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When All Else Fails, Go for Gold

Tuesday, September 23rd, 2008
by Sck

Author: Fat Prophets

The jewellery, industrial and investment markets drive the demand for gold today. Of these, jewellery accounts for more than two-thirds of the total. The Jewellery market follows seasonal trends, peaking during the fourth quarter on the back of the major Indian festival of Diwali and of course Christmas. The first quarter is also a strong period, incorporating the Indian wedding season, Chinese New Year and Valentines Day. Gold’s industrial uses predominately stem from the metal’s resistance to corrosion and electrical conductivity. The dental industry is also a significant element of overall industrial demand, which totals approximately 12% of the market. Investment driven demand accounts for some 19% of the market and derives from the precious metal’s role as a monetary asset and a store of wealth. Indeed, gold has featured in financial systems for many hundreds of years. Due to its weight though, gold is impractical to use on a day-to-day basis. This led to the emergence of state issued coin and paper currencies from around the 17th century, which were exchangeable for gold. In the more modern period, the international gold standard was in force from the 1870s through to the outbreak of World War 1 in 1914. There were various attempts to re-establish some form of gold standard following the war. The last of which was the Bretton Woods system that pegged the US dollar to gold at $35 per ounce. However, the supply of money backed by a finite resource cannot expand at a faster rate than the resource itself. This limits the financial system’s ability to supply credit (not necessarily a bad thing in light of the credit bubble), thereby restricting the value of goods and services that can be purchased. Due to this and the huge costs of the Vietnam War, the United States abandoned the system in 1971. While gold no longer held its role as an official currency, it has nevertheless remained the ultimate hard currency, against which all paper currencies are measured. Paper currency strength, specifically the US dollar, equals gold weakness and vice-versa. It is in this regard that despite its seeming insignificance relative to jewellery, investment demand is the most important determinant of gold’s price and certainly underpins the metal’s latest price strength. As with any asset, the price of gold is determined at the margin. While the Jewellery and industrial markets are subject to cyclical fluctuations, their longer-term level of demand is relatively constant. Investment demand on the other hand can often surge when investors seek the safety of a real asset, as has been the case recently. Looking in more detail at the drivers of gold’s recent price action, the yellow metal had been falling against the US dollar following the unwinding of the credit bubble and the associated asset market deflation. In a deflationary environment, the relative value of cash (US dollars) rises as the price of all other assets fall. As investors around the world pay down debt, assets are sold, cash is raised and debts paid off. This process of deleveraging underpinned the US dollar’s recent rally while at the same time savaging the precious metals and commodity markets. However, asset price deflation in a highly indebted economy, such as most of the developed world, is a recipe for disaster. Governments and central banks will therefore not sit back and allow the deleveraging process to play out. Massive fiscal and monetary policy stimulus will be required to offset the forces of deflation. Deflation therefore begets inflation. We have of course already seen large-scale intervention. The US Federal Reserve engineered the rescue of Bear Stearns in March, and the Treasury promised to inject more than US$200 billion into Fannie Mae and Freddie Mac. There have since been billions of additional dollars pumped into the system in the wake of the Lehman’s collapse, which sparked gold’s largest one-day gain in almost three decades. In the short term, the change in investor sentiment towards gold is the classic flight to safety. However, the actions of the Fed are inherently inflationary and will ultimately leading to further US dollar weakness and long-term gold price strength. This underpins our view that gold is in a secular bull market, with recent weakness simply representing a cyclical correction. Turning to the charts, price support is evident at US$730 an ounce, as indicated by the major high of 2006. This level coincides with additional support provided by the 38.2 percent Fibonacci retracement of the 1999 to 2008 rally. In the shorter-term, we have witnessed a completion of the Elliott Wave ‘ABC’ correction with prices surging back above US$846 per ounce. This move confirms the positive signals recently reflected in the ‘bullish divergence’ on the momentum oscillator indicated below. “Bullish divergence” arises when prices make a new low, as seen between August and September, while the oscillator makes a higher low. Such divergence often occurs at major price turning points. While it is important to consider the depth of any correction, time is also an important factor. In our opinion, more than six months of consolidation activity will be required to correct the 8-year bull run. Accordingly, an extensive period of consolidation is likely before gold once again hits new highs against the US dollar. IMPORTANT: This message, together with the Fat Prophets website and all its contents have been prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the Fat Prophets website. Past performance is not a reliable guide to future performance, and investors should be aware that returns can be negative. For a full explanation of the performance calculation methodology, please visit the Fat Prophets website.

Article Source: http://www.articlesbase.com/investing-articles/when-all-else-fails-go-for-gold-573240.html

About the Author:
Fat Prophets are leading global independent stock market advisors with a comprehensive product range of research reports for all investors. Visit the Fat Prophets website to learn more and get expert advice on investing in shares and managed funds. fatprophets.com.au

Houses Down, But Definitely not Following the US or UK

Tuesday, September 23rd, 2008
by Sck

Author: Australasian Investment Review

The problems in the Australian housing market pale into insignificance beside the woes of credit markets in the wake of Lehman Brothers bankruptcy, but they do tell us something about the Australian economy. Yes, housing, especially new homes, are depressed with a low level of starts, especially in NSW. But unlike the US where new home starts are 30% or so under what they were a year ago, our home building industry isn’t on its knees, despite what you might read from time to time. There is some life, not much, but its still there. And that tells us a lot about the slow, but solid health of the economy. The Australian Bureau of Statistics said that 38,348 homes were started in the three months to June, a seasonally-adjusted drop of 3.7% on the March quarter. That was the lowest quarterly figure in a year, but given the sharp rise in the cost of money over that time and the drop in consumer confidence, it was an understandable outcome. It gives an annual rate of just over 153,000 new homes a year, 20,000 under what’s really needed. But in a tiny bit of encouragement was that new private home starts were up 4.1% quarter on quarter and other private new dwellings (home units etc) fell a very sharp 17% in the June quarter, compared to March. And, compared to the June quarter of 2007, there was a 2.1% rise in total new dwelling starts and a 5.4% rise in new private home starts. Other new private dwellings were down 3.7% in the June quarter, compared with the June 2007 quarter. So while activity has been quiet and well below the capacity of the industry (as the Housing industry Association has been pointing out), our industry hasn’t down and out like the debt and loss-riddled US and UK sectors. Westpac yesterday cut its fixed mortgage rates for new and existing customers, a sign that funding pressures continued to fall, but also an attempt to position it as being ahead of the rate cut curve. The new rates apply from today, but until it or other banks cut the extra margin of half a per cent or more built into its variable rates, there will be no reason to boast. Variable rates are by far the most popular form of mortgage and it would take a real upsurge in demand for housing loans to see some rate cutting competition emerge, but that in turn would horrify the RBA and prompt a rethink on interest rates. Remember the RBA is worried about inflation and has long regarded the housing sector as a good indicator of consumer and economic expectations; and inflationary pressures, particularly on building material costs and wages. The abs said that seasonally adjusted estimate for the total number of dwelling units commenced fell 3.7% in the June quarter which follows a revised fall of 1.0% in the March quarter; the seasonally adjusted estimate for new private sector house commencements rose 4.1% in the June quarter following a revised fall of 5.3% in the March quarter. (That’s quite a turnaround and is a stark contrast to the unremitting gloom from the US and UK). The weakness has tended to be, if anything in the “new private sector other residential building” part of the industry, to use the descriptor of the ABS. Essentially its apartments and units, much of it driven by investor demand and activity. The home unit and residential sector in places like the Gold and Sunshine Coats, parts of inner Sydney and Melbourne (Docklands) has cooled. So much so that Raptis, the big Gold Coast home unit developer is in trouble, looking to raise hundreds of millions of dollars of new money in the next month to remain alive. It has up to $700 million of new properties and projects it could sell, if buyers appear. That’s not very likely given the tough financial climate at the moment. If anything the downturn in commercial building finance has affected this part of the industry, rather than new private building which tends to be financed by private individual mortgages. Seasonally adjusted, the estimate for new private sector other residential building fell 17.1% in the June quarter following a revised increase of 9.5% in the March quarter. The housing figures provided the backdrop to the release yesterday of the Federal Government’s five-year $512 million housing affordability fund at a residential development in suburban Canberra. In a bit of PR spin, Mr Rudd said the fund would bring down the cost of houses and new developments by up to $20,000 by reducing infrastructure charges and speeding up planning approvals. So perhaps that might be better applied to NSW where the problems seem to be concentrated. Despite being the biggest state, the biggest population and the largest home building sector, NSW is now not even outbuilding Queensland, let alone Victoria. According to the ABS figures around 6,990 houses were started in NSW in the June quarter, against 9,850 in Victoria and more than 10,700 in Queensland. No wonder the recent national accounts showed NSW contracted in the June quarter: the housing performance played a big part in that grim news. IMPORTANT: AIR reports about financial markets and investment products in the widest sense possible. The AIR website and all its contents is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before making any investment decisions.

Article Source: http://www.articlesbase.com/investing-articles/houses-down-but-definitely-not-following-the-us-or-uk-573250.html

About the Author:
Australasian Investment Review (AIR) is a free daily news service covering global financial markets with a focus on Australia, New Zealand and Asia. Each day our team of experienced journalists presents you with a concise digest of expert opinions and analysis on trends and backgrounds that matter in these markets. Subscriptions are free at aireview.com.au

Commodities Slump Grows

Tuesday, September 23rd, 2008
by Sck

Author: Australasian Investment Review

The downturn in commodities since the middle of July has been pretty vicious and this week it seemed to be made more tense by the way the market fell across the board as Hurricane Gustav squibbed it and didn’t prove to be the major destroying storm that many had feared. The way, oil, gold, copper and other metals, plus major grain prices fell after the passing of Gustav indicates that the old fear about supply shortages no longer dominates thinking in these commodity markets. Most commodities were weaker to steady overnight Wednesday, but it was more of a holding pattern than any sort of recovery. For Australia, as we start enjoying the fruits of the boom, it’s a timely reminder that more needs to be done here to make the economy more efficient and more productive. We are at present relying on higher receipts for our coal and iron ore exports and not much more as prices for other resources have titled downwards since the slump started. If anything should slow China’s economy in the next year or so to a much lower level of growth, then we will be exposed to a much sharper slump in activity than we saw with yesterday’s GDP numbers. The Reuters-Jefferies CRB index, a global benchmark for commodities prices, has fallen 18.9% since June 30, to a six-and-a-half-month low, after surging in the first half by almost 30%. July was in fact the worst month for many commodity indexes for 30 years or so because mainly of the steep drop in oil prices. Prices are still higher than they were a year ago, but as we move through the rest of 2008 and into 2009 that premium will either simply disappear with each month’s comparison, or will show up in more price falls to the point where the comparison is negative. We have to assume that just as commodities probably overshot and went to high from March through mid-July that prices will overshoot on the way down and fall to unsustainably low levels. But some analysts warn that because their financial investors involved there could be a much steeper fall than expected simply because of the impact of momentum. Oil is trading closer to $US100 a barrel than it has for more than five months, gold eyed and eased under $US800 an ounce, copper, is glancing towards the $US3 a pound level and wheat, soybeans and corn futures prices are busy retracing former price rises. Gold was trading at $US799.90/800.90 an ounce in Asia late yesterday, down from $US804.90/806.25 an ounce late in New York Tuesday, when it fell as low as $US790.40 after oil dropped and the dollar rallied. It traded just above $US800 an ounce in New York overnight.Gold struck a nine-month low around $US773 in mid-August. Oil traded around $US109 a barrel in New York. This sharp sell off in commodities, led by oil seems to have had its first notable victim among investors with a multi-billion dollar hedge fund imploding and now facing being broken up. Bloomberg has reported that this slump had ensnared Ospraie Management of the US which is going to close its biggest after it fell almost 27% in August and 38.6% from the start of 2008. It’s 20% owned by the struggling Lehman Bros investment bank. Bloomberg said the Fund had a value of $US2.8 billion at the start of last month, so the loss would have been in the order of $US750 million in the month. Bloomberg said a letter from founder, Dwight Anderson, to investors explained that the Ospraie Fund lost 26.7% in August, after a “substantial sell-off in a number of our energy, mining and resource equity holdings.'’ “I am extremely disappointed with this result and the fund’s sudden reversal in performance. After nine years of striving to be a good steward of your capital, I am very sorry for this outcome.'’ The Ospraie Fund was started in 1999. Bloomberg said that the closure of the Ospraie Fund leaves the New York-based firm overseeing three remaining funds with more than $US4 billion in assets, down from $9 billion in March. Commodity market indexes fell by around 10% in August, and are off 20% since the slump started in Mid-July as investors switched out of mining and resource investments and into mainly US shares because of expectations the US wouldn’t slump as much as Europe, Asia the UK or Japan would. It sold out of Iluka in recent days, according to a statement to the ASX from the beach sands miner and processor yesterday evening. Oil closed at around $US115.46 a barrel in New York on Friday before the holiday long weekend. At one stage overnight the price was down around $US105 a barrel. Copper plunged as well, losing nearly 11 US cents a pound in New York to close at $US3.29 a pound (a seven month low) while gold fell by around $US24 to $US810 an ounce. The Australian dollar weakened, falling to a day’s low of 82.70 US cents, that’s also the lowest for around a year. It then recovered back over 83 US cents. While that followed the Reserve Bank’s 0.25% rate cut yesterday, it wasn’t the major reason. The rate cut had been widely expected and was in the price of the currency: it was the sharp drop in oil, copper and other commodities that hit resource-based currencies including the Aussie overnight. The futures prices for wheat, corn and soybeans all fell sharply as well as Gustav faded. It was a significant slump across the board for commodity prices. Metals in London, led by lead also fell sharply. Markets were tossed around as investors wondered about whether this rapid correction would finish. Not helping was a gloomy assessment of the current state of the world’s major economies that helped ended the whoopee over oil prices. The Organisation for Economic Cooperation and Development warned that overall, “the picture for the major economies is of a particularly weak second half”. It saw a growth uptick for the US, but the eurozone and UK economies will “barely creep forward” in the second half of this year. The OECD suggested that global financial turmoil might be entering a “new phase” with the stream of bad news reported by banks now reflecting generally economic weakness rather than direct effects of the credit squeeze. The OECD revised up significantly its forecast for US growth this year, after significantly stronger-than-expected second quarter data. It expected 1.8% growth, compared with its previous forecast of 1.2%. But surveys out yesterday showed a sharper than expected fall in US construction spending and a contraction in manufacturing, led by a drop in forward orders, employment and inventories. Exports were up and inflation eased. The OECD gave itself an out by warning that there was a lot of uncertainty about how quickly the effects of the US fiscal stimulus package would fade. The OECD was worried about inflation in Europe and overnight those concerns were given some additional impetus with news that producer prices in the 15 country eurozone rose 1.1% in July, compared with 1% in June. That made for an annual rate of 9% (not much different to the US) in the year to July. European retail sales fell 2.1% in July compared with July 2007, after a record 3.1% drop in June. That won’t be enough to get the ECB to cut rates tonight, while the Bank of England’s next move is unclear, despite the overwhelming weight of gloomy news about the British economy. Its decision will come tonight, our time. A desperate Labour Government has attempted to boost the sinking housing sector by significantly expanding the stamp duty exemption on house purchases of homes worth up to 175,000 pounds from 125,000 pounds. It will cost near $A2 billion in a budget already heavily in deficit. Money will also go to helping people avoid repossession (nearly $A400 million). But the British pound continued its worst fall in 16 years. IMPORTANT: AIR reports about financial markets and investment products in the widest sense possible. The AIR website and all its contents is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before making any investment decisions.

Article Source: http://www.articlesbase.com/investing-articles/commodities-slump-grows-573253.html

About the Author:
Australasian Investment Review (AIR) is a free daily news service covering global financial markets with a focus on Australia, New Zealand and Asia. Each day our team of experienced journalists presents you with a concise digest of expert opinions and analysis on trends and backgrounds that matter in these markets. Subscriptions are free at aireview.com.au

Markets: We Ban Shorting, Will There be a Bounce?

Tuesday, September 23rd, 2008
by Sck

Author: Australasian Investment Review

There’s nothing more to be said about the markets last week except that we all survived, battered, bruised, shell shocked and worse if you were shareholders in some American companies no longer with us like Lehman Bros, Merrill Lynch, AIG, Macquarie, HBOS and a host of other financial stocks. This week events will be dominated by the shape of the rescue body announced Friday to bailout the dodgy securities. Here in Australia we have banned all short selling, not just the naughty naked kind, in a new development revealed last night by the financial regulator, ASIC. It starts from today and continues until further notice. It is a step up of the ban on naked shorting announced Friday. But the big issue is the $US700 billion bailout fund which is likely to provide an opportunity for ambitious and idiotic US congress representatives to try and add pet deals of their own to the bill. Markets around the world simply love the idea, but that affection will be hard to hold as the fund takes ages to have any lasting impact. The Standard & Poor’s 500 dropped by more than 4.7% twice last week after Lehman Brothers’ collapse; Bank of America Corp’s takeover of Merrill Lynch and the US government’s seizure of American International Group. But the S&P 500 ended the week by jumping 8.5% on Thursday and Friday on the US government’s plan to purge banks of bad assets, crack down on short sellers and to stand behind money market funds through support from the Federal Reserve. Shanghai surged 9.5%, in the biggest daily gain for seven years, to 2,075.091. Hong Kong’s Hang Sang gained 9.6% to 19,327.73, London’s FTSE 100 had its biggest daily gain in its 24-year history, jumping 8.8% and in Australia the ASX 200 was up 198 points or more than 4.2% on Friday. It was the biggest two-day global stocks rally in 38 years. Friday’s rallies in London and the US were partially fuelled by bans on short-selling in financial stocks announced on Thursday night. Besides the S&P 500’s gains the Dow added 929 points from Thursday’s low and markets from the UK, China, and Australia and elsewhere surged as investors appreciated the fact that the great panic had been halted for the time being. But it is short term, even the new fund being set up to help buy the so-called toxic securities by the US Treasury. The longer term issues will be the newly increased size of the US deficit and debt, the impact of this huge expansion of money supply on inflation, and most of all the slumping US economy and the disaster that is the US housing sector. The S&P 500 ended up 48.57 points to 1,255.08 on Friday, the Dow surged 368.75, or 3.4%, to 11,388.44 and Nada rose 74.8, or 3.4%, to 2,273.9. The MSCI World Index of 23 developed nations’ markets jumped 5.7% to 1,286.44 on Friday and rose 8% over Thursday and Friday. Europe’s main regional index (the Sox 600) rose a record 8.3% Friday and the MSCI Asia Pacific Index added 5.5% Friday. The S&P 500 actually erased its fall to close up 0.3% for the week, but it is still down down 15% this year. Market reports said a record 3 billion shares were traded on the NYSE on Friday: that was more than double the three-month daily average. Under pressure investment banks, Goldman Sachs and Morgan Stanley saw their shares leap more than 20% on Friday as shorts scrambled to cover themselves. Traders said that only consumer staples, the best performing group this year, fell led by Wal-Mart, the world’s largest retailer. Its shares fell almost 3% for the biggest decline in the Dow. That reaction has a touch of unreality because it won’t be too long before investors start worrying about the economy and banks again and go back into consumer staples. US and European government bonds tumbled; reversing gains made earlier in the week as investor sold equities and commodities and moved into bonds as quickly as possible. The proposal from Paulson and Bernanke (and strongly supported by president Bush over the weekend) is aimed at isolating devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression. US Congressional leaders said they aim to pass legislation soon, but some have started wondering about loans to US car companies like General Motors and a $US50 billion stimulatory package to follow the $US120 billion tax rebate which came and went from May to July of this year. That sort of grandstanding is going to be dangerous, and expensive. In Australia the major banks led the surge on Friday and today the market is forecast to be up by around 130 points, if Saturday morning’s overnight futures finish is any guide. The ASX200 index finished up 196.8 points, or 4.27%, to 4804.1, while the All Ordinaries index ended up 188.8 points, or 4.06%, to 4840.7. The National Australia Bank soared $3.40, or 17.35%, to $23.00; the Commonwealth jumped $2.62, or 6.54%, to $42.70; the ANZ rose $2.26, or 14.63%, to $17.71; and Westpac ended up $1.54, or 7%, at $23.54. But the focus was on Macquarie Group: after being belted up to the close Thursday, it rocketed $9.85, or 37.81%, to $35.90 after touching an intraday high of $38.55 just before noon. Suncor Metway leapt 75c to $9.10 as the company completed the underwriting on its dividend reinvestment plan two weeks early. In resources BHP Billiton ended up 40c at $35.40 and Rio Tinto jumped $3.10 to $101.50. Iron ore miner Fortescue Metals Group added 50c to $5.70 despite reporting an annual bottom-line net loss of $2.8 billion and saying it would not provide a forecast for the current year because it may prejudice “the interests of the company”. Oil and gas producer Woodside Petroleum was up $2.66 at $54.06, and Santos 53c to $18.28. Newmont dropped 55c to $4.92 and gold fell; Newcrest eased 65c to $23.85 and Lehar dropped 3c to $2.45. The Australian dollar finished higher in New York at 83.40, US cents after the US dollar lost ground as nervy investors sold the currency. Earlier, the Aussie had finished around 81.15 on Friday, up about 1.3 US from Thursday’s close of 79.88. That’s up 3.5c in two days, or almost 5%. And naked short selling will be banned on the Australian Stock Exchange from today. But in a dramatic decision the regulator, the Australian Securities and Investments Commission has banned ALL short selling for a month from today, not just the naked variety. ASIC said the widened ban would act as a circuit breaker to restore investor confidence. Short selling, where traders seek to profit by selling borrowed shares of companies to then buy them back, in the anticipation their prices will drop, has been partly blamed for the sharp falls of stocks such as Macquarie Group in recent days. Naked short selling, involves selling without first borrowing the stock, or even ensuring the shares can be borrowed. The Australian Securities Exchange (ASX) said on Friday it would remove all securities from its list of stocks approved for naked short selling from Monday. The ASX said the “The removal will remain in force until further notice.” “It will be reviewed when the government’s foreshadowed legislative amendments to the reporting of covered short selling activity take effect.” But last night the ASX ban was supplanted by the wider ban from ASIC. ASIC chairman, Tony D’Aloisio, said “To limit the prohibition to financial stocks, as has been done in the UK, could subject our other stocks to unwarranted attack given the unknown amount of global money which may be looking for short sell plays.” IMPORTANT: AIR reports about financial markets and investment products in the widest sense possible. The AIR website and all its contents is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before making any investment decisions.

Article Source: http://www.articlesbase.com/investing-articles/markets-we-ban-shorting-will-there-be-a-bounce-573282.html

About the Author:
Australasian Investment Review (AIR) is a free daily news service covering global financial markets with a focus on Australia, New Zealand and Asia. Each day our team of experienced journalists presents you with a concise digest of expert opinions and analysis on trends and backgrounds that matter in these markets. Subscriptions are free at aireview.com.au

What Do You Know About Bonds?

Tuesday, September 23rd, 2008
by Sck

Author: Uchenna Ani-Okoye

A bank or establishment will give you bonds in exchange for you lending them cash; they issue bonds that promise to compensate yourself back in the time to come including interest.

Bonds are they gamble free?

A bond has low gamble elements but it is not gamble free. If you buy corporate bonds, this means that you are buying a claim to their assets. Just like conventional persons big corporations tend to take on debt, which must be paid back, they take on debt in a trust to grow. It is possible for them to take on too much debt which they are not able to pay the loan back. Just like a conventional person being not able to make their credit payments. If a company was to file for bankruptcy they would be unable to to payoff the bonds that you bought from them. This means that the investor, which is yourself can on paper lose the bonds that you invested in them, as luck would have it bonds are not normally lost this way.

If you invest in bonds, they can be sold to the market at any time. Similar to stock bonds they have an assigned price driven by the market. If you choose to sell it on the open market, you should keep in mind that people will enquire to know the rate of interest the bonds pay out and the rate the market values it at. For example, if you own a bond paying five percent interest and you want to sell it when the interest has expended up to 9% you’re going to get a lower cost than what you paid. A person could at ease get a new bond, instead of your bond.

The different varieties of bonds

Municipal Bonds: - Municipal bonds are also known as ‘minis’. They signify the bonds, which have been issued by municipal corporations. Municipal bonds allow the holder to claim tax exemption.

Corporate Bonds: - Big corporate companies float such bonds. These bonds carry rather a higher gamble element no matter how big the corporate company is.

Government Bonds: - If a regime authority wants to raise cash they broadly issues regime bonds. These are generally gamble free in nature and will provide the owner with tax exemptions.

Saving Bonds: - The regime will also issues savings bonds, a huge vantage of these bonds is that you can get tax exemptions by investing in these bonds, features of mutual bonds, always important to see the features of the specific bond you may want to invest in. factors to study are Maturity period, purchase cost and fiscal constraints also deciding factors, these should all be interpreted into account when investing in mutual bonds.

In conclusion

Bonds are excellent over looked investment acknowledging the low gamble bonds have it is amazing how many people have little to no information about them. Bonds require very simply understanding; you buy them and sell them if you want to. They key to investing in bonds is to set a time frame for how long you intend to keep the bonds. Bonds are ordinarily a long term investment. When investing in corporate bonds, always read up on their current bond rating. A bond evaluation is a letter grade assigned to each bond to tell investors how high-risk it is. Don’t deal with “junk” bonds.

Article Source: http://www.articlesbase.com/investing-articles/what-do-you-know-about-bonds-573308.html

About the Author:
Uchenna Ani-Okoye is an internet marketing advisor and co founder of Free Affiliate Programs

For more information and resource links on bonds visit: Savings Bonds




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