A currency certificate is also called a foreign exchange (Forex) certificate (FEC), and it validates that the bearer is entitled to a certain amount of foreign currency upon the redemption of the certificate, or that a certain amount of foreign currency was exchanged for it. This is not to be confused with a certificate of currency, which is proof that some types of insurance are currently in effect. Currency certificates have been historically used in countries with closed or controlled economies, such as the Soviet Union, Cuba, and China. Continue reading...
Currencies may work fine in a particular country or region, but it may happen that certain currencies are not convertible into other currencies or gold. Sometimes this is by choice, such as was formerly the case with closed economies like the People’s Republic of China, Soviet Russia, Cuba, and others. Most currencies are convertible into other currencies. Banks, at least the central banks of countries, tend to have reserves of most foreign currencies with their citizens do business. Continue reading...
When an investor takes a short position on an option contract by selling (“writing”) a call or put option, he or she is opening a position, which creates more open interest in an underlying security which will be handled by the brokerage house, and this is called “selling to open.” If the price changes in the underlying security in an unfavorable way, the investor will seek to get out of the short position he holds on the options contract before the option’s expiration date. To do so, the investor must buy back the option (or, really, cancel out the position by buying the same kind of contract that he or she previously sold short). Continue reading...
A closed-end fund is a collective investment model where a company raises a fixed amount of capital through a share offering. It’s also known as a closed-end investment, and it trades on a stock exchange just like a stock. Closed-end funds that are managed generally tend to focus on a specific sector or segment of the market. What is an Open-End Fund? What Should I Know About IPOs? Should I Buy IPOs For My Portfolio? Continue reading...
Mortgage fallout refers to the instance of proposed loans falling through before closing. This is something tracked by not only mortgage producers and their mortgage companies, but also economists who keep up with mortgages and the secondary market for mortgage derivatives. Since mortgages take two months or more to close, the fallout rate can indicate a stagnancy in the economy and trouble for the secondary mortgage market. Continue reading...
As of 2014, global GDP was $77 trillion. The total market capitalization of all world stock markets is approximately $70 trillion, and about a fourth of that amount is the U.S. market. The U.S. economy is the largest by GDP, which for 'fiscal year' (FY) 2016 was approximately $19 trillion. The total value of notional derivatives fell to $18.1 trillion. How Many Dollars do We Have in Circulation? What is Currency in Circulation? Continue reading...
The total United States national debt is $19.3 trillion as of fiscal year (FY) 2016. Total debt is near what the U.S. produces in annual GDP, and a majority of our national debt is public debt — money owed to those who have Treasury obligations. The U.S. also owes a large amount of money to foreign countries (foreign debt), but a majority of U.S. debt is held domestically. As of June 2012, the three countries who hold the most of our national debt are: Continue reading...
This is a simple question, but one that varies almost exclusively based on geographical location (cost of living). According to the US Census Bureau, in 2008, the Median Household Income for the state of Mississippi was $37,818, while the figure for Maryland was $70,482. In California, the average was at $61,017, and in Arkansas it was $38,820. Since the cost of living is drastically different in various states, counties, and even cities, the figure changes drastically. In San Francisco, California, for example, the median income for 2008 was $71,957, while in Billings, Montana, the figure was $35,147 (less than half as much). Continue reading...
Income inequality is the difference in the average income of the lower/middle class and the upper class. Naturally the high income of very rich people in the country, which constitute a very small percentage of the population, will dwarf the average income of those who are not very rich. The worrisome thing is when the gap between them widens at an accelerating rate and the lower classes are not able to break through to the upper classes. Continue reading...
Leading indicators are economic or price data which have some degree of correlation with a movement in the market or a stock price. Leading indicators tend to happen before the market or price movement occurs. Traders and economists use leading indicators frequently to prepare for what’s next; they are based on theory as well as empirical historical evidence but like all indicators, they do not have a 100% accuracy rate – past performance does not guarantee future results. Continue reading...
The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System. The FOMC makes the decision on “raising” or “lowering” interest rates, which refers to moves in the federal funds rate. The FOMC consists of 12 members, which is comprised of the seven members of the Board of Governors and 5 of the 12 Reserve Bank presidents. The president of the Federal Reserve Bank of New York always has a seat on the FOMC, while the other presidents rotate for one year terms. This policy-making body meets eight times a year to decide monetary policy, which consists of setting the benchmark interest rate and make decisions regarding the supply of money. All dependent on economic conditions. Continue reading...
When trading options, the language is slightly different than other transactions. You might be “opening” or “closing” a position with each trade. If you buy a put or call option, your ticket with say “buy to open” since you are opening a position and increasing the open interest on the underlying. Open interest is similar to trade volume in the stock markets, but it only increases with the number of outstanding positions interested in the outcome of the movements of the underlying security, and does not increase with each trade like trading volume. Continue reading...
Pensions are income streams guaranteed to employees upon their retirement. A Pension is a type of Defined Benefit Plan in which your employer promises to pay you a certain amount every month for the rest of your life. Employers who are part of the pension plans are sometimes called pensioners. An employer retains the funds in a trust, usually, and everyone’s pension assets are pooled together in what’s called a Pension Fund. Continue reading...
Commodities Futures are one of the most highly traded securities in the world, and it is partially because nothing has to be delivered by the participants as in a spot-trading market. Futures can be purchased on margin, opening up large positions, long or short, and if a trader finds a place to exit before the settlement date of the contract, the trader will buy/sell to close his or her position, and the exchange will regard the trader’s position as flat, and nonexistent for all intents and purposes. Continue reading...
A naked call is a type of option contract where the seller of a call does not own the underlying security, thereby exposing them to unlimited risk. Investors have the ability to “write” or sell options contracts as well as to buy them. The seller of a call option has opened a position in which the buyer is given the right to buy 100 shares of a stock at the strike price named in the contract. The seller – along with all other sellers of calls for that security – are the ones who must cover and close the open positions if the call owners exercise their options. Continue reading...
The concept of an efficient market is more applicable today than it was when it was conceived, a truly efficient market is nearly impossible. The Efficient Market Hypothesis states that random new information will affect the value of securities, and that new information disseminates so quickly among rational investors that it is futile to try to beat the “market portfolio.” Thirty years ago, this was more of a theory than an observable phenomenon, and plenty of inefficiencies in the dissemination of information and the pricing of securities could be pointed out. Continue reading...
Mortgages take a while to process, but a broker or bank can lock in a rate for themselves or their clients. Locking-in rates costs money somewhere along the line, and the longer the rate is locked in, the more it costs. 60 days is generally the longest time frame you will see a rate locked in, due to the cost associated with that risk. Mortgage rates can be locked in for a period of time long enough to underwrite the loan. This might be for a period as short as 20 days or as long as 60 days. Continue reading...
HERA was passed in 2008 in response to the subprime mortgage crisis that rocked the entire economy and left many Americans underwater on their mortgages. People would need to refinance their mortgages and this bill approved the funding to help that happen. The Housing and Economic Recovery Act did several things, all aiming to help American consumers and lending institutions get out of the recession left by the subprime mortgage bubble in 2008. Continue reading...
No-Cost Mortgages waive the initial closing costs by making a repayment structure for those costs into the interest payments on a mortgage loan. Closing costs can range from 2%-5% of the total cost of the home, and include attorney fees, underwriting fees, application fees, and so on. These costs are deferred and are paid in the form of additional interest on the loan. Closing costs are separate from down-payments of equity, and are a miscellaneous hodgepodge of a wide range of fees associated with closing a mortgage deal. These costs are sometimes covered by the seller, but most often they are paid by the buyer. Continue reading...
Appraisal is a valuation conducted by a certified professional to assess the value of property, especially real estate. Appraisals are an important service in the real estate industry in particular. Where mortgage loans are being taken out from banks, including original mortgages, refinancing, home equity loans and lines of credit, as well as in business and estate valuations, the property appraisal will play an important role. Continue reading...