Wednesday, August 31, 2011
They promise more return, but do your post-tax and allied homework to assess if the risk element is worth it.
Bank fixed deposits, company fixed deposits and now a raft of non-convertible debenture issues — as a retail investor, you are indeed spoilt for choice. And, all of these are offering handsome returns, given the high interest rate regime.
A plain comparison on returns would suggest no scope for debate, as several companies issuing NCDs are promising double-digit rates, much more than bank or company FDs. But wait before taking a decision, as the apparent returns are just one way of looking at things. The risk element also needs to be considered.
I've been warning bears for a couple of weeks that the market was due for an aggressive bear market rally. That rally has clearly begun.
I have often referenced the rubber band theory in my writing. For those not in the know, the rubber band theory is nothing more than the tendency for any market to regress to the mean. And the further a market is stretched away from the mean, the more violent the snap back tends to be once the pressure is released.
Markets are really no different. The further you stretch the stock market the more violent and persistent the snap back tends to be once the turn occurs. At the recent yearly cycle low on August 9, the stock market had stretched to ridiculous levels, both sentiment wise and technically. This should generate an extremely convincing bear market rally.
Gold and silver rises to highest levels in a week
Bullion metals were back at their winning spree on Tuesday, 30 August 2011 surging more than 2% to end at their highest level in a week as investors questioned the rebound for U.S. equities and had lingering concerns about the state of the global economy. Worse than expected economic data boosted bullion prices again asa asafe haven for alternative investment.
Prices pare initial weakness and rise on hopes of strong demand
Crude-oil futures shed their initial weakness and ended substantially higher on Tuesday, 30 August 2011 to end at their best level in nearly three weeks. Crude price at Nymex were under pressure earlier following weak consumer confidence data. Then, prices gave up earlier weakness and rose as U.S. equities rose and brought some optimism about oil demand to the market. The dollar turning weak also aided in rising crude prices.