Hi Bob, I posted this on Les H's thread.... some interesting thoughts on Indexing, Private Equity and Foundations. as well as a Master's level mini course on tax effectiveness for the elite.... and for the rest of us as well.
this could prove to be a thought provoking post for several individuals......
Hi Les , your April post that you linked to has 2734 stocks and this post today has 2728 stocks..... so the number of individual stocks continues to shrink..... while the proliferation and growth in the number of ETF's continues to expand.... almost exponentially....
at some point the number of ETF derivatives is going to be so much greater and have some much more assets under management, that it seems like it will cause a dislocation and turbulence in the underlying market.
I continue to find it fascinating that the Wilshire 5000 index is down to only 3618 components due to mergers, take unders (DELL going private) and the absolute dearth of IPO's..... what a changed world from the 1960's and the 1990's.. when Silicon Investor started in 1995..... and in 1998 -1999.... there was like an IPO a day...
I recall days when there were multiple IPO's....
Hi Les , your April post that you linked to has 2734 stocks and this post today has 2728 stocks..... so the number of individual stocks continues to shrink..... while the proliferation and growth in the number of ETF's continues to expand.... almost exponentially....
at some point the number of ETF derivatives is going to be so much greater and have some much more assets under management, that it seems like it will cause a dislocation and turbulence in the underlying market.
I continue to find it fascinating that the Wilshire 5000 index is down to only 3618 components due to mergers, take unders (DELL going private) and the absolute dearth of IPO's..... what a changed world from the 1960's and the 1990's.. when Silicon Investor started in 1995..... and in 1998 -1999.... there was like an IPO a day...
I recall days when there were multiple IPO's....
The Wilshire 5000 Total Market Index, or more simply the Wilshire 5000, is a market-capitalization-weighted index of the market value of all stocks actively traded in the United States. As of December 31, 2016 the index contained only 3,618 components. [1] The index is intended to measure the performance of most publicly traded companies headquartered in the United States, with readily available price data, (Bulletin Board/penny stocks and stocks of extremely small companies are excluded). Hence, the index includes a majority of the common stocks and REITs traded primarily through New York Stock Exchange, NASDAQ, or the American Stock Exchange. Limited partnerships and ADRs are not included. It can be tracked by following the ticker ^W5000.
It's a changed world with Dodd-Frank and Private Equity keeping companies private longer and longer..giving rise to the unicorn (a Private company start up valued at over $ 1 billion dollars, )
A unicorn is a startup company valued at over $1 billion. ... A decacorn is a word used for those companies over $10 billion, while hectocorn is the appropriate term for such a company valued over $100 billion.
Unicorn (finance) - Wikipedia
en.wikipedia.org
having a private equity valuation of over $100 billion dollars in a completely illiquid investment is really a theoretical value.... it is similar to what some of the Major Bank FX long-dated trader books have looked like.... their is no liquidity or even a standardized methodology of marking a 7 year Forward NZD position is
worth...... the bid ask spread..... if you were at Citibank, or Deutschebank and running an intermediate or long dated FX book... you have a currency and interest rate assigned... by yourself if you are running the book and can really tweak the valuation of the position 20% higher or lower without anyone even the bank risk management overlords and highest level of C level management knowing what you are doing... and
since you are generating your own valuations on a mark to market you can show profitability which the management loves..... and as positions mature.... additional ones are put on in a perpetuity... in theory and
often in practice.
Andy Krieger, A Banker's Trust FX trader made the front page of the WSJ in 1987 or very early 1988 when it
made the news that he had generated $300 million dollars in profits on his FX trading..... The headline question in the WSJ article is how much compensation should he receive for his bonus.... the normal compensation percentage would have him earning a potential $30 million dollar bonus or more....
Much more money than the Bank CEO was making..... it later came out that he was making markets in his FX options book and I believe he probably also had long-dated FX positions (which can be thought of as a
foreign currency bond type of derivative instrument).... Krieger had a number of highly illiquid, option positions in currencies like the New Zealand Dollar, the Australian dollar... and other currencies... and you can have long dated OTC (over the counter) custom made option positions with your counter party banks and there is no site where you could go and look up the valuation of the position... and more importantly... different methodologies to valuing the positions.... several of which could be theoretically argued as correct.
Unicorn Definition | Investopedia
www.investopedia.com/terms/u/unicorn.asp
In the world of business, a unicorn is a company, usually a start-up that does ... 80 private companies have raised financings at valuations over $1B" since the ...
A unicorn is a startup company valued at over $1 billion. The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures. [1] [2] [3] [4] Canadian tech unicorns are known as narwhals. [5] A decacorn is a word used for those companies over $10 billion, [6] while hectocorn is the appropriate term for such a company valued over $100 billion. According to TechCrunch, there were 223 unicorns as of March 2017. [7] The largest unicorns included Uber, Xiaomi, Airbnb, Palantir, Dropbox and Pinterest. [8] Snap, Inc. is the most recent decacorn that turned into a public company on March 2, 2017.
Bill Gurley, a partner at Benchmark predicted in March 2015 and earlier that the rapid increase in the number of unicorns may presage what he has termed a "risk bubble" that will eventually burst, leaving in its wake what he terms dead unicorns. [9] [10] [11]
I realize I am deep in the weeds here....Les... I though I would drop by and give you big time kudos
for the incredible yeoman efforts you put in on this thread.... really fantastic statistical information in a noise free environment.
John
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Three out of the top 5 most valuable Unicorns are located in China. The other two Unicorns are headquartered in San Francisco, California.
Uber[ edit]Current Valuation: $62.5 Billion (July 2016)Total Equity Funding: $8.6 BillionUber, formerly known as UberCab, is a car-sharing, transportation network company that lets the consumers use its mobile app to order a car to transport them to another location (like a taxi service). Uber services are active in a total of 81 countries and 581 cities around the world. [33]Founding Date: 2009Headquarters: San Francisco, California ANT Financial[ edit]Current Valuation: $60 Billion (February 2017)Total Equity Funding: $4.5 BillionANT Financial, formerly known as Alipay, is a payment to payment company that runs the payment platform of Alibaba.Founding Date: 2014Headquarters: Xihu District, Hangzhou, China Xiaomi[ edit]Current Valuation: $45 Billion (April 2015)Total Equity Funding: $1.1 BillionXiaomi is a Chinese electronics company that has become the 5th largest smartphone maker in the world.Founding Date: 2010Headquarters: Haidian District, Beijing, China Didi Chuxing[ edit]Current Valuation: $33.7 Billion (September 2016)Total Equity Funding: $9.94 BillionDidi Chuxing, formerly known as Didi Kuaidi, is a car-sharing, transportation network company that lets the consumers use its mobile app to order a car to transport them to another location (just like Uber). Didi Chuxing services span 400 cities with almost 400 million users in ChinaFounding Date: 2012Headquarters: Haidian District, Beijing, China Airbnb[ edit]Current Valuation: $31 Billion (March 2017)Total Equity Funding: $3.4 BillionAirbnb, is a property-sharing, online marketplace company that lets the consumers have short-term lodging in a variety of vacation rentals, apartment rentals, hostel beds, or hotel rooms. Airbnb has over 3 million lodging listings in 65,000 cities and 191 countries.Founding Date: 2008Headquarters: San Francisco, California----------------------------
More on Andy Krieger... from Investopedia.....
investopedia.com
The Greatest Currency Trades Ever Made
By Andrew Beattie
The foreign exchange ( forex) market is the largest market in the world because currency is changing hands whenever goods and services are traded between nations. The sheer size of the transactions going on between nations provides arbitrage opportunities for speculators, because the currency values fluctuate by the minute. Usually these speculators make many trades for small profits, but sometimes a big position is taken up for a huge profit or, when things go wrong, a huge loss. In this article, we'll look at the greatest currency trades ever made.
SEE: Forex
How the Trades Are Made
First, it is essential to understand how money is made in the forex market. Although some of the techniques are familiar to stock investors, currency trading is a realm of investing in and of itself. A currency trader can make one of four bets on the future value of a currency:
Shorting a currency means that the trader believes that the currency will go down compared to another currency.Going long means that the trader thinks the currency will increase in value compared to another currency.The other two bets have to do with the amount of change in either direction - whether the trader thinks it will move a lot or not much at all - and are known by the provocative names of strangle and straddle.
Once you're decided on which bet you want to place, there are many ways to take up the position. For example, if you wanted to short the Canadian dollar ( CAD), the simplest way would be to take out a loan in Canadian dollars that you will be able to pay back at a discount as the currency devalues (assuming you're correct). This is much too small and slow for true forex traders, so they use puts, calls, other options and forwards to build up and leverage their positions. It's the leveraging in particular that makes some trades worth millions, and even billions, of dollars.
No. 3: Andy Krieger Vs. the Kiwi
In 1987, Andy Krieger, a 32-year-old currency trader at Bankers Trust, was carefully watching the currencies that were rallying against the dollar following the Black Monday crash. As investors and companies rushed out of the American dollar and into other currencies that had suffered less damage in the market crash, there were bound to be some currencies that would become fundamentally overvalued, creating a good opportunity for arbitrage. The currency Krieger targeted was the New Zealand dollar, also known as the kiwi.
Using the relatively new techniques afforded by options, Krieger took up a short position against the kiwi worth hundreds of millions of dollars. In fact, his sell orders were said to exceed the money supply of New Zealand. The selling pressure combined with the lack of currency in circulation caused the kiwi to drop sharply. It yo-yoed between a 3 and 5% loss while Krieger made millions for his employers.
One part of the legend recounts a worried New Zealand government official calling up Krieger's bosses and threatening Bankers Trust to try to get Krieger out of the kiwi. Krieger later left Bankers Trust to go work for George Soros.
FOUNDTIONS--- The keys to the Kingdom of Tax effective Asset preservation and growth for the long haul...... leave a legacy for the ages.
an excellent example ---- The F M Kirby Foundation ------ fdnweb.org
I watched it built out and grow for 40 years. As my Grandfather and his son, my Mom's only brother worked for the foundation from 1964 until into 2003... when my uncle, who spent his entire career working on part of the one of the foundations many large scale.... multigenerational projects.
( Krieger who read sanskrit and was a pretty sharp guy, took some of his several million dollar bonus and wisely set up a Foundation.... i believe it was named the Karma foundation...... a highly tax effective maneuver that I would recommend anyone with even a relatively modest sum of wealth consider doing..... as the Money grows tax free in perpetuity.... assets you acquire can be left on the books at purchase cost and not marked to market<< (think cash flow positive each year and whose asset value appreciates greatly over time..... a 5,000 acre parcel of Timber producing land in the Adirondack mountains or Wisconsin (hint).... or New Zealand would be a great example... the foundation pays out 5% of asset value each year.... however, there are numerous of completely legal (GAAP) Generally Accepted accounting Principles that enable the foundation to actually disburse a smaller % than 5 %..... especially since part of the operating expenses of running the foundation are expenses that are taken into consideration and foundations can also donate to philanthropic causes that are aligned with the interests of the board of directors of your foundation... i.e. your wife and children.... or husband and wife and a asset management specialist, and specialist in philanthropic giving........ and one can fund genuinely worthy and spiritually fulfilling ventures, in areas of interest.... opening a free library in the small town you grew up in, or a medical clinic... a literacy project, seeing eye dogs... where the foundation buys a property that trains seeing eye dogs and rescue and service dogs... youth education scholarships.... Mentoring.... .Editorial addendum by JJP)
No. 2: Stanley Druckenmiller Bets on the Mark - Twice
Stanley Druckenmiller made millions by making two long bets in the same currency while working as a trader for George Soros' Quantum Fund.
Druckenmiller's first bet came when the Berlin Wall fell. The perceived difficulties of reunification between East and West Germany had depressed the German mark to a level that Druckenmiller thought extreme. He initially put a multimillion-dollar bet on a future rally until Soros told him to increase his purchase to 2 billion German marks. Things played out according to plan and the long position came to be worth millions of dollars, helping to push the returns of the Quantum Fund over 60%.
Possibly due to the success of his first bet, Druckenmiller also made the German mark an integral part of the greatest currency trade in history. A few years later, while Soros was busy breaking the Bank of England, Druckenmiller was going long in the mark on the assumption that the fallout from his boss' bet would drop the British pound against the mark. Druckenmiller was confident that he and Soros were right and showed this by buying British stocks. He believed that Britain would have to slash lending rates, thus stimulating business, and that the cheaper pound would actually mean more exports compared to European rivals. Following this same thinking, Druckenmiller bought German bonds on the expectation that investors would move to bonds as German stocks showed less growth than the British. It was a very complete trade that added considerably to the profits of Soros' main bet against the pound.
No. 1: George Soros Vs. the British Pound
The British pound shadowed the German mark leading up to the 1990s even though the two countries were very different economically. Germany was the stronger country despite lingering difficulties from reunification, but Britain wanted to keep the value of the pound above 2.7 marks. Attempts to keep to this standard left Britain with high interest rates and equally high inflation, but it demanded a fixed rate of 2.7 marks to a pound as a condition of entering the European Exchange Rate Mechanism (ERM).
Many speculators, George Soros chief among them, wondered how long fixed exchange rates could fight market forces, and they began to take up short positions against the pound. Soros borrowed heavily to bet more on a drop in the pound. Britain raised its interest rates to double digits to try to attract investors. The government was hoping to alleviate the selling pressure by creating more buying pressure.
Paying out interest costs money, however, and the British government realized that it would lose billions trying to artificially prop up the pound. It withdrew from the ERM and the value of the pound plummeted against the mark. Soros made at least $1 billion off this one trade. For the British government's part, the devaluation of the pound actually helped, as it forced the excess interest and inflation out of the economy, making it an ideal environment for businesses.
A Thankless Job
Any discussion around the top currency trades always revolves around George Soros, because many of these traders have a connection to him and his Quantum Fund. After retiring from active management of his funds to focus on philanthropy, Soros made comments about currency trading that were seen as expressing regret that he made his fortune attacking currencies. It was an odd change for Soros who, like many traders, made money by removing pricing inefficiencies from the market. Britain did lose money because of Soros and he did force the country to swallow the bitter pill of withdrawing from the ERM, but many people also see these drawbacks to the trade as necessary steps that helped Britain emerge stronger. If there hadn't been a drop in the pound, Britain's economic problems may have dragged on as politicians kept trying to tweak the ERM.
The Bottom Line
A country can benefit from a weak currency as much as from a strong one. With a weak currency, the domestic products and assets become cheaper to international buyers and exports increase. In the same way, domestic sales increase as foreign products go up in price due to the higher cost of importing. There were very likely many people in Britain and New Zealand who were pleased when speculators brought down the overvalued currencies. Of course, there were also importers and others who were understandably upset. A currency speculator makes money by forcing a country to face realities it would rather not face. Although it's a dirty job, someone has to do it.
(The Rothschild Brothers -- family-- were specialists in this type of activity from the late 1780's well into the 20th century..... as well as huge gambits in Gold and other vast wealth creation Investment Banking activities...... )
Read more: The Greatest Currency Trades Ever Made investopedia.com
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