Inflation, Interest rates and exchange rates

HAKUNAMATATA · Post by **HAKUNAMATATA** » Fri Mar 09, 2007 2:42 am

All this interest rate gimmick sounds good, but if one has the knowledge one should make investments in the stock market which is growing at a phenominal pace.With careful planning and chosing a good stock portfolio one can get a return of 50% a year in India alone.

Inflation by goverment standards is 6-7%, realistically its almost 10.
If you guys get 8-9% on deposits you are actually losing money from the banks:cool: ,its simple economics, as inflation devalues money kept in bank,. Plus, dont forget this interest is further taxable.

The other way around this if one wishes to keep money in the bank is keep it in dollars or sterling(pounds) as they both pay above 5% in any indian bank gross plus they are appreciating currencies. Uk's inflation rate is @2% so you are still better off earning a nett of 3% and you have the appreciation factor, like 12 months ago £1 was 79 rupees today its almost 86.

take care out there!!

money_in_my_mind · Post by **money_in_my_mind** » Sat Mar 10, 2007 2:45 am

HAKUNAMATATA;11391All this interest rate gimmick sounds good, but if one has the knowledge one should make investments in the stock market which is growing at a phenominal pace.With careful planning and chosing a good stock portfolio one can get a return of 50% a year in India alone.
[/quote]
Or maybe you just need to own one stock that is about to double or triple over next month or so. BTW, what knowledge or planning are you refering to? I wonder if making 50% a year is as easy as you are saying, why all the money in the world is not entering into Iindian stock market, I'm sure there are knowledgeable investors out there who happen to carefully plan as well.

HAKUNAMATATA;11391The other way around this if one wishes to keep money in the bank is keep it in dollars or sterling(pounds) as they both pay above 5% in any indian bank gross plus they are appreciating currencies. Uk's inflation rate is @2% so you are still better off earning a nett of 3% and you have the appreciation factor, like 12 months ago £1 was 79 rupees today its almost 86. take care out there!![/quote]
Maybe I'm missing something here. How do the deposits in forex beat Indian inflation? Are the returns pegged to Indian inflation figure somehow? BTW, have you checked the dollar/rupee graph over past several years?

HAKUNAMATATA · Post by **HAKUNAMATATA** » Sat Mar 10, 2007 3:23 am

money_in_my_mind;11597Or maybe you just need to own one stock that is about to double or triple over next month or so. BTW, what knowledge or planning are you refering to? I wonder if making 50% a year is as easy as you are saying, why all the money in the world is not entering into Iindian stock market, I'm sure there are knowledgeable investors out there who happen to carefully plan as well.

Maybe I'm missing something here. How do the deposits in forex beat Indian inflation? Are the returns pegged to Indian inflation figure somehow? BTW, have you checked the dollar/rupee graph over past several years?[/quote]

CHECK THE RUPEE VS POUND OR EURO GRAPH.....dollar is Pegged to the rupee and RBI intervenes when the rupee falls, although the rupee has devalued quite a bit against the greenback , it's being kept constant by RBI with its foreign reserves.
I thought someone was going to be inquisitive when i made this post about losing money on a 9% return. Ok,first i suggest you read all my post and you will get an idea what i am talking about and where i trade.
I live in the UK and invest currently in the Uk, i started investing in the FTSE(UK STOCKS) and DOW JONES(US) when the ftse was at 3500, about 2 years back, that was the buying oppurtunity, similarly i follow the indian market which was @7500 about 18 monhts ago, so leave the stocks alone even if you just bought the index on points @1000 rupee a point, as India is emerging and the stock market will go upto 18000 by next year if interest rates remain stable...if...that is my guess...don't hold me to it.
today the market @13000-7500(18months ago)=6500*rs1000=6500000(65 lakhs in 18months)lol:emsmiled: . Thats money witout hard work eh...My investments are on property and i am retired and trading stocks@35 and i didn't even go to college.But i teach myself i read and i ask alot of questions and i've made a total of nearly £1,8mil from £30k in 10 years, call it luck,hardwork or just oppurtunistic.
I am only retired cause the property market is saturated and the bubble must burst ,till then i am stock trading.(even that looks saturated for now)

The way to trade or the way i do it is i buy 30 shares initially for 1000 pounds/portfolio and these are into banking,mining,automobile.....and mainly blue chips and a few AIM shares. I started the portfolio with 32k and today after 2 years and 2 months its worth 63k.
Now about interest rates......majority of the public don't even care about INFLATION....JAPAN is the only country with deflation btw that is another story.
This inflation is the most dangerous thing which the goverments don't talk about. Your hundred rupees in 1982 is worth 500 rupees today or even 1000,that is because of inflation(mehngai), IT erodes the money in your pocket .
Thats why you have a property boom in India sustained because of black money as poeple are buying flat worth crores cause their black money becomes worth less by 5-10years, atleast investing in bricks and mortar gives em something in return rather than a loss...and ye, it turns their money into white(money washed).
If you get a 9% return,don't forget you still have to pay tax on it, and the countrys inflation is 6-10%(india) ,it means you got zero return, as the value of your money has depreciated.You don't feel it by year but in 10 years your 500 rupees today will be worth 50 in ten years....@10% inflation.;)
Now, pounds is pegged to the UK ECONOMY ,where they work very hard to peg inflation under 2 %, if they can't control it,they raise interest rate to counter the effect of inflation.PLus the pound and euro appreciate against the rupee, last year the pound was 79...today it stands at 86. plus, sterling gives you 5% in bonds minus the inflation of 2%in uk....u are left with 3 %, plus the 15% appreciation agaist the rupee.
The rupee will appreciate against the dollar in the long run as India has huge foreign reserves and so will the Yuan(chinese), but for now .....these are safe bets.
The foreign reserves of India and china is another story and how the dollar will devalue is another post...for now...TAKE CARE OUT THERE.
I would appreciate anyone who could add to my knowledge and correct me.
;)

b2b · Post by **b2b** » Tue Mar 13, 2007 7:12 pm

HAKUNAMATATA;11391 like 12 months ago £1 was 79 rupees today its almost 86.

take care out there!![/quote]

24 months ago it was 88 and went down to 76......and now it is back to 85 (as I type..courtsey XE.com - Universal Currency Converter)

HAKUNAMATATA · Post by **HAKUNAMATATA** » Tue Mar 13, 2007 11:27 pm

RRK;12213HAKUNAMATATA,

We have several threads and if you wish to talk about investing, we have threads on that too. Here we are talking about cash investments and the interest rates. This is not right place to talk about stocks.

Many experts dont recommend investors to invest in stocks if the time horizon is less than 5 years and further one needs to diversify. Bonds and Cash are important assets in the portfolio allocation.

So suggesting to invest in stock markets instead of bank deposits is like asking people to fly when they have to go to next street.[/quote]

i suggest you read my post again .......before jumping to conclusions

The whole topic is on pro and cons of investments on cash.....stock was just taken in comparison to cash investments.

UNLESS U MEANT THIS PLACE IS FOR ADVERTISING THE BEST RATES FOR CASH INVESTMENTS?

TAKE CARE OUT THERE!!

HAKUNAMATATA · Post by **HAKUNAMATATA** » Tue Mar 13, 2007 11:36 pm

b2b;1221024 months ago it was 88 and went down to 76......and now it is back to 85 (as I type..courtsey XE.com - Universal Currency Converter)[/quote]

You are talking about 2 years ago ...since then USA has its defecit increased to 3 times...i suggest you do youR homework and stop scoring points here.

You also have to understand that sterling is not pegged to the dollar.
The dollar will fluctuate in world markets but remain steady agaist the rupee,but currencies doing well against it will do well against the rupee too. considering its rising debt and slowing economy its a bad currency for now not 2 years ago.Futher,I have also mentioned the Euro, you have any figures on it?

b2b · Post by **b2b** » Wed Mar 14, 2007 1:16 am

HAKUNAMATATA;12284You are talking about 2 years ago ...since then USA has its defecit increased to 3 times...i suggest you do youR homework and stop scoring points here.

You also have to understand that sterling is not pegged to the dollar.
The dollar will fluctuate in world markets but remain steady agaist the rupee,but currencies doing well against it will do well against the rupee too. considering its rising debt and slowing economy its a bad currency for now not 2 years ago.Futher,I have also mentioned the Euro, you have any figures on it?[/quote]

I am not challenging your wisdom - you have been showcasing your 1.3 million in many posts and surely you are one of the greatest in terms of financial wisdom. But that does not mean the lesser mortals can't comment on your post.

I understand that after trying several things like pegging against Gold standard, US dollars, Deutsch Mark, European Currency Unit (the famous black wednesday) - the Brits have now turned to inflation target base. The latest has been brought as a concept by Labour Govt when they came in power 10 years back. But that's precise reason why it is one of the most volatile currency. You can peg the currency to economy and control the inflation rates through interest rate mechanisms - but ultimately what define interest rates is demand and supply. It also depends on how much UK economy grows. It depends on how effective the interest rate controls are - e.g. in last 5 years the interest rates have moved from 2% to 5.5% - still it can't control UK housing prices.

LoveIndia · Post by **LoveIndia** » Wed Mar 14, 2007 1:19 am

HAKUNAMATATA is a 'Rich Dad' in this forum, moulded in the form of Robert Kiyoski's way. Informed and knowledgeable finance wizards in this forum know about how Robert Kiyoski's finance works :mad: However, there are some followers who seek Robert Kiyoski's advice. Hopefully we can all read about our forum's 'Rich Dad' views and make our own conclusion.

HAKUNAMATATA - Please don't take this as personal. There are some things which will work out for you or me but will not workout for everyone. This forum looks for utmost quality with a proven track record investment principles that work for a long time and not for speculators who will lose everything when economic downturn happens.

Desi · Post by **Desi** » Wed Mar 14, 2007 1:51 am

[quote]
You are talking about 2 years ago ...since then USA has its defecit increased to 3 times...i suggest you do youR homework and stop scoring points here.
[/quote]

Care to explain what you really mean by the deficit increasing 3 times. Are you talking of budget deficit, national debt, trade deficit? What has increased three times in last two years?

Please substantiate your statement. Have I misunderstood what you have said?

US budget Deficit: (http://www.cbo.gov/budget/historical.pdf_)

Fiscal 2004: 412 Billion
Fiscal 2005: 319 Billion
Fiscal 2006: 248 Billion
Fiscal 2007: Anticipated at 172 billion revised downwards from 270 billion.

Oh, you did not mean budget deficit, you meant national debt? OK.

US budget Deficit: (http://www.cbo.gov/budget/historical.pdf_)

September 2003: 6.7 Trillion
March 2007: 8.8 Trillion

The above is absolute dollars, we can discuss this as a percent of GDP if you like.

Tripling in two years. Can you show me anything there that has even gone 150%. The deficits are now shrinking!

RRK · Post by **RRK** » Wed Mar 14, 2007 2:01 am

HAKUNAMATATA;12284
The dollar will fluctuate in world markets but remain steady agaist the rupee,but currencies doing well against it will do well against the rupee too. considering its rising debt and slowing economy its a bad currency for now not 2 years ago.Futher,I have also mentioned the Euro, you have any figures on it?[/quote]

I dont think this is correct statement. RBI uses a basket of currencies to value INR. US$ has been given higher weightage compared to other currencies. But UKP, Euro and YEN are all part of the valuation.

Further RBI manipulates INR exchange rates by buying and selling INR as and when required. For that matter, most of the countries have federal banks to do some currency manipulation. BoJ does it for Yen; Malaysia, Singapore, Korea, China, UK, all manipulate their currencies to certain extent.