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Credit, Securities Backed Lines Of Credit

Securities Backed Lines Of Credit

The Differences between Individual Margin Accounts and Revolving Credit?

It’s noon the day after Donald Trump has been victorious in his comeback cementing his Re-Election as President of the United States, and the country is electrified and the Stock Market is Roaring to all time heights today. But did you know? You can use you Securities as collateral to finance a loan? Yep! So I felt the need to share more about this today. Hmmm…It’s true!

Imagine yourself in the world of business and your a entrepreneur and all of a sudden you find yourself needing to use some debt to pay for your liquidity crisis? It happens and happened to me recently here is what I learned!

Credit Types

First before we dive into Margin Accounts that Banks Offer, we first must distinguish the two different types of Credit. The first type is Short term high interest credit. This credit type is usually one year or less and has a higher Interest rate because of the convenience it offers consumers. Just like in the Bond market the second type of credit is moderate to long term credit. Depending on the time involved with your credit needs? Moderate to long term credit is longer than one year and shorter than 10 years. This credit facility is used to offer borrowers lower interest rates.

Endowment Funds are a unique topic alone. Read all about this topic I wrote HERE!

Margin Vs. Short Term Revolving Credit

It seems I must share some quick facts and differences about Margin and Short Term Revolving Credit. Margin is credit offered by a Investment Bank that is lent to a individual who has a Brokerage Account with securities as collateral. It is usually high interest credit and short term. Margin credit works like this, Your portfolio of Securities of Stocks, Bonds, Mutual Funds and Investments held in your Brokerage account act as collateral for the Credit granted by the Bank.

It also must be pointed out that it’s highly likely you must have at least Fifty Thousand to One Hundred Thousand Dollars minimum invested in your Brokerage Account before the Bank will grant you a Securities Backed margin account. Under Finra rules a Bank is not allowed to grant credit of more than fifty percent of the total Securities held in the persons brokerage account. Example: If I have Fifty Thousand of Blackstone Stock in my Brokerage Account? The Bank can lend or extend me Fifty Thousand dollars on Margin. This credit is not to be used for purposes of Trading securities. It must be used as cash on anything else except Investments.

Revolving Credit | Credit Cards

According to Investopedia Revolving Credit is explained best by:

How Revolving Credit Works?

When a borrower is approved for revolving credit, the bank or financial institution establishes a credit limit that can be used over and over again, all or in part. A credit limit is the maximum amount of money a financial institution is willing to extend to a customer seeking funds.

Revolving credit is generally approved with no date of expiration. The bank will allow the agreement to continue as long as the account remains in good standing. Over time, the bank may raise the credit limit to encourage its most dependable customers to spend more.

Did you read my Page and Investment Portfolio? HERE.

Borrowers pay interest monthly on the current balance owed. Because of the convenience and flexibility of revolving credit, a higher interest rate typically is charged on it compared to traditional installment loans. Revolving credit can come with variable interest rates that may be adjusted. The costs of revolving credit vary widely:

So as you can see and imagine this can be a complex topic of discussion and to explain. However I like to keep thing simple and straight when I am writing. To sum up Securities Backed Lines Of Credit? It’s a Bank Loan that is deposited into your Brokerage account with the expectation that you will pay it back and use your Securities or Investments in the Account as collateral for the Loan. It’s that simple.

Larry Ellison loves his margin Account so much he uses it regularly for very large purchases. In fact if you want to read more on the topic? I would highly suggest you read this article by Forbes.

“How the Richest Public Company Executives use their Stock to have access to Billions.”

Speaking about Billions My Good Friend and Fellow Value Investor and Investment Advisor Mr. Bogumil Barnowski has built a Fantastic Podcast “Talking Billions” and Finance Professional Presence. Click on image.

Mr. Barnowski’s Podcast and Advisory Practice is incredibly interesting. Soon I will have to do a interview or post all about his Life as a Professional Advisor to High Net Worth Families.

SBLOC’s

As I conclude this Post about Margin Accounts and Securities Backed Lines Of Credit (SBLOC’s) Id like to leave you with this thought. Securities Backed Lines of Credit are more convenient than most other Lines of Credit. After all Securities are Asset’s just like a Home is a Asset to most Americans who invest into a Mortgage and store and grow their wealth using this method. However I would disagree with the thought “A Home is a Asset.”

I was taught by Investment Bankers as a Investment Advisor and as a Qualified Advisor? I do not feel a Home is a Asset. It is indeed a Liability. The upkeep and maintenance costs alone will erode and defy the mere fact your trying to create wealth for the future. I prefer my assets to be cash producing Investments. Buying Companies is a great way to build wealth as a Investor. At least you know if your wealth is increasing. Anyway’s I am getting off topic.

Using Securities Backed Lines of Credit

Securities Backed Lines of credit can incredibly useful as a Business owner or as extra source of finance when you find you need the convenience of fast money. As a Entrepreneur this can be incredibly useful and easy. The thought you can deposit income then buy stocks and bonds over time using your Income will no doubt generate wealth for you as a Entrepreneur.

Be Responsible With Debt and Credit

I would like to leave you with this one thought. What better way as a entrepreneur is there than taking the income we make from our Careers or Businesses than to deposit into a Brokerage account and buy Investments? Then when we have built up a small fortune with our stocks and bonds and investments? We can begin using them as assets to generate new strategies to building wealth.

I would argue that it could be risky if you don’t use this responsibly. However even thought with this said? If Larry Ellison and Elon Musk can use this for their convenience? To me that just seems like a convenient and winning strategy. It no doubt is bullish and capitalistic. Thank you for reading.

Godspeed
JS

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Business Articles, Capital Allocation, Executive Management, Leveraged Finance, Structured Finance

CEO’s Asset Allocation & Finance

There are Different Capital allocation strategies for CEO’s. However this post will dive into the different ways and avenues CEO’s have for Allocating Capital and what Equity vs. Debt is used for when raising Capital for growth.

Imagine your a CEO and you growing your public company, but find that your really not prepared for the capital it takes to buy a larger company. What do you do? That is a hard question to ask. However I can go through the different options a CEO has when using finance to Buy a company. And what being smart with asset allocation looks like? And what are the different options a CEO has with Leveraged Finance? Let’s get started! Uncle John Malone the Founder of Liberty Media teaching about Structured Financing below.

Did you read my post on the Six types of Assets?

Capital Allocation Chessboard

There are really only five Capital Allocation moves on the chessboard as a Chief Executive. First you have the option of investing into Research and Development or the Operations of your company. The next option is for you as the CEO to Invest into and or Acquire Strategic Assets or Companies. Next you could Issue Shareholder Dividends with Cash from the Balance Sheet. Or if your Cash is beginning to pile up like Bill Ackman’s Company Pershing Square from buying all those incredible cash flowing businesses you as the CEO have the option to implement a Stock Repurchase plan. And the very last? Pay off Debt that is causing your balance sheet to be inefficient. These are your options.

  • Invest into Company Operations
  • Acquire Strategic Assets
  • Issue Shareholder Dividends
  • Repurchase Stock with Cash
  • Pay off Debt

Did you catch my post about Special Situations Investing?

The Problem Issuing Additional Shares Diluting Current Shareholders Shares

Issuing Additional Equity Shares as a Capital Raise is foolish and blatantly unfair in my opinion to Shareholders. Because this dilutes current shareholders equity shares. In other words shareholders holding shares who are not able to provide additional capital will have their shares diluted equaling a reduction in ownership. To me that’s a touchy subject. I don’t feel that is fair to shareholders.

So what are the options a CEO has for Financing? That is a loaded question. Because we have 2 Finance Topics that need more explained real fast.

  • Structured Finance

Structured Finance is a entire topic unto itself about Finance LAW. However for todays article or post we will keep it brief. Structured Finance Refers to financing options for Restructuring a company out of Bankruptcy. You have Structured Finance options such as?

First we can share Structured Finance. What is Structured finance is all about? Financing a Business using Securitization, Tranching, Credit Enhancements.

  • Leveraged Finance

Leveraged Finance on the other hand is all about the Following: CEO’s. Pay ATTENTION!

Leveraged Finance (LevFin) refers to the financing of highly levered, speculative-grade companies. Within the investment bank, the Leveraged Finance (“LevFin”) group works with corporations and private equity firms to raise debt capital by syndicating loans and underwriting bond offerings to be used in LBOs, M&A, debt refinancing and recapitalizations.

The funds raised are used primarily for: Leveraged Buy Outs of Companies, Mergers and Acquisitions, Recapitalizations, Refi Old-Debt. If your a Investment Banking Analyst or Finance Student the links will help you find more about these different options Advisors, Bankers and CEO’s use to Finance Business’s Acquisitions or Debt.

  1. Leveraged buyouts (LBOs): Financial sponsors need to raise debt to fund a leveraged buyout.
  2. Mergers & Acquisitions: Acquirers often borrow to pay acquisitions. When a lot of debt is needed, it falls under the leveraged finance umbrella.
  3. Recapitalizations: Companies borrow to pay dividends (“dividend recap”) or to buy back shares.
  4. Refinancing old debt: There is an old investment banking adage that says “the best thing about bonds is that they mature.” Once a company’s debt matures, the company will need to borrow again to pay for the old debt.

One last part that is not obvious but crucial for CEO’s to understand. There is another method of Financing a Companies Sub-Division that may not correlate well with the Holding Companies niche in the Market Space. A way to keep finance separate is through the use of Tracking Stocks. Please read the Image below for more detailed description of Tracking Stocks.

Did you know? “Tracking stocks will trade in the open market separately from the parent company’s stock.” I was introduced first by and was educated about the use of Tracking Stocks by none other the Cable Cowboy CEO of TCI and Founder of Liberty Media Mr. John Malone.

Conclusion for CEO Finance Options

I do hope you found value in today’s post about Financing Options for CEO’s and hope you will use this new information to make better informed decisions as Public Company and Private Company CEO’s running and navigating finance. There are so many topics that evolve around the Finance Capital Markets that it would be impossible to include all available information on one post on my blog. But I would like to leave you with a very valuable nugget of wisdom from Mr. Warren Buffett.

Warren Buffett the CEO of Berkshire Hathaway always buys and invests into companies that gush cash flow. In turn his Company Berkshire Hathaway is always stacking cash and using the Treasury Markets to store that cash flow for the Balance Sheet. You see Mr. Buffett is smart enough to never place his companies extra cash inside a Bank Account at a Bank. That would be extremely inefficient and he would not receive hardly any long term value placing money into these facilities. Mr. Buffett would actually lose money over time. So he uses the Treasury markets to gain a positive interest on the cash Berkshire holds.

I hope you found value and wisdom from the information provided today. Nothing in this post is Personal or Business Financial Advice. And should be construed as strictly entertainment and the options a CEO has when considering all options for Financing. I hope you will take a page from Mr. Buffett’s book and Mr. John Malone’s Book and use what I have provided to make better and more informed decisions using the complex Capital Markets. Often times? Financing Business basics and using unsexy practices are all it takes to outperform the market as a informed CEO. Thank you.

Godspeed

JS

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Asset Management, Business Articles, Investing, Investment Management, Learn About Investing, Money Manager, Value Investing

7 Lesson’s You Can Use From Investor Guy Spier

What comes to our minds when I mention the name Guy Spier?

Guy Spier is a Value Investor, Fund Manager, Investment Banker, Harvard Graduate, Talented Skier, Father, Husband and also Mr. Spier is a Community leader of VALUE X.

Here are Seven lessons I have learned from Guy Spier that I would like to pass on to you. It doesn’t matter if your a Professional Investment Fund manager or Company Executive. You will find calmness and wisdom from Guy’s wisdom.

Investing Without Emotions

Guy teach’s his followers like myself that we should always invest without emotions. First we must break down what this means. 1. Breaking down what are our personal Behavior Biases truly are? 2. Be aware of common behavioral biases we may resort to without thought. 3. Defining your goals and time horizon can help you avoid emotional biases. 4. Bucketing or Achieving Milestone’s helps your clearly see your progression. Discipline can help you keep to a plan of action.

You may feel that watching CNBC or Bloomberg as a Retail Investor is good to gather the latest information on the market. It will feel like this gives you an investing edge in the market. However your are dead wrong! It’s simply a media outlet meant to deliver news and entertainment in the business world. That’s all. It’s smart not to allow this Television content to cloud your judgment and emotions while Investing. We as Value investor’s have a checklist, and a sophisticated skill set that includes Due Diligence and valuation processes before Investing in a Opportunity. We use these skills and our personal research before deciding if this would a good investment opportunity. Having the discipline to say no to things or investments does have tremendous value. Survival is everything. Protecting Capital is your duty. These are all ways to help you as a individual keep thing in focus and Invest without Emotions.

Resist Rebalancing

Many Retail Investors are being taught by the Traders on Youtube and it’s also standard practice for many Financial Advisors to Rebalance your Portfolio of securities when it looks like the market is overvalued. This looks like this. Your standard Retail investor has twenty securities positions. And if you place Five Percent of your Capital in to twenty positions this equals a hundred percent of your capital. However if history is a teacher? And if you were to just allow your portfolio grow organically? You may have a few positions see substantial growth and you will see a mixed bag of performance of mediocrity. And then you will see a few positions perform poorly earning you no returns or possibly loosing money. However with Guy’s approach of just allowing your portfolio to grow organically without rebalancing? You will see your small set of high performers account for most of your growth in your portfolio. While at the same time limiting the loss’s of the poor performers. In other words? Investing is very forgiving if you adhere to using long term time horizons as a strategy for your portfolio.

Learning From Your Mistakes Early in Your Career

This is truly a important lesson that Mr. Spier has shared publicly that I feel has a ton of merit for other Investors and Entrepreneurs like myself. Bottom line up front? You will make mistakes. You will make many mistakes. You will embarrass yourself. Making Mistakes and learning from them is just apart of the Human Experience. And if your a Entrepreneur? You will likely find that your failing your way forward. Now let’s learn about a big Mistake most Investors encounter when they begin investing as Retail Investors. You just don’t know what you don’t know. There are three different types of Entrepreneurs. Small Business Boutique Entrepreneurs, Enterprise Operator Entrepreneurs, and the Decentralized Investment Entrepreneurs. All has their own unique world. However they all encounter one mistake after another. It’s truly important to share your mistakes so that others may learn from your mistakes in business. Let’s be honest! Sometimes they make for great stories when your successful in the end. LOL

Defining Your Circle of Competence

Defining your circle of Competence means “What are you trained to do and what are you professionally knowledgeable about?” This important question can give you direction and confidence when evaluating Investment Opportunities. And if we are being honest if you can fix your Car’s Engine when it fails on you. I wouldn’t expect to see Guy Spier turning wrench’s in his Driveway in Switzerland when his car suddenly has a failure. No He would dispatch a Automotive technician or just buy a new car. Why spend the time on something of this caliber when you have options. Expert Networks operate in the same manner. There are Business professionals who do not have backgrounds in all things related to technology, manufacturing and and so many more topics of interest.

GLG Insights is a company any Investor or Business Professional can access and speak to Experts in their respective fields about a topic and answer difficult questions you may have about their respective professions and expertise. If you don’t have a Background in Softdrink manufacturing it’s likely you would seek out Softdrink Manufacturing experts. This is what we mean by saying, “Define your circle of competence.” You know what you know. And leave the hard questions to the experts of their fields.

Risk and Downside

Investing is a activity that involves Risk. Risk is the thing that acts as barrier or is the Downside of Investments. Some investments are relatively safe like Investing in US Treasuries. Then their are Investments like for example investing in to High Risk opportunities that may not return your capital and may not give you a return like New Startups and Junk Bonds. It all comes down to What is your Risk threshold. The lesson we can take from Guy’s lesson’s on Risk directly is communicated by his friend Warren Buffett. Warren spends a lot of time thinking about the Downside of an Investment. If you are comfortable investing your money into a company with a proven track record? Then it’s highly likely the downside of risk will be lower than investing into a unproven company that has not been in business for long. Your appetite for Risk is a personal comfort level. And I must mention that your comfort with risk directly correlates with what your circle of competence is!

Interestingly Mr. Guy Spier’s father was a Sapper in the Israeli Army. And the reverence and love that he speaks about his Father and how his Father is able to calm the environment with his presence and ability to listen while bringing calmness to the situation. Sounds to me like the Man you want next to you in a Fox Hole while your being bombarded with Bombs and all out War. This touches on the Topic of Risk and Downside because you want to be able to keep your cool during stressful situations. Id love to learn more about Mr. Spier’s Father. He sounds like a real Bad Ass. I can respect that.

Did you catch my latest Article on Bill Ackman’s Investing Principles Here.

Courageous Integrity

While watching or rather Listening to Guy Spier and his fellow writer Mr. William Green it was very refreshing to hear these two community leaders speak about having the Courage to share your thoughts and feelings in real time. While filming a episode of the Podcast Surviving and Thriving recently. They were sharing a point in time when they were collaborating and writing Guy’s first Hit Book “The Education of a Value Investor”. I found it utterly Courageous that Mr. William Green had the fortitude to hone in and selectively ask hard questions and seek difficult answers to personal situations that occurred to Mr. Spier during the very stressful weekend of the Great Financial Crisis of 2008. The Video is below. Furthermore during the weekend of the Great Financial Crisis Guy’s Aquamarine Fund was hanging in the balance and held hostage during the Bankruptcy of Bear Stearns. However Jamie Dimon and JP Morgan came to his Funds rescue by making a Bid and buying Bear Stearns. It’s truly a fascinating look at how two very good friends of 30 years can open eachother up and allow mutual trust. A lesson definitely worth the watch.

Keep a Professional Journal | Annual Reports

William Green and Mr. Guy Spier touch on the very important topic of keeping and committing to writing a Professional Personal Journal or even servicing your Funds Annual Reports. Some in our space of Investing, do diligently keep Annual Reports detailing their Thoughts, Decisions, and the reasoning behind the exposures in the Market within their Portfolio’s. How many times have we as individuals forgotten why we did this or that or forgotten our split of the moment thoughts and reasoning while explaining our actions to others who were not present? Keeping track of professional actions is vital to our success as Professionals. So understandably It makes since to keep a journal. However it’s also important to keep a Personal Journal to allow the reader or you back into your Decision making process. We are all humans. We are all imperfect. So keeping a Personal and Professional Journal can make a ton of sense for Professionals like myself and Guy who do openly and admittedly have ADHD.

Mr. William Green’s advocacy of writing throughout your career stems from his professional life as a Author and writer. He is always selflessly adding value in the Investment Space. Mr. Green is a professional writer within the Value Investor community. And his speech’s and guidance and journal suggestions are always pure gold. I genuinely appreciate Mr. Green sharing thoughts publicly as it has helped me in my writing.

Annual Reports

Why keep a Journal for a Annual Report? As Professional Investment Advisors and Investment Fund Managers or Partnerships it’s not only smart to keep a Annual Report, but also it’s required by Securities Regulators. When Investors read your Annual Reports it’s wise to let them in to see how your decisions and actions led to you choosing to build a Professional Portfolio.

After all the Investment Returns or Failures need to be accounted for. An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. At the end of the year when Annual Reports are drafted and published this keeps all involved in the Profession Accountable and demonstrates Public Transparency. I hope you found something in this post useful and insightful from Mr. Spier’s content.

Godspeed
JS

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Accounting, Business Articles, Financial Adviser

X-Spaces Three Financial Statements Chat

Recording From Today’s X-Spaces Chat HERE.

As Promised, Sharing the Content I was reading on the X-Spaces Value Investors Chat from today.

Mary Buffett’s Book

“Warren Buffett’s Interpretation of Financial Statements”

Compouding Quality’s Infogram VISIT HIM HERE ON X

Wall Street Oasis “Three Financial Statements Cheat Sheet” VISIT & CREDIT WSO

What did Mary Buffett Give Warren Buffett for Christmas several Years Ago? Read about it Here & below.

If you did not read my last post on the Three Financial Statements and Accounting Visit HERE!

Thank you for joining me today, I hope those who find this content learn something. That is my goal.

JS

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Business Articles, Investing, Investment Philosophy, Value Investing

Special Situations Investing

“Sometimes Political Pressure Comes From Shareholder Value Creation”

This Week’s Post will dive into Special Situation Investing and how this investment niche can be used in the Market to sometimes force Corporate Governance, Management, and Boards of Directors to hold a Proxy contests to install a new outside Director on to a unfriendly Board Of Directors. They elect a new outside Board Of Directors member to correct the board alignment. Creating shareholder value.

According to Investopedia: A special situation is an unusual event that compels investors to buy a stock or other asset in the belief that its price will rise.

Activist Investing

Sometimes Special Situations Investing is referred to by some Investment Professionals as “Activist Investing.” Special Situation Investing by definition has little to do Security Analyses. And more to do with buying a controlling percentage of shares of at least five percent to force a vote to elect an outside member to the Board of Directors. Often this person is a Fund Manager, or elected member of the investor. With this said there is Risk involved with these actions and proxy vote contests.

“Attention:” The following content or post is a general post about “Special Situations Investing”. And is not to be construed or intended to be “How to Invest in Special Situations”.This post is meant to be a general outline of the topic related and share stories related to Special Situation investing. Entertainment only. Meant to be examples of stories. Thank you all Investment Fund Mangers who are close to me. They are always challenging me to be better. That’s respect. Thank you. Are the Markets Efficient? After realizing markets are far from Efficient like the media and some academics likes to proclaim. It’s clear Special Situations has a long history of wins by very notable prolific Investors. And some very publicly losses that have ruined some Fund Managers.

Value Investing Spectrum

Value Investing can be described as paying less for a piece of a company in the market than the actual intrinsic value of the company. You will find that most Value Investors like myself and other close followers of Warren Buffett, Charlie Munger, Li Liu, Ben Graham, Guy Spier, Bill Ackman, Mohnish Pabrai etc. choose to invest for the Long Term.

However Value Investing has a spectrum of Investment Philosophy’s. Some Value Investors like Howard Marks, Bruce Karsh choose to Invest in the Long Term specializing in asset classes like fixed income as Investment Vehicles. Other Value Investors like Mr. Bill Ackman has chosen earlier in his Hedge Fund Career to use “Event Driven – Special Situations Strategies” for his Portfolio’s advantage. A great example of a Successful Trade is when Mr. Ackman generated a 100 fold return during the Pandemic by foreseeing the Impact the Corona Virus would have on the country’s linked communities.

Bill’s Corona Virus Hedge Trade yielded $2.6 billion in profits. If we look at the position or bet Mr. Ackman bought? His traders bought as much Hedged Protection they could find in the market to Hedge Pershing Square’s Portfolio of Investments before the Corona Virus pandemic. In the end his bet on the market falling was proven right. And It is celebrated as one of the Legendary Trades on Wall Street during this time Corona Virus Time-period.

The Value investing spectrum includes all Asset Classes and can even be applied to the Commercial Real Estate space. However the spectrum of Value investing is like a umbrella of different areas of specialities. From Special Situations Investing to buying undervalued assets like securities. Investing in general can be simplified by the following thought. Buy Low, hold long term, Sell High.

Believe it or Not? Investing in general is pretty simple. Special Situations Investing is a complex topic. But for the purpose of this post I will keep it simple and not make this a long drawn out white paper for other Investors who love to nerd out on this topic.

Understanding Special Situation Investing

Typically a “Special Situation arises from a News Event happening in the Market, a Stock may have intermittently dipped below it’s intrinsic value during a short tie period. Other forms of events include; Rumors in the market that point to spinoffs, tender offers, Mergers happening soon, Acquisition speculation, Bankruptcy, litigation, capital structure dislocations, shareholder activism, stock buybacks, and other events that may affect a company’s short-term prospects.

  • A special situation is a special event or one-time event that has an impact on a stock or other asset.
  • A Series of Events could have a negative or postive affect on a stock price.
  • There are Special Situation Funds ready at a moments notice to act on events and profit from events.
  • Nearly all Special Situation Investing is executed by a Institutional Investors.

In light of impacts Special Situations events have in the Public Markets, we must stop and ask will the outcome be a Positive Impact or Negative Impact? Often times Special Situations can either be positive or negative depending on the action or intent by the Institutional Investor. Sometimes the Institutional investor profits from a misfortune or failure that is occurring to a Public Company. And sometimes the Public company can be positively impacted by the Investor creating Shareholder value.

Activist Investor Challenges The Board Of Directors Status Quo

Let’s say for an example a Board of Directors is being run by a short sighted sloppy CEO and Chairman. And this complacency is causing the Board of Directors to fall into following the herd and not making waves. They have put their own comforts and expenses before the shareholders interests. This has caused a situation where status quo is the normal operating governing procedure. Causing the Public Company to lose it’s way affecting the company’s financials. Ultimately the stock price falls and the company loses Market share. None of the Directors on the Board want to bring attention to the failures and just go along to get along type situation.

For many quarters the Public Company has falling sales, revenues and all the financial Statements are impacted. An outside Institutional investor or Portfolio Manager see’s the news and decides to take a closer look and does some due diligence. Only to find the Public Companies Board and management are acting irresponsibly with company funds and assets. Putting their own interests before the Shareholder.

The Institutional Investment Team decides to act. And begins purchasing all the Shares they can buy on the open market. Until they have bought a controlling interest in the company. This act by the Institutional Investment team can force the Boards of Directors to hold a Proxy Vote. Removing a member of the Board of Directors and Shareholders electing a new Board Member (Often from the Proxy Challenger “Who is The Institutional Investor who invested.”)

This in turn will begin to align shareholders interest and create shareholder value. And with this new Outside Board Member elected to the Board? The Companies management will have a new objectionable voice who won’t allow the CEO and Chairman to hold congruent votes. Shaking up the “Go along to Get Along” Boards procedures.

This is important because this new voice on the Board of Directors can suggest or demand new ways to fix the companies future direction. Often times by insisting the Board instal a new CEO, and or taking a close look at what is not working correctly in the Managements operations that is affecting the Companies financials. This action can and often will correct a companies future profitability and growth. Or can make matters worse. It all depends on the situation within the Board Room.

Proxy Votes and Fights

When we think about Proxy Fights between Activist Investors and Boards of Directors and Management. This really begins to get into the political area of Corporate Governance. And these disagreements are certainly a gray area of Policy and Law between Boards of Directors and Outside majority Shareholders. I wrote a little about these situations above. However if your really interested and want to read all about Proxy Votes and Proxy Fights? I would highly suggest reading Michael Levin’s “The Activist Investor Newsletter Website HERE.“

“The goals of electing a new outside Board member usually are to align shareholder interests and generate Shareholder Value.”

-Bill Ackman

Investment Strategy – Share Buy Backs

A share buy back is another example of a special situation and will cause the stock of a company to trend upwards in the short term. On the other hand a negative impact could be such as a Government Antitrust inquiry may push a Public Companies stock price into falling for the short term. News sometimes of Events happening in the world of Business Litigation will and do often times do cause price speculation and investors to capitalize on opportunities happening publicly.

Merger Arbitrage “Opportunistic Investing Model” Special Situations

When a public company intends to merge with another medium to large company that is also publicly traded a special event occurs. And this event is usually extremely profitable. Company Board Members and even Executive Management have a personal and professional duty to keep confidential company information safe from the public. In other words they are charged with “Keep it Confidential” Policy or you will be shown the Door.

Sometimes outsiders in the Companies hemisphere create “Rumors”. And these rumors sometimes are false or true. Or they maybe a little of both. Your typical Sophisticated Investor knows; “When you create a list of well positioned companies that more than likely will be acquired soon.” You create an opportunity to capitalize on Public Companies who are merging. And this leads to the Public Company buying market share. Generating Dominance. This is a profitable strategy for Special Situations Investors.

Bill Gross who is a Prolific Philanthropist and Investor has said on CNBC in 2023 to look for Merger Arbitrage opportunities. This is where he was looking in 2023 for Money makers rather than focusing on the usual in Credit Markets. Here is the Video of Mr. Gross sharing his Opinion about where he is Investing in 2023.

Special Situation Example

Bill Ackman Vs. Carl Icahn + Dan Loeb = Public Market Brawl “HERBALIFE”

First I want to highlight a knockdown investment market brawl that literally had the Financial World on the Edge of their Seats when Pershing Square’s CEO and Chairman Mr. Bill Ackman took on a Public Company that was “allegedly” taking advantage of Hispanic Migrants in the communities across the United States using unfair distributorship and salesman tactics that are propelled by dubious Multi Level Marketing Practices. Mr. Ackman felt by releasing unseen information and bringing attention to the predatory Salesmanship and unfair Distributorship Multi Level Marketing happening to these poor unsophisticated Migrants the Market would correct the Market Pricing forcing the company to correct its policies while Mr. Ackman’s fund would profit off-handedly from the correction. While Mr. Ackman was dong the Market and the Migrant Community a Community Service that the Government could not.

This is not what happened. Instead of the Market taking corrective action another professional Investor named Carl Icahn and another activist named Dan Loeb worked separately to short squeeze Mr. Ackman’s Funds Herbalife Short Position. It’s likely the intent of Icahn’s involvement was for the unfair purpose to punish Mr. Ackman for a previous perceived Slights. I am not a Icahn expert. And never want to be. However Mr. Ackman previously pursued litigation against Mr. Icahn forcing Icahn to court when he refused to pay up. A Judge forced Icahn to pay a Profit margin on a previous investment agreement. This is an brief example of a Special Situation that had all the Hallmarks of being a Good Faith Action for the market and to help the American underserved Migrant Community. But just went terribly awry for a very Good man and Community Leader. If you would like to read about more details of this Special Situation? Please Read About It Here In Vanity Fair. Or Watch Bill Explain his actions below with Lex Fridman.

Elliot Investment Management L.P. Vs Proctor & Gamble

In 2003 Elliot Investment Management Partners formed the opinion Proctor & Gamble was not being fair in offering all Preferred Shareholders a fixed price while it tactically acquired German Hair products company “Wella A.G.”. A collective of Investment Funds along with Elliot opposed the Boards proposal to acquire the German Hair Products Company. Even one of Germany’s largest Fund Managers “Deka Investments” joined in the Special Situation to force a Shareholder Proxy Vote of Proctor and Gambles Board Of Directors. After many years of Litigation P&G capitulated and offered all Preferred Shareholders a raised fixed price offer. Elliot stated: “The Goal of the Investment Funds joining forces against P&G was to protect the rights of Minority Shareholders.”

Risk & Special Situation Investing

Public Companies provide the most opportunities for Special Situations. Senior to Subordinated Debt Securities are often analyzed and used for Special Situations. Did you know? “Event Driven Investing is often referred to as Special Situation Investing.” The Risk involved in special situation investing is inherently dangerous to Investors who do not stop and understand that this area of investing is unique and filled with uncertainty. Situations and life that you do not control can be seriously risky. Often change at a moments notice. So on the spectrum of Investing. Special Situations or Event Driven Investments usually are categorized as some of the most Riskiest Investments a Institution or Investor can make.

Conclusion

It’s clear Special Situation Investing and The Funds raised for this investment strategy are extremely unique and can move markets. It’s serious business. And has serious consequences for Management, Boards of Directors, Shareholders and even for Communities. Most of the Special Situation Investment Activity we see in the Market is executed by very experienced Investment managers. The truth of Special Situations Investing is generating Investor returns. I guess it can be said there is Value in taking a Company to court for the purpose of? Standing up for minority shareholders. Or more descriptively when Bill Ackman decides to Buy Hedging Positions to protect his Shareholders (like me) from a possible portfolio collapse during a Pandemic. I can see the positivity and responsibility in Mr. Ackman’s Hedging Positions.

But make no mistake there are those out there who do use Special Situations under the radar. These Opportunistic Investors who use “Special Situations Investment Strategy” can most certainly be a force of greedy negativity! I won’t name names. But frontline has made documentary’s on this topic. You can watch youtube for more on this criminal topic.

In reality it does feel like there is Political undertones in certain Special Situations Investing. However I feel as long as the Regulators at the S.E.C. and our fellow Institutional and Retail investors see the negativity Special Situations Investments for what they are. We can put the Bad Actors who use Special Situations for greedy unhealthy purposes out of business. Making our communities better in the process. Capitalism is all about making things better in our communities and in our markets. I just hope this philosophy works for Special Situations as well.

Thank you for reading. Godspeed.

JS

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Business Articles, Family Offices, Interviews

Mr. Family Office | On Twitter

As an Investment Adviser, Banker, or Investment Professional, you will discover other interesting stories from professionals in our investment space. Today’s post regards a confidential Adviser, who posts fascinating content about the often-misunderstood world of Ultra High Net Worth Family Offices. He is the King of Twitter’s Family Office Investment Space, the always generous and astute Mr. Family Office X- Account.

While preparing for this interview I knew I would have to give up control, as I don’t want to put anyone’s job or livelihood at stake. After all, I am still new to the community, and I need to build trust and demonstrate my strict competency with professional leaders such as Mr. Family Office. We must keep the personal Identity of Mr Family Office hidden. We have rules in this small space, just like serving in secret areas of the Military. So, in the small world of Ultra High Net Worth Family Offices, trust is earned, and reputation is everything. The rules are simple, bluntly spoken, and strictly enforced… “KEEP YOUR MOUTH SHUT ABOUT YOUR FAMILY AND WORK”. 

Confidentiality and Discretion

Mr. Family Office is an X account, (Twitter) and has grown to over thirty thousand followers and is the undisputed authority in the Family Office space on X. He generously educates his Investment Professionals and even Entrepreneurs, who have become Centi-millionaires who want to open their own Family Offices. His account has been an incredible resource for me, as a growing Venture Capital Investor and Qualified Adviser and Entrepreneur. Here is a photo of his X Account. 

Mr. Family Office

Mr. Family Office is a Twitter or X account and has grown to over 30 thousand Followers and is the undisputed authority in the Family Office space on X. He generously educates his fellow Investment Professionals and even Entrepreneurs who have had an exit and have become Centi-Millionaires who want to open their own Family Offices. His account has been an incredible resource for me as a growing Venture Capital Investor and Qualified Adviser and Entrepreneur. Here is a photo of his X Account.

The Community Network of Family Offices

Since the Family Office or Space of Ultra High Net Worth Individuals is a small, elite community, another person I want to introduce and just had to include later in this post is a friend, Jorge Nikaido from Grupo Salinas in Mexico. 

Jorge is the trusted Right-Hand Man or “Chief of Staff” for a bold and honorable Mexican Business Magnate named Don Ricardo Salinas Pliego. And being a right-hand man of a Business Entrepreneur doing great, philanthropic projects for your community, earns you a spot in our group of Trusted Family and Friends. This is why I just had to include this Professional Leader later on in this article. More about Jorge later. 

So, without further delay, let’s jump into the interview with Mr. Family Office. 

1.Thank you for agreeing to be here with me and writing this post Mr. Family Office, When you first started your Twitter account Mr. Family Office did you feel any apprehension you were going to get pushback from our Adviser and Banker community because we have a Professional Duty to keep things secretive and confidential in our Investment world?

“Thanks Jameson, it’s good to meet you! Confidentiality and discretion are obviously fundamental in my world and it’s always my first thought when tweeting about any topic. I never tweet specific details about the family I represent or other family offices I work with. I would not break trust in this way. This can be limiting, there is a lot that I could share. But in fact there is plenty to talk about whether it’s general stories, my own stories or insights from the sector.“

“The feedback I get from advisors and bankers has been very positive so I think I get the balance about right. ” 

2. It’s Fascinating to others out there in the World “How Family Offices Work” what was it like building your twitter account so others could see into this secretive space?

“It’s a lot of fun! I’ve met some very interesting people who I wouldn’t have met otherwise and I’m learning every day.  I think family offices are slowly opening up, so the Twitter account is riding the wave of more transparency.  “

3. How did you feel when you saw a community of Advisers, Investors, and Entrepreneurs being built around your Family Office Guy Account? What excited you about this and where do you see it going?

“It’s great to see. I started tweeting without any expectations at all, so I’m delighted to see the community that has grown around the account.” 

As to where it’s going… good question. I’m focusing on the newsletter at the moment, but also discussing a few ideas with others from the family office world. Watch this space. 

His NEWSLETTER LINK HERE:

https://mrs-newsletter-6afd08.beehiiv.com/

4. Not many people know Investment Partner has ownership in a Investment Advisory Firm with many Advisers as part of his Family Office, can you tell us about the spectrum “Small to Large Family offices you have seen as a Professional?

It’s an age old question – how much is enough for a family office. Family offices have become something of a status symbol in recent years. The SFO Alliance requires that members have at least $400 million AUM, I feel that this is a good minimum benchmark – but even at that level, the core team is going to be pretty small. 

5. Do you feel your Twitter presence is helping to demystify the secretive and sensitive world of family offices and Billionaire investment management? “I hope so! “

SFO Family Office Website

Did you catch my latest article “Why VC Firms are turning to Investment Advisers”

Interview Continued

6.Have you ever been worried anyone would find out who you are? And how do you stay safe? ( Stupid question. Sorry No worries if it crosses the line. Don’t answer if it’s stupid. ) 🙂 

“Quite a few people know who I am… but it’s safe to say that the mystery is far more interesting than the reality! As the account has grown, there have been contributions from various people in the sector, so it’s fair to say that there is more than one Mr (or Mrs) Family Office” 

7.Has building your Family Office Acct. on twitter/X given you access to opportunities, relationships, and Investment Transactions you wouldn’t otherwise have access to? Do you have a short example?

“I have not sourced deals through Twitter yet, but I have connected with a bunch of family offices and FO professionals. ”   

8. What does the continued growth of Family Office Account look like in 10 years?

“I’m certainly not looking 10 years ahead!  Twitter under Elon Musk can be pretty wild, so you never quite know where you are! As I said, my focus for the immediate future is on collaborating with other contributors and building the newsletter.”  

9. Can you share more about your Process for choosing Content and topics for your Posts of Family Offices?

“I like to mix things up.. I generally tweet about stuff I find funny or interesting. The inspiration comes from day-to-day work or from what I read. I think it’s important to have a balance between serious and non-serious. Overall, I don’t take myself too seriously… I think people like that about the account.” 

10. What is the largest family office and (AUM) you have seen as a Family Office Expert?

“The largest I have worked with has been several billion dollars. But there’s always a bigger fish.” 

11. Is there anything you can share that may be controversial about you building Mr. Family Office?

“Being anonymous on Twitter can be controversial in itself. But once people figure out that I’m not hawking courses or selling sketchy deals they tend to relax. “

12. How do aspiring Professional CFP’s, CFA’s and Investment Advisors get into the Family Office space as a career?

“Look out for some upcoming newsletters!  I am planning to write a lot more on careers in family offices in the coming weeks.“

End of Interview questions.

This certainly was an interesting interview and opportunity. I would like, to take this opportunity to personally Thank Mr. Family Office for his time, generosity, and willingness, to help educate all my readers and myself about the World of Family Offices. It’s a look into a world and a view many professionals do not get to see, now they do have a little view into this discretionary world. This is very insightful and helpful. Thank you, Sir! It’s very professional of Mr. Family Office to help me as a part-time Journalist, grow with another interesting interview into our world of High Finance and Investing. Thank you again, Mr. Family Office. 

Grupo Salina’s “Chief Of Staff” Jorge Nikaido

My friends in life are special and keeping their “Trust” is everything to me. So, I hope you understand I would never betray the confidence of anyone who does not wish to be publicly identified or participate in my posts. However, Don Ricardo and Jorge Nikaido are celebrities in Mexico and Latin America. Even so, I informed Jorge, that I was going to mention him in my article with Mr. Family Office. He deserves a little love and recognition considering he is always selflessly serving family and friends of ours. 

Feel Free To Follow Jorge Nikaido on X-HERE

While preparing for this post and interview, I immediately thought ‘Who else do I know who is in our small world?’ And it hit me! My good friend, who I am connected to on X, (Twitter) and is Mexican Billionaire Don Ricardo Salina’s Pliego’s Right Hand Man, Sénior Jorge Nikaido.

Jorge is known as “THE FIXER” in the life and Family Office of Don Ricardo’s Salinas Pliego Empire in Mexico. So it’s only natural I would give a quick mention to him in my Post here with Mr. Family Office. To my Professional Friend in Mexico City who is always helpful and ready to assist and advise his Family and Friends like Me and Mr. Family Office? Salud Sénior Nikaido! I can’t wait to interview you soon and drop in to see you in Mexico City in the near future. Thank you.

Thank you for reading this week’s article and post about Mr. Family Office. As I continue to find new and interesting stories from High Finance, Investing and the Community of Business, I would like to leave you with this thought from Don Ricardo Salina who I consider an Honorable Community Leader, who cares about his friends and family. Don Ricardo says to us… 

“To me, wealth is the peace of mind you have, your family, your friends, your colleagues. Everything else is just money, and it really is funny how people pay so much attention to that.”

Follow Don Ricardo Salinas Pliego here.

If you found this Article, and Interview Post interesting, please share and comment on your Social Platforms. If you’re taking time out of your busy day to read this post, we greatly appreciate all who find this interview insightful, informative and interesting.

Thank you for reading.
JS

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Business Articles, Prolific Investors

Peter Thiel

When someone asks me what comes to mind when I think of Mr Peter Theil. I respond with, an American Business Leader, and a Bad Ass Investor, who is one hundred per cent an American Patriot. 

Peter Thiel is an American Attorney, Venture Capitalist, Political Activist, and Entrepreneur who has deep Libertarian Conservative Patriotic Values. 

In the overall look at Mr Thiel’s many life achievements, from graduating from Stanford, working as a Securities Attorney at Sullivan & Cromwell and deciding to leave Big Law after a short time. To invest and help build PayPal, and Facebook, growing and building a public company Palantir, with Dr. Alex Karp, Joe Lonsdale, and Stephen Cohen to Authoring; Zero to One, and establishing the Venture Capital Mega Fund Founders Fund in San Francisco, California. 

Peter’s backstory is incredible, and the Capitalistic Value and street credit speak for themselves. I have read many articles on Mr Theil. I have reached out for a short statement about his Venture Capital Investing and Use of Funds for Entrepreneurs. 

Political Action Through Funds

As an Investor, Mr. Theil’s Political Activism and Contributions, have been public and is a positive influence on the sometimes-struggling American Conservative Political Action. Since I am a Qualified Investment Adviser it’s only natural for me to write about the Political funds and contributions associated with American Patriot’s.

According to the political contributions website OpenSecrets Mr. Thiel has contributed around $50 million to state and federal political candidates and campaigns since 2000, and he was the 10th largest individual donor to either party in the 2022 midterm congressional elections, according to the non-profit OpenSecrets.

Mr. Stephen Moore, Richard Gilder, Thomas L Rhodes, and Harlan Crowe are the Founders of the Libertarian Conservative Club for Growth. The Club For Growth Action Fund is a Federal Super Pac and State Political Action Committee that helps fund Congressional Candidates, and State Candidates running for Federal and State Offices. The main policy theme behind Club for Growth is to help Congress push and pass Conservative Economic Policy Initiatives. 

It’s no secret and is a privilege that I have collaborated with the Club for Growth in Washington D.C. when I was serving in politics at all levels. I can honestly say the team at Club for Growth have become friends of mine.

If there is one thing you must watch today? It is the fantastic GOP National Convention Commencement Speech Mr. Thiel gave for Presidential Candidate Donald Trump in 2016.

Palantir

Time Magazine attempted to paint Mr. Thiel as dangerous because he is Politically Active, I however have an issue with this characterization. Here are the facts, any American Investor who is not dangerous in business and life as a professional leader, should not be in a position of Authority in Business and Investing. 

It’s ridiculous to think an American man who is as successful as Mr. Thiel wouldn’t be dangerous. That’s how we keep our dominance as Americans and keep America first. 

Dangerous business leaders like Mr. Thiel and others like Joe Lonsdale, and Dr. Alex Karp keep the Bad Actors and Foreign adversaries across the world in their place and away from threatening America’s Business Dominance.

Speaking of Dominance, I would like to introduce Palantir. According to Palantir’s Website, Palantir’s mission is to build software that empowers organizations to effectively integrate their data, decisions, and operations. This can be used offensively and defensively and makes Palantir dangerous for our adversaries. 

Time Magazine attempted to paint Mr. Thiel as Dangerous because he is Politically Active, I however have a issue with this characterization. Here is the Facts! Any American Investor who is not Dangerous in Business and Life as a Professional Leader? Should not be in a Position of Authority in Business and Investing. It’s ridiculous to think an American Man who is as Successful as Mr. Thiel wouldn’t be dangerous. That’s how we keep our Dominance as Americans and keep America First! Dangerous business leaders like Mr. Thiel and others like Joe Lonsdale, and Dr. Alex Karp keeps the Bad Actors and Foreign adversaries across the world in their place and away from threatening America’s Business Dominance.

I am certain we need American Public Companies that can help with America’s Foreign Policies and threats. It needs to be shared that Business Insider wrote a nasty hit piece about Mr. Thiel’s American Duty to assist the Government when needed as a Public Company Governing member. And let’s not forget to toss into the trash the Business Insiders’ mission to write smear stories of Conservative-leaning American Business Leaders like my friend and Hedge Fund Manager Bill Ackman and his lovely wife Neri.

Peter Theil is a Co-Founder of Palantir, according to the Wikipedia Page: Link Click.

Venture Capital – Founders Fund

In 2005 Thiel invested and started a Venture Capital Fund with Ken Howery, and Luke Nosek, and he currently invests in Startups and Tech Entrepreneurs who built companies like Facebook and Yelp, companies that made a huge impact from Silicon Valley to some of the most important Tech companies in the world. Currently, Mr. Theil’s partners at Founders Fund are Lauren Gross, Brian Singerman, Napolean Ta and a dozen more incredibly successful names that dominate and demonstrate professional excellence in the VC Landscape. Founders Fund currently operates an Investment Adviser to manage capital. 

If you missed my latest article “Why Venture Capitals are Turning to Investment Advisers” Read about it here. 

Investing

Peter Thiel continues to play a part and be a leader in the San Francisco Venture Capital and is often asked to attend church and other events by friend YC Partner Mr. Garry Tan, and others in Silicon Valley. 

Some of Mr Thiel’s latest investments can be traced to SpaceX, Palantir, Stripe, Anduril, AirBNB, NUBANK, Neural Link, Ramp, Affirm, OpenAi, Cognition, Figma, The Boring Company and many more recognizable names.

Conclusion on Mr. Theil’s Investing & Leadership

Mr. Peter Theil will continue to dominate and play major roles in Professional Investing, the Venture Capital Landscape, and the Political Activist space that influences policy within and outside the United States Economic System.

You would be correct in stating that Mr Thiel is an American name that instils instant respect in all four corners of the world from Israel to Australia and Taiwan. 

I would like to save the best for last, Mr. Theil was attending an AI Conference and I happened to be two chairs away and I met him. I reached out to Mr Theil with the phone number and email address I have in my contact list. I am waiting for a return email, but it seems likely and understandable he is very busy and I will need to catch him next time.

In conclusion, the next time you hear Mr. Peter Thiel’s name in the news or the media, I hope you refer to this man and business leader as an American Hero, Prolific Investor and Philanthropist who holds our country’s best interest at heart. That’s all I have for today on Mr. Thiel, thank you for reading.

I do welcome your thoughts on things to include that should be mentioned.

Thank you again. Godspeed

JS

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Business Articles, Investing, Investment Philosophy, Learn About Investing

Qualitative Growth Investment Philosophy

This post will share and demonstrate what is written and communicated inside of Phil Fischer Book which is the origin of Qualitative Growth. A investors greatest concern should be managing Risk. If you manage to understand your business and all it’s unique qualities while considering Risk? It’s likely you have stumbled upon the foundation of Qualitative an Growth Investing Principles.

Asking detailed hard questions. Example: When we buy or invest in any company or security? It is only natural to ask detailed educated pointed questions and do some due diligence before we make that investment. And if we add in the fact we are not seeking dividends? That is basically the foundation of Phillip Fisher’s Investment Philosophy Growth Investing. Let’s get into some examples of questions and details.

Charlie Munger may he rest in Peace long ago when Berkshire was growing. Convinced Warren Buffett to begin considering and partially adopting the Phil Fisher philosophy of investing to implement into the Berkshire’s strategy. If I remember correctly this video should help. Warren Buffett starts by sharing Phil Fisher’s Book is one of the best Books on Investing.

Who is Investor Phillip Fisher

Philip Arthur Fisher was an American stock investor best known as the author of Common Stocks and Uncommon Profits, a guide to investing that has remained in print ever since it was first published in 1958. Mr. Fischer basically began using his insights as a Investment Philosophy. Example, assume If a stock is going to outperform the market longterm? In this case it does not matter what the current price is! Becuase the performance over time will outpace the price volatility and increase if you have done your due diligence and leg work correctly.

Mr. Fisher focused on Qualitative Fact finding and positive assumptions backed by verifying tangible information. The fact he did such heavy investigating is that his findings may lead to a Stocks growth and having the right information for his investment fundamentals over the longterm.

Put another way? Qualitative investing requires assumptions about the future that are made on the basis of quality. An analyst will make judgements on the prospects of the stock based on the qualitative attributes of the company.

Mr. Phil Fisher career began in 1928 when he dropped out of the newly created Stanford Graduate School of Business (later he would return to be one of only three people ever to teach the investment course) to work as a securities analyst with the Anglo-London Bank in San Francisco.

Growth & Qualitative Investing

Mr. Fisher wrote in his book detailing a basic checklist that helps investors sift and sort through Stocks and Investment Opportunities using Qualitative and a checklist of sophisticated questions that arrive at a “YES,NO or Maybe” conclusion. This strategy of investing gave birth to Growth and Qualitative Investing.

Asking Questions that helped Mr. Fisher?

  • Does the company have excellent management teams?
  • How is the Business’s Qualitative Fundamentals on the Balance Sheet rather than using ratios?
  • Stock Price is not evaluated. So if a Stock is Expensive currently Fischer’s reasoning looks towards the long term growth of the business which will outperform short term stock pricing models.
  • If a investment fails any of the questions on the Checklist after investing? Mr. Fischer makes it a point to move on selling the investment.
  • Understanding the Business and what makes the business work? Valuable question.
  • R&D Spending? If target company is outspending and outperforming competitors? This is a good indicator or qualitative fundamentals at work within the business.
  • What makes the Business grow? Very important to understand.
  • Does the Business have repear customers?
  • Business profit margins must be healthy.
  • Does the Executive Management have outstanding community relations?
  • Is the cost analysis and quality controls of the business products and services accounted for? Will this share information about operations?
  • Is the Companies Management Integrity Unquestionable?
  • Would you want your family to work in this business? And does the community value the Business’s presence?
  • Is there room for growth in the space and is the company’s management providing information about current industry forecasts?

These are all questions Mr. Fisher has shared in his Book written in 1958, which have withstood the test of time. And yes many of these questions have evolved with time into my own use. And in all fairness most of these assumptions or questions still very much apply and are used today by Institutional Investors and Professional Investors who manage Fund’s. You may recognize some of the fellow Buffet followers who use these methods of Investigating Investments. Professional Investors and Fund managers like Guy Spier, Christopher Tsai, Li Liu, Chuck Akre, Seth Klarman, Peter Lych, Bill Ackman and many more.

Conclusion

In Conclusion for today’s post on learning more about Growth or Qualitative Investing Philosophy, we must look at what works in the markets as legitimate Investment Philosophy and what doesn’t work. If you consider most individuals investment experience and ability to mitigate and consider investment RISK. Most retail investors who day trade do not have Advisors. This ends up making them lose money and treat the Stock and Credit Markets like a Casino. Their goal is always the same. They are hoping and praying that twenty dollar stock they just bought with their life savings will rise in the next week or few days. But this is absolutely not how the Professionals invest. Nothing about investing can be done from feelings or judging ones own intuition! It takes serious investigation and professional trained discipline.

Individuals who don’t use any Investment Philosophy will likely be humbled by the sudden unemotional Market Volatility. Magellan Fund Manager Peter Lynch loved volatility for this exact reason. He used volatility to invest as a Value Investor during times were Fearful. So in all fairness? I think it’s safe to say after reading the Book by Mr. Phil Fisher the more sophisticated detailed and creative questions we ask about a Investment opportunity? The better off we will likely be years down the road. Thanks for reading everyone Please do read Mr. Phil Fisher’s book. Uncommon Stocks and Uncommon Profits.

I appreciate you reading my Post. It was a blast preparing this for you. And to my fellow Professionals who do run Investment Funds and use Mr. Fisher’s Investment Philosophy? Please do drop me a line to correct anything I may have written or shown in this post that is incorrect. I am doing my best with what I have. Thank you. JS

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Asset Management, Business Articles, Endowments, FUNDS, Trusts

Endowment Fund Basics

A Endowment is a Legal Trust Structure for the purpose of creating a FUND that raises donations for continuing the mission and operations of Non-Profit Organizations such as Hospitals, University’s, Museums.

What are the Three Types of Endowments

When your Non-Profit organization is considering using the Endowment structure? It’s appropriate to have your team of Investment Advisers, Accountants, and Attorneys work together to discuss the type of structure or type of Endowment Structure is appropriate for your Organizations needs. Here are the three types of Endowment Structures and how they are used. According to the Financial Accounting Standards Board (FASB) these are the details of the three types of Endowments.

Term Endowments

    A Term Endowment is not perpetual, it is organized and funded for a specific time period. This can be years or until a specific end date that is specified on the Endowments Documents. Term Endowments can begin often when a Death of a Donor takes place or when a Document states. After period of time or expiration the total amount can be used to begin funding Operations.

    True Endownments

    A True Endowment begins by the Donor providing FUNDS to the Endowment and specifying the Funds are to be kept in perpetuity. A written agreement is used to facilitate the Funding and future use of Income of True Endowments.

    Quasi-Endowments

    The Board of Directors of Endowment Funds vote on the best use and deployment of funds with their Advisers. This includes electing to use Reserve Funds, making unrestricted Gifts to other Organizations, and deploying new funds from a unforseen donation. Inclusion is at the Discretion of the Board of Directors of a Endowment. This means the Board can elect if the new funds can be placed into a new fund or included into a outside Quasi Endownment Fund.

    Endowment Management

    Fund Managers of Endowment Funds and Non-Profit Boards of Directors work very closely with each-other to ensure the Endowments Investment Objectives are being met and kept. The Endowment Fund manger is professionally duty bound and a Fiduciary. The deployment of Funds by Investment management will work to allocate into appropriate Investment Assets. Keeping to the Endowments Investment Objectives and Policies.

    Endowment Funding

    Endowments are funded mainly by relying on public donations. A “PRINCIPAL” amount Donated is invested into Income producing Assets which may include Bonds, Equity Stocks, and other Appreciating Assets. And later the income from these assets are used for Operations and other uses as stipulated by the Trust Documents and at the Discretion of the Board of Directors.

    Some Disadvantages of using the Endowment include: Some donations can only be used for limited purposes. There also maybe some limitations or restrictions in the Endowment Trust Docs that prevent funds from being withdrawn or used for operations. That depends on the Fund Covenants.

    Advantages of using Endowment Funds? Funding a Endowment Trust can lead to Non-Profits being able to fund a mission and it’s operations. Not to mention being able to invest donations for the purpose of funding programs that help and improve communities or causes.

    Did you catch my Article on “The Ultimate Guide To Trusts”click here.

    Largest Non Profit Endowments from the year 2021

    The National Center For Education Statistics lists the largest Endowment Trust Funds below, and HERE.

    In Conclusion I hope you learned some basics about Why and How Non-Profit Organizations use Endowments for their Organizations needs. This post is meant to communicate the uses, and what are Endowments for public educational purposes only. Thank you for reading.

    JS

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    Business Articles, Investing, Investment Adviser, Investment Adviser Arizona, Investment Adviser Kansas City, Investment Adviser Representative, Investment Vehicles, Money Manager, Venture Capital

    Why VC Firms Are Turning To Investment Advisers?

    VC and other Partnerships have a big problem. Some are not evolving with the changing Financial Landscape.

    Many Venture Capital Funds and Private Partnerships are literally risking their capital to risk. It’s not difficult to observe the Capital they have worked tirelessly to raise is diminishing from sitting for long periods. It’s also apparent from the current VC Partnerships without a Investment Adviser the accounts they keep their funds in do nothing to serve the developing Risks. Which in return silently and maliciously erodes the Funds Purchasing Power and additionally? Diminishing the capital. Discounting continuity and Preservation of Principle. Investment Advisers know how to minimize risk, strategically Preserving Capital, while at the same time implementing Growth of Funds. The bottom line is this! Not evolving to the changing ecosystem. Will diminish your Partnership Performance and diminish your returns and capital performance for your clients.

    Exemption for Venture Capital Funds for Investment Advisers

    Currently the Investment Advisers Act of 1940 has an Exemption for SEC or State Registered Investment Advisers who manage Private and or Venture Capital Funds. This is a Gift to the VC Partnership and Private Fund world. However based on my experience and research only the serious Professionally managed Firms are quietly utilizing Investment Advisers skills to help manage their VC Funds. After reading a Post on Medium about this Topic. It seemed prudent for me to give my Professional opinion as a new Investment Advisor Representative. You can read the article the Attorney who wrote about Compliance of RIA’s turned Venture Captial Firms “HERE“.

    Market Conditions Always Changing

    The SEC is very strict in it’s Regulations, and the Finance Laws are extremely complex in the Investment Adviser money management world. However the Laws and Regulations can be used for good. Especially for PROFIT AND FUND GROWTH. If you have a small team of Advisors and Attorneys who are experienced and trained in how to use their skills to navigate the complex Regulations and laws for the Benefit of your Partnerships Fund. Your ahead of the Curve of Diminishing Funds. Making your Clients capital grow and keeping your Clients Happy with your Fund or Partnerships performance. There is one certainty in Business. That is “THINGS ARE CERTAIN TO CHANGE! EVLOVE OR DIE.”

    Founders Fund Registered Investment Adviser?

    Peter Thiel Founders Fund is now a Registered Investment Adviser. (Image BELOW)

    Which recognizable VC Firms are Investment Advisers Currently? Sequoia Capital registered recently as a Registered Investment Adviser to begin investing in the Capital Markets and Crypto Assets. Andreessen Horowitz is another Venture Capital Fund that recently registered as an Investment Adviser. This list is growing. And it seems more and more VC Firms who are serious in the space are turning to Investment Advisers for their Funds. It’s likely they have so much money under management they need to distinguish themselves and account for risk vs. returns to add a layer of Preservation of Capital. It also must be shared it’s just good business acumen to have a Money Manager who can give peace of mind to the Fund Manager and Client’s personal Asset Allocators.

    If you stop to fully read the SEC.Gov website on Exemptions for Advisers to Venture Capital Funds (BELOW). You will likely conclude this is certainly the future of VC Funds who are leaders in the VC Space. Having a Professional manage your Firms Funds is added security. The benefits far outweigh any downsides. When your thinking strategically as a Investment Committee. Recently a College PH.D Finance Professor shared with me at Arizona State University, “He feels the future of Investment Advisers will begin to morph into a fragmented space where VC funds become Powerhouse VC Investment Adviser Run groups.” I honestly can see myself it’s likely to expand into other Partnership Funds as well. Interestingly this is already taking place.

    Did you know..? “It is against the Professional Standards and Regulations of the Uniform Securities Act and Investment Advisers Act of 1940 for any Investment Adviser Representatives to make guarantee’s or promises related returns.”

    Venture Capital Firms Turning Into Investment Advisers

    Traditionally many Private Funds or Venture Captial Funds have used a REG D offering for their Funds framework. However based on evidence in the space and growing sums of Capital under management? Times are changing and VC Firms are turning to or into Investment Advisers. To leverage Capital Markets for Preservation of Capital and Growth.

    A Reg D offering and a (RIA) Registered Investment Adviser are completely two different things. A RIA is a Firm that Manages Funds for a percentage of Assets Under Management. Usually 1.5percent. A REG D offering is a “Exempt Offering”. The Law and Regulations all RIA’s Registered Investment Advisers have to adhere to professionally. Includes a long list of seriously strict responsibilities, Regulations and Policies. It’s serious business. Some of the rules of the road address Portfolio Management, Custody, Investment Discretion, Record keeping and lots lots more. However this is not a Post about Laws, Regulations or the differences of a REG D offering vs. a Registered Investment Adviser. This is meant to share more in depth examples of the complexity of Managing Funds.

    Venture Capital Teams Under Pressure to Evolve From Competition

    With many Venture Capital Firms under pressure to out perform each other and evolve from their competition by performing with their Clients Money. These Venture Capital Funds are feeling the squeeze of having Capital sit for long periods inside accounts without proper preservation policies implemented. This causes the Capital to be inactive on the Firms Balance Sheet. There are strategies Investment Advisers can execute to minimize Purchasing Power Risk and begin to grow Funds implementing a preservation of capital as it’s Objective. Several large VC Firms have seen the Value Investment Advisers bring to the Balance Sheet using Advisers. And more and more Venture Capital firms are on the look out to Recruit Investment Adviser Representatives for their Skills. One thing is certain in this Asset management Business. You should always be looking to gain the edge by utilizing Investment Advisers Skills to help grow the Firms Funds.

    Conclusion Clients Impressed By Increased Returns

    In conclusion after sharing the above examples. It looks to be completely clear the Venture Capital space is turning to Investment Adviser Representatives and utilizing their money management skills. It’s absolutely clear the Value and increased performance Advisers can bring to a VC Firm and their Investment committee. Traditionally speaking? Investment Advisers do 3 things incredibly well. Preserve Capital, Manage Capital while managing risk, and strategically use Capital Markets to Grow funds, for the purpose of beefing up a Company’s Balance Sheet.

    Have you read my post on the Three Financial Statements “HERE“.

    Risk will always be apart of Professional Investing at every stage. However many Investment Committee’s and Investment Professionals would most likely agree. “Having a Professional Money Manager on your Firms Team will likely give your Company an Edge in the Market while making your Clients very happy from seeing a improvement ROIC.”

    Thank you for reading.

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