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Fidelity > Class > Flashcards

Class Flashcards

1
Q

Inflation

A

Things are more expensive

Measured through an index that takes a basket of products

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2
Q

Business cycle

A

-

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3
Q

GDP rising = peak

A

Expansion
More jobs
More money
Low unemployment rate

Stimulate the economy
With more dollars= people are spending more
Inflation=increases
Companies rise prices

With all the spending in money=inflation= Fed will increase interest rates=GDP goes down and begins contraction=if continues past 2 quarter and 18 months past that=recession

Problem for fixed income

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4
Q

Inflation= primary factor in purchasing power risk

A

-

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5
Q

GDP lowering= trough

A 
Less money 
Less jobs 
Lower interest rates 
Inflation down 
% IR down 
Higher unemployment
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6
Q

Business cycle stages

A

-

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7
Q

Inflation rises=

A
  • Interest rates rise
  • Money market instruments become a more attractive investment RIGHT when inflation happens
  • short term is best
  • don’t want long term obligations
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8
Q

Leading Indicators: future

A

Initial unemployment claims

M2=measure of where we are at
Higher=better position
Lower=worse position

Housing starts

Helped wanted ads

Manufacturer new orders

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9
Q

Lagging indicators: past

A 
Corporate profits 
Personal savings 
Prime rate (last rate to move) 
Duration of unemployment 
Inventory
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10
Q

Coincident indicators: right now

A
  • GDP right now
  • CPI index (inflation up or down)
  • Personal income (up or down for individuals) right now
  • Industrial production (how much are we producing) right now
  • employment RIGHT NOW
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11
Q

Cyclical industries:

A 
If things are good these do good:
Buy a new Cars 
Appliances 
Durable goods 
Steel products
Don’t need to have but want

If things are bad these do bad

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12
Q

Counter cyclical:

A

If things are bad, these do good:

  • Basic foods (grocery stores) cheaper
  • Precious metals

If things are good, these do bad

*counter to a downturn

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13
Q

Defensive industries

A

Don’t go up and down a ton regardless good or bad:

Clothing 
Bread 
Utilities 
Pharmaceuticals 
Drug/alcohol
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14
Q

Growth industries:

A

Emerging markets (market that is new up and coming)

Growth

Blue chip companies (best companies)

  • good track record
  • good dividends
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15
Q

Special situation industries:

A

Spin offs

Mergers

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16
Q

Fiscal policy

A

Changes:
Taxes
Spending
Transfer payment

Government

17
Q

Keynesian economic policy

A

Increase consumption

Government spending and then tax more to get the money back

18
Q

Supply side economic policy

A

Reverse from Keynesian
Reduce taxes and incentives companies to do more
-hire mire people
Less government spending and more letting business lead the way

19
Q

Monetary policy

A

Reserve board

M1:what’s in checking account, amount of money to be spent (smallest)
M2: M1 and different time deposits (cd) get to it quickly but takes alittle longer
M3: M1 and M2 even more?

L: broadest

20
Q

Short term lending rates

A

Pretty boys don’t fight

P=prime rate=highest rate
Bank—>commercial
Last rate to change

B= broker call
Bank—>broker dealer

D= discount
US treasury—> bank
Fed directly controls

F=fed fund rate= lowest rate
Bank—>bank

Fed changes=discount changes=broker call changes=prime rate changes

21
Q

Repurchase agreements

A
  • Loosen credit
  • Prime dealer sells bonds to the fed and agrees to repurchase them at a later date

Small risk

Fed giving money to banks.. injecting cash into the money supply so banks can loan money to individuals

22
Q

Reverse repurchase agreement

A

Tightening

Fed sells bonds to banks and agrees to repurchase them at a later date

Fed sells bonds to dealer= less money for banks to loan out

23
Q

Tools of the fed

A

DORM

24
Q

Balance of trade

A 
Deficit 
-Exporting less than we are importing 
Dollar to decrease in value over time 
Paying for products
GDP going down
Surplus
Exporting more importing less
dollar is stronger 
Selling stuff and money coming in
GDP going up
25
Q

Balance of trade generality

A

Getting paid in foreign currency
Exports buy puts
Importers buy calls

Getting paid in US dollar
Exports buy calls
Imports buy puts

26
Q

Something analysis

A 
Gross sales 
        Expenses 
Operating income 
        Bond interest expenses 
Net income before tax 
        Taxes
Net income after taxes
        Preferred dividend 
Earnings for common 
        Common dividend 
Retained earnings
27
Q

Technical analysis

A 
What are other people doing 
What are the trends 
What do the charts say
History of what charts say
Price and volume histories

Fidelity (12 decks)

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