A Stocks’s Tale - Interest Rates Are Not In My Interest
If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!
Dear readers,
How’s everything? This is a note from your ever dependable Mr Stock.
Well I know, I know pal…
Market ain’t doing too well. Bloodbath everywhere. You are probably blaming me for the 57% reduction in your portfolio value.
Wait! You can’t do that to me. Don’t forget I’m single-handedly responsible for your 258% charge up in your portfolio value during the bull run last year? You were very happy with me then. Quick to forget already?
Anyway, if there is someone you have to point you finger to, point it at my old friend, Mr Interest.
Mr Interest - He Is A Sneaky Cheat. Let Me Explain…
He has always wanted to see me down. It’s like his personal life mission. To watch me fall is his greatest pleasure. Cos that’s when he is rising.
You know what? I’m don’t take that lying down. When I go up, no more party time for him - he goes down!
If you realize by now, our fortunes are always the opposite of each other. We have an inverse relationship. Weird but true.
It has to be either one of us enjoying the highs or suffering the lows! Sad to say, due to this, we can never be friends!
Come to think of it, he is only my friend when he is down! Cos’ that’s when I’m up. Heh…
As Idiotic And Irritating Mr Interest Can Be, He Is Not Sorely To Blame…
C’mon. Who, you ask?
The government! Or rather the Federal Reserve. Who else?
When they tighten their monetary policy in the name of curbing inflation, they raise Mr Interest to crazy levels, the first one to get hit are always going to be the consumers.
When interest rate are high, everything gets expensive. Capital, labor, production and other expenses go up. Spending goes down.
Naturally, with lack of affordable loan coupled with increasing expenses, profitability of companies spiral downwards too! The future cash flow projection is hit, and in turns adversely affect my intrinsic value - a measuring yard stick for many investors in a company.
And that’s when I’m ultimately dragged down into the mess when investors everywhere start getting jittery!
Darn…just can’t leave me in peace when I’m on the ascendancy, no?
No One Keeps A Good Man Down Forever
There will be a time when the Fed Reserve wakes up it’s idea and decide that the market should be competitive again. So when they start to slash Mr Interest in the guts, the market cheers again - finally! And I go up.
BYE sucker! It’s my turn now!
There you go. The love-hate relationship between me and Mr Interest… The never ending saga…
A Note To All Wise Crack Investor…
If you can’t handle me falling, then don’t touch me. I’m only for the sophisticated and intelligent investor. The focused and the ones who think long term are those that eventually reap the rewards from me.
You choose who you want to be!
Till then, I’m going to pay Mr Interest a little visit. From an old foe….
Play It Smart,
Jag Foo (Mr Stock in disguise)
Chief Editor
StocksForGrads.com
This article is available as a PDF Download
“A Stock’s Tale - Interest Rates Are Not In My Interest” PDF Download
Posted
on
Tuesday, September 11th, 2007 at 7:27 am under
