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what is an offering memorandum | an offering memorandum is a legal document that states the objectives risks and terms of an investment involved with a private placement this document includes items such as a company s financial statements management biographies a detailed description of the business operations and more an offering memorandum serves to provide buyers with information on the offering and to protect the sellers from the liability associated with selling unregistered securities understanding an offering memoranduman offering memorandum also known as a private placement memorandum ppm is used by business owners of privately held companies to attract a specific group of outside investors for these select investors an offering memorandum is a way for them to understand the investment vehicle offering memorandums are usually put together by an investment banker on behalf of the business owners the banker uses the memorandum to conduct an auction among the specific group of investors to generate interest from qualified buyers an offering memorandum while used in investment finance is essentially a thorough business plan in practice these documents are a formality used to meet the requirements of securities regulators since most sophisticated investors perform their extensive due diligence offering memorandums are similar to prospectuses but are for private placements while prospectuses are for publicly traded issues example of an offering memorandumin many cases private equity companies want to increase their level of growth without taking on debt or going public if for example a manufacturing company decides to expand the number of plants it owns it can look to an offering memorandum as a way to finance the expansion when this happens the business first decides how much it wants to raise and at what price per share in this example the company needs 1 million to fund its growth at 30 per share the company begins by working with an investment bank or banker to draft an offering memorandum this memorandum complies with securities laws outlined by the securities and exchange commission sec after compliance is met the document is circulated among a specific number of interested parties usually chosen by the company itself this is in stark contrast to an initial public offering ipo where anyone in the public can purchase equity in the company the offering memorandum tells the potential investors all they need to know about the company the terms of the investment the nature of the business and the potential risk of the investment the document almost always includes a subscription agreement which constitutes a legal contract between the issuing company and the investor offering memorandum vs summary prospectuswhile an offering memorandum is used in a private placement a summary prospectus is the disclosure document provided to investors by mutual fund companies before or at the time of sale to the public this written document is an abridged version of the final prospectus that allows investors to see pertinent information regarding the fund s investment objectives and goals sales charges and expense ratio focused investment strategy and data on the fund s management team relevant tax information and broker compensation are also included in the disclosure document a summary prospectus provides investors the information they need from the final prospectus quickly and in plain english | |
what is an offering price | an offering price generally is the price at which something is offered for sale in finance and investments the offering price most often refers to the per share value at which publicly issued securities are made available for purchase by the investment bank during an initial public offering ipo underwriters analyze numerous factors when attempting to determine the ideal price for a security s offering the underwriter s fee and any management fees applicable to the issue are typically included in the price understanding offering pricesthe term offering price is most often used in reference to the process of issuing securities such as stocks bonds mutual funds and other investments that are bought and sold in financial markets for example a stock quote includes a bid and offer the bid is the current price that an investor can sell shares and the offer which is also called the ask price is how much it costs to buy shares in the context of an ipo a lead manager of the underwriting sets the offering price ideally an investment bank assesses the current and near term values of the underlying company and sets an offering price that is fair to the company relative to capital in order to attract sufficient buying interest when the offering becomes available to the public the price must also be fair to investors in terms of potential value the public offering price pop is the price at which new issues of stock are offered to the public by an underwriter because the goal of an ipo is to raise capital for the issuer underwriters must determine an offering price that will be attractive to investors when underwriters determine the public offering price they look at factors such as the strength of the company s financial statements how profitable it is public trends growth rates and investor confidence setting the offering price may look more like hollywood scriptwriting than high finance especially when high profile companies go public the underwriting syndicate handling the ipo wants to set the offering price high enough that the company is satisfied with the amount of money raised but just low enough that the opening price and the trading on the first few days of listing provide a nice ipo pop as the public finally gets a chance at shares offering price and opening pricethe offering price was and sometimes still is referred to as the public offering price this is a bit misleading as almost no individual investors are able to purchase an ipo at the offering price the syndicate generally sells all the shares at the offering price to institutional and accredited investors the opening price is thus the first opportunity for the public to purchase shares and it is set purely by supply and demand as buy and sell orders queue up for the first day of trading shares of an ipo can see some ups and downs from that point forward offerings and individual investorsindividual investors should not be too upset about missing out on the offering price because many ipos hit a patch of post ipo blues where they can be snapped up below the offering price as initial market expectations and a company s performance in reality finally collide indeed there are many examples where an offering price is set much higher than any intrinsic value can justify the high valuation is often based on the perceived market appetite for shares in the sector or industry a company operates in as opposed to the fundamentals of that particular company in that case the stock price in the market can fall and offer investors an opportunity to buy shares below the offering price | |
what is the office of foreign assets control ofac | the office of foreign assets control ofac is a department of the u s treasury that is charged with enforcing economic and trade sanctions imposed by the u s against countries and groups of individuals 1sanctions have been imposed on those involved in foreign aggression terrorist activities and narcotics sales among other acts the ofac was created in 1950 when china entered the korean war president harry truman declared the event a national emergency and froze all chinese and korean assets that were subject to u s jurisdiction ofac s predecessor was the office of foreign funds control ffc established in 1940 in response to the nazi invasion of norway 2 | |
how ofac works | ofac enforces sanctions that were imposed by the u s government based on its foreign policy and national security objectives according to this federal agency those policies are aimed at foreign nations terrorists and narcotics traffickers who pose a threat to the national security or economy of the u s this includes entities that stockpile weapons of mass destruction 1the agency s actions are usually authorized by congressional legislation however the president of the united states can use national emergency powers to perform certain actions such as freezing foreign assets that fall under u s jurisdiction 2in addition ofac imposes sanctions based on mandates by the united nations these are often carried out in cooperation with allied nations the use of sanctions and other punitive trade policies are used to persuade a nation or group to change some behavior that is seen as detrimental to the international community 2the policies are intended to disrupt the economy and everyday life of the nations or groups violating international norms it is a way to pressure a country to conform to acceptable standards of behavior short of actual armed conflict for example if a terrorist group is known to fund its activities through the sale of a commodity on the international market sanctions might be introduced to disrupt this revenue source ofac s efforts on this front could reduce the group s ability to support the training of new recruits and the acquisition of weapons a threat of sanctions currently exists against any nation or entity that seeks to interfere with a u s election 3nations under sanctionsif a belligerent country were to invade a neighboring country trade and other assets could be frozen ofac would take charge of enforcing these sanctions which might compel the belligerent country to halt its actions or at least agree to talks to end the conflict programs administered by ofac have included sanctions on iran north korea cuba syria and russia 4 the agency has taken action against individuals such as drug traffickers by blocking assets owned by the criminals 5another on the list is a 2018 executive order that threatens sanctions against any foreign nation that seeks to interfere with a u s election 6in 2023 the u s has a long list of countries under u s sanctions from the balkans to zimbabwe other sanctions relate to any nation or group conducting specific criminal activities such as cyber terrorism and narcotics trafficking 4sanctions on russiaone of the most widely known sanctions is against russia ordered in response to the russian incursion into ukraine that began in 2014 7in early 2022 additional sanctions were imposed on russia in response to russia s military aggression against ukraine 8 russia moved troops into the two separatist regions of eastern ukraine and engaged in military operations throughout the country u s president joe biden responded on feb 22 2022 by announcing sanctions that initially blocked two state owned russian financial institutions vnesheconombank and promsvyazbank and their subsidiaries which provide financing to the russian military 9 however on feb 24 2022 sanctions were expanded in scope to include other russian financial institutions including the two largest banks sberbank and vtb bank blocking access to the u s financial system 8sanctions were imposed prohibiting u s companies and individuals from buying both new and existing russian sovereign debt in the secondary market russian elites and their families have been financially targeted while export controls have been established to block russia s importing of technological goods 109 | |
what is the office of the comptroller of the currency | the office of the comptroller of the currency occ is a federal agency that oversees the execution of laws relating to national banks specifically it charters regulates and supervises national banks federally chartered savings associations and federal branches and agencies of foreign banks in the u s the comptroller of the currency appointed by the president and approved by the senate heads the occ | |
how the office of the comptroller of the currency occ works | founded through the national currency act of 1863 the occ monitors banks to guarantee they operate safely and meet all requirements the occ oversees several areas including capital asset quality management earnings liquidity sensitivity to market risk information technology compliance and community reinvestment the occ is an independent bureau within the department of treasury its mission statement verifies it is to ensure that national banks and federal savings associations operate in a safe and sound manner provide fair access to financial services treat customers fairly and comply with applicable laws and regulations congress does not fund the office of the comptroller of the currency instead funding is from national banks and federal savings associations who pay for examinations and processing of their corporate applications the occ also receives revenue from its investment income which is primarily from u s treasury securities the agency is headed by the senate confirmed comptroller for a five year term the comptroller also serves as director of the federal deposit insurance corporation fdic and neighborworks america occ structurethe occ has four district offices field and satellite offices nationwide and an examining office in london 1 the staff of bank examiners conducts on site reviews of national banks and federal savings associations or thrifts they provide supervision by analyzing the institution s loan and investment portfolios funds management capital earnings liquidity and sensitivity to market risk examiners also review internal controls and compliance with applicable regulations and laws and evaluate management s ability to identify and control risk power of the occthe office of the comptroller of the currency has the power to approve or deny applications for new charters branches capital and other changes in the banking structure they may take supervisory actions against banks under its jurisdiction for noncompliance with laws and regulations further the agency has the authority to remove officers and directors other responsibilities include the power to negotiate agreements to change a bank s practices impose monetary penalties and issue cease and desist orders following the dodd frank act the office of the comptroller assumed the responsibility for the ongoing examination supervision and regulation of federal savings associations during the same month the occ issued a final rule implementing several provisions of the dodd frank act including changes to facilitate the transfer of functions from the office of thrift supervision | |
what is the office of the superintendent of financial institutions osfi | the office of the superintendent of financial institutions osfi is an independent agency of the government of canada that is responsible for the supervision and regulation of banks insurance companies and trust and loan companies the agency also regulates private pension plans which are subject to federal oversight 1the agency s stated goals are to protect depositors policyholders the financial institution fi creditors and pension plan members while allowing financial institutions to compete and take reasonable risks 1understanding the osfithe osfi s mission is to maintain consumer confidence in the financial markets 1among its functions is to guarantee deposits through the canadian deposit insurance corporation cdic 2 it also reviews the pension plans of businesses to ensure that they are adequately funded 1overall the osfi is bound to advance and administer a regulatory framework that promotes the management of risk the osfi is tasked with monitoring and evaluating system wide or sectoral issues that may negatively impact financial institutions 1the office was founded on july 2 1987 by combining the department of insurance and the office of the inspector general of banks a law passed in 1996 further defined the role of the office indicating that its primary responsibilities are to minimize losses to individuals and to maintain public confidence in the canadian financial system 3osfi reports to the canadian minister of finance 1preventing banks from failing is not part of the agency s directive however the office does support sound business practices which helps reduce the likelihood that a bank will fail 1osfi supervises institutions and pension plans to make sure they are in good financial health the agency ensures that the plans meet minimum funding requirements and are abiding by their governing laws and supervisory requirements 1osfi is expected to provide quick guidance to financial institutions and pension plans if they are found to have financial deficiencies the office may mandate that management boards or plan administrators take action to fix identified problems 1operating as an independent unit within the osfi is the office of the chief actuary this office provides a series of actuarial valuation and advisory services to the government of canada 1the current superintendent is peter routledge appointed june 29 2021 for a seven year term 4 his role is to represent canada on the financial stability board steering committee and the standing committee on supervisory and regulatory cooperation 56he also serves on the council of governors of the canadian public accountability board and the board of directors of the canada deposit insurance corporation 7the osfi also acts as an information hub for canadian financial institutions they periodically post important news and guidelines for the member banks as an example in january 2019 they issued an advisory on the increasing threats to cybersecurity osfi warned that these attacks may disrupt interconnected and global financial systems and businesses 8 | |
definition of the office of thrift supervision ots | the office of thrift supervision was a bureau of the u s treasury department that was responsible for issuing and enforcing regulations governing the nation s savings and loan industry in 2011 the ots was merged with other agencies including the office of the comptroller of the currency the federal deposit insurance corporation fdic the federal reserve board of governors and the consumer financial protection bureau cfpb 1understanding the otsthis bureau was responsible for ensuring the safety and soundness of deposits in thrift banks it did this by auditing and inspecting the banks to see if government regulations and policies were being adhered to | |
how the ots worked | the office of thrift supervision ots the successor to the federal home loan bank board was established by congress in 1989 as the primary federal regulator of all federal and state chartered savings institutions across the nation that belong to the savings association insurance fund saif 2 ots issued federal charters for savings and loan associations and savings banks this bureau adopted and enforced regulations to ensure that both federal and state chartered thrift institutions operated in a safe and sound manner according to the treasury department the ots was formed following the savings and loan s l crisis which began under the volatile interest rate climate of the 1970s when vast numbers of depositors withdrew their money from s l institutions and deposited them in money market funds to remain in business s ls began engaging in high risk activities to cover losses such as commercial real estate lending and investments in junk bonds depositors in s ls continued to funnel money into these risky endeavors because their deposits were insured by the federal savings and loan insurance corporation fslic widespread corruption and other factors led to the insolvency of the fslic the 124 billion bailout of junk bond investments and the liquidation of more than 700 s ls by the resolution trust corporation 3ots began enforcing stricter regulations as it shut down hundreds of troubled institutions the number of thrift banks has dwindled over the years from nearly 4 000 in the 1980s to less than 1 000 in 2018 thrifts are savings and loans associations thrifts also refer to credit unions and mutual savings banks that provide a variety of saving and loans services thrifts differ from commercial banks in that they can borrow money from the federal home loan bank system which allows them to pay members higher interest due to their charter thrifts are mandated to focus on housing related assets and must be members of the federal home loan bank system | |
what is an official settlement account | an official settlement account osa is a special type of account used in international balance of payments bop accounting to keep track of central banks reserve asset transactions with one other the official settlement account keeps track of transactions involving gold foreign exchange reserves bank deposits and special drawing rights sdrs essentially this type of account keeps track of transactions related to international reserves and central bank assets that are transferred among nations to settle either a balance of payment deficit or surplus understanding official settlement accountsosas are used in international balance of payments accounting and represent the current account and the capital account of central banks the current account keeps a record of a country s imports and exports of goods services income and transfers and whether the country is a net creditor or net debtor the capital account records the change in foreign and domestic investments government borrowing and private sector borrowing when there is either a balance of payments deficit or surplus inflows of reserve assets or outflows of reserve assets bring the ledger back into balance this is recorded in the official settlement account the bank for international settlements bis is an international financial institution that aims to promote global monetary and financial stability and maintains oversight of official settlement accounts the bis is sometimes called the central bank for central banks because it provides banking services to institutions such as the european central bank and federal reserve importance of official settlement accountosas are integral to a nation s balance of payments accounting which tracks its international transactions these accounts help monitor a country s financial health by recording inflows and outflows of foreign currency this data is vital for policymakers and central banks to make informed decisions regarding exchange rate policies trade regulations and monetary stability it can also be useful for manufacturers or distributors to understand how broader markets are performing second osas are essential for maintaining foreign exchange reserves governments hold these reserves in osas to ensure liquidity and stability in international trade this money can be used to stabilize exchange rates protect against speculative attacks and support domestic currency values in times of economic turbulence it can also be used in short term periods where quicker turnaround of needing foreign capital is needed last osas facilitate a country s ability to engage in international trade and finance by holding foreign currency in an osa nations can honor their international financial obligations and manage their external payments effectively this lets countries maintain their credibility in the global financial system and transact with essentially any other country it chooses around the world in july 2023 the u s international trade deficit increased from 63 7 billion to 65 billion 1monitoring an official settlement accountnations keep an eye on the official settlement account to gauge their economic health in the global economy if there are continual outflows of reserve assets for a country it means that its competitiveness in producing exported goods is relatively weak or it s business environment is not as attractive as that offered by other countries for direct foreign investment a nation running chronic current account deficits may then formulate policy prescriptions to improve the quality of its goods for export or seek exchange rate adjustments to make their exports more price competitive it also may try to create better conditions for international companies looking to build new factories abroad tax incentives infrastructure projects and workforce training programs could be promoted by a country to address unwanted outflows recorded in its official settlement account an example of the use of official settlement accounts is the exchange stabilization fund the fund is used to buy or sell currencies and all transactions require authorization from the secretary of the treasury 2official settlement account vs regular accountson the surface osas and regular bank accounts may appear similar however there are several key differences in their purpose ownership and functionality osas are reserved for government use and are primarily employed to manage a country s international transactions and foreign exchange reserves whereas generally any member of the public can set up a regular bank account osas are much more niche and not used by the general public for receiving income making payments or saving money another key distinction is in ownership osas are owned and operated by a government s central bank or treasury department making them public assets designed for official government transactions regular bank accounts on the other hand are privately owned by individuals or entities granting only the account holders control over their funds and transactions last the type assets held in these accounts differ osas often contain foreign currency reserves crucial for international trade and exchange rate management regular bank accounts primarily hold domestic currency used for shorter term deployment or long term savings | |
what types of transactions are recorded in an official settlement account | osas record a wide range of international transactions including imports and exports foreign debt payments foreign exchange market interventions and investments in foreign assets note that any given osa may include any single specific type of transaction above can a country have multiple official settlement accounts in different currencies yes some countries may maintain multiple osas in different currencies especially if they have significant international trade relationships with multiple countries in addition governments may have an osa for each specific type of transaction such as a debt payment account or exchange account | |
what is the relationship between the official settlement account and a country s exchange rate policy | osas play a key role in implementing a country s exchange rate policy if the national currency is depreciating the central bank can use foreign currency reserves to purchase its own currency which increases demand and can help strengthen the exchange rate conversely if the currency is appreciating too much and impacting exports the central bank can sell foreign currency to weaken the exchange rate can official settlement account balances be used to gauge a country s economic stability the balance in the osa is closely linked to a country s balance of payments which tracks all its international transactions a surplus in the osa indicates that a country is earning more foreign currency than it is spending which can be a sign of economic stability in addition a healthy osa with ample foreign exchange reserves can act as a financial cushion during times of economic crisis perhaps meaning that entity is in greater economic health the bottom lineofficial settlement accounts are specialized accounts typically managed by a country s central bank or treasury department designed to record and manage international financial transactions these accounts play a pivotal role in the country s balance of payments accounting allowing for the tracking of inflows and outflows of foreign currency | |
what is an official strike | an official strike is a work stoppage by union members that is endorsed by the union and that follows the legal requirements for striking such as being voted on by a majority of union members workers engaging in official strikes have better protections against being fired as opposed to an unofficial strike an official strike is usually undertaken by employees as a last resort in response to grievances an official strike may also be called an official industrial action a strike action or a strike understanding an official strikein the u s industrial labor relations are governed by the national labor relations board nlrb under the national labor relations act and other relevant laws ultimately the nlrb decides whether a strike complies with the requirements to be considered an official strike these laws grant workers the right to engage in protected concerted activity including strikes provided they follow the required legal processes laid out in the law and enforced by the nlrb an official strike is one that follows these processes and thus is legally recognized and protected under the law by the nlrb workers who engage in an official strike can enjoy protection from retaliation by their employer such as being disciplined or dismissed 1 strikes are undertaken as part of the collective bargaining process that goes on between labor unions and employers in order to determine wages benefits working conditions and in the case of public servants legislation governing said services generally union members will vote to go on strike when other bargaining tactics have failed when workers decide to strike without the approval of a union it is called a wildcat strike a wildcat strike may be undertaken when a union refuses to endorse a strike action or because the striking workers do not have a union such a strike may not offer workers the same protections as an official strike undertaken with formal union authorization typically striking workers refuse to go to work and may instead form a picket line outside the place of work in order to hinder the employer s normal business or stop strikebreakers from crossing the picket line to go to work sometimes workers conduct a strike by occupying the workplace but refusing to complete their normal tasks and also refusing to leave the premises such a strike is known as a sit down strike where employees are public servants picketing may take place not at the workplace but where lawmakers meet such as in the west virginia public school teachers strike of 2018 historical examplea famous official strike in the united states was the 1994 major league baseball strike which canceled the end of the regular season and the entire postseason 2 some of the replacement players who played during 1995 spring training when the strike had not yet ended remained in the major leagues but were not allowed union membership one reason this is important is union players receive a certain percentage of major league baseball revenues because mlb licenses players names and images for items like jerseys and baseball cards nonunion members do not receive this benefit | |
what is an offline debit card | an offline debit card is a type of automated payment card similar to a traditional online debit card that allows a cardholder to pay for goods and services directly from their bank account as it is not online there is a delay before the incurred cost is debited from the account and it does not require a pin for use it is similar to writing a check these types of cards are not common in the u s but are available in some foreign countries offline debit cards may also be known as check cards | |
how an offline debit card works | offline debit cards work in a similar way as traditional debit cards but can also be compared to the process of writing a check an offline debit card transaction creates a debit against the cardholder s bank account with delayed processing and only requires a signature rather than a pin number offline debit cards are issued by banks in partnership with a card network processing service provider such as visa or mastercard these cards are associated with a customer s bank account and are used for payments and are not available for making withdrawals or deposits from an atm offline debit card transactionsoffline debit cards will often have a maximum daily limit that is lower than a standard debit card if this is not the case the maximum amount is based on the funds held in the underlying bank account because this debit card is offline the bank account is not accessed directly meaning there s a delay of 24 to 72 hours before the amount of a purchase is debited from the account users of offline debit card transactions must still be cautious of returned payment fees and overdrafts while the processing time and services differ for offline debit cards in comparison to traditional debit cards the repercussions for payments with insufficient funds are still the same account holders can expect an overdraft fee for each transaction that is made with insufficient funds using an offline debit card in some cases vendors who offer preliminary acceptance of an offline debit card payment that is not fully authorized at settlement may also incur a returned payment fee offline debit card transactions do pose a risk for vendors as they are not certain the transaction will be fully completed until the processing is finished and accepted days later the vendor is susceptible to certain risks as the customer can charge the amount but perhaps the card is not valid or does not have the funds or the transaction is denied for some reason | |
what is an offset | an offset is a financial market strategy that requires a trader to take an opening position and then take a directly opposite position for example if you are long 100 shares of xyz selling 100 shares of xyz would be the offsetting position an offsetting position can also be generated through hedging instruments such as futures or options in the derivatives markets to offset a futures position a trader enters an equivalent but opposite transaction that eliminates the delivery obligation of the physical product that it represents the goal of offsetting is to reduce an investor s net position in an investment to zero so that no further gains or losses are experienced from that position in business an offset refers to the generation of gains in one business unit that makes up for losses in another unit | |
how an offset works | offsetting is used in several types of businesses its effect is to remove or limit liabilities businesses may offset losses in one business division by reallocating gains from another this allows the profitability of one activity to support the other activity for example a business that is successful in the smartphone market may decide to produce a tablet as a new product line the profits from smartphone sales can help offset the early losses associated with expanding into a new arena similarly companies with global sales may offset losses in one currency with gains in another one unit may have risk exposure to a decline in the swiss franc compared to the euro while another may benefit from a declining franc offsetting in derivatives contractsinvestors offset futures contracts and other investment positions to remove themselves from any associated liabilities almost all futures positions are offset before the terms of the futures contract are realized even though most positions are offset near the delivery term the benefits of the futures contract as a hedging mechanism are still realized a futures contract is an agreement to purchase a particular commodity at a specific price on a future date if a contract is held until the agreed upon date the investor could become responsible for accepting the physical delivery of the commodity in question the purpose of offsetting a futures contract on a commodity for most investors is to avoid having to physically receive the goods associated with the contract in the options markets traders often look to offset certain risk exposures sometimes referred to as their greeks for instance if an options book is exposed to declines in implied volatility long vega a trader may sell related options to offset that exposure or if an options position is exposed to directional risk a trader may buy or sell the underlying security to become delta neutral dynamic hedging or delta gamma hedging is a strategy employed by derivatives traders to maintain offsetting positions on an ongoing basis | |
why would i take an offset position | one definition of the word offset is something that serves to counterbalance or to compensate for something else in all of the businesses in which offsets are used they are employed to eliminate a loss or some other downside risk inherent in a previous decision 1 | |
what does it mean to offset a payment | an offset in a payment is a reduction in the total amount owed it occurs when one party successfully argues that the amount due should be reduced due to some compensation owed to the payer | |
what is a tax refund offset | if your tax refund is offset the federal government has seized a portion of your refund to put towards a state or federal debt you owe unpaid child support is an example 2the bottom lineif the initial investment was a purchase a sale in the same amount is made to neutralize the position to offset an initial sale a purchase is made to neutralize the position with futures related to stocks investors may use hedging to assume an opposing position to manage the risk associated with the futures contract for example if you wanted to offset a long position in a stock you could short sell an identical number of shares | |
what is an offset mortgage | an offset mortgage is a type of home loan that involves blending a traditional mortgage with one or more deposit accounts held by the same financial institution the savings balance maintained in the deposit account may then be used to offset the mortgage balance lowering interest payments due 1offset mortgages are standard in many nations such as the u k but are currently not eligible for use in the u s due to tax laws the closest alternative to an offset mortgage in the u s would be an all in one mortgage understanding offset mortgagesan offset mortgage is a desirable option for diligent savers the linked savings account will not earn interest during the life of the loan however most savings accounts are typically low earning accounts that pay only 1 to 3 per year or less the mortgage interest rate is usually substantially higher than the rate paid on the savings account so any savings there is a net benefit to the borrower also the foregone interest on the savings account becomes non taxable payments toward the mortgage 1the savings account is typically a non interest bearing account which allows the bank to earn a positive return on any balances held in the account the calculation of interest is on the remaining balance of the note less the aggregate amount of savings in one or more deposit accounts the borrower still has access to their savings account however the next mortgage payment will be calculated on a higher principal balance if the borrower withdraws funds from the account more than one savings account may link to the offset mortgage account and family members of the borrower can link their savings accounts to the mortgage account to reduce the amount of the principal and thus the interest on the remaining balance 2example of an offset mortgagethe smith family has an offset mortgage the principal is 225 000 with a 5 interest rate and the family has 15 000 held in savings with the same lender with no withdrawals during the last month calculation of the next interest payment on an offset loan would be based on the 210 000 balance which reflects the loan principal less the savings account balance 225 000 15 000 210 000 benefits of an offset mortgagean offset mortgage is an attractive option for paying back a mortgage loan primarily because the borrower can make small payments to pay down the principal instead of the interest as more funds apply toward the principal the loan balance reduces more rapidly at the same time because these payments are to the borrower s own savings account the borrower still has the use of their money if needed this flexibility gives the borrower all the benefits of paying back the mortgage quickly but also the benefits of saving money in an investment account 2 | |
what is an offsetting transaction | an offsetting transaction cancels out the effects of another transaction offsetting transactions can occur in any market but typically offsetting transactions refer to the options futures and exotic instrument markets an offsetting transaction can mean closing a transaction or taking another position in the opposite direction to cancel the effects of the first understanding offsetting transactionsin trading an offsetting transaction is an activity that in theory exactly cancels the risks and benefits of another instrument in a portfolio offsetting transactions are risk management tools that allow investors and other entities to mitigate the potentially detrimental effects that could arise if they cannot simply cancel the original transaction being unable to close a position frequently happens with options and other more complex financial trading instruments with an offsetting transaction a trader can close out a trade without having to acquire consent from the other parties involved while the original trade still exists there is no longer an effect on the trader s account from market moves and other events since options and most other financial instruments are fungible it does not matter which specific instrument is bought or sold to offset a position as long as they all have the same issuer strike and maturity features for bonds as long as the issuer insurance coupon call features and maturity are the same the specific bond that is bought or sold to offset a prior transaction does not matter what is important is that the trader by offsetting their position no longer has a financial interest in that instrument offsetting complex transactionsthe process of neutralizing a position becomes more involved in exotic markets such as with swaps with these specialized over the counter otc transactions there is no ready liquidity to merely buy or sell the equivalent but opposite instrument to offset a position here the trader must create a similar swap with another party counterparty risk may not be the same although all parties may agree to the same terms and conditions as the original swap there are other imperfect offsetting transactions including holding short and long positions in spot and futures markets example of an offsetting transaction in the options marketassume an investor writes a call option on 100 shares one contract with a strike price of 205 on apple inc aapl with a september expiration to offset this transaction before the september expiry the investor would need to buy an appl 205 strike with a september expiry call option this would precisely cancel the exposure to the original call option what they do not need to do is repurchase the options position from the exact person who bought it from them in the first place the trade no longer exists in the investor s account because they have offset it yet the person who originally bought the contract from them may still hold it in their account therefore the contract may still exist but only in one of the accounts | |
what is offshore | the term offshore refers to a location outside of one s home country the term is commonly used in the banking and financial sectors to describe areas where regulations are different from the home country offshore locations are generally island nations where entities set up corporations investments and deposits companies and individuals typically those with a high net worth may move offshore for more favorable conditions including tax avoidance relaxed regulations or asset protection although offshore institutions can also be used for illicit purposes they aren t considered illegal understanding offshoreoffshore can refer to a variety of foreign based entities accounts or other financial services in order to qualify as offshore the activity taking place must be based in a country other than the company or investor s home nation as such while the home base for a person or company may be in one country the business activity takes place in another put simply going offshore provides services to non residents in the simplest sense offshore can mean any location abroad any country territory or jurisdiction however the term has become widely synonymous with specific locations that have become popular for offshore business activity notably island nations like the cayman islands bermuda the channel islands and the bahamas other centers in landlocked countries including switzerland ireland and belize also qualify as popular offshore financial centers ofcs 1the level of regulatory standards and transparency differs widely among ofcs but they generally offer going offshore is common for companies and high net worth individuals hnwis for the reasons mentioned above they may also choose to bank and hold investments in a specific country offshore if they travel there frequently supporters of ofcs argue that they improve the flow of capital and facilitate international business transactions however critics suggest that offshoring helps hide tax liabilities or ill gotten gains from authorities even though most countries require that foreign holdings be reported going offshore has also become a way for more illicit activities including fraud money laundering and tax evasion as such there are increasing calls for ofcs to become more transparent with global tax authorities offshoring and tax avoidanceoffshoring is perfectly legal because it provides entities with a great deal of privacy and confidentiality however authorities are concerned that ofcs are being used to avoid paying taxes as such there is increased pressure on these countries to report foreign holdings to global tax authorities for instance the swiss are known for their strict privacy laws at one point swiss banks didn t even have names attached to bank accounts however switzerland agreed to turn over information to foreign governments on their account holders effectively ending tax evasion 23according to the organisation for economic co operation and development oced 108 countries automatically shared information about offshore accounts with tax authorities in 2023 this entailed the disclosure of 123 million accounts worth more than 12 trillion 4types of offshoringthere are several types of offshoring business investing and banking offshoring is often referred to as outsourcing when it comes to business activity this is the act of establishing certain business functions such as manufacturing or call centers in a nation other than where the company is headquartered this is often done to take advantage of more favorable conditions in a foreign country such as lower wage requirements or looser regulations and can result in significant cost savings for the business companies with significant sales overseas such as apple and microsoft may take the opportunity to keep related profits in offshore accounts in countries with lower tax burdens offshore investing can involve any situation in which the offshore investors reside outside the nation in which they invest this practice is mostly used by high net worth investors as operating offshore accounts can be particularly high it often requires opening accounts in the nation in which the investor wishes to invest some of the advantages of holding offshore accounts include tax benefits asset protection and privacy offshore investment accounts are generally opened in the name of a corporation such as a holding company or a limited liability company llc rather than an individual this opens up investments to more favorable tax treatment the primary downsides to offshore investing are the high costs and the increased regulatory scrutiny worldwide that offshore jurisdictions and accounts face this makes offshore investing beyond the means of most investors offshore investors may also be scrutinized by regulators and tax authorities to make sure taxes are paid offshore banking involves securing assets in financial institutions in foreign countries which may be limited by the laws of the customer s home nation much like offshore investing think of the famed swiss bank account that james bond like account that puts rich people s money out of reach of their own country s government people and companies can use offshore accounts to avoid the unfavorable circumstances associated with keeping money in a bank in their home nation most entities do this to avoid tax obligations holding offshore bank accounts also makes it more difficult for them to be seized by authorities for those who work internationally the ability to save and use funds in a foreign currency for international dealings can be a benefit this often provides a simpler way to access funds in the needed currency without the need to account for rapidly changing exchange rates offshore jurisdictions such as the bahamas bermuda cayman islands and the isle of man are popular and known to offer fairly secure investment opportunities 1advantages and disadvantages of offshore investingtaking your investments abroad to an ofc may also help you diversify your portfolio by going international and investing in different asset classes and currencies you can help cut down the risk to your overall investments you re very apt to get favorable tax treatment on your investments depending on where you hold your assets for instance the cayman islands doesn t impose taxes on income dividends or capital gains which means you get to keep more of the money you earn 5your assets get a certain level of protection because many offshore centers are located in places with sound economic and political systems and because they re in foreign lands it s harder for creditors to seize your assets holding accounts offshore subjects you to more scrutiny that s because it s often seen as a way for people to avoid paying taxes if you don t report your holdings to your tax authority such as the internal revenue service irs you could be in serious trouble as mentioned above even though some jurisdictions provide complete confidentiality to account holders an increasing number of countries are becoming more transparent with tax authorities this means you could be on the hook if you don t report your holdings you should do your due diligence if you re going to invest abroad the same way you would if you re doing business with someone at home make sure you choose a reputable broker or investment professional to ensure that your money is handled properly failure to do so could put your investments at risk portfolio diversificationfavorable tax treatmentasset protectionmore scrutinyincreased transparency from offshore jurisdictionsrisk of working with the wrong professional | |
what does it mean to work offshore | working offshore means that you have a job outside your home country you may get paid in the local currency and are usually subject to local labor laws for instance you are considered to be working offshore if your company opens an office in another country and moves you to that location | |
what is onshore and offshore | onshore means that business activity whether that s running a company or holding assets and investments takes place in your home country going offshore on the other hand means these activities take place in another country location or jurisdiction | |
are offshore accounts legal | offshore accounts are perfectly legal as long as they are not used for illicit purposes but keep in mind though that hiding your offshore assets is illegal this means you must report any and all offshore accounts you hold to your country s taxing authority | |
what is meant by offshore banking | offshore banking describes a relationship that a company or individual has with a financial institution outside the country of their residence this requires opening a bank account and making deposits withdrawals and transfers from that account the exact same way you would with a bank account at home | |
what is offshore trading | offshore trading involves opening and maintaining a brokerage or trading account with an offshore investment firm these accounts are generally opened in the name of a holding company rather than an individual trading this way provides investors with favorable tax treatment which puts more money back into their pockets the bottom linegoing offshore is usually an option meant only for corporations or people with a high net worth those who do go offshore do business open bank accounts or hold investments anywhere overseas although going offshore isn t illegal it does put the entity up to more scrutiny that s because people often use it as a way to avoid paying taxes however with global tax authorities putting pressure on these financial centers to be more transparent the landscape for offshore activities may change in the future | |
what is an offshore banking unit obu | an offshore banking unit obu is a bank shell branch located in another international financial center for instance an offshore banking unit could be a london based bank with a branch located in delhi offshore banking units make loans in the eurocurrency market when they accept deposits from foreign banks and other obus eurocurrency simply refers to money held in banks located outside of the country which issues the currency local monetary authorities and governments do not restrict obus activities however they are not allowed to accept domestic deposits or make loans to residents of the country in which they are physically situated overall obus can enjoy significantly more flexibility regarding national regulations understanding offshore banking unitsobus have proliferated across the globe since the 1970s they are found throughout europe as well as in the middle east asia and the caribbean u s obus are concentrated in the bahamas the cayman islands hong kong panama and singapore in some cases offshore banking units may be branches of resident and or nonresident banks while in other cases an obu may be an independent establishment in the first case the obu is within the direct control of a parent company in the second even though an obu may take the name of the parent company the entity s management and accounts are separate some investors may at times consider moving money into obus to avoid taxation and or retain privacy more specifically tax exemptions on withholding tax and other relief packages on activities such as offshore borrowing are occasionally available in some cases it is possible to obtain better interest rates from obus offshore banking units also often do not have currency restrictions this enables them to make loans and payments in multiple currencies often opening more flexible international trade options | |
how offshore banking units work | there are several steps for a client to get involved in depositing and transacting with an offshore banking unit broadly speaking the offshore banking unit process starts based on an investor s specific needs investors choose an offshore jurisdiction based on factors such as its legal framework tax advantages political stability and banking regulations after selecting an offshore jurisdiction investors can open an account with an offshore banking unit which can be in various forms such as personal corporate investment or trust accounts they must complete necessary documentation and undergo a due diligence process including identification documents proof of address and the source of funds similar to a domestic bank the investor must decide on the range of services needed as well offshore banking units offer a wide range of banking services including deposit accounts international wire transfers foreign currency exchange investment products loans credit cards and wealth management services in addition to banking services offshore banking units can assist investors in optimizing their tax liabilities through legal means such as favorable tax regimes they may also offer access to a broader range of investment opportunities including international stocks bonds mutual funds commodities and alternative investments these offshore banking units may also provide legal guidance to ensure compliance with both the offshore jurisdiction s laws and their home country s laws to avoid legal or regulatory issues the federal reserve has prescribed guidance outlining general policies and procedures to be used when examining u s branches of foreign banking organizations 1offshore banking unit regulationoffshore jurisdictions typically have a dedicated regulatory body or financial authority responsible for overseeing the financial sector these regulatory bodies include offshore banking units obus must obtain proper licensing and authorization from the regulatory body meeting specific requirements such as capital adequacy operational infrastructure and adherence to anti money laundering aml and know your customer kyc regulations the regulatory framework aims to maintain the integrity of the financial system protect customers and prevent illicit activities therefore regulatory authorities supervise obus to ensure compliance including ongoing monitoring periodic audits and examinations of operations obus are required to submit periodic reports and financial statements to the regulatory authority offshore jurisdictions also often engage in international cooperation and information exchange agreements to combat financial crimes and ensure regulatory compliance this includes sharing information with foreign regulatory bodies participating in international initiatives against tax evasion and adhering to global standards like the common reporting standard crs and the foreign account tax compliance act fatca offshore banking units vs domestic banking locationsthere are some key distinctions between offshore banking units and normal bank branches the obvious difference is physical location obus are located in offshore financial centers or jurisdictions with specific legal and regulatory frameworks designed to attract international clients while common bank branches are typically located within a country s domestic territory and subject to the regulations of that jurisdiction another major difference is the underlying regulatory regimes obus are known for their favorable tax structures confidentiality laws and business friendly environments meanwhile domestic bank branches operate within the regulatory framework of the country in which they are located and are subject to the laws and regulations applicable to domestic banking institutions in many cases since these laws are prevalent across the country they are less incentivizing for those seeking specific shelter features the clientele base is often very different between the two as well offshore banking units typically serve international clients including individuals and corporations they often cater to clients who want to optimize their tax liabilities protect their assets or access international investment opportunities on the other hand normal bank branches primarily serve local customers and offer standard banking services to individuals small businesses and corporate clients within the country where the branch is located history of offshore banking unitsthe euro market allowed the first application of an offshore banking unit shortly afterward singapore hong kong india and other nations followed suit as the option allowed them to become more viable financial centers while it took australia longer to join given less favorable tax policies in 1990 the nation established more supportive legislation in the united states the international banking facility ibf acts as an in house shell branch its function serves to make loans to foreign customers as with other obus ibf deposits are limited to non u s applicants offshore banking units have been impacted by recent developments in europe the savings tax directive applied in 2005 aimed to combat cross border tax evasion in the eu however it has undergone several updates and revisions since then 2in 2014 the eu revised the directive to close loopholes allowing individuals to avoid paying taxes on their savings the revised directive required all eu member states to automatically exchange information on non residents bank accounts with their country of residence the oecd introduced the common reporting standard crs in 2014 to detect and deter tax evasion by offshore account holders 3a 2013 directive required member states to automatically exchange non residents financial accounts but this was separate from the revised savings tax directive the agreement between switzerland and the eu signed in may 2015 requires swiss banks to automatically exchange information on eu residents accounts with their country of residence 4 the exchange began in 2018 ending the special secrecy that eu resident clients of swiss banks had previously enjoyed | |
how do offshore banking units ensure privacy and confidentiality | offshore banking units ensure privacy and confidentiality through strict regulations and robust legal frameworks offshore jurisdictions often have stringent penalties for breaching confidentiality discouraging unauthorized disclosures however it s essential to note that privacy should not be confused with secrecy as offshore banks are required to comply with anti money laundering regulations and may be obligated to share information with relevant authorities under certain circumstances | |
what types of banking services are offered by offshore banking units | offshore banking units offer a range of banking services similar to those provided by traditional banks these services include deposit accounts international wire transfers foreign currency exchange investment products loans credit cards and wealth management services additionally offshore banking units may assist with the establishment and administration of offshore companies trusts and investment funds | |
what are the risks and challenges associated with offshore banking units | offshore banking units come with certain risks and challenges these include potential reputational risks associated with using offshore jurisdictions increased scrutiny from regulatory authorities and compliance risks investors should be aware of the legal regulatory and reputational risks associated with offshore banking and conduct thorough due diligence to ensure compliance with applicable laws and regulations | |
an offshore mutual fund is an investment vehicle based in an offshore location outside the jurisdiction of the united states often used as a tax haven | understanding offshore mutual fundsoffshore mutual funds are domiciled internationally they may provide investment exposure to international markets they are known to offer some cost benefits such as lower taxes as well internationally domiciled funds are obligated to follow the laws and regulations of the country where they are incorporated funds may choose their domicile to target a specific investor many offshore funds are incorporated in the bahamas or cayman islands which offer tax efficiencies taxation regulation and investor demand are three main factors influencing the country a fund chooses to incorporate in the united states addresses specific offshore definitions and legislative obligations in section 871 of the internal revenue code offshore funds can be structured much like an open end investment fund they can also be formed as an offshore company partnership or unit trust most offshore funds are required to have operational functionalities in their domiciled country this has led to substantial fund administration management custodian and prime brokerage services in popular offshore locations risks and advantagesoffshore funds can have higher risks with domicile in a foreign country investors may not clearly understand a fund s terms and conditions which could lead to unprotected loss of capital offshore funds may follow different rules and regulations than standard investments which could present some higher risks of capital loss generally offshore funds seek to provide an advantage through their international incorporation the lower level of regulation makes it easier to establish and administer the funds funds domiciled in most offshore countries allow for tax free income which enables the fund to reinvest gains they also include tax free distributions for investors operating costs are significantly reduced and management fees can be lower investors should always add extra due diligence when investing money in offshore accounts with sponsors that are not well known or are located outside of established offshore financial centers while many funds offer competitive advantages non mainstream offerings can be prone to fraudulent activity because of relaxed regulations in some offshore locations offshore mutual fund investmentsmany brokerage platforms will offer their investors a selection of offshore funds which can help to reduce some of the investment risks the third point investors limited is a london listed closed end fund managed by dan loeb its tpou share class is denominated in u s dollars | |
what was the offshore portfolio investment strategy opis | the offshore portfolio investment strategy opis was an abusive tax avoidance scheme sold by kpmg one of the big four accounting firms between 1997 to 2001 this was a time when fraudulent tax shelters had proliferated across the global financial services industry opis was one of many tax avoidance products offered by accounting firms understanding the offshore portfolio investment strategy opis offshore portfolio investment strategy opis used investment swaps and shell companies in the cayman islands to create fake accounting losses that were used to offset taxes on legitimate taxable income and defraud the internal revenue service irs some of these fake accounting losses were significantly more than the real financial loss many tax shelters were based on legal tax planning techniques but they became such big business that the irs began a crackdown on abusive tax shelters and their increasingly complex structures which had deprived the u s government of 85 billion between 1989 and 2003 according to the government accountability office 1the design of the offshore portfolio investment strategy opis accounting firms that audit companies created financial losses using a variety of accounting practices these losses were then used to offset actual profits from operations or from capital gains resulting in a lower reported profit and therefore a lower amount taxed for example if a company reported 20 000 in profits before taxes and had to pay 10 tax on those profits they would owe 2 000 20 000 x 10 and their profits after taxes would be 18 000 20 000 2 000 now if an accounting company was able to generate additional losses through false accounting practices say in the amount of 5 000 the company s profits before taxes would be 15 000 instead of 20 000 the tax the company would now pay would be 1 500 15 000 x 10 which is 500 2 000 1 500 less than what they should legally be paying this was 500 that was robbed from the government and added to its pockets or to the pockets of the accounting firm if the company was not aware of the fraudulent practice which in many cases they weren t resulting in the payment of back taxes owed the manner in which an accounting firm would conduct this tax avoidance scheme was through the creation of a shell company the shell company would record a variety of transactions and investments all that would result in losses these losses were not of course real as the transactions and investments were not real these fake losses were then used to offset the actual profits of a company the kpmg deutsche bank tax shelter scandalthe irs formally declared opis and similar tax shelters unlawful in 2001 2002 because they had no legitimate economic purpose other than reducing taxes however email messages showed that kpmg had subsequently discussed selling new shelters that were similar to the banned version and that they failed to cooperate with investigators the u s senate permanent subcommittee on investigations began an investigation in 2002 its report in november 2003 found that numerous global banks and accounting firms had promoted abusive and illegal tax shelters 2 along with kpmg s opis products it singled out deutsche bank s custom adjustable rate debt structure cards and wachovia bank s foreign leveraged investment program flip products banks like deutsche bank hvb ubs and natwest had provided loans to help orchestrate the transactions 3in 2002 pricewaterhousecoopers reached a settlement for an undisclosed amount with the irs while ernst young finalized their 123 million settlement in 2013 45 in the meantime kpmg ended up admitting unlawful conduct and paying a 456 million fine in 2005 part of the settlement attorney general alberto gonzales negotiated was kpmg s promise to stay out of the tax shelter business but nine individuals including six partners were indicted for creating 11 billion in false tax losses and depriving the u s government of 2 5 billion of tax revenue 6subsequently many of the firms which had helped sell these tax shelters were sued by clients who had to pay the irs back taxes and penalties investors who sued deutsche bank brought to light that it had helped 2 100 customers evade taxes reporting more than 29 billion in fraudulent tax losses between 1996 and 2002 it admitted criminal wrongdoing in 2010 and settled for 553 6 million 7 | |
what is an offtake agreement | the term offtake agreement refers to an arrangement between a producer and buyer to purchase or sell portions of the producer s upcoming goods offtake agreements often help selling companies acquire project financing for future construction expansion projects or new equipment through the promise of future income and proof of existing demand for the goods they are normally negotiated in volatile markets before a company builds its factory or facility to secure a position in the market and a future revenue stream understanding offtake agreementsan offtake agreement is a legally binding contract between a buyer and seller it can take the form of a purchase agreement for the buyer or a service contract for the seller the contract s provisions usually specify the purchase price for the goods and the delivery date even though the agreement is reached before any goods are produced and any ground is broken on a facility the offtake agreement is commonly used in project financing which is why it serves an important role for the producer producers can face issues if they have no cash flow especially when production hasn t even started and or when they are trying to secure a production facility offtake agreements make it easier to obtain financing to construct a facility if lenders can see the company has clients and customers lined up before production begins they are more likely to approve the extension of a loan or credit the arrangement provides a guarantee that there will be a steady supply of goods and services to meet the demands of consumers but if there are issues before production begins companies can usually back out of an offtake agreement through negotiations with the other party and with the payment of a fee offtake agreements are frequently used in markets that tend to be volatile this includes energy oil mining and natural resource development the capital costs related to the extraction of resources in these markets are often significant by obtaining an offtake agreement the selling company hopes to secure a guarantee that some of its products will be sold they are also common to finance major projects such as real estate development and infrastructure special considerationsmost offtake agreements include force majeure clauses a force majeure clause removes liability from one or both parties in a contract if there is a serious unforeseeable external event that prevents both parties from living up to their contractual obligations these clauses may also be enforced if one party puts unnecessary hardship on the other force majeure clauses often protect both parties against the negative impact of certain acts of nature such as flooding wildfires hurricanes earthquakes pandemics terrorist attacks war and conflict offtake agreements also include default clauses that outline the recourse that either party has in case there is a violation of one or multiple clauses this includes penalties that must be paid to the supplier if the buyer violates the contract and vice versa types of offtake agreementsthe following are some of the most common types of offtake agreements used by producers and buyers benefits of offtake agreementsofftake agreements provide a guaranteed market and source of revenue for a company s product but that isn t the only benefit they also allow the producer or seller to guarantee a minimum level of profit for their investment since offtake agreements often help secure funds for the creation or expansion of a facility the seller can negotiate a price that secures a minimum level of return on the associated goods thereby lowering the risk associated with the investment offtake agreements may provide a benefit to buyers as well functioning as a way to secure goods at a particular price that means prices are fixed for the buyer before they are manufactured doing this may act as a hedge against future price changes especially if a product becomes popular or a resource becomes scarce causing demand to outweigh supply it also provides a guarantee that the requested assets will be delivered fulfillment of the order is considered the seller s obligation under the terms of the offtake agreement can parties break an offtake agreement offtake agreements are legally binding financial contracts which means that both parties are obligated to live up to their promises most contracts include provisions if one party must back out for instance they may negotiate and cancel the contract if one party pays the other a penalty or fee these agreements may also be canceled in the event of unforeseen circumstances under force majeure clauses the liability of one or both parties is removed under certain circumstances such as natural disasters pandemics and or conflicts | |
what is a supply chain | the term supply chain refers to a network of entities involved in the creation and delivery of a product or service this chain begins with those who produce and supply raw materials to producers and ends with the entities who deliver goods to the end user or consumer the supply chain includes producers suppliers and retailers it also includes warehousers transportation companies and distributors | |
what is a force majeure clause | a force majeure clause is a provision included in many contracts that absolves one or more parties of their liability in the event of an unforeseen circumstance these acts which are commonly referred to as acts of god including natural disasters earthquakes floods hurricanes and wildfires conflicts war and terrorist attacks and pandemics the bottom linecompanies may find it difficult to secure financing for their projects especially if they are capital intensive and don t have a manufacturing facility in place offtake agreements take some of the pressure off these producers with companies promising to buy their goods once they are manufactured these contracts give producers access to the money they need and future financing they may require from lenders to manufacture their goods while guaranteeing market prices for buyers if one or both parties can t live up to the contract they may negotiate its cancelation with the payment of a fee | |
what is an ohlc chart | an ohlc chart is a type of bar chart that shows open high low and closing prices for each period ohlc charts are useful since they show the four major data points over a period with the closing price being considered the most important by many traders 1the chart type is useful because it can show increasing or decreasing momentum when the open and close are far apart it shows strong momentum and when the open and close are close together it shows indecision or weak momentum the high and low show the full price range of the period useful in assessing volatility there several patterns traders watch for on ohlc charts understanding ohlc chartsohlc charts consist of a vertical line and two short horizontal lines extending to the left and right of the horizontal line the horizontal line extending to the left represents the opening price for the period while the horizontal line extending to the right represents the closing price for the period the height of the vertical line represents the intraday range for the period with the high being the period s high and the low of the vertical line being the period s low the entire structure is called a price bar | |
when the price rises over a period the right line will be above the left since the close is above the open often times these bars are colored either black or green if the price falls during a period the right line will be below the left since the close is below the open these bars are typically colored red 2 | ohlc charts can be applied to any time frame 3 if applied to a 5 minute chart it will show the open high low and close price for each 5 minute period if applied to a daily chart it will show the open high low and close price for each day ohlc charts show more information than line charts which only show closing prices connected together into a continuous line ohlc and candlestick charts show the same amount of information but they show it in a slightly different way while ohlc charts show the open and close via left and right facing horizontal lines candlesticks show the open and close via a real body 2interpreting ohlc chartsthere are several different techniques that technical analysts use to interpret ohlc charts here are several guidelines vertical height the vertical height of an ohlc bar is indicative of the volatility during the period if the line height is great then traders know that there s a lot of volatility and indecision in the market 1horizontal line position the position of the left and right horizontal lines tell technical traders where the asset opened and closed relative to its high and low if the security rallied higher but the close was much lower than the high traders might assume that the rally fizzled toward the end of the period if the price fell but closed much higher than its low selling fizzled toward the end of the period if the open and close are close together it shows indecision since the price couldn t make much progress in either direction if the close is well above or below the open it shows that there was strong selling or buying during the period bar color typically during an uptrend more bars will be colored black than red during a downtrend more red bars than black bars are common this can provide information on the trend direction and its strength a series of large black bars at a glance shows strong upward movement while more analysis is necessary this information may be helpful when deciding whether to look further into the details patterns traders also watch for patterns to occur on the ohlc chart the major patterns include the key reversal inside bar and outside bar a key reversal in an uptrend occurs when the price opens above the prior bar s close makes a new high and then closes below the prior bar s low it shows a strong shift in momentum which could indicate a pullback is starting a key reversal in a downtrend occurs when the price opens below the prior bar s close makes a new low and then closes above the prior bar s high this indicates a strong shift to the upside warning of a potential rally example of an ohlc chartthe following is an ohlc chart for the s p 500 spdr etf spy overall rises are typically marked by a greater number of black bars like the period at the start of october trough mid november the price moves slightly higher but mostly sideways marked by more alternating bar colors in mid november the price starts to rise marked by a couple wider ranging black bars at the start of the year the price continued to escalate dominated by black rising bars at the start of february there are large red bars much larger than any seen during the prior advance this is a major warning sign of strong selling pressure | |
what is an oil etf | an oil etf is an exchange traded fund etf which invests in companies engaged in the oil and gas industry companies featured in the etf basket include discovery production distribution and retail businesses as well as the commodity itself some oil etfs may be commodity pools with limited partnership interests instead of shares these pools invest in derivative contracts such as futures and options understanding an oil etfan oil etf offers advantages to those wanting to participate in oil markets and reap the potential profits without the logistics of handling single energy related stocks like mutual funds an exchange traded fund will track an index a commodity bonds or a basket of assets unlike mutual funds an etf trades like a common stock on an exchange they experience price fluctuations throughout the day so have higher daily liquidity also they frequently have lower fees than mutual fund shares making them an attractive alternative for individual investors 1most investors especially individuals cannot obtain and store physical supplies of crude oil nor would they want to do that however the volatile oil industry is a favorite investment and trading sector with an oil etf the investors are not dealing in futures so physical inventory isn t a concern this option provides a convenient way for investors interested in getting into the oil market to participate the benchmark target for an oil etf may be a market index of oil companies or the spot price of crude itself funds may focus on only united states based companies or may invest around the world there are even inverse etfs for oil and other sectors inverse securities move in an equal and opposite direction to the underlying index or benchmark 2 oil etfs will attempt to track their relative index as closely as possible but small performance discrepancies will be found especially over short time frames the total assets under management of the 12 oil etfs traded in the united states 3investing challenges of oil etfsoil etfs have a high level of demand from investors because oil is such a pervasive commodity in the modern global economy this investing trend is only likely to increase almost every end product used by people companies and governments is in some way affected by the price of oil either as a raw component or through the costs of energy transportation and product distribution however investing in oil etfs can be tricky and complicated many fluctuating factors impact the market and these conditions can be difficult to predict the market is continually adjusting and global political events and environmental conditions have significant and unexpected effects on the market 45there are many oil based etfs available for investments research and comparison of the expenses and results of the available funds are critical before investing some of the most significant oil etfs in the u s marketplace include | |
what are the biggest oil etfs | united states oil fund lp uso is the largest oil etf with 1 6 billion in assets under management according to etf database the next biggest proshares ultra bloomberg crude oil etf uco with 675 million under management 10 | |
what are the top performing etfs | in 2023 the top performing oil etf was the brent oil fund lp bno however the united states oil fund uso had the lowest fees and the highest liquidity | |
how do i invest in oil etfs | the easiest way to invest in an oil etf is through a brokerage like fidelity or td ameritrade search for the ticker symbol of the etf you want or use the brokerage s screener to search for oil etfs the bottom lineoil etfs are exchange traded investments that a basket of oil related instruments such as securities in oil companies or petroleum commodities these can be easily traded like a stock but have the advantage of more diversification than investing in a single security | |
what is an oil field | an oil field is a tract of land used for the purpose of extracting petroleum such as natural gas or crude oil from the ground although some contest the exact origins of oil most consider petroleum to be a fossil fuel created from dead organic material often found in ancient seabeds thousands of meters below the surface of the earth identifying viable oil fields is an important piece of the upstream oil industry understanding oil fieldsan oil field consists of a reservoir of fossil fuel found deep in the rocky strata of the earth where hydrocarbons have become trapped an impermeable or sealing rock layer covers the reservoir keeping intact over millennia typically oil industry professionals use the term oil field with an implied assumption of economic size for instance an oil field may be discovered containing a million barrels of oil equal to the market price of oil multiplied by its size presently there are more than 65 000 oil fields around the world with many of the largest located in the middle east where tens of thousands of oil fields have been discovered despite the large number of fields 94 of known reserves are concentrated in fewer than 1500 major oil fields the locations of oil fields have been the origin of past geopolitical conflicts and environmental concerns oil may also be discovered beneath the ocean floor where deep sea rigs explore and extract these fields complications of establishing an oil fieldestablishing an oil field can be a herculean feat of logistics and can be a risky prospect if an oil field proves be less productive than anticipated exploration will often include establishing the basic infrastructure necessary for what can be decades of extraction production and maintenance integrated oil companies often contain entire divisions that are responsible for infrastructure construction and specialized services that are required to operate a profitable oil field oil fields are dotted with a variety of extraction equipment which includes drilling rigs offshore platforms pump jacks and more there may also be exploratory wells probing the edges pipelines to transport the oil elsewhere and support facilities in recent years new technologies in oil exploration and production have dramatically increased the productivity levels of oil fields these include horizontal drilling hydraulic drilling hydraulic fracturing or fracking and the use of the material proppant proppant is a mixture of water and sand used to keep the fractured pathways to the wellbore clear these technologies coupled with advances such as seismic monitoring have helped to increase oil field efficiency rates and contributed to a glut in oil supply which drove oil prices down companies that work in oil fields remain focused on technological development to lower their production costs in the current price pressured environment example of an oil fieldghawar field in saudi arabia which started production in 1951 is by far the largest oil field uncovered to date it has yielded more than 80 billion barrels of black gold through 2018 1 there are also offshore oil fields and the safaniya field is the world s largest located in the persian gulf off the saudi arabian coast the safaniya field is thought to hold more than 50 billion barrels of oil | |
what does oil initially in place mean | oil initially in place oiip is the amount of crude oil first estimated to be in a reservoir oil initially in place differs from oil reserves as oiip refers to the total amount of oil that is potentially in a reservoir and not the amount of oil that can be recovered calculating oiip requires engineers to determine how porous the rock surrounding the oil is how high water saturation might be and the net rock volume of the reservoir the numbers for the aforementioned factors are established by conducting a series of test drills around the reservoir understanding oil initially in place oiip oil initially in place is known more simply as oil in place oip it is also referred to by a few variations stock tank oil initially in place stoiip is the same volumetric calculation with it being made explicit that the volume being estimated is the volume filled by the extracted oil at surface temperature and pressure rather than the compressed volume the crude oil fills in the reservoir due to geological pressure original gas in place ogip is again the same volumetric calculation but for natural gas reservoirs finally hydrocarbons initially in place hciip is the generic term that can be used for both oil and gas when doing a volumetric calculation to estimate the contents of a potential drill site the importance of oil initially in place oiip determining oil initially in place is one of the major components taken into account by analysts determining the economics of oil field development oil initially in place hints at the potential of a reservoir this is a critical data point but it is only the start of the analysis prior to the decision to drill or sit on a lease oil in initially in place gives an oil company an estimate of the total number of barrels sitting under the various leases if all the oil initially in place was recoverable then oil companies would just need to start at their biggest reservoir and work their way down to the smallest trying to keep drilling costs fixed along the way in reality only a portion of the oil initially in place will ever be recovered and characteristics of the formation will impact drilling costs so analyzing oil initially in place is the trigger for further analysis of how much of the oiip is recoverable with the current technology the estimated recoverable oil for a reservoir will allow the oil company holding the lease to decide if current prices support drilling and production for example if an oil company can only be able to extract 50 of the oil initially in place with current technology it may make sense to move those acres into its probable reserves and hold them for future development the company can then use the money saved by not drilling that reservoir to tap a different one with better overall production for the cost of drilling if however global oil prices climb then the reservoir may be put into production simply because the new price makes the cost of getting that 50 out of the ground economical for this reason oil companies are constantly re evaluating their lease holding and the oil initially in place against global prices to make decisions on where and when to drill | |
what is the oil pollution act of 1990 | the u s congress enacted the oil pollution act of 1990 opa to streamline and strengthen the environmental protection agency s epa power to prevent oil spills it was passed as an amendment to the clean water act of 1972 following the exxon valdez oil spill of 1989 the oil pollution act of 1990 is one of the most wide reaching and critical pieces of environmental legislation ever passed understanding the oil pollution act of 1990the exxon valdez oil spill on march 24 1989 resulted in 11 million gallons of alaskan crude oil being spilled into the waters of prince william sound the oil spill was the worst in the u s until it was eclipsed by the larger deepwater horizon oil spill in 2010 1the exxon valdez oil spill affected 1 300 miles of coastline and hundreds and thousands of animals twenty five years after the event there are still four species that have not recovered as of august 2020 pockets of oil can still be found in the area 2 it also shed light on the fact that the u s was severely limited in its ability to react to oil spills both in terms of having adequate resources primarily federal funds to respond to such spills and that the scope of damages compensable to those impacted was very narrow the oil pollution act was created to remedy these shortcomings the oil pollution act was designed to establish a comprehensive federal framework that would prevent future spills and develop cleanup procedures in the case of a spill related emergency primary enforcement and administration of the act are by the u s coast guard and the u s environmental protection agency epa 3before passage of the opa federal pollution legislation had been an ineffective web of weak enforcement and insufficient liability for polluters the opa sought to solve this problem by establishing stricter standards for the maritime transportation of oil which included the following the opa greatly increased the government s oversight of maritime oil transportation and created a detailed prevention response liability and compensation regime to deal with vessel and facility caused oil pollution to u s navigable waters 5liability under the oil pollution act of 1990a primary emphasis of the opa is the liability financial and otherwise which the act imposes on any party found to be responsible for a destructive oil spill any firm identified as a responsible party is subject to virtually unlimited cleanup costs however any claimant seeking reimbursement for cleanup costs must first request it directly from the guilty party if the responsible party refuses a claimant can then take legal action against the firm or seek it directly from a federally established oil spill liability trust fund 4the opa has also authorized the oil spill liability trust fund osltf up to 1 billion to pay for quick oil removal and uncompensated damages for each oil spill the establishment of the oil spill liability trust fund osltf came in 1986 before the valdez incident it was established to finance clean up efforts and damage assessments and to cover unmet private liability on the part of a responsible party funding for the trust is by a tax on both domestic production and imports of petroleum products 6 | |
what is the oil price to natural gas ratio | as its name suggests the oil price to natural gas ratio is a ratio in which the price of oil is the numerator and the price of natural gas is the denominator the purpose of the oil price to natural gas ratio is to capture the relative valuation of these two important energy commodities it is widely used by commodities traders energy analysts and investors understanding the oil price to natural gas ratiocrude oil and natural gas are important energy commodities that are actively traded on commodities markets such as the new york mercantile exchange nymex they are widely used as fuels for heating and electricity generation throughout the world one nymex crude oil contract is equivalent to 1 000 barrels of crude oil whereas one natural gas contract equals 10 000 british thermal units mmbtu of natural gas 2 3 when calculating the oil price to natural gas ratio the oil numerator refers to barrels of oil whereas the natural gas denominator refers to units of 10 mmbtu the higher the oil price to natural gas ratio the greater the price of oil relative to natural gas if the ratio declines then this means the difference in the prices of the two commodities is narrowing oftentimes traders will purchase crude oil futures when the oil price to natural gas ratio is below its historical averages believing that they are receiving a bargain price for oil likewise they will purchase natural gas futures when the ratio is above its historical norm the same strategy can also work in reverse selling oil futures when the ratio is high and selling natural gas futures when the ratio is low real world example of the oil price to natural gas ratiothe oil price to natural gas ratio has shown a fair amount of volatility in recent years up until 2009 for instance the ratio averaged about 10 1 meaning that when oil was at 50 a barrel natural gas would be at 5 per mmbtu in april 2012 however the ratio jumped to 50 1 with oil at 120 per barrel and natural gas at only 2 per mmbtu just a few years later between june 2014 and march 2015 the price of oil dropped to 45 per barrel bringing the ratio down to 16 1 1but perhaps the most dramatic recent event in the oil price to natural gas ratio occurred in april 2020 when the price of oil hit historic lows as a result of the 2020 global crisis during this period crude oil reached 15 per barrel while natural gas reached 1 91 per mmbtu yielding a ratio of 8 1 1 | |
what is an oil refinery | an oil refinery is an industrial plant that transforms or refines crude oil into various usable petroleum products such as diesel gasoline and heating oils like kerosene oil refineries essentially serve as the second stage in the crude oil production process following the actual extraction of crude oil up stream and refinery services are considered to be a down stream segment of the oil and gas industry the first step in the refining process is distillation where crude oil is heated at extreme temperatures to separate the different hydrocarbons understanding oil refineriesoil refineries serve an important role in the production of transportation and other fuels the crude oil components once separated can be sold to different industries for a broad range of purposes lubricants can be sold to industrial plants immediately after distillation but other products require more refining before reaching the final user major refineries have the capacity to process hundreds of thousand barrels of crude oil daily in the industry the refining process is commonly called the downstream sector while raw crude oil production is known as the upstream sector the term downstream is associated with the concept that oil is sent down the product value chain to an oil refinery to be processed into fuel the downstream stage also includes the actual sale of petroleum products to other businesses governments or private individuals according to the u s energy information administration eia u s refineries produce from a 42 gallon barrel of crude oil 19 to 20 gallons of motor gasoline 11 to 12 gallons of distillate fuel most of which is sold as diesel and four gallons of jet fuel 1 more than a dozen other petroleum products are also produced in refineries petroleum refineries produce liquids the petrochemical industry uses to make a variety of chemicals and plastics cracking crude oilan oil refinery runs 24 hours a day 365 days a year and requires a large number of employees refineries come offline or stop working for a few weeks each year to undergo seasonal maintenance and other repair work a refinery can occupy as much land as several hundred football fields famous oil refining companies include the koch pipeline company and many others crack or crack spread is a trading strategy used in energy futures to establish a refining margin crack is one primary indicator of oil refining companies earnings crack allows refining companies to hedge against the risks associated with crude oil and those associated with petroleum products by simultaneously purchasing crude oil futures and selling petroleum product futures a trader is attempting to establish an artificial position in the refinement of oil created through a spread the nelson complexity index nci is a measure of the sophistication of an oil refinery where more complex refineries are able to produce lighter more heavily refined and valuable products from a barrel of oil the proportions of petroleum products a refinery produces from crude oil can also affect crack spreads some of these products include asphalt aviation fuel diesel gasoline and kerosene in some cases the proportion produced varies based on demand from the local market the mix of products also depends on the kind of crude oil processed heavier crude oils are more difficult to refine into lighter products like gasoline refineries that use simpler refining processes may be restricted in their ability to produce products from heavy crude oil refinery servicesoil refining is a purely downstream function although many of the companies doing it have midstream and even upstream production this integrated approach to oil production allows companies like exxon xom shell rds a and chevron cvx to take oil from exploration all the way to sale the refining side of the business is actually hurt by high prices because demand for many petroleum products including gas is price sensitive however when oil prices drop selling value added products becomes more profitable refining pure plays include marathon petroleum corporation mpc cvr energy inc cvi and valero energy corp vlo one area service companies and refiners agree on is creating more pipeline capacity and transport refiners want more pipeline to keep down the cost of transporting oil by truck or rail service companies want more pipeline because they make money in the design and laying stages and get a steady income from maintenance and testing oil refinery safetyoil refineries can be dangerous places to work at times for example in 2005 there was an accident at bp s texas city oil refinery according to the u s chemical safety board a series of explosions occurred during the restarting of a hydrocarbon isomerization unit fifteen workers were killed and 180 others were injured the explosions occurred when a distillation tower flooded with hydrocarbons and was over pressurized causing a geyser like release from the vent stack 2 | |
how many oil refineries are there in the united states | as of jan 1 2021 there were 129 operable petroleum refineries in the united states 3 the last refinery to enter operation was in 2019 in texas | |
how much crude oil does it take to make a gallon of gasoline | one barrel of oil 42 gallons produces 19 to 20 gallons of gasoline and 11 to 12 gallons of diesel fuel 4 | |
what is the crack spread | in commodities trading the crack spread is the differences in price between a barrel of unrefined crude oil and the refined products such as gasoline that are derived from it traders look to changes in the crack spread as a market signal for price movements in oil and refined products | |
what are oil reserves | oil reserves are an estimate of the amount of crude oil located in a particular economic region with the potential of being extracted reserves are calculated based on a proven probable basis and oil pools situated in unattainable depths are not considered part of a nation s reserves 1understanding oil reservesin its 2021 report oil industry leader bp plc estimates that there are 1 73 trillion barrels of oil reserves in the world according to the british company s statistical review of world energy report venezuela leads with 303 8 billion barrels in reserve saudi arabia is second with 297 5 billion canada ranks third with 168 1 billion and the u s ninth with 68 8 billion barrels 2source bp plc 2the organization of the petroleum exporting countries opec however concludes that 1 25 trillion barrels exist globally the cartel estimates that 80 4 of global reserves are held by its members including venezuela saudi arabia iran iraq kuwait united arab emirates and libya 3calculating oil reservesbp s statistical review of world energy is one of the leading sources of energy market data and information dating back several decades 4 another source is the world oil review supplied by the italian oil company eni spa similar to bp s statistical review eni s publication provides details about global oil reserves 5 the energy information administration eia calculates u s oil reserves with information dating back to 1900 6one of the critical ratios analysts use to measure the longevity of reserves is the reserve to production ratio r p the r p estimates the number of years a reserve base will last at current annual production rates and is used by companies operating in the oil industry as well as oil producing countries 7this chart from bp reveals two significant trends in global oil reserves world s reserves to production r p ratios by yearsource bp plc 8first and most obvious it illustrates the massive increase in south and central american oil reserves relative to production since 2006 when brazil made some significant oil finds in its offshore pre salt basins 9 bp currently estimates that the south and central america region has enough oil reserves to last more than 150 years at current production levels 8the volume of oil reserves does not necessarily translate into production figures for example venezuela s share of the overall oil production market has collapsed in recent years due to internal strife 10 according to the 2021 bp statistical review of world energy the south american nation accounted for just 0 6 of overall production volumes despite having the world s largest oil reserves 11a downtrend also exists in middle eastern oil reserves relative to production in the 1990s middle eastern countries had r p ratios of 100 years over the last 30 years this ratio has fallen until the last several years while production rates fluctuate and reserves become harder to find reserves to production for the middle east now stands at approximately 80 years 8a similar trend of a downward sloping r p is happening in north america which has aggressively increased production over the last several years the reserve for north america is estimated at 30 years 11 | |
what are the components of an oil reserve | petroleum reserves and resources are hydrocarbon deposits predominantly occurring in subsurface geologic formations reserves can be reported in the context of a reservoir field petroleum basin or country as a whole 12 | |
why are oil reserves important to the united states | the strategic petroleum reserve spr is an emergency supply of crude oil that can be used to offset a severe oil supply shortage the spr was created to provide the united states with crude oil in the event of a severe oil supply or economic disruption only the president of the united states can give permission to use it and maintaining the strategic petroleum reserve is an important national security tool and the reserve is intended to serve as america s insurance policy against a severe oil supply disruption or a severe economic disruption 13 | |
what are oil sands | oil sands or tar sands are sand and rock material that contain crude bitumen a dense viscous form of crude oil bitumen is too thick to flow on its own so extraction methods are necessary bitumen is extracted and processed using two methods mining and in situ recovery oil sands are found primarily in the athabasca cold lake and peace river regions of northern alberta and saskatchewan canada and in areas of venezuela kazakhstan and russia oil sands trade as part of crude oil commodities understanding oil sandsthe end product from oil sands is very similar to if not better than that of conventional oil which uses oil rigs for extraction intensive mining extraction and upgrading processes mean that oil from oil sands typically costs several times more to produce than using conventional methods and is environmentally destructive the process of extracting bitumen from oil sands results in significant emissions destruction to the land negative impacts on the wildlife pollution of the local water supply and much more despite the negative environmental impact oil sands produce significant revenue for canada which relies on oil sands as a significant portion of its economic health canada has an estimated 171 billion barrels of proven oil reserves of which 166 3 billion barrels are found in alberta s oil sands at the end of 2014 canada ranked third in the world in proven reserves after venezuela and saudi arabia 1 this means oil sands are a significant component of canada s economy in terms of investment employment and revenue process of extracting oil from oil sandsin surface mining oil sands clearing large land areas of trees and brush is the first step the topsoil and clay are removed to expose the oil sand this surface mining method uses large trucks and shovels to remove the sand which can have a volume of anywhere from 1 to 20 of actual bitumen after processing and upgrading the results travel to refineries for refining into gasoline jet fuel and other petroleum products the mining method is considered to be very damaging to the environment as it involves leveling hundreds of square miles of land trees and wildlife oil sands operators must develop a plan to reclaim the land and have this approved by the government since oil sands operations began in canada in the 1960s just 8 of total mining area has been reclaimed or is in the process of reclamation 2 another method of mining oil sands is in situ also called in situ recovery isr or solution mining it is mainly used to extract bitumen in oil sand that is buried too deep below the earth s surface for recovery with a truck and shovel in situ technology injects steam and chemicals deep beneath the ground to separate the viscous bitumen from the sand and then pump it up to the surface the bitumen then goes through the same upgrading process as it would in the surface mining method because mining for oil sands is extremely expensive the price of oil is a critical factor in profit generation for mining companies if the price of oil drops too low then mining oil sands may not be monetarily beneficial the in situ method is more costly than the surface mining method but it is less damaging to the environment requiring only a few hundred meters of land and a nearby water source to operate after drilling holes a mining solution is pumped into the soil at times explosions or hydraulic fracturing may be utilized to open pathways it is estimated by the alberta government that 80 of oil in the oil sands is buried too deep for open pit mining therefore in situ methods will likely be the future of extracting oil from oil sands 3 the most common form of in situ is called steam assisted gravity drainage sagd environmental protection and oil sandsthe environmental impact of extracting oil sands from alberta s oil fields has led environmentalists to object to the oil pipeline that connects the country with the united states organizations such as canada s oil sands innovation alliance cosia are focused on reducing the environmental impact of mining oil sands for oil they provide funding for research initiatives related to mitigating the environmental impact of mining for oil sands the organization provides in depth information related to mining wildfire risks vegetation industry reports research reports and more 4 | |
what is okun s law | okun s law is an empirically observed relationship between unemployment and losses in a country s production it predicts that a 1 increase in unemployment will usually be associated with a 2 drop in gross domestic product gdp | |
when economists are studying the economy they tend to hone in on two factors output and jobs because there is a relationship between these two elements of an economy many economists study the relationship between output or more specifically gross domestic product and unemployment levels | okun s law looks at the statistical relationship between gdp and unemployment okun s law can also be used to estimate gross national product gnp | |
what is the old age survivors and disability insurance oasdi program | the old age survivors and disability insurance oasdi program is the official name for social security in the united states the federal oasdi tax noted on your paycheck funds this program that provides benefits to retired adults and people with disabilities and to their spouses dependents and survivors the goal of the program is to partially replace income that is lost due to old age the death of a spouse or qualifying ex spouse or disability social security recipients will receive a 3 2 increase in 2024 due to a cost of living adjustment the increase in 2023 was 8 7 a reflection of the high inflation preceding the period 1understanding the old age survivors and disability insurance oasdi programthe u s social security program including both retirement and disability income was ushered in through the social security act signed by president franklin d roosevelt on aug 14 1935 when the u s economy was in the depths of the great depression 2 the program has grown massively over the decades along with the u s population and economy 34in 1940 about 222 000 people received an average monthly benefit of 22 60 5 the average monthly benefit was 1 827 in 2023 the benefit amount is reviewed annually and adjusted for inflation 6it is the largest such system in the world and is also the biggest expenditure in the federal budget costing around 1 3 trillion in 2023 7 nearly nine out of 10 individuals age 65 and older receive social security benefits 8social security benefits are determined by calculating the individual s average indexed monthly earnings aime during the 35 years in which the person earned the most 9oasdi payroll taxpayments to qualifying persons are funded through oasdi taxes which are payroll taxes collected by the government they are known as fica taxes short for federal insurance contributions act and seca taxes short for self employed contributions act 10in 2023 and 2024 the social security tax rate is 6 2 for employees and 12 4 for the self employed the combined federal tax rates for social security and medicare are 7 65 and 15 3 for employees and self employed respectively 11these revenues are kept in two trust funds these trust funds pay out the benefits and invest the remainder of the revenue they collect 12there is a cap on annual earnings for which you pay social security tax the maximum earnings subject to the tax is 160 000 in 2023 and 168 600 in 2024 income above those amounts is not subject to further oasdi tax 13oasdi program criteriathe oasdi program provides payments to people who meet certain criteria for old age payments money is paid to qualifying persons starting as early as age 62 full retirement age depends on the individual s birth date and is 67 for everyone born in 1960 or later 14qualifying persons who wait until age 70 but no later to begin collecting benefits collect higher maximum benefits due to delayed retirement credits 15payments are calculated based on people s past wages earned survivors payments are made to surviving spouses or dependents of deceased workers 16 disability payments are made to eligible persons who are no longer able to participate in a substantially gainful activity and who meet additional criteria 17to qualify for retirement benefits a worker must be fully insured a worker becomes fully insured by accumulating credits also called quarters of coverage credits or quarters are accumulated based on covered wages earned for a particular period 18 one quarter of coverage is awarded to a worker for every 1 640 earned in 2023 and 1 730 in 2024 19a worker can earn up to four credits or quarters of coverage per year and 40 credits are needed to qualify for social security income benefits 20 | |
is oasdi tax mandatory | yes federal law requires that workers and employers contribute to the oasdi fund through social security taxation on income of up to 160 200 for 2023 and 168 600 in 2024 19at what age are social security payments no longer taxed a portion of your social security benefits is taxable regardless of your age unless your income is very low only individuals with incomes below 25 000 a year or couples with incomes below 32 000 a year keep their social security tax free everyone else pays taxes on up to 85 of their benefits depending on income 21 | |
how can i avoid paying oasdi tax | there are very rare exceptions and exemptions to oasdi taxes including clergy of certain religious groups and some types of nonresident aliens note however that these individuals are also ineligible to receive social security payments 2223the bottom linethe oasdi program is the federal benefits program better known as social security it covers both retirement income for individuals and surviving spouses as well as disability income workers pay into the program through a tax levied each year on a portion of their income at a rate of 6 2 for employees or 12 4 for self employed individuals 11that money is then paid out as income benefits to retired or disabled individuals at a rate that is adjusted regularly for inflation | |
what is old economy | old economy is a term used to describe the blue chip sector that enjoyed substantial growth during the early parts of the last century as industrialization expanded around the world these sectors do not rely heavily on technology or technological advancement but use processes that have been around for hundreds of years even with the rise of the new economy old economy companies still experience growth albeit at a declining rate old economy vs new economyold economy differs from new economy in that it relies on traditional methods of doing business rather than leveraging new cutting edge technology this traditional economic system dates back to the industrial revolution and revolves around producing goods as opposed to the exchange of information common goods are valued by measurable factors such as operating expenses and scarcity of the product although firms in the old economy have adopted new technology there is a limit to how much innovation can assist the industry a large portion of production in manufacturing and agriculture for example benefited from technology but still require human supervision and even manual labor to proceed in fact the notion that it is old economy versus new economy continues to prove incorrect instead it s a combination of the two blue chip companies must innovate on the traditional methods of operating that created scale and influence during previous generations as the old economy evolved it laid the foundation for what would soon become the new economy while the old economy continues to adopt new technologies several roadblocks may hinder traditional institutions from making further progress in many ways old economy companies didn t need to think outside the box as they commanded sizable market shares for multiple decades but today they must quickly replace established practices with new technologies to meet modern demands and ignite productivity examples of old economymembers of the old economy operate in traditional sectors such as steel manufacturing and agriculture many of which do not depend entirely on technology despite losing market share to new economy companies they still employ a large swathe of the population and contribute a significant portion to gross domestic product gdp in financial markets investors often equate old economy companies with blue chip stocks which offer stable earnings growth consistent returns and modest dividend payments however examples of old economy go beyond that to include small business such as bread making horse farms and landscaping meanwhile external shocks such as climate change pose an issue for multiple sectors of the old economy farming in particular could experience substantial variation in crop production if weather conditions continue to change lastly the energy sector which is another example of an old economy industry is rapidly evolving to include newer technologies such as solar wind and hydro | |
what is the old lady | the old lady is an eighteenth century nickname for the bank of england it is a short version of the old lady of threadneedle street a reference to the bank s address in the middle of london understanding the old ladythe old lady as a nickname for the bank of england originates in a james gillray political cartoon from 1797 the cartoon political ravishment or the old lady of threadneedle street in danger depicts a woman in a dress of one and two pound notes sitting on a chest marked bank of england a man prime minister william pitt forcibly kisses the woman while reaching for the gold coins in her pocket the woman yells murder murder rape murder o you villain what have i kept my honor untainted so long to have it broke up by you at last o murder rape ravishment ruin ruin ruin 1the cartoon comments on the then recent decision by the prime minister william pitt the younger that under the bank restriction act of 1797 the bank would suspend redemption of notes for gold and begin making payments to customers exclusively in paper money rather than coins the act was passed in response to an incipient run on the bank following a period of heavy paper note issuance to finance the war with france and triggered by the landing of french forces near the town of fishguard 2the historical moment represented a test of the public s confidence in paper currency as well as of the political power of the prime minister to impose his prerogatives this was the first time in the bank s history that its notes were no longer redeemable in gold leaders of the opposition whig party in the parliament characterized the act as an outrageous abrogation of private contract and likened the bank to an elderly woman seduced by a swindler i e pitt the younger this comparison then became the basis for gillray s cartoon this caricature of the bank of england as an old woman stuck and would repeatedly appear in political cartoons newspaper headlines and common financial vernacular history of the bank of englandthe bank of england now the central bank of the entire united kingdom began in 1694 and has provided the blueprint for most central banks now operating across the globe initially the bank of england operated as a retail bank as well the bank suffered its first crisis in 1720 when the south sea company financed some of britain s national debt and acquired trading rights in what is now south america a price surge in south sea company stock ensued the stock eventually crashed and many lost their fortunes the bank moved to threadneedle street in 1734 from its original location on walbrook 2another crisis in 1825 spurred the bank of england to open branches across the country to exert more control over the currency in 1866 the bank of england refused to bail out discount house overend gurney after it collapsed under the weight of bad loans the crisis eventually expanded the role of the old lady as a lender to failing financial institutions 3 | |
what is an oligopoly | an oligopoly is a type of market structure in which a small number of firms control the market where oligopolies exists producers can indirectly or directly restrict output or prices to achieve higher returns a key characteristic of an oligopoly is that no one firm can keep the others from having significant influence over the market an oligopoly differs from a monopoly in which one firm dominates a market investopedia ellen lindnerunderstanding oligopoliesmarket structures come in different forms and sizes the term is used to describe the distinctions between industries which are made up of different companies that sell their products and services most market structures aim for perfect competition which is a theoretical construct that doesn t actually exist these market structures are made up of a small number of companies within an industry that controls the market firms in an oligopoly set prices whether collectively in a cartel or under the leadership of one firm rather than taking prices from the market profit margins are thus higher than they would be in a more competitive market some of the barriers to entry that prevent new players from entering the market in an oligopoly include economies of scale regulatory barriers accessing supply and distribution channels capital requirements and brand loyalty oligopolies in history include steel manufacturers oil companies railroads tire manufacturing grocery store chains and wireless carriers the economic and legal concern is that an oligopoly can block new entrants slow innovation and increase prices all of which harm consumers special considerationsgovernments sometimes respond to oligopolies with laws against price fixing and collusion yet a cartel can price fix if they operate beyond the reach or with the blessing of governments oligopolies that exist in mixed economies often seek out and lobby for favorable government policy to operate under the regulation or even direct supervision of government agencies the main problem that firms in an oligopoly face is that each firm has an incentive to cheat if all firms in the oligopoly agree to jointly restrict supply and keep prices high then each firm stands to capture substantial business from the others by breaking the agreement and undercutting the others such competition can be waged through prices or through simply the individual company expanding its own output brought to market companies in an oligopoly benefit from price fixing setting prices collectively or under the direction of one firm in the bunch rather than relying on free market forces to do so oligopoly characteristicsoligopolies are considered stable one of the main reasons why they are is because participating firms need to see the benefits of collaboration over the costs of economic competition then agree to not compete and instead agree on the benefits of cooperation the firms sometimes find creative ways to avoid the appearance of price fixing such as using phases of the moon price fixing is the act of setting prices rather than letting them be determined by the free market forces another approach is for firms to follow a recognized price leader so that when the leader raises prices the others will follow the conditions that enable oligopolies to exist include high entry costs in capital expenditures legal privilege license to use wireless spectrum or land for railroads and a platform that gains value with more customers such as social media the global tech and trade transformation has changed some of these conditions for instance offshore production and the rise of mini mills have affected the steel industry in the office software application space microsoft msft was targeted by google docs which google funded using cash from its web search business oligopolies and game theorygame theorists have developed models for these scenarios which form a sort of prisoner s dilemma when costs and benefits are balanced so that no firm wants to break from the group it is considered the nash equilibrium state for oligopolies this can be achieved by contractual or market conditions legal restrictions or strategic relationships between members of the oligopoly that enable the punishment of cheaters maintaining an oligopoly and coordinating action among buyers and sellers in general on the market involves shaping the payoffs to various prisoner s dilemmas and related coordination games that repeat over time as a result many of the same institutional factors that facilitate the development of market economies by reducing prisoner s dilemma problems among market participants such as secure enforcement of contracts cultural conditions of high trust and reciprocity and laissez faire economic policy might also potentially help encourage and sustain oligopolies advantages and disadvantages of an oligopolyone of the main benefits of having an oligopoly is that competition is very limited that s because there are very few players in the market since there are few competitors an oligopoly allows those who participate to net a higher amount of profits oligopolies come with higher barriers to entry for new participants this means that it can be difficult to enter the market because of the high costs associated with doing business the regulatory environment and the problems that arise when it comes to accessing supply and distribution channels because of the lack of competition there may be very little incentive to innovate product and service offerings with no diversity in offerings consumers remain loyal to what they know best limited competitionhigher profits for companiesgreater consumer demandhigh barriers to entry for new participantslack of innovationvery little choice for consumersexample of an oligopolythere are many examples of oligopolies in the market but one of the major examples of a global oligopoly is the organization of the petroleum exporting countries opec the organization was founded in baghdad in 1960 with five countries but expanded to 13 oil producing countries in 1975 1one of the main reasons why opec is considered an oligopoly is because it has no overarching authority every member nation within the group also has a substantial portion of the group s market share these countries also have a great deal of power together not separately when it comes to supply and demand issues and pricing so when the group lowers its supply as demand drops prices rise the opposite is true when demand rises | |
what are some negative effects of an oligopoly | an oligopoly is when a few companies exert significant control over a given market together these companies may control prices by colluding with each other ultimately providing uncompetitive prices in the market among other detrimental effects of an oligopoly include limiting new entrants in the market and decreased innovation oligopolies have been found in the oil industry railroad companies wireless carriers and big tech | |
what is an example of a current oligopoly | one measure that shows if an oligopoly is present is the concentration ratio which calculates the size of companies in comparison to their industry instances where a high concentration ratio is present include mass media in the u s for example the sector is dominated by just five companies nbc universal walt disney time warner viacom cbs and news corporation even as streaming services like netflix and amazon prime begin to encroach on this market meanwhile within big tech two companies control smartphone operating systems google android and apple ios | |
is the u s airline industry an oligopoly | with just four companies controlling nearly two thirds of all domestic flights in the u s as of 2021 it has been purported that the airline industry is an oligopoly these four companies are delta airlines united airlines holdings southwest airlines and american airlines according to a report compiled by the white house reduced competition contributes to increasing fees like baggage and cancellation fees these fees are often raised in lockstep demonstrating a lack of meaningful competitive pressure and are often hidden from consumers at the point of purchase 2 interestingly in 1978 the airline deregulation act was imposed which stripped away the civil aeronautics board the ability to regulate the industry 3 prior to this time the airline industry operated much like a public utility while fare prices had declined 20 years before the deregulation was introduced the bottom linethere is no such thing as perfect competition in the market but there are different market structures including oligopolies these types of markets are characterized by a small number of participating firms which may work together to set prices | |
oligopsony an overview | an oligopsony is a market for a product or service which is dominated by a few large buyers the concentration of demand in just a few parties gives each substantial power over the sellers and can effectively keep prices down the opposite effect can be seen in an oligopoly it is a market that is dominated by a few sellers who can keep prices high in the absence of competition from alternative sources of supply understanding the oligopsonythe fast food industry is a good example of an oligopsony a small number of large buyers including mcdonald s burger king and wendy s buys a huge amount of the meat produced by american ranchers that gives the industry the ability to dictate the price they are willing to pay cocoa is a less obvious example of an oligopsony just three firms including cargill archer daniels midland and barry callebaut buy most of the world s cocoa bean production which mostly originates with small farmers in third world countries american tobacco growers supply an oligopsony of cigarette makers three companies including altria brown williamson and lorillard tobacco company buy nearly 90 of all us grown tobacco and supplement it with tobacco produced in other countries in american book publishing consolidation has led to the emergence of just five dominant publishers known as the big five they account for about two thirds of all books published this is not immediately evident to readers each of the publishing giants has absorbed or created a number of specialized imprints that cater to different market segments and often carry the names of formerly independent publishers imprints create the illusion that there are many publishers but they coordinate within the parent company to prevent internal competition for manuscripts from popular authors the publishing oligopsony also tends to depress advances paid to authors and creates pressure for authors to cater to the tastes of the publishers producers caught in an oligopsony can get caught up in racing to the bottom with an impact on price and quality in recent years supermarkets have begun to emerge as an oligopsony the largest parent company in the industry is now kroger s which operates chains including dillons pay less super markets ralphs and city market among many others the german company aldi nord owns not only aldi s but trader joe s this emerging oligopsony is reaching developed economies around the world as a result they increasingly influence not only price but what crops are grown and how they are processed and packaged the impact of this oligopsony reaches deep into the lives and livelihoods of agricultural workers around the world their influence has also forced many suppliers who couldn t compete out of business in some countries this has led to allegations of unethical and illegal conduct oligopoly vs oligopsonyin an oligopoly the control is in the hands of a few sellers as long as they stay firm on prices the buyers have little negotiating room an oligopsony market sees frequent price wars as each player works to entice a buyer s business that effectively drives the price a down and the quantity up getting caught in an oligopsony is known as racing to the bottom sellers lose the power to control supply and demand | |
what is an ombudsman | an ombudsman is an official usually appointed by the government who investigates complaints usually lodged by private citizens against businesses financial institutions universities government departments or other public entities and attempts to resolve the conflicts or concerns raised either by mediation or by making recommendations ombudsmen may be called by different names in some countries including titles such as a public advocate or national defender | |
how an ombudsman works | an ombudsman typically has a broad mandate that allows them to address overarching concerns in the public and sometimes the private sector that said sometimes an ombudsman s mandate extends over only a specific sector of society for example a children s ombudsman may be tasked with protecting the rights of the young people of a nation while in belgium the various linguistic and regional communities have their own ombudsmen in the united states members of the united states congress serve as ombudsmen at the national level representing the interests of their constituents and maintaining staff tasked with advocating for constituents faced with administrative difficulties especially those caused by maladministration an ombudsman is free for consumers to use and is typically paid via levies and case fees ombudsmen are in place across a wide variety of countries and organizations within those countries they may be appointed at a national or local level and are often found within large organizations too ombudsmen may focus exclusively on and deal with complaints regarding a particular organization or public office or they may have wider ranges depending on the jurisdiction an ombudsman s decision may or may not be legally binding however even if not binding the decision typically carries considerable weight types of ombudsmanwhile the general duty of the ombudsman is the same the types of grievances they handle and resolution services they provide may differ according to their appointment ombudsmen can be found in organizations governments schools and other institutions an industry ombudsman such as a telecommunications or insurance ombudsman may deal with consumer complaints about unfair treatment the consumer received from a company that operates within that industry often and especially at the government level an ombudsman will seek to identify systemic issues that can lead to widespread rights violations or poor quality of service to the public by the government or institution in question a large public entity or other organization may have its own ombudsman an example being the california department of health care services depending on the appointment an ombudsman may investigate specific complaints about the services or other interaction a consumer has had with the entity concerned an ombudsman within an organization may also have a primary function of dealing with internal issues such as complaints by employees or if an educational institution complaints by its students ombudsmen duties may be more wide ranging nationally for example some countries have ombudsmen in place to deal with issues such as corruption or abuses of power by public officials furthermore some countries have ombudsmen whose main function is to protect human rights within those countries while an ombudsman is usually publicly appointed they will typically have a large degree of independence and autonomy in fulfilling their function this is to enable the official to act in a fair and impartial way to all parties involved in a complaint an advocate ombudsman just as the name suggests advocates for people who have filed grievances or for those with whom the grievances concern 1 they can be found in the private or public sectors but are typically found championing for long term care residents aging adults the underserved and those who cannot advocate for themselves a media or news ombudsman who receives complaints about news reporting the media ombudsman promotes accurate and transparent news reporting in an environment that fosters trust with the general public having a media ombudsman can help media outlets avoid lengthy and costly litigation involving false reporting and claims of defamation media ombudsmen work with journalists editors and other media professionals to investigate and respond to complaints often to promote transparency in operations they publish their response to a broader audience people may complain to a media ombudsmen if they feel that a broadcast is particularly lewd or offensive advantages and disadvantages of an ombudsmanombudsmen provide a channel for people to submit complaints against institutions e g governments businesses organizations news outlets and schools without influence from the accused they conduct fair and unbiased investigations at no cost to the complainant providing resolutions or mediation services | |
where corruption is present ombudsmen can investigate expose and help correct illegal behaviors ombudsmen help prevent governments from abusing their power such as imposing unfair laws and exerting controls over their citizens without constraints they also help restore confidence in the system and its ability to fairly address issues | in addition to investigating and providing resolutions ombudsmen serve as a source of information about policies and procedures serving as an unbiased party they are able to promote communication between parties and clarify issues that stifle progress on the other hand an ombudsman offers no benefit when their work produces lackluster or no results a lack of dedication and service erodes the trust of the complainant and the audience they are appointed to serve if the claim is complex receiving a quick resolution is unlikely investigations take time and may require additional resources despite the recommendation or resolution the institution has the final say on how to resolve the issue unlike lawyers ombudsmen are impartial except in cases where they advocate for the rights of others some are familiar with or have legal training however they cannot provide legal advice 2 if the complainant disapproves of the resolution they may pursue other actions such as suing the institution an ombudsman cannot however investigate a case after it is submitted to a court facilitates customer or public complaintsunbiased and objectivecan restore and maintain confidence in organizations or institutionspoor performance can erode trustcannot provide legal advicecomplex issues can take a lot of time to resolveif legal action is later pursued for the same complaint the ombudsman s suggested remedy can influence judicial decisions | |
what is the role of an ombudsman | an ombudsman is someone appointed to investigate complaints against an institution and seek resolutions to those complaints some have full authority to investigate and resolve issues and some have limited capacity to only investigate and provide suggested resolutions to a governing authority or the institution subject to the complaint | |
which type of ombudsman do i need | if seeking the services of an ombudsman the type you need is dependent on the nature of your grievance and the institution which has aggrieved you if the complainee is a member of an organization seek an ombudsman dedicated to resolving issues for that organization and likewise for other entities if in the uk ireland or british crown dependencies or overseas territories the ombudsman association is a great starting point for finding an ombudsman for your particular situation 3 in the u s the united states ombudsman association provides a list of websites for public ombudsmen in the united states and parts of canada 4 | |
how long does an ombudsman investigation take | investigations conducted by ombudsmen vary the length is determined by the type and complexity of the complaint available resources to resolve the complaint as well as other factors if simple it could be six to eight weeks 5 | |
what powers does an ombudsman have | an ombudsman has the power to investigate and file complaints against otherwise influential organizations or high ranking officials they often have the power to request key documents interview individuals and order a legal investigation if necessary if agreed to ombudsmen rulings are legally binding the bottom linean ombudsman is an official who is responsible for ensuring the integrity of a business or institution in universities government bodies and other institutions an ombudsman is responsible for following up on any complaints and resolving their concerns | |
what is omega | omega is a measure of options pricing similar to the option greeks that measure various characteristics of the option itself omega measures the percentage change in an option s value with respect to the percentage change in the underlying price in this way it measures the leverage of an options position understanding omegatraders use options for many reasons but one of the most important is leverage a small investment in a call option for example allows the trader to control a larger dollar value of the underlying security in other words a call option trading at 25 per contract could control 100 shares of a stock trading at 50 per share with a value of 5 000 the holder has the right but not the obligation to purchase those 100 shares at a specific price the strike price by a certain date omega is the third derivative of the option price and the derivative of gamma it is also known as elasticity to see leverage in action assume ford motor co f shares increase 7 in a given period and a ford call option increases 3 in that same period the omega of the call option is 3 7 or 0 43 this would imply that for every 1 ford stock moves the call option will move 0 43 the formula is as follows percent change in v percent change in s where v price of the option s underlying price begin aligned omega frac text percent change in v text percent change in s textbf where v text price of the option s text underlying price end aligned percent change in spercent change in v where v price of the options underlying price options greeksomega is calculated based on two of the standard option greeks delta and gamma this set of metrics provides a sense of an options contract s risk and reward with respect to different variables the most common option greeks are relationship to deltaan option s gamma is also the rate of change roc in its delta and may be called the delta of the delta the equation for omega can also be expressed v s s v omega frac partial v partial s times frac s v s v vs given that the equation for delta is v s delta frac partial v partial s s v omega can be expressed in terms of delta as s v omega delta times frac s v vs | |
what is an omnibus account | an omnibus account allows for managed trades of more than one person and allows for anonymity of the persons in the account omnibus accounts are used by futures commission merchants transactions within the account are carried out in the name of the broker protecting the individual identities of the two or more people invested in the omnibus account the broker managing the omnibus account typically has the ability to execute trades on behalf of investors with funds inside the omnibus account trades are made in the name of the broker although trade confirmations and statements are provided to customers within the account the basics of an omnibus accountomnibus accounts refer to accounts that hold more than one item omni meaning many and bus meaning business a minimum of two individuals are required to create an omnibus account all transactions occurring within an omnibus account will appear under the name of the associated broker leaving the details of individual investors private an omnibus account is normally overseen by a futures manager the futures manager uses the funds in the account to complete trades on behalf of the participating individual investors this method is similar to when an investor leaves stock in a broker s name allowing the broker to hold the majority of the responsibility while also allowing them to take fast actions when required aside from performing trades the fund manager may also perform other actions designed to maintain the value of the account in exchange the futures manager charges fees or commissions to compensate for taking on the responsibility of these tasks omnibus accounts and foreign marketsif a country accepts an omnibus account from a foreign country it becomes the host market depending on the host country involved regulatory concerns may arise since the individual investors participating in the account aren t known there is no way to determine the intents of the investors involved the addition of foreign funds may destabilize a small host market if the omnibus account represents a very large sum of money because of this some markets have banned omnibus accounts to defend against destabilization or potential market manipulation other countries welcome the accounts seeing it as an ideal method for encouraging foreign investments into the host market an omnibus account can provide investors with access to foreign markets while maintaining a level of anonymity although omnibus accounts are not allowed in parts of the world | |
what is the omani rial | the currency of oman the omani rial is broken into smaller units called baisa and is found in both coin and banknote form it is managed by the central bank of oman 1understanding the omani rial omr the omani rial was created during the early 1970s as a replacement to the indian rupee and maria teresa thaler 2 it was part of a modernization effort undertaken in the wake of a rebellion the currency is pegged to the u s dollar though the rate was adjusted in 1986 3 | |
what is on account | on account is an accounting term that denotes partial payment of an amount owed on account is also used to denote the purchase sale of goods or services on credit on account can also be referred to as on credit | |
how on account works | on account can refer to purchases on account but there are also other ways to use this notation | |
when a customer or business makes a purchase on credit a general ledger account known as accounts payable is created or the current one is increased accounts payable refers to the short term debt that a company owes another entity during conducting business operations as the company purchases more goods on credit this account will increase the account will decrease as the company pays off its outstanding bills | any purchases made with credit can be referred to as purchased on account a business that owes another entity for goods or services rendered will record the total amount as a credit entry to increase accounts payable the outstanding balance remains until cash is paid in full to the entity owed | |
when payment is made against an account such that the entry in the accounts payable of a company s books is no longer outstanding it is referred to as paid on account payments made on account decrease accounts payable as a debit entry to the account most lenders will accept payments on account | for example if a business purchases 5 000 worth of merchandise on account this refers to the purchase of the goods on credit and deferral of payment the business will have an increase in its accounts payable of 5 000 this means that the business will owe 5 000 for the purchase of the merchandise since they have not rendered payment at the time the goods were delivered types of on accounton account can refer to several bills or debt settlement events on account could refer to payment on account in which payment is made against a certain customer s account without any reference to a specific invoice payments on account are often made for purchases on account where the customer has not yet received a bill or invoice they are common in industries in which it is common for businesses to purchase goods and services on credit example of on accountfor example a customer has a 20 000 outstanding balance due to a vendor the customer makes a 10 000 payment to the vendor with no reference attributed to an individual invoice the payment made will be applied against the outstanding balance as a whole at a later date the payments can be partially or fully matched to the related invoice usually customers are given a specific period in which to make full payment on a specific invoice even when credit is extended it is very important for accuracy of accounting to keep accurate records of all accounts payable and accounts receivable and to match payments on account with their relevant invoices as soon as can be done so the maintenance of accurate records and the proper classification of payments allows accounting ledgers to be correctly reconciled at the end of the month quarter or year | |
what is on balance volume obv | on balance volume obv is a technical trading momentum indicator that uses volume flow to predict changes in stock price joseph granville first developed the obv metric in the 1963 book granville s new key to stock market profits 1granville believed that volume was the key force behind markets and designed obv to project when major moves in the markets would occur based on volume changes in his book he described the predictions generated by obv as a spring being wound tightly he believed that when volume increases sharply without a significant change in the stock s price the price will eventually jump upward or fall downward image by sabrina jiang investopedia 2021formula for on balance volume obv | |
what is on chain governance | on chain governance is a system for managing and implementing changes to cryptocurrency blockchains in this type of governance voting systems for instituting changes are programmed into the blockchain developers propose changes and each stakeholder votes on whether to accept or reject the proposed change blockchain stakeholders might be developers validators token holders or anyone else the blockchain is designed to include understanding on chain governanceon chain governance systems are programmed to allow certain participants to vote on changes these changes are usually submitted via whatever method the project uses it might be github discord slack or an online forum the blockchain network usually sends out voting requests through user wallets or other interfaces participants cast their votes and the system records and tallies the results each blockchain is different in its voting process the design can dictate factors like how many votes are needed for the proposal to pass which of the voters get to vote the weight each vote receives and even if voters receive a reward for voting the project then moves forward in the direction the voters decide on if the change is voted for it is included in the blockchain which then forks when the developers implement it if the proposal fails the blockchain continues operating as it was while anyone can propose changes for a community governed and open source blockchain it s usually a core group of developers proposing changes because they are the ones who understand how the program is written and what needs to be done voting usually involves stakeholders who meet the blockchain s voting criteria generally these stakeholders own tokens that grant them voting rights blockchains are not yet at a stage where forks are automatic after voters accept a proposal people still need to program bug test and release the new code network participants must also load the new version onto their machines the only thing that is automated currently by blockchains is the voting process types of on chain governanceimplementation of on chain governance differs between various blockchains for example tezos uses what it calls a self amending ledger community approved changes are implemented to a test net version of the coin s blockchain as soon as a version is ready if the planned changes are successful they are finalized into a production version of the blockchain published on its main net if not the test net blockchain is rolled back with no changes to the main blockchain 1future of on chain governanceon chain governance emerged as an inclusive approach to blockchain technology in which all participants can share the benefits as the blockchain community and their networks look to improve scalability speed and uses these systems are likely to continue gaining popularity on chain governance will likely center around enhancing transparency and trust in blockchains decentralized autonomous organizations daos use this type of blockchain governance it can be incorporated into enterprise decision making and legislative voting processes the primary challenge faced by on chain governance developers participants or any other interested party is its eventual centralization wherever and whenever possible certain types of people or entities always find a way to exploit systems created for fairness and equality for their own benefit on chain governed blockchains are likely to be no different in this regard advantages of on chain governancesome of the advantages of on chain governance are as follows changes to a blockchain are not routed through a core development community which evaluates its merits and demerits instead each voter has a say in proposed changes and can read about or discuss its benefits and drawbacks it is decentralized because it relies on the community for collective decision making informal governance systems require time and effort between stakeholders to reach an agreement on a project s direction on chain governance records and tallies votes on proposed changes in much less time once voting is concluded developers are obligated to follow the results programming begins or stops changes are tested if needed and all node operators must follow the decision if they want to remain part of the updated or unchanged network operators participants and developers who choose not to follow the vote s results end up using a version not supported by the community and their version of the blockchain and network becomes a fork disadvantages of on chain governancewhile there are many reasons to like on chain governance systems there are just as many to dislike here are a few similar to real world elections low voter turnout is a problem for on chain governed blockchains low voter turnout creates other issues usually it is a core group of people voting which results in a centralized group that decides the future of the blockchain thus the effort to decentralize decision making is wasted voters with more tokens sometimes have more votes this means that users with more stakes can take control of the voting process and steer development in their desired direction more importantly it skews the dynamic away from developers network participants and the community towards investors who are likely to hold more tokens their interests usually focus on maximizing future profits instead of innovating for the blockchain s future | |
what is on chain governance | on chain governance is a blockchain voting system that grants stakeholders the ability and right to vote on and affect the outcomes of decisions about a blockchain s future | |
does ethereum have on chain governance | the main ethereum blockchain does not use on chain governance but there are governance tokens created using the ethereum blockchain for other projects | |
what is the difference between on chain and off chain governance | on chain governance gives token holders the decentralized right to vote on and implement changes in a blockchain off chain governance refers to changes proposed and implemented by a select group of individuals centralized the bottom lineon chain governance blockchains use systems that let token holders or others with rights vote on proposals for changes to a blockchain these blockchains are intended to decentralize decision making and give cryptocurrency or blockchain communities and fans control of their tokens and the blockchains they reside on the comments opinions and analyses expressed on investopedia are for informational purposes online read our warranty and liability disclaimer for more info | |
what are on the run treasuries | on the run treasuries are the most recently issued u s treasury bonds or notes of a particular maturity on the run treasuries are the opposite of off the run treasuries which refer to treasury securities that have been issued before the most recent issue and are still outstanding media mentions about treasury yields and prices generally reference on the run treasuries | |
how on the run treasuries work | the on the run bond or note is the most frequently traded treasury security of its maturity because on the run issues are the most liquid they typically trade at a slight premium and thus yield a little less than their off the run counterparts some traders successfully exploit this price differential through an arbitrage strategy that involves selling or going short on the run treasuries and buying off the run treasuries treasuries are considered to be a lower risk than some other investment options as they are debts owed by the federal government the treasury issues them to raise revenue for government expenses as treasuries are created and sold the newest batch becomes the on the run treasuries on the run vs off the run treasuriesa treasury transitions from on the run to off the run once a newer set of treasuries is released for sale for example if one year treasury notes are issued today those would be the current on the run treasuries if another set of treasury notes get issued in the next month those become the new on the run treasuries and the previously issued treasuries are considered off the run this cycle continues as each new batch is created with every group other than the newest run deemed off the run for the rest of its associated time until it is cashed in upon reaching maturity the most actively traded treasuries at any point in time are those that are considered on the run due to the increased activity they tend to have a higher initial cost and lower yield than off the run notes this causes on the run treasuries to be more liquid as finding a buyer tends to be simpler than off the run options this leads to more investments relating to hedging than to longer term investments long term investors do not need to purchase on the run treasuries at a higher price since the included return or interest rates tend to be similar the price difference between on the run and off the run treasuries is often referred to as the liquidity premium as the more liquid treasuries are obtained at a higher cost if liquidity is not a concern the investor will likely look for more cost effective options advantages and disadvantages of on the run treasurieson the run treasuries are more scarce than off the run treasuries there are plenty of off the run treasuries yet there are a limited amount of on the run securities that is new issues are a small part of the treasury universe thus on the run securities tend to have higher prices and lower yields on the run securities tend to be highly liquid as they trade heavily on the secondary market meanwhile the liquidity for off the run treasuries is less where they ve already been bought and are held by investors thus on the run treasuries trade with that liquidity premium but if investors don t need the newest issue they will likely find a better deal with off the run treasuries | |
what is on the run treasury yield curve | the on the run treasury yield curve graphically shows the current yields versus maturities of the most recently sold u s treasury securities and is the primary benchmark used in pricing fixed income securities understanding on the run treasury yield curvesimply put the on the run treasury yield curve is the u s treasury yield curve that is derived using on the run treasuries and it plots the yields of these instruments of similar quality against their maturities the on the run treasury yield curve is the opposite of the off the run treasury yield curve which refers to u s treasuries of a given maturity which are not part of the most recent issue on the run treasury yield curve is less accurate than off the run treasury yield curve as the volatility of current demand for recent supply tends to lead to price distortions the on the run treasury yield curve s relevance lies in the fact that it is commonly used to price fixed income securities however its shape is sometimes distorted by up to several basis points if an on the run treasury goes on special a treasury goes on special when its price is temporarily bid up this price increase is usually the result of increased demand by securities dealers wishing to use the security as a hedging vehicle this hedging can make on the run treasury yield curves somewhat less accurate than off the run treasury yield curves the treasury yield curve indicates that there are two important factors that complicate the relationship between maturity and yield yield curve shapesthe typical shape for the on the run treasury yield curve is upward sloping as yield increases with maturity which is referred to as a normal yield curve the shape of the yield curve is the result of supply and demand for investments in particular segments of the curve for example if an investment fund chooses to invest only in securities with 5 to 10 year maturities that would raise prices and lower yields in the corresponding segment if demand by short term investors is extremely high the yield curve will become steeper an inverted yield curve reflects higher interest rates for shorter term maturities than for longer term maturities an inversion in the yield curve can sometimes be the result of aggressive central bank policies these policies temporarily raise short term interest rates to slow the economy however this is considered to be a short term abnormality and there is an expectation that the curve will revert to a flat or positive structure in the near term a flat yield curve where short and long term rates that are approximately equal is normally associated with a transitional period this period is when interest rates are moving from a positive yield curve to an inverted yield curve or vice versa | |
what is an on us item | an on us item is a check or draft that is presented to the bank where the check writer has the funds on deposit as opposed to the depositor s bank although in some cases both check writer and depositor may happen to use the same bank the check can then be cashed or deposited into another account of course the drawing account must have a sufficient balance to pay the check understanding on us itemson us items can be very beneficial for banks conducting the transactions as they often obtain revenues from both the acquiring and issuing sides of the payment in on us transactions there is often no need to go to an outside network to obtain authorization or funds for the exchanges which may carry additional fees or surcharges on us checks may also be referred to as house checks on us items can also be in the form of electronic debits or transfers as with checks electronic on us items refer to the drawing and paying accounts at the same bank if the bank of first deposit bofd is the same as the bank of the issuer deposits do not need the services of a private clearinghouse or other third party entity on us versus other forms of transactionsin addition to on us items a number of other categories of bank transactions exist these include but are not limited to a not on us transaction an international or cross border transaction and intra regional transactions not on us items occur when the acquirer and issuer bank are separate in a typical credit card process for example an acquirer a merchant s bank both processes and settles a merchant s credit card transaction after a merchant swipes a credit card the merchant s bank requests authorization for the sale this request is routed to the card issuing bank prior to the completion of the sale international or cross border transactions are defined as when an acquirer and issuer are from different countries intra regional transactions occur when acquirers and issuers are from different regions yet still to an established geographic grouping such as europe single euro payments area sepa or gim uemoa a banking group of the economic and monetary union of west africa gim uemoa represents over eighty regional financial institutions and more than 80 million individuals | |
what is a bank holding company | a bank holding company is a corporation that owns a controlling interest in one or more banks but does not itself offer banking services holding companies do not run the day to day operations of the banks they own however they exercise control over management and company policies they can hire and fire managers set and evaluate strategies and monitor the performance of subsidiaries businesses bank of america citigroup and jpmorgan chase co all are operated by holding companies bank holding companies are regulated by the federal reserve banks that are not owned by holding companies are regulated primarily by the office of the comptroller of the currency although u s banking regulations are so complex and far reaching that a total of five federal agencies are involved understanding the bank holding companyholding companies or holdcos exist outside of the realm of banks some corporations have been formed just to hold the assets of several subsidiaries not to produce any products or services holding company assets may include limited liability companies or partnerships real estate patent trademarks stocks bonds and more they are partially protected by law from the financial losses of their assets and can structure themselves to spread tax financial and legal liabilities among their various subsidiaries reducing overall risk perhaps the best known holding company in the u s is berkshire hathaway which is owned and run by the investor warren buffet berkshire hathaway is a holding company for businesses in which it holds a significant stake including coca cola geico dairy queen bnsf railway lubrizol fruit of the loom and helzberg diamonds the holding company also has stakes in the kraft heinz company and american express a variation of the holding company is the one bank holding company which by definition is a corporation that owns at least one quarter of the voting stock of a commercial bank a bank holding company does not offer any banking services it owns and controls a bank or banks the one bank holding company is a creation of the late 1960s their formation allowed independent banks the greater operating range of a bank holding company that is they could branch out from their dependence on individual depositors into other types of banking activities such as loans and commercial paper the ability to issue commercial paper in capital markets was a particular priority of the one bank holding companies commercial paper is a key method for a corporation to raise money quickly and cheaply to meet its short term liabilities and finance its accounts receivable and inventories it is a short term debt instrument rarely maturing in more than 270 days it does not pay interest in the traditional sense but is issued at a discount from face value | |
what is one belt one road obor | one belt one road obor the brainchild of chinese president xi jinping is an ambitious economic development and commercial project that focuses on improving connectivity and cooperation among multiple countries spread across the continents of asia africa and europe dubbed as the project of the century by the chinese authorities obor spans about 78 countries | |
how one belt one road works | initially announced in the year 2013 with the purpose of restoring the ancient silk route that connected asia and europe the project s scope has been expanded over the years to include new territories and development initiatives also called the belt and road initiative bri the project involves building a big network of roadways railways maritime ports power grids oil and gas pipelines and associated infrastructure projects the project covers two parts the first is called the silk road economic belt which is primarily land based and is expected to connect china with central asia eastern europe and western europe the second is called the 21st century maritime silk road which is sea based and is expected to will china s southern coast to the mediterranean africa south east asia and central asia the names are confusing as the belt is actually a network of roads and the road is a sea route they contain the following six economic corridors additionally the maritime silk road connects coastal china to the mediterranean via singapore malaysia the indian ocean the arabian sea and the strait of hormuz obor spans over 78 countries special considerations obor s importance to chinaobor is of prime significance to china as it aims to boost its domestic growth and is also a part of the country s strategy for economic diplomacy by connecting the less developed border regions like xinjiang with neighboring nations china expects to bump up economic activity obor is expected to open up and create new markets for chinese goods it would also enable the manufacturing powerhouse to gain control of cost effective routes to export materials easily any excess capacity in terms of production can be channelized effectively to regions along obor routes china has announced investments of over 1 trillion in the various infrastructure projects and is funding them by offering low cost loans to the participating countries many participating countries like kyrgyzstan and tajikistan support the obor due to massive investments by china in local transmission projects in these nations landlocked nepal has recently joined obor by signing a deal that will help it improve cross border connectivity with china and pakistan is set to benefit from the 46 billion china pakistan economic corridor cpec that will connect southwestern china to and through pakistan allowing access to arabian sea routes 1 while china continues to pitch obor as an all inclusive project for regional development other nations perceive it as a strategic move by the asian powerhouse to attain significance and control at a regional level and to play a larger role at the global level by building and controlling a china focused trading network china sees this venture as an opportunity to emerge as a regional leader in the future we may see a boost in the chinese yuan with increased usage in the obor region | |
a one cancels the other oco order is a pair of conditional orders stipulating that if one order executes then the other order is automatically canceled an oco order often combines a stop order with a limit order on an automated trading platform when either the stop or limit price is reached and the order is executed the other order is automatically canceled experienced traders use oco orders to mitigate risk and enter the market | oco orders may contrast with order sends order oso conditions that trigger rather than cancel a second order basics of a one cancels the other ordertraders can use oco orders to trade retracements and breakouts if a trader wanted to trade a break above resistance or below support they could place an oco order that uses a buy stop and sell stop to enter the market for example if a stock is trading in a range between 20 and 22 a trader could place an oco order with a buy stop just above 22 and a sell stop just below 20 when the price breaks above resistance or below support a trade is executed and the corresponding stop order is canceled conversely if a trader wanted to use a retracement strategy that buys at support and sells at resistance they could place an oco order with a buy limit order at 20 and a sell limit order at 22 if oco orders are used to enter the market the trader must manually place a stop loss order when the trade is executed the time in force for oco orders should be identical meaning that the time frame specified for the execution of both stop and limit orders should be the same example of an oco ordersuppose an investor owns 1 000 shares of a volatile stock that is trading at 10 the investor expects this stock to trade over a wide range in the near term and has a target of 13 for risk mitigation they do not want to lose more than 2 per share the investor could therefore place an oco order which would consist of a stop loss order to sell 1 000 shares at 8 and a simultaneous limit order to sell 1 000 shares at 13 whichever occurs first these orders could either be day orders or good til canceled orders if the stock trades up to 13 the limit order to sell executes and the investor s holding of 1 000 shares sells at 13 concurrently the 8 stop loss order is automatically canceled by the trading platform if the investor places these orders independently there is a risk that they might forget to cancel the stop loss order which could result in an unwanted short position of 1 000 shares if the stock subsequently trades down to 8 | |
the chinese government implemented the one child policy mandating that the vast majority of couples in the country could only have one child the phrase one child policy used often outside china can be a bit misleading the one child rule didn t apply to all exceptions were frequently made and local officials had discretion over how population limits were achieved 1 these collective efforts were nevertheless intended to alleviate the social economic and environmental problems associated with the country s rapidly growing population the rule was introduced in 1979 and phased out in 2015 2 | understanding china s one child policythe one child policy refers to a set of laws implemented beginning in 1979 in response to explosive population growth that government officials feared would lead to a demographic disaster china has a long history of encouraging birth control and family planning in the 1950s when population growth started to outpace the food supply the government started promoting birth control however by the late 1970s china s population was quickly approaching 1 billion and the chinese government considered ways to curb population growth this effort began in 1979 with mixed results but was implemented more seriously and uniformly in 1980 as the government standardized the practice nationwide 3there were however exceptions for ethnic minorities for those whose firstborn was labeled as disabled and for rural families whose firstborn was not a boy the policy was most effective in urban areas since those in china s agrarian communities resisted it to a greater extent 4initially the one child policy was meant to be a temporary measure though in the end it may have prevented up to 400 million births 5 ultimately china ended its one child policy after it became apparent that it might have been too effective many chinese were heading into retirement and the nation s population had too few young people to provide for the older population s retirement and healthcare while sustaining continued economic growth 5the government mandated policy was formally ended oct 29 2015 after its rules had been slowly relaxed to allow more couples fitting certain criteria to have a second child now all couples are allowed to have two children 5enforcementthere were different methods of enforcement including incentives and sanctions that varied across china for those who complied there were financial incentives and preferential employment opportunities for those who violated the policy there were sanctions economic and otherwise at times the government employed more draconian measures including forced abortions and sterilization 1the one child policy was officially discontinued in 2015 the efficacy of the policy itself though has been challenged as it s typical that population growth generally slows as societies gain in income as happened in china during this time in china s case as the birthrate declined the death rate declined too and life expectancy increased 5one child policy implicationsthe one child policy had serious implications for china s demographic and economic future in the early 2020s china s fertility rate stands at 1 6 among the lowest in the world 6 the u s is at 1 7 china now has a considerable gender skew there are roughly 3 to 4 more males than females in the country with the implementation of the one child policy and the preference for male children china had a rise in the abortion of female fetuses the number of baby girls left in orphanages and even in infanticides of baby girls 7this continues to affect marriage and birthrates around the country fewer females means there were fewer women of childbearing age in china 8 the drop in birthrates meant fewer children which occurred as death rates dropped and longevity rates rose it is estimated that the share of adults ages 65 and older will have risen from just 12 to a projected 26 by 2050 9 thus older parents will be relying on their children to support them and have fewer children to do so this is compounded by the massive urbanization of china since 1980 with those living in urban areas increasing from 19 in 1980 to 60 in recent years 10 china is also facing a potential labor shortage and will have trouble supporting this aging population through its state services 11finally the policy led to the proliferation of undocumented non first born children their status as undocumented makes it impossible to leave china legally as they cannot register for a passport they have no access to public education oftentimes their parents were fined or removed from their jobs 5one child policy faqs | |
does china still have the one child policy | no china reverted to a two child policy after its one child policy ended in 2015 and the restrictions were gradually loosened before its official end 3did china s one child policy increase its economic growth there s a chicken or egg quality to any answer china s one child policy by initially reducing population growth could have contributed to economic gains by creating a larger working age population relative to children which would have boosted productivity and savings however it s also the case that countries with increases in national wealth tend to have population growth that slows down thus the increase in economic growth in china may have helped reduce the number of chinese newborns over this time not the other way around whatever the case the long term effects of these demographic shifts from about 1979 to 2015 include a shrinking labor force and a greater proportion of the population that is retired posing challenges for continued economic growth and the social safety net | |
is china encouraging the birthrate today | yes china has implemented or increased parental tax deductions family leave housing subsidies for families and spending on reproductive health and child care services to increase the national birthrate since ending the one child policy formally in 2015 the chinese government also promotes flexible work hours and work from home options for parents most interesting are policies one wouldn t consider related to the birthrate at first glance such as banning private tutoring companies from profiting off teaching core subjects during weekends or holidays by lowering educational pressure on children and this often costly financial load on parents china is attempting to lower the burdens of parenting with greater financial security parents may feel better able to handle additional children another upshot by reducing pressure academically especially on weekends and holidays families can spend more time together thus fostering greater family connections | |
what happened if you broke the one child policy | violators of china s one child policy could be fined forced to have abortions or sterilizations or lose their jobs 5the bottom linechina s one child policy a phrase used for a set of laws related to population growth implemented starting in 1979 represented one of the more draconian modern attempts to intervene in a country s rising demographics while the population did slow the policy also resulted in unintended consequences such as an aging population gender imbalance and a shrinking workforce its discontinuation in 2015 and subsequent measures to encourage higher birth rates reflect china s complex challenges in balancing population control with sustainable economic and social development | |
what is the one percent rule | the one percent rule sometimes stylized as the 1 rule is used to determine if the monthly rent earned from a piece of investment property will exceed that property s monthly mortgage payment the goal of the rule is to ensure that the rent will be greater than or at worst equal to the mortgage payment so the investor at least breaks even on the property the one percent rule can provide a baseline for establishing the level of rent that commercial property owners charge on real estate space this rent level can apply to all types of tenants in both residential and commercial real estate properties purchasing a piece of property for investment requires a thorough analysis of numerous factors the one percent rule is just one measurement tool that can help an investor gauge the risk and potential gain that might be achieved by investing in a property |
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