Loans and Mortgage Tips

Sunshine trading We assume that information on the identity of some uninformed traders is made public or is known by the other market participants, and that their trading strategies are being pre-announced, which means that the size of the orders they will submit at a certain time in the near future is disclosed. The idea behind this practice is that by pre-announcing, uninformed traders should have lower adverse selection costs; essentially, market-makers should reduce the costs for the orders that they recognize as uninformed. Admati and Pfleiderer (1991) call the pre-announcement of uninformed traders’ orders ‘sunshine trading’. They study the effects of pre-announcement, assuming a market similar to the competitive protocol of Grossman and Stiglitz (1980). Here, however, we analyse the efficacy of sunshine trading in the Kyle-type framework in which agents behave strategically; the Grossman–Stiglitz framework is left for the discussion of anonymity in section 10.1.2. The model used here differs from Kyle’s standard model discussed in section 3.3.2 in that it has two types of liquidity trader: those who pre-announce orders and those who do not. By pre-announcing, liquidity traders disclose themselves as uninformed before trading starts; those who do not pre-announce do not reveal their type. The purpose of the model is to determine the effects of pre-announcement on market quality and traders’ welfare. Which traders will take the other side of uninformed traders’ pre-announced orders is also in question.

Shoestring Budget™ inventing does not mean cost-free inventing. If only that were the case! It means that you must contribute, at least some of your own money, to the project. You may be saying, “But, I don’t have any money!” If that is the case, then you might as well stop now. Almost anyone can tap into savings or plan for future expenditures by saving small amounts as they can for something that is really important to them. As we mentioned in an earlier chapter, an inventing project does not require that you have the entire amount at the start. It is very possible to pay for your invention in segments as you move through the steps. In fact, that is the way it must be done since product development, protection and marketing take place over a somewhat extended period of time and the expenditures are made in different areas, such as prototyping, legal, and so on.

When we were first inventing our product, Ghostline ®, we were the epitome of Shoestring Budget™ inventors. We were a couple of wives and mothers who were working full time jobs and we did not have a lot of expendable income. We did have faith in our idea; enough faith to dip into our savings to get our first prototypes made. We did it in bits and pieces.

First, we each contributed about $200, when that money was exhausted we each dipped into our savings again to replenish our “company fund” in order to have the money to continue the prototyping process. Thankfully, our first visits to patent attorneys were free (we interviewed several patent attorneys before selecting one) but when the time came to start the patent application we each dipped into our family savings again. If you truly have faith in the potential of your idea, you will be willing to invest at least some of your own money. If you do not have enough faith in your idea to put your money, even if it is limited, where your mouth is, stop now. Do not waste your time or anyone else’s.

The steps given below are very basic and they are not intended to be exhaustive but they will help you to learn how to do a simple, preliminary patent search in order to avoid unnecessarily spending money for a professional patent search if you should happen upon your invention idea very quickly.

The USPTO database is the same one that you would find if you went to one of the patent and trademark depository libraries that are scattered around the country. By the way, although you can do these searches on your home computer, it is a good idea to go at least once to one of these libraries if you have the opportunity to do so because the librarians are so knowledgeable and helpful and it is a wonderful experience for an inventor. It’s just a great place for creative people to hang out and learn! The United States Patent and Trademark Depository Libraries around the country frequently hold free classes and seminars on all subjects related to inventing, patents and trademarks. Call your nearest branch to be placed on a mailing list for these opportunities.

Many investors go to full-commission brokers for stock research, investment advice, and financial planning. Today, online discount brokers also provide these services. Unfortunately, most brokerage information is designed to sell more product more often, not to improve your financial position.

Wall Street has always known that buyers are primarily interested in stocks that increase in value. Profiting from declines is un-American. The easiest sell is a stock or fund that has already gone up. You will naturally be more confident that a stock or fund that has gone up will continue to do so. A broker will show you a select list of stocks that have strong momentum. Your overconfidence will hurt you. Studies show that stocks that have good streaks soon revert to the mean. While your broker is sure to know this, he will not disclose it to an optimistic buyer. He also has other sales tools.

The misery of repeated, painful investment mistakes will be over and creativity and joy will grow in your life.
Michael and Susan are typical of investors who need to take an inventory. They know something is not working in their investment lives. As yet, they cannot pin down the nature of the problem or the solution. Though many of their friends and co-workers are aware of Michael and Susan’s specific character flaws, Michael and Susan themselves are unaware. A weekend working through the exercises in Chapter 8 will change their lives. Once they find their comfort zone, other aspects of their life will improve as well. Their children will be integrated into their investment life. Their investment life will improve their marriage rather than be a source of division.

Remember, this chapter is all about getting started. It’s your pep talk to get you over the hump. So while we’re breaking it all down, let’s look at your credit score (we’ll discuss it more in Chapter 20). It’s a great measure of how bad your debt situation is.

If your debt situation is worse than you care to admit, your credit score will help to bring you back to reality. It’ll also help you measure your progress in the eyes of lending professionals.

I’d suggest that you check your credit score once a quarter as you’re trying to clean up debt. It’s kind of like standing on the scale when you are trying to lose weight. It’s where the rubber meets the road. Either your overall situation is improving, or it isn’t. Getting your credit report isn’t the same thing as getting your credit score. Ideally, you would check both two to four times per year. You can receive your free credit report, which shows your account history and should be checked for errors once per year by visiting www.AnnualCreditReport.com. Your credit score, which is actually computed for lenders by private companies like the Fair Isaac Company (creators of the FICO score), is not required to be given to you for free. However, you can visit websites such as www.MyFico.com and pay a small fee to view this score that determines your rates on loans.

Here are the basic ranges and ratings for the FICO credit scores:

700–850. You’ve got “Very Good” to “Excellent” credit depending on where you fall in that range. Getting a loan is usually no problem for people with scores in this range, and borrowers with these scores usually get the best rates and terms.

680–699. You’ve got “Good” credit. With a score in this range, you can usually get a standard loan as long as your other factors, like income and down payments, are solid.

620–679. You’ve got “Okay” credit. You can usually get a loan for smaller purchases without a co-signer or a major down payment, but you’re going to pay for it. Borrowers in this range and below start getting charged higher interest rates and fees.

Below 620. It’s official, you’ve got “Bad” credit. You may or may not get approved for a loan based on how far below 620 your credit score is. If you do manage to get approved, the further your score falls, the higher the interest rate you’ll typically pay.

Statutory frameworks can be broadly categorised into those that are ‘creditor-friendly’
or ‘debtor-friendly’. In a strict creditor-friendly insolvency regime, the control over all the assets and businesses of a company is taken away from its management and shareholders upon entering into formal procedures. Responsibility for managing and realising the assets passes to a trustee or administrator, who does so on behalf of all, or the secured, creditors. Also, the country’s priority rules are followed strictly when proceeds are distributed among creditors. Countries with English law tradition, such as England, Ireland, Malaysia and Australia, are considered as having strongly pro-creditor insolvency regimes.

Scandinavian countries and those with German law traditions also have creditor-friendly regimes, although less so than the first group. Insolvency under debtor-friendly regimes tends to encourage some form of debt
forgiveness or forbearance as part of the financial restructuring. Also, the company is generally allowed to continue operating, either in the hands of its existing management, or a trustee. The creditors have a relatively passive role in the restructuring process. Debtor-friendly insolvency procedures are found in the United States, France and, to a lesser extent, in parts of Central and South America. The lenders’ influence over the outcome of statutory insolvency proceedings is considerably weaker in debtor-friendly regimes.

Some countries without a corporate tradition, such as Islamic jurisdictions, tend to be neutral in this area.

There is normally considerable uncertainty and instability surrounding a company experiencing financial difficulties. This makes an accurate assessment of its position and prospects difficult. Reaching agreement on a course of action becomes problematic.

Insolvency legislation is aimed at overcoming such problems. The key challenge for policy-makers in this area is to design a legal and regulatory framework that meets two key objectives:

• To identify and rescue those companies that can and should be rehabilitated.
• To liquidate efficiently those companies that do not have a viable future.

In reality, various shortcomings associated with statutory frameworks, highlighted later in this chapter, create difficulties in meeting these objectives. Rescuing commercially viable companies within a statutory framework can be particularly difficult. Failure of such companies causes unnecessary losses among their stakeholders and for the economy as a whole.

Many of the drawbacks of rescuing companies within a statutory framework can be avoided if a company’s stakeholders, and in particular its creditors (who are usually the interest group most affected) can assess a company’s commercial viability and agree a financial restructuring without recourse to the courts. Loan workouts, which are essentially financial restructurings agreed in an out-of-court process, can therefore be
an effective tool for corporate rescues.