Retirement should not be considered as a difficult part in one’s life. It too can be made productive and yielding by careful financial planning. MLP’s or Master Limited Partnerships gave been found to be fruitful in providing good income opportunities after requirement. This partnership consists of a general partner who is entrusted with the task of operating the business and some limited partners who provide capital. This unique kind of partnership module which is often referred to as publically traded partnerships can be purchased from major stock exchanges by potential investors. Stipulated rules require MLP’s to generate at least 90% of their income from natural resources related activities. This rule thereby makes MLP to operate in the sector of natural resources activities which envelopes the transportation, mining, storage and marketing of these natural resources.
This unique partnership scheme has been found to generate yields ranging between 6% to 8%. MLP’s is a very good avenue for cash flow which is meant to compliment low yield giving equities and bonds targeted towards retired personnel’s who look forward to taking home distributions of about 4% to 6% of their investment portfolio each year. Investing in MLPs provides the investor with higher current distributions which then grows further as and when the company progresses further. Also, the other benefit from these MLP’s is the fact that some percentage of the annual distribution is considered as a return of the capital and thereby exempts it from current income tax subjection. This there by ensures a higher after tax income which boosts the disposable income of the individual after retirement.
Though, what must be kept in mind is that once the investor decides to part ways with these units the deferred units will be subjected to income tax but that may happen many years down the line. Summing it up, it can be said that by means of investing in Master Limited Partnerships, the investor which are mostly retirees get the opportunity to receive 6% to 8% of inflation adjusted distributions where a part of these distributions is tax free.
Tags: Master Limited Partnerships, Retirement planning
If you considered tough times affecting the wall street were abating well it is time to think again. In a move which has come as a surprise, Morgan Stanley and Goldman Sach will now lose their coveted Investment bank status and will henceforth function as traditional banking companies. Their functions will now be regulated by the US Federal Reserve. I see this move coming with its own set of benefits and drawbacks. While on one hand it will enable these institutions to start accepting deposits and will provide them with an easy access to the financing sector. It will also provide them the opportunity to buy other retail banks if the desire. The Fed has authorized credit to both the mentioned firms against all types of collateral that any other commercial bank is permitted to consider as acceptable to take loan from the central bank.
But this status of being a traditional bank will now subject them to tighter banking regulations by the Feds which also include tougher capital requirements. By being under the umbrella of Investment banks these institutions were free from these regulations earlier. Like every other spectator witnessing this news I too fear that these restrictions and rules would result in curbing the ability of these companies to leverage up their propriety trading activities and other such related activities.
This would in turn hamper their huge profit making chances. I would suggest that these steps taken by the US Government should be taken in positive spirit as they go on to show the gravity of seriousness that the US government is granting to the financial crisis and by means of these short term risks they aim to provide some systemic relief to the distraught financial market in the US. As a part of this new set up, the Federal Reserve will take over as being the primary regulator of the parent companies.
Tags: commercial banking, finance regulators, goldman sachs, investment banks, morgan stanely
Turmoil conditions affecting the equity markets has left everyone running for cover. The once sworn upon blue chip companies have lost their sheen and are now hovering near their all time low levels which has also eroded the value of investments. I classify an investor as a smart investor who knows the right time to select the right investment option. Even times as these when the markets are at their all time low there is opportunity lurking in every nook and corner to make some quick profit. The list of once existing trusty and ever profit bearing companies is now burned to its ashes. So where should one invest now?
The answer lies in the under performing industries which in recent times have started realizing their potential and value. With these industries the bottoms up approach is used to carry out the scrutiny and filtration process to decide the ones worth investing in. The foremost step after obtaining the list of selected probable’s would be to uncover and understand their relative strengths in their core fields. Various modes can be utilized to carry out this valuation like comparing the stock price with the companies earning or studying the relation between the price to its book value. In my personal opinion calculating the value to price ratio would be the best to enable a comprehensive overall picture of the health of the company. This ratio would help us to evaluate the company’s earnings, long term growth rates, interest rates and the overall risk involved with the company.
These parameters hold high importance as they give us the complete view of the company’s core fundamentals. Once this process lets us segregate industries of our interest the next step according to me would be to evaluate the quality of its management. Since at the end of the day the company is managed by decisions made by its management it is their competence which takes on utter importance. The market has plenty of such options which fit these mentioned categories. The market might look saturated by overvalued sectors but personally I agree that it is only certain sectors of real estate investment which are highly overvalued while the others provide ample investing opportunities. The only necessity is to look out for them.
Tags: industries, investment tips, Investments, underperforming stocks, which stocks to invest
In an act of complete desperation, the US Federal Reserve department announced its decision to step in and come to the rescue of the bleeding insurance giant American International Inc. My personal opinion on this move is that by this step by the US Fed has lost whatever credibility it had earned by taking the hard stance a few days back by denying intervening to bail out Lehman Brothers. Seen as a measure to bring in a sense of calmness and respite after the turbulent days that the global market has witnessed the US Fed will be lending $US 85 billion to AIG to take stock and come out of its financial crisis.
This move has surely put the spotlight on the Federal department pertaining on its selection criteria for companies it plans to bail out. I would like to point out that in recent times the US Fed had intervened and bailed out various big names including the likes of JP Morgan, Freddie Mac and Fannie Mae and the Federal Housing society. By refusing aid to Lehman Brothers it had seemed like they had drawn the line in lieu of the help they could offer but this recent bailout of AIG has washed it all off. With the taxpayers presently on the hook for coughing out more than $US 900 billion it looks as if the present US economical situation seems to point out towards the time where the profits are privatized and the losses socialized. But when viewed in bright light it looks to me as if this act by the Feds was critically important to calm the concerns ruling the global market because if AIG had collapsed the repercussions would have been felt in thousands of countries world over and would have caused complete chaos in the world market of credit default swaps where it holds an important and a strategic position.
This agreement confirms the US government an equity stake of 79.9% of AIG. This 24 month line of credit to AIG comes along with an interest rate which is equivalent to the London inter-bank rate plus 850 additional base points. I would also like to add here that in lieu of the agreement the loan will be collateralized by taking in all the assets of AIG and also those from its primary non-regulated subsidiaries. The loan will facilitate AIG in selling off some of its businesses in an orderly manner without causing major disruptions to the overall economy. The proceeds from this sale will be used by AIG in repaying back the loan to the ES Federal Department.
Tags: aig
In times as recent as last week, the shares of Lehman Brothers ( one of the largest investment banking entity) nosedived almost 77% to reach levels which posted its biggest ever loss in its 158 year investment history. In wake of Lehman’s acquisition by another firm leading to its loss of independent identity the list of potential losers is huge. Topping the list are the employees of Lehman Brothers. The last count of these employees’s stood at a mammoth figure of 25K. 30% of the companies stocks are owned by its own staff members who now have a sad story to share. The recent turmoil in Lehman has resulted in a severe shrinkage of wealth of its staff members and the loss is being pegged at $15 billion of the total net worth of shares owned by its staff members.
Now this loss of personal wealth is further aggravated by the prospect of them losing their jobs as well. The news is equally grim for its horde of other shareholders. Anticipating a rebound in the economy in the near future propelled many of Lehman’s big investors to double their stakes. Amongst the list of its famous shareholders suffering huge losses now is Lehman’s number one share holder Alliance Brenstein LP hailing from New York who increased its stake by a huge 43% this year to reach 65.7 million shares. Even seasoned hedge fund managers of the likes of George Soros have not been spared from bearing the brunt. George doubled the size of his firm’s stake in Lehman Brothers to reach 9 million in the 3 month period ending 30th June. The damage does not end here and goes on to take a more vicious turn. Standing on the brink of suffering huge losses are the privately negotiated derivative contracts in tune of almost $44 billion signed by customers with Lehman who now only has $28 billion with him to offer in return.
But one’s misery is often the source of another’s joy. Travelling on same lines here are the other investment firms and individuals who hope to draw out maximum benefit from Lehman’s messy situation. The revenue of almost $59 billion posted by Lehman Brother’s last year will be up for grabs by these competitors with Morgan Stanley, Goldman Sachs and Merrill Lynch taking in the lion’s share. Also up for grabs will be the best parts of Lehman and will be eyed constantly by major investors or group of investors in wait for acquiring it at throw away prices.
Tags: Alliance Brenstein LP, George Soros, investment banking, lehman brothers, Lehman’s acquisition, share price of lehman borthers
Bank of America, the second largest bank in America in accordance to its asset size in a major development is all set to buy Merrill Lynch in a deal that has valued Merrill Lynch at a figure of US$ 29 per share. This deal has valued Merrill at US$ 44 billion which is almost half of the value that the investment firm was worth when it was at its peak performance last year. Through this deal Bank of America has added another feather to its hat which has lately been on a major acquisition drive. This particular corporate combination deal is been seen with much hope to find respite from the ongoing credit crisis. The bank was interested in this investment firm since long and was also speculated of showing interest in the investment firm of Lehman Brothers too. But the absence of a guarantee or a propped funding option on behalf of the US Federal regulators keeping in mind the risky state of assets Lehman Brothers has reached; the bank finally decided to pull back and not continue further with the Lehman option.
In other news, what is speculated to be fallout to this corporate inking, in the presence of limited options, Lehman Brothers have confirmed their intentions of filing for Bankruptcy. This filing will be carried out by the holding company without involving any of its several subsidiaries. Meanwhile the firm is still supposed to be on a look out for a deal regarding the sale of its broker-dealer operations as well as the sale options for its asset management unit. Lehman’s meltdown will mark the biggest implosion to hit the investment banking sector in nearly two decades and will take away nearly 25 thousand jobs in its fold. The US Securities and Exchange commission has given hope that it will work hard towards providing extensive protection to the customers of Lehman Brothers and will do whatever it can to minimize the impact or blow of this development on the customers of the company. These developments regarding Merrill and Lehman come only 6 months after JP Morgan was taken over by Bear Stearns. All these moves go on to suggest the volatile credit times hitting the investment sector at this point of time. The lack of confidence awakened by the financial crisis has lead to a drying up of liquidity which in turn has resulted in increasing borrowing costs and a subsequent tighter credit environment.
Tags: Bank of America, bankruptcy, lehman brothers, merger and acquisitions, Merrill Lynch
According to news coming in from sources, the Department of Treasury and the Federal Reserve in the US are in the process of initiating the sale of Lehman Brothers Holding Inc through a consortium comprising of private companies. Though with nothing nearing completion or finalization several possible outcomes have been speculated and the final deal is expected to be disclosed by the weekend. The troubled assets of Lehman Brothers have left potential buyers worried and concerned who are now hoping that the US government might intervene and help prevent the company from incurring any more losses. With a number of firms present in the market who have the potential of saving Lehman Brothers the only ominous question is that which of these firms will step up to the occasion.
Lehman Brothers have registered a third quarter net loss of almost $4 billion. This figure comes immediately after the firm suffered a setback of more than $5 billion of new write-downs found mostly on soured mortgage exposures. With the market thick with all these news the shares of Lehman Brothers registered a dip of almost 42% and were finally trading at $4.22 as on Thursday, September 11th, 2008. This downslide in its prices began ever since the company reported a huge loss in its third quarter which subsequently resulted in its shares being cut by several rating firms followed by a shake up amongst its elite executive group.
The chairman of Lehman Brother’s blames this downslide on the on weak sales and writes downs of commercial real estate assets and a slow moving real estate market. The firm has also announced its plans of selling off a majority of its stake in its investment division and diverting the funds towards strengthening of its newly formed publicly traded company. The company has also reported to have taken care of some key appointments in its fixed income international business setups.
Tags: lehman brothers, mrtgage backed securities, result of lehman brothers, sale of lehman brothers, stock price of lehman brothers
Infosys created history of sorts by penning down a record 24K crore group insurance scheme with LIC which would be aimed at providing insurance cover to almost 97,000 of its employees. Terming this insurance cover as being the largest cover provided to any organization LIC might not be wrong in speculating this mammoth deal to be the largest of such deals in the entire world. Though there is nothing new with multinationals opting for group insurance schemes for their employees which provide the employees with life, health as well as accident cover, it is the sheer magnitude of the amount of the cover which has made this deal one of its kinds.
This deal between Infosys and LIC was initiated in the year 2002 wherein a uniform cover for all the employees of Infosys was provided. This insurance cover was of Rs 10 lakh per employee and was to cover a total of about 12,000 employees. The total value of this cover came out to be about Rs 1,791 crores which was subsequently increased to 7,981 crore in the year 2006 and Rs 11,792 crore in 2007. Other IT giants of the likes of Wipro and Satyam also benefit their employees by providing them with similar comprehensive group insurance schemes. With the amount offered as the insurance cover depending upon the seniority of the employee in the organizational hierarchy the insurance cover in Wipro is also meant to cover the health of the employee’s family as well.
The insurance cover provided by Satyam on the other hand is focused on providing the employee’s with a personal accident policy, a term life insurance policy as well as a medical insurance policy which takes into account not only the employee but 3 of his immediate dependents as well. With no legislative bindings present so as to provide employees with insurance benefits the main aim of providing these employee friendly insurance cover benefits is to prevent and control high levels of attrition within the organization.
Tags: infosys, Insurance, satyam, wipro
The Indian rupee registered a slump to reach its lowest level in almost 2 years. This has been a result of unprecedented speculation and fluctuating forex market amongst the investors and importers who decided to shun the Rupee and stepped up the purchase of the Dollar after witnessing the rally of the US currency against the Euro. With worldwide strengthening sentiments for the Dollar the momentum against the Rupee has gathered speed. Along with the Rupee dropping for the third day, 8 other active Asian currencies have registered the same fate. The Indian benchmark stock index (BSE Sensex) also witnessed a fall of almost 29% this year heralding it towards the first annual loss registered since the year 2001.
In times when the Dollar supply is very small and limited the importers holding short term liabilities have started covering aggressively thereby aggravating the problem. The Rupee was trading at 45.46 against a Dollar which is a fall of about 0.6% in accordance to the lowest it had reached as on 16th October 2006. This downfall has marred the impressive growth of 12.2% shown by the rupee last year when it had touched its decade high level of 39.185 a dollar. It is not only the Indian Rupee against which the Dollar has shown strengthening but all the other 16 major currencies being traded in the market too have met with the same fate. This decline of major currencies has been attributed to the bad state in which the commodities are today. This slump in the Indian currency may be tempered by the surrounding speculations which indicate a possible intervention by the Reserve Bank of India to assess and take stock of the situation because a weak currency has the potential of adding fuel and aggravating the already increasing inflation in the country. The central bank is expected to curb this volatility of the Rupee by actively arranging sales and purchases of foreign currencies.
The Indian foreign currency reserves too have registered a drop in almost 3 weeks of the time frame starting June which clearly shows indications and signs of the Reserve Bank selling Dollars with the aim of halting or slowing down the pace with which the value of the Rupee was depreciating. The Indian foreign currency reserve too is seeing a decrease and was pegged at a six month low of $286.1 billion in the week ending August 29th.
Tags: currency, Forex, forex market, indian rupee, Reserve Bank
Putting to rest all speculations regarding the safety and need of adding an insurance product in one’s investment portfolio, most of the financial advisers questioned declared that they have been strongly recommending the addition of insurance products to their clients. This indicates a turn towards a more planned approach being adopted by clients towards their portfolio’s rather than the aggressive stance on asset management maintained till now. With wealth managers having the obligation to look at things other than simple investments these insurance products are a good tool in their hands to try out diversification in the client’s portfolios.
Insurance and particularly long term insurance is now finding place in the advisers recommended list much more frequently. The top reasons cited by individuals who have been shying away from including insurance in their portfolio’s are the cost and decision to ensure oneself. Apart from long term insurance products, annuities are still raked to be the favorite insurance product amongst advisers. The total percentage of advisers who have started advising long term universal life insurance products has also moved up from what they were some years ago. The reason cited for these universal life insurance products being not so popular is the fact that most of the prospective buyers already posses a life insurance policy and are now searching and looking out for products which are income generating in nature.
The feature of a guaranteed income tagged along with annuities is what is still making them the hot favourites in the insurance market. Amongst all the features that one possibly scrutinizes before taking their insurance policy the rating of the company is considered important by the clients. A good rated company directly conveys a sense of safety and security to the customer who has to take the decision of entrusting the company with his money. The next criteria taken up for consideration by the customer is the price factor of the insurance product being sought. Coming next in line is the financial strength of the insurance company. This factor too is important as when one decides to purchase an annuity contract he becomes a part of the company and its integrity during the course of time. Whatever product one chooses at the end it all boils down to the economics attached with it and what the client desires it to be.
Tags: Insurance, investment portfolio, Life insurance, lnsurance products