Equity Investment Quotes

Equity without income is unnatural.

At Mayflower-Plymouth, we believe that active capital management is the responsible way to invest. Even passive funds should be actively managed.

If you can follow only one bit of data, follow the earnings—assuming the company in question has earnings. As you’ll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.

At Mayflower-Plymouth we aim to employ capital and maximize ROI for central banks, sovereign wealth funds, pension funds, corporations, foundations and endowments, and individual investors around the world.

Trust is vital. In order for investors to have us steward their capital, a prerequisite is that they trust us.

The two greatest enemies of the equity fund investor are expenses and emotions.

At Mayflower-Plymouth, we care about profit and growth. And just as much we also care about things like the health of the earth, Whole Foods plant based or I-Tal living, vegan or vegetarian living, holistic education, spirituality, human rights, money equity, social cohesion, liberty, family, human health and more. To us, Investing is more than profit.

Trust is a prerequisite for financial transacting.

We can't all be bakers or chefs. Many of us have modest ambitions. But we can all buy a piece of the pie.

Shopping the equity market solely based on stock prices is like shopping for groceries solely based on food prices as opposed to the quality of the food. Price matters, but what really matters is the value that you get for the price.

Everybody who really makes money at some point owns a piece of a product, a business, or some IP. That can be through stock options if you work at a tech company. That’s a fine way to start. But usually, the real wealth is created by starting your own companies or even by investing. In an investment firm, they’re buying equity. These are the routes to wealth. It doesn’t come through the hours.

Many investors have a homogeneous view of portfolio diversification. They’re thinking about large cap vs small cap vs equity vs bonds. And that’s important, but nature views diversification much more holistically. And at Mayflower-Plymouth, so do we.

Regret is a lifestyle disease of equity investing.

Trust is vital. In purser for investors to have us steward their capital, a prerequisite is that they trust us.

Everyone our company touches should experience a net value-add as a result of our investment activities.

Municipal bonds finance local government projects, such as schools, roads, and utilities. So there’s a public good aspect to investing in municipalities that isn’t antithetical to equity investing but it’s different.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity. Think of these options collectively as a tool kit. Over the long term, returns for shareholders will be determined largely by the decisions a CEO makes in choosing which tools to use (and which to avoid) among these various options. Stated simply, two companies with identical operating results and different approaches to allocating capital will derive two very different long-term outcomes for shareholders.

In the mutual fund industry, for example, the annual rate of portfolio turnover for the average actively managed equity fund runs to almost 100 percent, ranging from a hardly minimal 25 percent for the lowest turnover quintile to an astonishing 230 percent for the highest quintile. (The turnover of all-stock-market index funds is about 7 percent.)

Shopping the equity market solely based on stock prices is like shopping at the grocery store solely based on food prices instead of based on the quality of food — you may end up with a full pantry, and poor health. Price matters. But it’s really about the value that you get for the price.

Lesson: Look at your cash everyday if you wish, your bonds every couple of years and your equities every ten years! Really, do not look at your performance more than once a year.

The market rewards, not the best stock, but the best behavior.

The last transaction price is the least accurate measure of the fair value.

Prices are dominated by the minority, and values are governed by the majority.

Teach your children about credit, tax and investing. Be extremely truthful about how they all work

Don't take advice from people unless they are writing you a check.

Millions wish for financial freedom, but only those that make it a priority have millions.

The Decentralization of Finance is really good for humanity and it’s ultimately a win for each and every one of us. Because now that we can circumvent banks, exchanges and brokerage companies by using smart contracts on the blockchain… every person, every family, and every business will experience more liberty, more freedom, more opportunities, more abundance, more power, and more wealth. This makes way for more opportunities around financial wellness, permaculture investing, more effective crowdfunding, better ownership and equity arrangements, and more.

Markets are not efficient enough to incorporate actual inherent risk, given information bias, and emotionally challenged participants. Instead, prices are adjusted up to the cumulative perceived risk of all participants.

The only way for a business to survive the constant and persistent changes that take place through time, is to be anchored to something that is changeless and timeless — and that something is the mindset of creating value for others.

Waaant equity," hisses the alien intruder. "You can't be Pamela Macx," says Pierre, his back to the wall, keeping the sword point before the lobster-woman-thing. "She's in a nunnery in Armenia or something. You pulled that out of Glashwiecz's memories - he worked for her, didn't he?" Claws go snicker-snack before his face. "Investment partnership!" screeches the harridan. "Seat on the board! Eat brains for breakfast!" It lurches sideways, trying to get past his guard.

SHAREHOLDERS’ EQUITY has two components: CAPITAL STOCK: The original amount of money the owners contributed as their investment in the stock of the company. RETAINED EARNINGS: All the earnings of the company that have been retained, that is, not paid out as dividends to owners.

Basically, CEOs have five essential choices for deploying capital—investing in existing operations, acquiring other businesses, issuing dividends, paying down debt, or repurchasing stock—and three alternatives for raising it—tapping internal cash flow, issuing debt, or raising equity.

1. Project What is the project? Why is it unique? Why is the business needed? Why will customers love your product? 2. Partners Who are you? Who are the partners? What are your educational backgrounds? How much experience do you all have? How are you and your partners qualified to make the project a success? 3. Financing What is the total cost of the project? How much debt and how much equity is there? Are partners investing their own money? What is the investor’s return and reward for their risk? What are the tax consequences? Who is your CFO or accounting firm? Who is responsible for investor communications? What is the investor’s exit? 4. Management Who is running your company? What is their experience? What is their track record? Have they ever failed? How does their experience relate to your industry? Do you believe this is the strongest management team you can assemble? Can you pitch them with confidence?

Allies tend to crowd out the space for anger with their demands that things be comfortable for them. They want to be educated, want someone to be kind to them whether they have earned that kindness or not. The process of becoming an ally requires a lot of emotional investment, and far too often the heavy lifting of that emotional labor is done by the marginalized, not the privileged. But part of that journey from being a would-be ally to becoming an ally to actually becoming an accomplice is anger. Anger doesn't have to be erudite to be valid. It doesn't have to be nice or calm in order to be heard. In fact, I would argue that despite narratives that present the anger of Black women as dangerous, that render being angry in public as a reason to tune out the voices of marginalized people, it is that anger and the expressing of it that saves communities. No one has ever freed themselves from oppression by asking nicely.

What Hunter Biden, the son of America’s vice president, and Christopher Heinz, the stepson of the chairman of the Senate Committee on Foreign Relations (later to be secretary of state) were creating was an international private equity firm. It was anchored by the Heinz family alternative investment fund, Rosemont Capital.

The global bond market, already a behemoth dwarfing its equity counterpart, is poised for unprecedented growth in the coming decades. By 2050, this financial colossus is projected to reach staggering proportions, fueled by a confluence of factors that will reshape the investment landscape and create a wealth of opportunities for discerning investors.

From an asset-allocation perspective, when we talk about diversification, we're talking about investing in multiple asset classes. There are six that I think are really important and they are US stocks, US Treasury bonds, US Treasure inflation-protected securities [TIPS], foreign developed equities, foreign emerging-market equities and real estate investment trusts [REITS]. p473

Apple raised $17 billion in a bond offering in 2013. Not to invest in new products or business lines, but to pay a dividend to stockholders. The company is awash with cash, but much of that money is overseas, and there would be a tax charge if it were repatriated to the USA. For many other companies, the tax-favoured status of debt relative to equity encourages financial engineering. Most large multinational companies have corporate and financial structures of mind-blowing complexity. The mechanics of these arrangements, which are mainly directed at tax avoidance or regulatory arbitrage, are understood by only a handful of specialists. Much of the securities issuance undertaken by Goldman Sachs was not ‘helping companies to grow’ but represented financial engineering of the kind undertaken at Apple. What

All too often high-income-producing UAWs spend countless hours studying the market—but not the stock market. They can tell you the names of the top auto dealers, but not the top investment advisors. They can tell you how to shop and spend. But they can’t tell you how to invest. They know the styles, prices, and availability at various car dealers. But they know little or nothing about the various values of equity market offerings. As

At Mayflower-Plymouth, we believe in having a long term view with investments. We believe that maximizing long-term ROI requires having a big picture view in terms of business and economics. We believe that equity without income is unnatural – so every portfolio should generate consistent income. We believe in prioritizing not just growth, but also resilience. And we believe that we should employ a multitude of traditional investment approaches toward the achievement of our investment goals.

raising chickens. It was almost as hard for Eisman to imagine himself raising chickens as it was for people who knew him, but he’d agreed. “The idea of it was so unbelievably unappealing to him,” says his wife, “that he started to work harder.” Eisman traveled all over Europe and the United States searching for people willing to invest with him and found exactly one: an insurance company, which staked him to $50 million. It wasn’t enough to create a sustainable equity fund, but it was a start. Instead of money, Eisman

But increasing the amount of equity finance in an economy is easier said than done: it is a project that would take decades rather than years. Some of the barriers are institutional: outside of the very small world of venture capital (of which more later) and the even smaller and newer field of equity crowdfunding, most businesses do not raise equity, and most financial institutions do not provide it. There are established agencies that can rate the creditworthiness of even quite small businesses, and algorithms to allow banks to quickly and cheaply decide whether to lend to them. Nothing similar exists for equity investment, and the equivalent analytical task (working out a company's likely future value, rather than its likelihood of servicing a fixed debt) is more complex. And cultural factors stand in the ways too: despite a very elegant financial economics theorem that shows that business owners should be indifferent between equity and debt finance, for many small business owners there seems a cognitive and cultural bias against giving away equity.

In recent years, annual trading in stocks—necessarily creating, by reason of the transaction costs involved, negative value for traders—averaged some $33 trillion. But capital formation—that is, directing fresh investment capital to its highest and best uses, such as new businesses, new technology, medical breakthroughs, and modern plant and equipment for existing business—averaged some $250 billion. Put another way, speculation represented about 99.2 percent of the activities of our equity market system, with capital formation accounting for 0.8 percent.

The capitalist-investor class experiences a tremendous loss of “real” wealth during depressions because the value of their investment portfolios collapses (declines in equity prices are typically around 50 percent), their earned incomes fall, and they typically face higher tax rates. As a result, they become extremely defensive. Quite often, they are motivated to move their money out of the country (which contributes to currency weakness), dodge taxes, and seek safety in liquid, noncredit-dependent investments (e.g., low-risk government bonds, gold, or cash).

As women gain rights, families flourish, and so do societies. That connection is built on a simple truth: Whenever you include a group that’s been excluded, you benefit everyone. And when you’re working globally to include women and girls, who are half of every population, you’re working to benefit all members of every community. Gender equity lifts everyone. From high rates of education, employment, and economic growth to low rates of teen births, domestic violence, and crime—the inclusion and elevation of women correlate with the signs of a healthy society. Women’s rights and society’s health and wealth rise together. Countries that are dominated by men suffer not only because they don’t use the talent of their women but because they are run by men who have a need to exclude. Until they change their leadership or the views of their leaders, those countries will not flourish. Understanding this link between women’s empowerment and the wealth and health of societies is crucial for humanity. As much as any insight we’ve gained in our work over the past twenty years, this was our huge missed idea. My huge missed idea. If you want to lift up humanity, empower women. It is the most comprehensive, pervasive, high-leverage investment you can make in human beings.

Here are my simple rules for identifying market tops and bottoms: 1. Market tops are relatively easy to recognize. Buyers generally become overconfident and almost always believe “this time is different.” It’s usually not. 2. There’s always a surplus of relatively cheap debt capital to finance acquisitions and investments in a hot market. In some cases, lenders won’t even charge cash interest, and they often relax or suspend typical loan restrictions as well. Leverage levels escalate compared to historical averages, with borrowing sometimes reaching as high as ten times or more compared to equity. Buyers will start accepting overoptimistic accounting adjustments and financial forecasts to justify taking on high levels of debt. Unfortunately most of these forecasts tend not to materialize once the economy starts decelerating or declining. 3. Another indicator that a market is peaking is the number of people you know who start getting rich. The number of investors claiming outperformance grows with the market. Loose credit conditions and a rising tide can make it easy for individuals without any particular strategy or process to make money “accidentally.” But making money in strong markets can be short-lived. Smart investors perform well through a combination of self-discipline and sound risk assessment, even when market conditions reverse.

Here’s a Reader’s Digest version of my approach. I select mutual funds that have had a good track record of winning for more than five years, preferably for more than ten years. I don’t look at their one-year or three-year track records because I think long term. I spread my retirement, investing evenly across four types of funds. Growth and Income funds get 25 percent of my investment. (They are sometimes called Large Cap or Blue Chip funds.) Growth funds get 25 percent of my investment. (They are sometimes called Mid Cap or Equity funds; an S&P Index fund would also qualify.) International funds get 25 percent of my investment. (They are sometimes called Foreign or Overseas funds.) Aggressive Growth funds get the last 25 percent of my investment. (They are sometimes called Small Cap or Emerging Market funds.) For a full discussion of what mutual funds are and why I use this mix, go to daveramsey.com and visit MyTotalMoneyMakeover.com. The invested 15 percent of your income should take advantage of all the matching and tax advantages available to you. Again, our purpose here is not to teach the detailed differences in every retirement plan out there (see my other materials for that), but let me give you some guidelines on where to invest first. Always start where you have a match. When your company will give you free money, take it. If your 401(k) matches the first 3 percent, the 3 percent you put in will be the first 3 percent of your 15 percent invested. If you don’t have a match, or after you have invested through the match, you should next fund Roth IRAs. The Roth IRA will allow you to invest up to $5,000 per year, per person. There are some limitations as to income and situation, but most people can invest in a Roth IRA. The Roth grows tax-FREE. If you invest $3,000 per year from age thirty-five to age sixty-five, and your mutual funds average 12 percent, you will have $873,000 tax-FREE at age sixty-five. You have invested only $90,000 (30 years x 3,000); the rest is growth, and you pay no taxes. The Roth IRA is a very important tool in virtually anyone’s Total Money Makeover. Start with any match you can get, and then fully fund Roth IRAs. Be sure the total you are putting in is 15 percent of your total household gross income. If not, go back to 401(k)s, 403(b)s, 457s, or SEPPs (for the self-employed), and invest enough so that the total invested is 15 percent of your gross annual pay. Example: Household Income $81,000 Husband $45,000 Wife $36,000 Husband’s 401(k) matches first 3%. 3% of 45,000 ($1,350) goes into the 401(k). Two Roth IRAs are next, totaling $10,000. The goal is 15% of 81,000, which is $12,150. You have $11,350 going in. So you bump the husband’s 401(k) to 5%, making the total invested $12,250.

Data sliced sufficiently finely begin once again to tell stories. The top 1 percent of the income distribution—representing household incomes in excess of roughly $475,000—comprises only about 1.5 million households. If one adds up the numbers of vice presidents or above at S&P 1500 companies (perhaps 250,000), professionals in the finance sector, including in hedge funds, venture capital, private equity, investment banking, and mutual funds (perhaps 250,000), professionals working at the top five management consultancies (roughly 60,000), partners at law firms whose profits per partner exceed $400,000 (roughly 25,000), and specialist doctors (roughly 500,000), this yields perhaps 1 million people. These are surely not all one-percenters, but they are all plausibly parts of the top 1 percent, and this group might comprise half—a sizable share—of 1 percent households overall. At the very least, the people in these known and named jobs constitute a material, rather than just marginal or eccentric, part of the top 1 percent of the income distribution. They are also, of course, the people depicted in journalistic accounts of extreme jobs—the people who regularly cancel vacation plans, spend most of their time on the road, live in unfurnished luxury apartments, and generally subsume themselves in work, encountering their personal lives only occasionally, and as strangers.

A classic LBO works this way: An investor decides to buy a company by putting up equity, similar to the down payment on a house, and borrowing the rest, the leverage. Once acquired, the company, if public, is delisted, and its shares are taken private, the “private” in the term “private equity.” The company pays the interest on its debt from its own cash flow while the investor improves various areas of a business’s operations in an attempt to grow the company. The investor collects a management fee and eventually a share of the profits earned whenever the investment in monetized. The operational improvements that are implemented can range from greater efficiencies in manufacturing, energy utilization, and procurement; to new product lines and expansion into new markets; to upgraded technology; and even leadership development of the company’s management team.

I strongly believe in the fact that there’s still plenty of money and plenty of private equity capital available around the globe. What are in short supply are great entrepreneurs and great teams. A trading opportunity or a company’s biggest challenge is and has always been the team behind it. There’s enormous change under way in every facet of the world. Some is technology driven, some is market driven. All that change creates unprecedented opportunity, but to take full advantage of such opportunities I mostly focus on the team. The right teams and right people behind those opportunities always win. There is no secret sauce. Trading and investing has, in my experience, boiled down to building relationships and exchanging value. It consists of striking the right balance between backing and interacting with the right teams with the right business model at the right time and with the right amount of money.

We're all equal before a wave. —Laird Hamilton, professional surfer In 2005, I was working as an equity analyst at Merrill Lynch. When one afternoon I told a close friend that I was going to leave Wall Street, she was dumbfounded. "Are you sure you know what you're doing?" she asked me. This was her polite, euphemistic way of wondering if I'd lost my mind. My job was to issue buy or sell recommendations on corporate stocks—and I was at the top of my game. I had just returned from Mexico City for an investor day at America Movíl, now the fourth largest wireless operator in the world. As I sat in the audience with hundreds of others, Carlos Slim, the controlling shareholder and one of the world's richest men, quoted my research, referring to me as "La Whitney." I had large financial institutions like Fidelity Investments asking for my financial models, and when I upgraded or downgraded a stock, the stock price would frequently move several percentage points.

Taking on a mortgage to buy a house is the classic definition of “good debt.” But don’t be so sure. The easy availability of mortgage loans tempts far too many into buying houses they don’t need or that are far more expensive than prudent. Shamefully, this overspending is often encouraged by real estate agents and mortgage brokers. If your goal is financial independence, it is also to hold as little debt as possible. This means you’ll seek the least house to meet your needs rather than the most house you can technically afford. Remember, the more house you buy, the greater its cost. Not just in higher mortgage payments, but also in higher real estate taxes, insurance, utilities, maintenance and repairs, landscaping, remodeling, furnishing, and opportunity costs on all the money tied up as you build equity. To name a few. More house also means more stuff to maintain and fill it. The more and greater things you allow in your life, the more of your time, money, and life energy they demand. Houses are an expensive indulgence, not an investment. That’s OK if and when the time for such an indulgence comes. I’ve owned them myself. But don’t let yourself be blinded by the idea that owning one is necessary, always financially sound, and automatically justifies taking on this “good debt.

Son arrived at Yahoo’s office looking as slight and uncommanding as ever. But he brought a bazooka. In a bid without precedent in the history of the Valley, he proposed to invest fully $100 million in Yahoo. In return he wanted an additional 30 percent of the company. Son’s bid implied that Yahoo’s value had shot up eight times since his investment four months earlier. But the astonishing thing about his offer was the size of his proposed check: Silicon Valley had never seen a venture stake of such proportions.[21] The typical fund raised by a top-flight venture partnership weighed in at around $250 million, and there was no way it would put 40 percent of its resources into a single $100 million wager.[22] Private-equity investors and corporate acquirers sometimes made investments in the $100 million range, but in return they expected to take full control of companies.[23] Son, in contrast, would be a minority investor and on an unheralded scale. Because he had SoftBank’s corporate balance sheet behind him, he could pump in fully one hundred times more capital than Sequoia had provided when Yahoo got started. After Son dropped his bombshell, Yang, Filo, and Moritz sat in silence. Disconcerted, Yang said he was flattered but didn’t need the capital.[24] “Jerry, everyone needs $100 million,” Son retorted.[25]

What’s an IPO, exactly? A company decides it wants to “float” part of its equity on the public markets, allowing employees and founders to sell private shares to pay them off for years of service, as well as sell shares out of the corporate treasury to have some money in the bank. Large investment banks (such as my former employer Goldman Sachs) form what’s called a “syndicate” (“mafia” might be a better term) wherein they offer to effectively buy those shares from Facebook, and then sell them into the capital markets, usually by pushing it via their sales force onto wealthy clients or institutional investors. That syndicate either guarantees a price (“firm commitment”) or promises to get the best price it can (“best effort”). In the former case, the bank is taking real execution risk, and stands to lose money if it doesn’t engineer a “pop” in the stock on opening day. To mitigate the risk, the bank convinces the offering company to expect a lower price, while simultaneously jacking up what real price the market will bear with a zealous sales pitch to the market’s deepest pockets. Thus, it is absolutely jejune to think that a stock’s rise on opening day is due to clamoring and unexpected interest. Similar to Captain Renault in Casablanca, Wall Street bankers are shocked—shocked!—that there should be such a large and positive price dislocation in the market they just rigged.

Statisticians say that stocks with healthy dividends slightly outperform the market averages, especially on a risk-adjusted basis. On average, high-yielding stocks have lower price/earnings ratios and skew toward relatively stable industries. Stripping out these factors, generous dividends alone don’t seem to help performance. So, if you need or like income, I’d say go for it. Invest in a company that pays high dividends. Just be sure that you are favoring stocks with low P/Es in stable industries. For good measure, look for earnings in excess of dividends, ample free cash flow, and stable proportions of debt and equity. Also look for companies in which the number of shares outstanding isn’t rising rapidly. To put a finer point on income stocks to skip, reverse those criteria. I wouldn’t buy a stock for its dividend if the payout wasn’t well covered by earnings and free cash flow. Real estate investment trusts, master limited partnerships, and royalty trusts often trade on their yield rather than their asset value. In some of those cases, analysts disagree about the economic meaning of depreciation and depletion—in particular, whether those items are akin to earnings or not. Without looking at the specific situation, I couldn’t judge whether the per share asset base was shrinking over time or whether generally accepted accounting principles accounting was too conservative. If I see a high-yielder with swiftly rising share counts and debt levels, I assume the worst.

Construction finally began that winter, and by early 1974 Syncrude’s Mildred Lake site bustled with 1,500 construction workers. But the deal remained tentative as cost estimates grew beyond the initial $1.5 billion to $2 billion or more and the federal government’s new budget arrived with punitive new taxes for oil and gas exports. Then, in the first week of December, one of the Syncrude partners, Atlantic Richfield, summarily quit the consortium, leaving a 30 percent hole in its financing. A mad scramble ensued in search of a solution. Phone calls pinged back and forth between government officials in Edmonton and Ottawa. Finally, on the morning of February 3, 1975, executives from the Syn-crude partner companies and cabinet ministers from the Alberta, Ontario and federal governments met without fanfare and outside the media’s brightest spotlights at an airport hotel in Winnipeg to negotiate a deal to save the project. Lougheed and Ontario premier Bill Davis both attended, along with their energy ministers. Federal mines minister Donald Macdonald represented Pierre Trudeau’s government, accompanied by Trudeau’s ambitious Treasury Board president, Jean Chrétien. Macdonald and Davis, both Upper Canadian patricians in the classic mould, were put off by Lougheed’s blunt style. By midday, the Albertans were convinced Macdonald would not be willing to compromise enough to reach a deal. Rumours in Lougheed’s camp after the fact had it that over lunch, Chrétien persuaded the mines minister to accept the offer on the table. Two days later, Chrétien rose in the House of Commons to announce that the federal government would be taking a 15 percent equity stake in the Syn-crude project, with Alberta owning 10 percent and Ontario the remaining 5 percent. In the coming years, it would be Lougheed, with his steadfast support and multimillion-dollar investments in SAGD, who would be seen as the Patch’s great public sector champion. But it was Chrétien, “the little guy from Shawinigan,” whose backroom deal-making skills had saved Syncrude

The Global Financial Crisis shows the credit cycle at the greatest extreme since the Great Depression. Debt markets historically had been marked by general conservatism, meaning excesses on the upside were limited and most bubbles took place in the equity market. Certainly it was the site of the Great Crash of 1929. But the creation of the high yield bond market in the late 1970s kicked off a liberalization of debt investing, and the generally positive economic environment of the subsequent three decades provided those who ventured in with a favorable overall experience. This combination led to a strong trend toward acceptance of low-rated and non-traditional debt instruments. There were periods of weakness in debt in 1990–91 (related to widespread bankruptcies among the highly levered buyouts of the 1980s) and in 2002 (stemming from excessive borrowing to fund overbuilding in the telecom industry, which led to prominent downgrades that coincided with several high-profile corporate accounting scandals). But the effects of these were limited because of the isolated nature of their causes. It wasn’t until 2007–08 that the financial markets witnessed the first widespread, debt-induced panic, with ramifications for the entire economy. Thus the GFC provided the ultimate example of the credit cycle’s full effect.

The wealth-creating equity bias, the risk-reducing portfolio diversification, and the return-enhancing tax sensitivity combine to undergird the asset-allocation structure of effective investment portfolios.

Because equity owners get paid after corporations satisfy all other claimants, equity ownership represents a residual interest. As such, stockholders occupy a riskier position than, say, corporate lenders who enjoy a superior position in a company’s capital structure.

Ibbotson Associates, founded by Yale scholar Roger Ibbotson, produces a widely used survey of returns covering the past seventy-eight years. Over the nearly eight-decade period from 1926 to 2003, U.S. stocks produced an annual compound return of 10.4 percent, U.S. government bonds returned 5.4 percent, and U.S. Treasury bills generated 3.7 percent. The 5.0 percentage point difference between stock and bond returns represents the historical risk premium, defined as the return to equity holders for accepting risk above the level inherent in bond investments.

Six asset classes provide exposure to well-defined investment attributes. Investors expect equity-like returns from domestic equities, foreign developed market equities, and emerging market equities. Conventional domestic fixed-income and inflation-indexed securities provide diversification, albeit at the cost of expected returns that fall below those anticipated from equity investments. Exposure to real estate contributes diversification to the portfolio with lower opportunity costs than fixed-income investments.

Rizvi Traverse Management --- The secretive New York private equity firm founded by Indian-born Suhail Rizvi. Investments include ICM Talent Agency, Summit Entertainment, Playboy Enterprises, SpaceX, Flipboard, and Square. Rizvi Traverse was the largest initial stakeholder of Twitter and was instrumental

The description of enterprise value highlights the clear, direct trade-off between the interests of stockholders and bondholders. The value of the enterprise lies in the sum of the value of the debt and the value of the equity. To the extent that owners of a company reduce the value of the bondholders’ position, the equity owners benefit. Stockholders gain by imposing losses on bondholders. Because corporate management’s interests generally align with equity investors, bondholders find themselves sitting across the table from corporate management.

Junk-bond investors cannot win. When fundamentals improve, stock returns dominate bond returns. When rates decline, noncallable bonds provide superior risk-adjusted returns. When fundamentals deteriorate, junk-bond investors fall along with equity investors.

Our firm has dynamic money-making potential and will continue to grow and prosper beyond our wildest dreams if we devote all of our working hours to Bear, Stearns & Co. This has led the Executive Committee to decide that no General Partners or General Partners’ spouses can make any outside investments (other than publicly traded stocks and bonds or a residence) without the approval of the Executive Committee. The Executive Committee does not want our partners worrying or thinking about any business other than Bear Stearns. Owning an equity interest in our firm is the best investment any of us will ever see; so let us give B.S. 100% of our effort.

(1) Selecting winning equity funds over the long term offers all the potential success of finding a needle in a haystack. (2) Selecting winning funds based on their performance over relatively short-term periods in the past is all too likely to lead, if not to disaster, at least to disappointment.

equity investments are the riskiest and anyone should reconsider investing

complement the first. The initial credit line Junior offered for investing in artists was only $100 million, much less than what had been available at Warner, but Morris could see that, sitting on a limitless tap of booze money, there was a lot more where that came from.4 Best of all, Seagram was domiciled in Canada, where the lyrics of popular rap songs were not a pressing political issue. Although Jimmy Iovine and Doug Morris were temporarily estranged as colleagues, they remained best friends and hoped to reunite. Fuchs’ actions had stung them both, and Iovine had raised such a stink after Morris’ sacking that he was no longer permitted in the Time Warner Building. Under normal circumstances, he too would have been fired, but Iovine didn’t actually work for Warner directly—he was an equity partner in a joint venture, and the only way to get rid of him was to sell him back his shares. This was an expensive proposition, as Interscope had diversified beyond rap, signing No Doubt, Nine Inch Nails, and Marilyn Manson. Together, the two came up with a plan. Iovine, the agitator, would make himself unbearable to Fuchs, and push extreme albums like Dogg Food and Antichrist Superstar that made the provocations of The Chronic seem boring by comparison. Morris,

A world equity index tracker is the only equity investment a rational investor ever needs to own.

The four main factors you’ll want to investigate are: 1. Borrower’s credit: Look for whether they’re paying their bills regularly and on time, how much debt they have in relation to their income (the debt-to-income ratio, or DTI), and the status of the senior lien. 2. Borrower’s payment history: The longer someone has been making mortgage payments, the more likely they are to keep doing so; it demonstrates their commitment to the property. 3. Fair market value (FMV): Find the current FMV of the property, as it affects the equity (ownership stake) in the property; if the property has declined substantially, you may not be able to recover your investment if the borrower defaults. 4. Location: With real estate debt, geography matters for several reasons including state foreclosure laws, local demographics (which can affect future property values), and area economy.

However, simply giving users what they want is not enough to create a habit-forming product. The feedback loop of the first three steps of the Hook—trigger, action, and variable reward—still misses a final critical phase. In the next chapter we will learn how getting people to invest their time, effort, data, or social equity in your product is a requirement for repeat use.

REIT ETFs can cover a broad market (like all equity REITs) or a narrow slice (like hotel REITs). Examples of real estate ETFs include: • Vanguard Real Estate ETF (VNQ), which follows the MSCI US Investable Market Real Estate 25/50 Index (a broad REIT index) • iShares Global REIT (REET), which tracks the FTSE EPRA/NAREIT Global REIT Index and holds a combination of US and overseas property REITs • Pacer Benchmark Industrial Real Estate Sector ETF (INDS), a targeted fund that follows the Benchmark Industrial Real Estate SCTR Index with an emphasis on industrial (such as cell towers and data centers) and self-storage properties • Schwab US REIT ETF (SCHH), which tracks the Dow Jones US Select REIT Index, holding a broad mix of residential and commercial REITs

Real Estate Investment Trusts, or REITs (pronounced “reets”), are companies that own and collect rent from commercial and residential properties.10 Bundled into real-estate mutual funds, REITs do a decent job of combating inflation. The best choice is Vanguard REIT Index Fund; other relatively low-cost choices include Cohen & Steers Realty Shares, Columbia Real Estate Equity Fund, and Fidelity Real Estate Investment Fund.11 While a REIT fund is unlikely to be a foolproof inflation-fighter, in the long run it should give you some defense against the erosion of purchasing power without hampering your overall returns.

high end” of finance—the investment banks, junk bonds, hedge funds, mortgage-backed securities, private equity, quants, etc.—and this is where many of the astronomical earnings have shown up in recent years.

The one problem with a strong free cash flow yield security selection emphasis is that it handicaps compelling growth companies unnecessarily. A company with low free cash flow may be very compelling if the reason for the low free cash flow is a large capital expenditure budget that is being spent well on high-return projects. A company with high free cash flow is good, but a company with high cash flow from operations being spent on new high return on equity projects is better.

protected securities [TIPS], foreign developed equities, foreign emerging-market equities, and real estate investment trusts [REITs].

Many real estate investing clubs assign roles to members based on their personal background and abilities. Those responsibilities could include: • Keeping club records • Bookkeeping and taxes • Property maintenance • Tenant management • Member communications • Scheduling meetings • Representing the club at closings • Researching potential investments By keeping these jobs “in-house,” the club can direct more funds toward building its real estate portfolio or increasing equity.

While these REITs may have lower yields than other categories, they tend to have lower risk profiles and high-growth potential (which increases total returns). Examples of residential REITs include: • AvalonBay Communities (AVB), which holds apartment communities throughout the US and has a yield of 3.15 percent • American Campus Communities (ACC), which holds student housing communities in the US and yields 4.25 percent • Equity Lifestyle Properties (ELS), which holds manufactured home communities, campgrounds, and RV resorts in North America and has a yield of 2.19 percent

The purpose of this chapter is to explain what it means for skillful investors to add value. To accomplish that, I’m going to introduce two terms from investment theory. One is beta, a measure of a portfolio’s relative sensitivity to market movements. The other is alpha, which I define as personal investment skill, or the ability to generate performance that is unrelated to movement of the market. As I mentioned earlier, it’s easy to achieve the market return. A passive index fund will produce just that result by holding every security in a given market index in proportion to its equity capitalization. Thus, it mirrors the characteristics—e.g., upside potential, downside risk, beta or volatility, growth, richness or cheapness, quality or lack of same—of the selected index and delivers its return. It epitomizes investing without value added. Let’s say, then, that all equity investors start not with a blank sheet of paper but rather with the possibility of simply emulating an index. They can go out and passively buy a market-weighted amount of each stock in the index, in which case their performance will be the same as that of the index. Or they can try for outperformance through active rather than passive investing.

I had a vision to earn game-changer returns vs. the market by seeking patterns that predict performance

The valuations of private and public companies were soaring, and there seemed to be a consensus that the gold rush was beginning. Amid this infrastructure mania, Reliance Power launched an IPO in January 2008 that was oversubscribed seventy-two times! It made the company’s owner, Anil Ambani, the richest Indian. Despite having a power capacity of less than 1,000 megawatts at the time of the IPO, the company’s value was about $35 billion. Did this lead to a large number of IPOs for infrastructure businesses that investors lapped up hungrily? Does the sun rise in the east? Both private and public equity investors in the hyped-up story of Indian infrastructure forgot or chose to ignore some uncomfortable truths: Every infrastructure business is held hostage to the whims and fancies of the government; the government hates to be a paying customer—underpayment and late payment are the rule, not the exception; and even if the government behaves well, the returns on these projects are capped according to law. So why would we want to spend a single minute debating if any power business is worth investing in?

limited partnerships that do some combination of the following: unleveraged investment in high-tech corporations in their infancy; leveraged investments in corporate buyouts; leveraged relative value trades in equities; and leveraged convergence trades and other exotic trades in all kinds of securities and derivatives.

There is no one metric that captures all facets of financial performance. But if I had to pick a single one, I would choose return on invested capital (ROIC). ROIC compares the profit realized from business operations (operating income) with the capital (equity and debt) that is employed to generate that profit. In other words, ROIC tells us how good a business is at turning investors’ funds into income from operations.1

For the online investor who wants a ‘hands off’ approach to investing, the Wealth Report provides an economic outlook, trading guide and trade advice for Cash Flow strategies and medium-term positioning.Our focus is on the US equity markets, utilizing stock and option strategies such as Covered Calls for an investment portfolio, and Exchange Traded Funds (ETF’s) which provide exposure to global stocks, indices and commodities.To assist in updating you with global market activity, we provide Financial News in terms of the Weekly Economic Outlook written report at the start of each week, outlining our views of market activity, a revision of the previous weeks’ influences, and a discussion of scheduled events for the coming week.

There is no optimal ratio for equity and debt distribution of a portfolio. Different times require different splits.

running Gutenberg Research, a crowdsourced earnings modeling community.

Elite Wealth Management is a firm of independent financial advisers specialising in providing advice on Personal and Corporate Pensions, Mortgages, Equity Release, Investments, Inheritance Tax planning, Corporate, Wealth and Personal Protection. We’ve been helping clients navigate complex financial markets since 2009 as a company, and each adviser has many years experience in their own right having worked for various companies, and from those very early days, our business has evolved primarily through client, accountant and solicitor recommendations.

Overall, US equity investments increased four or five times on average (before taxes, investment adviser fees, and other costs), and Berkshire Hathaway advanced from $12,000 to almost $150,000, fell to $75,000 during the crisis, then rose above $200,000 per share in 2016. When the crisis of 2008 struck, equities lost half their value before rebounding. As tax receipts shriveled, the massive deficits of the US government were echoed at state and local levels. The safety of municipal bonds no longer seemed so assured. However, although they would have done better in equities, they still had enough money and, feeling safe, didn’t worry as they would have done watching the ups and downs in the value of a stock portfolio.

Those that use only fundamental variables refer only to a company's business performance, not the relationship between that performance and its share price. Studies have sorted stocks using returns on equity or on total capital invested, growth in earnings per share, growth in assets—as opposed to sales growth—and various measures of profit margins. Companies with high marks on these variables are successful firms whose shares are inherently attractive to investors. However, consistent with the studies we discussed above, it is often the firms that ranked lowest on these measures—low returns on capital or narrow profit margins—that have tended to generate the highest future market returns.

NSO works with the Israeli state to further its foreign policy goals, and is used as an alluring carrot to attract potential new friends. Since its inception, NSO has been funded by a range of global players, including London-based equity firm Novalpina Capital. One of the biggest investors in Novalpina, to the tune of US$233 million in 2017, before NSO was on the company’s books, was the Oregon state employees’ pension fund.3 In 2019 pension money for the British gas provider Centrica was also invested in Novalpina.

Constant Obligation Leveraged Originated Structured Oscillating Money Bridged Asset Guarantees, or Colostomy Bags. Designed to accommodate the most sophisticated investment strategies, Colostomy Bags contain the equity tranches of Structured High Interest Taxable derivatives, or Shit, and are leveraged an infinite amount of times through the innovative use of derivatives.

I created XPO with a private investment in public equity (a “PIPE”) that gave me control of a logistics company with about $175 million in revenue. Its main focus was freight transportation: matching truckers with shippers, forwarding freight, and expediting urgent shipments. I felt confident we could create a business model with a major upside to earnings by applying scale and technological innovation, and we did that, building XPO into an integrated, global logistics leader.

The idea was for the government to invest $100 million to create ten new venture capital funds. Each fund had to be represented by three parties: Israeli venture capitalists in training, a foreign venture capital firm, and an Israeli investment company or bank. There was also one Yozma fund of $20 million that would invest directly in technology companies. The Yozma program initially offered an almost one-and-a-half-to-one match. If the Israeli partners could raise $12 million to invest in new Israeli technologies, the government would give the fund $8 million. There was a line around the corner. So the government raised the bar. It required VC firms to raise $16 million in order to get the government’s $8 million. The real allure for foreign VCs, however, was the potential upside built into this program. The government would retain a 40 percent equity stake in the new fund but would offer the partners the option to cheaply buy out that equity stake—plus annual interest—after five years, if the fund was successful. This meant that while the government shared the risk, it offered investors all of the reward. From an investor’s perspective, it was an unusually good deal.

In addition to casting our net for firms with a high ROIC, we are also looking for firms with a low Faustmann ratio, meaning a low market capitalization (of common equity) over net worth (or invested capital plus cash minus debt and preferred equity) ratio.

Three components define a buyout strategy: equity control, leverage and economic alignment.

The opportunity to improve companies, the ability to have an alignment of interest with management and us being the shareholders with long-term, patient capital—to me, these are the hallmarks of private equity.

Jacor was probably an asset I would have held for decades, but it was an investment through one of our private equity funds where we had promised investors a return of capital at the end of a predetermined period.

Carried interest is the share of a fund’s net profits paid to its GP—typically 20%—and serves as the main incentive for a PE firm’s principals.

Deal-by-deal carry (with loss carry-forward): Also known as an American-style waterfall, this structure entitles a GP to carried interest after each profitable exit from a portfolio investment during the fund’s life, but only after investors have received their invested capital from the deal in question, a preferred return and a “make whole” payment for any losses incurred on prior deals.

Financial management takes on a new meaning when you enter a partnership with a private equity group. There are software systems marketed to investment firms to consolidate their financials among the companies they own. For them, it has many benefits. It simplifies financial reporting and management of their investments. For the operating companies, it may provide huge value if their current reporting systems are inadequate. However, if your company has a well-implemented modern system, this can be a burden. Imagine having someone come in and require that you abandon your cuttingedge integrated system and, instead, put your reports in their format. I have a friend who was a CFO with a modern ERP system who was required to integrate their company’s reporting with an antiquated Excel-based report generator because their new equity partners required their charts to look a certain way. It cost them time and money that could have been applied to building their company’s value elsewhere.