Bulletins on Business and Economics
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It's still out there
That wishful thinking about tax rates (see Christine Romer, 3/18/12
NYT)...that reductions in marginal tax rates will more than pay for
themselves by stimulating revenues at a greater than dollar for dollar
rate. But actual studies, done with math, show that at most a reduction of
1% in the marginal rate (at the higher end) results in a 0.25% increase in
reported income.
So reductions in the marginal tax rate will increase the deficit and
national debt. That's the fact, Jack.
NYT)...that reductions in marginal tax rates will more than pay for
themselves by stimulating revenues at a greater than dollar for dollar
rate. But actual studies, done with math, show that at most a reduction of
1% in the marginal rate (at the higher end) results in a 0.25% increase in
reported income.
So reductions in the marginal tax rate will increase the deficit and
national debt. That's the fact, Jack.
What do we do as Financial Advisors?
A typical list of services for a Client:
n most engagements, Red Hawk will provide some or all of the following services:
(1) identifying or initiating potential restructuring
transactions;
(2) reviewing and analyzing the Operating Company's assets and its
operating and financial strategies;
(3) reviewing and analyzing the Company's business plans and
financial projections;
(4) evaluating the Company's debt capacity in light of its
projected cash flows and assisting in determining the
appropriate capital structure for it;
(5) assisting the Company and its other professionals in
reviewing the terms of any proposed restructuring
transaction and in evaluating alternative proposals for a
restructuring transaction;
(6) determining a range of values for the Company and any
securities that it offers or proposes to offer in
connection with a restructuring transaction;
(7) reviewing and analyzing any proposals the Company receives
from third parties in connection with a restructuring
transaction;
(8) providing advice to the Company with respect to, and
attending, meetings of its Board of Directors, creditor
groups, official constituencies and other interested
parties; and
(9) participating in hearings and providing testimony with
respect to the issues related to any proposed plan.
(1) identifying or initiating potential restructuring
transactions;
(2) reviewing and analyzing the Operating Company's assets and its
operating and financial strategies;
(3) reviewing and analyzing the Company's business plans and
financial projections;
(4) evaluating the Company's debt capacity in light of its
projected cash flows and assisting in determining the
appropriate capital structure for it;
(5) assisting the Company and its other professionals in
reviewing the terms of any proposed restructuring
transaction and in evaluating alternative proposals for a
restructuring transaction;
(6) determining a range of values for the Company and any
securities that it offers or proposes to offer in
connection with a restructuring transaction;
(7) reviewing and analyzing any proposals the Company receives
from third parties in connection with a restructuring
transaction;
(8) providing advice to the Company with respect to, and
attending, meetings of its Board of Directors, creditor
groups, official constituencies and other interested
parties; and
(9) participating in hearings and providing testimony with
respect to the issues related to any proposed plan.
Valuing the Stimulus
I think a good paper about valuing the economic stimulus passed in '09 and
ideas relevant to economic policy today in the US and Europe.
http://www.econ.berkeley.edu/~cromer/Written%20Version%20of%20Effects%20of%20Fiscal%20Policy.pdf
The author has a lot of negative baggage in some circles but the analysis
and exhibits seem solid. If demand has decreased, then it must be replaced
or the economy shrinks.
ideas relevant to economic policy today in the US and Europe.
http://www.econ.berkeley.edu/~cromer/Written%20Version%20of%20Effects%20of%20Fiscal%20Policy.pdf
The author has a lot of negative baggage in some circles but the analysis
and exhibits seem solid. If demand has decreased, then it must be replaced
or the economy shrinks.
"Local software makers continue to add jobs"
An article in 2/20/2012 *Crains Cleveland* reports that the number of
workers in local software companies has increased by 16% in the past year.
The title of the article was misleading, most of these firms are not
makers but consultants. However, the larger point is that this market is
growing well. I see consolidation increasing amongst software consultants
and marketing companies driven by the demands of large customers who want a
broad and deep array of services. Those customers do not want to have many
vendors but fewer vendors so that they can have simpler, more efficient
relationships and also have more leverage over a community of fewer
vendors.
My suggestion to many small firms is to prepare your company for sale, get
your capital structure in order, produce sound financial statements, have a
professional sales, marketing and senior management team and process. The
result will be maximum value for your business.
workers in local software companies has increased by 16% in the past year.
The title of the article was misleading, most of these firms are not
makers but consultants. However, the larger point is that this market is
growing well. I see consolidation increasing amongst software consultants
and marketing companies driven by the demands of large customers who want a
broad and deep array of services. Those customers do not want to have many
vendors but fewer vendors so that they can have simpler, more efficient
relationships and also have more leverage over a community of fewer
vendors.
My suggestion to many small firms is to prepare your company for sale, get
your capital structure in order, produce sound financial statements, have a
professional sales, marketing and senior management team and process. The
result will be maximum value for your business.
What rate do the Top 400 Earners Pay?
Interesting data from the IRS. Comments later but: the problem I see is
that income from work is taxed at a much higher rate than that from
investments. There are many studies showing that the diminishing returns
from effort (work) quell effort, few (that I know of) showing that higher
marginal rates diminish investing.
that income from work is taxed at a much higher rate than that from
investments. There are many studies showing that the diminishing returns
from effort (work) quell effort, few (that I know of) showing that higher
marginal rates diminish investing.
Corporate Innovation: I favor Google's Approach Now
The Yin and Yang of Corporate Innovation by Steve Lohr in The New York Times, (1/29/12) lays out the different innovation approaches used by Apple and Google. Partly because Apple sells hardware primarily, its approach is more top-down, measured and less customer-centric. The cost of failure to them of a new hardware product is significant. Steve Jobs was famously quoted as saying that "it's not the consumers' job to know what they want".
Google products are almost entirely software. Lohr says that it "speaks to the power of data driven decision making, on line experimentation and of networked communication". As a Google customer, I notice that there are always many "labs" developing products and beta versions of apps to try. Customers can decide to try or not with no promise by Google of successful implementation.
I think Google's model is more useful for corporate leaders to consider now since it is very different than most companies' approach which is still top-down. Be willing to throw a lot of stuff against the wall and be willing to test and change strategy frequently. The annual strategic plan is a joke now. Those plans are usually obsolete the day they are printed.
I'm reading now
*King Lear* for book club.
*Agents of Innocence* by David Ignatius
*Agents of Innocence* by David Ignatius
Hooray!
For the Crimson Tide winning the BCS. Great for Tuscaloosa.
Continuing the sports theme, too bad for the tough loss for the Hoyas of Georgetown on the court.
I'm Reading...
Tom Peters (the coauthor of In Search of Excellence, etc.), my imaginary guru, says that you have to outread your competitors. As a coauthor myself of a business book, I am very aware that most business people don't read business books unless made to or out of desperation. Anyway, I am trying to read more and as much as I can (but always distracted by the latest game on TV). I figure if I note what I'm reading here it will spur me to read more and maybe interest readers of this blog. Here's what I'm reading now:
- Shucked by Erin Byers Murray, about an oyster farm in Duxbury, MA (my hometown)
- The Mind of the Strategist by Kenichi Ohmae, the art of Japanese business
- SEO for Dummies, self explanatory
Too Esoteric? The Debt Settlement Process Summary
I know this one pager on debt restructuring for businesses has a small target audience but a few people may benefit from it.
Bio Link
David Brown is a consultant, investment banker, speaker and author. His consulting firm, Red Hawk Associates, has helped dozens of businesses raise capital or develop and execute strategies to increase value.
