Margin Account Defined

"DEFINITION of 'Margin Account'
A brokerage account in which the broker lends the customer cash to purchase securities. The loan in the account is collateralized by the securities and cash. If the value of the stock drops sufficiently, the account holder will be required to deposit more cash or sell a portion of the stock.

BREAKING DOWN 'Margin Account'
In a margin account, you are investing with your broker's money. By using leverage in such a way, you magnify both gains and losses."


( http://www.investopedia.com/terms/m/marginaccount.asp#ixzz3kOnJUMOF )

The Paper Trade Part 1

Approximately $10,000 (half the money) is split between 5 stocks for now. Be it a Paper Trade (not my actual account(s) and I do not buy on margin )  I did the same with the VOO (vanguard s&p500) and VTI (vanguard total market) for comparison purposes between individual stock picking and a broad index fund. If I do not outpace the broad indicies at some point, which is the bench mark for fund managers (and retail investors alike) it will be a failure.

I bought positions with half the money yesterday....and I will put in the second half of the money once China stabilizes, crude stabilizes, more news from the federal reserve, if political unrest pops up etc. I'm not sure about the bottom of this recent correction (bear market for some individual stocks) as China is making noise and the fed is making noise. I suppose that I will put the other half on the money to work sometime next month when factors of this recent market decline seem to be resolved.

Granted, I may have missed the bottom of the correction (bear market for some individual stocks) the other day when apple hit a 52-week low of $92 intraday.



anyways, until part 2....GET MONEY!!!

Pull back, Correction, Bear...Oh My!

Pull Back: A stock, bond, commodity or index that is no more than 10% under it's 52-week high

Correction: A stock, bond, commodity, or index that is 10%- 20% under it's 52-week high

Bear Market: A stock, bond, commodity or index that is more than 20% under it's 52-week high

Yeah bruh....ain't Dry Powder that Michael Jackson biopic?

Naaaaw man!!! It's Cash on the sidelines for equity investments...and real estate! As in literally cash, money market accounts, savings accounts, and/or checking accounts with funds ready for buying stocks (real estate too). Also, dry powder can be any assets that can be liquidated quickly and with little effort...even if a financial penalty or value loss occurs.

And from a business perspective dry powder can be used to pay future obligations or to purchase assets at a favorable price.

What is Monetary Policy?

"DEFINITION of 'Monetary Policy'
The actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).


INVESTOPEDIA EXPLAINS 'Monetary Policy'
In the United States, the Federal Reserve is in charge of monetary policy. Monetary policy is one of the ways that the U.S. government attempts to control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow. In general, the U.S. sets inflation targets that are meant to maintain a steady inflation of 2% to 3%."



( http://www.investopedia.com/terms/m/monetarypolicy.asp#ixzz3jAbplBB8 )

Federal Funds Rate Defined.

"DEFINITION of 'Federal Funds Rate'
The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight. The federal funds rate is generally only applicable to the most creditworthy institutions when they borrow and lend overnight funds to each other. The federal funds rate is one of the most influential interest rates in the U.S. economy, since it affects monetary and financial conditions, which in turn have a bearing on key aspects of the broad economy including employment, growth and inflation. The Federal Open Market Committee (FOMC), which is the Federal Reserve’s primary monetary policymaking body, telegraphs its desired target for the federal funds rate through open market operations. Also known as the “fed funds rate".


INVESTOPEDIA EXPLAINS'Federal Funds Rate'
The higher the federal funds rate, the more expensive it is to borrow money. Since it is only applicable to very creditworthy institutions for extremely short-term (overnight) loans, the federal funds rate can be viewed as the base rate that determines the level of all other interest rates in the U.S. economy.

Banks and other depository institutions maintain accounts at the Federal Reserve to make payments for themselves or on behalf of their customers. The end-of-the-day balances in these accounts are used to meet the reserve requirements mandated by the Federal Reserve. If a depository institution expects to have a larger end-of-day balance than it needs, it will lend the excess amount to an institution that expects to have a shortfall in its own balance. The federal funds rate thus represents the interest rate charged by the lending institution.

The target for the federal funds rate – which as noted earlier is set by the FOMC – has varied widely over the years in response to prevailing economic conditions. While it was as high as 20% in the inflationary early 1980s, the rate has declined steadily since then. The FOMC has maintained the target range for the federal funds rate at a record low of 0% to 0.25%, from December 2008 onward, to combat the Great Recession of 2008-09 and stimulate the U.S. economy."



( http://www.investopedia.com/terms/f/federalfundsrate.asp#ixzz3j4wWP5Af )

Open Market Operations Defined.

"DEFINITION of 'Open Market Operations - OMO'
The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite.


INVESTOPEDIA EXPLAINS'Open Market Operations - OMO'
Open market operations are the principal tools of monetary policy. (The discount rate and reserve requirements are also used.) The U.S. Federal Reserve's goal in using this technique is to adjust the federal funds rate - the rate at which banks borrow reserves from each other."



( http://www.investopedia.com/terms/o/openmarketoperations.asp#ixzz3izv7g39g )

Reserve Requirement Defined.

"Reserve requirement

The reserve requirement (also known as the cash reserve ratio) is the minimum amount of money that banks must hold in reserve, usually given as a percentage of customer deposits. The cash is normally stored in a vault at the bank or with a central bank and cannot be invested or loaned out to businesses or individuals. The requirement is set by each country's central bank and raising or lowering the reserve requirement will subsequently influence the money supply in the economy.



How does adjusting the cash reserve ratio affect money supply?

If the reserve requirement is raised, banks will have less money to loan out and this effectively reduces the amount of capital in the economy, therefore lowering the money supply. It will mean less money for investment and spending, and would stunt the growth of the economy. It would also mean that banks earn less interest and could see their share prices fall.

Lowering the reserve requirement will have the opposite effect; banks will be able to lend more which would increase money supply and stimulate economic growth.



How can adjusting the reserve requirement affect currency value?

Raising reserve requirements can cause an increase in currency value because when banks are restricted in the amount that they can lend out, they may charge borrowers a higher rate of interest. This is bad news for borrowers, but good news for savers who can benefit from a higher rate of return on their savings. If more capital enters the economy to benefit from those higher interest rates, the value of the currency is likely to increase.

The opposite is true if reserve requirements are lowered. Banks will be able to lend more and so may offer lower interest rates, which can in turn cause the value of a currency to decrease."

( http://en.tradimo.com/tradipedia/reserve-requirement_97012/ )

Federal Discount Rate Defined.

"DEFINITION of 'Federal Discount Rate'
The interest rate set by the Federal Reserve that is offered to eligible commercial banks or other depository institutions in an attempt to reduce liquidity problems and the pressures of reserve requirements. The discount rate allows the federal reserve to control the supply of money and is used to assure stability in the financial markets.


INVESTOPEDIA EXPLAINS'Federal Discount Rate'
A decrease in the discount rate makes it cheaper for commercial banks to borrow money, which results in an increase in the supply of money in the economy. Conversely, a raised discount rate will make it more expensive for the banks to borrow, and would thereby decrease the money supply. Funds borrowed from the fed are processed through the discount window and the rate is reviewed every 14 days."



( http://www.investopedia.com/terms/f/federal_discount_rate.asp#ixzz3inuJZGa2 )

What is Quantitative Easing?

"DEFINITION of 'Quantitative Easing'
An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. Quantitative easing is considered when short-term interest rates are at or approaching zero, and does not involve the printing of new banknotes.


INVESTOPEDIA EXPLAINS'Quantitative Easing'
Typically, central banks target the supply of money by buying or selling government bonds. When the bank seeks to promote economic growth, it buys government bonds, which lowers short-term interest rates and increases the money supply. This strategy loses effectiveness when interest rates approach zero, forcing banks to try other strategies in order to stimulate the economy. QE targets commercial bank and private sector assets instead, and attempts to spur economic growth by encouraging banks to lend money. However, if the money supply increases too quickly, quantitative easing can lead to higher rates of inflation. This is due to the fact that there is still a fixed amount of goods for sale when more money is now available in the economy. Additionally, banks may decide to keep funds generated by quantitative easing in reserve rather than lending those funds to individuals and businesses."



( http://www.investopedia.com/terms/q/quantitative-easing.asp#ixzz3iiotW5VW )

What are Consensus Earnings Estimates (Earnings Forecast)?

"What are Consensus Earnings?
Consensus earnings estimates are far from perfect, but they are watched by many investors and play an important role in measuring the appropriate valuation for a stock. Investors measure stock performance on the basis of a company's earnings power. To make a proper assessment, investors seek a sound estimate of this year's and next year's earnings per share (EPS), as well as a strong sense of how much the company will earn even farther down the road. (For further reading, see Earnings Guidance: The Good, The Bad And Good Riddance?)

That's why, as part of their services to clients, large brokerage firms such as Citigroup and Merrill Lynch (the "sell side" of Wall Street and other investment communities) employ legions of stock analysts to publish forecast reports on companies' earnings over the coming years.

A consensus forecast number is normally an average or median of all the forecasts from individual analysts tracking a particular stock. So, when you hear that a company is expected to earn $1.50 per-share this year, that number could be the average of 30 different forecasts. On the other hand, if it's a smaller company, the estimate could be the average of just one or two stock analyst forecasts.

A few companies, such as Thomson First Call, Reuters and Zacks Investment Research, compile estimates and compute the average or consensus. Consensus numbers can also be found at a number of financial websites, including Yahoo! Finance and MSN MoneyCentral. Some of these sites also show how estimates get revised upwards or downwards.

Consensus estimates of quarterly earnings are published for the current quarter, the next quarter and so on for about eight quarters. In some cases, forecasts are available beyond the first few quarters. Forecasts are also compiled for the current and next 12 month periods.

A consensus forecast for the current year is reported once actual results for the previous year are released. As actual numbers are made available, analysts typically revise their projections within the quarter or year they are forecasting.


Even the most sophisticated investors - such as mutual fund and pension fund managers - rely heavily on consensus estimates. Most of them do not have the resources to track thousands of publicly-listed companies in detail - or even to keep tabs on a fraction of them, for that matter.

DEFINITION of 'Consensus Estimate'

A figure based on the combined estimates of the analysts covering a public company. Generally, analysts give a consensus for a company's earnings per share and revenue; these figures are most often made for the quarter, fiscal year and next fiscal year. The size of the company and the number of analysts covering it will dictate the size of the pool from which the estimate is derived.

INVESTOPEDIA EXPLAINS'Consensus Estimate'

When you hear that a company has "missed estimates" or "beaten estimates", these are references to consensus estimates. Based on projections, models, sentiments and research, analysts strive to come up with an estimate of what the company will do in the future. 

Obviously, consensus estimates are not an exact science. This leads some market pundits to believe that the market is not as efficient as often purported, and that the efficiency is driven by estimates about a multitude of future events that may not be accurate. This might help to explain why a company's stock quickly adjusts to the new information provided by quarterly earnings and revenue numbers when these figures diverge from the consensus estimate.

Conclusion: Implications for Investors

Consensus estimates are so powerful that even small deviations can send a stock higher or lower. If a company exceeds its consensus estimates, it is usually rewarded with an increase in stock price. If a company falls short of consensus numbers - or sometimes if it only meets expectations - its share price can take a hit.

With so many investors watching consensus numbers, the difference between actual and consensus earnings is perhaps the single most important factor driving share-price performance over the short term. This should come as little surprise to anyone who has owned a stock that "missed the consensus" by a few pennies per share and, as a result, tumbled in value.

For better or for worse, the investment community relies on earnings as its key metric. Stocks are judged not only by their ability to increase earnings quarter over quarter, but also by whether they are able to meet or beat a consensus earnings estimate. Like it or not, investors need to keep an eye on consensus numbers in order to keep tabs on how a stock is likely to perform."

( http://www.investopedia.com/articles/stocks/06/earningsforecasts.asp#ixzz3iVn5MGTz ) 

( http://www.investopedia.com/terms/c/consensusestimate.asp#ixzz3i9Ixkhhf ) 

What is Earnings Season?

"DEFINITION of 'Earnings Season'

The months of the year in which a majority of quarterly corporate earnings are released to the public. Earnings season is generally accepted as the months immediately following the quarter-ends of the year, which means that earnings seasons would fall in January, April, July and October. This is due to the lag between quarter-end periods and the time in which firms are able to release their earnings following their accounting periods.

INVESTOPEDIA EXPLAINS'Earnings Season'

Earnings season is easily one of the busiest times of the year for those who work in and watch the markets, as virtually every large publicly-traded company will report the results of their last quarter. Analysts and managers typically set their guidelines and estimates to correspond to specific quarters or fiscal year ends, so the results reported by firms during earnings season often have a big role in the performance of their stocks. "

( http://www.investopedia.com/terms/e/earningsseason.asp#ixzz3i3lf2fvs )

Top-line and Bottom-line (Earnings).

Four times per year you will hear the phrases "top-line" and "bottom-line" as it pertains to earnings. Those four times per year is known as Earnings Season, which starts 2-weeks after the end of a quarter and last for one month. During earnings season (Mid-January-Mid-February, Mid-April-Mid-May, Mid-July-Mid August, Mid-October-Mid-November) a publicly traded company will have a earnings call (conference call) to discuss the business after a 10-Q (quarterly financial report) or after a 10-K (annual financial report) is filled with the SEC.

Top Line = Gross Sales/ Revenue of a company

Bottom Line = Net Income (Revenue minus Cost of doing business) of a company and is usually stated as EPS (Net Income/Shares outstanding) for media purposes and investor purposes. 

Stay Abreast of Class Action Settlements! (Don't Leave Money on the Table)

Companies will not make a full effort to reach out to you for settlements. I check out http://topclassactions.com/lawsuit-settlements/open-lawsuit-settlements/ to see what is going on in that arena. They have a list of open settlements and news about lawsuits so you can get your fair share of money. Hundreds and even thousands of dollars are waiting for you to claim! The site does not require you to sign-up and is a good point of reference for extra cash in which you may be entitled. I found out about this website a couple of days ago and I have found several settlements for which I am qualified, and unfortunately several settlements in which I have missed out upon.... *sigh*

Do not miss out on extra cash for your pockets, extra cash for your gas tanks, and extra cash for your investments! Great resource!