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Welcome to the Finance Storyteller series. I'm here to make business strategy and finance enjoyable and easier to understand. In this video we're going to cover the financial terms EBIT and EBITDA. Let me give you some context so that you know where EBIT and EBITDA fit in. There are three financial statements. The balance sheet and overview of what we own and what we owe at a point in time. The income statement and overview of the profit or income jet you generate during a period. And the cash flow statement and overview of how much cash you generate and where you spend your cash during a period. EBIT and EBITDA are income statement metrics. EBIT is earnings before interest and taxes. EBITDA is earnings before interest, taxes, depreciation and amortization. Earnings is the same as income or profit. The word before suggests that we're excluding certain items from our operational performance metric. Interest is excluded as it depends on your financing structure. How much did you borrow and at what interest rate? Taxes are excluded because it depends on the geographies that you work in. And the arbitration are sometimes excluded because they depend on the historical investment decisions that the company has made. Not the current operating performance. Let me show you an overview of an income statement or profit and loss statement so that you know where EBITDA and EBIT fit in. Revenue minus cost of sales equals gross profit. Gross profit minus SGNA and R&D equals EBITDA. EBITDA minus depreciation and amortization equals EBIT. EBIT minus interest and taxes equals net income. Please be aware that different companies use different terminology. So what you see here might be different from what your company is using. Also, not every company reports both on EBITDA as well as EBITDA. EBITDA is commonly used as a metric in very capital intensive industries like manufacturing, trucking, oil and gas and telecom. Service heavy industries like consultancy wouldn't even bother splitting out the two. What is depreciation and how does that work? Let's assume you want to buy a truck for your company to deliver your products. You spend $100,000 to buy it. What happens on your financial statements is that cash goes down by $100,000. Your fixed assets or plant and equipment go up by $100,000. It would be incorrect to book the full $100,000 straight away as a cost for the current year because you're going to use the truck for multiple years. That's when depreciation comes up. Let's assume that the truck has a useful economic life of five years and has no residual value. If you use straight line depreciation, you book 20,000 per year in depreciation. The value of the asset on the balance sheet goes down by 20,000 per year and in the income statement you charge this 20,000 as an expense. Let's look at an example of using EBITDA and EBITDA in financial reporting. I took the 2015 and a report of the Merch Group, a company headquartered in Denmark and operating globally. They report in US dollars. Their best known business is Merch line, which is the largest container shipping company. They are also active in areas like oil and gas, terminals and drilling. Merch's revenue in 2015 was 15% lower than the year before and the income or net profit was down by 82%. But as net income the most relevant way to measure their profitability performance, Merch gives you the choice to also evaluate profitability at other levels. EBITDA was down 68%, and EBITDA was down 24%. Depreciation and amortization are sometimes referred to as fixed costs. They don't go up and down with the number of units that you sell, but they are driven by the investments that you have made and the number of years that you use those assets. In the case of a company like Merch, which operates in a capital intensive industry, depreciation is a huge number, $8 billion in 2015, almost 20% of revenue. Looking at the EBITDA as well as the EBIT performance gives you more information than looking at EBITDA alone. What a business of finance people use EBITDA for is often mentioned as part of M&A or Merch's and Acquisitions news. The quick and dirty way to calculate the value of a company is by using a multiple of EBITDA. This can help you to get to a ballpark number, but I would advise to always do a more thorough analysis and a more thorough evaluation of a company as there are a lot of ifs connected to using an EBITDA multiple. You are assuming the profitability and the industry doesn't change, you exclude the impact of working capital, which could go up dramatically for a finance growing company, and you exclude the cash that you need for capital expenditures on an ongoing basis for the company. In summary, what is EBITDA? EBITDA is earnings before interest and taxes. EBITDA is earnings before interest, taxes, depreciation and amortization. Both EBITDA and EBITDA are measures of profitability along with terms like gross profit and net income. EBITDA is a meaningful metric for capital intensive industries. I hope you have enjoyed this finance storyteller video. Thank you for watching. Please let me know what you think in the comments section and connect on my blog, LinkedIn, Twitter or YouTube.

Burning Spurshare or EPS? How do I calculate EPS? Is EPS the same as dividend per share? These are the questions we will look at in this final storyteller video. Let's take an example of EPS from a very well known company. Do you know of any company that had 216 billion in revenue in 2016 and 46 billion in income? You guessed it right, Apple. How do we calculate Apple's EPS? The formula for the earnings per share is to take the net income and divide it by the number of shares. EPS is there for the proportional part of total profits that is attributable to you if you own one unit of a company's stock. Apple's net income was 45.7 billion, but how many shares did Apple have on average in 2016? There are two numbers at the bottom of the page, the basic number of shares and the diluted number of shares. What is the difference between these two? The word diluted gives you the way. If you have ever taken a science class, you probably have worked on diluting the active ingredient in a fluid to make its effect weaker. That's pretty much the same as what is happening when you look at diluted EPS. The effect of dilution has been taken into account. The basic number of shares is the number that currently exists. The number below it is the number that could exist if all convertible securities were exercised at the earliest point in time. Things like stock options, convertible debt and warrants. So let's calculate basic EPS first. Take the 45.7 billion of net income and divide by 5.47 billion shares to get to $8.35 per share. Next we calculate diluted EPS. We once again take the 45.7 billion of net income in the numerator, but this time we divide by 5.5 billion of what is often called common stock and common stock equivalence. We get to $8.31 of diluted EPS. Is EPS the same as dividend per share? No it is not. EPS is the proportional part of total profits that is attributable to you if you own one unit of a company's stock. Dividend per share is what is actually paid out by the company. As you see in this chart, Apple has a dividend payout of 26% of its profit. The rest of the cash is kept inside the company for future use, but that's the topic of another video. On the Finance Storyteller YouTube channel, you can find lots of well-researched videos explaining business, finance and accounting topics. Please subscribe to the Finance Storyteller channel and take the time to like the video and comment below. On average I post one new video per week. If you subscribe to the channel, you will be the first to see it.

This is Confident and it's my job to get you past the series 65 and this series 66. This might be the most boring video I ever do but it's going to be a long, I was going to curse, you know, it's just a curse in the first 30 seconds of a YouTube video where they demonetize your ass. We don't need that. This is going to be a long boring video but it's going to be very, very valuable. Once telling me that this is going to be the key to passing the series 65 or the series 66. These are going to be one really long video or a bunch of like other videos. I have to see, I will absolutely have to timestamp it because I'm going through a lot of stuff and what am I going to do? And I'm just going to go down all the terms and we're going to go through all the terms from various books and get everything. So this will be have a thing. So if you go, what is this? I got that. You're just looking up and there it is. And you get a little stupid video with me talking about it. But some art around it. Who the hell knows? But let's get going. Okay. So we'll start with we're in the letter A's right, a credit and investor. So what is an accredited investor? Well, first of all, what can they do? They're allowed to buy on regulation D. Okay. So accredited investors are kind of rich people. Remember, one, two, three accredited, one million net worth, 200 salary if you're single, 300 of their miserable. I mean, married. Okay. One, two, three accredited. They can buy on red D it with impunity. You can have as many of them as you want their rich and keep in mind. Binder's job is to protect grandma grandpa. So they put a lot of restrictions on retail people. So as they get richer and richer or more and more sophisticated, they get to what's the best way to explain it. They are going to have less protections, sensors less protections. They let them do more things. Kind of a trade off like when you're raising a kid when they're little, you're tight on them and then toddler little more teenager than adult and that's what we're doing. So accredited investors are like the high teenagers like almost an adult because then we get qualified in quibs and institutions or even higher. So they let them do things. They let them buy and rest. They let them buy on red D plus I think they have less restrictions on the on the red red gate, red A plus tier two. But we're not there yet. We're going to get into it. So accredited investors are 1 million net worth 200 salary single 300 if they're I want to say miserable again, but married also if you have a an active series seven, series 65 or an 82. Now a lot of people I see and I'll do a separate video on this want to just get this series 65 to become accredited. Okay, you have to get the 65 and I have to be associated with an IA. You can't just have the license. It has to be an active license. So again, that's a credited investor. Now a accumulation stage or accumulation unit accumulation stage or accumulation will put them together when you're buying into an annuity a variable or fixed. You're putting money in you're putting money in after taxes most of the time if it's non-qualfit. So that's the accumulation phase or accumulation stage and what are you buying? You're buying a accumulation units. So when you put this stuff in, you're buying accumulation units. Okay. They grow in value. Now if you do a lump sum, you can buy a fixed number of units and then they grow in value. If you do a contract plan, you're paying over every year you're putting 100 bucks in 200 bucks a month, whatever it is that you're going to you're actually going to be buying more and more units every time, which makes sense. Okay. The acid test. Okay. So there's a cart ratio and then they're acid test. The acid test is based on the cart ratio without inventory because it's a more strict version of liquidity. So cart ratio is current assets divided by current liabilities. That's liquidity. Even tighter is current assets without inventory over current liabilities. Now anything current, I have videos on the current stuff. Current assets is anything like that you have or going to get in a year. Current liabilities is anything you owe in the next year or so. The reason they take inventory out of the acid test because it's very strict is because they want to not count the inventory because if it was liquid, it would have been sold already because you could have all these dresses like say like women who maybe you buy dresses. I don't know if you do anymore, but we'll say like you're not going to buy one spring comes. You're not buying spring dresses. You're buying the next one. So if they have dresses left over and there's two three hundred dollar dresses in the spring, they're listed on the books as 200 dollar dresses, but they're not going for that. There's no one's paying full price in the spring for spring stuff. So it's more fair to take that out and say listen, we're getting rid of the inventory and then we're doing the liquidity. I'm going to figure it out from there. The acid test is a current ratio with current assets without inventory minus inventory taking it out. Active management style. Passive means like you're rebalancing and you're not trying to beat the market. You may be indexing your benchmarking, but then active is you're actually trying to identify inefficiencies or industries that are going to be going good or you're going to do sector rotation or even asset asset allocation where you're moving asset allocation. Let's go with sector rotation. You're moving stuff around for industries like during the upward cycle, you're going to be buying cyclical stocks and they're in the downer and you're going to be doing defensive. You're actively trading to try to find inefficiencies and move the market. Not move the market, but get a better price to beat the market. That's active. It also comes along with more cost because there's more commissions and you're paying for an active manager to live in Grandest Connecticut and make a lot of money and not do all that. Active 1933, the two acts, the act of 1933 is the primary market. The act of 1933 is all about the primary market and new issues offer non-exempt securities. It's for new issues, non-exempt securities. It's going to say, oh, if you're going to issue shares, you have to register them with the SEC, Father Registration Statement, search a 20-day cooling off period, a 20-day cooling off period and then it's effective after that. They have rules what you can't do. You can't sell the issue. You can't take money. You can't take orders, stuff like that, during the 20-day cooling off period. You can get indications of interest, send out a red-haring slash preliminary perspective, stuff like that. I have all videos on that. You should all understand that the act of 1933 is for a primary market, the act of 1934. The act of 1934 is for everything else, for violations, for the secondary market. So I have an acronym called Miss Perms. I'll try to put it here or not. I'll just put a link to the video. Miss Perms, it covers margin, insiders, short sales, the SEC created the SEC. Funny they created the SEC after the act of 1933, but that's funny. He for proxy rules that's voting by mail. E, all the exchanges and broker dealers had a register with the SEC. Remember that IA's register act of 40 if they're federal and broker dealers register the act of 34 under the act of 34. With the SEC, but whose rules? All reports, that's like 8K's which are just like random reports by issuers, 10 Tuesday quarterly, 10K is an annual report and that one's audited. Then we have M, the last one, manipulation. It's like not turning, but marking the open, marking the clothes, pegging. Don't Google that. What else do we have in that? We have marking the open, marking the clothes, pegging. We can do I guess wash trades, wash sales, all the violations, all manipulation. And remember, they did put in in there that if the SEC decides something is manipulation or fraud, then it is because they knew back then they did know everything that would go on, Ponzi schemes and stuff like that. And the last S's stabilization, stabilization, that allows the underwriter to buy the shares during a new offering at the POP price or lower to hold the price until it gather some interest. Okay. It's the only form of manipulation allowed. Okay. Adjusted basis. This is basically cost basis. Okay. So we have cost basis, what you paid for something and then it can be adjusted like you. Maybe you buy more or you sell some or you do like if it's a limited partnership. You get a distribution, maybe you got a return to principle. Adjusted basis is you have your cost basis and then depending on how you do after that, it's going up or down. And then AGI adjusted gross income. That's your gross income from all your sources. Okay. That's adjusted gross and then you would do some things like deductions and stuff. Adjusted gross is income is what you're going to be taxed on. Maybe of IRA deductions, maybe have distributions and stuff like that that you're going to deduct from your income. But then once you do that, that's your AGI. You're adjusting income gross income. I'm stuttering. Then that's what you'll pay taxes on. And there's nothing left in my capital vintage to drink. Okay. And it's funny. The one thing that I really like, I don't sell. My wife made it for me for a father's day. Okay. The administrator. Okay. What's the administrator? The administrator is like the regulator for the state. Each state has your own regulator. It could be a person. It could be a team. Whatever it is, they have jurisdiction over all security streets and registrations of a securities personnel and securities in the state. They see if it's federal and administrator kind of conflicting overlap, Fed takes precedence. But the administrator absolutely has jurisdiction in their state. They can investigate outside their state if there's jurisdiction. And remember, no regulator ever proves anything ever. So if you ever see all the administrator proved, throw it out. It's no good. Okay. Adoption. Oh, how cute. Adoption is if, like, say, I talk about your company. I say, oh, you the viewer was great investor advisor and I put it on Twitter or Facebook or something else. If you don't do anything, no problem. But if you retweet it, like it, share it, copy paste, put it on your website, something to or direct attention to that's considered adoption. And then you kind of have to treat it as if it's a communication. Okay. So that's when a third party site endorses us, we're at endorse on a third party site. And we the broker dealer or the IA either like it, retweet it, refer to it direct people to it, make light of it, not make attention to it. And that would be adoption and then we have to follow certain rules because we are now part of it. As opposed, I'll talk about entanglement even though it's not in the A's. Entanglement is when you were the broker dealer or IA actually involved in writing it. And that could be illegal or illegal. But entanglement is when somebody posts on a third party website and you help the person write it. Like, oh, say this, say that and put it over there. We'll pretend we it wasn't us. That's entanglement and that's not a good thing. What's an ADR? An ADR is an American depository receipt that is absolutely a foreign security. So what happens is I'm a bank in the US and I have branches in let's say Switzerland. I go my branch in Switzerland buys a bunch of shares in Nestle, puts them in a package and then sells that in the US to do this security. So all the securities are in this bucket and you're buying this ADR and this will go up and down based on what's happening to the stock in Switzerland. Now what's cool is that there's an arbitrage sometimes that when the Swiss is closing we're open, the stock may move on its own without that changing it. So sometimes there's a way to capture a little difference. But either way, it's a US security. You get dividends in US currency. They pay in the foreign, whatever it is. But we the bank will convert it and you'll get paid in US currency. So ADRs are representative of foreign securities trading here. Okay, advertising. It's any kind of circular, any writing, any publication, anything else to help you determine whether you should make a buyer sell or use a certain service. So that's advertising is when you do anything that is to make someone help determine how if they should make a purchase or a sale or some of that like a recommendation a little bit, that's an advertising. And it has to follow either the state laws or the SEC or Finne rules. Okay, agency basis. Okay, agency basis is if you're doing a trade on an agency basis, that means you're the middle man. Like you give me an order to buy a thousand shares of 40, I find a seller for you and it must like a real term with a house. I find a seller and that to him up, you buy from that person through me. I charge a commission and we go on our way. That's agency. We charge a commission. All it is. Sent to a here, that's a member, ABC agent broker commission. Now the other side principal side is principal dealer markup PDM, principal dealer markup. Okay, is a principal order. If you get acting as a principal, you're acting as a dealer, you're doing a markup. Okay, what does that mean? That means you're getting involved. You give me an order to buy a thousand shares at 50. I go buy it and then turn around and sell to like 50, 50. So you give me an order to buy a thousand shares at 50. I go buy it. I turn around and sell to you at 50, 50 and I charge your markup. That will be a risk as principal because I'm not taking a chance or what if I'm not taking a chance because I'm not buying it until you give me the order. Okay, by the way, I have to disclose that to you. Now on the other side of principal is what if I already own this shares, you give me an order to buy stock at 50. I'll sell it to you at 50,000 and 50 cents and say I charge you at 50. Sent markup. That's where I've risked because if the stock may go up or down while I own it. What's an agency cross transaction? An agency cross transaction is you give me an order to buy 10,000 shares at IBM at 50. You're going to beat up IBM. Then I go wait a second. You know what? Johnny or whatever. I know they wanted to sell IBM. So I call them up and say, hey, I have a buyer. Do you want to sell it? And I go, understand I'm doing both sides. I have to disclose this. I have to say, I have a buyer. Do you want to sell it? They go, sure, they sell it. So I'm going to tell the buyer that I'm doing it internal. I'm going to cross it. So I basically take my buyer and my seller and cross them and then I charge your commission on both sides. It's an agency cross transaction. They're principal cross transactions, not really testable. They can do that where I'm going to buy it from this person and sell it to that and it turns to mark up on both. Doesn't matter. But again, agency is right to take a buyer that came in. I find a seller or if the seller comes in, I find a buyer and then I just cross both sides. It's kind of like if you go to buy a house and you call the realtor and then the realtor goes, oh, I have a listing. One of my listings is the perfect house for you. So they sell you the house and they have the buy and the sell listing. They get commissions on both sides. I think there's some loophole to that, but that's the idea. What is an agent? An agent is an individual that works for a broker dealer on the state level. On the federal level, we call them registered reps, but on the state level, we call them agents. Agents, you have to take the 63 or the 65, 66. You work for a broker dealer executing transactions. Remember, you're an individual agent. You're always individuals. They work for the broker dealer executing transactions on behalf in securities, on behalf of the eight of the broker dealer. They made church commissions or not. I was in, I was where I worked in the stock exchange for 20 years. I never got a commission. It was bonuses. I got salary and bonuses based on how much money we made trading and how much business we generated. It wasn't a direct commission. We just got bonuses based on that. Now, agents, so what's not an agent, right? So that's an agent. They work for a broker dealer. They register at the federal level and the state level wherever they have a police of business. They've retail clients, whatever. Now, what's not an agent is if your client's on vacation, you don't have to register there. But the other one is if you work for an issuer, not the broker dealer, if you're an agent and you work for the issuer, okay? You work for the issuer and you do exempt securities or exempt transactions for no commission, they're not going to make your register, okay? What's aggressive trading? This means you're being speculative. Aggressive. You're trying to beat the market. That's all it is. Okay. Okay. What's an all or none order? So let's talk about order types. Center in here. It's an oh, but it's an a all or none means. So let's start with the beginning. I give you an order to buy at the market. You just buy it at any price. If I give you an order to buy at a limit, I say listen, buy a thousand shares at 50. I'm going to do that price all the time. I give you a thousand shares. I give you a thousand shares to buy at 50. You are going to buy it at 50 or lower. If you're better. If I give you an order to sell a thousand at 50, you're going to sell it at 50 or higher. Okay. That's a regular limit order. If I buy, if I give you an order to buy a thousand shares at 50 and you only buy 300 and then the end of the day, I have nothing else. Well, then we cancel the seven. I take the three because that's what it is. But what if I have to take the partial execution? I have to. Now, what if I don't want that? I can do an all or none. I go look. My 1000 shares at 50 all or none, which means what it does not have standing in the book because it's a special kind of order. But I give you an order by a thousand shares at 50, a, o, n, or none. That means if you don't buy all a thousand in one shot, I don't want it. Now, you can leave it out there all day trying to do it. But it's an all in on meaning. I do all of it or I don't want any of it. So you can't buy like 200, 200, 200, 200, 200. You have to buy all a thousand in one shot, but you can wait all day to do it by all a thousand in one shot where I want to accept it. So you don't do it. But another one, a version of that is an immediate or cancel, which means I want you to buy a thousand shares at 50, try to get as much as you can. You can buy 300, 400, a thousand, but then put it out there once and then cancel it right away. I don't want to be out there. That's an immediate or cancel. Another type is a filler kill. A filler kill is fill it or kill it. So it means it's a combination of an all or none and I O say that means buy. I give you a thousand shares to buy filler kill. You go out there right now. You try to buy a thousand shares at 50. You will not pay anything less than a thousand or you don't do it. And then if you don't do that, you can't so right away. There's specialized orders kind of bratty. Okay. What's alpha? Okay. Alpha. So first you have to get alpha. You have to know beta. Beta is a volatility can render the market risk, whatever it is. So if you think of alpha as what you do better than expected, okay. Positive alpha, you did better than expected. Negative alpha. It did worse than expected. So if you have a let's just do this. So let's say you have a beta of 1.5, 1.5. That's a multiplier. You're going to multiply beta times the index. So if the index, I'll make do easy numbers. The index is 10%. If a beta 1.5, you're going to do 1.5 times the index. That means you're expected. Your portfolio is expected to do 15%. Fair. That's your expected return. But what if you actually do 17? You're expected to do 15, but you did 17. So that means you did two points better. That's two points of alpha. That's all alpha is alpha is what you do better. And it's kind of like non-systematic. It's basically what you're doing. It's what you're doing better than you expected after netty. Here's the thing. Some of the vendors like to talk about the risk free rate and do that. I don't really care about that. I'm just saying alpha is you're doing better than expected and is compared to your expected return. AMT, alternative minimum tax. Okay. AMT is an alternative minimum tax. It's for when you have some sort of tax deduction product that is tax deductible if you want to call about it. We'll talk about them where they take away your deduction. The more you make an income, the less you're allowed to deduct. So certain revenue bonds, not all of them, certain revenue bonds, they take all the money you're getting that's tax free. If you make too much money or if it's subject to AMT, they're gonna say, you know what? You can't take all of that. Say you made 50 grand from a revenue bond and you make a lot and they go, you know what? You had normally if it's a geo or you're a normal person, you don't have to pay taxes on that 50. But we're gonna make you pay taxes on like half of that or all of it, whatever it is. But that's AMT is just takes away your deductions and it's only applicable to really revenue bonds, not geo and limited partnerships. So if you see a tax preference item or they were excessive deductions or excessive write offs, they might be subject to AMT where the AMT will go. You know what? You can't take those deductions, you have to give it back. And that's where this thing called recapture, which you may or may not see. Recapture is not a good thing. Recaptures you take a deduction and the ask goes, no, we got on, we want that back. We're not giving you that deduction. You got to pay taxes on that. Okay, if you do a, if you anti-delutive covenant, so if you do a convertible bond, then remember, so if you have a convertible bond and say it's gonna turn into 50 shares, okay? And so that's great, it's awesome. Whatever percentage of the ownership that's really fricking tiny, but it is a percentage that you can count on. What happens is if the company issues more shares, well, then you're still only getting the 50. So the anti-delutive covenant adjusts your ratio up based on. So if you have, if you're normally gonna get 50 shares and they do a 10% stock dividend or another 10, so if they do a 10% stock, they're gonna stock split, they're gonna adjust your ratio to accommodate for that. You won't have to do the math on these exams, but just understand that if you have an anti-delutive covenant on your convertible bond, they're gonna adjust the ratio or the number of shares you get to keep your percentage ownership. Arbitrage, what is arbitrage? Arbitrage is when you capture an inefficiency in the market in two different markets, not the same market, two different markets. So like, when I was on, back in the late 90s and early 2000s, it was less electronic. So if on the New York Stock Exchange, you saw IBM trading at $40. And you also saw trading at $41 on the Pacific of the P-Cost, okay? Look, wow, I can make money. So you would buy the stock on the New York at $40. And at the exact same time, not a second later, exact same time, short the stock at $41 in the P-Cost. And then you would just use the shares you bought to cover your short, you'd make a dollar, lock it in no risk. That's a type of arbitrage. Other ones are merger arbitrage when one company's taken over another for stock, there'll be differences and you buy one and short the other to capture it. Not man, not you're not gonna have to do that. That's called merger arbitrage, risk arbitrage. That's what I did when I first started. Then we have convertible arbitrage, where if you buy a bond and you notice that if you would convert and it would be a profit, that means the common stock converted. If you, the amount of shares you get when you convert the bond, convertible bond, you get a certain amount of shares, right? We should know this right now. Whatever that's worth, okay? If that's less, if that's more than what the bond that you can buy is worth, you can buy the bond and short the amount of stock at the same time and then convert the bond and cover your short. Just remember convertible arbitrage is for convertible bonds when it would be profitable to convert. Mean, arithmetic mean is just basically average. You take all your numbers, you add them up and divide, say if you have five numbers, you add them all up and then divide by five. That's the arithmetic mean. That'll be tested if even maybe more than geometric mean. Geometric has a lot more parts to it where it's like, well, how much traded at each number and then you divide that and add it, that we always use that for a fine weighted average price trades, but you won't have to know that. Just know if you see the word mean, it's average and some exams make you decide between arithmetic and geometric, they're not going to. The real exam won't vendor zoo because it jerks, okay? Okay, ask, okay, what's the ask? So there's bid and ask, so we have the bid which is where people are willing to buy and the ask is where people are willing to sell. That's the bid ask that creates the inside market, okay. The bid is where people will want to buy. The ask is where people are willing to sell. If you want to buy stock you have to pay, you have to buy it where people will want to sell. If you pay the ask and if you're going to sell, you're in a sell white to bid because that's where people are willing to buy because you buy the ask, you sell the bid. Okay. And the difference is spread to the inside market. Okay, so let's talk about, It's not really, it's an A, but if you sell, if you want to give somebody a gift of securities, really nice, feel free to send them to me. I'll give them a Venmo, whatever. If you want to give me something, if you give me a non-assessable security, then it's a gift. It's fine. Because a non-assessable security means you give it to me. It's like giving me shares of Tesla. They'll never ask me for more money, but an accessible security means they can assess you and ask you to put more money. And I like to think limited partnerships are them. They don't say it's definitely, but I think why wouldn't it be? Because if you buy a limited partnership, they can always ask you for more money because it's a partner call. So a margin call, whatever you want to call it, I guess it's a partner call. So if I give you an accessible security, that is considered an off-and-assail, and it's some just in the jurisdiction. Even if I say here, here's a $20,000 worth of this accessible security. Don't worry about paying me whatever. The fact that the issue or could ask you for more money means it's accessible, and that's considered an off-and-assail, and subject to the jurisdiction of the administrator of the state. What is an asset? Basically, it's basically something that a corporation or a person owns. An asset is what you own. There's two types. There's car assets, which is like stuff you own like now, cash, we're going to get in here, and then there's fixed assets like equipment, buildings, long-term shit like that. Okay, asset allocation. All you're doing is dividing it up, but you're dividing your portfolio up between stocks, bonds, cash, shit like that. Okay, you're just you're allocating a certain percentage of your portfolio to certain asset classes. That's all of it. Now, we talked about this before. A 10K is audited is basically the issue we're issuing audited financial statements. What does that mean? Audited means it's audited by a CPA or an auditing firm, and advisors have to do that if you have custody. They have to do an annual surprise audit where their finances are going to be audited and they have to submit them. Okay, that's the A's. Let's go to B. So, well, I'm going to throw in here. So, that's that's the A's. Well, let's jump into the B's for a second. So a backend load, we have to know. So mutual funds have front and loads class A should be in the A's, right? Class A is a front and loads probably in the half's like greater or highly filing system. So A is an A shares is a front and load. B is what they call a backend loan or a CDSC contingent deferred sales search. So A is a front and load. B is a backend loan contingent deferred sales search. What does that mean? That means that you pay when you leave when you redeem the shares. Okay, you don't pay anything when you come into the fund. And the longer you stay. So it deferred, that's the contingent deferred. The deferred means you pay when you leave. And the contingent means the longer you stay the lower it gets. That's why it's called the contingent deferred or a backend. It's good for long term. A lot of places don't do many more. A is good for long term, a lot of money because they have break points, what's I'm sure we'll get to. And then C shares center here. They don't really pay a sales chart. So they can't be called a no load because they usually have a very high 12 B1 fee. A no load fund has no sales charge with a very low 12 B1 fee 100.25% or 25 basis points. Okay, what's a balanced fund? A balanced fund is basically they always have all portions. It's basically going to be, you know, like it doesn't have to be 33% bonds, 33% preferred, 33% common. Okay, and they're going to give both income and growth. They're going to give both income and growth, but they kind of are safer or they diversified because they have all three stocks, preferred bonds. That's a balanced fund. Okay, okay, let's talk about balance of payments and balance of trade. Okay, balance of payment is like basically how much money is going out first is coming in. It's for the most part exports and imports, right? So if we have, if we, you know what, I think I have a way to do it. So okay, good. So let's say, so this is the upside. This is the surplus. The more we export, the more we export. Remember, the more we export, the more money we're getting. Okay, so if we bring in money, if we bring in more money, and we export more goods, people are buying our stuff so we're getting cash. And if we're export, if we're importing, that means we're buying other people's stuff and then our money's going out. So what happens is, is that let's say the dollar, the dollar rises. So just hear me out on this. Okay, so the dollar rises, that means it's harder for people to buy our stuff because it's more expensive. So if that happens, we're going to go more toward this way. As the dollar rises and rises, we're going to go down. Okay, we're going to be importing more, because dollar will buy more stuff. So we'll buy more things. Always money runs downhill. So now what, as the dollar starts dropping, it's going to get lower. So this is right now. So if we look at this, what I've done so far is that our deficit is increasing. So our deficit, our balance of trade is going negative. It's going to be deficit is going down. Now, and that's good. The dollar's rising. We're importing more, we're spending more money. But as the dollar maybe starts dropping, our deficit's going to get closer to zero. And because people are going to say, we're going to get more, more, more closer to exporting. And then if the dollar really goes down, we're going to be exporting more and more and more. So the more the dollar drops, the more we go up. Okay, we start exporting more. And that means we have more money coming in. So I always say, do we want a strong dollar or a week dollar? We will, we save you want a strong dollar, but we actually want a week dollar because if we have a week dollar, people can buy our stuff more. So we have more exports. So all the foreign money is coming here. So this will be a surplus under balance of payments versus a deficit. So we'd like a surplus. And look, it's not this. It's like if you depending on what, you know, it may be corns here and then weed is here and then it all depends on what we do. As a general rule, I think we're still on the importing more than exporting. But we'd love to be on the exporting more than importing because then money is coming in. Like with oil, you know, it's like we were importing more than we were exporting and now we're importing again. So it goes all over the place. And that problem is it costs us money and that hurts. Now, exporting is good because it helps our farmers or producers, all that stuff, they can sell their stuff to bigger and bigger markets. And that's a thing. So like if you have a week your dollar, right? So if you're a dollar's weaker, if you state inside the country, you'll never freaking know. Like if you're in the middle of Mississippi and you're, you've never left the state, whether the dollar's strong or weak doesn't matter to you on a day to day basis, but if you're a farmer, a week dollar means more, there's more people buying your stuff maybe from other countries. So that's, that's the balance of paid balance of training. Okay. Okay. The balance sheet is basically just a financial condition, it's like a snapshot. It's a snapshot of the financial condition of the company. It has assets and liabilities on it. That's it. Assets and liabilities and sources sort of balance out, right? Income statement is not that income statement is more about cash flows and money and money out. So gross sales, gross income, that's going to be on the cash flow statement or the income statement. They're different things, but they kind of do the same. Balance sheet is about assets and liabilities. And again, some guy who's probably a CFA is, well, you shouldn't say that. I'm talking about test world, not real world. A bank. So there's a bank and a bank holding company. So a bank is where you put your money. That's a bank and they're exempt from everything. Remember, on the under NASA and the states banks are pretty much fucking ghosts. Okay. Nobody knows what they are. They know it's not that they don't know what they are. They just have no regulations. They have their own regulations. They're pretty much ghosts are not issuers and uprooted dealers or not IAs or exempt from all that shit or excluded whatever you want to call it. Now, bank holding companies are none of that. Okay. Bank, they're really exempt, but I should have said excluded. I'm just rambling. Bank holding companies are none of that. A bank holding companies literally just a company that owns a bank. That's all it is. It's a company that owns a bank. They're not exempt. So like think of like JP Morgan. Okay. JP Morgan owns JP Morgan securities and Chase. Chase is the bank. Chase, if they issued bonds would be exempt. JP Morgan would not. Now JP Morgan is exempt because it's trading on the exchange, but if they didn't, they would have to register anything they issued because they're not exempt. Bank holding companies are not exempt. Okay. Basis just remember the word basis. Freaking means yield to maturity. Okay. Basis means yield to maturity. Now the next one is basis points. Remember 100 basis points. I'll put it on here. I've been doing this for years. Other people use it. I just find out. I don't care. I'm ready to share them off. 100 basis points equals $10 equals 1% equals 1. Okay. Anubond. So if you if you are in 200 basis points or 200 bips, you're in 2% or you're 20 bucks a month. There you go. 100 basis points equals $10 equals 1% equals 1. Onward we go. Okay. Okay. Bearish and bullish. I guess we can talk about that. So bearish means you think it's going down. A bear market means it's going down. Again, it usually means it's down 20% but don't worry about that. They're not going to ask you what is a fish seed by a market because a bear market is when the market is up 20%. Okay. Bear just means down. Bull means up. Right. Okay. Bear down. Bull up. Bulls go up. Bear swipe down. Whatever. However a man remembered, remember you can make money either way as a bull or as a bear. It's not like bears lose money and bulls make money. It's you can be bulls and make money or you can be bear as a bear as a make money. And let's see. So if you bearish short stock by puts sell calls credits for credit call spreads debit put spreads stuff like that. Inverse ETFs if you're bullish you buy regular ETFs you buy calls you buy stock you do debit call spreads credit put spreads buy calls sell puts all those things are bullish. Okay. What's benchmarking? Okay. Ben's marking is when you your portfolio is going to be benchmarked to an index. It's low cost. It's usually very passive because all you're doing is matching to a benchmark or an index and you're just sitting on that. Okay. Index indexing all the same thing in general. Very passive and you only kind of rebalance once a quarter. So if something gets out of skew or the index rebalance is you're going to rebalance to you. You're not very active. The costs are lower than an active strategy. Black sholes just know that it's the way they measure options for the risk. Okay. It's how they price options. That's all you have to know. Black sholes you just pricing options. Okay. Blue skylaws. Okay. What's a blue skylaws? So blue skylaws are the state laws. That's all they are. They're basically registering a security, a broker dealer, an agent, IR with the state. That's all they're blue skylaws are just about registering with the state. Okay. My favorite word bonafide or bonafide, depending who you are, it just means real. Okay. It means it's actually going to happen. It's genuine, authentic. It's actually going to happen. It's the thing. Okay. So a bonafide offer is a real offer. A bonafide trade is a real trade. Bonafide market making activity is real market making activity. It's not like fake to pretend something. It's authentic. It's real. Okay. What's a bond? A bond is a form of debt issued by a corporation, by an issued by an issuer who is your corporation, a municipality, or a government, and it's a debt where you lend them money and they pay you back over time and you get an interest, either interest every six months or at the end if it's a zero coupon or yes, those are really two choices. What's a bond fund? Now here's the thing. So an income fund is an oh, so this is where it will get confused. An income fund isn't going to be bonds. It doesn't have to be. Okay. But a bond fund will be corporate's munis treasury. Okay. So a bond fund is going to be it's going to be looking for stable income that's pretty freaking safe. Corporates munis treasuries. Bond ratings. We know these rates. So the higher the rating, the better the company, right? So triple A is the top, then double A, then A, then triple B. Now triple B is the lowest investment okay. Now if it's munis, it's BAA, instead of triple B, instead of saying, like S&P is AA, what do I just do it this way, right? It's just stupid. This is S&P, this is munis. Why is muni different? Because he's fucking muni. Okay. So these are all investment grade. BA and lower, so it'll be B down here and then B, these are all speculative or junk or high yield. This line is big, okay? This line between them and this where I make the space is big. Because literally almost anyone can buy this a lot of institutions and banks and stuff can't buy speculative. Okay. Let's talk about the bond yield. So we have coupon is just the annual stated interest rate. If you buy a 5% bond, a regular bond is paying 50 bucks a year. That's nominal stated interest coupon. They all mean the same thing. Current yield, we should know this current yield is what you're earning based on what you spent. So if you think about it, there's a current. If current is electricity, what do they have in their amps? AMP, so it's AMP, annual over market price. Current yield is annual over market price. The other yields are the basis, which is yield to maturity, which you'll never have to figure out and yield to call, which again you want to figure out. But again, if it's a discount bond, it's coupon, current yield to maturity, yield to call. That's how the discount that's the lowest time. Who bonds the lowest? Then current, then yield to maturity, then yield to call. And if it's a, I'm going to break my arm. I'll do this right. If it's a premium, it's going to be coupon up here. Then current, then yield to maturity, yield to go. Remember, yield to call is always on the end. A lot of people flip them. Yield to call is always on the end. Remember that. Okay. Book value. It's basically the net worth of each error. So book value is like think of the tangible assets of a company, the furniture, the trucks, the buildings, the equipment, all that stuff is that. And they divide that up by the number of shares. That's the book value per share. So the book value of the company is like the liquidation value. It's what it's all the tangible assets are worth. And that's the book value. Book value per share is that divided by the number of outstanding shares. And then price to book is the market price divided by that number. Okay. That works. And a high price to book or even a price to earnings means it's a growth company low means it's about it. Okay. Retta the market. Okay. So the breadth of the market is just this. It's we look at how many shares are up or down in the day, not how much how many. So we look at how many shares are up on the day versus how many are down. Okay. So like, if you ever look on CNBC, they have the heat map. Like the other day, it was all red. Like maybe today, it was all green. But if you look at it, if the market's on big, you may look at it and you have say there's 500 stocks, 498 of them are red. So that's the breadth of the market showing you that it's up or down. How deep it is. Because look, there were some years when the tech stocks were so up that even the market was mostly down. Those like 10 names were bringing it up. Okay. Like you'd see a big mark, you'd see mostly red, but the market was up because those stocks who were very big would pull the stock, pull the market up, even though everything was down. So that's what you look at. The breadth of the market is to see, okay, the market's down is like half red, half green, is it all green, is it all red, you get an idea of how strong this, okay, the brochure. So what's the brochure? The brochure is a form ADV part two, okay, part two A. So part ADV part one is what you file with the register with the, with the, either the administrator or the SEC, whatever it is, that's the facts. Like, you know, what the name is, who the principles are, what kind of customers you have, how much money you have on your management, all that crap, it's the facts, where you're registered, show like that. Part two is a disclosure docs, okay, that's the disclosures where you disclose everything. So that's called the brochure or ADV part two A, okay, ADV part two A is the disclosures for the firm, you know, if they have any conflicts of interest, how they manage the money, you know, how they get the fees, any kind of past problems, we all that shit, but that's part two A. Now the brochure supplement is to B, okay, to B you're not to B. So I'll put a Caesar thing here, right? So to B you're not to B, oh my god, I can't believe I said that. The to B is the brochure supplement, that's like for you or you or your team. So you may have a team and it'll be like the to B will be like, oh, John, as you went to Oxford, blah, blah, blah, and Mary went to Pat, you know, you pan and someone to Stanford, someone to Stockton, whatever it is, those are all the different, it's all their education and their conflicts and how they do the money and their expertise and all that, it's the disclosures for you. So two A is for the firm, to B, so you actually do the Pomodoro method and have that phone in another room, right? To B is a brochure supplement. Now both of them have to be delivered at or prior to the signing of the contract, that's the rule, that's a brochure rule. The brochure rule is they both have to be at or prior to the signing of the contract, but the state also adds in hey, that's fine, but if you don't give it to them 48 hours before they sign the contract, the customer gets five days to back out a free look, okay? So again, the brochure rule is always delivered at or prior to the signing of the contract, okay? But the state adds in the old, we wanted 40 hours ahead of time, and if you don't decide to be deal, but if you don't do it, then you got to give them five days out, that's all it is. That's probably like four questions on the exam. Okay, what's a broker? There's a, well, say broker dealer, we'll solve that. A broker dealer is a firm or a person, right? It's always a person, but it's always a firm that executes transactions for themselves or others. They register with the SEC, Finder, and any state they do business, and if they don't have an office or retail clients, then they don't have to register. Remember, no office, no retail, no register, no office, no retail, no register, okay? That is a broker dealer. It's a firm, as opposed to an IA that gives advice. It's not here, it's wrong letters, but the IA, and I'll get to an investor advisor is a firm that gives advice as a business for compensation. Oh, ABC, advice, business compensation, okay? And they register either the state or the SEC, never both, okay? So a broker dealer registers with SEC, Finder, and any state they do business in, and they are a firm. A broker dealer is always a firm, and they execute. So I always remember, broker dealers execute transactions, they collect commissions, mark up my talents in some fees, IAs, they give advice, and they charge a fees for the advice. We're going to talk about the market. Okay, business cycles, these are the four cycles, right? So we have expansion peak contraction trough, okay? That's so expansion is when the GDP is rising, we have inflation, and the Fed is tightening during that to slow it down. Then we have peak, which is coming up, and it's going to start dropping. That's when everything's still going up, we may have disinflation, which means it's still going up, but it's starting to drop, okay? It's going up, but not as fast. Oh my god, I'm just talking too much. Now, just what I do, okay, so now, and then what happened is right during that, the Fed will start loosening a little bit, because they wanted to go down, they don't want to go down, they just wanted to go down hard. They know it's going to happen, so they kind of do a, they want a soft landing, right? So it's going to happen, it's in a short lowering rates and loosening. So during expansion, they sell treasuries and raise rates. That's monetary policy, and that's going to tighten and slow it down, and then once it starts going, and they fuck it up, and they make it go down, they're going to go, oh, we got to help out. So they're going to lower rates and buy treasuries. So they're going to buy treasuries from the banks, and lower the rates to make it easier to borrow. So it goes expansion, peak, contraction, and if it's a long contraction, it's a recession, and then it goes to a trough. Now, what's the definition of recession? Well, it's two consecutive quarters of negative GDP, although this year they go, well, that's not really true, but we go by that. Or you can say, my neighbor's out of a job. What's the definition of a depression? Well, that's six quarters or 18 months of negative GDP growth, or I'm out of a job. So recession, my joke, I didn't make it up, I stole it. A recession is my neighbor's out of a job, a depression is I'm out of a job. Business risk is non-systematic, okay? Non-systematic risk is business risk that you invest in a company to sucks. How do you get rid of that? You get rid of it by diversifying, okay? Business risk, you just get rid of it by diversifying. And how do you do that? You buy by mutually, immediately, really quick, you buy ETFs, mutual funds, close-in funds, ETFs, ETFs, ETFs, not really, but similar. Okay, so you have trust, you have some type of trust, I'm going to just to an order, bypass trust is this. I'm married, I have say I have a lot of money, woof, please, okay. So let's say I have a lot of money, I said I have a bypass trust, so what happens when I die, all the money is in a trust to go to my wife, tax-free. And she can use the money or he whatever, she can use the money anyway, according to the trust rules, but the money is for them, but when she dies, the money goes to the children or the financial beneficiary. So a bypass trust is this, I have money I said, but trust, when I die, my spouse gets it. They manage it, they're the trustee, and then when she dies, then the money goes to the children and usually if they do it right, they, it's tax-free. So that's what a bypass trust is. Okay, we're on to the seas now, let's go, we're going an order of a medical sort of, okay, I just did a video on this calendar year versus fiscal, a calendar year ends on December 31st, a fiscal year ends whenever they want, like the government does October 1st, it starts, I think charities do July 1st, it doesn't matter, it's just a year, fiscal is a year other, any 12-month period other than the calendar year. Okay, a call, what's a call? It's a couple things. A call is an option to buy stock, okay? We got that. A call is also when a company calls back their calls back their bonds or their preferred, they buy and back from you. Call is always about buying. So if you, if you buy a call and option, you have the right to buy stock or whatever, if the company calls that they're buying the bonds or they're preferred back. Okay, we have bonds, callable bond, that's a bond that is callable, which means the company can buy it back as opposed to a non-callable bond, which is one that they can't call it back, they can buy it in the market if you want to sell to them, but they can't buy it, they can't, they can't take it from you, a non-callable, callable, they can, a non-callable would have a lower coupon, which is more attractive to the investor. Callable preferred literally the same thing that's a preferred that is callable. So again, we have bonds and preferred, they're both callable and non-callable when I get to that, I'm probably not going to talk about it. The call date, that's literally the date that they can start calling the bonds back. So if they say, oh, bond, say a bond issued in 2023, wow, and it's callable in 2028, that means the first time they can call it, that's the first date when they can start calling it, that's listed in the prospectus. Call feature is call feature, call provisions, same thing, they're basically the ability to call the bonds back. That sort of call provision or call feature is the method or the allowance of the issuer to buy the bond back from you. They, and they'll say it's not callable for the first five years, that's also called protection. Call protection is the number of years that the issuer can't buy it back, so you're sort of protected from being called. That's most attractive when interest rates are dropping because normally issuers will buy the bond back when rates are dropping because then they can buy back at its cheaper rate, they can buy back and then issue a new bond at a lower rate and save money. What's called risk? Well, when interest rates drop, the risk at the company will buy the bond back. And why is that bad for you? That is bad for you because if you're the investor and they call it back, they usually do that when rates are lower. So you get your money back, you're like, yeah, I got my money back and then when you go to reinvest it, there's everything's at a lower rate. So you would actually have to find a risk your bond to match the rate you were getting before. So that's not a good thing. What's capital appreciation? That's literally growth and increase in what you own. If you buy something at 40 and it goes to 50, that's capital appreciation. What's a capital asset? A capital asset is basically something you can touch like property and it's for long term like equipment or a building or something. That's a capital asset as opposed to a current asset, which is for a year or less. Okay. Cap M capital asset pricing model. Cap M is basically trying to determine their relationship between risk and reward. Systematic risk and reward. Are you getting enough return for the risk you're taking to get this reward? You need this risk. This risk, you better get this reward. So it's all about the relationship between risk, systematic risk and reward. Cap, but again, that's actually a realized appreciation. So if you buy stock at 50 and you sell it and you sell it, you have to have a gain at cost basis and it proceeds. You have to have a buy and a sell. So capital appreciation. Cap, but gain is when you realize the capital appreciation. Okay. Cap, but gain is when you buy stock, it goes up and then you sell it for a gain or if you're short stock and it drops and you buy it for a gain and it's a taxable event. Okay. Cap, but gain is when you have a buy and a sell or a sell and a buy and you actually realize the gain. Capitalization, that's basically all over the company's worth. You add up the debt, the stock and everything else or all their cash and everything and that gives you the capitalization what it's worth. Okay. So capital is capitalization ratio is dividing its debt by all its capitalization. The bonds, the stocks, all the other surplus is cash and all that. So it's debt divided by the capitalization. It's to determine we do the capitalization ratio to determine whether the company's over leveraged or not under leveraged. So if you have the debt capitalization area, if you have more debt, if you have a very high capitalization ratio, that means I'm a lot of debt and you're, you might be over leveraged. What's the capital loss? That's the opposite of a capital gain. A capital gain is when you sell stock or something from more than you bought it for you have a gain that's taxable and capital loss is when you sell something from less than you bought it for and you realize a loss and you actually get to write it off your taxes, right? Good stuff. Now capital losses, you can use capital losses to offset all capital gains, but you can only use three grand of capital losses to offset your income, then you can carry forward the rest to the next year. Okay. So if capital market and then we have money market, so capital market is like long term debt inequities anything over a year and then money markets are under year technically, I think 13 months kind of works, but anything over a year is a capital market. Money markets is anything a year or less or really short term. Capital stock is all of the corporations equity, preferred and common, but they're listed apart. So it's not the actual market value, it's the par value. You remember, so par value on common stock is a dollar on preferred is a hundred. So it's all the common and preferred with based on their par value, not on the market value. So capital surplus, paid and capital paid and surplus surplus, only the same thing capital surplus, paid and capital paid and surplus, all mean the same thing. Those are what you sell the stock for over par. Now common is usually a dollar. So if you sell if you do an IPO with the stock at 20 bucks, it's 19 dollars of capital surplus, paid and capital paid and surplus. Happy with capping, it's manipulation. It's ready to keep the stock down to there's capping, pegging, all that stuff. Again, don't Google pegging, please don't do it. Stop right there. Don't do it. You can hate me. Okay. Capping is when you're selling something or doing something to push the price down so it doesn't go over price. A lot of times is to either make your P&L look good or to prevent an option from being exercised or to force an option to be exercised. Pagging is when you buy and sell to make it close at a certain price. Remember capping is keeping it down. Pagging is trying to get it to go up. You're going to buy yourself to get it close at a certain price. Very similar to capping, just it's both buying and selling. What's a cash account? A cash account is opposed to a margin account. A cash account is where you pay 100% for everything. So there's really two types of accounts. There are other little nuances, but for the most part, we have cash accounts where you pay 100% for all your stock and everything. You can't shorten it. You can do some options in it, but you can't really shorter use, you know, borrowing. And then there's a margin account. A margin account is when you borrow against it. You take on, you get a debit balance, you can shorten it. You're borrowing money to buy stock. So I have a margin account that before I had to grant in it, I can only do cash transactions, pay for everything. Once I had to grant an equity in the account, I could start borrowing against it up to 50% of the value of the stock. What's a cash dividend? A cash dividend is when your company pays its profits in the form of cash. So there's cash dividend, there's stock dividend, then there's product. So they can give you like Gillette, give your razors, they'll be pissed. But like I said, that's when I was a kid of what Playboy Stock hoping never happened. Although the annual part was pretty cool. It's only annual part with a picture of a woman in lingerie. Okay, so again, cash dividend is when you get paid cash, usually quarterly. They announced that that's where the declaration X record payable, right? Declaration of Day. They announced it, they announced, and they named the record day. That's a day you have to be an owner of record. The day before that is the X day. That's a day you, if you buy it on the X day, you don't get the dividend. Remember X dividend, X girlfriend, X boyfriend, X wife, X dividend without. Then P, D, R, P declaration, X record, then payable. Payable is a date that they actually pay the dividend. What's a cash equivalent? It's something that can be readily turned into cash, T bills, CDs, money markets, and so on. Money market funds and so on. Cash equivalent to anything that can be turned easily, very, very quickly into cash. Like I always joke that technically, you could walk into a bank with $100,000 with the T bills and be out of there in five minutes or so with $100,000 cash. It's just that liquid. Cash flow, that's what the company gets minus any money paid out. So if you bring in money, but we pay out, so if you're bringing $100,000, what you pay out, $30,000,000 in expenses, our cash flow is $70,000. It's basically net income plus depreciation and depletion. So net income is how much we get. So we bring in $100, we spend $30,000, we have $70,000, then it kind of depreciation or depletion when we come out, that's going to take out of that. Good. A cease and desist order. That's when an administrator can do when it appears that a person is going to commit a violation or did. You send a notice and say, please stop what you're doing. It actually has no bite, right? So if they just go screw you, I'm going to keep doing it. Then what would happen is then the administrator who really can't do anything, you know, they threaten you and throw you shake the hands at you and say, you stop that, you young whippersnapper, they would say that, but they can't do anything. Well, just got blurry, right? I'm moving too much to get blurry. So then they would go to the court and have the court issue an injunction to they'd be enjoined, which then has bite of the court as legal robber vacations. So a CD is where you deposit money with a banker in a security for a set amount of time in a page of interest. They can be short term, they can be long term. The short term ones probably pay at the end. They might pay you, but the whole point of a CD is it's very safe, very usually very short term. And it's using a money market under a year over a year. It's obviously not. And if it's over a year, it can pay income. If they buy, if they do a market CD or like a negotiable CD, there are other feeds that we're not going heavy into that here. I'm just saying what a CD is, it's a short term. Basically, you put money with a bank and you get it back at the end of the term, you can then reinvest it in by new ones if you want, whatever short term. What is a chartist? That's like a technical trade. They look at charts, trends, patterns, they look at a chart to determine like the 200 and moving average support resistance. That's a technical trader. They use the movements of the stock to determine where it's going nest. Obviously, efficient market theory doesn't believe any of that shit. Okay, we'll get to that. So the point is a chartist is a technical trader who looks at charts and tries to predict the next movement based on that. You look at support, resistance, breakouts, all that stuff. Okay. What's a Chinese wall? So a Chinese wall is known as an information barrier. A lot of times big companies like they have to have some sort of Chinese wall. And it's not racist because it's basically based on the fact that the great wall of China surrounds, you know, what's supposed to, is inventable. You can't get through it. So they just call that that you're on either side of the wall. Like investment banking can't be with research. They have to have a Chinese information barrier so they can't talk to each other or prevents the spread of information of inside information. So an information barrier Chinese wall is there between different departments to keep them separated so they can't share information or have coffees of interest. A lot of times they'll have these information barriers between small departments, even if they don't have to, so that if I get an order in this and you're on the other side of the wall and you get an order in that, we don't have to worry about front running or anything like that because we're separate. Like if I get an order from a customer to buy and you're on the other side of the wall and far enough away from me, you can buy stock without worrying about being front running because you don't know about it. What's churning? Churning is excessive trading. Okay. Churning is when you excessively trade an account. You need this to see if they were excessive or unsuitable, whatever it is. Remember, they look at to determine if you're churning. They look at like what the character of the account are there is a person rich? What's the rich rich? What's the objectives? What they do not look at is gain or loss. Gain or loss has nothing to do with where you're churning at. You can make money and they can still be what do you call it? They can still be considered a churning even if they make money. Closed-end investment company. What is it? So we have open-end and closed-end and open-end is a mutual fund. I think we've an open-end is a mutual fund. You buy it at NAV plus a sales charge of trades one today. They constantly issue you should know this by now. A closed-end fund, a closed-end fund, it issues shares one time. They pack into the issue of the shares and then it's on the exchange. If you want to buy shares of it, remember, they're both closed-end open and are actively managed by a rich portfolio manager. Here, she lives in Greenwich and makes weight-em-or-a-hamptons. They make a lot of money. They're an investor and advisor and manage in the portfolio, which means they have to be federally covered advisor. But the closed-end fund issues shares one time and then if you want to buy them, you have to buy them on the market. Based on supply and demand, you buy at the ask, you sell at the bid and they charge your commission or mark up or down. You can short them and buy them on margin. All that stuff you can't do with a mutual fund. Open-end issues shares constantly. You buy at NAV plus a sales charge. It's priced at the end of the day. No margin. Okay, so we have opening sale, opening purchase, whatever it is, opening and closing. So if you have an option or even any position, if you create a position, it's an opening. So if you buy an option for the first time, that's an opening buy. If you short an option for the first time, that's an opening sale. So if you're doing an opening buy to create an option, how do you get rid of it? If the sell it, that's a closing sale. So an opening buy, fall by a closing sale. Jumping down on the other side. So if we short an option for the first time, it doesn't matter, call it put, that's an opening sale and that's fall by a closing purchase. So it's always going to be opening and then closing and then it's either buy then sell or sell them. Buy. That's where it works. And closing means get rid of it. Okay, what's a coincidence to the indicators? Right? So we have three types of indicators. You have leading, lagging and coincident. We've put them all together. A leading indicator is at the stock market. It tells you where we're going to be in the next six to 12 months. I explain that all the time. Everyone was trying to figure out not everyone. People who didn't know, sounds like I'm going to lead us, but I'm not. They did know why was the start market ripping up during the pandemic? Because they weren't thinking about now, it's predicting the future when they think the vaccine will be out and all that stuff will be out of it. So that's why the stock market was ripping up because it's a leading indicator, a coincidence telling us where we are, like employment, personal income, industrial production, those are all coincidence. That's telling us where we are. The me of lagging telling us where we were. That's like corporate profits. They reported it at the end of the year in a 10k, right? So leading is telling us where we were, coincident is telling us where we are, lagging is telling what we were. Let's say that. Leading is telling us where we're going. Coincident is telling us where we are. Lagging is telling us where we were. What's collateral? Collateral, like when you borrow money, you have to put up collateral. That's not collateral damage. It's collateral. So collateral is when you put up something to borrow. So if I went to go borrow $50,000, they say we need some collateral. I put my two or three cars on there as collateral. That if I don't pay it, they pay me out. They sell that. They sell that out from under me. Okay. So what's a CMO? A CMO is a mortgage-backed security. You should know this. Some of this by now. If you're taking this exam, but a mortgage-backed security or a CMO is a big picture. When you buy a house, you pay a mortgage, you're paying into the mortgage. The bank who you're paying the mortgage to, gets getting an income. They sell that to someone else who's now getting the income. And what they do is they put a bunch of mortgages in a pool and then somebody buys pieces of this. I can probably put the video up here to explain it. But I have, I'll put it, maybe I'll put a link in the description. What is a CMO? So a CMO is a mortgage-backed security. It has prepayment risk. It has extension risk. Because if rates drop, people refinance the mortgages and also in your income stream drops. And you're getting monthly income. Remember that you're getting monthly income. Okay. A collateral trust bond. Let's talk about secured bonds. Okay. We have unsecured bonds which are debentures. Uncured corporate bonds are debentures. Then we have secured bonds. We have three types that we think about. We have mortgage bonds which are they're not mortgages, mortgage-backed securities. The mortgage bonds, they're just backed by property. So if I default on the bond, they sell the property to pay the investors, the creditors. Then we have an equipment trust certificate which is basically an issue bond. And we use like trains, planes, fleet of cars, boats as collateral equipment, as collateral tractors, as collateral for the bond. And if we default, they sell that. And hopefully that's enough to pay for it. Then we have a collateral trust certificate where I'm a company. I have a portfolio of securities or something. I'm going to use that as collateral for the bond. And if I default, they sell that. Hopefully it's still around. And you get that. Okay. Commercial paper. What's commercial paper? To short-term unsecured bond. It's 270 days or less. It's issued at a discount. That is a financial company. We'd say, oh, we need money for the next nine months. So they'll issue a commercial paper for like, you know, $999,000. And then they'll pay back a million at the end or something like that. So it's short-term, unsecured, promise or you know, we promise to pay you. It's 270 or less. So then it's exempt. Now, it's exempt from federal. But to be exempt from state also, it has to be 270 days or less. Top three credit rating agencies. And it has to be a minimum denomination of 50 grand. That means you cannot buy a $30,000 commercial paper. It's 50 grand. So it keeps the retail people out. So what's a commission? Okay. So commission or a more, let's go along with that. So commission is eight member ABC agent broker commission. A commission is when you act as an agent and you charge a commission for doing a trade. So if I do a trade for you, I'm the middleman. I'm acting as an agent. I'm going to charge your commission. You buy a socket 50. You bought it at 50. I find a seller for you. I don't do it myself. I charge your commission on top of it. Much like if you go to buy a house, the agent's going to charge your commission on top of the price of the house. As opposed to a markup markdown is when you act as a principal. So if you give me an order to buy stock at 50, I'm going to sell it to you out of my own portfolio, out of my own inventory. I'm going to sell it to you. I'm going to charge your markup. You give me order to buy stock at 50. I'm going to sell to you at 15 a quarter. That's a principal. Okay. Principal transactions. Remember ABC agent broker commission and then PDM principal dealer markup. Let's comment on this. Basically just the ownership of the company. That's the one you see on there on the on CNBC and stuff like that. It's the lowest form of ownership. You own stock. You buy it. You can buy shares. You buy all the shares of a company. You're actually the owner. It's just basically the ownership of the company. It's a form of equity to lowest one. It's the less to be paid, but it does have the highest risk and highest reward because as it basically it moves with this company. If the company is as well, it goes up. Hopefully the company goes down. It goes down. So we have two types of trust. We have a complex trust and a simple. A complex trust means that you set up the trust. We have it. I'll talk about trust later in general, but a trust is like an account that you set up that you put your money in. Let's go through it. So it's either revocable or irrevocable first. So an irrevocable trust is you set it up. You're the grand tour. You name a trustee. You name your beneficiaries. It could even be you for all of them. And you put the money in. And if it's irrevocable, once you put the money in, it's up to the trustee to decide where the money goes. You can't take it back, but it is not taxable to you anymore. It's not in your state. It's just on the trust end. Then we have an it that we have a revocable one. Same thing, but you put the money in, but it's still yours. You can take it back anytime you want. But remember, so we have you put the money in if it's irrevocable or revocable, the trustee is going to manage it for the beneficiary or the beneficiaries as a whole, not just one or the other. If there's more than one beneficiary, they manage it as a whole. So that's revocable versus irrevocable. Revocable, you can take it back, you can revoke it or irrevocable once it's in there, you'll never touch it again. Now, the other part of it is there's a complex and simple complex trust means that if you put money in and it earns, you can either decide to pay it out based on the rules or let it build. You don't have to do anything. A simple trust, all of the growth has to be distributed every year. So a complex, they can hold it and let it grow. A simple trust every all the earnings, not the corporate, not the body and not the principal, but the earnings of the trust have to be distributed each year. Okay, so let's think about back to the mutual funds. Condueteary, Condueteary is the fact that if you have a mutual fund, they pass through the gains and that's it. They pass through 90% of the gains. As long as a mutual fund passes through 90% of the gains, you the investor are going to get the money that's never been taxed yet and then you're going to pay taxes on it. The reason that's to be deal is it's like a corporation. A corporation, you know, they earn money, they pay taxes on it and then they pay you so it's double tax because it's taxed on their end and then on yours. So in a corporation, the IRS pretty much takes like 70% of the money. It's crazy and they still don't have enough. Okay, so a condo with deer means it's flow through like a condo. I don't have a pipe. Well, if you went through here, the money goes through the conduit, goes right through the mutual fund and right to you, 90% of it at least. Okay, what's a confirmation? A confirmation is basically after you do a trade, you have to get a confirm usually by completion of the trade, which is settlement that lists like in general, not good the whole thing, but what you what you butter sold, how many shares, what it cost you, whether what the commissions were, the net prices, if it's a bond, whether it's callable or not, it's going to give you the yield to maturity of the yield to call. It'll give you maybe the exchange actually give you that it'll give you the date, but it doesn't have to give you the time, but it does have to tell you that it's available. It'll have your account number and it'll have the name of the firm and all that on there. It's a confirm. Okay, it's a confirmation. Okay, so what's a constant dollar plan? It's basically a formula of investing in your investing in a portfolio and you're keeping a fixed dollar amount of each asset. That's not a ratio of fixed dollar. So what happens is if it goes to what happens is if it goes to higher low, they have to either add or subtract. So they're keeping it at a dollar, not a percentage, they're keeping it at a dollar like 30 million in this or two million in that. And that if it gets too high, they'll rebalance it, bring it, sell it to bring it back to that or if it's too low, they'll buy more to bring it up to that. They always want to keep it at a fixed dollar. Literally have no idea what I said when we do that, but whatever. Okay, a constant ratio plan is based on the same thing, but everything's on a ratio like percentages. Okay, 30% this, 30% that 20% this, it's always going to be that. And then a recorder, so they'll rebalance it if it gets out of whack and bring it back to those ratios. That's sort of passive. That's a type of passive management. Okay, what's the CPI consumer price index? It's the measure of inflation. Right now, we all know that if you're if it's 2023 and you're watching this, we know inflation has been crazy. CPI is a consumer price index and measures inflation. Okay, consumption is basically the purchase and use of goods by households. It's what we, that yeah, it's not so much eating, but it's buying and using services and goods. Okay, contraction. Okay, this is we have the four four business cycles, expansion, peak contraction, trough. So contraction is when it's dropping, expansion is when the GDP is rising, things are getting better. I'm out of done this already. Things are getting better. That's when the federal zero will tighten. Then we get to peak. That's where the top it's going up. It's so slowing down. That's where disinflation happens. What's disinflation? That's when we still have inflation, but it's less. It's going up. That goes 8%, 7%, 6%, it's still going up, but it'll less rate. That's kind of what we have now. So everyone's like, oh, inflation's better. No, it's still going up at a ridiculous rate. It's just not going up as fast. Okay, that's so contraction is when it's dropping. Got an entire drop, right? Whatever they're called. A rant. So expansion, peak contraction. Contraction is when the GDP is dropping. The economy is getting worse. A long one turns into a recession. And during that time, the treasury will loosen the economy. They will buy treasures from the bank to inject money. And they will lower rates to make it easier to borrow. What's a control person? A control person is a partner, officer, director, the pods or a 10% owner of more than 10% I shouldn't say 10%. So someone who is more than 10% or a pod partner, officer, director, they usually have if it's for an investment company, it's usually the own more than 25% of the vote. I think the same thing for broker dealers. By the way, also the spouse of a control person is an affiliate or control person. No, they have the rules that if they if the control person of a public company, and they want to sell their shares, they have to follow the 144 rules. They can sell the greater of 1% of the assets, 1% of the outstanding, the four-way straightening volume, four times zero. Wow, 1, 4, 4. Great of 1% of the greater of 1% of the outstanding shares, four-way straightening volume, four times zero, which is every 90 days. Kind of built into the price. Control security. It's basically shares. I've never really heard someone talk about it that way, but a control stock is controlled stock is owned by control people, so they have to follow the one-way four rules. Conversion parity. Convertibles. Let's talk about convertibles. Convertibles are securities that turn into common stock. I don't think on the 65 or 60, 60, 60 have to do the math, but we have videos on that. Convertible bonds are our preferable or convertible securities are securities that turn into common stock. They will have a conversion ratio, which is how many shares they get. They will have a conversion price, which is at what price they get converted at, which is just a number to figure out the ratio. Then the ratio will tell you how many shares you get, and then you're going to multiply that ratio. We should all know how to do this. You're going to use that ratio multiple times the common stock price, multiple other ratio times the common stock price to get what the parity is, the conversion parity, and then if that number, so think about this way, I buy a bond. It turns into common stock. If the amount of shares that I could turn into is worth more than the bond, I would convert the bond into the stock because they get a discount. If the value of the stock is less than the value of the bond that's trading, I would not convert because I'd be losing money. Convertible bond is bond is convertible. Convertible preferred is a preferred this convertible. Bonds pay income every six months. It's a debt. Proofers pay quarterly and it's an equity. Convexity. Don't have to do go crazy on it. It's probably a wrong answer. Remember that we know that duration is how volatile bond is. The problem is the difference between an eight-year bond and a ten-year bond and a 12-year bond. We know that the ten-year and the 12-year bond move more, but it's not a straight line. It's curved. Maybe the ten moves a lot more. It's not exactly equal. If you have a six-year, I think you're in a ten-year bond. They're not exactly the amount. The eight-year may move three times as fast as this x, and then ten may move four times as fast as the eight. That's what convexity measures. Basically the curvature of the speed at which things move. Again, you don't have to do the math. I always say this one. Duration is how much a bond moves. Convexity is how fast it moves. I don't think it's exact, but it's showing you the difference between the two. Cooling off period. The cooling off period is what when we issue stock for the first time under the act of 33, we'll bother registration and then we start a 20-day cooling off period. The 20-day cooling off period, we can't sell the bonds. We can't sell the stock. We can get indications of interest. We can sell it at a red herring. We can even register in the red states blue sky. We can't sell it, tank money or anything. But we can do that during the 20-day cooling off period. At the end of the cooling off period, the SEC declares it effective. They don't approve. They're never fucking approve. Remember no regulator ever proves anything ever. They just declare effective. They say, we didn't find anything wrong with it. It's not a video. A corporate account or a partnership account, a corporate account is a corporate account. You have to have certain documents. You have the Articism Corporation or the Charter. You have to have the name of someone. You have to have a name of someone who completes orders with the authorized representative or authorized trader or authorized individual who completes orders for the corporation because it's not an individual. Now if it's a partnership, it's not a joint account. It's a partnership. It's for a partnership. And you need probably the signature of the GP and the partnership agreement. What's a corporate bond? A corporate bond is an issue of bond debt issued by a corporation. The amount of bond is when the investor lands money to an issuer. So corporate bonds are issued by corporates. The immuneis and the have treasuries. They will have their own things. Corporates fully taxable, like taxable with issue of bond. And Muni is like a city or state issue of bond. And normally if you buy it in the same state you live on, it's tax-free. The interest at least is and then treasuries. They're issued by the federal government. The thing about them is they have no default risk pretty much, except for what's going on now with the debt ceiling. There's no default risk. But so corporate to pay tax on every level. Munis, you may, you don't pay federal, but you might pay state unless you buy it in your own state. And treasuries, you pay federal tax, but not state tax. What's a corporation? It's one of the types of setting up. So we have different types. We have sole prop, which is just like one person. Okay, just one person setting up. You have no, you have no limitation of the risk. You have unlimited risk. It's super free. Like when I first started teaching, I did a sole prop because it didn't matter. I didn't have risk or anything. Now I'm doing other projects. So I have to create something else. So it's so proper. It's just me alone. You can't really transfer it. There's no continuity of life when I die. It's over. Then I can go up to an LLC. And LLC is a limited liability corporation company, whatever you want to call it. They can have as many members as you want, but it has limited liability. Like if you're a member, you can't, you can only be sued up. You can only lose what you put in unless you're committing crimes. We have one member. You can have a single member LLC or hundreds. Okay, we have a, they pass through the gains and losses. That's the thing about these, the next three things I talk about, they pass through the gains and the losses. That's the, what does that mean? That means we get the money, the partners get the money, not the corporation or the company. And they also get losses. They don't owe the money. That's easy to, they get a piece of paper. That's a write off. So LLCs, partnerships and S Corps all pass through. So that's an LLC. A partnership. There's two types. There's a general partnership, which is just partners, general partners, they get together, it can be verbal. We run a business, but if it just says partnership, it doesn't mean limited it. If it just says partnership, that means that they have unlimited risk and they can all run the company, but the partnership, if it's a limited partnership, we have limited partners that just put money in, no, they can only lose what they put in, but they can't run it. And then general partners of the GPs and LPs, they have a GP who runs it and an LP who just drops the cash. LPs can only lose what they put in. GPs can hang on unlimited liability. They're also paid last. Okay. But if they just say limited partnership, it's an LP GP thing, you have to have one of each. If they just say the word partnership, it means general partnership, which means everyone has unlimited risk and everyone can be involved. Keep that in mind. And S Corp is a corporation with up to 100 investors, 100 shares, I should say, there's a lot of nuances to that, but it's fine. 100 shares. All the shareholders have limited loss. They can only lose what they put in and it does pass through gains and losses like the other two. The me of the C Corp basically, every company you've ever heard of is a C corporation. They do not pass through to the actual, it's the most expensive. It's the best way to raise a lot of money. You can have an unlimited number of shares pretty much and you can just authorize them, you issue them, they're outstanding, all that crap. As they get paid, the actual corporation pays taxes at the corporate rate and then they pay dividends and then you pay taxes. So the problem with the corporation is it's double tax, but the good part is it's the best way to raise a lot of money. Okay. Correlation. Correlation is how two assets run with each other. So it's highly correlation of one means they go up together, down together, don't move together, all the same. You don't want that. You don't want positively correlated. It goes one to negative one. One means they're perfectly correlated the same way. Zero means they're not correlated and then negative one means they go opposite the same amount together. Okay. You don't you don't you want non correlated. You want this because they want diversification. You want this to go up in this knot. You do not want them to go together because good is good, but bad is really bad. You don't want them negative correlation because how can you make money if they both go the same amount the opposite way is she want non correlated assets. They have nothing to do with each other. That's perfect correlation. Okay. So perfect correlation is when they move together. I guess perfect negative, negative pure negative is negative one. They move exactly opposite. What you want is non correlated. So they have nothing to do with each other. Okay. I think we talked about this already. Cost basis is what you paid for something. Cost basis is what you paid. You bought it 20. They have adjusted cost basis. Like if you put more money in or you get payouts and stuff like that, but cost basis what you pay. Procedures what you sell it for and the difference is your capital gain or loss. Okay. Groupon yield is like so if you coupon nominal stated in interest mean the same as coupon nominal stated in interest all mean the same thing. It's the coupon rate. So if you buy a 5% bond, it's paying 5% of par if par is a thousand. It's paying 5% of a thousand. It's 50 bucks. The coupon never changes. Remember that once a bond is set or a pervert is set with a coupon. That's it. Uh, coverage securities. Those are the federal coverage securities. That's like, um, for the most part, munis are a little bit if they're certain way, but when I can talk about that, we got all we will. So mutual funds are covered. New York Stock Exchange listing. Share sold to share sold to qualified purchases with which is 5 million or more. Um, rag D five was 60 is federal covered and munis issued in another state. So munis are always exempt, but if you buy a municipal bond in your state, it's exempt because of the USA state law. But if you buy a muni bond issued in another state, it's still exempt, but because of federal law. That's why it's a federal covered security. Okay. What's credit risk? It's the same as default risk. Credit risk and default risk are the same that if you buy a bond that's out of treasure, you have credit or default risk. It's the risk that they won't pay you. How do we measure that? We have the credit ratings. You know, AAA AA triple B those are the those are the best. Did I do this? Ready? I feel like I did, but whatever. So then we have munis is trip A little A little A. Um, AA I've done this already. I've burned this a million times the bond ratings. So that's so we measure credit or fault risk by the bond ratings. The higher it is, the less risks we have. Triple A is the best. They have hardly any default risk. Anything below triple B is speculative or junk. They have higher credit or default risk. So what's a credit spread? Okay. So that's on this test, a credit spread is basically when you have a buyer call, you have two calls, you buy one, sell the other and the sell call is more expensive than the buy calls. You're bringing in money or it puts two puts, buy and sell a put, the sell is more expensive. But I don't think that's what we're talking about here. We're talking about a credit spread, which is the difference between um, the different routine yields and two securities. So like if we look at that, that's the interest rates. That's the years. So we have a bond that's treasuries. You know, those shorter term lower rate higher term than we have corporates. Okay. So these to, so the spread here, this corporates will always be higher than the treasures always because these have no risk, these have risk, default risk. So what happens is people measure the difference and if it gets narrower, okay. That means it comes, the con, the oh my god, I can't speak. The economy is getting better because people have buy in the, corporates forcing the price up in the yield down and they're selling the treasuries, putting the price down in the yield up. So getting closer together is means economy is getting better. But if they're getting wider apart, that means that means they're running to safety. They're selling the corporates and buying the treasuries. So that's the sign of a bad economy. So if you see the yield, the yield or credit spread widening, that's sign of a bad economy. If it's narrowing, it's a sign of a good economy. Okay. Then there's prefer, this different types of prefer, right. So we have regular preferred, some preferred sign that pays you every quarter, boom, boom, boom. And it's consistent. It's like a fixed income. They don't have to pay. They're supposed to pay. But what if we miss a year, right? So if we miss a year or two, it's fine. I mean, it's not a big deal. You, you, it's nothing you can do about it. But they made it to, it's so we don't owe you the money, right? So if I buy a 5% preferred and you don't pay me in 2020 and it's now 2021, there's literally nothing I can do. I can yell at you and say, please pay me, we don't have to. Unless it's cumulative preferred, cumulative preferred means that even if they miss the previous three or four years, before they can pay anything to the common, they have to make up all the, all the past payments. So if they miss my payment in 2019, 2020, 2021, in 2022, they got to pay me, if they want to pay, if they want to start catching up and pay the common, they got to make up all those past years, that's cumulative preferred. Participating preferred means you have a normal coupon 4%, you should know, you should know the basics, right? So normal 4% preferred is paying 4%, but if the company has a good year, I say we have a really good year, they'll give you a little bit more of that quarter of that year. So you have 4%, maybe it bumps up to 5%, you get an extra percent or two, and then it goes back down to the original when they have a good year. So you get to participate in the, you get to participate in the earnings, in the earnings growth of a company if they do well. That's so the cumulative and then they prefer, and then we have participating, cumulative, you pay the past dividends, participating, you get to participate in the earnings, should they give you a little bonus if they have a good year. Okay, your current assets, current assets are assets that we have cash and other assets that we're expected, we can convert into cash or get within the next 12 months. Okay, so basically cash, account receivable, inventory, and prepaid expenses, that's all stuff that we're going to get back. And reason prepaid expenses are, so let's say I pay their rent over the next four months, I prepaid that, I'm getting that service over the next four months, I'm getting the rent to get to stay, that's what. Current liabilities are what we owe, we owe that in here, that's current liabilities, a crude wage is payable, current part of long term debt, so if we have a bond and we pay, you know, we owe that money, what we owe in this year with interest payments, that would be considered a current liability. And remember, so current ratio is current assets divided by current liabilities, quick ratio is current assets not including inventory divided by current liabilities, and working capital is current assets minus current liabilities. Current market value is really just what the stock is worth right now, CMV they call it, current market value. I did current ratio. Okay, current yield, now let's see, so current ratio is the same as before I just gave it to you. Okay, so current yield, okay, current yield is what basically what you're earning when you expend, when you buy a bond. So if you buy a 5% bond and you pay 900 for it, you're getting 50 bucks, because remember the coupon is always based on par. So if you buy a 5% bond, you're getting 50 bucks, if you paid 900 for it, you're still getting 50. So what's your return, you're going to do 50 divided by 900. You buy a 5% bond for 90 or 900, okay, so you get the current yield, you're going to say what up, what's it, what am I earning? So remember, as my one friend said, he said current yield is like electricity, electricity has amps to do annual divided by market price, so you're going to do annual divided by market price to get your yield. Let's do it. 50, which is what we're getting divided by 900, that gives me 5.5%. So this is my current yield, I'm earning, even though I'm getting 5%, I don't remember, I only paid, I only paid, I put a common woman idiot, okay, I only paid 900 for it, so there you go. So I'm earning my yield, it's a little bit more than that, but it's my current yield is 5.55555%, I'm not writing that out. So that's the little point here is that a current yield is going to be what you're personally earning based on this. This is paying you 50 bucks. So whether you pay 800 or 10,000 for this bond or say 1200 for the bond, you're still getting 50 bucks. What you're earning, what you're ratio is what you're currently yield is this divided by that. So it's annual divided by the current market price, not the original market price, the current market price. A custodial account, a custodial account is basically where a custodian is on behalf of someone else, usually it's a minor like an up-and-down account or a UGMA or a TMA account, that's a custodian account, custodial, where your job is to have a fiduciary responsibility for someone like a minor or even somebody's asking a capacitated. Usually it's a minor account. The custodian is an institution or a person that is in charge of that kind of account. That's one thing. The other type a custodian, that's a custodian, but the other type of custodian is that a bank or a broker deal that's holding cash for a broker dealer or an IA or a mutual fund or some of that. Custodian is actually holding cash and securities on behalf of someone. Yeah, you can't just be Joe and do it. It has to be real broker dealer bank, something like that. What's custody? Okay, so custody is having control. It's not getting the kids, right? Okay, but it's having control or an asset. So if you have like full discretion, that's custody. Okay, if you have your name, the trustee and account, that's custody. If you accept a check and don't forward or return it within three days, that's custody. They forget you holding the money. If you accept prepaid fees of $500 and more six months, a prepaid fee six months before you do the advisory service of 500 or more, that's custody. Those are all things that are custody. If you have an omnivast account where you're the advisor and you have an advisor, you have an account with a broker dealer one account and your name as the advisor and you have a bunch of account to people with money with you, you have custody because you're controlling it. If you, if you, the advisor sends statements to the clients inside of the broker dealer, that's custody. And there's a lot of rules on that. So if you have custody, you have to notify the administrator. You have to put up a shorty bond unless your net cap or net worth is high enough. You have to send your financials. You have to get audited, audited financials, a surprise audit, unannounced. You have to send a, if the letter, no. Okay, and then you have to send a quarterly statement to your clients telling where their money is. That's custody. There's a couple more things, but that's, you have to notify everyone that you have. Okay. What's a customer? Anyone that opens an account with a broker dealer? Okay, it could be a, it could be an individual or a person. It can't be broker dealers are not customers, which is interesting. Okay. The statement, so what you have, the customer statement, that's what we end up. We send out quarterly. There's no monthly. A lot of firms do it, but there's no requirement to send a monthly statement. The, the whole act that we have activity, it's monthly, that's not a thing. So statements are quarterly. You send a quarterly statement list. How much you have, what you've done in the last quarter? Well, it's just a statement and everything you did. And it's going to tell you what you've done. And sometimes they ask questions about fraud, like sometimes brokers when they had a bad month or something for their clients, they would send a fake statement. Totally legal. That's fraud. They should be in jail for that. But that's a sign of fraud. If all of a sudden you get a, if your statement doesn't match what you're, your con firms and what you expect, you reach out to them and you have to say, listen, what's going on? Okay, cyclical industry. A cyclical industry is basically, it's an industry that moves with the cycles, like retail stuff. I think fashion, like automotive, things like that. When the con is going well, they do well. When the con is into a bad, they don't do so well. That's the opposite of defensive. Okay. So like defensive is like, that's like cigarettes, alcohol, food, shit like that. Those are all like, they're pretty steady utilities. They're steady. They're not going to do great in a good economy or bad in a bad economy. They're just like staples. People always need to take drugs, pharmaceuticals, they always need to eat. They like to drink alcohol, they like to smoke and they need to see which is utility. Okay. Those are all defensive securities that never really go. Okay. So that's A through C. I'll try to do the rest of the alphabet over the next couple of days. I'd like to get one ass with one big fucking video, put it up there and have one massive video that you can just tap into what you're not. I'm going to put like timestamps for the letters. Not for each one because I'll have too many. I'm going to put timestamps for all the letters. Thank you very much. And hopefully, right now, it'll go right into D without having a break, but who knows, I'm fucking lazy and I'm tired and it's two o'clock in the morning. Do this to everyone really long fucking video. Seriously, this could be five, six hours long, who the hell knows. And I'm not breaking it up. I'm going to do a massive one. It's right out there. Watch what you want. I'll put timestamps for the letters. So now it's what letter it's time for a little D in your life. Everyone needs a little D in their life. Well, I don't, but everyone needs a little D in their life. Okay. So what's a dark pool? A dark pool is basically still thinking about this. It's an alternative trading system. So I want you to think about it like two ships passing in the night. So you put in, okay, so I want you to think of a dark pool or a dark liquidity or whatever you want to call it as a way of doing orders without anyone knowing who you are. It's like an ECN or an alternative trading system, what's ECN's are, where you don't know who puts the order in. So you may put an order in and get executed and go, wait, there's no offer there, but it could happen because there's dark liquidity, but a dark pool is where you put your money in and you put your order in and then somebody else puts an order in and if they kind of match up, they get executed. Other than that, nobody knows what happens. Okay. So let's think of like ECN's dark pools fourth market stuff like that. Dark pools are like it's like you put you you arrange. I'm stuttering because it's a hard thing to explain, right? I mean, I see it on my head, but it's hard to get it out there. So a dark pool is like you put an order in and another institution puts an order in and if they happen to match up where they can actually get they will, but nobody knows who the other side of the trade is. So let's say Jeffries in the 90s, Jeffries ran one and they would do it's more sophisticated now, but this explains it. So like 11, 12, 1, 2, and 3, they would say, okay, everyone who wants to put their order is in put them in the box in this black box. Okay. And then if you put them in there, I think, and it would print anything that would Chris cross. So like say there's 50,000 to buy at 40 and there was 50,000 to sell at 40, then that would mean a buyer and sell it match up and also you'd see a print for 50,000 shares because it would match up, but they would not know it was there. So here's the problem. You put into you know, 10,000 shares to buy at 40, somebody comes in in 41 to sell. Well, you're not going to execute because there's a difference here, but you'll never know it was there. So that's the whole point of a dark pool is that you're staying anonymous. You don't know who the orders are and it's a good way like if you're in a stock a lot, like say you're gulman and you're buying, buying, buying a ton of shit. Well, people start realizing that and when they see you walk in, try to fix this out again, right? When they see you, maybe it's just I'm crooked. Maybe I'll just do that. If they see you in their buying, they go, well, you know what, go into buyer. I could probably get a couple extra pennies out of them so they'll jack their price up a little bit and go, let's see if gulman comes to me. But if you do it in a dark pool, nobody knows who the buyer is or the seller is. Again, I've gone way too deep more than you'll ever need to know, but it's a way for institutions to say anonymous while doing orders. Okay, let's talk about orders in three years. So day orders is day orders. There's GTC orders. Those are the two we're going to talk about. So a day order is an order for the day. 99% of orders are day orders. You place an order to buy a thousand j's at 50. I automatically assume it's a day order, which means it expires at 4 p.m. Three p.m. if you live in the Midwest, right? Okay, or I guess one p.m. If you live in the Pacific coast. Okay, so now the order ends at four o'clock. Okay, that's a day order. Boom. If you have discretion, you can extend them and change them. But if you don't have discretion, like you don't have full power of attorney and I give you a not held order, it only lasts until four. You can't carry it to the next day. So day orders mean you place an order. I automatically assume it gets canceled at 4 p.m. automatically, whatever you did, you did and you have to accept it. A GTC order is good to cancel. Now, they have days that are not testable where they actually have to renew them. But a GTC order is good to cancel. That means I'm giving you the order. I put GTC on it very rarely and it stays. It goes day by day by day and it stays there. And the reason you do that is because I want you to think when you have an order book, it's always first come first serve. So if you go into by a share of 40 and I do and you're half a second ahead of me, a millisecond if you want to say, ahead of me, you will get completely done before I buy anything. It's kind of like when you go to buy a concert tickets from Teller Swift, right? The people ahead of you get to buy all they want before you get even in. Okay, so that's there's a problem there, but every day it resets. So you put an order in 99% or day orders. So if you put an order in at 10 a.m. and I put an antenna one on behind you. But if I said it is GTC and we don't execute, yours cancels it for my stays. And the next morning, I'm already probably in the front of the book, I'm in the front of the line. So that's what a GTC order does. It stays there over time. You would not do a market order because market order is like any price is no price limit. So a market order, you would not do GTC because you're pretty much going to be executed the same day. Okay, we talked about principle versus dealer members for ABC, agent broker commission and then dealer, principle dealer markup like it to venture. What is it to venture? It's an unsecured corporate bond, unsecured corporate bond. And a lot of it, yeah, that works. So it's an unsecured corporate bond. Okay, what's a debit spread? A debit spread is a as a caller puts spread where the amount of money you pay for is more than what you receive. So I'll show both. So let's say we have a spread is going to be by, you know, by a 50 call. I hear in the second, by a 50 call at seven and sell the 60 call at four. Okay. So in this case, I spent seven and brought in four. So I have a debit of three. And here's a little trick here. If you want to know bullish of Arish, find the dominant option. So since you buy, since this is the dominant option with the bigger premium, that defines the spread. If whatever this is, so this is bullish, then so is the spread. And by means debit, so means credit. So if the dominant is a buy that the debit spread, so this is a debit, it's a bullish spread because this is bullish. Now, let's change this up and make this in. It has to go this way. You can't just really nilly it. Okay. I'm going to change that to, we'll change that to 14. Okay. So now this would be a credit spread because the sell has a bigger premium. So this, since selling a call would be bearish, this can work on puts and calls to, but both put spreads and call spreads. So if you sell this, if this is the bigger premium, that's a sell. So then that's a credit. And in this case, since selling a call is bearish, this spread is bearish. So this is a bear spread also. Okay. debt, debt security is any kind of time as opposed to really what we have, equity of debt, that's kind of it, right? So equity is when you have ownership, it's common and preferred. And debt is when you borrow money. So debt is when the company borrows money from the investors. So debt is when the company borrows money from the investors. So it's like, even if it's a government, so the entity does. So commercial papers, short term debt, bonds, debentures, um, munis, our debt, uh, T bills, T notes, T bonds, tips and strips, those are all forms of debt. Those are all types of debt. And it just means you're, oh, the money to someone, you borrowed the money versus giving that ownership. Like, if you ever watch Shark Tank, like they want, you know, what I want, $20,000 for 10% of my company or something like that. And then maybe Kevin O'Leary, Mr. Wonderful comes in and says, well, how about this? Have an incentive you giving up equity. I give you a loan and I get a royalty blah, blah, blah, but I give you a loan and you pay me back and I get my money back and they make interest on it. That's debt and he, and he got, sometimes you'll hear him pitch and go, look, you don't want to give up equity. So let me lend you the money. I'll help you out. And then I'll take a much smaller piece of the equity because remember equity is ownership. That's why if you watch on Shark Tank, they're always fighting over like a little bit because the more equity have, the more control you debt equity will absolutely freaking show up on these exams. Debt equity is how much debt we have versus how much equity we have. That's literally it. How much equity? Okay. Basically stock, we'll call it stockholders equity, but it's really total assets minus total abilities. That's the shareholders equity. And then you do the debt by that, not the market value, just the amount of debt because the vibe bar of a million dollars at like 4% and rates go down. That debt's going to go up in value, market value, but it doesn't matter to me. I only owe the million. So remember debt to equity is how much debt we have versus how much equity we have for shareholders equity, shockholders, whatever you want to call it. And that is, and anything a one to one means same debt, same equity. More than one to one, you're more leverage, leverage means borrow, right? So more the more you borrow, the more leverage you are, the higher the debt equity goes. And in some industries it's fine. In some industries, that's not good to be that high. Default. What does the vault? Just don't fucking pay you, right? Like if you let me money, your biggest risk could be that I would freaking default. So that's the risk. Okay, so the risk is that default or to fault risk credit risk. Same thing. And that we know how we measure it. So default risk is that I just want to compare you. The interest or the principle. Okay, what are defensive industries? Okay, defensive industries are like the staples. I think we talked about them in the business cycles. They do find all the time they're always steady. So even in a bad economy, they're good to buy. Okay, and a good economy, they're probably not the thing to do because you'll underperform, but they'll probably overperform. Not doing they just they're steady on, but the market's shitting or the economy's shitting, they're going to march on. And what's that? That's like pharmaceuticals, utilities, alcohol, food. I just forget the fifth one. It's just really it's a tobacco. So everyone needs to drink, everyone needs to smoke, everyone takes drugs, everyone needs to see and never need to eat. Okay, those are staples. Defensive securities. Do not confuse that with defense industry, which is like weapons of war, Bowie, Lockheed, Pratt and Whitney, the ones who make bombs and and fighter jets and ships. Okay, what's defensive? So if you're a defensive investment strategy, that means you're being very conservative and you're trying to minimize your risk. Okay, basically you're putting a lot of this stuff in bonds and cash. Like if you think the more you're worried, the older you get, the more defensive you get, you know, I always say the best the best defense is good offense, right? Or the best offense is a good defense. But I'm not I don't like doing defensive. I'm in a moron. I probably should be more conservative, but everything is in equity. Despite me being 50 something years old, I should be at 50 50, but fuck it, I'm all equity all the time. So defensive is going to be your very conservative. You're trying to minimize your risk. Remember, whenever you minimize risk, we've talked about cap evidence stuff. If you minimize risk, you're giving up return. Not just a pair of that absolutely has to be the way it is. Okay, a deficiency notice. Okay, this is a deficiency notice. A deficiency notice is when the SEC says, hey, there's something wrong. Okay, you have to basically have a registration statement, you file it, you have the 20-day review, and they come back and say, hey, something's wrong. Or if you if you register with the SEC as an investment advisor, anytime you do something and they go wait, something's missing, there's a deficiency notice. Okay, they're just saying, hey, fix it. It's not a crime. You're not getting trouble. Just fix it in. That's all. Something's wrong. You missed the signature. The numbers don't work out. You're missing something. You did it wrong. Like when I first registered, when I first had to create a form ADV part two for investor advisors, federal coverage, they had just changed the rules. It used to be bullet point. Then it became narrative. They wanted to do it as a narrative. And every time I sent it in, I mean, I'd never done it before. I sent it in. Then they came back with a deficiency notice saying, no, it has to be this. I did that. And they go, no, another deficiency notice has to be that. I became a really good friend to this person. So because we kept talking every other day until he goes needy to table content and you need a glossary, all that crap. So there was a lot of rules on it, which are not testable. I'm just explaining that a deficiency notice isn't a big thing. Big thing. It's just, they're saying, hey, you got to fix something. Okay. So let's talk about this. Define benefit versus define contribution. Okay. Define benefit plan means that you know it's a retirement plan qualified. You know what you're going to get to find benefit. You know what you're going to get like a pension. Like they go, look, if you work here for 20 years, you're going to get this at the end. Okay, that's what you're going to get. We're going to pay you 20% of your salary this much money a month. Like my buddies and I and worker, he worked with me on the stock exchange. And then when we all left, he went to do this. He's probably making more money now than all of us. But they told him for every year, you work when you retire, we'll pay you 200 a month. So if he does 20 years, he'll get four grand a month for the rest of his life. Okay. And that's right. That's a nice, you can move anywhere, anywhere in other in the world, and never have to worry about money ever because they will pay him for life. They're defining his benefit. Does he care what they're putting in now for them? Does not give a shit. Doesn't care. And it goes in pre-taps. Define contribution. That's like what we're doing, right? 401k stuff like that, where you know what's going in. Technically a KO is an HR 10 is one, but we're going to go with the whole theory here. Define contribution. You know what's going in. We know we're putting in. We know what they're putting in. Maybe a, it doesn't matter if you know, you know, what they're going to do over the next three years, you just know right now how much they put in. The question is, if you have a 401k, you put money in. Do you know what it's going to be? Look, if you're like 22 years old and you drop 18 grand or 10 grand into a 401k, do you know how much it's going to be when you're 70? You have no idea for your defining the contribution, but the benefit, the ending result, you don't know. But again, define contribution is better for younger people because they have the time to have that shit grow to find benefits for older people like me. I'm an old fuck. I think I want to go to a job at my town. They pay like, they don't pay great. Maybe they pay 70, 80 grand. I mean, oh, some people get a well over 100. They pay that, but then they'll, but if you work there for at least five years, they pay you 30% of your salary for the rest of your life. So it's like, wow, I could put in five years, make no money and then have a nice little nut that this way I can never have to worry about that. So as an older person, that would work for me, but as a younger person, you'd miss out. Okay. So younger, you are defined contribution is better. Older you are defined benefit is better. What's deflation? So let's see. So inflation is a rising of prices. Right? Consumer goods, CPI, we know how to measure that. That's going up. We're dealing with it now in 22, 23. Now, moving on. If it goes up, if it's going up 9%, 9%, 9%, and then it starts going up seven or six percent, still going up, that's called disinflation, not deflation. Don't let the news trick you into this. If the inflation is still going up, but slower, it's called disinflation, not deflation. Deflation doesn't actually happen. Maybe it happened in 2009 for like a day, but deflation when prices drop actually get lower. Like you buy eggs, the big one gold, right? You buy eggs today of $2 of dozen and then tomorrow it's $1.90. It's actually cheaper. That doesn't really happen. Okay. So these prices are not dropping. They're just, so even if we get inflation back under control, these prices are here. Okay. So it's just going to happen. It's just they're not going to rise as fast anymore. So you're not, again, it's not, don't expect prices to drop because that's deflation and the shit does not happen. Why would you give that up? Like I'm not going to lower my rates. Okay. Delta to Greek. Okay. The Greeks. Okay. So the Delta is a measure of how much an option will move compared to the underlying asset. So if you have a Delta of 40, okay? Delta of 40. For every dollar, the stock moves up or down, the option will move 40 cents, 40%. Delta is a percentage. So if you have a Delta of 80 for every dollar, the stock moves or the underlying moves, you'll move 80 cents, 80%. So think of Delta as a percentage. If it's a 30% a 30 Delta, it means it's going to move 30% of the underlying asset in the same direction. And what we mean is what I mean by moving in case I didn't say the premium, the premium will move because a strike price doesn't change. So if you have a 40 call three, if I can do the math here, and as it says, a Delta of 40 and the stock goes up a dollar, then you will now have a 40 call at 340 because it'll move 40 cents compared to the dollar. That's Delta. Again, theory. Okay. Supply and demand, right? So there's supplies what the actual stuff we have and then we have demand. Demand. This is how we determine. So if you see a lot of demand prices go up. That causes inflation, although we really know the government causes inflation. That's what I'm known. I'm not just shitting on the current administration. It always happens. So demand is how much people want supplies, how much people have. If there's more demand, then supply prices go up. If there's more supply than demand prices may go down, even though I just said a second ago that it doesn't happen. But on an interim basis commodities, it's supply and demand. The more demand, the price will go up, the more supply prices go down. Okay. So if you ever see the thing about M1 and all that shit, so demand deposit account is something where you can just walk in and take your money out at any time. Like a checking account. Okay. So demand deposit. Demand deposit is like a checking account savings account. Okay. Because you can take your money out at any time you want and convert it into cash. Okay. So depreciation and depletion. So depreciation is when you have a manmade thing. Okay. Manmade thing and over time it gets worth less and less and less. So you get to depreciate it. One of the greatest write-offs in the world. I have two cars that work. You use for business. I have to travel and all that stuff. I'm in carry stuff around. So I write them. Oh, the fact that my car every year is worth less and less. I get to write that off and lower my taxes. Write-off means it's a loss. It tax-loss. I get to lower my income. Okay. That's depreciation. Depletion is when you use something. Crop, not crops. Definitely not crops because they grow back. Lumber, gold, oil, coal, gas. Once you use something, you can't use it again. So it's being depleted. So they actually let you write off the fact that you can't use it again. So if you have a hundred barrels of oil and you sell one, you get to write off on your taxes the value of one barrel of oil. That's depletion. So remember depreciation is from manmade shit. Depletion is for God made shit. Okay. So natural resources, God made stuff is depletion. Actual things is depreciation. Buildings, cars, tangible shit. Okay. What's a depression? I think we did this. So I don't have to go into it. Depression is what I feel at night. No. I know I'm totally fine. I'm actually surprisingly happy. As much as angry I seem all the time. I'm actually pretty happy. So depression is a long recession. Right. So when you have 18-stake months of negative GDP or six-stake quarters of GDP, negative GDP, that's a depression. We haven't had one since the 30s. Okay. So what's a derivative? The derivatives, right? It's an asset. It's a thing that is based on something else. So it's a product that's a security, hopefully, sometimes not always. That is based on another underlying asset. So like an option or an option, a put or a call, that's values based on the stock. Okay. Futures and forwards are not securities, but their values based on the commodity that is tracking or the index or the stock or whatever it is. So like warrants, rights, options, futures forwards are all considered derivatives. I still think a CMO is a derivative, but I don't know. Okay. Okay. Delusion. What the hell's delusion? Delusion is when you do something, right? So you're like, say you have a glass, say you have this and I pour a bunch of ice in it. It's fine at first, but eventually gets diluted. Okay. Have a drink. Now, to make it's not on call. I don't drink alcohol. That's the thing. Okay. You just think I would. So delusion off of back of my tangent. Delusion is when you lower the potency, right? So let's say you're a 10% owner of stock. Okay. And then the company issues another 100,000 shares. If they didn't give you the right to buy more shares to keep your ownership called a preemptive right, you would be diluted because let's say a million shares outstanding. You want 100,000 shares. You're a 10% owner. If we issue another two, not a stock, but a stock dividend, that doesn't do shit. But if we issue another million shares and we didn't give you the right to buy another 100,000, you'd now be a 5% owner because you're in 100,000 shares out of 2 million. So delusion is where your ownership is diluted down to less. Okay. I think if you watch the Facebook movie, whatever the social, whatever that was called, they did Zuckerberg did it to the CFO. They didn't like them. So they just diluted them. They said, oh, you're a 5% owner. Now you're 0.001% owner because of the way they did it. Okay. So directed brokerage is where you decide as the customer where to send your brokerage count, you want you to send your order to go to. So if you have, if you're an IA and I'm an experienced customer and I say, listen, I want you to send the order to 3TD. I'm directing it where to go. That's all. Okay. What's a discount bond? A discount bond is a bond. So we have bonds issued at par a thousand. If rates go up, average issued, the pressure go down because it's less attractive. So that's a discount bond. If you issue a bond at 5% and rates go to 7, your shit doesn't look as attractive so the price will drop. So we have a discount. And then the other side is if you issue a 5% bond and rates drop, then your bond looks better. So it becomes a premium. So remember, a discount bond is when the price is below par and a premium bond is when it's above par. I mean, straight up forward. That's straight forward. Okay. What's the discount rate? The discount rate? We I think we talked about these four rates. Prime rate, broker loan rate, discount, fed funds. Prime rate is the rate that the banks lend are the best customers. It's the highest rate. Then the broker loan rate is what banks lend you broker dealers from margin. That's a broker loan. That's lower. Then we have the discount rate. That's lower even still. And that's what you see in the news with the Federal Reserve is raising and dropping. That's what the Federal Reserve, that's the rate that Federal Reserve charges banks into some broker dealers for overnight lending. Then the fed funds rate is the lowest. It's the most volatile and moves every day. It's an average of all the rates that all of the if you watch my Pomodoro method video, I should have this another room. But it's the rates where banks and broker dealers lend to each other overnight lending. That's due to the lowest rate. It is very volatile. Power of attorney and discretion pretty much the same thing. There's two limits. There's there's limited and full and there's variations in between. But basically, discretion is saying, Hey, I'm going to let you the advisor or the investor advisor rep or the agent make decisions on what I buy, how much and buy yourself on my behalf. I don't have to be you don't have to ask me everything regular accounts. You the advisor can do trades, but you have to ask me first and say, I want to do this that's solicited. You can do that. But if it's a discretion or power of attorney, you can actually make decisions. So in power of attorney, you can choose everything. If you don't have power of attorney, the only thing you can choose is the time and the price. That means I have to choose by sell the amount and the asset. So that's the three is the amount, the asset and the action. If you only choose time and price, you don't need discretion or power of attorney. If you choose anything more than time and price, if you choose by yourself or the amount or even the security, no matter what, even if I call you up and say, Hey, buy a bunch of bank stocks, you're choosing the banks who you need power of attorney. Now, let's go on that. To a fidget agent on the broker dealer side, you have to have an in writing in hand before you do anything. You can't say, Oh, it's in the mail. As on the IA side, you're allowed to actually have verbal discretion for 10 days. And then it must be followed in writing. Let's say the question comes, you they give you verbal power of attorney and on the 10th or 11th day, you get nothing. Okay, you don't get the paperwork. Your discretion ends that day. But on the 10th day, it's done. You can't do any more discretion. You don't go back and bust the old trades, but you are going to do that is where you're going to draw the line. Now, there's let's talk about this a little bit. There's full unlimited, right? Limited means you can do any suitable trade, but you can't really pay bills and stuff like that. And that's not custody. You may have to put a shardy on, but you don't know, it's not custody. The next step up is full power of attorney and there's gradations of that. But let's start at the top. So full power of attorney means you can you can do any suitable trade plus write checks with draw money, pay bills, or the benefit of the client. You can't pay for your trip to Rio, but it is what it is. So that's full power of attorney. You can pay bills and do the money. So if you can touch the cash or withdraw your own fees without checking with the client first, that's full power of attorney. That's custody. And we know the rules on custody because I did them in about maybe half an hour. Okay, so if you do something wrong, you may have to just scourge your commissions, which just means give them up. Just give them back. Discourage means give back. We love the big words. Okay, disposable income that's basically what you can spend on, you can just spend like you have you have savings, you have your bills, whatever leftover is disposable income, which means you can spend an ungrat. Okay, so now to distribute a distributable net income, that's basically what the beneficiaries receive from a trust that would be taxable to the beneficiaries. If you pay them, they get the money, they have to pay taxes on. Diversification is modern portfolio theory anyway. So diversification is instead of buying one security, you buy a bunch of securities and spread it out to reduce your non-systematic risk. You can almost get rid of it by having that. You can lower your system. Now you can't really lower your systematic. They try to book, try to say it can, but it doesn't matter. It doesn't matter if you're cross the board owning everything, the market drops up, market fucking drops. Okay, we'll be back. Take a break. I have a student. So what's a diversified fund? You might see over the course of this, my beard may grow. I may get fatter. Who knows? When I was long, this is going to take. So a diversified fund is a mutual fund. Usually it's in common, suck and stuff. Here's remember 75, 5, 10, 75, 5, 10, 75, 5, 10, 75 percent of the assets have to be invested somewhere of the fund, have to be invested somehow. No more than 5 percent of the funds assets can be in any one security. So if $199 fund, 75 million at least has to be invested. No more than 5 million can have any one asset. And you can own more than 10 percent of the voting stock. Because if you own more than 10 percent, you will come control and then you can't really sell this shit. So if you want to be called the diversified fund, I'm going to be fixed in this damn hat. You want to call it a diversified fund, 75, 5, 10, 75 percent invested. No more than 5 percent of the funds assets in any one security. And you can't own more than 10 percent of the voting stock of any company. What's a dividend? A dividend is when the corporation, we have all videos in this, you should know this. But dividends are what when you own common stock will prefer. You're going to get paid a part of the profits. Remember dividends are up to the board of directors. They're not guaranteed in any way, shape or form. Even on preferred, so not guaranteed. The board of directors has to approve it every single time one day. I'll fix that. Why I'm mentioning. And remember, the order is declaration X record payable. So it's declaration date. Then you get the X date, which is a date before the record date. Then you have payable. Remember DURP, D-E-R-P. And remember, on the X day, the actual price of the stock will drop by the amount of the dividend to offset the fact that you're not getting it. Because remember X means without, X point, X-Gallfront, X-Dividend, all without. Dividend discount model. Okay. So we know what DCF is, right? Discount of cash will is taking all the future cash flows discounting them back based on a discount rate and coming up with the present value. That's for bonds and projects. For common stock, it's dividend discount model. There's dividend discount model, which is taking all the future dividends and bringing them back to find the present value. And that's, but that one, that one isn't the best one because it assumes that the dividend is not changing. That's the dividend discount model. They may have the dividend growth model, which is saying, oh, yeah, we're going to do the same thing, think all the future dividends discount them back to today's dollars. But we're going to assume that the dividends growing over time. Only for stocks that actually pay a consistent dividend. So get Tesla a Google that wouldn't work for it. But a company that actually pays a dividend consistently, that would be valuable for it. If you are the dividend exclusion rule, right? So the exclusion, whatever it is, if you are how it's taxable, right? So if you have a dividend, it's taxable at ordinary income. And unless it's qualified and then you get taxable or tax bracket, which means you've held it for 60 days before and after the X-Day. Then they drop your rate down to 15 to 20%. But here's the kicker. I know you're on the edge of your seat to find out what I was going to say. But I have to think of breaking it because I'm going to try to emerge it. So hopefully at the end of this little clip, you can go right on. If not, just look for the second one in the series and it'll finish what I'm saying. We got there.