Finance Explained (In Plain English)

Many people seem to having trouble with all the terms in the fiscal crisis. Here is a handy guide I have prepared. Hope this helps.

“Typical investor”

You go to the grocery store and buy an orange, take it home, and eat it when it ripens.

“Short seller”

You go to the grocery store. You borrow 100 oranges and immediately sell them to someone else. You wait for the price of oranges to go down. You buy 100 cheaper oranges, return them to the bank and pocket the difference in price. Everybody hates you.

“Hedge fund”

You take your rich uncle’s money, borrow more, and secretly buy lots of oranges on the cheap. Then you then drive up the price of oranges. At the same time, you short oranges. Either way, you keep 20 percent of profits. Everybody envies you.

“Pension fund”

You take a bowling league’s meager savings and try to copy what the hedge funds were doing. Everybody pities you.

“Warren Buffet”

Owns the orange groves. Always makes money.

“Alan Greenspan”

The aging greeter who encourages you to buy more oranges than you can afford.

“Subprime mortgages”

Rotting oranges infested with worms.

“Mortgage-backed securities”

You buy a huge amount of oranges — including the diseased ones — chop them up and sell the whole thing off in baskets of varying sizes and quality. Nobody knows what they are buying.

“Credit-rating agency”

Clerk who says the worm-infested oranges in the basket are really very sweet and delicious.

“Credit default swap”

Insurance in case the bad oranges spoils the bunch. Sold at checkout counter.

“Special Investment Vehicle (SIV)”

The store stashes the rotten oranges in the freezer and forgets about them.

“Investment Bank”

Cashier who pockets a few cents every time oranges are bought and sold. Stuck with lots of unsold fruit baskets.

“Treasury secretary”

Ex-cashier promoted to management.

“Federal bailout”

The government buys all the worm-infested oranges and makes you eat them.

One comment

  1. Susan Kishner

    I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you down the road!

    Like

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