Personal Finances and Loans Solutions » taxes

Meeting your payday loan requirements

admin — Fri, 16 Apr 2010 09:32:12 +0000

The subtitle of Harvey Mackay’s book Swim with the Sharks Without Being Eaten Alive (1996) offers this advice: “Do what you love, love what you do, and deliver more than you promise.” There’s no better way to develop a trusting partnership than to do more than the minimum your partner expects. Trust isn’t automatic; it has to be earned. Trust levels are relative and can increase or decrease depending on what the partners do or don’t do to build trust. If doing what you promise to do builds trust over time, exceeding your promises multiplies the impact of your actions.

We should try to exceed—rather than merely meet—the requirements of our promises. “Exceeding expectations” sounds like you expend full effort and enthusiastically complete the task, whereas “meeting requirements” sounds like you grudgingly perform the minimum. A law of physics states that for every action there is an equal and opposite reaction. Exceeding performance expectations triggers a reciprocal reaction.How do you feel about doing your part when your partner has already given 110 percent?

Credit status will persist as hard evidence

admin — Sat, 21 Nov 2009 19:54:05 +0000

Aggregate financial ratios give a reliable picture of the state of the highyield market and should not be neglected irrespective of technical factors. Technical factors driving the high-yield market can change fairly quickly but credit status will persist as hard evidence and change only slowly over time. The most important fundamental measures are:

Free cash flow generation
Refinancing calendar
Access to capital markets (bank lending standards)
Reported earnings and earnings outlook
Equity performance
Growth prospects
CAPEX needs
Leverage trend
Coverage trend.

Leverage and coverage ratios are particularly important for the analysis of high-yield issuers. We find significant correlations between the spread levels of selected high-yield issuers and their coverage ratios and their leverage ratios.

Picking stocks by the numbers

admin — Mon, 07 Sep 2009 13:02:09 +0000

Most managers pick stocks by the numbers: P/E ratios, earning growth rate, EBITDA to enterprise value, and so on. Hundreds of studies have shown that you cannot outperform the market looking solely at numbers. Insight is required. But insight can cost a manager his job and a $500,000 annual salary. Picking stocks by the numbers as does everyone else, keeps those paychecks rolling in. In interviews and slick marketing brochures, mutual fund managers boast that they have one-on-one contact with company managers. Unfortunately for you, every mutual fund manager talks to the same company managers at your expense. Trips to New York, Boston, Silicon Valley, and Los Angeles are paid for by you. Investment conferences in Las Vegas, Honolulu, and Hong Kong cost you even more money. Because all the fund families talk to all the companies and go to all the conferences, no one gains any insight and all return home to the same numbers.

Fund gathering, job security, and indexing has resulted in most funds, index and non-index, owning the same stocks. Overowned stocks have huge market capitalization. It requires larger and larger purchases of stock to move prices up. In essence, $100 million in new money will increase the value of a $1 billion stock by 10 percent; a $100 billion stock will only increase in value by 0.1 percent.

The Magic of Growth Multipliers

admin — Fri, 12 Jun 2009 13:18:29 +0000

The magic by which seemingly small income streams get magnified into huge market valuations is intimately tied up with the arcane mathematics of perpetuities. It sounds dull, but it is well worth understanding because it is the mathematical foundation of Wall Street wealth.

Aperpetuity is defined as an investment offering a level stream of cash flows forever. What is the value of a perpetuity paying $100 per year forever? Using a cost of capital of 12 percent, it would be the present value of the first payment, plus the second payment, plus the third payment, . . . , plus the fiftieth payment, and so on; that is, $89.29 + $79.72 + $71.18 . . . . The value of the payments gets progressively smaller. The value of the fiftieth payment is only 3 cents!

It turns out that the present value of this stream, no matter how far one goes out in time, cannot exceed $833.33. That number is the free cash flow of $100 divided by the cost of capital, 12 percent, or 0.12—a very simple relationship that we introduced earlier.

Mathematicians say simply that this series converges to a finite limit. This one converges fairly quickly—it reaches 90 percent of the limit in 20 years, and 95 percent in 26 years. So in a practical sense, realizing the value of a perpetuity does not take forever, just a period of time that is consistent with the lifetime of a durable business.

Competitive Power

admin — Sat, 23 May 2009 16:29:28 +0000

Competitor reaction to an innovative new development is always uncertain, but it is to be expected. Competitors have the power to obviate the assumptions in a business plan. Ignoring this power can lead to overvaluation of the option. We have seen this factor in the Amazon case.

Prior to the innovation, some competitor reaction is already built into the economic base case; after all, the existing price structure and market share has been established in a competitive environment. Changes tend to be incremental. But a new development typically may elicit an exceptional response.

Consider a hypothetical situation. Today’s catalytic converters on automobiles must meet government-mandated emissions specifications regarding performance and durability. They require expensive noble metals, such as platinum, palladium, and rhodium. Assume that Aardvark Catalyst Co. invents and patents a new formulation that replaces more than half the noble metals with nickel and can thereby reduce its cost of goods sold by a full 50 percent. It offers the customers, automobile manufacturers, the new product at a 25 percent discount. This discount reflects half the cost savings, thereby giving the customer a compelling value proposition, while adding the other half of the savings to Aardvark’s bottom line.

THE OUTLOOK FOR INNOVATION IN FINANCES

admin — Thu, 30 Apr 2009 11:56:26 +0000

If innovation has been the source of our extraordinary prosperity, it is important to inquire about its future. The good news is that the rate of discontinuous innovation in Western society appears to be accelerating. This rate is likely to hold if the two bedrock premises of innovation also hold over time: (1) the willingness of investors to accept high risk and (2) the continued existence of opportunity.

Today, investors seem very willing to accept high risks. The level of financing is virtually unprecedented, with the prospect of more than $50 billion being invested per year by venture capitalists alone, a 10-fold increase over the previous decade. Whether this pace of investment will be sustained is another issue. Too much capital chasing too few good ideas is a sure way to drive down returns. But if we believe Daniel Bernoulli’s ideas about utility, the fact that investors have a greater stock of capital than ever before virtually ensures that they will, over time, be more tolerant of high risks.

What about the continued existence of opportunity? At the end of the nineteenth century, the commissioner of the U.S. Patent Office famously recommended that the office be shut down because everything that could be invented already had been. His colossal misjudgment is as widely quoted by speakers at innovation conferences as is Malthus in economics textbooks—but the number of issued patents continues to grow exponentially.

Strategic Financial Alliances

admin — Tue, 28 Apr 2009 10:19:39 +0000

Service relationships—with vendors, consultants, and law and accounting firms—have been mentioned as a hidden part of a company’s intellectual capital. Partnerships and alliances can be even more important. To the extent that a company can effectively muster the energies and the brainpower of a powerful strategic partner, it can speed its product development, reduce the cost of manufacturing, and rapidly penetrate its target markets—all enormous competitive advantages. Major companies such as IBM enter hundreds of such relationships. These relationships are intellectual capital of a most important type—mutual understanding of capabilities and costs and trusted working relationships.

From the viewpoint of the real options solution, strategic alliances only create value when they enable plans. It is possible they will be formed because of personal relationships and a vague sense that working together can help both parties, as when two top executives meet on the golf course. But value will not be created until an option is framed. In time, when that option is exercised, the strategic capital represented by the alliance is translated into economic capital.

Cisco, which produces networking devices (the king of routers) and software, owns only two of the 38 plants that assemble its products. It connects component manufacturers, assemblers, logistics providers, systems integrators, and its own employees and customers in what is known as a b-web (business web). The arrangement leverages the strategic capital of the participants and appears to provide exceptional value. Nortel has embraced the same approach.