A – E
Balance of Payments: The BoP is the net value of all goods and services—both made to other nations, and received from them—on a global basis, generally for a particular period of time, and in current U. S. Dollars
Balance of Trade: Also referred to as the Trade Balance, the BOT is the net of all trade goods, bought and sold, in the same currency, for a particular period of time. It is commonly calculated on trade with a particular nation, a region or the world, at large.
Break-Even Analysis: Many business decisions—whether in production or marketing—include a number of factors—some fixed, and some variable. A business that produces the ubiquitous widgets, might have to decide between: additional, more expensive equipment versus the using existing equipment, and adding a third shift; the personnel expense of paying extra for a night shift versus another, separate day shift; additional security at night; would the price impact of the additional supply of widgets justify the additional production costs, etc? The final Cost-BenefitDecision is determinant.
Brexit: The slang term used to indicate Great Britain leaving, or exiting, the European Union. Similar French and Dutch (the Netherlands) movements to leave the E. U. were referred to as “Frexit” and “Nexit”, respectively.
Consumption Tax: A National Sales Tax, assessed on top of any State or City Sales Taxes. Such a tax tends to be regressive, since it is generally assessed on necessities, and mostly effect the poor members of our society. Don’t be surprised if luxury items are exempt!
Cost-Benefit Analysis: A simple process. in which all relevant costs and benefits involved with a particular project or operation, are considered in determining its validityFor instance: Constructing a coal-fired power generating facility, without factoring in the incremental health care and environmental costs, would be an example of an invalid profitability decision.
Deficit-Spending: This occurs when a government spends more than it takes in, generally in order to stimulate the economy. Deficit-spending is normally financed through the sale of U. S. Treasury securities, sand it increase the National Debt.
Economies of Scale: This pertains to the cost savings of production. A manufacturer generally has both fixed expense, and variable ones. Plant and equipment are the largest fixed costs, while hourly wages, cost of raw materials and maintenance are variable. Accordingly, the fixed expenses generally do not increase until a certain volume is reached. Variable expenses, however, do increase proportionate to the hours worked, raw materials consumed, etc. Generally, until that threshold requiring expansion or additional equipment is required, the cost-of-goods manufactured, on a per unit basis, declines. Such economies-to-scale led to lower prices which, in turn, increase sales volume, and so on.
Euro: The Euro is the common currency, which is used by all 19 member nations witting the Eurozone, which is also called the Euro Area.
European Union: The 28 member nation trade pact (including the U. K.). Goods are free to flow unimpeded, from one country to another, and citizens are free to live or work in any E. U. nation, since they are Citizens of the European Union.
Eurozone: The (currently 18) member nations, within the European Union, that have joined together, into a monetary union, and use the common currency—the Euro. The European Central Bank manages monetary policy on behalf of the Euro members; however, each country still retains control of its own fiscal policy. The Eurozone is also commonly referred to as the Euro Area.
Exchange-Traded Fund (ETF): ETFs are securities that generally replicate a particular stock or bond index, or a combination of the two. Unlike most actively traded mutual funds, ETFs trade on an exchange, like stocks, and their prices change throughout the trading day, moment-by-moments. The ETFs, which replicate major indices, such as the S & P 500, Dow Jones Industrial Average or NASDAQ tend to have higher trading volumes, since institutional investors often use them to take advantage of sudden market shifts. Also, that additional institutional trading—in both buying or selling—can add to the volatility of such ETFs. The expense ratio for ETFs are extremely minimal, since the composition of most indices only change quarterly.
F – J
Fiscal Policy: A country’s use of revenue collection (or In-flow), generally taxes and fees, and/or government spending (Out-flow) to influence the overall national economy.
Foreign Exchange (or “ForEx”): The process by which one currency is convert to, or exchanged for, another.
GDP—Gross Domestic Product: is the total of all goods and services produced within a country. The GDP of states, regions or other political subdivisions is occasionally reported; however, like any statistic, with smaller sample sizes, the margin of error increases. GDP is a measure of economic health.
K – O
Monetary Policy: The means by which a Nation’s monetary authority controls the money supply, in order to stabilize the economy. This is usually done primarily by targeting the unemployment and inflation.
Moore’s Law (Simplified): In 1965, before he co-founded Intel, Gordon Moore informally suggested that the size, speed and capacity of microchips would double annually, and the price would drop significantly, each year for another decade. Fifty years later, that concept has continued—depending upon a person’s measurement scale—to be relevant. This is what gives the Digital Age the aura of all technology moving faster and faster. That also means, however, that workers and users must also maintain a similarly kinetic pace, just to keep up!
O – T
ROE—Return on Equity: The appreciation of the equity in an investment, as compared to the initial equity investment made. Leverage (debt), if used, would increase the ROE, on the upside, similarly to how it would increase the decline in value, on the downside.
Sector SPDR (“Spider”): A Sector SPDR is an ETF that replicates all of the components (corporations) within any one of the ten industrial sectors that compose the S & P 500, broad-based index. SPDRs trade like stocks, and can be purchased as “Long”, owned outright, or they can be held :”Short”, in a negative or sold position.
Strong Dollar Policy: Managing the dollar, either to strengthen or weaken it, is preposterous! As the means of exchange, foreigners buy dollars and sell their currency, in order to purchase our goods and services. Conversely, we sell dollars in exchange for other nations’ currencies, in order to make purchases from them.
Currencies seek their natural equilibrium, based on the Supply vs. Demand of all global currencies. The strength of a currency provides a measure of the economy’s health, which is also effected by interest rates, and the nation’s political stability.It is best to allow the markets, working through the relative Supply and Demand, to establish the relative value of the dollar, versus other currencies.
A dollar that is too strong, for instance, may cause an increase in Imports, since they are cheaper in our currency. That would also result in a decline of exports, since they would be more expensive in the import country’s currency. Such an imbalance would help some industries, while hurting others.
Top Line versus Bottom Line: “Top Line” refers to the Gross Revenue, which a business receives from the goods that it sells, or the services it provides, to customers. That revenue generally appears on the top line of most business Income Statements. After Expenses are deducted from the Revenue, the Net Income appears on the “Bottom Line”” of the Income Statement. These two informal labels eliminate the confusion, that corporate jargon might cause.
Revenue: (Money received for goods sold or services provided:
Less Operating Expenses:
Raw Materials, Plant and Equipment, Labor, etc.
Net Income: (Revenue, less expenses):
U – Z
Yield-Curve: A chart, reflecting the (generally U. S. Treasuries) bond-yields across the spectrum from, let’s say, one to 30 years. When the curve is higher, or lower, that may suggest a more robust, or stagnant, overall economy. When the overall slope is steep, versus flat, that may be a predictor of a stronger, or weaker, future economy. An d, an “Inverted Yield-Curve”—where short-term rates are higher than longer-term ones—is a strong predicted of a pending economic recession.
Yield-to-Maturity (or Call): The result of an adjustment to the bond price to correlate the Yield-to-Maturity to current market yields. For instance, the price would drop, in order to bring the Yield-to-Maturity up to higher market rates. And similarly, the price would be higher, to enable the bond owner to withdraw the profit, before selling the bond into a lower rate environment. Bonds that are “callable” by the issuer, for mandatory redemption prior to maturity, might have a similar price adjustment. That would result in the Yield-to-Call.