Personal Finances and Loans Solutions

Resolving the basic debt management problems

admin — Fri, 14 May 2010 13:47:04 +0000

A classic example of this happened to a client of mine: an appliance manufacturing company. The sales and production departments worked together to ensure that stock was delivered on time to cover sales promotions. Things were going well, customers were buying appliances through the promotions, and back orders almost ceased to exist. Yet, while sales managers were making record bonuses, production managers were not seeing any change in their bonuses.When the partnership met, this gap was brought to the attention of the Sales and Production vice presidents. They were told that production managers and supervisors were starting to get angry that salespeople were making huge bonuses while they did all the hard work. The two partners decided to split the promotion sales bonuses evenly between Production and Sales to deal with the inequality and provide mutual benefits to both partners. As a result, the partnership between
Production and Sales worked so well that after a two-year period, both groups got record high bonuses. The partnership moved from resolving a logistics issue to making design improvements based on customer feedback that Sales passed along to Manufacturing. The partnership worked so well, in fact, that the vice president of Sales told me one day: “I can’t even remember what it was like when we were not working together in partnership.”

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?

Consensus credit decision making

admin — Tue, 16 Mar 2010 17:09:16 +0000

Had the airline been more precise with its employees and stated that it regarded the stock option as a different form of paycheck, perhaps my friend wouldn’t feel so resentful. The airline overstated the scope of the partnership and inflated employees’ expectations. A similar proposal may backfire in the future. The next time the labor contract is up for negotiation, employees may hold out for the money.

A partnership based on trust and mutual benefit must have open communication between partners. Openness allows people to say what is in their heart. This type of communication, while difficult for some, must be incorporated at every stage—especially at the Storm stage. Progress comes from working through conflicts. And in order to resolve conflicts, people need to work collaboratively. The purpose of using a consensus style of decision making is to create win-win scenarios.

By using some basic guidelines for consensus decision making, people embrace the technique because it ultimately enlists the enthusiasm of the whole team.

Emphasizing the credit opportunity

admin — Thu, 18 Feb 2010 22:53:03 +0000

In a labor–management situation, for instance, a company may want to partner with its union to improve quality, productivity, or processes—yet it wants to be adversarial when it comes to negotiating benefits and wages. These two contrary positions may be difficult to understand. A true partnership needs to focus on mutual interests, but it doesn’t have to encompass all the interests of both parties. Even in a labor–management dispute over compensation, the two sides can succeed in forging a partnership based on common objectives to resolve their dilemma.

After the partners have determined the scope of the partnership, they must communicate quickly and often to make sure both sides understand the limits of the partnership. My friend Larry works for an airline that recently offered its employees stock in the airline in exchange for pay cuts. The company broadcast its offer through the media—emphasizing the opportunity for employees to own the airline, just as management does with its stock ownership program. But Larry discovered he did not have the same benefits and privileges the managers had; while managers fly for free, the union employees pay a nominal fee for their passes. Larry resents the fact that while he takes stock instead of dollars, just like management, he doesn’t enjoy the same treatment. The managers’ free seats undermine the credibility of the public relations campaign aimed at building employee morale.

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.

The flows of pension funds and payday loans

admin — Wed, 11 Nov 2009 11:17:34 +0000

Fund flows measure the amount of money that comes into or leaves the open-ended mutual funds during a given period. Coupon payments are not included. The flows of pension funds, hedge funds and insurance companies are not tracked in this number. Nevertheless, there is a high correlation between high-yield market total returns and mutual fund flows. The reason is that mutual funds account for a big part of secondary trading.

During a period of high market uncertainty and increasing negative event risks the correlation with equity markets tends to rise. Fund flows in the high-yield market are directly related to the developments in the equity market.

Fund Flows are a function of:

Expected risk
Interest rates
Inflation
Default rates
Economic outlook
Event risk

Index fund investors and pseudo-index fund investors

admin — Mon, 05 Oct 2009 12:43:27 +0000

Index fund investors and pseudo-index fund investors must be prepared for a decade of mediocre returns. Stock investors looking for the fast lane will find it clogged. Frustration and other symptoms of unmanageability will be common. Should indexing lose popularity, returns will turn negative as investors seek alternatives. If the herd abandons the index funds for money market funds, bonds, real estate, or other asset classes, all the emotions of a panic can be expected. If you are an independent thinker, you are best off avoiding mutual funds.

Long-term mutual fund holders often drift into indifference. After a few years, they have no sense of connection with their money. All fund statements and mailings are glanced at and filed or thrown out. In the back of their minds, they know there is something they ought to be doing but having put it off for many years, they simply leave it be. Mutual funds in IRAs and 401(k)s are often abandoned for decades. On retirement, the holders are shocked at how little money has accumulated.

Active investors become resentful of fund managers. Fund managers’ salaries are insulated from fund results. Salaries rise in bad years as well as good. With no stake in the outcome of their investment decisions, fund managers’ interest and yours are opposed. Fund managers make more Money than doctors, lawyers, and all but the CEOs of the largest corporations. Yet their results are no better than random picks from the stock tables.

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.

Is the index the right finger to be pointing?

admin — Fri, 28 Aug 2009 17:31:38 +0000

For investors tired of watching mutual fund managers make lousy decisions and underperform the market, mutual fund families invented the index fund. The manager of the index fund buys and holds the stocks in the market index. Index funds return exactly what the market returns. Index funds have become extremely popular in the last decade.

As index funds increase in popularity, many non-index funds also imitate the indexes. Increasingly, more and more funds buy the same stocks, have exorbitant marketing expenses, and have the same goal: increasing funds under management. Stock selection is motivated by this goal. A fund full of unknown stocks will not be recommended by financial planners or understood by the public. Unusual funds are quickly labeled “too risky” and disappear.

Mutual fund families comb through the stock picks of each fund and assure that a minimum number of the popular index stocks are present. Managers who vary too far are reprimanded and eventually fired if they do not conform.

The obstacle course overview

admin — Wed, 05 Aug 2009 11:09:28 +0000

Each investment has its own emotional traps. Ancient tribes stored seeds through winter. These tribal savings were loaded with community and individual feelings. Today, few realize the embedded emotion in passbook savings accounts until banks begin to fail or inflation destroys the purchasing power of precious dollars.

Investing produces a wide range of emotion. The highs can be as disorienting as the lows. The most common emotional traps are described here. For each, consider if you would be comfortable owning investments that produce these feelings.