Capital Gains (Losses) and Capital Gains Tax

Capital gains are often thought of in the context of profiting from the sale of some stock or other security-based financial product. Capital losses on the other hand, are the opposite (the loss incurred from the sale of stock). It is important to remember however, that capital gains and capital losses can also include other sales such as the sale of a vehicle, the sale of a home, the sale of an antique, etc.

Capital gains tax is paid by sellers (both businesses and consumers) who have profited from the sale of some asset (bonds, stocks in other businesses, company equipment that was sold for profit). 

Capital loss occurs when an asset is sold for less than was purchased. The amount of this sale is usually exempt (deductible) from taxes up to a certain amount.

Reference: https://www.fool.com/retirement/2017/02/15/what-is-the-capital-loss-tax-deduction.aspx

Commodities and Securities Futures

"A futures contract is an agreement to buy or sell an asset at a future date at an agreed-upon price"

Futures markets such as the New York Board of Trade and the Chicago Mercantile Exchange facilitate the trading of futures contracts. Futures trading is often thought of only as raw materials (commodities), however financial products or "securities" are also traded in futures markets:

Commodities: A commodity is a raw material that has value and is more or less in constant demand (think- milk, eggs, pork, beef, chicken, lumber, iron, salt, crude oil, coal, etc.).

Securities (Financial): A security is a financial product such as an interest rate, the price of a stock, the value of some kind of debt like CDOs.

A recent history of returns on commodities futures by year and type

Futures trading is simply buyers betting on the future value of some product from the sellers. In commodities this could be a day trader speculating that the price of oil is about to skyrocket and buying contracts for purchases of oil at a lower price (he/she hopes).

Remember that futures trading is not limited to commodities

In securities futures, an example would be a buyer entering a contractual agreement to purchase some amount of stock for an agreed upon price at some future date. This would be to the buyer's advantage only if the price of the stock price on the future date is higher than the price agreed to in the futures contract.

At the heart of this kind of trading (and one could argue all trading) is the idea of betting for (+) or hedging against (-) the inevitable fluctuation of future value.


Reference: https://finance.zacks.com/futures-vs-commodities-5663.html

Continuous Integration

"Continuous Integration (CI) is a development practice that requires developers to integrate code into a shared repository several times a day. Each check-in is then verified by an automated build, allowing teams to detect problems early."

The idea behind CI is that by having all developers continuously tracking (pulling down changes from)- and incrementally integrating their branch/feature code into- a "master" branch (or some common branch that facilitates CI of all other branches), problems that stem from incompatible or "not easily merge-able" features surface at the first detection of incompatibility, as opposed to at the end of feature branch development when any incompatibilities are magnified, and result in time-consuming redesign efforts to make things merge and interoperate cleanly.

In short, CI is used to nip potential integration problems in the bud.

Dividends

Dividends are a company's optional distribution of (typically) cash to stockholders and provide another way to earn money from investing beyond growing the value of one's portfolio.

A dividend is defined as "a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves)".

A dividend yield is an expression of the dividend amount relative to the company's current share price. You can calculate the current dividend yield for a given year by dividing the total dividend paid for that year or the following year (or any 12 month period) by the current stock price.

Some companies regularly pay out a cash dividend and can make their stock more attractive by doing so. Johnson Controls (JCI) for instance, has managed to pay a quarterly dividend every year since 1887. They paid a total dividend of $1.04 in 2018 and the stock price as of today is $31.21.

There are two ways to calculate a company's current dividend yield: (1) by using what are called "forward dividends" or (2) by using "trailing dividends". Trailing uses the preceeding 12 months while forward uses the expected payouts in the proceeding 12 months. As of today (1/2/2019) using trailing dividends, or to be more clear- in relation to their 2018 total dividend payout"- JCI's dividend yield was:

$1.04 / $31.21

...or 3.3%.

As you can see from the charts above, General Electric and Honeywell have paid out cash dividends consistently for years. But GE has recently clawed back these payouts dramatically. This is probably due to GE's ongoing restructuring and spin-off efforts.

Reference:

https://www.nasdaq.com/symbol/jci/dividend-history

Collateralized Debt Obligations (CDOs)

Collateralized Debt Obligations are units of packaged debt, sometimes referred to as "Frankenstein debt" which consists of various kinds of debt obligations (auto, home, credit card, student loans, corporate debt, etc.) of various credit ratings (AAA, AA, A, BBB, BB, B, CCC, CC, etc.).

"Originally developed as instruments for the corporate debt markets, after 2002 CDOs became vehicles for refinancing mortgage-backed securities." -Wikipedia

The idea behind this type of investment is that although it contains lots of high-risk debt (that may well default), that risk is offset by the better rated debt in the CDO package.

There are also CDOs known as "CDOs squared". These are also simply packages of variously rated debt, but with an additional layer of abstraction (obfuscation). Instead of various cash-backed assets and other kinds of direct claims on debt in the bundle, CDO^2 consist of pieces or "tranches" of other CDOs.

Additionally, there are Synthetic CDOs and CDSs. A Synthetic CDO is not backed by debt assets but rather derivatives of debt assets known as "Credit Default Swaps" (CDSs), which are basically CDO insurance. The buyer of a CDS makes periodic premium payments in much the same way as premiums for home and auto insurance.

CDSs provide a way for investors to hedge CDO investments. If a credit event (default on a CDO's underlying debt asset) occurs, the buyer of a credit default swap is protected from losses. If no credit event occurs, the seller of the CDS continues to collect the premium payments for the duration of the term of the CDS.

Crazy stuff, huh? Be careful, Wall Street.. Lehman Brothers never saw it coming... 😶

2008 was obviously the wake-up call, trillions in wealth vanished as values crashed to Earth

Price Discrimination

Price Discrimination is the act of selling the same product or service at different prices to different buyers in order to match differing levels of demand. It is used to ensure business from lower demand markets and earn the maximum possible profit from higher demand markets. This can be illustrated in the case of your grandparent or child getting a discount at the movie theater because they tend to have a lower demand than the average moviegoer.

Examples of Price Discrimination

"Price Equilibrium" (PE) is the price point at which a Supply Curve and Demand Curve intersect. Any price charged above the PE will result in more profit (seller surplus) and any price below PE will result in less profit (consumer surplus, missed opportunity by seller). Pricing products and services is done through the process known as Marginal Cost Analysis.

Price discrimination can be quite problematic when it is applied on the basis of ethnicity or socioeconomic status.

Just a matter of risk data? Or a racially biased algorithm used by banks?

Although the discriminatory practice known as "redlining" has been outlawed for over 50 years, banks continue to charge higher mortgage rates to non-white consumers. From the bank's perspective they would argue that it is coincidence and simply reflects the consumer's credit and a higher risk they are taking on. Others would argue that minority loan-seekers are being priced out of the American Dream because of the color of their skin.

Gas stations tend to have higher-than-average prices in low income areas because the customers in these areas have less nearby options, are often less mobile and are in general less discriminating than shoppers in a wealthy suburb who can leverage their environment of more competition, their mobility and in turn be more selective in their consuming habits (which is to say, more likely to sharply increase or decrease demand if a price is not in equilibrium).

Now in some cases price discrimination makes perfect sense. Take for example a hardware store in Arizona and a hardware store in Wisconsin who are both selling snowblowers. The store in Arizona is almost assuredly going to sell their snowblowers for far less as the demand for snowblowers is very low in that area of the country.

But in Wisconsin, there is virtually year-round demand as it snows every year, and so the Wisconsin store is likely to charge much more than the Arizona store. Furthermore, even within Wisconsin, stores will charge less for snowblowers in the summer than in the winter (when demand is higher).

Companies differentiate prices to match demand for different types of consumers

With the exception of 4th degree price discrimination, when a price is different for different types of consumption of the same product or service- it is because demand for that product or service is different among consumers and so companies set the prices accordingly.