What is Asset Bubble ?

In accounting, an asset is a financial reserve. It could either be tangible or intangible, and it can be used by its owner to create value. In other words, assets reflect the worth of proprietorship that could be transformed into money (though money is also treated as an asset).

The financial worth of assets managed by a firm is documented in the balance sheet. Tangible assets can be categorized as current assets and fixed assets.

Current assets consist of inventory, accounts receivable, cash among others. Fixed assets include structures and machinery.

Intangible assets are not real resources, but they provide the firm a competitive advantage. For e.g., brand value, patents, trademark.

An asset bubble is defined as the process in which the value of shares or other assets increase significantly and at a constant rate that they surpass estimates supported by basics. It is probable that an unexpected crash could take place and at that stage the bubble would burst.

There are many reasons for an asset bubble including low-interest rates. Low rates result in an excess supply of money in the market. Investors can secure funds inexpensively, but they would not get high returns on bonds. Hence, they migrate to an alternate asset class.

An asset bubble could also be intensified by a supply scarcity under the scenario that investor confidence is low. Several recent asset bubbles are mainly due to demand-pull inflation. It is a type of inflation that is not correctly reflected in the Consumer Price Index (CPI).

Hence, financial decision makers do not pay attention to it, eventually it keeps increasing and bursts.

There are several ways an investor could safeguard from an asset bubble. The trademark of an asset bubble is unreasonable eagerness. Almost all the investors are purchasing the same asset. For a long period, the purchase of the asset appears to be profitable.

The difficulty is in predicting when the bubble would burst. According to experts, it would be prudent to manage a diversified portfolio of investments.

Diversification indicates a well-adjusted combination of shares, bonds, commodities. It would be advisable to monitor the asset distribution regularly. If there is an asset bubble in one particular asset of the portfolio, it would be the time sell that particular asset.

Central banks must play a positive role in limiting the impact of an asset bubble. They must not take any unnecessary risks and initiate measures to improve investor confidence. They should increase interest rates when asset bubbles expand. Another option would be to increase government expenditure. According to experts, not all asset bubbles cause damage, the differentiation being debt.

Real estate bubbles ignited by credit booms are the most unsafe. Capital markets impact the economy severally through the “wealth effect”. Any decrease in the value of an asset would result in less investment which, when combined with debt could lead to a downward trend.

Asset bubbles must be treated with caution. It could influence the economy adversely and result in recession. It would take a combined effort by various stakeholders to negate the ill effects of an asset bubble.

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How to Succeed On Wall Street ?

Wall Street refers to the financial markets in the US, the financial industry in the US, the financial interests based out of New York city. Since Wall Street is located in New York, it has been termed as the most dominant financial powerhouse globally and the prominent international financial hub.

New York is the base for the two biggest stock exchanges in terms of the overall market capitalization –  The New York Stock Exchange and NASDAQ. Many key exchanges are present or used to be present at the Wall Street location, which includes the New York Mercantile Exchange, the New York Board of Trade, and the former American Stock Exchange.

Some of The Factors That Are Vital for Success at Wall Street Are:

Mathematical Aptitude

If the person is good with numbers, then success on Wall Street is feasible. Mathematical acumen reflects the capability to compute numbers. It assists in conducting financial analysis.

Other skills, including organizational ability, foreign language expertise would be helpful.

Interpersonal Intelligence

The interpersonal intelligence is vital to move ahead. The ability to understand the behaviour of personnel really helps.

Intrapersonal Intelligence

The ability to determine outlooks, objectives, strong points and flaws. The acceptance of weakness and the willingness to change sends the correct message.

Independent Thinking

Displaying independent judgment during the crucial decision making helps in projecting leadership abilities to key stakeholders.

Identify A Mentor

The mentor would not only provide guidance, but safeguard you during a crisis.

Learning from Failure

Making mistakes is normal and it would be prudent to learn from it. Every working day provides an opportunity to succeed.

Establish A Network

It is the called “The hidden rule on Wall Street”. Connecting with the correct people helps in identifying the opportunities that shape your career.

Accept the Career Fluctuations

The career fluctuations are inevitable and it would be practical to accept them.

Hard work

If you want to achieve long-term success, then, hard work pays.

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Why Asian Banks’ Bad Debt Pile Highest Since Global Financial Crisis ?

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A bad debt is defined as a quantity that a creditor owes and most probably would not pay. Bad debt is interpreted differently based on accounting conventions, regulatory treatment and institution provisioning.

The bad debts of several banks in Asia have reached a peak since the global meltdown. The trend would aggravate as local economies confront China’s downturn and unpredictable oil & commodity rates.

The total bad loans covering 74 key listed banks in Asia, other than the banks in India and Japan touched US$ 171 billion in the last quarter of 2015. This was the maximum, since 2008. Non-performing loans (NPLs) soared 28% from the previous year, almost two times the development in 2013.

According to market experts, the slowdown in the economy of the Asian region would result in weakening of the lenders asset quality. Once banks release information on quarterly earnings, they would have to prepare write-downs that would impact profit and decrease valuations.

The central banks in Asia have reduced interest rates to ensure enough liquidity, but unpredictable economic development and sluggish exports would result in loan evasions in the short term.

According to Gene Fang, Moody’s Associate Managing Director for financial institutions group, “We expect asset quality to weaken and bad loans to increase. The key factor we see is Asia entering into more challenging phase of the credit cycle. In the recent past, we saw relatively strong growth and low interest rates, which encouraged loan growth and higher leverage. But growth has now weakened, most significantly in China, which is impacting the rest of the region.”

The Chinese economy increased by 6.9% in 2015, the slowest momentum in nearly 25 years. Bad loans reached the highest point in a decade at the end of the 4th quarter. According to Moody’s, “There would be continued asset quality pressure over the next 12-18 months.”

The fourth biggest bank in Thailand, Kasikornbak, estimates the ratio of non-performing loans to cumulative loans to increase to around 3.5% in 2016 from 2.7% in 2015.

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