On private equity

Most big companies naturally belong in liquid public markets. This is because investors value shares they can sell easily more highly than shares they cannot freely trade. It should not be easy for private equity firms to find big, undervalued targets. If investors think listed shares are cheap, they can buy them without paying a private equity firm to do the job for them. Alternatively, undervalued companies can be taken over by other listed companies able to extract synergies from merging their operations. Private equity firms have no synergies to offer. Small companies may not be valued correctly because there is not enough public information about their prospects. The same could be true of emerging markets. The problem here is that in markets with weak regulation and corporate governance, private equity firms may not enjoy full information either. They tend to go for bigger, not smaller, companies

The FT on why Buffett was successful

One of the reasons why the bets have worked, and why Berkshire has since stopped making them, is that it was able to agree very large derivative contracts where it received all the premium up-front, and then did not have to post collateral. Any payment only comes due when the contracts are unwound or expire.

Simply stated, Berkshire appears to have enjoyed tremendous, and perhaps unique, advantages when it came to selling the derivatives from which the float (and thus the edge’s foundation) comes. Without those advantages in place, the whole thing may not have been possible to begin with. And the true key is that those advantages may be reserved for Buffett and, maybe, just a handful of other people. Enjoying those advantages , in other words, can lead to vast competitive benefits.

Those three key factors that may not have been available to all market players are:

(1) very soft collateral requirements,

(2) utter disregard for quarterly earnings volatility, and

(3) the ability to find buyers of sizable and often heterodox contracts.

Other players may have faced much more stringent collateral requirements. Other players may care much more about cont inuous earnings turbulence. Other players may not be able to sell such contracts. Buffett is very clear about it: If he had to face “normal” collateral rules, he would not have entered into the trades.

Kingsley Amis

Elizabeth Jane Howard: Bunny, do you have to have a drink?

Kingsley Amis: Look, I'm Kingsley Amis, you see, and I can drink whenever I want."

Flaubert on art

The more words there are on a gallery wall next to a picture, the worse the picture.

Robert Buckland says equities are the new bonds

Buckland has a suspicion that QE is doing the exact opposite of what polcymakers intended. It’s destroying jobs, rather than creating them. Theory: QE is forcing bond investors out of fixed income into equities, where they are demanding income rather than capital growth. This, in turn, is pressing corporates into boosting dividends and share buybacks. Example: Pfizer closed its Viagra lab in the UK, sacked more than 2000 white-coat workers, announced a buyback and watched its share price spike 7 per cent.