down but knowledge more basic than that. Like: What the hell is a corporate bond? There are two main kinds of investments: debt and equity. Debt is just lending money. A General Motors corporate bond is a “debt instrument.” You lend GM money, and GM promises to pay you back, plus interest. Your savings account is also a debt instrument. You lend the bank money, and the bank promises to let you withdraw it, never mind that the interest is less than you’d get from keeping a sock full of buffalo nickels under your bed. And your checking account is a debt instrument, too. You lend the bank money and they . . . charge you for it? Plus ATM fees? This is probably why so many pistol-waving people rob banks and why so few pistol-waving people rob General Motors. Various companies, such as Standard & Poor’s, provide bond ratings from AAA to D to help you estimate how safe your debt instrument is. A D-rated bond is like money lent to a younger brother. An AAA-rated bond is like money lent to a younger brother by the Gambino family. U.S. government bonds are considered “riskless”—unless Vince Foster is still alive and Iraq has the bomb. Bonds rated BB and lower are called “junk bonds.” Junk bonds are just loans that are risky and therefore pay higher interest rates. The credit-card debt that you’ve run up is essentially a junk bond held by Visa. There’s no collateral except the Benetton sweater that the dog chewed. And Visa knows what your Standard & Poor’s rating would be if you had one. Visa knows more about you than your parents and psychotherapist. There’s a good reason you get soaked on your credit-card balances. Debt means that you’re renting your money to someone. Equity means you’re buying something from him. If you buy a share of a corporation’s common stock rather than buying its corporate bond, you own part of the corporation. You don’t get a mere loan payment, you get the profits. Specifically, you get the profits that are left after the corporation settles its tax bill, pays off its bond debts and other prior obligations, gives enormous bonuses to its top executives, uses part of its earnings to buy other corporations and Indonesian real estate, and retains another part of its earnings in case it needs to buy more Indonesian real estate later. You get those profits, or, rather—since there are, say, a couple million shares of common stock outstanding—you get ½ ,000,000 of those profits. This is your stock dividend. Oh, and because you’re one of the owners of the corporation, you get to vote. This means that once in a while you receive something in the mail called a proxy statement. The proxy statement allows you
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