A Quote by Warren Buffett
Many stock options in the corporate world have worked in exactly that fashion: they have gained in value simply because management retained earnings, not because it did well with the capital in its hands.
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I think there's an awful lot of twaddle and bullshit on EVA. The whole game is to turn retained earnings into more earnings. EVA has ideas about cost of capital that make no sense. Of course, if a company generates high returns on capital and can maintain this over time, it will do well. But the mental system as a whole does not work.
I believe in libertarian options because they allow an interesting management of the capital and are based on co-operation, reciprocity, contract, federation.
The aggregate capital appears as the capital stock of all individual capitalists combined. This joint stock company has in common with many other stock companies that everyone knows what he puts in, but not what he will get out of it.
Nothing in finance is more fatuous and harmful, in our opinion, than the firmly established attitude of common stock investors regarding questions of corporate management. That attitude is summed up in the phrase: "If you don't like the management, sell your stock." ... The public owners seem to have abdicated all claim to control over the paid superintendents of their property.
Capital, never concerned with distribution, is now less and less concerned with production. Capital is driving for power, for the control over markets, lands, resources. Capital, in corporate hands, can move anywhere and thus demand and get the utmost in concessions and privileges as well as the freedom to operate in the interest of ever-increasing wealth and assets.
I love the Knicks and Rangers, right, but you still have a responsibility to your shareholders. They're not there because they're fans. You don't invest hundreds of millions of dollars in a stock because you're a fan. You do it because you think that the business is going to increase in value, that the stock price is going to go up.
I have always worked a bit with fashion people. I worked with Issey Miyake for a while, then Dolce & Gabbana; now we're working with Valentino. It's fine. The fashion world is a fairly weird world, but there are good people in it. It's weird because their timetables are unbearable.
The big picture is: the main thing you should be concerned about in the future are incremental returns on capital going forward. As it turns out, past history of a good return on capital is a good proxy for this but obviously not foolproof. I think this is an area where thoughtful analysis can add value to any simple ranking/screening strategy such as the magic formula. When doing in depth analysis of companies, I care very much about long term earnings power, not necessarily so much about the volatility of that earnings power but about my certainty of "normal" earnings power over time.
For every company that sees the value of their capital go up, there's another company that has been disrupted, and the value of their capital gets marked down because it's not going to compete in the same way.
I presumably lost $150,000 in the depression of 1937—on my one stock investment—because I did everything Lehman Brothers told me. I said, well, this is a fool’s procedure . . . buying stock in other people’s businesses.
I believe that online paid content hasn't worked for general circulation newspapers because consumers weren't ready for it, because the implementation did not deliver enough value, because content was typically the same as in the print version, and because much of the material was being syndicted by the papers to other publishers or was not protected with DRM technologies to exclude use by others.
The reason is they failed to learned the primary lesson we should have learned from when Long Term Capital Management went belly up ten years ago. That is, investments that seem uncorrelated can be correlated simply because we're interested in it.
Before I entered politics, I worked for more than 15 years in corporate finance in the City, where I saw for myself the value of foreign investment. Simply put, it is a catalyst for prosperity.
When you buy enough stocks to give you control of a target company, that's called mergers and acquisitions or corporate raiding. Hedge funds have been doing this, as well as corporate financial managers. With borrowed money you can take over or raid a foreign company too. So, you're having a monopolistic consolidation process that's pushed up the market, because in order to buy a company or arrange a merger, you have to offer more than the going stock-market price. You have to convince existing holders of a stock to sell out to you by paying them more than they'd otherwise get.
Rising interest rates are considered bad for stocks because they raise the cost of doing business and depress corporate earnings and because higher yields make bonds relatively more attractive than stocks to investors.
Are you going to divest in the banks and pension funds? Plenty of people are willing to invest in stock of those companies. You can argue that when a lot of people divest, it makes the stock price artificially low, which makes their price-to-earnings ratio more favorable, which makes it a better investment for the people who don't give a damn - - and is it really going to change corporate behavior? It begins to create a climate of antagonistic opinion, the result might be that the corporate executives will retreat even more into their own selfjustifying narratives.
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