Tier 1 Capital are the core asset holdings of a bank. They are disclosed, liquid, risk-averse assets, and are used by regulators to evaluate a bank's compliance with capital requirements. Banks lend out about as much money as they can in general. They must have capital on hand to absorb losses and remain solvent. The Basel Accord is an international agreement dealing with capital reserve requirements for banks, enacted after the meltdown of 2008. Continue reading...
Solvency ratios come in several flavors, but they all seek to shed light on a company’s ability to pay its long-term debt obligations. There are several types of what is known as solvency ratios. Some examples of solvency ratios include debt-to-equity, debt-to-assets, interest-coverage ratio, the quick ratio, the current ratio, and so forth. These are meant to be metrics for a company’s ability to meet its debt obligations through various market conditions. The quick ratio, for instance, can reveal whether the current-year liabilities (payables) of a company are covered by the current year cash and receivables, or whether the company will depend on other sources such as inventory liquidation to meet this need. Continue reading...
International banking regulations set forth in the Basel Accords require that institutions maintain a certain amount of capital relative to the amount of risk-weighted assets (RWA) they have. Conservative investments such a treasury notes have a risk weighting of zero, while corporate bonds have a weighting of .20, and so forth. The exact weighting system is laid out in Basel agreements. The system is designed to reveal a bank’s level of exposure to potential losses, and the capital requirements are there to balance out the risks and to protect the global economy from a meltdown in the financial system. Continue reading...
Market discipline is a term which describes the restraint implicitly required of financial services companies in order to remain solvent and financially strong in the face of market pressure instead of regulatory pressure. The markets can sometimes make a ruling on which companies were conducting their business according to prudent and ethical guidelines, without the need of an SEC audit or the intervention of any other regulatory agency. The companies that weren’t will lose their customers and go bankrupt, in no particular order. Continue reading...
The Federal Deposit Insurance Corporation (FDIC) is a government entity created by the Glass-Steagall Act of 1933, and its purpose is to protect savers from losing their deposits in banking institutions if the bank becomes insolvent. FDIC insurance only covers certain types of assets, up to certain limits for each person, and only at member banks. FDIC insurance will “make whole” any deposit amount up to $250,000 per person if the banking institution that held the funds declares insolvency. Most banks are members of the FDIC program, which was established by the Federal government in the 1930s. Continue reading...
Institutional investors are corporations, banks, pension funds, mutual funds, and other forms of pooled capital which act as one entity to engage in securities transactions in the best interest of the constituents or company that they represent. Foreign Institutional Investors are those whose company is based in another country. Investments made on behalf of foreign companies, foreign financial institutions, and foreign funds (such as the foreign equivalent of hedge funds, mutual funds, and pension funds) are foreign institutional investments. There are usually reporting requirements for both the foreign government for the county in which the interests are held and for the domestic government of the institutional investor. Continue reading...
Unlock the secrets of the financial markets with candlestick patterns. Originating from 18th-century Japanese rice traders, these patterns are more than just visual charts; they're powerful predictors of market movements. From the basic anatomy of a candlestick to intricate patterns like bullish engulfing lines and abandoned baby tops, this guide offers a deep dive into the art of candlestick analysis. Whether you're a novice trader or a market veteran, understanding these patterns can be a game-changer for your trading strategy. Equip yourself with the knowledge to make well-informed decisions in the ever-evolving world of finance. Continue reading...
Currency in circulation tends to be defined as the currency held by commercial banks, and currency with the public, without including long-term deposits or investments. As much as 2/3rd of Currency in Circulation is held outside of the borders of the US, and is estimated to be around $1.5 trillion as of 2016. Currency in Circulation is one part of what’s known as the money supply. Money supply is divided into four levels: M0, M1, M2, and M3. Some might define currency in circulation as the larger part of M0, which is the money base, constituted by the currency held in commercial banking institutions and excluding central bank reserves / Federal funds. This definition disregards the Currency with Public, which is included in other definitions and is part of M1. Continue reading...
A chartered financial analyst (CFA) is a prestigious professional designation awarded by the CFA Institute, formerly known as the AIMR (Association for Investment Management and Research). This designation serves as a testament to the expertise and integrity of financial analysts. The rigorous CFA program is designed to ensure that individuals who earn the charter possess comprehensive knowledge and skills in various areas of finance, including accounting, economics, ethics, money management, and security analysis. Continue reading...
Discover the power of long-term investing in dividend stocks. Learn how they provide steady income, offer opportunities for compound earnings, and how AI tools can enhance your investment strategy. A must-read for those seeking a profitable, low-risk investment avenue. Continue reading...
Any professional that you work with for financial planning is going to be compensated for the work they do, but there are different ways they earn their pay. Whether it’s worth it to you is another question. If you have enough knowledge and time on your hands, and your investment portfolio is not very complicated, you may be able to manage it on your own. This can save you some money on financial advisor fees. Continue reading...
In an era where the fusion of lifestyle and fashion is more pronounced than ever, the shoe industry stands at the crossroads of utility and aesthetic appeal. With a global footprint that stretches across continents, the industry is a beacon of both cyclical trends and enduring growth. In this article, we'll lace up our financial analysis boots and delve deep into the top stocks within the shoe sector, focusing on notable companies like Nike (NKE), Skechers USA (SKX), Foot Locker (FL), G-III Apparel Group Ltd (GIII), and Canada Goose Holdings (GOOS). Continue reading...
A time spread using call options is a strategy that buys and sells the same number of options with the same strike prices, but different expirations. Time spreads are sometimes called calendar spreads or horizontal spreads. They make money based on the time decay of the options being shorted. Two calls are used: one is shorted and one is purchased, and both have the same strike price and same underlying security. Continue reading...
Explore a week of earnings reports! Discover how companies like GitLab and Bath & Body Works are navigating challenges and seizing opportunities in the dynamic financial landscape of June 3-7, 2024. Continue reading...
The footwear industry, characterized by its dynamic blend of style and functionality, represents a significant sector in the global economy. This article delves into the financial nuances of notable companies within this sphere, examining market capitalizations, business models, and future prospects. Continue reading...
In the bustling arena of the stock market, the sports sector emerges as a captivating theme, weaving together a dynamic tapestry of companies ranging from sporting goods manufacturers to high-end sports apparel producers. This sector, under the broad umbrella of the consumer discretionary domain, is a reflection of economic vitality and consumer confidence. As we dive deeper into this exciting field, we spotlight the titans and trailblazers that are shaping the future of sports commerce. Continue reading...
The contribution limits are increased over time with cost-of-living adjustments. 403(b) contribution limits are currently the same as 401(k) limits, and are adjusted for inflation at the same rate. As of 2016, if you are under age 50, you may contribute up to $18,000. If you’re over 50, you can also make a catch-up contribution of up to $6,000, for a total of $24,000 for the year. 403(b)s also allow an additional form a catch-up for employees who have been at the job for over 15 years and whose contributions in the past average out to less than $5,000 per year. These catch-ups are called Fifteen Year Cap Expansion Option or just service-based catch-ups. Continue reading...
When foreigners purchase shares of domestic companies that represent less than 10% of the voting shares in the companies, and the investments are not those of company expansion or market penetration, but rather to add diversification to the foreigners’ investment portfolios, it is known as Foreign Portfolio Investment (FPI). FPI is the passive investing that foreigners do in a domestic market. It is separate from investments that companies might make into joint ventures or purchase facilities or acquire controlling interest in a domestic company — all of those are active investing and are usually called Foreign Direct Investment (FDI). FPI can be done by individuals or institutional investors. Institutional investors might run a mutual fund or pension fund in another country. Continue reading...
The U.S. Dollar (USD) isn't just a currency; it's a symbol of global economic dominance. As the official currency of the United States, the USD has evolved over centuries to become the world's primary reserve currency, influencing global trade, forex markets, and international reserves. From its early days anchored to the gold standard to its modern-day status as a free-floating fiat currency, the journey of the USD is a testament to the economic prowess of the USA. Its stability, global acceptance, and role in oil trade (petrodollars) further amplify its significance. Moreover, with the advent of digital currencies, the USD continues to adapt, as seen with the USDCoin. As we navigate the intricate world of finance, the USD stands tall as a beacon of trust, stability, and strength, shaping the financial destinies of nations and individuals alike. Dive in to unravel the story of the world's most influential currency. Continue reading...
Created about the same time as the FDIC, the FSLIC, which insured up to $100,000 in deposits at savings and loan institutions, also known as “thrifts.” In the 1980s, the “savings and loan crisis” caused the FSLIC to become insolvent. In 1989 it was disbanded by the FIRREA Act and replaced by the Resolution Trust Company (RTC) which was merged with the FDIC a few years later. During the 1980s, a huge number of savings and loan companies (“thrifts”) went bankrupt. Continue reading...