One day, back when I was a young college student, I walked into my father’s home and discovered him white faced, grimly staring at the TV, muttering to himself over and over that he was ‘an idiot.’ Even at that self absorbed age I knew my dad was no idiot. He was a talented mechanical engineer who helped develop the Selectric typewriter, and had recently taken a well deserved, generous early retirement deal. But on this lovely fall afternoon in an upper middle class living room, his eyes were focused on distant galaxies, his body slumped over in his chair, clearly dejected and broken, as the financial channel blared away in a theater of despair. The date was October 19, 1987. Black Monday.

As the news sunk in, I quietly resolved then and there that if I could ace courses in vector calculus or quantum mechanics, not only could I master this uninvited phenomenon that ruthlessly reached out from Wall Street and wrecked my father’s golden years, I could extract a little freaking payback. That's why, years later, when my twin 12 year-old nephews asked me to explain the financial markets to them, I knew what to say. I told them you can either Loan or Own.

One way to invest is to loan someone or something money and earn interest on the loan. When you make a loan, and I'm talking about a real one, not a tapped out buddy who wants to borrow a hundred bucks in Vegas that you'll never see again, what are the questions that come to mind? You guessed it, how safe is this loan, and when and how will I get paid back? That's exactly what you should be asking. Loans as an investment are referred to on Wall Street as fixed income, bonds, notes, bills, or paper.

Another way to invest is to buy something and hope it goes up in value so that you can sell it for a gain. Whether the investment vehicle is a stamp, a painting, or a beanie baby, the principle is the same: Buy low, sell high. Of course, there's no guarantee it will go up, in fact it may do the opposite! On Wall Street, owning usually refers to a piece of a company in the form of stock, also referred to as equity, shares, or a growth investment.

Loan or own: sounds easy, and that's the point. But the details can get confusing real fast. Each comes in all shapes and sizes, bundled together or available separately, some reasonably safe, others suicidal, and many combine one or more characteristics of both. But most every single investment vehicle you see on the news or read about in newspapers, no matter how esoteric, convoluted, or common place it is, boils down to or is derived from one or both: Loan or Own.

And now, if you're wondering why we're reviewing this, it's not because Daily Kos is getting into the investment advice business. Find a broker you trust or a palm reader or whatever, and invest, if you wish, at your own risk. What we will be doing is reviewing some of the basics of the financial markets using simple, understandable, language. So that later, when overhauling financial regulation becomes a big political topic, readers of Daily Kos will have a leg up and be better able to follow the sure-to-be-entertaining ins and outs of how industry lobbyists and politicians try to piss down our leg and tell us it's raining.

Which brings me back to my dad, and the resolution I made more than twenty years ago. I began studying the stock market using all the snazzy analytical tools a math and physics major enjoys. It took time and effort, but you know what I eventually discovered? It's Not That Hard! One thing led to another, and within a few years I was a successful portfolio manager at a major Wall Street firm. Over the next few years I made many, many times what my father lost that day. From time to time I’d drop in on my dad to regale him with my Kung-fu market savvy, and once or twice I even slipped him a wad of cash telling him it was ‘payback'. Which was every bit as deliciously satisfying as it sounds.

But I never forgot Black Monday, or the look on his face. When the markets got slammed last year following the mortgage debacle, I couldn’t help but imagine all the hard working moms and dads sitting in all the living rooms, a lifetime of hard work and their dreams of a secure future in tattered ruins around them. It happened to my dad in 1987, it happened to millions last year, and it'll happen again. And that’s why it’s so important that you understand this, too.