This week I am really delighted to be able to give you a condensed version of Gary Shilling's latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary's latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. His track record in this decade has been quite good. I want to thank Gary and his associate Fred Rossi for allowing us to view this smaller version of his latest letter.
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Sunday, February 28, 2010
Monday, February 15, 2010
Wild's play will decide its strategy
With eight pending unrestricted free agents, it's the most common question as the March 3 trade deadline approaches: Will the Wild be a buyer or a seller?
It's not a simple question to answer because the Wild can't figure out what it is. Is it the workhorse team that looked like a playoff contender by sweeping a four-game homestand against tough competition or is it the outworked team that looked like a playoff pretender by not showing up until it was too late in each game of its just-completed three-game road trip?
The Wild, two points behind the eighth and final playoff spot one week ago, has fallen to 12th place and six points behind.
"The play of the team will dictate what we do," General Manager Chuck Fletcher said. "Our goal is to make the playoffs, and we feel we're a playoff-caliber team.
"The good news is in the very near future we will get [defenseman] Brent Burns back [from a concussion] and that'll be, we think, an impact addition to our lineup as we go down the stretch. But certainly, we have to make some real strides here in the next couple weeks."
In today's salary-cap world, it's hard to be a true "buyer" or "seller." With 11 teams within $1 million of the $56.8 million cap -- six are over, including the Wild because of Pierre-Marc Bouchard's long-term injury status -- teams can't just add and add like the old days.
That affects the Wild, which might want to dish away some of its pending free agents at the deadline.
Say the Wild decides to trade defenseman Kim Johnsson. He has $4.85 million cap hit. Over a 193-day season, his cap hit is $25,130 per day. Even if the Wild waited until the deadline to trade him, a team would have to take on 40 days of his cap, or $1.005 million.
Source
It's not a simple question to answer because the Wild can't figure out what it is. Is it the workhorse team that looked like a playoff contender by sweeping a four-game homestand against tough competition or is it the outworked team that looked like a playoff pretender by not showing up until it was too late in each game of its just-completed three-game road trip?
The Wild, two points behind the eighth and final playoff spot one week ago, has fallen to 12th place and six points behind.
"The play of the team will dictate what we do," General Manager Chuck Fletcher said. "Our goal is to make the playoffs, and we feel we're a playoff-caliber team.
"The good news is in the very near future we will get [defenseman] Brent Burns back [from a concussion] and that'll be, we think, an impact addition to our lineup as we go down the stretch. But certainly, we have to make some real strides here in the next couple weeks."
In today's salary-cap world, it's hard to be a true "buyer" or "seller." With 11 teams within $1 million of the $56.8 million cap -- six are over, including the Wild because of Pierre-Marc Bouchard's long-term injury status -- teams can't just add and add like the old days.
That affects the Wild, which might want to dish away some of its pending free agents at the deadline.
Say the Wild decides to trade defenseman Kim Johnsson. He has $4.85 million cap hit. Over a 193-day season, his cap hit is $25,130 per day. Even if the Wild waited until the deadline to trade him, a team would have to take on 40 days of his cap, or $1.005 million.
Source
Monday, December 28, 2009
California builders lobby for tax credit extension for new home buyers
Remember the $10,000 California tax credit for newly built homes that state buyers exhausted earlier this year in only about four months? Well, new-home activity is down since that money ran out, and state builders are calling for an extension of the credit, according to today's news release from the California Building Industry Assn.
“Since the discontinuation of the popular home buyer tax credit, we have seen a significant drop in traffic these past few months, which continues to drag down new-home construction, and in turn, job creation,” said Liz Snow, CBIA’s president and CEO. “We applaud the Senate for taking swift action in passing the tax credit extension, and we hope the Assembly follows suit.”
According to statistics compiled by the Construction Industry Research Board (CIRB), home builders pulled permits for 2,920 total housing units in September, down 1% from August. When compared to September of last year, production in 2009 was off by 36%. Permits for single-family homes totaled 2,150, down 2% from the previous month and down 12% from September 2008, while multifamily permits totaled 770, up 0.5% from August but down 63% from September of last year.
The builders' stance is that more home building means more jobs and work for Californians, which would benefit the state's overall economy. Because things slowed once the credit funds were exhausted, this doesn't seem to have much staying power as a strategy, although it did help reduce unsold inventory. Will an extension help fuel an economic recovery or just drag out the process?
Source
“Since the discontinuation of the popular home buyer tax credit, we have seen a significant drop in traffic these past few months, which continues to drag down new-home construction, and in turn, job creation,” said Liz Snow, CBIA’s president and CEO. “We applaud the Senate for taking swift action in passing the tax credit extension, and we hope the Assembly follows suit.”
According to statistics compiled by the Construction Industry Research Board (CIRB), home builders pulled permits for 2,920 total housing units in September, down 1% from August. When compared to September of last year, production in 2009 was off by 36%. Permits for single-family homes totaled 2,150, down 2% from the previous month and down 12% from September 2008, while multifamily permits totaled 770, up 0.5% from August but down 63% from September of last year.
The builders' stance is that more home building means more jobs and work for Californians, which would benefit the state's overall economy. Because things slowed once the credit funds were exhausted, this doesn't seem to have much staying power as a strategy, although it did help reduce unsold inventory. Will an extension help fuel an economic recovery or just drag out the process?
Source
Tuesday, December 15, 2009
Glad to have buyer of PYCO oil mill
Greenwood and Leflore County received some welcome economic news last week with the announcement that PYCO oil mill had a buyer.
Delta Oil Mill of Jonestown, the last remaining cottonseed-oil processing facility in Mississippi, has announced its plans to acquire the Greenwood plant as well as PYCO’s storage facilities in Minter City and West Helena, Ark.
The PYCO mill had stopped production in March as the Texas-based company scaled back its operations in response to the severe reduction in cotton acreage in Mississippi and throughout the South.
The acquisition works for Delta Oil Mill, a gin-owned cooperative just like PYCO, because it plans to use this opportunity to diversify its business.
At least in the short term, the Greenwood oil mill will be converted to processing soybeans, while all the cottonseed production will be concentrated at the Jonestown plant.
Should cotton acreage rebound sufficiently in the future, however, the Greenwood plant will have the capability to quickly revert back to cottonseed.
This strategy gives Delta Oil Mill more flexibility to respond to the planting decisions made by farmers, which in recent years have been heavy on grains and light on cotton.
Since it doesn’t take as much labor to process soybeans as cotton, the anticipated employment at the Greenwood mill, when it resumes production in the first quarter of 2010, will be less than one-third of what PYCO employed at its peak. Still, 30 jobs are 30 jobs. Given the spate of closures and reductions during this recession, it’s nice to have news of jobs being added back.
Those 30 jobs are not the only benefit that Delta Oil Mill brings to this community. It gives grain elevators and farmers a nearby buyer for their commodity, and it brings back on line for Greenwood Utilities one of its larger industrial consumers.
We welcome Delta Oil Mill to Greenwood and hope this is the beginning of a long and prosperous relationship.
Source
Delta Oil Mill of Jonestown, the last remaining cottonseed-oil processing facility in Mississippi, has announced its plans to acquire the Greenwood plant as well as PYCO’s storage facilities in Minter City and West Helena, Ark.
The PYCO mill had stopped production in March as the Texas-based company scaled back its operations in response to the severe reduction in cotton acreage in Mississippi and throughout the South.
The acquisition works for Delta Oil Mill, a gin-owned cooperative just like PYCO, because it plans to use this opportunity to diversify its business.
At least in the short term, the Greenwood oil mill will be converted to processing soybeans, while all the cottonseed production will be concentrated at the Jonestown plant.
Should cotton acreage rebound sufficiently in the future, however, the Greenwood plant will have the capability to quickly revert back to cottonseed.
This strategy gives Delta Oil Mill more flexibility to respond to the planting decisions made by farmers, which in recent years have been heavy on grains and light on cotton.
Since it doesn’t take as much labor to process soybeans as cotton, the anticipated employment at the Greenwood mill, when it resumes production in the first quarter of 2010, will be less than one-third of what PYCO employed at its peak. Still, 30 jobs are 30 jobs. Given the spate of closures and reductions during this recession, it’s nice to have news of jobs being added back.
Those 30 jobs are not the only benefit that Delta Oil Mill brings to this community. It gives grain elevators and farmers a nearby buyer for their commodity, and it brings back on line for Greenwood Utilities one of its larger industrial consumers.
We welcome Delta Oil Mill to Greenwood and hope this is the beginning of a long and prosperous relationship.
Source
Saturday, November 28, 2009
Husky a big buyer at B.C. land sale
Drilling Rights - Husky Energy revealed itself as a big buyer at last week's British Columbia land sale that saw mostly anonymous bidders plunk down $370 million for drilling rights.
In a news release, Calgarybased Husky said it bought almost 10,000 hectares for an undisclosed sum.
The new acreage will form the basis of an expanded push into tight gas, CEO John Lau said in a news release. "These results are encouraging for Husky to expand its strategy in unconventional resource play development in this area. The acquisition enhances Husky's position in the Doig/ Montney play, which has become one of North America's most promising plays for natural gas development."
Husky said a pair of vertical exploration wells tested 2.9 million cubic feet per day each from the Doig formation, while a third Montney well flowed 5.4 million cubic feet per day.
The company plans to drill its first horizontal well in the area next year.
Source
In a news release, Calgarybased Husky said it bought almost 10,000 hectares for an undisclosed sum.
The new acreage will form the basis of an expanded push into tight gas, CEO John Lau said in a news release. "These results are encouraging for Husky to expand its strategy in unconventional resource play development in this area. The acquisition enhances Husky's position in the Doig/ Montney play, which has become one of North America's most promising plays for natural gas development."
Husky said a pair of vertical exploration wells tested 2.9 million cubic feet per day each from the Doig formation, while a third Montney well flowed 5.4 million cubic feet per day.
The company plans to drill its first horizontal well in the area next year.
Source
Sunday, November 15, 2009
Top-line oven to warm home buyers' hearts
A MIELE oven can do more than bake a cake these days - it might just help whip up a home sale. More developers are including branded appliances in apartments to impress home seekers, and some have certainly stopped to gawk at the gadgetry.
But will all house hunters bite? Anecdotal evidence suggests that some would still care more about the prices of the homes, especially if they were never fans of the brands to begin with.
'The inclusion of branded appliances has both its good and bad points,' said Chesterton Suntec International research and consultancy director Colin Tan.
'If the developer knows his target market well, it is a plus. . . It is a negative if the buyer does not recognise the brand or appreciate it.'
Developers of mid to high-end units have used premium furnishings to boost their projects' image for some time, but the trend gathered more steam some two years ago when markets boomed.
Rich consumers searched for new ways to spend, and steel fridges and dishwashers quickly became the new status symbols.
It is easy to get used to a good thing but difficult to quit it. The recession may have eroded some consumers' savings but not their aspirations for luxury. This is especially so in Asia, which did not bear the brunt of the downturn.
'As consumers become more globalised and develop a taste for fine living, they are more willing to pay for luxury homes that are distinguished in areas such as design and architecture, premium fittings and furnishings as well as facilities,' said Keppel Land marketing general manager Albert Foo.
CapitaLand and Far East Organization also shared that they use fittings which meet home owners' lifestyle needs.
To stand out among the competition, prime-district projects such as Keppel Land's The Promont, Viva, and Belle Vue Residences will have bathrooms decked out with Axor fittings.
The brand comes under Hansgrohe and according to the latter, Axor Starck, Axor Citterio and Axor Massaud fittings are popular with developers here. Single-lever high-riser basin mixer from these lines are priced from around $1,300 to $2,190. 'We have achieved consistent and very significant growth in our partnership with property developers,' Hansgrohe said.
Developers are also giving attention to kitchens. Units at The Ritz-Carlton Residences and The Marq On Paterson Hill will come with a 90cm Miele oven, which is priced at a cool $15,730.
'Apart from the key essentials which are cooker hoods, hobs and ovens, many property developers have further embraced lifestyle components such as Miele wine cellars, coffee makers, steam ovens and plate warmers for their luxury developments,' said Miele projects general manager Roland Ong.
And reflecting the growing trend of using branded appliances, even mass-market projects such as Trevista in Toa Payoh and The Peak @ Balmeg in West Coast are creating a splash in their bathrooms with Hansgrohe fittings.
'Not only in the prime areas - in other districts also, more developers are using branded goods,' Knight Frank executive director (residential) Peter Ow observed.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak estimates that 6-8 per cent of the cost of building a high-end apartment goes to appliances and furnishings such as dryers and cooker hoods. For mass-market condominium units, the figure is about 5-6 per cent.
Chesterton Suntec's Mr Tan believes that the money is well spent for prime projects which compete less on pricing. The appliances 'add considerably to the overall show apartment experience' and with them, 'developers are able to go some way to justify the higher prices'.
In fact, market watchers reckon that developers could have received discounts from buying the appliances in bulk. This would lower the cost of including them in units.
But the strategy may not be as effective for mass-market projects which tend to draw more price-sensitive buyers. A civil servant who declined to be named told BT that she recently bought a resale condominium unit because it cost less than a newly launched one. The place did not come with fancy appliances but she later installed one - a Hansgrohe shower.
Home seekers in this market may also place less emphasis on brands and developers need to know their target markets well, Mr Tan said.
Source
But will all house hunters bite? Anecdotal evidence suggests that some would still care more about the prices of the homes, especially if they were never fans of the brands to begin with.
'The inclusion of branded appliances has both its good and bad points,' said Chesterton Suntec International research and consultancy director Colin Tan.
'If the developer knows his target market well, it is a plus. . . It is a negative if the buyer does not recognise the brand or appreciate it.'
Developers of mid to high-end units have used premium furnishings to boost their projects' image for some time, but the trend gathered more steam some two years ago when markets boomed.
Rich consumers searched for new ways to spend, and steel fridges and dishwashers quickly became the new status symbols.
It is easy to get used to a good thing but difficult to quit it. The recession may have eroded some consumers' savings but not their aspirations for luxury. This is especially so in Asia, which did not bear the brunt of the downturn.
'As consumers become more globalised and develop a taste for fine living, they are more willing to pay for luxury homes that are distinguished in areas such as design and architecture, premium fittings and furnishings as well as facilities,' said Keppel Land marketing general manager Albert Foo.
CapitaLand and Far East Organization also shared that they use fittings which meet home owners' lifestyle needs.
To stand out among the competition, prime-district projects such as Keppel Land's The Promont, Viva, and Belle Vue Residences will have bathrooms decked out with Axor fittings.
The brand comes under Hansgrohe and according to the latter, Axor Starck, Axor Citterio and Axor Massaud fittings are popular with developers here. Single-lever high-riser basin mixer from these lines are priced from around $1,300 to $2,190. 'We have achieved consistent and very significant growth in our partnership with property developers,' Hansgrohe said.
Developers are also giving attention to kitchens. Units at The Ritz-Carlton Residences and The Marq On Paterson Hill will come with a 90cm Miele oven, which is priced at a cool $15,730.
'Apart from the key essentials which are cooker hoods, hobs and ovens, many property developers have further embraced lifestyle components such as Miele wine cellars, coffee makers, steam ovens and plate warmers for their luxury developments,' said Miele projects general manager Roland Ong.
And reflecting the growing trend of using branded appliances, even mass-market projects such as Trevista in Toa Payoh and The Peak @ Balmeg in West Coast are creating a splash in their bathrooms with Hansgrohe fittings.
'Not only in the prime areas - in other districts also, more developers are using branded goods,' Knight Frank executive director (residential) Peter Ow observed.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak estimates that 6-8 per cent of the cost of building a high-end apartment goes to appliances and furnishings such as dryers and cooker hoods. For mass-market condominium units, the figure is about 5-6 per cent.
Chesterton Suntec's Mr Tan believes that the money is well spent for prime projects which compete less on pricing. The appliances 'add considerably to the overall show apartment experience' and with them, 'developers are able to go some way to justify the higher prices'.
In fact, market watchers reckon that developers could have received discounts from buying the appliances in bulk. This would lower the cost of including them in units.
But the strategy may not be as effective for mass-market projects which tend to draw more price-sensitive buyers. A civil servant who declined to be named told BT that she recently bought a resale condominium unit because it cost less than a newly launched one. The place did not come with fancy appliances but she later installed one - a Hansgrohe shower.
Home seekers in this market may also place less emphasis on brands and developers need to know their target markets well, Mr Tan said.
Source
Wednesday, October 28, 2009
Successfully sell your business to the right buyer
f you plan on selling your business, it will help you to understand the different types of buyer. Each buyer who inquires will have their own unique reason to want to buy. By talking with the buyer, understanding their needs and then placing them in one of the categories below, will help you understand what they are looking for so you are better prepared to discuss and negotiate the transaction.
Individual Buyer
This is generally one person with good financial resources and background or experience for managing and leading a particular business in a particular industry. This type of buyer is usually looking for a particular business that is financially healthy. They are looking for a return on their investment and some flexibility in lifestyle choices. They also believe they can buy and at least maintain the current performance of the business or take it to a higher level.
Corporate Executive
This is a buyer who has many years of service with a large corporation and has concerns that downsizing may occur. In some cases, they are getting older and have their retirement money tucked away and would like to see what it would be like to run their own business. Franchise businesses are particularly attractive to them as they like the structure and organization that comes from working in this business model.
Existing Employee
The buyer of a business can be an existing employee. If the business has a strong cash flow and the employee is able to put together a small down payment with the seller carrying back some of the financing, this can be a mutually beneficial arrangement. SBA financing may be an option here—especially if the employee has management expertise.
Investment Buyer or Financial Buyer
All buyers want a return on their investment. However, with investment or financial buyers this is their primary motivation. Their ability to get financing on as large part of the purchase price as possible is also motivating. They have less interest in the type of industry and many of the specifics of the business operation.
Synergistic Buyer
This is usually a company and their purpose of buying the business is their belief that joining the two companies will produce more, or be worth more, together than if the two companies were to remain separate.
Industry Buyer
This type of buyer is often a competitor or owns a very similar operation. They know the industry well and therefore see little value in paying for the expertise and skill of the seller.
Strategic Buyer
Like the synergistic buyer, the strategic buyer is usually a business owner with a goal to expand their current company. They leverage their expertise to enter into new markets by acquiring market share and then increase market share through the acquisition. Their strategy can also include deploying a new technology and/or eliminating a competitor or some competitive element.
Source
Individual Buyer
This is generally one person with good financial resources and background or experience for managing and leading a particular business in a particular industry. This type of buyer is usually looking for a particular business that is financially healthy. They are looking for a return on their investment and some flexibility in lifestyle choices. They also believe they can buy and at least maintain the current performance of the business or take it to a higher level.
Corporate Executive
This is a buyer who has many years of service with a large corporation and has concerns that downsizing may occur. In some cases, they are getting older and have their retirement money tucked away and would like to see what it would be like to run their own business. Franchise businesses are particularly attractive to them as they like the structure and organization that comes from working in this business model.
Existing Employee
The buyer of a business can be an existing employee. If the business has a strong cash flow and the employee is able to put together a small down payment with the seller carrying back some of the financing, this can be a mutually beneficial arrangement. SBA financing may be an option here—especially if the employee has management expertise.
Investment Buyer or Financial Buyer
All buyers want a return on their investment. However, with investment or financial buyers this is their primary motivation. Their ability to get financing on as large part of the purchase price as possible is also motivating. They have less interest in the type of industry and many of the specifics of the business operation.
Synergistic Buyer
This is usually a company and their purpose of buying the business is their belief that joining the two companies will produce more, or be worth more, together than if the two companies were to remain separate.
Industry Buyer
This type of buyer is often a competitor or owns a very similar operation. They know the industry well and therefore see little value in paying for the expertise and skill of the seller.
Strategic Buyer
Like the synergistic buyer, the strategic buyer is usually a business owner with a goal to expand their current company. They leverage their expertise to enter into new markets by acquiring market share and then increase market share through the acquisition. Their strategy can also include deploying a new technology and/or eliminating a competitor or some competitive element.
Source
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