The Case for Why Stocks are Over Valued (and Why it Might Not Matter)!
Stocks are up fivefold, multiples have doubled. Are we partying like it’s 1999? Has irrational exuberance set in? Finance theory and history suggests we are and it has, but it might not matter. The attached article, which can be downloaded below, provides the theoretical analysis of why we could see a 50% to 60% reduction in stocks values.
The Conundrum of Federal Finances
The budget, taxes, deficits, surpluses, interest rates, economic growth -- we read about these subjects every day and it is, frankly, dizzying! The numbers are so large as to make them difficult to truly grasp. In an election year, it is a topic that has come up even more than usual and it made me realize that most of us (me included) do not actually know all that much about the structure and composition of the federal budget. The attached article, which can be downloaded below, provides is a great primer that explains where our federal government spends our money and what is and had been driving that spending ever higher.
The EBITDA Fallacy in Business Valuation
Business valuation is a critical issue for all entrepreneurs, whether they are growing their business through acquisition or considering a sale themselves. One of the most common valuation approaches used in business valuation is actually a bit of a fallacy and entrepreneurs and merger and acquisition professionals should be cognizant of the implicit assumptions made by the usual rules of thumb employed, and their limitations. The attached article, which can be downloaded below, discusses these issues and offers some guidance.
Valuation Theory & Practice
What is an asset worth? Many believe that there is an answer, meaning one answer. Some would simply say that it is the present value of the future cash flows. A simple answer is not, however, always the case. The real answer is -- it depends! For many asset sales and M&A transactions, a premium must be paid and sometimes they are even sold at a discount! When assessing value, beauty is often in the eye of the beholder, value depends on who the buyer is and how a deal is structured. The attached presentation, which can be downloaded below, dives into the theoretical and practical aspects of valuation and the issues that affect value and should be considered.
Assessing and Managing Risk in M&A Transactions
The concept of making a deal can be intoxicating. Large dollar amounts get thrown around, and the idea of empire building or selling out and enjoying lavish lifestyle in retirement are common thoughts that flow through an entrepreneurs mind. But behind any successful deal there are a myriad of issues to consider – is it the right time to sell, who is the best buyer, what is the right deal structure and what is the “right price”. In addition, there are all the complex issues associated with due diligence and documentation that need to be considered in order to make sure the risks involved are well understood and priced into the final offer. The attached paper, which can be downloaded below, discusses these many complex issues and serves as an excellent primer for anyone considering a transaction, whether they are acting as buyer or seller.
The 2008 Recession - Causes and Effects
We have been hearing for over a decade now what caused the great recession and financial crisis that unfolded in 2007 and 2008. It was the fault of “greedy bankers” is the common simple answer thrown about. In reality, yes, greedy bankers played a role, but it was also the culmination of a number of forces that built up over a forty year period. The 2008 recession and financial crisis caused innumerable pain throughout the United States and the rest of the world. A global contraction of credit fueled by the collapse in housing prices and by extension the value of sub-prime filled collateralize debt obligations (CDOs) caused the world financial system to grind to a halt. There are many nuanced facts and underlying causes that are overlooked in the simple explanations generally given. The attached presentation, which can be downloaded below, provides a fulsome explanation of what happened and the underlying trends and causes that created a perfect storm for the crisis to unfold.