Advertisements

Tag Archive: DEBT


Identifying the Bubble

The Indian markets benchmarks Sensex @29000 and Nifty moving towards 9000 mark, has the music begun, has blogthe party started? Many of the Market Bear analysts have already cautioned the move.  Too much information these days in market is extremely dangerous.

Has the bubble formation started how long it will last, to be honest I don’t know. Bottom line the long-term story remains bullish and if you are in quality stocks you will get returns.

So how do we identify the bubble problem, the problem with bubbles is that if you sell stocks before the bubble bursts, you look foolish, but you also look foolish if you sell stocks after the bubble bursts.

Stock market bubbles don’t grow out of thin air. They have a solid basis in reality, but reality as distorted by a misconception.” — George Soros  Continue reading

Advertisements

Leverage versus Debt

Few days back Macro business published an article on Leverage versus debt . Found interesting and thought of sharing my point of view on it.Google

Europe, Japan and America are printing money at an extraordinary rate. It has reduced the cost of debt to negligible levels. Usually this is explained with reference to what is happening in the conventional economy, but I suspect there may be another explanation. The systemic effects of the bizarre financial system that we have created, which is based on leverage. That leverage, which is thought of as debt, is not really what we mean by debt.

One of the features of the explosion of derivatives in the last 15 years, the rise of “meta money”, is that it was achieved through the creation of massive amounts of leverage. When Long Term Capital Management nearly destroyed the world financial system in 1998, it was done through a highly leveraged play on the rouble. LTCM was brought undone when Russia defaulted on its bonds.  Continue reading

Debt Vs Leverage

Generally, companies have two options when they wish to raise money. They can issue shares of stock, which are also

Leverage title screen

known as equities. Alternatively, they can issue bonds, which are also known as debt instruments. Leverage ratios tell investors how much debt a company has outstanding relative to the equity in their capital structure. I will write the above soon, lets discuss about Leverage and debt now.

Recently Sen. Rob Portman (R-Ohio) with Politico said, “Let’s use the debt limit, yes, as leverage.” As a practical matter, what he meant was, congressional Republicans should threaten to hurt Americans on purpose unless President Obama agrees to slash public investments. Because the White House won’t want such a catastrophe, Republicans will have “leverage” that Portman wants to see his party “use.”

In the finance world, debt and leverage are used interchangeably. Continue reading

All about Risk free Rate

English: Chart of the components of United Sta...

I have quarried in the past that risk free rate for doing the valuation of equities and got some interesting answers, wanted to share here.

This is holistic view where an average of 10 year debt YTM of five lowest ratio of govt debt to GDP:

The 10yr Treasury is still a decent risk free rate, but the U.S.’s sovereign debt load will soon match Greece‘s. It may already exceed that level if you count the unfunded liabilities of entitlement programs. Continue reading

1Today, I was really confused as what to write on. We have discussed various aspects, classes, faces & divisions of finance & banking sector But, today I choose to discuss something which may fall us apart from finance few minutes but also placing a question in your minds to think on for the future scenario. “Self-Employed Are Taking The Lead Over The Salaried Class”:  This topic may be a deviation from finance but yet, a very much talked about topic with global approach without any bar or age, cast, race sector etc.

As the global business climate is turning towards dark , Continue reading

%d bloggers like this: