If the interest rate is very low the public wish to possess larger amounts of cash, on the other hand if the interest rate is very high, people would seek to rid the cash with the consequent future profit by not spending money on this moment. Now well, even if the audience wanted to keep or get rid of cash as you vary the interest rate, it would be for the monetary policy of the State compensate the movements in demand for money from the public, so that interest rates rise or fall too much in comparison to the expectations that the State has for the better operation of the economy. Therefore, the interest rate is fixed by the action of the supply and demand for money. Technically the interest rate will have a variation that is intimately related to the prices of bonds and shares. When people have more money that wish to maintain, given your income and the level of the interest rate, it is likely to use the extra junk money to acquire bonds or stocks and other assets. any increase in the demand for stocks and bonds drives up their prices. This simultaneously reduces the interest rate. Why is this happening? The interest rate for an action is its performance by dividends, i.e.
the dividend in dollars divided by the share price. Suppose that initially the price of a stock that pays a dividend of $5 is $50, so that the yield from dividends is 0.10 or 10% (5/50). However, if there is a performance in actions demand that forced its price to rise to $100, the yield from dividends is reduced to 0.05 or 5% (of 5/50 to 5/100) that the $5 payment in dividends are not affected by changes in the price of the shares. In the same way, the annual payment in dollars for interest on a bond long-term, say $5 per year, it is not affected by movements in the prices of the bonds. If the price of the bond is originally $50, the bonus paid a yield interest or interest rate of 10% when the price of the bond rises to $100, performance is reduced to 5%. If there is a real oversupply of money in circulation (an offer above the needs of individuals for the current level of) (income and interest rates), it is likely that the prices on shares and bonds are rising and therefore the rate of interest declining. The opposite occurs if the offer is less than the needs of society.
That is why the Colombian Government closely follows what happens to the U.S. economy since a recovery of the same and greater strength in the dollar can solve this crossroads that Uribe’s Government is going through. And since I speak of Colombia, surely many must be attentive to what is happening with the Colombian State petroleum ECOPETROL (BVL:eco), which in 2007 reported profits US $2.878 billion, since it is expected that in the second half of 2008 the process of registration of its shares in New York Stock Exchange after making it this year in the Colombia stock exchange of values. I agree with the vision of Jaime Mejia posed in an article for the Colombian portal portfolio, that quote in the New York Stock Exchange will involve greater transparency to the investment because the company will have to submit to the standards of reporting of global companies and this translates into an immediate profit for shareholders. ECOPETROL has signed agreements last year to participate in 16 exploration blocks in Peru, Brazil and the Gulf of Mexico (US)UU.) through companies such as Shell, Petrobras, Repsol and Talisman.
With the opening of the equity capital of ECOPETROL in Colombia bag more than 482,000 Colombians became shareholders of the oil company. In 2007 the company hydrocarbon reserves closed the year at 1,456 million barrels of oil and continued recovery of exploratory work. The President of ECOPETROL, Javier Gutierrez said in the Assembly: drilled in total 75 wells throughout the country, of which Ecopetrol participated in 33, doing it directly in 12 of them. For 2008 the company expects an increase in its earnings of 10.1% compared to 2007 and the participation will increase in new businesses such as the petrochemical, natural gas, transportation and marketing of products. We will meet again tomorrow, Horacio Pozzo – cheap actions that analysts would not reveal during the last year and a half, one of the chains of more profitable shares on Wall Street could have converted U$ S 200 u $S 9.4 million. I will show you how in one second. I refer to actions which are not mentioned in the stock programs that never appear in The Wall Street Journal or Investor s Business Daily and those by which your stock agent would prefer to die before telling it to you (because you want them for your own portfolio!). Click here to continue reading.