The Financial Rating Agencies

The rating agencies are responsible for assessing the risk of a borrower's credit worthiness, which may be a business, a state or a community at large. In other words, they size up the risk of a borrower not to repay its debt. Only financial criteria are taken into account in the scoring. There are around150 rating agencies are there in worldwide but the most important are a few more particularly Moody's, Standard & Poor's and Fitch. They are in the lime light in the recent years due to the worldwide financial crisis. The scoring system, which is the statistical analysis, is more specific to each rating agency and they differ.

For example let us consider the following two agencies which were mentioned above, their possible scores are the best score to worst:
 
Standard and Poor's: AAA, AA, A, BBB, BB, B, CCC, CC, D


Moody's: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C

Generally, agencies add to their score the medium term may be positive, neutral or negative. Financial markets are very attentive to the ratings agencies. Thus, the rating given by rating agencies has a direct impact on the borrowing rates. AAA borrower can expect to get loans at very low rates (about 3% for the State), while a borrower rated poorly will have real difficulties in obtaining the same loan for higher rate of interest. These agencies have been criticized, especially about the role they played in the Greek crisis of 2010. The European Commission and European governments feel they have contributed to speculation on the financial markets. Evaluation methods of banks by the rating agencies have recently been questioned by the European Securities and Markets Authority (ESMA) after the rating downgrade of a large number of international banks and the lack of stability of their ratings.

Virtual banks

Virtual banks are increasingly popular among investors. Since they have combined more advantages than the regular banks, people are attracted towards it. Now a day we are hearing more positive news about them. As the name suggests, almost all their entire activities happens online. Having all their activities focused on the web platform their operating cost minimized. No need for branches and no need for high paying multiple advisory. Consequence of all these the money savings are passed on to the customers virtual banks. In banking industry, the bank charges are very high and they are charging for each withdrawal but this kind of charges can be avoided in the online banks.

In virtual banks the administration fees and other regular bank charges are absent. You not only pay less but also the offer higher interest rates for your money deposited with then unlike the other street banks. With online banking, you can access your money at any time, 24h/24 and 7 days / 7. Sites are secure and the customer service is often of good quality. You can also automatically save practicing payroll deductions and pay yourself first. This behavior is preferred to achieve affluence smile icon Virtual banks. Finally, there is no bank fees charged; no minimums and most importantly, no limit transactions.

U.S. Probe of Gold Price Manipulation

The noose is tightening on manipulation of the price of gold and silver. According to some sources of the financial sector, U.S. regulators are investigating at the moment on possible price manipulation in the world biggest gold market. The Commodity Futures Trading Commission (CFTC - Commission control and regulation of U.S. futures markets) examines closely the method of pricing in London. The Gold price is decided by few banks who meet twice a day to fix the 'spot' price of troy ounce of physical gold, according to some sources. The CFTC focuses on transparency factors including pricing for both the gold market.

 No official investigation was opened according to sources. This study took place at a time when regulators are reconsidering larger scale criteria for financial references following a scandal involving the manipulation of interest rates. Three major banks have agreed to pay penalties totaling U.S. $ 2.5 billion following the alleged manipulation of the London interbank rate, or Libor practiced and where more than a dozen financial firms are still subject to investigation. Is the price of gold the most important market in the world was controlled by five banks? The gold price is fixed daily by a group of banks and plays an important role on the price of the jewelery industry. It determines the gains that will be going to the mining companies that are selling their raw materials to the refineries. This helps determine the value of derivatives whose prices are linked to metals. U.S. commercial banks had some $ 198 billion in contracts related to precious metals during the month of September 2012, according to sources from the Office of Currency Control (Office of the Comptroller of the Currency). CFTC's decision is alarming. The agency headed since 2009 by Gary Gensler, a former executive at Goldman Sachs Group Inc., has played a key role in the global survey of interest rates. Mr. Gensler has called for the analysis of the benchmarks that are subject to further reforms that would require them to be based on actual transactions rather than estimates submitted by industrial companies. Mr. Gensler is the co-chair of a working group of international regulators mechanism and in charge of examining these criteria and plans to publish a new set of guidelines in the spring.

 "The thought that widespread manipulation or tampering (interest rates) can spread leads us to ask questions about the veracity of other key points," said Bart Chilton, CFTC Commissioner at a roundtable on February 26 in Washington on financial benchmarks. "What energy swaps, the fixing of the gold and silver in London and the whole litany of 'bors' referring to Libor, Euribor and many others. In the case Libor, are traders who have provided false data to the industry organization in charge of publishing the reference rate with the aim of creating more profitability. Barclays PLC, Royal Bank of Scotland Group PLC and UBS AG have made regulations result in fines up to $ 1.2 billion, paid to the CFTC. CFTC leaders have said that if Libor drew their attention. The agency had previously reported a series of cases between 2003 and 2005 imposing sanctions on companies and contractors for trying to manipulate the price of natural gas by providing false information to companies responsible for energy rankings.


 The CFTC began investigating following complaints received from a number of investors in the summer of 2008. These worried indeed the sudden decline in the price of silver. And this could be the result from a manipulation or market malpractice. The CFTC has never confirmed or denied the facts relating to the investigation. A spokesman for the CFTC did not want to speak on this subject. Controlling binding factors of the market prices of gold and silver has long been a source of debate. According to Kurt Pfäfflin, precious metals broker at Daniels Trading in Chicago said that this has always been in the minds of those who lingered on theories conspiracy. He says he does not believe in price manipulation 'spots'. Price-fixing, dating back to 1897 in the case of silver and 1919 in the case of gold, takes place through telephone conferences between banks.

Calls on gold held from 10.30 to 15 pm UK time. Calls related to money held at noon every day. Fixing the price of gold in London involves five banks: Barclays, Deutsche Bank AG, HSBC Holdings PLC, Bank of Nova Scotia and Society General SA. Pricing involves money Bank of Nova Scotia, Deutsche Bank and HSBC. Methods of price fixing are "based rather on the basis of supply and demand until a price is determined. This method is fully transparent. Nothing to do with the Libor "said a spokesman for the London Bullion Market Association (LBMA), in charge of guidelines on the quality of gold and silver traded on the London market. It does not handle the money.

Financial Analysis

These thoughts are centered on financial analysis and the creation of value for a commercial or industrial enterprise. Financial analysis is a method of analyzing the financial health of a company based on accounting documents, schedules, forecasts and intangibles such as a factory visit or experience managers. The objective of financial analysis is to answer two questions that may vary depending on where we place ourselves.

Shareholders: Does the company within the scope of my investment strategy?

Creditors: If I lend money, will I get it?

Attention, everyone can be an investor or creditor! Buy shares makes you a shareholder, subscribe to bonds makes you creditor. However, you have to analyze the company whoever you may be! I strongly emphasize this point, since the financial environment changes over time, the safe products become risky and that deserve analysis. Even in times of euphoria, a financial analysis is essential because even the best company’s of euphoria can fail. From my point of view, what I could see between schools, banks, investors and entrepreneurs, financial analysis is often incomplete. It is not enough to look at whether a company has been profitable for the last 3 years by adding liquidity ratios, management, structure, or even credit for a complete analysis.

 When a company makes a profit, we must always ask ourselves whether these profits can be converted into cash. It is only with cash that a company can repay its debt or pay its shareholders. Analysis of cash flow or cash flow-often forgotten-is an essential step in any financial analysis. A company may have an increase in its constant activity, an important benefit but have a severe shortage of cash. Most of the Americans investors know this and have invented one worship saying: Cash is king. While many start ups rely on equity funds that imply they lack the cash to finance their activity despite growth rates maddening.

Good and Bad credit!

Normally, if you are in debt, you are not rich. This is the fact. The intention here is precisely to have no debt and enough money aside to buy what you want. In looking more closely, there are basically two types of debt, good debt and bad, as there are good and bad cholesterol, good and bad stress etc. A bad debt is a loan you take out for something that does not earn you money: a loan for your car, your home, your plasma screen etc. Because these assets do not generate money and you need to repay your credit from your pocket.

Most of the Rich people who are well aware of credit traps pay cash for these things instead of getting a bad debt. A good debt, you'll understand a credit contracted for a asset that generate income for your investment. For example, if you pay the monthly installments on your house rented and you are receiving the rent paid by your tenant, or the loan you take out to start a company will be repaid from profits. You do not take money out of your pocket to pay for a good debt. However, there are exceptions in the case of bad debt.

 When the rate of your credit is less than the rate of inflation, for example in the case of a zero-interest loan, it is better to credit. This is also the case when you put the money you were going to spend on your purchase that brings you more than the cost of credit that you will incur to complete this purchase. Now a day mortgage rates are low, you can benefited through that also.