Global Public Articles

For many starter businesses the venture capital is just not there to start up a new business. Just because a business person does not have the funds to begin the business does not mean the idea should be washed and the business venture forgotten. Angel investors are available to help produce the capital needed to start up that new business. But, these investors are in the business of providing capital for more than just the love of the game.

The Angel Investor

There are two different types of angel investor. The individual who has enough money to provide all the capital for the startup business is a sole angel investor. These people often provide the money in the beginning for a considerable share of the profits in the end. The capitalists may ask for stock holdings, a share of the total business or only repayment of the capital after a set amount of time. These factors will need to be discussed with the person providing the capital before any monies are exchanged.

It is also advisable that the startup seek legal advice regarding the inclusion of outside money in their startup. A business contract will need to be agreed upon and signed by both parties before the money can be used to start the business. For some startups, the idea of someone else holding the purse strings provides confidence in their ability to stay within a budget. For others, they do not like the fact that they need to ask another person for permission to spend money on the new business.

The Angel Investing Firm

Another choice for investment money is the Angel Investing Firm. These firms are often created be several angel investors who pool their money and their resources into an investment business. The benefit of the angel investing firm reaches far beyond that of the individual. The firms often have the attorney on payroll and have offered capital to enough businesses for the process to be streamlined and easy to follow. However, the business startup must keep in mind that the angel investment firm is a business too. These monies are being provided as a service which the firm will see profit from in the long run.

The startup business will need to weigh heavily their thoughts regarding the income used to start the business. If the idea is a solid one with a business plan sure to succeed, the startup may choose to save the money over time in order to reap the full benefits of the business. But, this can backfire if the business needs of the community change. The angel investor is there to provide all the capital a business start up needs because these investors have already made their money and have extra to spare. However, the angel investor whether they are an individual or a firm are look for some sort of long term connection to the business or a strong return on their investment. This needs to be weighed before the startup takes money from the angel investor or angel investing firm.

Jordan Mcpelt is a professional author who specializes in angel investing and venture capital. For more information on angel investing please visit http://www.washingtonvc.com

With stock markets tumbling all around the world, 2008 has been a truly awful year for stock market investors. However a lot of people, myself included, think that this is now a good time to slowly start snapping up some bargains, with the focus being on quality shares.

I would define quality shares as being shares in large, well-established companies that consistently grow their profits and their dividend payouts every single year. Furthermore in this credit crunch that we are all now witnessing, they should also have little or no debts so they are unlikely to run into any financing difficulties in the near future.

Nowadays there are not too many of these companies left, but they do still exist. The key is to adopt a Warren Buffett style of investing and focus on long-term profits rather than short-term gains. If you look to invest in market-leading companies who don’t have to worry too much about new competition, then you should do well in the long run, particularly if you get your timing right.

For example, two such shares in the UK are Tesco and Rio Tinto. Both are huge companies who are at the forefront of their industry and have a long and distinguished record of profit growth. Although profits may inevitably drop slightly in the short-term, in the long run they should, in my opinion, continue to see strong earnings growth in the years to come.

So now could be a good time to start drip-feeding money into these types of market-leading companies because they have been sold off sharply along with the rest of the market. These times of doom and gloom very often present investors with excellent opportunities to invest in good quality companies at bargain prices, and I personally think we are in one of those times at the moment.

It’s certainly a much better strategy to focus on large high quality companies because smaller companies are very much out of fashion at the moment, and are seen as a much riskier proposition at a time when all companies are struggling to raise the finances needed to survive.

The Warren Buffett investment method remains one of the best investment strategies so as long as you are patient and are prepared to hold onto the shares of these companies for several years, now could be a good time to start buying these quality shares. While it is very much a trader’s market at the moment, there are still good buying opportunities for the traditional long-term investor as well.

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Exotic Morocco, located on the north coast of Africa facing Spain and Gibralta, shares a border with Algeria (which is closed) and with the disputed territory of Western Sahara. Its main cities include myth-inspiring Marrakech, Casablanca, Fez, Agadir and Tangiers.

At the gateway to the Mediterranean, the country has a cultural blend of Arab, Berber, and African influences. As Morocco was a French protectorate from 1912 to 1956, there is also still a distinctive French and European influence, French being the second language.

With the Atlas mountains running from the north east of the country to the south west, most of the major towns (Marrakech excepted) are on the coastal strip to the north and west of the mountains. Casablanca is the leading port and Rabat the seat of government.

The coastal areas have a pleasant Mediterranean climate although the southern desert areas are extremely hot and dry during day but very cold at night. The mountainous regions are much cooler and experience snow in the winter months.

The population of some 33.2m is relatively young, a third being aged under 15.

Morocco has an association agreement with the EU, its main trading partner, which envisages establishment of a free trade area between the EU and Morocco by 2012. Like other Euro-Med countries, it has expressed the wish for greater co-operation with the EU.

Around 200,000 British nationals visit Morocco each year. Most visits are trouble free but the British Embassy in Morocco warns that there is a high threat from terrorism in the country. In May 2003, 45 people were killed in a series of terrorist attacks in Casablanca including some on hotels and restaurants frequented by foreigners.

The attacks prompted new anti-terrorism laws, but there has been some criticism that these have eroded human rights, about which Morocco has sometimes faced other criticisms. The country is modernising and liberalising itself within its Muslim context.

The latter means that during Ramadan, for example, all street cafes and many restaurants will be closed until early evening. Advice is given to women to dress inconspicuously and generally to avoid wearing clothes that could be regarded as provocative, such as short skirts or low necked tops.

British nationals do not require entry visas to visit Morocco as tourists but those who wish to extend their stay may apply to the Immigration or Bureau des Etrangers, to be found in local police headquarters in most larger towns.

Although Morocco has relatively low economic grow, its economy has been stable in recent years with low inflation (1 per cent in 2005). According to the USA State Department, employment remains overly dependent on agriculture, which is extremely vulnerable to inconsistent rainfall.

While overall unemployment stands at 11 per cent, it can be as high as 33 per cent among urban youths. Some 19 per cent of the population lives below the poverty line.

Morocco is currently promoting overseas investment in property and has five major tourist resort developments underway.

There are no restrictions on foreign nationals owning property in Morocco (other than agricultural land). The buying and selling process is akin to that in France and involves a notary who will act for both sides.

There is a land registry, with registration being proof of ownership. Buying costs, including stamp duties, registration and notary fees, are approximately 5 per cent of purchase price.

There are tax breaks for foreign investors and in the case of property bought with money transferred from abroad, no restrictions on repatriation of both capital and capital gains.

Overseas investment has helped fuel property price rises. It is said that property prices in Marrakech, for example, have tripled in the last five years.

A focus on investment property Morocco is just one of many dedicated country focus sections that can be found on Fly2let.net, the free unbiased resource for overseas property investors. For UK buy to let investments visit Residentiallandlord.co.uk.

Italy, a founder member of the EU, is a relatively young country which was only unified as a nation in 1861. It has land borders with Austria, France, San Marino, Slovenia, and Switzerland while the Vatican City is a separate state within Rome.

The country’s long coastline, stretching some 7,600km, has contributed to problems with immigration control. Besides deep rooted problems, such as the need to import most raw materials, the country is also plagued by corruption and crime.

The economy is divided by the industrial north and less developed and poorer agricultural south. The latest OECD report assessment of the country reported that exports and investment activity rose markedly in the first half of 2004, ending a protracted slump. GDP growth of between 1.5 per cent and to 2 per cent was forecast for 2005-06 although ‘inflation could start to rise again’.

As in much of Europe, property prices have been rising. According to the Royal Institution of Chartered Surveyor’s European Housing Review 2005, the housing market has been on ‘a sustained upward swing for five years’ (following a seven year period of recession in which prices fell by over 20 per cent). Last year ‘agents were reporting that market activity was still brisk - although it had fallen below its peak’.

Most Italian property is sold as freehold although Italian property law recognises various other property rights and tenures. Usufruct is a right to use the property of another for a fixed period but not to change its nature.

Leasehold rights, which may be for a fixed period of 20 years or more or in perpetuity, allow the lessor to use the property as if he or she were the owner, subject to a requirement to improve the land and pay a rent. Building rights entitle the holder to construct a building on land belonging to a third party, or maintain a building standing on land belonging to a third party.

Building rights may be for a limited or unlimited period of time, but if for a fixed period, ownership of the building reverts to the owner of the land on their expiry.

Italian property transfer processes have some similarities to France. Based on land registration, the state regulated process involves both purchaser and seller using the same state appointed notary to complete the transaction.

The process begins with a formal and nominally binding offer to purchase arranged through an estate agent. If accepted during the set period of the offer, this is followed by a preliminary contract signed by both parties (at which point a deposit will be paid). Finally comes formal completion.

The notary, in front of whom the completion documents must be signed, will verify that the documentation is correct, that the property is free from registered encumbrances and checks the identities of the parties involved. Searches beyond what is included in the registry are unlikely to be exhaustive.

The notary also collects the taxes and duties involved. These vary between Non-resident property purchasers are treated differently to resident purchasers in a number of ways. In particular they will be obliged to pay higher registration fees, although residence can be claimed within a fixed time subsequent to the purchase.

Total fees and charges are likely to amount to between 5 per cent and 20 per cent, including estate agents fee, if applicable, registration fees or VAT if a new property, and the notary’s fee. Fees in the order of 8 to 10 per cent are also payable on sale of a property.

Some charges are based on the registered value of the property, which is likely to be less that the actual purchase price. This also applies to local property taxes, the amount of which varies from region to region. The Imposta Comunale surgli Immobili is paid by both resident and non resident owners - although the amount is halved for property that is not habitable. In addition there are likely to be charges for local services.

Italian taxation is undergoing reform. From the start of 2005 personal tax rates have been set on a graduating scale ranging from 23 per cent to 39 per cent, with a 4 per cent supplement for income in excess of 100,000 euro.

Property owners are obliged to file annual tax returns but are only taxable on income arising in Italy. However, there tax is levied on the notional rental value of the property (based on its registered value) whether or not it is rented out.

Both residents and non-resident property owners are subject to Italian inheritance law and tax. But the good news is that currently there is no capital gains tax to pay on property gains.

A focus on investment property Italy is just one of many dedicated country focus sections that can be found on Fly2let.net, the free unbiased resource for overseas property investors. For UK buy to let investments visit Residentiallandlord.co.uk.

Every fall, especially in opportunity rich markets like this, I encourage investors to think about some year-end strategies that make the final calendar quarter a special time in all markets. Several forces are at work, all of which have links to conventional Wall Street wisdom; none of which promote good long-term investment decision-making.

This year, we have the added excitement of anticipating a new, perhaps economically too liberal, administration taking over with an already implanted, and demonstatably inept, congress. The markets are in a truly unprecedented state of “uncertainty overload”. What’s an investor to do— or not to do?

Typically, the November syndrome has features that impact in both directions. It causes weak prices to fall even further and strong prices to climb higher. This year, the strong category requires a microscope for candidate viewing, while the weak seem to have inherited the listings. Money Market funds and Treasury securities are the low yielding, lower-risk, depositories of choice.

At the individual investor level, the mad dash to lose money on equity securities has begun. The idea that this is somehow a good thing is an anomaly created by a counter productive tax code and an industry that has a vested interest in perpetuating the absurdities it (the IRC) creates.

Assuming that we are dealing with investment grade securities, lower prices should most logically be seen as an opportunity to add to positions cheaply— not as an opportunity to reduce one’s tax liability on investment earnings. There is, and never will be, a good loss or a bad—.

Naturally, both you and your CPA feel better with lower tax bills, but why sell a perfectly good security at a loss to produce pennies on the dollar in tax relief? Speculations, sure, valueless securities, why not? But when nearly all IGVSI stocks are at their lowest levels in decades, selling for losses should be the last thing on your mind.

Most IGVS companies remain profitable. Less profitable, for sure, but few have cut dividends and nearly all will survive and prosper when the economy recovers. Would your CPA accept just half his fee to save on his own taxes? Would you barge into your boss’ office and demand a pay cut?

In the old days, when markets moved slowly and buy-and-hold was the investment strategy of choice, the 30-day, buy-it-back, tactic was an effective way of having your tax break cake and maintaining your portfolio as well. But with 1,000-point weekly swings, there are no guarantees that the markets will tread water for your personal tax convenience.

In fact, more often than not, major corrections such as this one produce either a Santa Clause rally or “January Affect” that is far more profitable for November-low buyers than for tax-motivated sellers.

Similarly, “letting your profits run” to push the dreaded taxes into next year is foolishness. Talk to the geniuses that didn’t take profits in 1999, or in the ‘87 or ‘07 summers. The objective of the equity investing exercise is to take profits— the more quickly and more frequently, the better. This year’s volatility has produced hundreds of profit taking opportunities.

Another popular year-end shell game is the “bond swap”, which preys on the fear most income investors experience when their somewhat guaranteed, income securities, fall in market value. This is the same absurdity that allowed “mark-to-market” accounting rules to crack the foundations of financial institutions around the world.

A contract (from a quality borrower) to pay a fixed rate of interest, and full principal at maturity will vary in price throughout its existence. It’s nothing to be particularly anxious about. Junk bonds are for speculators, not for those of us with gray-templed children.

Bond swaps allow an advisor to pick your pocket by exchanging them at a “nice tax loss” for another bond with “about the same yield”. He gets a double dip (invisible) commission and you get a bond of longer duration or lower quality.

On the same page, the idea of exchanging a steady, much-higher-than-normal-yield, closed-end-fund (CEF) cash flow for an overpriced T-Bill yielding less than 1% is above Emperor’s New Clothes absurdity levels.

But there are even more year-end games going on to take advantage of your confusion. Wall Street gangs up on you with a self-serving strategy blithely referred to by the media as “Institutional Year End Window Dressing”— a euphemism for consumer fraud.

In this annual ritual, mutual fund and other institutional money managers unload stocks (and CEFs) that have been weak and (usually) load up on those that are at their highest prices of the year. This year, they’ll be holding cash and Treasuries.

Always keep in mind that (a) Wall Street has no respect for your intelligence and (b) the media “talking heads” are entertainers, not investors. Institutions must paint a picture of brilliance in their annual glossies. This year, a panic-stricken Main Street is helping them with their annual “sell low” hypocrisy.

It would be an understatement to say that these year-end tax and face saving activities are misguided and unnecessary. But this year’s “November Syndrome” is an unprecedented investment opportunity that most people are too confused to appreciate.

Simply put, get out there and buy the (high quality) November lows, both equity and fixed income. Establish new positions for diversity, and add to old ones without surpassing “working capital model” diversification limits. Keep appendages crossed for a therapeutic dose of “January Affect” elixir, as you reaffirm your understanding of long-term investment strategy.

The media will talk about this New Year phenomenon with wide-eyed amazement. Most of those terrible losers (you just sold?) begin to rise from the ashes, as the professional window dressers repurchase the solid companies they just sold for losses— interesting place Wall Street.

One last thought; if you have taxable profits that you can’t bear the thought of holding on to, just send the profit portion to me. I’ll pay the terrible taxes.

Steve Selengut
Sanco Services
Kiawa Golf Investment Seminars
Author: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read” and “A Millionaire’s Secret Investment Strategy”.