the business reports of a large manufacturer and a bank in table-of-contents order.
Read✓ ReadGraduation: your own one-page company analysis note
Write a six-box note covering business, growth, profitability, stability, cash, and shareholder disclosures.
Read✓ ReadThis is educational material and not investment solicitation. There is no guarantee that past relationships will repeat in the future.