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Wednesday, 21 September 2011
Tuesday, 20 September 2011
The Four Big Threats to Your Wealth in 2011 (MoneyWeek Magazine)
UK Housing threat
UK Stock market threat
Drop the Euro before it collapses
The "bond bubble" is about to burst
The fact is we're in unchartered territory ... and it's a very dangerous and unstable situation.
Does a 40% rise in the FTSE and a 9% rebound in property prices over the last 18 months seem right to you?
The way we see it, these aren't healthy markets at all ... they're not even recovering markets ...
...these are grossly inflated markets, pumped up by desperate government intervention.
Will the UK economyh sink into deflation if the Government follows through its pledge to rein in our national debt? ...
... Or, with the Bank of England's furious attempts to keep the ball rolling, is it inflation we have to fear?
So ... what should you do?
Survival Action #1 Buy defensives and "bear market protectors"
Defensive stocks: These kinds of companies don't need economic growth to make money, because people have to spend on their products out of necessity. In short, they're specifically suited to keep your portfolio ticking over in times of upheaval ... and GROW when the market truly recovers.
Survival Action #2 Get the right dividend players into your portfolio now
But since the bust up of 2008, investors have rediscovered the appeal of dividend cheques. This is for three reasons ...
1. Dividends outperform bond yields. According to Bloomberg, by the third quarter of 2010 more U.S. stocks were paying dividends that exceed bond yields than any time in the last 15 years.
2. Dividends can't be fudged - they have to be paid with real money.
3. Dividend-payers are excellent stocks to own in times of unprecedented uncertainty.
Dividends contribute to share price stability. If the share price of a dividend-paying firm falls, it is likely to fall less sharply than a pure growth stock. That's because as the price falls, the yield tends to pick up, encouraging investors to buy back in.
Survival Action #3 Ride gold all the way to $2,230 .. or even more!
... you're talking an eye-popping gold spike to $23,450 per ounce. And during times of confusion, gold often performs better than most other assets. Consider this ... adjusted for inflation, the 1980 gold peak of $850 gives you a price of $2,230 still on the horizon today.
UK Stock market threat
Drop the Euro before it collapses
The "bond bubble" is about to burst
The fact is we're in unchartered territory ... and it's a very dangerous and unstable situation.
Does a 40% rise in the FTSE and a 9% rebound in property prices over the last 18 months seem right to you?
The way we see it, these aren't healthy markets at all ... they're not even recovering markets ...
...these are grossly inflated markets, pumped up by desperate government intervention.
Will the UK economyh sink into deflation if the Government follows through its pledge to rein in our national debt? ...
... Or, with the Bank of England's furious attempts to keep the ball rolling, is it inflation we have to fear?
So ... what should you do?
Survival Action #1 Buy defensives and "bear market protectors"
Defensive stocks: These kinds of companies don't need economic growth to make money, because people have to spend on their products out of necessity. In short, they're specifically suited to keep your portfolio ticking over in times of upheaval ... and GROW when the market truly recovers.
Survival Action #2 Get the right dividend players into your portfolio now
But since the bust up of 2008, investors have rediscovered the appeal of dividend cheques. This is for three reasons ...
1. Dividends outperform bond yields. According to Bloomberg, by the third quarter of 2010 more U.S. stocks were paying dividends that exceed bond yields than any time in the last 15 years.
2. Dividends can't be fudged - they have to be paid with real money.
3. Dividend-payers are excellent stocks to own in times of unprecedented uncertainty.
Dividends contribute to share price stability. If the share price of a dividend-paying firm falls, it is likely to fall less sharply than a pure growth stock. That's because as the price falls, the yield tends to pick up, encouraging investors to buy back in.
Survival Action #3 Ride gold all the way to $2,230 .. or even more!
... you're talking an eye-popping gold spike to $23,450 per ounce. And during times of confusion, gold often performs better than most other assets. Consider this ... adjusted for inflation, the 1980 gold peak of $850 gives you a price of $2,230 still on the horizon today.
Monday, 19 September 2011
Finance for Managers - How to value a company? Summary
This chapter has examined the important but difficult subject of business valuation. It described three approaches:
1. Asset based: The first valuation approach is asset-based: equity book value, adjusted book value, liquidation value, and replacement value. In general, these methods are easy to calculate and understand, but have notable weaknesses. Except for replacement and adjusted book methods, they fail to reflect the actual market values of assets; they also fail to recognize the intangible value of an ongoing enterprise, which derives much of its wealth-generating power form human knowledge, skill, and reputation.
2. Earnings based. The second valuation approach described is the earnings-based: P/E method, the EBIT, and EBITDA methods. The earnings-based approach is generally superior to asset-based methods, but depends on the availability of comparable businesses whose P/E multiples are known.
3. Cash-flow based. Finally, the discounted cash flow method, which is based on the concepts of the time value of money. The DCF method has many advantages, the most important being its future-looking orientation. This method estimates future cash flows in terms of what a new owner could achieve. It also recognizes the buyer's cost of capital. The major weakness of the method is the difficulty inherent in producing reliable estimates of future cash flows.
In the end, these different approaches to valuation are bound to produce different outcomes. Even the same method applied by two experienced professionals can produce different results. For this reason, most appraisers use more than one method in approximating the true value of an asset or a business.
1. Asset based: The first valuation approach is asset-based: equity book value, adjusted book value, liquidation value, and replacement value. In general, these methods are easy to calculate and understand, but have notable weaknesses. Except for replacement and adjusted book methods, they fail to reflect the actual market values of assets; they also fail to recognize the intangible value of an ongoing enterprise, which derives much of its wealth-generating power form human knowledge, skill, and reputation.
2. Earnings based. The second valuation approach described is the earnings-based: P/E method, the EBIT, and EBITDA methods. The earnings-based approach is generally superior to asset-based methods, but depends on the availability of comparable businesses whose P/E multiples are known.
3. Cash-flow based. Finally, the discounted cash flow method, which is based on the concepts of the time value of money. The DCF method has many advantages, the most important being its future-looking orientation. This method estimates future cash flows in terms of what a new owner could achieve. It also recognizes the buyer's cost of capital. The major weakness of the method is the difficulty inherent in producing reliable estimates of future cash flows.
In the end, these different approaches to valuation are bound to produce different outcomes. Even the same method applied by two experienced professionals can produce different results. For this reason, most appraisers use more than one method in approximating the true value of an asset or a business.
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