Business Articles, Economics, Finance Articles

“What is Quantitative Easing?”

Today your going to learn “What Quantitative Easing is?”

About a Month ago I was invited to a ACG (Associated Corporate Growth) Reception and the first person I meet turns out to be a very nice guy named Chad G. Chad is just no ordinary average finance guy, he is a respected leader and a experienced Portfolio Manager. Chad is the Senior Vice President and Portfolio Manger for Waddell Reed’s High Income Fund. But meeting him you would never know he manages a huge Asset. He’s just a fantastic nice guy. As soon as I meet him? We immediately connected and began talking shop all about Corporate Finance, M&A, and his work in Asset Management. These are incredibly advanced topics. But very interesting to me.

Talking shop with other Finance Professionals is something that usually does not happen to me as a Entrepreneur here in Kansas City. Most people look at me like I am talking Greek. But here in front of me is a SVP of a Major Kansas City Asset Management Company and Fund. Chad could easily speak my new language of Finance. And truth be told that was really awesome to me. It made connecting with him all that more interesting and dynamic. Thanks Chad! It truly is a Privilege to connect with you Good Sir!

Why was this connection unique to me? Usually I do have a very difficult time meeting and connecting with others who work in Financial Services here locally in Kansas City. But this night would be very different. The entire presentation on the Mergers & Acquisitions state within Kansas City was truly impressive. CC Capital Advisors did a fantastic job presenting. If you missed my article about Kansas City’s best Investment Bankers? Read that (HERE)

The Bond Market Explained By Video

Quantitative Easing Described?

For most out there reading this Post? I will most likely need to describe what Quantitative Easing is in simplistic terms. And please don’t mistake this article as “Quantitative Tightening” thats the reverse of Easing. And a different article.

What does Quantitative Easing Mean?

Quantitative Easing is when the Central Bank approves the creation of Money. This money is invested into Government Bonds. These Government Bonds are held by Banks. These Banks are then able to begin lending to Small Businesses and Individuals. And this in theory will stimulate the United States Markets.

How Quantitative Easing help the Economy?

This is all theory based, it’s only based on what the Economy Academics have brought to the table to explain how this may work. But in general. We don’t know. But what we do know is Quantitative Easing is supposed to stimulate the American Economy when it looks like the Economy is about to freeze or fail from lack of capital being traded.

Quantitative Easing is supposed to stimulate the Economy in three ways.

The federal government auctions off large quantities of Treasurys to pay for expansionary fiscal policy.⁵ As the Fed buys Treasurys, it increases demand, keeping Treasury yields low (with bonds, there is an inverse relationship between yields and prices).

QE Keeps Bond Yields Low

Treasurys are the basis for all long-term interest rates. Therefore, quantitative easing through buying Treasurys also keeps auto, furniture, and other consumer debt rates affordable. The same is true for long-term, fixed-interest debt. When mortgage rates are kept low, it supports the housing market. Low rates on corporate bonds makes it affordable for businesses to expand.

QE Attracts Foreign Investment and Increases Exports

Increasing the money supply also keeps the value of the country’s currency low. When the dollar is weaker, U.S. stocks are more attractive to foreign investors, because they can get more for their money. It also makes exports less expensive.

QE Could Lead to Inflation

The only downside is that QE increases the Fed’s holdings of Treasurys and other securities. For example, before the 2008 financial crisis, the Fed’s balance sheet held less than $1 trillion. By July 2014, that number had increased to almost $4.5 trillion

WARNING – Some Financial Experts Warn Quantitative Easing could create out of control inflation, and possibly “HYPERINFLATION”.

The more dollars the Fed creates, the less valuable existing dollars are. Over time, this lowers the value of all dollars, which then buys less. The result is inflation.

Inflation doesn’t occur until the economy is thriving. Once that happens, the assets on the Fed’s books increase as well. The Fed would have no problem selling them. Selling assets would reduce the money supply and cool off any inflation.

The Following Three Ways QE could stimulate the Economy was borrowed from “THE BALANCE ARTICLE”.

I do hope you learned more on the topic what Quantitative Easing is today? And I also hope you learned more about the Basics of the Bond Market in the Video.

In conclusion of today’s post it was important for me to share my story of connecting with Chad. Chad’s professional career is certainly involved with the Bond Market. Which in turn is related to Quantitative Easing. But regardless I had to introduce him somewhere. And today’s post made the most since. I genuinely hope you learned a few things today. And as always Stay Tuned. You never know what it right down the road on this journey I am on inside Finance.

Thanks for Reading! GODSPEED.

Business Articles, Investing, Investment Banking, Mergers and Acquisitions

The Federal Reserve Raises Interest Rates

The Federal Reserve raises it’s Benchmark Interest Rates by half a percentage point which is the most aggressive action since the US is facing highest inflation rates in 40 years. Behold a new term for most? “Quantitative Easing”

After much anticipation, fan fare, and business news speculation due to rising costs within the market and easy access to cheap margin debt? The Fed convenes and finally comes out and say’s “It’s time to raise the Fed’s Interest Rates.”

The last time the Fed Raised Interest rates were in 2018. Quantitative Easing is now working by pushing more money into the economy by way of the Central Banks buying more Government Bonds through individual banks which lends money to businesses and individuals.

Ok! But What does raising the interest rates mean? After yesterday’s press conference, the Federal Reserve’s Chairman Mr. Jerome Powell began informing the Press and the Finance community. Today’s Information and Report from the Good Reporter Mr. Jeff Cox, The Business News Editor of CNBC. FULL ARTICLE

“The Federal Reserve will begin to Raise Interest rates by a half a Percentage point per the markets anticipation. When asked, The Fed’s Chairman Jerome Powell had to say about this historic increase?

“Inflation is much too high and we understand the hardship it is causing. We’re moving expeditiously to bring it back down,” Fed Chairman Jerome Powell said during a news conference, which he opened with an unusual direct address to “the American people.” He did touch on the burden of inflation on lower-income people, saying, “We’re strongly committed to restoring price stability.”

Furthermore the Feds Chairman say’s, “The American economy is very strong and well-positioned to handle tighter monetary policy,” he said, adding that he foresees a “soft or softish” landing for the economy despite tighter monetary policy.

It’s likely according to the Chairman Powell’s opinion and comments on this interest rate hike, “Their will be many Fifty 50-Basis Points rate increases are coming soon. But likely not more aggressive than that.”

When you stop and consider how the Fed will begin raising the Interest rates in detail? It will look like this. They will start by raising the Interest rates by Half a percent in the first stage. Then raise again to the Three Quarters range of a Point. Then another quarter percentage of a point, Equaling the Full 1.0 percentage point. The video below demonstrates the numbers in detail.

With all the free flowing margin debt that has been free flowing for years? It makes sense the Fed is wanting to take the steps and transition raising the debt interest rates instead of a sudden hike. This ensures markets are not suddenly impacted to the point of panic. Rolling out stricter policy for a soft landing on the American People and Investors. This also begins to address the Inflation that is beginning to be out of control. But here are some more in depth facts from the report.

In conclusion we will need to sit back and see how things begin to work. It’s never easy to accept the Party’s over with easy free cash. But as time moves on I have a suspicion the market wont rise above what the market can handle. That is just my 2 cents

In addition, the central bank outlined a program in which it eventually will reduce its bond holdings by $95 billion a month.

This undoubtedly is the largest rate increase since the fed relaxed rates in 2000, and the inflation of American Debt has pressured the Fed to begin the process restricting Debt Rates.

Fed Chairman Jerome Powell underlined the commitment to bringing inflation down but indicated that raising rates by 75 basis points at a time “is not something the committee is actively considering.”

Thanks for reading todays Post on this Historic Event we have all been anticipating and speculating on for quite some time. If you have anything worth the time to add? Please comment below,

GODSPEED
JS

Business Articles, Investing

Berkshire Hathaway Annual Meeting

If your anything like myself? You want to attend the Berkshire Annual Meeting if you can. Today’s meeting did not disappoint. Warren Buffett and Charlie Munger put on a show that we in the Finance and Business space will be dissecting and analyzing for decades.

Berkshire Hathaway

Click here for Berkshire’s Website

Since I am certain you do not want me continuing with my ridiculous interference. Without further ado, Here is today’s Meeting from CNBC.

Berkshire Hathaway Shareholders Meeting 2022 LIVE STREAM

Did you catch my article on Finance Models? (CLICK HERE)

The two Oracles of Omaha Nebraska, Charlie Munger and Warren Buffett.

Investing is Simple. The lesson’s stacked up from Both Mr. Buffett and Mr. Munger are this. Invest in things that will be around a long time. And invest in the things we love. Like See’s Candy, and Coca-Cola. That’s great advice and advice I live by. I hope you got a bang for your buck visiting my short post about the Annual Meeting today. Thank you for dropping by.

Godspeed JS

Mergers and Acquisitions

Dan Peña

Mr. Dan Peña the Trillion Dollar Man was very generous in tweeting and sharing the interview I conducted with him. For the full interview? Click Here

Respect! 100%

Dan Peña’s Website of Interviews.

I made it on his super short list of Interviews. 100% Awesome. Click Image to go to Dan’s Website

If you have not read Dan Peña’s Book “Your First 100 Million?” Do so today, you will likely learn a few things you never thought possible. To Download his book? CLICK HERE

Your First Hundred Million Book Image Dan Pena

Dan Peña Gutherie Castle

Guthrie Castle valuation? The Castle and estate is 156 acres and just about 500 years old. Mr. Pena rents out the Castle grounds for Events like Marriage Ceremonies and other get togethers. This is not longer the case and this majestic property is private now. \We don’t know the exact worth of the castle but it’s been said to be worth over $25 million!

Godspeed

Business Articles, Finance Articles, Venture Capital

Ten Common Problems Entrepreneurs Face With Venture Capitalists

Yesterday I found myself chatting with a local Kansas City VC Attorney and he shared some personal experiences that really shared a few challenges Entrepreneurs face when seeking Venture Capital Partnerships. These insider secrets and failures really snapped a few things into perspective. The VC’s must be very selective and use strategic selections to keep and sort the deal flow that is not a waste of time.

If you really think about it? Venture Capitalists are bombarded with so much junk? Often real opportunities must be challenged and sorted. And the only way to accurately find the real opportunities? Is to create impossible standards and a crucible of challenges. The following is common things Venture Capitalists say to Entrepreneurs who are seeking Capital Partnerships or Investments.

Investor, Partner, or Venture Capitalists

Are you seeking a Partner or Money Investor? Is a question VC’s will likely directly ask you. However if you don’t know what your seeking? Your going to end up disappointed and likely roadkill. Fair warning. When a VC say’s they are Value investors? That means they like to fix things and make money.

However some will add money and other things like connections, guidance for improving operations and more. Some just give you money and say go get busy without guidance or mission support.

Did you catch my last Article and Post on “How Entrepreneurs Stay Safe When Investors Invest?” Read this article before accepting investment money from anyone. Back on topic an Back to business.

Often times when your in the Boardroom with a VC you should already know what you want, how much money your asking for and a laundry list of other details. If your there and unprepared? It’s likely your going to be disappointed like I shared earlier and roadkill. You should always be prepared and have a battle plan that is at least 6 months out.

Impossible Odds and Certain Rejection

2. Thank you for coming in and presenting your vision and business. However my partners just won’t let us move forward right now. (They say this because you weren’t convincing or exciting. They were just curious.)

How to handle this?

I would Thank them for your time. And leave. All things considered? Your going to face lots of rejection. Thousands of people who reject you and your business vision. However it’s likely you will work for face to face meet for over a year. And when you get in that boardroom with a Investment Committee? It was all for nothing. You fail and you move on. Your value process should be creating a huge pipeline. That’s your edge in a market filled with rejection and time wasters.

Scheduling Problems and Impossible Follow Up?

3. Trouble Scheduling a Meeting? Ok. So your a Entrepreneur your working hard and your finding it nearly impossible to have a meeting scheduled with Investors. What is happening? Well two things are happening. A. The Investment Team is watching you and looking at your background and your business vision. They also won’t tell you they are doing this. But expect it to be happening covertly behind your back. B. They want to see if your easily distracted and they want to test your mettle so to Speak. Don’t give up. Be polite. Be Confident. And under no Circumstances be a jerk or look weak.

People in general will watch your behavior and read in detail your communications. If your nice and sincere and completely committed? It will show in your perseverance. To many people call once or twice and are frustrated and never call back or follow up. This is the game they are playing. And it’s ridiculous at times. There is always a reason they don’t answer. It’s been my experience. People will Lie, deceive, and play games. However playing games and protecting their portfolios is how they stay above the fray in the business world.

How are you treated when your invited for a interview?

4. Are you meeting a Vice President of Development or are you meeting in a Board room with a Committee of Partners and Principals? This will gauge the level of interest the Private Equity Firm, Venture Capitalists will have in you as the entrepreneur or new business team.

A. If they place you in a small room with a VP of Development and a smile? This means it’s likely your not very attractive. B. If they invite you in to a large nice board room with coffee and a team of Partners and Principals? Your deal is fucking HOT!!! Act accordingly.

Is the Equity and Finance Structuring Trustworthy?

5. We are going to be fair with structuring Debt, and equity positions. (Unless your good good trust worthy friends? Don’t trust this whatsoever.) You should be taking steps to protect your interests and your equity. Have your own personal corporate Attorney negotiate the structures and equity positions that are best for you. If they threaten to walk away? You walk away first. You don’t want to beg or plead for anyone to ever be your capital partner or be the reason you wasted 20 years on a business that ended up not paying you a healthy equity piece.

The business world is extremely unfair at times. Make sure you know that the Attorneys for the VC will rob you without a gun. Or try to freeze you out as slave labor. Act accordingly. Your welcome.

The Lie Of Performance Based Equity Buy Back

6. Based on Performance you can earn back more equity down the line. ( Meaning if you perform at impossible levels? You will earn back equity in the company.) This should be pretty obvious. You want to do your background checks and put in the effort of interviewing previous successful and unsuccessful Venture Capitalists partners or entrepreneurs. You always want to work with well known names and Business leaders known for integrity and know for taking care of their people.

You don’t want to find out later you are on your own with a ship that is sinking. And your investment partners don’t care either way. They will just come in with corporate raiders and destroy the sinking ship. Leaving you with a failed experiment and a new sad life story. Be smart.. Be prepared, Be vicious in your approach for success.

Control Your Expectations

7. Our procedures for getting our partners funding as VC’s takes a month or two. ( This should be suspect) If you are lucky enough to sit down with a Venture Capital fund? It’s likely that they level of interest is moderate. But based on most of the experiences you should already have from others who have worked with them? You should know that its more likely that your in for a 1 year wait. Or longer. Prepare and keep a full pipeline. Often times after a few month’s they may call you back and follow up. Just to dig and see if your still interested for a sit down or if you have quit. More than likely your in for a year or two wait with VC’s. Be prepared to survive and fill up your VC Pipeline.

Feigning Interest as Investors

8. OH YA WE ARE INTERESTED!!! ( Honestly it’s more likely they are interested in your product or Intellectual property. Can they replicate it? Can they be the first knock off?) Be informed the game is largely rigged for Entrepreneurs. The only hope you have at fairness is from a Banker and someone you know treating you well. Don’t expect VC’s to invite you in and automatically partner and write you a check. Or work with you for the success of the project. Often they are not well organized and are ver opportunistic. Make sure your professional deck is clean, clear, concise with a time line. Don’t wait around. Be proactive and never ever get excited just because they called you back. Lower your expectations. But be pragmatic. You will thank me later.

Financial Modeling, Number Charts, and BS Statistics

9. You think all the financial models and assumed projections will impress their Accountants. WRONG! It will be dissected, interrogated, your math will be questioned for all failures. And you will have to answer slick impossible questions. But the good news is if you happen to have a CPA worth their salt? You can avoid the interrogation and punt to the Accountant or Analyst on your team.

Start at Failure and Build up from there

10. Just expect everything to be almost impossible with downsides and failures around every corner. If your able to prepare and research and interview all possibilities before hand? You may just have a fighting chance. Thank you for reading. I know this post seems impossible. As it was meant to be this way. Honestly most entrepreneurs need to not only change their expectations. But also settle in for a long, disappointing ridiculous ride. That is my experience and you should be aware the world of business is a cruel and unfair place. Make sure you are prepared for certain failure. And do prepare a mindset of certain failure. Armor your expectations and this will ensure your success one day.

Godspeed

Business Articles

The Sit Down For Entrepreneurs

If your not sitting down with your Business Partners to collaborate on direction, agreements, leadership and other terms once a year? Your likely setting your business partnership up for certain failure and possible major disagreements. If your willing to ask hard questions up front and use my suggestions in this post? You will walk away with a impressed Business Partner and a solid relationship foundation moving forward.

Accounting is Accountability

I am very aware most Entrepreneurs in small business more than likely are Financial illiterate. They have no way of knowing what they are doing right and what they are doing seriously wrong. The first step in building a Financial Foundation is to take a Accounting class online or at a local community college immediately. Having trouble absorbing the information? Take it two times if need be. Learning these lessons are the foundation for business literacy. Education will begin your financial knowledge foundation. This simple task is often over looked and sadly dismissed as unnecessary. Usually by ignorant and or over confident entrepreneurs doomed from the beginning.

Your Accounting course will begin shaping your thoughts and questions in finance and business. Meaning you will become curious and personally teachable like myself. Figuring out through extended time and gaining more experiences “How business really works.” You need to be aware of when you may be getting robbed in a Board room and a fancy pen with unforgiving businessmen who have blank unemotional faces. I know what your thinking? Harsh? Yep! But I have to prepare you for the reality. I know you probably think I am completely nuts! Because of me slipping that in there. But truth is I have to keep you on your toes.

Being able to take raw numbers and data organize them in excel spreadsheets. Is how you make sense of business numbers and Profit Loss P&L Statements and more projections. Most entrepreneurs fail to consider metrics and numbers. When you can evaluate and know the numbers. This undoubtedly makes you more valuable and attractive as a Business partner. Speaking of partners and investors in business? Your bound to have disagreements. But most times its easily negated by active listening and personal collaborating.

Are You Creating Your Own Business Disasters?

Maybe you have been building your business, maybe you have spent your life savings and built a nice little business with a income stream to match. But you have one problem. Your margins are not allowing your business growth. What do you do? You have a few options. Keep growing at a small rate over time. Risking possible bankruptcy. Or B. Recruiting a Business Partner who can invest Capital or other possibilities to help you grow it fast. Example: Let’s say hypothetically your sitting at a table across from your new capital partner and She or He offers you $150,000 dollars to begin scaling the business. Do you take the money? Or do you ask more questions and try to collaborate? It seems likely many Small Business owners have difficulty in situations like this. If you go look at Business Equipment Financing websites? It’s littered with confused entrepreneurs who have made poor capital decisions. They just did not ask enough questions and did not use metrics.

I would first ask A.”How can we grow this together as a qualifying collaborative question? And B. “What are you looking for in return for investing this money?” Asking these starter Questions are great because they take you deep into collaborating together. Building a solid partnership. But for now let’s hypothetically say you do not take my advice. And you end up….Smiling at your new partner, take the check shake hands. Leave the meeting. And get busy scaling your business to new heights.

But! There is a problem. YES!! YOU HAVE A HUGE PROBLEM!! You have have no mutual understanding. And you have “NO PARTNER or Terms AGREEMENT!”

Agreement’s Mean Collaborating.

Ok let’s say you left that meeting deposited the 150 thousand dollar check in to your business account and began scaling your business right away. A little time goes by and your small business is honestly becoming bigger than you ever thought. The stream of cash flow coming in to your business accounts receivable. It’s powerful. LOL It’s wonderful. Then you get a call out of the blue. It’s your Partner. He or she is confused and annoyed and down right borderline furious. Your partner wants to know “WHY THEY HAVE NOT GOTTEN ANY INTEREST’S PAYMENTS?”

You assume you have been a responsible business owner and think to yourself “No problem. I got you!” And ask your partner “How much do you need for interest payment?”. Your partner responds “I need 25.00% percent on the principal.” And just like that! Your life and future business starts to crumble and spiral out of control all from the fact you failed to negotiate terms on the money. And you failed to negotiate your Partnership Agreement. Whoops. Shaking my head. Now you begin seeing doing a little prep work goes along ways.

The Sit Down

There is a reason the Italian Mafia or Cosa Nostra was very effective in business. They were great because they had the sit down! They had behavior Guidelines. Michael Franzese has some genuinely great content. I would highly suggest reading his books.

In the video above your gonna learn some invaluable business advice. And I mean invaluable. So pay attention Capeche? Good! Im gonna stand on my soap box for a second here and share with you some invaluable advice and experience. So pay attention please. In the Military you learn real fast that you will be punished severely for not taking responsibility for anything and everything and everyone as a team. So I suggest you take responsibility for your partnership and team. Recruit a Business Attorney to help you negotiate and prepare your interests for success. Instead of ending with headaches and certain failure.

Did you miss my Post about Creating Trust in Business Negotiations? It is a must read for anyone in business.

Click Here!

Back to military service punishments for a second. This is funny in a dark way. Their is a underlying theme to being punished in the military. And this transfers to almost every other part of your life. You are responsible for your behavior and all your future outcomes. This means taking responsibility for anyone, everything, and everyone associated with a goal in mind as you move to that objective as a team. If something falls short. Your mission is disrupted by a mechanical failure. Something breaks? Doesn’t work correctly? Even if something isn’t your fault? Step right up! Spin the wheel of certain misfortune. Guess what? It’s your failure! No one else’s. lol It’s 100$ definitely a cruel way to learn. But it does work.

The Knapkin Contract In Business

If you don’t have a contract or a Agreement written down? Tough Luck! Your Busted Out! Don’t be the victim.

Back when you first sat down and your Partner offered to give you $150,000 dollars to invest in your business. You should have taken the initiative to draw up a knapkin agreement. Negotiate favorable and collaborative investments terms while writing these terms out on a piece of paper at the table with the person offering you the money. You can do this in a Restaurant or anywhere a knapkin is available. At the end of your desired agreement you both sign this binding ad hoc legal document. Then take this document and have your Business Attorney finalize it as a formalized, and signed. This is how you should have done it in the first place.

Capitalize on this opportunity. Don’t ever feel the need rush things and always make counter offers. And do your best to prepare questions and what if’s to protect yourself and your new partnership moving forward. I hope you did gain something or some foresight with this post tonight. Thank you for reading everyone. Please do suggest a topic you would like for me to cover. I would be happy to do so. Email me at JamesonDocSharp@gmail.com

Goodnight & Goodluck!

Financier, Investor, Writer

Kansas City & Scottsdale Arizona

Tag Archives: Finance