Loans and Mortgage Tips » taxes

Rational credit expectations model

admin — Thu, 13 May 2010 21:46:58 +0000

The following example illustrates the broker-dealer’s behaviour. Let us assume that when the price is e100, the broker-dealer receives a buy order for a hundred shares. The strategy he adopts is to supply half that amount from his own portfolio and buy the remaining fifty shares from the market at a price of e101 (supposing the price rises by 1 per cent with the buy order). At this price, the dealer resells all the shares ordered and the price goes back down to e100. The profit comes from selling at e101 the fifty shares he already had in his portfolio at e100.

We now tackle the issue of anonymity by extending the rational expectations model set out in previous articles to a regime of full transparency. Under those assumptions, participants observed only the market price and thus traded under the regime with anonymity. We now compare that case with a regime of full pre-trade transparency in which the identity of both informed and uninformed traders is disclosed and agents can consequently tell whether their counterparts are informed or uninformed.

Credit that affects your saving accounts

admin — Sun, 10 Jan 2010 10:03:23 +0000

If you can finance your invention from your own funds, this is the very best, least complicated way to go. We did exactly this with a twist. As we have previously mentioned, quite a lot of the initial steps were funded by our personal savings. Once we were patent pending we started manufacturing and selling Ghostline® on a limited basis. We loaded up the trunk of the car with 100-piece packages and drove around selling it to local independent teacher stores and office supply stores. We made enough money doing this to pay the legal fees when our First Office Action came back from the patent office. An Office Action is any correspondence that comes from the USPTO relating to your application for protection of your intellectual property, whether it is a patent application or a trademark application. Office Actions require a response from whomever is prosecuting your application.

We also made enough money from sales of the poster board to pay for the next run of the product. Several times we repeated the cycle of manufacturing small runs and then selling it to earn enough money for the next run and to pay patent related expenses until we finally received notice that our patent would be allowed. So, even though we weren’t selling a lot of Ghostline®, we were “in the black.” We were covering our expenses as we went.

By proceeding in the pay-as-you-go mode we kept complete control of our product and our company. For us, it was the right decision. Success might have come sooner had we gotten investors or loans, but the comfort of knowing that we were limiting our financial risk was worth the extra time it may have taken. Only you can decide if this is the proper course of action for you and your product. If your product is “time sensitive,” that is if it is essential that you get to market as soon as possible or risk losing out entirely, you may need to consider the following options.

Researched stocks recommended by experts

admin — Mon, 07 Sep 2009 19:02:29 +0000

Brokers know that you want researched stocks recommended by experts. That is why you came to them to begin with. Each brokerage house, therefore, has its own experts rating stocks just for you. When brokers rate stocks, on average more than 65 percent are rated buy, less than 35 percent are hold, and less than 1 percent are rated sell. Every broker, therefore, has a long list of buys to show you, several of which are certain to piqué your interest.

Unfortunately, buy ratings have a dual purpose. Buy ratings sell stock to you and they sell services to companies issuing stock and bonds. In 2000, brokers made more than $30 billion dollars helping companies issue stocks and bonds. These stocks and bonds are always given buy ratings. That keeps the client coming back; it may or may not keep you coming back.

Studies show that buy-rated stocks have random returns on average no better than the market. Frequently they serve to prop up stock prices temporarily so insiders can cash out their stock options at a profit before the collapse. Insiders have to act quickly, though. According to a 2001 study by Investors.com, buy ratings on IPOs by the analysts of the underwriting firm lead to losses six months later of greater than 50 percent.

Investors also go to their broker for comfort and support during the markets down periods. Unfortunately, a full-service broker is not a financial counselor or a psychologist, but a salesperson looking for a commission. He will always have a product to sell you in an attempt to ease your discomfort.

The nature of loan workouts

admin — Fri, 12 Jun 2009 11:00:25 +0000

Loan workouts are voluntary agreements to restructure a company’s finances. The principal aim of such transactions is to improve a company’s ability to service its debt.

At its core, this requires one or more of the following:

A reduction in the nominal or present value of the company’s debts.
An extension of the period over which its debts are serviced.
The provision of new finance.
The appropriate restructuring of the business of the enterprise.

A loan workout may be formally defined as: An out-of-court agreement between the stakeholders of a company on a mutually acceptable course of action, with the aim of rescuing an enterprise with a commercially viable future. Loan workouts are entered into voluntarily by all the participants affected by their terms, without being compelled to do so by a court. There is also a distinction between the company (or the legal entity) and its business undertakings. The focus of a loan workout is on the latter. In certain circumstances, a business may be viable, whereas the company which owns it, may not be. In such circumstances, a loan workout may focus on the commercially viable parts of an enterprise (provided they are a relatively significant element of the group), whereas other parts may be subject to statutory insolvency procedures.

A typical loan workout involves three stages:

The calling of a moratorium to achieve stability.
A restructuring of the company’s business and finances.
A refinancing once the business has been turned around, or the implementation of other exit strategies by the company’s lenders.

Creditor- and debtor-friendly insolvency regimes

admin — Sat, 23 May 2009 15:00:23 +0000

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.

Statutory loans insolvency frameworks

admin — Thu, 30 Apr 2009 09:35:04 +0000

Statutory insolvency frameworks provide the rules and mechanisms for the realisation and distribution among stakeholders of the assets of insolvent companies. If the value of a company as a going concern is greater than if it were to be liquidated, such frameworks also enable the preservation of the enterprise of the company so that, if appropriate, it can be rehabilitated. If necessary, this can be under a different ownership. Also, the procedures provide for changes in control once insolvency is established or expected. Statutory insolvency frameworks aimed at the recovery of assets from a non-viable business are prevalent in all countries around the world, although they vary considerably in their effectiveness. They generally provide for a trustee or other official appointed by a court (or other body empowered by legislation) to realise the assets of an enterprise and distribute them to the various stakeholders of the company in accordance with priority rules. In many jurisdictions, they also provide for the prevention of preferential treatment of a party or interest group in the period leading up to a financial crisis.

Insolvency procedures aimed at rehabilitation are also common, providing for the stabilisation and, usually, sale of the business to new owners, under the supervision of a specialist appointed under the provisions of a statute.