From Marc Andreessen’s Guide to Career Planning:
Also, make an investment in yourself by reading the Financial Times and the Wall Street Journal every day. Read those two papers cover to cover for five years and you’ll know a lot of what you need to know.
And so I subscribed to WSJ home edition two weeks ago.
He implies that a person can get through it in an hour a day. Maybe I’m just a slow reader, but I think I’d be lucky if I could get through it in three. I wish I had paid more attention in my high school or college econ classes. The world news I can follow just fine, but when I get to the Marketplace and Finance sections, I quickly get lost. My lack of a financial background could be why it takes me so long to get through the articles…
Frustrated, I started looking things up. The internet is great like that. Here’s a list of terms and explanations from a few articles from a single day last week:
FDIC – Federal Deposit Insurance Corporation, insures checking and savings deposits up the $100k/person/bank. IRAs are covered for $250k as of 2005.
Solvency – Ability to pay debts/long term fixed expenses with existing cash. You can be profitable without being solvent, such as when you’re expanding rapidly. You can also be solvent and unprofitable, but not sure how.
OTS – Office of Thrift Supervision, part of Department of the Treasury, regulates federal savings associations (federal savings bank and federal savings and loans).
Savings and loan association – S&L, aka a thrift (hence the thrift supervision) accepts savings deposits and makes mortgage loans
Fire sale – sale of goods at an extremely discounted price, such as when seller face bankruptcy. Term may have originated after fires, when damaged goods were sold very cheaply.
Insurance assessment – ?
Blue Chip – a well established company w/stable earnings and no extensive liabilities. There is not a defined list of blue chip stocks, it’s just a description for a type of stocks. Term is from casino blue chips, which had the highest value.
Earnings report – official doc published by publicly traded companies showing earnings, expenses, and net. Can be published quarterly or yearly (what determines this?). kind of like a report card for the company.
Fannie May – Federal National Mortgage Association issues loans and loan guarantees, but not directly to home buyers. They also buy mortgages from lenders, which they use to issue more mortgages. Lenders purchase loans and pay Fannie May a fee for assuming the credit risk. If a borrower doesn’t repay the loan, Fannie May pays back the lender. Since lots of people aren’t paying back their mortgage loans, Fannie May is losing a lot of money, which is why its stock price as plummeted recently. Fannie May and Freddie Mac guarantee almost half the home loans in the US. Oops. (Why not more? How much is the fee?) They currently receive no government funding. (Good site: http://www.annaly.com/ie/ffmfaq.html)
Freddie Mac – Federal Home Loan Mortgage Corporation buys mortgages (How?), combines them, and sells them as mortgage-backed securities to investors.
MBS – Mortgage-Backed Securities – Fannie May and Freddie Mac issue these to lenders exchange for mortgages. MBS’s are a more liquid asset.
Federal Reserve System – The Fed – the central banking system of the US. There are 12 Federal Reserve Banks throughout the US. The FRS manages the nation’s money supply and policies.
Liquidity – how easily something can be converted (?) by buying or selling without causing it to lose value. Exchanging a less liquid asset for a more liquid asset is liquidation. In a liquid market, there are lots of buyers and sellers available.
Loan guarantee – It lets small businesses owners borrow money from lenders.
Secondary mortgage market – a market in which existing mortgages are traded (why would you want to trade a mortgage?)
Mortgage backed security – a security backed by a pool of mortgages. (?)
Security – head asplode. Its an investment.
Discount Window – Allows banks to borrow money from their regional Federal Reserve Bank’s lending facility to meet money shortages. The central bank charges the banks an interest rate, called the discount rate or primary rate.
Crude – Petroleum in its unprocessed form.
Petroleum – Oily, flammable liquid found 1 to 2 miles below the surface in rock formations where plants died and were compressed over hundreds of millions of years. Crude oil is liquid petroleum.
Dollop – a large portion of solid matter, like a dollop of ice cream ;)
Legg Mason – an investment company
Shares outstanding – shares held by insiders + shares held by the public, but not shares repurchased by the company (why would they do this?)
Hormesis – when the body reacts favorably to small doses of toxins
Mithridatism – taking small doses of a toxin to prevent yourself from being harmed by it, named after Mithridates VI, a general-king who supposedly did this out of fear of being poisoned.
Syndicating a bid – ?
To determine what terms I should look up, I ask myself whether I could explain it to somebody if they asked. If I couldn’t give them a confident answer, I look it up. I’ve considered getting up an hour early to read, since I often find it difficult to make time at work, but there’s no way I would stick to it. A better idea is to set aside an hour during lunch — away from my office — and read it then.
I hope one day I’m not confused as hell =)