Article: http://business.financialpost.com/2011/05/05/profit-taking-window-opens-in-bond-sector/
Summary:
The article that I read talked about how investing in treasury bonds could be profitable because they have reached a very low percentage yield. The lower the yield is the more profitable and preferable it is for bond traders. Here is an example to explain the situation. Let's say you buy a $1000 bond and you get 10% on return. However, when the bond drops to $900 they will have to increase the rate to 11.11% in interests so it matches up to the previous $1000 bond that you bought. So, if this continues you will be earning a lot in interest. If that's the case what determines the percentage yield of the bond? Inflation is a key factor in determining the yield of the bond. As inflation rises, the bond's profitability decreases. Due to economic instability, both the US and Canada are reluctant to raise interest rates and cause inflation, so this is a good time to cash in those bonds. Here are some hard numbers about ten year US treasury bonds; they have hit an all-time low yield of 3.22% on Wednesday May 4. This will also benefit the Canadian bond market, because there is a lot of uncertainty in the US economy. The ten year government bond for Canada was at yield of 3.211%, so you can see why it would be more favourable over the US treasury bond.
Connections:
This article relates to the book in terms that it talks about a type of bond, treasury bonds. To start it off, bonds are like purchasing the government's debt. However, there is a bright side to it! When, you purchase a bond, they promise to pay all of it back on a certain date called the maturity date. To top it off, they will pay you a specified interest rate on your money, so you will get richer as an incentive to lend them money. Banks usually sell bonds to they can decrease the purchasing power of the people. This will lead to less buying, less production, less jobs, and higher prices for goods. By doing this, the bank would have reduced the money supply in the country. There are also treasury bills, which are promissory notes that promised a certain amount of money. This are short-term "bonds" that hold no interest rates, so you won't benefit from them.
Reflections:
After reading and analysing bonds, I think that they might be a worthy investment to uptake. If enough people are willing to buy bonds, especially in developed countries that have a lot of debt, the whole economy would benefit from it. When the economy prospers, it will lower inflation rates which will increase the profitability of the bonds. At the end, you might end up richer than you started since the treasury bond's interest rate will increase to match up to your previous bond amount in case a rise in inflation occurs. However, there are some people that are risk takers. When the percent yield is low, they still wait for it to be lower before they are willing to cash in their bonds. Even if bonds are a worthy investment, you have to have an understanding of the economy and keep on top of it to earn the most profit on your bonds. So consider purchasing a bond, who knows you might be in luck.
Sunday, May 15, 2011
Tuesday, May 3, 2011
Virtual Wallet
http://business.financialpost.com/2011/04/23/smart-phone-money/ (Article)
1. How long do you think it's going to take to get to all virtual cards? How many years? (1 point)
I think it is going to take a very short period of time to get all credit/debit cards, even ID's, virtually into phones. I'd say it would take about 30 years for there to be a widespread use and availability of virtual cards all around the world.
2. Why? (1 point)
1311 years ago coins were created (http://www.wdfi.org/ymm/kids/history/the_first_coins.asp).
150 years ago money (bill) was created (http://answers.yahoo.com/question/index?qid=20081210143310AATRc2U).
61 years ago debit/credit cards were created (http://history1900s.about.com/od/1950s/a/firstcreditcard.htm).
As you can see by the chronology, it takes less and less time for the type of legal tender to change and be accepted by everyone because we live in a fast-paced world. Therefore, it wouldn't be illogical to assume that it would take 30 years (less than half of previous time) for debit/credit cards to become virtual.
It will also be so soon because there are so many evolving technologies in our fast-paced world that are created everyday. It is the same case with e-mail, it took about 40 years for it to be so widespread (http://www.livinginternet.com/e/ei.htm). People are already working on RFID's for phones so stores recognize you and you can pay with your phone. There already is an iPhone Swipe app that allows merchant to allow them to carry out credit card payments (http://globalmerchantservices.com/iPHONEPhoneSwipeFAQandDownload.html). As you might notice this virtual frenzy might become possible in our lifetime.
3. Who will not be on board with this new virtual wallet? (2 points)
Seniors citizens, who really can't handle technology, will be really annoyed with this new-fangled technology and have trouble trying to pay for their purchases.
Young children or people who don't have a phone will have trouble trying to buy things.
Money collectors might get annoyed at not having more things to collect anymore.
4. What companies are going to be affected negatively by this? Name 3. (3 points)
Wallet making industries, such as leather industries, will experience a downfall on their sales since people won't be needing them (http://www.craftstomakeandsell.com/LeatherWallets.html).
Industries providing material for printing money and making coins would experience a decrease in sales of their materials. Bank note producers would go out of business since paper money no longer has any value attached to it (http://www.bank-banque-canada.ca/en/banknotes/facts.html).
Small businesses will have to update all their equipment to adjust for this new type of payment (http://www.barcodesinc.com/cats/rfid-readers/) and it will be quite an expense on them to keep up with all the changes made to legal tender.
5. Who is going to make money form this? Name 3 industries not companies (3 points)
Cell phone companies that sell iPhones with NFC technology such as Apple will make money if money became virtual (http://www.phbeta.com/apple/the-apple-iphone-5-features-and-price-expectation/).
Wireless Internet providers will be needed to connect all the debit/credit you have so you will be able to use make purchases.
Hence, this will lead to the importance of the app creators as a form of advertisement for major businesses (http://www.studio1c.com/blog/17-internet-marketing/156-internet-marketing-iphone-money.html).
1. How long do you think it's going to take to get to all virtual cards? How many years? (1 point)
I think it is going to take a very short period of time to get all credit/debit cards, even ID's, virtually into phones. I'd say it would take about 30 years for there to be a widespread use and availability of virtual cards all around the world.
2. Why? (1 point)
1311 years ago coins were created (http://www.wdfi.org/ymm/kids/history/the_first_coins.asp).
150 years ago money (bill) was created (http://answers.yahoo.com/question/index?qid=20081210143310AATRc2U).
61 years ago debit/credit cards were created (http://history1900s.about.com/od/1950s/a/firstcreditcard.htm).
As you can see by the chronology, it takes less and less time for the type of legal tender to change and be accepted by everyone because we live in a fast-paced world. Therefore, it wouldn't be illogical to assume that it would take 30 years (less than half of previous time) for debit/credit cards to become virtual.
It will also be so soon because there are so many evolving technologies in our fast-paced world that are created everyday. It is the same case with e-mail, it took about 40 years for it to be so widespread (http://www.livinginternet.com/e/ei.htm). People are already working on RFID's for phones so stores recognize you and you can pay with your phone. There already is an iPhone Swipe app that allows merchant to allow them to carry out credit card payments (http://globalmerchantservices.com/iPHONEPhoneSwipeFAQandDownload.html). As you might notice this virtual frenzy might become possible in our lifetime.
3. Who will not be on board with this new virtual wallet? (2 points)
Seniors citizens, who really can't handle technology, will be really annoyed with this new-fangled technology and have trouble trying to pay for their purchases.
Young children or people who don't have a phone will have trouble trying to buy things.
Money collectors might get annoyed at not having more things to collect anymore.
4. What companies are going to be affected negatively by this? Name 3. (3 points)
Wallet making industries, such as leather industries, will experience a downfall on their sales since people won't be needing them (http://www.craftstomakeandsell.com/LeatherWallets.html).
Industries providing material for printing money and making coins would experience a decrease in sales of their materials. Bank note producers would go out of business since paper money no longer has any value attached to it (http://www.bank-banque-canada.ca/en/banknotes/facts.html).
Small businesses will have to update all their equipment to adjust for this new type of payment (http://www.barcodesinc.com/cats/rfid-readers/) and it will be quite an expense on them to keep up with all the changes made to legal tender.
5. Who is going to make money form this? Name 3 industries not companies (3 points)
Cell phone companies that sell iPhones with NFC technology such as Apple will make money if money became virtual (http://www.phbeta.com/apple/the-apple-iphone-5-features-and-price-expectation/).
Wireless Internet providers will be needed to connect all the debit/credit you have so you will be able to use make purchases.
Hence, this will lead to the importance of the app creators as a form of advertisement for major businesses (http://www.studio1c.com/blog/17-internet-marketing/156-internet-marketing-iphone-money.html).
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