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what is a walk away lease | a walk away lease is an auto lease that allows the lessee to return the car at the end of the lease period without any financial obligations based on the car s residual value a walk away lease is also known as a closed end lease understanding walk away leasea walk away lease is a common type of car lease that releases the lessee from any financial obligations at the end of the lease assuming they have satisfied the maintenance and mileage requirements of the lease agreement the lessee makes an initial down payment plus monthly lease payments over the life of the agreement they must have the car serviced regularly and are subject to penalties if they exceed an agreed upon monthly mileage cap at the end of the lease the car is returned to the lessor who will then sell the car in an attempt to recover its residual value the lessee can then enter into a new lease on a second car often receiving a favorable deal if they remain with the same leasing company pros and cons of the walk away leasethe advantages of a walk away lease when compared to the purchase of a new car via a loan lie in the convenience and short term cost savings of a lease the lessee will never have to sell the car and is therefore not as concerned about maintenance and resale value basic maintenance is required but the lender typically provides a service plan since the lender remains the owner of the car and will recover residual value at the lease s end the monthly lease payments tend to be lower than loan payments on a comparable vehicle for some drivers the appeal of leasing a new car for a few years then walking away and replacing it with another leased new car trumps other concerns about a lease 1from a purely financial point of view however experts typically agree that a walk away lease is generally a poor choice at the lease s end the driver has no equity in the car the initial down payment and monthly payments cannot be recovered unless the lessee agrees to purchase the car at its residual value and then sell it hidden or unexpected costs can also arise first the driver will generally be held responsible for maintenance above and beyond normal wear and tear on the vehicle second a driver who exceeds the monthly mileage cap will be subject to a penalty on a per mile basis other types of leases may make more sense for some drivers an open ended lease generally involves few restrictions on driving but comes with some added risk relating to the unknown residual value when the lessee decides to terminate the agreement a single payment lease requires one up front payment and generally results in a better interest rate | |
what fees will i have to pay at the end of a walk away lease | at the end of a walk away lease you may have to pay a fee for excessive mileage or wear and tear as well as a disposition fee that covers the costs of getting the car ready to sell to the next owner 23 every lease is different and the contract should clearly state any end of lease fees can i buy my car at the end of a walk away lease a walk away lease gives you the option to return the car but most lenders will be happy to offer to sell you the car based on its current fair market value am i responsible for wear and tear on a walk away lease normal wear and tear is expected but your lender may deem some wear and tear excessive in that case you may be charged an excessive wear and tear fee at the end of your lease 2the bottom linea walk away lease may not be the most cost effective way to lease a car but it does offer ease for those who don t want the hassle of purchasing their car at its current value check the fine print for monthly mileage caps and additional end of lease fees before signing your agreement | |
what is a walk through test | a walk through test is a procedure used during an audit of an entity s accounting system to gauge its reliability a walk through test traces a transaction step by step through the accounting system from its inception to the final disposition however walk throughs aren t required for accountants but can be instrumental in addressing weaknesses and problems understanding walk through testsa walk through test is only one of many tests performed by auditors during their evaluation of an organization s accounting controls and risk management measures the test can reveal system deficiencies and material weaknesses that would need to be rectified by the organization as soon as possible in conducting a walk through test an auditor will study how a transaction is initiated and moves through a company or organization s accounting system to completion this involves identifying how a transaction is authorized recorded manually by automated means or both and then reported in the general ledger of the books the auditor will want to know how controls for accuracy are applied at each step in the process and how follow up steps are taken to improve controls a good walk through test will also document the personnel involved in transaction entries in the accounting system checklists and flowcharts are helpful in conducting thorough walk through tests the american institute of certified public accountants aicpa recommends walk through tests on an annual basis walk through tests don t have to be a formal process as many small businesses will perform a walk through test without keeping detailed records or assessing a company s accounting records that is the auditor will observe and make inquiries without requesting detailed documentation or reviewing the paperwork or paper trail of the transaction special considerationsa walk through test can be done by simply asking employee questions although this isn t recommended this is because an employee s description isn t always what happens in practice the better method of a walk through is actually observing employees how they process transactions etc as well actually analyzing paperwork and documents is a step further in analyzing the company s accounting process example of a walk through testa walk through will look differently depending on the company and auditor but broadly the process should include a visual assessment of how the staff operates when recording a transaction next the auditor will talk with anyone who handles the transaction and then review the documents related to the transaction an auditor may also test the accounting controls if any are in place at the end of the walk through the auditor will outline the weaknesses in how the transaction was handled the idea is that these weak points can then be corrected to improve a company s accounting system | |
what is the wall of worry | wall of worry is the financial markets periodic tendency to surmount a host of negative factors and keep ascending wall of worry is generally used in connection with the stock markets referring to their resilience when running into a temporary stumbling block rather than a permanent impediment to a market advance understanding the wall of worrywhile a wall of worry may sometimes consist of a single economic political or geopolitical issue significant enough to affect consumer and investor sentiment it more commonly comprises concerns on numerous fronts the markets ability to climb a wall of worry reflects investor confidence that these issues will be resolved at some point however market direction once the wall of worry has been surmounted is impossible to ascertain and depends on the stage of the economic cycle at which it occurs for example the markets ability to climb the wall of worry is most clearly discernible at the end of major bear trends which means that the markets may continue to advance once the wall has been surmounted however a continued advance is much less certain if the wall of worry forms near a major market peak in which case a subsequent decline is more likely climb the wall of worry or take profits even when the financial markets are growing at a healthy rate under financially sound circumstances investors always find reasons to worry those reasons may be legitimate or not depending on an individual s perception of the market and what their investment goals happen to be however when you get down to the root of the concept of a wall of worry what it ultimately means is that a bull market isn t a peaceful place when times are good investors are constantly tense wondering how long they will keep rolling fretting about when a seemingly inevitable correction will finally put a stop to the market elation as a market continues ascending the decision can become increasingly agonizing whether to take profits in a position or let it ride market pundits do their part by issuing warnings about everything that could possibly go wrong with the economy the markets and most leading stocks and as always economists can be counted on to give conflicting predictions that arrive at diametrically opposite conclusions from exactly the same data however just like anyone else these supposedly expert assessments rely on an individual perspective and point of view which can be skewed and look quite different to two people how an investor chooses to regard the wall of worry often directly correlates to their risk tolerance | |
what is wall street | wall street is literally a street located in new york city at the southern end of manhattan figuratively wall street is much more it s synonymous with the financial industry and the firms within it this connotation has its roots in the fact that so many brokerages and investment banks historically have established their headquarters in and around the street all the better to be close to the new york stock exchange nyse being on or near wall street is no longer considered essential for financial institutions in fact these days they are located all around the country however the term wall street still means business the investment business and the interests motivations and attitudes of its players understanding wall streetwall street and its surrounding southern manhattan neighborhood known to locals as the financial district remain an important location where a number of financial institutions are based the financial district is iconic with the bronze arturo di modica statue of the charging bull however the globalization and digitization of finance and investing have led to the rise of many u s broker dealers registered investment advisors and investment companies located elsewhere still wall street remains a collective name for the financial markets the companies that trade publicly and the investment community itself stock exchanges investment banking firms commercial banks brokerages and broker dealers financial services and underwriting firms all symbolize wall street it s a globally recognized expression that to some extent ever refers to the u s financial system both the nyse the largest equities based exchange in the world and the federal reserve bank of new york arguably the most important regional bank of the federal reserve system are based in the wall street area wall street is often shortened to the street which is how the term is frequently used by those in financial circles and the media for example when reporting a company s earnings an analyst might compare a company s revenues to what the street was expecting in this case the analyst is comparing the company s earnings to what financial analysts and investment firms were expecting for that period the importance of wall streetwall street has had an important impact both economically and culturally the u s is the largest economy in the world and new york city is its financial center as such wall street s global importance is unparalleled wall street consists of some of the largest financial institutions in the world and employs hundreds of thousands of people it s home to the nyse and nasdaq stock exchanges two of the largest stock exchanges in the world on these exchanges are listed some of the biggest companies including amazon google apple and exxon the economic importance of wall street extends throughout the american and international economies as many financial firms do business worldwide extend loans to a variety of businesses and individuals and finance large scale global projects wall street s cultural influence extends to movies tv shows books and more films such as wall street margin call boiler room barbarians at the gate and more from previous decades highlight what the fast paced life is like on wall street they display an exciting wealthy and interesting lifestyle large players on wall street have become celebrity icons warren buffett jamie dimon carl icahn bernie madoff george soros and larry fink are names familiar to many in the imaginations of some in contemporary society the term wall street may evoke a sense of power the elite and often unscrupulous behavior during times of economic trouble such as the financial crisis of 2008 wall street sometimes becomes a scapegoat and the ills of the economy are blamed on the assumed greed associated with it no other financial term has become so woven into the global culture history of wall streetwall street got its name from the wooden wall dutch colonists built in lower manhattan in 1653 to defend themselves from the british and native americans the wall was taken down in 1699 but the name stuck 1given its proximity to new york s ports the wall street area became a bustling center of trade in the 1700s its origins as a financial center began in 1792 when 24 of the most prominent brokers and merchants in the u s signed the buttonwood agreement they reportedly gathered on wall street under a buttonwood tree to do business 21the agreement outlined the common commission based form of trading securities in effect it was an effort to establish a members only stock exchange some of the first securities traded were war bonds and the stocks of such institutions as the bank of new york 32out of this acorn of an agreement the oak that became the nyse grew in 1817 the buttonwood brokers renamed themselves the new york stock and exchange board the organization rented out spaces for trading in several locations until 1865 when it settled on a location of its own at the corner of wall and broad streets 1the location of the beating heart of wall street the nyse is a 1903 neo classical structure of white marble an adjacent annex constructed in 1922 is located at 11 wall street and another subsidiary building is at 20 broad street these three buildings fill the block bounded by wall street on the north broad street on the east exchange place on the south and new street on the west 4as the u s grew several other major exchanges established headquarters in the wall street area these included the new york mercantile exchange the new york board of trade the new york futures exchange nyfe and the american stock exchange now known as the nyse american options to support the exchanges and to be where the action was banks brokerage firms and financiers clustered offices around wall street in the late 19th and early 20th centuries the house of morgan officially j p morgan co the forerunner to jp morgan chase and morgan stanley was directly opposite the nyse at 23 wall street after world war i new york city surpassed london to become the world s largest and most significant financial center wall street vs main streetwall street is often compared and contrasted to main street the term main street is used as a metaphor for individual investors small businesses employees and the overall economy it s derived from the common name for the principal street of a town where most of the local businesses are located there is often a perceived conflict between the goals desires and motivations of main street and wall street wall street tends to represent big businesses and financial institutions while main street represents mom and pop shops small companies and individuals key events on wall streetevents that happened on or around wall street often have impacted not just the investment industry but the global economy and society here are some significant moments in wall street history on july 8 1889 charles dow edward jones and charles bergstresser launched the wall street journal a four page afternoon newspaper devoted to objective financial and business news the three men were reporters but dow was also a numbers cruncher who came up with the idea of creating a benchmark list of companies and their stock prices to represent the entire stock market 5soon the journal was publishing the dow jones industrial average djia index along with hundreds of prices of company stocks bonds and futures and the average prime rate for bank loans for nearly a century before the advent of real time internet listings the journal was the paper of record for the financial markets it evolved into a six day a week periodical that s been online since 1996 the journal is a leading and well respected source of financial and business journalism the three founders operated out of offices in lower manhattan the fact that they chose to name their new publication the wall street journal indicates that wall street already was something of an umbrella term for the world of finance and its denizens over the years the paper helped fix this meaning in the public s mind it was around noon on sept 16 1920 a horse drawn cart pulled up at 23 wall street right in front of the headquarters of j p morgan co a bustling corner of the neighborhood it was especially crowded with those headed out for lunch the cart suddenly exploded it had been packed with dynamite and filled with sash weights that sailed through the air 6at that time it was the worst domestic bombing in u s history ultimately 40 people were killed or died from their injuries and another 300 were injured the j p morgan building s interior was gutted marks from the shrapnel still are visible on the exterior 7no one claimed credit and the case was never solved but because the explosion occurred in front of the morgan building known as a symbol of american capitalism the bombing was ultimately decided to have been an act of terrorism performed by reds anarchists and communist sympathizers a stack of anarchist flyers found in a mailbox a block away from wall street supported this theory 7as a result the authorities arrested hundreds of suspected reds and deported those of foreign nationality the bombing also encouraged the nativist sentiments that developed in the u s during the 1920s which led to tighter restrictions on immigration 7the stock market crash of 1929 remains the worst financial crisis in u s history in a pre digital trading era its epicenter was the nyse the crash began on october 24 when after nearly a decade of unparalleled uninterrupted growth the stock market opened lower than the previous session equities prices continued to drop throughout the day and as the news spread crowds began to gather outside the exchange 8they groaned as the market closed down again that day cheered brokers during the next two days when the market seemed to rally and then panicked on october 28 and october 29 when the declines resumed inside the stock exchange the scene was sheer pandemonium as prices fell too fast for ticker tapes and blackboards to record them 8ultimately the djia was to fall 89 from its september 1929 peak wiping out both corporate and individual wealth 8the crash ushered in the great depression a quarter of america s working population lost their jobs as the u s economy went into a tailspin economies throughout europe followed suit in the end the stock market crash and the ensuing decade long depression directly impacted nearly every segment of society and altered an entire generation s perspective of and relationship to the financial markets 9on what is known as black monday oct 19 1987 the s p 500 index and dow jones industrial average plunged more than 25 in value leading exchanges around the world to drop in a similar frenzy the week prior indices had fallen an approximate 10 priming the pump for the ensuing panic up until that time a bull market had been in control since 1982 thanks to the actions of chairman alan greenspan and the federal reserve a seeming disaster on a global scale was averted but the crash brought to light the potential for disruption that the then new technique of computer programs instigating large scale amounts of trading might cause even though enormous amounts of trading were handled by humans that day as well the exact cause of this short term crash has never been pinpointed however afterwards exchanges implemented circuit breaker rules to prevent program trading from spurring runaway selling it was hoped that this and other trading curbs would allow the markets time to stabilize and give regulators and investors the chance to take appropriate steps the global financial crisis of 2007 2008 resulted from years of deregulation easy credit predatory mortgage lending the collapse of the subprime mortgage market and the unregulated use of derivatives it led to the great recession the root cause of the crisis was unethical and exploitative behavior by banks investment banks and insurance firms borrowers with unsatisfactory credit were given mortgage loans without concern for their ability to pay them off and without their comprehension of the risks involved with the loans as rates rose those borrowers mortgage rates reset higher and they couldn t afford to make monthly payments what s more as home prices fell dramatically homeowners couldn t sell their houses for enough to cover their loans this caused massive numbers of defaults risky derivative securities had been created with the subprime mortgage loans sold by banks in addition banks and other large investors used customer deposits to invest in these derivatives with the defaults on home loans the derivatives plunged in value many financial institutions had ties to the loans derivatives and credit default swaps an insurance product that investors in the derivatives bought to protect against the risk of default thus they found themselves in severe trouble after the housing market bubble burst from housing industry crash to a u s financial industry on the brink of collapse to the near ruin of other financial systems across the globe it was the worst financial crisis since the stock market crash of 1929 the u s government had no choice but to bail out financial institutions that had always been considered too big to fail occupy wall street was a 2011 protest movement against social and economic inequality that was centered in zuccotti park located in manhattan s financial district it began on september 17 as hundreds of protesters camped out in the park the police forcibly removed and arrested them two months later on november 15 during the intervening period there were marches and speeches calling for more balanced income distribution better paying jobs bank reform and less corporate influence in politics we are the 99 was the occupy protestors slogan the regulation of wall streetregulatory measures were put into place to address the lack of government oversight that was considered to have led to the crisis that began in 1929 among other things the securities act of 1933 required financial institutions to provide investors with all significant information about securities being offered for sale it also prohibited fraud in securities sales the securities exchange act of 1934 established the securities and exchange commission sec and gave it significant power over the securities industry this included the authority to regulate brokerage firms and to require financial reporting by publicly traded companies in 2010 congress passed the dodd frank wall street reform and consumer protection act dodd frank it created new government agencies with financial system oversight the idea behind the act was to address the risky behaviors of financial institutions and the dearth of regulatory oversight that led to the crisis one area of grave concern was the predatory mortgage lending that had occurred another focus was the stability of financial institutions the act made it possible to liquidate or restructure firms if necessary to prevent the use of taxpayer funds to keep them afloat the act s volker rule restricted the investing practices of banks and regulated derivative securities it also set up the sec office of credit ratings to ensure that credit agencies henceforth issued appropriate ratings for institutions rather than the fabricated favorable ratings that were part of the lead up to the crisis the economic growth regulatory relief and consumer protection act signed in 2018 by president trump addressed criticisms of dodd frank and rolled back some of its provisions among other things it exempted banks with assets of less than 10 billion from the volker rule requirements gave consumers the ability to freeze their credit files at no cost and eased capital requirements for banks that didn t offer lending or traditional banking services | |
what does wall street speculation mean | speculation refers to the act of investing in securities that have a high risk reward profile with the goal of obtaining substantial gains despite the risk of substantial losses an investor who speculates is likely focused on price fluctuations they may believe that the market has inaccurately priced a security and they re trying to capitalize on that disparity wall street speculators tend to be professional traders as opposed to retail investors who buy and hold stocks or other assets for the long term | |
what time does wall street open and close | the major u s stock markets including the nyse and the nasdaq are normally open 9 30 a m to 4 p m eastern time monday through friday however there are also extended hour sessions earlier and later | |
what is black wall street | black wall street was a nickname given to the greenwood district of tulsa oklahoma one of the largest and most prosperous african american business communities in the u s in the early 20th century from may to june 1921 its 35 blocks were destroyed during the tulsa race riot it was quickly rebuilt with over 80 businesses reopening by 1922 more generally black wall street can also refer to any area of african american high economic or financial activity 1011 | |
how do you get a job on wall street | getting a job on wall street often starts in college majors like finance business administration and management economics accounting and mathematics are natural fits for the investment industry firms will consider degrees in other areas too like marketing or engineering try to get an internship at a wall street firm or similar institution for at least one summer a master of business administration mba can also be attractive to financial institutions as can tech industry experience it s also important to target what type of wall street job you d be best suited for they break down into three main areas the bottom linewall street is both an actual street and a symbol it s home to a variety of financial and investment firms along with institutions like the nyse and the federal reserve bank of new york globally it s come to connote the u s financial and investment communities and industries plus its interests attitudes and behavior | |
what is the wall street journal prime rate | the wall street journal prime rate is an aggregate average of the various prime rates that 10 of the largest banks in the united states charge to their highest credit quality customers for loans with relatively short term maturities 1 this combined rate is obtained by way of a market survey and published regularly by the wall street journal wsj understanding the wall street journal prime ratethe prime rate is the interest rate that commercial banks charge to their most creditworthy customers the federal funds overnight rate serves as the basis for the prime rate and prime serves as the starting point for most other interest rates the wsj prime rate is one of the market s leading sources for comprehensive average prime rate reporting the wsj prime rate gets its name from the wall street journal s practice of polling the 10 largest u s banks to see what their prime lending rate is when seven or more of the 10 banks polled change their prime rate the wall street journal publishes a new prime rate the current rate can be found on the wsj s market page 1the wsj prime rate has historically fluctuated substantially over time in dec 2008 it reached a then low of 3 25 after being reported at 9 5 in the early 2000s in dec 1980 it reached a record high of 21 50 2 as of aug 2021 it is once again down to 3 25 1 generally the rate is dictated by changes from the federal reserve s federal open market committee which meets every six weeks and reports on the level of the federal funds rate the wsj prime rate provides a gauge for the prime rate at banks across the industry the wsj prime rate has historically been approximately 3 higher than the federal funds rate thus the rate is heavily influenced by the federal reserve s monetary policies lending products that utilize the prime rategenerally a bank s prime rate is the lowest rate it charges on lending to its highest credit quality customers and also to other banks banks can lend all types of products to borrowers at their prime rate they also use the prime rate as an indexed rate for variable credit products products utilizing a prime rate can include mortgages home equity lines of credit and loans and car loans typically a prime rate is most broadly used in variable credit products with the prime rate serving as the indexed rate indexed rate products often use the prime rate as the base rate of interest with a margin or spread determined by the borrower s credit profile the prime rate is commonly utilized in variable rate products as an indexed rate since it is widely recognized and followed across the industry other comparable indexed rates can include libor and u s treasury if a borrower has a variable rate loan or credit card the terms of the variable rate changes will be disclosed in their credit agreement lenders typically base their rate spreads for variable rate products on a borrower s credit profile therefore borrowers with a higher credit score can receive a lower margin while borrowers with a lower credit score will receive a higher margin in a variable rate credit product the margin remains the same over the life of the loan however the variable rate is adjusted when there is a change in the underlying indexed rate borrowers with variable rate products will typically want to follow the prime rate and specifically the wsj prime rate since it is published publicly when a majority of the banks surveyed by wsj increase their prime rate then it is a good indication that variable rates are rising for one example of a prime rate s influence consider a bank of america credit card borrower with a credit card balance that is subject to a variable annual percentage rate the borrower s margin is 15 99 plus the indexed rate which is based on the bank s prime rate for the borrower this means that if the prime rate is 3 25 their interest rate will be 19 24 if the bank s prime rate increases to 4 25 their interest rate would increase to 20 24 | |
what is a wallflower | in finance a wallflower describes a stock in which the investment community has lost interest resulting in low trading volumes a wallflower stock typically sits in an unpopular industry sector due to the general neglect shown to such stocks by traders they may trade at a low price to earnings p e or price to book p b ratio creating potential value should attention shift toward them again at a later date understanding a wallflowerin the trading markets wallflower stocks likewise sit all dressed up with no place to go waiting for attention from investors but typically without doing much of anything to generate real interest that lack of interest can cause a snowball effect as analysts ignore the stock and low trading volumes lead to uncertain pricing and wide bid ask spreads scant information to recommend the stock from the analyst community and uncertainty on pricing and value act as a deterrent for retail investors creating the potential for such stocks to languish further wallflowers and economic bubbleswhile unpopular market segments generate fertile ground for wallflowers economic bubbles in hot market segments can provide a warning sign that today s hot issue could be tomorrow s wallflower consider the dotcom bubble during which investors threw money at internet startups almost indiscriminately the amount of money available for any company related to the internet led to massive initial public offerings for companies that in some cases boasted questionable fundamentals at best a sell off among major players in the technology sector sparked by cisco and dell among others resulted in a brutal bear market for internet stocks it took the nasdaq 15 years to recover to the peak it hit in march 2000 and many of the freshly minted dotcom companies faded rapidly into wallflower status as investor funding dried up various media outlets began to refer to the crop of failing companies as dot bombs the majority of which had blown up by the end of 2001 taking trillions of dollars of investment capital with them the term wallflower derives from slang for individuals who remain outside of the general buzz and conversation at a social function hugging the walls rather than interacting special considerationssome wallflowers with decent fundamentals retain enough potential to interest investors since the low p e or p b ratios associated with these companies make them reasonable candidates for value stocks these stocks bear relatively higher risk than growth stocks because a failure to attract future attention could result in them languishing further however the upside to investing in a value stock can be considerable if and when the investing community recognizes its potential and prices move to match the fundamental strength of the company more closely investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment investors investing involves risk including the possible loss of principal | |
what is wallpaper | wallpaper is the name given to stocks bonds and other securities that have become worthless this colloquialism saw its beginnings when stocks and bonds existed as printed physical certificates rather than digital identifying information stored on a brokerage s server the name stuck however and denotes when a stock or bond certificate or another exercisable right to securities such as stock options no longer has value due to a variety of reasons most commonly bankruptcy understanding wallpaperthe term wallpaper implies that because the certificates are worthless they may as well wallpaper your house with them this was an actual practice during the great depression that followed the stock market crash of 1929 in that era physical paper certificates represented actual ownership of shares of a company | |
when the stock market crashed on black thursday oct 25 1929 30 billion was quickly lost that amount was twice the u s national debt at the time some 20 000 companies went bankrupt which left many investors with a lot of worthless paper | those lucky enough to avoid homelessness used the now worthless stock certificates to paper their walls an old technique used to plug drafts before insulation was widely available or used others may have sardonically pasted the worthless certificates to their walls as decoration now wallpaper is used to describe any security that has lost all value even if there is no longer a practical use for it | |
don t throw out your old stock certificates because they may end up being valuable | modern day examples of wallpapersome modern day examples of wallpaper include a variety of companies that went bust during the dotcom bubble burst of march 2000 to october 2002 and the great recession of the late 2000s and early 2010s some examples include online retailers pets com and webvan when the dotcom bubble burst and lehman brothers during the great recession collectible wallpaperold securities certificates have found a new life as a collectible collectors have been known to pay thousands of dollars for certificates that are considered quality artwork popular images have the signatures or images of famous individuals or were issued by popular or notable corporations or governments some popular examples are exceedingly rare such as a confederate states of america 1 000 bond and an 1887 stock certificate from chadborn coldwell manufacturing co later toro co featuring a vignette of a boy mowing a lawn each is valued at about 2 500 the practice of collecting out of date or worthless wallpaper stock and bond certificates is called scripophily special considerationsindividuals who hold old stock certificates bearing the names of long gone companies should not assume they are worthless however decades of mergers acquisitions name changes and stock splits do not mean a stock is worthless it could mean that a stock or bond certificate is worth far more than one expects depending on the situation if it isn t worth cash as an actual tradable security you may find a collector who will pay good money for it as the old adage goes one person s junk may be another person s treasure investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment investors investing involves risk including the possible loss of principal | |
what is the walmart effect | the walmart effect is a term used to refer to the economic impact felt by local businesses when a large company like walmart wmt opens a location in the area the walmart effect usually manifests itself by forcing smaller retail firms out of business and reducing wages for competitors employees many local businesses oppose the introduction of walmart stores into their territories for these reasons view press getty images | |
how the walmart effect works | the walmart effect also has its positive benefits it can curb inflation and help to keep employee productivity at an optimum level the chain of stores can also save consumers billions of dollars but may also reduce wages and competition in an area the walmart effect has been shown to not only affect competing companies and suppliers but consumers as well advantages and disadvantages of the walmart effectwalmart s insistence on procuring products at lower prices from suppliers means that suppliers must find ways to make their products for less money or else they could be forced to take losses if they choose to sell through walmart the exposure of selling merchandise through walmart may increase consumers awareness of a product however the cost of delivering that product to market may be pushed back upon the supplier this can compel them to seek out lower cost alternatives to manufacture their product which could lead to the use of overseas operations or less expensive materials in the production of their goods requirements for the walmartthe walmart effect is driven by the scale and scope of walmart s buying power the company has over 4 700 stores in the u s including almost 600 sam s club stores 1 it s the largest employer in the u s as a retailer of this size it can dictate the price it pays to wholesalers at a magnitude many other companies cannot as a result walmart has the capacity to sell its merchandise at lower prices compared with other businesses in the markets in which it operates this can have an effect that goes beyond the retail market and into manufacturing and production in addition to its buying power walmart has historically controlled its compensation to employees in such a way that rival companies might feel pressured to reduce salaries or cut benefits to their workers in response once a walmart location opens the lower prices concentration and selection of merchandise in its stores tend to draw consumers away from local retailers with less foot traffic and declining sales local retailers see their profits fall forcing them to make cost cutting decisions such strategies however may not be enough to keep such businesses open as walmart continues to operate profitably while local retailers losses mount in time walmart might choose to relocate its store to another location but the impact of its initial arrival may continue to last well afterward the term walmart effect was first used in the 1990s but charles fishman wrote a book entitled the wal mart effect in 2006 which details how economies are affected by walmart 2 fishman goes beyond the advantages and disadvantages for local businesses but also includes how walmart can positively and negatively impact consumers | |
what is walras s law | walras s law is an economic theory which states that the existence of excess supply in one market must be matched by excess demand in another market so that both factors are balanced out walras s law asserts that an examined market must be in equilibrium if all other markets are in equilibrium keynesian economics by contrast assumes that one market can be out of balance without a matching imbalance elsewhere understanding walras s lawwalras s law is named after french economist l on walras 1834 1910 who created general equilibrium theory and founded the lausanne school of economics walras s famous insights can be found in the book elements of pure economics published in 1874 walras along with william jevons and carl menger were considered founding fathers of neoclassical economics 1walras s law assumes that the invisible hand is at work to settle markets into equilibrium where there is excess demand the invisible hand will raise prices where there is excess supply the hand will lower prices for consumers to drive markets into a state of balance producers for their part will respond rationally to changes in interest rates if rates rise they will reduce production and if they fall they will invest more in manufacturing facilities walras predicated all of these theoretical dynamics upon the assumptions that consumers pursue self interests and that firms try to maximize profits limitations of walras s lawin practice observations have not matched walras s theory in many cases even if all other markets were in equilibrium an excess of supply or demand in an observed market meant that it was not in equilibrium walras s law looks at markets as a whole rather than individually economists who studied and built on walras s law hypothesized that the challenge of quantifying units of so called utility a subjective concept made it difficult to formulate the law in mathematical equations which walras sought to do measuring utility for each individual not to mention aggregating across a population to form a utility function was not a practical exercise critics of walras s law argued according to them if this could not be done the law would not hold because utility influences demand | |
what is walrasian market | a walrasian market is an economic model of a market process in which orders are collected into batches of buys and sells and then analyzed to determine a clearing price that will decide the market price this is also referred to as a call market understanding a walrasian marketthe walrasian market was developed by leon walras he developed the concept in response to a problem by french philosopher and mathematician antoine cournot cournot posited that it was not possible to demonstrate a state of general equilibrium in which there was equal supply and demand at the same time in all markets the walrasian market model is used regularly in the financial markets the new york stock exchange nyse uses a similar process before the opening bell to determine opening prices a specialist looks at all the collected orders for a particular security and selects the price that will clear the greatest number of trades in fact up until 1871 all trading on the new york stock exchange was executed in this fashion within a walrasian market buy and sell orders are grouped together and then carried out at specific times instead of executed one by one continuously a walrasian auctioneer gathers prices about orders and determines the final price the auctioneer is expected to function in a market with complete and perfect information about orders walrasian market vs auction marketa walrasian market differs from an auction market in which buyers and sellers trade continuously in auction markets market forces determine the final price more directly whereas the buyers and sellers in a walrasian market do not have the last say on what the final price is in their trades the u s treasury holds auctions for treasury securities in order to finance government budget requirements in an auction market buyers enter competitive bids and sellers enter competitive offers simultaneously the price at which a stock is traded is a representation of the highest price that a buyer is willing to pay and the lowest price that a seller is willing to accept matching bids and offers are then paired together and the orders are completed walrasian markets can be more helpful in markets where there are few buyers sellers and shares to trade example of a walrasian marketfor example say these are the buy orders for company a s stock in a walrasian market the buy orders are grouped together and executed at a price and time that will clear most of those orders in this case that price might be 5 25 even though some of the parties are willing to buy or sell for 5 00 the price that clears most of the transactions is 5 25 and in a walrasian market that is the price at which the exchange s market analyst executes these trades | |
what is walras s law | an economic theory walras s law states that excess supply in one market must be matched with excess demand in another market so that both factors negate one another the law states that a specific market must be in equilibrium if all markets are in equilibrium | |
what is walras s general equilibrium theory | walras s general equilibrium theory seeks to show that all markets tend towards equilibrium in the long run as opposed to partial equilibrium where only some markets in an economy reach equilibrium the key aspect of the theory is not that all markets reach equilibrium but that they tend towards equilibrium | |
what is the classical theory of money | the classical theory of money states that the amount of money that a household requires at a given point in time is proportional to the dollar value of its demand for commodities purchasing a higher value of goods will require a household to keep more cash on hand this is known as the propensity to hold money 1 | |
how do you solve for walrasian equilibrium | to solve for the walrasian equilibrium there are four steps involved step 1 is calculating feasible outcomes step 2 is solving for the optimum step 3 is solving for the prices that support the optimal production plan and step 4 is explaining why consumer demand is equal to supply at these prices 2 | |
what is wanton disregard | wanton disregard is a legal term that denotes an individual s extreme lack of care for the well being or rights of another individual wanton disregard is a serious accusation that indicates that a person behaved extremely recklessly and is most commonly used in an insurance context where it refers to negligence to describe reckless behavior that has led to damages or injury wanton disregard may also be referred to as wanton conduct and may more formally be expressed as willful and wanton disregard understanding wanton disregard | |
when an individual fails to employ reasonable duty of care in their actions it constitutes negligence yet not all negligence is the same there are degrees of negligence | wanton disregard in the legal sense is not always deliberately malicious though it is more serious than mere carelessness in a lawsuit wanton disregard might result in punitive damages depending on the severity of the situation and state laws ordinary negligence requires that an individual behave in a way that is contrary to how a reasonable person would act under the same or similar circumstances it may also entail an individual failing to do something that a reasonable person would be expected to do negligence laws require that individuals undertake reasonable actions to protect themselves or others from harm a standard of care when such a duty is not met payment for damages may be recovered 1in general gross negligence denotes indifference on the part of an individual or entity it is a significantly greater lack of care or diligence than ordinary negligence courts define gross negligence as a violation of the legal duty to the rights of other individuals in wrongful death cases a court must find evidence of gross negligence to award punitive damages 1 such behavior comes very close to actual intent to cause harm or damages without actually crossing over into malicious behavior for example the phrase willful and wanton disregard suggests that the danger of an action is understood by an individual they know it is likely to cause a substantial harm yet they do it anyway 1examples of wanton disregarda financial advisor at a large firm uses the company s online database to store sensitive information about their clients the database is hacked and a client s identity is stolen the client tells their financial advisor they think their identity has been stolen through the financial advisor s firm the financial advisor notifies the appropriate people within the company but they do not correct the problem this would be considered wanton disregard because while the company is not intentionally or maliciously exposing its clients sensitive financial data it is recklessly ignoring a problem that it has been made aware of another example of wanton disregard would be a supervisor instructing a subordinate to service a piece of machinery while it was still running a reasonable person would know that this is unreasonably dangerous behavior any injury that resulted from such an action would be evidence of wanton disregard | |
what is a war bond | a war bond is a debt security issued by a government to finance military operations during times of war or conflict because war bonds offered a rate of return below the market rate investment was achieved by making emotional appeals to patriotic citizens to lend the government money understanding war bondsa war bond is a debt instrument issued by a government as a means of borrowing money to finance its defense initiatives and military efforts during times of war a war bond is essentially a loan to a government the bonds were sold below their face value investors paid less than the face value initially and were paid the face value amount at maturity in other words war bonds were considered zero coupon bonds because they didn t pay interest payments throughout the year or coupon payments instead investors earned the difference between the purchase price and the face value of the bond at maturity war bonds were baby bonds which meant they had a smaller par value or face value than standard bonds this made them more affordable for retail investors another feature of the bonds was that they were nontransferable only the bond purchaser could redeem the bonds in the future war bonds originally had a 10 year maturity which resulted in a 2 9 return congress extended the interest that could be earned so that bonds sold from 1941 to 1965 accrued interest for 40 years bonds issued after 1965 accrued interest for 20 years after the end of world war ii war bonds became known as series e bonds the u s government continued issuing series e bonds until 1980 when series ee bonds replaced them characteristics of war bondswar bonds issued by the united states were a little different from other treasury securities war bonds or liberty bonds depending on the year were zero coupon securities meaning that they did not pay any interest over the lifetime of the bond moreover the face value was different from the actual price of the bond you would buy the bond at a discount typically between 50 75 of the bond s face value and receive the full face value when the bond matured the exact maturity date would depend on the year a war bond was issued a bond issued at the beginning of world war ii could only be cashed out ten years later congress later amended the law so that war bonds could continue to accumulate interest over 40 years the history of war bondsbesides the united states government other countries also issued war bonds including canada germany the united kingdom and austria hungary in the u s the war advertising council promoted voluntary compliance with bond buying motives to purchase war bonds were embedded in patriotism and conscience given that these bonds offered a rate of return that was below the prevailing interest rates in the market advertisements for the bonds were carried out through multiple media such as radio stations newspapers magazines and newsreels in theaters to reach the american people hollywood stars like bette davis and rita hayworth helped promote war bonds by touring the country people could save up for war bonds by contributing 25 cents each time the girl scouts also sold stamps valued at 10 cents each norman rockwell created several paintings as part of the advertising effort for war bonds after the russian invasion of ukraine in 2022 the ukrainian government announced an issue of war bonds to pay fighters and other military expenses on march 1 just after the invasion began the ukrainian government announced that it had raised 270 million from a one year bond with a yield of 11 1 the country issued several successive bond issues raising a total of nearly 1 billion 2advantages and disadvantages of war bondswar bonds allow the issuing government to quickly raise money to fund military campaigns governments that issue war bonds may appeal to patriotic feelings to sell the war bonds allowing them to offer a yield that is lower than current market rates they can also be used to reduce inflation by removing extra money from the economy for investors war bonds can also be a way to profit by speculating on the outcome of a war if one side suffers from a temporary military defeat investors can buy that country s war bonds if they expect a quick reversal however they also take the risk of losing their investment if the war is lost however they were not always an ideal vehicle for investments united states war bonds did not pay interest over the life of the bond and they offered lower profits than competing bonds moreover if a country borrows heavily to finance its war efforts it will have to repay all of those bills upon the conclusion of the war war bonds could be purchased for a price that was below their face value war bonds were guaranteed by the u s government investors experienced a sense of pride and patriotism by helping the nation in times of war paid a lower interest rate than other securities in the market war bonds did not pay interest payments throughout the life of the bonds as with any security war bonds carried the risk of a loss if sold before maturity for a lower price than the purchase price example of war bondsin the u s the sale of war bonds was overseen by the war finance committee war bonds were initially known as defense bonds and were first issued as liberty bonds in 1917 to finance the united states government s participation in world war i through the sale of these bonds the government raised 21 5 billion dollars for its war efforts after the japanese attack on pearl harbor on dec 7 1941 the u s entered the second world war and defense bonds were renamed war bonds more than 80 million americans purchased war bonds and brought in over 180 billion in revenue the bonds sold for 50 to 75 of their face value and had denominations ranging from 10 to 1 000 depending on the year they were issued | |
how do you buy ukrainian war bonds | ukrainian citizens and residents can buy war bonds through a ukraine licensed broker or bank although overseas institutional investors can also buy war bonds it is not clear if they will be available to foreign retail investors 3 | |
what is the purpose of war bonds | war bonds allow a country to raise money for its military expenditures without having to resort to heavy taxation or inflationary monetary policy however governments must be cautious of the risk that they will assume more debt than they can repay | |
how much are war bonds worth today | the u s government has an online tool to calculate the current value of war bonds for a series e bond issued in 1942 with a face value of 100 the current value as of september 2022 would be 377 40 4the bottom linewar bonds allow a country to raise emergency funds to support military expenditures at a lower cost than a typical sovereign bond issue however there is risk involved war bonds tend to offer a lower yield and investors assume the risk that they may lose the investment if the country defaults | |
what is a war chest | war chest is a colloquial term for the reserves of cash set aside or built up by a company to take advantage of an unexpected opportunity while a war chest is typically used for acquisitions of other companies or businesses it can also be used as a buffer against adverse events during uncertain times a war chest is often invested in short term investments such as treasury bills and bank deposits which can be accessed on demand understanding war chestsa war chest that has swelled up too much can sometimes be viewed as an inefficient way of deploying capital while investors may be willing to give a company with a huge cash hoard the benefit of the doubt for some time if the cash balance continues to grow well beyond the company s normal operating requirements its investors may clamor for a share of it 1if the company is unable to deploy its war chest efficiently it may consider distributing part of its cash holdings to its shareholders such return of capital to shareholders is usually achieved either through a special dividend distribution an increase in the regular dividend a share buyback or a combination of these measures special considerationscompanies may rely on debt instead of cash however to fund acquisitions or pay unexpected expenses this allows companies to carry less cash especially if they have credit available on the flip side companies often choose to redistribute their war chest to shareholders via special dividends or buybacks 2types of war chestcash and liquid cash equivalents are a key part of a war chest more recently companies have started to include more intangible assets as part of a bigger war chest these intangibles may include social capital political capital and human capital all can prove effective when launching a corporate raid or defending against one the war chest of corporate entities will look different for various countries industries and business models in a sense no two are alike the war room is another business term businesses often assemble or refer to a war room which is where core executives gather to plot and development high stakes strategies modern war rooms will include the latest in audio video and communications technologies examples of war chestswar chests of cash are used to fund purchases and investments looking at how these change over time can give a picture of a company s near term prospects analysts and the media like to focus on the war chest of apple aapl which has historically had a large cash hoard apple had 27 5 billion in cash on hand as of june 25 2022 down from 35 billion a year earlier 3 the company after getting pushback from shareholders had started buying back shares and paying a dividend to put some of its cash to use 4another example of a closely watched war chest is warren buffett s berkshire hathaway brk b the company had 26 5 billion in cash as of june 30 2022 down from more than 85 billion at the end of 2021 5 analysts watch buffett s cash position and speculate on companies that it might purchase and the significant dip in these six months reflects berkshire s buying spree in stocks as markets dipped including a large stake in occidental petroleum oxy 6 | |
why do companies accumulate war chests | war chests are sizable funds set aside by a company these are useful for making large investments or purchases when opportunities arise or can serve as a buffer against economic downturns by having a war chest a company can wait until the time is right and jump on such opportunities having a large war chest can also be used as a defense against a hostile takeover | |
what is a company s war chest made up of | a war chest holds liquid assets that can be accessed quickly such as cash cash equivalents bank deposits and treasury bills | |
where does the term war chest come from | the etymology of the term war chest comes from mediaeval military terminology where it referred to one s personal cache of weapons and armor kept in the home in a chest ready for use if conflict were to break out 7 | |
what was the war damage corporation | the war damage corporation was an initiative launched by the united states government during world war ii first established in 1941 the purpose of the program was to provide american citizens with insurance against the risk of property damage due to war congress found it necessary to offer this program because most private insurers felt that the potential cost of such insurance would be unsustainably high following the end of world war ii the war damage corporation was discontinued by the act of congress in 1947 1mission of the war damage corporationofficially created through the war damage insurance act of 1941 it was first known as the war insurance corporation then was renamed the war damage corporation in 1942 1 understandably many americans of that time were concerned that the ongoing war could potentially lead to significant physical damage in the united states in order to protect their personal possessions citizens sought to insure against this risk by buying insurance from private providers however from the perspective of private insurers at this time the potential scale of the damage from war could be so vast that they could not offer these sorts of contracts in a profitable manner in order to make those policies profitable the premiums they would need to charge would be so high as to be unaffordable to most customers as a solution to this impasse the government stepped in to provide this type of insurance to the public at a subsidized rate history of the war damage corporationthe creation of the war damage corporation in 1941 marked a significant change in legal thinking among american lawmakers prior to world war ii the u s government did not consider individuals automatically entitled to compensation for war related damage to their private property however governments in the united states and europe increasingly adopted the view that individuals should be compensated for private property damage caused by war given that these acts of war are beyond the control of those parties programs similar to the war damage corporation were also pursued in other countries such as the united kingdom and some similar programs continue to exist today president ulysses s grant was firmly against the idea of compensating property owners in southern states whose property had been damaged or destroyed during the american civil war in his own words grant described damages to private property due to war as a matter of bounty rather than of strict legal right 2legacy of the war damage corporationalthough the war damage corporation no longer exists it has nevertheless had a lasting impact on the american insurance industry for example some private insurance companies now provide policies specific to war related damage these include damages related to weapons of mass destruction acts of civil unrest or terrorist attacks such as hijackings a more common example can be found in travel insurance policies which sometimes offer compensation for flights or hotel bookings canceled due to acts of terrorism or war nevertheless it remains true that most insurance policies include war exclusion clauses that explicitly exempt the insurer from having to cover damages caused by war the organization was abolished in 1947 following wwii and several of its functions were assumed by reconstruction finance corporation 1 | |
what is a war economy | war economy is the organization of a country s production capacity and distribution during a time of conflict a war economy must make substantial adjustments to its consumer production to accommodate defense production needs in a war economy governments must choose how to allocate their country s resources very carefully in order to achieve military victory while also meeting vital domestic consumer demands understanding war economywar economy refers to an economy of a country at war a war economy prioritizes the production of goods and services that support war efforts while also seeking to strengthen the economy as a whole during times of conflict governments may take measures to prioritize defense and national security expenditures including rationing in which the government controls the distribution of goods and services as well as resource allocation in times of war each country approaches the reconfiguration of its economy in a different way and some governments may prioritize particular forms of spending over others for a country with a war economy tax dollars are primarily used on defense likewise if the country is borrowing large amounts of money those funds may go mostly toward maintaining the military and meeting national security needs conversely in countries without such conflict tax revenue and borrowed money may be used to improve infrastructure and domestic programs such as education war economies often exist out of necessity when a country feels it needs to make national defense a priority war economies often demonstrate more industrial technological and medical advancements because they are in competition and therefore under pressure to create better defense products at a cheaper cost however because of that focus countries with war economies may also experience a decline in domestic development and production war economy exampleall of the major members of both the axis and allied powers had war economies during world war ii these included countries such as the united states japan and germany america s economic strength was a vital pillar that allowed the allies to receive the money and equipment needed to defeat the axis powers the u s government transitioned to a war economy after the japanese attack on pearl harbor raising taxes and issuing war bonds to help fund the war effort 12the war production board wpb was formed to allocate resources to the war effort including copper rubber and oil award defense contracts to civilian corporate interests and incentivize military production among civilian business owners 3 famously women around the united states participated in the war economy by taking military production jobs and other positions previously filled by men many of whom had joined the military 4special considerationsbecause wars can sometimes have the effect of accelerating technological and medical progress a country s economy can be greatly strengthened after the war as was the case with the u s after both world war i and world war ii some economists argue however that the wasteful nature of military spending ultimately hinders technological and economic advancement 5 | |
what is a war exclusion clause | a war exclusion clause in an insurance policy specifically excludes coverage for acts of war such as invasions insurrections revolutions military coups and terrorism a war exclusion clause in an insurance contract refers to the protection of an insurer who will not be obligated to pay for losses caused by war related events insurance companies commonly exclude coverage perils on which they cannot afford to pay claims understanding a war exclusion clausebecause most insurance companies would be unable to remain solvent let alone profitable if an act of war suddenly presented them with thousands or millions of expensive claims auto homeowners renters commercial property and life insurance policies often have war exclusion clauses however entities that are faced with a significant risk of war such as companies located in politically unstable countries may be able to purchase a separate war risk insurance policy insurance companies typically won t cover damages caused by war for clear reasons if war breaks out in a country it could cause a catastrophic amount of damage that would likely bankrupt the insurance company if it were on the hook to cover such damages moreover if an insured individual decides to join the military and go to war they are voluntarily putting themselves at a much higher risk of getting disabled or killed as a result many life and disability policies do not cover losses from war two primary factors require the modern version of the war exclusion clause the inability of insurance companies to gauge premiums to cover the risk of war and the need for insurance companies to protect themselves against a catastrophic financial disaster that could result from war level destruction if private insurers were to assume the normal risk incidents to military service in time of war under ordinary premium rates they would likely go out of business standardization of war exclusion clausesthe war exclusion clause became an important issue in the insurance industry following the sept 11 2001 terrorist attacks on new york city and washington d c before the attacks most war exclusion clauses applied only with respect to contractually assumed liability on the theory that private persons and organizations cannot otherwise incur liability in connection with war 12however after september 11 war and terrorism exclusions that broadened the war portion of the exclusion beyond contractually assumed liability were quickly added to liability policies this development widened the scope of the war exclusion clause which is now considered standard regardless of whether terrorism is insured or excluded in the policy 1 | |
what is war risk insurance | war risk insurance is an insurance policy that provides financial protection to the policyholder against losses from events such as invasions insurrections riots strikes revolutions military coups and terrorism auto homeowners renters commercial property fire and life insurance policies often have war exclusions with these exclusions the policy will not pay for losses from war related events because a standard insurance policy may specifically exclude war risk it is sometimes possible to purchase a separate war risk insurance rider understanding war risk insurancethose entities which have risk exposure to the possibility of sudden and violent political upheavals are good customers for war risk insurance for example companies operating in politically unstable parts of the world have exposure to an elevated risk of loss from acts of war war risk insurance may cover perils such as kidnappings and ransom sabotage emergency evacuation worker injury long term disability and loss or damage of property and cargo also some policies may cover event cancellations due to war there are war risk insurance policies that include acts of terrorism but others consider terrorism and war to be two separate categories of peril some countries may require airlines to have war risk insurance before they can operate in their airspace or use their airports industries in the aviation and maritime spheres may have more specific war insurance options tailored to meet their particular needs for example war risk insurance may compensate a ship s owner for the full cost of a vessel in cases where a government seizes the ship if war activities force a ship into temporary detention war risk insurance may cover that loss of time the bumbershoot policy is a specialized form of excess liability insurance targeted to the maritime industry concerns with war risk insurancethe war exclusion clause became a hot issue in the insurance industry following the sept 11 2001 terrorist attacks on new york city and washington d c the attacks caused an estimated 40 billion in insurance losses the threat of further terrorist attacks or hijackings made the insurance industry leery of issuing war risk policies insurers canceled issuing many third party policies and coverage in response congress voted to amend and expand the federal aviation administration faa aviation war risk insurance program the law required the faa to offer war risk insurance to u s based airlines it also ordered the premiums for this coverage to be based on the pre 9 11 cost of coverage the program was in place until 2014 at which point the private industry had increased capacity and lowered prices for war risk insurance the difficulty with war risk insurance is the inability of an insurance company to accurately assess the possible outcome of damages and therefore calculate appropriate premiums to charge furthermore the damage from war or related activities can be so vast and unpredictable that even high premiums might not be enough to cover the damage that insurance companies are liable for this makes war insurance an unknown quantity for insurance companies with a high risk that a war insurance policy could send them into insolvency | |
what is a warehouse bond | a warehouse bond provides financial protection for individuals or businesses storing goods in a storage facility the bond gives protection for any losses if the event the storage facility fails to live up to the contract terms if the operator of the warehouse fails to meet its contractual obligations a third party surety company acting as an intermediary will compensate the client for loss understanding warehouse bondsthe warehouse bond is a contract between three entities the warehouse operator is the principal that needs to get bonded the state authority that provides the licensing is the obligee finally the surety is the bond underwriter warehouse bond claims may arise from fire theft water damage roof collapse insufficient facility maintenance damage during handling climate control failure lost inventory and other causes warehouse bonds typically remain in effect for one year periods and must be renewed annually warehouse bonds are required for warehouse owners in many states they guarantee compliance with state laws and regulations for the storage and handling of goods every state sets its bond amount requirements items reviewed when setting the bond amount include the number of warehouses operated and the value of the goods stored in the warehouses bond requirements may also be on a case by case basis in some states the bond cost also depends on the warehouse owner s credit score and business financials each state will stipulate requirements for storage facilities independently for example massachusetts requires all public warehouse owners to be licensed and bonded with a 10 000 surety bond for every warehouse 1 the state of new york requires a 5 000 bond amount while new york city requires 10 000 2 3 bond requirements may also vary depending on the type of warehouses such as grain eviction or public warehouses special considerations and acts of godthere are many limitations on recovery associated with warehouse bond agreements for example acts of god are often listed as an absolute exclusion in agreements although a warehouse owner cannot reasonably be expected to control forces of nature such as hurricanes and earthquakes there are certain circumstances where liability is a consideration for example a warehouse operator may be liable for damages if there is a warning of an impending loss that they should have taken steps to avoid suppose a warehouse location is along a river prone to flooding and the facility previously sustained damage to cargo stored on the ground floor in such a scenario if a warehouse owner knew of an approaching flood warning and took no action they could be found negligent for failing to move the cargo to a higher floor or alternate location | |
what is warehouse financing | warehouse financing is a form of inventory financing that involves a loan made by a financial institution to a company manufacturer or processor existing inventory goods or commodities are transferred to a warehouse and used as collateral for the loan warehouse financing is most often used by smaller privately owned firms particularly those in commodities related businesses that do not have access to other options note that warehouse financing is different from warehouse lending which is a way for a bank to provide loans without using its own capital understanding warehouse financingwarehouse financing is an option for small to medium sized retailers and wholesalers the collateral goods inventory or commodities for a warehouse finance loan may be held in public warehouses approved by the lender or in field warehouses located in the borrower s facilities but controlled by an independent third party take the example of a manufacturer of electric car batteries that has used up its entire line of credit and needs another 5 million to expand operations it asks around and finds a bank willing to offer a loan through warehouse financing the bank accepts the company s large inventory of unsold car batteries as collateral and those batteries are transferred to a warehouse controlled by a third party if the company fails to pay the loan the bank can begin selling the batteries to cover the loan alternatively the company can repay the loan and begin taking possession of its batteries again a financial institution engaged in warehouse financing will usually designate a collateral manager who issues a warehouse receipt to the borrower that certifies the quantity and quality of the goods it leverages the use of raw material as the primary collateral while additional financing can be synchronized with the build up of stock or inventory inventory of any kind tends to depreciate in value over time warehouse financing therefore may not be able to offer the full upfront cost of the inventory the benefits of warehouse financingwarehouse financing often enables borrowers to obtain financing on more favorable terms than short term working capital nwc or unsecured loans while the repayment schedule can be coordinated with the actual usage of inventories or materials since it is secure lending warehouse financing is often less expensive than other types of borrowing the commodity inventory in the warehouse is contractually pledged to the lender so that if the borrower fails to pay the lender can take the inventory and sell it on the market to recover the loan this form of lending is often less expensive because the lender would not be involved in lengthy legal battles to recover the loan as they would if the loan were unsecured a commodity company can also improve its credit rating lower its borrowing costs and potentially secure a larger loan when utilizing warehouse financing this offers a business advantage to a similar sized company without such resources | |
what is warehouse lending | warehouse lending is a line of credit given to a loan originator the funds are used to pay for a mortgage that a borrower uses to purchase property the life of the loan generally extends from its origination to the time it is sold on the secondary market either directly or through securitization the repayment of warehouse lines of credit is ensured by lenders through charges on each transaction in addition to charges when loan originators post collateral understanding warehouse lendinga warehouse line of credit is provided to mortgage lenders by financial institutions the lenders are dependent on the eventual sale of mortgage loans to repay the financial institution and to make a profit for this reason the financial institution that provides the warehouse line of credit carefully monitors how each loan is progressing with the mortgage lender until it is sold warehouse lending is not mortgage lending a warehouse line of credit allows a bank to finance a loan without using its own capital | |
how warehouse lending works | warehouse lending can most simply be understood as a means for a bank or similar institution to provide funds to a borrower without using its capital a small or medium sized bank might prefer to use warehouse lending and to make money from origination fees and the sale of the loan rather than earn interest and fees on a 30 year mortgage loan in warehouse lending a bank handles the application and approval of a loan but obtains the funds for the loan from a warehouse lender when the bank then sells the mortgage to another creditor in the secondary market it receives the funds that it then uses to pay back the warehouse lender the bank profits through this process by earning points and origination fees warehouse lending is commercial asset based lending according to barry epstein a mortgage lending consultant bank regulators typically treat warehouse loans as lines of credit giving them a 100 risk weighted classification epstein suggests that warehouse lines of credit are classified in this way partly because the time risk exposure is days while the time risk exposure for mortgage notes in years 1fundamentalswarehouse lending is similar to accounts receivable financing for industry sectors though the collateral is typically much more significant in the case of warehouse lending the similarity lies in the short term nature of the loan mortgage lenders are granted a short term revolving credit line to close mortgage loans that are then sold to the secondary mortgage market the housing market crash from 2007 to 2008 drastically affected warehouse lending the mortgage market dried up as people could no longer afford to own a home as the economy has recovered the acquisition of mortgage loans has increased as has warehouse lending who are the warehouse lenders to small banks commercial banks and large consumer banks are typically warehouse lenders they extend credit to smaller institutions so that they don t need to use their own capital to offer mortgage loans to borrowers the loans are then sold and the money is repaid | |
how do warehouse lenders make money | warehouse lenders charge their clients a small fee for funding similar to an origination fee for a mortgage they also charge interest for the time period that the money is extended 2 | |
what are the benefits of warehouse lenders | for a small bank cash flow can be an issue borrowing from a warehouse lender allows smaller banks to do a higher volume of mortgage lending without depleting their cash reserves since they quickly sell the loans after closing it also means they don t have to service the loans for their term length the bottom lineas a borrower you might assume that your mortgage is borrowed from the bank where you apply however warehouse lending means that although you interact with your local bank your mortgage can be funded by a larger entity this helps keep the smaller institution liquid and allows them to originate loans and sell them quickly to earn profits | |
what is a warehouse receipt | a warehouse receipt is a type of documentation used in the futures markets to guarantee the quantity and quality of a particular commodity being stored within an approved facility warehouse receipts are important because they serve as proof that the commodity is in the warehouse and that the proper documentation has been verified 1 warehouse receipts are also used during the warehouse financing process to verify the quality of pledged collateralized inventory commodities need to meet specific quality standards in order to be traded as a futures contract and the warehouse receipts play a role in verifying that the necessary requirements have been met understanding a warehouse receiptwarehouse receipts are a part of the operational business processing involved with futures contracts for physical delivery 1 a futures contract is an obligation to buy or sell a commodity or security at a predetermined price at a date in the future futures are derivatives because they derive their value from the price of the underlying security or commodity there are many types of commodity futures including corn wheat oil gold and silver futures contracts are standardized meaning they have a set quantity and are deliverable by certain dates throughout the year 2however futures also have quality standards that must be met and warehouse receipts play a role in the inventory and delivery process of the underlying commodity for the contract for a commodity to be delivered to satisfy a futures contract there must be a warehouse receipt for the goods 21 sometimes instead of the physical delivery of the actual commodities backing a contract warehouse receipts can be used to settle futures contracts for precious metals warehouse receipts may also be referred to as vault receipts commodities for physical deliveryfutures contracts are broadly used by all types of companies manufacturing and transporting various types of goods some of the most popular futures exchanges include the chicago mercantile exchange cme chicago board of trade cbot new york mercantile exchange nymex and the new york board of trade nybot futures exchanges are used by buyers and sellers to hedge or protect themselves from the price volatility of all types of commodities in some cases traders may use the futures market to speculate and profit from arbitrage opportunities however the majority of trades made on futures exchanges are done by commercial traders who seek to either sell or buy commodities for physical delivery commodities for physical delivery are used to produce and manufacture a wide range of goods that comprise a large portion of the u s economy s gross domestic product gdp gdp is a measurement of economic growth in an economy futures contracts on commodities differ from plain vanilla options on stocks options contracts give the holder the right to buy or sell the underlying stock at a preset price or strike price 3 while stocks and other underlying exchange traded securities for options can be easily bought and sold electronically with electronic settlement futures contracts require the tracking of physical inventory also specific quality standards must be met for a commodity to be physically delivered as a result of a futures contract 2certificated stockthe tracking of physical inventory provides for some important procedures that must be followed by commodity producers in order for commodity producers to write contracts on their commodity inventory they must be licensed and registered with the appropriate authorities commodity producers must also certificate their physical inventory through a certification process that involves inspection and authentication resulting in a certificated stock approval certificated stock can then be used to write contracts on inventory in the futures market warehouse receiptseach futures exchange has specific delivery and storage requirements that must be met for example at the cme exchange approved warehouses are the only entities and locations that can deliver against a futures contract 1exchange approved warehouses are used to provide a secure location to store the physical commodity the warehouse also provides the inventory management services for the futures exchange and ensures that any commodities delivered to the warehouse meet the strict specifications including having the proper certifications for example copper and gold would each have their own specific weight and quality requirements that would need to be met before the warehouse could accept a shipment from a refiner or producer warehouse receipts are another operational step taken when a physical commodity is used as backing for a futures contract a warehouse receipt provides the exchange with documentation that the goods authorized for sale are available and ready for transfer to a buyer 1 the entity selling their inventory will write a futures contract to sell at a specified price warehouse receipts are required with the writing of a short or sale commodity futures contract the entity that takes the long or buy position is assured by the warehouse receipt the entity with the long position contract at expiration will receive the commodity inventory at the specified price 4if the buyer didn t want to take delivery of all of the commodity for example they could ship a partial order to where they need it such as their store to sell it and hold the remaining portion in the warehouse the warehouse receipt would act as ownership for the commodity in storage at the exchange approved warehouse 1 | |
what is a warehouse to warehouse clause | a warehouse to warehouse clause is a provision in an insurance policy that provides for coverage of cargo in transit from one warehouse to another a warehouse to warehouse clause usually covers cargo from the moment it leaves the origin warehouse until the moment it arrives at the destination warehouse separate coverage is necessary to insure goods before and after the transit process understanding a warehouse to warehouse clausea warehouse to warehouse clause is a provision most commonly found in commercial insurance policies that seeks to cover the risks of shipping there can be several types of insurance policies available for shipping all kinds of goods from one destination to another in some cases automatic insurance may be included or offered for an additional cost this is common with retail shipping for commercial shipping automatic insurance may or may not be included and if it is included may not necessarily be sufficient commercial businesses may pay for one time coverage or have an open policy that covers all shipments over a specified period of time when shipping is involved commercial business partners will typically have standards for insurance coverage ownership in some cases sellers may take responsibility for insurance coverage in other scenarios the buyer may be responsible for any damages moreover insurance coverages are usually segmented by location such as warehouse warehouse to warehouse and destination the warehouse to warehouse clause in an insurance coverage policy generally provides for coverage if damages occur in transit from a storage warehouse to a destination warehouse but not necessarily for storage or destination warehouses which may need to be covered under different clauses or protection plans in a commercial shipping insurance policy the insured pays a premium for the security of repayment coverage for any damages incurred the warehouse to warehouse clause assures a policyholder against any risks of loss for damaged goods that may be incurred through transit processing goods will either arrive safely or be paid for if lost or damaged in transit the insured pays a small premium for the policy in comparison to the actual costs of goods shipped example of a warehouse to warehouse clausecommercial insurance for the transportation of goods can be an important component of any supply chain department managing the distribution of their own manufactured goods in large business distribution sellers will often take the responsibility for shipping costs and insurance this is where warehouse to warehouse clauses may be important since the seller may only be providing insurance coverage for this transit period consider the case of a tire manufacturing company the company manufactures and produces tires in china that are distributed to businesses all over the world the tire company would likely partner with an insurer to provide commercial insurance coverage for the tires while they are in transit to the company s many different buyers with an insurance policy that includes a warehouse to warehouse clause the tire company would pay a premium to insure the cost of any loss or damage that occurs from the time a tire leaves the manufacturer s warehouse until the time it arrives at the buyer s warehouse this may include being transported on a truck from the manufacturer to a port then by boat from a port to another port and finally transportation via train to a buyer s warehouse history of warehouse to warehouse clausesthe warehouse to warehouse clause was introduced in the late 19th century to cover land transport at the time there was no time limit on sea passage nor on the journey to the loading port in order to encourage the cargo owner to take delivery of the goods quickly a time limit was imposed after discharge during the second world war initial time limits were found to be impractical and later extended to 60 days these initial policies and procedures associated with early supply chain management were then further developed and more heavily integrated by insurance companies in broader offerings for commercial cargo insurance in the commercial insurance industry a standardized set of terms has been developed to help provide the framework for commercial insurance policies involving the insurance of goods through land and water transportation one grouping of standardized terms can be known as institute cargo clauses institute cargo clauses are typically segmented by classes of a b or c in general standardized terms and institute cargo clauses help to provide uniformity for details applicable to insurance policies typically details associated with any warehouse to warehouse clauses will include requirements tied to insurance attached from the time goods leave a specified warehouse until a specified termination such as | |
what is the purpose of a warehouse to warehouse clause | a warehouse to warehouse clause is a provision in a commercial insurance policy intended to provide protection in the case of losses incurred while goods are being shipped from one warehouse to another the purpose of the clause is to protect the policyholder from the risks of loss for damaged goods that may occur through transit processing | |
does a warehouse to warehouse clause cover goods before and after arrival | a warehouse to warehouse clause is meant to protect in the case of losses that are incurred while goods are being shipped from one warehouse to another however this kind of clause does not typically provide protection in the case of losses incurred while goods are at a storage warehouse or a destination warehouse with a separate protection plan needed for such risks | |
what guarantee does a policyholder have with a warehouse to warehouse clause | a policyholder of a warehouse to warehouse clause has a guarantee that the goods will arrive and arrive undamaged at the intended destination or the cost of the lost or damaged goods will be covered the bottom linea warehouse to warehouse clause is typically used in commercial shipping so as to protect the policyholder from losses incurred while the product is being transferred from one warehouse to another such as a storage facility to another destination the clause does not address the risk of loss before or after the product is shipped only the risk of loss while it is in transit | |
what is a warehouser s liability form | a warehouser s liability form is a document that describes the obligations of a storage facility toward its customers warehouse owners and operators can be held liable if the goods being stored in their warehouse are destroyed damaged or stolen 1 thus the warehouser s liability insurance exists to protect owners and operators against the costs of legal defense damage awards and other expenses related to a damage claim understanding a warehouser s liability formwarehouser s liability forms vary between different storage facilities also certain types of property are commonly not covered by a standard form including money precious metals and stones once the owner removes their goods from the warehouse and signs a warehouse storage receipt and release of liability the warehouse owner or operator is no longer responsible for the goods under the united states uniform commercial code storage facility operators assume liability for the goods that they warehouse in exchange for a fee these warehousers must follow a legal standard known as reasonable care and if a warehouser doesn t take reasonable care to protect a stored good the company is liable for damages 2 therefore warehouse companies must buy additional insurance to protect themselves against the chance they need to compensate customers for damaged goods in cases when property is damaged as a result of of an insured warehouser s negligence the insurance company will often pay the property owner directly the relationship between a warehouser and the owner of the goods being warehoused is known as a bailment the term comes from the latin word bajulare which means to bear a burden in the united states bailment laws regulate the relationship between the owner of a piece of property and another party that is put temporarily in charge of that property 3a bailment is any situation in which property is rightfully controlled by a party that is not the owner 3a bailment does not have to be established by a contract to be recognized by courts in the united states and a property owner wishing to claim damages must establish that a bailee had both the possession of a physical good and the intent to exert control 4 as bailees warehousers have a responsibility to protect the property in its control up to a certain point though they are not held liable for damage to property that results from an act of god like an earthquake because warehousers are held responsible for goods in their possession it s in the warehouser s interest to clearly establish with a customer its rights and obligations before taking possession of a piece of property with the help of documents like a warehouser s liability form | |
what is warehousing | warehousing is an intermediate step in a collateralized debt obligation cdo transaction that involves purchasing loans or bonds that will serve as collateral in a contemplated cdo transaction the warehousing period typically lasts three months and it comes to an end upon closing of the transaction when they are ultimately securitized and sold as part of the cdo understanding warehousinga cdo is a structured financial product that pools together cash flow generating assets and repackages this asset pool into discrete tranches that can be sold to investors the pooled assets comprising mortgages bond and loans are debt obligations that serve as collateral hence the name collateralized debt obligation the tranches of a cdo vary substantially with their risk profile senior tranches are relatively safer because they have priority on the collateral in the event of a default the senior tranches are rated higher by credit rating agencies but yield less while the junior tranches receive lower credit ratings and offer higher yields an investment bank carries out the warehousing of the assets in preparation of launching a cdo into the market the assets are stored in a warehouse account until the target amount is reached at which point the assets are transferred to the corporation or trust established for the cdo the process of warehousing exposes the bank to capital risk because the assets sit on its books the bank may or may not hedge this risk cdos gone wild in 2006 and 2007 goldman sachs merrill lynch citigroup ubs and others were actively warehousing subprime loans for cdo deals that the market seemed to have an insatiable appetite for until it didn t when cracks in the dam started appearing demand for cdos slowed and when the dam burst holders of cdos collectively lost hundreds of billions of dollars in a detailed chronicle of events laid out in a subcommittee report of the u s senate wall street and the financial crisis anatomy of a financial collapse it was reported that goldman was acquiring assets for several cdos at once and the cdo desk generally had a substantial net long position in subprime assets in its cdo warehouse accounts in early 2007 the report continues goldman executives began to express concern about the risks posed by subprime mortgage related assets in the cdo warehouse accounts | |
what is warm calling | warm calling is the solicitation of a potential customer with whom a sales representative or their firm has had some prior contact it refers to a sales call a visit or an email that s preceded by some sort of contact with the prospect such as a direct mail campaign an introduction at a business event or a referral warm calling is the opposite of cold calling the solicitation of prospects who weren t anticipating such interaction and with whom the sales representative or business has not had prior contact | |
how warm calling works | warm calling tends to have a personalized element because the prior contact can be referenced or mentioned such as hi mrs jones i saw you followed our company on x formerly twitter or hi mr jones we met last week at the abc conference the previous contact acts as an icebreaker for the follow up warm call warm calling works best on prospects that check all the customer suitability boxes even though they haven t yet expressed any interest in a product or service you don t have to sell to the prospect during a warm call in fact it may be better to use the call to set up an appointment or a virtual meeting instead warm calling also describes a classroom participation technique that lets students know in advance that they re going to be tagged to contribute a demonstration or a response the premise is that cold calling on students can produce anxiety and that this can thwart learning 1warm calling tipsan easy introduction breaks the ice with the prospect but successful warm calling still takes a significant amount of effort here are a few tips target prospects who are similar to your company s most common customers working from a familiar profile will give you a better idea of what these prospects are looking for and how to appeal to them resist the temptation to go after only bigger prospects they re fewer and farther between prepare by researching your target company and its decision makers knowing their needs and values will help you tailor your pitch and better serve them you must get the target s attention and do it quickly be sure to tweak your pitch to ensure that it s brief and gets to the point fast while demonstrating your value proposition try to hit all your key points in a minimum of time and words be sure to respect their time | |
don t be afraid to employ humor or attempt to be informal and personable when you re making the call the product may be good enough to sell itself but you ll never get to that point if you lose the target s attention or miss the opportunity to connect | be sure to use various methods to ensure several points of contact such as voicemails that include an offer to provide more information and emails that offer tips and assistance via video | |
how successful is warm calling | linkedin has indicated that warm calling can be 2 to 30 more effective than cold calling but your own success rate will depend on your technique and your preparation for establishing leads 2 | |
what is the drawback of warm calling | warm calling requires that you have warm leads prospects with whom you ve had some prior contact establishing them may take some time and require preliminary efforts such as an email or direct mail campaign or attending certain events where you re likely to make contact with the type of consumer you seek these efforts can cost money so warm calling can be more expensive than cold calling | |
what s the difference between warm calling and hot calling | warm calling and hot calling are basically the same concept and the terms are often used interchangeably but hot calling typically involves reaching out to and engaging with a prospect who has already actively expressed interest in your product or service they may have called you and left a message requesting to talk the bottom linewarm calling and the use of effective sales channels such as email text message marketing and social media portals are all considered to be more efficient and effective in generating new leads than cold calling modern social media platforms such as linkedin x and facebook also allow opportunities for potential clients to reach out indirectly or directly to businesses by posting comments on a blog sharing an article with a peer or tweeting something that s of interest | |
what is a warm card | a warm card is a type of bank card that provides restricted access to a business account it is given to an employee who needs to have limited access to a company s financial accounts typically these cards allow deposits but not withdrawals this allows the employees to make transactions while reducing the risk of theft understanding warm cardswarm cards are used by businesses that want to minimize their risk of fraud or theft employees whose job descriptions require them to make bank deposits can be given warm cards that allow them only the access needed to complete their duties by blocking withdrawals warm cards eliminate the risk of theft by employees 1businesses also have access to other security measures such as the use of multi factor authentication or complex passwords as the scale of online fraud continues to grow businesses are increasingly turning to a mixed approach in which they combine these online methods with physical measures such as the use of warm cards warm cards are distinct from debit cards in that the latter generally allow for both deposits and withdrawals another difference between them is that debit cards are used by both business and individual bank customers whereas warm cards are specific to business customers debit cards also permit transfers between accounts but warm cards are limited to specified accounts as online fraud has increased businesses have had to combine physical measures such as using warm cards with other security measures like multi factor authentication or complicated passwords example of a warm cardto illustrate how warm cards work say you are the owner of a chain of coffee shops altogether your company has five locations and 15 employees each location has a store manager whose responsibilities include depositing the cash received from customers at the end of each week as part of your internal controls you issue warm cards to each of five store managers each of these cards is connected to a company bank account set up to hold the cash from customers when the store managers present their cards the bank tellers know that they are authorized to deposit cash into the company account at the same time the warm cards don t permit withdrawals or transfers to be made so they effectively insure against the risk of fraud or theft unlike credit cards the warm cards don t impart any borrowing capacity to the user therefore you don t need to record any liability associated with these cards and you doesn t need to be concerned with the creditworthiness of the employees using them similarly the employees know that using warm cards won t affect their personal credit scores | |
what s another name for a warm card | warm cards are also sometimes called deposit only cards by banks and the business customers who use them | |
what are the main benefits of a warm card | warm cards come with two key benefits fraud protection and convenience because warm cards let employees to make deposits into business accounts but restrict access to the ability to spend with them the employees won t be able to commit fraud by withdrawing money they shouldn t or using a business card to make personal purchases in terms of convenience with warm cards a variety of employees can handle deposits and relieve the owner of that task 1 | |
how can you get a warm card | warm cards are relatively easy to obtain from financial institutions that provide them usually you have three options for requesting a warm card 1 go to the bank branch and ask for one it typically takes a few business days for the card to be shipped to you 2 you also can call your bank to request a warm card 3 or most financial institutions offer mobile banking apps those offering warm cards should make it easy to access these restricted cards through their app 1the bottom linea warm or deposit only card is a bank card used by businesses to let employees to make deposits in the business s financial accounts unlike debit cards warm cards typically only allow the employee to make deposits while prohibiting them from making withdrawals warm cards are used by companies to enable their employees to make necessary transactions while reducing or eliminating the risk of theft or fraud they also can increase convenience for owners by allowing them to delegate cash deposits to employees without concern about fraud or theft | |
what is the warning bulletin | the warning bulletin is a list of canceled past due or stolen credit cards created by the two biggest credit card vendors mastercard and visa and issued weekly in paper format the list is now online and updated in real time the vendors instruct merchants to obtain authorization before accepting the cards listed and engage certain protocols when collecting cards that have been flagged for improper use understanding the warning bulletinthe warning bulletin is also known as the cancellation bulletin the hot card list or the restricted card list it is meant to deter credit fraud which costs businesses and individuals billions of dollars per year the sheer number of credit cards in the market and the massive number of transactions that occur every day means credit card processors need a way to communicate lists of lost stolen or compromised card numbers quickly and efficiently the warning bulletin is one such method visa and mastercard require merchants and member banks to follow specific procedures and protocols when recovering and returning counterfeit cards or cards that are not used by the authorized cardholder typically the processor must follow several steps when returning a recovered card to the issuer if the merchant has not already done so the processor cuts the card in half through the magnetic stripe after receiving the card along with any required documentation the processor then forwards the recovered card to the issuer cards should be recovered provided that can occur through safe and reasonable means preventing credit card fraudas warning bulletins have evolved over time moving from a paper list to an online database capable of immediate updates so have credit cards in particular embedded computer chips known as emvs are replacing the once ubiquitous magnetic stripes the emv format has become the global standard for card use at both atms and for point of sale purchases the main purpose of chip cards is to reduce credit card fraud and make sure data breaches do not occur one of its major advantages is that it cannot be easily copied cards with magnetic stripes can be duplicated through a simple swipe of the card because the information contained on the strip is permanent making it easier to copy and reuse conversely chip cards create one time codes unique to the specific transaction all details of that transaction are stored in the one time code thus the information gathered would not be usable for subsequent purchases | |
what is a warrant | warrants are a derivative that give the right but not the obligation to buy or sell a security most commonly an equity at a certain price before expiration the price at which the underlying security can be bought or sold is referred to as the exercise price or strike price an american warrant can be exercised at any time on or before the expiration date while european warrants can only be exercised on the expiration date warrants that give the right to buy a security are known as call warrants those that give the right to sell a security are known as put warrants | |
how a warrant works | warrants are in many ways similar to options but a few key differences distinguish them warrants are generally issued by the company itself not a third party and they are traded over the counter more often than on an exchange investors cannot write warrants like they can options unlike options warrants are dilutive when an investor exercises their warrant they receive newly issued stock rather than already outstanding stock warrants tend to have much longer periods between issue and expiration than options of years rather than months warrants do not pay dividends or come with voting rights investors are attracted to warrants as a means of leveraging their positions in a security hedging against downside risk for example by combining a put warrant with a long position in the underlying stock or exploiting arbitrage opportunities warrants are no longer common in the united states but are heavily traded in hong kong germany and other countries types of warrantstraditional warrants are issued in conjunction with bonds which in turn are called warrant linked bonds as a sweetener that allows the issuer to offer a lower coupon rate these warrants are often detachable meaning that they can be separated from the bond and sold on the secondary markets before expiration a detachable warrant can also be issued in conjunction with preferred stock wedded or wedding warrants are not detachable and the investor must surrender the bond or preferred stock the warrant is wedded to in order to exercise it covered warrants are issued by financial institutions rather than companies so no new stock is issued when covered warrants are exercised rather the warrants are covered in that the issuing institution already owns the underlying shares or can somehow acquire them the underlying securities are not limited to equity as with other types of warrants but may be currencies commodities or any number of other financial instruments | |
how to find derivative warrants | trading and finding information on warrants can be difficult and time consuming as most warrants are not listed on major exchanges and data on warrant issues is not readily available for free | |
when a warrant is listed on an exchange its ticker symbol will often be the symbol of the company s common stock with a w added to the end for example abeona therapeutics inc s abeo warrants were listed on nasdaq under the symbol abeow 1 in other cases a z will be added or a letter denoting the specific issue a b c | warrants generally trade at a premium which is subject to time decay as the expiration date nears as with options warrants can be priced using the black scholes model | |
how do derivative warrants differ from options | both derivative warrants and options give the holder the right to buy or sell shares at a set price before a specified date however options are listed on an exchange and traded from investor to investor while derivative warrants are issued by the company itself | |
what does it mean for a derivative warrant to be dilutive | a derivative warrant is dilutive because it dilutes or reduces each other shareholder s ownership in the issuing company if you hold a warrant allowing you to buy 1 share in a company that currently has 10 shares outstanding and you exercise it the number of shares outstanding will increase to 11 you ll gain ownership while each other shareholder will lose a percentage of their stake in the company | |
what happens if a derivative warrant expires | if a warrant expires without being exercised it becomes worthless the holder of that warrant can no longer use it to buy shares in the issuing company | |
why buy derivative warrants over options | derivative warrants have some advantages over options for example they have much longer expiration timelines and are often attached to otherwise already valuable securities such as bonds the bottom linederivative warrants are a complex type of security that isn t widely traded they give investors the opportunity to buy shares in a company but can be difficult to research and costs for trading can be high | |
what is warrant coverage | warrant coverage is an agreement between a company and one or more shareholders where the company issues a warrant equal to some percentage of the dollar amount of an investment warrants similar to options allow investors to acquire shares at a designated price warrant coverage agreements are designed to sweeten the deal for an investor because the agreement leverages their investment and increases their return if the value of the company increases as hoped understanding warrant coveragewarrant coverage assures investors that they can increase their share of ownership in the company should circumstances rapidly improve this is done by means of issuing warrants as a condition of the investors participation a warrant is a type of derivative that gives the holder the right to buy the underlying stock at a specified price before or at maturity the warrant does not obligate the holder to purchase the underlying stock a warrant coverage is simply the agreement to issue stocks to cover the possible future execution of the warrant instrument warrants are similar to an option but have three main exceptions first they originate from a company not from traders second warrants are dilutive to the underlying stock when the holder exercises a warrant the company issues new stock rather than delivering existing stock finally they can be attached to other securities most notably bonds giving the holder the right to purchase shares of stock as well reasons for warrant coveragewarrant coverage allows and possibly encourages the holder to participate in the success of the company manifested in the appreciation of the price of the underlying stock it also gives the holder protection against the dilutive effects of any future new share offerings this future protection is ironic because the exercise of the warrant is dilutive itself to the existing shares while warrants technically can come in both put and call varieties for use in warrant coverage they almost always are calls one reason a company might issue warrants is to attract more capital for example if it cannot issue bonds at a satisfactory rate or amount warrants attached to a bond can make them more attractive to investors often warrants are seen as speculative one of the best examples of warrant coverage took place during the financial crisis of 2008 wall street giant goldman sachs needed to increase capital and raise the perception of its financial health goldman sold 5 billion of preferred stock to warren buffett s berkshire hathaway inc the warrants to purchase 5 billion of common stock with a strike price of 115 per share had a five year maturity goldman s shares were trading near 129 at that time giving berkshire an instant although not guaranteed profit 1example of warrant coveragefor example an investor purchases 1 000 000 shares of stock at a price of 5 per share totaling a 5 000 000 investment the company grants a 20 warrant coverage and issues to the investor 1 000 000 in warrants in technical terms the company guarantees 200 000 additional shares at an exercise price of 5 per share issuing warrants does not give the investor any additional downside protection as the underlying shares would be issued at the same price they paid for the stock however the warrant coverage would give the investor additional upside if the company goes public or is sold at a price above 5 per share | |
what is a warrant coverage on a convertible note | on a convertible note a warrant coverage allows the holder to purchase additional shares of a company the amount that is allowed to be purchased is a percentage based on the loan principal | |
what is a 10 warrant | warrant coverage is a percentage based on the principal amount of the loan as opposed to the value of the company for example a 10 warrant coverage on a 1 000 000 loan equals 100 000 in warrants | |
why do companies issue warrants | companies issue warrants in order to raise capital when a company sells a warrant it receives payment if stocks are purchased using the warrant at a later date then the company also receives money | |
what is a warrant premium | a warrant premium is the difference between the current traded price of a warrant and its minimum value a warrant s minimum value is the difference between its exercise price and the current traded price of its underlying stock alternatively a warrant premium is the percentage difference between the cost of purchasing shares by exercising a warrant and buying them in the open market at the current price rizwan tabassum getty imagesunderstanding a warrant premiumwarrants have both a price and a premium typically the premium will decrease as the price of the warrant rises coupled with the decrease in the time to expiration a warrant is in the money itm when the exercise price is less than the current share price the more in the money the warrant is the lower the warrant premium high volatility may also cause the warrant premium to be higher as with call options the premium can increase or decrease depending on supply and demand factors calculating the warrant premiumfor the simple definition the premium is the amount above the intrinsic or minimum value example of warrant premiumin this example if the warrant price is 10 the exercise price is 25 and the current share price is 30 then the warrant premium would be 10 30 25 5 for the second calculation the premium expressed as a percentage is the difference between buying warrant shares vs buying shares through the open market for example an investor holds a warrant with a price of 10 and an exercise price of 25 the current share price is 30 the warrant premium would be 10 25 30 30 100 16 7 warrants tend to trade at premiums because traders believe that the underlying stock can increase in price therefore the longer the time until expiration the longer the stock has to rise however as with options as expiration approaches the premium shrinks difference between options and warrantsa warrant is similar to a call option it gives the owner the right but not the obligation to buy an underlying security at a specific price quantity and at a future time warrants are unlike an option in that it is issued by a company whereas an option is an instrument of the stock exchange the security represented in a warrant usually share equity is delivered by the issuing company instead of by an investor holding the shares traders cannot write warrants companies will often include warrants as part of a new issue offering to entice investors into buying the new security while most listed options have a maximum expiration term of one to three years warrants may have expiries of up to 15 years or more | |
how do warrants differ from company stock | warrants are sometimes given by companies to their employees as a form of equity compensation known as employee stock options eso because they are options contracts they do not pay dividends nor have any voting rights the warrants however may be exercised and converted into shares | |
what is a warrant sweetener | sometimes a company will attach warrants to other securities that it issues in order to raise capital making the issue more attractive to investors for example a warrant may be attached wedded to corporate bonds or preferred shares this is known as a sweetener | |
how can warrants dilute earnings per share eps | earnings per share eps is a key metric followed by investors and analysts it is computed as a company s net income for a certain period divided by the number of shares outstanding warrants however can have a dilutive effect in that these contracts represent potential new shares that are not yet available therefore fully diluted eps is often preferred which takes into account all potential new shares that could be brought about through warrants other employee stock compensation and convertible securities investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is a warranty | a warranty is a guarantee or promise made by a manufacturer or similar party regarding the condition of their product a warranty also refers to the terms and situations in which repairs refunds or exchanges will be made if the product does not function as originally described or intended warranties offer consumers some assurance that the goods and services they purchase are as advertised | |
how warranties work | as noted above warranties are promises made by manufacturers or retailers about their products and services these promises can be either explicit or implied warranties provide a guarantee about the condition of goods and services purchased providing an assurance that they are as advertised they are generally only good for a specified period when that period ends the issuing entity is no longer obligated to repair or replace a product previously covered warranties usually have exceptions that limit the conditions in which a manufacturer is obligated to rectify a problem for example many warranties for common household items only cover the product for up to one year from the date of purchase generally they are covered only if the product has problems due to defective parts or workmanship as a result of these limited manufacturer warranties many vendors offer extended warranties extended warranties are essentially insurance policies for products that consumers pay for upfront coverage will usually last for several years above and beyond the manufacturer s warranty and is often more lenient in terms of limited terms and conditions home warranties can provide discounted repair and replacement services for household appliances and systems and the best home warranties offer a range of plans depending on the coverage you want special considerationsthe u s congress passed the magnuson moss warranty act of 1975 to set standards and rules for consumer product warranties to protect consumers from fraud and misrepresentations 1the act stipulates that the terms and conditions of warranties must be fully and clearly disclosed to the buyer before purchase including whether it is a full or limited warranty it also prohibits deceptive practices such as the inclusion of misleading or false terms or requiring the buyer to purchase another product to validate the warranty in addition to what the manufacturer guarantees in an express warranty the uniform commercial code ucc provides additional consumer protection by providing the implied warranty of merchantability this warranty guarantees remedy if the product fails to perform as designed 2warranty terms can vary from free repairs on the defective product to complete replacement the owner may be instructed to bring the product to the nearest authorized repairman the seller or ship it to the manufacturer types of warrantiesthere are two general types of warranties expressed and implied each category has different sub types of warranties with terms conditions and guarantees as its name suggests an express warranty is an expressed guarantee from a seller or manufacturer to a buyer that the purchased product performs according to certain specifications if defects are present the seller agrees to repair or replace the defective product the warranty can be expressed in writing or verbally in advertising on the product or through other means all expressed guarantees are not warranties for example if a retailer claims that its mattresses will give you the best night s sleep ever they are not issuing a guarantee that it will deliver upon that statement it is considered puffery which is a form of exaggerated language used to advertise a product and attract customers it can be reasonably assumed that this claim is based only on the opinion of the person making the statement in an attempt to promote the product an implied warranty which is also called an implied warranty of merchantability is a guarantee that the purchased product functions in the manner designed it need not be expressed to be valid this guarantee is implied unless it is explicitly excluded typical of as is sales implied warranties also apply when sellers present and sell a product fit to fulfill a specific purpose the buyer relies on the seller s expertise to purchase the product any statements made by the seller regarding the product can be considered assurances there are many different warranty subtypes but the most common are extended warranties and special warranty deeds denied warranty claimseven though manufacturers and retailers may offer warranties there are instances where they may not honor these promises we ve outlined a few of these below warranties are meant to guarantee the condition of products and services as they are when they are purchased this means that they typically only apply to products that have not been altered or modified after they were purchased for example car enthusiasts enjoy changing engines or making other enhancements to a vehicle s drivetrain to coax a particular type of performance many modifications can nullify the vehicle s warranty coverage of the modified and affected components because they can affect the vehicle s reliability in ways for which the dealer and manufacturer are not responsible each company has a unique process for addressing warranties even if a product is within the timeframe designated by a warranty the company may require multiple proof points to show that the product failed in normal use if the product failed because of the owner s actions rather than a fault in the design or manufacturing the warranty is not likely to be honored for instance the owner might have placed the product in an extreme environment that was too hot or too cold for its reasonable use warranty vs guaranteethe terms warranty and guarantee are often used interchangeably but there are subtle differences between the two both require sellers to act on certain promises they make to consumers about their offerings however the difference lies in the level of confidence the manufacturer expresses regarding the product s quality and functionality a warranty is a guarantee from a seller that if their product fails to meet certain specifications a remedy is available a warranty describes the conditions in which the seller is liable and what conditions are excluded although the buyer does not pay a separate cost for the warranty the warranty price is included in the product s price a guarantee on the other hand is a promise or assurance from the manufacturer or seller that the product will work as described or meet specific quality standards if it doesn t the manufacturer will fix or replace it guarantees are of no cost to the buyer and can be offered for both products and services foreign companies are subject to the magnuson moss warranty act if their deceptive practices are likely to cause injury within the united states 3resolving warranty disputesunderstandably it is easy to become confused with the coverage a warranty provides because of the language used in it however if you believe a warranty covers an issue here are some steps you can take before a sale sellers must provide written warranties to consumers for products that cost more than 15 5warranty tipsas a consumer there are some things you can do to minimize warranty issues | |
how does a warranty work | a warranty is a guarantee issued by a seller to a buyer that a product will meet certain specifications if the product does not meet those specifications the buyer can ask the manufacturer or seller to correct the problem certain exceptions apply and not every defect is covered the terms and conditions of the warranty depend on the type of warranty covering the product | |
what does having a warranty mean | a warranty means that a manufacturer or seller will replace or repair an item under specific conditions and circumstances generally the conditions and covered issues are outlined in the warranty document | |
what are the 3 types of warranties | there are two types of warranties express and implied each has sub types intended for different circumstances and products | |
what is an example of a warranty | imagine you purchase a new television in the box with the instructions you find a document that explains what the manufacturer will do if you experience specific issues within a certain time frame the bottom linea warranty is a guarantee from a manufacturer or seller that defective products will be repaired or replaced the warranty sets forth the terms and conditions to which the warranty applies as well as exclusions there are two types express and implied with many sub types in each category designed for specific products and services in the u s the magnuson moss warranty act and the ftc s uniform commercial code provide rules on consumer product warranties 16 if you experience a problem covered by a warranty contacting the seller or manufacturer is the first step to resolving the issue you can contact the ftc or file a lawsuit if they can t or won t fix a matter covered by the warranty | |
what is a warranty deed | a warranty deed is a legal real estate document that protects the buyer and ensures that the seller holds a clear title to the property has no outstanding liens or mortgages and there will be no future claim to the title of the property the two parties involved in a warranty deed are the seller known as the grantor and the buyer or the grantee and either party can be an individual or a business most lenders require a warranty deed for properties they finance | |
how warranty deeds work | a deed is a legal document that transfers real estate property from one entity to another as a seller to a buyer during a real estate transaction a title company provides a full title search of current and past ownership of the property to see if there are any defects or issues affecting the title during past ownership of the property a warranty deed holds the seller or grantor responsible for any breach after the title search even if the breach occurred without their knowledge or during a period before the grantor owned the property it ensures that the buyer will not be responsible for any past title defects or encumbrances the warranty deed is delivered to the grantee during the closing of the sale it contains an accurate legal description of the property being conveyed is signed and witnessed following the state law where the property is located contains legal words of conveyance that the seller is granting the property to the buyer and shows proof of the amount of money or consideration paid for the property types of warranty deeds the grantor warrants that they are the rightful owner of the property and have the legal right to transfer the title of the property in a sale the grantor warrants that the property is free and clear of all liens and that there are no outstanding claims on the property from a creditor who may claim it as collateral a guarantee that the title can withstand any third party claims to ownership of the property conveys that the grantor holds the title and there has been no encumbrance of the property during the grantor s ownership period of the property the grantor does not guarantee against any defects in clear title that existed before they took possession of the property | |
how to get a warranty deed | a real estate agent or real estate lawyer can help both buyers and sellers obtain a warranty deed whether buying or selling a property a warranty deed can guarantee against problems with the title as a seller or grantor having a warranty deed in place will give potential buyers some assurance concerning the property a buyer will likely look for the highest level of protection and peace of mind when investing in real estate if there are no outstanding liens or claims on the title of the property a warranty deed can lead to a mutually successful transaction other types of deeds | |
what is the difference between title insurance and a warranty deed | a title company completes a title search and examines public records for any issues or errors the guarantees and disclosures in a general warranty deed allow the new owner to hold the former owner responsible if there is a title defect or if a claim is made against the title title insurance covers a wider range of potential claims than the general warranty deed does including conflicting estate wills or tax liens | |
what are examples of claims that are protected by warranty deeds | a buyer or new owner will be protected from previous owner s fines issued because of code violations or if a previous owner failed to pay hoa fees | |
what is warranty of title | a warranty of title is a guarantee by a seller to a buyer that the seller has the right to transfer ownership and no one else has rights to the property in addition a warranty of title may be used to guarantee that no other party has copyright patent or trademark rights in the property being transferred understanding warranty of titlea formal warranty of title is included in a warranty deed which is used to transfer property in a sale legally this document guarantees that the seller has the legal right to transfer the property and that no other entity such as the internal revenue service or an ex spouse has a lien against or claim to the property a warranty deed s warranty of title protects the buyer s interests and gives the buyer legal recourse if any entity later tries to make a claim to the property other types of deeds such as a quitclaim deed do not provide a warranty of title there is no guarantee of a clear title but the grantor effectively signs away their interest in the property if a question of ownership arises later the buyer would not have the protections that a warranty of title would grant | |
how a warranty of title is used to confirm a transaction | a warranty of title is automatic in most sales but if the seller is acting as a representative no warranty of title may exist this situation might arise in an auction a sheriff s sale or an estate sale in these cases the person selling the property is not its owner and therefore may not be aware of any other entity s rights in that property warranty of title can give the buyer of a property legal recourse to sue the seller if there is a claim or issue attached to the property for example an heir of a prior owner may have an unresolved claim to the property that was not made known by the seller the buyer could pursue litigation to recoup the money they put toward the purchase along with damages other risks to completing a transaction can include ongoing disputes about the boundaries that define the property the owners of the adjacent real estate might claim the property lines are different from what the seller presented to the buyer liens for unpaid bills and taxes could exist further complicating the transaction if the property is completely free of impairments and ownership is properly established then the property a clear title and the seller can offer a warranty of title without any encumbrances | |
what is the warsaw stock exchange | the warsaw stock exchange wse is the largest stock exchange in central and eastern europe and one of the most recognized financial institutions in poland it runs financial and commodities markets to trade instruments such as company shares bonds derivatives and spot and forward contracts for electricity and natural gas 1 understanding the warsaw stock exchange wse capital markets in poland date to 1817 when the warsaw mercantile exchange was founded in 1991 the state treasury created the warsaw stock exchange as a joint stock company following the overthrow of poland s communist regime in 1989 the wse was established as a modern stock exchange with electronic trading and dematerialized registration of securities 2 trading began on april 16 1991 five formerly state owned enterprises were listed tonsil pr chnik krosno kable and exbud 5 as of april 2021 the wse listed 432 companies on its main and parallel markets representing roughly 1 1 trillion pln in market capitalization 4 the wse is the biggest exchange in central and eastern europe it operates two main businesses a financial market and a commodities market the financial market trades in equities derivatives and bonds the commodity market trades in spot and forward contracts for electricity and natural gas in addition to carbon emission allowances commodities trading contributes about 40 of group revenue 3 many economists expect that eastern europe will continue to be an area of rapid growth and the wse will benefit from the increased investment the wse s stated mission is to provide a competitive exchange and clearing services support economic growth and ensure high standards and safety of trading practices 6 the exchange operates monday through friday with most equities sessions starting at 9 a m and concluding at 4 50 p m derivatives products start trading at 8 45 a m while other investment products start at 9 05 a m 7 corporate social responsibilityinitiated by the wse in 2009 the respect index is central and eastern europe s first index of socially responsible businesses it covers companies from poland and around the world that are listed on the wse main market which follow the highest standards in corporate governance and disclosure while also taking into account environmental and social principles 8 companies in the index are screened by the wse and the association of listed companies seg in a three step review of these factors and are audited by the project partner 8 | |
what is a wash | a wash is a series of transactions that result in a net sum gain of zero an investor for example can lose 100 on one investment and gain 100 in another investment that s a wash but the tax implications can be complicated for the investor a wash is also referred to as a break even proposition understanding a wash | |
when it s a wash two transactions cancel each other out effectively creating a break even position | if a company spends 25 000 to produce merchandise and sells it for 25 000 the result is a wash if an investor loses 5 000 on the sale of an investment and gains 5 000 from the sale of another the transaction has been washed that s simple enough but the irs has complicated tax rules regarding wash sales by investors and they are related to the claiming of losses on investments specifically the rules prevent an investor from claiming a loss if they sell a security at a loss and then repurchase the same security or one that is substantially identical within 30 days 1for example say an investor buys 100 shares of anheuser busch bud stock for 10 000 just six weeks later the value of the 100 shares declines to 7 000 the investor sells all 100 shares hoping to deduct the capital loss of 3 000 at tax time but then a week later decides bud is a real bargain and buys 100 shares again the initial loss cannot be claimed for tax purposes since the same security was repurchased within the limited time interval an investor can t sell a stock at a loss buy the same stock again within 30 days and still claim the loss as a deduction however the loss realized from a wash is not completely wasted the loss can be applied to the cost basis of the second purchase of bud that increases the cost basis of the purchased securities and therefore will reduce the size of any future taxable gains when the stock is sold the benefit of the wash has been delayed but it hasn t disappeared in addition the holding period of the wash securities is added to the holding period of the replacement securities in this example the investor has added six weeks to the holding period of that stock making it that much easier to qualify for the most favorable tax rate on long term capital gains stock must be held for one year to qualify for that lower tax rate | |
when a wash is illegal | some wash sales are illegal because they resemble a pump and dump scheme for example an investor cannot buy a stock using one brokerage firm and then sell it through another brokerage firm for the purpose of stimulating investor interest | |
what is a wash out round | a wash out round also known as burn out round or cram down deal is when a round of new financing usurps control of previous equity holders when such financing is done the new issuance drastically dilutes the ownership stake of previous investors and owners new investors are thus able to take control of the company because the previous owners are in desperate need of more financing to avoid bankruptcy wash out rounds are most often associated with smaller companies or with startup ventures that lack financial stability or a strong management team understanding wash out roundsin many cases a wash out round of financing is offered with the intent of seizing control of a company perhaps to gain access to assets new investors and management believe they can leverage the round usually prices shares at such a diminished value and for such an overwhelming interest in the company that the stake held by prior investors and owners may be deemed to be near worthless the ratio of returns may vary but typically the financing is priced in such a way to force prior owners to submit to the decisions of the new backers for struggling ventures the wash out round is often the final financing opportunity available to entrepreneurs before a company is forced into bankruptcy wash out rounds often occur when companies are unable to achieve performance levels that have been set in order to receive additional financing from investors numerous wash outs for example occurred during the dotcom craze of the late 1990s when many companies were significantly overvalued the effect of a wash out roundit is possible that some of the company s previous management might remain with the company however there is a high propensity for the leadership to be removed in a wash out round with consideration to the overall performance of the business the leadership decisions that led to the need for a wash out round make it unlikely that new owners would desire to maintain the status quo for sake of brand recognition it is plausible that some elements of the prior management and operations could be retained however the new owners might find that the best return on investment for a wash out round is to find buyers for assets of the company such as intellectual property product lines or customer databases wash out rounds can occur with companies that built up their valuation but suffered either a sudden or gradual turn of events that nullified the prospects to grow under its current operations and management for instance if the core product of a company that develops a medical device or novel biomedicine is rejected by regulators the company might not have another substantial product prepared to take its place likewise if a service provided fails to reach the market penetration level it needs to generate profits it might not achieve its revenue growth goals these circumstances can leave the companies looking for wash out round financing that as a last resort could salvage the brand | |
what is a wash sale | a wash sale is a transaction in which an investor sells or trades a security at a loss and purchases a substantially similar one 30 days before or 30 days after the sale 1 this is a rule enacted by the internal revenue service irs to prevent investors from using capital losses to their advantage at tax time the wash sale rule applies to stocks contracts options and all other types of securities and trading understanding a wash salemany countries tax laws allow investors to claim a specific amount of capital losses on their taxes as an income reduction in the u s you can claim up to 3 000 or your total net loss whichever is less if you have more than 3 000 in capital losses you can carry the additional loss forward into the following years 2the ability to carryover losses led to investors inventing a loophole where they would plan to sell a losing security and buy it again within a short period this allowed them to claim a capital loss and use that loss to mitigate tax liabilities to prevent the abuse of this incentive the internal revenue service irs instituted the wash sale rule in the u s in the u k the practice is known as bed and breakfasting and the tax rules in the u k have an implementation similar to the wash sale rule the law states that if an investor buys a security within 30 days before or after selling it any losses made from that sale cannot be counted against reported income this effectively removes the incentive to do a short term wash sale generally a wash sale has three parts day traders especially pattern day traders those that execute more than four day trades over a five day period in a margin account may encounter wash sales regularly the wash sale rule still applies to these traders the tax implications for day traders are complex so it s best to consult a tax professional if you re day trading wash sale exampleassume an investor has a 15 000 capital gain from the sale of abc stock they fall in the highest tax bracket and must pay a 20 capital gains tax of 3 000 but let s say they sold xyz security for a loss of 7 000 the net capital gain for tax purposes would be 15 000 7 000 8 000 which means they ll have to pay only 1 600 in capital gains tax notice how the realized loss on xyz reduces the gain on abc reducing the investor s tax bill however if the investor repurchases xyz stock or a stock substantially identical to xyz within 30 days of the sale the above transaction is counted as a wash sale and the loss is not allowed to offset any gains the irs does not ordinarily consider bonds and preferred stock of an issuing company to be substantially identical to the company s common stock however there may be circumstances where preferred stock for example may be considered substantially identical to the common stock this would be the case if the preferred stock is convertible into common stock without any restriction has the same voting rights as the common stock and trades at a price close to the conversion ratio per revenue ruling 2008 5 ira transactions can also trigger the wash sale rule if shares are sold in a non retirement account and substantially identical shares are purchased in an ira within 30 days the investor cannot claim tax losses for the sale nor is the basis in the individual s ira increased 3reporting a wash sale lossthe good news is that any loss realized on a wash sale is not entirely lost instead the loss can be applied to the cost basis of the most recently purchased substantially identical security not only does this addition increase the cost basis of the purchased securities but it also reduces the size of any future taxable gains as a result thus the investor still receives credit for those losses but at a later time also the holding period of the wash sale securities is added to the holding period of the repurchased securities which increases an investor s odds of qualifying for the 15 favorable tax rate on long term capital gains tax loss harvesting can inadvertently lead to wash sales if not carefully managed tax loss harvesting is the strategy of selling securities at a loss to offset a capital gains tax liability elsewhere and then buying back a replacement security to maintain the existing portfolio s overall composition the objective is to lower your overall tax bill by realizing those losses however if you re not careful about how you replace the securities you ve sold you can trigger the wash sale rule to avoid this investors often look for alternative investments that are similar but not substantially identical | |
are wash sales illegal | a wash sale is not illegal there is no wording that states you cannot sell a security and purchase a substantially similar one 30 days before or after the sale the rule only makes it so you can t claim a loss on the sale in that year s tax filing | |
is a wash sale window 30 or 60 days | a wash sale is a total of a 60 day window starting from 30 days before the sale to 30 days after the sale | |
how do i avoid a wash sale | if you have sold or intend to sell a security at a loss you can avoid triggering the wash sale rule by purchasing a similar instrument 31 days or more before or after the sale the bottom linea wash sale occurs when an investor sells a security at a loss and then purchases the same or a substantially similar security within 30 days before or after the transaction this rule is designed to prevent investors from claiming capital losses as tax deductions if they re enter a similar position too quickly while not illegal wash sales have negative tax implications losses from such sales cannot be used to offset gains in the same tax year however these losses can be added to the cost basis of the newly purchased security affecting future gains this rule is relevant to all types of securities and trading and it s particularly significant for day traders and investors looking to use capital losses to mitigate tax liabilities understanding and navigating the wash sale rule is crucial for effective tax planning and investment strategy correction oct 14 2022 a previous version of this article misleadingly stated that a wash sale occurred when selling a security at a loss for a tax benefit it also incorrectly stated that an investor could not purchase the same or similar security within the 60 day window of 30 days before or 30 days after selling it | |
what is a wash sale | a wash sale is a transaction in which an investor sells or trades a security at a loss and purchases a substantially similar one 30 days before or 30 days after the sale 1 this is a rule enacted by the internal revenue service irs to prevent investors from using capital losses to their advantage at tax time the wash sale rule applies to stocks contracts options and all other types of securities and trading understanding a wash salemany countries tax laws allow investors to claim a specific amount of capital losses on their taxes as an income reduction in the u s you can claim up to 3 000 or your total net loss whichever is less if you have more than 3 000 in capital losses you can carry the additional loss forward into the following years 2the ability to carryover losses led to investors inventing a loophole where they would plan to sell a losing security and buy it again within a short period this allowed them to claim a capital loss and use that loss to mitigate tax liabilities to prevent the abuse of this incentive the internal revenue service irs instituted the wash sale rule in the u s in the u k the practice is known as bed and breakfasting and the tax rules in the u k have an implementation similar to the wash sale rule the law states that if an investor buys a security within 30 days before or after selling it any losses made from that sale cannot be counted against reported income this effectively removes the incentive to do a short term wash sale generally a wash sale has three parts day traders especially pattern day traders those that execute more than four day trades over a five day period in a margin account may encounter wash sales regularly the wash sale rule still applies to these traders the tax implications for day traders are complex so it s best to consult a tax professional if you re day trading wash sale exampleassume an investor has a 15 000 capital gain from the sale of abc stock they fall in the highest tax bracket and must pay a 20 capital gains tax of 3 000 but let s say they sold xyz security for a loss of 7 000 the net capital gain for tax purposes would be 15 000 7 000 8 000 which means they ll have to pay only 1 600 in capital gains tax notice how the realized loss on xyz reduces the gain on abc reducing the investor s tax bill however if the investor repurchases xyz stock or a stock substantially identical to xyz within 30 days of the sale the above transaction is counted as a wash sale and the loss is not allowed to offset any gains the irs does not ordinarily consider bonds and preferred stock of an issuing company to be substantially identical to the company s common stock however there may be circumstances where preferred stock for example may be considered substantially identical to the common stock this would be the case if the preferred stock is convertible into common stock without any restriction has the same voting rights as the common stock and trades at a price close to the conversion ratio per revenue ruling 2008 5 ira transactions can also trigger the wash sale rule if shares are sold in a non retirement account and substantially identical shares are purchased in an ira within 30 days the investor cannot claim tax losses for the sale nor is the basis in the individual s ira increased 3reporting a wash sale lossthe good news is that any loss realized on a wash sale is not entirely lost instead the loss can be applied to the cost basis of the most recently purchased substantially identical security not only does this addition increase the cost basis of the purchased securities but it also reduces the size of any future taxable gains as a result thus the investor still receives credit for those losses but at a later time also the holding period of the wash sale securities is added to the holding period of the repurchased securities which increases an investor s odds of qualifying for the 15 favorable tax rate on long term capital gains tax loss harvesting can inadvertently lead to wash sales if not carefully managed tax loss harvesting is the strategy of selling securities at a loss to offset a capital gains tax liability elsewhere and then buying back a replacement security to maintain the existing portfolio s overall composition the objective is to lower your overall tax bill by realizing those losses however if you re not careful about how you replace the securities you ve sold you can trigger the wash sale rule to avoid this investors often look for alternative investments that are similar but not substantially identical | |
are wash sales illegal | a wash sale is not illegal there is no wording that states you cannot sell a security and purchase a substantially similar one 30 days before or after the sale the rule only makes it so you can t claim a loss on the sale in that year s tax filing |
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