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Copyright (C) 2023, Michael D. Jenkins
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(NOTE REGARDING THIS SAMPLE FILE: Some of the hyper-links in this file may be to other chapters of this strategy manual, which are not accessible from this web site, since only this file and the Table of Contents file are provided as free samples on this web site. -- M. Jenkins, author)

300% RULE--A rule in Wall Street Raider, based on the U.S. Investment Company Act of 1940, which requires that certain investment companies (ETFs in Wall Street Raider) must maintain a 300% ratio of net asset value to total indebtedness (loans owed and bonds issued). If the fund's assets decline in value so that net asset value is less than three times total indebtedness, the fund must pay off some of the debt and, if necessary, sell off some of its assets.

ACCOUNTANT--A shy, retiring, denizen of large downtown office buildings, the species Beancounteris self-effacius is often deceptively obsequious in appearance and eager to please, yet potentially dangerous to the financial health of those who must deal with members of this odd clan. This mainly nocturnal, balding creature frequently is known for its uncanny creativity in arranging and presenting financial numbers in novel and complex ways that totally conceal and obscure the underlying reality from civilians. Its victims, who are often confused and lulled into a false sense of security by the bland assurances of these seemingly mild-mannered and trustworthy creatures of the night, will awaken one morning to find themselves suddenly impoverished, while the beancounter has migrated to its usual nesting place, Brazil. See also, "Assassins, Certified Public."

AFFILIATE--In Wall Street Raider, a company is an "affiliate" of another company if both companies are under control of the same player or company. A company that DIRECTLY owns 20% or more of another company will include that percentage of the subsidiary's income or loss in its net income, and will do so even if the company whose stock it owns is not an "affiliate," such as when ABC owns 22% of XYZ, but an unrelated company or opposing player owns 23% of XYZ, and controls XYZ. Nevertheless, ABC will include 22% of XYZ's income or loss in its reported income, even though it does not control XYZ.

ANTITRUST LAWS--Laws designed to prevent unfair business practices, including monopolies or other activities intended to reduce competition. In Wall Street Raider, as in the real world, your company may be sued by competitors for antitrust damages or by the public for price-fixing, and may also be restrained by various government enforcement agencies from taking over competing companies in an industry that your company or companies already dominate. In both the real world and Wall Street Raider, the main effect of such laws is usually to punish companies that are too successful and well-run.

BACKWARDATION--A term used in commodity futures trading to describe the very unusual situation where the prices of futures contracts for a commodity are less than the current "spot" price. The more normal condition, where futures prices are higher than the spot price, is referred to as "contango." Backwardation only occurs, generally, when interest rates are very low, or when the price of a commodity is widely expected to decline in future months. Backwardation almost never occurs in such non-perishable commodities as gold and silver.

BAD DEBT RESERVE--For banks, an accounting entry on their books, designed to be a "reserve" for anticipated future bad debt losses. The reserve is evaluated each quarter and if it is too low, an amount is added to the reserve and charged as an expense against operating income of the bank. Actual bad debts, when incurred, are thus applied against (reduce) the reserve, rather than being charged directly against income. Thus, bad debt expenses tend to be spread out more evenly, over a period of years, rather than all bunched in the year when the debt is recognized as having gone bad. This generally allows a banker to sleep better at night when a big loan goes bad.

BALANCE SHEET--A financial statement that shows a company's (or player's) assets, liabilities, and net worth, with net worth being what is left after subtracting total liabilities from total assets. In Wall Street Raider, the "Finncial Profile" consists partly of a balance sheet, in addition to other relevant financial information about a player or company.

BANKRUPTCY--In simple terms, going broke; either because the debtor (a person or a corporation) can't pay debts as they come due, or in some cases because the value of remaining assets is far below the amount owed, even though the debtor may still have considerable amounts of cash.

In Wall Street Raider, a player is ejected from the game in utter disgrace if he or she goes bankrupt. If a corporation goes completely bankrupt, all of its assets are used to pay off as much of its debt as possible, and the lenders (bank and any bondholders) take bad debt losses on the rest; all stock of shareholders usually becomes worthless and is canceled. In a "Chapter 11" bankruptcy, the company continues in business, while its capital structure is "reorganized." See "CHAPTER 11 BANKRUPTCY" below.

BEAR MARKET--A grim, pitiless stock market, where all your stocks are plunging to new depths every day, and where everyone else is losing gobs of money, too. This is different from a BULL MARKET, where all your stocks are plunging to new depths every day, while everyone else, from your barber to the cabbie to the shoeshine boy, is bragging about how they are getting filthy rich in the stock market.

BOOK VALUE--Net worth. In the real world, "book" value usually refers to the COST of a company's assets, as carried on its books, less the amount of its debts. (Cost doesn't necessarily bear any relationship to what the assets are currently worth.) In Wall Street Raider, most marketable assets (stocks and commodities) are reflected at current market value, so "book value" or "net book value" in Wall Street Raider more nearly reflects a company's net worth and creditworthiness. Bonds are reflected in a bank or insurance company's book value at their adjusted cost ("tax basis"), which is original cost, plus or minus the amortization of discount or premium. However, if bonds are in default ("D" credit rating), they are valued at their current market value, if less than adjusted cost.

A company's stock may trade at much more or somewhat less than its "book value," depending on whether its business is highly profitable or not and other factors.

BUBBLE--The name given to a rip-roaring bull market in retrospect, after the souffle has collapsed and everyone but the insiders who got out early has been left with nothing more than the sleeves of the vest. A "bubble" is invariably followed by years of plunging stock prices, soaring unemployment, angry recriminations, and endless government hearings and investigations by the same foxes who were supposed to be guarding the hen house while the bubble inflated to grotesque proportions.

BUSINESS ASSETS--In Wall $treet Raider, the operating assets (sometimes referred to as "capital assets") of a business; a catchall term to describe plant and equipment, trucks, planes, ships or whatever kind of operating assets a company invests money in to increase the size of its business and its sales -- other than "working capital," such as inventory and accounts receivable. In Wall $treet Raider, $1 of business assets is assumed to generate $1 per year of sales. ("Non-business assets" in Wall $treet Raider would include working capital, cash, T-bills, bonds, stocks of other companies, derivatives contracts such as options, futures or interest rate swaps, or, in the case of a bank, its loan portfolio. These are all "intangible" assets, except to the extent "working capital" included inventory items.)

BUYBACK--A transaction, such as an LBO ("leveraged buy-out") or a "Greenmail" buyback, in which a corporation buys (and cancels) its own stock from certain shareholders, which will tend to increase the per share value of the remaining shareholders' stock, if the company's stock is bought back at a discount to net worth per share.

CD'S OR CERTIFICATES OF DEPOSIT--Interest-earning deposits in a bank. In earlier versions of Wall Street Raider, all cash of companies (except banks) and players was assumed to be fully invested at all times in CD's, earning interest quarterly. In newer versions, players and companies hold their "cash" as either Treasury bills (T-bills) that earn a low rate of interest or in bank demand deposits that pay no interest. In the newer versions, CDs are only relevant to banks, which have some of the deposits by "the Public" in the form of CD's that the banks must pay interest on, at the "CD Rate." The "CD Rate" is the rate of interest players and companies earn on their cash, and is the rate that banks pay out on CD deposits, which is a higher rate for banks with weaker credit ratings than for banks with stronger credit ratings.

CALL OPTION--An option to buy a stock at a specified price over an agreed period of time. The person who buys a call option is betting that the underlying stock is going to go up. The person who sells, or sells short, a call option is betting that the stock will either go down, go nowhere, or only will go up slightly.

CAPACITY GROWTH--Growth in "business assets" such as plant and equipment. In Wall Street Raider, as in the real world, an industry's profitability will tend to suffer if industry-wide capacity (supply) grows faster than demand for that industry's product for very long (or will tend to improve if demand grows faster than supply). An example would be the airline industry, when there are too many aircraft in service, and not enough paying passengers to fill most of the seats.

CAPITAL ASSETS--In W$R, the same as "business assets." It is assumed in W$R that each dollar of investment in business/capital assets generates a dollar of sales. Thus, 100 million of business assets that generates 100 million of sales might have a "return on capital" of 12 million, or 12%. This is essentially the same as the profit margin on sales, since W$R assumes sales=capital assets. It does not take into account any non-operating expenses (or CEO salaries), such as interest, taxes, gains or losses on disposition of assets, or other types of income such as interest or dividends. "Return on capital assets" in W$R has very little relation to "return on equity." See the definition of RETURN ON EQUITY for more details.

CAPITAL CONTRIBUTION--Money injected into, or "contributed" to a subsidiary corporation by its controlling shareholder. In Wall Street Raider, the controlling shareholder must own 100% of the subsidiary's stock before it is allowed to make a contribution of capital to the subsidiary. A capital contribution is used to move money from a parent corporation to a subsidiary when the subsidiary needs the funds for some reason, such as when the subsidiary has a tax loss carryover that will shelter any income it may earn from investing the funds or other assets.

CHAPTER 11 BANKRUPTCY--Also sometimes referred to as "operating bankruptcy," where the debtor continues in operation, rather than being dismantled. A less severe form of corporate bankruptcy, Chapter 11 Bankruptcy (or reorganization) is sort of a "halfway house" where the troubled corporation gets some relief from its debts, in the hope that it may survive. In Wall Street Raider, this means that the stockholders and junk bond holders have to write off part or all of their stock or what the company owes them, and the bank writes off a (smaller) percentage of what the bankrupt company owed the bank.

In Wall Street Raider, as in the real world, the shareholders are usually completely wiped out in a bankruptcy reorganization, and the bondholders take a much larger hit than the banks. The bank loans are "senior" to the bond indebtedness owed to bondholders. In practical terms, this means that bank presidents don't want to give up riding to work in chauffeured limousines, so you and other small investors need to lose your savings you invested in the bankrupt's bonds, and give up eating regularly, rather than have their bank suffer a loss along with you.

COLLECTIVE BARGAINING--Bargaining between companies and labor unions that represent employees, regarding wages and working conditions. As practiced between governments and government employee unions, it is sometimes described as collusive bargaining.

CONSOLIDATED TAX RETURNS--In Wall Street Raider, as in the real world, a company that owns 80% or more of another company will generally file "consolidated" tax returns with the subsidiary company, where the taxable income of the two is combined, and a single tax is paid. If one company has taxable income, and the other a loss, corporate law usually provides (and Wall Street Raider requires) that the company that has taxable income compensate the "loss company" for the taxes saved by utilizing some or all of the "loss company's" tax losses. This is all done automatically in Wall Street Raider.

In the real world, consolidated tax returns can't always be filed, such as in situations where the parent company is incorporated in a different country than the subsidiary, but Wall Street Raider does not impose that limitation. All 80%-owned (or greater) subsidiaries pay tax on a "consolidated return" basis with their parent company in Wall Street Raider and any tax credits of a subsidiary are passed up to the parent company, which pays the subsidiary $1 for each $1 of tax credits, whether the parent can currently utilized the credits or not.

CONTANGO--In commodity futures trading, contango is the usual situation where futures prices for a commodity are somewhat higher than the "spot" price, a condition which tends to reflect the time value of money and the costs of storing a commodity until it is delivered at a future date. The much less usual situation, where futures prices are actually lower than the spot (current delivery) price, is referred to as "backwardation."

CONTROLLED CORPORATION--In Wall Street Raider, a corporation that is at least 20% owned by a player (and by companies he or she controls), or by a single corporation, is considered to be under the control of its largest shareholder (and of whomever might also control that shareholder company, if anyone). Thus, if you own 51% of company ABC, you control it. If you also own 10% of company XYZ, and ABC owns another 10%, you will also control company XYZ, unless some other player or corporation owns 20% or more of XYZ.

CONVERTIBLE BONDS--These are bonds that some companies issue that have an equity feature, by being convertible into stock of the company if the stock rises above a specified level. Convertibles are usually issued at significantly lower interest rates than "straight" bonds that do not offer an "equity kicker." For example, a company that would otherwise have to pay 10% interest if it issued straight bonds, might be able to issue convertibles at a 6% interest rate.

If the company's stock is, e.g., 35, the bonds may be convertible in the event the stock rises above 40. Thus, each $1,000 bond would be convertible into 25 shares of stock ($1,000 / $40). If the stock rises above 40 and the company calls the bonds, either at maturity or before, the bondholders would generally receive stock instead of the call price or face value ($1,000, or in some cases of an early call, something slightly more than $1,000, like $1,050). For example, if the stock had gone up to 50, each bond would be worth $50 x 25 shares, or $1,250, so bondholders would choose to receive the stock worth $1,250 instead of the $1,000 face value or $1,050 or less call price in cash. In Wall Street Raider, the conversion into stock is immediately followed by an automatic deemed sale of the stock at the current stock market price by the recipient if the recipient's holding is very small -- that is, if it would be less than 2% of the company's issued stock.

Because the value of a convertible bond increases as the underlying stock rises (although generally not as fast as the stock), convertibles are often a good alternative to stock investing, if the stock price is near or above the bond's conversion price. In addition, if the stock plummets, the bond will offer downside protection, since it will eventually be paid off at 100 (barring a bankruptcy). This means convertibles offer some interesting arbitrage possibilities, such as selling call options on a stock and buying the convertible bonds instead of buying the stock, which would be an alternative to selling "covered calls."

Likewise, some savvy traders will buy convertible bonds, trading near par (100), convertible into, e.g., 2,000 shares of a stock, while selling 1,000 shares of the stock short, in which case a profit may be made if the stock goes up a lot OR down or lot, and you at least earn interest on the bonds if the stock doesn't fluctuate much (but may have to pay the amount of any dividends the company pays on the stock you have sold short, if the stock pays dividends).

COVERED CALL--Covered calls are call options a person sells short, while also buying (or already owning) a number of shares of the underlying stock equal to the number of shares "covered" by the call options. Each call option (or put option) gives the purchaser of the option the right to buy (or sell) 100 shares of a specific stock at a specified price (the "strike price") over a certain period of time, such as a month, 6 months, or a year or longer. Thus, if you buy 200 shares of XYZ Corporation and sell short two call options on XYZ, those two call options will be considered "covered calls."

CPA--Certified Public Assassin. A CPA firm is a supposedly independent outside auditor, paid handsomely by the company that it audits, to "certify" that it has reviewed a company's financial statements, and has blessed the numbers that the company's financial officers have made up, no matter how absurd and outlandish those numbers may be, and no matter how close to its financial deathbed the company issuing the rosy financial statements may be.

CYCLICAL--As applied to an industry, an up-and-down or boom-and-bust cycle that is typical of the industry, where demand grows very rapidly for a while, and then stops or shrinks for a while. In other words, an industry that is not characterized by steady or predictable growth.

DEBT-TO-EQUITY RATIO--A decimal amount that shows the ratio of a company's total debts to its net worth. For example, if a company has 1400 million of assets, less 400 million of debts, its net worth ("equity") would be the difference, or 1000 million. Thus, its debt-to-equity ratio would be .40, or 40%, the ratio of its 400 million of debt to its 1000 million of equity. In general, the higher the ratio, the more "leveraged" and risky the company is likely to be, with such a capital structure. A very high debt-to-equity ratio, such as 5-to-1, would indicate that the company is VERY highly leveraged, and that only a modest period of losses could wipe out its thin amount of "equity" and perhaps push it into bankruptcy.

In W$R, companies can (generally) borrow up to at least 1 times (100% of) their net worth, under a bank line of credit, though a line of credit may be frozen if the company's bank loan exceeds 25% of the lending bank's total business loan portfolio. However, for this purpose, any options owned by the borrower are not counted as part of a borrower's net worth, except to the extent any such options are "in-the-money." For example, a $30 call option might have a market value of $9 when the stock is trading for $35 a share, but only its $5 of "intrinsic value" ($35 $30) would be counted when computing its debt-to-equity ratio.

DEMAND DEPOSITS--Non-interest-bearing deposits in a bank, which the bank can lend out at interest. In Wall Street Raider, banks' demand deposits usually grow at a rate of about 3 to 5% per year, and in newer versions, all uninvested cash of players and corporations is deemed to be a demand deposit at the bank that the player or company borrows from. See "CD's OR CERTIFICATES OF DEPOSIT" above.

DIVIDEND--A distribution of profits by a corporation to its shareholders, usually in the form of cash. In Wall Street Raider, dividends are always in cash, except for distributions which occur in the liquidation of a subsidiary into its parent corporation, or when a company does a "spin-off" of stock of a subsidiary, to its shareholders.

DIVIDEND PAYOUT RATIO--The percentage of a company's annual reported earnings that is paid out to shareholders as regular dividends. State or national laws usually prohibit a company from paying out dividends when net worth is negative, although an exception is generally made for dividends paid out of current earnings, where the company is currently profitable ("springing dividends"). In Wall Street Raider, dividends cannot be paid if the company has a negative net worth.

DIVIDEND YIELD--The rate of return on investment in a stock, based on the dividends it pays, expressed as a percent of the current value of the stock. For example, if a stock sells for $100 a share and pays an annual dividend at the rate of $6 per share, the dividend yield would be 6% (6/100).

EBITDA--An acronym, meaning "earnings before interest, taxes, depreciation, and amortization," which some investment analysts prefer to look to in valuing a stock, rather than simply looking at net income. EBITDA can provide investors a better view of short-term operational efficiency than the net income figure, since it excludes extraneous factors such as the cost of financing (interest expense), which will largely depend on how much has been borrowed, rather than operational efficiency. Similarly, taxes may depend on factors such as the geographic locations where the business is conducted, and non-cash expenses such as depreciation or amortization are simply accounting adjustments that reflect previous historical transactions that are being written off, rather than current operating expenses.

EBITDA is most often useful in determining the ratio of EBITDA earnings to interest expense, as a way of evaluating how capable the company is likely to be in meeting its debt obligations.

The main weakness of the EBITDA number as an analytical tool is that it does not take into account capital spending requirements, which may be higher for companies in some industries, in order for them to remain competitive.

In Wall Street Raider, EBITDA can't be precisely calculated, since Wall Street Raider does not break out depreciation expense separately, due to the massive amount of accounting that would be required for every capital expenditure. As a shortcut, in Wall Street Raider the capital spending rate is a just considered to be the net amount of the increase or decrease in capital assets; that is, gross capital spending less depreciation. Shrinkage in the asset base in the simulation generates cash, like a business that is not making capital investments, and letting its capital assets gradually become obsolescent.

EPS--An abbreviation for "earnings per share." If a company in Wall Street Raider has 100 million shares of stock outstanding, and it earns $4.00 per share, that means it earned a total of $400 million. A company's EPS is usually a major determinant of its stock price, in the real world as well as in Wall Street Raider.

EQUITY METHOD OF ACCOUNTING--A recognized method for corporations to account for their investment in subsidiary corporations, usually subsidiaries in which they own at least 20% of the stock, but not enough stock to "consolidate" the subsidiary's finances with the parent company's in full. However, the parent is allowed to include its percentage share of the subsidiary's earnings (or losses) in the parent's reported earnings. Wall Street Raider adopts this latter rule for any company that owns 20% or more of another company (even if it does not control the other company). Where earnings or losses from stock holdings in another company are reported on the equity method, dividends received from the other company are not treated as income to the recipient (as taxable income or otherwise).

ETF (EXCHANGE-TRADED FUND)--An investment company that invests in a diversified portfolio of stocks or, in some cases, other assets, such as options or commodities. In Wall Street Raider, there are 15 "sector" ETF's, each of which invests in certain industry sectors, such as technology, energy, retail, consumer goods companies, natural resources, transport, etc. Releases 9.0 and later include 5 more ETFs (3 bond funds and two triple-leveraged stock index funds).

EXCESS LOSS ACCOUNT--A tax term, which refers to a negative tax basis (cost, as adjusted) for the stock of an 80% (or greater) owned subsidiary, due to losses that have flowed up to the parent company/shareholder. If the parent company's ownership of the sub falls below 80% (due to sale of the sub's stock, or taxable liquidation or bankruptcy of the sub), the parent must "recapture" the amount of the excess loss account as taxable income (since the parent got the benefit of losses that were greater than its investment in the sub's stock).

FDIC--Abbreviation for "Federal Deposit Insurance Corporation," the U.S. federal agency that insures bank deposits, in case a bank goes broke. In Wall Street Raider, the FDIC may force a bank to cut or eliminate dividend payments if in financial trouble. Or, as in the real world, if a bank gets in too deep a financial pit, the FDIC may pull the plug by taking over the bank, canceling the stock held by its stockholders and reviving the bank, under new ownership, often after an injection of new capital and cancellation of some percentage of deposits in the bank, to restore the bank to solvency. While small depositors usually don't lose any of their deposits, large depositors often lose some percentage of their deposits at the bank that are in excess of the amount the FDIC insures.

In the real world, the FDIC is usually poorly funded, and will run out of money very quickly if a significant number of banks ever fail, in which case, the most likely outcome will be the "Cyprus Solution," in which the depositors, other than very small depositors, all take a "haircut" by having a significant percentage of their deposits "bailed in" (confiscated) in lieu of a "bail out" by the FDIC. As in the real world, most major transactions in Wall Street Raider can only be consummated after running through a political gauntlet.

FTC--Abbreviation for the U.S. "Federal Trade Commission," the federal agency that acts as a watchdog (more often as a sleeping lapdog) to prevent consumer fraud and other unfair trade practices. It also may occasionally wake up long enough to block mergers and takeover attempts that it feels could tend to reduce competition in the marketplace, or just to create the appearance that it is actually doing something, rather than just sleeping on the job. In Wall Street Raider, various U.S. or foreign government agencies may also intervene to block planned mergers, liquidations, spin-offs, or LBO/Greenmail transactions.

FEDERAL FUNDS--Funds banks borrow from each other to meet certain Federal Reserve requirements, usually on a very temporary basis. In Wall Street Raider, this term refers to money that banks borrow from each other or elsewhere when they run short of funds and have no more bonds to sell off. "Federal Funds" or "interbank borrowings" are quickly paid off in Wall Street Raider when a borrowing bank obtains the money to do so.

FEDERAL RESERVE BANK--The U.S.'s central bank, whose job it is to print money -- endlessly -- when the U.S. Treasury can't borrow enough money to pay its bills. The Federal Reserve is a government-licensed counterfeiting operation, as well as America's largest printer of bad paper.

FRAUD--The chief industry on Wall Street, Fleet Street, Bay Street, and other major bourses/gambling dens around the world, responsible for creating thousands of extremely lucrative jobs, all of them funded by sucking up the life savings of millions of the "little people" -- those unfortunate souls who actually work for a living -- and redistributing the booty to the rich and well-connected. For performing this necessary service to society (separating the weak and the stupid from their loot on a mass scale), the most successful cads, cons, liars, frauds, poltroons and mountebanks are frequently awarded honorary doctorates at places like Harvard and Oxford.

GDP--Abbreviation for "Gross Domestic Product." See definition of "GROSS DOMESTIC PRODUCT" below. (Formerly GNP, Gross National Product)

GOLDEN PARACHUTE--Large sums of money and benefits paid to departing executives of large companies, typically paid to reward them for running their company into the ground, or thoroughly looting it. Managers who steal over $100 million rarely go to prison; more often, they are given honorary doctorates at prestigious universities, for being generous enough to share some of their ill-gotten loot.

GOODWILL--In accounting terminology, "goodwill" is an intangible asset to which part of the purchase price of a business, or part of a business, may be allocated, which reflects the superior earning power of the acquired business assets. For example, if you were to acquire a profitable service business for $100,000, which had no "real" assets other than a few dollars worth of office supplies and a few beat-up pieces of furniture, most of your purchase price would have to be allocated to goodwill (assuming the paper clips and a few old desks aren't worth very much).

In W$R, if your company purchases 1000M of business assets from another company, and such assets are currently earning an above-average rate of return on investment (above 10%, ignoring the seller's market share and spending on R&D or marketing/advertising), you will have to pay an additional price, depending on the level of profitability of the acquired assets. Thus, you might have to pay 1200M, for the 1000M of assets, or a premium of 200M.

That premium is called "goodwill" and will show up on the buyer's financial statements as an asset, called "Unamortized Goodwill." Realistically, it is not a "real" asset, except under accounting theory -- it generates no income, and has to be written off (expensed), sooner or later. In W$R, this asset is expensed (or "amortized") gradually, at 5.4% per quarter (equal to about 20% annually, on the remaining balance of that account). Thus, if acquiring 200M of goodwill, the buyer would amortize (write-off) about 40M in the first year, reducing the Unamortized Goodwill balance to 160M. In the next year, it would write off 20% of that, or 32M, and so on.

GREENMAIL--A practice made popular in recent years by certain corporate raiders who take a large position in a target company's stock. Management of the target company, fearful of a takeover that would cause them to lose their jobs, stock options, chauffeured limousines, palatial homes, Learjets and other God-given rights paid for by the stockholders, quite consistently find it to be in the company's best interest to buy back the raider's stock holdings for a price well above current market prices, in exchange for a promise by the raider to go away and pick on some other mismanaged company. The money extracted from the target company is frequently referred to as "greenmail," perhaps due to the uncanny resemblance of such a payment to its somewhat less savory cousin, blackmail.

In Wall Street Raider, a "greenmail" buyback can be made of the stock held by a non-controlling corporate shareholder, but not of stock held by a player, and not of stock held by a company controlled by the same player whose company is paying the greenmail. That would be a blatant form of fraud -- not merely immoral, but illegal. Too blatant, even for Wall Street.

GROSS DOMESTIC PRODUCT-- An economic statistic that represents the estimated value of all goods and services produced in a country in a year, which is a measure of an economy's overall size and its level of activity.

HOLDING/TRADING COMPANY--A corporation that does not actively engage in business itself, but instead holds the stocks of one or more operating subsidiaries. In Wall Street Raider, any company, other than a bank or insurance company, that no longer has any "business assets," is classified as a "holding/trading company." In Wall Street Raider, once a company has become a holding company, it can enter into any industry you choose for it, other than banking or insurance, by using the "Buy Corporate Assets" command button on the Buy/Sell Menu to acquire business assets from an existing company in that industry or acquire new assets. Another way such a company can acquire business assets and enter an industry is if it is a 100%-owned subsidiary of another company that drops down some of its business assets to the subsidiary as a capital contribution, using the "Capital Contribution" button on the Finance Menu to do so.

However, if the holding company has tax loss carryovers, they will be lost if it enters a new line of business by acquiring business assets. In Wall $treet Raider, holding/trading companies are allowed to buy and sell put and call options and trade commodity futures, physical commodities, and interest rate swaps, as well as investing in stocks of other companies.

INDEX FUND--An investment fund, such as an ETF, designed to track the movements of a stock index. Some index funds, such as those in this simulation, are leveraged by buying or shorting large amounts of index futures, in order to magnify the effects of movements of the actual index by some multiple, usually 2 or 3 times the movement of the underlying index. In this simulation, as in the real investment world, leveraged index funds are useful as high-powered short-term trading vehicles, but are generally abysmal as long-term investments, due to their incessant trading of futures, resulting in commissions and other trading costs that rapidly deplete the assets of such funds, in normal circumstances.

INSURANCE IN FORCE--A technical term used in the insurance industry to describe the amount of insurance a company has written, and which is still in force. In Wall Street Raider, it is used more loosely, and is deemed to be equal to the insurance company's "policy reserves." See definition of "POLICY RESERVES" below.

INTRINSIC VALUE OF OPTIONS--This refers to the value of a put or call option other than its "time value," such as at the date the option is expiring. A call option's intrinsic value is the excess of the underlying stock's price over the exercise ("strike") price of the option. For example, if the stock price is $60 and the strike price is $50, the intrinsic value of the call option is $10. However, if the stock price is $50 or less, the intrinsic value is zero.

For a put option, the intrinsic value is the strike price minus the stock price. Thus, if the strike price of a put is $50 and the stock is down to $40, the put has an intrinsic value of $10, or has no intrinsic value if the stock price is $50 or higher.

When an option has time remaining before it expires, it will also have "time value," in addition to any intrinsic value. For example, a $50 call might have zero intrinsic value if the stock is at $49, but might trade at $5 if the option does not expire for several months, all $5 of which would be "time value." Or, if the stock is at $52, the intrinsic value would be $2, but the option might trade at $6, having a time value of $4 in addition to its intrinsic value. See also the definition of TIME VALUE OF OPTIONS below.

INVESTMENT ANALYST--On Wall Street, a highly-paid, highly skilled specialist, one whose job it is to analyze the investment outlook for companies and to get caught napping when a company surprises everyone by filing for bankruptcy, shortly after the investment analyst has issued a "strong buy" on the company's stock, and attested to the company being "sound as the dollar." Synonyms: "Eternal optimist; soothsayer; scoundrel; huckster; dreamer; charlatan." To the child and the investment analyst, all things are possible.

JUNK BONDS--In Street language, high-yielding, high-risk bonds issued by companies of dubious creditworthiness, often for the purpose of taking over another company or for a "leveraged buy out" in which the company buys back most of its own stock, allowing holders of a few shares (usually management) to become the only remaining shareholders.

In Wall Street Raider, junk bonds are any bonds issued by a highly-leveraged, risky corporation; they pay interest at a rate that depends on their credit rating. As in the real world, companies in Wall Street Raider that issue a lot of junk bonds face a high risk of bankruptcy if their business hits a few rough spots.

Not all corporate bonds are considered junk -- if a company's credit rating is BBB, A, AA, or AAA, the corporate bonds are not "junk," but are considered to be "investment grade" bonds. (At least until they are later downgraded to "junk," after the skeletons come out of the closet.)

Any bonds rated BB or lower (B, CCC, CC, C, or D) are very risky, however, and are thus quite properly called "junk bonds." To Wall Street insiders, "junk bonds" are those that are issued with neither the expectation nor the intention of ever paying back the principal amount thereof to the investors/suckers who are unfortunate enough to buy the stuff.

To certain churlish types, who have repeatedly been badly burned by investments in these unsavory securities, junk bonds are known as "certificates of confiscation."

LAWYER--The larval form of a politician.

LBO OR LEVERAGED BUY OUT--A transaction in which one or a few people buy a small part of the stock of a company and then have the company borrow enough money to buy out all of the other shareholders, so that the buyers obtain most or all of the stock of the company with little or no investment on their part. In some cases, they may even extract dividends from the company afterwards, in order to quickly recoup part or all of their investment (or more). In Wall Street Raider, a player (or a company controlled by the player) can sometimes do an LBO by buying minimal control of a target company (say 20%), and then having the company borrow or issue junk bonds to finance a buyback of the other 80% of its stock (using the "LBO" command button on the Buy/Sell Menu), leaving the acquiring player or company with 100% ownership of a highly leveraged corporation.

An LBO can be a great strategy if the company does well. If things don't work out, though, all the added debt (leverage) can result in a financial meltdown for the LBO'd company -- which happens more often than not when a company is that massively leveraged with debt.

LIBOR RATE--The name given to a benchmark interest rate, usually quite low, which is the rate banks charge each other for overnight loans. LIBOR is an acronym, which stands for "London Interbank Offer Rate." In the real world, various interest rates on loan instruments are based on the LIBOR rate. As recent (2012) news has disclosed, the LIBOR rate has been rigged for years by crooks at 20 or more of the world's largest banks, manipulated to increase their profitability on various debt instruments.

Accordingly, in the real world, the LIBOR rate was to be phased out at the end of 2021, possibly to be replaced by the Secured Overnight Financing (SOFR) Rate and Overnight Index Swap (OIS) Rate, and possibly by other alternative standard reference rates to be used in loan instruments and interest rate swap transactions. In fact, LIBOR has been phased out after June 30, 2023 and generally replaced by SOFR, in the real world, and we have also replaced LIBOR references in Wall Street Raider with references to SOFT.

In Wall Street Raider, the "SOFR rate" is used only as the rate at which banks pay interest on interbank loans, and is loosely related to the Prime Rate and rates paid on CD's. Banks with less-than-Sterling credit ratings may pay somewhat more than the SOFR rate on their interbank borrowings in Wall Street Raider.

LIMIT ORDER--An order a customer places with a broker to buy or sell a security, in which the customer specifies the price he or she is willing to accept. A limit order does not always get executed, if the stock price moves away from you. It stands in contrast to a "market order," in which you indicate you will take whatever price the stock specialist is willing to give you, like a common beggar. In short, a limit order is often a safer way of trading stocks or other securities, while regularly doing market orders is a good way to become a homeless beggar. On the other hand, the "market maker" on Wall Street can look at all the existing limit orders on a particular stock, and act accordingly, so it is somewhat like playing poker where the dealer gets to see your cards before he bets.

See "MARKET ORDER" below.

LINE OF CREDIT--An amount a lender, such as a bank, agrees in advance to lend to a customer, if the customer wishes to borrow it. In Wall Street Raider, each player and company normally has a line of credit allowing him or it to borrow up to at least 1 times net worth (often much more when the economy is thriving and interest rates are low). To have a line of credit, your financial situation must demonstrate, basically, that you don't need to borrow. Bankers are, in short, the type of people, as Alan Abelson once put it, who will only lend you an umbrella on a sunny day.

In W$R, a company or player can usually borrow on a line of credit until its debt is equal to 100% of net worth. Thus, if you have $500 million cash and no debt, you can borrow up to $500 million on your line of credit. However, when playing at Difficulty Level 2 or 3, a player who controls his/her lending bank can actually have a larger line of credit, up to either 2 or 3 times net worth. While this might seem like an advantage of playing at a higher difficulty level than "1," it actually increases your risk of bankruptcy greatly, if you succumb to the temptation of borrowing up to 2 or 3 times your net worth. Taking on that much leverage is roughly the equivalent of being given enough rope to hang yourself, or giving whiskey and car keys to a teenager.

If an opposing player controls the bank you borrow from, the player may choose to "freeze" (cut off) your line of credit from that bank.

Note, also, that your borrowing may also be subject to a $10 billion (U.S. or equivalent) dollar limit for any player or company, or 25% of the lending bank's loan portfolio, if that is greater. Your line of credit will be temporarily frozen if it goes above the greater of those two amounts.

LIQUIDATION--A corporate transaction in which a parent corporation, in effect, merges a wholly-owned subsidiary corporation into itself, so that all of the assets, debts, etc. of the subsidiary become property or debts of the parent, and the subsidiary corporation ceases to have any further activity, and ceases to exist. In Wall Street Raider, as in the real world, the above type of liquidation is treated as a "nontaxable" liquidation, with no taxable gain or loss recognized.

However, it is also possible to do a "taxable liquidation" of any company you control. In a "taxable liquidation," the liquidating company must first sell off all its business assets and any stocks it owns, and then pay off all of its debts, including bank loans, bonds issued, accrued income taxes, and advances from players, before it distributes its remaining cash, if any, to its stockholders, in proportion to their percentage ownership of its stock. Each stockholder treats the cash received for his/her/its stock in the liquidated company as sales proceeds, and will recognize a taxable gain or loss on the disposition of the shares, depending on his/her/its "tax basis" for the stock that was held.

LITIGATOR--An often despised subspecies of the much-feared reptilian species Lex disputatis; half literate, half alligator; known for its aggressive, ferocious, pit bull-like characteristics, and its penchant for going for the opponent's jugular and the client's pocketbook, often simultaneously. Like others of its species, heavy infestations of Lex disputatis intimidatum are found in California, New York, or wherever there are large concentrations of filthy lucre, on which it thrives.

The litigator subspecies is easily recognized by its sharp tongue and elbows, quick reflexes, its habit of toting large briefcases (often filled only with peanut butter sandwiches), and its highly developed aptitude for lying to and hypnotizing judges and juries. As it multiplies at an exponential rate under favorable breeding conditions, it is widely considered a pest throughout its range, and large infestations are often mistaken for clouds of devouring locusts.

LOAN PORTFOLIO--The loans made by a bank, on which it hopes to earn interest. The value of a bank's loan portfolio is offset by a reserve for potential bad debts. See definition of "BAD DEBT RESERVE" above. In the newer versions of Wall Street Raider, banks invest some of their funds in consumer and mortgage loans, as well as making business loans to players and corporations. Consumer loans and "subprime" mortgage loans are made at high interest rates, but the banks have frequent large charge offs for bad such loans, particularly during recessions. "Prime" mortgage loans, on the other hand, earn much lower rates, but have far fewer bad debt charge-offs.

Corporate loans and loans to players earn interest rates based on the banks' Prime Rate, which is the lowest rate charged, to AAA credit-rated borrowers. Other borrowers pay higher rates that depend on their credit rating, if not AAA. The worse their credit rating, the higher the interest rate they pay.

LOBBYIST--In America, a political courtesan; one who greases the wheels of the political system; a legal bribe-giver. Lobbyists are recognizable by their Gucci shoes, Louis Vuitton briefcases, Beltway addresses, Aspen chalets and unlimited expense accounts, or, more recently, by their neatly pressed Chinese People's Liberation Army Generals' uniforms. Noted for their self-proclaimed public spiritedness and altruism, lobbyists aver that they provide foreign travel junkets, first-rate hookers, and suitcases full of cash to high-ranking government and political party officials solely out a sense of civic duty, all with no expectation whatsoever of receiving any quid pro quo.

MARKET ORDER--An order a customer places with a broker to buy or sell a security "at the market" -- an often suicidal financial strategy or an invitation to be financially raped. See "STOCK SPECIALIST" below and "LIMIT ORDER" above.

However, it is usually safe (in the real world) to place a market order on a heavily traded stock, where the bid/ask spread is often only a penny or two per share, as long as you are only buying or selling a few hundred shares.

MARKET SHARE--A company's percentage share of total sales in a particular industry. In Wall Street Raider, this is the same as the company's share of "business assets" in that industry. In general, the larger a company's market share percentage, the more profitable the company tends to be, compared to other companies in the industry. Thus, it is a good strategy to merge two or more companies you own (and liquidate one into the other), if they are in the same industry, so that they become one large company, with a larger market share than either had alone, which will usually improve profitability, due to economies of scale.

During the great "dot-com bubble" at the end of the 20th century, it became the conventional wisdom that "market share" was more important than profitability, leading many companies to expand wildly, floating huge amounts of stock and junk bonds to finance their rapid expansion. (Most of them are now bankrupt, or "penny stocks," at best.) Over-expansion works the same way in Wall Street Raider.

MERGER--In the real corporate financial world, the term usually refers to a transaction where the assets and liabilities of two companies are legally brought together in a single "surviving" corporation. It also is often used to describe stock-for-stock swaps between a company and the shareholders of a target company, where the target company ends up as a wholly-owned subsidiary of the acquiring company. A "merger" in Wall Street Raider (using the "Merger" command button on the Buy/Sell Menu) is of the latter variety.

The "Tax-free Liquidation" command button can often be used in Wall Street Raider to effect what is essentially a merger of the type described in the first sentence of this definition, but only after one corporation acquires 100% of the stock of the corporation to be liquidated, usually by purchase or merger.

NOTIONAL VALUE--The face value or agreed total contract value for a derivatives contract, such as a commodity futures contract. For example, a contract to buy 10,000 barrels of oil at $41 per barrel at an agreed future date would have a notional value of $410,000. In the interim, before the delivery date, the contract would usually trade at a market price above or below its notional value and at settlement (before or on the expiration date) in W$R the difference between market value and notional value is a gain or loss to the contracting player or company, when the contract is closed out on the commodities exchange.

In the case of an interest rate swap contract, the notional value is the amount on which interest is calculated at the agreed fixed rate and the actual current rate, with the difference in interest calculated both ways being paid by one party to the other.

P/E RATIO--Wall Street jargon for "price/earnings ratio," or the multiple of earnings per share that a stock sells for. For example, a $100 stock of a company earning $5 per share would be said to have a P/E ratio (or earnings multiple) of 20; that is, the stock sells for 20 times its earnings per share. Stocks of rapidly growing companies often sell at high P/E ratios, because the stock market is "anticipating" much higher earnings in the future. Stocks of all companies tend to sell at lower P/E ratios when interest rates are at high levels (and vice versa). During major bull markets ("bubbles"), investors are always told by the experts that earnings, and therefore P/E ratios, are no longer important, and thus can be ignored.

POLICY RESERVES--Accounting reserves insurance companies are required to set up on their books when they sell an insurance policy. Policy reserves are, in effect, estimates of how much money the insurer needs to set aside to pay future insurance claims. They might also be considered as a kind of "loan" (without interest) from the insurance company's customers. Most insurance companies make most or all of their profits from investing these reserves for the period between the time they collect a premium and when they eventually have to pay a claim. For example, in a given year, an insurer might take in $100 in premiums and pay out $103 in claims and expenses, so that it would have an underwriting loss of $3, but might earn $10 interest, dividends, and investment gains on the "float" during the year, resulting in an overall profit of $7 for that year. In Wall Street Raider, an insurer's policy reserves are assumed to grow at the same rate as its "insurance in force," defined above.

PRODUCTIVITY EXPENDITURES--In Wall Street Raider, money a company spends each year on either R & D (Research & Development), or on marketing/advertising, to try to improve its profitability. The higher the percentage of sales or revenues a company spends, the better its chances of improving long-term profitability, but the high costs or R & D or marketing/advertising will penalize the company's earnings in the short-term. It is a form of short-term pain, for (hoped-for) long-term gain.

PUBLIC OFFERING--An issuance of securities for sale to the public, usually (but not always) by the issuing company. In Wall Street Raider, a Public Offering is a sale of new stock by a corporation to the Public for cash, to raise new capital for the corporation. An "IPO" is a private company's initial public offering. (By contrast, a "private offering" is a sale of stock to only one or a few investors--see "White Knight," described in this Glossary, regarding a private stock offering in Wall Street Raider.)

PUBLIC RELATIONS--An organized method of mass communication, calculated to circumvent critical thinking and induce a state of prolonged stupor; also, in politics, a term used to describe relatives who feed at the public trough.

PUT OPTION--An option to sell a stock at a specified price over an agreed period of time. The person who buys a put option is betting that the underlying stock is going to go down. The person who sells, or sells short, a put option is betting that the stock will either go up, go nowhere, or only will go down slightly. In Wall $treet Raider, corporations may trade put options, but banks and insurance companies may only use puts to hedge stocks they own.

QUANTITATIVE EASING--A very "loose" monetary policy, one employed by central banks in order to prop up the prices of investment assets such as stocks and bonds, by forcing interest rates down to very low levels. In recent years, "Q.E." has been a favorite tool of the Federal Reserve, the European Central Bank, and the Bank of Japan, supposedly used for the purpose of stimulating their respective economies, but with no notable results other than economic stagnation and growing unemployment, and creation of temporary "bubbles" in various sectors of the financial markets.

The actual purpose of Q.E. is to allow governments to borrow money at artificially low, zero, or even less than zero interest rates, to facilitate their massive spending programs, i.e., vote-buying. "Quantitative easing" is a more palatable term for money printing, since the the practice of money printing by central banks has a rather unsavory history and has consistently had less than salubrious consequences, as in the German Weimar Republic's runaway inflation in the 1920s (some said it led to the rise of Hitler). A few years ago, unrestrained money printing resulted in insane levels of inflation in Zimbabwe, where a loaf of bread eventually cost trillions of Zimbabwe Dollars, courtesy of "quantitative easing" by that African nation's Marxist government. And more recently, the socialist government of Venezuela was equally succesful in rendering the Venezuelan currency worthless and impoverishing what had been a large middle class in a prosperous nation. But, in theory, Q.E. is a good thing -- in the short run, at least. We'll see.

R & D (RESEARCH AND DEVELOPMENT)--R & D expenditures are funds spent to create new products or production processes or to improve existing ones. Since R & D expenses usually penalize current earnings, even though they may greatly increase long run profits, managements are often tempted to cut back R & D spending in the short term to make earnings look better. In Wall Street Raider, companies in certain industries are faced with this same choice between short-term vs. long-term profitability, in deciding how much money to spend on R & D. Besides lowering current earnings, a company runs the risk that money spent on R & D projects will not even pay off in the long run or may not pay off soon enough to avert bankruptcy.

RESTRUCTURING--Selling the family jewels; throwing out the baby with the bath water. Also, in financial parlance, "downsizing" a company by selling off assets, jettisoning employees by the thousands, looting the company pension plan, and using other time-honored scorched-earth tactics to improve the bottom-line profitability of the company, if it ultimately survives the bloodletting. As Conan the Barbarian once said, "Zat vich doesn't kill you makes you shtronger..."

(Or was that Conan the Contrarian???)

RETURN ON CAPITAL ASSETS--In W$R, this terminology has a very specific meaning -- the amount of profit generated each year by a given amount of "business assets" (which we sometimes refer to as "capital assets" in the simulation). Thus, if a company has $100 million of business/capital assets earning a 12% return on capital, that means it is earning $12 million for the year. Since earnings are computed quarterly and vary from quarter to quarter, a $3 million profit in one quarter would be reported as an annualized 12% "return on capital assets." Note that this profit figure does not take into account other types of income, such as interest, dividends, or gains on various transactions, or expenses such as interest or taxes.

Thus, a company may have a 12% return on capital, but if it is paying 17% interest rates on a bank loan and is highly leveraged, it may actually have a net loss, or even if it does have a net profit, even that will be reduced by income taxes, so its "RETURN ON EQUITY" will bear little resemblance to the "return on capital assets," since we are comparing apples to oranges. In this simulation, a company's rate of return on capital assets is directly reduced by whatever it spends on "productivity" expenditures -- R&D or marketing.

RETURN ON EQUITY--A way of calculating a company's level of profitability; a percentage figure determined by dividing its net income by its net worth. Returns on equity are typically in the 10 to 15% range for most American corporations. Returns over 20% are considered to be unusually good. In Wall Street Raider, returns on equity tend to be very much in the same range as in the real world and a highly profitable industry will tend to attract new entrants.

In W$R, when "return on equity" is shown for any company, it is the last full year's earnings divided by its net worth at the end of that year.

SEC--Abbreviation for "Securities and Exchange Commission," the federal agency charged with acting as a watchdog over investment markets in the USA, which usually behaves more like a lap dog. Its main job seems to be to get caught napping each time a major investment fraud is perpetrated against millions of investors. All publicly-traded companies are required to regularly file financial reports with the SEC, which from time to time takes legal action to prevent the boiler-room types from fleecing the public investors too flagrantly.

In Wall Street Raider, the SEC is merely another annoying government agency that may intervene at inopportune times to block those too-clever transactions you thought you could get away with.

SHORT SALE--Selling a stock (or other investment vehicle) that you do not own, by borrowing the stock from a person who owns it and selling it now, with the hopes of buying the stock back later at a lower price, returning the shares to the owner, and making a profit on the decline in the price of the stock. Of course, if the stock goes up, and you have to buy it back, you will lose money on the transaction.

SPOT PRICE--In commodity futures trading, the spot price is the price of the commodity for immediate delivery, as opposed to the futures prices for future delivery. In W$R, the spot prices of commodities are the prices displayed on the main screen.

STOCK SPECIALIST--One of the clan of wolves with yellow eyes and sharp fangs who works tirelessly on the floor of the stock exchange, betting against the sheep who wish to buy or sell stocks, who must trade against these cunning beasts. Members of the public who buy stock from or sell stock to such traders are like players in a poker game, where the stock specialist is the dealer and gets to see your hand before he bets. These remorseless, feral creatures harvest much of their profits from unsuspecting, naive investors who are foolish enough to place "market orders" with their stockbrokers.

STOCKBROKER--A professional person who dials for dollars, dispensing free (nevertheless grossly overpriced) investment advice to all who will listen, from an inexhaustible list of bad, worse, or terrible investments, usually recommending that one buy a stock that he or she, personally, is selling short; typically, a person who was selling shoes or aluminum siding before the latest market frenzy, and who will leave you dealing with pawnbrokers, not stockbrokers, once your life savings have been reduced to pocket change.

STRADDLE OPTION--A combination of a call option (to buy a stock at a specified price) and a put option (to sell the stock at that same specified price). The person who buys a straddle option is betting that the underlying stock is going to fluctuate greatly from the current stock price, by the time the put and the call expire, and that either the put or the call option will be worth more at that time than was paid for the two options. The person who sells, or sells short, a straddle option is betting that the stock will NOT fluctuate greatly by the time the put and call expire.

The call side of the transaction will be worthless when the expiration date arrives, while the put side will have some value, if the stock price is below the "strike price" (exercise price) of the options at that time; and vice versa if the stock is above the strike price at expiration. (Of course, neither side would have value if the stock price is at exactly the strike price, but that almost never happens.) The only question for the buyer and the seller of a straddle is: How MUCH value will one side of the straddle have at expiration? More than the price paid for the options? Or less?

STRIKE PRICE (OR STRIKING PRICE)--The price at which a put option or call option is exercisable. Sometimes also called the "exercise price." This is the price you pay for a stock if you exercise a call option, or the price you receive if you exercise a put option.

TAKEOVER--The act of taking "control" of a corporation, by acquiring enough of its voting stock to elect a majority of the board of directors, thus allowing the person doing the takeover to direct the actions of the corporation. In Wall Street Raider, a takeover may be effected through a cash tender offer for stock held by the Public, using the "Buy Stock" command button on the Buy/Sell Menu, or by a stock-for-stock merger, using the "Merger" command button on the Buy/Sell Menu. On Wall Street, a takeover is that step which sometimes immediately precedes the looting of a once-healthy corporation.

In Wall Street Raider, the player or company doing a takeover must always obtain a minimum of 20% of the target company's stock in order to gain control. Also, in Wall Street Raider, you can buy up to 5% of a company's stock on the open market, which will tend to run up the price of the stock somewhat. However, if you are acquiring (in total, counting existing holdings) more than 5% of a company's stock, you have to do so by a Tender Offer at well above the current market price. (The "Buy Stock" command automatically computes the correct purchase price either way, depending on whether you are making open market purchases of 5% or less, or "tendering" to acquire more than a 5% interest in a company.) If the stock you or your company want to buy is already owned by another company, you can make a formal offer to buy the stock, which will sometimes be accepted, other times refused if the price you offer is not high enough.

TAX AUDIT--A financial proctoscopic exam, performed by malevolent and sadistic civil servants in a medieval setting, without benefit of anesthesia.

TAX BASIS--The cost, or price paid for an asset, a number which is used to determine whether there is a gain or loss when it is sold or exchanged, or becomes worthless. In Wall Street Raider, the program keeps track of the tax basis of all stocks, bonds, and commodities owned by players or corporations, and of all "business assets" owned by corporations, in order to determine gain or loss when the stock or bond is sold or becomes worthless. Note that in Wall $treet Raider, any amount paid in excess of par (over face value) for a bond is amortized as a non-cash expense each quarter over the remaining life of the bond, and gradually reduces the tax basis of the bond, until it is equal to face value (par) at the time the bond matures (unless it is a convertible bond).

Or, if you pay less than par for a bond, the discount on the purchase is amortized as a non-cash taxable income item each calendar quarter, over the remaining life of the bond, gradually increasing your tax basis for the bond until it is equal to face value (par) at the time the bond matures. A player or company can see the tax basis of all stocks and bonds he, she, or it owns, by clicking on the "Tax Basis Info" button on the "ENTITY INFO" Menu, when the player or a particular company is the currently selected Active Entity.

TAX LOSS CARRYOVER--If a corporation has more expenses and losses than income and gains during a year, it will usually pay no income taxes, and the net loss becomes a "tax loss carryover" that can be used to offset taxable income in another year. In the real world, a corporation can in some cases carry back a tax loss to some of the preceding years, to claim a tax refund from those years, or carry it forward to any of the following years, until it is "used up." In Wall Street Raider, a corporation is only allowed to carry a tax loss forward, not backward in time. You can find out if a company has a tax loss carryover by using the "Financial Profile" command button on the Entity Research Menu and looking in the "Miscellaneous Info" section of the financial profile.

In Wall Street Raider, players do not have net operating loss carryovers, but can carry forward any net capital losses, until offset by capital gains in subsequent years.

TENDER OFFER--An offer by a person or company to acquire part or all of the stock of a company, usually made at an attractive price (considerably above the current market price of the stock). A "Tender Offer" is usually made as part of a takeover attempt (see "TAKEOVER" above), and the offer is usually only effective if a certain minimum number of shares are "tendered" for sale. In Wall Street Raider, a "Tender Offer" is made at a price well above the existing stock price, and the offer is only effective if the buyer has enough cash and credit to be able to acquire the percentage of stock specified at the tendered price.

When making a tender offer to the Public in Wall Street Raider, the program computes the tender price. However, if you make a tender offer to buy stock from a company that you do not control, you must decide on how much of a premium over the current market price you wish to offer, such as 25%. The owner of the stock may accept or reject your offer.

TICKER TAPE--In a broker's office, or on the bottom of the TV screen in the case of financial news channels like CNBC, the moving electronic display of stock prices which shows the price of each trade of a stock (and the number of shares or "lots" traded) that occurs on a stock exchange. Stock prices are usually quoted in dollars per share and decimal amounts. (In times past, the quotes were printed mechanically on a narrow paper tape by a "ticker tape" machine--hence the name.) Because of the enormous number of trades occurring every second in modern times, tickers only show a sampling of trades.

In Wall Street Raider, the electronic "ticker tape" moves across the bottom part of the screen, reporting a random sampling of one of every 50 to 100 stock trades that occurs in the 1500+ stocks that make up the Wall Street Raider investment universe. Volume is not shown.

TIME VALUE OF OPTIONS--The part of the price of a put or call option over and above the option's "intrinsic value." For example, if you buy an option exercisable at $30 a share on XYZ Corporation, when the stock is trading at $32, the intrinsic value of the option (also called the amount it is "in the money") is $2 a share. If you paid $5 a share for the option, $2 of the price is for the intrinsic value, and the other $3 is the time value. If the stock is still at $32 when the call expires, the option will only be worth its intrinsic value of $2, and the $3 of time value will have completely wasted away. See the definition of INTRINSIC VALUE OF OPTIONS above.

If, on the other hand, you bought a call option that was "out of the money," for example, a call exercisable at $30 a share when the stock was $29, the entire amount you paid for the option (say $3.50) would be time value, since the option has no intrinstic value when the stock trades below the strike price (exercise price). Thus, the entire price of the option will wither away to zero by the expiration date unless the stock rises to a price above $30 by that date.

UNDERWRITING RATIO--For an insurance company, the ratio of underwriting losses to net premium income. For example, if an insurer receives $1,000 million in insurance premium income but pays out $1,030 million to policyholders, its underwriting (loss) ratio would be 103%. It would need to make enough profit on the invested premiums (interest, dividends, capital gains) to cover that underwriting loss and overhead expenses, in order to show an overall profit. If it only had to pay out $980 million in claims, then it would have a 98% underwriting ratio, meaning that it is actually making a profit on the insurance business. Most of an insurance company's profits, however, come from successfully investing the "float" -- which is the money it takes in today as premiums, which can be invested until such time as it has to pay a claim to the policyholder.

WALL STREET--A giant spider web, whose denizens endlessly seek to lure hapless investors to their doom; a vast coven of money-runners located in tall buildings in downtown Manhattan, but with tentacles in Washington, D.C. and in every other place where money and power are to be found. The penultimate Wall Street firm, Goldman, Sachs, has been described in Rolling Stone as "... a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

WHITE KNIGHT--A friendly or neutral company (often quite large) that purchases a substantial percentage of the stock of a company at the request of that company's management, in order to keep the shares out of the hands of a potential corporate raider who might attempt an unfriendly takeover of the company. In Wall Street Raider, the "Private Stock Offering" command button (on the Financing Transactions Menu) can be used to implement the "White Knight Defense," enabling a company to raise money by selling a substantial block of new stock to a "neutral" company (a "White Knight"). The funds raised can then sometimes be used to "buy in" ("LBO" command button on the Buy/Sell Menu) publicly-owned shares, if desired, in order to make it even more difficult or impossible for any opponent or other company to buy up enough stock of the company to take control away from you. In the real financial world, this is an important form of job security for overpaid and poorly performing corporate executives.

WORKING CAPITAL--Money that a company has tied up in non-productive assets such as inventory or accounts receivable, as a necessary part of its business. In Wall Street Raider, the more "business assets" a company has, the larger the amount of cash it must invest in "working capital," which, unlike cash that can be invested in T-bills or elsewhere, does not generate any investment income. In Wall Street Raider, the more efficient and well-managed the company, in general, the smaller the percentage of business assets (as little as 5%) that must be committed to working capital; or for the worst-managed companies, as much as 20% of business assets will be tied up in unproductive working capital.

YIELD--The percentage rate of return on an investment, such as the interest yield on a bond or bank deposit, or the dividend yield on a stock. Yield is a percentage calculated by dividing the annual income from the investment by the value or cost of the investment. For example, a $100 stock that pays $6.00 per share in annual dividends would be said to have a "dividend yield" of 6% ($6 dividend / $100 stock price = .06, or 6%).

YIELD TO MATURITY--On a bond investment, the percentage rate of return on the investment, if the bond is held until it is paid off at its maturity date. While the "current yield" is merely the annual interest payment divided by the price of the bond, the Yield to Maturity involves a number of complex present value calculations, which take into account the fact that the price of the bond at present is either higher or lower than the face amount that will be paid at maturity. Thus, a 7% bond trading at face value (100) has a current yield of 7%, and also a Yield to Maturity of 7%. But if it matures in one year, and trades at 97, you will earn another 3%, approximately when it pays off at 100, so the current yield on such a bond would be 7.22% (7 divided by 97) and the effective "Yield to Maturity" would be 10.23%, assuming semiannual interest payments.

Bonds usually pay interest twice a year, although some pay on a quarterly or monthly basis. In Wall Street Raider, bonds pay interest quarterly (four times a year), so an 8% bond pays 2% each calendar quarter, for example, in Wall Street Raider. The "yield to maturity" (YTM) figure shown for bond issues in Wall Street Raider is computed using standard present value equations, based on quarterly payments.

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Last modified: August 25, 2023