Equity Market Quotes

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

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.

Did you ever think our misfortune is directly related to your good fortune? Maybe the house your parents bought was on the market because the sellers didn't want my mama in the neighborhood. Maybe the good grades that eventually led you to law school were possible because your mama didn't have to work eighteen hours a day, and was there to read to you at night, or make sure you did your homework. How often do you remind yourself how lucky you are that you own your house, because you were able to build up equity through generations in a way families of color can't? How often do you open your mouth at work and think how awesome it is that no one's thinking you're speaking for everyone with the same skin color you have? How hard is it for you to find the greeting card for your baby's birthday with a picture of a child that has the same color skin as her? How many times have you seen a painting of Jesus that looks like you? Prejudice goes both ways, you know. There are people who suffer from it, and there are people who profit from it.

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 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.

To be sure, I am not speaking about Christian equality, whose real name is equity; but about this democratic and social equality, which is nothing but the canonization of envy and the chimera of jealous ineptitude. This equality was never anything but a mask which could not become reality without the abolition of all merit and virtue.

Regret is a lifestyle disease of equity investing.

As we think about business, it’s important that we think from a value adding perspective.

Social media is a great tool for putting out fires, but it’s an even better tool for building brand equity and relationships with your customers. Once you stop thinking about it as a tool for shutting customers up, and rather as a tool for encouraging customers to speak up, and for you to speak to them, a whole world of branding and marketing opportunities will unfold.

I visualized my grief if the stock market went way up and I wasn’t in it—or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions 50/50 between bonds and equities.

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.)

Thumb-rule in Equity markets is that big boys chase either your shares or your money ... In former case, they will beat down the share so cheap that you will be forced to sell it ... In latter case, they will balloon the prices to an extent that you will be lured to buy!! Either way, heads they win, tails you lose!!!

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

If the stock market continues to advance, we know that inequality will increase, for capital gains on equities accrue disproportionately to the top income brackets.

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

if we should put the least priority on profit and sales growth numbers then what will be our priority? The answer is Return on Equity (ROE).

The majority of any society comprised, Smith knew, not landlords or merchants, but "servants, laborers, and workmen of different kinds," who derived their income from wages. Their welfare was the prime concern of economic policy, as Smith conceived it. "No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable," he wrote. "It is but equity, besides, that they who feed, clothe and lodge the whole body of the people should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged." The chief economic concern of the legislator, in Smith's view, ought to be the purchasing power of wages, since that was the measure of the material well-being of the bulk of the population. (p. 64)

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

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 Invention of Capitalism (1600s) Beginning with the Dutch, the development of publicly available and popularly used equity markets allowed savers to effectively transfer their buying power to entrepreneurs who could put that buying power to productive and profitable use. This significantly improved the allocation of resources and was stimulative to economies because it produced new buying power. It also produced the capital markets cycles.

The economic world, the world of the equities markets, just seemed like a perfect foil, the ideal backdrop against which to contrast this story about legendary amphibians from outer space, because everything these days is all about money. In this book (Half Asleep in Frog Pajamas) I'm hoping to illustrate that there not only are far more important things than money, but there are far more interesting things. (from NPR Interviews edited by Robert Siegel)

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 Capital Markets Cycle of the Dutch The Dutch invented capitalism as we know it. This was great for the Dutch and great for the world, but like most great inventions, it brought with it some potentially deadly consequences. While production, trade, and private ownership had existed before, the ability of large numbers of people to collectively buy ownership in money-making endeavors through public equity markets did not exist. The Dutch created that when they invented the world’s first publicly listed company (the Dutch East India Company) and the first stock exchange in 1602.

We select our marketable equity securities in much the same way we would evaluate a business for acquisition in its entirety. We want the business to be (1) one we can understand, (2) with favorable long-term prospects, (3) operated by honest and competent people, and (4) available at a very attractive price. We ordinarily make no attempt to buy equities for anticipated favorable stock price behavior in the short term. In fact, if their business experience continues to satisfy us, we welcome lower market prices of stocks we own as an opportunity to acquire even more of a good thing at a better price. 1977

I was targeting good real estate assets overburdened by excessive debt. Well, I began seeing similar scenarios unfold in the corporate world and realized I could provide equity to those companies for a stake at a discounted price, and that would help them position themselves for when the market recovered.

There’s only one way America’s neighborhoods will begin to integrate: people have to want it more than vested public and corporate interests are opposed to it. And more people should want it. Mixed-race, mixed-income housing is a product we need to market. It’s the only real solution to segregated schools, for one.

Oh, to be sure, there are the get-rich dreams that float in and out of idle conversation. But there are much headier rewards closer at hand - the freedom to be your own boss and chart your own course, the chance to explore the leading edge of some new technology, the career-opening opportunity to take on far more responsibility than any established organisation would ever grant. These are what really drive early market organisations to work such long hours for such modest rewards - the dream of getting rich on equity is only an excuse, something to hold on to your family and friends as a rationale for all this otherwise crazy behavior.

I concluded that I didn’t have to find an optimum solution to Pronto’s difficulties, just a reasonable one. Trying to find an optimum solution in business is a waste of time: the factors in the equation are changing all the time. But you’ve got to have something to hang your hat on. The one core value that I chose was our high compensation policies, which I had put in place from the very start in 1958. This may sound like a strange way for polarizing a business, but I did not want to destroy the faith that Pronto Markets’ then-handful of employees had in me and in our common future. After all, they had just ponied up half the equity money needed to buy out Rexall.

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.

The place to start is with a true history of capitalism and globalization, which I examine in the next two chapters (chapters 1 and 2). In these chapters, I will show how many things that the reader may have accepted as ‘historical facts’ are either wrong or partial truths. Britain and the US are not the homes of free trade; in fact, for a long time they were the most protectionist countries in the world. Not all countries have succeeded through protection and subsidies, but few have done so without them. For developing countries, free trade has rarely been a matter of choice; it was often an imposition from outside, sometimes even through military power. Most of them did very poorly under free trade; they did much better when they used protection and subsidies. The best-performing economies have been those that opened up their economies selectively and gradually. Neo-liberal free-trade free-market policy claims to sacrifice equity for growth, but in fact it achieves neither; growth has slowed down in the past two and a half decades when markets were freed and borders opened.

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

The gist of Laszlo’s pitch for the equity department was this question: When you turn on your television at six-thirty and Dan Rather tells you that today the market went up twenty-four points, what market do you think he means? “What!” Laszlo would say. “You think he’s talking about Grade A industrial bonds? Ha! He’s talking about the stock market.” In other words, if you joined the equity department, your mother would know what you did for a living.

The economists Ulrike Malmendier and Geoffrey Tate identified optimistic CEOs by the amount of company stock that they owned personally and observed that highly optimistic leaders took excessive risks. They assumed debt rather than issue equity and were more likely than others to “overpay for target companies and undertake value-destroying mergers.” Remarkably, the stock of the acquiring company suffered substantially more in mergers if the CEO was overly optimistic by the authors’ measure. The stock market is apparently able to identify overconfident CEOs. This

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.

The balance between consumption and production makes price. The market settles, and alone can settle, that price. Market is the meeting and conference of the consumer and producer, when they mutually discover each other’s wants. Nobody, I believe, has observed with any reflection what market is, without being astonished at the truth, the correctness, the celerity, the general equity, with which the balance of wants is settled. They who wish the destruction of that balance, and would fain by arbitrary regulation decree, that defective production should not be compensated by encreased price, directly lay their axe to the root of production itself. [Thoughts and Details on Scarcity]

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.

In one study, a trio of professors from Harvard Business School tracked more than one thousand acclaimed equity analysts over a decade and monitored how their performance changed as they switched firms. Their dour conclusion, “When a company hires a star, the star’s performance plunges, there is a sharp decline in the functioning of the group or team the person works with, and the company’s market value falls.”20 The hiring organization is let down because it failed to consider systems-based advantages that the prior employer supplied, including firm reputation and resources. Employers also underestimate the relationships that supported previous success, the quality of the other employees, and a familiarity with past processes.

Bobby wrote, “the Big Tech, Big Data, Big Pharma, Big Carbon and Chemical-Industrial Food plutocrats and their allies in the Military Industrial Complex and Intelligence Apparatus now control our government. These plutocrats have twisted the language of democracy, equity and free markets to transform our exemplary democracy into a corrupt system of corporate crony capitalism. The tragic outcome for America has been a cushy socialism for the rich and a savage and bloody free market for the poor. America has devolved into a corporate kleptocracy addicted to a war economy abroad and a security and surveillance state at home. The upper echelons of the Democratic Party are now pro-censorship, pro-war neocons who wear woke bobbleheads to disguise and soften their belligerent totalitarian agendas for our country and the world.

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.

The fragility of the US economy had nearly destroyed him. It wasn't enough that Citadel's walls were as strong and impenetrable as the name implied; the economy itself needed to be just as solid. Over the next decade, he endeavored to place Citadel at the center of the equity markets, using his company's superiority in math and technology to tie trading to information flow. Citadel Securities, the trading and market-making division of his company, which he'd founded back in 2003, grew by leaps and bounds as he took advantage of his 'algorithmic'-driven abilities to read 'ahead of the market.' Because he could predict where trades were heading faster and better than anyone else, he could outcompete larger banks for trading volume, offering better rates while still capturing immense profits on the spreads between buys and sells. In 2005, the SEC had passed regulations that forced brokers to seek out middlemen like Citadel who could provide the most savings to their customers; in part because of this move by the SEC, Ken's outfit was able to grow into the most effective, and thus dominant, middleman for trading — and especially for retail traders, who were proliferating in tune to the numerous online brokerages sprouting up in the decade after 2008. Citadel Securities reached scale before the bigger banks even knew what had hit them; and once Citadel was at scale, it became impossible for anyone else to compete. Citadel's efficiency, and its ability to make billions off the minute spreads between bids and asks — multiplied by millions upon millions of trades — made companies like Robinhood, with its zero fees, possible. Citadel could profit by being the most efficient and cheapest market maker on the Street. Robinhood could profit by offering zero fees to its users. And the retail traders, on their couches and in their kitchens and in their dorm rooms, profited because they could now trade stocks with the same tools as their Wall Street counterparts.

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.

In fact, the same basic ingredients can easily be found in numerous start-up clusters in the United States and around the world: Austin, Boston, New York, Seattle, Shanghai, Bangalore, Istanbul, Stockholm, Tel Aviv, and Dubai. To discover the secret to Silicon Valley’s success, you need to look beyond the standard origin story. When people think of Silicon Valley, the first things that spring to mind—after the HBO television show, of course—are the names of famous start-ups and their equally glamorized founders: Apple, Google, Facebook; Jobs/ Wozniak, Page/ Brin, Zuckerberg. The success narrative of these hallowed names has become so universally familiar that people from countries around the world can tell it just as well as Sand Hill Road venture capitalists. It goes something like this: A brilliant entrepreneur discovers an incredible opportunity. After dropping out of college, he or she gathers a small team who are happy to work for equity, sets up shop in a humble garage, plays foosball, raises money from sage venture capitalists, and proceeds to change the world—after which, of course, the founders and early employees live happily ever after, using the wealth they’ve amassed to fund both a new generation of entrepreneurs and a set of eponymous buildings for Stanford University’s Computer Science Department. It’s an exciting and inspiring story. We get the appeal. There’s only one problem. It’s incomplete and deceptive in several important ways. First, while “Silicon Valley” and “start-ups” are used almost synonymously these days, only a tiny fraction of the world’s start-ups actually originate in Silicon Valley, and this fraction has been getting smaller as start-up knowledge spreads around the globe. Thanks to the Internet, entrepreneurs everywhere have access to the same information. Moreover, as other markets have matured, smart founders from around the globe are electing to build companies in start-up hubs in their home countries rather than immigrating to Silicon Valley.

SCULLEY. Pepsi executive recruited by Jobs in 1983 to be Apple’s CEO, clashed with and ousted Jobs in 1985. JOANNE SCHIEBLE JANDALI SIMPSON. Wisconsin-born biological mother of Steve Jobs, whom she put up for adoption, and Mona Simpson, whom she raised. MONA SIMPSON. Biological full sister of Jobs; they discovered their relationship in 1986 and became close. She wrote novels loosely based on her mother Joanne (Anywhere but Here), Jobs and his daughter Lisa (A Regular Guy), and her father Abdulfattah Jandali (The Lost Father). ALVY RAY SMITH. A cofounder of Pixar who clashed with Jobs. BURRELL SMITH. Brilliant, troubled hardware designer on the original Mac team, afflicted with schizophrenia in the 1990s. AVADIS “AVIE” TEVANIAN. Worked with Jobs and Rubinstein at NeXT, became chief software engineer at Apple in 1997. JAMES VINCENT. A music-loving Brit, the younger partner with Lee Clow and Duncan Milner at the ad agency Apple hired. RON WAYNE. Met Jobs at Atari, became first partner with Jobs and Wozniak at fledgling Apple, but unwisely decided to forgo his equity stake. STEPHEN WOZNIAK. The star electronics geek at Homestead High; Jobs figured out how to package and market his amazing circuit boards and became his partner in founding Apple. DEL YOCAM. Early Apple employee who became the General Manager of the Apple II Group and later Apple’s Chief Operating Officer. INTRODUCTION How This Book Came to Be In the early summer of 2004, I got a phone call from Steve Jobs. He had been scattershot friendly to me over the years, with occasional bursts of intensity, especially when he was launching a new product that he wanted on the cover of Time or featured on CNN, places where I’d worked. But now that I was no longer at either of those places, I hadn’t heard from him much. We talked a bit about the Aspen Institute, which I had recently joined, and I invited him to speak at our summer campus in Colorado. He’d be happy to come, he said, but not to be onstage. He wanted instead to take a walk so that we could talk. That seemed a bit odd. I didn’t yet

If Jim was back at the imaginary dinner party, trying to explain what he did for a living, he'd have tried to keep it simple: clearing involved everything that took place between the moment someone started at trade — buying or selling a stock, for instance — and the moment that trade was settled — meaning the stock had officially and legally changed hands. Most people who used online brokerages thought of that transaction as happening instantly; you wanted 10 shares of GME, you hit a button and bought 10 shares of GME, and suddenly 10 shares of GME were in your account. But that's not actually what happened. You hit the Buy button, and Robinhood might find you your shares immediately and put them into your account; but the actual trade took two days to complete, known, for that reason, in financial parlance as 'T+2 clearing.' By this point in the dinner conversation, Jim would have fully expected the other diners' eyes to glaze over; but he would only be just beginning. Once the trade was initiated — once you hit that Buy button on your phone — it was Jim's job to handle everything that happened in that in-between world. First, he had to facilitate finding the opposite partner for the trade — which was where payment for order flow came in, as Robinhood bundled its trades and 'sold' them to a market maker like Citadel. And next, it was the clearing brokerage's job to make sure that transaction was safe and secure. In practice, the way this worked was by 10:00 a.m. each market day, Robinhood had to insure its trade, by making a cash deposit to a federally regulated clearinghouse — something called the Depository Trust & Clearing Corporation, or DTCC. That deposit was based on the volume, type, risk profile, and value of the equities being traded. The riskier the equities — the more likely something might go wrong between the buy and the sell — the higher that deposit might be. Of course, most all of this took place via computers — in 2021, and especially at a place like Robinhood, it was an almost entirely automated system; when customers bought and sold stocks, Jim's computers gave him a recommendation of the sort of deposits he could expect to need to make based on the requirements set down by the SEC and the banking regulators — all simple and tidy, and at the push of a button.

By now, though, it had been a steep learning curve, he was fairly well versed on the basics of how clearing worked: When a customer bought shares in a stock on Robinhood — say, GameStop — at a specific price, the order was first sent to Robinhood's in-house clearing brokerage, who in turn bundled the trade to a market maker for execution. The trade was then brought to a clearinghouse, who oversaw the trade all the way to the settlement. During this time period, the trade itself needed to be 'insured' against anything that might go wrong, such as some sort of systemic collapse or a default by either party — although in reality, in regulated markets, this seemed extremely unlikely. While the customer's money was temporarily put aside, essentially in an untouchable safe, for the two days it took for the clearing agency to verify that both parties were able to provide what they had agreed upon — the brokerage house, Robinhood — had to insure the deal with a deposit; money of its own, separate from the money that the customer had provided, that could be used to guarantee the value of the trade. In financial parlance, this 'collateral' was known as VAR — or value at risk. For a single trade of a simple asset, it would have been relatively easy to know how much the brokerage would need to deposit to insure the situation; the risk of something going wrong would be small, and the total value would be simple to calculate. If GME was trading at $400 a share and a customer wanted ten shares, there was $4000 at risk, plus or minus some nominal amount due to minute vagaries in market fluctuations during the two-day period before settlement. In such a simple situation, Robinhood might be asked to put up $4000 and change — in addition to the $4000 of the customer's buy order, which remained locked in the safe. The deposit requirement calculation grew more complicated as layers were added onto the trading situation. A single trade had low inherent risk; multiplied to millions of trades, the risk profile began to change. The more volatile the stock — in price and/or volume — the riskier a buy or sell became. Of course, the NSCC did not make these calculations by hand; they used sophisticated algorithms to digest the numerous inputs coming in from the trade — type of equity, volume, current volatility, where it fit into a brokerage's portfolio as a whole — and spit out a 'recommendation' of what sort of deposit would protect the trade. And this process was entirely automated; the brokerage house would continually run its trading activity through the federal clearing system and would receive its updated deposit requirements as often as every fifteen minutes while the market was open. Premarket during a trading week, that number would come in at 5:11 a.m. East Coast time, usually right as Jim, in Orlando, was finishing his morning coffee. Robinhood would then have until 10:00 a.m. to satisfy the deposit requirement for the upcoming day of trading — or risk being in default, which could lead to an immediate shutdown of all operations. Usually, the deposit requirement was tied closely to the actual dollars being 'spent' on the trades; a near equal number of buys and sells in a brokerage house's trading profile lowered its overall risk, and though volatility was common, especially in the past half-decade, even a two-day settlement period came with an acceptable level of confidence that nobody would fail to deliver on their trades.

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.

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.

(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.

For example, in 1602 when the United Dutch Chartered East India Company (Dutch East India Company, for short) became the first company to issue stock,1 the shares were extremely illiquid. When first issued, no stock market even existed, and purchasers were expected to hold on to the shares for 21 years, the length of time granted to the company by the Netherlands’ charter over trade in Asia. However, some investors wanted to sell their shares, perhaps to pay down debts, and so an informal market for the stock (the very first stock market) developed in the Amsterdam East India House. As more joint-stock equity companies were founded, this informal location grew, and was later formalized as the Amsterdam Stock Exchange, the oldest “modern” securities exchange in the world.2 Despite the structure of the shares of the Dutch East India Company not changing much, their market liquidity and trading volumes changed considerably.

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.

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

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

Islamic philosophy of life prioritizes equitable distribution over efficiency. Overreliance on efficiency paralyses the equity and ethical concerns of development policy change. While Islamic principles allow freedom and liberty in lawful consumption within the moral boundaries, they induce affirmative action to promote well-being when people possess the means. In contrast, according to consumer sovereignty, as long as people can put up dollar votes for their preferences, resources will be allocated on producing, marketing and distributing inessential goods even if a quarter of the world population lives in poverty and suffers from hunger, malnourishment and curable diseases.

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

Education, like the job market, is a children’s party game where everyone gets the same prize. Yet many are laboring under the misapprehension that the goal of -equity- can be successfully reached by setting the bar so low that anybody can step over it with ease.

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.

If you sell someone a prime-rate, 5 percent annual percentage rate (APR) thirty-year mortgage in the amount of $200,000, they’ll pay you back an additional $186,512—93 percent of what they borrowed—for the privilege of spreading payments out over thirty years. If you can manage to sell that same person a subprime loan with a 9 percent interest rate, you can collect $379,328 on top of the $200,000 repayment, nearly twice over what they borrowed. The public policy justification for allowing subprime loans was that they made the American Dream of homeownership possible for people who did not meet the credit standards to get a cheaper prime mortgage. But the subprime loans we started to see in the early 2000s were primarily marketed to existing homeowners, not people looking to buy—and they usually left the borrower worse off than before the loan. Instead of getting striving people into homeownership, the loans often wound up pushing existing homeowners out. The refinance loans stripped homeowners of equity they had built up over years of mortgage payments. That’s why these diseased loans were tested first on the segment of Americans least respected by the financial sector and least protected by lawmakers: Black and brown families.

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.

Cash is an asset and so it is included in the value of assets, equity and capital in our valuation metrics. But cash does not generate a return for the business because it is not being deployed by the business.

So far in 2008, the company had spent more than $3 billion buying its own stock. And in 2007, GE had spent $15 billion on its shares. Over the entire period, GE paid an average price of about $37.50 for half a million shares worth more than $18 billion. Now, it would sell almost 550,000 shares back to the market for $22.25 a share in order to raise $12.2 billion. By selling shares back to the market at a much lower price, GE was wiping out more than twice the amount of cash that the deal with Buffett had yielded. It was a disastrous use of the equity markets, and it wouldn’t be the last time.

Economist Walter Williams explains why: “The relative color blindness of the market accounts for much of the hostility towards it. Markets have a notorious lack of respect for privilege, race, and class structures.”63 If woke leaders truly wanted “fairness” and “equity,” they would be unabashed supporters of the free market.

Advertisers also won’t miss traditional media, since the thing traditional media advertising does best—build mass brands—is increasingly irrelevant as we graduate from the Brand Age to the Product Age. There is a double bind here, because brand equity erodes slowly, and a few months of reduced spend isn’t going to move any needles. Which will make it that much harder even for marketers still attending the church of brand equity to justify returning their traditional media spend to pre-pandemic levels.

The big three for most investors are equities, interest rate securities, and real estate. Each accounts for about a quarter of the total net worth of US households, though the proportions fluctuate, particularly when an asset class experiences a boom or a bust.

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.

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.

Hence, after this foreshortened discussion of the major considerations, we once again enunciate the same basic compromise policy for defensive investors—namely that at all times they have a significant part of their funds in bond-type holdings and a significant part also in equities. It is still true that they may choose between maintaining a simple 50–50 division between the two components or a ratio, dependent on their judgment, varying between a minimum of 25% and a maximum of 75% of either. We shall give our more detailed view of these alternative policies in a later chapter. Since at present the overall return envisaged from common stocks is nearly the same as that from bonds, the presently expectable return (including growth of stock values) for the investor would change little regardless of how he divides his fund between the two components. As calculated above, the aggregate return from both parts should be about 7.8% before taxes or 5.5% on a tax-free (or estimated tax-paid) basis. A return of this order is appreciably higher than that realized by the typical conservative investor over most of the long-term past. It may not seem attractive in relation to the 14%, or so, return shown by common stocks during the 20 years of the predominantly bull market after 1949. But it should be remembered that between 1949 and 1969 the price of the DJIA had advanced more than fivefold while its earnings and dividends had about doubled. Hence the greater part of the impressive market record for that period was based on a change in investors’ and speculators’ attitudes rather than in underlying corporate values. To that extent it might well be called a “bootstrap operation.” In

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.

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.

The one core value that I chose was our high compensation policies, which I had put in place from the very start in 1958. This may sound like a strange way for polarizing a business, but I did not want to destroy the faith that Pronto Markets’ then-handful of employees had in me and in our common future. After all, they had just ponied up half the equity money needed to buy out Rexall.

By the time I bought Pronto Markets, it might have taken only a slightly bigger trailer, mostly to accommodate the cribs for the two kids we now had. We did find the money, somehow. Rexall was willing to take back paper. (Dart was in a hurry to wind up his retailing affairs. This was a big advantage for me, because if I walked away, he’d be left with a crumb of a bastard business.) We had $4,000 from Alice’s savings from her teaching school before she had the kids (we lived on my $325) and we sold our little house in which we had an equity of $7,000. I borrowed $2,000 from my grandmother and $5,000 from my father. (Pop, an engineer, spent most of his career being alternately employed and dis-employed by General Dynamics depending on the vagaries of the aerospace business; in between he owned a series of small businesses. I think he even had a Mac Tool route in 1962.)

Another impressive ratio is Altman Z-Score. Discovered in 1968 by Edward Altman, this quotient measures the probability of a company going into bankruptcy within two years. Over the last few decades, the formula has proven to be highly accurate. It was originally developed for public manufacturing companies, with other versions for private and non-manufacturing organizations becoming available later. The original Z-Score formula was as follows: Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.99X5 Where: X1 = Working Capital / Total Assets X2 = Retained Earnings / Total Assets X3 = Earnings Before Interest and Taxes / Total Assets. X4 = Market Value of Equity / Book Value of Total Liabilities. X5 = Sales / Total Assets. If Z > 2.99, the company is in the Safe Zone.

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.

Trillions of dollars in homeowner equity…so are the best “captains” of “equity conversion airplanes” the homeowners themselves? No. There is an impetus placed upon real estate professionals - as well as an implied responsibility - to honestly, to effectively and to accurately communicate reality to home sellers. An inability to do so? Fewer real estate listings. Lower sale prices for home sellers. Less equity converted into cash for home sellers. Less revenue for real estate companies. Inopportune…across the board. Three years ago, American homeowners were custodians of an estimated $19 trillion in homeowner equity. Furthermore, over the past three years - even with these stubbornly-elevated mortgage rates - we witnessed an uninterrupted, further run-up in home prices. More equity gained, for American homeowners. As mortgage rates ease downwards heading into the fall, unlocking trillions of dollars in homeowner equity - as a result of more homeowners deciding to either trade up to larger homes, or to downsize to smaller homes, circumstances permitting - will trigger a large-scale (and an upcoming) re-thinking of this following question by more and more homeowners: What shall we now do with this equity we have in our home? So what’s the plan? In real estate, the effective utilization of well-tested "tools,” such as 3-D tours and virtual staging, coupled to good marketing processes - I.e.: a Marketing Plan - deployed by successful real estate teams is a great way for homeowners to convert the equity they have in their homes into cash. It works. Ok, so if you are a for sale by owner home seller in 2024, data indicate that an over-reliance in - as well as, maybe, blind faith placed upon(?), “the Internet,” if you decide to sell your home yourself, FSBO, could lead to an entirely avoidable (and a costly) home selling misadventure. As well as to a saddened foray for home sellers into this unintended outcome: lower sale prices.

The plan was to invest an equal amount of money in each of the fifteen hundred or so stocks listed on the New York Stock Exchange, as this was the closest approximation to the entire US equity market. And in July 1971, the first-ever passively managed, index-tracking fund was born, courtesy of an initial $6 million investment from Samsonite’s pension fund.

One early point of criticism—which would be echoed many times over the coming decades—was that if too many people turned to indexing, it would make markets less efficient and stunt their vibrancy. “The entire capital allocation function of the securities markets would be distorted, and only companies represented in indexes would be able to raise equity capital,” Erwin Zeuschner and Mary Onie Holland of Chase Investors Management Corp. warned in a letter to the Wall Street Journal in 1975.33

Can one unearth above-average fund managers, who can consistently or over time beat the market? Once again, the academic research is gloomy for the investment industry. Using the database first started by Jim Lorie’s Center for Research in Security Prices, S&P Dow Jones Indices publishes a semiannual “persistence scorecard” on how often top-performing fund managers keep excelling. The results are grim reading, with less than 3 percent of top-performing equity funds remaining in the top after five years. In fact, being a top performer is more likely to presage a slump than a sustained run.18 As a result, as Fernando’s defenestration highlighted, the hurdle to retain the faith of investors keeps getting higher, even for fund managers who do well.* In the 1990s, the top six deciles of US equities-focused mutual funds enjoyed investor inflows, according to Morgan Stanley.19 In the first decade of the new millennium, only the top three deciles did so, and in the 2010–20 period, only the top 10 percent of funds have managed to avoid outflows, and gathered assets at a far slower pace than they would have in the past.

The GNP lumps together goods and bads. (If there are more car accidents and medical bills and repair bills, the GNP goes up.) It counts only marketed goods and services. (If all parents hired people to bring up their children, the GNP would go up.) It does not reflect distributional equity. (An expensive second home for a rich family makes the GNP go up more than an inexpensive basic home for a poor family.) It measures effort rather than achievement, gross production and consumption rather than efficiency. New light bulbs that give the same light with one-eighth the electricity and that last ten times as long make the GNP go down. GNP is a measure of throughput—flows of stuff made and purchased in a year—rather than capital stocks, the houses and cars and computers and stereos that are the source of real wealth and real pleasure.

First, Modern Portfolio Theory only works if a portfolio has some fixed income as well as some equity. This system breaks down if you’re too tilted one way or the other. For example, during a stock market crash like the one we had, if I had been holding 100 percent equity, rebalancing wouldn’t work. As the stock market plummeted, there would have been no complementary asset that would rise, so my allocations wouldn’t have changed and I’d have had nothing to rebalance. That’s why I advise not going above 80 percent equity, even if you’re an aggressive investor.

1. Focus on return on equity, not earnings per share. 2. Calculate “owner earnings” to get a true reflection of value. 3. Look for companies with high profit margins. 4. For every dollar retained, make sure the company has created at least one dollar of market value.

Raising capital. Organisations like Rio Tinto, TomTom and GKN have all raised significant sums through the equity markets. Refinancing debt. Some companies, like Yell and Schaeffler, have rolled over billions in bank finance. However, many businesses are still finding banks reluctant to lend and have turned to bond issuance as an alternative. Divestment. Companies can sell off valuable assets, such as Barclays did with Barclays Global Investors, and it is always better to do so before a crisis; otherwise it will be seen for the fire sale it is and the price will be a fire-sale price. Furthermore, any sell-off that weakens a firm’s core capability or its long-term competitive position may also shorten its life. Cut costs but not capability The managing uncertainty survey revealed that the most common action that companies took when the financial crisis struck was to cut costs. Some 82% of respondents cut costs. When asked about their future responses to uncertainty, 76% indicated they would continue to focus on cost reduction.

The private-equity approach can take the form of simple improvements, such as changing irrigation from antiquated dykes and canal networks to automatic spray systems: these are the equivalent of picking low-hanging fruit. Pricey robots can boost milk per cow by 10-15%. Using “big-data” analytics to plant and cultivate seeds can push crop yields up 5%. “This is an industry where the gap between the top and bottom quartile is greater than anywhere else,” says Detlef Schoen of Aquila Capital, an alternative-investment firm. And yet the 36 agriculture-focused funds, with $15 billion under management, pale in comparison to the 144 funds focused on infrastructure ($89 billion) and 473 targeting real estate ($163 billion), according to Preqin, a data provider. TIAA-CREF, an American financial group, is a market leader with $5 billion in farmland, from Australia to Brazil, and its own agricultural academic centre at the University of Illinois. Canadian pension funds and Britain’s Wellcome Trust are among those bolstering their farming savvy.

There are six that I think are really important and they are US stocks, US Treasury bonds, US Treasury inflation-protected securities [TIPS], foreign developed equities, foreign emerging-market equities, and real estate investment trusts [REITs].

Albert Edwards admits that his “über bear” reputation is well deserved, at least with respect to equities, an asset class he has dismissed for the last 10 years. His bearishness has not abated, and for the coming year, he fears that “deflation will overwhelm the west.” Markets, he said, will riot. Edwards is the chief global strategist for Société Générale and he spoke at that firm’s annual global strategy conference in London on January 13. Andrew Lathrope, the firm’s head of global quantitative strategy, and Dr. Marc Faber, the publisher of the Gloom Boom & Doom Report, also spoke.

What does this mean? It means that there is a statistical link to firm performance through the MCM component capabilities of selection, portfolio view, monitoring, and adaptive learning. That is, firms that have these processes in place have better market performance, brand equity, and customer equity relative to the market average.

Customer equity. Relationship marketing to build customer equity. Examples include exclusive offers for loyal customers, executive events in B2B, reward cards, and so on.

When long-term effects were included in the calculations, however, the contribution of digital dropped by half. Online displays and Facebook advertising just cannot deliver the same emotional connection that brand equity requires that TV advertising does. Significant cuts to TV spend as suggested by traditional MMM would have reduced the NPV of the brand’s profit. In

Keynes had been appointed to the board of the National Mutual, one of the oldest institutions in the city, in 1919.107 He had served as chairman of the insurer, and helped manage its investment portfolio from 1921. That portfolio lost £641,000 ($61 million), an enormous sum of money in 1937. While Keynes was recuperating from a heart attack, F. N. Curzon, the acting chairman of the insurer called him to account for the loss.108 Curzon and the board criticized Keynes’s investment policy of remaining invested in his “pet” stocks during the decline.109 In a response to Curzon in March 1938, Keynes wrote:110 1. I do not believe that selling at very low prices is a remedy for having failed to sell at high ones. . . . As soon as prices had fallen below a reasonable estimate of intrinsic value and long-period probabilities, there was nothing more to be done. It was too late to remedy any defects in previous policy, and the right course was to stand pretty well where one was. 2. I feel no shame at being found owning a share when the bottom of the market comes. I do not think it is the business, far less the duty, for an institutional or any other serious investor to be constantly considering whether he should cut and run on a falling market, or to feel himself open to blame if shares depreciate on his hands. . . . An investor is aiming, or should be aiming, primarily at long-period results, and should be solely judged by these. . . . The idea that we should all be selling out to the other fellow and should all be finding ourselves with nothing but cash at the bottom of the market is not merely fantastic, but destructive of the whole system. 3. I do not feel that we have in fact done particularly badly. . . . If we deal in equities; it is inevitable that there should be large fluctuations.

Our analysis of the core proposition was flawed in one important regard: we allowed ourselves to be overly impressed by the science and spent too little time on the marketplace analysis. In fact, what we had was a solution looking for a problem—rather like the laser beam technology that sent so many people broke in the sixties and seventies before the market was ready for laser-based solutions. Beware of solutions looking for problems!

Herrick then had to prove the third part of his proposition—that a demand for wine from this region could be established in the UK market. Not surprisingly, convincing the key buyers in the specialty chains like Oddbins and Victoria Wines took longer than first thought. The 1993 vintage was small and somewhat experimental; it was really not until the 1994 vintage was available that the buyers became confident of the sustainability and quality of the James Herrick label. The big retailers Tesco and Sainsbury’s also bought the product as it began to establish a position at the then premium price point of £3.99 a bottle. The fundamental pieces of the core proposition were beginning to work.

A second piece of fortunate timing was the strength of the equities market and the voracious appetite for new issues during the first half of 1998.

To paraphrase the very quotable Silicon Valley venture capitalist Marc Andreessen, in the future there will be two types of jobs: people who tell computers what to do, and people who are told by computers what to do. Wall Street was merely the first inkling. The next place where this shift would be seen at whopping scale in terms of both money and technology (though I didn’t realize at the time) was in Internet advertising. And after that, it would hit transportation (Uber), hostelry (Airbnb), food delivery (Instacart), and so on. To take the theory further, computation would no longer fill some hard gap in a human workflow process, such as the calculators used by accountants. Humans would fill the hard gaps in a purely computer workflow process, like Uber’s drivers. But we’re getting ahead of ourselves. There’s an additional lesson here. This shift from humans to computers took place predominantly on the equity side of things. The debt side of the financial world, for various reasons, still traded in what amounted to open-outcry markets with humans talking to one another, whether through phones or instant messaging systems. It was capitalism at the speed a tongue can wag or hands can type. This was mostly because a company’s debt is complex and multifarious, and entities like General Motors have hundreds if not thousands of different types of debt floating around the world’s trading floors. Briefly, they are not what economists call “fungible,” meaning interchangeable the way quarter-inch screws or bottle caps are.

mismatched collection of flea market leftovers. The walls, though, were exhibiting an interesting collection of oils and pastels by local artists, all for sale at very reasonable prices. The artwork. The prior year the equity partners at Scully & Pershing had gone to war over a designer’s proposal to spend $2 million on some baffling avant-garde paintings to be hung in the firm’s main foyer. The designer was ultimately fired, the paintings forgotten, and the money split into bonuses.

The economist Harry Markowitz won the 1990 Nobel Prize in Economics for developing modern portfolio theory: his groundbreaking “mean-variance portfolio optimization” showed how an investor could make an optimal allocation among various funds and assets to maximize returns at a given level of risk. So when it came time to invest his own retirement savings, it seems like Markowitz should have been the one person perfectly equipped for the job. What did he decide to do? I should have computed the historical covariances of the asset classes and drawn an efficient frontier. Instead, I visualized my grief if the stock market went way up and I wasn’t in it—or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions fifty-fifty between bonds and equities. Why

HDFC Bank was the first of the private lenders to go public— even before it completed a full year. 'It was a mistake,' Deepak told me. The RBI required the new banks to go public within a year but all other lenders went back to the regulator and got extensions. 'We didn't ask for it. We were too naive,' Deepak said. 'Everybody took time as they wanted to get a premium. We sold at par, ₹10. But I have no regrets.' Deepak pushed for a par issue as the bank had nothing to show. And the disaster of parent HDFC's listing was still haunting him, though that had happened a decade and a half ago. In 1978, India's capital market was in a different shape and mortgage was a new product, not understood by many. HDFC put the photograph of its first borrower on the cover of its balance sheet, a D. B. Remedios from Thane, who took a loan of ₹35,000 to build his house. The public issue of HDFC bombed. In an initial public offering (IPO) of ₹10 crore, the face value of one share was ₹100. ICICI, IFC (Washington) and the Aga Khan Fund took 5% stakes each in the mortgage lender and the balance 85% equity was offered to the public, but there were few takers. The stock quoted at a steep discount on listing. For the bank, Deepak did not want to take any chance. So portions of the issue were reserved for the shareholders and employees of HDFC as well as the bank's employees. HDFC decided to own close to a 26% stake in the bank and NatWest 20%. Satpal was offered about 5% and the public 25%. The size of the public issue was ₹50 crore. 'We didn't know whether it would succeed. Our experience with HDFC had been a disaster,' Deepak said. But Deepak had grossly underestimated investors' appetite for the new bank. The issue, which opened on 14 March 1995, was subscribed a record fifty-five times. The stock was listed on the Bombay Stock Exchange (now known as BSE Ltd) on 26 May that year at ₹39.95, almost at a 300% premium.

The likes of UBS, CSFB, JPM, Merrills, Deutsche, Goldman Sachs and Rothschilds had all rapidly developed their PE practices dedicated to servicing the Australian PE markets. And so it was only a question of time before the major offshore PE houses would be encouraged to our shores. Blackstone, KKR, CVC, TPG, Carlyle were some of the ‘big guns’ seeking targets in antipodean hunting grounds.

In the immediate period ahead, there will continue to be a strong presence of the offshore PE group in the larger end of the Australian PE markets.

it makes sense to be ready should an attractive opportunity suddenly appear. This may manifest in the form of the IPO market window opening, or an unexpected approach by a major trade competitor.