2012 Financial End Game
2012 Financial End Game – The current global financial crisis has its roots embedded in the collapse of the subprime markets in the United States. As at October 2007 there was an estimated loss on the subprime market of approximately $250 billion. If you want to come out on top, you have come to the right place.
2012 Financial End Game
How to profit from the global crisis and make big bucks big time!
Global Financial Crisis Basics – Whilst at that time the subprime collapse seemed catastrophic, the reduction in the subprime market was in essence relatively limited and was a localized event. The effects of the event though did not in fact remain limited and localized.
The Basics
There has since been an expected cumulative loss of $4,700 billion in world output associated with the crisis. The loss in world output represents a figure that is close to twenty times greater than the loss experienced in the collapsed subprime market.
Though this loss is considerable, the impact on the decrease in stock market capitalization from July 2007 until November 2008 alone was calculated to have been $26,400 billion which was one hundred times greater than the loss on the subprime market in the United States where the crisis actually began.
Two questions have to be asked. How was it possible for the subprime crisis in the United States to occur and how was it possible for such a relatively limited and localized crisis to have been able to cause a crisis of such magnitude to world earnings?
The basics would indicate that there were fundamental flaws existing in the scrutinizing of the subprime market. Very importantly, the risk of the assets was understated and the balance sheets of the derived securities were not transparent to those buying into the risk.
When the crisis began there were two amplifying mechanisms behind the crisis which accelerated the rate of collapse, firstly there began the sale of assets to satisfy liquidity and this was followed by the rapid sale of even more assets to reestablish capital ratios.
The fact that the crisis rapidly spread globally was the result of the interconnectedness between banking institutions both nationally and internationally and the high levels of leveraging of the financial system as a whole.
Using Bonds
Whilst the term bond is mentioned and talked about considerably in financial circles few people outside of those circles really understand what a bond actually is. If we were to think of a bond as another form of an IOU it becomes easier to comprehend how bonds function.
About Bonds
A bond is a debt security in which the authorized issuer offers the holder a debt and depending on the terms of the bond the issuer is obliged to pay interest to use and or to repay the principal at a later date which is termed maturity.
A bond is in essence a type of loan. It provides the borrower with eternal funds to finance long term investments or in the case of Government bonds, to finance current expenditure.
Bonds offer much greater security than shares as there is virtually no risk involved. Bonds and treasury bonds are often utilized by investors when the stock market looks scary and unstable and there is a need for security.
Bonds perform differently to shares and move in the opposite direction of interest rates. When rates rise bonds fall and conversely when rates fall bonds will rise.
More complicated than shares, bonds come in an endless variety. For small investors considering debt investing the buying of bond mutual funds is advisable. Bond funds are free of the liquidity of individual bonds and investors can use them to diversify their holdings.
The security of bonds makes them a very attractive addition to any portfolio. The inclusion of bonds can keep a portfolio afloat. They are able to offer a cushion of stability against the unpredictability of stocks.
People who are already retired or are entering retirement should ensure the inclusion of bonds in their investment portfolios as they will provide a certain income with minimal risk.
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“2012 FINANCIAL END GAME”
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