Here’s a guest post from a fellow blogger who is truly inquisitive about the economy, stock market, and all things financial. Investment terms can be overwhelming and hard to understand, but if you study up on just a few terms a week, you can become a savvy investor in no time — or at least you can talk like one!

Learn New Wall Street Terms

by InquisitiveAboutFinance

This latest downtrend or recession has taught a common man many new financial terms. These terms are not new to the financial sector, they were just buried under the good economy for some time. Now, they are becoming part of our everyday conversations.

1. Ponzi Scheme: A Ponzi scheme is also known as a pyramid scheme. It’s a fraudulent investment plan promising very high returns to investors from their own money or money paid by earlier investors rather than from any actual profits earned. One common way for the Ponzi scheme to attract investors is with the promise of high short term returns. This scheme was named after Charles Ponzi who made this scheme popular in the 20s. Thanks to Bernie Madoff this scheme was brought again into the limelight!

The US Federal Trade Commission says that because of the pyramid’s very nature, at least 70 percent of those who invest in a Ponzie Scheme will NOT see any returns and will lose their investment. It is mathematically impossible to recruit enough investors to pay out to all levels of the pyramid.

2. Uptick Rule: According to Wikipedia, “The Uptick Rule is a securities trading used to regulate short selling in the markets”.  Uptick is the selling of stock or securities at a higher price than its last sale price. The Uptick Rule is a US regulation that a security cannot be sold short unless the trade before the short sale is at a lower price from when the short sale took place.

In 2007 this rule was eliminated in order to study its effectiveness. The Uptick rule is something Jim Cramer had been proposing to bring back for quite some time in his famous Mad Money. Due to the recent sell off in the markets, the SEC and Rep. Barney Frank announced plans to restore the Uptick Rule. We will see what long term effect this will have. Short term results have been good as the DOW, S&P and NASDAQ surged soon thereafter.

3. Deflation. Although practically everyone knows what deflation is, no one has heard this term so widely spoken until recently. Deflation in simple words is reduction in prices of goods and services. With recent decline in home, oil, and energy prices the economy is moving towards a less inflationary or into a deflationary mode. The FED is injecting a lot of amounts of money to increase inflation and at the same time kept the inter bank short term ratios very low. Typically the economy is in higher inflationary mode before entering a recession.

4. Hedge Fund: A type of fund that can use more aggressive strategies than other investments or mutual funds are allowed. Hedge funds are mostly used by the wealthy (and by institutions) since the minimum investment required is from $250,000 to over $1 million and no more than 100 investors are allowed into each fund.  They are exempt from many of the regulations that most mutual funds have to abide by. One of the common ways hedge funds offset their losses is by short selling the market. Short selling refers to selling an investment in the hope of buying it at a lesser price.

Do you have any new terms to add to this list?

The e-mail that accompanied this post made me really appreciate the many kind and wonderful people I’ve met with this blog… and there’s a lot of them! Of course there were some jerks in the beginning, but I don’t even remember their names. It’s the good ones that make a lasting impression on me and this guy, Sean, is one of them! Here’s an excerpt from his e-mail:

“I don’t even have the time or money to invest into the website I was building, but I checked yours and saw that you were sick. It reminded me that money isn’t everything and health is the most precious thing. I wanted to pay my respect by making a post. I know this economy is full of negativity. It only takes a change in prospective for people to appreciate what was right there in front of them from the start.”

This guest post is a thought provoking op-ed (opinion editorial) about America in a time when it’s so easy to feel negative about our circumstances. After the touching e-mail, I had to know more about Sean and I asked for a bio. As it turns out, Sean’s bio is an interesting story all on it’s own. He was a successful day trader who lost EVERYTHING in this economic downturn!  He’s only 22 and full of ambition, with an attitude like his I have no doubt Sean will succeed in whatever path he chooses.

Thanks Sean, I’m so glad to have met you!

America: A change in perspective
by Sean Sweeney

America is beautiful.. America is dandy.. America is like a baby reaching for candy..  Now I understand that this is a make money online blog, but I think a post of this nature is suitable for any blog. Sometimes it takes a dramatic fall for us to appreciate all that works around us. And even then, do we appreciate it as much as we should? I love you America.. I just don’t realize what we have here.. CHALLENGE: Lets 360 our lives for a second. Lets trade places with a 3rd world country.

Lets live in a place where government is against us. Lets not choose what we do for a living, how we eat and when. Lets have no choice but to stand on our own.  If Americans were stripped of the only lifestyle they know, do you think they could survive? When did the distinction of being American grow hand-in-hand with being dependent?  In such a fast paced world of innovations and free will, it gets too easy to lean. To lean on family, friends, the government, and even the simple tradition of visiting your favorite corner store every morning.  What has been seen for decades as advancements, and convenience, and giving to our lives. What has been conceived as a right of passage to grow with everything that is offered to us, has finally shown to be a front. A front to something ugly and something purposely overlooked.

While all this time we indulged in the fruits of new-aged living.. we as Americans were losing. The more we were given, the more we wanted. The more we wanted, the less satisfied we were with the “average” of today. The less satisfied we were, the more delusional we became to what really mattered.  In a place where it is more than accepted to have our own face. We chose not to. In a place where individuality and freedom cemented the foundation of our existence, we chose not to remember. Instead we followed one another. We lean so easily on those that lean on us.  While the rest of the world is born with two legs, Americans should be born with three or four, if not more. With all the power in the world granted to us.. we have the power to choose our paths and the power to live freely.  Yet we are born crippled. Crippled by our inability to reinforce where we come from. Crippled by the over indulgences that we familiarize with common practice.

In the spirits of a 360 with a 3rd world country. Is it at all fair to think that these new Americans would appreciate what we take for granted?  These people that appreciate a blade of grass and a roof. Would they willingly work tooth and nail day in and day out to maintain this new found lifestyle?  Would they let freedom be lost? Would they? I’d love to hear your views on the current economic turmoil which American and the rest of the world is facing.

I hope you get well in a hurry JJ.

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