Money news

Best CD rates

admin — Sat, 25 Jun 2011 22:50:14 +0000

Are you looking for the best certificates of deposits? A certificate of deposit is a wonderful investment tool for new investors or people who look for one of the safest, risk-free investment opportunities. For this reasons it is like a magnet drawing beginners to invest in safety and profitability. CD rates are constantly changing, not only over time, but between different financial institutions. When shopping for the best rate, the investor should check a number of institutions to compare their offers.
Searching for the best CD can be time-consuming. You have to spend hours on end searching the Web, which is full of websites that claim they offer low interest rates on certificates of deposit. Not only credit unions have good rates on CDs, but also some banks and other financial institutions. The Best CD rates can be found at Aurora Bank, for example. They offer more personalized serve than other financial institutions, which gives them a competitive edge in the industry.

Contract for difference CDF

admin — Mon, 11 Apr 2011 08:38:51 +0000

A contract for difference (also called CFD) is a contract between the buyer and the seller, in which the buyer is obligated to pay to the seller the difference between the current value of an asset and its value at contract time if the value is higher. If the value is negative, the seller is obligated to pay the difference to the buyer.
CFDs allow investors to take advantage of prices moving up or down on underlying financial instruments. They are often used to speculate on financial markets. Contracts for difference are one of the world’s fastest-growing trading instruments.
There is no restriction on the price of a CFD, no time limit is placed on when this exchange happens and no restriction is placed on buying first or selling first.
CFDs give traders more flexibility and trading power.

Check out the world’s best CFD trading provider and learn more about CDFs.

Insolvencies fall in Scotland

admin — Thu, 10 Feb 2011 12:55:47 +0000

Statistics from the Insolvency Service have revealed how many people entered a form of insolvency – bankruptcy/sequestration, an IVA (Individual Voluntary Arrangement), a DRO (Debt Relief Order) or a Trust Deed – in the second quarter of the year.

This time, Scotland was the ‘odd one out’, with lower figures than we’ve been seeing recently.

In England and Wales, the number of people entering bankruptcy was down by nearly a fifth on the previous quarter, but numbers of IVAs and DROs were up significantly, both reaching a new high.

In Northern Ireland, there were more personal insolvencies than we’ve ever seen in a single quarter. Compared with the other parts of the UK, the actual numbers are still quite low, but the 636 people declared insolvent last quarter in Northern Ireland represented an increase of around 13% both on the same period last year and on the first quarter of this year. There were 273 IVAs – the most ever seen in the country in one quarter.

In Scotland, however, the total number of personal insolvencies – 5,378 – was down almost 15% on the same time period last year, when there were a record 6,294 insolvencies in Scotland. The number of bankruptcies/sequestrations was down over 15% on the second quarter of last year, while the number of people entering a Trust Deed dropped nearly 13% in that time.
Further Scottish debt advice and information can be found here.

Taking Advantage of Historically Low Interest Rates

admin — Thu, 10 Jun 2010 15:09:39 +0000

If you pay attention to any housing news, odds are you’ve heard how low home loan interest rates have become. In fact, many home mortgage rates are down to almost 4.5%, a historical low for mortgage interest rates. But while we all love to stay informed, what’s really important is how we can possibly benefit from these lowered interest rates.
Interest rates are depressed right now because the Federal Reserve Bank is lending at lower rates to retail banks where we are all customers. When retail banks can borrow at low rates, they can afford to lend at lower interest rates to the general public. Right now, foreclosures and unemployment are both problems that will significantly affect the recovery of housing. The banks are smart to keep interest rates low in order to promote more growth and activity in the housing market, and you can directly benefit from this by refinancing your current mortgage rates.

Refinancing into Lower Interest Rates

Refinancing into lower interest rates doesn’t have to be difficult, but you’ll have to educate yourself the right way to really make a refinance work. You should be aware that despite promises made by refinance experts, not all loans will qualify. If you are currently underwater on your loan or need other financial assistance, you’ll have a much better chance of refinancing through specialized lenders or government programs. You should also consider whether you will be saving money in real dollars.
Reducing your monthly mortgage payments may be a good strategy for the short term, but it’s not a good idea if you can’t really afford the house or would be spending the money you save on discretionary expenses. Keep in mind that you will have to pay points for the amount you refinance, which will cost you money up front. Only you can do the math on your home loan rates to see if the lowered monthly payments are worth the expense.
If you can take advantage of low interest rates, you could effectively reduce your minimum monthly payments and use the extra money for more pressing needs or to simply free up more money each month. Interest rates tend to fluctuate according to market conditions and other economic factors. Keeping up to date on the latest mortgage data will also give you a better indication if rates are expected to stay low or will soon increase.

The Good Debt vs Bad Debt Debate

admin — Thu, 27 May 2010 15:31:54 +0000

Is there such thing as establishing good debt? Well to be frank, no. You never want to owe people money, which is not usually a good idea. However that doesn’t mean that all forms of debt are the same level of bad. In fact, there are many kinds of debt that are less severe than others, the trick is trying to limit your debt to the kind that is going to do less damage on your bank account and your credit score. In the wild world of debt reduction you must always consider the long term effects of every purchase you make.

So what kinds of debt should you consider better than others? Well first of all, investments can be considered debt in some situations, but since they are investments you are probably expecting some sort of return from it in the long run. Money you spend on an education can be considered an investment because you are putting stock in your future even though you are burying yourself in debt right now. This is one of the reasons selecting the right degree is an important step, spending thousands of dollars on a degree you will not be using is foolish and a waste of time.

There is no doubt that getting into debt is almost always inevitable, but you need to try and find the least harmful form of debt possible. Reducing your debt is going to be one of the most important thing in your life until it is gone. This is why I continue to stress over and over that there is no form of debt you should covet or seek. All forms of debt are still debt, meaning you should do your best to avoid them.

Statistical Skeletons

admin — Sun, 28 Mar 2010 16:03:04 +0000

In order to fully understand VaR modeling it is necessary to get to grips with some fundamental statistical theory. These bare bones are fleshed out in the statistics primer which provides a more formal treatment. The way in which the data is distributed has an important bearing on the effectiveness of statistical methods to measure risks. Most VaR methods assume:

Normal distribution. That the data in the form of price changes of instruments has a normal distribution. A normal distribution is one that has a mean equal to its mode and median and is symmetric about the mean. The price changes may be expressed in absolute or percentage terms. Stable standard deviation of returns. That the variation of returns about the mean is stable and does not vary over time. The variation of returns is measured by the distribution’s standard deviation.
No serial correlation. That there is no serial correlation between returns. This is particularly important when extrapolating results for a single holding period to multiple holding periods.

Broker Fees Can Make You Broker

admin — Fri, 17 Jul 2009 17:50:24 +0000

If you’ve taken a look at your mutual fund statements recently, your heart is probably sinking along with your retirement plans. In tough times when more people rely on a payday advance to make ends meet, it pays to review these investments and figure out how to cut costs.

One of the easiest ways is to review the fees offered by different brokers and try to find one that doesn’t take too big a cut of your investments. Even thought the stock market is jittery, it doesn’t mean you should stop investing, however, pay attention to the fees and seek to find ways to reduce them.

A Multi-Polar rather than a Bi-Polar Investment World

admin — Sat, 27 Jun 2009 21:26:18 +0000

The results we have looked at so far with regard to this model assume a bi-polar world of money/cash or interest-bearing securities. Suppose however that our investment world is much more complex than that, involving equities, ﬁxed income securities, money market funds and money/cash. As a central bank cuts interest rates, the effect of this should be spread across these asset classes, which in turn react in different ways. If a central bank cuts interest rates, this should cause the investor to cut their portfolio weighting in money market funds and increase it in equities. In the short term, it should also cause an increase in the weighting for ﬁxed income securities as the capital gain should offset the lost income. Eventually, however, we should assume that it causes a reduction in the weighting for ﬁxed income securities. Finally, a rate cut should also lead to an increase in the weighting of money/cash. The reduction in money market funds and ﬁxed income securities should logically equal the sum of the increase in weighting in equities and money/cash. Since money/cash has to share its gains with equities, one should assume that the effect on money demand and therefore prices is reduced. Prices should rise less than they would otherwise do without the inﬂuence of equities. Consequently, as prices rise by less, the exchange rate should also depreciate by less than one would otherwise expect. In the same way, an interest rate increase should in this multi-polar investment world lead to less of an exchange rate appreciation than would be expected in a bi-polar investment world.

Theory vs. Practice

admin — Fri, 26 Jun 2009 21:25:34 +0000

However, as ever with exchange rate models, in an open economy with high capital mobility there remains the issue of delay in the transmission mechanism. Monetary models suggest that an increase in interest rates should lead to an increase in the investor’s weighting of interest-bearing securities and a corresponding reduction in the weighting of money/cash. This in turn should lead to a reduction in the demand for and therefore the price of goods, which according to PPP should result in an offsetting appreciation of the nominal exchange rate in order to restore equilibrium.
In practice, it may not take place exactly like this, at least in the short term. Say you are an investor in US Treasuries and the Federal Reserve tightens monetary policy by increasing interest rates. Depending on what were market expectations for Fed policy prior to that and also depending on where you were positioned on the US yield curve, you may be facing losses on your position due to the simple inverse relationship between bond yields and bond prices. Eventually, the incentive to hold interest-bearing securities will rise as interest rates rise, but only at the point where the investor believes interest rates have stopped rising. Until that time, the investor may in practice do the opposite of what the model suggests, by reducing their position in interest-bearing securities and reverting to money/cash in order to preserve capital. Theoretically, the investor will have more money/cash to spend on goods and this should push up prices, which in turn should lead to depreciation — rather than appreciation — of the exchange rate according to PPP to restore equilibrium.
Equally, the natural reaction of our US Treasury investor to a fall in interest rates is not necessarily to reduce the position, given that falling yields equal rising prices. Eventually, the reduction in income will not be offset by the capital gain, at which point the investor will indeed reduce the position in favour of other assets such as money/cash. Before that, they may well maintain or even increase the position in interest-bearing securities in order to reap the capital gains impact. Thus, a reduction of interest rates may at least initially lead to an actual reduction in money/cash within portfolios, in turn causing money demand and prices to fall and the currency to appreciate according to PPP to restore equilibrium.
I suspect that the very suggestion that a reduction in interest rates may lead to a reduction rather than an increase in money/cash may cause one or two economists reading this to foam at the mouth. The point is a serious one however, and it is this — the assumption that a change in monetary policy leads directly and automatically to a parallel change in the exchange rate is ﬂawed for the following reasons:
There may be a delay in the transmission mechanism
The initial exchange rate reaction may be the exact opposite of what standard models assume This is not in any way to reduce the importance of the original work. Rather, it is to bring it into the context of modern-day trading and investing conditions. Over the medium to long term, the Mundell–Fleming model of policy combinations is an invaluable guide to future exchange rate direction. In the short term, however, as I have tried to show, there may be delays and distortions, which at least put off the anticipated results.

Mundell–Fleming

admin — Fri, 26 Jun 2009 21:24:39 +0000

Thanks to the work of Robert Mundell and J. Marcus Fleming we know that certain combinations of monetary and ﬁscal policy create speciﬁc exchange rate conditions. The Mundell–Fleming model illustrates how speciﬁc combinations of monetary and ﬁscal policy changes can cause temporary changes in the balance of payments relative to an equilibrium level. The exchange rate therefore becomes the transmission mechanism by which equilibrium is restored to the balance of payments. It must be noted within this that the degree of capital mobility is crucially important.
In an economy with high capital mobility, suppose that a central bank decides to loosen monetary policy by cutting interest rates. One must assume that it does this because of weak growth conditions and benign inﬂation. As we saw before when looking at money demand, lowering interest rates reduces the incentive to hold interest-bearing securities, thus on a relative basis increasing the incentive to hold money or cash. This increase in money demand can be put to work buying goods and should reﬂect a future rise in national income and growth. The standard monetary model thinks of this in terms of rising demand causing price increases, which in turn causes the exchange rate to depreciate via the concept of PPP. Looking at it another way, rising domestic demand will cause rising import demand, which should mean deterioration in the trade balance. This in turn should eventually lead to depreciation in the exchange rate to allow the trade balance to revert back towards an equilibrium level. Another way of expressing the same thing is that lower interest rates cause capital outﬂows, which in turn cause depreciation in the exchange rate. Conversely, the basic assumption is that tighter monetary policy through higher interest rates should lead either to weaker domestic demand and a positive swing in the trade balance, or capital inﬂows, both of which should cause exchange rate appreciation.
On the ﬁscal side, much depends on whether trade or capital ﬂows dominate. On the one hand, looser ﬁscal policy, either through tax cuts or spending increases, should cause rising domestic demand, which in turn should cause deterioration in the trade balance. On the other hand, looser ﬁscal policy causes higher domestic interest rates, which in turn attract capital inﬂows. If trade ﬂows dominate, then the exchange rate should depreciate. However, if capital ﬂows dominate, then the exchange rate should appreciate.
Conversely, tighter ﬁscal policy should, according to Mundell–Fleming, lead to weaker domestic demand. On the trade ﬂow side, this should result in reduced import demand, causing a positive swing in the trade balance. On the capital ﬂow side, tighter ﬁscal policy should lead to lower interest rates, which in turn lead to capital outﬂows. Here, if trade ﬂows dominate, the exchange rate should appreciate, whereas if capital ﬂows dominate, the exchange rate should depreciate. In a world of perfect or at least high capital mobility, it is assumed that capital ﬂows dominate over trade ﬂows.
This model can be used for developed economies and the leading emerging market economies which have deregulated and liberalized barriers to trade and more importantly capital. The classic example of this used in text books is that of the US dollar in 1980–1985, when it appreciated dramatically as the Reagan administration’s military spending programme dramatically boosted the budget deﬁcit, while the Volcker-led Federal Reserve waged war against inﬂation (caused at least in part by those budget deﬁcits). The Plaza Accord of 1985, which helped to bring down the value of the US dollar, worked only because it was accompanied by signiﬁcant policy changes. In the 1993–1995 period, the US had a somewhat different problem to 1980–1985. While the new US government was moving towards the idea of balancing the budget, and thus tightening ﬁscal policy, the Federal Reserve was in 1993 keeping a relatively loose monetary policy. Indeed, one could argue that the Fed maintained an inappropriately loose monetary policy for much of 1994 up until its tightening of November 1994, before policy was seen as appropriately tight. Perhaps not coincidentally, in 1994 the US Treasury market had its worst year on record. In line with this, the US dollar weakened up until November of that year. The above model and examples assume either perfect or high capital mobility. However, not all economies are like this. While the move towards liberalization of trade and capital has broadly increased capital mobility, there remain speciﬁc countries in the emerging markets where capital mobility remains low (e.g. China). In this case, therefore, one must assume that trade ﬂows dominate over capital ﬂows.
The Mundell–Fleming model has done much to explain how combinations of monetary and ﬁscal policy should affect exchange rates. Indeed, their model is the standard for this kind of work.