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why does the treasury issue tips | tips first appeared in 1997 the official reason for their appearance is that there was strong demand from the investing public for inflation linked government securities 7 however some economists have been puzzled by the government s continued issuance of tips since they amount to a more expensive way to borrow than traditional treasuries 8 | |
what maturities do tips come in | the original tips were set at 20 year maturities in 2009 20 year tips were discontinued in favor of 30 year tips the u s treasury currently issues five 10 and 30 year tips 7the bottom linetips are among the many types of debt securities offered by the u s treasury department you can think of them as treasuries with a twist their principal value is tied to inflation to protect investors when the cost of living rises however they are often misunderstood it s important to know that inflation protection comes at a cost as most of these securities carry lower interest rates than other similar government bonds also bear in mind that at the time of maturity bondholders are paid the inflation adjusted principal or original principal whichever is greater in other words there s protection in place for instances when there s lots of deflation another common misconception is that tips are guaranteed to do well when inflation is rising and function as a great short term hedge when the cost of living suddenly spikes as 2022 taught us tips are bonds at the end of the day and bond markets react badly to rising interest rates | |
what is a treasury note | a treasury note t note for short is a marketable u s government debt security with a fixed interest rate and a maturity between two and 10 years treasury notes are available from the government with either a competitive or noncompetitive bid with a competitive bid investors specify the yield they want at the risk that their bid may not be approved with a noncompetitive bid investors accept whatever yield is determined at auction understanding treasury notesissued in maturities of two three five seven and 10 years treasury notes are popular investments and there is a large secondary market that adds to their liquidity interest payments on the notes are made every six months until maturity the income for interest payments is not taxable on a municipal or state level but is federally taxed similar to a treasury bond or a treasury bill 34treasury notes bonds and bills are all types of investments in debt issued by the u s treasury the key difference between them is their length of maturity for example a treasury bond s maturity exceeds 10 years and goes up to 30 years making treasury bonds the longest dated sovereign fixed income security 2treasury notes and interest rate riskthe longer its maturity the higher a t note s exposure to interest rate risks in addition to credit strength a note or bond s value is determined by its sensitivity to changes in interest rates most commonly a change in rates occurs at the absolute level underneath the control of a central bank or within the shape of the yield curve moreover these fixed income instruments possess differing levels of sensitivity to changes in rates which means that the fall in prices occurs at various magnitudes this sensitivity to shifts in rates is measured by duration and expressed in terms of years factors that are used to calculate duration include coupon yield present value final maturity and call features a good example of an absolute shift in interest rates occurred in december 2015 when the federal reserve the fed raised the federal funds rate to a range 25 basis points higher at that time it had been in the range of 0 to 0 25 but then was changed to 0 25 to 0 50 this increase in benchmark interest rates has had the effect of decreasing the prices of all outstanding u s treasury notes and bonds 5special considerationsin addition to the benchmark interest rate elements such as changing investors expectations create shifts in the yield curve known as yield curve risk this risk is associated with either a steepening or flattening of the yield curve a result of altering yields among similar bonds of different maturities for example in the case of a steepening curve the spread between short and long term interest rates widens as the long term rates increase more than the short term rates if the short term rates were to be higher than any of the longer term rates it would create a condition known as an inverted yield curve thus the price of long term notes decreases relative to short term notes the opposite occurs in the case of a flattening yield curve the spread narrows and the prices of short term notes decrease relative to long term notes | |
what is treasury stock | treasury stock refers to previously outstanding stock that was bought back from stockholders by the issuing company the result is that the total number of outstanding shares on the open market decreases treasury stock remains issued but is not included in the distribution of dividends or the calculation of earnings per share eps treasury stock is also referred to as treasury shares or reacquired stock investopedia laura porterunderstanding treasury stocktreasury stock is a contra equity account recorded in the shareholders equity section of the balance sheet because treasury stock represents the number of shares repurchased from the open market it reduces shareholders equity by the amount paid for the stock in addition to not issuing dividends and not being included in eps calculations treasury shares also have no voting rights the amount of treasury stock repurchased by a company may be limited by its nation s regulatory body in the united states the securities and exchange commission sec governs buybacks treasury stock can be retired or held for resale in the open market retired shares are permanently canceled and cannot be reissued later once retired the shares are no longer listed as treasury stock on a company s financial statements non retired treasury shares can be reissued through stock dividends employee compensation or capital raising companies can reacquire shares in different ways the most common methods to buy back their shares include a tender offer or through a direct repurchase a tender offer involves buying shares back from investors above the market price or at a premium companies that do direct repurchases buy shares on the secondary market just like regular investors do | |
when a company initially issues stock the equity section of the balance sheet increases through a credit to the common stock and the additional paid in capital apic accounts the common stock account reflects the par value of the shares while the apic account shows the excess value received over the par value | due to double entry bookkeeping the offset of this journal entry is a debit to increase cash or other asset in the amount of the consideration received by the shareholders treasury shares reduce total shareholders equity and are generally labeled as treasury stock or equity reduction there are two methods of accounting for treasury stock the cost method and the par value method the cost method is the most commonly used method by most public entities it uses the value paid by the company during the repurchase of the shares and ignores their par value the cost of the treasury stock is included within the stockholders equity portion of the balance sheet under this method it is common for stocks to have a minimal par value such as 1 but sell and be repurchased for much more | |
when shares are repurchased the treasury stock account is debited to decrease total shareholders equity the cash account is credited to record the expenditure of company cash if the treasury stock is resold later the cash account is increased through a debit while the treasury stock account is decreased this increases total shareholders equity through a credit notation on the balance sheet | a treasury paid in capital account is also either debited or credited depending on whether the stock was resold at a loss or a gain under the par value method the treasury stock account is debited to decrease total shareholders equity at the time of share repurchase this is done in the amount of the par value of the shares being repurchased the common stock apic account is also debited to decrease it by the amount originally paid over the par value by the shareholders the cash account is credited in the total amount paid out by the company for the share repurchase the net amount is included as either a debit or a credit to the treasury apic account depending on whether the company paid more when repurchasing the stock than the shareholders did originally corporations use buybacks to reduce the amount of shares in circulation thereby boosting their stock price in 2023 the top 500 companies spent nearly 800 billion to repurchase their own shares purpose of treasury stock | |
why do companies choose to purchase stock from investors there are a few reasons why companies buy and hold treasury stock including | example of treasury stockhere s a hypothetical example to show how treasury stock works let s say that abc company originally sold 5 000 shares of common stock with a 1 par value at 41 per share on its balance sheet the company had abc company has excess cash and believes its stock trades below its intrinsic value as a result it decides to repurchase 1 000 shares of its stock at 50 for a total value of 50 000 the repurchase creates a treasury stock contra equity account under the cash method the treasury account would be debited for 50 000 and cash credited for 50 000 under the par value method treasury stock would be debited for 1 000 1 000 shares x 1 par value common stock apic would be debited for 49 000 1 000 shares x 50 repurchase price 1 par value and cash would be credited for 50 000 the total shareholders equity is decreased by 50 000 in both methods assume the total sum of abc company s equity accounts including common stock apic and retained earnings was 500 000 before the share buyback the repurchase brings the total shareholders equity down to 450 000 | |
what are retired shares | retired shares are treasury shares that have been repurchased by the issuer out of the company s retained earnings and permanently canceled while other treasury shares can be reissued or sold on the open market retired shares cannot be reissued they have no market value and they no longer represent a share of ownership in the issuing corporation retired shares will not be listed as treasury stock on a company s financial statements | |
what is the cost method of accounting for treasury stock | the cost method of accounting values treasury stock according to the price the company paid to repurchase the shares as opposed to the par value using this method the cost of the treasury stock is listed in the stockholders equity portion of the balance sheet | |
what is the par value method of accounting for treasury stock | the par value method is an alternative way to value the stock acquired in a buyback under this method shares are valued according to their par value at the time of repurchase this sum is debited from the treasury stock account to decrease total shareholders equity the common stock apic account is also debited by the amount originally paid in excess of par value by the shareholders the cash account is credited by the total cost of the share repurchase the net amount is recorded as either a debit or a credit depending on whether the company paid more or less than the shareholders did originally the bottom linetreasury stock refers to shares that companies buy back thereby decreasing the number of shares outstanding this stock can be purchased through a tender offer to investors or via a direct repurchase corporations may choose to hold treasury stock to raise capital later through resale to boost shareholder interests or to retire them completely if you re interested in finding a company s treasury stock look under the shareholders equity section of its balance sheet | |
what is the treasury stock method | the treasury stock method is an approach companies use to compute the number of new shares that may potentially be created by unexercised in the money warrants and options where the exercise price is less than the current share price additional shares obtained through the treasury stock method factor into the calculation of the diluted earnings per share eps this method assumes that the proceeds a company receives from an in the money option exercise are used towards repurchasing common shares in the market understanding the treasury stock methodthe treasury stock method states that the basic share count used in calculating a company s earnings per share eps must be increased as a result of outstanding in the money options and warrants which entitle their holders to purchase common shares at an exercise price that s below the current market price to comply with generally accepted accounting principles gaap the treasury stock method must be used by a company when computing its diluted eps this method assumes that options and warrants are exercised at the beginning of the reporting period and a company uses exercise proceeds to purchase common shares at the average market price during that period the number of additional shares that must be added back to the basic share count is calculated as the difference between the assumed share count from the options and warrants exercise and the share count that could have been purchased on the open market example of treasury stock methodconsider a company that reports 100 000 basic shares outstanding 500 000 in net income for the past year and 10 000 in the money options and warrants with an average exercise price of 50 let s assume that the average market price for the shares in the last year was 100 using the basic share count of the 100 000 common shares the company s basic eps is 5 calculated as the net income of 500 000 divided by 100 000 shares but this number ignores the fact that 10 000 shares can be immediately issued if the in the money options and warrants are exercised applying the treasury stock method the company would receive 500 000 in exercise proceeds calculated as 10 000 options and warrants times the average exercise price of 50 which it may use to repurchase 5 000 common shares on the open market at the average stock price of 100 the additional 5 000 shares the difference between 10 000 assumed issued shares and 5 000 assumed repurchased shares represent the net newly issued shares resulting from the potential options and warrants exercise the diluted share count is 105 000 100 000 basic shares 5 000 additional shares the diluted eps is then equal to 4 76 500 000 net income 105 000 diluted shares the number of additional shares that must be added back to the basic share count is calculated as the difference between the assumed share count from the options and warrants exercise and the share count that could have been purchased on the open market | |
what are treasury strips | treasury strips are bonds that are sold at a discount to their face value the investor does not receive interest payments but is repaid the full face value when the bonds mature that is they mature at par strips is an acronym for separate trading of registered interest and principal of securities these types of bonds are generally known as zero coupon bonds since they pay no interest or coupon understanding treasury stripsas the acronym implies treasury strips are created when a bond s coupons are separated from the bond the bond minus its coupons is then sold to an investor at a discount price the difference between that price and the bond s face value at maturity is the investor s profit the coupons become separate investments that are sold separately treasury strips are issued by the u s treasury and backed by the u s government they were introduced in 1985 replacing previous zero coupon bond issues that were known as tigrs and cats strips cannot be purchased directly from the government they can be bought by brokerages for resale to investors history of stripsthe first treasury strips were offered in 1961 but these were not the same types of securities that are available today these original strips consisted of a package of re opened bills maturing over a period of several weeks they were eventually phased out in 1974 1after changes to the tax law a new strips program was initiated in 1985 this allowed bonds with a maturity greater than ten years to be divided into separate principal and coupon payments which could be traded as separate securities the following year the treasury established a facility for re constituting principal and coupon payments into the original securities 1as the new securities proved popular on the market eligibility was slowly expanded in 1997 the program was expanded from only the 10 year and 30 year securities to all treasury notes and bonds in 2000 it was expanded to include 5 year notes that had previously been ineligible 1the first strips were introduced in 1961 but they were later discontinued the strips that are available today were initiated in 1985 coupon strippingthe process of detaching the interest payments from the bond is called coupon stripping the coupons become separate securities with the principal payments due at maturity no interim coupon payments are made along the way for instance a 10 year bond with a 40 000 face value and a 5 annual interest rate can be stripped assuming it originally pays coupons semi annually 21 zero coupon bonds can be created including 20 semi annual coupon payments and the bond itself each stripped coupon has a 1 000 face value which is the amount of each coupon all 21 securities are distinct and are traded separately in the market advantages of treasury stripslike all treasury securities strips are backed by the full faith and credit of the u s government which is considered extremely unlikely to default this makes them extremely attractive to investors seeking a safe investment strips are also extremely simple instruments with predictable costs and payoffs since there is a wide selection of maturity dates an investor can simply choose the strip that best fits the date when they may need cash this helps investors prepare for specific goals 2the required capital outlay is relatively small while the minimum institutional purchase of treasury bonds is 10 000 a strip based on bond interest may cost only a few hundred dollars moreover they have an active secondary market and it is fairly straightforward to invest in strips through a tax advantaged retirement account 2strips popularitystrips are a popular choice for fixed income investors they have extremely high credit quality because they are backed by u s treasury securities since strips are sold at a discount investors do not require a large stash of cash to purchase them assuming the strips are held to maturity their investors know the precise payouts they ll receive there is a robust secondary market for treasury strips with individual strips trading at market value until they reach maturity strips also offer a range of maturity dates since they are based on the dates of the interest payments if an investor wishes to sell a bond prior to its maturity the market has enough liquidity to accommodate the transaction tax considerationsgenerally speaking taxes are due on the interest earned each year even though there is no cash payment until the bond reaches maturity or the strips are sold however this tax can be delayed with a tax deferred account such as an individual retirement account ira each holder of strips receives a report detailing the amount of taxable interest income earned | |
treasury yield is the effective annual interest rate that the u s government pays on one of its debt obligations expressed as a percentage put another way treasury yield is the annual return investors can expect from holding a u s government security with a given maturity | treasury yields don t just affect how much the government pays to borrow and how much investors earn by buying government bonds they also influence the interest rates consumers and businesses pay on loans to buy real estate vehicles and equipment treasury yields also show how investors assess the economy s prospects the higher the yields on long term u s treasuries the more confidence investors have in the economic outlook but high long term yields can also be a sign of rising inflation expectations investopedia michela buttignolunderstanding the treasury yield | |
when the u s government decides to borrow funds it issues debt instruments through the u s treasury | while bonds are a generic name for debt securities treasury bonds or t bonds refer specifically to u s government bonds with maturities of 20 to 30 years u s government obligations with maturities above a year and up to 10 years are known as treasury notes treasury bills or t bills are treasury obligations maturing within a year treasury yields are inversely related to treasury prices each treasury debt maturity trades at its own yield an expression of price the u s treasury publishes the yields of all treasury maturities daily on its website | |
how treasury yields are determined | treasuries are viewed as the lowest risk investments because they are backed by the full faith and credit of the u s government investors who purchase treasuries are lending the government money the government in turn pays interest to these bondholders the interest payments known as coupons represent the cost of borrowing to the government the rate of return or yield that investors receive in return for lending money to the government is determined by supply and demand treasury bonds and notes are issued at face value the principal the treasury will repay on the maturity date and auctioned off to primary dealers based on bids specifying a minimum yield if the price paid for these securities rises in secondary trading the yield falls accordingly and conversely if the price paid for a bond drops the yield rises for example if a 10 year t note with a face value of 1 000 is auctioned off at a yield of 3 a subsequent drop in its market value to 974 80 will cause the yield to rise to 3 3 since the treasury will still be making the 30 1 000 x 03 annual coupon payments as well as the 1 000 principal repayment conversely if the same t note s market value were to rise to 1 026 the effective yield for a buyer at that price would have declined to 2 7 treasury yield curve and the fedtreasury yields can go up sending bond prices lower if the federal reserve increases its target for the federal funds rate in other words if it tightens monetary policy or even if investors merely come to expect the fed funds rate to go up the yields on the different treasury maturities don t all rise at the same pace in such instances because the fed funds rate represents the rate banks charge each other for overnight loans it most directly affects the shortest term treasury maturities the prices and yield of longer term maturities will be more reflective of investors longer term expectations for economic performance in past instances of fed rate hikes short term yields have typically risen faster than longer term ones as bonds priced in investor expectations of slowing economic growth in response to the fed s policy normally longer term treasury securities have higher yields than shorter term ones that s because the longer duration of those securities exposes them to more of a risk if interest rates rise over time however in advance of recessions the rate structure of treasury yields often called the yield curve can invert that happens when the yields on longer term treasuries fall below those on short term ones as they price in investor expectations of an economic slowdown an inverted yield curve on which the yield on the 10 year treasury note has declined below that on the two year treasury note to cite just one popular benchmark has usually preceded recessions though it has also provided a few false alarms 12 | |
when long term treasury yields are below short term ones the correlation is characterized as an inverted yield curve and is often seen as a precursor to an economic downturn | yield on treasury billswhile treasury notes and bonds offer coupon payments to bondholders the t bill is similar to a zero coupon bond that has no interest payments but is issued at a discount to par an investor purchases the bill at a weekly auction below face value and redeems it at maturity at face value the difference between the face value and purchase price amounts to interest earned which can be used to calculate a treasury bill s yield the treasury department uses two methods to calculate the yield on t bills the discount method and the investment method under the discount yield method the return as a percent of the face value not the purchase value is calculated for example an investor purchasing 90 day t bills with a face value of 10 000 for 9 950 will have a yield of discount yield 10 000 9 950 10 000 x 360 90 0 02 or 2 under the investment yield method the treasury yield is calculated as a percent of the purchase price not the face value following our example above the yield under this method is investment yield 10 000 9 950 9 950 x 365 90 0 0204 rounded or 2 04 note that the two methods use different numbers for days in a year the discount method is based on 360 days following the practice used by banks to determine short term interest rates and the discount yield or rate is how t bills are quoted on the secondary market the investment yield uses the number of days of a calendar year usually 365 or 366 which more accurately represents returns to the buyer but can be used to compare the yield on the t bill with that of a coupon security maturing on the same date 34yield on treasury notes and bondsthe rate of return for investors holding treasury notes and treasury bonds considers the coupon payments they receive semi annually and the face value of the bond repaid at maturity t notes and bonds can be purchased at par at a discount or at a premium depending on where the yield is at purchase relative to the yield when issued if a treasury is purchased at par then its yield equals its coupon rate or the yield at issue if a t bond or treasury note is purchased at a discount to face value the yield will be higher than the coupon rate while if it is purchased at a premium the yield will be lower than the coupon rate the formula for calculating the treasury yield on notes and bonds held to maturity is treasury yield c fv pp t fv pp 2 | |
where c coupon rate | fv face valuepp purchase pricet years to maturitythe yield on a 10 year note with 3 coupon purchased at a premium for 10 300 and held to maturity is treasury yield 300 10 000 10 300 10 10 000 10 300 2 270 10 150 0266 rounded or 2 66 | |
how do treasury yields pay | if you hold treasuries interest payments are made into your treasurydirect gov account if you do not have an account at treasurydirect gov but instead hold bonds with a brokerage payments will be made into your account there | |
why buy treasuries | though treasuries have lower returns than some other securities such as stocks they are attractive to investors because they offer stability and liquidity it is their low risk that makes them attractive which is also the reason for their lower returns | |
do you pay taxes on treasury yields | yes generally you will pay federal taxes on the interest payments you receive on the treasuries you hold you will not pay state taxes muni bonds are exempt from federal taxes and in some cases state taxes the bottom linethe yield of a treasury security is the inverse of its price and treasuries are priced quoted and traded using the yield to denote the price because of their relatively low risk when held to maturity treasuries offer a lower rate of return in comparison with most other investments rates on other fixed income investments are sometimes quoted as spreads over the treasury yield for the same maturity with the spread compensating investors for the increased credit risk of lending to an entity other than the u s government longer term treasury securities normally have higher yields than short term ones to compensate investors for the additional duration risk duration risk is the possibility that higher interest rates will lower the bond s market value short term rates in excess of longer term ones are a sign of an inverted yield curve and can signal an economic slowdown | |
what is treaty reinsurance | treaty reinsurance is insurance purchased by an insurance company from another insurer the company that issues the insurance is called the cedent who passes on all the risks of a specific class of policies to the purchasing company which is the reinsurer treaty reinsurance is one of the three main types of reinsurance contracts the two others are facultative reinsurance and excess of loss reinsurance understanding treaty reinsurancetreaty reinsurance represents a contract between the ceding insurance company and the reinsurer who agrees to accept the risks of a predetermined class of policies over a period of time | |
when insurance companies underwrite a new policy they agree to take on additional risk in exchange for a premium the more policies an insurer underwrites the more risk it assumes one way an insurer can reduce its exposure is to cede some of the risk to a reinsurance company in exchange for a fee reinsurance allows the insurer to free up risk capacity and to protect itself from high severity claims | even though the reinsurer may not immediately underwrite each individual policy it still agrees to cover all the risks in a treaty reinsurance contract by signing a treaty reinsurance contract the reinsurer and the ceding insurance company indicate the business relationship will likely be long term the long term nature of the agreement allows the reinsurer to plan out how to achieve a profit because it knows the type of risk it is taking on and it is familiar with the ceding company treaty reinsurance contracts can be both proportional and non proportional with proportional contracts the reinsurer agrees to take on a specific percentage share of policies for which it will receive that proportion of premiums if a claim is filed it will pay the stated percentage as well with a non proportional contract however the reinsurance company agrees to pay out claims if they exceed a specified amount during a certain period of time advantages of treaty reinsuranceby covering itself against a class of predetermined risks treaty reinsurance gives the ceding insurer more security for its equity and more stability when unusual or major events occur reinsurance also allows an insurer to underwrite policies that cover a larger volume of risks without excessively raising the costs of covering its solvency margins in fact reinsurance makes substantial liquid assets available for insurers in case of exceptional losses treaty vs facultative vs excess of loss reinsurancetreaty reinsurance differs from facultative reinsurance treaty reinsurance involves a single contract covering a type of risk and does not require the reinsurance company to provide a facultative certificate each time a risk is transferred from the insurer to the reinsurer facultative risk on the other hand allows the reinsurer to accept or reject individual risks moreover it is a type of reinsurance for a single or a specific package of risks that means both the reinsurer and the cedent agree on what risks will be covered in the agreement these agreements are generally negotiated separately for each policy the expenses involved in underwriting facultative contracts are thus much more expensive than a treaty reinsurance agreement treaty reinsurance is less transactional and less likely to involve risks that would have otherwise been rejected from reinsurance treaties excess of loss reinsurance is a non proportional form of reinsurance in an excess of loss contract the reinsurer agrees to pay the total amount of losses or a certain percentage of losses above a certain limit to the cedent excess of loss reinsurance is less similar to standard insurance like treaty and facultative reinsurance are oftentimes requiring both the cedent and reinsurer to share in the losses | |
what is a trend | a trend is the overall direction of a market or an asset s price in technical analysis trends are identified by trendlines or price action that highlight when the price is making higher swing highs and higher swing lows for an uptrend or lower swing lows and lower swing highs for a downtrend many traders opt to trade in the same direction as a trend while contrarians seek to identify reversals or trade against the trend uptrends and downtrends occur in all markets such as stocks bonds and futures trends also occur in data such as when monthly economic data rises or falls from month to month justin pumfrey getty images | |
how trends work | traders can identify a trend using various forms of technical analysis including trendlines price action and technical indicators for example trendlines might show the direction of a trend while the relative strength index rsi is designed to show the strength of a trend at any given point in time 2an uptrend is marked by an overall increase in price nothing moves straight up for long so there will always be oscillations but the overall direction needs to be higher in order for it to be considered an uptrend recent swing lows should be above prior swing lows and the same goes for swing highs once this structure starts to break down the uptrend could be losing steam or reversing into a downtrend downtrends are composed of lower swing lows and lower swing highs while the trend is up traders may assume it will continue until there is evidence that points to the contrary such evidence could include lower swing lows or highs the price breaking below a trendline or technical indicators turning bearish while the trend is up traders focus on buying attempting to profit from a continued price rise 1 | |
when the trend turns down traders focus more on selling or shorting attempting to minimize losses or profit from the price decline most not all downtrends do reverse at some point so as the price continues to decline more traders begin to see the price as a bargain and step in to buy this could lead to the emergence of an uptrend again | trends may also be used by investors focused on fundamental analysis this form of analysis looks at changes in revenue earnings or other business or economic metrics for example fundamental analysts may look for trends in earnings per share and revenue growth if earnings have grown for the past four quarters this represents a positive trend however if earnings have declined for the past four quarters it represents a negative trend the lack of a trend that is a period of time where there is little overall upward or downward progress is called a range or trendless period using trendlinesa common way to identify trends is using trendlines which connect a series of highs downtrend or lows uptrend uptrends connect a series of higher lows creating a support level for future price movements downtrends connect a series of lower highs creating a resistance level for future price movements in addition to support and resistance these trendlines show the overall direction of the trend 1while trendlines do a good job of showing overall direction they will often need to be redrawn for example during an uptrend the price may fall below the trendline yet this doesn t necessarily mean the trend is over the price may move below the trendline and then continue rising in such an event the trendline may need to be redrawn to reflect the new price action trendlines should not be relied on exclusively to determine the trend most professionals also tend to look at price action and other technical indicators to help determine if a trend is ending or not in the example above a drop below the trendline isn t necessarily a sell signal but if the price also drops below a prior swing low and or technical indicators are turning bearish then it might be example of a trend and trendlinethe following chart shows a rising trendline along with an rsi reading that suggests a strong trend while the price is oscillating the overall progress is to the upside the rising trend begins to lose momentum and selling pressure kicks in the rsi falls below 70 followed by a very large down candle that takes the price to the trendline the move lower was confirmed the next day when the price gapped below the trendline these signals could have been used to exit long positions as there was evidence that the trend was turning short trades could have also been initiated image by sabrina jiang investopedia 2021as the price moves lower it starts to attract buyers interested in the lower price another trendline not shown could also be drawn along the falling price to indicate when a bounce may be coming that trendline would be have been penetrated near the middle of february as the price made a quick v bottom and progressed higher | |
what is trend analysis | trend analysis is a technique used in technical analysis that attempts to predict future stock price movements based on recently observed trend data trend analysis uses historical data such as price movements and trade volume to forecast the long term direction of market sentiment investopedia michela buttignolunderstanding trend analysistrend analysis tries to predict a trend such as a bull market run and ride that trend until data suggests a trend reversal such as a bull to bear market trend analysis is helpful because moving with trends and not against them will lead to profit for an investor it is based on the idea that what has happened in the past gives traders an idea of what will happen in the future there are three main types of trends short intermediate and long term a trend is a general direction the market is taking during a specified period of time trends can be both upward and downward relating to bullish and bearish markets respectively while there is no specified minimum amount of time required for a direction to be considered a trend the longer the direction is maintained the more notable the trend trend analysis is the process of looking at current trends in order to predict future ones and is considered a form of comparative analysis this can include attempting to determine whether a current market trend such as gains in a particular market sector is likely to continue as well as whether a trend in one market area could result in a trend in another though a trend analysis may involve a large amount of data there is no guarantee that the results will be correct there are three main types of market trend for analysts to consider | |
what is trend trading | trend trading is a trading style that attempts to capture gains through the analysis of an asset s momentum in a particular direction when the price is moving in one overall direction such as up or down that is called a trend trend traders enter into a long position when a security is trending upward an uptrend is characterized by higher swing lows and higher swing highs likewise trend traders may opt to enter a short position when an asset is trending lower a downtrend is characterized by lower swing lows and lower swing highs chachamal getty imagesunderstanding trend tradingtrend trading strategies assume that a security will continue to move in the same direction as it is currently trending such strategies often contain a take profit or stop loss provision in order to lock in a profit or avoid big losses if a trend reversal occurs trend trading is used by short intermediate and long term traders traders use both price action and other technical tools to determine the trend direction and when it may be shifting price action traders look at the price movements on a chart for an uptrend they want to see the price move above recent highs and when the price drops it should stay above prior swing lows this shows that even though the price is oscillating up and down the overall trajectory is up the same concept is applied to downtrends with traders watching to see if the price makes overall lower lows and lower highs when that is no longer happening the downtrend is in question or over and the trend trader will no longer be interested in holding a short position trend trading strategiesthere are many different trend trading strategies each using a variety of indicators and price action methods for all strategies a stop loss should be used to manage risk for an uptrend a stop loss is placed below a swing low that occurred prior to entry or below another support level for a downtrend and a short position a stop loss is often placed just above a prior swing high or above another resistance level oftentimes traders use a combination of these strategies when looking for trend trading opportunities a trader might look for a breakout through a resistance level to indicate a move higher may be starting but only enter into a trade if the price is trading above a specific moving average these strategies involve entering a long position when a short term moving average crosses above a longer term moving average or entering a short position when a short term moving average crosses below a longer term moving average alternatively some traders may watch for when the price crosses above a moving average to signal a long position or when the price crosses below the average to signal a short position typically moving average strategies are combined with some other form of technical analysis to filter out the signals this may include looking at price action to determine the trend since moving averages provide very poor signals when no trend is present the price just whipsaws back and forth across the moving average moving averages are also used for analysis when the price is above a moving average it helps to indicate that an uptrend may be present when the price is below the moving average it helps to indicate that a downtrend may be present there are many momentum indicators and strategies in regards to trend trading an example might include looking for an uptrend and then using the relative strength index rsi to signal entries and exits for example a trader may wait for the rsi to drop below 30 and then rise above it this could signal a long position assuming the overall uptrend remains intact the indicator is showing that the price pulled back but is now starting to rise again in alignment with the overall uptrend the trader could potentially exit when the rsi rises above 70 or 80 and then falls back below the selected level a trendline is a line drawn along swing lows in an uptrend or along swing highs in a downtrend it shows a possible area where the price may pull back in the future some traders also opt to buy during an uptrend when the price pulls back and then bounces higher off of a rising trendline a strategy of buying the dip similarly some traders elect to short during a downtrend when the price rises to and then falls away from a declining trendline trend traders will also watch for chart patterns such as flags or triangles which indicate the potential continuation of a trend for example if the price is rising aggressively and then forms a flag or triangle a trend trader will watch for the price to break out of the pattern to signal a continuation of the uptrend trend trading chart examplethe following alibaba group chart shows several examples of how trends can be analyzed as well as some examples of potential trades using chart patterns and the trend image by sabrina jiang investopedia 2021the price starts out in a downtrend before rising through the descending trendline and above the moving average this doesn t mean the trend is up though trend traders will typically wait for the price to also make a higher swing high and a higher swing low before considering the trend up the price continues to move higher confirming the new uptrend it then pulls back and starts to rise again forming the first chart pattern the price breaks higher out of the chart pattern signaling a potential long position the uptrend continues aggressively forming two additional chart patterns along the way these both offered opportunities to enter a long position or add to an existing one called pyramiding the price continues to rise but then starts giving warning signs the price drops below the moving average for the first time in a long while it also creates a lower swing low and breaks through a short term rising trendline the price makes a new high after that but then drops below the moving average again this is not strong uptrend behavior and trend traders would typically avoid going long during conditions like this they would also be looking to exit any remaining longs they may have the chart shows that the price continues to oscillate around the moving average with no clear trend direction finally the price slides into a downtrend trend traders would be out of longs and avoiding new ones and possibly looking for spots to enter short positions | |
what is a trendline | trendlines are easily recognizable lines that traders draw on charts to connect a series of prices together or show some data s best fit the resulting line is then used to give the trader a good idea of the direction in which an investment s value might move a trendline is a line drawn over pivot highs or under pivot lows to show the prevailing direction of price trendlines are a visual representation of support and resistance in any time frame they show direction and speed of price and also describe patterns during periods of price contraction investopedia hilary allison | |
what do trendlines tell you | the trendline is among the most important tools used by technical analysts instead of looking at past business performance or other fundamentals technical analysts look for trends in price action a trendline helps technical analysts determine the current direction in market prices technical analysts believe the trend is your friend and identifying this trend is the first step in the process of making a good trade to create a trendline an analyst must have at least two points on a price chart some analysts like to use different time frames such as one minute or five minutes others look at daily charts or weekly charts some analysts put aside time altogether choosing to view trends based on tick intervals rather than intervals of time what makes trendlines so universal in usage and appeal is they can be used to help identify trends regardless of the time period time frame or interval used if company a is trading at 35 and moves to 40 in two days and 45 in three days the analyst has three points to plot on a chart starting at 35 then moving to 40 and then moving to 45 if the analyst draws a line between all three price points they have an upward trend the trendline drawn has a positive slope and is therefore telling the analyst to buy in the direction of the trend if company a s price goes from 35 to 25 however the trendline has a negative slope and the analyst should sell in the direction of the trend example using a trendlinetrendlines are relatively easy to use a trader simply has to chart the price data normally using open close high and low below is data for the russell 2000 in a candlestick chart with the trendline applied to three session lows over a two month period the trendline shows the uptrend in the russell 2000 and can be thought of as support when entering a position in this case a trader may choose to enter a long position near the trendline and then extend it into the future if the price action breaches the trendline on the downside the trader can use that as a signal to close the position this allows the trader to exit when the trend they are following starts to weaken trendlines are of course a product of the time period in the example above a trader doesn t need to redraw the trendline very often on a time scale of minutes however trendlines and trades may need to be readjusted frequently the difference between trendlines and channelsmore than one trendline can be applied to a chart traders often use a trendline connecting highs for a period as well as another to connect lows in order to create channels a channel adds a visual representation of both support and resistance for the time period being analyzed similar to a single trendline traders are looking for a spike or a breakout to take the price action out of the channel they may use that breach as an exit point or an entry point depending on how they are setting up their trade limitations of a trendlinetrendlines have limitations shared by all charting tools in that they have to be readjusted as more price data comes in a trendline will sometimes last for a long time but eventually the price action will deviate enough that it needs to be updated moreover traders often choose different data points to connect for example some traders will use the lowest lows while others may only use the lowest closing prices for a period last trendlines applied on smaller timeframes can be volume sensitive a trendline formed on low volume may easily be broken as volume picks up throughout a session | |
what are stock trendlines used for | trendlines are used by technical analysts to predict the direction of a stock or other financial security armed with a clearer sense of potential direction analysts can then make better decisions about stock trades who uses trendlines trendlines are typically associated with technical financial analysts however trendlines can be used by any investor looking to gain more insight into the direction of a stock commodity currency or other investment | |
what are the different kinds of trendlines | there are a number of different kinds of trendlines the most common are characterized as linear logarithmic polynomial power exponential and moving average | |
what is the treynor ratio | the treynor ratio also known as the reward to volatility ratio is a performance metric for determining how much excess return was generated for each unit of risk taken on by a portfolio excess return in this sense refers to the return earned above the return that could have been earned in a risk free investment although there is no true risk free investment treasury bills are often used to represent the risk free return in the treynor ratio risk in the treynor ratio refers to systematic risk as measured by a portfolio s beta beta measures the tendency of a portfolio s return to change in response to changes in return for the overall market investopedia michela buttignolthe treynor ratio was developed by jack treynor an american economist who was one of the inventors of the capital asset pricing model capm understanding the treynor ratio treynor ratio r p r f p where r p portfolio return r f risk free rate p beta of the portfolio begin aligned text treynor ratio frac r p r f beta p textbf where r p text portfolio return r f text risk free rate beta p text beta of the portfolio end aligned treynor ratio p rp rf where rp portfolio returnrf risk free rate p beta of the portfolio in essence the treynor ratio is a risk adjusted measurement of return based on systematic risk it indicates how much return an investment such as a portfolio of stocks a mutual fund or exchange traded fund earned for the amount of risk the investment assumed if a portfolio has a negative beta however the ratio result is not meaningful a higher ratio result is more desirable and means that a given portfolio is likely a more suitable investment since the treynor ratio is based on historical data however it s important to note this does not necessarily indicate future performance and one ratio should not be the only factor relied upon for investing decisions ultimately the treynor ratio attempts to measure how successful an investment is in providing compensation to investors for taking on investment risk the treynor ratio is reliant upon a portfolio s beta that is the sensitivity of the portfolio s returns to movements in the market to judge risk the premise behind this ratio is that investors must be compensated for the risk inherent to the portfolio because diversification will not remove it the treynor ratio shares similarities with the sharpe ratio and both measure the risk and return of a portfolio the difference between the two metrics is that the treynor ratio utilizes a portfolio beta or systematic risk to measure volatility instead of adjusting portfolio returns using the portfolio s standard deviation as done with the sharpe ratio a main weakness of the treynor ratio is its backward looking nature investments are likely to perform and behave differently in the future than they did in the past the accuracy of the treynor ratio is highly dependent on the use of appropriate benchmarks to measure beta for example if the treynor ratio is used to measure the risk adjusted return of a domestic large cap mutual fund it would be inappropriate to measure the fund s beta relative to the russell 2000 small stock index the fund s beta would likely be understated relative to this benchmark since large cap stocks tend to be less volatile in general than small caps instead the beta should be measured against an index more representative of the large cap universe such as the russell 1000 index additionally there are no dimensions upon which to rank the treynor ratio when comparing similar investments the higher treynor ratio is better all else equal but there is no definition of how much better it is than the other investments | |
what is a trial balance | a trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account column totals that are equal a company prepares a trial balance periodically usually at the end of every reporting period the general purpose of producing a trial balance is to ensure that the entries in a company s bookkeeping system are mathematically correct a trial balance is so called because it provides a test of a fundamental aspect of a set of books but is not a full audit of them a trial balance is often the first step in an audit procedure because it allows auditors to make sure there are no mathematical errors in the bookkeeping system before moving on to more complex and detailed analyses investopedia joules garcia | |
how a trial balance works | preparing a trial balance for a company serves to detect any mathematical errors that have occurred in the double entry accounting system if the total debits equal the total credits the trial balance is considered to be balanced and there should be no mathematical errors in the ledgers however this does not mean that there are no errors in a company s accounting system for example transactions classified improperly or those simply missing from the system still could be material accounting errors that would not be detected by the trial balance procedure requirements for a trial balancecompanies initially record their business transactions in bookkeeping accounts within the general ledger depending on the kinds of business transactions that have occurred accounts in the ledgers could have been debited or credited during a given accounting period before they are used in a trial balance worksheet furthermore some accounts may have been used to record multiple business transactions as a result the ending balance of each ledger account as shown in the trial balance worksheet is the sum of all debits and credits that have been entered to that account based on all related business transactions a company s transactions are recorded in a general ledger and later summed to be included in a trial balance at the end of an accounting period the accounts of asset expense or loss should each have a debit balance and the accounts of liability equity revenue or gain should each have a credit balance however certain accounts of the former type also may have been credited and certain accounts of the latter type also may have been debited during the accounting period when related business transactions reduce their respective accounts debit and credit balances an opposite effect on those accounts ending debit or credit balances on a trial balance worksheet all of the debit balances form the left column and all of the credit balances form the right column with the account titles placed to the far left of the two columns types of trial balancethere are three main types of trial balance all three of these types have exactly the same format but slightly different uses the unadjusted trial balance is prepared on the fly before adjusting journal entries are completed it is a record of day to day transactions and can be used to balance a ledger by adjusting entries once a book is balanced an adjusted trial balance can be completed this trial balance has the final balances in all the accounts and it is used to prepare the financial statements the post closing trial balance shows the balances after the closing entries have been completed this is your starting trial balance for the next year trial balance vs balance sheetthe key difference between a trial balance and a balance sheet is one of scope a balance sheet records not only the closing balances of accounts within a company but also the assets liabilities and equity of the company it is usually released to the public rather than just being used internally and requires the signature of an auditor to be regarded as trustworthy a trial balance is a less formal document there are no special conventions about how trial balances should be prepared and they may be completed as often as a company needs them a trial balance is often used as a tool to keep track of a company s finances throughout the year whereas a balance sheet is a legal statement of the financial position of a company at the end of a financial year special considerationsafter all the ledger accounts and their balances are listed on a trial balance worksheet in their standard format add up all debit balances and credit balances separately to prove the equality between total debits and total credits such uniformity guarantees that there are no unequal debits and credits that have been incorrectly entered during the double entry recording process however a trial balance cannot detect bookkeeping errors that are not simple mathematical mistakes if equal debits and credits are entered into the wrong accounts a transaction is not recorded or offsetting errors are made with a debit and a credit at the same time a trial balance still would show a perfect balance between total debits and credits 1 | |
what is a trial balance used for | a trial balance can be used to detect any mathematical errors that have occurred in a double entry accounting system if the total debits equal the total credits the trial balance is considered to be balanced and there should be no mathematical errors in the ledgers | |
what are the three trial balances | there are three types of trial balance the unadjusted trial balance the adjusted trial balance and the post closing trial balance each is used at different stages in the accounting cycle | |
what is included in a trial balance | it depends companies can use a trial balance to keep track of their financial position and so they may prepare several different types of trial balance throughout the financial year a trial balance may contain all the major accounting items including assets liabilities equity revenues expenses gains and losses the bottom linea trial balance is a worksheet with two columns one for debits and one for credits that ensures a company s bookkeeping is mathematically correct the debits and credits include all business transactions for a company over a certain period including the sum of such accounts as assets expenses liabilities and revenues debits and credits of a trial balance must tally to ensure that there are no mathematical errors however there still could be mistakes or errors in the accounting systems a trial balance can be used to assess the financial position of a company between full annual audits | |
what is a triangle chart pattern | a triangle is a chart pattern is a tool used in technical analysis the triangle chart pattern is named as such because it resembles a triangle it is depicted by drawing trendlines along a converging price range that connotes a pause in the prevailing trend technical analysts categorize triangles as continuation patterns of an existing trend or reversal despite being a continuation traders should look for breakouts before they make a move to enter or exit a position understanding triangle chart patternstriangle chart patterns are used in technical analysis which is a trading strategy that involves charts and patterns that help traders identify trends in the market to make predictions about future performance triangle patterns are aptly named because the upper and lower trendlines ultimately meet at the apex on the right side forming a corner these patterns are formed once the trading range of a stock or another security becomes narrow connecting the start of the upper trendline to the beginning of the lower trendline completes the other two corners to create the triangle the upper trendline is formed by connecting the highs while the lower trendline is formed by connecting the lows triangles are similar to wedges price patterns marked by converging trendlines and pennants continuation patterns that are formed when an asset shows a large movement which are also used in technical analysis they can be either a continuation pattern if validated or a powerful reversal pattern in the event of failure traders use triangles to highlight when the narrowing of a stock or security s trading range after a downtrend or uptrend occurs there are three potential triangle variations that can develop as price action carves out a holding pattern namely ascending descending and symmetrical triangles technicians see a breakout or a failure of a triangular pattern especially on heavy volume as being potent bullish or bearish signals of a resumption or reversal of the prior trend technical tools are meant to help make predictions about future trends based on past performance but remember that the market can be very unpredictable and can swing in any direction at any time types of triangle chart patternsthe following diagram shows the three basic types of triangle chart patterns the ascending descending and symmetrical triangles we go into more detail about what they are and how they work below an ascending triangle is a breakout pattern that forms when the price breaches the upper horizontal trendline with rising volume it is a bullish formation the upper trendline must be horizontal indicating nearly identical highs which form a resistance level the lower trendline is rising diagonally indicating higher lows as buyers patiently step up their bids buyers eventually lose patience and rush into the security above the resistance price which triggers more buying as the uptrend resumes the upper trendline which was formerly a resistance level now becomes support a descending triangle is an inverted version of the ascending triangle and is considered a breakdown pattern the lower trendline should be horizontal connecting near identical lows the upper trendline declines diagonally toward the apex the breakdown occurs when the price collapses through the lower horizontal trendline support as a downtrend resumes the lower trendline which was support now becomes resistance a symmetrical triangle is composed of a diagonal falling upper trendline and a diagonally rising lower trendline as the price moves toward the apex it will inevitably breach the upper trendline for a breakout and uptrend on rising prices or breach the lower trendline forming a breakdown and downtrend with falling prices traders should watch for a volume spike and at least two closes beyond the trendline to confirm the break is valid and not a head fake symmetrical triangles tend to be continuation break patterns which means they tend to break in the direction of the initial move before the triangle forms so if an uptrend precedes a symmetrical triangle traders would expect the price to break to the upside | |
what is technical analysis | technical analysis is a type of trading strategy where traders analyze markets and make predictions about future market movements based on past performance this trading strategy uses tools and techniques to evaluate historical data including asset prices and trading volumes rather than business results some of the tools used include charts and graphs including triangles and candlesticks | |
how do triangles work in technical analysis | triangles are chart patterns used in technical analysis named because they look like triangles these patterns connect the beginning of the upper trendline to the beginning of the lower come the upper line connects the highs while the lower line connects the lows in that security | |
are triangle patterns bullish or bearish | that depends on the type of triangle ascending triangles tend to be bullish as they indicate the continuation of an upward trend in some cases they may also point to the reversal of a downtrend a descending triangle on the other hand are bearish that s because they point to the continuation of a downtrend or the reversal of an uptrend the bottom linetechnical analysis requires a great deal of practice and patience this is true of any type of trading tool used in this strategy including triangle chart patterns it s important to keep in mind that the market is very unpredictable and can swing in any direction even if these tools can be used to make predictions about trends if you re going to use triangle patterns make sure you take positions only after you confirm a breakout in the price action of the security in question | |
triangular arbitrage looks to profit from discrepancies among three foreign currencies when their exchange rates across markets don t match up these opportunities are rare and traders usually employ sophisticated programs to automate finding these differences it involves exchanging one currency for a second then trading it for a third and then finally exchanging it back into the original currency | a trader using triangular arbitrage for example could make a series of exchanges u s dollar usd to euros eur to the british pound gbp to usd using the eur usd eur gbp and usd gbp rates and if the transaction costs are low net a profit understanding triangular arbitragetriangular arbitrage is used in foreign exchange trading to exploit differences in exchange rates across different markets it involves three trades exchanging an initial currency for a second the second currency for a third and finally the third currency back to the initial currency ideally at a profit hence the name triangular exchange rates should synchronize across all currency pairs but because of market inefficiencies they sometimes are not these can be caused by delays in moving market information differing levels of liquidity across markets or rapid changes in market conditions prospects for triangular arbitrage are typically fleeting existing for only a few seconds or less as the market quickly corrects the mispricing therefore automated trading systems capable of executing trades at high speed are used to exploit the momentary difference to be successful arbitrage trades have to offer returns greater than the transaction costs involved including bid ask spreads and trading fees the potential profit must outweigh these costs for the arbitrage to be profitable also triangular arbitrage is more feasible in currency pairs with high liquidity since this reduces the influence of the trade on the market price and minimizes the cost of trading 1in practice triangular arbitrage opportunities are rare and are exploited mainly by institutional traders with sophisticated technology capable of instantaneously identifying and acting on these opportunities automated trading platforms and triangular arbitrageautomated trading platforms have streamlined how trades are executed since an algorithm can be created to trade once specific criteria are met automated trading platforms allow a trader to set rules for entering and exiting a trade and the computer will automatically conduct the trade while automated trading has many benefits such as the ability to test potential rules on historical data before risking capital engaging in triangular arbitrage is only feasible using an automated trading platform since the market is thought to be self correcting trades happen so rapidly that an arbitrage opportunity can vanish within seconds of appearing 1the speed of algorithmic trading platforms and markets can also work against traders for example traders may not be able to lock in a profitable price before it moves past their desired position in less than a second causing a loss example of triangular arbitragesuppose we re working with three currencies usd eur and gbp the key to triangular arbitrage is exploiting discrepancies in the currency exchange rates let s say the current market exchange rates are as follows these currency rates mean that 1 usd equals 0 85 eur 1 eur equals 0 70 gbp and 1 gbp equals 1 50 usd to determine if there s an arbitrage opportunity the implied usd gbp exchange rate needs to be calculated and compared with the actual usd gbp exchange rate the implied rate can be found by multiplying the usd eur and eur gbp rates this is done as follows based on the above 1 usd should be exchangeable for 0 595 gbp for an arbitrage opportunity the actual exchange rate for gbp usd is 2 00 which is equal to a usd gbp rate of 1 2 00 0 5 this is lower than the implied rate of 0 595 thus there is the potential for triangular arbitrage let s say the trader has 100 000 usd the execution of the trades would be as follows 100 000 x 0 85 85 000 eur85 000 x 0 70 59 500 gbp59 500 x 2 0 119 000 usd the trader began with 100 000 usd and ended with 119 000 usd thus the profit is 119 000 100 000 19 000 thus the trader received a triangular arbitrage of 19 000 arbitrage is buying one asset and selling it in another market for a profit the technique can be used in many markets converting pairscurrency pair conversion is a fundamental concept in the currency market the value of one currency is quoted in terms of another currency each currency pair represents the exchange rate between two currencies and is used in forex trading to speculate on the relative strength of one currency against another the first currency listed in a currency pair is known as the base currency it s the currency being bought or sold the second currency is the quote currency which indicates how much is needed to buy one unit of the base currency in forex trading buying a currency pair implies buying the base currency and selling the quote currency conversely selling the pair means selling the base currency and buying the quote currency a direct quote occurs when the foreign currency is the base currency while an indirect quote is when the domestic currency is the base currency the bid price is what buyers are willing to pay for the base currency and the ask or offer price is what sellers are willing to accept the difference between these prices is the spread understanding currency pair conversion is crucial for forex traders since it helps them make informed decisions about buying and selling currencies based on their assessments of market conditions and economic indicators suppose a trader wants to convert 10 000 usd to eur the example below illustrates the basic process of converting from usd to eur taking into account exchange rates and bid ask spreads these factors are important for understanding how much foreign currency will be received and for making cost effective decisions when converting currencies the trader s first step is to check the exchange rate for eur usd the rates are assumed to be as follows the trader will sell the usd at the bid price and the trader will pay for eur at the ask price since the trader is buying eur the ask price will be used for the calculation to determine how many euros the trader will receive for 10 000 usd you ll need to do the conversion as follows amount in usd x exchange rate ask price 10 000 x 0 93023 9 302 30 eur | |
what is the triangular arbitrage algorithm | a triangular arbitrage algorithm is an automated trading program that finds and executes triangular arbitrage opportunities | |
is crypto triangular arbitrage possible | triangular arbitrage identifies price differences for trading opportunities so it might be possible to find three cryptocurrencies that allow you to use the strategy | |
is triangular arbitrage illegal | buying and selling currency is legal as long as all funds information sources and other practices are not against any laws there is nothing illegal about the triangular arbitrage trading strategy the bottom linetriangular arbitrage is a strategy where you find price discrepancies between three currencies and buy and sell them in a specific order to make a profit because of the constant and rapid fluctuation in exchange rates it can be risky so you need to be experienced to try it or use a proven automated trading method | |
what is trickle down economics | trickle down economics and its policies employ the theory that tax breaks and benefits for corporations and the wealthy will trickle down and eventually benefit everyone tools like reduced income tax and capital gains tax breaks are offered to large businesses investors and entrepreneurs to stimulate economic growth investopedia candra huffunderstanding trickle down economicstrickle down economics is a common political debate associated with supply side economics while there is no single comprehensive economic policy identified as trickle down economics a policy is considered trickle down if it disproportionately benefits wealthy businesses and individuals in the short run but is designed to boost standards of living for all individuals in the long run both president herbert hoover s stimulus efforts during the great depression and president ronald reagan s use of income tax cuts were described as trickle down supply side economics theorists believe that less regulation and tax cuts for corporations and high income earners trigger company investment and stimulate employment trickle down economic policiescorporate income tax reduction tax cuts for the wealthy and deregulation are the initial steps of a trickle down policy as more money remains in the corporate sector business investment may be triggered with new factories upgraded technology equipment and an increase in employment wealthy individuals may spend more creating more demand for goods in the economy the increase in the labor market leads to more spending and investing creating growth in industries such as housing automobiles consumer goods and retail the boost in the economy leads to tax revenue increases and according to the trickle down economic theory the additional revenue will pay for the original tax cuts for the wealthy and corporations trickle down economics and the laffer curveamerican economist arthur laffer a member of the reagan administration developed a bell curve style analysis that plotted the relationship between changes in the official government tax rate and actual tax receipts known as the laffer curve the nonlinear shape of the laffer curve suggested taxes could be too light or too onerous to produce maximum revenue a 0 income tax rate and a 100 income tax rate each produce 0 in receipts to the government at 0 no tax can be collected but at 100 there is no incentive to generate income suggesting that specific cuts in tax rates would boost total receipts by encouraging more taxable income laffer s idea that tax cuts could boost growth and tax revenue was quickly labeled trickle down under president reagan between 1980 and 1988 the top marginal tax rate in the united states fell from 70 to 28 between 1981 and 1989 total federal receipts increased from 599 billion to 991 billion 1the results empirically supported one of the assumptions of the laffer curve but could not prove a correlation between a reduction in top tax rates and economic benefits to low and medium income earners criticism of trickle down economicsalthough trickle down theorists argue that more money in the hands of the wealthy and corporations promotes spending and free market capitalism it does so only with government intervention critics argue that the added benefits the wealthy receive can distort the economic structure as lower income earners without an equal tax cut adds to income inequality many economists counter that cutting taxes for the poor and working families boosts the economy by increasing spending on goods and services whereas a tax cut for a corporation may go to stock buybacks or increased savings for the wealthy many factors drive growth including federal reserve monetary policy and lowering interest rates trade and exports sales from u s companies to foreign companies as well as foreign direct investment from corporations and investors overseas contribute to the economy in december 2020 a london school of economics report by david hope and julian limberg was released which examined five decades of tax cuts in 18 wealthy nations and found they consistently benefited the wealthy but had no meaningful effect on unemployment or economic growth | |
what is the tax cuts and jobs act | trickle down policies are common with republican leaders president donald trump signed into law the tax cuts and jobs act on dec 22 2017 which cut personal tax rates and personal exemptions which expire in 2025 and revert to the old higher rates however corporations received a permanent tax cut to 21 critics of the plan say the top 1 get the larger tax cut versus those in lower income brackets 23 | |
how did president hoover use trickle down economics | president hoover believed incentivizing business prosperity would trickle down to the average person and that economic assistance to citizens would stifle the workforce this philosophy was not effective against the depression and his failure to end it led to his defeat in the 1932 presidential election against franklin d roosevelt and the new deal | |
what is reaganomics | reaganomics is the economic policy instituted by president ronald reagan who instituted tax cuts decreased social spending increased military spending and market deregulation all influenced by the trickle down theory and supply side economics the bottom linethe trickle down theory includes commonly debated policies associated with supply side economics a policy is considered a trickle down if it benefits wealthy businesses and individuals in the short run to boost standards of living for all individuals and the economy in the long run presidents hoover reagan and trump have all employed methods of trickle down economic policies | |
what is a triggering event | a triggering event is a tangible or intangible barrier or occurrence which once breached or met causes another event to occur triggering events include job loss retirement or death and are typical for many types of contracts these triggers help to prevent or ensure that in the case of a catastrophic change the terms of an original contract may also change life insurance policies may include a triggering event based on the insured age also many employers require employees to reach a qualifying period of employment as a triggering event for eligibility for specific company benefits in the investment sphere stops are a triggering event which the investor may initiate to limit their downside risk understanding a triggering eventtriggering events can encompass a wide assortment of areas and contracts for example hedge funds sign documents that trigger termination events when their net asset value nav falls below a certain level in a given period of time these are usually outlined in an isda and may result in a fund s positions being closed out by the dealer if the dealer chooses to act upon the trigger the age limits in retirement plans can also be trigger events for most retirement plans such as 401 k s individuals are not allowed to withdraw funds without a penalty until they reach a specific age once that age limit is reached they are free to withdraw funds without incurring a penalty a triggering event is any occurrence that alters the current state of a contract triggering events in insuranceinsurance companies will include triggers called coverage triggers in the policies they underwrite in the case of property or casualty coverage it will specify the type of event which must take place for liability protection to apply insurers use triggering events to limit their risk exposure some typical triggering events include in some universal life insurance policies in service withdrawals are allowed from the cash portion of the policy within the contract these withdrawals allow for tax and penalty free distributions before an age based triggering event workers compensation is another insurance that requires a triggering event to happen before it is effective as an example if an individual has an accident while at work that event would trigger disability payouts from insurance the most common triggering event in an insurance policy is a cause to initiate a claim for instance in life insurance the death of the insured would be the triggering event that leads to the payout of the death benefit to the insured s beneficiaries triggering events with banksit is common for banks to issue debt at a given interest rate on specific terms for example when writing a loan one of a bank s requirements could be that the borrowing party does not incur any additional debt for the duration of the loan if the borrower should incur more debt the contract s triggering event or clause will kick in the bank may then take necessary actions to protect themselves which may include foreclosure of property secured through the loan or increasing the original rate of interest charged triggering events also occur in relation to defaults on loans banks can stipulate certain triggers that will determine a default if any covenants that were agreed upon beforehand are breached then that would trigger a default cross defaults are common trigger events whereby if an individual or business defaults on one loan it means that they have defaulted on all the other loans under the cross default agreement banks can include a wide range of default triggering events so it is important to carefully understand your contract before signing | |
what is a trilemma | trilemma is a term in economic decision making theory unlike a dilemma which has two solutions a trilemma offers three equal solutions to a complex problem a trilemma suggests that countries have three options from which to choose when making fundamental decisions about managing their international monetary policy agreements however the options of the trilemma are conflictual because of mutual exclusivity which makes only one option of the trilemma achievable at a given time trilemma often is synonymous with the impossible trinity also called the mundell fleming trilemma this theory exposes the instability inherent in using the three primary options available to a country when establishing and monitoring its international monetary policy agreements trilemma explained | |
when making fundamental decisions about managing international monetary policy a trilemma suggests that countries have three possible options from which to choose according to the mundell fleming trilemma model these options include | the technicalities of each option conflict because of mutual exclusivity as such mutual exclusivity makes only one side of the trilemma triangle achievable at a given time government considerationsthe challenge for a government s international monetary policy comes in choosing which of these options to pursue and how to manage them generally most countries favor side b of the triangle because they can enjoy the freedom of independent monetary policy and allow the policy to help guide the flow of capital academic influencesthe theory of the policy trilemma is frequently credited to the economists robert mundell and marcus fleming who independently described the relationships among exchange rates capital flows and monetary policy in the 1960s 2 maurice obstfeld who became chief economist at the international monetary fund imf in 2015 presented the model they developed as a trilemma in a 2004 paper 3the french economist h l ne rey argued that the trilemma is not as simple as it appears in the modern day rey believes that the majority of countries are faced with only two options or a dilemma since fixed currency pegs are not usually effective leading to a focus on the relationship between independent monetary policy and free capital flow 4real world examplea real world example of solving these trade offs occurs in the eurozone where countries are closely interconnected by forming the eurozone and using one currency the countries have ultimately opted for side a of the triangle maintaining a single currency in effect a one to one peg coupled with the free capital flow following world war ii the wealthy opted for side c under the bretton woods agreement which pegged currencies to the u s dollar but allowed countries to set their own interest rates 5 cross border capital flows were so small that this system held for a couple of decades the exception being mundell s native canada where he gained special insight into the tensions inherent in the bretton woods system | |
what is trillion cubic feet tcf | the term trillion cubic feet refers to a volume measurement of natural gas used by the u s oil and gas industry the measurement is usually abbreviated as tcf a cubic foot is a nonmetric measurement of volume also used in the u s a trillion written in numerals as 1 000 000 000 000 cubic feet is equivalent to approximately one quad of btu or a british thermal unit understanding trillion cubic feet tcf in the united states companies measure natural gas in cubic feet a trillion cubic feet can be hard to imagine for the average person it can represent billions of dollars of the commodity as mentioned above one trillion cubic feet is the same as one quad of btu a quad is the abbreviation for a quadrillion or 1 000 000 000 000 000 a btu on the other hand measures energy and represents how much heat is required to raise the temperature of a single pound of water by one degree fahrenheit at sea level for reference s sake a single btu is the same as the heat from a kitchen match stick most of the major international oil and gas companies have standardized reports to help analysts and investors accurately assess these figures this is due in part to a regulatory requirement with the u s securities and exchange commission sec requiring foreign companies with stock listed on u s exchanges to file standardized reports on an annual basis called a 20 f 1 this is equivalent to the 10 k filing for u s companies and provides investors with oil and gas production and reserve statistics published using imperial measurements to allow direct comparison investors in emerging markets of russia africa or latin america often receive reports with data reported with the metric system which is a global measurement system analysts of these companies will need to use conversion tables to accurately quantify and compare them to more sophisticated international operators investors in markets like russia africa or latin america often receive reports with data reported in the metric system special considerationswithin the oil and gas industry units of measurement are represented by letters where t is the equivalent of one trillion b represents one billion mm equals one million and m means one thousand any of these can appear before certain terms such as mmboe or million barrel of oil equivalent or tcf which is trillion cubic feet 2so just as a trillion cubic feet is abbreviated as tcf just as bcf refers to a billion cubic feet the latter is a gas measurement equal to approximately one trillion 1 000 000 000 000 btu mcf stands for one thousand cubic feet a measure used more commonly in the low volume segments of the gas industry such as stripper well production incidentally mcf is the conventional way to measure natural gas in the united states which uses the imperial measuring system 2in europe where the metric system is used the abbreviation most commonly used is thousand of cubic meters or mcm oil and gas financial analysts need to be especially careful when analyzing companies quarterly results to avoid mixing up various units for example it is quite easy to overlook the fact that u s companies will report in mcf while european companies often report in mcm this makes quite a difference because 1mcm 35 3mcf 3example of trillion cubic feetthe u s energy information administration reports the world s natural gas reserves by country as of 2019 according to the site russia had the highest reserves of natural gas with 1 688 tcf followed by iran with 1 194 tcf the u s was fourth with 465 tcf the list was rounded out by belarus and the czech republic which both reported 0 01 tcf of natural gas each 45 | |
what is a trimmed mean | a trimmed mean similar to an adjusted mean is a method of averaging that removes a small designated percentage of the largest and smallest values before calculating the mean after removing the specified outlier observations the trimmed mean is found using a standard arithmetic averaging formula the use of a trimmed mean helps eliminate the influence of outliers or data points on the tails that may unfairly affect the traditional or arithmetic mean trimmed means are used in reporting economic data in order to smooth the results and paint a more realistic picture understanding a trimmed meana mean is a mathematical average of two or more numbers while the trimmed mean helps to reduce the effects of outliers on the calculated average the trimmed mean is best suited for data with large erratic deviations or extremely skewed distributions a trimmed mean is stated as a mean trimmed by x where x is the sum of the percentage of observations removed from both the upper and lower bounds the trimming points are often arbitrary in that they follow rules of thumb rather than some optimized method of setting those thresholds for example a trimmed mean of 3 would remove the lowest and highest 3 of values leaving the mean to be calculated from the 94 of remaining data a trimmed mean is seen as a more realistic representation of a data set as the few erratic outliers have been removed that could otherwise potentially skew the information a trimmed mean is also known as a truncated mean trimmed means and inflation ratesa trimmed mean may be used in place of a traditional mean when determining inflation rates from the consumer price index cpi or personal consumption expenditures pce 12 the cpi and the pce price index measure the prices of baskets of goods in an economy to help identify inflation rising price trends the levels that are trimmed from each tail may not be equitable as these values are instead based on historical data to reach the best fit between the trimmed mean inflation rate and the inflation rate s core the core of the cpi or pce refers to the selected products minus prices associated with food or energy food and energy costs are generally considered the most volatile also referred to as noisy items within the data shifts in the non core area are not necessarily indicative of overall inflationary activities 12 | |
when the data points are organized they are placed in ascending order based on those prices that fell the most to the prices that rose the most specific percentages are removed from the tails to help lower the effect of volatility on the overall cpi changes | trimmed means are used in the olympics to remove extreme scoring from possibly biased judges who may impact an athlete s average score 3providing a trimmed mean inflation rate along with other measures provides a basis for comparison allowing for a more thorough analysis of the inflation rates being experienced this comparison may include the traditional cpi the core cpi a trimmed mean cpi and a median cpi example of a trimmed meanlet s say as an example a figure skating competition produces the following scores 6 0 8 1 8 3 9 1 and 9 9 the mean for the scores would equal to trim the mean by a total of 40 we remove the lowest 20 and the highest 20 of values eliminating the scores of 6 0 and 9 9 next we calculate the mean based on the calculation in other words a mean trimmed at 40 would equal 8 5 vs 8 28 which reduced the outlier bias and had the effect of increasing the reported average by 0 22 points | |
how are trimmed means used | trimmed means are used in reporting economic data they help smooth the results and present a more realistic picture | |
where are trimmed means the best fit | trimmed means are best suited for data with large erratic deviations or extremely skewed distributions | |
how does the trimmed mean help determine the inflation rate | providing a trimmed mean inflation rate along with other measures provides a basis for comparison allowing for a more thorough analysis of the inflation rates being experienced the bottom linea trimmed mean is a method of averaging that removes a small designated percentage of the largest and smallest values before calculating the mean it helps eliminate the influence of outliers or data points on the tails that may unfairly affect the mean | |
what is a triple bottom | a triple bottom is a bullish chart pattern used in technical analysis that s characterized by three equal lows followed by a breakout above the resistance level understanding a triple bottomthe triple bottom chart pattern typically follows a prolonged downtrend where bears are in control of the market while the first bottom could simply be normal price movement the second bottom is indicative of the bulls gaining momentum and preparing for a possible reversal the third bottom indicates that there s strong support in place and bears may capitulate when the price breaks through resistance levels there are a few rules that are commonly used to qualify triple bottoms | |
how to trade a triple bottom | the price target for a double bottom reversal is typically the distance between the lows and the breakout point added to the breakout point for example if the low is 10 00 and the breakout is at 12 00 the price target would be 12 10 2 12 14 14 00 stop loss points are usually placed just below the breakout point and or below the triple bottom lows the triple bottom is similar to the double bottom chart pattern and may also look like ascending or descending triangles traders always look for confirmation of a triple bottom using other technical indicators or chart patterns for example traders might note that the stock has an oversold relative strength index rsi before a double bottom forms and or look for a breakout to confirm that it s a triple bottom rather than a descending triangle or other bearish pattern an example of a triple bottomthe following chart shows an example of a triple bottom chart pattern in this example momenta pharmaceuticals stock formed a triple bottom and broke out from trend line resistance the difference between the third bottom and the breakout point was about 1 75 which translated to a take profit point of around 15 50 on the upside the stop loss point could have been placed at around 13 50 to limit downside risk as well the difference between a triple bottom and a triple topthe triple top is the opposite pattern of a triple bottom instead of a bullish reversal a triple top is a bearish reversal pattern where price action bumps off resistance three times posting three roughly equal highs before plummeting down through resistance that said these are essentially mirror patterns of the same market phenomenon a prolonged battle for control between the bears and bulls where one side emerges victorious if no winner emerges a triple bottom or top will simply become a longer term range limitations of a triple bottomthere is always some uncertainty when trading charting patterns as you are working with probability as with most patterns the triple bottom is easiest to recognize once the trading opportunity has passed double bottoms may fail and become a triple bottom and the triple bottom and the head and shoulders pattern can by definition be one and the same however the most often cited limitation of a triple bottom is simply that it is not a great risk and reward tradeoff because of the placement of the target and stop loss to ramp up the profit potential traders may choose to put their stop loss inside the pattern and trail it up as the breakout occurs the issue with this is the likelihood of being stopped out in the range for a small loss is higher | |
is a triple bottom bullish or bearish | a triple bottom pattern is a bullish chart reversal pattern that suggests a breakout to the upside | |
what happens after a triple bottom | after the third relatively equal low is spotted traders can anticipate the trend will move to the upside break resistence levels and reach higher prices | |
is a triple top pattern a good sign | the opposite of a triple bottom pattern a triple top pattern is a bearish chart pattern that suggests a move to the downside | |
what is the triple bottom line tbl | in economics the triple bottom line tbl maintains that companies should commit to focusing as much on social and environmental concerns as they do on profits tbl theory posits that instead of one bottom line there should be three profit people and the planet a tbl seeks to gauge a corporation s level of commitment to corporate social responsibility and its impact on the environment over time in 1994 john elkington the famed british management consultant and sustainability guru coined the phrase triple bottom line as his way of measuring performance in corporate america the idea was that a company can be managed in a way that not only makes money but which also improves people s lives and the well being of the planet 1understanding the triple bottom line tbl in finance when speaking of a company s bottom line we usually mean its profits elkington s tbl framework advances the goal of sustainability in business practices in which companies look beyond profits to include social and environmental issues to measure the full cost of doing business triple bottom line theory says that companies should focus as much attention on social and environmental issues as they do on financial issues tbl theory also says that if a company focuses on finances only and does not examine how it interacts socially it is not able to see the whole picture and therefore cannot account for the full cost of doing business the 3 ps of the triple bottom lineaccording to tbl theory companies should be working simultaneously on these three bottom lines in the context of the triple bottom line profit can mean more than just how much money a company makes a company must ensure it earns its income in ethical fair manners this includes soliciting business partners and vendors with which it aligns philanthropically it also defines how a company develops its strategy or financial operating plan for instance profit also ties to a company s responsibility to pay its lenders creditors and employees what is due to them and to have a sense of financial responsibility for these obligations some users of the triple bottom line may also say profit refers to not only a company s profit but the profit of those around the company this specifically refers to the community in which the business operates this may include in the context of triple bottom line people refers to every individual that is in touch with a company this includes but is not limited to traditionally a company would prioritize investors or shareholders triple bottom line shifts the focus to individuals potentially not financially invested in the company but still tangentially involved with its operations now instead of attempting to create value by only increasing investor returns triple bottom line strives to create value by encouraging volunteerism of its employees or support or business success of small suppliers for example the largest deviation from purely financial reporting relates to reporting on environmental impacts often a company must be forced between a lower cost option or a more environmentally friendly alternative a company may also choose between a less favorable alternative for example eco friendly transit will likely be slower than aircraft instead of reporting a company s positive changes to the planet it is often much easier to assess the impacts of the alternatives elected by the company imagine a company that redesigned its distribution channels to reduce its energy use such an activity would be reported as saving a certain amount of greenhouse gas emissions some users of triple bottom line may replace profit with prosperity both terms are meant to be interchangeable and refer to the long term health of the company and its programs | |
how to measure the triple bottom line | companies may need to get creative when measuring the triple bottom line traditional accounting rules provide very strong guidance on how a company must record its accounting profit alternatively there may be minimal to no structure in place on how a company must measure its triple bottom line especially considering there may be no external reporting requirement to do so a company will still usually report company wide net income as part of its triple bottom line for this reason profit is the easiest component of triple bottom line to report as it already has strong guidance however it may also report or call out several other profitability or financial metrics such as also referred to as social measures or social metrics the people component of triple bottom line may contain financial or non financial measurements again some may be stipulated by generally accepted accounting principles gaap or other reporting rules while others may be internally sourced data examples of measurements of people include perhaps the most difficult triple bottom line component to measure is planet as a company may need to know its existing impact as well as its eco friendly impact measuring impacts to the planet may require the most expertise or effort however there are very common environmental measurements such as to promote each category as being equally important to one another a true triple bottom report will have a consistent number of measurements for profit people and planet advantages and disadvantages of the triple bottom linethe obvious reason to apply the triple bottom line is to have a greater positive impact on the world instead of focusing on paper profit companies can quantifiably determine how the business is favorably changing the world and the people it engages with having a greater philanthropic presence may encourage employee retention and decrease attrition workers may be more likely to commit to a company if its environmental impacts are communicated in addition favorable working conditions including competitive wages training and time off to volunteer may keep employees around this may reduce recruiting training onboarding and general costs of new employees a greater triple bottom line plan may also entice customers and consciously capitalistic investors interested in prioritizing certain non financial metrics over financial metrics some customers may be torn between two similar products the deciding factor may be the esg prioritization of the companies in addition investors may actively seek to put their money into a company that has social and environmental plans last triple bottom line strategies may result in increased long term profitability though short term costs may increase a company may become more efficient in the long run consider a company converting its fleet to electric vehicles short term this will be a massive capital investment in the long term the company may reap the benefit of lower energy costs less maintenance or better equipment durability a key challenge of the triple bottom line is the difficulty of measuring certain social and environmental bottom lines 2 profitability is inherently quantitative so it is easy to measure however consider the example of attempting to evaluate the economic impact of preventing an oil spill a company may easily be able identify the input costs but it may be more difficult to pinpoint non financial inputs or outcomes it can also be difficult to switch gears between priorities that are seemingly antithetical such as maximizing individual financial returns while also doing the greatest good for society some companies might struggle to balance deploying money and other resources such as human capital to all three bottom lines without favoring one at the expense of another in addition electing to prioritize the triple bottom line will likely be more expensive consider a clothing manufacturer whose best way to maximize profits might be to hire the least expensive labor possible and to dispose of manufacturing waste in the cheapest way possible these practices might well result in the greatest possible profits for the company but at the expense of miserable working and living conditions for laborers and harm to the natural environment and the people who live in that environment aims to have positive impact on the worldmay boost employee retention as workers may appreciate favorable working conditionsmay result in greater external funds from investors seeking esg investmentsmay result in greater sales from customers seeking to support esg companiesmay result in long term efficiencies that reduce costs in the long runmay be more difficult to assess non financial inputs or outputslack of comparability across impact groups i e companies may need to choose one bottom line over the other may result in competing strategies making it difficult to easily pivot from one plan to anotherwill likely increase the cost of operations due to needing to find alternative products or processesexamples of companies that subscribe to tbl or similar conceptstoday the corporate world is more conscious than ever of its social and environmental responsibility companies are increasingly adopting or ramping up their social programs consumers want companies to be transparent about their practices and to be considerate of all stakeholders many consumers are willing to pay more for clothing and other products if it means that workers are paid a living wage and the environment is being respected in the production process the number of firms of all types and sizes both publicly and privately held that subscribe to the triple bottom line concept or something similar is staggering here are a handful of these companies ben jerry s is the ice cream company that made conscious capitalism central to its strategy as stated on its website ben jerry s is founded on and dedicated to a sustainable corporate concept of linked prosperity 3 the company opposes the use of recombinant bovine growth hormone rbgh and genetically modified organisms gmos and fosters myriad values such as fair trade and climate justice 4the lego group privately held billund denmark has formed partnerships with organizations like the nongovernmental organization ngo world wildlife fund in addition lego has made a commitment to reducing its carbon footprint and is working towards 100 renewable energy capacity by 2030 5in addition to partnering with the world wildlife fund the lego group has also pledged to transition to renewable bioplastics the first plant derived set of lego toys was launched in 2019 6mars incorporated privately held mclean va has a sustainable cocoa initiative called cocoa for generations it requires cocoa farmers to be fair trade certified to ensure they follow a code of fair treatment to workers providing labor in exchange for certification mars provides productivity technology and buys cocoa at premium prices 7starbucks corporation sbux has been socially and environmentally focused since its inception in 1971 the company has hired more than 30 000 veterans since 2013 and is committed to hiring 5 000 more per year going forward 89 | |
what are the 3 elements of the triple bottom line tbl | the triple bottom line is an accounting framework that incorporates three dimensions of performance social environmental and financial these three facets can be summarized as people planet and profit 2 | |
how is tbl different from the financial bottom line | including social human and environmental capital along with a company s financial capital makes it possible to get a more accurate picture of a company s impact on society while a company s financial line is helpful in knowing the profitability of the company a company s triple bottom line is used to evaluate non financial philanthrophic performance who came up with the triple bottom line the triple bottom line was conceived by entrepreneur and business writer john elkington in 1994 while at the think tank sustainability and it was later incorporated into the oil company shell s first sustainability report in 1997 10 as interest in sustainable investing has grown the need for a transparent and consistent measurement framework led to the creation of the non profit sustainability accounting standards board sasb | |
why is the triple bottom line important | a company s triple bottom line is important because it de prioritizes the importance of financial performance this alternative reporting metric encourages companies to set social environmental philanthropic and non financial goals instead of purely making decisions on what will maximize profit in addition triple bottom line is important for investors considering what companies invest in some may elect to invest in companies that may be reporting less financial profit but yielding stronger philanthropic results the bottom lineas companies commit more resources to social and environmental impacts instead of prioritizing profit the company can report their achievements using the triple bottom line this reporting structure demonstrates successes relating to profit people and the plant and quantifies results beyond a company s net income management regulators and investors may be interested in knowing how a company has performed not just selling product but making the world a better place | |
what is the triple exponential moving average tema | the triple exponential moving average tema was designed to smooth price fluctuations thereby making it easier to identify trends without the lag associated with traditional moving averages ma it does this by taking multiple exponential moving averages ema of the original ema and subtracting out some of the lag 1the tema is used like other mas it can help identify trend direction signal potential short term trend changes or pullbacks and provide support or resistance the tema can be compared with the double exponential moving average dema formula and calculation for the tematriple exponential moving average tema 3 ema1 3 ema2 ema3where ema1 exponential moving average ema ema2 emaofema1ema3 emaofema2 begin aligned text triple exponential moving average tema left 3 ema 1 right left 3 ema 2 right ema 3 textbf where ema 1 text exponential moving average ema ema 2 ema text of ema 1 ema 3 ema text of ema 2 end aligned triple exponential moving average tema 3 ema1 3 ema2 ema3 where ema1 exponential moving average ema ema2 emaofema1 ema3 emaofema2 | |
what does the tema tell you | the tema reacts to price changes quicker than a traditional ma or ema will this is because some of the lag has been subtracted out in the calculation a tema can be used in the same ways as other types of mas mainly the direction the tema is angled indicates the short term averaged price direction when the line is sloping up that means the price is moving up when it is angled down the price is moving down there is still a small amount of lag in the indicator so when prices change quickly the indicator may not change its angle immediately also the larger the lookback period the slower the tema will be in changing its angle when price changes direction the tema and trend directionthe location of the tema relative to the price also provides clues as to the trend direction generally when the price is above the tema it helps confirm the price is rising for that lookback period when the price is below the tema it helps confirm the price is falling for that lookback period that said a lookback period should be chosen so this actually holds true most of the time therefore it is up to the trader to choose the appropriate lookback period for the asset they are trading if they intend to use the tema for helping to identify trends if the tema can help identify trend direction then it can also help identify trend changes if the price is above the average and then drops below that could signal the uptrend is reversing or at least that the price is entering a pullback phase if the price is below the average and then moves above it that signals the price is rallying such crossover signals may be used to aid in deciding whether to enter or exit positions the tema for support and resistancethe tema may also provide support or resistance for the price for example when the price is rising overall on pullbacks it may drop to the tema and then the price may appear to bounce off of it and keep rising this movement is reliant upon the proper lookback period for the asset if using the tema for this purpose it should have already provided support and resistance in the past if the indicator didn t provide support or resistance in the past it probably won t in the future finally some traders use the tema typically with a small lookback period as an alternative to price itself the single line filters out much of the noise on traditional candlestick or bar charts a line chart would also work in this regard the tema vs the double exponential moving average dema both these indicators are designed to reduce the lag inherent in average based indicators the tema reduces lag more than the double exponential moving average dema 2the formula for the dema is different which means it will provide the trader with slightly different information and signals it is calculated by multiplying the ema of price by two and then subtracting an ema of the original ema 3limitations of using the temawhile the tema reduces lag it still inherits some of the traditional problems of other mas mas are primarily useful in trending markets when the price is making sustained moves in one direction or the other 4 during choppy times when the price is seesawing back and forth the ma or tema may provide little insight and will generate false signals since crossovers may not result in a sustained move as long as the price stays rangebound reduced lag may benefit some traders but not others some traders prefer their indicators to lag because they don t want their indicator reacting to every price change since the tema reacts quicker to price changes it will track the price more closely than a simple moving average sma for example but that also means that the price may cross the tema on a smaller price move than what is required to cross the sma investors typically don t want to actively trade so they don t wish to be shaken out of positions unless there is a significant trend change one type of ma is not better than another deciding which to use comes down to personal preference and what works best for the strategy someone is using the tema is best used in conjunction with other forms of analysis such as price action analysis other technical indicators and fundamental analysis example of the temahere s an example of a tema applied to the spdr s p 500 etf image by sabrina jiang investopedia 2021the tema smooths out the price action the angle of the tema helps identify the overall trend direction even during the day to day noise of minor price fluctuations | |
what is a triple net lease nnn | a triple net lease triple net or nnn is a lease agreement on a property where the tenant promises to pay all expenses including real estate taxes building insurance and maintenance these expenses are in addition to the cost of rent and utilities nnns are one type of commercial property net lease a single net lease requires tenants to pay property taxes plus rent and a double net lease typically tacks on property insurance investopedia michela buttignolunderstanding triple net leases nnn in commercial real estate a net lease is a contract in which the tenant pays a portion or all of the taxes fees and maintenance costs a triple net lease requires that the tenant pay the building s property taxes building insurance and the cost of any maintenance or repairs over the lease term the rent in the triple net lease is generally lower than that charged in a standard lease agreement the capitalization rate cap rate is the expected rate of return on a commercial property the cap rate which is used to calculate the lease amount is often determined in part by the tenant s credit rating commercial property is real estate used for business activities or profit generating purposes it usually refers to buildings that house businesses but also refers to land used to generate a profit and large residential rental properties pros of triple net leasesfor tenants the tenant controls the maintenance upkeep and appearance of theproperty and has direct control over the costs they pay such as electricity or water they can also select the insurance carrier of their preference and can protest the taxes if necessary for landlords a triple net lease provides a steady and consistent revenue stream utility expenses repair costs taxes and property management are passed to the tenant cons of triple net leasesfor tenants the tenant assumes the risk of tax and insurance cost increases the landlord might overestimate the operating costs when determining the rental price which results in the tenant overpaying for some costs unexpected costs may arise during the time of occupancy for landlords finding good and reliable tenants willing to sign a triple net lease can be challenging downtime between tenants could result in no rental income while the building is vacant the tenant s financial strength and stability are key since they are responsible for operating expenses investing in triple net leasestriple net leased properties are a popular investment vehicle for investors seeking steady income with relatively low risk triple net lease investments typically include a portfolio of three or more high grade commercial properties fully leased by a single tenant with existing in place cash flow the commercial properties could include office buildings shopping malls industrial parks or free standing buildings operated by banks pharmacies or restaurant chains a typical lease term may last 10 to 15 years with rent escalation the benefits for investors include long term stable income with the possibility of capital appreciation of the underlying property investors can invest in high quality real estate without management concerns like vacancies improvement costs or leasing fees when the underlying properties are sold investors can roll their capital into another triple net lease investment without paying taxes through a 1031 tax deferred exchange 1investors in triple net lease investment offerings must be accredited with a net worth of at least 1 million excluding the value of their primary residence or 200 000 in income 300 000 for joint filers smaller investors may participate in triple net lease real estate by investing in real estate investment trusts reits that focus on such properties in their portfolios 2triple net lease example | |
what are single and double net leases | the lease with the least tenant risk is a single net n lease the tenant pays just the property taxes double net nn leases are also common in commercial real estate the tenant pays two instead of three obligations property taxes insurance premiums and rent can tenants negotiate a triple net lease with a triple net lease almost all responsibilities fall on the tenant the tenant is responsible for paying rent and all overhead costs associated with owning the property taxes insurance operating expenses utilities etc as a result the base rental amount can become a key negotiating term because the tenant is taking on the risk of the landlord s overhead they may be able to negotiate a more favorable base rental amount | |
do individual tenants have to worry about paying net lease obligations on an apartment | net leases are most commonly used in commercial real estate and not for residential units residential tenants may be required to pay some or all of their utilities and will often be encouraged to purchase their own renter s insurance a residential landlord however would typically pay for the property and liability insurance and real estate taxes | |
how is a triple net lease payment calculated | there are various ways the amount of a triple net lease is calculated sometimes landlords will add all the property taxes insurance maintenance and common area expenses for a building and divide the total by 12 this number is the monthly cost this process is simplified when only one tenant is leasing a building the monthly base rental amount is typically calculated based on a rate per square footage the bottom linea triple net lease can be a good option for landlords and tenants while landlords can hand off paying various property expenses enjoy a stable source of income and focus on their own business tenants on the other hand may receive a lower monthly rent and maintain control of the property | |
what is a triple top | the triple top is a type of chart pattern used in technical analysis to predict the reversal in the movement of an asset s price consisting of three peaks a triple top signals that the asset may no longer be rallying and that lower prices may be on the way in order for the pattern to be considered a triple top it must occur after an uptrend the opposite of a triple is a triple bottom which indicates the asset s price is no longer falling and could head higher | |
how a triple top works | the triple top pattern occurs when the price of an asset creates three peaks at nearly the same price level the area of the peaks is resistance the pullbacks between the peaks are called the swing lows after the third peak if the price falls below the swing lows the pattern is considered complete and traders watch for a further move to the downside the three consecutive peaks make the triple top visually similar to the head and shoulders pattern however in this case the middle peak is nearly equal to the other peaks rather than being higher the pattern is also similar to the double top pattern when the price touches the resistance area twice creating a pair of high points before falling triple tops are traded in essentially the same way as head and shoulders patterns say a stock s price peaks at 119 pulls back to 110 rallies to 119 25 pulls back to 111 rallies to 118 then drops below 111 that is a triple top and signals the stock is likely heading lower it would look like the chart below significance of the triple toptechnically a triple top pattern shows us that the price is unable to penetrate the area of the peaks translated into real life events it means that after multiple attempts the asset is unable to find many buyers in that price range as the price falls it puts pressure on all those traders who bought during the pattern to start selling if the price can t rise above resistance there is limited profit potential in holding onto it as the price falls below the swing lows of the pattern selling may escalate as former buyers exit losing long positions and new traders jump into short positions this is the psychology of the pattern and what helps fuel the selloff after the pattern completes no pattern works all the time sometimes a triple top will form and complete leading traders to believe the asset will continue to fall but then the price may then recover and move above the resistance area for protection a trader could place a stop loss on short positions above the latest peak or above a recent swing high within the pattern this move limits the risk of the trade if the price doesn t drop and instead rallies trading triple top patternssome traders will enter into a short position or exit long positions once the price of the asset falls below pattern support the support level of the pattern is the most recent swing low following the second peak or alternatively a trader could connect the swing lows between the peaks with a trendline when the price falls below the trendline the pattern is considered complete and a further decline in price is expected to add confirmation to the pattern traders will watch for heavy volume as the price falls through support volume should pick up showing a strong interest in selling if the volume doesn t increase the pattern is more prone to failure price rallying or not falling as expected the pattern provides a downside target equal to the height of the pattern subtracted from the breakout point this target is an estimate sometimes the price will drop much lower than the target other times it won t reach the target other technical indicators and chart patterns may also be used in conjunction with the triple top for example a trader may watch for a bearish macd crossover following the third peak or for the rsi to drop out of overbought territory to help confirm the price drop real world example of a triple topthe following chart shows an example of a triple top in bruker corp brkr the price reaches near 36 50 on three consecutive attempts the price pulls back between each attempt creating the triple top pattern the stock quickly broke below trendline support at 34 and continued to decline on escalating volume traders could enter short or exit longs when the price drops below support at 34 a stop loss could initially be placed just above the major resistance area the estimated target for the decline is the height of the pattern about 3 25 subtracted from the 34 breakout point therefore the target is 30 75 the target was reached before the price started bouncing although that won t always happen special considerations for a triple topas with double tops and bottoms the risk reward ratio is a drawback of these triple patterns since both the stop loss and target are based on the height of the pattern they are roughly equal patterns in which the potential profit is greater than the risk are preferred by most professional traders by placing the stop loss within the pattern instead of above it triple top or below it triple bottom improves the reward relative to the risk the risk is based on only a portion of the pattern height while the target is based on the full pattern height depending on which entry points are used the trendline or the recent pullback low it is possible to have two profit targets since the height of the pattern can be added to either of these breakout points traders can choose which target breakout level they prefer in order to extract more profit from the trade | |
is a triple top bullish or bearish | the triple top is a bearish reversal chart pattern that leads to the trend change to the downside on the other hand the triple bottom pattern is a bullish reversal chart pattern that leads to the trend change to the upside | |
are triple tops rare | triple top patterns occur less frequently than double top patterns where there is one peak less to happen but the fact that it is a rare chart formation is also the biggest weakness of a triple top 1 | |
how long does the triple top pattern take to form | as other major reversal patterns the triple top pattern usually form over a three to six month period 2the bottom linethe triple top is used in technical analysis to predict the reversal in the movement of an asset s price a triple top occurs when the price peaks retraces rallies to a similar peak retraces rallies to a similar high again then declines again a triple top is considered complete once the price moves below pattern support and the trend changes to the downside then a trader may decide to exit longs or enter shorts the triple bottom chart pattern is an upside down version of the triple top and marks the end of a downtrend | |
triple witching is the simultaneous expiration of stock options stock index futures and stock index options contracts all on the same trading day this happens four times a year on the third friday of march june september and december the expected expiration date for the three might increase trading volume and cause unusual price changes in the underlying assets | understanding triple witchingtriple witching days generate more trading activity and volatility since contracts allowed to expire cause buying or selling of the underlying security while some derivative contracts are opened with the intention of trading the underlying security traders seeking derivative exposure only must close roll out or offset their open positions before the close of trading on triple witching days triple witching days particularly the final hour of trading preceding the closing bell 4 p m eastern time known as the triple witching hour can spike trading activity and volatility as traders close roll out or offset their expiring positions single stock futures last traded in the u s in 2020 were typically grouped with stock options index options and index futures giving rise to the term quadruple witching but they never drew nearly as much capital or trading interest as the other types of equities derivatives most notably stock options 1offsetting futures positionsa futures contract an agreement to buy or sell an underlying security at a set price on a specified day mandates that the transaction take place after the expiration of the contract 2for example one e mini s p 500 futures contract is valued at 50 times the value of the index 3 if the s p 500 is at 4 000 at expiration the value of the contract is 200 000 the amount the contract s owner must pay if the contract expires to avoid this the contract owner closes the contract by selling it before the expiration 2 after closing the expiring contract exposure to the s p 500 index can be continued by buying a new contract in a forward month this is known as rolling out a contract much of the action surrounding futures and options on triple witching days is focused on offsetting closing or rolling out positions on the expiration date contract owners can decide not to take delivery and instead close their contracts by booking an offsetting trade at the prevailing price settling the gain or loss from the purchase and sale prices traders may also extend the contract by offsetting the existing trade and simultaneously booking a new option or futures contract to be settled in the future which is called rolling the contract forward 2expiring optionsoptions that are in the money are similar for those holding expiring contracts for example the seller of a covered call option can have the underlying shares called away if the share price closes above the strike price of the expiring option in this situation the option seller can close the position before expiration to continue holding the shares or let the option expire and have the shares called away 4call options expire in the money that is are profitable when the underlying security price is higher than the strike price in the contract put options are in the money when the stock or index is priced below the strike price in both situations the expiration of in the money options causes automatic transactions between the buyers and sellers of the contracts 4 as a result triple witching dates are when all three types of contracts stock index futures stock index options and stock options all expire on the same day causing an increase in trading triple witching and arbitragethough much of the trading in closing opening and offsetting futures and options contracts during triple witching days is related to squaring positions the surge of activity can also produce price inefficiencies which can draw in short term arbitrageurs those who seek to profit from them these opportunities might be catalysts for heavy volume going into the close on triple witching days as traders look to profit on small price imbalances with large round trip trades completed in seconds despite the overall increase in trading volume triple witching days do not necessarily lead to high volatility an example of triple witchingfriday march 15 2019 was the first triple witching day of 2019 trading volume leading up to this third friday of the month had increased market activity trading volume march 15 2019 on u s market exchanges was 10 8 billion shares compared with an average of 7 5 billion average the previous 20 trading days 5for the week leading into the triple witching friday the s p 500 nasdaq and the dow jones industrial average djia were up 2 9 3 8 and 1 6 respectively however it seems much of the gains happened before the triple witching friday because the s p 500 and djia increased only 0 50 and 0 54 respectively that day 65triple witching datestriple witching happens four times a year or once a quarter on the third fridays of march june september and december 202420252026triple vs quadruple witchingthe terms triple witching and quadruple witching are often used to describe occasions on the third friday of march june september and december for about 20 years they had one difference but since 2020 they have referred to the same event triple witching occurs when three types of financial contracts expire simultaneously the fourth type of contract involved in quadruple witching single stock futures hasn t traded in the u s since 2020 1 any references to quadruple witching are about the three types of contracts above expiring simultaneously frequently asked questions | |
what is witching and why is it triple | in folklore the witching hour is when evil things may be afoot derivatives traders have colloquially applied this to the hour of contract expiration frequently on a friday at the close of trading it s triple for the three types of contracts expiring simultaneously listed index options single stock options and index futures can triple witching impact stocks beyond broad market volatility triple witching can influence individual stocks such as those with large options or futures contracts set to expire as traders adjust or close their positions there can be unusual movement in the stock s price and volume this is usually more pronounced in stocks with smaller market caps or those that trade heavily in the derivatives market caution is in order at this time since these price changes don t often reflect shifts in the underlying company s fundamentals 4 | |
are there strategies traders can use for triple witching dates | one strategy is to look for arbitrage opportunities from price discrepancies between the stock market and derivative markets also some traders might take up a straddle strategy holding both a put and a call option with the same strike price and expiration date to try to profit from large price swings in either direction however these strategies have risks and are not recommended for less experienced traders | |
what are some price abnormalities seen on triple witching dates | an interesting phenomenon is that often the price of a security may artificially tend toward a strike price with large open interest as gamma hedging takes place gamma hedging works to minimize the risk associated with changes in delta providing a more stable options portfolio changes in delta in turn are most simply defined as the change in an option s price sensitivity to any changes in the underlying asset s price the gamma hedging can lead the price to pin the strike at expiration pinning the strike when an underlying security s market price closes very near the strike price of heavily traded options can bring pin risk for options traders uncertain whether to exercise the long options that have expired in the money or are very close to it this is because they are also unsure how many of their similar short positions will be assigned the bottom linetriple witching refers to the third friday of march june september and december when three kinds of securities stock market index futures stock market index options and stock options expire on the same day derivatives traders pay close attention on these dates given the potential for increased volume and volatility in the markets | |
what was the troubled asset relief program tarp | the troubled asset relief program tarp was an initiative created and run by the u s treasury to stabilize the country s financial system restore economic growth and mitigate foreclosures in the wake of the 2008 financial crisis tarp sought to achieve these targets by purchasing troubled companies assets and stock | |
how the troubled asset relief program tarp worked | global credit markets came to a near standstill in september 2008 as several major financial institutions such as fannie mae freddie mac and american international group aig experienced severe financial problems lehman brothers went bankrupt and investment companies goldman sachs and morgan stanley changed their charters to become commercial banks in an attempt to stabilize their capital situations 12to prevent the situation from completely spiraling out of control treasury secretary henry paulson pioneered the troubled asset relief program tarp it was signed into law by president george w bush on october 3 2008 with the passage of the emergency economic stabilization act 34alison czinkota investopediatarp s original purpose was to increase the liquidity of the money markets and secondary mortgage markets by purchasing the mortgage backed securities mbs and through that reduce the potential losses of the institutions that owned them later tarp s aim was modified slightly to allow the government to buy equity in banks and other financial institutions tarp initially gave the treasury purchasing power of 700 billion the dodd frank wall street reform and consumer protection act simply referred to as dodd frank later reduced the 700 billion authorization to 475 billion 5tarp funds were used to purchase stock in banks insurance companies and auto makers and to loan funds to financial institutions and homeowners 6the u s government bought preferred stock in eight banks bank of america merrill lynch bank of new york mellon citigroup goldman sachs j p morgan morgan stanley state street and wells fargo the banks were required to give the government a 5 dividend that would increase to 9 in 2013 encouraging banks to buy back the stock within five years 7from the program s inception until october 3 2010 the deadline for extending funds 245 billion was used to stabilize banks 27 billion went to programs to increase credit availability 80 billion went to the u s auto industry specifically gm and chrysler 68 billion was used to stabilize aig and 46 billion went to foreclosure prevention programs such as making home affordable 58the provisions of tarp demanded that companies involved lose certain tax benefits and in many cases placed limits on executive compensation and forbade fund recipients from awarding bonuses to their top 25 highest paid executives 9 even so by 2009 bailed out firms paid some 20 billion to key personnel sardonically referred to as tarp bonuses 10 | |
when the treasury wrapped up tarp the government concluded that its investments had earned more than 11 billion for taxpayers by 2010 11 to be more specific tarp recovered funds totaling 441 7 billion from 426 4 billion invested the government also claimed that tarp prevented the american auto industry from failing and saved more than one million jobs helped stabilize banks and restored credit availability for individuals and businesses 12 | tarp is still controversial advocates say it saved the u s financial system and shortened the financial crisis while critics charge the initiative just gave wall street an unnecessary boost even so economists politicians and financial professionals still debate tarp s merits and wonder if it had been necessary critics charge the program did little to help the housing markets which remained depressed for years some say it did not go far enough that the government should have insisted on an equity stake in the financial firms it was bailing out to control their future practices instead critics opine that tarp s no strings loans essentially acted as a reward for bad behavior sending a message of act irresponsibly and we ll help you out and establishing a dangerous precedent of dependency tarp also did not endear the government to the american public which saw wall street reap benefits including those notorious bonuses and return to profitability even as individuals struggled with debt unemployment and foreclosures in the wake of the great recession | |
what is a trough | a trough in economic terms can refer to a stage in the business cycle where activity is bottoming or where prices are bottoming before a rise understanding troughsthe business cycle moves in five phases expansion peak contraction trough and recovery the trough is the bottoming process of moving from contraction or declining business activity to recovery which is increasing business activity economists use several metrics to track the economic cycle throughout its various phases the most recognizable of these is gross domestic product gdp which is the total value of all goods and services that a country produces a trough is the stage of the economy s business cycle that marks the end of a period of declining business activity and the transition to expansion the business cycle is the upward and downward movement of gross domestic product and consists of recessions and expansions that end in peaks and troughs employment levels also offer an indicator of where the economy stands in the business cycle unemployment levels of less than 5 are consistent with full employment and are indicative of economic expansion when the unemployment rate rises from month to month the economy has most likely entered a contractionary phase when the unemployment rate bottoms out a trough has likely occurred income and wages are also indicators of where the economy stands in the business cycle these increase during expansion recede during contraction and bottom out during a trough the major u s stock market indices such as the dow jones industrial average djia and standard poor s 500 index s p 500 also track closely with the business cycle declines in the stock market coincide or foreshadow contraction in the economy when stocks rally after a significant decline it could signal the economic trough is in or coming soon leading to a rise in economic activity troughs are usually only apparent in hindsight special considerationstroughs are recognizable in hindsight but harder to spot in real time as the economic indicators contract the economy is in a contraction phase this phase can last for a short or long period of time it is only once the economic activity begins to increase again as shown on economic indicators that expansion is likely underway and the trough or bottom has been put in while troughs vary in severity with some troughs only being minor setbacks in economic growth and others being sustained periods of hardship they are typically marked with declining business sales and earnings layoffs low credit availability higher unemployment and business closures all compared to the other business cycle phases troughs are important as they mark a positive turning point for the economy technical traders also sometimes refer to swing lows as troughs and swing highs as peaks asset prices move up and down forming peaks and troughs examples of troughs in the u s an economic trough occurred in june 2009 this date marked the official end of the great recession which began following the economic peak reached in dec 2007 at the end of 2007 the u s gdp reached an all time high of 14 99 trillion it then fell steadily for the next year and a half a period of severe economic contraction in june 2009 it bottomed out at 14 36 trillion a period of expansion ensued with the gdp eventually surpassing its 2007 high reaching 15 02 trillion by sept 2011 during the u s recession of the early 1990s the trough occurred in march 1991 at that date the gdp stood at 8 87 down from 8 98 trillion in july 1990 the month the recession began the recovery to this recession marked by the ensuing expansionary phase was robust with the gdp surpassing 9 trillion for the first time ever before the end of 1991 frequently asked questionsa trough in the business cycle occurs when a recession ends and economic recovery or expansion begins a recession s depth is determined by the magnitude of the peak to trough decline in the broad measures of output employment income and sales its diffusion is measured by the extent of its spread across economic activities industries and geographical regions its duration is determined by the time interval between the peak and the trough the economic cycle is another term for the business cycle the four stages are expansion peak contraction and trough a recession is a trough defined as negative gdp growth occurring over two consecutive quarters and lasting for several months or longer a depression is commonly defined as an extreme recession that lasts three or more years or which leads to a decline in real gross domestic product gdp of at least 10 in a given year depressions are relatively less frequent than milder recessions and tend to be accompanied by high unemployment and low inflation a peak is the opposite of a trough a high point at which expansion shifts to contraction | |
what is a troy ounce | a troy ounce is a unit of measure used for weighing precious metals that dates back to the middle ages originally used in troyes france one troy ounce is equal to 31 1034768 grams according to the u k royal mint 1one standard ounce also known as an avordupois ounce is used to weigh other commodities such as sugar and grain a standard ounce is slightly less than a troy ounce at 28 35 grams the troy ounce is to this day the standard unit of measurement in the precious metals market to ensure purity standards the troy ounce is often abbreviated to read t oz or oz t understanding the troy ouncethe troy ounce is the only measure of the troy weighting system that is still used in modern times it is used in the pricing of metals such as gold platinum and silver thus when prices of precious metals are listed per ounce it is often referencing the troy ounce it was also used when weighing certain gemstones the troy weight system however has largely been replaced by the carat system in the world of precious gems and stones history of the troy ouncethe troy system for weights and measures is believed to have gotten its name from the french city of troyes a business hub in the middle ages that attracted merchants from around europe and britain 2 in troyes merchants measured 480 grains of barley to equal a troy ounce and 12 troy ounces equaled one troy pound some historians however believe the troy ounce had its origins in roman times romans standardized their monetary system using bronze bars that could be broken down into 12 pieces called uncia or ounce with each piece weighing around 31 1 grams as europe s economic importance grew from the 10th century onward merchants came from all over the world to buy and sell goods there it was therefore necessary to develop a new standardized monetary weight system to make doing business much easier some believe the merchants of troyes modeled their new monetary system on the weights developed by their roman ancestors before the adoption of the metric system across europe the french born king henry ii of england adjusted the british coinage system to better reflect the french troy system the system was adjusted periodically but troy weights as we know them today were first used in england in the 15th century prior to the adoption of the troy system the british used an anglo norman french system called the avoirdupois system the word means goods of weight and was used to weigh both precious metals and non precious metal goods by 1527 the troy ounce became the official standard measurement for gold and silver in britain and the u s followed suit in 1828 3troy ounce vs ouncethe avoirdupois ounce simply referred to as ounce oz is the standard used in the us to measure foods and other items with the exception of precious metals and gems it is the equivalent of 28 349 grams or 437 5 grains a troy ounce is a little heavier with a gram equivalent of 31 1 the difference 2 751 may be minute for a small quantity but can be substantial for large quantities 4 | |
when the price of gold is said to be us 653 ounce the ounce being referred to is a troy ounce not a standard ounce because a troy ounce is heavier than a standard ounce there are 14 6 troy ounces compared to 16 standard ounces in one pound this pound is not to be confused with a troy pound which is lighter and is made up of 12 troy ounces 53 | troy ounce conversionbelow is a quick reference table for converting troy ounces into other common weights investing in precious metalsthe difference between a troy ounce and an avoirdupois ounce is of concern mostly to investors in precious metals gold has historically been seen as the ultimate safe haven although its market price is volatile not least because of its status as an imperishable asset but the age old practice of using gold and silver as a store of wealth has been joined in modern times by two more precious metals most modern investors probably don t want to buy precious metals by the troy ounce and stow them in a safe at home luckily there are modern ways to invest in these metals | |
which is heavier 1 oz or 1 troy ounce | a troy ounce is approximately 10 heavier than a standard ounce 1 0 1 097 | |
what are troy ounces used for today | troy ounces are still used in measurements of precious metals like gold and silver and gemstones most other goods are weighed using either the metric system or standard ounces | |
what is a troy pound | a troy pound is 12 troy ounces while a standard pound is 16 standard ounces 1 troy pound 0 823 pounds the bottom linetroy ounces are used to measure weights of gems and precious metals one troy ounce is equal to 1 097 standard ounces making it around 10 heavier the name dates back to the 16th century french town of troyes which was an important trade center that standardized the troy ounce as 480 grains of barley correction nov 5 2022 a previous version of this article misstated the conversion amounts for a pound and a kilogram as it relates to the troy ounce | |
what is the true strength index tsi | the true strength index tsi is a technical momentum oscillator used by technical analysts the true strength index is used to identify trends and reversals in the market the indicator may determine overbought and oversold conditions indicate potential trend direction changes via centerline or signal line crossovers and warn traders of trend weakness that may occur through divergence image by sabrina jiang investopedia 2021formula and how to calculate the true strength index tsi the formula for calculating the tsi involves the following steps tsi pcds apcds x 100 pc ccp pcp pcs 25 period ema of pc pcds 13 period ema of pcs apc avccp pcp apcs 25 period ema of apc apcds 13 period ema of apcs where pcds pc double smoothed apcds absolute pc double smoothed pc price change ccp current close price pcp prior close price pcs pc smoothed ema exponential moving average apc absolute pc apcs absolute pc smoothed begin aligned text tsi pcds apcds x 100 text pc ccp text pcp text pcs 25 period ema of pc text pcds 13 period ema of pcs text apc avccp text pcp text apcs 25 period ema of apc text apcds 13 period ema of apcs textbf where text pcds pc double smoothed text apcds absolute pc double smoothed text pc price change text ccp current close price text pcp prior close price text pcs pc smoothed text ema exponential moving average text apc absolute pc text apcs absolute pc smoothed end aligned tsi pcds apcds x 100pc ccp pcppcs 25 period ema of pcpcds 13 period ema of pcsapc avccp pcpapcs 25 period ema of apcapcds 13 period ema of apcswhere pcds pc double smoothedapcds absolute pc double smoothedpc price changeccp current close pricepcp prior close pricepcs pc smoothedema exponential moving averageapc absolute pcapcs absolute pc smoothed the main skill required in computing the tsi is the ability to calculate an exponential moving average ema | |
what is the true strength index tsi | the true strength index tsi is a technical momentum oscillator used by technical analysts the true strength index is used to identify trends and reversals in the market the indicator may determine overbought and oversold conditions indicate potential trend direction changes via centerline or signal line crossovers and warn traders of trend weakness that may occur through divergence image by sabrina jiang investopedia 2021formula and how to calculate the true strength index tsi the formula for calculating the tsi involves the following steps tsi pcds apcds x 100 pc ccp pcp pcs 25 period ema of pc pcds 13 period ema of pcs apc avccp pcp apcs 25 period ema of apc apcds 13 period ema of apcs where pcds pc double smoothed apcds absolute pc double smoothed pc price change ccp current close price pcp prior close price pcs pc smoothed ema exponential moving average apc absolute pc apcs absolute pc smoothed begin aligned text tsi pcds apcds x 100 text pc ccp text pcp text pcs 25 period ema of pc text pcds 13 period ema of pcs text apc avccp text pcp text apcs 25 period ema of apc text apcds 13 period ema of apcs textbf where text pcds pc double smoothed text apcds absolute pc double smoothed text pc price change text ccp current close price text pcp prior close price text pcs pc smoothed text ema exponential moving average text apc absolute pc text apcs absolute pc smoothed end aligned tsi pcds apcds x 100pc ccp pcppcs 25 period ema of pcpcds 13 period ema of pcsapc avccp pcpapcs 25 period ema of apcapcds 13 period ema of apcswhere pcds pc double smoothedapcds absolute pc double smoothedpc price changeccp current close pricepcp prior close pricepcs pc smoothedema exponential moving averageapc absolute pcapcs absolute pc smoothed the main skill required in computing the tsi is the ability to calculate an exponential moving average ema | |
what is a trust company | a trust company is a legal entity that acts as a fiduciary agent or trustee on behalf of a person or business for the purpose of administration management and the eventual transfer of assets to a beneficial party the trust company acts as a custodian for trusts estates custodial arrangements asset management stock transfer beneficial ownership registration and other related arrangements | |
how trust companies work | although trusts often have an individual assigned as the trustee a trust company can also act in the same capacity a trust company does not own the assets its customers assign to its management but it may assume some legal obligation to take care of assets on behalf of other parties a trust company or trust department is usually a division or an associated company of a commercial bank trusts and similar arrangements managed for eventual transfer are managed for profit which it may take out of the assets annually or upon transfer to the beneficial third party there are many trust companies to choose from ranging in size and fees the larger trust companies provide more products and services but may lack the personal touch of smaller institutions some of the larger trust companies are northern trust bessemer trust and u s trust which is now part of bank of america corporation these trusts generally charge their fees based on a percentage of assets ranging from 0 25 to 2 0 depending on the size of the trust | |
what trust companies offer | trust companies offer a variety of services including the daily operational tasks for managing the trust also there are many types of trusts that can use trust companies as a trustee such as charitable trusts trust companies are also used in estate planning matters a trust company can be left as a successor trustee for a trust when there are no financially responsible family members upon the death of the grantor the trust company will become the new trustee and manage the assets according to the terms of the trust trust companies also offer a variety of estate oriented services such as guardianship estate settlement and non financial asset management benefits of a trust companya trust company is hired to act as a fiduciary meaning they act on your behalf and won t take advantage of you as a result a trust company can make all of the investment decisions and act in the best interest of its client the investment management services offered by trust companies can be helpful to those who are not experienced or knowledgeable about the financial markets also clients who don t want or care to manage their day to day finances can also benefit from using a trust company trust companies are often good alternatives for preventing future family squabbles when dealing with inheritances and estate planning if dividing up the assets of an estate will cause family turmoil a trust company can act as a neutral third party | |
what is a trust deed | a trust deed also known as a deed of trust is a document sometimes used in real estate transactions in the u s it is a document that comes into play when one party has taken out a loan from another party to purchase a property the trust deed represents an agreement between the borrower and a lender to have the property held in trust by a neutral and independent third party until the loan is paid off although trust deeds are less common than they once were some 20 states still mandate the use of one rather than a mortgage when financing is involved in the purchase of real estate trust deeds are common in alaska arizona california colorado idaho illinois mississippi missouri montana north carolina tennessee texas virginia and west virginia a few states such as kentucky maryland and south dakota allow the use of both trust deeds and mortgages 1investopedia danie drankwalterunderstanding trust deedsa trust deed is a transaction between three parties in a real estate transaction the purchase of a home say a lender gives the borrower money in exchange for one or more promissory notes linked to a trust deed this deed transfers legal title to the real property to an impartial trustee typically a title company escrow company or bank which holds it as collateral for the promissory notes the equitable title the right to obtain full ownership remains with the borrower as does full use of and responsibility for the property this state of affairs continues throughout the repayment period of the loan the trustee holds the legal title until the borrower pays the debt in full at which point the title to the property transfers to the borrower if the borrower defaults on the loan the trustee takes full control of the property trust deed vs mortgagetrust deeds and mortgages are both used in bank and private loans for creating liens on real estate and both are typically recorded as debt in the county where the property is located however there are some differences a mortgage involves two parties a borrower or mortgagor and a lender or mortgagee when a borrower signs a mortgage they pledge the property as security to the lender to ensure repayment in contrast a trust deed involves three parties a borrower or trustor a lender or beneficiary and the trustee the trustee holds title to the lien for the lender s benefit if the borrower defaults the trustee will initiate and complete the foreclosure process at the lender s request in the event of default a deed of trust will result in different foreclosure procedures than a mortgage a defaulted mortgage will result in a judicial foreclosure meaning that the lender will have to secure a court order trust deeds go through a non judicial foreclosure provided that they include a power of sale clause 2judicial foreclosures are more expensive and time consuming than non judicial foreclosures this means that in states that allow them a deed of trust is preferable to a mortgage from the lender s point of view contrary to popular usage a mortgage is not technically a loan to buy a property it s an agreement that pledges the property as collateral for the loan | |
what is included in a trust deed | a deed of trust will include the same type of information stated in a mortgage document such as in addition a trust deed will also include a power of sale clause that gives the trustee the right to sell the property if the borrower defaults foreclosures and trust deedsmortgages and trust deeds have different foreclosure processes a judicial foreclosure is a court supervised process enforced when the lender files a lawsuit against the borrower for defaulting on a mortgage the process is time consuming and expensive also if the foreclosed property auction doesn t bring in enough money to pay off the promissory note the lender may file a deficiency judgment against the borrower suing for the balance however even after the property is sold the borrower has the right of redemption they may repay the lender within a set amount of time and acquire the property title in contrast a trust deed lets the lender commence a faster and less expensive non judicial foreclosure bypassing the court system and adhering to the procedures outlined in the trust deed and state law if the borrower does not make the loan current the property is put up for auction through a trustee s sale the title transfers from the trustee to the new owner through the trustee s deed after the sale when there are no bidders at the trustee sale the property reverts to the lender through a trustee s deed once the property is sold the borrower has no right of redemption furthermore a trustee has the responsibility of paying the proceeds from the sale to the borrower and lender after the sale is finalized the trustee will pay the lender the amount left over on the debt and pay the borrower anything that surpasses that amount thereby allowing the lender to purchase the property pros and cons of investing in trust deedsinvestors who are searching for juicy yields sometimes turn to the real estate sector in particular trust deeds in trust deed investing the investor lends money to a developer working on a real estate project the investor s name goes on the deed of trust as the lender the investor collects interest on the loan when the project is finished the principal is returned to the investor in full a trust deed broker usually facilitates the deal high yielding income streamportfolio diversificationilliquidityno capital appreciation | |
what sort of developer enters this arrangement banks are often reluctant to lend to certain types of developments such as mid size commercial projects too small for the big lenders too big for the small ones or developers with poor track records or too many loans cautious lenders may also move too slowly for developers up against a tight deadline for commencing or completing a project | developers like these are often in a bit of a crunch for these reasons trust deed investors may often expect high interest rates on their money they can reap the benefits of diversifying into a different asset class without having to be experts in real estate construction or management this is a form of passive investment trust deed investing has certain risks and disadvantages unlike stocks real estate investments are not liquid meaning investors cannot retrieve their money on demand also investors can expect only the interest the loan generates any additional capital appreciation is unlikely invested parties may exploit any legal discrepancies in the trust deed causing costly legal entanglements that may endanger the investment the typical investor with little experience may have difficulty as it takes specific expertise to find credible and trustworthy developers projects and brokers real world example of a trust deeda short form deed of trust document used in austin county texas covers the requirements for most lenders the form begins with a definition of terms and spaces for the borrower lender and trustee to fill in their names the amount being borrowed and the address of the property are also required after this section the document goes on to specify the transfer of rights in the property and uniform covenants including the form also includes nonuniform covenants which specify default or breach of any of the agreement terms and it specifies that the loan the document deals with is not a home equity loan that is something the borrower will receive cash from but one for purchasing the property the deed of trust ends with a space for the borrower s signature which must be done in the presence of a notary and two witnesses who also sign |
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