Fundamental Equation of Business

Value = Benefits – Price

To make sure that Value is greater than zero, executives have two – only two – possible strategies:
1) Make price lower
2) Make benefits bigger

Mad Money

Bulls make money.
Bears make money.
Pigs get slaughtered.

Booyah!

Cynics

A cynic is someone that knows the price of everything and the value of nothing.

The Big Five

1) Return on Investment Capital (ROIC)
2) Equity Growth
3) Earning per Share Growth (EPS)
4) Sales Growth
5) Cash Flow Growth

Buy a Business, Not a Stock

An invasion of armies can be resisted, but not an idea whose time has come.

Mortgage-backed Security

Wall Street repackages mortgage-backed securities with other debt into collateralized debt obligations (CDOs). CDOs are sold to institutional investors such as pension funds, mutual funds, and hedge funds.

Rising defaults in the housing market helped plunge mortgage lenders, banks, and institutional investors into illiquidity.

Business Priorities

1) Operating Profit
2) Revenue
3) Cash Flow
4) Share