Antitrust law (commonly called “competition law” outside of the US):

Since competition usually drives down prices for customers, the government tries to ensure that no major industry suffers from a lack of competitiveness. This almost always involves laws that preclude explicit collusion between companies regarding setting prices. It sometimes involves the government blocking companies from merging with each other or buying one another. When there are only a few number of companies in an industry, there are usually stringent laws on how much those companies can charge their customers (e.g. utilities like power and water suppliers).


Something that a person or company owns. It can be a factory, or a loan that a bank has made or even something somewhat intangible like intellectual property.

Balanced Portfolio:

When grouped together, one’s investments are called a ‘portfolio.’ A balanced portfolio is one that holds a variety of different types of investments. For example, some stocks, bonds, real estate and gold (perhaps). The idea is that when one goes down in value, another part of the portfolio will go up. The best example of this is when stocks go down, safe government bonds tend to go up. At this point, investors can sell some of the bonds that have made money and re-invest the proceeds in the stocks that have sold off. When the opposite happens, investors can sell stocks and buy some more bonds. The idea is that investors a) maintain the portfolio balance that is right for their risk (e.g. more stocks if they want to take more risk) and b) can, over time, benefit from volatility as things are sold when at relatively high prices and bought when at relatively low prices.

Board of Directors:

A group of individuals that oversee the management of a company on behalf of its shareholders. “Management”, which typically includes the CEO, CFO and other senior executives, typically operates under the authority of the board (sometimes, those executive officers are also board members). A board has a chairperson that acts as its head.

Bond Prices, Bond Yields and Interest Rates:


A bond is like a tradable loan. Imagine I lend you $100. In return, you agree to pay me $5 (a.k.a. 5%) each year in “interest” until 5 years have passed, at which point you pay be back the $100 that I lent you. Except, I sell your loan to someone else, so that you pay them $5 each year and pay them the $100 back after 5 years.

Government Bonds:

Government bonds are publicly traded: that means that their price is set by the market. If there are lots of buyers of US government bonds, then the price goes up. And when the price of a bond goes up, its “yield” goes down. For example, a bond is issued at $100 with a 5% coupon (meaning an investor that owns that bond gets paid $5 per year). If there are lots of buyers, the price of that bond might go up to $105 – but the coupon stays at 5$. That means that whoever buys the bond at $105 gets paid a “yield” of 4.76% (5/105). And that new “yield” is, effectively, the current interest rate of that bond.

Target interest rate:

The central bank – the Federal Reserve in the US and the European Central Bank in Europe – sets a target base interest rate. Technically, it’s the rate at which banks lend to each other for a period of 1 -day (e.g. extremely low risk lending). As such, it acts as the base interest rate on which all other interest rates are either formally or informally based on. Simply put, when the target rate goes up, it pushes up the interest rates that borrowers have to pay in the rest of the economy.


If you lose your job, the value of that loan will go down (probably). And so, I might only be able to sell your loan for $90 (because there’s a higher chance that you won’t be able to pay it back). You still pay $5 every year in interest, but the person who bought the loan for $90 is making an “annual yield” of 5.55% ($5/$90=5.55%). Also, they are going to get paid back $100 (assuming you pay it back), which gives them more yield. So… when the value of the loan goes down, its yield goes up (and vice versa).

*The difference between ‘government bond yields’ and interest rates are important:

Confusingly, the term “interest rates” sometimes refers to both categories. But, in reality, they can move in different directions. This is usually because government bond yields are determined by the market, which might anticipate future formal changes to interest rates. So, yields are government bonds might go up before the formal interest rate target is increased.

*Why is it true that lower interest rates (or “yields”) equal higher bond prices?:

A bondholder is paid the same fixed amount of interest. For example, they get $5 in interest for every $100 of the bond they own. When the bond goes down in price, that $5 interest payment becomes a higher percentage of the bond’s price. And that percentage is called the ‘yield.’ So, very simply, ‘yield’ increases as the price of the bond declines (and vice versa). The level of interest rates, set by the central bank, is one major factor on the yield and price of a government bond. When it looks like central banks will keep rates low (or lower for longer than investors expect), the price of government bonds tend to go up because yield is going down (the interest becomes a lower proportion of the value of the bond).

Capital Markets:

When you hear this term you can usually just substitute the word “markets” and you’ll get the same meaning. However, technically it refers to the market for things like stock and bonds – i.e. investment instruments that are used by companies to raise capital.

Central Bank:

The central bank in each currency area (e.g. the US, the eurozone) acts essentially as the “bank for the banks” – i.e. JP Morgan will deposit funds with the US Federal Reserve. Essentially, because of this relationship, the central bank can set the basic “target interest rate” (see above). That sets the base interest rate for other interest rates to be based on and when interest rates are low, the banks can then offer loans to people and companies at low interest rates – and that’s one major way a central bank affects the economy.


Raw materials, like iron ore or copper, or a agricultural products, like wheat. Commodities are often bought and sold like financial investments by both investors and actual producers and users of the commodities.


You! You are a consumer. And so are your friends and family. Consumers are normal people that go out and do things and buy things. “Consumer stocks” are stocks of companies that, predominantly, sell goods to consumers (for example, Proctor & Gamble, Nike or Philipp’s Morris).

Consumer Discretionary:

Companies that sell goods and services that people want but don’t have to buy. Examples include restaurants as well as apparel and electronics retailers (like Nike and Apple).

Consumer Price Index:

It’s best thought of as, literally, a basket of things that you can buyand services that you can pay to use. The price index assigns a weighting to each item of the basket based on its perceived importance to the typical person (so basic expenses like food and housing are usually weighted quite heavily). The cost of the basket is then tracked over time and the change is used to calculate how much prices are rising in an economy – and that’s one major measure of the economy’s “inflation rate.”

Consumer Staple

Companies that sell goods that people pretty much need. Like Procter & Gamble (which sells diapers and toothpaste) or Campbell Soup.


It’s a condition of borrowing money from someone. So, for example, I might borrow $1million from you, but you tell me that I can only borrow a maximum of 10x my underlying profit. So, effectively, if my profit declines below $100,000 and I still have $1 million in debt, then you can take control of the company. Conversely, if my profit goes up to $500,000, then I am able to borrow up to $5 million (from you or someone else).

Credit Rating:

There are a handful of major “credit rating agencies” (e.g. Moody’s and S&P) who rate the ability of a country or company to pay back its debt. The best rating is AAA; anything at or above BBB- is referred to as “investment grade.” Many investors aren’t allowed to buy the debt of companies (e.g. bonds) ranked below “investment grade” and hence that is an important classification that companies often seek to maintain. Anything below “investment grade” is termed “high-yield” or “junk”.

Credit Spread:

How much extra interest a company has to pay versus a government. So, Exxon might be able to borrow money at 2% interest while a government bond for the same amount of time (e.g. 10 yrs) would pay 1% interest. That means Exxon’s “credit spread” is 1% (or 100bps). It is used to measure the creditworthiness of a borrower: they higher their “credit spread,” the riskier it is to lend them money.

Currency Peg:

It’s when the value of one country’s currency is directly tied to the value of another country (or a basket of other currencies). So, for example, 3.75 Saudi Riyal is always worth 1 US dollar. That’s a hard peg. A “soft peg” is when a currency is allowed to trade within a set level of the peg. For example, China’s renminbi works as soft peg: each day the Chinese government sets a price point relative the US dollar and the renminbi is allowed to trade to trade within 2% of that price point. The Chinese yuan peg that is set each day against the dollar is, however, based on the value of a basket of currencies that includes the US dollar but also uses the value of the Yen, Euro and Pound.

Both hard and soft pegs often require the country setting the peg to do foreign currency trading in order to protect the peg. That means that if lots of investors are selling the Riyal, then the Saudi government will buy the Riyal and sell its holdings of US dollars so that the peg remains the true exchange rate.

Debt (corporate):

Just like an individual, debt is created when a company borrows money. Its debt can take various forms, for example, a loan from a bank or a bond issued to investors.


Very simply, it’s when prices in an economy start falling. It is the opposite of inflation. And it is, typically, a bad sign: if an economy is healthy, people should be able to afford to pay a little bit more for things each year. But if they can’t do that, and sellers need to reduce prices, it suggests demand is too low (effectively, the economy is too weak). And that can lead to a downward spiral as people and businesses stop buying things from each other – which further hurts economic growth. In almost every scenario, deflation is something to be avoided.


It’s an investment that “derives” it’s value from something else. So, an oil derivative derives its value from the price of oil. It could be an agreement for me to sell you a barrel of oil at whatever the price of oil is on September 30th, 2016. Our deal is worth a certain amount right now – even though it won’t be completed until September 30th. And I could sell our agreement, perhaps, to another investor who would buy it from more for a certain amount (I’d be trading ‘oil futures’ in that example). Derivatives exist on all sorts of things: stocks, bonds, the value of currencies and commodities.


A company’s profits can either be re-invested in the business (e.g. by building a new factory) or paid out to shareholders. The amount paid out to shareholders is called a dividend. If you own $100 of Nike stock, you might have received a $2 dividend last year. That means your dividend yield was 2% ($2/$100 = 2%).

Downgrade/upgrade/negative watch/positive watch:

An upgrade or downgrade from a major ratings agency can be a big deal for a company, especially if they are near the line between “investment grade” and “high yield.” Before a company is formally upgraded or downgraded, it is often put on “positive/negative watch,” which is essentially a warning to investors that a rating change is going to occur unless the company’s financial situation changes.


Technically, it is earnings before interest, taxes, depreciation and amortization. The EBITDA measurement is intended to eliminate the impact of financing and accounting decisions. So, for example, if I’ve borrowed a lot of money, I am then paying a lot in interest to the bank. That means I’m making less profit. But in order to compare my business to another business, I would strip out the effect of my interest payments (and they would do the same), and we would compare how much we make ignoring the financing decision that I’ve made (i.e. borrowing money). It’s the same principle with depreciation and amortization, which is an accounting decision. When you hear about companies earnings being released and “earnings-per-share,” it is typically EBITDA that the term earnings is referring to.

Emerging Markets:

The best way to think about it is to think about all the “developed markets” like the US, Japan, Europe and some others. These tend to be the largest economies in the world and the most advanced. Emerging markets are, essentially, less advanced. In the case of India and China, they can be quite large, but are still “developing.” Emerging markets often exhibit higher growth rates than developed economies, often because they are starting from a lower base (like a startup company, it’s easier to grow than a large, established company). But they also have higher risk. That can be due to political risk (think coups) as well as economic risks (like a lot of foreign investors might take their money out).

Exchange Traded Fund (ETF):

Exchange Traded Fund (ETF): It’s an investment fund that explicitly tracks an underlying “asset” like the price of oil or the value of US stocks (as determined by the S&P 500 or another large index). Investors can buy and sell it just like a normal stock – which makes it easy to invest in. Typically, ETFs have low fees as they simply track the value of something else, i.e. it is not trying to pick winning stocks. Robo-advisors and other firms often use ETFs to create low-cost investment portfolios for their clients.


Goods/services that companies sell to customers outside of their own country. They contributed positively to the size of a country’s economy (as measured by its Gross Domestic Product).

(The) Financial Crisis (2007-2009):

House prices and stocks (and other things) boomed from around 2001-2007. The financial system had accumulated a huge amount of debt, meaning that lots of actors (from individuals to investment funds to banks) had borrowed a ton of money. All the borrowing masked which institutions and investors actually had money – and which had simply borrowed too much money. Once some investments started to lose money, investors started withdrawing their funds. And then more and more investors started withdrawing their money, creating a snowball effect. That led to a dramatic bursting of the bubble. Stocks lost more than 50% of their value and major financial institutions, like Lehman Brothers (a major American investment bank at the time), went bankrupt. At times, it seemed like the world’s financial system might genuinely collapse. In order to stem the crisis, the US Federal Reserve had to enact some “emergency” measures which, essentially, made it impossible for any more banks to go bankrupt (at least under those emergency measures). That calmed everyone down and, eventually, the price of things like stocks and bonds recovered.

Financial Results

All public companies have to report their financial results. The announcement includes things like how much revenue and profit the company generated. US companies report results four times per year (which is why you hear terms like “2nd quarter results…”) while non-US companies often report only twice per year . Investors usually measure the reported results versus expectations that the company itself and independent analysts previously published.

Fiscal policy:

Refers to how a government sets spending and tax policies and, by doing so, exerts a lot of influence on its economy. Governments generally like to spend money – especially in a democracy where it helps keep voters happy – but a government can’t spend too much above what it generates in tax revenue without risking serious long-term consequences (like it’s currency collapsing in value).

Fiscal stimulus:

When a government either increases its spending or cuts taxes in an effort to boost economic growth. Often, fiscal stimulus (especially the spending part) is meant to be short-term in nature but with benefits that supposedly last for decades. For example, building a bridge today creates jobs immediately for workers, while creating a more efficient river crossing would help the transport of goods for decades to come.

Foreign Exchange Reserves:

Many countries maintain savings accounts of currencies other than their own (usually it’s the US dollar they are saving). This is typically so that the country can more easily guarantee that it will pay back any debt that is denominated in a foreign currency (again, usually that’s in dollars). Also, it can use its savings of foreign currencies to influence the value of its own currency, e.g. by selling dollars to buy its own currency and thus prop up its value.

Gross Domestic Product (GDP):

GDP is actually a very simple term that’s often made to sound complicated. It’s simply the size of a country’s economy – and it’s measured by the total amount of goods produced and services provided within that economy. And, therefore, GDP growth and economic growth are, essentially, the same thing.

Government Bonds (government borrowing)

Almost all governments borrow money to fund their operations (e.g. borrowing money to build a bridge; it then pays the interest with tax income). Governments usually borrow money by issuing bonds to investors.

If a government borrows in its local currency, it’s unlikely that they will ever not pay it back (e.g. default on it), because they can simply print more money. However, the value of their currency is a concern to potential investors. If a US investor lends Zimbabwe $1 million Zimbabwean dollars, she will almost certainly get paid back. But if Zimbabwe’s currency has plummeted in value in the meantime, then the $1 million Zimbabwean dollars that the investor gets back will be worth a lot less to them in US dollar terms (and so that would be a bad return for them).

Governments do borrow money in currencies other than their own sometimes (like US dollars), especially emerging market countries. The ability of the country to pay back that money becomes the main risk for investors.


A hedge is an investment that, to some degree, offsets another investment. So, if an investor wants to buy the stock of a Japanese company but doesn’t want any exposure to the Japanese Yen, then the investor could buy the stock but create a hedge by entering another investment whereby they agree to sell Yen at some point in the future. The investor would thus be exposed only to stock price move and not the value of the Yen (in theory, at least).

Hedge Fund:

The term hedge fund has become very broad, but it usually refers to funds that try to make money no matter what the overall markets do. They do this, usually, by employing strategies that can bet on various different types of things (like stocks, bonds, currencies and interest rates) and do so by setting themselves up to profit when such things go up or down in value. This contrasts with, for example, a traditional fund that can only buy stocks (and can’t set themselves to profit when stocks go down, e.g. by “going short”). Such a fund, typically, is much more exposed to broad movement of the markets (called “beta”). Hedge funds should be primarily exposed to “alpha,” which means that they “neutral” to the overall market.


Goods/services that are bought from a company in a foreign country. For example, when America buys Canadian lumber, it is “importing” it. Imports contribute negatively to the size of a country’s economy because the money that is paying for the good/service is leaving the country.


The rate at which prices increase. In a healthy economy, prices usually increase about 2% per year. Deflation is when prices decline and that’s bad because it causes people and businesses to hold off making purchases: why buy a new car today if it will be cheaper in the future? A little bit of inflation is good for the economy. But too much (hyperinflation) can be devastating because it makes one’s savings virtually worthless. Central banks, like the US Federal Reserve, try to maintain healthy rates of inflation by using their power over interest rates to either encourage economic growth by lowering interest rates (because businesses are encouraged to take loans to build factories, for example) or to keep growth from overheating by raising interest rates (because growth that is too low can lead to deflation while growth that is too high can lead to inflation).

Initial Public Offering (IPO):

The process by which a private company becomes a publicly traded entity, e.g. many investors can buy and sell its shares on a daily basis on a public stock exchange (like the NYSE).

Investment Banks:

It’s the part of a bank that focuses primarily on advising and raising money for companies (in the form of helping them to issue new stock or bonds to investors). An investment bank also typically trades stocks, bonds and other investments in the secondary market, partly as a way to help create a trading market for the stocks and bonds that it helped create (on behalf of the companies that issued them). Goldman Sachs is one of the world’s most well-known investment banks.


Interest is what you pay to borrow money – or what someone pays you to borrow money from you. So, when you take out a loan from a bank, you have to pay a set amount of money (like, say, 3% per year) for the privilege of borrowing that money. Equally, when you buy a bond, you are effectively lending money to a company or government and, as such, are paid interest each year (i.e. a cash payment) by the borrower in order to compensate you for the fact that you are lending them your money.

Investment Management:

It’s a fairly general term that refers to the act of managing investments, including stocks, bonds, real estate and other “assets.” The term “investment manager” refers to the person or company doing the management, e.g. choosing which stocks to buy, or choosing what proportion of the total investment value to invest in, say, stocks versus bonds.


Leverage can be simply thought of as “borrowing.” A company that is highly leveraged has borrowed a lot of money to fund its operations – and must eventually pay that money back. Technically, a leverage ratio measures how much a company has borrowed versus how much its shares are worth. With highly leveraged companies, investors that own the stock can be in trouble because investors that are owed the money have a priority claim on the things the company owns if the company can’t pay back their debt. It is, therefore, possible for owners of the stock to be left with nothing – while debt investors can at least take the companies belongings and try to sell them for cash (or just take control of the company and try to do a better job of running it).


Techincally a “profit margin” is the amount of profit a firm makes per dollar of revenue. So, if something sells for $100 and the firm makes a $10 profit, its profit margin is 10%. Typically, firms in new areas, like some kinds of technology, have high margins while those in established industries have lower margins.

Mergers and Acquisitions:

A merger is when two companies combine and an acquisition is when one company buys another. As the terms are somewhat overlapping (a company can be “bought” and then “merged” into the existing operations) they are often used as one term, as in “M&A”.

Market structure:

The number of firms that produce a certain type of product. For example, there are two major producers of aircrafts (Boeing and Airbus) and a few smaller ones (like Bombardier). But there are hundreds of thousands of independent convenience stores in America. The former is an example of an highly concentrated market structure (a.k.a. an oligopoly) – which typically has a very high barrier to entry and a strong ability to control prices. The latter is a much more competitive market where the companies have very little pricing power (i.e. one store cannot sell a chocolate bar for $2 when everyone else sells it for $1).


It’s just a loan, i.e. money that someone borrows from a bank, except that it is secured by real estate. So, for example, if you have a mortgage on your home but you fail to pay the interest that you owe each month, the bank can take ownership of your home. Since so many people use a mortgage to buy a home, mortgage rates (i.e. the interest rates on mortgages) have a huge impact on property prices.

Negative Interest Rates:

Much like the general term “interest rates,” the phrase negative interest rates can refer to a few different things. In the context of a central bank instituting negative interest rates, it typically means that the central bank has created a rule whereby banks that deposit their own money with the central bank have to pay a fee to do so (in normal times, those banks would expect to receive interest payments from the central bank, much as you would expect to receive interest in your bank account). The idea is that banks will choose to lend out the money to people and businesses instead of keeping it with the central bank. The phrase “negative interest rates” is also sometimes used to describe a scenario where bonds are trading at such a high price that an investor who buys them is guaranteed to lose money if they were to hold the bond until it expires. This should really be termed “negative yields,” but the term “negative interest rates” is often used interchangeably (note: such bonds often trade at such high prices because central banks are directly buying the bonds, thus driving up their price).


Just as it sounds, an option gives its holder the right but not the obligation to conduct a transaction. Options typically exist to buy or sell a stock or a stock index (like the S&P 500) at a certain price. If an investor holds an option to buy a stock for less than its current price or to sell a stock for more than its current price then that option is said to be “in the money.” Options derive their value primarily from the value of the thing that the option is on (e.g. the stock price), but things like the length of time that the option lasts for (e.g. 1 month, 3 months or 1 year) and the probability of the underlying achieving the option price also have an impact on the option’s value. It’s important to remember that while the value of the option is related to the value of the underlying investment, the option itself has its own value.

Peer-to-Peer Lending:

A new-ish online business model that matches borrowers and lenders. In theory, because these companies operate with less overheard (i.e. they are online only and are generally less regulated than a typical bank), they have lower cost and can provide lending services at lower rates than traditional banks. However, after a few years of popularity, the business model appears to increasingly struggle to differentiate itself from more traditional lenders.


It measures how efficient it is to produce goods and/or services in an economy. Technically, that means how many inputs (like workers or machinery) it takes to get a certain amount of output. The fewer inputs that are required for a set amount of output, the higher the productivity. Companies try to boost productivity because if they can produce more output with the same inputs than their costs go down – and their profits go up. From the perspective of the overall economy, high productivity is usually a good sign – it shows that innovation is occurring (i.e. improved technology is typically necessary for productivity to improve). And generally speaking, innovation leads to higher standards of living for the overall population (for example, better healthcare productivity = longer lifespans).

Price-to-earnings (P/E) Ratio:

This is best conceptualized as the value of the company versus its annual profit (technically, it’s the value of the company’s stock vs its earnings). Companies that are “richly” valued are worth a lot relative to their profits – that’s usually because their profits are expected to increase quickly in the future and, therefore, investors are paying up for access to those future profits. Stocks with “cheap” valuations are usually mature or struggling companies, i.e. they are unlikely to exhibit much profit growth (although this doesn’t necessary mean they are bad investments).

Private Equity:

Private equity is the stock of a company that is not a “public” company and therefore whose shares are not freely traded on a stock market. The place where you get your haircut is probably a “private” company (albeit a very small one). A private equity firm is an investment firm that invests in such companies (usually quite large private companies).

Quantitative Easing:

It’s when a central bank, like the US Federal Reserve, directly purchases government bonds from the market (sometimes it purchases other, similar bonds). The result is, in theory, lower interest rates for the economy: it’s cheaper for people and businesses to borrow money. They, in theory, do things like buy cars or build factories, e.g. stuff that stimulates the economy. It also physically puts cash into the economy (because the bonds are bought with cash). And that cash, in theory, gets put to work doing things – like buying cars and building factories – that boosts the economy.


Technically, a recession is when the size of the overall economy shrinks for two consecutive quarters (i.e. gross domestic product gets smaller). It, basically, is when the economy is getting smaller. Note that an economy actually shrinking is different than “slowing economic growth,” which is when an economy that’s growing begins to grow at a slower pace.


The term is used to describe significant changes that are made to a company. Those changes can be to things like its operations (e.g. separating various activities into different formal businesses) and/or its debt (e.g. agreeing with a company’s bondholders to give them shares in the company instead of paying them back in cash).

Return On Equity:

It’s the amount of money a company makes in profit as a percentage of the money that shareholders have invested in it. So, if a barber invests $100,000 in his barber shop and makes $30,000 profit after a year of business, then he’s made a 30% “return on his equity.” Its commonly used by banks as a measure of their profitability. For example, a small bank might make $100 million with their $1 billion of shareholders’ money while a large bank perhaps makes $500 million with $10 billion of shareholders’ money. The larger bank is making more money in absolute terms but the smaller bank is more profitable (in other words, investors would probably rather invest with the smaller bank). In that sense, it allows for different sized banks to be compared to one another.

Sales / Revenues / Profits:


The money that a company makes from selling goods/services to its customers not including the cost to the company of producing those goods/services. If Apple sells one iPhone for $750 then that counts as $750 in “sales.”


It’s just like sales, but it includes other income like fees or interest. So, it’s an all-inclusive number of how much money a company brought in as a result of all of its activities. Again, it does not include costs. So let’s say Apple sells $10 billion worth of iPhones in 2015 and gets paid $1 billion in interest for all the cash it holds then it’s ‘revenues’ are $11 billion for 2015 (these numbers are not reflective of Apple’s actual numbers, by the way – it’s just an example).


Very simply, Profit is just Revenues minus Expenses. In other words, all of the money that it takes in minus all of the money that it pays out.

Short or ‘To go short’:

When an investment is setup such that it will profit if the price of something goes down. It can be a profitable strategy (i.e. “shorting” the oil price in 2014 would have yielded a big profit), but the potential loss is infinite. That’s because in order to close out a short position, an investor must buy back the investment. Since the price of oil or a stock or any other investment can go up an infinite amount, it can be extremely costly to be wrong when shorting something (as opposed to going long something, which has a maximum loss of 100% of your investment). Think: if you short oil at $50, but buy it back at $150 then you will have lost $100 (150-50 = 100) – and that’s a 200% loss. So, the big potential loss often leads to “short covering” (see below).

Short Squeeze:

When traders initially bet on something, like oil, declining in price, but then realize the price is actually going up and frantically buy oil in order to minimize their losses.

Service Sector:

It’s perhaps best defined as what it’s not: it’s not manufacturing, construction nor agriculture. Most every other industry – from accounting to law to restaurants to leisure activities – is part of the “service sector.” In big, developed economies, it tends to make up the bulk of economic activity (e.g. it’s about 80% of the economy in the US).

Streaming Services vs Cable:

In simple terms, ‘streaming’ is delivering content via the internet. The content isn’t downloaded and then viewed (like it would be with the Apple store) but it’s streamed continuously from a source (like Netflix). It has emerged as a major threat to traditional “cable TV,” which is delivered to viewers, literally, via a cable (using radio frequency). That’s why the term “cord-cutting” refers to households that stop paying for cable and instead stream their entertainment content through their internet connection.


Companies often combine because they have overlapping areas that can benefit from the new partnership. This might be complementary technology or geographical footprints that would allow the companies to increase their revenues if they combined. They could also be areas where duplicate costs could be eliminated: for example, one company only really needs one head office and the marketing budget for one large brand could be lower than for two smaller brands. The former are called “revenue synergies”, while the latter are called “cost synergies”, e.g. they decrease costs (as opposed to boosting revenue).

Tax Inversion Deal:

A deal in which a company (usually US based) becomes a part of a bigger company that has its headquarters in a lower tax jurisdiction (like Ireland, for example). Many US companies have done this in the past because they can access a lower tax rate overseas but also because they can then use cash that has been “parked” overseas to avoid paying US taxes (it can be brought back to the US to do things like pay a dividend or invest in new businesses – but only when the company is no longer American). For more info, see our article on Apple’s CEO, Tim Cook, calling it “total political c*ap”.

Unemployment Rate:

It is the percentage of people not working who are actively seeking work. It is not just the percentage of people that are not working. If someone gives up looking for a new job, they cease to be counted among the “unemployed.” That’s a major reason why, despite its prominence, the unemployment rate can be somewhat misleading. Economists also look at the “labor force participation rate” which measures how the percentage of adults that are either employed or are actively looking for work. Since the financial crisis, the unemployment rate has recovered to go back down to a very low level but the participation rate remains historically quite low: that suggests that are actually more people who could be working but aren’t (and those people could ‘re-enter’ the labor force if employment opportunities arise).

Venture Capital:

It’s a type of investor that typically invests in private, early-stage companies. Usually, venture capital firms invest in companies that they think will grow very quickly in the near future due to, for example, some sort of innovative technology that the company is developing. Venture capital funds usually take an ownership stake in the companies in which they invest (rather than, say, lending them money) and hope to sell that stake at a much higher valuation after, typically, five to ten years.


Volatility is a statistic that measures the differences between returns of an investment over a given time period: the greater the difference, the greater the volatility. Generally, the higher the volatility, the more risky it is considered to be. Note that volatility refers both to positive and negative moves, but the nature of markets is such that negative moves typically occur more dramatically than positive moves (and, therefore, high volatility is often associated with negative performance).


Refers to what has occurred since January 1st of the current year. E.g. “the stock is up 10% year-to-date” means that the stock rose by 10% from January 1st until today.