Prajna Capital - An Investment Guide

The relation between the Fed’s interest rates and the markets here The US Federal Reserve has decided to leave the interest rates unchanged. However, it has expressed concerns on the escalating crisis. The unanimous decision left the benchmark overnight rates at two percent. The Fed has said, 'strains in the financial markets have increased significantly and labour markets have weakened further' . The central bank said it also remained concerned about the inflation pressures. The Fed said the downside risks to growth and upside risks to inflation are of significant concern to the committee. The move is expected to enable banks in the US to borrow money for the short term from the Fed as well as lend to each other at the same rate as before. In the past few months, the Federal Reserve had been cutting US short-term interest rates amidst concerns that the economic growth will slow down in the coming months. The effort was to stimulate economic activity and keep the country ...

On the face of it such worries are understandable. Over the last few months, many big names have been revealed to be quite hollow. As I'm writing these words, news has come in that the AIG group, the world's largest insurer has, for all practical purposes, been nationalised by the US government, The company's top management is in the process of being sacked. Lehman Brothers has gone bankrupt and Merrill Lynch has been sold off in a distress sale to Bank of America. Who's next? Nobody knows. Here's what has been worrying investors: Tomorrow if Fidelity or Franklin or Prudential or Sun Life or BNP-Paribas or Morgan Stanley or any of the others go bankrupt or are nationalised or otherwise cease to exist, will there be any impact on the money that you've invested in their fund? The simple answer is that your money is safe. In Indian law and accounting, there's a sharp distinction between the fund company's own money and the investors' money that it is m...