You Can Be a Cruise Ship Owner Even If You Are Not Rich

February 21, 2012 | Author blogsocietys

Unlike fractional ownership of aircraft and houseboats, fractional owners of a cruise ship can all use the ship simultaneously. There is plenty of room for you and the other owners to live on the ship any time you want, or all the time. You can use it as a full-time residence, and so can the other co-owners.

The first obvious benefit of shared ownership is acquisition cost. There are many cruise ships on the market in all price ranges, sizes, ages, and conditions. There are many smaller and older cruise ships available for less than one million dollars. At the lower end, some smaller cruise ships in fair condition can be acquired for about $250,000. At the highest end, the biggest new mega cruise ships now cost about $500 million to build.

Do the math. If one hundred buyers pool resources in exchange for a percentage of ship ownership, the acquisition cost will be divided by that same number. One percent ownership of a $250,000 cruise ship would cost a mere $2500 for ship acquisition. At the other end of the scale, one percent ownership of a brand new mega cruise ship would cost five million dollars.

There are some other figures that must be tabulated into the total cost of ownership. Acquisition cost is first and foremost. The next figure is the cost to put the ship in service. On an older ship this cost may be higher than the acquisition cost. On the other hand, the cost to put a ship into service can be much lower if you were to get a good deal on a ship that already meets the international standards for ship safety, especially SOLAS (Safety of Life at Sea). Maintaining compliance with Chapter II SOLAS 74 amendments is cost prohibitive for some older ships and they are typically scrapped instead of being refurbished at great expense. There is a very important SOLAS implementation date coming up on January 10, 2010. On that date all commercial international ships will be required to be in compliance with the new fire safety codes. The most important new codes deal with the use of combustible materials in the ship. It will be expensive to replace all combustible materials in ships with non-combustible or flame resistant SOLAS compliant materials that meet the new safety standards. This will result in many ships being sold for scrap metal.

The looming SOLAS 2010 implementation date offers both perils and opportunities. The biggest peril is the possibility that the expense to bring a ship into full compliance with international standards will be greater than the value of the ship. However, there is a silver lining in this cloud. This pending SOLAS implementation date has already started to show up as a primary factor in the asking and selling prices of ships on the market today.

SOLAS 2010 also offers a tremendous opportunity for those who may prefer to have a very large houseboat instead of a commercial ship. Ships that are not in compliance with SOLAS 2010 are now selling for a song (inexpensively). A cruise ship can easily be converted into a megayacht with the stroke of a pen. Privately owned yachts, not in commercial service, and not carrying passengers or cargo for hire are exempt from many of the SOLAS requirements. Operating costs are also lower for a private yacht. It cost less to register, flag, and insure a private yacht. Megayachts can be flagged and classified for unlimited service. That means that a megayacht can go practically anywhere you want it to go. There is one major drawback to registering a cruise ship as a private yacht. You cannot use the yacht commercially. This cuts off a potential revenue source.

There are many decent cruise ships for sale at prices of less than one million dollars that would make good private megayachts. For example, take the ‘VERGINA SKY’ is a ship that I have personally inspected and so I can talk first hand about it. The asking price was $750,000. Here are the specifics of the ship in a nutshell:

Current Name: Vergina Sky

Ship Details: Built: 1971 in Japan – totally rebuilt 1992 in Greece

Dimensions: LOA 97.8m x LBP 82m x beam 14.6m x draft 4.49m Dwt: 500 on 4,49 GT/NT: 4,668 / 1,717

Description: Pielstick 2 x 8400bhp, twin screw, bow thruster, 3 x 500kw generators, 16 knots, 2 saloons, restaurant, 3 bars, casino, duty free shop, disco, swimming pool, 120 cabins for 318 guests. Lying Greece

My Comments after inspecting the ship

This is a well built little ‘Pocket Cruiser.’ At just over 320′ in length overall, it is a small cruise ship. Many experienced cruise passengers prefer smaller more intimate cruise ships for a variety of reasons. This ship can go places where the big cruise ships cannot reach, such as shallow draft ports and even many rivers. It has an omni-directional bow thruster and can turn on a dime (relatively speaking of course). I have carefully examined this ship from the engine log to the ultrasound hull report. This is a sound and safe little cruise ship. It is also a very fuel efficient and economical ship. My first time on this ship was in the middle of the summer in Greece when it was very hot outside. The ship is fully air conditioned and it was cool and comfortable inside the ship. I checked the engine room to see how many generators were running. I am happy to report that all the electric and air-conditioning requirements can be met by running just one of the three Daihatsu generators. These generators are very economical to operate in terms of fuel consumption and maintenance.

I was able to negotiate with the owner, John Kosmas and get some concessions. I got the price down to $500,000. And at that price, he agreed to bring the ship into compliance with SOLAS 2005 and also to include new paint topside. The ship was fairly well furnished even including bed linen, but the ship had been laid up for years. Its most recent service was in the Mediterranean and Black Seas. Cruise ships that trade exclusively in the Mediterranean and Black Seas tend to have smaller cabins and fewer amenities than the typical cruise ships that frequent the Caribbean. The bottom line is that this ship was an economy model, not a luxury model. When I was inspecting the engine room, I asked for the engine log. When I opened it I noticed all the entries were in Greek. I was able to discern some dates and other data that told me when the ship was last in service, but I could not read the Greek entries so I handed the engine log back to the ship owner, and told him “It’s all Greek to me.” Being Greek, Mr. Kosmas failed to find the humor in that.

Let’s look at the numbers on this ship. 100% of the acquisition cost would have been $500,000. 1% thus = $5000. One hundred buyers could own one percent each. There are 120 cabins so each co-owner could have a private cabin with 20 cabins left over. However, these cabins are a bit on the small side. Every cabin does have a bath and shower, but the size is just too small to be comfortable for most people, especially if the owners intend to live onboard full time. On a ship this size I would recommend that there be no more than 60 joint owners so each can have two cabins and will have the option of converting those two cabins into a two room suite. To keep the numbers simple lets say that this ship has 50 buyers who each buy 2% of the ship. Buy in cost per owner would then be $10,000. If there were only ten buyers, then the acquisition cost per buyer would be $50,000. $50,000 will not buy much of a house on land, but on this ship it would buy 10% of a ship like the Vergina Sky and twelve cabins that could be converted into a fairly large home.

At the economy end of the scale, a co owner could buy 1% of an economical cruise ship for about $5000. However it is not necessary for all co owners to have equal shares in the ship. Ownership can easily be divided up into 1% increments. If one buyer wanted 5%, then his cost of acquisition would be $25,000. He would be entitled to 5% of the ship’s cabins, and would have five votes on operations and management of the ship, such as itinerary planning.

Before becoming a joint owner, it would be imperative to find other people who have similar goals. I would suggest composing a preliminary DCCR (DECLARATION OF

COVENANTS, CONDITIONS AND RESTRICTIONS). You can do this before you even shop for a ship. Write your version of how you envision the shared ownership of a cruise ship as it should be. Then see if you can find some people who agree with your goals and your DCCR, subject to some revisions and concessions to accommodate other joint owners.

Step One: Determine if you and your family have the desire and financial capability to become joint cruise ship (or megayacht) owners.

Step Two: Find others who agree with your concept for shared ownership of a ship.

Step Three: Shop for a ship. This is the fun part.

Step Four: Buy a ship.

Step Five: Put the ship into service.

Even if you are not rich, you can afford to jointly own a cruise ship. But then comes the next logical question: Why would you or anyone want to live on a cruise ship? Who would this be suitable for?

If you are retired or otherwise have a stable income from a dependable source you probably can afford to be a cruise ship co-owner and live full-time onboard a cruise ship. If you work in a field where you can work from home online, then you too can probably afford to become a co-owner of a cruise ship. Most modern ships have satellite Internet service available 24-7.

Operating a cruise ship is expensive. The expenses include the cost of fuel, labor, maintenance, repairs, spares, food, port charges, insurance, technical management, shore management, registration, and the other costs of operating the ship. At first glance these costs may seem expensive, but in reality the cost of living at sea is actually a bargain considering what you get based upon what you pay. The best value does not always translate to the cheapest price. If the ship is well managed, the management will seek the highest quality goods, services, and labor at the very best global value. If the owners are dissatisfied with either technical or shore management, they replace them.

If there are many other co-owners of the ship to split the operating expenses of the ship, it can be affordable for those with a moderate level of income, such as a retirement check. I do have specific operating cost figures but I won’t bore you with that data. The bottom line is that it would not be prohibitively expensive for a middle-class average person to be able to afford to own a fraction of a cruise ship and be able to afford to live on the cruise ship full-time if they elect to do so.

For comparison purposes it is noteworthy that you have expenses in land based housing too. Those expenses include property taxes, homeowners insurance, maintenance and repairs, yard care, and utilities. Additionally you have transportation costs and of course food costs. Most people also spend money on entertainment too. When these expenses are added up the maintenance fees for living aboard a ship are comparable.

There are actually some savings resulting from living aboard a ship. The ship’s executive chef buys food and kitchen supplies in bulk for the ship and can get better prices than the average shopper. Other savings result from the large freezers and the mobility of the ship giving the food service management the ability to stock up on supplies in countries where prices are low. Some crew and owners may choose to fish for leisure. This can supply some fresh food at even lower costs to the owners. Labor savings are realized when the crew is hired based upon the best global labor rates. The laws of supply and demand drive prices down in some places in the world. Proper ship management can capitalize on these disparities. All the savings would be passed on to the cabin owners resulting in an economical cost of living similar to what you could expect to spend with a conventional home. Ship management should have accounting transparency will all books (financial records) open and available for any owner to inspect. Also ship management should submit all financial records quarterly to an outside auditor for the peace of mind of the owners. Anybody in the chain who spends any of the ship’s operational funds should also be periodically audited. For example, a good way to audit the executive chef would be for one or more of the live-aboard co-owners of the ship to go to the food market district of each port of call and they should try to haggle and get a better price for the same food than the price the executive chef was able to acquire. If the executive chef cannot find better deals than the ship’s co-owners, then the executive chef should be given his walking papers. The executive chef position is a vital position on a cruise ship. This is a position of trust because he will bill the food he buys to the ship. He must never be tempted to accept bribes from vendors or suppliers. Therefore, he should know that he will be routinely audited and any substandard performance will result in termination of his employment.

The biggest value of all onboard cruise ship is in labor costs. The better cruise ships tend to be labor intensive, providing passengers with unrelenting attention and extravagant pampering. The hotel staff on all cruise ships provides the basic services including food preparation and serving, laundry, cabin stewarding, entertainment, casino operation, beauty shop operations, This is one area where I would prefer to not scrimp because of the very good value in these services due to the low cost of international labor. I would prefer to go beyond the level that most cruise ships go in the area of spas. Land based luxury and specialty resort spas are very expensive, but the exact same level of service, professionalism, skill, and treatments can be provided on a cruise ship at extremely low cost. Labor is the key and the primary reason for most of the expense of spas. Labor is a tremendous value on a cruise ship because the cruise ship managers can choose workers from the global marketplace where it is easy to get the best value for the money.

Spas

Spa treatment is customized for each client. Spas commonly offer services such as:

Soothing massage therapies, skin and body treatments drawing from European and Eastern principles, expert hair and nail services, and a full menu of therapeutic treatments utilizing a deep-cleansing facial at the start of the program, as well as a series of detoxification and contouring wraps, lypo-reduction wrap, as well as marine mud and herb wraps. Massage Therapies including: Swedish Massage, Shiatsu Massage, Deep Tissue Treatment, Maternity Massage, Therapeutic Foot Massage (Reflexology), French Hydrotherapy Massage.

The healing therapies include a variety of massages, reflexology, facials, firming and many other body treatments. Plus a wide variety of services and wellness programs specially designed to meet the individual’s needs and desires. A full service salon offers all manner of hair treatments (including a certified colorist), as well as a variety of manicures, pedicures, and ‘facelifts’ for your hands. Extensive skin care includes: Age Management Therapies including, Glycolic Facial, Anti-Aging Facial Peel, Microdermabrasion; Facials including: Aromaplasty Facial, Teen Facial, Gentleman’s Facial, Nutrisource Facial, Regulating Acne Facial, Vitamin “C” Skin Renewal Facial; Body Treatments including: Decleor Sauna Mask, French Hydrotherapy Massage, Andromeda Salt Glow, Mummy Mud Mask, Seaweed Body Wrap, Safe Sun Treatment, Herbal Wrap; as well as various hair and nail treatments.

Additionally, spas also can facilitate weight reduction programs, and even administer physical therapy. In short, you can be treated like a king, on the budget of a pauper.

Labor Costs – International competition provides the most value to the ship owners.

On paper it seems to make good sense to man the ship with a Philippine crew. I love the Philippines. I have been there several times. English is still widely spoken and usually spoken quite well. The people are usually friendly and happy to see foreign tourists. A large percentage of ships worldwide are manned by crews from the Philippines. The Philippine government has a pretty good structure and system to facilitate the export of Philippine labor. In spite of how attractive it seems on paper, I would recommend NOT hiring a crew from the Philippines. Philippine workers tend to be envious of others, and especially of everybody else’s wages. They tend to think they are getting the raw end of the deal. It is rare to find a Filipino who is happy with his employment. While I am sure there are many good employees from the Philippines, there are more who are dissatisfied than satisfied with their employment. There seems to be a cultural anomaly in the Philippines where people feel that employers are bad guys. I would hesitate to recommend a crew from the Philippines in spite of the apparent advantages on paper.

My recommendation (for what it is worth)

I do know something about what I am writing about here. I am the former President of Adventure Spa Cruise. My advice is not just uninformed ranting. Back to the point now, the second best manning nation for a ship is India. I highly recommend India for the medical staff and the entire hotel staff, including the spa, and every other position except the deck and engineering. The labor costs in India are very attractive. I would also recommend using an Indian based manning agency. It is best if the ship’s owners do not have to deal with every employee issue or concern. The manning agency takes the pressure off the ship’s management, and their service is very reasonable. Indian employees tend to make better employees than do Filipinos. Indians also speak English, albeit not quite as well as Filipinos. I know Americans tend to get all worked up when someone uses a broad brush to paint an entire ethnicity. I love the people from the Philippines, but as employees they tend to be more problematic than do Indian employees. I realize that this statement is politically incorrect, and these days that might get me thrown in jail. I usually do not worry so much about being politically correct. I call it the way I see I and I let the cards fall where they may, and hope I can stay out of jail for speaking my mind.

All deck and engineering positions should be filled with an all Ukrainian crew. The ship will realize the most value for the money with Ukrainian deck and engineering staff. The Ukraine has a long maritime history and tradition. Maritime training and standards in the Ukraine are among the best in the world. Ukrainian deck and engineering staff are as good as or better than any other, but the cost of their labor is a very good value. The labor for deck officer and engineering staff are governed by international agreements, including STCW (Standards of Training, Certification and Watchkeeping for Seafarers).

Putting a cruise ship into service

After acquiring the ship, it will require some more investment to put it into service. At this point the joint owners will need to reach some agreements on many points. The cost of putting a cruise ship into service as a megayacht (very large private yacht) is much less than putting the ship into commercial service. However, if you can afford to buy a ship can easily meet SOLAS 2010 requirements, and can afford to flag and register it as a commercial ship then you can use the ship commercially to produce income and ROI (return on investment).

There are many marketing options for a commercial cruise ship. If the owners use no more than half the cabins, then that will leave sufficient means to produce enough revenue to at least pay for operating costs, and possibly produce a profit above operating costs. I will just briefly touch on some of the options available for marketing cruise ship capacity.

1. Conventional cruises. There is a trade-off here. You can produce revenue by providing conventional cruises. This will require that the ship have an itinerary that suits the commercial cruising market.

2. Freight and cargo. Some cruise ships have enough cargo capacity to produce some revenue by booking freight.

3. Assisted living. A cruise ship is well suited for assisted living, including crew and facilities. The going rate for assisted living in the average city in America is higher than the average cost of a cruise of the same duration.

4. Timeshares. This is an option not available to conventional cruise ship operators but could be facilitated if your co-owners agree to this type of marketing to fill cabins not used by co-owners. I will not go into the figures here, but timeshares tend to be high profit sales. There is a good chance that if the joint owners use no more than half the ship’s cabins for their own personal use, the remaining cabins could easily produce more than the total amount all the joint owners combined have invested.

Ships that would easily meet SOLAS 2010 tend to cost a bit more money to buy up front, and cost more to put into service. So I will give you couple of examples.

The Orient Venus is one of my favorite high-end ships. The specs:

M/V ORIENT VENUS

BUILT: JULY 1990 AT I.H.I.TOKYO

JAPANESE FLAG

JG. NK OCEAN GOING

GRT: 21,884 TONS

DWT: 4,863 TONS ON 6.50 M

LOA x B x D : 174.0×24.0×8.7 M

M/ENG: DIESEL UNITED-12PC2-6V x 2 SETS ,

TWIN SCREW CPP

SPEED: SERVICE ABT21.0 KNOTS / ABT 56.70MT /D

FUEL TANKS CAPA: IFO 1,500.4 M3 /MDO 87.30M3

GENERATOR: 1,600KWxAC450Vx60HZx 3 SETS

ENGINE ROOM M0 SYSTEMS

CRUISING RANGE: ABT 7,000MILE

PASSENGERS: MAX 606 PERSONS

CREW: 120 PERSONS

ABA WOG

DELIVERY: BY ARRANGEMENT

INSPECTION : KOBE.JAPAN

OWNERS PRICE USD 22 MIL net here

My personal assessment of the Orient Venus

It is a late model and beautiful ship. It has many highly desirable attributes for a residential ship. It is a high end luxury cruise ship with an extraordinarily high tonnage to passenger ratio. This is very important for a residential ship. More living room and more space per passenger is far more essential for a residential ship than for a conventional cruise ship. When passengers are only on a ship for a short time, they can tolerate cramped living quarters, but when they live year-round on a ship, the extra space is quite valuable. The owners have been trying to sell this ship for $22,000,000. That may seem like a high price, but when you divide it by the number of cabins (195) the asking price per cabin is $102,564. This price is in line with what you would expect to pay for a condominium. The last word I got from the owners is that they will sell the ship for $18,000,000 now ($92,307 per cabin). The cabins are all “outside” cabins and are large. The ship can accommodate 606 passengers and a crew of 120, for a total of 726 people.

Several ship brokers have this ship listed. I usually do not talk to ship brokers. I prefer to talk directly with the ship owners. I am in contact with the owners of the Orient Venus. I could probably get this stunningly beautiful ship for less than $15,000,000 today, and get some concessions and extras thrown in to boot.

Another example of a high end ship that would make do well as a commercial cruise ship, plus accommodate a hundred or so full-time live aboard co-owners is the Dream Princess, originally named Song of Norway.

GRT: 22,945

Max Draft: 6.7 M in sea water

Length: 194 M.

Total No. of Cabins: 538

Total No. Of Beds + Berth: 1280

Outside Cabins: 346

Inside Cabins: 192

Cabins size range: SQ. M: 11 -18.

Main Engines: 4 Wartsila Sulzer – 18,000 HP.

Service Speed: 16 Knots.

Public Rooms:

Main Dinning room – “King & I”- about 500 pax.

South Pacific Lounge about 400 pax.

My Fair Lady Lounge about 500 pax.

Bars- 5

Self Service Restaurant on the swimming pool deck

Large Swimming pool

Disco

Casino

Duty Free Shops

Gym

8 passenger decks

extensive outdoor areas

Ship was redecorated / refurbished extensively during 2005.

The asking price on this ship is $31 million USD. Divide the asking price by the number of cabins and the average cost per cabin would be $57,620. Of course some cabins are better than others so co-owners would have to agree of the shared usage before agreeing to the purchase.

I have some bad news for the ship owners and some good news for you. This ship will not sell for the asking price.

Fuel

Ship fuel is cheaper than automobile fuel for a few reasons. There are no road taxes on ship fuel of course and also it is different fuel. Ships main engines usually run on IFO180 or IFO380. Generator engines tend to be more finicky and commonly require diesel (MDO), which is still cheaper than automotive diesel. IFO 180 and 380 costs much less than MDO, usually about half the price. Ships consume a lot of fuel. So fuel cost is a major concern. I have some suggestions. If I were a co-owner of a ship I would be willing to invest a little more in the ship to increase fuel efficiency, and thus lower operating costs. There are many things that can be done to increase fuel efficiency. I would start with hull resistance. There is a new silicone-based paint from International Paints that when applied to the hull reduces amount of resistance in the water sufficiently to result in a 3 to 5% decrease in fuel consumption. A similar coating for the propellers also has been proven to increase fuel efficiency.

In addition to hull and prop coatings, there is an even more promising way to achieve dramatic fuel savings.

There is a company called Kiteship that has developed and produces kites for racing sailboats. These sailing kites do not require a mast. The kites fly high above the vessel, attached by cable and controlled from the vessel. Dave Culp of Kiteship has done a technical feasibility study on fitting a very large kite onto a conventional cruise ship. This would dramatically reduce fuel consumption. It would convert a fuel guzzler to a “green machine.” This is tantamount to converting a powerboat into a sail boat. The design of a cruise ship limits the amount of sail that a conventional ship can safely accommodate. A cruise ship lacks the ballast of a sail boat. If used in addition to the main engine(s) the kite will increase fuel efficiency. If the kite is used to pull the ship with the main engines shut down the ship’s speed will be reduced substantially. However, in this case, not only would the ship save IFO (main engine fuel) but also save MDO (generator engine fuel). If the kite were pulling the ship unassisted by the ship’s engines, then the propellers could be used to propel the ship’s generators without firing up the diesel generator engines. Even if the ship were traveling very slowly in the water, the propellers would turn in reverse if freed from the main engines. This is a very simple and easy task for the ship’s engineer to accomplish. In other words, the ship can be pulled by the kite, and that motion will push the ship’s propellers providing power to produce electricity and power the air-conditioning without using any fuel. The trade-off is a loss of speed and also some tacking is required, further reducing actual speed. What’s the rush? Why not go for maximum fuel savings? The salient point is that a high flying large kite can pull a cruise ship. If I were a co-owner of a cruise ship I would hope to find like minded co-owners who would be receptive to using such state-of-the-art technologies to save fuel.

There are hundreds of cruise ships on the market but I will just mention one more here. This cruise ship has RO/RO (Roll-On, Roll-Off) capability. This would be very convenient for live aboard owners who want to bring their “toys” with them. The garage deck will accommodate 6 to 8 trucks, or 60 to 80 cars. That converts to a lot of co-owner toys such as motorhomes, travel trailers, campers, cabin cruisers, ski boats, jet skis, sailboats, houseboats, bass boats, motorcycles, ATVs, cars, and trucks.

Specifications:

650 PASSENGER CRUISE SHIP FOR SALE

VESSEL IS FULLY FITTED WITH SPRINKLERS

SOLAS 2005/2010 FITTED

TWIN SCREW CRUISE

VESSEL DIMENSIONS LOA 137.10 X BREADTH 21.00 X 5.8 METERS DRAFT

BUILT 1981 / POLAND

REBUILT 1991

REBUILT – UPGRADED 1999

REBUILT – RENOVATED – REFURBISHED 2002

CLASS R.S. ICE CLASS L2

GRT 12637

PASSENGERS 650 IN 230 CABINS (BASIS 3 BERTH OCCUPANCY)

ALL CABINS WITH PRIVATE FACILITIES (INCLUDING SUITES AND SEMI SUITES)

9 DECKS

HELICOPTER PAD

MAIN ENGINES SULZER 4 X 4,350 BHP

SPEED ABOUT 17.5 / 15 KNOTS ON ABOUT 45 / 36 M/TONS + 9 TONS DIESEL OIL

BOWTHRUSTER 800 BHP

STABILIZERS

120 TONS PER DAY WATER MAKER

RECEPTION

LOUNGE

RESTAURANT (420 SEATS)

NINE BARS

CASINO

DUTY FREE SHOP

CHILDREN’S PLAY ROOM – TWO DISCOS

TV/MOVIE CORNER

DUTY FREE SHOPS

HAIRDRESSING SHOP

JACUZZI

ONE PASSENGER ELEVATOR

LAUNDRY SPA & HEALTH CLUB

TWO SAUNAS

CLINIC

TWO SWIMMING POOLS (ADULT & CHILDREN)

Cost per cabin based on asking price, $71,739. This ship will sell for less than asking price. It is already SOLAS 2010 compliant. It would cost very little to put into commercial service.

Conclusion

Becoming a co-owner of a cruise ship is not a far fetched idea. It is practical and feasible if you are able to find like minded people who would be willing to share the expenses.

Eyes Makeup Wine Cheese Almonds

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Fire Insurance Under Indian Insurance Law

February 16, 2012 | Author blogsocietys

A contract of Insurance comes into being when a person seeking insurance protection enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire and or lightening, explosion, etc. This is primarily a contract and hence as is governed by the general law of contract. However, it has certain special features as insurance transactions, such as utmost faith, insurable interest, indemnity, subrogation and contribution, etc. these principles are common in all insurance contracts and are governed by special principles of law.

FIRE INSURANCE:

According to S. 2(6A), “fire insurance business” means the business of effecting, otherwise than incidentally to some other class of insurance business, contracts of insurance against loss by or incidental to fire or other occurrence, customarily included among the risks insured against in fire insurance business.

According to Halsbury, it is a contract of insurance by which the insurer agrees for consideration to indemnify the assured up to a certain extent and subject to certain terms and conditions against loss or damage by fire, which may happen to the property of the assured during a specific period.

Thus, fire insurance is a contract whereby the person, seeking insurance protection, enters into a contract with the insurer to indemnify him against loss of property by or incidental to fire or lightning, explosion etc. This policy is designed to insure one’s property and other items from loss occurring due to complete or partial damage by fire.

In its strict sense, a fire insurance contract is one:

1. Whose principle object is insurance against loss or damage occasioned by fire.

2. The extent of insurer’s liability being limited by the sum assured and not necessarily by the extent of loss or damage sustained by the insured: and

3. The insurer having no interest in the safety or destruction of the insured property apart from the liability undertaken under the contract.

LAW GOVERNING FIRE INSURANCE

There is no statutory enactment governing fire insurance, as in the case of marine insurance which is regulated by the Indian Marine Insurance Act, 1963. the Indian Insurance Act, 1938 mainly dealt with regulation of insurance business as such and not with any general or special principles of the law relating fire of other insurance contracts. So also the General Insurance Business (Nationalization) Act, 1872. in the absence of any legislative enactment on the subject , the courts in India have in dealing with the topic of fire insurance have relied so far on judicial decisions of Courts and opinions of English Jurists.

In determining the value of property damaged or destroyed by fire for the purpose of indemnity under a policy of fire insurance, it was the value of the property to the insured, which was to be measured. Prima facie that value was measured by reference of the market value of the property before and after the loss. However such method of assessment was not applicable in cases where the market value did not represent the real value of the property to the insured, as where the property was used by the insured as a home or, for carrying business. In such cases, the measure of indemnity was the cost of reinstatement. In the case of Lucas v. New Zealand Insurance Co. Ltd.[1] where the insured property was purchased and held as an income-producing investment, and therefore the court held that the proper measure of indemnity for damage to the property by fire was the cost of reinstatement.

INSURABLE INTEREST

A person who is so interested in a property as to have benefit from its existence and prejudice by its destruction is said to have insurable interest in that property. Such a person can insure the property against fire.

The interest in the property must exist both at the inception as well as at the time of loss. If it does not exist at the commencement of the contract it cannot be the subject-matter of the insurance and if it does not exist at the time of the loss, he suffers no loss and needs no indemnity. Thus, where he sells the insured property and it is damaged by fire thereafter, he suffers no loss.

RISKS COVERED UNDER FIRE INSURANCE POLICY

The date of conclusion of a contract of insurance is issuance of the policy is different from the acceptance or assumption of risk. Section 64-VB only lays down broadly that the insurer cannot assume risk prior to the date of receipt of premium. Rule 58 of the Insurance Rules, 1939 speaks about advance payment of premiums in view of sub section (!) of Section 64 VB which enables the insurer to assume the risk from the date onwards. If the proposer did not desire a particular date, it was possible for the proposer to negotiate with insurer about that term. Precisely, therefore the Apex Court has said that final acceptance is that of the assured or the insurer depends simply on the way in which negotiations for insurance have progressed. Though the following are risks which seem to have covered Fire Insurance Policy but are not totally covered under the Policy. Some of contentious areas are as follows:

FIRE: Destruction or damage to the property insured by its own fermentation, natural heating or spontaneous combustion or its undergoing any heating or drying process cannot be treated as damage due to fire. For e.g., paints or chemicals in a factory undergoing heat treatment and consequently damaged by fire is not covered. Further, burning of property insured by order of any Public Authority is excluded from the scope of cover.

LIGHTNING : Lightning may result in fire damage or other types of damage, such as a roof broken by a falling chimney struck by lightning or cracks in a building due to a lightning strike. Both fire and other types of damages caused by lightning are covered by the policy.

AIRCRAFT DAMAGE: The loss or damage to property (by fire or otherwise) directly caused by aircraft and other aerial devices and/ or articles dropped there from is covered. However, destruction or damage resulting from pressure waves caused by aircraft traveling at supersonic speed is excluded from the scope of the policy.

RIOTS, STRIKES, MALICIOUS AND TERRORISM DAMAGES: The act of any person taking part along with others in any disturbance of public peace (other than war, invasion, mutiny, civil commotion etc.) is construed to be a riot, strike or a terrorist activity. Unlawful action would not be covered under the policy.

STORM, CYCLONE, TYPHOON, TEMPEST, HURRICANE, TORNADO, FLOOD and INUNDATION: Storm, Cyclone, Typhoon, Tempest, Tornado and Hurricane are all various types of violent natural disturbances that are accompanied by thunder or strong winds or heavy rainfall. Flood or Inundation occurs when the water rises to an abnormal level. Flood or inundation should not only be understood in the common sense of the terms, i.e., flood in river or lakes, but also accumulation of water due to choked drains would be deemed to be flood.

IMPACT DAMAGE: Impact by any Rail/ Road vehicle or animal by direct contact with the insured property is covered. However, such vehicles or animals should not belong to or owned by the insured or any occupier of the premises or their employees while acting in the course of their employment.

SUBSIDENCE AND LANDSLIDE INCULUDING ROCKSIDE: Destruction or damage caused by Subsidence of part of the site on which the property stands or Landslide/ Rockslide is covered. While Subsidence means sinking of land or building to a lower level, Landslide means sliding down of land usually on a hill.

However, normal cracking, settlement or bedding down of new structures; settlement or movement of made up ground; coastal or river erosion; defective design or workmanship or use of defective materials; and demolition, construction, structural alterations or repair of any property or ground-works or excavations, are not covered.

BURSTING AND/OR OVERFLOWING OF WATER TANKS, APPARATUS AND PIPES: Loss or damage to property by water or otherwise on account of bursting or accidental overflowing of water tanks, apparatus and pipes is covered.

MISSILE TESTING OPERATIONS: Destruction or damage, due to impact or otherwise from trajectory/ projectiles in connection with missile testing operations by the Insured or anyone else, is covered.

LEAKAGE FROM AUTOMATIC SPRINKLER INSTALLATIONS: Damage, caused by water accidentally discharged or leaked out from automatic sprinkler installations in the insured’s premises, is covered. However, such destruction or damage caused by repairs or alterations to the buildings or premises; repairs removal or extension of the sprinkler installation; and defects in construction known to the insured, are not covered.

BUSH FIRE: This covers damage caused by burning, whether accidental or otherwise, of bush and jungles and the clearing of lands by fire, but excludes destruction or damage, caused by Forest Fire.

RISKS NOT COVERED BY FIRE INSURANCE POLICY

Claims not maintainable/ covered under this policy are as follows:

o Theft during or after the occurrence of any insured risks

o War or nuclear perils

o Electrical breakdowns

o Ordered burning by a public authority

o Subterranean fire

o Loss or damage to bullion, precious stones, curios (value more than Rs.10000), plans, drawings, money, securities, cheque books, computer records except if they are categorically included.

o Loss or damage to property moved to a different location (except machinery and equipment for cleaning, repairs or renovation for more than 60 days).

CHARACTERICTICS OF FIRE INSURANCE CONTRACT

A fire insurance contract has the following characteristics namely:

(a) Fire insurance is a personal contract

A fire insurance contract does not ensure the safety of the insured property. Its purpose is to see that the insured does not suffer loss by reason of his interest in the insured property. Hence, if his connection with the insured property ceases by being transferred to another person, the contract of insurance also comes to an end. It is not so connected with the subject matter of the insurance as to pass automatically to the new owner to whom the subject is transferred. The contract of fire insurance is thus a mere a personal contract between the insured and the insurer for the payment of money. It can be validly assigned to another only with the consent of the insurer.

(b) It is entire and indivisible contract.

Where the insurance is of a binding and its contents of stock and machinery, the contract is expressly agreed to be divisible. Thus , where the insured is guilty of breach of duty towards the insurer in respect of one subject matters covered by the policy , the insurer can avoid the contract as a whole and not only in respect of that particular subject mater , unless the right is restricted by the terms of the policy.

(c) Cause of fire is immaterial

In insuring against fire, the insured wishes to protect him from any loss or detriment which he may suffer upon the occurrence of a fire, however it may be caused. So long as the loss is due to fire within the meaning of the policy, it is immaterial what the cause of fire is, generally. Thus , whether it was because the fire was lighted improperly or was lighted properly but negligently attended to thereafter or whether the fire was caused on account of the negligence of the insured or his servants or strangers is immaterial and the insurer is liable to indemnify the insured. In the absence of fraud, the proximate cause of the loss only is to be looked to.

The cause of the fire however becomes material to be investigated

(1). Where the fire is occasioned not by the negligence of, but by the willful

(2) Where the fire is due is to cause falling with the exception in the contract.

LIMITATION OF TIME

Indemnity insurance was an agreement by the insurer to confer on the insured a contractual right, which prima facie, came into existence immediately when the loss was suffered by the happening of an event insured against, to be put by the insurer into the same position in which the accused would have had the event not occurred but in no better position. There was a primary liability, i.e. to indemnify, and a secondary liability i.e. to put the insured in his pre-loss position, either by paying him a specifying amount or it might be in some other manner. But the fact that the insurer had an option as to the way in which he would put the insured into pre-loss position did not mean that he was not liable to indemnify him in one way or another, immediately the loss occurred. The primary liability arises on the happening of the event insured against. So, the time ran from the date of the loss and not from the date on which the policy was avoided and any suit filed after that time limit would be barred by limitation.[2]

WHO MAY INSURE AGAINST FIRE?

Only those who have insurable interest in a property can take fire insurance thereon. The following are among the class of persons who have been held to possess insurable interest in, property and can insure such property:

1. Owners of property, whether sole, or joint owner, or partner in the firm owning the property. It is not necessary that they should possession also. Thus a lesser and a lessee can both insure it jointly or severely.

2. The vender and purchaser have both rights to insure. The vendor’s interest continues until the conveyance is completed and even thereafter, if he has an unpaid vendor’s lien over it.

3. The mortgagor and mortgagee have both distinct interests in the mortgaged property and can insure, per Lord Esher M.R.”The mortgagee does not claim his interest through the mortgagor , but by virtue of the mortgage which has given him an interest distinct from that of the mortgagor”[3]

4. Trustees are legal owners and beneficiaries the beneficial owners of trust property and each can insure it.

5. Bailees such as carriers, pawnbrokers or warehouse men are responsible for there safety of the property entrusted to them and so can insure it.

PERSON NOT ENTITLED TO INSURE

One who has no insurable interest in a property cannot insure it. For example:

1. An unsecured creditor cannot insure his debtor’s property, because his right is only against the debtor personally. He can, however, insure the debtor’s life.

2. A shareholder in a company cannot insure the property of the company as he has no insurable interest in any asset of the company even if he is the sole shareholder. As was the case of Macaura v. Northen Assurance Co.[4] Macaura. Because neither as a simple creditor nor as a shareholder had he any insurable interest in it.

CONCEPT OF UTMOST FAITH

As all contracts of insurance are contracts of utmost good faith, the proposer for fire insurance is also under a positive duty to make a full disclosure of all material facts and not to make any misrepresentations or misdescreptions thereof during the negotiations for obtaining the policy. This duty of utmost good faith applies equally to the insurer and the insured. There must be complete good faith on the part of the assured. This duty to observe utmost good faith is ensured b requiring the proposer to declare that the statements in the proposal form are true, that they shall be the basis of the contract and that any incorrect or false statement therein shall avoid the policy. The insurer can then rely on them to assess the risk and to fix appropriate premium and accept the risk or decline it.

The questions in the proposal form for a fire policy are so framed as to get all information which is material to the insurer to know in order to assess the risk and fix the premium, that is, all material facts. Thus the proposer is required too give information relating to:

o The proposer’s name and address and occupation

o The description of the subject matter to be insured sufficient for the purpose of identifying it including,

o A description of the locality where it is situated

o How the property is being used, whether for any manufacturing purpose or hazardous trade.etc

o Whether it has already been insured

o And also ant personal insurance history including the claims if any made buy the proposer, etc.

Apart from questions in the proposal form, the proposer should disclose whether questioned or not-

1. Any information which would indicate the risk of fire to be above normal;

2. Any fact which would indicate that the insurer’s liability may be more than normal can be expected such as existence of valuable manuscripts or documents, etc, and

3. Any information bearing upon the more; hazard involved.

The proposer is not obliged to disclose-

1. Information which the insurer may be presumed to know in the ordinary course of his business as an insurer;

2. Facts which tend to show that the risk is lesser than otherwise;

3. Facts as to which information is waived by the insurer; and

4. Facts which need not disclosed in view of a policy condition.

Thus, assured is under a solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be accepted or not. While making a disclosure of the relevant facts, the

DOCTRINE OF PROXIMATE CAUSE

Where more perils than one act simultaneously or successively, it will be difficult to assess the relative effect of each peril or pick out one of these as the actual cause of the loss. In such cases, the doctrine of proximate cause helps to determine the actual cause of the loss.

Proximate cause was defined in Pawsey v. Scottish Union and National Ins. Co.,[5]as “the active, effective cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source.” It is dominant and effective cause even though it is not the nearest in time. It is therefore necessary when a loss occurs to investigate and ascertain what is the proximate cause of the loss in order to determine whether the insurer is liable for the loss.

PROXIMATE CAUSE OF DAMAGE

A fire policy covers risks where damage is caused by way of fire. The fire may be caused by lightening, by explosion or implosion. It may be result of riot, strike or on account of any, malicious act. However these factors must ultimately lead to a fire and the fire must be the proximate cause of damage. Therefore, a loss caused by theft of property by militants would not be covered by the fire policy. The view that the loss was covered under the malicious act clause and therefore .the insurer was liable to meet the claim is untenable, because unless and until fire is the proximate cause f damage, no claim under a fire policy would be maintainable.[6]

PROCEDURE FOR TAKING A FIRE INSURANCE POLICY

The steps involved for taking a fire insurance policy are mentioned below:

1. Selection of the Insurance Company:

There are many companies that offer fire insurance against unforeseen events. The individual or the company must take care in the selection of an insurance company. The judgment should rest on factors like goodwill, and long term standing in the market. The insurance companies can either be approached directly or through agents, some of them who are appointed by the company itself.

2. Submission of the Proposal Form:

The individual or the business owner must submit a completed prescribed proposal form with the necessary details to the insurance company for proper consideration and subsequent approval. The information in the Proposal Form should be given in good faith and must be accompanied by documents that verify the actual worth of the property or goods that are to be insured. Most of the companies have their own personalized Proposal Forms wherein the exact information has to be provided.

3. Survey of the Property/ Consideration:

Once the duly filled Proposal Form is submitted to the insurance company, it makes an “on the spot” survey of the property or the goods that are the subject matter of the insurance. This is usually done by the investigators, or the surveyors, who are appointed by the company and they need to report back to them after a thorough research and survey. This is imperative to assess the risk involved and calculate the rate of premium.

4. Acceptance of the Proposal:

Once the detailed and comprehensive report is submitted to the insurance company by the surveyors and related officers, the former makes a thorough perusal of the Proposal Form and the report. If the company is satisfied that their is no lacuna or foul play or fraud involved, it formally “accepts” the Proposal Form and directs the insured to pay the first premium to the company. It is to be noted that the insurance policy commences after the payment and the acceptance of the premium by the insured and the company, respectively. The Insurance Company issues a Cover Note after the acceptance of the first premium.

PROCEDURE ON RECEIPT OF NOTICE OF LOSS

On receipt of the notice of loss, the insurer requires the insured to furnish details pertaining to the loss in a claim from relating to the following information-

1. Circumstances and cause of the fire;

2. Occupancy and situation of the premises in which the fire occurred;

3. Insured’s interest in the insured property; that is capacity in which the insured claims and whether any others are interested in the property;

4. Other insurances on the property;

5. Value of each item of the property at the time of loss together with proofs thereof , and value of the salvage ,if any; and

6. Amount claimed

Furnishing such information relating to the claim is also a condition precedent to the liability of the insurer. The above information will enable the insurer to verify whether-

(1) The policy is in force;

(2) The peril causing the loss is an insured peril;

(3) The property damaged or lost is the insured property.

Rules for calculation of value of property

The value of the insured property is-

1) Its value at the time of loss, and

2) At the place of loss, and

3) Its real or intrinsic value without any regard for its sentimental vale. Loss of prospective profit or other consequential loss is not to be taken into account.

FILING OF CLAIMS

How a claim arises?

After a contract of fire insurance has come into existence, a claim may arise by the operation of one or more insured perils on an unsecured property. There may in addition one or more uninsured perils also operating simultaneously or in succession of the property. In order that the claim should be valid the following conditions must be fulfilled:

1. The occurrence should take place due to the operation of an insured peril or where both insured and other perils operated , the dominant or efficient cause of the loss must have been an insured peril;

2. The operation of the peril must not come within the scope of the policy exceptions;

3. The event must have caused loss or damage of the insured property;

4. The occurrence must be during the currency of the policy;

5. The insured must have fulfilled all the policy conditions and should also comply with requirements to be fulfilled after the claim had arisen.

MATERIAL FACTS IN FIRE INSURANCE: PREVIOUS CONVICTION OF THE ACCUSED

The criminal record of an assured could affect the moral hazard, which insurers had to assess, and the non-disclosure of a serious criminal offence like robbery by the plaintiff would a material non-disclosure.

INSURED’S DUTY ON OUTBREAK OF FIRE, IMPLIED DUTY

On the outbreak of a fire the insured is under an implied duty to observe good faith towards the insurers and the in pursuance of it the insured must do his best to avert or minimize the loss. For this purpose he must (1) take all reasonable measures to put out the fire or prevent its spread, and (2) assist the fire brigade and others in their attempts to do so at any rate not come in their way.

With this object the insured property may be removed to a place of safety. Any loss or damage the insured property may sustain in the course of attempts to combat the fire or during its removal to a place of safety etc., will be deemed to be loss proximately caused by the fire.

If the insured fails in his duty willfully and thereby increases the burden of the insurer, the insured will be deprived of his right to revive any indemnity under the policy.[7]

INSURER’S RIGHTS ON THE OUTBREAK OF FIRE

(A) Implied Rights

Corresponding to the insured’s duties the insurers have rights by the law, in view of the liability they have undertaken to indemnify the insured. Thus the insurers have a right to-

o Take reasonable measures to extinguish the fire and to minimize the loss to property, and

o For that purpose, to enter upon and take possession of the property.

The insurers will be liable to make good all the damage the property may sustain during the steps taken to put out the fire and as long as it in their possession, because all that is considered the natural and direct consequence of the fire; it has therefore been held in the case of Ahmedbhoy Habibhoy v. Bombay Fire Marine Ins. Co [8] that the extent of the damage flowing from the insured peril must be assessed when the insurer gives back and not as at the time when the peril ceased.

(B) Loss caused by steps taken to avert the risk

Damage sustained due to action taken to avoid an insured risk was not a consequence of that risk and was not recoverable unless the insured risk had begun to operate. In the case of Liverpool and London and Globe Insurance Co. Ltd v. Canadian General Electric Co. Ltd., [9] the Canadian Supreme Court held that “the loss was caused by the fire fighters’ mistaken belief that their action was necessary to avert an explosion , and the loss was not recoverable under the insurance policy, which covered only damage caused by fire explosion., and the loss was not recoverable under the insurance policy, which covered only damage caused by fire or explosion.”

(C) Express rights

Condition 5- in order to protect their rights well insurers have prescribed for better rights expressly in this condition according to which on the happening of any destruction or damage the insurer and every person authorized by the insurer may enter, take or keep possession of the building or premises where the damage has happened or require it to be delivered to them and deal with it for all reasonable purposes like examining, arranging, removing or sell or dispose off the same for the account of whom it may concern.

When and how a claim is made?

In the event of a fire loss covered under the fire insurance policy, the Insured shall immediately give notice thereof to the insurance company. Within 15 days of the occurrence of such loss, the Insured should submit a claim in writing, giving the details of damages and their estimated values. Details of other insurances on the same property should also be declared.

The Insured should procure and produce, at his own expense, any document like plans, account books, investigation reports etc. on demand by the insurance company.

HOW INSURANCE MAY CEASE?

Insurance under a fire policy may cease in any of the following circumstances, namely:

(1) Insurer avoiding the policy by reason of the insured making misrepresentation, misdescription or non-disclosure of any material particular;

(2) If there is a fall or displacement of any insured building range or structure or part thereof , then on the expiry of seven days wherefrom, except where the fall or displacement was due to the action of any insured peril; notwithstanding this, the insurance may be revived on revised terms if express notice is given to the company as soon as the occurrence takes place;

(3) The insurance may be terminated at any tie at the request of the insured and at the option of the company on 15 days notice to the insured

CONCLUSION

Tangible property is exposed to numerous risks like fire, floods, explosions, earthquake, riot and war, etc. and insurance protection can be had against most of these risks severally or in combination. The form in which the cover is expressed is numerous and varied. Fire insurance in its strict sense is concerned with giving protection against fire and fire only. So while granting a fire insurance policy all the requisites need be fulfilled. The insured are under a moral and legal obligation to be at utmost good faith and should be telling true facts and not just fake grounds only with the greed to recover money. Further all insurance policies help in the development of a Developing nation. Hence insurance companies have a burden to help the insured when the insured are in trouble.

REFERENCE:

1. (1983) VR 698 (Supreme Court of Vienna)

2. Callaghan v. Dominion Insurance Co. Ltd. (1997) 2 Lloyd’s Rep. 541 (QBD)

3. Small v. U.K Marine Insurance Association (1897) 2 QB 311

4. (1925) AC 619

5. (1907) Case.

6. National Insurance Company v. Ashok Kumar Barariio

7. Devlin v. Queen Insurance Co, (1882) 46 UCR 611.

8. (1912) 40 IA 10 PC

9. (1981) 123 DLR (3d) 513 (Supreme Court of Canada)

Books Referred:

1. The Economics of Fire Protection by Ganapathy Ramachandran

2. Modern Insurance Law, by John Birds

3. The Handbook of Insurance Regulatory and Development Authority Act and Regulations with Allied Laws ,by Nagar

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Day Trading Brokers – Tips On Choosing One

February 12, 2012 | Author blogsocietys

With the rise of online trading, traders are engaging in day trading and trying to make small regular profits and for this they need a day trading broker. If you want to choose one use the simple tips below.

Transaction Costs

The most important criteria in choosing a day trading broker is the cost of doing business. You should choose the lowest transaction cost you can. If you trade regularly then transaction fees mount up and impact your profit and loss.

Execution Only

If you want a day trading broker, you want them to transact orders only and don’t want advice. Many brokers will offer you signals and alerts and advice – don’t fall for it. If brokers could make money they would be traders and not brokers. If you want to be successful in trading then you need to do it on your own – only you can give yourself success.

Trading Platform

You need to be comfortable with the platform the broker uses and ensure that it’s reliable and you have 24 hour support. In most cases, a broker will let you test drive the trading platform and you can see how you get on with it with a demo trading account before risking real money.

Size and Security

Look for well capitalized brokers that have been in business for a few years, are stable and look at regulation and protection of your money. Bigger is better when you are using a broker on an execution only basis.

You want a broker that has been known for reliability over the years and you can easily check this by looking on the web. You should always search the brokers name and check any good and bad press they have. In many instances you will surprised at what you find.

Funding

Look at how quickly you can fund your account and how quickly you can withdraw. You should also look to see if the broker accepts online payments, safely and securely.

When choosing a day trading broker (or any broker for that matter), check the above points and keep in mind that your major cost is your transaction fee and this should be as low as possible. If you want to day trade and want a day trading broker that can give you the best service, the above are common sense tips that will help you find one.

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How are Currency Values Determined?

February 5, 2012 | Author blogsocietys

Stock Broker

And who determines currency values?

The answer to the second part is easy. Currency value is determine by the purchasers of the currency. These are primarily travelers, governments and Forex traders. FOREX stands for Foreign Exchange. There are many factors that currency traders, governments and businesses take into consideration in determining the Fair Market Value of a currency.

Fair Market Value is the price at which a willing buyer and a willing seller come together. The buyer must factor in many elements and considerations to try to accurately assess a currency’s value at any given time. There are approximately 180 different currencies in the world now. Let’s consider some of the factors that are used to determine a currency’s value.

Factors Affecting Currency Value:

1. Political Conditions in the Country – This includes the stability of the government, the amount of corruption, bribery and the degree of law and order. Also includes a country’s relationships with other countries and especially their relationship to US, UK, China and Russia. The form of government in the country is also a factor used to assess the value of a currency. Consider the widely varying forms of government in Saudi Arabia, China, UK, Venezuela and Thailand, just to name a few.

2. Economic Situation – This includes factors such as jobs, unemployment, work ethic, infrastructure, inflation and direction of the economy. Is it older or newer in orientation; computers and high tech, or more farming and manufacturing.

3. Perception from Outside – The perceptions and attitudes of other countries toward a country are as important as the reality of the country’s actual situation. News, media, movies, newspapers, rumors and spin can create perceptions. How much is known about a country? The less that is known, generally, the lower the value of a currency.

4. Demographics – A young population may mean better prospects for the future, people who are more open to change and development and a growing size of the workforce. The overall population of a country is a factor. How much weight does this country have on the world scene.

5. National Leaders – The openness, trustworthiness and likeability of visible leaders is a factor. This includes political leaders, sports figures, business owners and celebrities. Here are some national figures who affect their countries, either for better or for worse. Kim Jung Il, David Beckham, Nicole Kidman, Madonna, Osama bin Laden, Barack Obama and Vladimir Putin. These help form the world’s perception of a country.

6. Isolation versus Openness – Continuum China is becoming more open, more transparent. This helps. Cuba is very closed and isolated. Venezuela is becoming more isolated by some of its recent actions. China’s markets are becoming more open. Cuba, Kyrgyzstan, Russia and Japan, all have differing levels of openness with the outside world, which affects the value of their currency.

7. Natural Resources – The kind of and amount of exploitation of a country’s natural resources certainly helps create a perception of value, or lack thereof, of a country’s currency. Mining of minerals, forests, oil, fish and other resources are considered. Also the level of technology to development these resources.

8. Weather Factors such as drought, tsunamis, earthquake and floods are taken into consideration. How frequent are they and how is the country’s response to them. These also affect desirability, safety and perception of a country. Is it a tourist destination?

9. War and Conflicts – With which other country is a country at war, and who is it’s allies? Their military strength and technology, their willingness to go to war and for what, are important factors in assessing a country’s strength, stability and the value of its currency.

10 . Education – This includes languages spoken, level of computer know-how, Internet connectedness, culture and religion. Scientists, entrepreneurs, authors and inventors are all affected by the type and quality of education in a country.

In conclusion, currency values are determined by many factors. Not just one issue, but a composite of many must be considered. In trading currencies, such as in FOREX, trades are usually made in pairs. Values must be relative to something. So how is a country doing relative to another country is also significant. Common Forex pairs are US dollar and Japanese yen, Euro and US dollar, for example. These and other factors determine the value of a currency. Some are tangible, some intangible. Some are fixed and some are manageable. Sometimes it is the news of the moment and sometimes the long-term situation. That is why currency values are often changing and there is no one place or person who determines currency values. And why currency exchange, based on fluctuating currency values, can be an exciting, lucrative, volatile, fun or disastrous form of business or investment.

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Job Searching

February 3, 2012 | Author blogsocietys

Stock Broker

To start searching for jobs, one first needs to know what type of job is suitable for him/her. To know this, one need to first explore all possible avenues by meeting different types of people, reading newspapers, newsletters, visiting different employment agencies and searching the Internet. This helps to realize what field, what type of job and what type of employer is best suited for him/her.

After having decided this, one needs to prepare his/her resume. A good resume is self-explanatory and speaks about all the important milestones in the prospective employee’s professional life. It provides a confident as well as a natural view. Various job search engines on the Internet provide tips on writing a good resume. One should check this out before writing a resume. The resume should be modified as and when required depending on the type of job for which application is being made. Separate cover letters for each category of job should be provided with the resumes. Even after applying for jobs, research on different categories of jobs and companies should be continued to be aware of the latest trends in the market.

Next, one should prepare separate lists of recruiters and companies to identify the ones which have to be directly approached and those for whom mails or phone calls have to be made.

To get advice on what type of job is suitable one should consult experts as well as search the Internet. Answers to probable questions should be prepared and lot of people should be met to increase the confidence level. If required, one’s wardrobe should be modified according to the dress code required for that particular kind of job.

One important factor while searching for a job is to think boldly and energetically without fearing for rejection. One needs to think beyond other’s approval and only think for own approval.

To search for a new job, it is inconsequential whether one is unemployed or was fired. There is no need to feel inferior. If one can offer a proper reason specifying why he/she is best suited for the job and what extra value he/she can add to the organization, then there is no problem in getting the job. Traits like sincerity, honesty, dedication, professionalism are sure to set one apart from the rest in the job market. So if one is able to choose the correct field of job and a suitable employer, then finding the ideal job is no big deal.

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Currency Arbitrage

January 30, 2012 | Author blogsocietys

Stock Broker

A very simple meaning of arbitrage would be getting something from just nothing! If you are surprised then don’t be, for that’s what arbitrage is. Technically, however, it can be defined as a synchronized purchase and sale of a security which will derive you with a profit from a price difference between the two.  

Here is a small example to show how it works. Let’s imagine that the price of a stock on the NYSE is $15 per share, but the price of the same share is $10 per share in the Frankfurt exchange. Now the difference of a $5 could mean an instant profit for you requiring zero investment.  

So let’s suppose the arbitrageur therefore sells on the NYSE and buy at the same time on the Frankfurt exchange. And as the transactions are a simultaneous action theoretically, there will be a direct and instant gain of $5 per share. The same concept is applied for currency arbitrage.  

There isn’t any limit on the amount of shares an arbitrager would like to buy and sell, the gain being guaranteed by the discrepancy in price. In the above example a quick 10 million share if purchased by the arbitrager along with a simultaneous selling of 10 million share will help him net a profit of some $50 million.  

Now this new concept of making some fast bucks is a kind of trading which is emerging as one of the most interesting online entrepreneurship. It is gradually gaining popularity as many are not aware of it as yet.  

Furthermore, the concept of arbitrage is not limited to financial instruments alone. The entire practice could be applied to almost any and every kind of a circumstances where there arise an immediate opportunity to buy and sell simultaneously at particular price differences.  

Internet is the best place to carry the currency arbitrage. You will come across various sites selling similar things for different prices. So what you can do is buy from one site and sell through another site at the particular price difference and pocket the profit.  

Currency arbitrage seems to be a very lucrative trading business but one needs to be very careful while proceeding with such affairs.  

Currency arbitrage is simple but one must be careful because you never know when it gets noticed and the price differences gets equal closing the opportunities. So if you want to try it out, just get set and go. Here’s wishing you happy arbitraging!

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How To Use Your IRA To Buy Real Estate

January 26, 2012 | Author blogsocietys

Stock Broker

In life there are a lot of things we learn by accident, which can be very beneficial to us. Sometimes understanding these processes can take a while. Sometimes after proper explanation …BLAM, you get it. That is exactly what happened to me. When I first heard about the topic, I will discuss in this E-book, it was perplexing, however, I knew that it could reap huge rewards in the future. It took a while for me to understand the process. I remember trying to tell a buddy who owned an apartment building about _________ and what it could do for him. I remember getting it all confused (like telling someone a good joke, but while you are trying to say the good joke, in mid sentence you realize that you don’t remember it all and it is not coming out right, so you just say forget it because you are screwing the joke up). Fortunately, by mistake I came across the company Pensco Trust who has educated me on this great opportunity of____________. I am considered one of their “Preferred Professionals.” My learning curve is your benefit. Enough with my teasing games, the purpose of this E-book, is to educate you on Self Directed IRAs. So buckle up!

This publication is made to provide basic information in regard to Self Directed IRA’s. It is presented with the understanding that I am not engaged in rendering accounting or legal advice. If you need legal advice services of a proficient professional should be contacted. I can not in any way guarantee that this material will be properly used for the purposes intended and I assume no responsibility for its correct and proper use.

We all know that Social Security (SS) is struggling and the money there will eventually disappear. Prior to 1935 there was no personal SS. All that existed were people saving their money in their bank/under the mattress. In 1935 SS was created. Remember that this was the same time period of the Great Depression. Keep in mind the life expectancy back then was like 62 years old. Now it is 76. Baby Boomers make up a huge portion of the population. Baby Boomers are retiring everyday. You want some hard facts? Well according to Research Corporation Study: The New Landscape of IRA Rollover © 2005 BISYS Retirement Services.

o The first of the baby boomers reached age 59.5 in July 2005

o 4 million more will reach age 59.5 each year

o 24 million people will reach age 65 by 2010

o 55% plan on to work after “retirement”

Now on the flip let’s say there was no problem with SS. Have you ever talked to someone who gets SS checks? They don’t get a lot of money. It is sad sometimes. I am not trying to offend anyone, but the majority of the older people you see at Wal-Mart greeting you and marking your receipt didn’t have a “nest egg” to rely on when they “retired”. The topic I will discuss will prevent that from ever happening to you and I.

1974 congress created IRA (Individual Retirement Account) to supplement Social Security. We know these are programs to help shelter money away for tax benefits. Typically people go after the traditional investments. We always hear about stocks, bonds and CD’s. Yes all investments have risks, but the thing about these investments is that you can not affect the outcome of the business/your return. You are a spectator, watching the game. Also, you can’t use leverage (an example of using leveraged will be discussed later). Also, with stocks if any little blip in market occurs, like oil, war, scandal, etc. your value could go down. Real estate does go up and down but generally you don’t lose all of your money in worst case scenarios. Real estate appreciation has kept pace or exceeded inflation. It is a cycle. When it goes down, the value does not go down instantly (like Enron).

Self Directed IRA (SDI) an overview. Now I am not bashing stocks, I have them, if you talk to any financial planner, they will tell you to always be diversified in your investments. This is what SDI does for you. Ideally you should have SDI, stocks, bonds etc.

SDI has been a well kept secret. Why? I think it is because of ignorance, and I also the folks on Wall Street don’t benefit. A broker at an investment company will not tell a person about it, because they can’t make money off of the transaction (let alone having them understand how it works). The last reason is because there are “professionals” who don’t have a clear understanding on its use.

To get a SDI, you would either have to go through an Administrator, or a Custodian.

What is an Administrator? Banks, brokerage firms (like Charles Schwab) and insured credit unions.

What Is A Custodian?

There are very few self-directed IRA/401k custodians in the United States. In order to be a custodian for self-directed products, the custodian is known as a “passive custodian.” This simply means that they are obligated by law to provide only custodial and administrative services for the qualified plan. They can provide NO investment advice. This tremendously reduces the fees associated with traditional investments because you, the investor, make all of the investment decisions. They are also FDIC insured.

What is the role of the custodian

o Holds your IRA assets

o Performs all IRA transactions

o Keeps all IRA records

o Provides all IRS required reports

o Keeps IRA plan in compliance

o Provides access online access

There are only three things your SDI can’t invest in and they are

o Collectibles/antiques

o Life insurance

o Stock of a sub-chapter “S” corporation (these are companies that are traded publicly on the stock market)

As long as the transaction is for investment purposes and you have not created a “prohibited transaction” (will discuss later) the list of investments are endless.

The beginning of a long list of real estate you can buy with your SDI

o Foreclosures, Options, Pre-construction, raw land, apartments, offices, strip malls, mobile homes, public storage, any type of investment property

o Trust deeds/mortgage notes

o Privately held C-Corp stock, LLC membership

.

The rules on prohibited transactions

o Cant buy from or sell to a disqualified/prohibited person

o Cant make personal use of property

o Cant use SDI as collateral for personal loan

Personal use prohibitions

You can’t personally use a vacation home. Even if you rent it out for 354 days and spend one day in it, this is illegal. You can’t perform maintenance on the property. You can hire a maintenance crew using the money coming out of your SDI, but you can’t physically work on the property. You also can’t hunt on raw land, dock boat at a SDI owned boat slip. There was a person, who worked with Pensco, that bought a specific area of a water fishing spot in Alaska. The person, couldn’t fish there, so she leased out the area to other fishermen and received profit.

More on disqualified persons

You can’t buy from a person providing services to the investment. It has to be a clean slate. It can’t be business between employer and employee. If you have your SDI in an LLC and you want to buy property, you will not be able to if you own more than 50% of the company. You can’t buy/sell to a member of your family including spouse, ancestor, lineal descendant and any spouse of a lineal descendant. Meaning, not you parents, children, your son in law etc. But, you can buy/sell to a sibling. There can’t be a sale/exchange/leasing of any property or providing a loan between a plan and a disqualified person. Lastly, you can’t buy something you already own (SDI can’t be used for funds to pay off your mortgage. There should be no perceived direct or indirect personal benefit to the account owner).

Basic rules

o Can’t involve the account holder, his/her spouse a lineal ascendant/descendant of family nor the spouses of your children and you can’t use SDI funds to pay off a personal mortgage

o Can’t make personal use of property (must be for investment purposes only)

o Can’t personally guarantee the loan for your SDI nor use the SDI as collateral for a personal loan

o Can’t work for or take income from an SDI investment

o Can’t have your spouse, nor your family members (your siblings are ok) own the property prior to its purchase by your plan

o Can’t have your business lease or be located in or on any part of the property while it’s in your plan. You may receive any property as a distribution from your plan as a retirement benefit

What transactions are prohibited?

The following are defined as prohibited transactions when they involve the account holder:

o Borrowing money from the SDI

o Selling property to the SDI

o Receiving unreasonable compensation for managing assets for the SDI

o Using the SDI as security for a loan

o Buying property for personal use with the SDI

o Collectibles/antiques

o Life insurance

o Stock of a sub-chapter “S” corporation

50% rule

If a disqualified person(s) owns 50% or more collectively of an entity, then the SDI can’t engage in a transaction with the entity because the company is considered a disqualified person.

Using IRA as collateral

You can’t use your SDI as collateral for a loan. If you will get a loan it must be an unsecured loan. If you default in paying the loan, the lender can’t go get the money out of your IRA, nor can they go after personal assets.

Any type of prohibitions have penalties, if you violate them. SDI is no different. Here are the consequences if you do not comply:

o Loss of IRA status resulting from prohibited transaction

o Loss of tax exempt status

o Income tax on account value

o Penalties and interest

o Possible audit to determine extent of prohibited transactions

If you really want more information on the rules check out:

o IRS code 4975

o UDFI/UBTI: IRS code 598

o Department of Labor (DOL) 2004-8

Tax court cases

o Swanson 1997

o Rollins 2004

o Rousey v. Jacoway 2005

Ways to invest by using your SDI

o Property purchase all cash

o Property purchase using a loan (NOTE this has not always been the case where you can get a loan from a bank for your SDI. These past couple of years a few establishments are offering loans to SDI. I have those contacts, contact me and I will explore options for you)

o As a member of an LLC or “C” Corp.

o As a lender on a trust deed (mortgage note)

o As a partner in a joint venture

o As a Tenants in Common T.I.C. member (if any of the terms I use are unfamiliar to you, look them up online)

o Make a private loan to an entity or person (hard money loans)

To give you ideas of what investors have bought through Pensco:

o Largest US massage school

o Cypress tree farm in Costa Rica

o Fish farm in Salinas, CA

o Interests in movies, plays

o Condo in Lithuania

o House on a private lake in Colorado

o Thoroughbred race horse

o Nudist resort in Virgin Islands

o Over 35 U.S. banks

o Napa Valley B & B

o Biotech company

Pensco’s top investor success story is going to amaze you on the potential your SDI can have. In March of 1999, four men opened up SDI accounts. They each invested individually and through their IRA’s in a company they were starting. They brought in other unrelated investors. That company is bought out a couple of times. The company goes public and sells out in June 2002. Well how much did they make? CEO made $34 million (12,000% return). Chief scientist made $22 million. CFO make $17 million. Marketing VP makes $8 million (4,000 return) What is better than that? They all invested $2,000 through their IRA’s except the CEO who invested $1,800. Pensco explained the features of the 1 year Roth IRA and they all chose to invest with a Roth IRA. If the CEO gets an average return of 12% until he is eligible to withdraw tax-free at 59.5 he will have $1 billion, $100 million tax free! Yeah that is right…show me the money!

Let’s compare

Real Estate Investing – with SDI

o Tax deferred growth on income and cap gains

o No 1031 requirement!

o No annual tax reporting

Taxable investments non SDI

o Tax deferred cap gains (if 1031)

o Tax on net earnings

o Annual reporting required

How it works

You have an account with Pensco (you can roll over your current IRA account to them) you tell them what you want to invest in, they do all of the paper work, make out the check and now it is in your trust account. All money that is needed for expenses and all profits go into/taken out from the trust account. The title of the property in your IRA will be held with Pensco Trust as follows: “Pensco Trust Custodian, FBO (client name) IRA, (Acct #). All documents will be reviewed and initiated by the you (the IRA owner) and signed by Pensco Trust.

Introducing SDI on steroids in the neck…Solo 401(k)

A solo (k) is a combined salary deferral and profit sharing retirement plan for sole proprietors, small business owners with no employees (other than part timers working less than 1,000 hours per year or their spouses).

Roth contributions can increase tax free $15,000 to %20,500 per year or 30k to 41k per married couple (for 2007). Unlike a Roth IRA, there are no income limitations placed on the contributor. You could be a zillionaire and it would not matter! Currently a single person making over 110k can’t contribute to their Roth married couple is 160k.

Who can benefit from Solo (401)k

o Real estate brokers

o Consultants

o Contractors

o Lawyers

o Electricians

o Any sole practitioner

o Even if you work full time for an employer and have a business on the side where you are a sole proprietor you can establish a solo K

The difference is…

o You can borrow up to 50k (or up to 50% of balance, if less) from your Solo 401 k

o You can invest in life insurance

o You can invest in “S” corporations

o You can avoid UDFI and capital gains UBIT (UDFI and UBIT will be discussed later) when using leverage to buy real estate

o A portion of your savings can grow tax free for life

o You can put away more money faster with larger contributions

o No income cap on contributing to the Roth component

o Above 50 year old employee has the option to put up to $20,500 per year away, to grow tax free

Why appealing

o Allows the sole proprietor funds to grow tax free

o While Roth IRAs allow similar contributions they are limited to $4,000 in 2007 ($5,000 if over 50), and to those earning annual gross income of less that $110,000 for that year

o You can increase tax free growth opportunities by also contributing to a Roth IRA ($4,000/$5,000) in addition to the Solo (k) (15,500/$25,000), if you are eligible (check with Pensco for details)

o A married couple in business together can put up to $51,000 ($25,500 each ) per year of after tax money into retirement accounts that will grow tax free for their lifetimes and those of their heirs (including $5,000 Roth IRA contributions) and another $59,000 ($29,500) each that will grow tax deferred. That is a total of $110,000 as a couple of which $51,000 will grow tax free (assumes each is over 50 and earns less than $100,000

o And there is no income limit on contributions

o May roll pre existing plans and IRAs into it

Types of purchases of SDI

All cash

Your SDI buys one property all cash. No debt, LLC, and partners. When you do this your SDI needs to have enough funds to cover purchase price, all closing costs, custodial fees and ongoing property expenses. If you run out, you can loan your personal money to your SDI (with interest and principal).

Multiple SDI – All cash T.I.C.

SDI may belong to anyone – even prohibited people. All SDI go on contract, and on title, as “tenants in common.” Ownership percentage must be identified and all costs and proceeds prorated correctly according to these percentages.

Multiple Parties – IRAs & People all cash T.I.C.

Same as multiple IRAs, as long as there is no loan (as an all cash deal) it does not matter who the SDI belongs to, or who the people are. All names must be on contract and title for unique percentages.

All cash

Buy/sell, with/without, friends/family is by far the easiest and most common transaction. When this happens all income comes back to SDI, so having a1031 exchange is not required to defer taxes. The money in your trust account is also used to pay any expenses incurred. Real estate investment related expenses are paid out of the SDI.

Getting a loan to buy

In the past there were NO banks lending to SDI. Only until recently a few banks in the nation offer this service. The loan that is offered is a non-recourse loan. This is great news, because now investors could use leverage.

When you get a loan for your SDI you:

o Can’t guarantee the loan personally.

o Can’t co-invest with your IRA.

o Pay the tax on any income or capital gains derived from leverage.

o Increase the returns and growth of your SDI two to three times.

What is a “non recourse loan?”

o You are not personally liable for repayment of the loan. In the event of a default/foreclosure the lender can only recover the property and your equity.

o Typically requires 30-35% down payment. If there is low cash flow or the condition of the property is bad then they may require a larger down payment.

Non recourse loan process

o After setting up the SDI, it will typically close in 30 days.

o Cash out refinance: funds are distributed back into the SDI.

THERE IS NO PRE PAYMENT FOR A NON-RECOURSE LOAN!

Property Eligibility

o Single family residential

o Condo’s (100% complete, 33% or more sold, and HOA turned over by developer)

o Duplexes

o 4-plexes

o Multi-family (5 or more)

o Commercial property: including retail, warehouses, and office buildings

Ineligible properties include:

o Residential with large acreage

o Raw land

o Farms

o Manufactured homes

o Hotels, condo-hotels

o Co-ops, timeshares

o Senior or assisted living facilities

o Non-franchise restaurants

o Entertainment properties

o Mini-storeage

Requirements for debt financing must be verified for purchase along with reserves (10-20% loan amount).

Documentation required for loan approval:

1. Completed loan application

2. Most recent asset statement verifying IRA assets for purchase and reserves.

3. Purchase sales contract

4. Acceptable real estate appraisal for the property to be financed. The appraisal must come from lender.

5. Copy of drivers license

6. Property insurance should read the IRA/LLC as the insured

Income requirements for homes

o The financed property must generate sufficient net operating income to exceed debt service payments by:10%single family (less then 10% or negative cash flow is acceptable with sufficient reserves on SFR). For 2-4 unit properties it is 10-15%

o IRA assets must be verified for purchase along with reserves

How the closing process works:

1. Title company prepares closing documents.

2. SDI owner initials for approval.

3. Originals sent to Pensco for execution by the tile company or broker.

4. Pensco signs, notarizes and returns package. They overnight and wire balance of funds for closing.

5. Title company forwards recorded grant deed to Pensco.

6. Through your trust, you now own the property.

Another way to invest using IRA

This is a true story from a Pensco client. One investor wanted to buy a property in San Francisco. They buyer didn’t have all of the money for a down payment. So, he approached his friend and asked about him if he was interested in earning a certain percentage return on his IRA. He agreed. So, the buyer took his portion and combined it along with his friends SDI, to purchase the property. His friends SDI issued him a second on the property. This created a “win” situation for everyone. The buyer gets the property. His friend gets a great return on his IRA (that is secured by real estate) the sales agent wins because the deal closed. The owner of the property is happy, because they sold the property. The bank, is happy because they are making a return by giving a loan. All of this is possible because the SDI was used.

There was another person, who used his SDI to buy pre construction property. In Las Vegas, there was a developer who was forming a community. The investor approached the developer and solved a problem for them. Apparently there were some fall outs with buyers. The investor, said (paraphrasing) “I will buy any homes that fall out of escrow for a discount.”

If you would like to read upon an investor who used their SDI, look up: Time June 14th 2005. Investor used $195,000 to invest in property on Marco Island FL. Sold resulted in a $500,000 profit going directly to IRA

Rental property purchases

Question:

I want to purchase a rental property for $100,000 can I use:

o A. $30,000 of my IRA funds

o B. $65,000 of my personal funds

o C. $5,000 loan from my brother to do this?

o D. All of the above

o Answer: D

In the begging of this E-book, I expressed that using SDI has been kept a secret. One of the reasons is because of misinformation from “professionals” is from CPA’s. Some CPA’s say not to use an IRA to invest in real estate because:

o You will lose tax benefits e.g. depreciation (not quite)

o Using SDI “destroys” tax deferred compound growth in IRA (wrong)

o You have to pay ordinary income tax versus capital gains tax at the end of the line (true just like any other IRA investment)

Some CPA view points do not take into consideration the following:

o They do not address need for diversification in the retirement portfolio to hedge against other assets

o Broadly implies that even if you know that you can get better results investing in real estate through your SDI you shouldn’t do it

o It is IRRELEVANT if real estate out performs other IRA investments

o IGNORES the facts that 44% of net worth in US is in real estate

o Does not recognize that after tax yield is the primary goal of the investor

Unrelated Business Taxable Income (UBTI)

If your SDI produces income from activity not “substantially related” to the exempt status UBTI comes into play. The purpose of UBTI was to alleviate unfair competition by exempt organizations with taxable enterprises. Basically when you conduct business and it is not passive income, you come across UBTI. Further explanation; if your SDI is going to open up a restaurant, you are going to have ordinary income. The IRS feels that is fair that you pay tax on the money you make everyday. Because it is not fair for you to open up a restaurant and for someone else to open up a restaurant down the street, but you don’t pay tax. If it is “ordinary income” UBTI applies. If it is passive income UBTI does not apply, such as rent, interest and capital gain.

Unrelated Debt Financed Income (UDFI)

Income generated by activity that had debt financing. Tax is applied to that portion of gain/income that is debt financed. Most “passive” investments income such as rents from a property are normally excluded from taxes, but such investment income is going to get taxed if derived from debt financed property (UDFI). Basically, if you buy a property for 5 million. You have your SDI, put up 2.5 million and you get a loan for the other 2.5 million. Well the gains you get from the borrowed 2.5 million from the bank will get taxed (UDFI). You will not get taxed on the portion that comes out of your SDI.

Wall Fountain

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Factors Affecting Share Prices

January 24, 2012 | Author blogsocietys

Stock Broker

Like any other commodity, in the stock market, share prices are also dependent on so many factors. So, it is hard to point out just one or two factors that affect the price of the stocks. There are still some factors that are that directly influence the share prices.

Demand and Supply – This fundamental rule of economics holds good for the equity market as well. The price is directly affected by the trend of stock market trading. When more people are buying a certain stock, the price of that stock increases and when more people are selling he stock, the price of that particular stock falls. Now it is difficult to predict the trend of the market but your stock broker can give you fair idea of the ongoing trend of the market but be careful before you blindly follow the advice.

News – News is undoubtedly a huge factor when it comes to stock price. Positive news about a company can increase buying interest in the market while a negative press release can ruin the prospect of a stock. Having said that, you must always remember that often times, despite amazingly good news, a stock can show least movement. It is the overall performance of the company that matters more than news. It is always wise to take a wait and watch policy in a volatile market or when there is mixed reaction about a particular stock.

Market Cap – If you are trying to guess the worth of a company from the price of the stock, you are making a huge mistake. It is the market capitalization of the company, rather than the stock, that is more important when it comes to determining the worth of the company. You need to multiply the stock price with the total number of outstanding stocks in the market to get the market cap of a company and that is the worth of the company.

Earning Per Share – Earning per share is the profit that the company made per share on the last quarter. It is mandatory for every public company to publish the quarterly report that states the earning per share of the company. This is perhaps the most important factor for deciding the health of any company and they influence the buying tendency in the market resulting in the increase in the price of that particular stock. So, if you want to make a profitable investment, you need to keep watch on the quarterly reports that the companies and scrutinize the possibilities before buying stocks of particular stock.

Price/Earning Ratio – Price/Earning ratio or the P/E ratio gives you fair idea of how a company’s share price compares to its earnings. If the price of the share is too much lower than the earning of the company, the stock is undervalued and it has the potential to rise in the near future. On the other hand, if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point.

Before we conclude this discussion on share prices, let me remind you that there are so many other reasons behind the fall or rise of the share price. Especially there are stock specific factors that also play its part in the price of the stock. So, it is always important that you do your research well and stock trading on the basis of your research and information that you get from your broker. To get benefit from the effective consultancy service it is therefore always better from professional stock trading companies rather than getting lured by discount brokerage advertisements that you must be coming across everyday.

Rainwear Crank Brothers

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Philippine Peso Dollar Exchange Rate

January 23, 2012 | Author blogsocietys

Stock Broker

Forecasting what the Philippine Peso Dollar Exchange Rate would be is not as simple it may look. There are a lot of variables to look out for, the economy, government, news and environmental factors contribute to what the Philippine Peso Dollar Exchange Rate would be for the day. It is govern by supply and demand. When one is in this field of buying or selling dollars, be an importer, exporter, traveller or a currency changer, they will do have a hunch on what the Philippine Peso Dollar Exchange Rate be.

The trend most of the time for the Philippine Peso Dollar Exchange Rate to go down is during June and December. Most Oversea Workers send a lot of remittances to the Philippines during June for enrollment and specially on December, Christmas holidays. A slight increase in the Philippine Peso Dollar Exchange Rate on the months of January and September where importers pays out goods purchased.

Decades ago, the Banko Central ng Pilipinas controlled the Philippine Peso Dollar Exchange Rate to a fix twenty six pesos P26 to a dollar. Today, the Philippine Peso Dollar Exchange Rate is governed by the supply and Demand of it. Since 2004, Peso has been gaining and appreciating from the dollar. From a high of Fifty six pesos P56 on the year 2004, it has come around to Forty four P44 now, October 2007. The Philippine Peso Dollar Exchange Rate has not really been going down each day, there are also times when bad government news affected a slight increase on the Philippine Peso. But because of good economic performance Peso has been gaining stronger.

The Philippine Peso Dollar Exchange Rate has also been strengthening because of the poor economic update on the United States. United States has been in economic crisis which has also have a strong effect on the Philippine Peso Dollar Exchange Rate.

Economist has predicted for Peso to strengthen up to Forty Pesos P40 this coming Christmas holiday where Remittances would be fast coming in the Philippines. Oversea Workers mostly send remittance during this season. But the Oversea Workers and Exporters has been complaining of the sudden downfall of the Philippine Peso Dollar Exchange Rate. Oversea workers should be remitting more to cope up with the exchange rate, thus working more hours or having lesser savings. Exporters have also been complaining on the low exchange rate, their dollar earned when converted is much lesser now a days. There are a lot of exporters who have closed down due to their crisis right now. On the contrary, there are a lot of happy importers, and dollar spenders. They can buy goods much cheaper with the Philippine Peso Exchange Rate going down.

It may not be easy on how to predict what Philippine Peso Exchange Rate would be, but hope it has given you a few insights and tips on it.

Pilates Exercise Alternating Stone

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