Tags: LearnVest | Consumers | Buzz | Financial | Lingo

LearnVest: Consumers, Here's Some Buzz on Financial Lingo

By    |   Sunday, 07 September 2014 03:56 PM

LearnVest put together a plain-English crib sheet of the most frequent financial buzz-phrases Americans are hearing these days, and how they impact the wallets of investors.

According to the financial advice site, macroeconomic headlines have a way of making their way to the individual consumer level.

The first phrase, “quantitative easing,” involves the Federal Reserve buying short-term bonds from banks to inject money into the economy. It may be arcane to many, but now that the Fed’s open wallet is expected to close in coming months, some experts say the results could be unexpected.

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"If interest rates rise, people will not be able to borrow as much money. And if they can't borrow as much, they can't spend as much," says Robert S. Rycroft, a professor of economics at the University of Mary Washington. "And it's people spending money that creates jobs."

The second buzz-phrase, “student loan debt,” affects more than just the typical 2014 college graduate who finished school with an average $33,000 in student loans – the highest in U.S. history. According to LearnVest, the huge level of U.S. student debt has broad implications for the rest of society.

Dan White, a Philadelphia-based financial analyst, "You've got kids graduating with $80,000 in debt working at Bennigan's. These are the years when college graduates should be spending money. If they're not contributing to the economy and not spending, it's a drag on economic growth."

The term “emerging markets” refers to developing nations that are experiencing rapid economic growth. LearnVest said those countries now make up more than 50 percent of global gross domestic product for the first time. Some of those countries’ gains have been America’s loss; LearnVest noted the big loss in U.S. factory jobs has been the result, in part, to manufacturing moving to emerging markets.

“Pork belly futures” sounds like a comic phrase, but LearnVest said a more serious economic concept lies behind it. Futures contract prices may be smart to follow “because they are usually a long-range warning signal of what might happen to the prices of specific commodities — like wheat or oil — based on supply and demand. And this could have a trickle-down affect on your cost of living.”

The final buzz phase, about “overextended equity rallies” – or “stock market bubble” to put it another way – is something consumers should definitely pay attention to, according to LearnVest.

LearnVest noted that when stocks go up too fast without a correction (a downturn of more at least 10 percent but less than 20 percent), it’s often followed by an even bigger downturn.

Mike McGlone, director of research at ETF Securities, told LearnVest, "Since the 2012 election, the stock market's gone straight up without any normal corrections. We all know what a free lunch is — something that will not last much longer.

In a similar vein, U.S. News & World Report last week came up with a list of 10 financial terms every investor should know.

“Breaking down investing lingo into layman's terms is key to understanding your financial picture,” said U.S. News writer Geoff Smith.

The terms ranged from “expense ratio” to “asset allocation.”

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LearnVest put together a plain-English crib sheet of the most frequent financial buzz-phrases Americans are hearing these days, and how they impact the wallets of investors.
LearnVest, Consumers, Buzz, Financial, Lingo
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2014-56-07
Sunday, 07 September 2014 03:56 PM
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