Connect with us

Invest for Quick Return

How to Invest: The Fears of Bond Buying Part 1

Editorial Staff

Published

on

Which type of bond works for you?

There are bonds out there where the issuer has the right at any time to pre-pay. This means it’s callable before its due date. By that, let’s say the interest rate is 10% and rates drop to 5% now there is an issuer paying 10% on a bond and they decide to refinance the bond and pay off the 10% bond holders and take them out of the picture and then only pay 5% from then on. Most bonds are callable – if you have a bond that is out there with a high interest rate . . . they aren’t financing capable of refinancing or they are not a smart enough organization to know that’s what they have to do but either one is not a good indicator of that company if they have a callable bond that is going there. . . .

There was an interest rate environment at one point where us treasury bonds were paying 17 – 18%. Since they aren’t callable the people who bought those bonds got 17 – 18% for 30 years and the government could not do anything about it.

Understanding Risk

Interest Rate Risk

The risk that a bank’s earnings or capital may suffer due solely to fluctuating interest rates. A risk that an investment will lose from its value dependent upon change in interest rates. Simply put, it’s the higher the interest rate, the higher the risk. However, this does not necessarily meant that correlation implies causation even though it may intuitively seems so.

Interest Payment Date

Valuation of bonds at the current time is to determine the present value of all future payments on the bonds based on the moments of time when they will be made. Usually when assessing bonds it is believed that the interest rate equal to the market (current) rate of interest established securities market at the time of evaluation, and will remain constant until the bond matures. It was at this rate and discounting of future benefits provided at the time of assessment bonds. Current value of the coupon bond is equal to the sum of the present value of the nominal value paid at maturity, and the present value of the stream of coupon payments made at the end of each coupon period.

Inflation

The rising price of goods and services within an economy. Inflation causes a hike in prices and is a catalyst to the loss of purchasing power. As an economy becomes stronger, more people want to borrow money to invest and debt becomes expensive so interest rates increase with it. When interest rates rise, it is an indication that things are becoming more expensive and prices rise.

Position risk

The risk is for any one position (based on the percentage at any given moment). For example, the bank issues a floating rate loan. It is not known whether it will bring success to the bank. What is possible in order to prevent this risk provision on the balance sheet? First of all, you need to change the interest rates on deposits and align the interest on assets and liabilities of the bank balance. This way the bank can account for how fluctuations in float rate will impact it, moving forward. Though there’s no perfect way to avoid this type of risk it is yet another reminder of the need for preparation when dealing with bonds.

Structural risk

It is the risk for the whole balance of the bank caused by changes in the money market due to fluctuations in interest rates.

Therefore, interest rate risk affects both the profit derived from the interest and the balance of the bank as a whole. The reasons for the interest rate risk can be:
• Wrong choice of varieties of interest rate (fixed, fixed, floating, declining, etc.);
• Undercount in the loan agreement possible changes in interest rates;
• Changes in interest rate policy by the nation’s Central Bank;
• Establishment of a single cent for the entire period of the loan;
• Lack of developed bank interest rate policy strategy;
• Incorrect definition of the price of credit, i.e. the interest rate.

Are you Vulnerable
to Inflation Risk?

Read More about
Inflation, and it’s affects on your Personal Investments

 

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Invest By Amount

China’s Not Quite Craigslist IPO

This is the first Chinese tech original community offering in the U.S. since Alibaba’s runaway success stock sale in September. Jack Ma’s company owns a 20% stake and plan to buy additional shares as division of the IPO. 58.com (WUBA), a company often referred to as China’s Craigslist, is also purchasing a stake. Momo raised $216 million from the bring in sale and is now worth more than $3 billion.

Editorial Staff

Published

on

This is the first Chinese tech original community offering in the U.S. since Alibaba’s runaway success stock sale in September. Jack Ma’s company owns a 20% stake and plan to buy additional shares as division of the IPO. 58.com (WUBA), a company often referred to as China’s Craigslist, is also purchasing a stake. Momo raised $216 million from the bring in sale and is now worth more than $3 billion.

Momo said that it has only 60.2 million monthly vigorous users and 25.5 million standard daily users. And the company is still not money-making. Jonathan Xiaosong Zhang, chief monetary officer of Momo, said this is intentional. He said the company’s main concern right now is boosting its user base.

Chinese online gaming company Netease (NTES) issued a declaration Wednesday accusing Momo chairman and CEO Yan Tang, who had worked for Netease prior to starting Momo, of immoral behavior.

Momo responded to Netease in a Securities and Exchange Commission filing afterward Wednesday. The company quoted Tang as saying that the “allegations are malevolent and intends to vigorously defend him against them.”

There have also been manifold reports in Chinese media outlets about how Momo is being used by prostitutes to find clients.

My colleague Sophia Yan in Hong Kong lately downloaded Momo and told me that “it actually is like Tinder in that its location based tracking.” She added that you can in fact blacklist people you no longer desire to meet and that it was “very sex-focused.”

“Tinder is purely a dating app. We give confidence people to get bigger their social circle and safeguard their affairs,” he said.

Either way, investors didn’t seem too concerned Thursday. With the backing of Alibaba’s Jack Ma, it shouldn’t be a huge surprise.

But Momo needs to locate a way to boost its income and in fact earn a revenue one day if it wants to live up to its name and become a true impetus (or momo) darling on Wall Street.

 

Read More 216 Million IPO.

Continue Reading

Invest for Quick Return

RIP Radio Shack

Editorial Staff

Published

on

The atrocious results from RadioShack’s latest earnings highlight things featured by electronic retailers within the brick-and-mortar storefronts.

Margin compression is coming back which is not too much of a surprise and stocks area unit being priced consequently. Granted, RadioShack stock is presently solely mercantilism around $1.30 a share, however it will decline.

When trends area unit moving thus chop-chop against brick-and-mortar electronic retailers, I simply do not see however it may be a reputation that produces sense unless you’re taking part in a serious investor read.

There is an area for natural philosophy retailers; it’s simply not the present house they operate in. Best get understands what the longer term feels like and you see their electronic kiosks in airports round the country.


Best get rumored cheap earnings in its latest report; however it had been a lot of regarding cutting prices than increasing revenue. True, they need declared that they’re increasing their dividend which could be a positive for investors.

You think the net retailers like Amazon area unit destined to appear profit; one solely wants investigate the company’s recent quarterly report numbers to grasp that merely isn’t the case.

There can be a time in associate degree age of net transparency wherever on-line and brick-and-mortar margins will look plenty like grocery stores — skinny. Profit generations are going to be from generic product made cheaply in China like cases, lens covers, and screen protectors.

Compressing margins means that a lot of competitive costs. There’ll be a time in associate degree age of net transparency wherever on-line and brick-and-mortar margins will look plenty like grocery stores — skinny. Profit generation is going to be from generic product made cheaply in China like cases, lens covers, and screen protectors.

I expect RadioShack to fade away; it is time has come back and gone. Best get can still exist however become smaller presences in electronic merchandising.

RadioShack and, to a lesser extent, Best get are going to be casualties within the continued emergence of economical delivery of retail product to customers. The new economy is well afoot.
radioshack-17

Continue Reading

Invest for Quick Return

Abercrombie has become troubled over the past decade

Editorial Staff

Published

on

Abercrombie & Fitch Co. (ANF) Chief officer electro-acoustic transducer Jeffries, World Health Organization helped produce the definitive wardrobe for Nineteen Nineties teens before losing his standing as a tastemaker in recent years, is stepping down. Jeffries can retire now as corporate executive and a member of the board, the New Albany, Ohio-based company aforesaid these days during a statement.


The corporate conjointly suffered from broader call shopping-mall traffic, causative to eleven quarters of same-store sales declines and a 77 percent plunge in profit last year. Jeffries’s departure reflects a modification in strategy, aforesaid Simeon Siegel, a replacement York-based analyst at Nomura Holdings Iraqi National Congress. This is what individuals are looking forward to,” he said. “They’ve not been proud of the results. Therefore in theory, modification is nice.” The shares jumped 8 percent to $28.46 once the move was proclaimed, marking the most important one-day gain in additional than 9 months.

Abercrombie had already stripped Jeffries of his chairman role earlier this year. Whereas the temporal arrangement of the modification — but a month before Christmas — could appear abrupt, merchandise, discount and promoting plans for the season have long been set and therefore the corporate executive search won’t have an effect on execution in stores, he said. Photographer: archangel Loccisano/FilmMagic for Paul Wilmot Communication. Electro-acoustic transducer Jeffries, former chief officer of Abercrombie & Fitch Co. “The temporal arrangement could be a byproduct of an extended method over many months,” Martinez aforesaid in associate degree interview. “Succession designing within the council chamber these days is topic No. 1. Choice of a corporate executive is that the most significant duty a board has.”

Like several teen-apparel retailers, Abercrombie began troubled over the past decade, hurt by e-commerce competition and therefore the rise of fast-fashion chains like H&M. The company’s next corporate executive can got to facilitate the corporate adapt to the chop-chop dynamic trade, Martinez aforesaid. “It’s not like they’re getting to be aimless while not a corporate executive. As a part of the makeover, Hollister stores area unit additional bright lit and therefore the company has turned down the music. “He really was the whole,” aforesaid Terre Simpson, president of recent York-based executive-search firm Simpson Associates. “Now it’s virtually as if they have retail psychotherapy to see what the whole direction ought to be.”

Continue Reading
Advertisement

Facebook

Trending

Copyright © 2019 The Capitalist. his copyrighted material may not be republished without express permission. The information presented here is for general educational purposes only. MATERIAL CONNECTION DISCLOSURE: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this page and may receive commissions from purchases you make on subsequent web sites. You should not rely solely on information contained in this email to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.