All about Finance

The Cheapest Car Insurance

2011-08-25T09:44:00.000-07:00

What is the cheapest car insurance? These days, wherever possible, we all retire, you can stand. Even the money that sits on top of the global economic concerns, most plague us. There is an important and essential part of our life as an automobile.

There are many areas on a car insurance policy. Nearly every state of the auto insurance industry in the United States on the minimum requirements that must be met. In most states, own and operate a vehicle, you must have auto insurance. When it comes to each state, cover property damage and medical bills and has a minimum requirement.

Many think they can be good insurance, but to be honest, we do not have good coverage. You have a car accident, medical bills and transfer responsibility to you or if other vehicles are thought to be responsible.

As well as the other driver is going to keep in mind your own bills. If an accident is to help you win the necessary minimum. I can not imagine that you have a car available in many areas of policy.

Individuals must act as a vehicle for additional security options. That is the best job you can select your financial situation is lost.

You can get a good deal of that going to the lowest price does not mean, is required.

To be honest, if you can afford your deductible and you pay out of pocket, consider yesterday's accident.

If you used your car insurance, good benefits and cheap car insurance you have not done anything wrong to go to S T to offer

European Economy-What Are The Problems

2011-07-19T13:04:00.000-07:00

European economy is facing tremendous problems. Most of the problems are created due to increase of spending sourced by borrowing. We are reproducing one good article below for the benefit of our readers.

European Economy-What Are The Problems

In this Article I am going to discuss the problems which the economies of the European countries are facing right now. Although different countries have different issues I thought there is one underlying commonness in all the problems. The major reason for the problems in European Economy is unusual growth funded entirely by borrowed funds without any corresponding rise in incomes.

I wrinkle I would make a brief growth again, as I have been watching the slip of Europe into a mess up with a feeling of watching a close circuit footage of a road accident.

Since the issues are being raised about the debts of countries like Greece, Portugal, Italy, Ireland & Spain the administrators have implemented a chain of bailouts, negotiations, strict measures & so on….but still the crisis pops back actively in haste. In all of the above cases, the troubled economies were long living on borrowed money, and that borrowed money has shaped the composition of the economies. The borrowed money was utilized for consumption, and the consumption beyond the actual income was unsustainable. As you would agree, the savings rate is directory determined by Income & consumption rates. If there is an increase in consumption without any changes in the underlying income in long run, the savings would in fact be –ve (negative).

The economic logic underlying this phenomenon is that the country’s economic growth would be entirely financed by the borrowed money which would in, short term increase consumption, employment & GDP rates. This improved statistics would again tempt the lenders to lend even more. However, the problem with the recovery plan of all the administrators seeking to save European countries from the crisis is that if we don’t have a internal growth in the underlying capacity or resources of the economy & if the inflow of borrowed money stops, the growth cycle would break & it would reverse the positive impacts it had generated on employment, consumption & GDP.

Borrowing money for consumption purpose is the main issue which is causing a drop in savings & the actual underlying growth of the countries.

Somehow, it is necessary for consumption within a crisis lands to come back into balance vis a vis creating capacity of the country.

We have seen that one of the major reasons for the problems in European countries are originated from excessive borrowings. There might be any ancillary issues which I have not covered here.

Article Source: Original Articles Directory

When To Choose Debt Consolidation To Solve A Financial Problem

2011-04-12T08:52:00.000-07:00

When To Choose Debt Consolidation To Solve A Financial Problem

By Lenore Rocamora

If you are currently facing severe financial problems, it is all too easy to panic and make the wrong decisions. Due to the current poor state of the economy, many households are now struggling to make ends meet. Debt consolidation is an activity that may allow you to once again be free of monetary worry, but this is an option that should only be considered after exploring all other eventualities.
Debt consolidation services can be extremely desirable, but they should not be used casually. If the reason for your financial headache is your credit card bills, it can be of use contacting the issuing agency and explaining your current predicament. You may discover that the representatives of the companies are authorized to alter the interest rates on your cards, dependent upon the circumstance. If this is possible, it is a far more attractive option than availing of another loan.
If you own your own home, there is always the option of releasing equity to help pay off debts. Though this can be a risky enterprise, and especially so if you are on a low income, it may offer the breathing space that allows you to overcome your current difficulties. Techniques such as this may be too great a risk if you have a young family, you would not want to end up losing your home.
Always try to get as much information as possible when deciding what course of action to take. It can be of use requesting a meeting with an independent financial adviser, they should be able to help you understand whether to consolidate your debts or to use a different technique. Though there would be cost involved with the consultation, the advice that is given may help in bringing about a situation that is highly advantageous.
Unfortunately, debt has become a part of modern life. To be able to clear all your debts is a goal that is perhaps unattainable in the short term, the best option would be to choose a technique that helps you address immediate problems, without causing too great a burden over a long period of time. Always workout the costs over the full term of a new loan.
Debt consolidation is a service that is certainly of value to many people, though it is an option that should not be rushed into. Explore all the facilities open to you, and make an informed decision as to which path to go down.
Currently facing severe financial problems? Learn more about debt consolidation in South Africa now in our overview of consolidation loans on http://www.badcreditconsolidation.co.za/

Article Source: http://EzineArticles.com/?expert=Lenore_Rocamora

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Payday Loan - What You Need To Consider Before Applying For One?

2011-03-26T10:29:00.000-07:00

A Payday loan is a small loan given to facilitate borrower's expenses until their next payment day. Payday loan is vey popular due to its convenient nature.

We came across a very good article which explains how to choose a good payday loan & other aspects relating to Payday loans. We have reproduced that article for our readers.

Payday Loan - What You Need To Consider Before Applying For One?

By Yasmin Gulam Yunos

A payday loan is a short term cash advance loan, one may require for any number of reasons. It is a loan most can get quickly and relatively easily. However there are many factors to consider before deciding to apply for one.
Is a cash advance something you really need? Can you do without this for another month, until your next paycheck? Can you save up for whatever you need the Loan for?
Take into account the high interest rates of a cash advance, if after looking at the high cost and you are comfortable that you can afford to return the lender the full amount plus interest and still be able to manage your finances when your next paycheck comes, then there should be no problem taking a Cash Advance Loan.
A cash advance is meant as a short term loan and not a long term loan. The difference between payday loans which are easier to get than long term loans is with a long term loan you have a longer period to repay the loan plus interest. With a Payday loan, it is best to make payment when your next paycheck comes in, failure to do so would just incur extra cost on the amount you have borrowed?
Only borrow what you can afford to repay. How much you can borrow also depends on your monthly salary. So if your monthly salary is $1000, borrowing $1000 is out of the question as the lender would want you the borrower to be able to make payment for your loan by your next payday. So if you need to borrow more than your monthly salary, you should look for an alternative loan.
Most payday lenders would only borrow to those who receive their wages directly into their bank account.
Next is for you to decide what type of cash advance loans to apply for. Some lenders require you to fax documentation such as your bank statements. Others have no fax instant Payday Loans which you can get on the same day, most likely though such lenders require a credit check in order to process no fax cash loans as quickly as possible.
The most important consideration when deciding which cash advance loans to apply for and take up is the interest fee. Research and compare with various lenders the interest fee before deciding on which lender to get the Cash Advance from.
So is a Payday Loan right for you. You need to look at the advantages and the disadvantages of a Payday Loan, how this loan will affect your life financially. Do your research and know your own financial situation. You can read more articles and find more resources quickly and compare payday loans lenders easily at http://www.paydayloansapplynow.com/.
Compare Payday Loans from different lenders and read articles on Payday Loan. Find the Best Loan for your yourself. Easy and Fast Online Application. Complete an Application in two minutes. Go to http://www.paydayloansapplynow.com/ to find out more.

Article Source: http://EzineArticles.com/?expert=Yasmin_Gulam_Yunos

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How To Master The Stock Market

2011-01-09T05:42:00.000-08:00

A Big question everyone faces now a days is what is really required to really master the stock market. The answer is very simple – use your brain and you should be willing to learn.

Unfortunately, most investors are not at all interested in mastering the stock market. Statistics show that in any given financial year fifty percent of the people having trading accounts lose money even in years in which the market goes up.

This is because they just gamble. They chase stocks and do reckless trading.

What is missing is a real trading strategy to make money. They don’t spend time to really figure things out.

Former hedge fund manager and master trader Mike Swanson just opened up his WSW Power Investor Service today.

It comes with a free Stock Market Mastery Trading course where he spills the beans and explains exactly how he makes winning trades and gets consistent winning results.

Most courses like this sell for over $1,500, but he is practically giving his away, because he really cares about new traders and works to turn them into long-term winners.

His whole philosophy is that if you can just risk $1 on a trade to make $3 and do that over and over again you’ll make money.

Go check it out Link Below:

How To Master The Stock Market

Oh, he is only accepting a few hundred people into his trading service and told me that he expects it will sell out today, because he hasn’t let anyone into it or his course since last April.

A lot of people are talking about it. It is the buzz on the Internet right now.

So go check it out now:

How To Master The Stock Market

2011 Stock Market Forecast

2011-01-02T11:21:00.000-08:00

I just finished reading Mike Swanson’s 2011 Stock Market Forecast. He just put this out today and it is a real thought provoking report on what he thinks will happen in 2011.

To check it out go here:

2011 Stock Market Forecast

If you don’t know who he is he’s worth listening too, because he has a great track record and pretty big following on the Internet. He’s a retired hedge fund manager who beat the market when he was running his fund and predicted the 2008 stock market crash months before it happened and in his forecast for last year he called for a big first half sideways market and that is exactly what we got until the market went up in the Fall. Now some of the things he is saying about 2011 surprised even me.

This is a good way to prepare for the coming year.

Go check it out:

2011 Stock Market Forecast

2011 Stock Market Forecast- Shocking Video

2010-12-31T00:35:00.000-08:00

Dear Readers,

I have a shocking Video which reveals 2011 Stock Market Forecast. I am sharing this Video with you. Just check the link below to access it instantly.

2011 Stock Market Forecast

Issuance of Non-Convertible Debentures- Reserve Bank of India Directions August 2, 2010

2010-08-05T08:19:00.000-07:00

The Reserve Bank of India (RBI) has issued directions for the agencies dealing in securities. These directions would come into effect from August 2, 2010 & would apply to Non Convertible Debentures issued by Corporates.

For the purpose of these directions a Non Convertible Debenture would include the Debentures issued with the maturity date up to one year through Private Placement.

Appointment of Debenture Trustee:

As per these RBI directions every Company issuing such NCDs should appoint a qualified Debenture Trustee (DT). A qualified DT is any entity registered with Securities & Exchange Board of India (SEBI) under SEBI (Debenture Trustees) Regulations, 1993. The DT should comply with the directions issued for Issuance of NCDs with effect from August, 2 2010. Under these directions, RBI may ask for any information as required from time to time & the DT is under obligation to provide the same.

Who Can Invest in NCDs:

As per these directions following types of Investors are allowed to invest in NCDs:

· Any Individuals

· Banks

· Primary Dealers

· Corporate bodies

· Insurance Companies

· Mutual Funds incorporated in India

· Unincorporated entities

· Non Resident Indians (NRIs)

· Foreign Institutional Investors (FIIs, Subject to such limits as prescribed by SEBI)

The Companies issuing Non Convertible Debentures with a maturity period of upto one year should follow the Disclosure Document as prescribed by the Fixed Income

Money Market and Derivatives Association of India (FIMMDA).

Eligibility for issuing Non Convertible Debentures:

A Company can issue NCDs in it fulfills following conditions:

· The tangible Net Worth of the Company as per the latest audited Balance Sheet should be at least INR

4crore;

· The borrower account of the issuing Company in the books of the financing banks should be classified as a standard asset ( and not a Non Performing Asset)

· The issuing Company has been sanctioned a working Capital limit or tern loan by any bank or financial institution in India.

· The issuing Company should obtain a credit rating from credit rating agencies & the credit rating should be minimum P-2 of CRISIL or equivalent credit rating by other rating agencies

Conditions for Maturity Date of the NCD:

· The maturity date of the NCD should not be of less than 90 days from the date of issue

· The exercise dates of any Options issued with NCDs being an underlying should not fall within the 90 days of the issue of the NCD.

Crude Oil Falls to $72 a Barrel

2010-07-02T11:01:00.000-07:00

The Crude Oil prices dropped due to rising concerns over the delaying economic recovery in United States. The U.S. reports on manufacturing, unemployment, home sales and construction spending are very disappointing & have contributed to fall in Crude prices.

The crude prices today fell to $ 72.05 from $79.38 a barrel on Monday. The slowdown in Chinese & United States are impacting the demand for crude oil, China & United States being one of the largest crude oil consumers. The investors are not forecasting any positive trend as they are expecting the US Non Farm Employment data to be negative.

Also the Crude Oil futures slide by 3.5 percent reaching a three week low. The Crude Future for August delivery was trading at $ 72.95 per barrel on the New York Mercantile Exchange. The August future were quoted at $ 75.63 per barrel yesterday.

South Korean Fund Managers increasing Equity Holding in Korean Stocks

2010-07-01T10:29:00.000-07:00

The largest investors of South Korea’s stock market, the pension funds have increased their Equity holding in the market as the foreign investors sold out around 400 billion South Korean won.
The bullish move by the pension funds has helped the Kospi index to gain. The domestic investors started buying shares as the economic growth in South Korea surpassed the forecast of 2 percent.
According to sources the Korean Pension funds have bought equity shares valuing around 3.8 trillion till date in year 2010.

European Central Bank to Lend Euro 111 Billion to Banks for Six Days

2010-07-01T10:28:00.000-07:00

The European Central Bank has confirmed that it would lend € 111 billion to banks for six days to help them to honor the expiry of their 12-month loans. As per sources more than 75 banks have approached the European Central Bank asking for short term funds as they need to repay Euro 442 billion of 12 month loans. Apart from this banks have also asked for additional 3 months loan from ECB. The ECB funding is at benchmark interest rate of 1 percent. The markets in Europe reacted & the European Banking Stocks fell across the board.

Introduction to Credit Default Swaps

2010-06-29T19:36:00.000-07:00

Swap essentially is a contract between two parties (usually called ‘counter parties’) to exchange with each other cash flows spread across a period of time depending upon the terms of the swap contract.

Any swap contract involves counter parties with exactly opposite financial views about the market, stock price, interest rates etc.

Credit default swaps also involve counter parties with opposite views about the credit risks involved in holding the debt of any Corporation or any Sovereign debt security.

Risky corporate & sovereign bonds are the most recent type of securities that have benefited from the related derivative contracts. There is always inherent risk of default is involved in any bond or debt security. The default by the issuer of the bond or other debt is termed as a credit event.

Credit Default Swaps (CDS) are used as a medium to transfer credit risk from one investor who wishes to avoid credit risk (the protection seeker) to another investor who is willing to assume the risk (the protection seller).

A CDS contract is meant to provide protection to holder of Corporate or Government bonds or other debt from the credit risk involved in holding these securities in case of a credit event.

In a typical CDS contract the holder of the bond or debt buys the protection from the protection seller against the credit risk arising out of a credit event. Here the protection seller agrees to buy the bonds or debt security (reference obligation) at par value in case of a credit event happening.

In return for the protection provided the protection buyer makes periodical payments (CDS Spread) to the protection seller till the time the credit event occurs or the maturity of the reference obligation which ever is earlier. These periodical payments are usually calculated by applying pre agreed basis points on the Notional Principal involved.

Sometimes the CDS contract may provide for cash settlement between the protection buyer & the protection seller in case of a credit event happening.

Important Terms in CDS Contract:

1)    Reference Entity:

The Company or Government issuing the Bonds or debt in question is called as reference entity.

2)    Credit Event:

Any default in payment of any servicing or maturing of bond by the reference entity is called as the Credit Event.

3)    Reference Obligation:

The Bond or debt for which the buyer of CDS is buying a protection against a credit risk is called as a reference obligation.

4)    Notional Principal :

The notional principal is the total par value of the reference obligation. Suppose for example if the Par value of Bond X is $100 & the protection buyer is holding 100,000 units of Bond X then the Notional Principal of the CDS would be $10,000,000 i.e. (100 x 100,000)

5)    Spread:

The periodical payment made by the protection buyer to the protection seller is called as CDS spread. Customarily, if the tenure of two different bonds is same but their CDS spreads are not same it can be said that the bond having higher spread is more risky & the probability of the default is more for it.

A CDS contract is similar to insurance contract in the sense that both the contracts involve buying a protection against some inherent risk. However, in CDS contracts it is not necessary that the buyer of the protection should have ownership interest in the underlying asset. The contract of insurance essentially requires that the insured person (the protection buyer) should have insurable interest in the asset being insured.

This feature of a CDS has facilitated speculation as it is not necessary that you should be holding the bond to buy a CDS for that bond. Moreover, in case of a credit event happening for that bond it is not even necessary that the CDS buyer should have incurred a loss due to the credit event happening. This kind of CDS trading is called as Naked CDS & many people think & rightly so that these should be banned as it encourages rigorous speculation without any beneficial bonafide interest in the underlying security.

Settlement of the CDS contract:

It is necessary that there should a credit event to initiate the process of settling the CDS.

The CDS contract can be settled by either Physical delivery or by Cash Settlement.

•    Physical Settlement:

In physical settlement of a CDS the buyer of protection would deliver the reference obligation (bonds/debt) to the protection seller & the Protection seller would pay the Notional Principal (the par value of the holding) to the protection buyer.

•    Cash Settlement:

In Cash Settlement of the CDS the protection buyer is paid the amount equal to the difference between Par value & the market price of the reference obligation after the credit event happens. The market price is determined by polling the dealers in the market.

Example of a Credit Default Swap

Suppose two parties enter into a five year CDS contract for Bond X on August 2010. The protection buyer agrees to pay 75 basis points annually in return for the protection in the event of the credit event happening. The total par value of the underlying bond (reference obligation) is say $10 million. The protection buyer would pay $75,000 annually to the protection seller. There is no credit event till Dec 2013. In this scenario the buyer of protection would have paid 4 annual payments till August 2013. As per the standard practice in the market the protection buyer also need to pay the amount of annual payment accrued for the period Sept. 2013 to Dec 2013.

In case of physical settlement the protection buyer would sell $ 10 million bonds to the protection seller & would receive $ 10 million.

In case of cash settlement suppose the post credit event market valuation of the reference obligation (bond/debt instrument) is determined to be $ 40 per unit for a par value of $100 the protection buyer would receive the balance amount i.e. $6 million from the protection seller.

OTC Nature of CDS Market

The CDS trading is currently done over the counter (OTC) of Investment Bankers. As per an estimate by Depository Trust & Clearing Corporation (DTCC) the notional amount of the total CDS outstanding as of April 2009 was about $28 trillion. The OTC nature essentially carries counterparty risk in CDS. The protection buyer may default in paying the CDS spread to the protection seller or the protection seller may default paying the protection buyer in case of a credit event happening for the reference entity. This type of risk is called as ‘Counter party Risk’. The counter party risk is highly dependent upon the overall economic conditions prevailing in an economy. The chain reaction of counter party defaults may expose the whole economy to systematic risk.

As per experts, given the huge volume of CDS trade worldwide it is necessary to regulate the CDS market & they recommend of clearing the CDS trades through central clearing houses. This indeed would result in eliminating the counter party risk involved in CDS trade.

I hope this article would help you to gain a basic understanding of the Credit Default Swaps. In my next article we would discuss the valuation & accounting treatment of CDS. Till then enjoy the reading!

China's Manufacturing Growth Slows down

2010-06-01T10:53:00.000-07:00

Stocks in Asia declined due to concerns over the growth of China as the manufacturing growth in China is less than what was anticipated for the month of May.

The Purchasing Managers’ Index (PMI) fell to 53.9 from 55.7 in April. The Purchasing Managers’ Index is an indicator of economic activity. A PMI above 50 is an indicator of economic growth whereas a PMI below 50 is an indicator of reduction in economic activity.

The Shanghai Composite Index fell by 1.93 percent to 2542.09. Slower economic growth may stop China from raising benchmark interest rates or letting the yuan appreciate against the dollar.

The Shanghai Composite Index fell by about 9.7 percent in May, 2010 due to concerns over the worsening European debt crisis and the government’s property measures.

The central bank one-year lending rate is 5.31 percent and the deposit rate at 2.25 percent since December 2008. The yuan is trading at about 6.83 per dollar under a policy in place since July 2008 to aid exporters.

The fall in the PMI might be an early indication of a slowdown in China. The Chinese Government measures for reducing the speculation in property market has resulted in reduction in property trade. The drop in Euro may also intensify the slowdown in China.

An Introduction to Proprietary Trading

2010-05-06T09:46:00.000-07:00

Proprietary trading is a term used in the context of a bank or other financial institution wherein the bank or financial institution engages in trading stocks, futures, options, commodities, currencies & other derivative instruments with its own money & on its own account.

Traditionally banks & other financial institutions are engaged in accepting deposits from clients & lending the same at a higher rate to earn an income equivalent to interest rate differentials. Also Investment banks have played a major role in fund raising for its clients. Investment Banks also play a big role in helping their clients to find the buyers for stock issues. Banks have been acting as a guarantor many times for buying the shares of their clients in case the stock issue is under subscribed. Many banks also provide portfolio management services & trading facilities to their client. While providing all these services the bank or other financial institution is engaging in trading on behalf of their clients for which usually it charges fees or commission to the clients.

However, in case of proprietary trading these financial institutions engage in trading activities on their own & with their own funds. They appoint full time dedicated traders to trade for them. The proprietary traders use all the available data & market analysis while making the investment decisions.

The purpose of engaging in proprietary trading is to make a profit with actual market movements as against to earning commissions & fees with trading on behalf of the clients. Many financial institutions also prefer to appoint freelancing traders from across the globe to trade on their behalf & for that they pay handsome amounts usually based on the trading performance.

The topic of proprietary trading is not free from criticism & critics argue that many times there is a conflict of interest in proprietary trading. As per critics the proprietary desks of bank use insider information from their front desks to make a profit & there by affect the customer interest. Also the front desk may trigger a buy signal to their client for stocks the proprietary desk has already purchased to put a buying pressure & earn a profit from the existing positions.

Legally the proprietary trading desk is not supposed to know the customers’ trading data & the front desk & the proprietary desk should be separate.

As per latest development, U.S. President has proposed to put a ban on proprietary trading by depositories & requires that Federal banks keep high reserves in case they wish to engage in proprietary trading. The conflict of interest arising out of proprietary trading may jeopardize the interest of the clients who are investing as per bank’s advice or the investors in general investing on their own.

Proprietary traders use different trading strategies while trading like statistical arbitrage, index arbitrage, risk arbitrage, volatility arbitrage etc. I would discuss those strategies in my coming article.

Option Trading: An Overview

2010-05-05T10:54:00.000-07:00

Trading Option means buying or selling Options over the exchanges. Option trading is designed for sophisticated investors. Traders use the option trading for speculation as well as hedging.

The main advantage of trading option is the leverage offered by the options trading. A trader can invest in Options with very less investment instead of investing in the underlying security.

If he chooses to invest in the underlying security he has to pay the full price of the security. But instead of buying the security in cash market he can buy a right to buy the same security i.e. option on that security with a very less price.

The trader may, if he wishes, buy the underlying security at the time of Option expiry. Here the buyer of the option would always have a right to choose to exercise or not to exercise. If the market situation goes against his expectations he may simply choose not to act.

This facility is not available in case of actual stock trading where in if you buy or sell anything you have committed your investment which would be subject to risks coming through the market movements.

Also with the leverage offered by many Option Brokers you can take high positions with minimum investment.

Option trading can be used as a speculative tool to reap the benefits of volatility of stocks. Also you may take the advantage of price fluctuations of high priced stocks by taking advantage of leverage in option trading.

Options can be used as a hedging tool to protect your stocks against adverse price movements.

Suppose you own 1000 units of Stock ABC at a cost of $100 each & you anticipate a fall in price of the stock. You may buy a Put Option on Stock ABC with expiration after 60 days at a strike price of $115. For that you may pay an Option premium of say $10. So at the Option expiry if the actual price of Stock ABC falls to $80 you would still be able to sell the stock at a price of $115 under the option contract. Remember here that you have bought a put option & you have a right to sell the underlying stock at strike price & your counterparty (Seller of Put) would be under an obligation to buy the same.

Similarly if you think that the price of any stock would increase you may buy a Call Option i.e. a right to buy the underlying stock at strike price. In our example suppose the current market price of the stock is $100 & you expect the price of Stock ABC to increase but do not wish to invest in buying the stock itself but you may buy a Call Option at a strike price of $110 by paying $10 option premium. If the price of Stock ABC at the expiry of the option increases to $125 you would earn a profit with minimum investment (option premium).

Trading Options allows the traders to formulate different strategies for each market movement whether it be an upward movement or a downward movement.

As compared to trading individual stocks the option trading can be less risky if proper strategies are used. But wrong strategies used without understanding the basics could be fatal. Many times Option trading can be dangerous & if the market moves in opposite direction than what you have anticipated you may lose whole of your capital & loss potential could be unlimited. Also you need to understand the terms of each Option contract before you buy or sell any option.

Option trading is a fantastic tool which, if used with proper analysis & correct data could make wonders.

What is Option Exercise?

2010-05-05T08:55:00.000-07:00

The purpose of this article is to throw some light on the financial logic behind the Option trading & investors’ decision to exercise or to allow the option to expire. We would discuss the logic taking an example of Equity or Stock Option in which the underlying instrument of the Option is an equity share.

Option exercise means the buyer of the option chooses to buy or sell the underlying instrument of the option contract depending upon the nature of option, either Call or Put respectively.

When a call option is exercised the buyer of the call option calls for the underlying security from the option seller i.e. the buyer of a call option buys the underlying security & the seller has to deliver the same to the buyer at a pre decided strike price.

When a put option is exercised the buyer of the put option puts the underlying security i.e. the buyer of the put option sells the underlying security at strike price & the seller of the option has to buy the same at that price.

To understand the logic behind why a particular option contract is exercised or not first we need to understand why the Option contract is entered into.

Following are the possible trades in an Option trade

•Buy a Call Option
•Buy a Put Option
•Sell a Call Option
•Sell a Put Option

Buying is going Long & Selling is going short. Hence we would have following possibilities of option trades corresponding to each of the above mentioned possible trades.

Example: Suppose we have an Equity Option having Stock X as underlying security. Suppose the current market price of Stock X is $75. The Option on Stock X is trading at $10 Premium with a Strike Price of $80.

Going Long on Call:

A trader who is optimistic about the future price of the stock X has a feeling that stock X would appreciate in near future. He would buy a right to purchase the Stock X i.e. a call option on Stock X instead of buying the Stock X itself. If the difference between the market price of stock X at expiry of the Option & the strike price is more than $10 (the option premium already paid) the trader would make a profit.

Suppose the actual market price of Stock X at the expiry of the Option is $97 the Option would still give a right to the trader to buy the Stock at $80 (the strike price). The buyer would exercise the option to buy the Stock X at $80 & may sell the same in the market at $97. His profit would be $97 minus ($80+$10) = $7 per share.

In contrast to this if the actual price of the stock at the time of expiry goes down the trader would not exercise the option but would prefer to let the option expire.

Going Long on Put:

Take an example of a trader who is bearish about Stock X price & expect that the price is going to fall in near future. He would buy a Put Option i.e. a right to sell the stock at a pre decided price (strike price). If the actual price of Stock X at option expiry is decreased below the exercise price by more than the premium paid ($10 in our example), the trader would make a profit.

Suppose the actual price of Stock X at the expiry of the option is $65 the trader would exercise the option to sell Stock X at $80 (strike price as per above example) making a profit of $5 per share i.e. $80 minus ($65 +$10). To make the logic clear here please note that even though the trader might not have a Long position (number of units of Stock X required for exercising Put Option) he could buy the shares from market at $65 & Sell them at $ 80.

If the price of Stock X at expiration of the in fact increases, the trader would not exercise the Put option as he may earn more by selling the stock in the market instead of selling it under the Option contract.

Going Short on Call:

Any Option buyer has a corresponding Option Seller. In above discussion on Going Long on Call the buyer of the Call option is optimistic about the price of Stock X. He buys a Call Option on Stock X. The corresponding Counterparty would in fact be Selling a Call Option with exactly opposite expectation about the price of Stock X. This Selling of Call Option is called as Going Short on Call. Here the trader expects that the price of the stock would fall. If the actual price at the expiry of the Option decreases the Option Seller would earn a profit equal to the premium paid to him. But if the price increases the Buyer of the call option would require the Seller to sell the security to him & the loss could be unlimited to the Seller.

Going Short on Put :
A trader who anticipates that the stock price will increase could sell a put option to another trader who is expecting the price of the stock to decrease. If the actual price of Stock X at the expiry is above the exercise price, the trader going short put would earn a profit equal to the amount of the premium received. If on the other hand the stock price is below the exercise price by more than the amount of the premium, the trader will make a loss.

To summarize our discussion we can say that Option mechanism is usually of complex nature & whether an Option would be exercised or expire without exercise would depends upon the expectations of the traders & the actual outcome of the market.

I hope this article would be helpful to understand the basic logic behind the option exercise. Although I have not discussed the Option trading from hedging & speculating perspective my coming articles would take care of this.

Introduction to Options

2010-05-04T20:43:00.000-07:00

The purpose of this article is to introduce our readers with the basic concepts of Options. People having a good knowledge of options may find this article a simplified version but that is my main motive of writing this article. I would cover the intermediary & advanced option concepts in my coming articles. I have covered the basic structure of the Option contracts in this article to achieve ease of understanding.

What is an Option?

An Option is a derivative instrument or a financial product under the terms of which you have an option to buy or sell a particular security or other financial instrument as specified in the Option contract. This security or other financial instrument is called as “Underlying Instrument” of the Option on which the Option is based.

The option contract is well structured & highly precise regarding the period of option contract for which the option would be in force, the price at which the underlying instrument would be bought or sold, how the rights & obligations under the option contract would be settled & so on.

Usually we have a particular date for any Option contract till the time which the Option to buy or sell the underlying security would be available to the investor. This date is called as “option expiry date”. After the expiry date the rights & obligations under the Option contract are dissolved & cease to remain in force.

The price at which the underlying would be bought or sold is known as “exercise price” or “Strike Price”. In case the buyer of the option decides to exercise the right to buy or sell the underlying instrument then that needs to be done at exercise price only.

Parties to Option Contract:

There are two parties involved in any option contract i.e. buyer & seller of the Option. The buyer of the option contract has a right but no obligation to buy or sell the underlying instrument on or before the expiration date at pre decided price i.e. the strike price

The seller of the option is also called as “option writer”. The option seller receives a payment from the option buyer in return for his giving the right to buy or sell the underlying instrument. This amount is called as “Option Premium”.

Classification of Options:

Options can be classified as “Call option” & “Put Option”

Call Option:

A Call Option is an Option which confers the buyer a right but not the obligation to buy the underlying instrument on or before the option expiry date at strike price.

Put Option:

A put option is an option that gives the buyer a right but not the obligation to sell the underlying instrument on or before the option expiry date at strike price.
In both Call & Put Options if the buyer decides to exercise the right to buy or sell the underlying instrument the seller is under obligation to sell or buy, as the case may be, the underlying instrument to the buyer.

As can be seen from above the buyer of the option has always a right to buy or sell the underlying instrument. So if the price of the underlying instrument moves in a direction not favorable to the buyer of the option the buyer may simply waive the right to buy or sell the underlying & the option would expire on the expiry date. In that case the only loss to the buyer would be the Option premium paid at the time of acquiring the option.

Foreign Earned Income Exclusion (FEIE) -Best Alternative to Expatriation

2010-04-26T08:37:00.000-07:00

If you are living outside the U.S. for more than two years, then there is good news for you.

I’m referring to the “Foreign Earned Income Exclusion” (FEIE) program. Through the program, U.S. citizens living abroad are exempted up to $91,400 in earned income each year from their taxable income. For married couple it is $182,800 per year..

Please note that this is not a deduction from the taxable income but the amount of $91,400 or $182,800 as the case might be would not be considered to be income at all.

It’s not a credit or a deferral either. It is an exclusion of that income from your taxable income. There are no taxes at all payable on this amount…

If you have ever planned about living outside US, but had dropped your plans thinking you could afford to pay U.S. taxes on your earnings then this exclusion would be good news for you. One important point you should remember here is that the exemption applies only to earned income & not to income earned on investments. Nonetheless, this exclusion would reduce your tax slab & you would enjoy lesser tax on your unearned income.

Following are the criterions before you could claim the benefit under FEIE:

You should establish a “tax home” in a foreign country

You should pass either the “foreign residence test” or the “physical- presence test”

You must have a source & actually have earned income offshore

Your stay in U.S. should not be more than one month a year, and

You should file a U.S income tax return for each year you live outside U.S.

Please note that you may claim exclusion only for earned income & you still have to pay taxes on unearned incomes like rents, royalties, interest, dividends, etc. Also there is no exclusion for capital gains taxes and estate tax.

In general the taxing Authorities worldwide do not charge citizens taxes on income when their stay outside home country exceeds a year or more.

Bank of Ireland to Sell 3 Flagship Businesses

2010-04-21T18:56:00.000-07:00

As per sources the Bank of Ireland may sell of three of its major businesses as a part of bailout agreement for receiving state aid. The bank has around 17 % owned by public & is negotiating the bail out deal with the European Union regulators.

As per the sources in Bank of Ireland it may be forced to sell following three major businesses.

Ireland Assurance: This is its Pension & Life Insurance business with a Net worth of approximately €12 billion.

ICS Building Society: This Irish intermediary sourced mortgage business is having mortgage loans of about €7 billion.

Bank of Ireland Asset management: This is its investment division with total assets under management of around €25 billion.

As per the sources all those divisions are adding around €89 million to the annual profits.

The bank of Ireland is among the three to be bailed out by Irish Government when the collapse of realty markets in Ireland. The reason why the bank is forced to sell off its businesses is to smooth out the unfair competitive advantage due to receipt of state funding as contemplated by the European Union Authorities.

The bail out deal is expected to be finalized in the mid of the year & as per analysts the bank may also be forced to sell off its foreign exchange division.

As per current deal the bank has accepted to hold on its discretionary interest payments on its debt till the end of this year. The bank would also dilute its clearing business & some of its operations to other financial institutions.

As a part of the deal the bank would not make any dividend payout before year 2012 until it pay off the whole Government stake.

What is Turbo Tax?

2010-04-20T08:58:00.000-07:00

TurboTax is an American tax preparation software package developed by Intuit, Inc. The package was initially developed by Chipsoft in 1980s. In 1993 Intuit took over the Chipsoft. Turbo Tax is the most popular Income Tax preparation & e filing software in United States.

Turbo tax software comes with different versions like Turbo Tax Deluxe, Turbo Tax Premier etc. The Turbo Tax software can be used to prepare both Federal & State Income Tax Returns. The good thing about this software is that it is always updated once the IRS completes the revisions to the Income Tax Forms. This software is widely used in the United States due to its step by step guidance to the tax payer & user friendly interface. Turbo Tax Deluxe is designed to handle most people’s tax needs.

The Turbo tax software is useful especially to people having no accounting or taxation background to file their Income Tax Returns simply by answering simple questions. The software interface is designed to ask questions to user & the user has to simply answer those questions. In case the user is not very much sure about the answer the 'Help section' provides detailed but still simplistic explanation to the user queries.

The Turbo Tax software comes with in built error detection module which automatically checks the Income Tax return for common errors which an user may commit while preparing the Income Tax Return.
In year 2009 the Turbo Tax came into news when Timothy F. Geithner, to be the United States Secretary of Treasury confirms at Senate confirmation hearing that he was using Turbo Tax software for 4 years & he had committed a mistake in calculating his Self Employment taxes. He accepted that that was his error & Turbo Tax software is not responsible for this. The error was discovered in IRS Audit & Geithner had to pay around $40K as taxes.

In a communication released by Intuit it said that the calculation of the amount of taxes payable is arrived on the basis of the information as provided by the user.

The Deluxe version of Turbo Tax is designed for filing Federal Returns. There is separate charge for filing State Returns. E-filing of Income Tax Return is free up to five people. The Online service can only be used by one person. If someone purchases the software CD or download it, filing of one state tax forms are provided free of cost. In online service one has to fill in all the information about taxes and one only have to pay when he/she wish to print or E file the tax Return. Turbo Tax has a free edition for those with simple filing needs, as well as a Premier, Home & Business and Business version for those with more tax complexities .

Turbo Tax Estimated Taxes is an online estimated income tax calculating and filing service. This is useful for people who file quarterly estimated payments. The software provides payment calculation and allows e-filing of estimated tax statements. The software comes with deadline reminder which is very useful to tax payers.

Turbo Tax Deluxe is very user friendly & arranged in a very useful manner.

Goldman Sachs CDO ( Collateralized Debt Obligation) Case

2010-04-19T08:17:00.000-07:00

The US Securities & Exchange Commission, has filed a complaint against Goldman Sachs on April 16 alleging that the investors of Collateralized Debt Obligation issued by Goldman Sachs have been cheated by not disclosing the involvement of Paulson & Co, a Hedge Fund in creating the underlying securities.

The Securities and Exchange Commission wants to prove that the Goldman Sachs has cheated its investors by not disclosing the fact that a hedge-fund firm betting against them has a role in creating the underlying securities on which the CDO is based.

As per Goldman Sachs the assets selected were signed off by an independent Asset Manager who had initially rejected more than 50 percent of the assets suggested by the Hedge Fund.

The case against Goldman Sachs is a strong indication that SEC may start investigating other banks that have issued CDOs. The list may include Merrill Lynch, UBS & Citigroup.

The CDO deals has helped the Hedge Funds to profit from Housing Loans defaults by the borrowers.

Goldman Sachs Chief Executive Officer Lloyd Blankfein, said that the SEC allegations are baseless and that it would strongly challenge them and defend the firm and its reputation.

As per Goldman Sachs the offer document prepared for potential investors said that CDO would be associated with securities “selected” by asset manager.

As per SEC Paulson & Co, the hedge-fund firm became the world’s third-largest Hedge Fund after betting sub prime mortgages and has earned around $1 billion on the Abacus deal.

In a marketing document for the CDO, Goldman Sachs said it might have access to “non-publicly available information” about the collateral and, as a result of this, “this presentation may not contain all information that would be material to the evaluation of the decision to purchase the CDO.

As per SEC the Goldman Sachs hired a third party independent Asset manager when it realized that the investors would not invest unless the assets are selected by an independent asset manager. As the complaint allege, Goldman Sachs presented the information about the Hedge fund to the Asset manager in such a way to suggest that the involvement of Hedge fund is trivial but in fact it turned out to be for a major portion.

The allegation against Goldman Sachs says that the CDO deal was closed knowing that it would fail & if the investors had been informed about the involvement of the Hedge Fund they should have abstained from investing in it. This is so because Paulson & Co. is well known as "Bearish" & this would affect the outcome of the investments.

According to experts in synthetic instruments there is always a high risk involved in instruments like CDOs & the buyer of the instrument knows that there is someone with the exactly opposite perception & this is the underlying principle of any synthetic instrument.

It is very interesting to know that many of the world’s biggest banks have issued CDOs involving hedge-fund firms betting against mortgage bonds. This includes, JP Morgan Chase, UBS, Citigroup, Bank of America, Wachovia, Deutsche Bank etc. As per sources many CDO managers have acted partially in favor of hedge funds while designing the CDOs. The outcome of Goldman Sachs investigations may trigger a chain of investigations by the regulators in CDOs already issued.

BRIC Countries: An Overview

2010-04-18T09:20:00.000-07:00

The term BRIC is a short form of Brazil, Russia, India & China. There is so much being discussed about BRIC countries that I thought we should take an overview of what BRIC countries signify in the world of Investments.

World economies have seen many bumps & turbulence over a recent past. That is the main reason why BRIC countries have gained importance in the eyes of world wide investors. Reducing rates of internal economical growth, reduction in domestic demand, falling markets have created major threats to the survival of Global Investors & they are searching for new avenues for investing their funds to ensure a good return on capital & also the safety for their capital.

Definition of BRIC:

Jim O'Neill from Goldman Sachs head of Global Economic Research came up with this short form BRIC for Brazil, Russia, India & China. He first defined the BRIC Countries in his report on Emerging Markets in year 2001.

What makes BRIC different from other Economies:

As per Jim O'Neill BRIC Report the combined economical wealth of these four nations would be more than the wealth of the richest nations by year 2050. As of today these four countries taken together would account for around 40 % of World Population & around 25 % of Global Land. This optimistic scenario would offer better growth as well as safety for investors.

Brazil is 5^th most populated Country of the world & the 9^th highest GDP in the world.

Russia is at 7^th rank in most highest GDP.

India is the 2^nd most populated country of the world & the 4^th highest GDP rank.

China is the most populated country of the world & the 2^nd highest GDP. The 1^st rank being United States.

As per the Goldman Sach report these four countries would be having sustained growth over next 40 years that would surpass the European Countries in terms of economic growth.

We have seen many ups & downs in the Global economies due to credit crisis & various bubbles created through improper trading practices. Emerging markets are becoming heaven for global investors due to their realistic & somehow conservative growth policies.

BRIC Countries offer high level of economic growth with sustainable rate of economic activity that is estimated to last for some decades to come. Given the turbulent global market scenario investor are getting attracted to BRIC nations due to high rate of return on investment plus a Capital appreciation anticipated.

As a Global Investor one can not ignore the growth potential of these countries & any investment in these countries would guarantee an improvement Portfolio performance. This has diverted the attention of most of the global Investors from western countries to BRIC nations. This global attention would again help these countries to harness their resources in most optimum way & would make these markets more competitive ensuring more transparency in market operations.

The chain effect of this would last for at least 3 to 4 decades to come & these countries would become a focal point for global investors to invest.

In summary I can say that as a Global investor you can not ignore the importance of BRIC countries & you can further compare these countries among themselves to find out which is the best one to invest in to optimize your investment portfolio.

U.K. Banks Win Supreme Court Ruling on Overdraft Fees

2009-11-27T09:15:00.000-08:00

HSBC Holdings Plc, Royal Bank of Scotland Group Plc and six other U.K. lenders won a court bid to
halt an antitrust regulator’s challenge to fees that lenders charge customers who exceed overdraft limits.

The Supreme Court, the highest court in Britain, reversed two earlier rulings that said overdraft fees are subject to laws regulating unfair terms in consumer contracts. The ruling may block the Office of Fair Trading from challenging whether the specific terms used by the bank are unlawful.

The London-based OFT said Banks earn about a third of their retail revenue from overdraft charges, citing a market study last year. Banks’ profit margins are under pressure as they face increased competition for customer accounts to fund lending, after wholesale credit markets seized last year.

“The banks may not be the most popular institutions in the country at present, but that does not mean that their methods of charging for retail banking services are necessarily unfair when viewed as a whole,” Justice Brenda Hale said in the judgment.

Supreme Court President Nicholas Phillips said that customers agreed to pay bank charges as part of the price of
having a current account. He said the fees “might still be open to assessment by the OFT” under consumer contract rules.

Corinne Gladstone, a spokeswoman for the OFT, said the regulator will review the ruling and make an announcement next month.

‘Stunning Victory’

Judges at both the High Court and the Court of Appeal had ruled overdraft fees are subject to laws regulating unfair terms in consumer contracts, allowing the OFT to continue its legal challenge.

“This is a stunning victory for the banks which will provide greater legal clarity going forward,” said Ed Crosse, a
finance litigation partner at U.K. law firm Osborne Clarke.

“Many commentators wrote off the banks’ chances of winning.” Shares in Barclays Plc and HSBC Holdings Plc, the U.K.’s two biggest banks by market value, climbed after the ruling. The five-member FTSE 350 Banks Index rose 0.3 percent to 5119.32 points at 11:15 a.m. in London trading.

“Overhanging the shares was the fact that there would have been quite a number of retrospective payments going back to 2001, perhaps even longer,” said Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers in London. The repayments could have run into “billions of pounds,” he said.

The British Bankers’ Association said its members will work with regulators to ensure that pending customer complaints are resolved quickly.

‘Real Concern’

We recognize this issue has been of real concern to a large number of our customers and we are pleased that this
decision now brings clarity for all parties,’’ the BBA said in a statement.

British banks charge as much as 30 pounds ($50) and up to 30 percent interest to customers who bounce checks or spend more than they have in their account, according to data company Moneyfacts Group Plc.

Tens of thousands of bank customers have written to lenders asking for the charges to be refunded. Thousands of them have lodged cases in the U.K.’s county courts, which hear smaller claims than the High Court. Those cases had been put on hold pending a definitive ruling.

The U.K. Treasury said Nov. 3 that RBS, Britain’s biggest government-controlled bank, and Lloyds Banking Group Plc will ensure consumer account fees are “transparent and fair” in return for taxpayer support.

‘Extremely Disappointed’

“Consumers, who have been waiting a number of years, will be extremely disappointed with this outcome,” Sarah McCarthy Fry, exchequer secretary to the U.K. Treasury. “It’s clear that in the past, banks were not thinking enough about their customers. That needs to change for the future.”

The banks sued in the case are RBS, HSBC, Abbey National Plc, Barclays Plc, HBOS Plc, Clydesdale Bank Plc, Lloyds TSB Bank and Nationwide Building Society. The lenders and the OFT agreed to take the issue to court to clarify the law.

(News by Bloomberg)

UCB Seeks 2 Billion-Euro Loan to Refinance Schwarz Pharma Debt

2009-11-27T08:58:00.000-08:00

UCB SA, Belgium’s biggest drugmaker by sales, plans to get 2 billion euros ($3 billion) of loans to
refinance debt used to buy Germany’s Schwarz Pharma AG.

It’s arranging a 500 million-euro 364-day term loan and 1.5 billion euros of three-year revolving credit with a one-year extension option, the Brussels-based company said in an e-mailed statement. BNP Paribas Fortis, Commerzbank AG, and Mizuho Financial Group Inc. are arranging the deal.

UCB wants to refinance 3.3 billion euros of outstanding debt it took to buy Schwarz Pharma in 2007, and for general
corporate purposes, the company said. The maker of allergy treatment Zyrtec bought Schwarz Pharma for 4.4 billion euros to add new medicines as its Keppra epilepsy drug lost patent protection.

The company in September sold 500 million euros of 4.5 percent convertible bonds and in October priced 750 million
euros of 5.75 percent senior secured notes maturing in 2014, according to data compiled by Bloomberg.

“Following the successful capital market issues announced previously, this bank refinancing will form part of the funding diversification program,” according to the company. It plans to sign the loan before the end of the year, it said.

UCB is paying interest of 150 basis points more than the euro interbank offered rate for the loans it signed in 2006 for the Schwarz Pharma acquisition, Bloomberg data show. A basis point is 0.01 percentage point.

German Bonds Little Changed as ECB Discusses Rates for Loans

2009-11-25T09:11:00.000-08:00

German government bonds were little changed amid speculation the European Central Bank may increase the interest banks pay for some loans, even as data showed the economy is still suffering the after-effects of the recession.

The yield on the 10-year bund traded within one basis point of its lowest level since Nov. 3 after German consumer confidence unexpectedly declined for a second month and Italian retail sales dropped. People familiar with the ECB discussions said officials are debating whether to put an adjustable interest rate on December’s 12-month loans. Germany and Italy sold 6.6 billion euros ($9.9 billion) of securities today.

“We’ve had a bit of disappointing data this morning,” said Marius Daheim, a senior fixed-income strategist in Munich at Bayerische Landesbank, Germany’s second-largest state-owned lender. “This gives the bond market support.”

The 10-year bond yield fell 2 basis points to 3.24 percent as of 1:10 p.m. in London. The 3.25 percent security due January 2020 rose 0.13, or 1.30 euros per 1,000-euro ($1,507) face amount, to 100.11. The yield on the two-year note rose 1 basis point to 1.33 percent.

Central banks across the world are mulling withdrawing the stimulus programs they introduced to counter the worst recession since World War II. The 10-year bund yield increased 3 basis points on Nov. 5 after European Central Bank Governor Jean- Claude Trichet said policy makers would withdraw some measures.

ECB Measures

The ECB began buying covered bonds this year, offered banks unlimited loans and cut the main refinancing rate to a record low of 1 percent.

If the ECB “makes the risk for anyone who takes the liquidity higher, you decrease the demand for it,” said Michael Markovic, a senior fixed-income strategist at Credit Suisse Group AG in Zurich. “That would automatically lead to lower participation of banks” in bond sales, he said.

German consumer confidence for December unexpectedly declined as households grew more concerned about job security, according to GfK AG. The market-research company said its sentiment index, based on a survey of about 2,000 people, fell to 3.7 from 4 in November. Economists forecast the index would hold steady, according to the median of 15 estimates in a Bloomberg survey.

Italian retail sales fell 0.1 percent in September from the month before, missing analyst estimates for a 0.1 percent increase.

Bond Sales

Germany sold 4.1 billion euros of 2.5 percent five-year notes at an average yield of 2.35 percent. Italy sold 2.5 billion euros of zero-coupon bonds maturing in September 2011 at an average yield of 1.48 percent.
Austria canceled its December bond auction because of “lower financing needs,” the country’s Federal Financing Agency said on its Web site yesterday. The country sold 23.5 billion euros of bonds this year, according to Bloomberg calculations.

The yield on the 10-year Greek bond rose 5 basis points to 5.04 percent. The difference in yield, or spread, between 10-year Greek government bonds and equivalent-maturity.

(Source: Bloomberg News)

Retirement Planning Basics: The Key is to Start Early

2009-11-20T04:11:00.000-08:00

Even if retirement is in the future, you should start planning as early as possible. In fact living well in retirement depends a lot on how you will plan it early on. Of course you can always rely on you Social Security or company retirement plan, but let's face it this will not be enough to have enough after you retire.

The first thing to check when planning your retirement is how much you will need after you retire. The income you will need depends not only on your basic expenses such as food, clothing, utilities, etc but on your health or any loans that you will have. If you are still repaying your mortgage the number should be bigger. If your health is not that perfect and you need to receive medical treatment often, than you should think about this as well. Generally speaking 70% of your current yearly income should be enough to live well after you quit working.

When you set this number you should start thinking of ways to achieve it. There are three main sources of retirement income pensions, social security and your savings. The easiest two are your pension and the social security incomes that you will receive as you can check well in advance how much these will be. You can ask for a statement or use online calculator. It may happen that these incomes will be enough and you do not need to worry much. However it is wiser to think about your saving as well. Consult a specialist and invest your money. You can invest in stocks, mutual funds, bonds, etc. Even if you are not able to invest a lot, do it as you will receive regular incomes after you retire. A common mistake that many people make is that they just try to save a lot of money. Not only that you will never be able to save that much (except you win the lottery of course) but pilled money will be spent quickly.

Finally, think of a home business or any other business that you can run after retirement. The fact that you are no longer working in an office doesn't mean you are useless and incapable to do anything. In fact it's the best time to try something new. You can turn your hobby into a small business or start something fresh. Not only you will be occupied during most of your time but you will have another source of income that will allow you better life standard.

California Debt Unnerves Investors as Taxes Plunge $2 Billion

2009-10-14T06:17:00.000-07:00

A $2.1 billion drop in California tax collection is opening a hole in Governor Arnold Schwarzenegger’s budget only three months after lawmakers in the most-populous state slashed spending for the second time in a year.

General fund revenue in the state accounting for 13 percent of the U.S. gross domestic product dropped to $19.4 billion during the fiscal year’s first three months, according to figures Democratic Controller John Chiang released Oct. 9. The total for the period ended Sept. 30 trailed by $1.1 billion, or 5.3 percent, forecasts in the annual budget the Republican governor signed July 28.

This reinforces that state’s budget problems aren’t over, and as the year goes on, we’re likely to see growing budget deficit projections,” said David Blair, an analyst with Pacific Investment Management Co. in Newport Beach, California, which invests $20 billion in municipal bonds. “This clearly is going to continue to put pressure on the Legislature and the governor.

The latest report underscores how states including California, the largest municipal bond issuer in the U.S., are still dealing with fallout from the recession even as the economy begins its recovery. The state last week was forced to raise yields to attract buyers to a $4.1 billion debt sale, after cutting the issue from $4.5 billion.

California’s decision helped push up borrowing costs in the municipal market by the most in almost four months even as states prepare new issues of taxable Build America Bonds, whose sales already total $40.2 billion. The Treasury pays 35 percent of interest costs for the debt, part of the federal economic stimulus plan approved in February.

Losing Jobs

State governments are particularly hard hit by a continuing loss of jobs, which dampens the income- and sales-tax collections upon which they depend. From April through June, states and localities recorded a 12 percent tax revenue decline from a year earlier, the third consecutive quarterly drop, according to the U.S. Census. The national unemployment rate in September was 9.8 percent, the highest since 1983, according to the U.S. Labor Department.

In New York, Governor David Paterson on Oct. 6 ordered state agencies to cut spending amid predictions that the deficit for the year ending March 31 may grow to $3 billion, $900 million more than budget Officials estimated in July.

Pennsylvania, acting 101 days into the fiscal year, enacted a $27.8 billion budget on Oct. 9 that raises cigarette taxes and expands gambling to boost revenue. Ohio confronts an $844 billion gap, while Connecticut will borrow $2.25 billion over the next two years, beginning with a $1 billion debt sale in November, to balance its budget.

‘Somewhat Unique’

California’s problems, while somewhat unique and self- inflicted, are really America’s problems,” said Bill Gross, ‘s co-chief investment officer of the world’s biggest bond fund wrote on Oct. 1. State and federal lawmakers, unable to comprehend the extent of consumer borrowing, “reflect a lack of vision to perceive that the strong growth in revenues was driven by the same excess leverage and the same delusionary asset appreciation that was bound to approach cliff’s edge.

The state has been among the hardest hit and its Legislature, requiring a two-thirds vote to raise taxes or pass a budget, has struggled to respond swiftly as the state’s fiscal strains worsened this year. Since February, Schwarzenegger and lawmakers have slashed $32 billion from spending, cutting into funding for schools, universities and welfare programs. They also raised taxes by $12.5 billion to balance the $85 billion budget.

Court Decision

Chiang, the controller, said the state’s latest figures show that Schwarzenegger and the Legislature must prepare for “more difficult decisions ahead.” California was as also handed a defeat on Oct. 2 by the state’s Supreme Court, which let stand a ruling that the governor and lawmakers illegally used $3.6 billion of money meant for local transportation agencies to balance the budget since 2007.

Revenues more than $1 billion under estimates and recent adverse court rulings are dealing a major blow to a budget that is barely 10-weeks old,” Chiang said in a statement Oct. 9.While there are encouraging signs that California’s economy is preparing for a comeback, the recession continues to drag state revenues down.

California isn’t at immediate risk for running out of cash as it did in July, when it resorted to issuing IOUs to pay some vendors and tax refunds as lawmakers fought over how to shore up finances. Last month, it borrowed $8.8 billion by selling notes, an advance on the tax it will collect later in the budget year.

Plugging Gaps

Schwarzenegger’s administration said it’s too soon to tell whether the slide in tax receipts through September foretells a worsening trend. Should revenue continue slipping, California lawmakers may find it difficult to make up for the gaps, given how deeply they have already cut and resistance among Republicans to further tax increases.

Schwarzenegger, 62, who can’t seek re-election because of term limits, doesn’t have to present his budget for the next 12- month fiscal period until January, and he has given no indication that he is planning to call an emergency session beforehand, as he did last year.

Clearly, the numbers are cause for concern but the issue now for us is to determine if this is a one-time event or whether it has one more long-term implications,” said H.D. Palmer, a spokesman for chwarzenegger’s finance department.

The tax collection figures were released after the conclusion of a $4.1 billion bond sale, which was trimmed by about $400 million after investors demanded higher yields than the state was willing to pay on some of the securities. The sale came after a rally in demand for municipal bonds pushed state- and local-government borrowing costs to a 42-year low.

Watching for Deterioration

David Blair, the Pimco analyst, said the pullback was caused by the low yields California offered amid lingering investor concern that the state’s fiscal condition may deteriorate further.

They just got a little aggressive in where they wanted to price it, Blair said. Most people still recognize that there’s budget deficits the state is trying to deal with this year and going forward.

The difference between a 10-year California bond and a top- rated municipal security reached as much as 1.71 percentage points on July 1, when the California debt yielded 5.21 percent, according to Bloomberg data. The difference slipped to 1.06 percent on Sept. 11 before ending at 1.21 percent on Oct. 9.

Future Debt Sales
California plans to sell as much as $15 billion more in bonds this year and its deficits, while not projected to reach the $60 billion it dealt with in the two years that end in July, are persistent. The state will face a $7.4 billion gap in the fiscal year beginning on June 30 and about $15 billion in each of the following two fiscal periods, California Treasurer Bill Lockyer said in his annual report on the state’s debt, released ahead of the bond sale.

Tom Dresslar, a spokesman for the treasurer, said his office has alerted investors that the fiscal troubles are far from over and the latest tax data did little to alter the outlook.

The state has been very clear that our budget problems aren’t behind us,” Dresslar said. “This shouldn’t be a big surprise to anybody.”

(Source: Bloomberg News)

Ten Stock Market Myths That Bedevil Investors

2009-10-05T19:59:00.000-07:00

In the dinosaur saga “Jurassic Park,” author Michael Crichton wrote about a man who believed
a tyrannosaurus couldn’t see him if he held still. The carnivore ate him.Later in the book,
someone asks what killed the man. Another character answers, “He was misinformed.”Misinformation
can be costly. Here are 10 notions that lead investors astray.

Myth No. 1: The best companies make the best stocks.
Stocks advance when a company exceeds prevailing expectations.The bestcompanies usually generate
lofty hopes among investors, which are hard to exceed.

I began writing about stocks in 1972, when the “Nifty Fifty” stocks were all the rage. Companies such as
International Business Machines Corp., McDonald’s Corp. and Xerox Corp. were so universally beloved that investors happily
paid 60 times earnings to own them.

These were indeed good companies: Their earnings continued to climb strongly for a decade or more. Yet they were bad
stocks, because people overpaid for their anticipated success.Today’s equivalent in my opinion is Apple Inc. The
Cupertino, California, maker of iMacs, iPhones and iPods is highly profitable, debt-free, and held in universal awe. That’s
why shares sell for 32 times earnings, more than six times book value and almost five times revenue.
Apple is a great company. But I predict that over the next two years it will be only an average stock.

Trading Costs

Myth No. 2: In today’s volatile markets, one must be an active trader.

Before you are tempted to believe this, consider commissions and taxes. The commissions are not too bad these days, now that discount brokerage is routine.
Taxes are nasty, though. Long-term capital gains are taxed at 15 percent, short-term gains at up to 33 percent. You have to be pretty arrogant to disregard that cost.

Myth No. 3: Analysts are a good guide to picking stocks.

Analysts are intelligent, know a company’s managers better than you ever will, work long hours, and have a staff of young,hard-charging assistants.
None of that necessarily makes them standouts at picking stocks. In my ongoing study, now at 10 years and counting, analysts’ most-favored stocks underperform the Standard & Poor’s
500 Index. I think analysts tend to fall for Myth No. 1.

Don’t Fear October

Myth No. 4: Beware of October, the killer month for stocks.

The worst month for the markets is September, not October. According to Ned Davis Research, the average monthly price change for the Dow Jones Industrial Average in September since
1900 has been a loss of 1.1 percent.

February and May also show small losses, on average. October, with an average gain of 0.1 percent, is the fourth worst month. Admittedly, October has seen more than its share of
stock market crashes, but there have also been plenty of robust Octobers.The best months, incidentally, are December (average gain 1.5 percent), July (1.3 percent) and April (1.2 percent).

Presidential Preferences

Myth No. 5: You can count on the U.S. presidential cycle to predict the market.

Sorry, Charlie, but the stock market has precious few things one can count on. In general, the first year of a president’s term is the weakest for stocks, and the third year
is strongest. The second and fourth years tend to be average.

The key phrase is “tend to.” According to presidential cycle lore, 2008 should have been a normal year, yet the S&P 500 fell 37 percent (including dividends). This year should be sub-
par, yet the S&P 500 has risen 13.5 percent.

Myth No. 6: Price-to-earnings ratios are the perfect measure of a stock’s value.

I probably love P/E ratios as much as anyone. Yet they are neither a perfect measure nor a magic shortcut to stock picking.For example, Ford Motor Co. earned $1.20 a share in 2005.
At the end of that year the stock was selling for about $8 a share, so the P/E ratio was attractive at about six. A winsome P/E, however, didn’t stop Ford from losing money
in each of the next three years. And it didn’t stop the stock from falling to $2.29 at the end of 2008.
No single measure tells you everything you need to know.

Malkiel’s Advice

Myth No. 7: Stocks should be bought when they have momentum.

Many respected market participants hold this belief. Perhaps foremost is William O’Neil, publisher of Investors Business Daily.I tend to side with Burton Malkiel, a Princeton economics
professor who argues that the benefits of using relative strength are canceled out by the increased trading costs involved in using this strategy. Momentum investing works some
of the time, but in my judgment it doesn’t work consistently. In addition, it is a tax-inefficient strategy because it often generates short-term gains.

Myth No. 8: War is good for the stock market.

Because spending on World War II helped pull the U.S. out of the Great Depression, many people think rising military spending correlates with a rising market. It’s often untrue. The
market made little headway in the 1970s, when the Vietnam War raged. It boomed during the 1980s, a time of relative peace.

Party Favors

Myth No. 9: The market prefers Republicans.

According to Ned Davis Research, the annual gain in the Dow average was 7.2 percent under Democratic presidents from March 4, 1901, through July 8, 2008.
It was only 3.6 percent under Republicans during the same period.
The best stock-market performance on record so far was logged under Bill Clinton, a Democrat.

Myth No. 10: Market timing can greatly enhance your returns.

It could, if one could do it accurately. However, successful market timers are rarer than scrawny sumo wrestlers. Most people who try to time the market end up being on the
sidelines during the unexpected sudden upturns that account for a significant part of the market’s long-term gains -- this spring’s rally, for example.

U.S. Economy: Home Prices Increase by Most Since 2005

2009-10-02T09:21:00.000-07:00

Home values in 20 U.S. cities climbed in July by the most in almost four years, helping stem the record plunge in household wealth that’s depressed spending.

The S&P/Case-Shiller home-price index rose 1.2 percent in July from the prior month, the biggest gain since October 2005, the group said today in New York. Another report showed consumer confidence unexpectedly fell in September, while holding above the record low reached earlier this year.

Home values are rebounding as low borrowing costs and government tax credits lift home sales. Combined with rising stock prices, the gains will begin to restore the $13 trillion plunge in net worth caused by the worst financial crisis since the Great Depression, a process that economists such as Brian Bethune say will take years to complete.

Home prices are “a major, major turning point for the economy,” said Bethune, chief financial economist at HIS Global Insight in Lexington, Massachusetts. “We are eating away at the problem of household balance sheets.”

The New York-based Conference Board’s consumer confidence index fell to 53.1 in September from 54.5 the prior month, the private research group said today, amid growing concern over the lack of jobs. The gauge sank to 25.3 in February, the lowest level in data going back to 1967.

The Standard & Poor’s 500 Index dropped after the confidence report, erasing earlier gains, and closed down 0.2 percent at 1,060.61 in New York. The yield on the benchmark 10- year Treasury note was little changed at 5:15 p.m. in New York from 3.28 percent late yesterday.

                         Decline Slows

From a year earlier, the S&P/Case Shiller index was down 13.3 percent, less than economists anticipated and the smallest decrease in 17 months.

The measure was forecast to fall 14.2 percent, according to the median projection of 36 economists surveyed by Bloomberg News. Estimates ranged from declines of 12.5 percent to 15 percent. It was down 15.4 percent in the 12 months ended in June.

Compared with the prior month, 17 of the 20 cities covered showed an increase, led by a 3.1 percent jump in Minneapolis and a 2.9 percent increase in San Francisco. Las Vegas suffered the biggest one-month decrease at 1.9 percent.

                         Sales Rising

Combined sales of new and existing homes have risen for four out of the last five months, signaling the worst of the housing crisis is over.

The Obama administration’s $8,000 tax credit for first- time buyers, which is due to expire at the end of November, combined with lower prices as foreclosures soared, have helped lift sales this year. The National Association of Realtors and the National Association of Home Builders have lobbied to extend the credit on concern demand will wane after it lapses.

Karl Case, co-creator of the S&P/Case-Shiller index, said the U.S. residential property market is improving enough to end the tax credit for first-time buyers.

“We’ve got to phase back incentives and this may be a good time to do that,” Case said in an interview on Bloomberg Radio. “I believe in some cities you’ll see the beginning of recovery.”

                        Pending Profit

Lennar Corp., the third-largest U.S. homebuilder, is among companies that see demand improving, even as losses mount. The Miami-based company said last week it expects to turn a profit in fiscal 2010.

“In the third quarter we started to see some real signs that the housing market is in fact starting to stabilize,” Stuart Miller, Lennar’s chief executive officer, said on a Sept. 21 conference call. “The sense that now is the time to buy is starting to gain momentum.”

The Conference Board’s confidence gauge was projected to increase to 57, according to the median estimate of economists surveyed by Bloomberg News.

The decline was caused by growing pessimism over jobs. The share of consumers who said jobs are plentiful fell to 3.4 percent this month from 4.3 percent. The proportion of people who said jobs are hard to get increased to 47 percent from 44.3 percent.

“It’s a little hard for households to look at their paychecks, or the lack thereof, and feel more confident,” Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in a Bloomberg Television interview.

Even so, “we should continue to see consumer confidence turn around,” because the recession is over and hiring eventually will rebound, she said.

                       Fewer Job Losses

The pace of job losses is easing as the economy shows signs of accelerating. Payrolls fell by 216,000 in August, the smallest decline in a year, according to the Labor Department.

Employers probably cut another 180,000 workers this month, economists project a Labor Department report later this week will show.

Economists say the Conference Board’s index tends to be more influenced by attitudes about the labor market. Confidence may improve in future months as balance sheets rebound. Net worth for households and non-profit groups climbed by $2 trillion in the second quarter, marking the first gain since the third quarter of 2007, according to figures from the Federal Reserve.

Fed policy makers last week said they would keep the benchmark lending rate near zero “for an extended period,” and noted that sluggish income growth and tight credit are curbing household spending and slowing the pace of the economic recovery.

(Source: Bloomberg)

Economy in U.S. Shrank at a 0.7% Annual Rate in Second Quarter

2009-09-30T09:26:00.000-07:00

The worst U.S. recession since the Great Depression eased more than anticipated in the second quarter, setting the stage for a recovery to take hold in the last half of 2009.The world’s largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, revised figures from the Commerce Department showed today in Washington. Gross domestic product contracted at a 6.4 percent pace in the first three months of 2009.

Government stimulus plans such as “cash for clunkers” and first-time home buyer credits are giving manufacturing and housing, the two areas at the center of the economic slump, a boost this quarter. Federal Reserve policy makers are among those concerned that gains in consumer spending will not be sustained as unemployment climbs and incomes stagnate.

“It’s a much better picture than a few months ago,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. “Inventories and government programs will drive growth in the second half. We’re expecting a mild recovery as the job market is still very weak.”

The drop in GDP, the sum of all goods and services produced, was less than the 1.2 percent median forecast in a Bloomberg survey of 78 economists. Estimates ranged from declines of 1 percent to 1.5 percent. The government previously calculated the pace of contraction at 1 percent last quarter.

This is the last of three estimates the government issues on economic growth.

                       Deepest Recession

The drop in GDP was the fourth in a row, the longest contraction since quarterly records began in 1947. The world’s largest economy shrank 3.8 percent since last year’s second quarter, making this the deepest recession since the 1930s.

Consumer spending, which accounts for about 70 percent of the economy, fell at a 0.9 percent pace last quarter, less than the government previously estimated. The median forecast of economists surveyed projected spending would be unrevised at a 1 percent drop.

Purchases are recovering this quarter. Sales at retailers surged in August by the most in three years, boosted by demand for automobiles as Americans rushed to take advantage of the “cash for clunkers” plan, figures from the Commerce Department showed earlier this month.

A smaller decline in business investment on equipment and software than previously estimated also contributed to the improved reading on GDP, the report said. Such spending fell at a 4.9 percent annual pace, compared with the 8.4 percent decline announced last month.

                       Inventories Plunge

Today’s report showed the record drop in stockpiles in the second quarter was even larger than previously estimated, paving the way for gains in manufacturing in the second half of the year. Automakers General Motors Co. and Ford Motor Co. are among firms boosting production in coming months.

Government spending climbed at a 6.7 percent pace last quarter, more than previously estimated and the biggest gain in more than seven years. The Obama administration’s $787 billion stimulus plan means such expenditures will keep rising in coming quarters.

The Fed’s preferred measure of inflation, which is tied to consumer spending and strips out food and energy costs, rose at a 2 percent annual rate, the same as the government previously estimated and matching economists’ forecasts.
Fed policy makers last week said they would keep the benchmark lending rate near zero “for an extended period,” and noted that household spending, while showing signs of stabilizing, was still being constrained by “job losses, sluggish income growth, lower housing wealth, and tight credit.”

                        ‘Slow’ Recovery

The economic recovery is “slow but certain,” FedEx Corp. Chief Executive Officer Fred Smith said this week, adding he has “guarded confidence” about an improving global outlook.“Recovery is not a straight line up, but a zig-zag with a few steps forward and backward,” Smith, the founder of the second-largest U.S. package-shipping company, said at FedEx’s annual meeting in its hometown of Memphis, Tennessee.

The drag from residential construction, which subtracted 0.7 percentage point from growth last quarter, is dissipating, economists said. Sales of new homes rose in August to the highest level in almost a year, and a report yesterday from S&P/Case-Shiller showed house values in 20 cities climbed in July from the prior month by the most since 2005.

The economy will expand at an average 2.6 percent pace in the second half of the year, according to the median estimate of economists surveyed by Bloomberg earlier this month.

The jobs report in two days may show payrolls declined by 180,000 in September after a 216,000 drop the prior month, and the unemployment rate climbed to 9.8 percent from 9.7 percent,the survey median shows. Economists surveyed by Bloomberg predict unemployment may reach 10 percent by year-end, the highest level since 1983.

Finally, today’s report showed corporate profits climbed 3.7 percent in the second quarter, the second consecutive gain.

(Source: Bloomberg News)

World Economy: Nobel Winner Krugman Says -End of World Postponed

2009-09-21T09:22:00.000-07:00

The global economic downturn has probably hit bottom though the recovery will be “slow and painful,” said Paul Krugman, the Nobel Prize winning economist.

“The end of the world appears to have been postponed,”

Krugman, a professor at Princeton University, said at a seminar in Helsinki today. The world economy “does not appear to be falling into an abyss but is still” in trouble.

The outlook is “very fuzzy’ and a W-shaped recovery may become U-shaped.Germany, France and Japan emerged from recession last Quarter, adding to evidence some of the world’s biggest Economies are over the worst. The U.S. recession probably endedin late July or August, Krugman said, after gross domesticProduct fell 1 percent in the second quarter from the prior

three months.

The Nobel Laureate said ‘‘the truly extraordinary thing”has been “the collapse of world trade,” the subject for whichhe was awarded the prize last year, and he cast doubt on the potential for exports to lead the global recovery. He also said China’s economy isn’t big enough to serve as a growth engine.

“The problem is that this is a global financial crisis,”he said. “How can we have an export-led recovery unless we find another planet to export to?”

                          No Locomotive

Krugman questioned whether China’s economy is large enough to be a locomotive of recovery.

“One of the reasons it’s so difficult to tell a story about a fast recovery is the large surpluses in Asia,” he said.

“If they can find a serious increase in consumer demand, that would help. We don’t really understand why the Chinese savings rate is so high, but it’s probably due to” large precautionary savings.

He warned that any decision by China to diversify its Currency reserves away from the dollar would “hurt Europe and Japan the most.”

While budget deficits “saved the world” in the short term, “for most people things are going to get worse,” he
said. “Governments can help us cope with the crisis, but they have levels of debt that are sufficiently high to be a source of concern.”

Even so, the recovery remains too frail to warrant scaling back support measures, he said. “Exit from stimulus should certainly wait until we have clear signs that we’re closing the output gap. This is no time to start exiting stimulus.”

                          ‘Don’t Panic’

Economies can “suffer” more than necessary if governments introduce austerity measures prematurely, Krugman said.

“Obviously deficits are building up, but to respond with severe cuts increases the human and the economic cost right away. You do not want to inflict upon yourself the equivalent of an IMF program. You want to avoid doing that if you can. You have to keep an eye on the debt numbers but not panic over them
if you can avoid it.”

While, last quarter’s drop in U.S. GDP was the fourth in a row, the longest contraction since quarterly records began in 1947, Krugman said the U.S. has $1.1 trillion in annual capacity “staying idle.” T he U.S. consumer “that’s been such an important driver of the global economy, is exhausted,” he said, forecasting U.S. unemployment may rise until early 2011.

                        Reason to Invest

Leading the recovery will be business investment, he said, “but what’s going to drive business investment? It would be very helpful if someone could” make a discovery that would lead us out of this recession. “If we can introduce effective climate change policies, particularly the cost of carbon emissions,” that “would be a reason to invest.”

A “good” agreement at the forthcoming international climate change summit in Denmark “wouldn’t just be good for the planet, it would be good for the recovery,” Krugman said.The crisis has hurt the euro in its ‘competition’ with the dollar, he said. “The international role of the euro is that it has suffered a setback. The crisis has not been good for the euro and its competition with the dollar as the international
reserve currency.”
Krugman said he was concerned global efforts to emerge from the crisis “could just drag on and on for a long, long time.”

“The consequences of that are that you start to have problems with financing the debt and you start to have social and political problems,” he said. My great concern is that this just drags on and on with severe consequences for political and social stability.’’

History is no guide to a path to recovery, he said. “The trouble is, we really have no road maps. The only
model is the Great Depression itself.” That “was ended by a very large spending program known as World War II and we don’t Really want to repeat that.”
(source: Bloomberg News)

Student Loan Consolidation - What Are PLUS Student Loans?

2009-08-20T20:23:00.001-07:00

At the time of researching your student loan consolidation information options you need to investigate PLUS student loans, with the rising cost of education over the previous few decades, reliance on traditional Stafford loans has in many instances failed to cover most student expenses, the PLUS (Parent Loans for Undergraduate Students) loan plan was designed to close that gap.

Though the rate is higher than other loans the cap on borrowing is much more flexible and the loans are not need-based.

For the FFEL (Federal Family Education Loan) plan, in which private lenders fund the loan the rate is 8.5%, through the Direct loan program the U.S. Dept of Education funds the loan directly @ 7.9%, the difference of 0.6% is often very large over the lifetime of the average loan, in the initial year alone on a 10 year loan of $25,000.00 it amounts to virtually $2,050.00 as apposed to $1,920.00 that equals $130.00 in interest, for an exact calculation you ought to experiment with some sample strategies using a loan calculator such as the ones available on-line.

Apart from the changes in interest rates, another recent alteration to the plan is to now allow professional and graduate students to qualify for PLUS loans, similar interest rates and eligibility criteria apply, like other students they must be enrolled in an eligible institution and program no less than half-time, unlike most Stafford loan schemes, repayment of a PLUS loan begins immediately, generally within 60 days after the loan funds are disbursed, interest begins accumulating from the time the initially disbursement is made, both the main loan and interest are paid in regular monthly installments whilst the student is in school, re-payments are made to the private lender in the situation of FFEL (Federal Family Education Loan) loans and to a U.S. Dept of Education servicing center in the circumstance of Direct loans.

Be certain to calculate carefully all the costs linked with obtaining a PLUS loan and look on it as a loan of last resort as even a home equity loan, for example may easily be less expensive since the interest is tax-deductible, it is essential to keep this information at hand when looking at any student loan consolidation information.

How to Achieve Financial Freedom?

2009-08-15T08:52:00.000-07:00

We work so hard until we caught up in the routines for years. With the salary that we earn every day, we try to pay all of our bills. We always expect to get a higher salary, getting promotion or our business running better so we can earn more money. But we do not realize that when we get more income, we also have spent more money on our needs. After we work for two, five, or even ten years we just realize that we have been in the rat race of our financial troubles.

We already set our mind set that we will retire after 40 years of working and then we start to enjoy our life after that. What if you can get the financial freedom faster than 40 years? What if I can show you how to get to financial freedom in 5 years? There are couples steps to achieve financial freedom.

First, you have to get the right mind set. Your mind set is what you are. When you think that you are short, then you always will be short. Unless you want to change your mind set to the positive way, there is no way that you can get your dream, which is Financially Free. If you don't have the money, don't spend it! Our society nowadays, has a brand new habit that does not exist centuries ago. We can spend our money before we earn it! That's right; I am talking about credit card. If possible, cut all the credit cards that are not in used. We will be trap in this financial mouse trap easily with all the credit cards lying around on our tables. If you use your credit card, please do it in your current budget, not your future budget. A lot of people are trapped because they use their credit card based on their 'future' budget. For example, Bob just got promoted this week, and his salary will be raised next month. He was so happy about it, and then he spends his future salary with his credit card. In short, don't spend it until you have it in your 'pocket'.
Third, don't put your money in the bank for too long. We often forget that if we put our money in the bank, the value of the money will be decrease so fast. The interest rate that the bank gives is far less than the inflations rate each year. The bank doesn't care about our money; in fact, they made the most profit from our money.

We have to find the perfect investment. I suggest you to go to your financial advisor ask for their best opinions. They will seek your needs, and they can give you the investments that are suitable to your needs.

Fourth, if we really want to be financially free, we have to earn a passive income. There are several ways to earn passive income. First we can create our own company that can runs without us. So, in short you can create a system that can works for you. It doesn't have to be big; you can start it with a small size company, for example a groceries store. Franchising nowadays has increasing tremendously in the past few years. This industry gives the owner to adapt a system that are already being established and proven. If you don't want to build your own system, you can buy a franchise and run it.

Network marketing is very reasonable for people that don't have big capital. Opening your own business or franchising a business could cost you a fortune, but network marketing usually cost very little to start. You can always find a good network marketing company and stick with the company for 5 years. There you can learn how to built your network and achieve Financial Freedom.

Those are couples steps that you can follow to achieve financial freedom. Every journey is start with a small step. So, you can start your own journey to your financial freedom by start it with a small step. Don't you waste your time, because the time is so precious that we can't turn back the time. Hopefully this entire article help you realize that everyone need financial freedom, before you caught up into the routines for years.

U.S. economy still wobbly; France, Germany show Growth

2009-08-13T20:31:00.000-07:00

Fresh data on Thursday dented hopes the U.S. economy is on the verge of a strong rebound, even as Western Europe's two largest economies reported a surprising return to growth in the second quarter.

Many pundits had expected the United States to lead the global economy out of recession, but the world's largest economy was soundly beaten to the punch as its retail sector struggled to lure skittish consumers.

Massive job losses and sharp declines in the housing market have prompted many Americans to pare back spending.

U.S. households are "in no position to drive a decent economic recovery," said Paul Dales, economist at Capital Economics in Toronto.

An unexpected rise in second-quarter GDP in Germany and France, pillars of the euro zone economy, boosted financial markets, which are still fretting over the potential for a global economic pickup.

German Economy Minister Karl-Theodor zu Guttenberg was cautious about the figures. Europe's recovery will likely be patchy at best, with Britain, Italy and the Netherlands still weak and parts of eastern Europe, which rely heavily on exporting to the wealthier western nations, reporting a far gloomier outlook.

GDP in the euro zone fell in the second quarter, albeit by a marginal 0.1 percent.
Germany and France emerged from lengthy recessions in April-June, with their gross domestic product rising 0.3 percent quarter-on-quarter [ID:nLD331672]. The much smaller Portuguese and Greek economies matched that growth.

The country's jobless rate fell in July for the first time in nine months.
We're entering a phase of stabilization and slow growth," Christian Dreger at the DIW Institute. "The main risk for Germany is a sharp rise in unemployment."

U.S. CONSUMERS NOT SPENDING

Retail sales excluding automobiles and gasoline, a popular measure with analysts, fell by 0.4 percent. Headline retail sales fell by only 0.1 percent as the government's "cash for clunkers" auto subsidy program drove more traffic to car dealerships. But new car sales may have drawn demand from other parts of the retail universe.

"While vehicle sales have rebounded, core retail sales have floundered after severe declines in late 2008," said Steven Wieting, economist at Citigroup.

The latest reading on continued claims, or those staying on the unemployment rolls, fell to 6.2 million from 6.3 million, a decline that suggested more long-term unemployed workers are exhausting their benefits.

Taken together, the data dulled hopes for a consumer-led U.S. recovery are elusive. Following a two-day policy meeting it said the economy is "leveling out," the first time in a year that its post-meeting guidance did not characterize the economy as contracting, weakening, or slowing.

WAL-MART EARNINGS BEAT STREET, DESPITE SOFT SALES

Wal-Mart Stores Inc. the world's largest retailer, reported on Thursday unexpectedly better earnings, but it warned that the economy remained a challenge.
The key metric for the giant discounter -- sales at stores open at least a year -- unexpectedly fell by 1.2 percent. Wall Street had looked for a gain of 0.85 percent.

Wal-Mart has benefited from "trade-down" from pricier retail chains, as many American consumers attempt to save cash, especially on staple items such as groceries and household products. Department store operator Kohl's Corp gave a grim outlook for the rest of the year, looking for same-store sales at its 1,000-plus outlets to fall as much as 5 percent.

STOCKS, EURO, INDUSTRIAL METALS RISE

Stocks, commodities and the euro rose due to the GDP surprise, while the dollar dipped. World stocks as measured by MSCI were up 1.1 percent, with U.S. markets rising despite the soft economic data. Wal-Mart surged by 2.8 percent to a four-month high.
Major U.S. stock indices are bumping their 2009 highs. Paulson's disclosure late on Wednesday that he bought large stakes in several banks, including Bank of America Corp., lifted financial stocks and helped sustain the rally.
Paulson of the eponymous Paulson & Co is credited for anticipating the looming credit crisis in 2007.

Meanwhile, copper led advances among industrial metals, reaching a 10-month high of $6,450 a ton on the London Metal Exchange. Lead, zinc and aluminum prices also rose.
"The German numbers are very helpful, the French numbers are very helpful, and that's supporting the copper market," said Sterling Smith, analyst for Country Hedging in Inner Grove Heights, Minnesota.

Debt factorization and invoice discounting:the basics

2009-08-04T08:35:00.000-07:00

Debt factoring involves selling your invoices to a third party. process the invoices and allow you to draw loans against the money owed to your business. Essentially, these companies provide a debt collection and ledger management service.

This is used basically to reduce administration overheads & thereby improve the Cash flow. Businesses that supply this service are called factors or debt factoring companies.

Invoice discounting is an alternative way of drawing money against your invoices. However, your business retains control over the administration of your sales ledger. It offers valuable support services and credit insurance.

This guide gives information on how debt factoring and invoice discounting work,the advantages and disadvantages, different types of factoring and invoice discounting, the cost, and how to choose a factor or discounter.

How debt factoring works

Factoring provides a fast prepayment against your sales ledger, at a cost, to flexibly increase your working capital and improve cash flow.

Factoring is offered to businesses trading with other businesses on credit terms. It is not normally available to retailers or to cash traders.

When factoring starts

Factors can be independent or subsidiaries of major banks and financial institutions. business, review your financial situation and study your business plan to evaluate your suitability for a factoring facility.

After signing the agreement, the factor will typically agree to advance up to 85 per cent of approved invoices. all sales go through the factor.
Check the notification period - most factors require three months' notice to end Negotiate if you are not happy with the notice period.

Factoring is a complex, long-term agreement. solicitor on the legal and financial implications of factoring.

When an invoice is raised

You raise an invoice, which has instructions to pay the factor directly and sendit to the customer. Send a copy of it to the factor.

The factor pays an agreed percentage of the invoice to you.

The factor issues statements to the customer on your behalf. It operatescredit control procedures including telephoning the customer if necessary.When an invoice is paid by the customer

The customer should pay 100 per cent of the invoice directly to the factor.

The factor pays the balance of the invoice to you. Fees and interest will be deducted from the payment. factoring and invoice discounting.

When an invoice is not paid

If an invoice is not paid, responsibility for paying the debt will depend on the type of agreement - either recourse factoring or non-recourse factoring. page in this guide on recourse factoring and non-recourse factoring.

Advantages and disadvantages of factoring
There are numerous advantages to debt factoring, but also some potential
drawbacks.

Advantages

Factoring provides a large and quick boost to cash flow valuable for businesses that are short of working capital.

Other advantages:

there are many factoring companies, so prices are usually competitive

it can be a cost-effective way of outsourcing your sales ledger while freeing upyour time to manage the business

it assists smoother cash flow and financial planning

some customers may respect factors and pay more quickly

you may be given useful information about the credit standing of your

factors can prove an excellent strategic as well as financial resource whenplanning business growth

you will be protected from bad debts if you choose non-recourse factoring

cash is released as soon as orders are invoiced and is available for capital

Disadvantages

works best when a business is efficient and there are few disputes and queries.

Other disadvantages:

The cost will mean a reduction in your profit margin on each order or service fulfillment.

It may reduce the scope for borrowing - book debts will not be available as security.

Factors may want to vet your customers and influence the way that you do business.

Some customers may prefer to deal directly with you.

How the factor deals with your customers will affect what your customers think of your reputation.

You have to pay extra to remove your liability for bad debtors.

Student Loan Consolidation: How It Helps?

2009-07-26T02:02:00.000-07:00

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

2009-07-26T01:58:00.000-07:00

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.

2009-07-18T00:00:00.001-07:00

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US Stock Market: Top Movers

2009-07-17T08:33:00.000-07:00

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.

Housing Loan: Steps You Should Follow

2009-07-10T21:47:00.000-07:00

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

2009-07-06T20:25:00.000-07:00

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 CHALLENGES

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

2009-07-05T20:27:00.000-07:00

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.

Quick Online Cash Loans - A Way To Get An Emergency Cash

2009-07-04T20:05:00.000-07:00

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

2009-07-04T19:56:00.000-07:00

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'

2009-07-02T12:27:00.000-07:00

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

2009-07-01T10:35:00.000-07:00

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.

These are the organizations who will increase the supply of currency on the exchange market. Now we'll investigate the demand side of foreign exchange markets.

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".

Barack Obama's Speech on 21st Century Financial Regulatory Reform

2009-06-28T20:59:00.000-07:00

Speaker: Barack Obama

President Obama gave these remarks on financial regulatory reform on June 17, 2009.

THE PRESIDENT: Thank you very much.

Since taking office, my administration has mounted what I think has to be acknowledged as an extraordinary response to a historic economic crisis. But even as we take decisive action to repair the damage to our economy, we're working hard to build a new foundation for sustained economic growth. This will not be easy. We know that this recession is not the result of one failure, but of many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades.

That's why, as part of this new foundation, we're seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil. We want to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries and jobs. And as I discussed on Monday at the American Medical Association, we want to reform our health care system so that we can remain healthy and competitive.

This new foundation also requires strong, vibrant financial markets, operating under transparent, fairly-administered rules of the road that protect America's consumers and our economy from the devastating breakdown that we've witnessed in recent years.

It is an indisputable fact that one of the most significant contributors to our economic downturn was a unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess. A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory regime basically crafted in the wake of a 20th century economic crisis -- the Great Depression -- was overwhelmed by the speed, scope, and sophistication of a 21st century global economy.

In recent years, financial innovators, seeking an edge in the marketplace, produced a huge variety of new and complex financial instruments. And these products, such as asset-based securities, were designed to spread risk, but unfortunately ended up concentrating risk. Loans were sold to banks, banks packaged these loans into securities, investors bought these securities often with little insight into the risks to which they were exposed. And it was easy money -- while it lasted. But these schemes were built on a pile of sand. And as the appetite for these products grew, lenders lowered standards to attract new borrowers. Many Americans bought homes and borrowed money without being adequately informed of the terms, and often without accepting the responsibilities.

Meanwhile, executive compensation -- unmoored from long-term performance or even reality -- rewarded recklessness rather than responsibility. And this wasn't just the failure of individuals; this was a failure of the entire system. The actions of many firms escaped scrutiny. In some cases, the dealings of these institutions were so complex and opaque that few inside or outside these companies understood what was happening. Where there were gaps in the rules, regulators lacked the authority to take action. Where there were overlaps, regulators lacked accountability for their inaction.

An absence of oversight engendered systematic, and systemic, abuse. Instead of reducing risk, the markets actually magnified risks that were being taken by ordinary families and large firms alike. There was far too much debt and not nearly enough capital in the system. And a growing economy bred complacency.

Now, we all know the result: the bursting of a debt-based bubble; the failure of several of the world's largest financial institutions; the sudden decline in available credit; the deterioration of the economy; the unprecedented intervention of the federal government to stabilize the financial markets and prevent a wider collapse; and most importantly, the terrible pain in the lives of ordinary Americans. And there are retirees who've lost much of their life savings, families devastated by job losses, small businesses forced to shut their doors.

Millions of Americans who've worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight. Our entire economy has been undermined by that failure.

So the question is, what do we do now? We did not choose how this crisis began, but we do have a choice in the legacy this crisis leaves behind. So today, my administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.

These proposals reflect intensive consultation with leaders in Congress, including those who are here today: Chairman Dodd and Chairman Frank, who, along with Senator Shelby and Representative Bachus, will be meeting with me throughout this process. They met with me earlier this year to jumpstart the discussion of reform. These reforms are also drawing on conversations with regulators, including those I met with this morning, as well as consumer advocates and business leaders, academic experts, and the broader public.

In these efforts, we seek a careful balance. I've always been a strong believer in the power of the free market. It has been and will remain the engine of America's progress -- the source of prosperity that's unrivaled in history. I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world.

That's our goal -- to restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed; in which honest, vigorous competition is the system -- in the system is prized, and those who game the system are thwarted.

With the reforms we're proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse. We seek to create a framework in which markets can function freely and fairly, without the fragility in which normal business cycles suddenly bring the risk of financial collapse; we want a system that works for businesses and consumers.

There are those who will say that we do not go far enough, that we should have scrapped the system altogether and started all over again. I think that would be a mistake. Instead, we've crafted reforms to pinpoint the structural weaknesses that allowed for this crisis and to make sure that these problems are dealt with so that we're preventing crises in the future.

There are also those who say that we are going too far. But the events of the past few years offer ample testimony for the need to make significant changes. The absence of a working regulatory regime over many parts of the financial system -- and over the system as a whole -- led us to near catastrophe. We shouldn't forget that. We don't want to stifle innovation. But I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealing, we will actually promote a more vibrant market. This principle is at the heart of the changes we're proposing, so let me list them for you.

First, we're proposing a set of reforms to require regulators to look not only at the safety and soundness of individual institutions, but also -- for the first time -- at the stability of the financial system as a whole.

One of the reasons this crisis could take place is that while many agencies and regulators were responsible for overseeing individual financial firms and their subsidiaries, no one was responsible for protecting the whole system from the kinds of risks that tied these firms to one another. Regulators were charged with seeing the trees, but not the forest. And even then, some firms that posed a so-called "systemic risk" were not regulated as strongly as others; they behaved like banks but chose to be regulated as insurance companies, or investment firms, or other entities that were under less scrutiny.

As a result, the failure of one firm threatened the viability of many others. The effect multiplied. There was no system in place that was prepared for this kind of outcome. And more importantly, no one has been charged with preventing it. We were facing one of the largest financial crises in history -- and those responsible for oversight were mostly caught off guard and without the authority needed to address the problem.

It's time for that to change. I am proposing that the Federal Reserve be granted new authority -- and accountability -- for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure. We'll also raise the standard to which these kinds of firms are held. If you can pose a great risk, that means you have a great responsibility. We will require these firms to meet stronger capital and liquidity requirements so that they're more resilient and less likely to fail.

And even as we place the authority to regulate these large firms in the hands of the Federal Reserve -- so that lines of responsibility and accountability are clear -- we will also create an oversight council to bring together regulators from across markets to coordinate and share information, to identify gaps in regulation, and to tackle issues that don't fit neatly into an organizational chart. We're going to bring everyone together to take a broader view -- and a longer view -- to solve problems in oversight before they can become crises.

As part of this effort we're proposing the creation of what's called "resolution authority" for large and interconnected financial firms so that we're not only putting in place safeguards to prevent the failure of these firms, but also a set of orderly procedures that will allow us to protect the economy if such a firm does in fact go underwater.

Think about this: If a bank fails, we have a process through the FDIC that protects depositors and maintains confidence in the banking system. This process was created during the Great Depression when the failure of one bank led to runs on other banks, which in turn threatened wider turmoil. And it works. Yet we don't have any effective system in place to contain the failure of an AIG, or the largest and most interconnected financial firms in our country.

And that's why, when this crisis began, crucial decisions about what would happen to some of the world's biggest companies -- companies employing tens of thousands of people and holding trillions of dollars in assets -- took place in emergency meetings in the middle of the night. And that's why we've had to rely on taxpayer dollars. We should not be forced to choose between allowing a company to fall into a rapid and chaotic dissolution, or to support the company with taxpayer money. That's an unacceptable choice. There's too much at stake, and we're going to change it.

Second, we're proposing a new and powerful agency charged with just one job: looking out for ordinary consumers. And this is essential, for this crisis was not just the result of decisions made by the mightiest of financial firms; it was also the result of decisions made by ordinary Americans to open credit cards and take out home loans and take on other financial obligations. We know that there were many who took out loans they knew they couldn't afford, but there were also millions of Americans who signed contracts they didn't always understand offered by lenders who didn't always tell the truth. Even today, folks sign up for mortgages or student loans or credit cards and face a bewildering array of incomprehensible options. Companies compete not by offering better products, but more complicated ones, with more fine print and more hidden terms.

So this new agency will change that, building on credit card reforms I signed into law a few weeks ago with the help of many of the members of Congress who are here today. This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want -- and actually understand. Consumers will be provided information that is simple, transparent, and accurate. You'll be able to compare products and see what's best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out -- those things will be a thing of the past. And enforcement will be the rule, not the exception.

For example, this agency will be empowered to set new rules for home mortgage lending, so that the bad practices that led to the home mortgage crisis will be stamped out. Mortgage brokers will be held to higher standards. Exotic mortgages that hide exploding costs will no longer be the norm. Home mortgage disclosures will be reasonable, clearly written, and concise. And we're going to level the playing field so that non-banks that offer home loans are held to the same standards as banks that offer similar services, so that lenders aren't competing to lower standards, but rather are competing to meet a higher bar on behalf of consumers.

The mission of this new agency must also be reflected in the work we do throughout the government. There are other agencies, like the Federal Trade Commission, charged with protecting consumers, and we must ensure that those agencies have the resources and the state-of-the-art tools to stop unfair and deceptive practices as well.

Third, we're proposing a series of changes designed to promote free and fair markets by closing gaps and overlaps in our regulatory system -- including gaps that exist not just within but between nations.

We've seen that structural deficiencies allow some companies to shop for the regulator of their choice -- and others, like hedge funds, to operate outside of the regulatory system altogether. We've seen the development of financial instruments, like many derivatives, that are so complex as to defy efforts to assess their actual value. And we've seen a system that allowed lenders to profit by providing loans to borrowers who would never repay, because the lender offloaded the loan and the consequences to somebody else.

And that's why, as part of these reforms, we will dismantle the Office of Thrift Supervision and close loopholes that have allowed important institutions to cherry-pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor. We'll raise capital requirements for all depository institutions. Hedge fund advisors will be required to register with the SEC.

We're also proposing comprehensive regulation of credit default swaps and other derivatives that have threatened the entire financial system. And we will require the originator of a loan to retain an economic interest in that loan, so that the lender -- and not just the holder of a security, for example -- has an interest in ensuring that a loan is actually paid back. By setting common-sense rules, these kinds of financial instruments can play a constructive, rather than destructive role.

Over the past two decades, we've seen time and again, cycles of precipitous booms and busts. In each case, millions of people have had their lives profoundly disrupted by developments in the financial system, most severely in our recent crisis. These aren't just numbers on a ledger. This is a child's chance to get an education. This is a family's ability to pay their bills or stay in their homes. This is the right of our seniors to retire with dignity and security and respect. These are American dreams, and we should not accept a system that consistently puts them in danger.

Financial institutions have an obligation to themselves and to the public to manage risks carefully. And as President, I have a responsibility to ensure that our financial system works for the economy as a whole.

There's always been a tension between those who place their faith in the invisible hand of the marketplace and those who place more trust in the guiding hand of the government -- and that tension isn't a bad thing. It gives rise to healthy debates and creates a dynamism that makes it possible for us to adapt and grow. For we know that markets are not an unalloyed force for either good or for ill. In many ways, our financial system reflects us. In the aggregate of countless independent decisions, we see the potential for creativity -- and the potential for abuse. We see the capacity for innovations that make our economy stronger -- and for innovations that exploit our economy's weaknesses.

We are called upon to put in place those reforms that allow our best qualities to flourish -- while keeping those worst traits in check. We're called upon to recognize that the free market is the most powerful generative force for our prosperity -- but it is not a free license to ignore the consequences of our actions.

This is a difficult time for our nation. But from this period of challenge, we can once again tap those values and ideals that have allowed us to lead the global economy, and will allow us to lead once again. That's how we'll help more Americans live their own dreams. That's why these reforms are so important. And I look forward to working with leaders in Congress and all of you to see these proposals put to work so that we can overcome this crisis and build a lasting foundation for prosperity.

Thank you very much, everybody. Thank you. (Applause.)

Why the U.S. Should Encourage FDI

2009-06-27T10:33:00.000-07:00

Last year, foreign investors set new records for their acquisition activity in the United States. And 2008 began with nearly daily stories of American financial executives courting foreign direct investors, particularly sovereign wealth funds, for new investments. Calls for increased oversight of such investments have already begun to percolate. Are these concerns warranted? If history is any guide, foreign investors in the United States have more to worry about than domestic regulators do. The singular fact about foreign direct investors in the United States is just how unsuccessful they are. They appear to systematically earn low returns on their investments in American corporate assets.

"The singular fact about foreign direct investors in the United States is just how unsuccessful they are."

The returns on American inbound foreign direct investment (FDI) are highly distinctive for two reasons. First, they are systematically lower than the returns of American outbound FDI. By way of example, the data indicate that GE earns a much higher return on overseas activities than Siemens does in the United States. Indeed, over the last 25 years, the accounting rate of return on inbound FDI to the United States has averaged 4.3 percent while the average for outbound FDI from the United States has been 12.1 percent.

Second, this remarkable return differential doesn't reflect a more general differential in investment returns. During this same period, the equity markets in the United States outperformed the rest of the world in the majority of years. As such, there is something particularly bad about the return experience of foreign investors taking a controlling position in American companies. In short, America is a beautiful country for stock portfolio investors and a very difficult one for direct investors.

Tilted playing field

Why is it so difficult to make money as a direct investor in the United States? Indeed, much of the rhetoric on investing environments argues that the major destinations for U.S. outbound FDI—the developed markets of Europe and Japan and the emerging markets of China and India—are filled with capital controls and ownership restrictions. How can the United States as a destination end up being so much less attractive despite the relative absence of this usual litany of investment obstacles?

Part of the answer may lie precisely in how these obstacles tilt the playing field between local firms and multinational firms. In a series of papers, [HBS associate professor] C. Fritz Foley, [University of Michigan professor] James R. Hines Jr., and I have shown that distorted environments are precisely where multinational firms have an advantage relative to local firms. In countries with weak capital markets and burdensome regulatory regimes, multinational firms can use their internal capital and product markets to access global resources while local firms can't. In effect, these distorted environments burden local firms, create opportunities for institutional arbitrage for multinational firms, and can lead to a successful set of foreign activities for multinational firms.

The United States, in contrast, creates few such opportunities for low-hanging fruit for foreign multinational firms relative to local firms. As such, the conditions that may underpin the profitable experience of U.S. firms as they expand abroad are not there for foreign firms investing in the United States. More generally, the presence of highly competitive local firms in the United States undercuts efforts by foreign multinationals that don't have truly differentiated capabilities. Simply replicating strategies that were successful at home is likely to be insufficient in the United States.

The real lesson of this experience is that investing directly in corporate assets is a very different experience, and creates a distinct return profile, than investing as a portfolio investor. In the absence of a unique capability that is a source of value-added expertise on some dimension, making money on direct investing is very difficult. In a relatively unfettered market like the United States, the presence of such a capability is all the more important, and recent experience suggests that direct foreign investors on average do not possess that advantage when entering the United States.

For sovereign wealth funds eager to deploy capital, the experience of the last two decades of investing in the United States is a cautionary tale. While firms and countries can be tempted to think that they have a unique capability that will allow them to generate returns through direct investment, most such arguments are founded on hubris rather than on solid advantages or capabilities.

Indeed, Norway, the country with the most experience in investing national wealth, has developed an endowment model that eschews direct investments. Instead, the Norwegians have evolved into a world-class portfolio investor that predominantly makes asset allocation decisions.

For U.S. regulators, these patterns do not recommend increasing barriers to foreign investment. Indeed, America should be rolling out the welcome mat and thanking foreign direct investors for investments that appear to be, on average, transferring wealth from abroad to the United States.

Michael Jackson's Estate Has Piles of Assets but Loads of Debt

2009-06-26T22:57:00.000-07:00

As Hollywood reacted with sadness and shock to the death of Michael Jackson, Sony executives in New York were on the phone all night Thursday with advisers to Mr. Jackson trying to understand the financial morass the pop star is leaving behind.

“It’s all a mess,” said one executive involved in Mr. Jackson’s financial affairs who spoke on the condition of anonymity out of respect for the entertainer’s family. “No one really knows what is going on, but these are early days.”

Mr. Jackson’s business life, like his public life, was a perplexing mass of contradictions. Unlike many performers, he was a keen negotiator and shrewd investor — in 1985 he pulled off one of the great deals in music business history when he bought the publishing rights to the Beatles for $47.5 million. Today it is part of a larger collection of songs worth more than $1 billion, and owned in partnership with Sony.

But his personal finances, at least in recent years, were perpetually in tatters, as he burned through millions of dollars to maintain his Neverland ranch, go on art-buying sprees and indulge in whimsies like traveling with a pet chimpanzee named Bubbles. And he burned through financial advisers almost as swiftly, with a revolving door of characters coming in and out of his life.

“Michael never thought his personal finances were out of control,” said Alvin Malnik, a former adviser to Mr. Jackson who is the godfather of Prince Michael II, the youngest of his three children. “He never kept track of what he was spending. He would indiscriminately charter jets. He would buy paintings for $1.5 million. You couldn’t do that every other week and expect your books to balance.”

The big question now is what happens to his assets. So far, that is unclear even to Mr. Jackson’s closest representatives, several of whom were hired only weeks ago, in Mr. Jackson’s latest round of managerial housecleaning. They say it could take years to sort through the financial and legal mess left after the singer’s death, not to mention millions of dollars worth of tickets sold for a series of 50 concerts Mr. Jackson had planned in London.

Mr. Malnik, for example, said that in 2004 he agreed to be the executor of Mr. Jackson’s estate. “I said yes, but I never inquired further, and I don’t know what’s happened since then,” he said. Mr. Malnik said there was still a chance that he was an executor, but had not heard anything since the death. Other advisers said that Mr. Jackson left behind at least two wills.

It is also unclear how much would be left for any heirs. It has been estimated that Mr. Jackson earned about $700 million as a performer and songwriter from the 1980s on, much of it spent. And his debts have been estimated at $400 million to $500 million.

His single biggest asset is a 50 percent share in Sony/ATV Music Publishing — which owns the rights to more than 200 Beatles songs, along with thousands of others — valued at more than $500 million, but he has about $300 million of debt against it held by Barclays, Mr. Jackson’s biggest creditor. He also owns his own publishing catalog, called Mijac, which is estimated to be worth $50 million to $100 million, and has an unknown amount of debt attached.

In late 2005, while Mr. Jackson was living in the Middle East after being acquitted of child molestation, his finances were particularly precarious. Sony then negotiated a deal with the singer that resulted in Mr. Jackson paying a lower interest rate on his debt in return for Sony gaining more authority to operate Sony/ATV and the option to buy half of Mr. Jackson’s share.

One question Sony executives have now is with whom they will negotiate. Mr. Jackson’s share is owned by a trust that he set up around the time of his molestation trial in 2005; people close to the situation say that his mother, Katherine, now controls it.

Mr. Jackson’s investment in song catalogs was no accident. Contrary to his popular image as a naïf, he took an active interest in the wider music business, associates say, with a shrewdness he inherited from his father, who shaped the careers of Michael and his brothers.

Martin Bandier, chairman and chief executive of Sony/ATV, said that Michael Jackson “had a keen sense of the value of music copyrights” and was a highly effective dealmaker.

“There was nobody better to close a deal,” Mr. Bandier said. “Michael called Jerry Leiber and Mike Stoller a few years back to tell them that he wanted to buy their copyrights and that they would have a safe home at Sony/ATV.”

Mr. Jackson also negotiated a favorable royalty rate with Sony for his recordings; according to some estimates, he earned at least $300 million in record royalties since the early 1980s. And since Sony’s rights to his master recordings are set to expire in the next several years and would become owned by Mr. Jackson, according to one of his advisers, his estate would stand to earn even more from sales and from the licensing of music to film, television and any other media.

On the other side of the ledger, however, was Mr. Jackson’s biggest liability: his exorbitant lifestyle. His large Neverland estate in California, which contained a zoo and an amusement park and at its peak had as many as 150 employees, cost millions of dollars each year to maintain. He nearly lost it last year when he defaulted on a $24.5 million loan.

Neverland was saved by a real estate company, Colony Capital, and according to court papers, Mr. Jackson then contracted for an auction of memorabilia from the ranch. About 2,000 items — like statues of E. T. and 13 of Mr. Jackson’s trademark glittering gloves — were to be put up for sale in April 2009, and the value of the auction was estimated at up to $20 million.

But with only weeks before the sale was to begin, Mr. Jackson sued to prevent it, saying that he had never been given an opportunity to review the contents. In a settlement, the auctioneer, Julien’s Auctions of Los Angeles, returned all of the property to him.

Another big question left by his death is his deal with AEG Live, the big concert promoter behind the London shows. The company invested at least $20 million to produce the concerts and might have to refund more than $80 million in tickets, according to industry estimates. Randy Phillips, the chief executive of AEG Live, said in a telephone interview on Friday that that the concerts were insured, but that the company needed to wait for the coroner’s report before filing a claim.

“Over the weekend we’re all going to be working late trying to figure out what the basis of our insurance claim might be,” Mr. Phillips said. “It’s very, very critical for us that we get the toxicology report from the coroner so we know what the cause of death is.”

Perversely, the fortunes of Mr. Jackson’s estate could benefit from his death. First, there will undoubtedly be an influx of revenue from music sales after the entertainer’s death. Together, the sales from his own recordings, plus income from Sony/ATV and his own catalog would be worth $30 million a year, according to one of his business associates. And the amounts he spent on his lifestyle would be gone.

The winners in all of this could be his family.

“I’m of the view that Michael’s passing, as untimely as it is, is the one opportunity his family and his children have to preserve his asset legacy,” said Charles Koppelman, who is chairman of Martha Stewart Living Omnimedia, and a former music industry executive who several years ago was a financial adviser to Mr. Jackson. “They will earn a tremendous amount of money over the next 12 to 18 months given the outpouring, and he won’t be spending.”

Bill Werde, the editorial director of Billboard, compared Mr. Jackson with Elvis Presley as a star whose very likeness would remain a valuable asset for decades to come.

“If this estate finds smart management, his image and likeness is going to be very easy to exploit,” he said. “There’s a fan base that is hungry for seemingly as much Michael as they can ever get.”

Just how much the outside world learns about the details of Mr. Jackson’s finances may well turn on whether he set up a trust intended to distribute his assets privately, limiting the role of a court. If there is not enough money left behind to satisfy his creditors, the ensuing battle could make the details public, according to lawyers interviewed on Friday.

“If there’s going to be litigation by creditors against these assets, that’s what would happen,” said Andrew S. Garb, a lawyer at Loeb & Loeb in Santa Monica, Calif. Creditors could essentially demand an accounting of the assets left in the trust by Mr. Jackson to satisfy claims, he said.

If instead Mr. Jackson relied on a will, and advisers think there are at least two, then personal financial information would be revealed through probate proceedings. (In the case of multiple wills, generally the most recent valid document prevails.)

Regardless of how Mr. Jackson structured his financial affairs, someone could try to challenge the validity of the documents. For example, someone might argue that he signed a document under duress or that he did not understand the import of signing.

“If, for example, he left everything to some unrelated person and did not provide for his children, that may be another basis to indicate he didn’t know what he was doing,” said Lawrence Heller, a partner in the Los Angeles office of the law firm Bryan Cave.

Mr. Koppelman says he believes the delays, even with the costs of litigation, could ultimately benefit the estate. “I think it’s going to be so confusing that they’ll be able to pile up a lot of money. There’s a real opportunity to save his financial empire.”

“He was a fantastic visionary on the business front,” Mr. Koppelman added. “He just couldn’t deal with his personal finances.”

NY Times

Breaking News in Finance:Live London shows now financial disaster after Michael Jackson's death

2009-06-26T22:51:00.000-07:00

It was a huge risk, with a potentially huge reward:Michael Jackson's 50 sold-out London shows.

And now it's a huge financial disaster.

Concert promoter AEG LIVE must return $85 million in ticket sales for the eerily billed "This Is It" dates, the first Jackson live shows in a dozen years.

It's already spent more than $20 million on production costs for the shows, billed as the most expensive arena gigs ever.

AEG is out millions more in lost merchandise sales, and perhaps another $10 million in upfront money paid to Jackson.

AEG won't say if insurance covered its outlay for the mega-deal with the notoriously unpredictable Jackson. The first date was set for July 13.

"We're still dealing with all our financial people," said AEG spokesman Michael Roth. "There are a lot of numbers out there, everybody has it wrong so far. It's too early."

How You Can Become Wealthy

2009-06-26T09:20:00.000-07:00

Robin and his wife live at home with their 2 children. They own a 3 bedroom house in a middle class neighborhood and try to live within their means. Robin works full time in the Printing
Industry, while his wife is in charge of the home and looking after the children.

They've accumulated some credit card debt and have 2 years left on a car loan. They try to stay out of debt as much as possible and together they've managed to contribute a total of $32,000 to
their own Retirement Fund. It is kept in term deposits receiving 5% interest annually.

Two years prior, the couple bought an older house that they fixed-up and rent out for $850 a month. After paying the mortgage and taxes $300 is left over each month. This goes into
their savings account each month.

At Christmas, the family bought themselves a new computer and decided to start a home-based business. Things started out fairly slowly but after 8 months they were receiving a steady
check of $400 a month which also goes into their savings account. This part-time business will continue to grow with the effort they dedicate to it.

This business also offers them some very lucrative tax savings. By taking advantage of these Tax Strategies they are able to save an additional $300 a month on tax that was normally
deducted from Robin's paycheck at work. This monthly income is also added to the couple's savings.

Robin has just begun writing an E-book about his "production expertise" at work. His plan is to market this book on the internet for profit Every Sunday the couple takes a drive to stay familiar with the Real Estate market in their area. They're looking for another property, a "handyman's special" to fix-up and rent out. They have saved enough for a down payment and their credit with the bank is well established.

The family's total monthly expenses are $2000. Now, here's the question:

Does Robin's family have Wealth yet?
To answer this question properly you first have to understand exactly what "wealth" means.You achieve wealth when: *Your Passive Income is the same or greater than your Expenses.* So
what does this mean?

First, what is Passive Income?

Passive Income is money that you are paid over and over again for work that you only do once. (This excludes using a gun or finding cash on the street) Some examples of this would be
royalties for writing a book or a song, commissions that you receive for sales that others make and interest from bank savings or dividends on stocks/options that you own.

Second, what Expenses are we talking about? This one's a little easier to understand. Expenses are the total amount it takes to run your household and your life. This includes, rent, mortgage
payments, car insurance, food, credit card and loan payments, ???

Let's look at Robin's family a little closer???? Does Robin have any Passive Income? Yes he does. Robin's salary is not considered Passive Income. That's because he has to work 40
hours a week just to get the basic amount. If Robin doesn't go to work then he doesn't get paid. His overtime also doesn't count as Passive Income.

The interest from their Retirement Fund does though. It's paid to him month after month as long as it's left in that account.
So, $32,000 at 5% is $1600 a year. Divided by 12 months equals $133 a month in interest. Ok?..what else?

After the mortgage and expenses are paid with the rent money they receive on their rental property they are left with $300 every month. This is Passive Income. Just as long as the tenant
stays and pays his monthly rent.

How bout that $400 from the home-based business and the Tax savings. Is this Passive Income? Well, Robin's wife made sure that she chose a company where she could sign new business accounts and get paid commissions on those accounts over and over again. They've made a 5 year commitment to build this business part-time. So yes, both the $400 and the $300 in Tax Savings would apply as Passive Income. Let's add up Robin's
total Passive Income.

Interest $166.00 Rental Income $300.00 Home Based Business$400.00 Tax Savings $300.00 Total $1166.00 Not including Robin's salary from work, his family's Passive Income is $1166.00. Not bad. Every month this amount flows into the family's bank account, regardless of anything else they do.

We said that Robin's monthly expenses total $2000.00 a month. And we also said ????? You have Wealth when: *Your Passive Income is the same or greater than your Expenses.*

$2000 Expenses subtract $1166 Passive Income = $834 monthly balance needed to have Wealth.

Robin's Expenses are still more than their Passive Income so they're not wealthy just yet. But they're well over half-way there. With this kind of knowledge a family can know exactly
where to focus their financial attention.

Maybe when Robin writes that ebook he could get some sales and royalties from it. Also the new Real Estate and more work on their Home-based business would certainly help them to attain
more Passive Income. Once Robin's Passive Income is more than the family's Expenses then Robin could start to have much more freedom. He may even choose to quit his job and continue
developing his Passive Income streams.

Take a look at your own finances. What are your monthly expenses? Do you have more Passive Income than your Expenses? If you do Congratulations. You're Wealthy!!! If you don't. It's
time to get started and start adding Passive Income from other areas as soon as possible.

When you truly understand this principle, you'll be well on your way to becoming wealthy

Small Business Loan Basics

2009-06-26T09:16:00.001-07:00

Many people who wish to start their own business need an injection of financial capital at the beginning of a business; the main source of funding for entrepreneurs is business loans.

Let's take a look at what you should expect if you plan to apply for one.

First of all, you should know that most lenders have their doubts when it comes to lending money to a first-time business owner. You're considered a high business risk at this point, and you should go in to your loan negotiations armed with a few advantages. Of course, the ideal option is to run your business for a few years, even just out of your home, and turn a good profit before approaching a bank for a loan.

That shows that you have the ability to make money and that your business won't flop before the Open sign shows up on the door. But if this isn't possible, if you need the cash before you can begin at all, then chances are you will need to offer some type of collateral. Collateral can be anything from your car to your home and everything in between. Depending on the size of the loan, you may require some pretty hard assets for collateral. The lender is not interested in whether or not your business will make money, aside from the extent that will allow you to pay them back on time. They simply don't want to lose out on the loan, and so you'll have to find some way to back yourself up.

Backing up your loan with assets, if you have them, is a good route - provided you have enough confidence in your financial situation to ensure you are not going to lose your collateral. If you don't have enough assets to stand in for your loan, another option is to find a cosigner. Chances are you won't get as much cash as you would if you had the assets. But having someone with good credit who is willing to sign onto your loan and promise to pay if you don't can be the factor that gets you through the door. This is a good way for friends and family who believe in your business to help you get it off the ground, even if they don't have the money to loan you up front.

When it's time to borrow, do some comparison-shopping among banks and credit associations, and don't stop until you find the lowest interest rate possible. You're already gambling a lot here- minimize the amount you will have to pay back by doing your homework and choosing the company that offers you the best deal. If you can't get enough to cover your beginning business expenses, consider borrowing part of the cash from a friend or relative if you can, or even asking for investors, such as customers who believe in your business, to help out. Don't accept a high-rate, high-risk business loan just because it offers you the biggest amount.

The small business loan: The first step in a long chain of financial events. If you take the right step, it could be your leap into the business world.

A Guide For Newbies To Forex Trading

2009-06-24T20:58:00.000-07:00

The main function of the foreign exchange market is to support the trading of assorted global currencies. Although the majority of trades concern only a small number of currencies, including the U.S. Dollar, Yen, Euro, Swiss Franc, Pound Sterling, Australian Dollar, and Canadian Dollar, many other different types of currency are exchanged on a smaller scale. Over 90% of all exchanges on the forex markets involve the U.S. Dollar.

The forex market is, despite the popular impression, a composite of several contrasting markets, each of which sustains its own rules and regulations, with no one centred market in which all currency trading takes place. The major markets, the U.S., London, and Tokyo, open during different hours because of the different time zones. When the New York market opens, and while the European markets are still operating, is when trading is heaviest and nearly two thirds of the trading action happens during this convergence.

An individual exchange rate for a given currency does not subsist since there is no centred market. The bid and ask rates for a currency whilst normally reasonably close to each other, can, because of the over-the-counter (OTC) nature of the markets, deviate among dissimilar geographic markets and market makers.

Three letters express an international currency code for every currency and because the price of a currency must be applied in reference to another currency, it is displayed in the form XXX/YYY. The price of the British Pound in U.S. Dollars is recorded as GBP/USD, for instance. Acknowledged as the base currency, and the securest currency when the pair was made, is the first in the pair while the other currency is known as the counter currency. Presented in decimal form the real prices themselves are normally rounded to the nearest ten-thousandth of a unit.

Close to $2 trillion is exchanged each day in the forex market and it comprises the largest market in the world. With more than three quarters of deals surviving less than a week forex trading is, for the most part, a high-risk, short-term market. It is a highly fluid market, a good deal more so than equities, with the many traders worldwide and the very high daily turnover rate.

The top ten most active traders, however, are responsible for nearly three quarters of total dealing volume. The trading activity that happens within the interbank market, which is formed by international banks, provide the market with bid and ask prices that are far closer than retail customers can get.

In 1972, at the Chicago Mercantile Exchange, forex futures contracts, that are derivatives, were introduced and now make up around seven percent of the all foreign exchange volume.

Something else that has also taken hold and is another popular hedging strategy is foreign exchange options. Investors often buy these derivatives, which are contracts to purchase currency at a certain price on a future date, to counterbalance the decline in the price of a currency and any possible losses they might endure.

An additional means by which traders are capable of mitigating risk is through an exchange, in which both parties agree to switch one currency for another for a set period of time, and will then reverse the transaction after the period runs out.

Amongst financial markets the foreign exchange market is without competition and is a fast-paced, international currency exchange. International companies, prominent banks and financial organizations will ensure its huge popularity continues and its growth is guaranteed into the future.

Things To Do Immediately To Raise Your Credit Scores 50-100 Points

2009-06-22T11:06:00.000-07:00

Let me start off by saying that understanding how the three major credit bureaus arrive at your credit score is one of the most powerful pieces of knowledge you can have. Most likely this is not something that you have ever been taught. In fact, when it comes to your credit scores, the three major credit bureaus, Equifax, Experian, and Transunion, run sort of a "black box" operation.

To explain what makes up your credit score in as simple terms possible, this is how it works

Your Payment History (35%) Makes up the largest factor in determining your score. This is a picture of how you pay your bills.

Credit Utilization 30%: The percentage of available credit used. Keeping your account balances below 50% of the available credit limit will maximize your scores. For the purpose of this article, this is where we will find the most room to quickly increase your scores.

Credit History 15%: A more seasoned account carry more weight than one that was just opened.

Inquiries 10%: When you apply for credit, an inquiry is made to your credit. If you have too many inquiries, your score can be negatively effected.

Credit Types In Use 10%: The number of accounts in use, and the type of credit accounts. Finance company accounts are of the lowest value, and too many of them can cause a negative effect on your scores

Ok, now we have some powerfull knowledge. It's time to put it to use with 2 things we can do in about 30 minutes to increase our credit scores...

Increase your credit limits: This is actually easier than you think. It is truly remarkable what will be granted to you simply for the asking. What I want you to do is simply call each of your credit card companies and ask them to increase your credit limit. One technique you might also use is to tell them you are doing some financial house-cleaning and are considering getting rid of the card and using one with a higher limit and better interest rate, unless they can give you a better offer. In my experience, I have found this to be successfull 100% of the time.

Here is an example of what can be achieved. You have a credit card with a balance of $4,000 and a limit of $5,000. This means you are 80% utilized. After using the above technique, your limit is raised to $6,500. Now you are only 62% utilized. Immediately your credit scores have increased. Keep in mind that we want to ideally keep our balances at 50% or lower compared to our credit limits. This segways to the next tip.

Lowering your balances to add more points. Continued from the above example, you are now utilized at 62% on your credit card. What this means is that you still have room to further increase your scores. If you coule put just $750 on this credit card, you could bring the current balance to 50% of your new credit limit ($6,500 credit limit, with a balance of $3,250). You might be saying that you don't have $750 to put down on your credit card. Ok, you could stop right here, since you already increased your scores, and you can most likely get the limit raised for all your credit card accounts. However, if you are trying to buy a home, or a new car, you can potentially save thousands, or even tens of thousands in interest on that new loan and even get a lower monthly payment, just by paying a little down on your current accounts. When that results in higher credit scores, you may qualify for much better loan terms. In one case, a client paid down $450 on one credit card and was able to increase their scores so they could purchase their new home with zero down, instead of the $5,200 required down payment they were previously facing.

If you use these powerful techniques, you are sure to increase your scores quickly and easily. I have seen it work over and over. One recent client was able to increase their credit scores by 105 points after getting the credit limits raised on all three of their credit cards in less than 30 minutes. You have nothing to lose by making a couple calls.

Keep in mind that these techniques work best for those who have a good credit history, and at least 3 open, established credit accounts. For those with more challenged credit or a negative credit history, a more aggressive approach and credit repair strategies may be more appropriate.

The Different Types Of Home Mortgage Loan

2009-06-21T06:05:00.000-07:00

If you are considering buying a home, then you may be a little confused by all of the terms you hear about home loans. After all, lenders just throw around words like fixed rate, balloon mortgages and adjustable rate mortgages without a thought. What follows are the three most common types of home loans. Study it, and determine which one would be right for you.

The first type of loan is the Fixed Rate Loan. If you are planning to buy a home and stay in it until you pay it off, then you will probably want a fixed rate home loan. With this type of loan, you will be assigned a fixed interest rate, and that rate will not change for the life of the loan. If interest rates do skyrocket, yours will remain the same. On the other hand, if they plummet, you will be paying a higher rate.

The second type is the adjustable rate mortgage or the ARM. This loan's interest rate basically goes up and down with the market so if the interest rate is low, so will yours; and if high, your home mortgage rate will, too. One disadvantage of this type is that the interest rate on a home mortgage loan affects the payments so you will never know what your monthly mortgage payments will be so this type won't be right for everyone.

Another reason to use an ARM as a home loan is if you are buying a home in a time when interest rates are on the decline. You can take out an ARM, and then have it changed to a fixed loan once the interest rates bottom out.

The balloon home loan is the third type of loan and with this type, for a fixed amount of time with a fixed interest rate, you will do monthly payments. But in this type, you are to owe an unpaid balance in one lump of sum at the end of the payment schedule. So interest rates in this type of loan are much lower than the other two previous types.

The only drawback of a balloon loan is at the end, you have to make a huge payment but if you plan to keep the house for only a short period, this can just be the right loan for you.

By understanding the various types of home loans that are available to you, you will be better prepared to make a decision on choosing a home mortgage loan that is just perfect for you and your family.

To make good use of an ARM loan, individuals usually plan to sell a house quickly that they purchased for investment purposes so they may take advantage of the low interest rates especially if it looks as they may go lower.

Creating Budget 'Helps To Prepare For Major Purchasing'

2009-06-21T03:54:00.000-07:00

Those struggling to manage their finances should look to create a budget, one industry commentator has advised.

According to Mark Wapshott, spokesperson for St Edmundsbury Financial Services, people who find saving money difficult should plan their monthly income and outgoings. Consequently, he suggested that consumers will be able to get their finances in much better shape when it comes to purchasing "essential items that need saving for" such as holidays, house deposits and putting money into retirement funds. In addition, Mr Wapshott reported that Britons will be able to get a better grip on repaying any debts owed, ranging from credit cards and personal loans to overdrafts and mortgages.

Mr Wapshott said: "People struggling with savings should set up a standing order or direct debit to a savings plan (or just a deposit account to start with) and then prepare a budget and identify where they are currently spending. Most people will be surprised at how much they spend on just enjoying themselves. Then they just have to budget, budget, budget".

"Most people carry too much debt, including their mortgage and should repay as much as possible prior to making any saving decisions."

As a result, the St Edmundsbury representative claimed that consumers should have between three and six months' salary saved in an easily accessible account to help supplement their spending, particularly if they are the victim of unexpected circumstances such as redundancy or illness.

Overall, Mr Wapshott reported that those consumers over the age of 55 tend to be the best in the country when it comes to saving money for essential items. However, it is the 18 to 25-year-old age bracket that were said have the greatest difficulties setting cash aside to make large purchases, which in turn could well see them at greater risk of having large amounts of debt to pay back.

He added that the "main reason" for why many consumers often find that they do not have money set aside when it comes to making large purchases "is that there are too many demands on limited income". The St Edmundsbury spokesperson also purported that "clients tend to spend for today and forget about tomorrow", with a number of people getting themselves into debt via credit cards and personal loans as a result of impulse spending. In addition, he stressed that financial education within schools is in need of improvement.

Another area which could well be putting financial strain on Britons is the festive period. Mr Wapshott claimed that consumers often tend to fund spending over Christmas "from salary not savings", which as a result may leave them with debt difficulties at the start of a new year.

Last month, a Citizens Advice spokesperson claimed that by introducing personal finance classes in secondary schools, more Britons could adopt a responsible attitude towards borrowing and debt. By developing awareness of products such as personal loans and overdrafts, the advisory service's representative suggested that many of the country's debt difficulties could be avoided as the majority of problems are currently caused by a shortfall in monetary understanding.