If stock markets or stocks crash, WHO will benefit the most?

Those who bought during bubbles become paupers during crashes.

Those who bought during crashes become millionaires when the market reverses.

Wealth is destroyed by bubbles and created from crashes.

Your potential returns are a function of price you paid for the stocks offered by the market.

Those who will be investing for a long time will like the stock market when it is on CHEAP SALE.

Those who need to cash out significantly for various reasons during crashes will be the losers.

Ways on Pricing a Business

Posted: Feb 14, 2011

When done properly, purchasing or selling a business can be a rewarding and fulfilling decision. There are different ways for you to do these two tasks but they both share a common issue - determining the right business selling price. It usually takes experience and skills to properly price a business.

Pricing a business for sale

When you decide to buy or sell a business, coming up with the price is one of the first tasks that you will encounter and is also among the hardest phases in the process. The truth is that there is no best way to price a business. In most cases, the final selling price depends on the seller's determination to sell and the buyer's willingness to buy the business. However, there are standard methods used in pricing a business for sale.

The market-based valuation is the first method used in pricing a business. Compared to other methods, this is probably the simplest one. Basically, the business selling price must have the same price with similar businesses that have been sold within the industry around the same area. This approach, however, does not consider the unique features of a certain company. In a manner of saying, it is a "quick and dirty" way of pricing a business for sale.

The next method in determining the business selling price called asset-based valuation. This method bases its calculations on the liquidation and book values of a particular company. This method determines the sale price of a business based on the bare minimum value, as the other important aspects, such as the customer base and brand name, are completely unaccounted for.

The last and most extensive type of business pricing method is called the earnings-based valuation. Considering the account historical, present, and future revenues and cash flows, this type of valuation calculates the business selling price most accurately, especially when used with the second valuation method.

The business selling price

Even if the three methods mentioned above give accurate results, the actual business selling price can still fluctuate depending on a number of factors that can be easily quantified. When the price you set is too high, it can discourage prospective buyers and may stain the business' reputation if it stays in market for a long period of time. On the other hand, you may also lose a large amount of money if you put a business on sale for a very low amount.

The intangible value of businesses is the main reason why a business selling price fluctuates. For example, an entrepreneur sells a reputed online company with a few 'hard assets'. If he disregards the value of those intangible assets, the price would significantly decrease and it would be a disastrous mistake on his end. Note that in a lot of cases, the value of intangible assets can cover up to 95 percent of the final selling price.

Other than the challenging assessment of intangible assets, another important factor in making business decisions is not letting your emotions get in the way. You may think that buying a reputed bakery franchise is a smart financial move, but are you sure you are ready to begin operations at 3 in the morning?

The same warning goes to sellers who are pricing a business for sale. It is normal to feel emotionally attached to a company that you once owned, but be professional enough not to show any emotion when discussing a business selling price. Remember that you should avoid over or under valuation of your company. Knowing the different ways of how to determine business sale prices, do you now agree that it is not such a difficult task after all?



http://www.articlesbase.com/entrepreneurship-articles/ways-on-pricing-a-business-4225431.html#ixzz1E2MatFpg

What Is Intangible Asset Valuation?

Intangible asset valuation is the method by which accountants determine the effect of an intangible asset on the company’s balance sheet. Unlike other accounting procedures, determining the transactional value of an intangible asset is an arduous process. Intangible assets include both intellectual property, such as grants, logos or trademarks, as well goodwill from buying another company. Intangible asset valuation requires both legal and financial analysis.
http://www.wisegeek.com/what-is-intangible-asset-valuation.htm

Investing mantra: Consequences dominate Probabilities

"Investing isn't just about probabilities. It's about consequences, and you've got to be prepared for them." - John Bogle 

Higher inflation rates are playing havoc in real estate sector in India

Higher inflation rates are playing havoc in yet another sector. This time it is real estate. To contain the ever rising inflation, the RBI (India) has been hiking interest rates. And it plans to continue doing so in the near future as well. This has led to higher cost of borrowing funds, which in turn has led to a slack in the demand for homes. Net result being that prices for homes in major cities are expected to drop by as much as 30%. 

This is definitely exciting news for those who are seeking to buy a home. But the point is that when the funds are so expensive, how will these people fund the purchase? This would just lead to demand dwindling. So is this the end of the real estate bubble at least for the major cities? Looks like it. 


Equitymaster Agora Research Private Limited
103, Regent Chambers,
Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India.

Weaker trade surpluses is what the Chinese government is aiming at.

China's selfish currency policies have attracted criticisms from all counters. But the dragon nation seems to have done well for itself by managing to contain its currency appreciation. Lower inflation and higher imports in an attempt to reduce the economy's dependence on exports have worked in this direction. China's imports rose 51% YoY in January 2011. To put things in perspective, this brought down the country's trade surplus from US$ 13 bn in December to US$ 6.5 bn in January 2011. This data may be colored with seasonal impact due to the New Year festivities. However, weaker trade surpluses is what the government is aiming at. Notwithstanding the fact that it is coming at the expense of other economies. The G-20 nations have expressed displeasure over China's trade and currency policies in the past. But given its apex position in global trade, it seems that China will have its way longer than expected. 

Chart of the day: Flows to emerging market equity funds

In terms of fund flows, 2011 does not seem to be turning out well for emerging markets. In fact, today's chart of the day shows that funds have been withdrawn from emerging markets in 2011 so far as compared to 2009 and 2010. In those years, investors rushed to emerging market shores to capitalise on the strong growth opportunities there as the developed world languished in recession. Now with inflation rearing its ugly head and food prices soaring, concerns have begun to emerge from these fast growing markets too. 




* Up to Feb 8
Data Source: The Economist

A crisis as big as the subprime one is brewing in Asia

In 2009 and 2010, Asia was the apple of the investor's eye as countries in the region recovered strongly from the global financial crisis to post healthy growth rates. But loose monetary policies in the West and high inflation have posed its own set of problems for the Asian economies. The biggest problem that Asia has been witnessing in recent times is the surge in food prices. And this issue could end up being more chronic rather than cyclical in the years to come. For starters, weather patterns have become unpredictable which in turn has hampered agricultural production of late. Then there is the issue of population. Asia alone, for example, will have another 140 million mouths to feed over the next four years. That is in addition to the almost 3 billion people in the fast-growing region currently. This means that demand will remain high in the future and supply may not always catch up.

The other big fallout of soaring food prices for the Asian region is likely to be a significant rise in debt. So far, it was believed that bloated debt was a problem that only Europe and the US were facing on account of the global crisis. But Asia is also likely to join this bandwagon. Take India for instance. It still has one of the highest proportion of poor in the world. This obviously means that most will not be able to afford food at such high rates. As a result, the Indian government would most certainly increase subsidies sharply and cut import taxes, which would put an additional strain on its finances.

Indeed, the crisis in Egypt was a product of the inability of the Egyptian government to tackle the problem of high inflation. And though extreme, noted economist Nouriel Roubini believes that persistently high food prices and inflation could raise the risk of more governments getting toppled. Certainly, Asian governments including India will have to give serious thought to some long term reforms if such shocks are to be avoided in the future.

Do you think that rising food prices will lead to a bigger crisis in Asia in the future?


Equitymaster Agora Research Private Limited
103, Regent Chambers,
Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India.

Beware of Inflation

Beware of inflation.

The longer you leave your money in fixed deposit, the higher the risk of inflation eating away the purchasing power of your money.

Money market investments are safest when the money is needed in the short-term.

The very same safe investments become high risk the longer they stay invested.


Stocks are on the opposite track. They are high risk investments in the short-term, but are lower risk investments in the long term:

Fixed deposit 
1yr = Low risk 
10 yrs = High risk

Stocks 
1 yr = High risk 
10 yrs = Low risk


http://myinvestingnotes.blogspot.com/2008/10/risks-of-investments.html

There are many variations on the value investing theme. However described, the fusing theme among value investors is appreciating the difference between stock price and business value.

There are many variations on the value investing theme.  The philosophy permits particular applications that vary to suit individual taste and ability.  Leading value investors employ a range of styles.

Philip Fisher is a good example.  In Fisher's era, investment wealth arose either:

• from traditional value investing (buying underpriced securities and holding them until fairly priced or overpriced) or 
• fairly-priced businesses poised to grow so rapidly in sales and earnings (today we would add cash flows) that profits arise from that growth.  

The former describes traditional Graham-based pure value investing.  The latter is Fisher's pioneering sense as a growth rather than a value investor and leads to the distinction (somewhat false) between the two.

Many contrast Graham, the father of value investing, and Fisher, the father of growth investing.  But because value investing and growth investing are really cousins of one another, Fisher is better understood as developing a variation on value investing's themes.  The difference is more a matter of style and emphasis than fundamentals.

Among the most famous published accounts of success reported by students of Graham-Dodd's teachings is Buffett's essay The Superinvestors of Graham-and-Doddsville.  He documents a range of value investors who adopted varying styles of the philosophy.

• Some diversify investments widely while others allocate wealth to a concentrated group of stocks.  
• Most place a high premium on understanding the particulars of any business before investing, yet some will invest while holding only a reasonable level of expertise on a business.

Columbia University Business School professor Bruce Greenwald published a series of essays updating and elaborating Buffett's Superinvestors theme.  He highlights numerous value investors to underscore slight variations of approach.

• Some refine valuation methods to define value as what informed industrialists would pay to own a business's equivalent assets.  
• Some relate historical price fluctuations to intrinsic business value.
• Others combine this innovation with more traditional valuation metrics to enhance investment discipline.  
• Some emphasize the role of catalysts such as takeovers and bankruptcy reorganizations that can transform underpriced businesses into reliased investment results.

Of the variety of value investors and their styles, those most closely aligned to Graham might be called pure value investors.  Those giving more weight to other traditions or contemporary influences might loosely be described as modified value investors.  

However described, the fusing theme among value investors: 

• is appreciating the difference between stock price and business value.  
• All also believe in the gospel of the margin of safety.  

A common characteristic is superior investment results.

Value Investors don't believe stock markets can be predicted.

Value investors don't believe stock markets can be predicted, over short or long periods.

What can be ascertained, with a modest degree of reliability, is the probable performance of underlying businesses over long periods, based on past performance and current information.

Value investors analyse this information to ascertain value and relate this to price.

Appointing a nominee for your stock investments

14 FEB, 2011, 03.43AM IST, 

Appointing a nominee for your investments

Many of us invest in shares, deposits and mutual funds without bothering to fill up the nomination details. Since choosing a nominee is not mandatory while making an investment, the decision is often postponed. However, this process simplifies for nominees the realisation of investment proceeds in case of the original investor’s demise. This is even more critical when an investment is held in one person’s name since death makes it difficult to access his funds till several formalities are completed. 

If nominees have been appointed, they can produce basic documents, such as a death certificate,to access the funds. The absence of a nominee may require more documentation,such as the probate of will and certified list of legal heirs, before the investment can be transmitted or withdrawn. Nominees are deemed to hold the investment proceeds in a trust if it is disputed by legal heirs, pending a decision by thecourts. 

Documentation: Most investment forms provide a space for selecting a nominee. If it is not filled up at the time of investing, other prescribed forms can be used later. 

Multiplenominees: Most investments allow more than one nominee and the percentage of share that each would be entitled to. 

Signature: The nomination form has to be filled up by all joint holders, irrespective of the mode of operation of the investment. 

Transmission: Nominees can have investments transferred in their names for redemption later.  For this, they need to complete the KYC and PAN formalities. 

Points to note 

Who cannot nominate : Kartas of HUFs and powerof attorney holders are not authorised to make or change nominations or be appointed as nominees to an investment. 

NRIs: Non-resident Indians can be named as nominees of investments made in rupees.However, the proceeds cannot be repatriated and have to be continued to be held in rupees. 

Who can be the nominees: Certain investments permit the nomination of a trust, religious or educational institutions. Others only permit individuals to be nominated. 


Thecontent on this page is courtesy Centre for Investment Education and Learning(CIEL)


http://economictimes.indiatimes.com/articleshow/7487182.cms

Top 1pc of UK workers pay quarter of all income tax

Top 1pc of workers pay quarter of all income tax
A quarter of all of Britain's income tax revenues this year will be paid by just one per cent of earners, according to official data.

New figures released by HM Revenue and Customs reveal those in the top 1 per cent of earners pay a quarter of all income tax. Photo: PA

By Harry Wallop, Consumer Affairs Editor 1:18PM GMT 13 Feb 2011

Harry Wallop's Twitter

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The figure is in sharp contrast to 1978, an era associated with supertaxes, when the top one per cent paid 11 per cent of all the tax revenues.

Experts suggested the projections, published by HM Revenue and Customs, was evidence of how the rich had got richer over the last three decades, while the tax burden on them had increased substantially in recent years.

The new top rate of 50p income tax rate came into force in April 2010, landing a small number of people with the highest rate of income tax since 1988.

It is not yet fully clear how much money this top rate of tax, introduced by the former Labour government, will raise. However, last week the HMRC published its forecasts for all income tax revenues for the current tax year. It suggested that 275,000 individual, those that will pay the 50p rate, will pay £41.4 billion in tax – 25.7 per cent of the country's total income tax bill.

In total there is expected to be 30.6 million taxpayers this tax year.

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In 2008-2009 it took 648,000 of the richest taxpayers to pay a quarter of the country's income tax revenues.

John Whiting, the Tax Policy Director of the Chartered Institute of Taxation, said: "The rich are getting proportionately richer, and therefore are paying more tax.

"In a curious way it demonstrates what a contribution they make. It is well worth the country attempting to keep them here. In trading terms, they make a considerable profit for the taxman."

There have been fears in the City that the 50p tax rate would drive out many businessmen from London. Though some hedge funds have relocated to Switzerland there is no evidence of companies or individuals relocating offshore in substantial numbers.

http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/8321369/Top-1-of-workers-pay-quarter-of-all-income-tax.html

Bangladesh investors, police clash over stocks slide

February 13, 2011

DHAKA, Feb 13 – Hundreds of Bangladeshi small investors, angry at a new plunge in share prices, set fire to tyres and pelted police with bricks today outside the stock exchange and demanded the resignation of the finance minister.

Police with batons dispersed the protesters in pitched battles that snarled traffic for hours.

The country’s main Dhaka Stock Exchange General Index dived by more than 474.77 points or 7.27 per cent to 6052.41 today, the steepest one-day fall since January 20.

“Who is to blame for the continuing fall of share prices? Why haven’t they been found and punished?” shouted Shafiqur Rahman, a small investor.

Demonstrators called for the resignation of Finance Minister Abul Maal Abdul Muhith.

“He assured us that the market will see an uptrend this week,” said investor Rakibul Haq. “It makes me so frustrated and angry that this has not happened.”

Prime Minister Sheikh Hasina last week asked the relevant authorities to take immediate steps to stabilise markets, with about 3.3 million people, mostly small-time investors new to stock trading, relying on it to supplement meagre incomes.

Share prices nearly doubled in 2010, encouraging new investors into the market.

But banks and other financial institutions, some of which had invested 75 per cent of their deposits in the stock market in the past, are now holding back on further investments, prompting fears among individual investors.

Clashes between distraught investors and police have become regular occurrences in recent weeks. The steepest fall in the index – 660 points – took place on January 10.

Mirza Azizul Islam, a former finance adviser to the government, said today: “The market needs long-term investment to overcome its volatility while small investors should refrain from panic buying or selling.”

Hasina and her rival Begum Khaleda Zia, a former prime minister and contender in parliamentary elections due by the end of 2013, accuse each other of prompting the price declines.

“They (Khaleda and her allies) are fuelling the unrest in the stock market, trying to cause greater anarchy and make gains out of it,” Hasina told parliament last week.

Khaleda said at the weekend that the slide in the bourses was further proof that the government was incapable of managing anything. – Reuters

Genting expediting share buyback

Genting expediting share buyback


Written by Yong Min Wei
Thursday, 10 February 2011 14:25

KUALA LUMPUR: Genting Malaysia Bhd appears to be expediting its share buy back activities while at the same time committing fresh investment into gaming assets in the US and UK.

As at Feb 8, 2011, total Genting shares retained in the treasury account amounted to 252.95 million shares, which is worth RM870.2 million based on GenM’s closing price of RM3.44 yesterday. The number of treasury shares has risen by 21.5% from 208.2 million as at May 31, 2010.

Genting shares retained in the treasury account currently represented about 4.3% of the group’s total issued shares of 5.92 billion shares.

Note that in a filing with Bursa Malaysia on Jan 26, the group had said it “intends to purchase up to a further 340.86 million of its shares (representing approximately another 5.76% of the issued and paid-up share capital) within the next five months.” As at Jan 26, Genting had 4.24% of its shares in the treasury account.
Such further purchase is expected to cost the group at least another RM1.17 billion, assuming if Genting’s shares doesn’t fall from its current level, and nudge its total treasury shares to the permitted 10% level.

An artist's impression of the Aqueduct Racino in New York.

As per Bursa’s listing requirement, a public listed entity generally is not permitted to own shares or hold any of its shares as treasury shares if this results in the aggregate of the shares purchased or held exceeded 10% of its issued and paid-up capital.


“Share buybacks can enhance the returns per share of a company. It will be better if the shares are purchased when they are undervalued,” said a market observer, explaining that such moves theoretically favour shareholders as earnings and dividends are split among fewer shares.

An analyst familiar with Genting believes that the group will continue to buy back shares in the weeks to come, even if the stock looks firm to potentially test its 52-week high of RM3.72, adding that the group has sufficient cash flow to purchase more than 300 million of its shares within five months.

He said Genting’s decision to buy back shares also enables the group to earn a stronger return on excess cash. He noted Genting’s 30-year contract to redevelop the Aqueduct Racetrack in Ozone Park, New York, has made the group “extremely attractive.”

“Genting has been comfortable and actively buying back several tranches (of its own shares) at RM3.20 to RM3.30 levels. With close to RM900 million worth of treasury shares, it could also keep a portion for strategic choices, such as cancelling it or distributing it to shareholders,” he said while not discounting Genting declaring interim dividend payment in the first half of FY2011 ending Dec 31.

Genting’s net profit for 3QFY10 ended Sept 30 dipped 6.4% to RM336.41 million from RM359.45 million a year ago on the back of a lower revenue of RM1.2 billion versus RM1.34 billion. It posted basic earnings per share of 5.92 sen in 3QFY10 while net assets per share stood at RM1.96 as at Sept 30.

Shares in Genting  yesterday added four sen to close at RM3.44 with turnover of 9.82 million units. The counter had posted a 52-week high of RM3.72 on Sept 21, 2010 and a low of RM2.46 on July 2, 2010.
Of the 25 stockbroking firms polled by Bloomberg that were covering Genting, there were 11 “buy” recommendations consensus target price of RM3.65. Currently, the stock is trading at a consensus forward price-to-earnings ratio of 15.22 times.


http://www.theedgemalaysia.com/in-the-financial-daily/181320-genting-expediting-share-buyback.html

Savers' Impatience Hinders Retirement Goals

Too many savers choose immediate gratification instead of taking advantage of larger long-term payoffs.

Few would argue that we have a retirement crisis in America. What people might debate is how we solve the problem.

Slowly but surely, however, researchers are producing work that offers much-needed insight into how we can reduce the severity of the problem. Case in point: A working paper just published by the National Bureau of Economic Research, on two explanations for why consumers have trouble with financial decisions.

"One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations, such as computing compound interest, which could cause them to make suboptimal financial decisions," wrote Olivia Mitchell, the director of the Pension Research Council, and Justine Hastings, an economics professor at Yale University, in their paper, "How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors."

"A second is that impatience or present-bias might explain suboptimal financial decisions. That is, some people persistently choose immediate gratification instead of taking advantage of larger long-term payoffs."

In other words, people generally don't much know, if anything, about money. And two, consumers — even when they are financially literate — sometimes can't help themselves from making bad decisions. It's the way we are wired. The lizard part of our brain overrules the more rational part when it comes to things financial. The lizard part of the brain says that the joy of spending (or not saving) today is greater than the pleasure of having a nest egg later on.

"Impatience or present bias seems to be an inability to plan for long-term consequences," said Stephen P. Utkus, a principal with the Vanguard Center for Retirement Research. "It may be a learned trait from family and peers, or it may be inherited. There is some evidence from neuroeconomics that impatience may be related to certain brain structures.

Read more here.