Posts Tagged tenancy
Synergy between various types of credit
Posted by admin in manufacturing, market demand, market forecasts, marketing, material costs on April 17th, 2010
Now that you’ve formalized your partnership—and are in a position to capitalize on it—start planning for the future. Strategic planning is the best way for partners to envision what will happen in the next few years.When partners plan together strategically, the synergy created is enormous. And the outcome is something your competitors can’t replicate because it exists only in the context of your partnership. No matter how hard they try, they cannot re-create that unique set of dynamics that is uniquely yours.
Some time ago I witnessed an example of this type of partnership synergy. At the time, I was participating in a workshop for a multimember partnership including the National Highway Safety Board, the California Department of Transportation, several automobile manufacturers, and some computer and software designers. They are dedicated to increasing auto safety and using technology to improve efficiencies. Their vision is to create a systemto provide interaction between the automobile and the road to enhance safety and performance. Electronic sensors embedded in the road surface will monitor traffic, surface conditions, and other useful information and relay it to the driver via a computer in the car. This data will be projected via a dashboard monitor or onto the windshield and also signal the optimum speed the car should be traveling under these conditions. Such a system could also indicate alternate routes should there be traffic delays or other obstacles.
A joint strategic planning of credit
Posted by admin in Business plans, bonds, budget, business, communication on February 15th, 2010
Everything you’ve done up to this point has been focused on getting you to the full partnership stage. You and your partner have worked hard together, navigating the Stages of Relationship Development to produce trust and mutual benefits. You’ve also engaged in the steps necessary to accomplish a task in order to determine the partnership’s worth. You’ve used the Plan–Do–Check–Act cycle to continuously improve the task and relationship dynamics of your partnership.
You’ve seen the partnership move from a past to a future orientation. The final two stages will feel almost anticlimactic. This is a good thing. You’ve worked so hard to increase your Partnering Intelligence that by the time you’re prepared to make a commitment and move to full partnership it will feel like the only logical step. The only thing that stands between you and full partnership is one more task: to conduct a joint strategic planning session in order to solidify your future vision and spell out the plans to get you there. Your partnership is now in the Commit Stage of Partnership Development. You have achieved the trust and communication needed to help you maximize the synergy. You have identified the mutual benefits that the partnership provides. Having managed the changing dynamics of the relationship and its impact on each organization, you are now positioned to perform.
The fundamentals of credit valuation
Posted by admin in Save Money, performance objectives, profit margin, profit projections, revenue, understanding finances, variable costs on October 24th, 2009
Besides market fundamentals valuation is the major driver of market performance for the longer term. The other two drivers that are commonly mentioned in investment literature, technicals and market sentiment, are more likely to explain short- to medium-term fluctuations of credit spreads.
The subject of valuation arises on every level of the investment process. Generally, it is a question of relative attractiveness of one investment vis-avis another one. In this chapter, we will outline four approaches that may support asset allocation decisions in fixed income portfolios with an aggregate benchmark as well as help to determine the beta of a pure credit portfolio.
How to compensate for default payday risk
Posted by admin in Global Markets, Money Tips, financial information, fixed costs, marketing, material costs on October 23rd, 2009
The spread needed to compensate for default risk depends upon future default rates, recovery rates and ratings transition probabilities. The rating agencies publish their forecasts of future default rates based on historical data. Usually required spreads come out significantly lower than current spreads for investment grade companies. For high yield, however, observed spreads tend to be too low, given the actual risk of default. While over the long term buy-and-hold strategies may earn an excess return over government bonds for pure investment grade portfolios, this strategy is not appropriate for high-yield portfolios. Here, investors need to focus much more on the process of selecting the right companies and avoiding the blowup names. A look at historical data shows that market spreads tend to overshoot at the end of credit cycles, especially in the wake of a recession.
For example, even if the historically high default rates of 1990/91 had persisted over the following years, investors should have required a BBB credit spread of only 115 bps for medium-term bonds. At that time the average market spread for BBB-rated issues, however, peaked at more than 180 bps.
Consequently, the market was much too bearish in 1991. Conversely, in 1997, at the beginning of the severe bear market for credit, spreads were too tight for the period of downgrades and credit blowups that followed. Note that these observations apply for bonds with a maturity of roughly 4 years.
While the cushion is not as comforting as for shorter maturities, even at the long end the spread levels reached in recessions provide sufficient protection, even when assuming that default rates stay high for a sustained period of time.