Earnings is a pretty simple concept: you get revenue, subtract expenses, and get earnings. But there are many different types of earnings, all derived from different ways of subtracting expenses.
The second quarter of 2019 showed earnings declined by 0.4% in the second quarter of 2019 for all companies in the S&P 500 index, which just happens to be the same exact rate of decline observed in Q1. In both cases, the earnings decline ended up being better than the pessimistic expectations analysts had going into the quarter.
At the heart of finance is a reckoning of assets and liabilities. Both take their place on the left and right of a balance sheet, and the total value of the assets minus the cost of the liabilities is then determined to be the net value of the portfolio—which can be the value of a fund, a company, or an individual.
If you have been keeping up with the financial press, you have undoubtedly heard about the yield curve inversion. This somewhat technical sounding phenomenon is actually a very simple concept with profound implications for markets, which is why a solid understanding of what we’re talking about is essential for developing a view of future asset performance.
An important feature of many types of financial analysis is the yield. This term can have multiple specific meanings, but generally it means the income received on a principal. For instance, a fund that pays investors $3 every year per every $100 invested has a yield of 3%.
Liquidity is one of the most common metaphors used in finance, because it’s also the most important. To understand it, think about liquid: liquid flows easily from one place to another, and so if there is a channel for the liquid to go through (a pipe, a stream, a hose), it will go from Point A to Point B naturally and, well, fluidly.