Full Money Market

Archive for December, 2009

I understand that it has something to do with governments trying to fix exchange rates, but my textbook isn’t making the rest of it clear.

Here’s how:

Assume that some government has fixed their exchange rate 1-1 with the US Dollar.

Now, assume that the "market" exchange rate, based on money supply, demand, whatever, is 1.2 -> 1 dollar.

Since the country’s central bank is committed to a fixed exchange rate of 1 dollar for 1 local, people will give the central bank 1 local currency and receive 1 dollar.

Then they’ll turn around and sell the dollar on the market for 1.20 of their local currency.

They just made a free 0.20 in their local currency.

What happens if a bunch of people do this, multiple times? Eventually, more dollars are in the market, and less local currency is in the market (since the central bank is giving out dollars and receiving local currency). This will eventually force the exchange rate to the fixed 1-1 ratio.

This is why governments with fixed exchanged rates have trouble controlling interest rates in their economy, since they cannot control the money supply.

I have recently moved to Cyprus and as a self confessed Diet Coke addict, I am convinced that the beverage I am supping is not the same as the gallons I consume in the UK, even to the extent that I am regulary having a foray to the dark side (Diet Pepsi) which I find myself prefering.

That got me wondering… Do The Coca Cola Company use different recipes depending on the climate or the tastes of that particular country’s market?

It would be interesting to know. Answers on a postcard please.

xxxx

The climate is not a factor, but the local taste definately is.
Well – I say "local" – but it has to be a big enough market, to be worthwhile making and marketing a special soda.
I think the cc-light you get in the UK is probalby the same as you get in Holland, Germany and Scandinavia. I know it’s different from the light you get in Poland and Spain.

You can get Vanilla Coke in Holland, but not in Scandinavia or Spain, and Dr. pepper – I know it’d the dark side – is much more available in Spain, than in Denmark and Holland.

At The World of Coca Cola in Atlanta (Five Points – marta-station), you can taste some of the many specialized sodas they make all over the world.
As well as the regular American favourites, of course.

At the W.of C.C. you’ll also get the full story about the invention of Coca Cola – as well as details on how they adapt the world-wide brands, but also how and when they decide to make new, local sodas

How is currency risk exposure classified?

Not sure what you are asking there… I’m not aware of any classifications for currency risk exposure.

From a trading point of view:
– If you are long a currency, then that is your exposure.
– If you are short a currency, then that is your exposure.

From an economic point of view:
– if you need to purchase goods and services on the international market and you agree on a price at a date in the future – then you carry some risk – see above.

What is the main purpose of the foreign exchange markets?

Allow two different currencies to be exchanged at what ever price the buyers and sellers agree. Currencies measure value, so it they allow value to be traded from one country/area to another.

the top 5 Tourists or foreignersto visit the Philippines from 2004 to 2006

Korean, Chinese, Japanese, Americans, Singaporeans.

Your principal should not fluctuate at all in a true money market. The interest rate that you receive could fluctuate over time based upon the APY of the money market. Companies compute their interest differently so there is no across the board answer on that. Good luck.

It’s for a Personal Finance paper, and I’m having trouble understanding exactly what they are, how they work, their pros and cons, etc. Any help would be appreciated!

Money markets are ultrashort notes of obligation – or ultrashort debt instruments – issued by borrowers. They are purchased by institutions and because they are so short duration, the institutions can guarantee that they will maintain their value. they also have to be highly rated AAA or so, by the agencies like S&P, Moodys.

The very visible event that happened last year with the Reserve MM fund was that they had lied, and invested in Lehman CDOs, which were NOT of short duration, so when Lehman could not redeem them and collapsed, the NAV of the Fund went below $1.

It was also then that they found out that the rating agencies had lied and rated toxic debt as AAA, thus destroying their reputation.

That is why many banks had to defend the financial system by guaranteeing the value of MM accounts up to much higher levels – $250,000 – to reassure the public. Otherwise, there would be a run on the banks, and every major bank in the world would have collapsed because they were all holding varying degrees of toxic debt instruments.

As one with a terrible credit history and ONLY a savings account to work with I am beyond the point of considering the risk factor for my money. What I want to know is if it is possible for me with very little resources to get some amount of success with the market and how do I go about doing it. Please consider this question as from the point of view of worse case senerio.

Great question, and congrats for having the courage to enter the investing world!

Without a doubt, YES! It is possible for you to to succeed in the market with very little initial resources…

Firstly, to be successful in any form of investing you need to maintain a level head. Don’t allow any dissatisfaction you may have with your current situation to blind your judgment as you enter the stock market arena, or you will be taught an expensive lesson!

The good news is, there are many different strategies out there, and they cater for a wide range of both experience and available start up capital.

I understand you are super keen to jump in and start making money, but don’t be careless. I am imagining the worse case scenario, and that is probably exactly where you are right now, without your savings! This could very well be the case if you do not properly plan your investment strategy.

I suggest you do as much free research as you possibly can. Read newspapers to get familiar with the current climate and industry jargon. Spend time in your local library devouring everything you can on investing. Search the internet thoroughly, and compare each and every "get rich now" scheme you come across.

Following your research you should write down what your goals are and why. These should be clearly defined goals, not just "to make lots of money". Think about why you want lots of money. What will it enable you to do? Your why is also very important in maintaining your focus and commitment to your investment plan.

Once your plan is in place, then begin revising all the strategies and programs you have learnt about, and decide which best suits your outcome, and which feels right for you.

In short, the best way to stack the odds of success in your favour is to be an educated, and plan well. You will find this to be a powerful combination!

All the best!

http://www.federalreserve.gov/releases/H15/update/

I think Stock Markets keep going up year after year because of so much money flows.
How can I find out how much money is flowing into the Stock Markets?

-try to contact your broker.
-use indicator like MACD, Bolliger Band.
-I prefer invest in Forex ; lower risk, low capital, easy to run, less hustle.

Give an assessment of the advantages and disadvantages of each type of instrumnet(stocks, bonds, leases)including when it would be appropriate or inappropriate to use each.

Buy stocks when the economy is in a recession and has already bottomed out. Advantage: you will be buying at the low end of a market cycle. Buy low, sell high. Disadvantage: risk = uncertain about forecast of economic behavior.
Buy Bonds when interest rates are topping. Bond prices are at their lows. ADV: rates drop and you bonds go up in value.
Leases depend upon each individual property occupancy percentage and the length of the existing lease, Safest to buy as economy is in an uptrend. Adv: good cash flow, Disadv: occupancy rate drops and cash flow can turn negative.