In the early 1980's and 90's, AIDS was rampant and incurable. The sufferers needed cash, and so they started selling their life-insurance policies to investors/companies who were ready to pay cash. They got the much need cash and they did not have to pay premium anymore! The investors paid the premium till the insured died and made themselves a neat profit, if they died early!
"Death Bonds" or "Life Settlement-backed Security" are rapidly becoming the safety nets for companies from the turbulence of the other investments for the obvious reason that 'Life Expectancy' is not as volatile as the other financial instruments - but for the terrorists who are likely to have invested only in Death Bonds. Life insurance policies are pooled together, repackaged ('securitized') into bonds and sold to investors.
"Profiting From Mortality - Death bonds may be the most macabre investment scheme ever devised by Wall Street " - Businessweek Cover Story, July 2007
For example, if the person is insured for Rs 10 lakhs upon death, the investor buys the policy at a lump sum of Rs 5 lakhs. For the insured, this is quick and easy cash - the investor bears the premium and waits to the get the money upon death of the insured.
Death Bonds are still unheard of in India; but they are fast becoming a popular and safe investment in Europe and United States. Death Bonds may still be far in the future in India, but how eerie is it knowing that the investor wants you DEAD!
the beginning of the end : Death Bonds!
Vicious Circle Fuelled by Oil Price
There has been a lot of hush hush in the newspapers about rising fuel costs and search for alternate fuel sources. Why is fuel becoming expensive? How does it touch each of our lives? We try and analyze the vicious cause-effect cycle driven by the fuel costs.
Here is a list 9 potential factors which drive the fuel prices up.
- OPEC Policies : Since m
id-eighties Organisation of Petroleum Exporting Countries (OPEC) has been creating an artificial scarcity i.e. it produces only to fill the gap between global oil demand and production by non-OPEC countries. This has resulted in OPEC having a lot of idle capacity and thus a control over the oil prices. But recently with surging oil demands OPEC has hardly any idle capacity left i.e. no safety net and a higher ris
k premium. - Petro-Dollars to Petro-Euros : Till recently almost all oil buying and selling was in US-dollars (petro-dollars) through exchanges in
- Political Instability : Most of the known oil reserves are in West Asia (or the
- Speculations in Oil Futures by large amounts of funding also drive prices up.
- Weak Dollar Policy : With most oil deals worldwide are priced in US dollars; and the dollar's devaluation puts on the pressure for higher oil prices. To maintain an income and purchasing power, raising prices has become a major strategy of OPEC members.
- Rising demand from
f corn and ethanol : An increase in oil prices increases the demand for alternate fuel i.e corn and ethanol; which increases costs of cattle feed and ultimately food-products. Inflation goes up sharply resulting in cracking of the economy.
Gold vs Liquid Gold
Gold / Oil prices have maintained a ratio of ~15 for half a century, but the sudden steep surge in oil prices has resulted in this ratio halving! Also, a strong negative correlation is seen between the Gold/Oil price ratio and Dollar/Euro conversion rate.
The Bank HOLIdays and taking stock
With the long holiday (20/03 to 23/03) that all market participants are facing, it is a good time to 'take stock' of the situation that nayainvestors could be facing
- You bought gold/ gold BEES as suggested by NAYAinvestor - you would be sitting pretty on the strong holdings or it would be the perfect hedge for your underperforming portfolio
- You are still looking for an opportune moment to enter the mayhem that is the stock market
- You did enter the market with equity positions and consequently have burned you fingers (hopefully to a small extent only)
Well the one thing we have never professed to be is a site / blog attempting to tell you how to run your investments, instead we plan to put in front of you the situation, our reading of it and also try to read between the lines that you see daily and then let you make the informed choice... sounds good??
Stunning occurences of the week
Bear Stearns getting bought out at less than 10% of its market value and that too with FED sponsored money - is it a desperate measure or are they trying to build investor confidence by providing the sponsor amount??
LB results: 57% decile in First Quarter Profits
Lehman’s first-quarter profit equates to 81 cents a share, which is significantly ahead of the consensus analyst forecast of 72 cents and sent the group’s stock up 46 per cent to close at $46.49. However, the share price jump, from $31.75, followed declines of 15 per cent and 19 per cent in the previous two trading days as Bear Stearns’s firesale to JPMorgan was hammered out. Bear Stearns was unable to meet a surge in margin calls by its creditors late last week as the credit crunch continued to escalate. After the Bear Stearns sale, Lehman had been among the group of Wall Street firms viewed as most likely to follow suit, in large part because it was the biggest underwriter of mortgage-backed bonds last year and owned $80 billion of them at the end of November.
Probability of lower earnings from companies for this quarter (awaiting the results season - and how each result is going to change the fortunes of traders/speculators and Investors is a big learning that naya investors should attempt to take away from this season. It is a time when we will notice how deviation from an expected value hits/props the price of a stock either way.
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