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Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

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Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#101

Post by s73v3r_ »

nokcha wrote: post #99
s73v3r_ wrote: post #62

Earlier quoted context omitted.

How much would you have invested, and how well would you have done had the start-ups went belly up?

>How much would you have invested Only what I could have afforded to lose. Around $5k. Not a lot of money (maybe even too small an amount to overcome the friction of traditional early-stage fundraising), but I would have gotten a much better RoI than my indexed stock-market fund got. >and how well would you have done had the start-ups went belly up? Well clearly I would have done poorly in that case. But that is why…

"but I would have gotten a much better RoI than my indexed stock-market fund got."

Are you sure? How many stories have we heard here about people being diluted to shit when big investors come in?

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#102

Post by psyc »

patentatt wrote: post #92
psyc wrote: post #82

Earlier quoted context omitted.

Often this argument isn't really about whether everyone is collectively 'better off' by some particular metric. It's about how much of a nanny state it takes to get that result, and whether that's contrary to the spirit of freedom of association. In other words, money is not the only value. Liberty itself is a value.

What of the liberty to not be swindled? The liberty to have access to public markets with an expectation that there is third party oversight of the companies you are investing in? The liberty to live in a society where hucksters are the exception rather than the norm?

Those aren't liberties by the connotation implied by the US framers. You seem to be repurposing the word for rhetorical reasons.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#103

Post by conanbatt »

Trundle wrote: post #58
conanbatt wrote: post #56

Earlier quoted context omitted.

You are welcome to restrain yourself from your own ignorance, but I don't see why you should have the right to do so on others that don't enjoy that bondage. Punish those you disagree with by letting them hang by their own rope, or realize later on that it is you today who is being hang by your own.

You can't "punish people by letting them hang their own rope" when they don't actually get hung, because they're still around afterwards but now a burden. They now have to rely (more) on the social safety net, or turn to crime, or just sit around all poor and broken being unpleasant to look at. A society that has decided to take on, at least partially, the burden of individual failure is incentivised to try to preven…

We plunge deeper into the rabbit hole. If only a citizen could decide to renounce taxes for services the government provides but that he doesn't use!

We are now all forced to contribute in name of helping the needy, but then we ask in return that they stay needy, and that attempts to rise above their station will be met with the reminder that it is the best for them and for everyone to remain ignorant of such matters.

How caritative, how empathic and how benevolent are those that get their nobility validated with their bank account statement.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#104

Post by conanbatt »

s73v3r_ wrote: post #100
conanbatt wrote: post #77

Earlier quoted context omitted.

You overestimate the cost of speculative gambles, but let me ask a the opposite: if the regulation costs you your job and an economic recession who is going to compensate you for it? Because as far as i know the government has never given a check to compensate for its mistakes.

"You overestimate the cost of speculative gambles" No, I remember my history. "if the regulation costs you your job" What regulation? The regulation saying that you can't screw people over? I wouldn't find myself in that job to start with. "Because as far as i know the government has never given a check to compensate for its mistakes." Not true in the least. Retraining programs to help people get into other industrie…

> What regulation? The regulation saying that you can't screw people over? I wouldn't find myself in that job to start with.

For example, city regulations in San Francisco has made it very expensive and difficult to build. Hence, the rent of everyone that lives in the city is much higher than it would have been because of city regulations. When will I, an SF resident, get my compensation for the cost of regulation?

The government's mistakes are like spilled milk. They can only replace the milk spilled by taking it from someone else, and they drink the milk on the way to deliver it.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#105

Post by ataturk »

lr4444lr wrote: post #66
JumpCrisscross wrote: post #47

Earlier quoted context omitted.

> So a company has to claim it loses money to be absolved of any moral burden? State and federal governments aren't private companies.

I think you're missing his point. Those very entities have agencies which are both "protecting" the public by imposing regulations that prevent them from expenditures with negative expected value, and at the same time peddle them. Imagine if there were a state-run cigarette producing public benefit corporations alongside public health departments. You'd have two agencies, one cultivating and the other discouraging th…

State OTB and lotteries in NY were enacted because there were so many underground/illicit versions of the same things run by the mob. It was an attempt to eliminate thievery and corruption but all it did was turn the whole state corrupt instead.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#106

Post by MR4D »

maerF0x0 wrote: post #21
charlesdm wrote: post #15

Earlier quoted context omitted.

One simplified example: say people are investing in a passive property fund. Those funds generally yield around 3 to 5% per year. You're a smart entrepreneur. You build a huge skyscraper for $200m. You manage to generate a yield of 10% on that $200m. Most of the $200m is debt levered against the asset. The building subsequently gets sold to the fund on a yield basis. They'll pay $400m, i.e. $20m in yield p/a = 5%. Sm…

Smart entrepreneur had to take massive risks (albeit short term because of the sold yield) and do a ton of work over the timespan it takes to have that come to fruition. Yes, I understand the reward is also super high. I'm just trying to point out that for most people if they tried this they'd likely fail to pull it off(competence) or run out of runway(contingency).

I think you’re partially correct, but you’re missing out on the asymmetry of the risk/reward payoff. People often forget that there is a lower bound to losses (zero), but no upper bound on price (and therefore profit).

Also, most of these bets that have super high payoffs are initially made when others were walking away from similar bets. There’s significant research to support this, too.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#107

Post by MR4D »

charlesdm wrote: post #22
maerF0x0 wrote: post #21

Earlier quoted context omitted.

Smart entrepreneur had to take massive risks (albeit short term because of the sold yield) and do a ton of work over the timespan it takes to have that come to fruition. Yes, I understand the reward is also super high. I'm just trying to point out that for most people if they tried this they'd likely fail to pull it off(competence) or run out of runway(contingency).

Just pointing out how you can siphon off massive amounts of money from passive investors because they invest in a certain fixed way. Smart entrepreneur (he's smart after all) would also likely raise his capital from a wealthy family office, thus take very few risks himself. Private equity roll-ups are another example -- you buy one amazing asset at 15x earnings, roll up a few other ok or "meh" businesses that you can…

The p/e is basically irrelevant. You want to buy a company that is somehow broken (hence why p/e is irrelevant - if the company was barely losing money, the p/e would be infinite).

Buying a broken company allows you to fix the flaw(s), and then sell the fixed company back to the market. Even if the p/e were the same, if done correctly, you make a killing on the deal.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#108

Post by MR4D »

kspaans wrote: post #37
fricat1ve wrote: post #13

Earlier quoted context omitted.

Essentially toothless because an index fund is going to invest the money either way.

False! SNAP has been explicitly excluded from the S&P500 index for exactly this reason[0]. I'm not sure if "whole market" passive funds would include it or not. At the very least VTI has 0.03% of assets in SNAP[1]. Not much to worry about. 0 - https://uk.reuters.com/article/us-snap-s-p-idUKKBN1AH2RV 1 - https://www.etfchannel.com/symbol/snap/

You’re confusing the maintainer of the index’s ( Standard & Poors) with the implementation (Vanguard).

If S&P puts a company in, Vanguard will buy the shares. Not doing so could cause problems, including lawsuits.

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#109

Post by MR4D »

rdlecler1 wrote: post #74

One issue is even with accredited investors is the so-called 99 investor problem for pooled investment vehicles. If I’m a company I don’t want thousands of individual shareholders on my captable. The answer would be that we could have crowdfunded VC funds that invests. But because the SEC limits pooled investment vehicles to 99 accredited investors you limit the number of $1k-$100k checks you can take in, which then…

Qualified Purchasers ($5MM+) are limited to 500, thereby minimizing this problem considerably.

There are other ways around this that are surprisingly obvious to those who work in the industry (but virtually unknown to outsiders)

Re: Stock and Bond Markets Dethroned: Private Fundraising Is Now Dominant

#110

Post by MR4D »

JumpCrisscross wrote: post #12
sol_remmy wrote: post #9

Thank goodness the government protects me, a non-accredited investor, from investing in any private companies! I'm too stupid to make investment decisions without going broke! https://passiveincomemd.com/not-secret-society-accredited-in...

I used to be skeptical of accredited investor requirements [1] until cryptocurrencies happened. That an entire space can (a) go from zero to fraud in the blink of an eye and (b) not only ignore the delineation between gambles and core investments, but develop a collective disdain for it and anyone espousing it, has me convinced of the rule's wisdom. Investing in start-ups costs money. Diligence costs money, negotiati…

Your last statement is incorrect. If it were true, then only millionaires would be able to start companies.

You’ve (inadvertently, I believe) just prohibited every independent plumber, carpenter, computer programmer, etc., from starting their own business. Because, trust me, starting a business is very illiquid - it’s like having a hole in your pocket.

Even worse, said plumber, carpenter, etc., has a high concentration risk - pretty much everything in one basket, including the person’s income.

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