Archive for the ‘Stocks’ Category
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16
May
2010
The etheral qualities of a loan
Now that the partners understood the ethereal qualities of the two businesses, the next area of discussion concerned the material aspects. First we reviewed the differences that would help or hinder the partnership from an organizational structure perspective. Again I used a grid to help guide the discussion and enable the partners to view their organizations from a holistic perspective.
The last piece of information the partners needed to discuss before they could begin a formal strategic planning session was the external impacts on the partnership. This article lists the external issues the partners wanted to explore to ensure that they covered all the potential traps that might derail the partnership—before they spent time, money, and energy creating a strategic plan.
10
Jan
2010
Groups that help with credit and loan solutions
You may be thinking, “I’ll just go to a Venture Capitalist. Isn’t that what they do?” The answer is no, rarely, if ever, for you as a small independent inventor. Venture Capitalists are the big time. They invest big money, to be sure, but they want a virtual guarantee that they are likely to make big money on their investment in a relatively short period of time. Independent inventing is entirely too risky for most Venture Capitalists. They are not an option for most independent inventors.
Investment angels, on the other hand, may be a possibility. Investment angels can be found informally among the people previously suggested: doctors, lawyers, accountants and so on. Or, they may be found in formal organizations. For example, many communities have investment angel groups. You can find listings for such groups in your local business journals.
You can find links for several angel investment lists in Appendix B at the back of this book. You can also find angel investors by running a classified ad for them. Your ad should say something like, “Inventor seeks angel investor for patent-pending product. Small investment opportunity. (Your phone number).”
Classified newspaper or Internet ads that you find listing investment angels may or may not be legitimate! They are often “services” that promise to put you in touch with angel investors in exchange for a fee. It is best to find your own angel investors.
5
Oct
2009
How swiftly can you process your emotions?
Stocks trade on exchanges. Because dividends are either small or nonexistent, the value of your stock is determined solely by what other investors are willing to pay for it. In a calm market, you will experience a sense of unmanageability, because there is nothing you can do to force others to raise the price of your stocks. Even small losses in calm markets can be troubling because investors rarely want to admit their mistakes, feel the pain of loss, and move on. Focusing on prices rather than the cause of the losses, they hang on to losers until they can break even.
Optimism can grow into fantasy. Investors sometimes fall in love with their companies. They fantasize about new products and skyrocketing stock prices. All evidence of deteriorating fundamentals is rationalized away or ignored. Individual stocks can decline for years or decades. Believing fantasy can lead to many years of pain even in calm markets. However, we have seen few calm markets in recent years, and volatile markets are more troublesome.
In most markets, stock losses happen quickly. A bad earnings report can cut a stock price in half. An unexpected rate hike by the federal government can knock the whole market down 15 percent in a month. For still unexplained reasons, the whole market dropped 22 percent on October 19, 1987. Few investments move so quickly. Real estate rarely moves 1 percent a month. Unless you can process your emotions quickly, stocks will cause you a lot of pain.
7
Sep
2009
Difficulties with employees is not going to change
I want to point out that difficulties with employees is not going to change. The interests of shareholders and employees have always been and always will be opposed. In fact, in the last two decades, employees have increasingly siphoned off a larger and larger share of profits. According to a 2001 study by Sanford C. Bernstein & Co., accounting tricks disguised the fact that there was no growth in profits between 1995 and 2001. Nevertheless, salaries, bonuses, and stock options soared. Industries in which shareholders have no chance to make a profit may soon be the norm. Claims that stocks are the best investment for the long-run ignore this trend.
You cannot change the fact that employees have an advantage over shareholders. This is an inalterable, long-term fact of stock investing. You must focus on yourself, not them. If you can handle a long-term relationship with decades of built-in conflict, stocks may be for you. If you currently have great difficulty with conflict in relationships, yet you really want to own stocks, you may be able to change. Always ask how you can change, not how you can change them, or how they can change themselves. However, be realistic about how much emotional turmoil you can handle and how much you will have to change internally if you are going to stay in stocks. Even if you can handle the conflict of interest with employees, there are other equally difficult issues.
28
Aug
2009
Bank loans are taken out and bonds are issued
Highly public maneuvers can dilute your interests as well. Bank loans are taken out and bonds are issued, taking control of the company away from you and granting it to bankers and the whims of the bond market. New shares issues are sold to the public, diluting your stake. Mergers and acquisitions of other companies further dilute your power and tighten the hold of management over your earnings.
Investor relations departments are set up to divert your attention from what is really going on and to placate your reaction. Companies often buy back their own shares, indicating that this will increase your ownership interest. What is really going on is that your interest is transferred elsewhere.
Bought-back shares are placed in employee stock ownership plans or financed by bonds and bank loans. When it is all over, employees and lenders own more of the company and you own less.
Ask yourself: How does all this makes me feel? You may feel betrayed or abandoned. Your broker or financial planner never mentioned the fact that simply buying stock is likely to make a sucker out of you. Certainly, a sense of unmanageability begins at this level.
12
Jun
2009
Cross-fertilization of ideas in investing abroad
By investing abroad, not only can you get the benefit of a cross-fertilization of ideas, but you can also benefit from a cross-fertilization of projects. In New Zealand I am involved with a boutique hotel and a small vineyard. To many people, this may just be of passing interest, but my colleague and friend Rich Lamphere recognized a tremendous opportunity to link the New Zealand operation to his extensive project in northern California that also includes a vineyard and boutique hotel.
Rich is a true visionary with a big heart, and is living proof of Zig Ziglar’s maxim that “You can get whatever you want, so long as you help enough other people get what they want.” By offering guests in either country wines from both projects, reciprocal hotel perks, combined frequent-user benefits, and an excuse and incentives to use the other country’s facilities, both projects benefit.
As for the claim that real estate is so complex, and the laws so involved, that it is difficult to keep up with the regulations in your own turf, let alone a foreign country, these critics need to get a passport (I would put money on it that they do not have one), jump on a plane, and go somewhere where they have never been before. Of course real estate is complex, even at home. In fact, it is so complex that even at home you should barely do any of it yourself.
23
May
2009
Investing Abroad
A few years back I was shown a property by Craig Donnell, a colleague who consistently ferrets out opportunistic deals, in Melbourne, Australia. The building was located directly opposite the University of Melbourne, and comprised 12 stories of student accommodation (277 rooms) along with ground-floor retail space and a basement. (See Figure 22.1.) There was a new 10-plus-5-plus-5-year lease in place to the university at a starting rental of A$950,000 per annum, with annual reviews in line with the consumer price index (CPI). To an outsider looking at market cap rates, returns, location, strength of lease, and in deference to the fact that the building had been completely renovated, it appeared as though the building was being offered at a price substantially above market. This would also explain why it had not sold.
However, this building also highlights the need to conduct thorough due diligence. It turns out that despite the recent renovations, the building did not comply with the fire code. Before long, the students had to be evacuated and relocated, and the university commenced legal action against the owner. We were informed that an offer would be entertained by the owner, who was eager to extricate himself from the situation.
27
Apr
2009
Panama Real Estate Possession Rights: Buyer Beware
Not all properties in Panama are in the private domain. Many beachfront properties, islands, and real estate in special tourism zones and historically protected areas are owned and managed by the national or local municipal governments. In those areas, possession rights are granted for a determined period of time. Two such protected areas are the archipelago of Bocas del Toro (mouth of the bull), which to many visitors fits the description of tropical paradise, and Portobelo, a beautiful harbor on the Caribbean visited by Columbus and the final resting place of Sir Francis Drake. Some beachfront property is available for purchase but is subject to the law that all beaches are public. All beachfront properties must provide a right of way starting twenty-two lineal meters from the highest tide to the property line.
Because of the lack of uniformity regarding the granting of possession rights, possession rights should be approached with caution.
When considering properties located in such areas, you should ensure that the possession right has in fact been granted by the relevant national or local government authorities and that the length of the time right is adequate for the purpose of the investment. The possession right should also contain a complete description of the property, including boundaries, encumbrances, and any other significant features or details (with an accompanying complete blueprint drawn and approved). You should make sure that any anticipated construction, activity, or improvement is acceptable by the national or local government. Transferring a possession right can take up to six months, depending on many factors, such as the date of recognition of the possession right and inspection by the granting entity.