analyze-your-stocks-and-double-your-profit
Analyze Your Stocks And Double Your Profit
Writen by Joseph Kenny
An investor buys a share of stock by resorting to various approaches that validate his investment by reaping rich profits. Before investing, however, it is necessary for a value investor to study the financials of a business, so that the stock he buys at the company’s intrinsic value promises a greater return at its liquidation value (the value of a company if all its assets were sold). A typical investor would buy growth stocks that have an upward trend, and seem likely to keep growing for a long time. Whereas, a technical investor (also known as a Quant) makes decisions based upon the psychology of the market and related factors, which involve much higher risk but may prove to be more profitable, or, can conversely result in much greater losses. The fundamental analysis of any business can depend on various factors: efficient market theory, value and growth, growth at a reasonable price and the quality of the business.
1. Efficient market theory pertains to stocks being always correctly priced, as all the requisite information is available on the current price.
2. The stock market sets up the price.
3. Analysts decide upon the value of a company based on the potential for its growth.
4. Price and value may not be equal, due to certain irrationalities governing the market.
Value investors need to rely on certain stringent rules governing the nature of the stock which adhere to the following criteria:
1. Earnings: company earnings are profits after taxes and interests.
2. Earnings per share (EPS): the amount of recorded income (on per share basis) available to the company to pay dividends to stockholders, or to reinvest in itself.
3. Price/Earnings Ratios (P/E) ratio (having a justified upper limit): If the company’s stock is trading at $80 and its EPS is $8 per share, it has a multiple, or P/E of 10. This means that investors could expect a 10% cash flow return:
$8/$80 = 1/10 = 1/(PE) = 0.10 = 10%
If it’s making $4 per share, it has a multiple of 20 (20 times $4 equals $80). In this case, an investor might receive a 5% return (in the same conditions);
$4/$80 = 1/20 = 1/(P/E) = 0.05 = 5%
However, a low P/E is not an untainted value indicator.
4. Price/Sales Ratio (PSR): is the same as a P/E ratio, except that the stocks are divided by sales per share instead of earnings per share.
5. Debt Ratio: percentage of debt a company has relative to the shareholder equity.
6. Dividend yields above a certain absolute limit.
7. Book value ratio: comparison of the market price against the book value of the stock per share.
8. Market capitalization value: Complete total value of a company’s outstanding shares (Market price per share
mortgages-and-loans-islamic-finance-avoids-interest
Mortgages and Loans: Islamic Finance Avoids Interest.
Writen by Michael Challiner
Two million Muslims in the UK face an ethical dilemma if they want a mortgage or a loan. Conventional mortgages and loans all require the payment of interest and “riba” as interest is called under Islamic law, is forbidden by the Koran.
British financial institutions are increasingly catering for Muslims’ specialist needs through a number of alternative arrangements that respects the teachings of the Koran. Here are just two of them:
Ijara with diminishing Musharaka - the mortgage alternative.
Ijara with diminishing Musharaka is an Islamic alternative to a conventional UK mortgage and has been adopted by several British banks and building societies.
In essence, Musharaka means partnership. Under this Islamic financial concept, the bank buys the house and legally becomes its owner. Then throughout the pre-agreed period, say 25 years, a monthly payment is made. Each monthly payment includes a charge for rent and a charge that buys a small proportion of the house itself. It’s form of variable shared equity plan with the proportion of the house being owned by the purchaser, steadily increasing as payments are made. Once the final payment has been made, the house is owned outright. Ijara
Here you tell the bank or financial institution what you want, for example a car, and they buy it. In return for a monthly payment that covers the cost of the bank’s capital, the bank then allows you to use the asset for an agreed period. In reality, it’s a form of leasing
Islamic finance is not widely available in the UK - so where can find it? Here are three suggestions:
Over the last few years Lloyds TSB has introduced Islamic products to 33 of its branches. Their spokesperson says, “It’s important for our customers to see that we are following the right procedures. We have a panel of four Islamic scholars who over-see the products. They offer guidance on Islamic law and audit the products”.
Another high street bank, HSBC, is developing a special range of Islamic products under the Amanah brand name. This range includes home finance plans, home insurance, commercial finance, and various current accounts and pensions. Hussam Sultan, the Amanah product manager says, “As a bank, we are not here to moralise or tell our customers that Amanah finance is the way to please Allah. We’re just here to provide them with a choice”.
The Islamic Bank of Britain has three branches in London, two in Birmingham and one each in Leicester and Manchester. They’re the only British bank specifically providing for Muslim customers and claim to be halal throughout their operations. All their financial products are approved by their Sharia’a Supervisory Committee - all Muslim scholars who are experts in all aspects of Islamic finance.
For your interest we show below, definitions of some words used widely in connection with Islamic finance.
A Glossary of selected Islamic words used in finance.
Amanah: Means trustworthiness, with associated aspects of faithfulness and honesty. As a central supplementary meaning, amanah also describes a business deal where one party keeps another’s funds or property in trust. This actually the most widely used and understood application of the term, having a long history of use in Islamic commercial law. It can also be used to describe different financial activities such as deposit taking, custody or goods on consignment.
Arbun: Means a down payment. It’s a non-refundable deposit paid to the seller by the buyer upon agreeing a sale contract together with an undertaking that the sale contract will be completed during a prearranged period.
Gharar: This means uncertainty. It’s one of three essential prohibitions in Islamic finance (the others being riba and maysir). Gharar is a sophisticated concept that encompasses certain types of uncertainty or contingency in a contract. The prohibition on gharar is often used as the grounds for criticism of conventional financial practices such as speculation, derivatives and short selling contracts.
Islamic financial services / Islamic banking / Islamic finance : Means financial services that meet the specific requirements of Islamic law or Shariah. Whilst designed to meet specific Muslim religious requirements, Islamic banking is not restricted to Muslims. Both the customers and the service providers can be non-Muslim as well as Muslim.
Ijara: Means an Islamic leasing agreement. Ijarah permits the financial institution to earn a profit by charging leasing rentals instead of lending money and earning interest. The ijarah concept is extended to hire and purchase agreements by Ijarah wa iqtinah.
Maysir: Means gambling. It’s another of three fundamental prohibitions in Islamic finance (the other two being riba and gharar). The prohibition of maysir is often used as the basis for criticism of standard financial practices such as conventional insurance, speculation and derivative contracts.
Mudarabah: A Mudarabah is a form of Investment partnership. Here, capital is provided by the investor (the Rab ul Mal) to another party (the Mudarib) in order to undertake a business or investment activity. Profits are then shared according to pre-arranged proportions but any loss on the investment is born exclusively by the investor and the mudarib then loses the expected income share.
Mudarib: The mudarib is the investment manager or entrepreneur in a mudarabah (see above). It is this managers responsibility to invest the investor’s money in a project or portfolio in exchange for a share of the profits. A mudarabah is essentially similar to a diversified pool of assets held in a conventional Discretionary Managed Investment Portfolio.
Murabaha: means purchase and resale. As opposed to lending money, the capital provider purchases the required asset or product (for which a loan would otherwise have been taken out) from a third party. The asset is then resold at a higher price to the capital user. By paying this higher price by instalments, the capital user effectively gets credit without paying interest. (Also see tawarruq the opposite of murabaha.)
Musharaka: This means profit and loss sharing. It’s a partnership where the profits are shared in pre-arranged proportions and any losses are shared in proportion to each partners’ capital or investment. In Musharakah, all the partners to the commercial undertaking contribute funds and have the right, but without the obligation, to exercise executive powers in that undertaking. It’s a similar concept to a conventional partnership and the holding of voting stock in a limited company. Musharakah is regarded as the purest form of Islamic financing.
Riba: This means interest. The legal concept extends beyond interest, but in simple terms, riba covers any return of money on money. It does not matter whether the interest is floating or floating, simple or compounded, or what the rate is. Riba is strictly prohibited under Islamic law..
Shariah: This is the Islamic law as disclosed in the Quran and through the example of Prophet Muhammad (PBUH). A Shariah product must meet all the requirements of Islamic law. To facilitate this, a Shariah board is usually appointed. This board or committee is usually comprised of Islamic scholars available to the organisation for guidance and supervision for the development of Shariah compliant products.
Shariah adviser: Means an independent professional, usually a classically trained Islamic legal scholar, appointed to advise an Islamic financial organisation on the compliance of its products and services with Islamic law, the Shariah. While some organisations consult individual Shariah advisers, most establish a committee of Shariah advisers (often known as a Shariah committee or Shariah board).
Shariah compliant: Means the activity that ensures that the requirements of the Shariah, or Islamic law are observed. The term is often used in the Islamic banking industry as a synonym for “Islamic”- for example, Shariah compliant financing or Shariah compliant investment.
Sukuk: This has similar characteristics to a conventional bond. The difference is that that they are asset backed and a sukuk represents the proportionate beneficial ownership in the underlying asset. The asset is then leased to the client to yield the profit on the sukuk.
Takaful: This is Islamic insurance. Takaful plans are designed to avoid the characteristics of conventional insurance (i.e. interest and gambling) that are so problematical for Muslims. They structure the arrangement as a charitable collective pool of funds based on the comcept of mutual assistance.
Tawarruq: When used in personal finance, a customer with a cash requirement buys something on credit on a deferred payment basis. That customer then immediately resells the item for cash to a third party. The customer thereby obtains cash without taking an interest-based loan. Tawarruq is the opposite to murabahah.
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what-is-invoice-factoring-and-invoice-discounting
What is Invoice Factoring and Invoice Discounting?
Writen by Henry Byers
The Romans were the first civilization to sell promissory notes at a discount, beginning the industry of factoring. America was built largely on the possibilities of factoring, when colonial businesses were factored by Europeans willing to invest cash in exchange for the promise of large returns, and government bonds also use the same principles applied by businesses when they engage in invoice factoring.
Invoice factoring is, at its simplest, the sale of the right to collect cash owed on your outstanding invoices. Most businesses engage in invoice factoring when they need cash up front quickly, or when they have customers that are slow to pay and don’t have the resources to build an accounts collections department. Though some companies are large and established enough to get accounts receivable financing through a regular bank, it can be handy to have access to invoice factoring companies as well.
Most businesses use invoice factoring to get fast cash. In the intense and fast paced business environment of today, ready cash can be invaluable. With the sale of your invoice futures, you can get the cash today you need to capture customers that will move your business forward.
Invoice factoring is not a loan; rather, it’s an outright sale of an asset. Another way of looking at it is as a cash advance: you give up a certain portion of the money you expect to receive in the future in exchange for ready cash today. While some businesses purchase invoices outright, others give you a down payment toward the invoice, paying you the balance less their fee when they receive payment from the customer. One of the best things about invoice factoring is that your credit has no bearing on whether you are approved; instead, your customer’s credit qualifies the invoice for factoring.
Many different industries take advantage of invoice factoring, including:
Because ready cash is so important in their business, industries that are heavily vested in human services and need to be able to meet payroll are among the best able to leverage invoice factoring. However, any business that generates at least ten thousand dollars in accounts receivable should be able to use invoice factoring, provided they’ve acquired creditworthy customers.
Other situations that might make invoice factoring a wise choice for you include:
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Henry Byers, Invoice Factoring advisor - focusing on Accounts Receivable Factoring and Factoring Financial Services |
credit-card-merchant-account-services
Credit Card Merchant Account Services
Writen by Shane Penrod
Did you know that credit card merchant account services could possibly multiply your sales receipts within a matter of weeks or months? Of course, other factors will play a role in the overall success of this strategy, but many company owners claim that the simple step of accepting credit card payments increased their income dramatically in a relatively short amount of time. That is why you need to know more about the benefits of credit card merchant services.
Basically, the premise of using credit card merchant account services works like this. You find a trusted lender with experience in merchant accounts. You might even want to check with customers at some of the lending institutions to see if they are satisfied with their merchant account services. You also can find online testimonials, although these may be biased when situated at the Websites of various lenders. You could visit chat rooms devoted to topics like this one that are sure to be discussed among entrepreneurs or start-up business owners. After getting objective feedback on several possible lenders, you can choose the one that seems like the best bet for your company.
It is a simple process to apply for credit card merchant account services. After reducing your possible underwriters to three or four after searching the Internet or checking with colleagues, it then becomes a matter of comparing and contrasting benefits with fees. Some companies are so well known that they can afford to charge more for their merchant account services. Others have recently added this option, so they might reduce, avoid, or omit certain fees in order to get your business. However, you may have to pay these fees after the first year or another type of trial period. Read all the terms carefully so that you understand how the account works, how much it costs, and what the potential glitches might be. Contact the lender with any questions or uncertainties before applying for an account. Then, when approved, you should feel confident that you have made a good investment.
Obtaining credit card merchant account services will let you accept credit card payments from your customers in a variety of ways. If you own or operate a store, for example, they can pay onsite with a credit card processor that you can plug into a wall outlet. But if you deliver goods or services to homes or businesses, you may want to take along a wireless credit card processor. Depending on how your customers like to pay and the level of involvement you want to pursue, you can add a pager and an e-check or debit processor right away or later on, depending on equipment cost and your need.
Being approved for a merchant services account will help you expand the way you do business. Many consumers prefer to pay by credit card, so accepting payments via this method will attract that segment of buyers and increase your volume of sales. Soon your profit margins should increase as well. Start thinking now about adding credit card merchant account services to your business.
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About The Author |
risk-aversion-and-incentive-fee
Risk Aversion and Incentive Fee
Writen by Amarendra Bhushan Dhiraj
Risk averse means being willing to pay money to avoid playing a risky game, even when the expected value of the game is in your favor.
Let’s find out how risk averse you are. If you are a student, I’m guessing that
serving-the-rural-community-with-affordable-financial-services
Serving the Rural Community with Affordable Financial Services
Writen by Peter Kopitz
In every society, access to financial services for every citizen is a vital part of sustained economic development. More emphasis should be given to the roots of society: the rural sectors and working-class. But most of the time, it is very hard to identify financial institutions that provide these needed services, which could improve the livelihoods and reduce risk. Most commercial financial institutions do not provide the proper services needed to support these sectors, as it is not viable to provide cheap services to these communities. They are also unable to provide their services directly to the target group because of high transaction costs coupled with small transaction size and the higher perceived risk of financing clients without collateral.
Therefore, may countries today use alternative approaches instead. The goal is to bring all people into the country’s financial system so that they will have continuous and permanent access to affordable financial services.
There are several categories of financial providers
1) Formal Financial Institution: Professional entities such as licensed banks. Problems: The small profits that can be earned may not compensate for the significant cost and effort involved in tailoring products and delivery systems, especially low-income people. Nevertheless, banks interested in this niche have successfully created a separate unit within the bank, or established a separate affiliated company before.
2) Informal Providers: Small member-managed entities that are not licensed.
3) Semi-Formal Institutions: NGO, small financial cooperatives, and community-based financial organizations
a) Cooperative Financial Institutions (Cooperative banks, credit unions to small village based cooperative entities)
b) Microfinance Non-Governmental Organizations
c) Community Based Financial Organizations (village savings, loan associations, savings and credit associations, self-help groups)
d) Traditional village-based providers (money lenders, small shops and input suppliers who provide goods on credit, and informal savings and credit groups)
The formal financial institutions approach focuses on building strong, stable financial systems that serve the entire population. This is the preferred approach when there are Labor banks, microfinance institutions, and financial cooperative/ credit union networks that are interested in broadening their outreach to the low-income society. The community-based institutions approach focuses on building strong informal or semi-formal community financial institutions, and then linking them with the formal financial sector.
The Purpose of Microfinance:
Microfinance is the provision of financial services, including savings, credit, insurance and payment services, to low income people. Typically, low-income people, especially those living in rural areas, have been unable to obtain quality services at a reasonable price from the formal financial sector. Microfinance is best supported through financial sector programs, however, in many countries where social funds operate there are no financial sector programs with a strong emphasis on access to finance issues, nor are there many viable microfinance institutions.
The Purpose of Social Funds:
Social funds are demand-driven mechanisms that channel resources to the poor and support subprojects that respond directly to the priority needs of the low-income population. They have been used in a growing number of countries to alleviate the social and economic effects of economic crises, cushion the impact of adjustment programs, generate short-term employment, and finance small-scale investments in poor communities. Access to micro-credit is not sufficient, the poor also need access to savings, insurance and payment services. Several wide-scale studies have been conducted on identifying lessons, best practices, and potential pitfalls; they include Panama, Yemen, and Eritrea.
Example Bosnia and Herzegovin:
The overall aim was to jumpstart the process of establishing a strong microfinance sector so as to help raise incomes, create jobs, and develop the smallest businesses. To provide access to credit to the economically disadvantaged, specifically low-income micro-entrepreneurs who had no access to credit from the commercial banking sector.
Problems in the past:
Government policy is oriented more towards creating employment and improving income in response to a crisis than toward long-term objectives. As such, social fund activities were not geared towards strengthening or reforming the microfinance sector, but rather towards using existing microfinance programs as channels for expanding employment. Further problems range from governments and donors using these organizations to channel cheap credit to rural populations to mismanagement of funds.
The Purpose of Credit Unions:
A credit union is a community based financial institution with representation from all socioeconomic levels. Main purposes are the economic, social, and political promotion of democracy and securing of financial stability, and to provide competitive and quality financial services responsive to the needs of its members to improve their livelihood. All credit unions operate within a common bond, such as employment- all members must work for the same group of employers or industry or in the same occupation. Credit unions are for service rather than for profits.
What is the right approach?
Consulting with communities to identify the demand for and supply of financial services among the working-class and rural areas to be covered. What financial services are provided, by whom, and how? What are the gaps in coverage, in terms of types of customers served, types of services provided, and geographical reach? Consider ownership structure, governance and management structure, financial products, customer base, ability to cover costs and existing relationships with professional financial services intermediaries
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Peter Kopitz is currently living in Bangkok, Thailand after graduating with Honors from the University Of Chicago Graduate School Of Business with a Masters Degree in Business Administration. He is actively involved in researching economic and political development in Thailand, focusing primarily on property development, security analysis and investment banking. Hawaii Home Loans | Honolulu Realtor | Hawaii Rentals |
managing-your-finances-pays-off
Managing Your Finances Pays Off
Writen by Elizabeth Newberry
Almost everyone is in debt at some point in their lives. Being “in debt” doesn’t mean you aren’t properly managing your finances; sometimes being “in debt” simply means you’re currently paying off a loan you used to buy your new house, you’re currently paying off a loan you used to buy your vehicle, or you simply have credit cards that haven’t been completely paid off yet. These kinds of debts are pretty normal and don’t pose any real threat to your credit score unless you fail to pay them back.
On the other hand, many Americans are so far in debt that they can’t make regular payments to their creditors, if they’re able to make payments at all. This kind of deep debt can be caused by a plethora of situations; loss of job, incarceration, and a serious illness or injury of a family member are just a few examples. These kinds of examples also don’t mean people are mismanaging their finances; they just happened to be hit with some bad luck that can harm their credit scores.
At the same time, this kind of deep debt can be caused by the inability to properly manage finances. Sometimes people apply for, and use, more credit cards than they can pay for. Sometimes people spend more money on clothes and entertainment than they do on their bills. Whatever the reason, their finances are mismanaged, and their credit scores, too, are harmed.
Most people know that when their credit scores are poor, they’re going to have a hard time getting loans until they’ve built their credit up again; however, not everyone knows that credit scores also affect insurance policies. People with poor credit scores are viewed as being “high risk” and can have trouble getting an insurance policy, much less an affordable one.
Financially plan ahead for emergencies, and manage your finances in the meantime; your future insurance policies depend on it.
a-balancing-act-how-to-properly-organize-your-checkbook
A Balancing Act: How To Properly Organize Your Checkbook
Writen by Jakob Jelling
With all the things you have to remember to do on a regular basis, balancing your checkbook doesn’t always receive priority. But if you plan ahead and schedule some time for this important task, you will reap the financial rewards.
Before you begin make sure you have the following items on hand: checkbook, ledger book, ATM and deposit receipts, calculator and a pencil. The next step is to check your items. First, separate your returned checks and ATM withdrawal slips into two distinct piles. Then place your returned checks in numerical order and compare them to your ledger book by writing an “X” in the ledger beside every figure that matches a cancelled check.
The next step is to put your ATM withdrawal slips in chronological order (that is, according to date) and compare them to your ledger book by placing an “X” beside every figure that matches an ATM withdrawal amount. You can make final changes to your ledger by comparing your deposit receipts with your bank statement. Write an “X” by every figure in the ledger that matches with a deposit receipt. If you notice any discrepancies after carrying out this relatively simple procedure, you must notify your bank immediately in order to rectify the situation.
To calculate your balance, record you checkbook’s current balance either at the top of a piece of paper, or on the back of your statement. It is recommended you use the back of your statement if your bank provides a worksheet there for calculating your balance. Now, subtract amounts for uncleared deposits and bank fees, including monthly fees and those for bounced checks, and subtract from your calculated total. Then add any uncleared checks and interest you have earned to this new figure. Finally, compare the final figure to your bank statement.
If you discover at this point in time that your bank has unfairly charged you for something, get in contact with them as soon as possible. Also, if you notice any discrepancies the first time around, or can’t reconcile your final balance to the bank statement, you might want to double and triple-check your calculations.
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About The Author Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate. |
start-up-business-finance
Start Up Business Finance
Writen by Kristy Annely
For executing a project, implementing a scheme, or for undertaking an operation, there is a general need for finances to start and endeavor and to further develop it. Finances are the roots of every business activity. Every business decision, whether it relates to production, personnel or marketing, will have a financial implication. The final criterion for the selection of any alternative course is its financial viability.
The study of all the monetary operations of a business is generally termed business finance. Every business requires financing to carry out its activities. The business needs funds for acquiring assets, purchasing raw materials or merchandise, paying the workers, the suppliers and for meeting various other obligations. This requires planning, raising, controlling and administering of funds. All these activities can be termed start up business finance.
In simple terms, business finance refers to the management of money and monetary claims within an individual business firm. Corporations, the commonly used word for joint stock companies, are the major form of business organizations. The financial operations are more complex and require more attention.
A business concern makes use of many resources like men, money, machine, materials, methods, markets, etc. Exercising proper management of resources used is necessary to attain the objective of getting maximum benefit. So management of money or finance is imperative. Besides, the resources, money or finance is the most important, since it influences all other resources. So management of finances assumes as much significance as does an enterprise.
All information related to economic, commercial and industrial activities are termed financial information. It includes information at both micro and macro levels like population, employment, inflation, money supply, foreign trade, stock market details and performance of individual business units.
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Business Finance provides detailed information on Business Finance, Small Business Finance, Business To Business Finance, Business Finance Software and more. Business Finance is affiliated with Auto Financing. |
time-out
Time Out
Writen by A. Raymond Randall, Jr.
The Patriots earned their money when settling the Super Bowl challenge thanks to Adam Vinatieri’s kick through the goal posts. Just before that kick, the Carolina Panthers called time-out to unnerve Vinatieri and Kinchen, the stand in center. On Thursday, January 29, 2004, Greenspan and company suggested they might kick up short-term interest rates. Hinting a time out for interest rates unnerved investors.
Interest rate moves have subtle effects on income for many. Our family benefits from the presence of our children’s great grandmother, who begins her 91st year, likes football (”Oh, that poor Drew Bledsoe.”), but dislikes current interest rates. Clearly, her perspective includes long-term opinions on history, mores, and the economy. That “Jimmy Carter was the best President. CD’s (cerfificates of deposit) were 14% and 16% back then. Now they’re 1% and 2%…”, and then a few words about those Republicans. I try explaining the inflation quotient, but Nana just shakes her head and walks away. I just wanted to say, “Like it or not, low interest rates benefit an economy; high interest rates undermine economic growth”.
Since 1790, the long-term (30 year interest rate) has averaged about 5% with eight years when it exceeded 11% (a number of those years when Jimmy Carter served as President; please don’t tell Nana.). The current Fed Funds rate sits at 1%, a forty year low. Now, the Federal Reserve Bank (Fed.) quietly implies that interest rates may creep up.
“I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said” - Alan Greenspan (Speech to the Economic Club of New York, 1988)
This news pounded Wall Street stock and bond traders harder than the Patriot’s defensive line. Each index declined more than 1.3% , the 10-year Treasury note shot up sharply to 4.20%, and the dollar moved up against the Euro. What made this news unsettling? Back in August (2003), the Federal Open Market Committee (FOMC) said, “The committee believes that policy accommodation can be maintained for a considerable period”. Six months later, the FOMC chooses to be “patient” about interest rate moves.
Most economists believe the Fed will not adjust rates upward until 2005 (of course most sports analysts did not believe the Partriots would win the Super Bowl).
These factors seem to effect future Fed action:
Employment data showing strong job growth
Job Growth means an improving economy
Improving economy means inflationary pressures
Inflation prompts Fed action
Stock Market “exuberance” provokes Fed action
Mortgage rates and Treasury rates may linger around current rates due to this Fed hike suggestion
What does it mean? Well, it’s like watching Adam Vinatieri preparing a field goal kick with a tie game and 9 seconds left on the clock. NO, it’s not that tense! Interest rate moves acknowledge the Feds role when managing the economy, and consensus views acknowledge that current rates have found their forty year lows. Essentially, exuberance within the housing markets and the equity markets will find “patience” more healthy than “irrational exuberance” as the Fed warns.
“The Fact that our economical models at The Fed, the best in the world, have been wrong for fourteen straight quarters, does not mean they will not be right in the fifteenth quarter” - Alan Greenspan
Stay tuned, and be patient. A “time out” serves good economic purpose.
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About The Author Ray Randall serves clients as a registered investment advisor with his firm, Ethos Advisory Services, Essex, Massachusetts http://www.ethosadvisory.com. He has wide experience within the financial services industry, writes a weekly newsletter for Ethos Advisory Services, and coordinates the developments at Echievements . Ray holds a Masters Degree from Gordon-Conwell Theological Seminary, Hamilton, MA. You may email him or call (877-895-3756). |
