The finance words you (kinda) know... Earnings Per Share (EPS) - The chances of making it through a financial news story without encountering this figure are slim. Earnings per share is calculated by taking the profits of a firm, subtracting the preferred dividends and dividing that figure by the number of the firm’s shares outstanding.
Generally speaking, someone studying the markets would favor firms with a higher EPS. However, for someone investing in the market, EPS alone is insufficient for throughrougly comparing companies as a firm can boast high profits while having a low EPS. When weighing investment options, this may be acceptable for some investors. Consider EPS one of many tools in your financial toolkit instead of the only tool.
S&P 500 - Looking for a figure that indicates the health of the stock market? The S&P 500 is a stock market index comprised of 500 large companies whose stock is listed on the NYSE or NASDAQ. An investor looking for quick diversification with (somewhat) predictable returns may choose to invest in a mutual fund or ETF which tracks the S&P 500.
You have likely heard a lot about the S&P 500 in recent months as it appears to be hitting unprecedented highs every few weeks. Most recently the S&P 500 went above 2,000. For some perspective, during the height (or depth) of the Great Recession, the S&P 500 was at 683.
We’ve come a long way, baby. You feeling it?
10 Year Treasury Note - Even if you’re a passive follower of financial news, you probably notice a lot of talk about ‘rates’. More often than not, the rate quoted is the 10 year treasury note which serves as a barometer for the health of the bond market as well as the overall economy.
Unfortunately, there is not a standard script for what an uptick or downtick in the rate of 10 year treasury note means -- especially as we continue to muddle our way out of the Great Recession. Rates were expected to go up this year as the Fed unwound its bond-buying program but instead rates have stayed below 3% amid global uncertainty and slower than expected growth led more investors to seek the relative stability of US treasuries. More buyers means lower rates. You follow?
SIFI - One of the many acronyms in the alphabet soup financial jargon. A SIFI is a “systemically important financial institution”. SIFIs are tied to another acronym of the Great Recession: TBTF, or “too big to fail”. While there isn’t a hard and fast definition for what makes a financial institution a SIFI, it is generally thought to be a firm whose failure would trigger the failure of similar firms. Since 2009, there have been a number of regulations -- such as Dodd-Frank and Basel III -- introduced to help ensure that banks won’t be susceptible to their previous misdeeds.
Inversion - Nothing like the Whopper to get people talking about taxes. Burger King’s merger with Tim Horton’s is about more than swapping burgers for poutine. The merger provides an opportunity for the American company to establish a headquarters in Canada and enjoy our northern neighbor’s lower corporate tax rates.
Is avoiding US tax unpatriotic? Probably, though you could argue that avoiding taxes is basis of our unique republic. Remember, the Boston Tea Party?