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.

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.

The volatility of foreign currency alone may place these stocks outside your comfort zone. In the Asian collapse of 1997-1998, most currencies declined by more than 50 percent and many stock markets collapsed by 50 percent in local currencies, leaving U.S. investors with 75 percent and greater dollar losses.

The range of loss is greater than in the United States. But the speed is also faster. The worst one-day loss in the overall U.S. market was 22 percent. Emerging markets have lost half their value in a single day. Some have closed and never reopened, essentially wiping out all values. If you find volatility disturbing, stocks, especially foreign and emerging market stocks, are outside your comfort zone.

In many non-U.S. markets, corporate employees and insiders have less respect for outside shareholders than they do here. If U.S. shareholders get too irritated, they can band together and oust management and other employees who are siphoning off all the earnings. In many overseas markets, insiders cannot be ousted, while minority shareholders may find their stock canceled or redeemed.

Few emerging markets have effective stock market regulation. In the United States and many developed countries, stocks cannot be bought and sold on the basis of secret corporate information. In emerging markets, this is common, even if it is technically illegal. It is also difficult in many emerging markets to cash out of profits when they do occur. In the United States, stock sales are settled in three days. In emerging markets, settlement dates and procedures can be vague and money is lost along the way. The level of unmanageability is much higher with emerging markets than in the United States.

You can buy stock in developed countries such as Germany and the United States. Many emerging markets such as Venezuela and Thailand also have stock markets. You can buy their stocks individually on the U.S. markets or through a foreign brokerage account. You can also buy U.S. mutual funds that specialize in foreign and emerging stocks. There are also CEFs and ETFs that own non-U.S. stocks.

Non-U.S. stocks have all the emotional content of U.S. stocks. Herd psychosis, powerlessness, issues with brokers and mutual funds, overconfidence, and all the rest are common in foreign investing. Foreign stocks also have additional traps we rarely encounter with local companies.Foreign stocks are bought and sold in foreign currencies. Foreign companies make profits and losses in foreign currencies. Because you spend U.S. dollars, foreign stock prices must be translated into U.S. dollars before you can determine if you have any gains or losses. This adds volatility to foreign stock prices. If the Euro sinks by 15 percent and your German auto stock declines in Euros by 15 percent, you lose 30 percent in dollars. If the Euro rises by 15 percent and the auto stock rises by 15 percent, you gain 30 percent in dollars. A similar U.S. auto stock would only swing up and down  15 percent.

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.

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.

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.

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.

Legal and regulatory provisions affect debt for equity swaps throughout the transaction and subsequently, until lenders have disposed of their shareholdings. Firstly, there is the need to ensure that the transaction is structured in compliance with all local legal and regulatory provisions. In addition, lenders must ensure that they are not in breach of laws and regulations that apply to them as a result of them being:

• Substantial shareholders in a company.
• Financial institutions holding shares in a non-financial entity.

Laws and regulations relating to the shareholdings held by the lenders in general, and the banks in particular, include:

• Obligations under corporate legislation, or local stock exchange regulation, to disclose acquisitions and movements in shareholdings above a certain threshold.
• The need to comply with local insider dealing legislation.
• In certain circumstances, local and regional mergers regulation may be triggered as a result of the lenders acquiring a substantial shareholding in a company. Dispensation may need to be applied for.
• In some countries there are rules that restrict banks holding shares in non-bank companies. Dispensation is usually available if the shares are acquired to facilitate a rescue.
• Lenders may become a ‘connected party’ with the company and may, as a result, become subject to additional legal and regulatory provisions that govern their dealings with it.

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.