We may not know how and when the cleansing of market excess will play out in specific terms, but cleansed it shall be.
At least we’re not falling back on Irrational Exhuberance.
If things change enough, a new yardstick is required.
The ebb and flow in the capital market cycle, which can infect almost anyone with fever when things get rolling as they are now, or deep depression when they are in a free fall or moribund.
But there’s one critical difference: Bill Gates and his entrepreneur-peers started with an idea, took extraordinary personal and financial risk, and were lucky enough to build meaningful companies (most fail, please remember). Corporate managers, on the other hand, are neither tasked with creating whole new industries nor required to take those risks, but they want to be paid as if they did.
The alternatives - holding the investments at historical book value or having them appraised in the traditional manner - may offer familiar comfort, but they are not suitable for this purpose.
All of these asset classes share the distinction of being large, growing and hard-to-value, and - in light of the three key industry drivers - compel Hedgebay and Numeria to align.
I think the potential for information markets is much larger than usually reported. I also think the reluctance to try them is deeper than most want to admit and thus it will take longer to catch on.
If truly understanding a firm’s operating cash flow is important to you, don’t just rely on someone else’s calculation thereof; and avoid the temptation to rely on widely-quoted measures of operating cash flow that may actually hide more than they reveal. Unless you don’t mind losing money.
Creating any new market requires patience. Even eBay didn’t go from zero to a billion transactions overnight
How in blazes Vonage could put its customer relationships at even greater risk by making it so easy to participate in the IPO is beyond me.
On top of an unprecedented amount of capital sloshing around the globe, not just in the U.S. and Western Europe, the big change this time is the role of hedge funds.
This crowd of seasoned pros, who’d all lived through several economic cycles, feel a slowdown coming on like a cold, damp rain.
IPOs are meant to be sold.
We may indeed be poised for a pullback in share prices, and maybe these firms will lead the way down, but I really think the whole options argument is a red herring.
Now we see what happens when the environment turns hostile; when blockbusters get some competition; and when growth doesn’t materialize: a slow, agonizing surrender of market value. Indeed, they’ve been grinding their stockholders to death for the past 5 or 6 years.
Deals sometimes aren’t fair. And even when they are, one has little faith in fairness opinions because they’re prepared by the same investment bankers who brokered the deal or have some other vested interest in its outcome.
FDA action can and will eventually get the market’s attention, not only damaging the erstwhile credibility of the firm but its enterprise value as well.
J&J may have lost this battle, but I’ll bet they’ll win the war. They stayed cool and retreated when they knew that prices were heading into Silly Land.
Even though Side Pockets reconcile several of the differences between hedge funds and private equity, such that the former can more easily invest in the latter, the question of valuation is still bouncing around like a just-fumbled football.
These are but two of the many reasons cynics will cite when they say hedge funds are playing with dynamite and don’t know it. That is to say, pricing discipline and thorough due diligence are the hard lessons learned in the 30-year history of the private equity market.
One can understand the cynics who say these are two worlds that should never, ever converge. Indeed, it could be a collision with bodies strewn everywhere. But opposites do attract, and it’s equally easy to see how their distinguishing features make them perfect complements.
Today’s trouble is just another version of “options as currency printing press”, which is merely a sophisticated way of looting the neighborhood.
Trust matters because when it unexpectedly departs, so too goes much of the value it created and sustained.
But the news isn’t all that bad: there’s a boomlet underway on Wall Street for good, old-fashioned advice from seasoned bankers who are neither intermediaries nor capital-raisers. Let’s hear it for independent and objective expertise.
Intangibles, and the error one makes by under or overweighting their importance, remains a huge unresolved debate among accountants, economists, investors and business leaders, due to several still-evolving trends and an accounting system struggling to catch up.
The Clearest View is about ideas that affect the creation (or impairment) of value, particularly in private firms. Why bother? Good question.