Posts Tagged foreclosure
Fundamental models for loans spreads
Posted by admin in Companies, Money Tips, consulting, credit, liability, management skills, manufacturing, material costs on October 25th, 2009
A popular approach to estimate the credit risk of an issuer is the use of z-scores. In this context, Altman’s five components framework has attracted particular interest. On the company level, it is based on the five metrics.
Replacing the company-specific metrics by macroeconomic factors yields a fundamental model for the credit market. Because of the required minimum history and data reliability we will focus on the US market. Data for this procedure is taken from the flow of funds statistics and the national accounts of the United States.
The ratio of working capital to total assets measures the net liquid assets of a firm relative to the sum of financial and tangible assets. We isolated net liquid assets for the US nonfinancial corporate sector from the flow of funds statistics by subtracting mortgages, consumer credit, trade receivables and miscellaneous assets from total assets and subsequently adding inventories, trade and tax receivables.
The large fall in 1974 is due to a significant decline in the value of trade payables. Usually, the ratio of working capital to total assets falls in a recession. But there also seems to be a secular downtrend in this ratio.
Innumerable financial and accounting schemes
Posted by admin in consulting, fixed costs, market forecasts, profit margin on October 5th, 2009
Innumerable financial and accounting schemes, all legal, also dilute your share of profits. Accounting tricks include non-deducted stock options, accruing unearned sales and commissions, classifying big losses as nondeducted special items, and counting pension gains as income. All tricks make earnings appear higher than they really are. Creating huge reserves in a bad year is common as well. This allows the company to then post high earnings in succeeding years. Many companies also use cash flow to speculate in the stock of hot companies. This boosts profits quickly, though it turns a solid business into a volatile investment fund. Companies also finance purchases by shaky customers. This boosts sales and profits in the shortterm but leads to huge write-offs later when the shaky customers fail.
All these accounting tricks inflate profits short-term. Higher profits justify higher salaries, bonuses, and grants of stock options. When these tricks are discovered and set right, earnings are restated and your stock price collapses. However, bonuses and salaries are long gone and stock options cashed. A series of legal accounting schemes can siphon off all earnings and leave the company bankrupt and you holding a worthless stock certificate.
Enron is a recent example. Enron used off balance sheet entities to inflate profits and enrich management. When the tricks were discovered, the stock price collapsed; outside shareholders ended up with penny stocks.
Particularly troubling stock options
Posted by admin in material costs, ownership, performance objectives, production cycles on September 7th, 2009
Stock options are particularly troubling. In theory, employees who own stock will work to make the price of the stock rise. Therefore they are given the right to buy shares at a discount. Unfortunately, when new stock is issued to employees who exercise their stock options, your interest is diluted. In some companies, you will find your interest cut in half in a few years. CEOs of large companies average $4 million a year in stock options.
In addition, studies show that the share prices of companies that issue large amounts of stock options underperform the market. Even worse, employees benefit when the stock price collapses. Stock options are repriced or new stock options issued so employees can dilute your interest at a fraction of the cost. You get no benefit from a stock price collapse.
The grant of stock options also increases the volatility of your shares. Stock options are only valuable if the price of the stock rises above the option price. If the value declines, the options are worthless, and employees will not spend money to exercise them. This gives employees an incentive to bet the company on risky ventures such as mergers, acquisitions, untested products, untested markets, untested technology, and untested corporate structures. Employee stock options are no benefit to you whatsoever.
Do you have any business owning stocks?
Posted by admin in Companies, communication, economy, fixed costs on August 28th, 2009
At the micro level, a stock is an ownership interest in a business. The earnings from the business belong to the stockholders. Theoretically, the employees of the business, including top management, work for the stockholders.
In practice, the employees are self-interested. Every employee, from the CEO to the janitorial crew, wants as large a piece of the earnings as possible, leaving as little for you as can be justified. You may have emotional difficulty with this built-in conflict of interest.
Elaborate schemes are routinely employed to siphon off your interests. In the old days, two-thirds of profits were paid out as dividends, giving you direct control of a large portion of earnings. Today, dividends are cut or eliminated so employees can use profits as they see fit. Fewer than half of today’s stocks pay any dividends at all. Every year the number of dividend payers declines. Even those that pay dividends pay only token amounts. Instead, employees grant themselves raises and bonuses without consulting shareholders. Insider boards of directors grant themselves profit-sharing plans, stock, and stock options, all to your deficit. Board remuneration committees offer excessive pay for executives in exchange for excessive pay for themselves.
The few profits that are left are often squandered on ill-advised acquisitions and other schemes. Hundreds of examples could be cited including the recent debacles at Enron, Lucent, Rite Aid, Millennium, Color Tile, Dow Chemical, Sunbeam, Trump Hotels & Casinos, Reliance Groups, and many Internet, tech, and telecom firms that crashed in 2000-2001.
With Real Estate Timing Is Everything
Posted by admin in Uncategorized on April 25th, 2009
With exchange rates, one day can make a difference, so know when the funds will be transferred and when they are to arrive. Verify the receiving bank’s rate of exchange and how many days it takes the bank to handle the transfer. Calculate this into your purchase price.
One of our clients learned the hard way. Tom was ready to purchase his pied-?-terre in Paris, so he transferred funds directly from the United States to the escrow account at the bank in France. He calculated the exchange rate on the Internet on the day of transfer and expected to receive i425,000 (euros) to pay for the apartment. At the closing, he discovered that he had only i414,000. Tom protested that someone had shorted him on the exchange rate. Unfortunately, here is what happened.
Tom transferred the money on a day that the exchange was indeed favorable—if the exchange had taken place on that day. The money was sent from his U.S. bank on the day he requested, but the French bank didn’t receive the funds until two days later. And then the bank did not exchange the money until four days later, when the rates went against Tom. The funds were actually credited to the bank on the date it received the dollars, but it disintermediated the exchange to profit from the lower rate.
Tom complained to the notaire (legal agent) who was helping him with the transaction, but there wasn’t anything to be done. The bank had chosen when it wanted to exchange the money, and Tom was out i11,000. The notaire would not, of course, close the deal unless another i11,000 was forthcoming. Then Tom also discovered that there were wiring fees and conversion fees that totaled another $30 from his U.S. bank and i25 from the French bank. But at least these were small surprises in comparison to the i11,000 exchange
difference.
Real Estate Investment – When in Rome…
Posted by admin in Uncategorized on April 24th, 2009
To make your real estate investment opportunities fare well in other countries and societies, consider the following.
Learn the language. Having just a small vocabulary goes a long way in the success of your investment. Knowing past, present, and future tense is very helpful. After all, that is the time line in which your real estate deal operates.
Learn the culture and local customs. Read up on and experience the culture. The culture you see on vacation is different from day to day. Religion makes up a large portion of culture and society.
Whether it is nonexistent, polytheistic, monotheistic, all have an influence on the society in which you plan to do business. Failure to understand and respect the nuances and roles that culture, customs, and religion play can cause your deal to fall apart or change adversely. Knowledge and understanding is power. Humility on your part is not weakness.
Understand the local economy. The local economy is usually different from the national economy. What makes the local economy self-sustaining: building aircraft, growing wine, services and to whom, education, fishing, tourism, a combination thereof? How does this fit into your personal and real estate goals and objectives, in both the short and long term? Is the local economy working, and what is its future? Will the area be deserted or abandoned in a few years? All these factors can affect your investment.
Real Estate and Tax (Dis)Advantages
Posted by admin in Uncategorized on April 23rd, 2009
Investing outside of the United States adds another tax dimension, so it’s a good idea to understand the tax codes of the country that you are investing in. When determining whether an investment property will generate positive cash flow, you must include the tax implications of the income in your calculation, because U.S. taxpayers are taxed on their worldwide income. You should also take into account that there are certain legal tax advantages available in the United States when investing in property. For example, you can acquire investment property with your retirement funds, which offers tax-free or tax-deferred opportunities, or you can make tax-deferred 1031 exchanges of like-kind property. Some of these tax advantages are not available outside the United States. You cannot do a 1031 exchange for property outside the United States. You can, however, invest selfdirected Individual Retirement Accounts (IRAs) and 401(k) money everywhere, but you may still be obligated to pay taxes in another country. For instance, with a Roth IRA, you pay tax once and then any profits made are tax free—tax free forever in the United States, that is. It does not mean they are tax free outside of the United States. No country outside the United States recognizes American retirement plans and so local taxes may apply.
New tenants bonus cuts taxes
Posted by admin in Uncategorized on September 26th, 2008
Not just house builders, but also the tenant may have been recently on an entirely legitimate form of tax savings are happy: The operating costs for a rented property in the tax may be specified. New rules for household services make it possible – even retroactively. Unless the outstanding tax can also operating costs for 2003 through 2005 be claimed. But how does it all?
Material costs are not included
Those who work in the apartment by professionals it leaves, can be 20 percent pure wage settle. Material costs remain ignored. But the operating expenses of the landlord to the tenant continues, there can be claimed for tax. Caretaker costs and repairs in the house belong to the garbage disposal is not.
Wage and material separately indicate
Since this year, a landlord wage and material cost of operating separately in payroll specify. Thus, it is easier for tenants, wage costs in the cover sheet indicated the tax return. Older settlements are often not separate costs. It remains the only tenant left, the wage cost estimate. A test compass of the German Federal helps tenants here, the corresponding cost for the chimney sweep or caretakers correctly.
For outstanding tax applies:
Who operating in the outstanding tax assessments fit, you must note that for the years 2003 to 2005 only the work are deductible, the tenant would even work. , Professional work ‘(eg, maintenance of a heating system) can therefore for this period are not invoked.
Patronage Websites
Posted by admin in Uncategorized on September 26th, 2008
The following websites are currently under our patronage:
- Business Digest Blog – Current information about business affairs
- http://money.best-real-estates.com/ – Experts’ advice on money investments
- Loans Insider Blog – Professional advice on loans and mortgage
- Real Estate Informer Blog – Fresh update on real estate market situation
- http://finances.best-real-estates.com/ – Personalized help for money investors
- http://investments.best-real-estates.com/ – Your source of information about investments
Introduction to Best Real Estates Blog
Posted by admin in Uncategorized on September 6th, 2008
Welcome to the best real estates blog! This blog was established for people who would like to familiarize themselves with up-to-date information on real estate issues dealing with insurance, mortgage and loans or various real estate opportunities. It is our intention to present only confirmed and unbiased information. Those who are interested in becoming members of the best-real-estates team are encouraged to contact us by email.