After reading these forums and some others on the economy, I have to admit that I have never seen a field of study with as much jargon as finance.
Can anyone recommend any articles, websites, or books that are good for explaining the terms and how these ideas work in the economy?
I'm not surprised that the average American is horrible at managing their finances. I've been reading these boards for over a year, and I still feel like a newbie on the field of finances and the economy.
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Clearing up the Jargon
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Clearing up the Jargon
by Falconoffury » Thu 16 Nov 2006, 13:38:49
"If humans don't control their numbers, nature will." -Pimentel
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"Bush, Bush, listen well: Two shoes on your head," the protesters chant
"There is not enough trash to go around for everyone," said Banrel, one of the participants in the cattle massacre.
"Bush, Bush, listen well: Two shoes on your head," the protesters chant
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Re: Clearing up the Jargon
by Dreamtwister » Thu 16 Nov 2006, 15:14:54
It's fairly simple:
Inflation:
The amount of purchasing power the Fed is stealing from you
Core Inflation:
The amount of purchasing power the Fed tells you it's stealing from you.
Bond, T-Bill:
A promisary note, indicating the government's intent to pay back the money you have loaned to it, in devalued dollars, with interest. See I.O.U.
Unemployment:
The number of people currently eligable for and recieving unemployment insurance. Not to be confused with Actual Unemployment.
Actual Unemployment
The number of people who are currently capable of working, but are unable to do so. Real figures are apparently classified.
Alternatively, people who are incapable of surviving on $2.15/hr before taxes, and choose alternative sources of income. See Criminals.
Gross Domestic Product:
A calculation of the collective value of everything a nation produces, including debt.
Outsourcing:
One of the processes by which foriegn holders of federal I.O.U.'s exchange those notes for products of value, specifically jobs. See also Multinational corporations, foriegn aquisitions
Inflation:
The amount of purchasing power the Fed is stealing from you
Core Inflation:
The amount of purchasing power the Fed tells you it's stealing from you.
Bond, T-Bill:
A promisary note, indicating the government's intent to pay back the money you have loaned to it, in devalued dollars, with interest. See I.O.U.
Unemployment:
The number of people currently eligable for and recieving unemployment insurance. Not to be confused with Actual Unemployment.
Actual Unemployment
The number of people who are currently capable of working, but are unable to do so. Real figures are apparently classified.
Alternatively, people who are incapable of surviving on $2.15/hr before taxes, and choose alternative sources of income. See Criminals.
Gross Domestic Product:
A calculation of the collective value of everything a nation produces, including debt.
Outsourcing:
One of the processes by which foriegn holders of federal I.O.U.'s exchange those notes for products of value, specifically jobs. See also Multinational corporations, foriegn aquisitions
The whole of human history is a refutation by experiment of the concept of "moral world order". - Friedrich Nietzsche
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Re: Clearing up the Jargon
by Pretorian » Sun 19 Nov 2006, 06:16:06
Dreamtwister, why dont you try and write more in this way? I am sure you will sell a book this way, I'd buy it.. And make a bunch of paper dollars.
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Re: Clearing up the Jargon
by tugboat » Sun 19 Nov 2006, 09:04:45
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Re: Clearing up the Jargon
by MrBill » Mon 20 Nov 2006, 05:43:15
$this->bbcode_second_pass_quote('tugboat', 'H')ere's a pretty good reference site:
http://www.investopedia.com/
http://www.investopedia.com/
Investopedia is a good quick reference. I would recommend reading The Economist cover to cover each week. It is not prefect, but it gives an excellent overview of world economic and polical events. I find it a better investment in time than the daily financial newspapers. More filtering of what is and is not important. Plus a selection of articles on topics you're not likely to pay any attention to normally, but are still illuminating. IMHO.
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Clearing up the Jargon
by Scactha » Wed 22 Nov 2006, 04:47:13
Agree 100% with Mr Bill. I do the same.
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Re: Clearing up the Jargon
by MrBill » Wed 22 Nov 2006, 06:57:31
$this->bbcode_second_pass_quote('Scactha', 'A')gree 100% with Mr Bill. I do the same.
I was wondering who 'the other guy' was? ; - )
What I dislike about the financial newspapers is how they attach such great importance to whatever is happening today, but usually do not put into any sort of perspective. They trumpet the latest trend, but rarely bother to go back and identify the duds that did not quite work out the way they predicted.
Occupational hazard I would say, but still have to take everything I read in the FT or WSJ with a pince of salt. Like sell side research!
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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Re: Clearing up the Jargon
by Doly » Wed 22 Nov 2006, 11:16:51
$this->bbcode_second_pass_quote('MrBill', '
')What I dislike about the financial newspapers is how they attach such great importance to whatever is happening today, but usually do not put into any sort of perspective.
')What I dislike about the financial newspapers is how they attach such great importance to whatever is happening today, but usually do not put into any sort of perspective.
Agree 100%.
But from time to time you find an article that takes the long view, and when you see it, it's scary. A few days ago I read a financial article in the Herald Tribune that explained how the credit ratings of two-thirds of bonds in American companies are what's considered "below investment grade". In other words, it isn't safe to invest in them. How scary is that?
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Re: Clearing up the Jargon
by MrBill » Thu 23 Nov 2006, 05:19:00
$this->bbcode_second_pass_quote('Doly', '')$this->bbcode_second_pass_quote('MrBill', '
')What I dislike about the financial newspapers is how they attach such great importance to whatever is happening today, but usually do not put into any sort of perspective.
')What I dislike about the financial newspapers is how they attach such great importance to whatever is happening today, but usually do not put into any sort of perspective.
Agree 100%.
But from time to time you find an article that takes the long view, and when you see it, it's scary. A few days ago I read a financial article in the Herald Tribune that explained how the credit ratings of two-thirds of bonds in American companies are what's considered "below investment grade". In other words, it isn't safe to invest in them. How scary is that?
Doly, it isn't safe to invest in them is incorrect.
My own company has a below investment grade issuer rating even though we have a very strong balance sheet. The reasons are because we have a business with very specific risks and we are held down as well by the country rating of our parent group. That does not mean we are unsafe. It just means we face a set of special risks that banks who lend us money should be aware of.
In general a credit rating is simply the chances within one year of any one company with a certain financial profile of not being able to repay its debts fully. It might be less than 1%, 1%, 5%, 10%, etc.
However, companies are in business to make money by taking on a certain amount of risk. A high credit rating may mean too many idle assets and not enough debt, which means the company is not growing as quickly as it should and earning a lower return on those assets. This makes them a prime take-over candidate and/or lowers their share price.
A best credit rating in my opinion for a company is A. Banks maybe AA. Governments AAA. But it would make little sense for a commercial company to set aside enough assets to be rated AAA. That would be a waste of capital and capital is expensive. A company should be striving to earn an internal rate of return in the double digits or returning that money to shareholders in the form of dividends or share buy backs. I do not want the firm I am investing in sitting on piles of idle cash.
Likewise below investment grade companies may be good investments if they are growing fast and making smart investments themselves. You just have to be aware of the risks. But if you buy a portfolio of below investment grade bonds or shares of companies with that rating the overall risk in the portfolio is lower than any single credit risk. The risk of default becomes 10% / 10 = 1% instead of 10% / 1 = 10% for example.
If I am getting higher returns for taking on more risk than that 1% risk may be well worth it versus a single name with a higher credit rating but lower yields.
For your guide, Moody's just upgraded the credit rating of 50 European companies today. That does not mean they are safer or less safe. It means Moody's perception of their riskiness improved. At the end of the day you would sooner invest in a non-investment grade company that does not default than a fallen Angel which is an investment grade company that does default!
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