Saturday, February 14, 2009

The Debts of the Spenders: The Government Trading Glossary

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.

1 comments:

Anonymous said...

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