Category Archives: Finance & Economics

FED…Bond Markets…A Primer

The FED recently came out with a plan to cut the asset size of its balance sheet. This article looks into the bond market with some interesting and insightful facts about the bond market. The credit crisis took its severe toll in 2008 and Ben Bernanke, whose Ph.D. dissertation was on 1929 recession articulated that the best way to avoid a severe recession in the market was to allow credit to move into the market. FED primarily regulates the liquidity within the system through the change in FED rate. FED rate is the rate at which banks are willing to other banks or financial institutions overnight without any collateral.  Depository institutions especially banks have to conform to a  minimum reserve ratio according to latest Basel III norms and manage the minimum threshold through the overnight lending mechanism. Source:Federalreserve.gov Continue reading FED…Bond Markets…A Primer

Bond Market Sentiments

Janet Yellen reiterated again that FED would be raising interest rates soon. The bond yields should rise since the price of the bonds will fall with a rise in interest rates. The fact is very simple. New bonds will be issued with higher coupon rates i.e. with higher interest rates so investors will sell their present holdings to acquire new bonds. Remember, most investors generally do not hold bonds until maturity and many bonds are traded like stocks although equities are more liquid compared to bonds. Sale in the bond holdings brings down the prices of the present bonds. However, the escalating risk due to North Korea has made investors vary with more buying of treasuries. This has resulted in a muted effect on the prices of US sovereign bonds. Continue reading Bond Market Sentiments

AI: Robo Advisors

For those who have seen Matrix and Space Odyssey 2000, understand the disruptive power of AI. Artificial Intelligence might not be truly disruptive in the way it’s portrayed in the movies. Disruptive Power is the ability of a new technology to change the pattern of consumer behavior. The introduction of Smart Phones led to the disruptive technology in mobiles. Before smartphones, the primary purpose of mobiles was to talk with people but with Smart Phones, the slogan changed to…and you can also use it for talking. Smart Phones refined the way we interacted with others through social platforms or the consumer buying power. Apps were the catalyst through which consumers leveraged technology for their gratification. Continue reading AI: Robo Advisors

Exchange Traded Funds: Rise of Passive Investing…Series Begins

ETF also known as Exchange Traded Funds are on a meteoric rise globally. According to a report by PWC, ETF’s in the US is going to grow to $5.9 trillion by 2021, a whopping 23% cumulative annual growth compared to $1.6 trillion in Europe and $560 billion in Asia. ETF’s are passive investment products which track an index. Exchange Traded Funds are linked to different asset classes like equities and commodities. In the US, S&P 500 would be a broad equity index so an ETF linked to S&P 500 would replicate this index. Replication here means it would track the index. ETF would not outperform the underlying index i.e. S&P 500 but rather deliver similar returns. Let’s understand a few concepts here.   Continue reading Exchange Traded Funds: Rise of Passive Investing…Series Begins

How Much Does Venture Capital Drive the U.S. Economy?…Stanford Business School

I am republishing an article by Stanford Graduate School of Business on venture funding.

Over the past 30 years, venture capital has become a dominant force in the financing of innovative American companies. From Google to Intel to FedEx, companies supported by venture capital have profoundly changed the U.S. economy. Despite the young age of the venture capital industry, a fifth of current public U.S. companies received venture capital financing.Venture capital (VC) is a high-touch form of financing that is used primarily by young, innovative, and highly risky companies. Venture capitalists provide not only financing but also mentorship, strategic guidance, network access, and other support. These investments are highly speculative — most of the companies that receive VC funding will fail, even as some become runaway successes. Three out of the five largest companies in the world received most of their early external financing from VC. Continue reading How Much Does Venture Capital Drive the U.S. Economy?…Stanford Business School

US Equity Markets, Technology, Innovation and Wage Growth: Part 1

Majestic Benjamin Franklin ” Tell me and I forget, teach me and I may remember, involve me and I learn.” Founding Father United States of America

VIX Index also known as fear index reflects the market sentiment in a country. A higher value of VIX shows a high probability of uncertainty in the market usually reflected during crisis. Higher the value, the more volatility the market, with a bearish outlook. If you look into the graph, VIX was at the highest during the subprime crisis. Presently, low value implies a bullish sentiment in the market…  Continue reading US Equity Markets, Technology, Innovation and Wage Growth: Part 1