Yes, leverage is now good…

When we talk about Leverage, the common meaning is “financial lever”. The financial lever is a fancy way to mean debt. In the past few years, we overindulged on home equity loans not only as a financial tool but we overindulged in those fancy words throughout which the mainstream media dressed all the swindles the Wall Street folks did to us!!! In my latest post, "Is Leverage still good", I wrote that certain use of debt financing were not convenient anymore because they were real scams.

In addition I also explained there's good and bad debt. The good debt allows you to generate cash flow, while the bad one it'll eat your cash flow.

 

However even the good debt could eventually become bad if we are over-indulging in refinancing.

 

What we mean for over-indulging? It's really simple: If I buy a $100 grand apartment and I ask for a loan of $70G I have to invest $30G. This is obviously a use of the debt as a financial tool. However if through those same $30G I try to get a $3M mortgage, even a 10 year child would tell me maybe I am over-indulging a bit.

 

Unfortunately this is what happened with the financial crunch. Someone got incredibly rich, at the big masses' expenses and these people are now paying the crisis.

 

You got to know how to keep your debt under control and you have to know how to manage it. However if I am here today, it's because I want to give you a new vision of the leverage as a financial tool and not only.

 Here you'll read how the leverage can become positive.

 

Today the world has changed and the old economic laws have been swept away by the digital system. Today you can be in more places at the same time and make money side by side. If you start using these tools you can really give your finances a boost. 

 

You know when they say "that person has that little bit extra?" ...there you go! if you keep reading my posts you can have that bit extra too.  

 

Job Leverage in one example: If you are a seasoned pro, you can decide to work 10 hours a day and being paid on an hourly basis. If you devote yourself more than usual, you can work 12 or 14 hours a day.

 

However if I am telling you: you can increase the value of that same day like about 40 or 100 hours more, would you believe me? The point is really simple. If you write a book, every reader pays a fee that's represented by its price-tag. If your readers become 40 or 100 you multiply your presence and your fee as well.

 

The difference is the simplest: while before the boost you worked 1 to 1, this way you work 1 to infinite. Obviously this is just an example but it gives you a clear idea about the difference.

A form of leverage that allows you to make money is Real Estate.

 

If you buy a property, you receive a rent for every time-lapse. If you buy 2 properties you obviously have 2 rents for each time-lapse. This way you keep growing.

 

However you can make a fair objection like: "I have limited resources". Being this the situation you can get a mortgage. Obviously it has to be financially solid. In practice it's your tenants who pay your mortgage rates, then you automatically grow richer. At this point your new job is finding a property that once it has been rented out it can repay your mortgage back. Even a bank leverages its customers. For every deposit, the bank can clearly loan a higher size of it. And if you think about it, there are analogies between the bank's role and that of a Real Estate entrepreneur who invests in rental building.

 

Another form of leverage is the one of the Multilevel Marketing. A very discussed subject and in some cases even controversial. However like in every field there are bad apples that ruined a business that in the past demonstrated to be very efficient instead. For those who don't know what MLM is, when you enter a MLM, you can sell or look for distributors by creating a pyramid scheme. The commissions you generate are shared among all the people above the distributor. Paradoxically, after you worked to recruit a network of distributors, you can even make money without too much effort. All these leverage forms were linked to some form of works.

 

Nonetheless, if you really want to leverage the leverage we have to look inside of us. There's indeed an Inner Lverage. This is our stream of thoughts. You may have read in my latest post how the Law of Attraction works. In short, you get what you re focused on, no matter if you want it or not. Thoughts become real things.

 

Here it is, the leverage of this extremely powerful law lies in the fact of thinking more often about what you really want. You have to figure it out, you have to feel it, you have to live it, you have to imagine the whole thing so intensively that you really would feel like as you'd already got it. And you have to do it often. More often than you can ever think and more times than when you think of those things you don't want. The non-objectives become real too if you just focus on them. The non-objectives are worrying racing thoughts. What you don't want: a negative person or somebody who hurt you, a bad situation, a situation to escape from. All you don't want becomes real if you think about it too often and with an "associated pattern" as said by the Neuro-linguistic programming (NLP).

 

According to the NLP When you are "associated" you are "inside the event" or picture looking around you and to the outside. When you are disassociated you are outside of the event or picture looking inwards, watching your own behaviour. When you are associated you live your experience through your emotional sphere, when you are dissociated you live your experience without the weight of the emotional sphere.

 

So the power of the mental leverage is not only in the use of the law of attraction. It's about using it all the time! 

 

This form of leverage also includes writing down your objectives and as we said in "the Survival Handbook" , the Tracking Ob is meant to impress in your mind what you'll become. At the end of the day you might understand that leverage is linked to time.

 

If you are able to break the rules of time. If you manage to assign time not a 1 unit value but infinite, you will be able to understand the value of leverage.

 

The new value of leverage...

 

Luigi Foscale

 

Is leverage still good?

 

This article is dedicated to someone I hold very dear.

In my latest post, "The Italian Government’s insider trading ", I wrote about the fact in Italy the financial system has been stuck by the government and the central bank. Those institutions poured huge amounts of money to the major banking institutions and those same bankers invested in Italian T-bond earning buku bucks in just a few months. The problem is that money wasn't invested in companies that needed mortgages for their business goals. 

The Italian economy is made of small to medium sized companies, which are near to bankruptcy due to their limited cash restrictions. On the other side, I was told by a big wig, that if the banks had not invested in the Italian T-Bonds, Italy would have gone bankrupt. In my opinion there is not a black-or-white position. The right way is in the middle. And in the middle there are deserving companies which didn’t receive the money they needed and now are in big financial trouble.

For the above mentioned reasons, this is the best momentum to explain if leverage is still good. In the last ten years, Banks gave money to everyone. Everybody knows it. And the Subprime Crisis is a widely known concept as I wrote in my post. History showed it was a destructive formula.

Now we are suffering for the opposite reasons. Banks stopped banking. And even if you are a healthcare company CFO, you are going to pay for the sins of others. Although this is a destructive way also. So, the right way is supporting only those businesses that deserve to be supported. But how can a banker trusts a company? There are tons of theories on “how to lend money”. I will focus on two of them I usually adopt with my banks.

Lien. If you have money, banks will give you more money. Money follows money. You will experience it once you have a 7 figure bank account. For the bank this is the easiest form to secure its own interest, but if a bank considers this form of lending as the only form to secure its interests then it can be considered as financially suicidal. Because not every business is a good business…

In addition to the tangible assets, banks should also consider how much cash flow their given money would generate. This is the basics of commercial banking. If you have a good business with a strong cash flow, you deserve a financial injection from the banking system, obviously if you need it. Unfortunately in Italy it ain’t always possible.

If I were a Banker, first of all, I would certainly consider the customer's cash flow. I run companies with solid cash flow figures and with solid assets. Sometimes in Italy I found it difficult receiving financial lending for my companies, or if I found it, it was too expensive. In other countries it's much easier. So my advice is simple: first you have to set up a business with a positive cash flow so that it will be much easier for you to find a Bank that understands your financial figures. In the end during these hard economic times I would focus on the debt. A debt is not good or bad. When you use a debt you are simply using other people's money. The debt is good whether it is necessary to generate a positive cash flow. If the positive cash flow creates a stream of cash to pay interests and the capitalization rate, then is a good debt. I use this type of debt. And if you need it, you need to have a supportive banking system. But if you have too many loan repayments you are going to be in trouble.

Never forget Leverage is like fire. You can cook your dinner with it but if the flames overwhelm yourself you will be dead in few seconds.

Use leverage only if you are able to live without it.

Luigi Foscale.

A note on Italy. Unfortunately Italy is not the best place to establish a new business because banks only give money to those who have a friend or a relative in that bank. If you have no connection, it can be really hard.