Guide to Analysing Companies

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NATIONALISATION
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example, until recently a high proportion of commercial
banks and insurance companies were in state hands. This
has been reversed in recent years as governments realise that
privatisation is a valuable source of funds and that such
companies are usually more efficiently run as private enter-
prises. During the 1990s, Latin American countries also priva-
tised many of their inefficient utilities (telephone, electricity
companies and the like); many of them were bought by pri-
vately run utilities based in the United States and Europe.
NAV
See net asset value.
Nearby delivery
See delivery.
Negative equity
The amount by which the market value of an asset falls short
of the debt incurred to buy it. It applies in particular to the
property market when the value of a house (perhaps bought at
the top of the market) falls to the point where it is worth less
than the value of the mortgage taken out to purchase it. This
happened to a number of homeowners in the UK during the re-
cession of the early 1990s and is a spectre that hangs over every
market during periods of strong rises in house prices.
Negative pledge
A condition that may be applied to a debt or security. The
borrower pledges that no new debt can subsequently be issued
which takes priority over it. Such pledges are usually made in
the form of a covenant.
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Negative yield curve
A situation in which the yields on short-term bonds are
higher than those on long-dated ones of the same or equal
quality. The yields on short-term bonds are usually lower than
those on long-dated ones because investors who commit their
money for longer periods are taking on more risk. However, if
interest rates climb sufficiently high, borrowers become in-
creasingly reluctant to lock themselves into high rates for long
periods, so they borrow for shorter periods instead.