Archive for the ‘investing’ Category
Friday, October 30th, 2009
Telecommunications companies serve as a good example at this point. They used to be fixed-line operators. The introduction of new wireless technology changed their business models since they had to adapt their strategies to the new technological landscape. Capital expenditures were massively increased for the building of new wireless networks and the competition intensified for new wireless customers since the telecommunications market was liberalized, and alternative providers were allowed to compete with the incumbent telecommunications companies. Additionally government regulators in Europe asked for billions of dollars in fees for wireless licenses (3G). These technological and regulatory changes resulted in a tremendous increase of leverage for most of the telecommunications companies and a repricing of credit risk in this sector occurred that was accompanied by a negative industry rating trend (from AA_ to BBB_). Another example for the changing landscape of an industry is the electric utilities sector. This market undergoes a liberalization process which is in different stages according to the various jurisdictions. Changes of the regulatory environment have an impact on the development of credit quality.
The business models became riskier as the competition in the sector increased, M&A activities picked up considerably and some utility companies got involved in the risky energy trading business. Formerly low risk and stable cash flows generating businesses turned into higher risk (e.g. energy trading) and more volatile cash flow businesses.
Tags: bad debt, car loans, compare credit, currency trading, debt consolidation, debt settlement, forex, funds, home equity, investment opportunities, portfolio, refinancing
Posted in Private Annuities, bonds, business tips, credit, credit cards, investing, money management | Comments Off
Sunday, October 25th, 2009
Oil companies’ relative profits also peak during a recession because an economic downturn is usually accompanied by high oil prices. Utilities have a noncyclical business profile and they are subject to regulated pricing. They will realize their profit peaks relative to the market during a later stage of an economic downturn.
Consumer staples is a noncyclical sector and hence the profit peak relative to the market is reached towards the end of a recession. Profits are not robust but consumers cut spending on large discretionary purchases while the demand, for example, for food and beverages remains relatively stable across the whole economic cycle.
Group sectors according to their change in profits during recession and recovery. The profits of cyclical sectors will fall in recessions and rise during a recovery. On the other side, the profit cycle of defensive companies is countercyclical. Profits will rise in recessions and they will tend to fall in recoveries. Some industries experience structural gains which means that their profits rise during recession and recovery. Other industries suffer from structural losses which means that they realize falling profits in recession and in recovery as well. Those are industries which reached a declining stage in their industry life cycles.
Tags: crisis, foreclosure, investments, loans, money advice, mortgage, stock, stock exchange, Tenancy-in-Common, tenant, trade value
Posted in credit, credit cards, economy, finances, global markets, investing, loans | Comments Off
Saturday, October 24th, 2009
Capital goods, paper, and metals and mining companies realize their respective profit peaks at the later stages of an economic expansion as they produce goods and services whose demand is closely tied to economic activity. Additionally business peak cycles are accompanied by inflation as demand exceeds supply and for example, basic material industries experience higher profit margins in this environment because their production costs are not significantly affected by inflation and, on the other side, they can increase prices for the finished products. Industries with a high operating leverage benefit as well because their costs are fixed in nominal terms and revenues increase with inflation. The fixed costs in a company’s operating structure determine the operating leverage. Generally, it can be said that industries with a high fixed cost base and high inventory costs, for example, the paper and the aluminum industry, are always under pressure to keep capacity utilization rates high because decreasing capacity utilization rates will have an immediate adverse effect on profitability.
Tags: price, Private Annuities, property, purchase real estate, shares, tax, taxes, tenancy, Tenancy-in-Common, tenant
Posted in global markets, investing, loans, money management, payday loans, real estate, taxes | Comments Off
Wednesday, October 21st, 2009
After analyzing industry life cycles and the competitive environment of industries the macroeconomic environment has to be incorporated in the industry analysis process. For this purpose the focus will be on business cycles and the cyclicality of industries.
Corporate profits hava a long history as a percentage of GDP across several economic cycles. Corporate profits tend to fall long before the economy goes through a recession. Corporate profits usually reach their bottom towards the end of a recession. They start to rebound with rising economic activity. During the last expansion, which was one of the longest and that stretched through the 1990s, corporate profits started to deteriorate already in 1998. Sharply rising equity valuations, a focus on shareholder value and an undisciplined build-up of leverage induced a decline in profits when the earnings growth trend reversed. Every business cycle will be different from past cycles so the task is to identify evolving trends in order to make reliable projections about future performance.
Tags: annuitant, Annuities, banking, banks, Bearish Patterns, Budgeting, cash, company costs, currency cycles, Debt
Posted in economy, finances, global markets, investing, loans, real estate | Comments Off
Monday, October 5th, 2009
Some investors who can process emotions quickly enjoy foreign stocks. Non-U.S. stocks are idea investments with great idea complexity. The romantic, foreign traveler who realizes the risk but enjoys the hunt can have fun here. Foreign and emerging markets are less picked over than the U.S. market. In the midst of the chaos, there are tremendous bargains. If you like to read about China and Israel, travel to Turkey and Paris, or think about Euros versus yen, then this may be in your comfort zone. For the foreign traveler, who is practically addicted to foreign investing, 50 stocks will provide a lifetime of entertainment. But most investors will be rattled by the volatility and dishonesty.
Even local investors are turned off by the irregularities overseas. Investors in most foreign and emerging markets invest in bank savings instruments, government bonds, and real estate. Only in the last five years has there been general interest in stocks. Huge American brokers, mutual funds, and investment banks see tremendous profits to be made from instilling an “equity culture” overseas. Not only can they sell products to overseas investors, but they can sell U.S. investors turned off by the U.S. market hot foreign and emerging market products.
Vast amounts of propaganda have been produced to instill equity culture overseas. The two pillars of the platform are that stocks are the best investment for the long-run and stocks are the only investment with returns high enough to save the shaky retirement systems of European and Asian countries. Respected newspapers and magazines looking for large ad revenues from the campaign have joined the chorus. Politicians looking for votes have enacted 401(k)-type legislation. Unfortunately, equity culture is not likely to make many investors happy.
Tags: payday, personal finances, profit managing, stock exchange, student loans
Posted in global markets, investing, loans | Comments Off
Wednesday, August 5th, 2009
Unmanageable investments gnaw at the investor, often for years or decades. Unmanageability manifests as anger, frustration, and resentment. Stockbrokers confuse investors with lots of numbers and stories and then sell them inappropriate stocks. The investors cannot sue. They were shown prospectuses and all the legal mumblings were made. What is left is a dud stock and a resentment against the broker, the stocks, the brokerage house, and the whole idea of buying stocks.
Typically, the sense of powerlessness leads to passivity. Unmanageability leads to attempts to manage people, institutions, and policies. Change brokers, change stocks, change Realtors, keep it all in a money market account. In the extreme, unmanageability manifests as rage. Investors who shoot their broker, call in bomb threats, plant false rumors on the Internet, or manipulate stock prices are attempting to control unmanageable investments.
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Tuesday, July 21st, 2009
If there is a punch line to this book, a must-do for your action plan or a secret to getting out of debt, increasing your discretionary income is it. You’ve got to make this your central mission. You need to realize that every dollar flowing in and out of your household affects your discretionary income.
With that in mind, there are only three real ways you can increase your discretionary income. While there might be a million different tips and tricks, they all still fall under one of these three categories:
Increase your household income. If you increase the amount of money coming in, there’s a good chance you’ll increase the amount of money left over. But it’s also one of the hardest things to do. It requires getting a raise or second job, or developing some type of passive income like owning rental property.
Decrease your fixed expenses. Our fixed expenses are often some of our biggest, which means we can make a huge impact on our discretionary income by lowering them. But finding a lower-rent apartment, getting rid of a car payment, or eliminating your child’s preschool tuition is a big decision that requires major life changes. Chances are, you’ll adjust your fixed expenses over the long-term, not overnight.
Decrease your variable expenses. Decreasing your variable expenses is the only real change you can make today. You can choose to say no to the iced mocha, skip the big birthday gift for Mom, or pass on that “thing” you think you really deserve. But let’s face it, that’s all the fun stuff. Knowing how hard it’ll be to cut these expenses, it’s important to remember that this change is temporary, and also to reward yourself as you make progress.
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Tuesday, July 7th, 2009
While you could just lump all expenses into one category, I think it is crucial to separate them. The reason for this separation has to do with how you spend money, and more specifically, how you chip away at your discretionary income.
Fixed expenses are not just those expenses that are the exact same amount every month, but they are the ones that don’t change if you are reckless, lose control, or rationalize. Essentially, you pay them every month and the amount due isn’t determined by your emotions or psychology. Some examples of fixed expenses are rent or mortgage, car payments, utility bills, and tuition.
Variable expenses, on the other hand, are expenses that can vary widely from month to month, depending on your money attitudes and willpower. When you’re having a hard time breaking even each month, much less creating discretionary income to pay off debt, variable expenses are usually the culprit. Variable expenses can include things like clothes, dining out, groceries, gifts, and leisure activities.
Posted in global markets, investing, loans, real estate | Comments Off
Friday, June 12th, 2009
A debt for equity swap will usually be effected through the issue of new shares in a company to its lenders. These could be either an existing class of shares, or a new class, sometimes with conversion rights into existing shares. The result would be the dilution of existing shareholders to the agreed level.
For non-listed companies, where the number of shareholders is usually small, the issue of new shares to the lenders would be agreed as part of the overall restructuring.
For publicly quoted companies, the issue of new shares is affected by the local stock exchange regulations. In addition, the existing shareholders would normally be offered the opportunity to subscribe for new shares pro rata to their existing holdings to meet their pre-emption rights, where such rights exist. If more than one class of new shares are being issued, these would usually be packaged into ‘units’. Any shares not taken
up by existing shareholders would be subscribed for by lenders in exchange for debt.
Pre-emption can be valuable in negotiations as the shareholders will in effect have the opportunity to avoid dilution by subscribing for the company’s shares on the same terms as those offered to its lenders.
Generally, lenders will be subscribing for shares at a substantial premium to the prevailing market price, principally to recognise the implicit discount in the value of the debt being converted. As a result, it is extremely rare that the existing shareholders will subscribe for shares at the same price as lenders. If an equity fund raising exercise is conducted at the same time as an exchange, non-lender subscribers would be offered shares at a lower price than that being ‘paid’ by the lenders.
Other methods of achieving the desired shareholding by the lenders might be possible, such as:
- Acquisition of the appropriate number of shares from existing shareholders for a
nominal consideration.
- Deferral or cancellation of the required number of existing shares.
Usually, however, such mechanisms tend to add considerable complexity to the transaction, and are therefore avoided unless there is a particular need to pursue them.
In addition, statutory provisions may also be available to implement a debt for equity swap through the courts. Strictly, however, they fall outside the scope of a ‘voluntary’ loan restructuring.
Posted in investing, loans, real estate, taxes | Comments Off
Sunday, April 19th, 2009
In select circumstances, loans may be canceled if you file a petition for relief under the Bankruptcy Code. Generally, however, bankruptcy doesn’t discharge student loan debt. Discharge. In some circumstances, loans may be canceled if you were unable to complete a course of study because the institution closed or if your loan eligibility was falsely certified. A portion of your loan may also be canceled if the school fails to pay a refund that was due on your loan.
If you pass away before completing repayment, your student loan debt, as well as any PLUS loans your parents took out on your behalf, will be canceled when documentation of your death is submitted to your loan holder.
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