Best Way To Make Money Fast
The well-known empirical results of Mishkin (1982) support the greater potency of expected inflation, compared to unexpected inflation (see Chapter 5). The theory presented in this chapter is consistent with such results. To the extent Mishkin's evidence holds up, the Fed may wish to announce its intentions when it wishes to engage in short-run stimulation. In the long run, however, expected and unexpected money growth should have roughly equal potency. Expected money growth will make the boom come sooner, but it will not change the risk-return opportunities embedded in the available array of real productive technologies.
The values in financial statements appear to be authoritative. However, many of the values in financial statements are estimates based on the cost principle of accounting. The cost principle of accounting states that assets are to be valued on the basis of their cost as opposed to market or other values. For example, the S500 000 given as the value of the land held bv Major Electric is what Major Electric paid for the land. The market value of the land may now be greater or less than 500 000. In summary, when examining financial statement data, it is important to remember that manv reported values are estimates. Most firms include their accounting methods and assumptions within their periodic reports to assist in the interpretation of the statements.
Some basic knowledge of accounting and financial statements is necessary for a chemical professional to be able to analyze a firm's operations, discover whether the firm is making a profit and whether a company will continue to make a profit. It is also essential to know how a firm's operation is reported to determine its role in a particular industry or in the national economy. Financial reports of a company are important sources of data used by management, owners, creditors, investment bankers, and financial analysts. Also, local and state governments and the federal government are interested in the information for tax purposes. There are differences of opinion concerning how much information about the bookkeeping process an engineer should know to understand accounting reports and financial statements which would greatly enhance his or her knowledge of the company. He or she interfaces with the accounting department in the budgeting and control function, in the operation of a...
Hence the fare is equal to D, the distance of the trip. To simplify, each trip is 5 miles long when the taxi driver takes the short route, and the long route is 10 miles long. The driver can make 30 trips a day of 10 miles each or 55 trips a day of 5 miles each. (Remember, time is lost between trips.) When the driver works efficiently her revenue is 55 x 1 x 5 275. But when the driver shirks, and takes the long route, her daily revenue is 30 x 1 x 10 300 She makes more money by shirking.
The three principles that describe how the economy as a whole works are (1) a country's standard of living depends on its ability to produce goods and services (2) prices rise when the government prints too much money and (3) society faces a short-run trade-off between inflation and unemployment. A country's standard of living depends largely on the productivity of its workers, which in turn depends on the education of its workers and the access its workers have to the necessary tools and technology. Prices rise when the government prints too much money because more money in circulation reduces the value of money, causing inflation. Society faces a short-run trade-off between inflation and unemployment that is only temporary. Policymakers have some short-term ability to exploit this relationship using various policy instruments. b. For a member of Congress deciding whether to increase spending on national parks, the trade-off is between parks and other spending items or tax cuts. If...
Various options for obtaining funds to finance capital projects were presented in Section 2.2. Top-level management is confronted with how a venture will be funded, considering the costs and risks involved. The capital requirements may vary from millions to billions of dollars.
The Wealth of Nations was the intellectual shot heard around the world. Adam Smith, a leader in the Scottish Enlightenment, had put on paper a universal formula for prosperity and financial independence that would, over the course of the next century, revolutionize the way citizens and leaders thought about and practiced economics and trade. Its publication promised a new world a world of abundant wealth, riches beyond the mere accumulation of gold and silver. Smith promised that new world to everyone not just the rich and the rulers, but the common man, too. The Wealth of Nations offered a formula for emancipating
For an equity mutual fund, return is determined largely by three factors the performance of the market that the manager invests in the performance of the manager's strategy (sometimes referred to as investment style) and the level of skill that the manager brings to bear. The most important single factor is the performance of the market. When stocks, in general, are down, most equity managers have a tough time making money. But investment outcomes may still vary according to the various styles and strategies used by different managers. For example, 2001 was a difficult year for U.S. stocks The S&P 500 was down 11.9 percent. But the Nasdaq Composite, which had For a hedge fund manager, the market drops out as a source of return, leaving just two factors strategy and skill. The market drops out largely because the hedge fund manager has the ability to take either long positions or short positions. Long positions are positions that make money when the price of the security goes up, while...
Because you can earn interest, a given amount of money today is worth more than the same amount of money in the future. After all, you could always deposit your money today into the bank and thereby get back more money in the future. This is an example of the concept of the time value of money, which says that a dollar today is worth more than a dollar tomorrow. This is one of the most basic and important concepts in finance.
Given the crucial role of prices in this process, suppression of the process by rent control laws leaves elderly people with little incentive to vacate apartments that they would normally vacate, if that would result in a significant reduction in rent, leaving them more money with which to improve their living standards in other respects. Moreover, the chronic housing shortages which accompany rent control greatly increase the time and effort required to search for a new and smaller apartment, while reducing the financial reward for finding one. In short, rent control reduces the rate of housing turnover.
If population is the key, the World Cup of 2050 could have a very different flavour from that of 2006. Perhaps Turkey will be challenging Germany as the automatic top European football country. US, Russian and other billionaires might be trying to buy Turkish clubs instead of British and Italian ones Can you imagine what would happen if India were to discover a taste for football, and if the trends emerging in China and the US were sustained Just as in economics today, Europe collectively wouldn't get a look in
One of the most powerful and important words in the English language is wealth. Most of us have come to believe that the word denotes material possessions, financial assets, property and ultimately power. The dictionary defines wealth as much money or property great amount of worldly possessions riches. 2' 3 In economics, wealth is defined as a stock of all those assets capable of earning an income. 4 Wealth is often associated with power those with more money, property, material possessions or riches are those with the
The hedge fund manager makes a deal that is exactly opposite to the mutual fund deal. The hedge fund manager wants maximum freedom in investing the assets of the fund, in exchange for which he accepts very substantial limitations on marketing and liquidity. As for liquidity, some hedge funds allow money to come in and go out only annually. Indeed, some very successful funds require that capital be committed for two or three years or more. Other funds are geared to a quarterly or monthly cycle. Daily liquidity does not exist in the hedge fund universe. As for marketing, the basic objective of the hedge fund manager is to attract a small number of large investors rather than a large number of small investors. The investors will be wealthy individuals, or institutions, that satisfy specific net worth requirements.
With your track record, you could easily raise a lot more money. That would just kill everything. The only way I can possibly maintain my track record is to make sure I don't overwhelm myself with assets. Right now, if I have a good quarter, it ramps up the amount of money I am managing. By growing through capital appreciation, I can evolve my trading
State and local bonds, also called municipal bonds, are long-term debt instruments issued by state and local governments to finance expenditures on schools, roads, and other large programs. An important feature of these bonds is that their interest payments are exempt from federal income tax and generally from state taxes in the issuing state. Commercial banks, with their high income tax rate, are the biggest buyers of these securities, owning over half the total amount outstanding. The next biggest group of holders consists of wealthy individuals in high income brackets, followed by insurance companies.
The junk-bond boom would not have occurred without the enthusiastic acceptance of financial-market participants. The greed and possibly the ignorance of individual investors, the short-term orientation of institutional investors, and the tendency of Wall Street to maximize its self-interest above all came together in the 1980s to allow a 200 billion market to develop virtually from scratch. Although unproven over a complete economic cycle, newly issued junk bonds were hailed as a safe investment that provided a very attractive return to investors. By 1990, however, the concept of newly issued junk bonds had been exposed as seriously flawed, defaults reached record levels, and the prices of many issues plunged. Even so, the junk-bond market staged a surprising recovery in early 1991 many of the flaws that had resulted in tens of billions of dollars of losses were once again being ignored. After graduating from the Wharton School, Milken took a job at Drexel Firestone, where he traded...
The stock market found a bottom on September 21 and performed well into early 2002. Then the Enron Arthur Andersen scandal, and a string of similar corporate scandals, created a crisis of confidence. Many investors think that making money in a conventional stock portfolio will be harder for the next several years than it was during the great bull market. Over the full period from 1926 to 2001, stocks returned about 11 percent annually before inflation, about 7 percent after inflation. These figures include the two major disinflationary periods, 1948 to 1965 and 1981 to 2001, when returns (both nominal and real) were much higher than the long-term averages. Many observers think that returns will revert to the mean, or go even lower. Hence the current interest in hedge funds, which offer
RESUME - ABSTRACT I THE OBJECTIVE OF THIS RESEARCH IS TO DEVELOP A MANAGEMENT HANDBOOK FOR SMALLER TRANSIT SYSTEMS. THE HANDBOOK SHOULD BE WRITTEN IN AN INVITING STYLE, BE FOCUSED ON POSING TYPICAL SMALL TRANSIT SYSTEM PROBLEMS AND CURRENT METHODS AND TOOLS FOR DEALING WITH THOSE PROBLEMS. SUCH PROBLEM DESCRIPTIONS MAY BE MODULAR FOR READY DISTRIBUTION INDEPENDENT OF THE MASTER VOLUME, AND MAY INCLUDE SOURCES FOR ADDITIONAL HELP SUCH AS HOTLINES FOR INTERNET SITES. POTENTIAL TOPICS INCLUDE THE FOLLOWING GEOGRAPHIC INFORMATION SYSTEMS, MAINTENANCE MANAGEMENT, MANAGEMENT INFORMATION SYSTEMS, COST ANALYSIS, MEDIUM-TERM PLANNING, COMPUTER PROCUREMENT AND OPERATION, PASSENGER ASSISTANCE AND ADA, EMERGENCY RESCUE AND EVACUATION, WRITING AND IMPLEMENTING OPERATING PROCEDURES, COMPUTER-ASSISTED DISPATCH, FINANCIAL PLANNING, STRATEGIES PLANNING, ALCOHOL AND DRUG TESTING, LEGAL ISUES IN THE WORKPLACE, AND PROGRESSIVE DISCIPLINE.
Concentration is critical to superior performance. The greater the number of stocks you hold, the more marketlike your performance becomes, and the less value you add as a money manager. Those who preach diversification as a risk control measure are essentially hedging their fundamental ignorance of their own holdings. Also, one of my objectives is to be able to make money in any market climate, which means that I have to decouple my performance
But if government officials are going to address these problems, they will need to be able to overcome the many information asymmetries and identify the most promising firms. Otherwise, as de Meza (2002) argues, these efforts are likely to be counter-productive. Is it reasonable to assume that government officials can overcome these problems while private sector financiers cannot Certainly, this possibility is not implausible. For instance, specialists at the National Institutes of Health or the Department of Defense may have considerable insight into which biotechnology or advanced materials companies are the most promising, while the traditional financial statement analysis undertaken by bankers would be of little value. In general, the certification hypothesis suggests that these signals provided by government awards are likely to be particularly valuable in technology-intensive industries where traditional financial measures are of little use.9
Let us first of all consider the structure and content of the book. After the dedication and the preface, the Breve trattato is divided into three parts. The first, and for us the most interesting, discusses 'the causes for which kingdoms may abound with gold and silver', as the title of chapter 1 went that is, in substance, the causes - even if not the nature - of the economic prosperity of nations in the broadest sense of the term, also through comparison of conditions prevailing in the Kingdom of Naples with those prevailing in other parts of Italy, particularly Venice. The second part is substantially concerned with refuting the proposals advanced a few years earlier by Marco Antonio De Santis (1605a, 1605b) with the aim of reducing the exchange rate to attract money into the kingdom from outside. The third part presented systematic discussion of the different policy measures adopted or proposed 'in order to make money abundant within the Kingdom'.
In asserting that there is a structure in the decisions made in the market place, we mean simply that the decisions belonging to each of the various market roles are linked in a stable pattern of relationships. Decisions of resource owners, for example, are conditioned on the one hand by the urge to gain money income, and on the other hand by the different alternatives offered by various entrepreneurs. The decisions of consumers are conditioned on the one hand by his own tastes and income, and on the other hand by the different alternatives offered to him by various
Making money in the bull market was easy, so vast portions of the U.S. population got hooked on the stock market. Some of this new interest in stocks was part of a healthy and growing equity culture, in which more and more people invested in diversified stock portfolios through their individual retirement accounts (IRAs), 401(k) plans, and other investment accounts. But some of this interest was not healthy. Some people became obsessed with the stock market, even giving up their more conventional jobs to become day traders. The United States became a market-obsessed culture, in which people watched financial news on television and spent time at parties swapping stories about stocks, mutual funds, star portfolio managers, and so forth. Newspapers advertised mutual funds run by investment wizards who had compiled dazzling performance records. The financial pages became an extension of the sports pages as investors pored over the statistics, and the paychecks, of celebrated financial...
Smith said that competition was absolutely essential to turning self-interest into benevolence in a self-regulating society. He preferred the cheaper natural price, or the price of free competition to the high price of monopoly power and exclusive privileges granted certain corporations and trading companies (such as the East India Company). Smith vehemently opposed the mean rapacity and wretched spirit of monopoly (428) to which privileged businessmen were accustomed. Competition means lower prices and more money to buy other goods, which in turn means more jobs and a higher standard of living. According to Smith, monopoly power creates a political society, characterized by flattery, fawning, and deceit (Muller 1993, 135). Monopoly fosters quick and easy profits and wasteful consumption (Smith 1965 1776 , 578).
Another factor deserves mention here economic statistics, especially those obtained from mass observers, are themselves great accumulations of figures. Thus, the volume of economic data (not necessarily observations) is very great and keeps on increasing at a great rate. This is important inasmuch as it makes checks and corrections exceedingly difficult. The masses of statistical data are seldom condensed into constants, etc., as is the case in the natural sciences. Furthermore, they continue to grow at a rapid pace, because more money is spent on obtaining data, electronic data processing is expanding rapidly, and the complexity of life increases. This calls for more information about more and more things. The mere accumulation of data in itself presents a new problem to economics.
With greater disposable income, consumers can spend more money on any good, and some consumers will do so for most goods. If the market price were held constant at Pv we would therefore expect to see an increase in quantity demanded, say, from Ql to Q2. This would happen no matter what the market price was, so that the result would be a shift to the right of the entire demand
The decade of the 1970s saw high inflation, rising interest rates, falling bond prices, and falling stock prices. But commodities performed well. Oil, gold, and other hard assets went into a bull market of their own as stocks and bonds languished. During this period, many wealthy individuals began to trade futures in brokerage accounts located either at the major brokerage firms or at specialized futures brokerage firms. Sometimes the account holder made his own trades, based on his own ideas or on trading recommendations generated by the research department of the brokerage firm. In those days, major brokerage firms retained a staff of in-house research analysts to cover precious metals (gold, silver, platinum, palladium), industrial metals (copper, nickel, zinc), agricultural commodities (corn, wheat, soybeans), and the energy complex (oil, natural
A hedge fund brings together three very different types of individuals and organizations. First, there are the individuals and organizations who invest in the fund. These are the owners of the assets. This category covers a wide range, including high-net-worth individuals, large pension funds and endowments, and others. Second, there is the manager of the fund, who buys and sells securities on behalf of the owners of the asse ts. This category also covers a wide range, all the way from small firms managing a few million dollars to large organizations managing billions of dollars. Third, there is a category of financial intermediaries, which includes small and specialized firms, as well as financial powerhouses like Goldman Sachs, Morgan Stanley, Merrill Lynch, and others. These firms deliver a broad range of financial services, many of which are indispensable for the hedge fund manage r. And the hedge fund manager has become an increasingly important client of these firms.
Even so, only a special social environment would allow James Watt to come together with Matthew Boulton, already a wealthy manufacturer of simply made buttons and buckles, to form a company for manufacturing steam engines. The British were greatly concerned with property rights so that patents protected the works of the British inventors like Watt, and, for the Boulton's, property was made relatively secure by laws favoring its accumulation. This environment allowed Richard Arkwright (who employed 150 to 600 workers in many factories) and other industrialists of modest beginnings to retire as landed millionaires. This capital accumulation so highly prized
Use it to make money from their initial investment. Or they may want to buy a consumer good like a new home theatre system and start enjo ing it immediately. What this means is that one dollar today is worth more than one dollar in the future. This is because a dollar today can be invested for productive use, while that opportunity is lost or diminished if the dollar is not available until some time in the future. The observation that a dollar today is worth more than a dollar in the future means that people must be compensated for lending money. They are giving up the opportunity to invest their monev for productive purposes now on the promise of getting more money in the future. The compensation for loaning money is in the form of an interest payment, say . More formally, interest is the difference between the amount of money lent and the amount of money later repaid. It is the compensation for giving up the use of the money for the duration of the loan.
Individual investors are real people. In the case of hedge funds, these people will generally be wealthy individuals who comprise the so-called high-net-worth market. The assets that they own fall into two categories taxable assets and tax-exempt assets. The tax-exempt category has become increasingly important over the years as individual investors have taken advantage of individual retirement accounts (IRAs), 401(k) plans, 403(b) plans, and other forms of tax-advantaged investing. Newspapers routinely describe hedge funds as secretive and unregulated investment vehicles for very wealthy individuals. It is true that the high-net-worth community has been an important source of assets for hedge fund investments. But the level of participation on the part of U.S. institutional investors has increased dramatically, and this interest has translated into a large volume of dollars flowing into hedge funds. More recently, the California Public Employees' Pension...
All five of the factors we discussed so far are defensive in nature, focused on capital preservation. They are designed to diminish risk but do not automatically translate into a significant money-making opportunity. All five could be in place and the stock may still fail to move. The key question is What is going to make the stock go up It is our task to identify and time that catalyst. Based on experience, the more severely depressed the valuation and the more pessimism that surrounds the stock, the less it actually takes to reverse the market's perception and trigger a price recovery. V
We tend to think of businesses as simply money-making enterprises, but that can be very misleading, in at least two ways. First of all, most businesses go out of business within a very few years after getting started, so it is likely that at least as many businesses are losing money as are making money. More important, from the standpoint of economics, is not what money the business owner hopes to make or whether he succeeds, but how all this affects the use of scarce resources which have alternative uses and therefore how it affects the economic well-being of millions of other people in the society at large.
You were an analyst before you were a money manager Is there an inherent sense of conflict being an analyst for a stock
There is an inherent conflict between you and your client. Your client wants to make money, and you want to generate maximum commissions that is the sell-side brokerage firm analyst's number one priority. Hence there is a bias for recommendations that are easily saleable by the sales force stocks that enjoy positive market perceptions and are ultraliquid so that firms can transact a maximum number of shares. Any exceptional money-making potential of the idea, or risk to capital if market perceptions turn negative, is strictly an afterthought. Recommending stocks that are deemed as
The second inference is that some institutional set-ups dominate others. 'Making money' dominates the pursuit of real profits. This is why firms shifted from manufacturing to finance, even though it precluded their technological upgrading and long-term real competitiveness.
While Mr Keynes on the whole rather tends to minimize the importance of the transactions-motive for the demand for money, the point has recently been stressed by Mr D.H.Robertson.10 He accuses Mr Keynes of having neglected the difference between money in the hands of entrepreneurs and money in the hands of the public ('those who desire to hold more money and those who desire to use it')11 and emphasizes the close connection between the profitability of investment and the magnitude of the business- funds. As the profitability of investment depends on the degree of confidence which enters the 'business outlook', the inverse proportionality between uncertainty and liquidity-preference seems thus rather firmly established.
A moderately rigorous test would involve a laboratory simulation of the market design. While this is recommended, especially when gambling with sums that can run into the billions of dollars, a more modest course of testing is presented here. No design should be implemented without this minimal level of testing, which is called the bottom-line test because it tests the effect of a market design on the total cost of supply. It does not provide a cookbook procedure, but it provides a structure that is often missing, and it sets a minimum standard. The test procedure
In Keynes's view, there were two reasons why income would affect the demand for money. First, as an economy expands and income rises, wealth increases and people will want to hold more money as a store of value. Second, as the economy expands and income rises, people will want to carry out more transactions using money, with the result that they will also want to hold more money. The conclusion is that a higher level of income causes the demand for money to increase and the demand curve to shift to the right.
Money managers buy and sell stocks, bonds, and other instruments on behalf of the clients whose accounts they manage. Money managers are available in all shapes and sizes. There are large firms that manage hundreds of billions of dollars. This group includes familiar names in the universe of banks, insurance companies, and brokerage firms. It also includes large independent money management firms that were started many years ago by people who left the large banks and insurance companies. And then there are the small independent money managers, the so-called boutiques. Hedge funds are an important part of the boutique money management business. The problem gets more complicated for firms that are involved not just in money management but also in other businesses. Consider the financial powerhouse that combines institutional investment management, money management for wealthy individuals, stock brokerage, lending, trading, and so forth. Suppose, for example, that the firm decides t o...
Another aspect is that sell-side research tends to be biased it is driven by investment banking relationships. If a brokerage firm earns several million dollars doing an underwriting for a stock, it is very difficult for an analyst of that firm to issue anything other than a buy rating, even if he believes the company has significant problems. Some of my research analysts have good friends who are sell-side analysts and have seen them pressured to recommend stocks they didn't like.
Remember our first encounter with money in the circular flow model in Chapter 1 By means of a numerical illustration we saw that endowing people with more money can lead to either more output (at given prices) or higher prices (for given output). The standard version of the Mundell-Fleming model considered so far focuses on the first option at the current price level, firms are prepared to produce any volume of goods and services that aggregate demand desires. This assumption may be a useful approximation when there is slack in the economy. However, it is misleading when the economy operates at full capacity. This section gives a first flavour of this. A more general treatment of the interaction between aggregate supply and demand will be postponed until Chapters 7 and 8.
Some observers believe that hedge funds have replaced the major Wall Street firms as a source of liquidity in the markets. This idea is often advanced as a reason for investing in hedge funds and a reason that hedge funds should make money. After all, liquidity is valuable, so if hedge funds can provide it, they should get paid.
Our supply and demand analysis provides the answer. A decreased income tax rate for rich people means that the after-tax expected return on tax-free municipal bonds relative to that on Treasury bonds is lower, because the interest on Treasury bonds is now taxed at a lower rate. Because municipal bonds now become less desirable, their demand decreases, shifting the demand curve to the left, which lowers their price and raises their interest rate. Conversely, the lower income tax rate makes Treasury bonds more desirable this change shifts their demand curve to the right, raises their price, and lowers their interest rates.
However, if we justify KH and KHZ on the grounds that they do the best job of ensuring that everybody is better off at the end of the day, it is necessary to ensure that no group is consistently on the losing side of KH efficient projects. The way to achieve this outcome is to include considerations of just compensation into the KH tests and to recognize value in distributional effects, as KHZ does. Otherwise there is a potential for a sort of cyclical downgrading of poorer groups so that they would have a tendency to fall into the loser group. Consider a project to place an undesirable public project such as a jail into a neighborhood. The most efficient location, if we ignore distributional effects and the regard for others, is likely to be in the poorest neighborhood - the land is cheaper and the WTA of its residents is likely to be less than that of other neighborhoods. However, if we place the undesirable project into the poorest neighborhood without compensating its residents we...
In a market setting, anyone may discover a veritable rule to make it rich. Some may go the next step and exploit their rule to their personal advantage (Mises 1949). Such discoveries are usually the province of entrepreneurs, and it is not likely that standard statistical research can produce any information about where economic profits can be found. Statistical categorization necessarily strips economic information of its distinctive or local aspects and therefore of much of its relevance to making money. In addition, by the time the statistical series have been published, individual actors in the chain of production will have had an opportunity to exploit these patterns and thereby destroy whatever market value the information might originally have had.
Summarizing, we see that adopting a correct statistical view of the true, limited nature of information produced by financial statements has profound operational significance. It must be realized that at present combinations of financial statements yield far less information than is implied by the nature and extent of the numerical operations carried out with these figures. For example, if the stated value of an asset depends on non-disturbance of the market by a sale of this asset, then the figures for all or many firms, showing such assets, are clearly non-additive (if the assets are at all estimated in close agreement with their market prices ). Yet additions are made for different firms and finally larger and larger aggregates are constructed when, for example, the capital invested in an industry is described, or when its total assets, inventories, etc., are discussed. Such figures give a very inadequate picture of physical or economic reality, even when a business balance is...
Make money in any way____If schools can profit off of student athletes, why should those athletes not be paid for helping schools make money . . . athletes in college. Also, it would help those same players develop their skills so they could make more money at the professional level. -Andrew Zivic, writer for iMPrint Magazine
We also looked at the example of a firm that has both a prime brokerage business and a private banking business. The prime brokerage business serves hedge funds as customers. The private banking business serves wealthy individuals as customers. The private banking clients may want hedge fund investments, and the private bankers may feel some corporate pressure to favor the hedge funds that are important prime brokerage clients. But the funds that are best for the prime brokerage business may not be the funds that are best for the private clients.
The unregulated status of hedge funds had been justified on the basis that the investors were sophisticated and wealthy individuals, and that only their own money was at risk. But it soon turned out that the leveraged investments made by LTCM had been financed by huge loans from major Wall Street and international banks, and that a failure by LTCM ran the risk of generating a systemic collapse.
On the other hand, in a democratic government, one citizen, one vote is the rule. But there are ways other than voting to influence political outcomes. People can donate both their money and their time to help a campaign. They can also try to influence friends and neighbors, write letters to legislators, and speak in public on behalf of a candidate or cause. The greatest rewards of the political process go to those best able and most willing to use their time, persuasive skills, organizational abilities, and financial contributions to help politicians get votes. People who have more money and skills of this sort-and are willing to spend them in the political arena-can expect to benefit more handsomely for themselves and their favorite causes. Thus, while the sources of success and influence differ, there is an unequal distribution of influence and power in both sectors.
For the true entrepreneur, risk is attractive in its own right, and winning is attractive in its own right, not just because of the financial rewards. There are certain people who love to compete, and must compete, simply so that they can win, or at least demonstrate that they can cope with losing. The people who climb mountains, write novels, and tinker all night in their laboratories are not doing what they do for financial rewards. And even when the financial rewards are enormous, those rewards are usually not the key motivator. The investment business, like many other businesses, has many people who have already earned more money than they could
Employee Well, since I have been freelancing for the past few years, I have grown accustomed to having more time to go on vacations. I work hard for most of the year but I am also able to take a few weeks at a time to travel abroad. I will be unable to do much traveling if I have only two weeks of vacation time a year. So if I won't be able to travel as much, I should at least make more money.
What happens to people who grow too fast, and I have taken the opposite extreme. I want to be comfortable doing what I do. I don't want to be scouring for new shorts because I am managing more money. I have my family, and when I go home, I don't think about work. I don't read Barren's over the weekend.
Determined by supply and demand, rather than by union contracts. Because truck deliveries were now more dependable in a competitive industry, businesses using their services were able to carry smaller inventories, saving in the aggregate tens of billions of dollars. Gross inefficiencies under regulation were not peculiar to the Interstate Commerce Commission. The same was true of the Civil Aeronautics Board, which kept out potentially competitive airlines and kept the prices of air fares in the United States high enough to ensure the survival of existing airlines, rather than force them to face the competition of other airlines that could carry passengers cheaper or with better service. Once the CAB was abolished, airline fares came down, some airlines went bankrupt, but new airlines arose and in the end there were far more passengers being carried than at any time under the constraints of regulation. Savings to airline passengers ran into the billions of dollars. These were not just...
A The middleperson is a mere transporter of coffee. Coffee in 1987 will be more expensive than in 1986 if the middleperson, Teresa Baker, does not transport coffee. She can therefore make money doing so. In other words, true. In trying to make money out of buying low and selling high, to put it another way, the speculator plays the same role as someone trying to make money out of a difference in automobile prices between That middlemen are sometimes wrong, however, is not an argument for outlawing them. Unless someone else God, the Department of Agriculture, or whoever can do better, and supposing that the predictions are not usually wrong, a case can be made for leaving the middlemen alone to put their money where their mouths are. Unlike their critics, after all, they back their predictions with their money. If they make money, their predictions were on average right, and society is on average better off. If they lose money, their predictions were on average wrong, and society is on...
It being a given that people pursue - and can pursue - their own goals through actions of their own choice, it necessarily follows that there cannot exist a superordinate 'societal' evaluation of such aims and actions in the sense of a hierarchical ranking. Thus an individual who is starving and whose goal is that of finding his next meal is not superior in aim to a billionaire whose goal is that of building yet another mansion, simply because there is no authority within the market order that dictates particular aims to individuals or the actions conducive to achieving such aims.4 Granted, on the personal level one may morally reproach the billionaire for building yet another palace instead of feeding the hungry. But when such moral precepts are imposed upon the individual by a sovereign authority, then that individual's economic freedom of choice is eliminated, at least to a degree, and the market order is transformed, to that degree, into a planned entity, i.e. an organization. The...
The efficient market hypothesis has numerous applications to the real world. It is especially valuable because it can be applied directly to an issue that concerns many of us how to get rich (or at least not get poor) in the stock market. (The Following the Financial News box shows how stock prices are reported daily.) A practical guide to investing in the stock market, which we develop here, provides a better understanding of the use and implications of the efficient market hypothesis.
Argument is one that has already been discussed if it is possible to diagnose the existence of a bubble, then it should be possible to make arbitrarily large profits betting against it. And if someone like Warren Buffett has in fact done this, that can be put down to luck. Only if everybody can make money betting against the market can the EMH be wrong. But, of course, it's impossible for everyone to bet against the market the market is just the aggregate of bets.
The market steers individuals into those areas where they can best serve the wants of their fellow men. It does this through voluntary inducements a person who produces what others desperately desire will make more money than if he spends his day toiling on what he himself thinks is best. Compulsion is the characteristic of the state, which is necessary for a market to function but is itself not part of the (voluntary) relations of the market.
To the stockholders only if that result pays off for him or her. In neither case is the institutional structure such that perfect reward and punishment systems will drive bureaucrats into maximizing the well-being of their superiors. It happens to be true, however, that the combination of the comparative simplicity of the objective aimed at by stockholders (that they want to make money) and the reasonably accurate methods of measuring the contribution of highlevel managers to that end, in the form of the bookkeeping system, makes control better in the private sector than it is in the public sector.2 The United States maintains an embassy in London and McDonald's has stores that sell its hamburgers. It is immensely easier for the management of McDonald's to find out whether its London branches are pursuing profit maximization than it is for the Department of State to determine whether the U.S. embassy in London is performing efficiently.
On a larger scale, if this basic tool of introductory economics is correct, global investors have got it all wrong. Instead of investing more money in New York, London, and Tokyo, wise investors should direct their funds toward India, Kenya, Bolivia, and other low-income countries where capital is relatively scarce. Money should move from North to South, not out of altruism but in pursuit of profit. The Nobel-winning economist Robert Lucas Jr. has measured the extent of the expected difference in returns across countries (assuming that marginal returns to capital depend just on the amount of capital relative to other productive inputs). Based on his estimates of marginal returns to capital, Lucas (1990) finds that borrowers in India should be willing to pay fifty-eight times as much for capital as borrowers in the United States. Money should thus flow from New York to New Delhi.6
That NHIC genes residing in the aid giver are put into jeopardy has empirical consequences that go unrecognized in Daw-kins's exposition. These arise if the positions of aid giver and aid receiver reflect a systematic selection process. Unhealthy people, for example, are more likely to find themselves in need of aid healthy people are more likely to find themselves capable of extending aid. The gene that differentiates between good and poor health often will be NHIC, in which case the altruistic action will reduce the probability that good health is passed to future generations eugenics by way of altruism instead of by way of sexual reproduction. Of course, the health-differentiating gene could be HIC, and in this case the altruistic interaction will promote the health of future generations by increasing the probability that information encoded in this gene survives. However, good-health genes are more likely to be NHIC, since the person in need of aid is more likely to be of poorer...
The NHL says it's going to save up to 400 million dollars. Twice as many teams are going to be in the black. Fans are returning to the rinks, but there's still some operating issues for teams in smaller markets. They're sort of facing a choice, do we lose five or 10 million or do we spend up to the salary cap and compete
We begin by explaining how cost is defined and measured, distinguishing between the concept of cost used by economists, who are concerned about the firm's performance, and by accountants, who focus on the firm's financial statements. We then examine how the characteristics of the firm's production technology affect costs, both in the short run when the firm can do little to change its capital stock, and in the long run when the firm can change all its factor inputs.
Moneymaking, then, is the economist's first, best explanation of buying, hiring, manufacturing, transporting, stocking, advertising, and selling by the business firm. This is part of the answer to the question posed by the theory of the firm A firm does these things because it wants to make money. The rest of the answer tells why it does them in the amounts it does, why exactly Fred
Let's go back to a basic principle of economics The same physical object does not necessarily have the same value to different people. This applies to an author's manuscript as well as to a house, a painting or an autograph from a rock star. What a literary agent knows is where a particular manuscript is likely to have its greatest value. If it is a cookbook, the agent knows which publishers and which editors have the knowledge and the connections to promote such a book in places that are very interested in such things gourmet magazines, cooking programs on television, and the like. This cookbook would be far more valuable to such editors and publishers than to others who specialize in technology, social issues, or other subjects, or to editors whose knowledge of food does not extend much beyond hamburgers and fried chicken. Even if an agent is not able to get any more money out of a given publisher than a writer could have gotten, the agent knows which publishers are most likely to...
An economist thinks of cost differently from an accountant, who is concerned with the firm's financial statements. Accountants tend to take a retrospective look at a firm's finances because they have to keep track of assets and liabilities and evaluate past performance. Accounting cost includes depreciation expenses for capital equipment, which are determined on the basis of the allowable tax treatment by the Internal Revenue Service.
It is said that two English noblemen were once riding along a road when they met a man whose horse had run away with him and who, being in danger of falling off, shouted for help. One of the Englishmen turned to the other and said, 'A hundred guineas he falls off'. 'Taken,' said the other. With that they spurred their horses to a gallop and hurried on ahead to open the tollgates and to prevent anything from getting in the way of the runaway horse. In the same way, though without that heroic and millionaire-like spleen, our own reflective and sensible age is like a curious, critical and worldly-wise person who, at the most, has vitality enough to lay a wager. (Kierkegaard 1978, p. 15)
States, emergency aid usually comes both from the Federal Emergency Management Agency (FEMA) and from private insurance companies whose customers' homes and property have been damaged or destroyed. FEMA has been notoriously slower and less efficient than the private insurance companies. Allstate Insurance cannot afford to be slower in getting money into the hands of its policy-holders than State Farm Insurance is in getting money to the people who hold its policies. Not only would existing customers in the disaster area be likely to switch insurance companies if one dragged its feet in getting money to them, while their neighbors received substantial advances to tide them over from a different insurance company, word of any such difference would spread like wildfire across the country, causing millions of people elsewhere to switch billions of dollars worth of insurance business from the less efficient company to the more efficient one. A government agency, however, faces no such...
Did you also feel that this selfimposed servitude was just punishment 1 really did How did your wife respond to this
When I started digging myself out of it, she said, I've never seen anyone who can make money like you can when you're backed into a corner. She's right. Even now, whenever I have a losing month, I just claw like a tiger to make it back. That's when I work my hardest. When I work fifteen-hour days, my wife knows that my trading is not going well. Conversely, when I'm home early, she'll say, Your trading must really be floating along.
The new macroeconomic equilibrium is, of course, at point C, where LM and the new IS curve intersect. But how do we get there Recall that the IS curve is an equilibrium condition. It lists all possible interest rate income combinations that equate goods supply with goods demand. So as a first step, after G has been raised, while the economy is still in Y, firms experience an increased demand for their products which they cannot meet. So they decide to increase production, which raises income. The economy moves from A to the right. Now in a second step, because of their higher incomes people want to hold more money than banks can supply at the current interest rate. This excess demand in the money market drives the interest rate up. Both movements - the increase in income and the rise in the interest rate - drive the economy towards and into its new equilibrium at C.
I increase my activity, not my exposure. In fact, the first thing I do when I'm losing is to stop the bleeding. That's why I have this sign on my computer. He points to a sheet that reads GET SMALLER. I don't get out of the trade that is hurting me completely I just reduce the position size. Then the next trade that I do, I feel compelled to make money. It doesn't matter how much. The point is to rebuild my confidence. Even if I only make a few hundred dollars on that trade, it shows that I can still make money. Once I have a winning trade, I'm ready to go again.
Reagan had once been on the Laffer curve himself. I came into the Big Money making pictures during World War II, he would always say. At that time the wartime income surtax hit 90 percent. You could only make four pictures and then you were in the top bracket, he would continue. So we all quit working after four pictures and went off to the country. High tax rates caused less work. Low tax rates caused more. His experience proved it.
The tick became very negative, the market would tend to snap back on the upside. Conversely, strongly positive tick readings seemed to be followed by sell-offs. I asked a broker who had been in the business for thirty years what it meant when the tick got very positive or negative. He said, A negative tick means the stock market is going down, and a positive tick means it is going up. Yeah, I know that, I said, but what do I do when the tick is very positive or negative Well, if it's a high plus, you buy, and if it's a high minus, you sell, he answered. I asked a number of other brokers the same question, and they gave me the same advice. Since this advice contradicted my observations, I did just the opposite When the tick went above plus 400, I would sell, and when it went below minus 400, I would buy. I recorded the results in my diary and confirmed that this strategy was making money. I noticed, however, that the more minus the tick became, the more the market would snap back, and...
Whether in England or the United States, there is a sharp contrast between those entrepreneurs focused on the honest production of more and cheaper products and those fascinated with making money for unscrupulous ends by unscrupulous means. Men like Henry Ford and Thomas Edison were thought to characterize the former. We next turn attention to the most notorious of the latter, who bequeathed an age with their name. Andrew Carnegie was somewhere in-between.
Indicator is still providing a signal, I will only trade in the same direction. If it's oversold, I will only buy calls, and if it's overbought, I will only buy puts. Puts are option positions that give the buyer the right to sell the stock or index at the strike price and will therefore make money in a declining market. I still traded in and out of the market, but I kept a core position of long calls. This core position was down about 25 percent. Since for this account I used a money management plan that limited my total investment to one-third of the equity, I was down about 8 percent in terms of total equity.
We can find many other cases of this sort in which the economy is distorted by the existence of tax advantages. One element of the tax code that affects wealthy people more than any other is simply taking long vacations. On a vacation I would not be earning money, but I would presumably be getting as much pleasure out of my vacation as from the income I would otherwise earn. If this assumption were not true, I would not take the vacation. Because leisure is not taxed, I avoid taxes by taking vacations. Given a choice between an income of 500,000 per year with the traditional two-week vacation or an income of 450,000 with seven weeks of vacation, I might choose the 500,000. However, if there is a 50 percent tax rate on earnings above 100,000, the net income after taxes is 300,000 versus 275,000.3 As a consequence, I might choose the job with the longer vacation. High-income earners, whether executives or television stars, are likely to allocate their time between work and leisure so...
If it is not the case that future interest rates are higher when forward rates are higher, it means that we are dealing with the second possible reason on average, it must have been the case that investors earned more investing in long-term bonds than they did investing in short-term bonds that they would have had to keep rolling over. You would have ended up with more money if you had purchased 20-year bonds than if you had purchased 1-month bonds every month for 20 years. The empirical data confirms this.
I f existing money is going to ground in this way i.e., being held as money balances , it is prima facie the duty of the banking system to create more money, and this is quite consistent with the arguments of those who have expressed themselves in terms of 'neutral' money, or of a 'constant effective circulation', or of the maintenance of the equality between the market and 'natural' rates of interest.
Some may think that this is more efficient but efficiency is not so easily defined. If we arbitrarily define efficiency as output per unit of labor, as the U.S. Department of Labor sometimes does, then it is merely circular reasoning to say that having one bus driver moving more passengers is more efficient. It may in fact cost more money per passenger to move them, as a result of the additional capital needed for the expanded busses and the more expensive labor of the drivers.
As people become wealthier, time becomes their major scarce resource. Suppose that you are very rich but have only a few hours a week of spare time. Give some examples of steps you can take to economize on your use of time. Compare time use of a wealthy person with that of a poor person.
Wright (1999) provides a test for the U.S. FCC's claim that the current arrangements cost U.S. consumers billions of dollars annually, largely to subsidize foreign carriers in low-income countries. In 1996, U.S. carriers paid out on the order of 5.5 billion more in such settlements than they received. The FCC claims that artificially high settlement rates are preventing the prices of international phone calls from falling to competitive rates. For example, in 1997 U.S. customers spent 495 million minutes on calls to Brazil, but Brazilians make only 159 million minutes' worth of calls to the United States. To pay for the deficit of 336 million minutes, U.S. carriers transferred 154.7 million to Brazil.
If absolutely everything is taken as open to question, entrepreneurial activity becomes impossible. If one cannot have some degree of trust in others with whom one forms business connections, or some confidence that one has a better insight into what counts in a particular market or manufacturing process, there is no firm spot on which to build an enterprise of any particular form. To make decisions, the entrepreneur takes some things for granted and uses a particular set of core do and don't rules (Earl, 1984 Harper & Earl, 1996) whose efficacy is taken for granted. When anomalies are encountered, these core elements in the entrepreneur's world-view determine how they will be construed, in other words, which of the more peripheral elements will be adjusted and the form the adjustment takes. Sometimes, the entrepreneur may sever a particular connection whilst maintaining core constructs - for example, I no longer believe it is going to be possible to make money from selling executive...
By arbitrage we mean making money out of nothing without risk. For example, suppose that for a given exchange rate say, U.S. dollars versus Japanese yen we get two different quotes by two different traders, simultaneously, so that we can buy yen in the cheaper market and sell them in the more expensive. Even though there might be short time periods in a financial market when there is an arbitrage opportunity, such opportunities tend to disappear quickly. As other market participants observe the mismatch, the demand for the cheap yen will increase and the supply of the expensive yen will decrease, and that process will drive the quoted exchange rates to the no-arbitrage level at which they are identical. The assumption of absence of arbitrage in market models is crucial for getting any kind of sensible general results. The right-hand-side inequality follows from expression (6.7). As for the left-hand side, suppose that it is not true, that is, S(t) + P (t) C(t) + K. Then we could sell...
Since modern economics seems to be focused on financial and material wealth management it is instructive to learn that Aristotle, the third-century-BC Greek philosopher, made an important distinction between oikonomia eco-nomics and chrematistics.35 Chrematistics is a word rarely heard in today's economic or business discourse yet it should be because it comes from the Greek meaning the art of money-making, with the root chrema meaning money, riches or something useful. Chrematistics (Greek) The art of money-making,the science of wealth the science, or a branch of the science,of political economy.35
Once the initial bank debt is repaid and money is destroyed, the monetary circuit is closed. New money will be created when the banks grant new credits for a new production cycle. This can take place almost automatically if firms, instead of repaying their bank debt, make use of the revenue coming from the sale of commodities and from the placement of securities to start a new production cycle. This doesn't mean that the firms have become financially independent the very fact of making use, for a new production cycle, of liquidity granted by the banks for a preceding one, implies a renewal of credit on the part of the banks, which is tantamount to granting new finance.
The root definition of industry is all firms that can profitably supply goods some group of consumers view as close substitutes. Close substitutes is a feature of the utility functions of consumers. Can profitably supply, it will now be shown, is a feature of the cost curves of firms. The industry contains everyone who can make money at the going price. At a higher going price more will enter.
In my senior year, I took a graduate-level course in financial engineering. I did my project on the options market and found it fascinating. tried to model what would happen if an option price was forced away from its theoretical value, say because someone placed a large buy or sell order that moved the market. My results convinced me that I had found a way to consistently capture profits in the options market. The idea that I could develop a model that would consistently make money in options, however, went against all the theory I had learned about the markets.
Where unions set wages above the level that would prevail under supply and demand in a free market, widget manufacturers are not only paying more money for labor, they are also paying for additional capital or other complementary resources to raise the productivity of labor above the 20 an hour level. Higher productivity may seem on the surface to be greater efficiency, but producing fewer widgets at higher cost per widget does not benefit the economy, even though less labor is being used. Other industries receiving more labor than they normally would, because of the workers displaced from the widget industry, can expand their output. But that expanding output is not the most productive use of the additional labor. It is only the artificially-imposed union wage rate which causes the shift from a more productive use to a less productive use.
Function, the Rule of Rational Life, equilibrium, the production function, and the one competing among many. If Americans suddenly develop a taste for carbonated water the Perrier Company will suddenly become rich. But in the long run its riches will be dissipated by the entry of others, and the many new makers of carbonated water will earn only normal profits. If Chicagoans develop a distaste for living in the center of the city the owners of property there will become poor. But in the long run their poverty will be alleviated by exit, and the few surviving landlords will earn normal profits. The assertion is that in the long run profits are normal, and in many shorter runs they are on their way to becoming normal. Notice that the assertion is not that super-or subnormal profits never happen. They do. That in the long run the weather is summer and that from December 22 onward it is on its way to becoming summer does not mean that winter is a mirage. But the tendency is nonetheless...
Given the sequence of events we have discussed here, it should be no surprise that savings and loans began to take huge risks They built shopping centers in the desert, bought manufacturing plants to convert manure to methane, and purchased billions of dollars of high-risk, high-yield junk bonds. The S&L industry was no longer the staid industry that once operated on the so-called 3-6-3 rule You took in money at 3 , lent it at 6 , and played golf at 3 p.m. Although many savings and loans were making money, losses at other S&Ls were colossal.
If entrepreneurship is about making connections, then competitive success may depend upon setting up systems within which it is more difficult for other entrepreneurs to make connections that one is capable of making. This process is obviously at work in some markets, where even though products take the form of modules that can be combined in different combinations, the interfaces between them are specific to the brand in question. The specifics of Canon and Minolta camera and lens relationships provide an example here, as do Apple Macintosh computers versus PCs. However, there are also many cases - the IBM PC being one of them - in which entrepreneurial insight takes the form of setting out to create a set of open standards to enable other entrepreneurs to make money by selling products that hook up with one's own and in the process generate demand for one's own product.
If labor were in fact the crucial source of output and prosperity, then We should expect to see countries where great masses of people toil long hours richer than countries where most people work shorter hours, in a more leisurely fashion, and under more pleasant conditions, often including air conditioning, for example. In reality, we find just the opposite. Third World farmers may toil away under a hot sun and in difficult working conditions that were once common in Western nations that have long since gotten soft and prosperous under modern capitalism. If those who are not laborers derive their wealth from exploiting labor, then we should expect to see countries with many wealthy people having ordinary working people who are especially poor. The United States, for example, not only leads the world in the number of billionaires, but has nearly as many billionaires as the rest of the world combined, so ordinary Americans should be especially poor, if the exploitation theory is...
This government-guaranteed subsidence for all at a poverty level was referred to as the iron rice bowl and it was egalitarian. When the new leader, Deng Xiaoping, announced a new policy of seeking to raise the economic level of the country as a whole, he said Let some people get rich first by allowing the kinds of incentives that exist in prosperous capitalist countries.
Entrepreneurial profit occurs when someone buys factors at a certain price and sells the resulting product for a certain price, such that he reaps a higher rate of return than the prevailing rate of interest. Such an entrepreneur has taken advantage of a general undervaluation of the particular factors had others generally been aware of the future sale price of the product, they too would have entered into this market (to earn the higher rate of return). Entrepreneurial loss entails the opposite, in which a capitalist invests in relatively overvalued resources only to find that he can sell the product at a price that does not correspond to the rate of interest. (Even if his future revenues exceed his money expenditures on factors, this is still a loss to the capitalist because he could have earned more money by lending his funds out at interest.)
Often there is a sense of amazement, or even resentment in some quarters, when the rich spend huge sums of money on such things as rare stamps or antique furniture. But often these are items of little or no use or interest to most people, even though their prices may be bid up to astronomical levels by a few rich people bidding against one another. The loss to the society .IS typically trivial. For example, a rare camera used by the Japanese navy 111 World War II was put on sale for 40,000, but better photographs can be taken with cameras on sale today for less than one percent of that. In such cases, the rich are paying for the distinction of having something rare, while others suffer no real loss in their standard of living. , It is not only in buying expensive things from the past that the rich may seek the distinction of ownership. They can also acquire distinction by buying new products that are too expensive for most other people to buy. When the first television sets were sold...
What prevents competitors from coming in and doing private equity funding deals similar to the ones you did with the US
In each of the strategies we have discussed, competition has increased and will continue to do so. That's the nature of the market. Our advantage is that we were there first. What is unique about our firm is that we never imitate someone else's strategy. Another advantage we enjoy is that we try to construct our deals so that they are fair to both the company and us. As a result of our approach, over time we have been able to evolve from doing deals with companies worth several hundred million dollars to companies
Questions of fairness aside, this financial imbalance presented problems of its own. Except for what is purchased as necessities, the large discretionary income of the rich is not dependably spent. It must go for mansions, yachts, Rolls-Royces, and Caribbean travel or else be saved and thus be subject to the even less predictable behavior of producers. It is one thing for producers to issue new equities and bonds to expand their facilities, it is quite another for rich people to buy and sell existing securities among themselves, changing only the prices and ownership of the pieces of engraved paper. The amount of unanchored cash chasing other pieces of paper probably had never been so high. When such great volumes of savings are held in so few hands, they must be parked somewhere or moved from lot to lot. Despite the obvious trouble that can be caused by cash on the loose, the average citizen threw caution to the restless winds He wanted nothing so much as getting rich quickly with a...
This is our worst story by far. L E T The worst story is always more interesting than the best story. Yes, I always focus on this episode whenever I talk to new investors. The company, which was a marketer of prepaid phone cards, needed financing. Although the deal was marginal, we decided to do it. Two weeks after the deal was completed, the company announced that all their financial statements were wrong and would be revised for the past two years. The stock dropped over 70 percent overnight. It happened so quickly that we didn't have time to get our hedges fully in place. Although the company still had a viable business and assets, they declared bankruptcy to facilitate the sale of virtually all of their assets to another company.
Tial need to liquidate its portfolio of 80 billion in securities and more than 1 trillion of notional value in derivatives (discussed in Chapter 13), the Federal Reserve Bank of New York stepped in on September 23 and organized a rescue plan with its creditors. The Fed's rationale for stepping in was that a sudden liquidation of Long-Term Capital's portfolio would create unacceptable systemic risk. Tens of billions of dollars of illiquid securities would be dumped on an already jittery market, causing potentially huge losses to numerous lenders and other institutions. The rescue plan required creditors, banks and investment banks, to supply an additional 3.6 billion of funds to Long-Term Capital in exchange for much tighter management control of funds and a 90 reduction in the managers' equity stake. In the middle of 1999, John Meriwether began to wind down the funds operations.
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Secrets of the Subconscious Millionaire Mind
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