Basel II

What Does it Mean?
------------------------------------------------------------
A set of banking regulations put forth by the Basel Committee on Bank Supervision, which regulates finance and banking internationally. Basel II attempts to integrate Basel capital standards with national regulations, by setting the minimum capital requirements of financial institutions with the goal of ensuring institution liquidity

Investopedia Says:
------------------------------------------------------------

A set of banking regulations put forth by the Basel Committee on Bank Supervision, which regulates finance and banking internationally. Basel II attempts to integrate Basel capital standards with national regulations, by setting the minimum capital requirements of financial institutions with the goal of ensuring institution liquidity

Spillover Dividend

What Does it Mean?
------------------------------------------------------------
A type of dividend in which the payment year and the taxable year occur at different times. Most often, this occurs when the dividend has been declared near the end of the calender year (during the fourth quarter), but the actual distribution date of the dividend payment does not occur until the first quarter of the following year.

Investopedia Says:
------------------------------------------------------------

For example, XYZ Corporation declared that shareholders on record on December 16, 2010, would be entitled to receive a $2 dividend on each share that they own - with the distribution date on March 1, 2011. For income tax related purposes, the shareholders will need to include the $2-per-share dividend when they file their annual tax return for 2010, not 2011.

Primary Earnings Per Share (EPS)

What Does it Mean?
------------------------------------------------------------
One of two methods for categorizing shares outstanding. The other method is fully diluted earnings per share (EPS). The term "basic EPS" is more commonly used instead of "primary EPS." Basic EPS is the simpler method to categorize outstanding shares, as it uses the number of shares currently available for trading. To calculate basic EPS, divide net income by the number of shares outstanding.

Investopedia Says:
------------------------------------------------------------

Diluted EPS is more complicated to compute, but it is considered more conservative because it takes into account all the outstanding convertible shares, warrants and options that could potentially be converted to shares that are able to be traded. If none of these financial instruments are outstanding, diluted EPS and primary EPS will be equal.

EPS can be calculated in many different ways depending on the accounting methods and assumptions the company uses; investors taking EPS into account in any decision-making process should understand how the EPS figure they are using was calculated.

Sinking Fund Method

What Does it Mean?
------------------------------------------------------------
A technique for depreciating an asset in bookkeeping records while also generating money to purchase a replacement for the asset when it reaches the end of its useful life. Under the sinking fund method, the business sets aside an amount of money to invest annually so that the principal plus the interest earned in the fund will be enough to replace the asset.

Investopedia Says:
------------------------------------------------------------
The amount of money that needs to be added to the asset-replacement fund each year is calculated by determining how much it will cost to replace the asset, how many years the asset is expected to last and what rate of interest can be earned as well as how much can be earned through the effects of compound interest. The sinking fund method is not common, and is not desirable when interest rates cannot reasonably be predicted.

Scrap Value

What Does it Mean?
------------------------------------------------------------
The worth of a physical asset's individual components when the asset itself is deemed no longer usable. The individual components, known as "scrap," are worth something if they can be put to other uses. Sometimes scrap materials can be used as is; other times they must be processed before they can be reused. An item's scrap value is determined by the supply and demand for the materials it can be broken down into.

Investopedia Says:
------------------------------------------------------------
For example, John has a very old car with a transmission that is shot. Because the cost to replace the transmission ($2,000) is significantly more than what the car would be worth even with a working transmission ($1,000), John decides to sell the car for its scrap value. He takes it to a junkyard where the car's usable parts and metal are valued at $500. Therefore, $500 is the car's scrap value

Special Drawing Rights - SDR

What Does it Mean?
------------------------------------------------------------
An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries. Created in response to concerns about the limitations of gold and dollars as the sole means of settling international accounts, SDRs are designed to augment international liquidity by supplementing the standard reserve currencies.

Investopedia Says:
------------------------------------------------------------
You can think of SDRs as an artificial currency used by the IMF and defined as a "basket of national currencies". The IMF uses SDRs for internal accounting purposes. SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries' governments.

Aged Assets

What Does it Mean?
------------------------------------------------------------
Equipment that has outlived its useful life. Aged assets might include equipment that is still functional, but is expensive to operate and maintain; equipment that still works, but breaks down frequently, disrupting operations; or equipment that is broken and is too expensive to repair. Proper management of aged assets is a significant issue in industries that rely heavily on equipment, such as the oil and natural gas industry

Investopedia Says:
------------------------------------------------------------
Not only is it expensive to maintain and replace aged assets, they can also create serious safety hazards and disrupt operations if they fail. Aged assets, particularly those used for defense, transportation, manufacturing and construction, can sometimes be cost-effectively remanufactured to make them useful and efficient again.

Five Percent Rule

What Does it Mean?
------------------------------------------------------------
A regulation that requires a broker to use fair practices and ethical guidelines when setting the commission rates. The five percent rule stipulates that the broker can change the commission percentage by 5%, either up or down, but can only do so if the change can be legally justified. The rule also applies to other transactions, including proceeds sales and riskless transactions.

Investopedia Says:
------------------------------------------------------------
The five percent rule is one of the rules of fair practice set forth by the National Association of Securities Dealers (NASD), and which must be followed by members of the organization. The rule itself does not set forth any calculation criterion. Instead, it indicates that the broker should follow guidelines. The rule itself has several exceptions.

Basel III

What Does it Mean?
------------------------------------------------------------
A comprehensive set of reform measures designed to improve the regulation, supervision and risk management within the banking sector. The Basel Committee on Banking Supervision published the first version of Basel III in late 2009, giving banks approximately three years to satisfy all requirements. Largely in response to the credit crisis, banks are required to maintain proper leverage ratios and meet certain capital requirements

Investopedia Says:
------------------------------------------------------------
Basel III is part of the continuous effort made by the Basel Committee on Banking Supervision to enhance the banking regulatory framework. It builds on the Basel I and Basel II documents, and seeks to improve the banking sector's ability to deal with financial and economic stress, improve risk management and strengthen the banks' transparency. A focus of Basel III is to foster greater resilience at the individual bank level in order to reduce the risk of system wide shocks

Power Broker

What Does it Mean?
------------------------------------------------------------
An individual who, through his or her connections, is able to influence the decisions of other parties. A power broker is typically an industry insider, and is familiar with other individuals and groups able to exert influence or make decisions. Power brokers may be elected officials, business leaders or individuals who are "connected".

Investopedia Says:
------------------------------------------------------------

Because of the influence power brokers have on an organization's decision makers, they are able to command high fees and the attention of individuals, organizations and companies looking to make headway with a particular project or goal. For example, industry lobbyists and media personnel familiar with the ins and outs of a particular issue are able to reach and influence decision makers faster than those who are unfamiliar with key players.

Invitation For Bid - IFB

What Does it Mean?
------------------------------------------------------------
When a company or organization provides detailed project specifications and allows contractors to send in their proposals indicating how much the project will cost to complete. Because the focus of the invitation for bid is on the bidder's price for project completion, there is less emphasis on the bidder introducing its own ideas. This separates the IFB from a request for proposal (RFP).

Investopedia Says:
------------------------------------------------------------

Companies typically choose the qualified bidder with the lowest bid. Going with the lowest bid can result in issues if the contractor isn't of sufficient quality, so it is important for the company creating an IFB to be very clear in what qualifications a bidder should possess and what the project specifications are.

Because a well-written IFB does not focus on the bidder producing ideas, the bidder can focus on the potential costs associated with completing a project and can produce a bid faster.

Hedge Fund Manager

What Does it Mean?
------------------------------------------------------------
The individual who oversees and makes decisions about the investments in a hedge fund. Managing a hedge fund can be an attractive career option because of its potential to be extremely lucrative. To be successful, a hedge fund manager must consider how to have a competitive advantage, a clearly defined investment strategy, adequate capitalization, a marketing and sales plan and a risk management strategy..

Investopedia Says:
------------------------------------------------------------
Individuals wishing to invest in hedge funds must meet income and net worth requirements. Hedge funds can be considered high risk because they pursue aggressive investment strategies and are less regulated than many other types of investments. The hedge fund manager is responsible for the investment decisions and the operations of the fund.

Chinese Hedge

What Does it Mean?
------------------------------------------------------------
A position that protects investors from risk, involving a short position in a convertible security and a long position in its underlying asset. The Chinese hedge looks to capitalize on mispriced conversion factors. The trader will profit when the underlying asset depreciates, diminishing the premium on the convertible security.

Also known as a "reverse hedge".

Investopedia Says:
------------------------------------------------------------
The Chinese hedge is a type of convertible arbitrage. A convertible security, such as a bond with an option to convert into shares, sells at a premium to reflect the cost of the option. The trader hopes that the underlying asset will drop in value, making the short position on the convertible profitable. By hedging his short position through longing the underlying, the investor is protected by large appreciations.

This is the opposite of executing a "set-up hedge".

Buy Limit Order

What Does it Mean?
------------------------------------------------------------

An order to purchase a security at or below a specified price. A buy limit order allows traders and investors to specify the price that they are willing to pay for a security, such as a stock. By using a buy limit order, the investor is guaranteed to pay that price or better, meaning that he or she will pay the specified price or less for the purchase of the security.

While the price is guaranteed, the filling of the order is not. In other words, if the specified price is never met, the order will not be filled and the investor may miss out on the trading opportunity.

Investopedia Says:
------------------------------------------------------------
A buy limit order ensures that negative slippage will not occur - the buyer will not get a worse price than he or she expects. Buy limit orders provide investors and traders with a means of precisely entering a position. For example, a buy limit order can be put in for $2.40 when a stock is trading at $2.45. If the price dips to $2.40, the order will automatically be executed.

Tax Lien Foreclosure

What Does it Mean?
------------------------------------------------------------
The sale of a property resulting from the property owner's failure to pay tax liabilities. A tax lien foreclosure occurs when the property owner has not paid the required taxes, including property taxes and federal and state income taxes. A statutory lien is first placed against the property of the person who has failed to pay taxes. The government that is owed the taxes (for example, the federal government in the case of unpaid federal income, self-employment, gift or estate taxes) will move to repossess the property in an attempt to recover the debt.

Investopedia Says:
------------------------------------------------------------
Properties that are foreclosed due to nonpayment of taxes are deemed tax lien foreclosures. Tax liens can be specific liens against specific property, such as with property taxes and special assessment liens. Tax liens may also be general liens against all property of the defaulting taxpayer, such as with federal or state income tax liens. Tax laws prevent the the former resident of the property (who failed to pay taxes) from bidding at the auction.

Death Star IPO

What Does it Mean?
------------------------------------------------------------
A company's highly anticipated initial public offering (IPO) that becomes a blockbuster with investors. The Death Star IPO is a reference to the DS-1 Orbital Battle Station, also more popularly know as the "Death Star," from the movie "Star Wars." This planetary weapon had the ability to destroy entire planets with a single beam, resulting in a massive explosion. In the stock market, stocks that have the ability to explode out of the gate are usually highly anticipated tech stocks, although stocks from other sectors can also fit the bill.

Investopedia Says:
------------------------------------------------------------
Broadly speaking, to be considered a Death Star IPO, the IPO would have to be a multi-billion dollar offering that is also in very high demand with investors. Some examples of Death Star IPOs include Google's IPO in 2004 and Yahoo! in 1996. Both IPOs were highly anticipated events and both stocks exploded on stock markets once the shares became publicly available.

The Celler-Kefauver Act

What Does it Mean?
------------------------------------------------------------
A 1950 refinement of previous antitrust legislation dealing primarily with mergers. The Celler-Kefauver Act targets mergers where companies purchase suppliers, and occasionally competitor's suppliers, in order to secure production. The Clayton Act already contained language addressing horizontal mergers, but the Celler-Kefauver Act added vertical mergers and conglomerate mergers to the growing list of possible antitrust violations.

Investopedia Says:
------------------------------------------------------------
Vertical and conglomerate mergers aren't illegal under the Celler-Kefauver Act unless they significantly reduce competition. Similar to other antitrust acts, actions that reduce competition aren't always easy to classify under Celler-Kefauver. Both types of mergers raise the barriers for entry by making competitors internalize more production to match the cost savings that come from economies of scale. However, as long as there is at least a couple other companies capable of keeping up, barriers can be raised as high as the duo or trio can handle.

Tontine

What Does it Mean?
------------------------------------------------------------
A system for raising capital in which individuals pay into a common pool of money, and then receive a dividend based upon their share and the performance of investments made with the pooled money. The principle invested in the tontine is never paid back to the investor; rather the investor receives dividends until death. If a "shareholder" dies, his or her shares are divided up among the surviving investors

Investopedia Says:
------------------------------------------------------------
This system is attributed to Lorenzo de Tonti, a 17th century Italian banker. Government-sponsored tontines paid dividends while investors were alive, but once all the investors died the government would absorb all the remaining capital. Tontines were used in the United States as a way of increasing the sale of life insurance in the 19th century, but have fallen out of use and are illegal in many parts of the country.