PRIVATE PLACEMENT FOR HIGH RETURN
The people tell that the Private Placement has realized very high
return ("miraculous profit"). Some Clients or traditional
Bankers smile in saying: "That´s miracle! There is no Père Noel
in finances, mostly in Banks!". Some people are often repeating:
"That´s the Fed! We have to follow the Fed´s Rules! The Fed can
give Paradise but the Fed may become Lucifer!"
In this document, we try to reply theorically to these opinions:
a) MIRACULOUS PROFIT IS NOT A MIRACLE
b) MECAHISNM OF ISSUANCE & DISTRIBUTION CHANNELS OF FED
A) MIRACULOUS PROFIT IS NOT A MIRACLE
High profit depends on three factors: amunt of capital, interest rate
and time of investment. PPP doesn´t make miracle to have high interest
rate but utilizes readily feasible banking techniques to realize trads
in normal conditios of market interest rates. There is no miracle if
we understand these banking tecniques. Indeed. the people commetn that
this is a miracle because they compare the high profit with a very
small amount of initial investment.
Again, three contributing factors to profits are: interest rate,
capital and time of investment. Interest rate in PPP is the rate
received by each Trade of bank instruments. In commercial competitive
market, it´s absolutely not frequent to obtain exceptional high price
for trades. Bank Trader in PPP doesn´t take much attention in
activating this aspect of high prices.
Bank traders particulary manipulate financial techniques to act on
two following contributing factors to profits: the amount of capital
and the time of investment. The technique of financial multiplier is
used to swell the capital reserved to a precise trade; the techique of
reduction of time for realization of each trade gives the possibility
to obtain profit from the real time of investment as per from a very
long period of investing funds in the future.