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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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  • Very interesting.
  • I'm surprised he didn't ask more of his respondents about the role of the Fed in propping up the system they think is so fundamentally sound, and efficient to boot.
  • Sounds good. Let's just keep living this way forever since it works so well and seems more dependable than a real some other economy is.
  • “Even including 401(k)’s and individual retirement accounts, only 55 percent of Americans are investors in the market, according to Gallup, down from 62 percent in the early-to-mid 2000s”

    Excellent article. Thanks for the link.
  • The only question I have is - Why doesn't this article get published in the NYT on (say) March 20, 2020.
  • beebee
    edited June 19
    Quote from the article:
    A primary function of the stock market is supposed to be the allocation of capital to help companies grow. Yet fewer and fewer companies seem to want the market’s help. In 1997, there were roughly 7,500 publicly traded companies in the United States. That number has since fallen by half, to around 3,600 — a startling trend when you consider that the economy has more than doubled in size over the same period. How is it that the stock market lost so many listed companies at a time when the economy was growing so much larger, and where have they all gone? Some are no longer in business, while more than a few have been swallowed up through mergers or acquisitions. Lately, though, the decline has been driven by the growing allure and financial muscle of private equity and venture capital. Private equity is now a $5 trillion market, having increased threefold over the last two decades, according to a Milken Institute study, and there are now nearly 8,000 private-equity-owned companies in the United States, quintuple the number at the start of the 2000s.
    My Question:
    Do small investors have a way to participate in private equity firms through mutual funds / ETFs?

    Reader comment on privatizing profits:
    You want to privatize the profits, OK, great! But you get to privatize the losses then, too...no government bailouts.
    private-equity/when-two-forces-compete-how-do-you-come-out-ahead
  • A reader comments on corporate buybacks:
    Lets be very clear - they were buying their shares at all-time highs in an effort to artificially support those ridiculously high prices and attempt to push them even higher. That benefits management compensation. The evidence is all over the place. If it were true about how/why companies buyback shares, why have nearly all share buybacks come to a screeching halt recently? Shouldn't companies be buying more of the shares when they are 30%, 50% or more lower than where they were throwing big money at the market buying the shares. Might the "experts" be making the argument that the companies were spending future profits repurchasing shares? For many of them, there will be no future for the path they have taken their companies down. Let's look at Macy*s for example. They spent over a billion dollars buying shares at their all-time highs, all the way up into the $50 to $70 range. As the shares fell below $20 and all the way down below $5, no more shares have been purchased. The company is now on life support - which was in motion well before the virus.
  • A relatable article:
    without intervention by the Federal Reserve, the United States in the coronavirus era would be looking at a Depression-level contraction.

    Assuming the Fed bazooka keeps firing, however, a large portion of the investor class is already on a road leading back to champagne and confetti. And that, as Robert Frost would say, has made all the difference.
    https://rollingstone.com/politics/politics-features/taibbi-covid-19-bailout-wall-street
  • edited June 19
    @bee
    Do small investors have a way to participate in private equity firms through mutual funds / ETFs?
    Small investors do, but the vehicles that exist such as BDCs or I think it’s called—Sharepost—are mostly terrible. While private equity/venture capital can be immensely profitable my impression is that only a handful of institutional funds have access to the best deals while the rest are also-rans. There is research to this effect but I don’t have it at my fingertips right now.
  • Mutual funds may invest directly in private offerings. One of the only startups I worked at that successfully went public (I made somewhere in the low 4 figures on that, whoopee) was approached by a fund firm before its IPO. Not being one of the muckamucks at the company, all I have are rumors as to who it was.

    https://www.morningstar.com/articles/867995/unicorn-hunting-large-cap-funds-that-dabble-in-private-companies
  • The four biggest (by capitalization) stocks of private equity firms are Blackstone (BX) $69B, KKR (KKR) $25B, IAC (IAC) $23B, and the Carlyle Group (CG) $10B. Owning one of these stocks is different from holding a company's stock or a MF or ETF. You will receive the dreaded K-1 form just before April 15 and your tax preparation will get harder (assuming you are a DIY).

    I found this link on these stocks without much trouble:
    https://fknol.com/list/best-performing/private-equity-stocks.php
  • msf said:

    Mutual funds may invest directly in private offerings. One of the only startups I worked at that successfully went public (I made somewhere in the low 4 figures on that, whoopee) was approached by a fund firm before its IPO. Not being one of the muckamucks at the company, all I have are rumors as to who it was.
    https://www.morningstar.com/articles/867995/unicorn-hunting-large-cap-funds-that-dabble-in-private-companies

    I don't know if anyone here remembers back when robertson-stephens was a bfd player in that mutual fund space, but they came and pitched and managed the ipo (or maybe it was some follow-on of an ipo) at a startup where I worked, and I made a bundle, and then lost most of it, or maybe all and more

    then I did the same at the next startup, losing like a year's salary equivalent, although there without any r-s help whatsoever

    those were the days, 1991-2001
  • edited June 20
    My impression is that mutual funds are restricted to a maximum private equity exposure of 15% for liquidity reasons. There have been disastrous examples despite those constraints. If I recall correctly, the Van Wagoner funds were among the worst. Private equity that should be held for years really shouldn’t be in open-end mutual funds that allow daily liquidity.
    https://google.com/amp/s/www.latimes.com/archives/la-xpm-2004-aug-27-fi-wagoner27-story.html%3f_amp=true
  • There may be other examples, but I do know of the biotech CEF, HQL, managed by Daniel Olmsted, that holds as much as 20% in private placements. These companies are hard to value, but if only one goes public, the payoff can be substantial. I have not owned the fund since about the time Scott left MFO.
  • edited June 20
    The last paragraph says "Perhaps one lesson this crisis can reinforce is that we should stop thinking of the stock market as a barometer of national prosperity. Maybe it served that function in the past, but it doesn’t now. Instead, the market has become an emblem and engine of American inequality. In that sense, its performance in recent months reflects our reality all too well."

    Interesting article but is there anything new in this article or the last sentence? not really.
    When was the stock market a barometer of national prosperity?
    Is it new the inequality in America (and probably in other developed countries but in lesser effect) is getting worse?

    In the last several decades, IT thru the big high tech companies is creating the inequality. If you want to be a part of it and make more money then graduate in STEM(science, technology, engineering and mathematics).

    But in America, the inequality creation has been faster than many other countries because American capitalism is more efficient and quick I worked for several IT companies. When things were good we got a reasonable increase when things were just average which means still made money but not beat the estimates, the CEO fired a % of the workers BUT the CEO salary stayed about the same (or a little cut) but the majority of his pay ( bonuses and stocks options) never got reduced. These CEOS are sitting in each other board of directors and make sure to keep their compensation intact.

    The result: CEO pay compared to their average employee is about 250-300 times now while it used to be at 30 times in the 80". This happened under GOP and Dem administrations.
    How can you explain the smaller pay of the CEO of Toyota, a leading auto company, compared to Ford,GM upper management and these companies trail Toyota?
    I'm for capitalism but I like a sensible one but not in America.

    The stock market? you either be an entrepreneur and take the risk of failing or become a millionaire or select the easier choice and own stocks and become a millionaire. I selected the second choice :-)

  • edited June 21
    .

  • The stock market? you either be an entrepreneur and take the risk of failing or become a millionaire or select the easier choice and own stocks and become a millionaire. I selected the second choice :-)
    @FD1000 - Your choice is not easier for most; you need to be smart and have trading abilities. Many are lacking your skills.
  • edited June 22


    The stock market? you either be an entrepreneur and take the risk of failing or become a millionaire or select the easier choice and own stocks and become a millionaire. I selected the second choice :-)
    @FD1000 - Your choice is not easier for most; you need to be smart and have trading abilities. Many are lacking your skills.
    I'm talking about owning a simple ETF like VOO/VTI. If you invest $1000 monthly compounded at 8% annually you will get to over one million after 27 years. It's not that difficult. You just have to be consistent.
  • @FD1000 You are completely divorced from what the financial realities are for most Americans.
  • edited June 23

    @FD1000 You are completely divorced from what the financial realities are for most Americans.

    I actually know a lot about what is going on. I started working at age 13 in the summer and then every week for several hours in high school and saved money. Then I was in the military for 3 years. After that, I paid for my own education while still working several hours a week. I paid attention to what profession I should learn and why I graduated with Computer Science + finance degrees. Thru my career, I made sure to keep my education and skills so I can find the next job. I was laid off 3 times but found a new job quicker than most of my co-worker and it was much harder after the age of 50.

    BTW, I immigrated to the US in my mid 30" with my wife and kids with nothing and only then was able to save and retired after 23 years with no debt.

    Americans have all the ingredients to do well (we have one of the lowest taxes) but many just spend beyond their salaries and I know families with combined salaries of $150K+ and still don't save at all.

    So sure, I admit it, I was diligent, I paid attention to details and I tried to do all the right things.

  • edited June 23
    @FD1000 Your story doesn't disprove my statement that you're out of touch with the financial realities of most Americans but highlights it. You've had a good education, came here in your mid-30s, after being educated most likely, and I suspect had parents supportive of that education. Most Americans are lacking either the education or the supportive parents or both. Human capital in America leads to financial capital. Many Americans don't have either. And it's not because they're lazy.
  • edited June 23

    @FD1000 Your story doesn't disprove my statement that you're out of touch with the financial realities of most Americans but highlights it. You've had a good education, came here in your mid-30s, after being educated most likely, and I suspect parents supportive of that education. Most Americans are lacking either the education or the supportive parents or both. Human capital in America leads to financial capital. Many Americans don't have either. And it's not because they're lazy.

    Yes and no. None of my siblings saved money, finished college, invest and retired with money. My wife's siblings are not successful either. None of our parents has a degree.
    When I came here I lived in a neighborhood with plenty of immigrants from around the world, most of them were poor without education. Their kids now have degrees and many with master's degrees and doing great. Nothing was easy to get to that point.
    Then I moved to a better neighborhood and the competition is very high starting from high school. I have seen it among Americans who have lived here for generations.
    This country gives plenty of opportunities to anybody who wants it.

    I don't give a pass to anybody. It has to come from you and you can't blame others. This is what I taught my kids.
  • @FD1000
    This country gives plenty of opportunities to anybody who wants it.
    No, it doesn't. Your extrapolating your unique personal experience for the rest of America is a fundamental category error. Did they teach much American history in the schools you went to or just math and IT? Ask George Floyd about the opportunities America afforded him. Wait you can't because America murdered him.
  • @FD1000; "This country gives plenty of opportunities to anybody who wants it.''
    Or who can buy it, unless they get caught !!

    Stay Safe, Derf
  • @FD1k,
    Of course there is much to what you say, wisdom and otherwise; no one can dispute that. The question is what is the right thing to do for, to help, all of those very very many who are not as good as you? What color is your skin?
  • So now I see, it's all about color and race, how convient...mmm...several of the poor uneducated immigrants that lived near me were from Nigeria and the Caribbeans and they are doing as well. Nice try but it doesn't work on me ;-)

    BTW, in my high school, they taught a lot more than American schools about other countries, especially about the USA and school encouraged passionate debates about religion, race and definitely politics. You couldn't just say you don't agree, you had to come up with solutions. Sometimes, if you were too good the teacher asked you to debate for the other side.
  • edited June 25
    @FD1000 You continue to extrapolate based on your personal experience what you think the reality is for the average American. Such personal extrapolations aren't accepted in the financial or IT world, and they shouldn't be regarding race or income inequality. I know you don't care though because of your own racial confirmation bias, but regarding your plenty of opportunity for everyone remarks:

    image
  • @LewisBraham
    I understand exactly where you are going with. I know the statistics.

    You want to blame everything on color and I'm saying it's not all color, maybe you can look a bit deeper into the culture, attitude, family. All I know is that we hired people of all colors and races, we did the interview and whoever was the best candidate got the job. We hired people from the Middle East, Asians, Indians, Africa, Careebeans, African Americans, whites. I never cared about any of these. The only question was always who can do the job best. Actually, I worked many years in a small team and 3 out 5 were African Americans. They were excellent and we got along very well.

    The easiest thing is to blame everything on color and race and call anybody with different views a racist. I'm sure it's coming soon.
  • You do know that no one but the truly stupid claims it is ALL and ONLY about skin color. Everyone knows family and culture and therefore attitude play very large parts. You are splitting them from color, which is not how life and the real world work. You show considerable granular and probing thinking elsewhere, and it is puzzling that you are unable to do so here.
  • Sounds a lot like something that I was noting re Old Skeet not too long ago. Much better than average in some areas requiring significant mental acuity, yet virtually blind in other areas not requiring all that much brainpower. Hard to understand.
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