Why invest in commodities? How to invest in commodities?

Historically, the process of building investment portfolios has focused on two asset classes: stocks and bonds, although in recent years investors have become increasingly interested in finding non-traditional assets with potential to increase performance, smooth volatility, or both if possible.
Thus the interest in raw materials, in particular, has increased as investors have found exposure to natural resource prices a "third asset class" with which optimize traditional portfolios of stocks and bonds .
The great returns generated by the asset class historically may serve as further evidence of the enormous potential of raw materials . However, the raw materials are complex assets and options that investors have access to this asset class are often complicated and difficult to understand. On the other hand there is a universe of possibilities in raw materials, with dozens of families and specific assets, many of which risk profiles / return drastically different.
Commodities are risky assets , but the understanding of the components of the prices and details of investment vehicles that offer exposure to these resources can lead investors to this asset class used efficiently and as a vehicle investment.
The classification as a commodity focuses on the concept of fungibility, which means that the products are treated as equivalent or exchangeable for end users and financial investors alike. In essence, the fungibility requires standardized identical physical properties, being similar consumables regardless of where they occur or where they are. Gold is perhaps the best example: a bar of gold in London is the same as a bar stocked in New York and Singapore. Light, sweet crude oil is light sweet crude oil, regardless of whether they reside in a tanker in the middle of the Atlantic or a pipeline in Louisiana.
The possibility of exchange is a fundamental concept in commodity markets and standardizing the market and enables investors worldwide market large volumes of goods daily.
The possibility of exchange with respect to raw materials simplifies the valuation of these assets significantly, prices of commodities are derived from the supply and demand only. Of course, predict and understand the factors of supply and demand is not easy, but the pricing equation in the raw materials is extremely simple.
Market segmentation Product: forking raw materials in soft commodities and hard commodities. Soft commodities grown in plants or trees as extracted from the soil hard. Soft Commodities are many agricultural resources such as corn, wheat, sugar, cattle and soybeans. Hard Products include industrial and precious metals such as gold, copper, nickel, silver, platinum, and zinc. Also falls under the classification "hard" petroleum products such as oil and natural gas Brent or WTI.
A more detailed commodity is to segment the market into product families that generally have similar physical properties and uses. The six major product families include:

1. Precious Metals: Gold, silver, platinum and palladium all fall under this category.
2. Industrial Metals: This category includes metals that are generally less expensive than precious metals and more used in sectors such as construction and industry
3. Agricultural products: This category includes natural resources that are frequently used for human consumption, including corn, wheat and soybeans.
4. Livestock: This category includes animals, livestock generally much beef as pork.
5. Energy: Raw materials related to energy production are among the most actively traded, this category includes crude oil in its two variables Brent and WTI, natural gas, and other mixtures and derivatives such as gasoline, diesel and furnace oil .
6. Perishable: In this category, sometimes grouped with other agricultural products include coffee, cotton, sugar, cocoa and orange juice.

Why invest in commodities?

Commodities are assets that have unique and cash flows associated with the underlying asset: a gold bar will never generate cash or make a dividend payment, and a wheat field never made a coupon payment or repayment on investment.
The appeal of raw materials is the ability of the asset class of smoothing overall portfolio volatility and protecting against certain adverse economic environments with low probability but high impact event in returns. inversely Adding assets correlated to a portfolio has the effect of smoothing the overall volatility, since it is unlikely that these components move in the same direction simultaneously. Thus mainstream appeal of the products lies in the correlation or lack thereof to traditional asset classes like stocks and bonds with the consequent potential to reduce overall risk.
Of course at the expense of reduced volatility of returns is not the desire of an investor, although there is evidence to suggest that the raw materials have historically delivered appreciation while overall lower volatility. in other words, the raw materials can provide the best of both worlds when it comes to asset allocation strategies.
The inflation coverage is a major concern for all investors, especially those living on fixed incomes, as the rise in prices erodes the purchasing power of existing wealth yields and eats all kinds of assets. On this side another attractive aspect of the raw materials is the ability of the asset class to act as a hedge against inflation due to the appreciation in value when inflation kicks in, which offset losses elsewhere (dividends, coupons, interest, rents) of the portfolio as a result of a general price increase. Inflation is an increase in prices, and as such, usually include an increase in raw material prices that are inputs into goods and manufacturing processes. In other words, inflation probably will not happen unless the prices of raw materials, including oil, metals and agricultural products become more expensive.
On the other side the raw materials can also function as a commitment to the maintenance of world economic growth, and in particular the expansion of emerging economies. Developing economies to supply rapidly urbanizing migration of rural populations to the cities, so it motivates the demand for raw materials to build infrastructure, to feed growing populations, and serve the consumer goods manufacturing. For those who believe that these demographic trends are favorable to increased demand for natural resources, investment in raw materials could be an optimal way to gain exposure to this investment thesis.

How to invest in commodities?

There are four main options for investors seeking exposure to commodities, each of which has advantages and potential disadvantages:

1. Physical exposure: The most basic way of achieving exposure simply involves purchasing and storage of the goods desired. This method ensures the investor exposure to changes in the spot price of raw materials. Unfortunately, physical exposure only makes sense for products that exhibit certain physical standards and involves the maintenance of a sufficient value to weight ratio to keep storage costs to a reasonable level. The storage of gold coins in a safe is one thing, but trying to get physical exposure to crude oil or livestock presents a number of logistical and cost barriers that hinder investment opportunities.
2. Futures Contracts: Developed in the futures markets allow investors to gain exposure to commodity prices through financial contracts with natural resources as underlying assets. While this method simplifies the investment process, it also introduces additional risk factors as the return of such assets derived not only depends on changes in spot prices, but also the slope of the futures curve and the current level of interest rates, and leverage suppose what some investors may feel uncomfortable or even limited by regulation. Futures are contracts created as a hedging tool for producers and traders of raw materials, but speculators have used as an investment vehicle at the same time.
3. Shares: shares in companies engaged in the production or extraction of raw materials. Because the profitability of these companies usually depends on the market price of their products, their perspectives tend to improve with increasing prices of raw materials in question and vice versa.
4. ETCs: Investment Vehicles listed on a stock exchange and traded like stocks that allow investors to gain exposure to commodities individually, sectoral or global. These exchange-traded commodities for benefiting from all the qualities I have outlined above, taking into account certain risks common to futures contracts, as such ETCs replicate indices whose constituents are commodity futures in question.

Below I discuss some tables with cumulative returns for different periods of time, the correlations with key benchmark stock indexes, volatility and Sharpe ratio for each of the reference materials used as ETF Securities ETCs.
 

Precious Metals

Industrial Metals

Agriculture

Energy

how to Invest in renewables energy

In recent years, renewable energy investment has increased in popularity largely because the world is becoming increasingly aware that the current economic model is based on finite resources and this has to change. Although crude oil and other fossil fuels will last us for the foreseeable future, there will come a time when our energy consumption will have to look for alternative and renewable sources.
And here come into play renewable energy, although this sector is still relatively immature in global terms, the growth opportunities presented are huge and it is worth considering exposure to renewable energy.

How to invest in alternative energy?

Biofuels:

Biofuels are an alternative form of energy derived from carbon based organisms. There are many different options including bio-alcohols, biodiesel, green diesel, vegetable oil ... Recently, the International Energy Agency has stated that biofuels have the potential to replace 27% of transport fuels by 2050, effectively reducing emissions greenhouse gases by 2.1 million tons per year. Even some countries already have existing mandates requiring companies to blend biofuels with gasoline, giving these various fuels with high growth potential.
Some companies with which exposure to biofuels, and thereby to alternative energies are:

• Archer-Daniels-Midland Company (ADM) company dedicated to the production of different agricultural commodities and also has many of its operations based in the biofuels industry.
• Methanex Corporation (MeOH): this is a company dedicated to the production and sale of methanol, a chemical that, among other things, is a very popular agent mixed with gasoline. Methanol is also one of the key components of biodiesel. MeOH pays a dividend yield of 2.6%.

Hydropower:

Hydroelectric power has become the most powerful energy alternative at this time, but of the least popular. Hydropower generates water currents moving and exercising more on large dams and rivers.
It is presented as one of the alternative energy sectors with greatest growth opportunity.

• China Hydroelectric Corporation (CHC): This company is engaged in the acquisition, ownership and development of hydropower in China. HCC has assets of $ 77 million.
• Zhaoheng Hydropower Ltd. (ZHYLF.PK): Zhaoheng generates electricity mainly in the southern and midwestern China.

Nuclear:

After the tragedy of Fukushima has questioned the safety of many nuclear plants, and that is why Germany has completely abandoned nuclear power. But with the new facilities are much safer and more efficient nuclear plants like Fukushima, so that investors take into account this energy Fuenta its considerable growth potential.
We expose ourselves to nuclear energy by investing in ETFs or companies related to these materials:

• Market Vectors Uranium + Nuclear Energy ETF (NLR): This ETF provides direct exposure to nuclear energy because it has stakes in companies such as Exelon Corp, Uranium One, and Areva engaged in the manufacture of this alternative energy.
• Uranium ETF (URA) ETF focuses on the mining of uranium it is considered a direct exposure to nuclear energy and impact the growth of this industry.

Solar:

The solar energy sector is the fastest growing developed in recent years, and a favorite for investors. The industry is still relatively small, but has an average growth of 39% annually over the last decade and a strong predictions for the future. For now, China dominates the solar market, and most companies base their operations in emerging markets.
To be exposed to this alternative energy we can choose companies or ETFs:

• First Solar, Inc. (FSLR): This US-based company is one of the best known in the solar energy sector. Even after the death of CEO of First Solar the company's future is uncertain.
• Market Vectors Solar Energy ETF (KWT): This ETF invests in companies that, on a weighted basis, get a 90% or more of their income from the solar energy sector. The main investments of the fund are in companies like First Solar, GT Solar and MEMC Electronic Materials.

Aeolian:

Wind power is one of the most established alternative energy in the world, and many countries have chosen it as an alternative to fossil fuels. Currently, wind power amounts to just over 2% of the world's energy supply, but its growth rate is increasing, and this figure is expected alcanzace 8% in 2018. Like so many other forms of renewable energy, energy companies are hard to find in equities, but this trend will change as the industry continues to grow.

• Broadwind Energy, Inc. (BWEN) sector company wind energies, based in Chicago. Owns more than $ 44 million in assets.
• Iberdrola SA (IBE.MC): This Spanish utility company, is part of your business based on wind energy production by Iberdrola Renovables, so it is an attractive investment option.
• ISE Global Wind Energy Index Fund (FAN): a fund that focuses all his interest in the wind industry. Your participation is divided into different companies, those companies which are exclusively in the wind business receive a higher weight than those with a broader business model.

What other way to invest in renewable energy you know?

Waiting for the big-market bond rotation

The OECD issued its latest revision on global economic growth prospects, in the first of his two appointments or annual reviews. The overall impression is of slow growth and downward adjustments in earlier projections.

In USA GDP will expand even more slowly, at rates of 1.9% this year and 2.8% in 2014.

In Europe much more pessimistic, expecting a contraction of 0.36% of GDP this year and moderate growth of 1.1% in 2014. The main problem remains the debt.

For Asia disparate and curious vision, the two largest economies China and Japan grow although downgrades the first, to 7.8% and the second upward to 1.6%. Curious because if China grows below 7.8% will be a warning sign of weakness and would alert the government while if Japan grows by 1.6% all happy ... not the Nikkei has left a 5.15% on the session.

U.S. bond markets nervous, considering that the expected growth without being robust, it could be enough to affect the asset purchase program by the Fed.

Furthermore bonds approaching resistance area (in profitability or price support, as you look) interesting from a technical perspective, the 10 years in 2.4%, which if exceeded invite managers to modify some strategies.

The technical aspect of fixed income USA invites caution for months, as I come through the graphic exposing long stretch following:

Bonds "high Yied" are also suffering falling sales and prices in line with the sovereign. You can read at this link an interesting article about the risks of rising rates, derived from the tendency to convexity hedging.

A reference to the debt market USA is the ETF (AGG) designed to track the performance of all U.S. debt, Total U.S. Bond Market ETF (37% Treasuries, 28% MBS and the rest in corporate and agencies) capitalization of $ 15,600 million is also falling in price and this will be five weeks straight and falling sales.

Generally, when the bonds fall weak moves financial markets assembly and intermediate trends ruptures tend to bring major changes in the outlook and portfolio adjustment, feeding additional losses in assets.

This time, before such change in the mindset presumed investor and as turbulent markets, handled all markets fall? Unison or there will be a mass migration of Fixed Income Funds Equity?.

Uncertainty about the Great Rotation is debated and concern among fund managers and selectors will depend largely on market confidence about staying "apuntaladora" Bernanke and real economic opportunities.

In view of the behavior of the Fed, it could be argued that the Great Rotation want to further enhance asset reflation and get the expected wealth effect that can finally bring down the pernicious tendency of the money multiplier.

Specific corrections in stock prices are necessary and "healthy" for the strength of trends, there should be an adjustment at any time, perhaps coinciding with breaks bearish on bonds.

After an eventual correction will attract capital bags different sources, one of them raised liquidity proceed with the settings fixed income portfolio and if the helicopter flies over satin, as the FED-BAG correlation is 85%.

True, stock valuations discounted cash flow worsen with rising interest rates and subtract bag. However, the bag can also grow through multiples expansion as we tested several times.

The music continues to play and as said the CEO of City before the debacle, must keep on dancing ... but unlike Mr. Charles Prince also closely monitoring the situation to avoid being caught in an artificial rise will end in tears, as the rest.

Bank deposit. You know how it works?

When hiring a bank deposit must look at several things and although it seems to be the easiest investment there, it is not the end of the post and I will tell you that if it is, we have to fix on the characteristics of product we hired, mostly to give us for a ride and at the end we get on a good scare and anger.

Before everything. A bank deposit, fixed term or fixed-term deposit is the same. You will leave some money to the bank to do its thing and he in return gives you a interest as compensation. It has a fixed duration and fixed remuneration contract is fixed, ie before entering already know what you're going to win. They are also guaranteed by the state (FGD) 100,000 per entity and person in case of bank failure.

This strong interest is mainly governed by the Euribor (interest rate to lend money to, including, entities) but with the whole issue of the crisis the illiquidity of banks have had to forget the taxes low interest rates by the European Central Bank (ECB) and make aggressive campaigns to individual customers a higher interest rate.

While official interest rates are at 1% banks are paying them to liabilities with 4.6% APR and without any connection from the client.

We will explain in more understandable words what the previous sentence. THE European Central Bank fixed in 1% the interest rate at which it lends money to banks, that is, that when you decide to open a window of liquidity to banks in need come to him to refinance because only charged 1% APR, which is very little.

But as always there are windows of liquidity banks must ingéniaselas to get more money and this is where the competition starts to get money from ordinary citizens.

Clearly, there are many people who prefer not to earn a little extra to have to change banks but there are many people and with real money if you are willing to move to earn more.

Therefore, the most interest is willing to offer, in theory, is the one with more numbers to get more funding. (Although other factors influence how the country of origin of the entity, rating rating and even if you drop close to home or if you are good at managing the Internet).

Once we are clear because there are going to explain bank deposits which typically offer entities and that we'll be looking.

There are several types of deposits but of course we say that we are interested only pure and hard deposits without additional links, no credit, no insurance, or payroll or anything.

Being a low-risk investment, and suitable for every investor profiles, we can see that the investment triangle occupy a very relaxed site to be a liquid investment, low risk and therefore unprofitable.

Investing in this way we will not get rich but how low we will not lose money, and I say now lose because if you go to a lot of companies and they offer a lower interest rate to 3% and enter missing. So clear.

If you want a band inflation eats it otherwise you better grab your money and spend it how you will at least give pleasure.

We also have to look at whether the associated account where interest is exempt receive commissions or we will charge between 6 and 20 euros per year. Thing that still remains for the low profitability that we provide.

Now we are chastened and they do but you have to be careful that we do not give any kind of product then selling costs or recover the money, you can leereste article preferred to go deeper on the subject.

Remember that the bank is to serve. 's not your friend , and if not keep his promises or not treating you how you deserve there are dozens of them scattered throughout the geography.

As a final conclusion and summary say that everyone who has "some" money should try to get some performance to keep purchasing power and try to at least get something "extra". Do not be charging for anything and remember that it is you who is indebted to the bank money and not leaving you giving interests.

Finally, always read the fine print to take no surprises.

Indeed, investment is simpler than having no money at home. In contrast is the least profitable of all but ultimately is an investment at 0% APR.

I hope this clarification have no hesitation in going to the bank to make "some investment" and if you do not hesitate to contact me.

APPLE Magic: Succulent PROFITS poor TAX

The U.S. Senate has set to work to investigate the major tax fraud occurring in their country. The genius of Apple to evade taxes has no limits, the Senate knows and wants to end it. They have made a report and the data are chilling.
Fraud is the concentration of profits in some subsidiaries that are not based tax.
The report highlights the possible agreement by Apple to Ireland for a tax rebate of 10%, from 12% to 2%.
A clear example is the holding of foreign affiliates (AOI), which in the past four years has made ​​a profit of 30,000 million dollars even stated anywhere.
On the other hand, we have (ASI), which is responsible for billing the sales in Spain, using companies from Ireland to escape the Spanish hacienda, specifically 74,000 million in the past four years.
In 2011, for example, of the 22,000 million profit paid 10 million dollars, less than 0.05%
Apple has more than 100,000 million U.S. dollars outside. 61% of its sales are overseas records.
Large experts believe that the problem is that "the tax system is not up to the digital age"
The U.S. Senate has launched accusations against Ireland to facilitate such companies to enter its country attracting them with their "tax incentives"
with these statements, Gilmore, Irish Deputy Prime Minister, leaving the way of a U.S. Senate report which states that the technology giant created two subsidiaries in Ireland that had no employees or physical presence, and whose sole purpose was to channel thousands of million of its global profits to avoid paying U.S. taxes, saying the tax problem comes from other countries, not yours. How do you think that affects the economy? Could eradicate extreme poverty by taxing big companies? Yes, but 2 times.

The role of hedge funds: inequality and financial instability

Hedge funds known as hedge funds or hedge funds, are a type of mutual funds that are not only subject to regulation, and that because of it have played a crucial role in virtually every financial crisis since the nineties . Due to its relative complexity are completely unknown to most people. A population that is, paradoxically, the main affected by the performance of these financial institutions. To prevent that remains so in this article I will try to shed enough light, of course following the usual teaching style, in the murky world of hedge funds.

The performance of mutual funds is collecting money from many sources (individuals, corporate savings or other funds) and investment thereof in any financial product (shares, for example). After a time, when there has been a benefit and money has appreciated, the fund returns to owners past the nominal (money) plus interest, keeping the bank with an important commission.
Origin
The first recognized hedge fund was established in 1949 in the U.S., but its most important expansion took place from the second half of the nineties. Hedge funds differ from other mutual funds precisely in their aggressiveness and risk exposure. On the one hand have no regulatory limitations of any kind, and on the other hand tend to maintain very high leverage positions (operations with borrowed funds, such loans). This means that any fund can perform operations with no money but with so much borrowed money as you want. In case of profit profitability is much higher, but in case of loss the problem is also serious and very contagious (defaults follow each other).
Hedge funds are also managed by professionals who largely turn their profits as investment in the same hedge funds, more intense commitment to the future of the fund. As a result of all these features hedge funds usually yield high levels of profitability.
How and where is made ​​a hedge fund
Hedge funds are managed by professionals and have very high entry barriers for investors, in many cases reaching the million dollars, but in any case depends on the specific regulation of the territory in which it is constituted. These barriers to entry are very high also precisely because of the high risk associated with financial transactions undertaken by hedge funds. Regulators seek to protect small investors and believe the best way is by raising the barriers, while more liberal from orbit is considered to be lower these barriers to involve the largest population possible benefit of hedge funds.
Hedge funds therefore have a minimum of stakeholders: investors, managers and companies that offer services. As investors are currently most other mutual funds (including other hedge funds), transnational corporations and millionaires course.
 

Also, the location is usually territory other than the territory of management. Indeed, 60% of hedge funds in 2010 were located in tax havens (in fact 37% of all hedge funds are in the Cayman Islands and 27% in Delaware, ie United States). The constitution in a tax return also increases because it reduces transaction costs (interest, records, etc..). In terms of managing 80% is on American soil (ie 41% is in New York), and most of the rest is in London. Hedge funds have Anglo flavor.
But banks also have flavor. Because the managers of these funds are logically banks, plus they are also those who offer specialized services to hedge funds. And as all this is a business statistics increasingly concentrated, precisely because of the crisis.
 

In short, like any mutual fund, the purpose of a hedge fund is to highlight the money deposited by investors, and for that we go to all financial markets (stocks, corporate bonds, government bonds, futures, etc..) Seeking returns. The aim is to speculate, and that almost anything goes.
Hedge Fund Strategies
The strategies used by hedge funds can vary between each other, but all seek to "exploit" the opportunities of making profits in the financial markets. And all are, in a sense, gambling. They are usually complex strategies, but sometimes can be as simple as a bet that interest rates of private bonds and government bonds are converging [1]. The usual way of hedge funds bet is to alternate short positions with long positions.
Taking a short position (short) means that the bet is "to think that the price will go down." For example, a hedge fund may sell their shares today and buy tomorrow when they have fallen. As today sells more expensive than you buy tomorrow's benefit. A naked short position (naked short) is the same but in case you are selling something that does not have [2]. For example, we sell at today's prices to deliver after tomorrow and hope that tomorrow is worth much less. Bought and delivered tomorrow after tomorrow, making the profit.
A long position is betting that "the price will go up", which is what we are accustomed. If you combine both positions in different markets can increase profits. For example, the sale we did in the short position will receive money that we invest as a long position. Money Never Sleeps.
History: hedge funds, crises and speculation
The most famous case of a hedge fund is that of Long-Term Capital Management (LTCM), managed by a team of professionals that included two Nobel laureates in economics, and its investors had even central banks. The net returns were from 42.8% in 1995, from 40.8% in 1996 and 17'1% in 1997, and the leverage was 30-1 (Vilariño, 2000). In 1998 the risky and complex hedge fund operations clashed with the Russian debt default and the losses were very severe. Finally the action of the Federal Reserve Bank of New York, who pressed a set of large investors to save the bank, prevented greater evils.
But other cases are also spectacular and also reflect the sign of the times. The first thing worth pointing is that of George Soros, who used his hedge fund to speculate against sterling. First George Soros borrowed 15,000 million pounds, and stealthily changed dollars. The purpose of short-Soros was betting with pounds, ie bet that lose value. When he was all prepared and wanted to attack it managed to make it very sounded: summoned the media and announced that he was convinced that the pound would fall. Then sold off their pounds borrowed and sent the signal to the market and the pound fell really (indeed, the sell-off, coupled with the fear of the other holders of pounds, has laid). The British government responded with all its weapons of monetary policy, but after spending more than 50,000 million dollars had to surrender: speculators had expired. With the pound on the floor Soros bought 15,000 million pounds (now worth fewer dollars) and the back (it was a loan). The gains were huge, and teaching more: a speculator, one, could sink an entire country [3].
The Asian crisis of the nineties gives many more examples of this, and the recent debt crisis even more. It teaches us that a few speculators, counted on the fingers but managing huge amounts of money, can bring down countries and set economic policies themselves.
Profitability and current developments
For all, hedge funds receive higher returns in scrambled scenes, as there is nothing worse for a mutual fund that the non-existence of space to speculate. However, widespread uncertainty scenarios or collective crisis can also be its own grave. Also, as I said before, the spread can be huge losses due to the leverage situation. Therefore, depending on which sectors and financial markets suffer losses suffer much hedge funds.
And the crisis was primed with hedge funds in 2008, as many of them had participated in toxic financial assets or had investments in mutual funds that had done so. The case of the investment bank Bear Stearns is representative, since in 2008 he had to respond to losses in two hedge funds managed (offshore) and that made him finally sinking. It was sold at a bargain price to JP Morgan [4].
But bailouts hedge funds could breathe easy again. And again they make profits and continue their speculative activity. Just look at the chart I made with TheCityUK data.
 

The hedge fund business is back up, and that's precisely what the data show not only profitability but also the data of assets managed by it. Without reach even 2007 levels, pre-crisis levels, the hedge fund space have recovered rapidly.
 

And ultimately it seems that the entire financial system returns to normal gradually. Even the leverage is regaining 2007 levels. But that's the "normalcy" that led to the crisis, because although we can guess that the hedge funds are responsible for the crisis itself that it had an important role in the expansion of the bubbles and contagion from further damage. And is that as a society we do not learn.
 

 

Conclusions
But you back to this "normality" was expected. In economics there is a concept of "moral hazard" that has to do with the incentives that exist in the market and the beliefs of the agents. Today all financial actors (investors and managers especially) know the United saved from burning to entities that are in trouble and that endanger the system (and given the amount of money that move the hedge funds and banks could say that are nearly all), so this risk no actual loss. To put it another way: they know that the bill is paid by workers with adjustment plans and other measures, so they do not care not to repeat the same activities that have made them richer and richer before and after the crisis.
We can not forget that the phenomenon of hedge funds and promote financial instability and distort the market (because liberals tell me what benefits to society of naked short operations), increase inequality in several ways. On the one hand because as industry financial elites that manage these funds promote an institutional configuration such that brings in the States tax competition and prevents them from effectively control tax evasion. Following public finances are distorted and end the welfare state ends up being paid by the middle and lower classes, being the high payments outside the system. On the other hand because logically are the upper classes who benefit most from the business of collective investment funds (pension funds, mutual funds, hedge funds, etc..) And therefore grows exponentially the difference between those less by entering your salary and who increasingly enter their financial activities.
The fact is that we are headed to another huge financial crisis. And if not, at the same time

The 12 principles of value investing (Part 1)

Bestinver has published a book that summarizes the 12 principles of management by value, with phrases and ideas of legendary managers who follow this philosophy, such as Peter Lynch, Warren Buffett, Mario Gabelli, Charlie Munger, John Templeton, John Neff, Jim Rogers, Christopher H. Browne, Walter Schloss or Francisco Garcia Paramés own. Joining them are two prominent figures Friedrich A. Von Hayek, Nobel laureate in economics and Benjamin Graham driver of investment value.
I put a short summary has been published weekly funds people, each one of these ideas:
1) The active equity is more profitable in the long term: Peter Lynch (1944), Magellan fund manager, once said that "the great advantage of investing in stocks, for those who accept the uncertainty, is the extraordinary reward for having reason. " From 1871-1992 and in spite of all bankruptcies, recessions and crises, stocks outperformed bonds in 80% of periods of 10 years and 100% of 30-year periods. Moreover, equities has resulted thirty times more profitable than bonds. The explanation is that when you buy shares you are buying a part of a business and is therefore part of its growth and expansion. "The bond investor is only the nearest source of money and the best we can hope for is to get it back with interest," says Bestinver AM on publication.
Real estate assets also increase the purchasing power of long-term investor, but not as consistent as stocks. As for raw materials, possibly the worst real asset returns over the long term due to its high cyclicality.
2) active equity is less risky in the long term: Indeed, and although it may seem paradoxical, the target equity is less risky to invest long-term, since its evolution is linked to economic growth and corporate profits . Instead government bonds depend on economic policies governments adopt q ue corresponding, often inflationary and therefore destructive of value to those "nominal assets" that do not incorporate price inflation. As an example, draws Bestinver Argentine investors. The investor in Argentine government bonds in 2001 lost 70% of their savings and have not since recovered, while the initial equity investor lost 60% in the same year and then not only recover quickly, but multiply by nine investment in five years. Moreover, the Argentine bond is approximately the same price as marked at the outset of the crisis. And, according to the manager, history is full of examples of very damaging inflationary periods for investors in all types of bonds (Argentina in 2002 and in the 80s and 90s; Russia in the 90s, Spain in the early 70, just as the U.S., or Germany in the 20s).
3) Few managers get beat market indices in the long run: Get an average annual return of over 10% that offers long-term stock market is not easy. In fact only 9% of American managers has managed to outperform the S & P 500 over 16 years (1981-1997). The fundamental reason is Bestinver is "the lack of discipline and the continuous changes of strategy they incur most fund managers", who often succumb to fads and phobias of each moment. Be true to the investment philosophy both in good and in bad times is one of the keys to obtaining a satisfactory long-term performance. History shows that the average fund manager tends to go wrong with your investment decisions and guided heavily by short-term economic forecasts. Thus, the different minima of the bag have been coinciding with maximum liquidity positions equity funds: 1970, 1974, 1982, 1987 and 1990.
4) Investment in setting produces higher returns than the indices in the long run: "All intelligent investing is value investing: buy something for less than it's worth," said Charlie Munger once (1924), vice chairman of Berkshire Hathaway . Among the different schools of management, "value investing" is the only one that brings together a group of managers who manage to beat the stock market long term and consistently. According to investment firm Ibbotson Associates, value investing has overtaken from a differential growth rate of 5% since 1932.
It is estimated that the investment value concentrates only between 5% and 10% of world capitalization by 200 managers, especially in North America and investors have achieved this common philosophy beat the market long term, although each with its own strategy.
5) The volatility and liquidity of an action are not representative of the risk: Friedrich A. Von Hayek (1899-1992), once said that "Wall Street used the CAPM model and other ways to reduce the uncertainty to a quantifiable risk. But only measure what is measurable, no matter what. " Thus, the risk that an investor takes when investing in shares is not determined by the volatility that has been in the past, but by the possibility of a permanent loss of value associated with the business of the company. Thus a volatile trading does not make a firm more risky but allows the investor to buy it at a time when the alteration between value and price is higher.
Neither the size or liquidity risk is representative, because in principle it is always easier to find major differences between value and price in small companies than in blue chips, as they are less analyzed. In fact, it has been shown that small caps are more profitable than large firms in the long run, but not necessarily more risky.
6) The stock market crises are inevitable and allow a significant value creation: As John Templeton (1912-2007), philanthropist and founder of Templeton Funds Financial, "the four most dangerous words in investment history to have been: this time is different. " Although the long-term actions are most profitable assets and secure, the history of the stock market is full of dramatic episodes. The value investor has to understand that uncertainty will always be present when investing in stocks, as strong or scilaciones are inherent to the market and investment strategy based on these oscillations is a mistake in the long term. However, staying true to the investment strategy during such episodes allows a significant value creation.
In the past 40 years the equity markets have faced several oil crises, many armed conflicts, various financial scandals, bankruptcies thousand and four major stock market crash. And despite everything, the S & P has provided an average annual rate of 9.3% since. Even from the crisis of 29, in less than four years an investor would have earned a higher return than investing in Treasury bills.
In my next article I will comment the last 6 value principles.
A greeting.

The U.S. economy grew 2.4% in the first quarter

Washington, May 30 (Thomson Financial). - The U.S. economy grew at an annual rate of 2.4% in the first quarter, a tenth less than originally planned, as a result of public spending cuts approved by Congress, especially on defense. However, Commerce Department data released today highlight that consumer spending rebounded in the first three months of the year at a rate of 3.4%, the highest in the past two years. The data is particularly significant in an economy like the U.S., where private consumption accounts for almost 70% of the total Gross Domestic Product (GDP). In its first estimate, the federal agency had estimated GDP growth at 2.5% for the period between January and February. In this way, the U.S. economy recorded over two years of sustained growth, despite its still palpable warmth accelerates its expansion over the last quarter of 2012, when it expanded 0.4%. The U.S. trade balance data also showed positive, with an increase in exports of goods and services by 0.8% compared with a fall of 2.8% reported for the fourth quarter of 2012, and imports which grew by only 1.9 % compared with a decrease of 4.2% in the previous period. Also, the real estate sector seems to consolidate its recovery from the 2008 crisis, and residential fixed investment grew at a rate of 12.1%. As a brake on economic growth, in contrast, behaved steep spending cuts amounting to 85,000 million approved last March to the end of the fiscal year in September 2013. Government spending fell 4.9% compared to 4.1% forecast in the first of three official estimates, with special emphasis on the defense sector which fell by 12.1%, compared with 11, estimated 5% previously. Without these cuts, the U.S. economic growth would have been 3.4% in the quarter. Meanwhile, prices remained controlled behavior, registering a growth of 1% in the annual adjusted, down from 1.6% at the end of last year, let alone the 2% threshold marked by the Federal Reserve ( Fed) U.S.. Although the data show some optimism about the U.S. economic discourse, the truth is that it is too weak to continue lowering the high unemployment rate in the country, which remains a major concern of citizens and which closed April in a 7.5%. In a parallel data released today, the figure weekly esempleo subsidy claims in the U.S. rose by 10,000 and stood at 354,000 last week. Experts valued the good performance of the economy in the context of sharp cuts in public spending, but said that is unlikely to affect the aggressive monetary stimulus policy implemented by the Fed to stimulate growth. In a recent appearance before the Joint Economic Committee of Congress, the Fed chairman, Ben Bernanke, stated that the policy stimulus including interest rates between 0% and 0.25% and monthly program billionaire bond buying is changed unless finding an economic expansion "continuous and sustainable." The third and final data on U.S. GDP will be released on June 26. MarketWatch

Washington, May 30 (Thomson Financial). - The U.S. economy grew at an annual rate of 2.4% in the first quarter, a tenth less than originally planned, as a result of public spending cuts approved by Congress, especially on defense. However, Commerce Department data released today highlight that consumer spending rebounded in the first three months of the year at a rate of 3.4%, the highest in the past two years. The data is particularly significant in an economy like the U.S., where private consumption accounts for almost 70% of the total Gross Domestic Product (GDP). In its first estimate, the federal agency had estimated GDP growth at 2.5% for the period between January and February. In this way, the U.S. economy recorded over two years of sustained growth, despite its still palpable warmth accelerates its expansion over the last quarter of 2012, when it expanded 0.4%. The U.S. trade balance data also showed positive, with an increase in exports of goods and services by 0.8% compared with a fall of 2.8% reported for the fourth quarter of 2012, and imports which grew by only 1.9 % compared with a decrease of 4.2% in the previous period. Also, the real estate sector seems to consolidate its recovery from the 2008 crisis, and residential fixed investment grew at a rate of 12.1%. As a brake on economic growth, in contrast, behaved steep spending cuts amounting to 85,000 million approved last March to the end of the fiscal year in September 2013. Government spending fell 4.9% compared to 4.1% forecast in the first of three official estimates, with special emphasis on the defense sector which fell by 12.1%, compared with 11, estimated 5% previously. Without these cuts, the U.S. economic growth would have been 3.4% in the quarter. Meanwhile, prices remained controlled behavior, registering a growth of 1% in the annual adjusted, down from 1.6% at the end of last year, let alone the 2% threshold marked by the Federal Reserve ( Fed) U.S.. Although the data show some optimism about the U.S. economic discourse, the truth is that it is too weak to continue lowering the high unemployment rate in the country, which remains a major concern of citizens and which closed April in a 7.5%. In a parallel data released today, the figure weekly esempleo subsidy claims in the U.S. rose by 10,000 and stood at 354,000 last week. Experts valued the good performance of the economy in the context of sharp cuts in public spending, but said that is unlikely to affect the aggressive monetary stimulus policy implemented by the Fed to stimulate growth. In a recent appearance before the Joint Economic Committee of Congress, the Fed chairman, Ben Bernanke, stated that the policy stimulus including interest rates between 0% and 0.25% and monthly program billionaire bond buying is changed unless finding an economic expansion "continuous and sustainable." The third and final data on U.S. GDP will be released on June 26. MarketWatch

The U.S. economy grew 2.4% in the first quarter - Expansion.com

Washington, May 30 (Thomson Financial). - The U.S. economy grew at an annual rate of 2.4% in the first quarter, a tenth less than originally planned, as a result of public spending cuts approved by Congress, especially on defense. However, Commerce Department data released today highlight that consumer spending rebounded in the first three months of the year at a rate of 3.4%, the highest in the past two years. The data is particularly significant in an economy like the U.S., where private consumption accounts for almost 70% of the total Gross Domestic Product (GDP). In its first estimate, the federal agency had estimated GDP growth at 2.5% for the period between January and February. In this way, the U.S. economy recorded over two years of sustained growth, despite its still palpable warmth accelerates its expansion over the last quarter of 2012, when it expanded 0.4%. The U.S. trade balance data also showed positive, with an increase in exports of goods and services by 0.8% compared with a fall of 2.8% reported for the fourth quarter of 2012, and imports which grew by only 1.9 % compared with a decrease of 4.2% in the previous period. Also, the real estate sector seems to consolidate its recovery from the 2008 crisis, and residential fixed investment grew at a rate of 12.1%. As a brake on economic growth, in contrast, behaved steep spending cuts amounting to 85,000 million approved last March to the end of the fiscal year in September 2013. Government spending fell 4.9% compared to 4.1% forecast in the first of three official estimates, with special emphasis on the defense sector which fell by 12.1%, compared with 11, estimated 5% previously. Without these cuts, the U.S. economic growth would have been 3.4% in the quarter. Meanwhile, prices remained controlled behavior, registering a growth of 1% in the annual adjusted, down from 1.6% at the end of last year, let alone the 2% threshold marked by the Federal Reserve ( Fed) U.S.. Although the data show some optimism about the U.S. economic discourse, the truth is that it is too weak to continue lowering the high unemployment rate in the country, which remains a major concern of citizens and which closed April in a 7.5%. In a parallel data released today, the figure weekly esempleo subsidy claims in the U.S. rose by 10,000 and stood at 354,000 last week. Experts valued the good performance of the economy in the context of sharp cuts in public spending, but said that is unlikely to affect the aggressive monetary stimulus policy implemented by the Fed to stimulate growth. In a recent appearance before the Joint Economic Committee of Congress, the Fed chairman, Ben Bernanke, stated that the policy stimulus including interest rates between 0% and 0.25% and monthly program billionaire bond buying is changed unless finding an economic expansion "continuous and sustainable." The third and final data on U.S. GDP will be released on June 26. MarketWatch

The U.S. economy grew 2.4% in the first quarter - Expansion.com

Washington, May 30 (Thomson Financial). - The U.S. economy grew at an annual rate of 2.4% in the first quarter, a tenth less than originally planned, as a result of public spending cuts approved by Congress, especially on defense. However, Commerce Department data released today highlight that consumer spending rebounded in the first three months of the year at a rate of 3.4%, the highest in the past two years. The data is particularly significant in an economy like the U.S., where private consumption accounts for almost 70% of the total Gross Domestic Product (GDP). In its first estimate, the federal agency had estimated GDP growth at 2.5% for the period between January and February. In this way, the U.S. economy recorded over two years of sustained growth, despite its still palpable warmth accelerates its expansion over the last quarter of 2012, when it expanded 0.4%. The U.S. trade balance data also showed positive, with an increase in exports of goods and services by 0.8% compared with a fall of 2.8% reported for the fourth quarter of 2012, and imports which grew by only 1.9 % compared with a decrease of 4.2% in the previous period. Also, the real estate sector seems to consolidate its recovery from the 2008 crisis, and residential fixed investment grew at a rate of 12.1%. As a brake on economic growth, in contrast, behaved steep spending cuts amounting to 85,000 million approved last March to the end of the fiscal year in September 2013. Government spending fell 4.9% compared to 4.1% forecast in the first of three official estimates, with special emphasis on the defense sector which fell by 12.1%, compared with 11, estimated 5% previously. Without these cuts, the U.S. economic growth would have been 3.4% in the quarter. Meanwhile, prices remained controlled behavior, registering a growth of 1% in the annual adjusted, down from 1.6% at the end of last year, let alone the 2% threshold marked by the Federal Reserve ( Fed) U.S.. Although the data show some optimism about the U.S. economic discourse, the truth is that it is too weak to continue lowering the high unemployment rate in the country, which remains a major concern of citizens and which closed April in a 7.5%. In a parallel data released today, the figure weekly esempleo subsidy claims in the U.S. rose by 10,000 and stood at 354,000 last week. Experts valued the good performance of the economy in the context of sharp cuts in public spending, but said that is unlikely to affect the aggressive monetary stimulus policy implemented by the Fed to stimulate growth. In a recent appearance before the Joint Economic Committee of Congress, the Fed chairman, Ben Bernanke, stated that the policy stimulus including interest rates between 0% and 0.25% and monthly program billionaire bond buying is changed unless finding an economic expansion "continuous and sustainable." The third and final data on U.S. GDP will be released on June 26. MarketWatch

The U.S. economy grew 2.4% in the first quarter - Expansion.com

IMF cuts growth forecast for China and warns of the credit problem

The Fund, which last month had placed the growth prospects for the Republic at 8% this year and 8.2% next, now estimates that the economy of this country will only increase by 7.75% this year and in 2014.
The IMF has doubts about the quality of Chinese investment by the rapid increase créditoEn a press conference in Beijing at the end of their annual mission to evaluate the progress of the Chinese economy, the Fund Deputy Managing Director David Lipton, attributed the cut in estimates of the weakness of the global economy, which has reduced the appetite for Chinese exports.
Lipton said the rapid growth of social financing, an indicator of credit available has grown very quickly, which "raises concerns about the quality of investments and their impact on the ability to repay the loans."
In particular, concerns increase while the increase represents "a rapidly growing part of the credit flows through parts unless supervised financial system."
The financial and monetary policy developed by Beijing is "appropriate" in this sense, Lipton found that one of the risks is that the loans are intended for investments "that are not sufficiently useful for the country."
In his view, control the overall growth of social finance is a "priority" will require greater oversight and accountability of investors for the decisions they make.
These policies may slow growth in the short term, he admitted, but stressed at the same time support the transition to a more sustainable model of growth.
However, Lipton insisted that financial and monetary policy developed by Beijing is "appropriate".
If this year's growth were to fall below the targets? Chinese government has set a target of 7.5 percent for this year?, The Fund recommends using a fiscal stimulus that favors income and domestic consumption.
The new Chinese government which took office in March is preparing a series of economic reforms that intends to present in October and which may include, among other things, greater openness to private investment and measures to promote the development.
Growth has become too dependent on the continued expansion of inversionesEntre detected problems are international financial institution which growth [...]

How the International Monetary Fund work

To get in history, the International Monetary Fund was created in 1945 in the United States, and its main objectives are to promote international monetary cooperation, facilitate international trade, and reduce, ultimately, poverty. It also conducts economic policies international regulatory and conciliatory. It is part of the United Nations being an intergovernmental organization made up of 187 members. Headquartered in Washington DC, but has several offices around the world.

IMF Performance

• The main objective of the International Monetary Fund is to ensure the stability of the international monetary system that allows member countries, and therefore its citizens transact with each other, which makes maintaining a stable financial system, sustainable and balanced.
• For this, the International Monetary Fund provides funding to member countries to improve the margin of maneuver of each country in relation to its balance of payments. Between national authorities and the International Monetary Fund made an action plan, ensuring effective both for its compliance.
• It also provides technical support and does a great job as a consultant to member countries to develop effective economic policies, for example on tax administration, monetary and exchange rate policy, supervision and regulation of banking systems and the regulations governing them.

IMF Resources

• Currently, the countries to become members of the International Monetary Fund, quotas must deposit called "subscription fees", which are directly related to the economic capacity of the country.
• These assessments determine the economic aid that the Fund will provide each country as well as their right to vote in decisions about regulations. Thus, the higher the contribution of a country, the more power on joint decisions and have more financial aid when tackling a crisis.
• When a country needs financial aid, IMF gives 25% of its shares, with the country's commitment to return within a period ranging from 3 to 5 years. It is expected that the country must repay the loan as soon as possible to not leave without credit to other member countries.
• In the past, obtaining resources from the International Monetary Fund was made by obtaining the interest on loans outstanding, which made it less effective and solvent, then opting for the model that is currently running .

What are the criteria of banks to lend

Unlike what banks and preach the good credit history of a customer is the most important when lending to this, but taking into account factors that are related to the ability to repay the loan voluntarily or necessity, and that should be very clear.

The ability to pay

The business of a credit institution not sue their debtors and keep their property in the event of default, which also usually results in losses, but to collect the amount borrowed and the interest and fees on time.
For this reason, the main criterion for granting loans is that the applicant can meet the periodic installments. Generally, in the case of mortgages, the monthly fee should not exceed 35% of the borrower's monthly income and your household.
If it is a loan in the medium or long term, banks and fixing the type of employment contract that the customer has, in addition to the strength of the employer. If this does not convince them, may require hiring a payment protection insurance, for example.

The warranty

Second, to ensure that in case of default can recover the borrowed capital and interest, the guarantee granted is very important. If it comes to purchasing a home, precisely the mortgage on the property is essential because the loan shall not exceed 80% of the valuation of this.
In other cases, especially whether to grant loans for amounts higher or long periods, you may require the financial institution, for example, the guarantor, that is, someone other than the client is committed to your estate to pay the debt if it does not comply.
It is also usual for the agency credit loans is fixed in current assets of the applicant, that is, both money and other personal property such as stocks or jewelry that may eventually be left with the first, as a garment, and use it to collect the debt.