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• 1997 Asian Currency Crisis - In 1997, currency speculators panicked, and started selling Thai baht. This triggered an overall panic in Asia, leading to the collapse of the economies. This explains why Asian countries keep high foreign reserves as a hedge against further runs.
• Asset Allocation - All the baskets that your eggs are
  in, and how many of your eggs are in each basket.
• Asset-backed Commercial Paper - Corporate debt that matures within a year and is backed by assets such as mortgages, auto loans and other commercial loans.
• Asset Bubble - When the prices of assets are over-inflated due to excess demand.
• Asset Price Inflation -  Rising prices in assets, such as housing and stock prices, that aren't included in the Fed's inflation measurement tools. Dangerous because bubbles have occurred, and the Fed continued to lower rates and feed inflation in these sectors.
• Basis Points - The percentage that the Fed raises bank rates. For example, an increase of 25 basis points is the same as an increase of .25 to the Fed Funds rate.
• Bear Market - When stocks are going down. Typically lasts about 18 months.
• Bilateral - Having to do with two sides only.
• Bolivarism - A movement led by Venezuelan President Hugo Chavez which advocates unity among South American countries in an attempt to gain local power to resist U.S. hegemony. It is named after Simon Bolivar, who liberated South America from the Spanish.
• Budget Deficit  - When the Government spends more than it takes in via taxes and other income.
• Bull Market - When stocks are going up. Usually lasts 3 - 4 years.
• CAFTA-DR (Central American Free Trade Agreement - Dominican Republic) - CAFTA is a free trade agreement between the U.S. and Honduras, El Salvador, Nicaragua, Guatemala, Costa Rica and the Dominican Republic.
• Call Option - The right to buy stock at an agreed upon price by a certain date. The investor hopes the price of the stock goes up by the date, so they can buy them at the agreed upon price, and sell them at the (higher) market price.
• Capital - Basically, money. It usually refers to any
  kind of financial investment, whether cash, bonds, etc.
• Capitalization - The total value of all stocks in a company. The stock price times the total number of stocks held.
• Carbon Emissions Trading - When a carbon producing company buys or sells an allotment of allowable emissions. Companies may either reduce their emissions and sell the surplus or buy them in the marketplace.
• Central Bank - Influences economic growth and inflation by adjusting liquidity through short term interest rates or the amount of money banks must keep on reserve.
• Chiang Mai Initiative - An agreement among the ASEAN+3 countries to support each other's current account reserves in the event of speculative capital outflows. This is to avoid another market crash similar to that which happened in 1997.
• Commodities - Hard assets, such as gas, oil, gold,
  silver, platinum and copper. Most commodities trading is done through futures contracts so that the trader doesn’t have to actually take possession of the commodity.
• Comparative Advantage - What makes a country inherently more competitive. For example, India has highly trained, young, yet relatively cheap labor force which allows it to provide high end services at a low cost.
• Competitive Advantage - The inherent qualities of a company that allows it to provide a particular benefit better than its competitors.
• Consumer Confidence - How likely consumers are to spend, usually measured by a poll.
• CPI (Consumer Price Index) - A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, including food, consumer electronics, rent, gasoline, airline travel, haircuts, etc.
• Correlated - When investments are affected by the same economic pressures, they will rise or fall at the same time. If all your assets are correlated, you will lose much more money, thus increasing risk.
• Coup - Or coup d’etat (pronounced coo dayta), a French term meaning “sudden blow of a state”. It is a sudden, illegal overthrow of a government, usually by the military.
• Covenant-lite Loans - Bank loans with few covenants, or restrictions, that banks normally place upon the borrowers, such as debt ceilings or repayment schedules.
• Covered Option - A short call or put option position that is covered by the sale or purchase of the underlying futures contract or other underlying instrument. For example, in the case of options on futures contracts, a covered call is a short call position combined with a long futures position. A covered put is a short put position combined with a short futures position.
• Current Account Deficit - The total trade deficit plus
  how much money we owe other countries and investors to pay for the trade deficit.
• Current Account Surplus - The total trade surplus plus how much is owed the country for goods and services bought.
• Declining Dollar - What happens when a trip to Italy
  costs more this year than five years ago. The dollar has declined in relative value to the Euro, so gelato costs more to you...but the same to Italians.
• Deflation - When prices of things go down, while the
  value stays the same. Can be caused by depression, recession (lower demand causes businesses to lower
  prices) or increased productivity (higher efficiency means manufacturers can lower prices to increase market share. Think computers).
• Depreciating - Declining in value.
• Derivatives -   Complicated financial instruments, like options and futures contracts, that derive their value by reference to an underlying asset or index.
• Developed Markets - Usually referring to the U.S., Europe, Japan and Russia. These are more mature economies that will grow more slowly, and so have less growth opportunity for investors, but are also less risky.
• Diversification - Basically, not having all your eggs in
  one basket. Lowering your financial risk by having your assets in things that aren’t affected by the same trends.
• Doha Round of Trade Talks - Started in 2001, the Doha round of trade talks was designed to reduce trade restrictions to help developing nations. Instead, it has stalled due to developed countries’ unwillingness to remove farm subsidies. Developing countries are afraid that, if they open their markets to these low-priced goods, their farmers will be put out of business.
• Dumping - Selling goods below cost to gain market share in a foreign country. Usually supported by the government with subsidies and low cost loans.
• Economic Growth - The increase in a country's production of all goods and services. It is measured by the percentage increase in that country's GDP.
• Economies of Scale - The ability of larger companies to produce things more cheaply per unit because they produce so many.
• Emerging Markets - Usually referring to countries that
  have more raw materials to develop, and are growing faster than the developed markets. They usually include Brazil, India, South Korea, South Africa,Mexico, Taiwan, Indonesia, Egypt, Turkey, and Hong Kong.
• EUA (European Allowance) - An allotment of carbon that the EU allows a company to produce. Companies that produce less can sell the EUA on the market to companies that produce more than their allotment.
• Exchange Rate - How much of one currency can be bought with another currency. For example, in February 2007, 114 Japanese yen could be bought for $1 U.S.
• Farm Bill - The U.S. farm bill is a comprehensive piece of legislation that revises 60+ laws that govern farm support, food assistance, agricultural trade and rural development. The farm bill is enacted every 5 years and implements U.S. agricultural policy.
• Fast-track Trade Promotion Authority - Gave President Bush the authority to negotiate trade agreements, giving Congress only the ability to approve or disapprove, and not attach amendments. Expired June 30, 2007.
• Fed Funds Rate - What the U.S. Federal Reserve charges banks to borrow money from it overnight.
• First World - Developed countries not aligned with communism - generally U.S., other industrialized Western nations, and Japan.
• Fiscal Policy - Basically, a nation's government budget.
• FDI (Foreign Direct Investment) - The investment foreign countries have made in a country’s economy.
• Foreign Reserves - A country's reserve of foreign currencies and gold.
• Free Trade Agreement - An agreement between countries to eliminate tariffs and other trade impediments.
• Futures Contract - An agreement to purchase or sell a commodity for delivery in the future at an agreed upon price that may be satisfied by delivery (hardly ever used) or offset (a compensating option).
• Globalization - A highly controversial trend towards freedom of trade between countries all around the world. Underdeveloped countries worry that they cannot compete fairly.
• Goldilocks Economy - Economic growth that is neither too hot (inflation) nor too cold (recession). Indicators would be GDP growth of around 3%, inflation around 2% and unemployment of around 4%.
• Growth Stocks - Stocks that don’t give a dividend, but
  are expected to grow fast.
• GDP (Gross Domestic Product) - The total value of all
  a country’s goods and services (minus payments on foreign investments) produced in a time period, usually a year. It is used to describe how large the economy is.
• GDP Growth - How fast the economy is growing during a time period.
• Hang Seng Index - Hong Kong’s blue chip stock index.
• Hedge - Reduce financial risk through protective purchases in investments that will offset the risk.
• Hedge Fund - A privately owned investment fund, whose managers usually get a percent of any gains. To achieve above market returns, they use sophisticated high risk derivatives. The primary investors are wealthy individuals and institutions.
• Hegemony - The leadership or predominance of one country over others, usually used to describe the United States' relationship to other countries in the world.
• Inflation - When prices of things go up, while the value
  of things stay the same. Government measures of inflation count rental rates, not housing prices. Things that contribute to inflation: rising oil prices, declining dollar (foreign goods will cost more), no increase in productivity (rising wages will translate to higher prices).
• Inflation Targeting - When central banks set monetary policy to keep inflation within a designated range.
• Interest-only Loan - Only the interest gets paid each month, not the principal, for the first 1- 5 years.
• Intifada - Arab term meaning uprising, applied to Palestinian rebellions against Israeli occupation.
• Inverted Yield Curve - When the Fed Funds rate pays
  higher interest than the 30-year Treasury Bond.
• IPO (Initial Public Offering) - The first time a company sells stock on the stock market, known as going public.
• Islamist - Muslim fundamentalism that advocates a return to Islamic values in government and Sharia law.
• Kospi Index - South Korea’s major stock index.
• Kyoto Protocol - Adopted as part of the UN International Convention on Climate Change in 1997 in Kyoto, Japan. Participating countries agree that, between 2008-2012, they will emit 5% less greenhouse gases (CO2, CH4, N2O, HFCs, PFCs, and SF6) than they did in 1990.
• Labor - Workers, often measured in man-hours.
• Large Cap Stocks - Companies with large capitalization. Traditionally, the safest stocks, but also the least rewarding in return.
• LBO (Leveraged Buyout) - Using a loan to buy another company. Usually the loan is secured by the assets of the target company.
• Leverage - Controlling a large amount of stocks with a small amount of the investor’s money, through either derivatives or loaned money.
• Liquidity - Amount of money, or capital, that is circulating in the economy and available for investment.
• Market Correction - When stock prices fall for a little
  while because they have gone up too far too fast.
• Marshall Plan - The U.S. spent $82 billion in economic and military aid between 1948-1961 to postwar Europe to prevent starvation and the spread of Communism. It was named for Secretary of State George C. Marshall, who received a Nobel Peace Prize for it.
• mcf - A measure of gas usage equivalent to one thousand cubic feet of natural gas.
• Mercosur - A trade alliance formed in 1991 between Brazil, Argentina, Paraguay, and Uruguay. Chile and Bolivia are associate members. Venezuela wants to join.

• Monetary Policy - What the Federal Reserve regulates, which is primarily short term interest rates and the total availability of money in the market.
• Mid Cap Stocks - Bigger than small caps, smaller than
  large caps, they are also in the middle of the road in terms of risk and reward.
• Mortgage-backed Securities - A package of mortgages that are resold to investors. This removes constraints on banks to make sure the loans are to qualified borrowers.
• NAFTA (North American Free Trade Agreement) Signed in 1992, and ratified in 1994, by the United States, Canada, and Mexico. It called for the gradual elimination of tariffs and certain other trade barriers between the three nations.
• Nationalize - When a government takes over ownership of a business, usually a utility or oil company. The former private owner may be allowed to retain partial ownership.
• NATO (North Atlantic Treaty Organization) - An alliance of 26 countries roughly bordering the north Atlantic Ocean - Canada, U.S., most EU members, and Turkey. NATO was established after World War II as part of the United Nations. Originally designed to defend only member nations, it expanded its role to include the war on terrorism after 9/11, which was considered an attack on the U.S.
• Nikkei 225 - Japan’s stock index.
• Nuclear Non-Proliferation Treaty - Signed in 1968, and made permanent in 1995 by almost all countries, except India, Israel, Pakistan and North Korea, who are suspected of having or developing nuclear weapons in defiance of the treaty. Under the treaty, nations that have nuclear weapons agree (1) not to help countries that do not already have such weapons acquire them; (2) to help non nuclear-armed countries benefit from the peaceful uses of nuclear energy; and (3) to seek nuclear disarmament. Also, countries without nuclear weapons agree (1) not to acquire nuclear weapons and (2) to allow the International Atomic Energy Agency (IAEA) to inspect nuclear facilities and materials in each country.
• Option - A derivative that gives the owner the right to buy or sell stock at an agreed upon price within a certain period of time.
• Overweight - Having slightly more than your usual percent allocation in a stock or mutual fund sector to take advantage of above-average growth.
• Pandemic - An epidemic of global proportions.
• PNTR (Permanent Normal Trade Relationship) - Denotes non-discriminatory trading relationship. In other words, all countries with PNTR have the same, lower tariffs than countries without. Only a few countries do not have this status, and are thus at a trading disadvantage.
• Private Equity - Private ownership, as opposed to stock ownership.
• Private Equity Firms - Companies that raise money through private investors, including governments and pension funds, to buy ownership (equity) in corporations.
  Private Equity Funds - Any type of capital that is not public, including cash or loans but not stock or bonds. Usually includes funds from pension funds, governments, and private investors.
• Privatization - When a government sells all or part of a state-owned company, usually a utility, to a private company.
• Purchasing Power Parity - How well someone is able to
  live in a country. For example, if people in China make half of what people in the U.S. make, but Coca-Cola only costs half as much, then they have equivalent purchasing power parity.
• Put Option - The right to sell stock at an agreed upon price at any time up to an agreed upon date. The investor hopes the stock price goes down by the date, so they can buy it at the lower market rate, and sell it at the (higher) agreed upon price.
• Recession - When GDP growth is negative for two quarters or more. Usually accompanied by people losing jobs, housing prices going down, and a bear market.
• ROI (Return on investment) - How much money you make from your investment.
• Roadmap for Peace - The Quartet's suggestion for MIddle East peace: Israel and Palestine establish two separate countries with internationally recognized boundaries, Israel withdraw from occupied territories, and Palestine must recognize Israel’s right to exist.
• Secular - Non-religious.
• SENSEX - India’s major stock index, the Bombay Stock Exchange Sensitive Index, is comprised of 30 stocks.
• Shanghai Composite Index - Mainland China’s major stock index.
• Sharia - Muslim religious law.
• Short sale - The promise to sell a stock that the seller does not now own at an agreed upon price. The investor hopes the stock price declines, so they can buy it at the lower price and sell it at the (higher) agreed upon price.
• Six-Party Talks - A negotiation between the U.S., North Korea, China, South Korea, Russia and Japan to convince North Korea to stop nuclear testing. Although it began in 2003, the U.S. has not been involved lately due to the distraction of the war in Iraq.
• Small Cap Stocks - Smaller companies that usually grow
  faster, giving a better return, but are riskier because they have less protection against going out of business due to their small size.
• Sovereign Wealth Funds - An investment pool of foreign reserves which a country's government invests in assets.
• Strong Dollar - When the dollar can buy relatively more of other currency.
• Subprime Mortgage - Mortgages to borrowers who don’t have sufficient credit history to qualify for conventional mortgages.
• Tariffs - Taxes levied against imports from another country.
• Third World - Economically developing countries in Asia, Africa and South America.
• TIPS (Treasury Inflated Protected Securities) U.S. Treasury Bonds that have the prinicipal re-adjusted in response to the Consumer Price Index. As inflation increases, the value of the bond increases.
• Trade Deficit - When one country imports more goods than it exports. It usually has to borrow from other countries to pay for the imports.
• Trade Promotion Authority - Gave President Bush the authority to negotiate trade agreements, giving Congress only the ability to approve or disapprove, and not attach amendments. Expired June 30, 2007.
• Trade Sanctions - A trade penalty that one nation levies against the imports of another country. The penalty usually is an increased import tax, or tariff, but can also be increased paperwork, licensing or administrative hurdles.
• Trade Surplus - When a country exports more than it imports. It usually accumulates excess foreign reserves.
• Treasury Bonds - What the U.S. government calls its loans. Refers to either Treasury notes, bills and bonds. When a person, pension fund or other country “buys” Treasury Bonds, they are basically loaning the U.S. government money.  Bonds held to maturity are paid back the face  value and the interest rate.
• Uncorrelated - When investments are affected by different economic pressures, they rise or fall at different times. This lowers the risk in your portfolio, because when some of your assets lose value, others gain.
• Underweight - Having slightly less than your usual percent allocation in a stock or mutual fund to protect yourself from below average growth.
• Unilateral - Affecting or benefiting one side only.
• VAT (Value Added Tax) - Most European countries have this tax, which allows them to tax the value-added that other countries have added to an import.
• Value Stocks - Companies whose stock price is a good
  value relative to their total worth.
• Volatility - How much and how quickly the price of an asset changes. High volatility means the asset is risky, low volatility means it is safe relative to the market.
• Yen Carry Trade - When currency speculators borrow in one country’s currency that have a low interest rate to reinvest in currencies and assets in countries that have a higher rate of return. Many experts believe that some of the global liquidity is due to the carry trade in yen, which has close to a zero interest rate cost.
• Washington Consensus - A 1980's IMF doctrine that said that deregulation, privatization, and open trade with primarily the U.S. would help Latin America increase economic growth. Many of those countries now feel they were exploited, which helps explain why they are attracted to China as a trading partner.