Since this bailout stuff can get so complicated and esoteric I am going to rephrase it in terms investors and traders can understand.
1) Averaging down - strategy used by novice traders to lower cost basis of their trade.
Govt application - strategy used by novice bureaucrats who know nothing about market dynamics to increase the cost basis of bank bailouts.
2) Margin call - When brokers liquidate positions and cut off credit.
Govt application - When China or foreign nations liquidate treasuries and cut off credit. (*Note - unlikely to happen but all bets are off if an official bad bank is declared).
3) Stop Loss Order - Orders that savvy traders use to limit losses.
Govt application - Orders that govt bureaucrats use to increase losses.
4) Arbitrage - The simultaneous purchase and sale of 2 different (but closely related) securities to take advantage of a disparity in their prices.
Govt application - the simultaneous spending and taxing of different generations to take advantage of disparities in age to benefit the oldest generation at the expense of countless future ones.
5) Back Testing - tests run on historical data and then applied to new data to see if the results are consistent.
Govt application - tests run on historical data and then applied to real life regardless of consistency.
6) Breakout - The point when the market price moves out of the trend channel.
Govt application - The point when Congress breaks for lobbyist lunch hour.
7) Volume - the number of contracts or shares traded between different parties over a certain period of time.
Govt application - the number of contracts traded between the same parties over and over again (even if it is the same body) to create the illusion of supply and demand.
8) Slippage - The difference between the price a trader expects to be filled at and the price they are actually filled at.
Govt application - the difference between subsection 2) paragraph 103(b) and subsection 2)paragraph 103(b)i-c. Not even CPAs, lawyers, and judges can agree on what this means.
9) Efficiency - Getting the most bang for your buck (runup/drawdown)
Govt application - Unions.
Saturday, February 14, 2009
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