mortgages and loans

In the time of crisis a lot of people try to cash their possessions in order to pay their bills. There are companies out there who try to take advantage of the situation and scam people off their money. Cashing your jewelry may lead you to a lot of trouble. This is how it works:

1. The company receives your refiner’s pack (jewelry) for appraisal.
2. They appraise it by hand (no specialized equipment is used, no experts involved)
3. They send you a check with a 100% Satisfaction Guarantee.

The catch is that the check is mailed to you very late and you can get your jewelry back or refund only if you contact the company within 10 days from when your check is dated (This begins with the time it takes for the accounts payables department to issue the check and also including the transit time for you to receive your check in the mail). The check is usually dated within 24 hrs of receiving your jewelry, but it is sent out a few days later. You usually receive your check around the 7th, 8th, or 9th business day so you may have only 1-2 days or none to ask for refund. If you try to contact company representatives, it is nearly impossible to get in touch with anyone. After the ten-day period has lapsed, you will be told that the item is already melted or it is no longer available for return.
The company insures your package for up to $100. If your jewelry is worth more than that, it often happens to get lost in mail. If you call the company to check on the status of your items, they will that you should have added extra insurance on your items.

International finance is, of course, a vital aspect of the overall area of current finance. However, “international finance” is something of a misnomer in that it presumes that if there is an international side to finance, there must also be a domestic understanding of the field. In the modern era all finance is international, especially as the result of advances in communication technology.

In contemporary times money flows around the globe seeking its best levels, like water – in terms of risks, returns, and entry and exit mechanisms. The large securities firms and investors pass their portfolios around the globe seeking optimum commitments in terms of risks, returns, and entry and exit costs. (Portfolio diversification is also a consideration for such investors; however, the complexities of diversification are beyond the scope of this analysis.) Large securities firms and investors can trade on a 24-hour basis; they can trade at any time and place they wish. As a result, in the contemporary world all finance is international and has been so for some time. National boundaries no longer come into play with respect to large-scale investing, and since large investors move markets, all current finance may be said to be international.

This was surely not always the case in the past as financial transactions across international boarders were often greatly hindered at one time as the result of national concerns with sovereignty and other similar issues. Relative exchange rates between currencies fluctuated greatly at one time, consequently drying up international trade because of the uncertainty as to the domestic value of international transactions that were to be settled in the future.

In the modern era these concerns have been alleviated as a result of the development of effective markets in international currencies that allow for transactions calling for the future delivery of any of the world’s major currencies. For example, a wine merchant in New York who is required in one month to pay a fixed amount in Euros for the purchase of French wine can, with U.S. dollars, buy Euros for one-month delivery, thereby fixing his commitment in dollars and eliminating the possibility of loss in dollars through the adverse movement during the month of the dollar versus the Euro. This has greatly enhanced international trade, with the consequent benefit to both sellers and buyers of international products and services and the countries involved.

Over the last 25 years of the 20th century, cash dividends declined as a percentage of earnings, but companies paying higher cash dividends have generally experienced higher returns during periods of market downturn. Dividends cushion the stock price fall and normally prop up share returns as long as the dividend can be sustained. However, there have been many cases of cuts in cash dividends. So the purchase of equity shares simply because of a current high dividend yield (dividends/stock price) cannot assure success. Accordingly, the ability of a company to maintain, or possibly increase, its cash dividend is an important aspect of share valuation for stocks with a high dividend yield. The best way to understand the ability of a company to continue paying its current dividend is by looking at the firm’s cash flow, not necessarily the income statement or the balance sheet.

A common fallacy with respect to dividends paid in a company’s stock (stock dividends or stock splits) is that investors get something of value as the result of the share distribution. Uninitiated investors normally like receiving such share distributions. They often feel a stock is cheaper if it’s at 20 as opposed to 40. This is silly in that if a company has 200 shares outstanding at a price of $20, it is quite the same thing as having 100 shares outstanding at a price of $40. In both cases the total capitalization (shares outstanding multiplied by their market price) of the firm is $4,000. All it has accomplished as the result of a two-for-one stock split or a 100 percent stock dividend is to double the number of shares outstanding with an almost certain halving of their market price. Stockholders have more pieces of paper as the result of a share distribution, but no increase in total value. So stock dividends and stock splits, when unaccompanied by increases in earnings or cash dividends, do not really mean a thing.

With electronic recording of share ownership, having more pieces of paper is not of great consequence. However, in terms of transaction costs, when investors seek to sell their shares, the cost of exiting their position will generally be greater if a larger number of shares are sold. This is particularly the case for institutional investors such as mutual funds that pay their commissions on the basis of pennies per share. The greater the number of shares such investors sell, the more the trade will cost.

Also of consequence in this respect is the bid-ask spread, which is the difference between what an investor can sell his or her shares for at any particular time versus the price the investor must pay if the shares are bought at that precise time. (Bid-ask spreads are more commonly known as the price a dealer will pay for a security – the bid price – versus what the dealer will sell the security for – the ask price). Accordingly, other things being equal, in terms of the total cost of the bid-ask spread, the greater the number of shares involved in any particular transaction, the larger the cost to the investor. In essence, the bid-ask spread is also a form of transaction cost in addition to commissions and must be considered in determining the cost of entering and exiting a position in stock. If an investor has more shares as the result of a share distribution, his or her transaction costs will, other things being equal, be greater. In this sense, contrary to popular belief, share distributions provide negative value to investors.

Valuations get way out of line during such times, and this was surely the case in both the 1920s and the 1990s. The result was the same in both cases, as well: a market crash (in one case abrupt, in the other prolonged) and an end to the merger movement of the time. The merger wave of the 1920s was fueled by excessively rising stock prices. The nature of most of the mergers of the decade was vertical. The antitrust laws in place at the time could be used to successfully attack horizontal mergers. However, these laws and those who were charged with the duty to enforce them lacked either the power or the will to attack vertically-based mergers. Accordingly, companies began integrating from the raw material phase to the consumer phase, and those kinds of mergers were not as successfully attacked as horizontal mergers. As might be expected, the stock market crash of the late 1920s and the market and economic depression that followed in the 1930s brought an end to the second merger movement.

Investors were generally uninterested in stocks during the World War II years of the 1940s and the Korean War years of the early 1950s. However, by the end of the 1950s, equity buying came back a bit. By the early to mid-1960s equity prices retained and held the levels of market peaks of the late 1920s and different kinds of mergers started coming about. These forms of mergers have persisted in various ebbs and flows to the present time: conglomerate mergers. These forms of mergers are neither vertical nor horizontal, as was the case in the two earlier merger waves.

Conglomerate-type mergers, which are very difficult to attack with the traditional application of the antitrust laws, became the state-of-the-art merger form in the 1960s. Once again, rising stock prices and, at times, a detachment of share value and price provided a currency by which such mergers could be accomplished. Earnings per share calculation (net income divided by shares outstanding) became a common form of financial analysis at the time, and, as long as an acquiring firm bought a company with a lower price/earnings ratio, they could be pretty well assured, simply on a mathematical basis, of increasing their earnings per share through the merger.

Interesting also is the frequent use of the security form favored at the time to accomplish many of the mergers of this era. Convertible securities came into common use and were most popularly employed in the most recent merger wave. Such securities, while not strictly common stocks, were convertible into common stocks, often with unique and arcane conversion privileges.

These securities fueled the third merger wave and were predominantly responsible for coining the title of the most recent merger movement as the “funny money merger movement.” This merger wave, with various fits and starts, continued through the 1990s, but was brought to a conclusion by the bear market that followed.

Accordingly, the three merger waves in U.S. financial history have some differences in merger forms (horizontal, vertical, and conglomerate) and financing methods, but also some commonalties in being fueled by irrational stock market exuberance and ending in cataclysmic events.