ask Dcifrths...well, anything...about finance/mkts/ports that is.

[DcifrThs]

title i think says it all...except for this:

DISCLAIMER: as opposed to most of the ask poster X about XYZ, i am nowhere NEAR qualified to give all, or likely even most, of the answers.

i do hope though, that the questions will expose holes in my understanding or prompt others who have the requisite knowledge to chime in.

i'm not averse to research so if a question is asked that require such i'll happily do it if i deem it worthy.

i hope this post will prompt some people to ask questions that they would otherwise be unwilling to post as a thread on their own. Or, if somebody wants to go over a concept that would hijack another post, this would be the place, imo.

Evan, if this is inappropriate, lemme know but i think it will prove valuable to everyone.

[/Disclaimer]

Now, for my qualifications: 2 years as an Economist for the dept. of labor in DC. MBA in finance w/ concentration in mathematical finance. 6 months intense training with top 3 macro-strategy hedge fund. now have time on my hands as i search for my next job...which is why i've been so active in this forum as of late. i'd like to stay sharp and keep learning.

let'er rip [img]/images/graemlins/smile.gif[/img]

Thanks,
Barron

[iSTRONG]

Here is a n00b question that maybe you can answer.

As I understand it, a company goes public to raise capital.
Now let's say I buy 10% of the share so I'm basically owning 10% of that company. So how is it that some years after the IPO, the company can decide to "release more shares" to raise more capital. Surely that's not fair to the current shareholders because once they do that I own less than 10% of the company.

[DcifrThs]

[ QUOTE ]
Here is a n00b question that maybe you can answer.

[/ QUOTE ]

i'll sure try. any questions ranging form n00b to expert are appreciated.

[ QUOTE ]
As I understand it, a company goes public to raise capital.
Now let's say I buy 10% of the share so I'm basically owning 10% of that company. So how is it that some years after the IPO, the company can decide to "release more shares" to raise more capital. Surely that's not fair to the current shareholders because once they do that I own less than 10% of the company.

[/ QUOTE ]

as i understand it, owning 10% of the company doesn't give you a say large enough to prevent future dilution of your holdings should the company choose to raise money via additional shares.

it may not be "fair" in terms of your ownership %, but it may be best in terms of the value of your holding. the management team (presumably) feels this influx of capital will serve the shareholders' interest. the management team also likely has a share of the company so they are diluting their own interest as well.

if others have better insight, please chime in.

hope this helps,
Barron

[stinkypete]

think about it this way.

you own 10 shares out of 100. the company is worth $10 mil. your shares are worth $1 mil.

now the company decides they need $2 mil to develop a new product. they decide to sell more shares. to get $2 mil, they sell 20 shares. but now the total value of the company is $10 mil + $2 mil (in reality, probably more, since the new project should increase the company's value by more than the investment).

so now you own 10/120 shares of a $12 mil company. your shares are still worth $1 mil+.

so while you own a smaller percentage now, the company is worth more which should (more than) make up for your reduced stake.

[wiseheart]

Dcifr,

Do you enjoy being an economist. How much do you have to deal with internal/external DC politics in your job?

Also, how do you categorize your economic viewpoint?
Neoliberal? How about supply vs demand side? How much government regulation is needed/good?

Thanks a bunch.

[iSTRONG]

stinkypete,
aha! of course. Forgot that the money raised belongs essentially to the stakeholders.

Thanks you both for the explanation.

[Scorpion Man]

Barron

To what do you ascribe the ability of a major macro firm to make money in the markets (i.e. quant-type analysis, Soros type "feel" and fundmamental analysis, superior access to information, etc)

Also...why aren't you returning there.

Lastly, do you agree that economists (that was my major) are "non experts" as described in the Black Swan and basically worthless, particularly as it relates to prediction (I subscribe to this belief, FWIW).

[dp13368]

If you don't mind, along the lines of your background, as I am now studying for the GMAT/preparing to enter grad school in the next 2 years:

Where is your MBA from? FT or Part time?

Did you work while pursuing MBA?

If you could go back, would you change anything about your MBA process?

[DcifrThs]

[ QUOTE ]
Dcifr,

Do you enjoy being an economist. How much do you have to deal with internal/external DC politics in your job?

Also, how do you categorize your economic viewpoint?
Neoliberal? How about supply vs demand side? How much government regulation is needed/good?

Thanks a bunch.

[/ QUOTE ]

well, i was an economist from 2001-2004. longer story not important. i'll get to your Q now.

i did enjoy it. crappy pay. supplemented by poker. otherwise i couldn't have lived at 21st & F.

i wrote 2 papers. one almost published. i had to deal with politics only so much as it determined WHAT my job was.

for instance, bill clinton issued Executive order 13125 which aimed at including more asiam american & pacific islanders in govt programs. my job was to determine whether they had statistically significant less access (for one reason or another). therefore, politics determined my job.

another example was my second paper about unobserved demand for health care. would a small business subsidy increase overall health insurance coverage by more than the cost of the subsidy? well on one hand, possibly, but on the other hand, possibly not. small businesses tend to have smaller #s of employees, younger employees, lower income employees, and less educated employees (some overlap there) which all contribute to a lower probability of accepting health insurance given an offer. so possibly not. i had to model that and it was pretty cool (mostly b/c you don't observe people's take up rates when they don't get offered so goooo HECKPROB [img]/images/graemlins/smile.gif[/img])

again, politics determined my job. i didn't have to deal with it though, just do it. NIKE baby!

in terms of my viewpoint, i dont really know. nobody really asks me that since i got out of DC where i was (probably the only) registered utopian socialist.

i used to say "im socially libral, fiscally conservative, geopolitically realist, and internationally economically libral." i dont know to what extent that holds true anymore. for the most part it probably does though.

i don't remember much about supply vs. demand side since it has been a while since i had to answer that.

now, in terms of govt regulation, i think int'l trade should be liberalized (as you could have probably guessed) so in that sense it is not so good. man, i suck at this. i dn't really know enough about instances, costs & benefits & studies to have a solid opinion on this. my instinct says though that govt regulation is probably un-necessary in almost all instances by typical definitions. in terms of SEC type "regulation" it is definitely needed but probably not optimal at present.

did you have a specific sector in mind?

lemme know and please feel free to critique or ask me to go into more depth anywhere (where possible that is...or provide thoughts and i'll try to expand)

Thanks,
Barron

[DcifrThs]

[ QUOTE ]
Barron

To what do you ascribe the ability of a major macro firm to make money in the markets (i.e. quant-type analysis, Soros type "feel" and fundmamental analysis, superior access to information, etc)

[/ QUOTE ]

well i have a vastly biased opinion here so bare with me. macro funds have an advantage iff they can find a methodology in which they can specialize and keep improving. my former fund generated buy/sell decisions through incremental improvement of very detailed and highly integrated algorithms that were thought about constantly & backtested thoroughly. very impressive stuff going on there. part of it did relate to the data, but it wasn't the access. it was the processing. we backfilled so much stuff for analysis it was crazy. and i learned a rediculous amt in a sickly short time.

the advantage was in that we traded only in some of the most liquid markets but incorporated fundamental value, momentum, & inter-market action into the buy sell "signals" better than almost all other participants. our expected risk adjusted return was 1.0. fittingly, we generated about a 1.0 historical information ratio over about 15 years. (i say we for simplicity. i obv am no longer included in "we")

so i guess i ascribe the advantage to "quant" analysis properly implemented & constantly thought about for improvement in addition to a vastly superior processing of information.

"feel" only comes into play during the improvement process. if you can have "feel" you should be able to write down what it is gives you that feeling. once you do that, you can test it, think about it, test it some more and eventually program it into the process you've developed. Alchemy of Finance was almost unreadable once into the experiment. i put it down after i gleaned what i could.

[ QUOTE ]

Also...why aren't you returning there.

[/ QUOTE ]

well firstly, i was let go so returning isn't an option. if given the choice though, i'd do it again (i.e. work there and get fired). i think this will probably work out best as the requirements there didn't play optimally into my strengths. i can't wait to see what lies ahead.

on the plus side, i learned a lot (vast understatement). more importantly though, i think i learned a good process for improving and constantly learning.

further, my managers will all give me solid recommendations and the fact that many highly successful people worked there and left or got fired (including former fed economists) means that it doesn't say much about the quality of the employee, only the fit with the firm.

[ QUOTE ]

Lastly, do you agree that economists (that was my major) are "non experts" as described in the Black Swan and basically worthless, particularly as it relates to prediction (I subscribe to this belief, FWIW).

[/ QUOTE ]

well i haven't finished or gotten far enough in black swan yet but i think i understand your and taleb's beef.

in terms of prediction, they are pretty worthless. but ironically, the use of the fundamental drivers that come from understanding what is trying to be conveyed by predictive models can be hugely useful in trading. especially where there are non-profit seeking participants.

the fed, though, does a pretty good job as far as managemnet goes and they use predictive models to think about this stuff, so that is aplus for "economists."

but yes...i think that they are for the most part "non expert" experts. i love the FDR quotation: "bring me a one handed economist!" (i think it was FDR)

as always, let me know if i can go deeper anywhere or if i missed your points.

thanks,
Barron