Section
Economics
The economic ideas that reach a brokerage account: the rate your cash earns, the rate your margin loan costs, and the policy decisions that move both.
Monetary policy is set by the Federal Reserve, fiscal policy by Congress and the President, and the two reach markets by different roads. Short-term interest rates move first, and with them the yield on Treasury bills, the interest paid on cash, and the base rate most brokers use to price margin loans.
Economic labels are applied after the fact. Recessions in the United States are dated by a committee of the National Bureau of Economic Research, often months after they begin, which is one reason economic data makes a poor timing tool. The margin interest calculator shows what a change in your broker's rate does to the cost of a loan in dollars.
Columns
All columns →Argument
Margin Debt Data: What the Crowd's Borrowing Can and Can't Tell YouMargin debt data is useful context on how much leverage sits in the market and a poor timing tool; the leverage number worth acting on is your own.
Argument
The T-Bill Yield Is the Hurdle Every Trading Strategy Must ClearJudge a trading strategy by what it earns above the T-bill yield, set against its drawdown and your hours, because the bill pays with no risk at all.
Answers
Concepts
- Marginal propensity to consume
The fraction of an additional dollar of income that a household or an economy spends on consumption, with the rest saved; a figure between zero and one.
- Net interest margin
A bank's interest income minus its interest expense, divided by the average assets that earn interest, showing what it earns on the spread between lending and funding.
- Risk-free rate
The return available on an investment treated as having no default risk, in practice the yield on short-term US Treasury bills, used as the baseline for judging other returns.
Quizzes
- Loud News, Quiet Price: A Quiz on Trading the Headlines
Whether you can separate a headline from the surprise inside it, and link economic releases, Fed decisions and company news to the price move.