Public Private Partnerships (PPPs) - These are deals struck between public institutions and private business to provide public services for a fee. Often these are long term arrangements where the private side of the deal will build or refurb a facility, for example a school or hospital, and then run that facility for a number of years.

The private side of the contract is usually a consortium of financiers such as a bank and specialists such as a construction company and a services provider.

The purpose of PPPs is to take public borrowing off the public budget accounts by moving the liability to the private side of the partnership. Because many of these deals are long term, say 30 years, it is often difficult to predict the performance of the contract particularly in later years, several studies have shown that their public value to be questionable.

Many of these contracts are awarded through a competitive tender process and there have been cases where commercial bidders have offered very low prices to win the deal, the incentive being the short-term benefits include an increase in company share value and awarding of bonuses etc. However, this behaviour can be at the cost of the long-term viability of both the contract and the private business offering the service.

PPPS have attracted criticism from many economists and public policy experts in Britain (and countries like Australia who have followed the UK model) who claim that this model ends up costing the tax-payer many times what an ‘on-budget’ government investment in public infrastructure would have cost, increasing the long-term cash outlays and indebtedness of government to the private sector. Professor Allyson Pollock has written extensively of the negative impact of PPP and Private Finance Initiatives on the NHS in England.

An analyst is employed by a financial institution and may follow a number of companies or a particular market sector or industry in a practice known as equity research. They undertake financial analysis of a company by reviewing its published accounts, the company’s financial statements and research into the trading function of the business, they will assess whether opportunities in the industry it operates look positive or not. Analysts will prepare and publish a “note” which will set out their belief of the future performance of the company and will usually include a recommendation regarding shares in the form of “Buy”, “Sell” or “Hold”, although some analysts offer different recommendations such as “outperform”, “overweight” or “neutral”. An analyst’s note can have a significant impact on a company’s share performance and are typically backed up with a large amount of complex financial analysis particularly if the recommendation takes a negative view of the company.

A “short” is where a share trader believes that a share will go down in value and uses the time it takes to administer the sale of shares, known as the settlement window, to make money of their belief. The trader does this by offering for sale a number of shares that they don’t own, the buyer pays at the current share price, known as the “opening price”. The seller then waits until the end of the settlement window to buy the shares they committed at sale at what they hope will be a lower “closing price”, making the difference as a profit. Clearly the price could go up and the trader could end up paying more for the shares, thus making a loss. To undertake a short in this manner does require the trader to “borrow” share stock to offer the initial position however as this can be restrictive as a result short positions are often undertaken using a Contract for Difference (CFD).

A CFD is a legal agreement between two parties which pays one of the parties the difference between the “opening” and “closing” price of an asset or security. CFDs can be used for shares, foreign currency exchange or commodities. CFDs are essentially a bet between two parties about the direction the price of something will take. They are “cash settled” meaning that no actual asset or security is traded.

Are bilateral contracts between parties that rely on the fluctuations in price of the underlying asset or security. They can take the form of entities known as “options” or “futures” where a trade and a price are agreed and then triggered by a future date or future price. The “option” or “future” is wrapped up in a contract which itself can then be traded. A CFD is an equity derivative because the parties have no rights regarding the underlying shares. As shares can have voting rights and often pay dividends typically a CFD will not entitle the parties to those benefits.

The complexity of these financial instruments, and their apparent disconnect from ‘the real economy’ – actual productive assets – have lead to negative comment from some progressive economists. Some experts regard them as highly destabilising and poorly regulated – for example, the Global Finance Crisis of 2008 was driven in part by speculation on a particular kind of derivative Collateral Debt Obligations. See Michael Lewis’ riveting analysis in The Big Short (book and film).