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Date: Tuesday 13th 2008f May 2008 09:22:38 AM

Glossary
 

M
 

Macaroni Defense:  A way for a company to defense itself from hostile takeover. It would issue a large number of bonds that will be redeemed at high price if an acquirer comes.

Our take: It got the term because the price of the redeemed bond will balloon like Macaroni in a pot.

 

Macroeconomics: The branch of economics that study economic in aggregate.

Our take: Macroeconomics studies economic phenomena such as GDP, national income, economic growth, inflation and employment level.
 

Main Street: It is another nickname for the investing public.

Our take: Individual investors can be considered as the main street. On contrary, mutual fund managers can be considered as the wall street.
 

Maintenance Margin: The amount of equity needed to maintain investor's margin position.
Our take: For a maintenance margin of 50%, investors need $ 1000 of their own money to buy a stock that is worth $ 2000 in the open market. Some experienced investors are allowed to have a maintenance margin as low as 25%.
 
Majority Shareholder: An investor who owns more than 50% of the outstanding shares for a company.
Our take: Majority shareholder have the authority to install the board of directors which in turn select the management personnel to run the company.
 
Managed Account: A personalized investment account that are managed by a professional.
Our take: With a managed account, investor can have a say on what stock to invest and what not to invest. On the other hand, mutual fund manager have a more leeway in determining on what stocks to invest.
 
Managed Money: An investment method where investors can place their fund in the hand of professional money manager.
Our take: A way for individual investor to take part in the stock market without knowing the details of investing. Example of managed money include: mutual fund and managed account.
 
Management Fee: A fee imposed on investors for using professional manager's help in managing their investment portfolio.
Our take: Management Fee varies depending on the type of mutual funds chosen by the investors.
 
Managerial Accounting: Accounting that uses historical data and forecasting tools to help managers make decisions on how to run its daily operations as well as business strategies.
Our take: Another branch of accounting is called financial accounting where it is geared towards outsiders. On the other hand, managerial accounting is geared more towards insiders.
 
Margin Account: A brokerage account that has the capability of getting borrowed fund from the brokers.
Our take: Initially, margin account needs 50% of maintenance margin. After a while, the broker may decide to give more leverage by lowering its maintenance margin to say 25%.
 
Margin Call: It happens when the broker wants investors to put more money onto their margin account. It occurs when investor's equity fall below the minimum margin maintenance specified beforehand.
Our take: When the stock you bought falls precipitously, investor may violate the  minimum maintenance margin and as a result, he receives a margin call from your broker.
 
Marginal Tax Rate: The additional dollar of taxes paid as more dollars of income is earned.
Our take: The more you earn, the higher taxes you pay. This seems like a perfect way of discouraging business performance.
 
Marginal Utility: The additional consumer benefit by consuming one more unit of product or service.
Our take: For example: when you are hungry, you order one piece of chicken strip. As your stomach get filled, the marginal utility of ordering one more chicken strip will diminish. At a point, ordering more chicken strips will not give you marginal utility at all.
 
Market Arbitrage: Purchasing a security in one market and selling it in another market to take advantage of market inefficiency between the two markets.
Our take: There is not plenty of market efficiency these days and investors need a truck load of money to make meaningful profit using market arbitrage.
 
Market Cannibalization: The negative impact of a new product for the sales of existing products.
Our take: For example if Motorola unveils a new line of camera phone, the rest of phone line up might have taken a hit.
 
Market Capitalization: The total amount of money to buy 100% stake of a company.
Our take: For example, market capitalization of Microsoft Corporation (MSFT) is $ 280 Billion. It takes that much money to buy a 100% stake of the company.
 
Market Jitter: Feeling of nervousness due to the uncertainty regarding the future of investing environment.
Our take: Market Jitter happens due to unemployment rate, terrorist bombing, oil supply disruption, interest rate uncertainty and so forth.
 
Market Order: An order to trade a security immediately at current price.
Our take: For a highly volatile stock, using market order to trade a stock is not advisable.
 
Market Risk: The risk associated with the day-to-day fluctuation of the market.
Our take: Beta is a measure of volatility of a security. You can measure market risk by investigating beta.
 
Market Risk Premium: The difference in return expected from the market versus the risk-free rate (10 year treasury bond)
Our take: When the market risk premium is negative, it signals that the stock market is expected to return less than the risk-free rate.
 
Market Segmentation: Grouping prospective customers of similar needs and respond accordingly based on this grouping.
Our take: For example: A soft drink company can divide their products into two market segmentation; the carbonated drink and the non-carbonated drink.
 
Marketable Securities: Securities that can be easily converted into cash.
Our take: For example: Common stocks traded in New York Stock Exchange (NYSE) can be considered marketable securities.
 
Mass Customization: The process of manufacturing goods that can be suited towards each individual customers
Our take: One good example of mass customization is Dell's direct selling method strategy.
 
Mature Industry: Industry that is not growing in aggregate.
Our take: Example includes: demand for television sets.
 
Merchant bank: Bank that deals with international finance, underwriting and other loans.
Our take: This niche has made merchant bank a valuable partners for multinational corporations.
 
Merger: The joining of the two companies to become one entity.
Our take: Two companies merge generally to obtain economic of scale and be more efficient in their operations.
 
Micro-cap: Defined as company with a market capitalization of between $ 50 M to $ 300 M.
Our take: Micro cap has different definitions depending on what price range qualifies as micro-cap.
 
Microeconomics: The branch of economics that studies market behavior of individuals.
Our take: Microeconomics mainly focuses on supply and demand and its effect on market price.
 
Minimum Margin: The minimum amount of money needed to open a margin account.
Our take: The minimum margin amount is $ 2,000 for most brokerage accounts. Some may require more than $ 2,000.
 
Minority Interest: A small stake at a company, usually less than 50 %.
Our take: Some companies may try to buy a minority interest of other company before deciding to buy out the entire corporation.
 
Monetary Policy: The policy established by the central bank, or other regulatory committee to determine the direction of interest rate.
Our take: Federal Reserve is in charge of setting interest rate in the  US.
 
Monetize: A way to convert both tangible or intangible assets into money.
Our take: For example stores with lots of visitors can monetize this phenomenon further by offering coupons to entice visitors to make a purchase next time they come.
 
Money: A common medium of exchange that can be used to purchase other goods or services.
Our take: Before money exists, individuals will trade their belongings for other goods, instead of paying them up with money.
 
Money Laundering: The process of moving illegal money around so that legal authority has a hard time tracking it.
Our take: Illegal business activity such as drug trafficking, smuggling or scam artists use money laundering a lot to cover their trails.
 
Money Management: The process of saving, allocating funds and budgeting of an individual's assets.
Our take: For example, you may set aside a portion of your money for mortgage payment, another portion towards your 401 K and the rest towards the children's trust fund.
 
Money Manager: An individual with credential that were given the task of managing other investor's money.
Our take: With a management fee, we can let qualified money manager allocate our fund for the best return.
 
Money Market: A relatively risk free instrument that utilizes treasury bills.
Our take: Money market is highly liquid as the investment duration picked is mostly less than a year.
 
Money market Account: A different form of saving accounts that offer a higher rate in exchange of higher deposit requirement.
Our take: For regular savings, most bank requires $ 500 in minimum deposit. For money market account, the minimum deposit can be as high as $ 5,000.
 
Money Market fund: A mutual fund that works like a money market accounts. This mutual fund invests in short-term maturity debt.
Our take: Money market fund offers low return low risk investment alternative for investors.
 
Money Supply: The total amount of a local currency (which includes bills, coins, checks, loans, credits) available in a country's economy.
Our take: Money supply is critically important in assessing  the effect of change of monetary policy to the local economy.
 
Monopoly: A situation where one company controls all the supply in a given market.
Our take: Without competition, monopoly can charge whatever prices they like and customer service is relatively poor.
 
Moratorium: It is the act of stopping payments due to terrible business circumstances.
Our take: For example, when a company with high debt level has difficult business condition, it will have a moratorium of its interest payments.
 
Mortgage: A loan secured by a real estate property.
Our take: When an individual is seeking loans to buy a house, he is said to seek a mortgage loan.
 
Mortgage Banker: An individual or institution that buy or sell mortgage loan
Our take: See the difference of it with mortgage broker.
 
Mortgage Broker: An individual that find buyer and seller interested in a real estate property.
Our take: Mortgage Broker will then suggest a mortgage banker for both parties to originate a mortgage loan.
 
Municipal Bond: Bond that are issued by the state, county and other municipality to finance capital expenditure and other expenses.
Our take: Municipal bond normally has favorable tax treatment because it is exempt from federal taxes and local taxes if you live on the state where it is issued.
 
Mutual Fund: A security that allows investors to invest in diversified portfolio of stocks, bonds and others without having to buy it directly.
Our take: 50% of mutual fund do not have a 5 year track record and most do not beat the market as measured by the performance of S& P 500 index.
 

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