In reality, college education gets expensive, that makes students turn their student loans into funds. This might get you through college, but in return, students pay all the loans once they graduated. That’s the help of the student loan consolidation.
Since you graduated with debt, you will exert all the borrower’s efforts to find job and pay for their bills according to their fields of study. If the borrower wants file bankruptcy as a way of getting out of the federal student loan, well, they should think it again. It doesn’t mean the students could take away from the student loans even though they declare bankruptcy, which means there still need to pay the loans.
Then, this can be taken to a student loan consolidation company. Because the company will provide the student loan consolidation, the borrower must make one payment to the company every month, or depending on the terms provided according to budget. This will in turn make the payments to the creditors likewise, to the student loans. Borrower must look for a lender that offers low fixed prices. More importantly, borrower must have fix proper payment periods to avoid any pressures.
It is better to contact the source of student loan to be more certain about the consolidation of loan so that the borrower have an idea regarding their current loan and status.
Student loan consolidation is sometimes misunderstood as exactly as a loan. But as we can see, student loan consolidation doesn’t give borrower lump sum to pay off their student loans. Student loan consolidation distributes the amount money the borrower’s paid every month in order to make the necessary payments.
Conclusively, borrower may consider the student loan consolidation program when they are still in college. This will graduate students plan their future without hassle of repaying their loan.
Student Loan Consolidation
Student Loan Consolidation, also called a Student Consolidation Loan, combines several student or parent loans into one bigger loan from a single lender, which is then used to pay off the balances on the other loans. Consolidation loans are available for most federal loans, including FFELP (Stafford, PLUS and SLS), FISL, Perkins, Health Professional Student Loans, NSL, HEAL, Guaranteed Student Loans and Direct loans. Some lenders offer consolidation loans for private loans as well.
How It Works
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
The interest rate on consolidation loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
If a student consolidates their loans before they enter repayment, the interest rate used is the lower in-school interest rate. During repayment, the interest rate is the 91-day T-bill rate plus 2.3%.) Additional details can be found in the interest rate loophole section.
To find out more about Student Loan Consolidation, check with your lender.
Alternatives
Consolidation simplifies the repayment process but does involve a slight increase in the interest rate. Students who are having trouble making their payments should consider some of the alternate repayment terms provided for federal loans. Income contingent payments, for example, are adjusted to compensate for a lower monthly income. Extended repayment allows you to extend the term of the loan without consolidation.
How It Works
Consolidation loans often reduce the size of the monthly payment by extending the term of the loan beyond the 10-year repayment plan that is standard with federal loans. Depending on the loan amount, the term of the loan can be extended from 12 to 30 years. The reduced monthly payment may make the loan easier to repay for some borrowers. However, by extending the term of a loan the total amount of interest paid is increased.
In certain circumstances (for example, when one or more of the loans was being repaid in less than 10 years because of minimum payment requirements), a consolidation loan may decrease the monthly payment without extending the overall loan term beyond 10 years. The total amount of interest paid will increase unless you continue to make the same monthly payment as before, in which case the total amount of interest paid will decrease.
The interest rate on consolidation loans is the weighted average of the interest rates on the loans being consolidated, rounded up to the nearest 1/8 of a percent and capped at 8.25%.
If a student consolidates their loans before they enter repayment, the interest rate used is the lower in-school interest rate. During repayment, the interest rate is the 91-day T-bill rate plus 2.3%.) Additional details can be found in the interest rate loophole section.
To find out more about Student Loan Consolidation, check with your lender.
Alternatives
Consolidation simplifies the repayment process but does involve a slight increase in the interest rate. Students who are having trouble making their payments should consider some of the alternate repayment terms provided for federal loans. Income contingent payments, for example, are adjusted to compensate for a lower monthly income. Extended repayment allows you to extend the term of the loan without consolidation.
US Stock Market: Top Movers
July 17 -(Bloomberg)- Shares of the following companies are having unusual moves in U.S. trading. Stock symbols are in parentheses, and prices are as of 10 a.m. in New York.
Akamai Technologies Inc. (AKAM:US) fell 3.7 percent to $19.44 and slipped 4 percent earlier, the most intraday since July 6. The provider of software that makes Web sites load faster was cut to “sell” from “neutral” at Goldman Sachs Group Inc., which cited “aggressive competition.”
AngioDynamics Inc. (ANGO:US) lost 13 percent to $11.33 and slumped 14 percent earlier, the most intraday since Jan. 7. The maker of devices to treat cancer and heart disease said that, excluding some items, it earned 14 cents a share in the fiscal fourth quarter. That trailed the average analyst estimate by 6.7 percent, according to Bloomberg data.
Badger Meter Inc. (BMI:US) declined 9.6 percent to $36.52 and fell earlier to $34.80, the lowest intraday price since May 26. The Milwaukee-based maker of water meters and fluid-control devices posted second-quarter profit excluding some items of 48 cents a share, missing the average analyst estimate by 12 percent.
BioCryst Pharmaceuticals Inc. (BCRX:US) jumped 39 percent to $5.85 for the biggest advance in Russell 2000 Index. The company said its experimental influenza treatment peramivir showed positive results in two Phase 3 studies.
Callaway Golf Co. (ELY:US) fell 9.4 percent to $5.12 and slipped 9.7 percent earlier, the most intraday since June 9. The maker of Big-Bertha and Steelhead golf clubs reduced its forecast, saying it no longer expects second-half earnings to be higher than last year.
Citigroup Inc. (C:US) gained 2.6 percent to $3.11. The New York-based bank posted second-quarter profit of $4.3 billion, or 49 cents a share, compared with a loss of $2.5 billion, or 55 cents a share, a year earlier. The results include a $6.7 billion after-tax gain from selling control of the Smith Barney brokerage to Morgan Stanley.
CIT Group Inc. (CIT:US) rose the most in the Standard & Poor’s 500 Index, surging 27 percent to 52 cents. The 101-year- old commercial finance company facing bankruptcy said it’s in talks with potential lenders after failing to receive federal guarantees for its bonds.
First Horizon National Corp. (FHN:US) fell 5.2 percent to $12.02 and dropped 5.5 percent earlier, the most intraday since May 20. Tennessee’s biggest bank had a second-quarter loss of 58 cents a share, double the average loss estimated by analysts in a Bloomberg survey.
General Electric Co. (GE:US) had the steepest loss in the Dow Jones Industrial Average, slumping 6.1 percent to $11.65. The industrial and finance company reported second-quarter revenue of $39.1 billion, missing average estimate of $41.9 billion in a Bloomberg survey of analysts.
Gilead Sciences Inc. (GILD:US) gained 2.9 percent to $48.24 and advanced earlier to $48.35, the highest intraday price since April 6. The world’s biggest maker of AIDS drugs said it will collaborate with Tibotec Pharmaceuticals to develop a once daily HIV treatment drug containing medicines from each company to help simplify therapy. If approved, the new product would be the second single-tablet treatment regimen for HIV of its kind, the company said.
Google Inc. (GOOG:US) retreated 2 percent to $433.60. The owner of the world’s most popular search engine reported slower second-quarter sales growth as advertisers held back spending amid the global recession.
International Business Machines Corp. (IBM:US) rose the most in the Dow Jones Industrial Average, adding 2.7 percent to $113.62. The world’s biggest computer-services provider increased its full-year earnings forecast as it boosted profitability during the recession.
Mattel Inc. (MAT:US) climbed 3.4 percent to $16.74 and increased earlier to $17.06, the highest intraday price since Oct. 8. The world’s biggest toymaker posted second-quarter profit, excluding some items, of 6 cents a share, surpassing the 1-cent average analyst estimate in a Bloomberg survey.
Popular Inc. (BPOP:US) dropped 9.2 percent to $1.19 and slumped earlier to $1.12, the lowest intraday price since December 1989. The Puerto Rican bank with branches in the U.S. posted a second-quarter loss excluding some items of 65 cents a share, 49 percent wider than the average analyst estimate, according to Bloomberg data.
Schnitzer Steel Industries Inc. (SCHN:US) fell 5.1 percent to $51.32. The century-old recycler of scrap metal was cut to “underweight” from “equal weight” at Morgan Stanley, which said slow growth in developed economies will cut scrap supply.
Tempur-Pedic International Inc. (TPX:US) jumped 5.8 percent to $13.79 and climbed earlier to $14, the highest intraday price since May 7. The maker of luxury mattresses reported earnings excluding some items of 22 cents a share in the second quarter, beating the average analyst estimate by 25 percent.
Yahoo! Inc. (YHOO:US) climbed 3.5 percent to $16.75 after rising earlier to $16.86, the highest intraday price since June 5. The world’s second-most-used Internet search engine had its share-price estimate raised to $19 from $13.25 at Oppenheimer & Co., which cited rival Google Inc.’s comment in a second quarter earnings call that larger advertisers are returning. Yahoo! also is close to signing a partnership to collaborate with Microsoft Corp. on Internet-search technology and advertising, two people familiar with the matter said.
Akamai Technologies Inc. (AKAM:US) fell 3.7 percent to $19.44 and slipped 4 percent earlier, the most intraday since July 6. The provider of software that makes Web sites load faster was cut to “sell” from “neutral” at Goldman Sachs Group Inc., which cited “aggressive competition.”
AngioDynamics Inc. (ANGO:US) lost 13 percent to $11.33 and slumped 14 percent earlier, the most intraday since Jan. 7. The maker of devices to treat cancer and heart disease said that, excluding some items, it earned 14 cents a share in the fiscal fourth quarter. That trailed the average analyst estimate by 6.7 percent, according to Bloomberg data.
Badger Meter Inc. (BMI:US) declined 9.6 percent to $36.52 and fell earlier to $34.80, the lowest intraday price since May 26. The Milwaukee-based maker of water meters and fluid-control devices posted second-quarter profit excluding some items of 48 cents a share, missing the average analyst estimate by 12 percent.
BioCryst Pharmaceuticals Inc. (BCRX:US) jumped 39 percent to $5.85 for the biggest advance in Russell 2000 Index. The company said its experimental influenza treatment peramivir showed positive results in two Phase 3 studies.
Callaway Golf Co. (ELY:US) fell 9.4 percent to $5.12 and slipped 9.7 percent earlier, the most intraday since June 9. The maker of Big-Bertha and Steelhead golf clubs reduced its forecast, saying it no longer expects second-half earnings to be higher than last year.
Citigroup Inc. (C:US) gained 2.6 percent to $3.11. The New York-based bank posted second-quarter profit of $4.3 billion, or 49 cents a share, compared with a loss of $2.5 billion, or 55 cents a share, a year earlier. The results include a $6.7 billion after-tax gain from selling control of the Smith Barney brokerage to Morgan Stanley.
CIT Group Inc. (CIT:US) rose the most in the Standard & Poor’s 500 Index, surging 27 percent to 52 cents. The 101-year- old commercial finance company facing bankruptcy said it’s in talks with potential lenders after failing to receive federal guarantees for its bonds.
First Horizon National Corp. (FHN:US) fell 5.2 percent to $12.02 and dropped 5.5 percent earlier, the most intraday since May 20. Tennessee’s biggest bank had a second-quarter loss of 58 cents a share, double the average loss estimated by analysts in a Bloomberg survey.
General Electric Co. (GE:US) had the steepest loss in the Dow Jones Industrial Average, slumping 6.1 percent to $11.65. The industrial and finance company reported second-quarter revenue of $39.1 billion, missing average estimate of $41.9 billion in a Bloomberg survey of analysts.
Gilead Sciences Inc. (GILD:US) gained 2.9 percent to $48.24 and advanced earlier to $48.35, the highest intraday price since April 6. The world’s biggest maker of AIDS drugs said it will collaborate with Tibotec Pharmaceuticals to develop a once daily HIV treatment drug containing medicines from each company to help simplify therapy. If approved, the new product would be the second single-tablet treatment regimen for HIV of its kind, the company said.
Google Inc. (GOOG:US) retreated 2 percent to $433.60. The owner of the world’s most popular search engine reported slower second-quarter sales growth as advertisers held back spending amid the global recession.
International Business Machines Corp. (IBM:US) rose the most in the Dow Jones Industrial Average, adding 2.7 percent to $113.62. The world’s biggest computer-services provider increased its full-year earnings forecast as it boosted profitability during the recession.
Mattel Inc. (MAT:US) climbed 3.4 percent to $16.74 and increased earlier to $17.06, the highest intraday price since Oct. 8. The world’s biggest toymaker posted second-quarter profit, excluding some items, of 6 cents a share, surpassing the 1-cent average analyst estimate in a Bloomberg survey.
Popular Inc. (BPOP:US) dropped 9.2 percent to $1.19 and slumped earlier to $1.12, the lowest intraday price since December 1989. The Puerto Rican bank with branches in the U.S. posted a second-quarter loss excluding some items of 65 cents a share, 49 percent wider than the average analyst estimate, according to Bloomberg data.
Schnitzer Steel Industries Inc. (SCHN:US) fell 5.1 percent to $51.32. The century-old recycler of scrap metal was cut to “underweight” from “equal weight” at Morgan Stanley, which said slow growth in developed economies will cut scrap supply.
Tempur-Pedic International Inc. (TPX:US) jumped 5.8 percent to $13.79 and climbed earlier to $14, the highest intraday price since May 7. The maker of luxury mattresses reported earnings excluding some items of 22 cents a share in the second quarter, beating the average analyst estimate by 25 percent.
Yahoo! Inc. (YHOO:US) climbed 3.5 percent to $16.75 after rising earlier to $16.86, the highest intraday price since June 5. The world’s second-most-used Internet search engine had its share-price estimate raised to $19 from $13.25 at Oppenheimer & Co., which cited rival Google Inc.’s comment in a second quarter earnings call that larger advertisers are returning. Yahoo! also is close to signing a partnership to collaborate with Microsoft Corp. on Internet-search technology and advertising, two people familiar with the matter said.
Housing Loan: Steps You Should Follow
The home buying process can seem complicated, but if you take things step-by-step and you know how to choose the right home loan, you will soon be holding the keys to your own home!
Ten steps to buying a home
Step 1:
Figure out how much you can afford. What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. A housing counselor can help you figure out how to manage and pay off your debt, and start saving for that down payment!
Step 2:
Know your rights
Step 3:
Shop for a loan. Save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.
Step 4: Learn about home buying programs
Step 5:
Shop for a home. Choose a real estate agent, Wish list - what features do you want, Home-shopping checklist - take this list with you when comparing homes.
Step 6:
Make an offer. Discuss the process with your real estate agent. If the seller counters your offer, you may need to negotiate until you both agree to the terms of the sale.
Step 7:
Get a home inspection. Make your offer contingent on a home inspection. An inspection will tell you about the condition of the home, and can help you avoid buying a home that needs major repairs.
Step 8:
Shop for homeowners insurance Lenders require that you have homeowners insurance.
Step 9:
Sign papers. Have Puja or hawan.
Terms used in Housing Finance
EMI:
Equated Monthly Installment till the loan is paid back. It consists of a portion of interest and the principal
Floating Rate of interest:
Rate of interest which varies with the market lending rate. Monthly Reducing balance: In this system interest reduces monthly with repayment of Principal amount
Annual Reducing Balance:
In this system principal is reduced annually at the end of the year so you end up paying interest even for the portion of principal you have actually paid back
Fixed rate of interest:
Rate of interest remains unchanged throughout the period of the loan
Processing charge:
It's a fee payable to the lender on applying for the loan
Prepayment Penalties:
When loan is paid back before the agreed term of the loan, then banks/ institutions charge penalty for the prepayment
Commitment Fee:
Some institution charge commitment fee in case the loan is not availed within a stipulated period, after it is processed and sanctioned
Miscellaneous Cost:
It is quite possible that some lenders may charge documentation or consultant charges .
Budget 2009:Highlights
Pranab Mukherjee quoted Mahatma Gandhi in his speech.Democracy is the art and science of mobilizing the entire physical, economic and spiritual resources of various sections of the people in the service of the common good of
all.
BUDGET 2009-10 CHALLENGESall.
- to lead economy to high GDP growth rate of 9 per cent per annum at the earliest
- to deepen and broaden the agenda for inclusive development to improve delivery mechanisms of the government.
- to lead economy to high GDP growth rate of 9 per cent per annum at the earliest
BUDGET HIGHLIGHTS
- to deepen and broaden the agenda for inclusive development to improve delivery mechanisms of the government.
- Govt unlikely to unveil any significant economic reform plans
- Agriculture sector may get a boost
- Big investments in irrigation and seeds may be on the anvil
- Government may ease export curbs on wheat and rice
- Fiscal deficit was projected to be 5.5% of GDP in Interim Budget
- This is Pranab Mukherjee's fourth Union Budget
- Economic growth slipped from 9% to 6.7% in 2008-09
- Gross budgetary support in the range of Rs 3,35,000 cr
- Govt to raise borrowing target to tackle budget deficit
- Fiscal sops likely for slowdown-hit sectors
- Govt may announce auctioning 3-G spectrum
- FM to announce PSU disinvestment plans
- PSU sell-off to help fund rural and social programmes.
- Infrastructure sector likely to get attention
- I am deeply aware of the youth's challenges
- I am conscious of people's faith in UPA
- FM Pranab Mukherjee begins his Budget speech
- Cabinet approves Union Budget
- High expectations for reformist Budget from the UPA
- Budget to carry forward NREGA and JNNURM
- Fringe Benefit Tax may be scrapped
- Securities Transaction Tax may be reduced
- Challenge before UPA to return to 9% growth
- Re-energise government and reinstitutionalise development
- One Budget can't solve all issues
- Improve rule of law for all citizens
- Mandate for inclusive growth
- Strengthen the delivery mechanism for healthcare
- Increase investment in infrastructure
- I am deeply aware of the youth's challenges
- New company IIFCL to look at infrastructure needs
- Two worst quarters since September slowdown behind us
- Signs of revival in the domestic industry
- Fiscal stimulus gave economy a boost
- Govt took 3 stimulus packages to fight slowdown
- Economic growth is a synergy of states and Centre
- Integration of Indian economy with rest of the world
- Significant hike in foreign capital
- Housing allocation hiked under Rajiv Awaas Yojana
- Fund allocation for urban poor accommodation is 3,973,000 cr
- JNNURM allocation hiked by 87 per cent
- NHAI allocation up by 23 per cent
- Hike infrastructure investment to over 9% of GDP by 2014
- IIFCL will refinance 60% of commercial bank loans in PPP
- IIFCL will look at new projects
- IIFCL will also look at incremental lending by banks
- Print media stimulus package extended by six months
- Target for agriculture credit raised to Rs 3,25,000 cr in 2009-10
- FIIs have returned to India in last few months
- Storm-water drainage project fund hiked to Rs 500 cr
- Blueprint for national gas grid
- Additional budget allocation to farmers
- Allocation of Rashtriya Krishi Vikas Yojna stepped up by 30%
- Total fiscal stimulus during '08-09 is Rs 1,86,000 cr
- Move towards energy security via Integrated Energy Act
- Saral-II forms to simplify taxation process
- An expert panel will look into petroleum product pricing
- Domestic oil prices must be in sync with global prices
- Fertiliser subsidy to go directly to farmers
- Export Credit Guarantee scheme extended till March 2010
- Pranab Mukherjee quotes Kautilya in Budget speech
- Incentives in interest rates to farmers to pay back
- Allocation for PM Gram Sadak Yojna up by 59 per cent
- Rs 39,100 crore allocation for NREGA
- NREGA gave employment opportunities to more than 4.47 cr households
- Aam Aadmi is the focus of all UPA's schemes
- Govt to shift to nutrient based fertiliser subsidy regime
- Banking network to be expanded
- One banking centre in every bloc
- Banks, insurance to stay with Govt
- Interest subsidy on education loans
- Rashtriya Mahila Kosh corpus to be raised to Rs 500 crore
- Rs 2,000 cr for rural housing fund under National Housing Bank
- National Mission for female literacy
- NREGA allocation up 144%
- Work on National Food Security scheme for subsidised food
- Rs 100 cr one-time grant to expand banks in unbanking areas
- Indira Awaas Yojna hiked by 63% to Rs 8,883 cr
- Unique Identification ID project to roll out in 12-18 months
- Unique Identification ID project to tap private talent
- Allocation for NRHM to be raised by Rs 257 cr
- National action plan on climate change
- Full interest subsidy for students in approved institutions
- Modernisation of national employment exchanges
- 50% cent of rural women in self-help groups
- Rural mega clusters in Bengal and Rajasthan
- Rs 25 cr each for AMU campuses in Murshidabad and Mallapuram
- Rs 2,113 cr for IITs and NITs
- Pension of non-commissioned officers to be hiked
- Commonwealth allocation hiked to Rs 16,300 cr
- Allocation of Rs 50 cr to Chandigarh University
- Rs 50 crore allocation for Punjab University
- Govt to hike allocation to National Ganga Project to Rs 562 cr
- One rank, one pension for ex-servicemen from July 1
- Allowances to para-military forces at par with defence forces
- Rs 1,000 cr for Aila rehabilitation programme to West Bengal
- New pension benefits for 12 lakh jawans and JCOs
- Allocation for rehab of Lankan Tamils
- Higher public investment in infrastructure
- Defence outlay has gone up
- Recent initiative, on direct taxes side, of the setting up of a Centralized Processing Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns filed in entire Karnataka, will be processed.
- National pension scheme exempt from STT
- Political funding to get 100 per cent tax deductions.
- Deduction under section 80-DD in respect of maintenance, including medical treatment, of a dependent who is a person with severe disability being raised from the present limit of Rs.75,000 to Rs.1 lakh.
- Sun-set clauses for deduction in respect of export profits under sections 10A and 10B of the Income-tax Act being extended by one more year i.e. for the financial year 2010-11.
- Exemption limit in personal income tax raised by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all other categories of individual taxpayers.
- Total budget expenditure for 2009-10 will Rs 10,28,032 cr
- Share of direct taxes has increased to 56 per cent in 2008-09
- GST to come into effect from April 01, 2010
- Corporate tax unchanged
- New tax code to be set up in 45 days
- Goods and Services Tax to be introduced from April 1, 2010
- Govt committed to tax reforms
- Anonymous funds to charitable bodies get some tax relief
- Commodities Transaction Tax to be abolished
- MAT hiked to 15% of book profit
- Fringe Benefit Tax to be scrapped
- Surcharge on personal Income tax slashed by 10%
- Hike in IT exemption for women to Rs 1,90,000
- Hike in IT exemption to Rs 2,40,000 for senior citizens
- General Sales Tax model will have a Central GST and State GST
- Branded jewellery for women to become cheaper
- Sensex crashes 869 Points
- Customs duty on bio-diesel reduced
- Tax holiday extended for textile units
- Small businesses exempt from advance tax
- Custom duty on LCD panels halved
- Set-top boxes to cost more
- Anonymous funds to charitable bodies to get some tax relief
- Excise duty on fibre for cheaper cloth reduced
- Service tax to be levied on law firms
- Excise duty on petrol-driven small trucks reduced to 10%
- Exemption of duty on goods made at construction sites restored
- Drugs for heart diseases to become cheaper
- Customs duty on gold and silver import increased
- Mobile phone accessories to become cheaper
- Pranab Mukherjee ends Budget speech by quoting the Mahatma Gandhi
US Stock Market: Earnings to decide fate of Stocks
NEW YORK (Reuters) With Wall Street stuck in a range since May, the start of second-quarter earnings season next week could prove to be a decisive factor for determining how much faith investors should have in an economic recovery.
After a rally of as much as 40 percent for the S&P 500 on expectations the economy will begin to turn around by year end, analysts will hone in on companies' projections to see if their hopes are corroborated.
The light menu of economic data will help keep the spotlight on earnings releases, with bellwethers Alcoa (AA.N) and Chevron (CVX.N) posting their quarterly scorecards. Of even more importance will be any outlook companies give for what they expect to see for the rest of the year.
A large U.S. Treasury auction could buoy the market if it shows there is good demand for government debt. Concern that the appetite for debt is waning as the government tries to fund its stimulus efforts was soothed by solid demand in last week's record $104 billion auction of Treasury securities.
"I think we are range bound and we're going to stay there for a while," said Paul Nolte, director of investments at Hinsdale Associates, in Hinsdale, Illinois.
"What will probably break it is going to be the earnings season because the expectation is for at least some rebound in earnings, especially from the banking sector."
WHEN 'LESS UGLY' LOOKS GOOD
Investors will be looking for companies to release results that are "less bad" in the same way that recent economic data has spurred optimism that the worst is over.
Analysts say that companies should be able to beat the relatively low bar that has been set by expectations, which could help the market add some gains.
Earnings for S&P 500 companies are expected to decline by 35.5 percent in the second quarter, according to Thomson Reuters data. While all 10 sectors are anticipated to fall, healthcare should fare the best, slipping just 2 percent.
On the opposite side, the materials and energy sectors are forecast to do the worst, falling 78.9 percent and 64.7 percent, respectively.
"On the earnings front, it's going to be ugly reading, but it's just going to be less bad, just like the economic data," said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis.
WANTED: HEALTHY OUTLOOKS
But the real spotlight will be on what companies foresee for the rest of the year.
Forecasts of profitability and improving consumer demand would increase optimism that the U.S. economy is finding its footing. Analysts said companies will have to signal the economy is actually improving and investors will not be impressed if they're just cutting costs and slashing jobs, as has been the case in recent quarters.
Nolte said the S&P 500 has been stuck between 880 and 950.
After surging from a 12-year closing low on March 9, the S&P 500's rally has stalled over the last couple of months. For June, the benchmark index was little changed.
Nonetheless, the S&P 500 has support at the bottom of that range and any dip toward that level will be a key test, analysts said. Holding above that range will be a positive sign for the market.
Since March, pullbacks have been relatively shallow and short-lived as investors who missed the rally the first time see the dips as buying opportunities.
"There's been plenty of reasons to have the legs kicked out from under us, but it hasn't happened," Marcouiller said.
"It tells you the money is quick to be there."
On the data front, reports are expected on the service sector in June from the Institute for Supply Management on Monday, as well as the international trade deficit for May and the preliminary July reading on consumer sentiment from Reuters/University of Michigan surveys -- both on Friday.
Weekly initial jobless claims data will get more attention than usual after Thursday's non-farm payrolls fell much more than expected.
"If initial claims continue to rise, it will probably begin to cast some doubt about the strength of the recovery," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
After a rally of as much as 40 percent for the S&P 500 on expectations the economy will begin to turn around by year end, analysts will hone in on companies' projections to see if their hopes are corroborated.
The light menu of economic data will help keep the spotlight on earnings releases, with bellwethers Alcoa (AA.N) and Chevron (CVX.N) posting their quarterly scorecards. Of even more importance will be any outlook companies give for what they expect to see for the rest of the year.
A large U.S. Treasury auction could buoy the market if it shows there is good demand for government debt. Concern that the appetite for debt is waning as the government tries to fund its stimulus efforts was soothed by solid demand in last week's record $104 billion auction of Treasury securities.
"I think we are range bound and we're going to stay there for a while," said Paul Nolte, director of investments at Hinsdale Associates, in Hinsdale, Illinois.
"What will probably break it is going to be the earnings season because the expectation is for at least some rebound in earnings, especially from the banking sector."
WHEN 'LESS UGLY' LOOKS GOOD
Investors will be looking for companies to release results that are "less bad" in the same way that recent economic data has spurred optimism that the worst is over.
Analysts say that companies should be able to beat the relatively low bar that has been set by expectations, which could help the market add some gains.
Earnings for S&P 500 companies are expected to decline by 35.5 percent in the second quarter, according to Thomson Reuters data. While all 10 sectors are anticipated to fall, healthcare should fare the best, slipping just 2 percent.
On the opposite side, the materials and energy sectors are forecast to do the worst, falling 78.9 percent and 64.7 percent, respectively.
"On the earnings front, it's going to be ugly reading, but it's just going to be less bad, just like the economic data," said Scott Marcouiller, senior equity market strategist at Wells Fargo Advisors in St. Louis.
WANTED: HEALTHY OUTLOOKS
But the real spotlight will be on what companies foresee for the rest of the year.
Forecasts of profitability and improving consumer demand would increase optimism that the U.S. economy is finding its footing. Analysts said companies will have to signal the economy is actually improving and investors will not be impressed if they're just cutting costs and slashing jobs, as has been the case in recent quarters.
Nolte said the S&P 500 has been stuck between 880 and 950.
After surging from a 12-year closing low on March 9, the S&P 500's rally has stalled over the last couple of months. For June, the benchmark index was little changed.
Nonetheless, the S&P 500 has support at the bottom of that range and any dip toward that level will be a key test, analysts said. Holding above that range will be a positive sign for the market.
Since March, pullbacks have been relatively shallow and short-lived as investors who missed the rally the first time see the dips as buying opportunities.
"There's been plenty of reasons to have the legs kicked out from under us, but it hasn't happened," Marcouiller said.
"It tells you the money is quick to be there."
On the data front, reports are expected on the service sector in June from the Institute for Supply Management on Monday, as well as the international trade deficit for May and the preliminary July reading on consumer sentiment from Reuters/University of Michigan surveys -- both on Friday.
Weekly initial jobless claims data will get more attention than usual after Thursday's non-farm payrolls fell much more than expected.
"If initial claims continue to rise, it will probably begin to cast some doubt about the strength of the recovery," said John Praveen, chief investment strategist at Prudential International Investments Advisers LLC in Newark, New Jersey.
Quick Online Cash Loans - A Way To Get An Emergency Cash
If you need a fast way to get an emergency cash advance, then apply for a quick cash loan online. Payday loan companies now offer instant approval with their paperless process. Once approved, your cash advance will be deposited into your checking account the next day, allowing you to pay for car repairs or any other unexpected emergency.
Before Applying
Save yourself time by gathering your contact and employment information before applying for your cash advance. A recent bank statement or a recent check stub should provide all the information you need.
You will also need the routing number from your checking account which you can find on your paper checks. You won’t need these numbers for the online application, but you will need them before your cash advance can be deposited.
Instant Approval
Through automated technology, cash advance companies are able to process your application within five minutes. You simply provide your contact information and income history. Cash advance loans are not based on your credit history or other financial factors.
Once verified, you will receive your approval notice and instructions to complete the process. Cash advances are usually approved for amounts between $500 and $1000. Overnight your cash advance will be deposited into your checking account through direct deposit.
Speedy Process
With online cash advances, you skip driving around town to offices or banks. The whole process is paperless, so you don’t have to fax copies of your paycheck stubs or social security payments.
Applications and deposits are also handled 24 hours a day, so you can apply anytime. Federal holidays and weekends will determine how soon your bank will release funds though.
Automatic Payments
Cash advance payments are also handled online. On each due date, usually after your payday, your loan payment will automatically be deducted from your checking account. You can choose to have just financing charges paid, part of the principal, or the entire loan amount. Cash advance companies offer flexible payment plans.
Easy To Contact
Reputable cash advance companies make it easy to contact them. Telephone and email are traditionally available. Many cash advance companies are also using instant messaging or fax to communicate with customers.
Investing The Right Way
The market is uncontrollable, but it helps to know what you're investing in. Become familiar with the products and businesses you invest in before you make the jump. Too many new investors invest in a hot stock from the previous year, excited by the market high. Remember: market highs never last. It's smart to invest in a strong stock with a record than a trend that's in one year and out the next.
The world of investments offers a dangerous draw: huge rewards with the chance of terrible losses. Investors love the idea of accumulating wealth, but no one likes losing money. The trick is to know how to invest with minimal risk. Nobody can predict the fluctuations of the market completely accurately, but as you start investing, you'll learn to take the losses and look forward to the next market high.
Just as important as the product is the reasoning behind your choosing it. If you know why you're investing in a stock, you'll always know what your next move is. For example, if you invest for the sake of profits only, when prices fall you'll know to drop out, instead of fretting over whether to wait and cross your fingers for the next market high, or cut your losses.
Investments are all about timing - not the timing of the market highs and lows, but the timing of your moves in relation to them. You have to know when to take profits and when to cut losses. Some say when the market is up, run a profit in case the market keeps climbing. However, others worry the market will fall, so it's best to back out while you're up. When the market is low, everyone knows to cut your losses - back out before it gets worse.
Don't invest in what you can't afford, and don't invest without a good reason. While the market highs are satisfyingly rewarding, the market lows are part of the ride. Although much of investing is gut instinct, you can't afford to make reckless decisions. Invest to your advantage, rather than let the market rip at your bank account.
The best thing to do is study the market. Don't jump to invest before you study the product's record and think over your reasoning. Some good books about investing include The Real Life Investing Guide by Kenan Pollack and Eric Heighberger, The Only Investment Guide You'll Ever Need by Andrew Tobias, and The Wall Street Journal Guide to Understanding Money and Investing (3rd Edition) by Kenneth M. Morris and Alan M. Siegel. Know what you're doing and why before you start investing.
When you make informed choices, you can gain many benefits from the market. The business world is unpredictable, but when the market's up, the rewards are well worth the gamble.
Buffett Warnings on Investment 'Time Bomb'
Derivatives are financial weapons of mass destruction
Warren Buffett
The rapidly growing trade in derivatives poses a "mega-catastrophic risk" for the economy and most shares are still "too expensive", legendary investor Warren Buffett has warned.
The world's second-richest man made the comments in his famous and plain-spoken "annual letter to shareholders", excerpts of which have been published by Fortune magazine.
The derivatives market has exploded in recent years, with investment banks selling billions of dollars worth of these investments to clients as a way to off-load or manage market risk.
But Mr Buffett argues that such highly complex financial instruments are time bombs and "financial weapons of mass destruction" that could harm not only their buyers and sellers, but the whole economic system.
Contracts devised by 'madmen'
Derivatives are financial instruments that allow investors to speculate on the future price of, for example, commodities or shares - without buying the underlying investment.
Derivatives generate reported earnings that are often wildly overstated and based on estimates whose inaccuracy may not be exposed for many years
Warren Buffett
Derivates like futures, options and swaps were developed to allow investors hedge risks in financial markets - in effect buy insurance against market movements -, but have quickly become a means of investment in their own right.
Outstanding derivatives contracts - excluding those traded on exchanges such as the International Petroleum Exchange - are worth close to $85 trillion, according to the International Swaps and Derivatives Association.
Some derivatives contracts, Mr Buffett says, appear to have been devised by "madmen".
He warns that derivatives can push companies onto a "spiral that can lead to a corporate meltdown", like the demise of the notorious hedge fund Long-Term Capital Management in 1998.
Derivatives are like 'hell'
Large amounts of risk have become concentrated in the hands of relatively few derivatives dealers ... which can trigger serious systemic problems
Warren Buffett
Derivatives also pose a dangerous incentive for false accounting, Mr Buffett says.
The profits and losses from derivates deals are booked straight away, even though no actual money changes hand. In many cases the real costs hit companies only many years later.
This can result in nasty accounting errors. Some of them spring from "honest" optimism. But others are the result of "huge-scale fraud", and Mr Buffett points to the US energy market, which relied for most of its deals on derivatives trading and resulted in the collapse of Enron.
Berkshire Hathaway, the investment group led by Mr Buffett, is pulling out of the market, closing down the derivatives trading subsidiary it bought as part of a huge reinsurance company a few years ago.
In his letter Mr Buffett compares the derivatives business to "hell... easy to enter and almost impossible to exit", and predicts that it will take years to unwind the complex deals struck by its subsidiary General Re Securities.
Warren Buffett, dubbed "the sage of Omaha", from where he controls Berkshire Hathaway, is well-known for both his blunt assessments of the markets and the high returns he delivers to shareholders.
This year, he remains cool towards further share investments, despite the sharp correction in stock market values. Mr Buffett says this "dismal fact is testimony to the insanity of valuations reached during The Great Bubble".
Berkshire backyard barbecues
A good friend of Bill Gates, he famously refused to invest in technology shares during the boom years that came to a sudden end in March 2000. As a result, Berkshire was sitting pretty after the technology bubble burst.
In marked contrast to the hubris of former managers at fallen firms like Enron and WorldCom, Mr Buffett is known for his down-to-earth style, summoning shareholders not to glitzy hotels but "Berkshire backyard barbecues" and baseball games in out-of-the-way Omaha, Nebraska.
But his strategy of identifying undervalued companies with good management in unfashionable retail sectors or the insurance industry and investing in them for the long-term has produced spectacular returns.
During the past 37 years, the company has delivered an average annual return of 22.6%. Since 1965 the company's book value has gone up by 194,936%.
However in 2001, the last year for which detailed numbers are available, heavy losses in the insurance industry worldwide resulted in a $3.77bn loss at Berkshire Hathaway - the first loss in the firm's history under Warren Buffett.
Guide to Foreign Exchange Rates and Foreign Exchange Market
Like most other rates in economics, the exchange rate is essentially a price and can be analyzed in the same way we would a price. Take a typical supermarket price, say lemons are selling at the price of 3 for a dollar or 33 cents each. Then we can think of the dollar-to-lemon exchange rate as being 3 lemons because if we give up one dollar, we can get three lemons in return. Similarly, the lemon-to-dollar exchange rate is 1/3 of a dollar or 33 cents, because if you sell a lemon, you will get 33 cents in return.
So when we speak of an X-to-Y exchange rate of Z, this means that if we give up 1 unit of X, we get Z units of Y in return. If we want to know the Y-to-X exchange rate, we calculate it using the simple exchange rate formula:
Y-to-X exchange rate = 1 / X-to-Y exchange rate
Of course, the exchange rates we read in the paper or hear on radio or TV are not prices for X and Y or for oranges and lemons. Instead they're relative prices for different currencies, but they work in the same fashion. On February 26, 2003 the U.S.-to-Japan exchange rate was 117 yen, so this means that you can purchase 117 Japanese yen in exchange for 1 U.S. dollar. To figure out how many U.S. dollars you can get for 1 Japanese yen, we can just use the formula:
Japan-to-U.S. exchange rate = 1 / U.S.-to-Japan exchange rate
Japan-to-U.S. exchange rate = 1 / 117 = .00854
So this tells us that one Japanese yen is worth .00854 U.S. dollars, which is less than a penny.
Similarly if the Canadian dollar is worth .67 U.S. dollars, we have a Canada-to-U.S exchange rate of .67. If we want to know how many Canadian dollars we can buy with 1 U.S. dollar, we use the formula:
U.S.-to-Canada exchange rate = 1/Canada-to-U.S. Exchange rate
U.S.-to-Canada exchange rate = 1/0.67 = 1.4925
So one U.S. dollar can get us $1.49 in Canadian funds.
To see why these relationships must hold, we'll look at the wonderful world of arbitrage.
Suppose the Algerian dinars-to-Bulgarian leva exchange rate is 2. We would expect then that the Bulgarian-to-Algerian exchange rate would be 1/2 or 0.5. But suppose for a second that it wasn't. Instead assume that the current market Bulgarian-to-Algerian exchange rate is 0.6. Then an investor could take five Algerian dinars and exchange them for 10 Bulgarian leva. She could then take her 10 Bulgarian leva and exchange them back for Algerian dinars. At the Bulgarian-to-Algerian exchange rate, she'd give up 10 leva and get back 6 dinars. Now she has one more Algerian dinar than she did before. This type of exchange is known as arbitrage. Since our investor gained a dinar, and since we're not creating or destroying any currency, the rest of the market must have lost a dinar. This of course is bad for the rest of the market. We would expect that the other agents in the currency exchange market will change the exchange rates that they offer so these opportunities to get exploited are taken away. Still there is a class of investors known as arbitrageurs who try to exploit these differences.
Arbitrage generally takes on more complex forms than this, involving several currencies. Suppose that the Algerian dinars-to-Bulgarian leva exchange rate is 2 and the Bulgarian leva-to-Chilean peso is 3. To figure out what the Algerian-to-Chilean exchange rate needs to be, we just multiply the two exchange rates together:
A-to-C = (A-to-B)*(B-to-C)
This property of exchange rates is known as transitivity. To avoid arbitrage we would need the Algerian-to-Chilean exchange rate to be 6 and the Chilean-to-Algerian exchange rate needs to be 1/6. Suppose it was only 1/5. Then our investor could again take five Algerian dinars and exchange them for 10 Bulgarian leva. She could then take her 10 leva and get 30 Chilean pesos at the Bulgarian-to-Chilean exchange rate of 3. If she then exchanged her 30 Chilean pesos at the Chilean-to-Algerian rate of 1/5, she'd get 6 Algerian dinars in return. Once again our investor has gained a dinar and the rest of the market has lost one. For any three currencies A, B, and C, trading A for B, B for C and C for A is known as a currency cycle. The A-to-C exchange rate not only places restrictions on the C-to-A exchange rate, but it also places restriction on the A-to-B and B-to-C pair of exchange rates. Most of the time all the exchange rates on the market will be synchronized like this, but occasionally they'll become out of sync and arbitrageurs can make a profit from currency cycles.
The relative prices of currencies are not set just to ensure that profitable currency cycles do not exist. Arbitrageurs only play a small, but important, role in the value of a currency. Currencies are simply a commodity, like any other, which has a price. Since the exchange rate is simply a price, it has the same basic determinants that any other price has: supply and demand. First we'll look at supply.
Basic econonomic theory teaches us that if the supply of a good increases, and nothing else changes, the price of that good will decrease. If the supply of a country's currency increases, we should see that it takes more of that currency to purchase a different currency than it did before. Suppose there was a big jump in the supply of the Canadian dollar. We would expect to see the Canadian dollar become less valuable relative to other currencies. So the Canadian-to-U.S. Exchange rate should decrease, from 67 cents down to, say, 50 cents. Each Canadian dollar would give us less American dollars than it did before. Similarly, the U.S.-to-Canadian exchange rate would increase from $1.49 to $2.00, so each U.S. dollar would give us more Canadian dollars than it did before, as a Canadian dollar is less valuable than it used to be.
Why would the supply of a currency increase?
Currencies are traded on the foreign exchange market, and the supply of a currency on that market will change over time. There are a few different organizations whose actions will cause a rise in the supply of the foreign exchange market:
Export Companies
Suppose a South African farm sells the cashews it produces to a large Japanese firm. It is likely that the contract will be negotiated in Japanese yen, so the farm will receive its revenue in a currency with limited use outside of Japan. Since the company needs to pay it's employees in the local currency, namely the South African rand, the company would sell its yen on a foreign exchange market and buy rands. The supply of Japanese yen on the foreign exchange market will increase, and the supply of South African rands will decrease. This will cause the rand to appreciate in value (become more valuable) relative to other currencies and the yen to depreciate.
Foreign Investors
A German automobile manufacturer wants to build a new plant in Windsor, ON, Canada. To purchase the land, hire construction workers, etc., the firm will need Canadian dollars. However most of their cash reserves are held in euros. The company will be forced to go to the foreign exchange market, sell some of its euros, and buy Canadian dollars. The supply of euros on the foreign exchange market goes up, and the supply of Canadian dollars goes down. This will cause Canadian dollars to appreciate and euros to depreciate.
Foreign investment does not have to be in tangible goods such as land. If German investors buy Canadian stocks, such as stocks listed on the Toronto Stock Exchange or purchase Canadian dollar bonds, we will have the same situation as above.
Speculators
Like the stock market, there are investors who try to make a fortune (or at least a living) by buying and selling currencies. Suppose a currency investor thinks that the Mexican peso will depreciate in the future, so it will be less valuable than other currencies than it is now. In that case, she is likely to sell her pesos on the foreign exchange market and buy a different currency instead, such as the South Korean won. The supply of pesos goes up and the supply of won goes down. This causes pesos to depreciate, and won to appreciate.
Note the self-fulfilling nature of the beliefs investors hold. If investors feel that a currency will depreciate in the future, they will try to sell it today. Since the currency is being sold by investors, the supply of it will go up, and the price of it will decrease. The investor thought that the currency would depreciate, she acted on that belief and sold her currency, and the act of selling caused the depreciation to take place. Self-fulfilling prophecies such as this one are quite common in economics.
Central Bankers
The central bank of the United States is the Federal Reserve, more commonly known as "The Fed". One of the responsibilities of the Fed is to control the supply, or the amount, of currency in a country. The most obvious way to increase the supply of money is to simply print more currency, though there are much more sophisticated ways of changing the money supply. If the Fed prints more 10 and 20 dollar bills, the money supply will increase. When the government increases the money supply, it is likely some of this new money will make its way to the foreign exchange market, so the supply of U.S. dollars will increase there as well.
A central bank will often directly increase the supply of money on the foreign exchange markets. Central banks like the Fed keep a supply of most (if not all) currencies in reserve and will often use them to influence the exchange rate. If the Fed decides that the U.S. dollar has appreciated in value too much relative to the Japanese yen, it will sell some of the U.S. dollars it has in reserve and buy Japanese yen. This will increase the supply of dollars on the foreign exchange market, and decrease the supply of yen, causing a depreciation in the value of the dollar relative to the yen. Of course, the Fed cannot do this as much as it would like, because it may end up running out of some currencies. As well, the Japanese central bank (named the Bank of Japan) could decide that the Fed is manipulating the price of the yen too much and the Bank of Japan could counteract the Fed by selling yen and by buying dollars.
Why would the demand for a currency increase?
Not surprisingly pretty much the same organizations who caused supply changes will cause demand changes. They are as follows:
Import Companies
A British retailer specializing in Chinese merchandise will often have to pay for that merchandise in Chinese yuan. So if the popularity of Chinese goods goes up in other countries the demand for Chinese yuan will go up as retailers purchase yuan to make purchases from Chinese wholesalers and manufacturers.
Foreign Investors
As before a German automobile manufacturer wants to build a new plant in Windsor, ON, Canada. To purchase the land, hire construction workers, etc., the firm will need Canadian dollars. So the demand for Canadian dollars will rise.
Speculators
If an investor feels that the price of Mexican pesos will rise in the future, she will demand more pesos today. This increased demand leads to an increased price for pesos.
Central Bankers
A central bank might decide that its holdings of a particular currency are too low, so they decide to buy that currency on the open market. They might also want to have the exchange rate for their currency decline relative to another currency. So they put their currency on the open market and use it to buy another currency. So Central Banks can play a role in the demand for currency.
Supply and demand are often thought of as being two sides of the same coin. Here we see that this is the case, as in every transaction there is a buyer and a seller, or in other words, a demander and a supplier.
Now we know what agents can cause price changes and for what reasons. We can use our knowledge to analyze what happens in the "real world".
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