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The communication innovations we have around us today like the internet, financial newspapers, and special interest television channels focused on investing like CNBC are a high speed pipeline of nonsensical chatter. All these sources of information mean that there is no shortage of media people trying to answer our questions about the stock market and specific stocks. You have to remember that the news media are constantly competing to survive against other stuff you can watch. If they don’t always sound like they know exactly what is going on then you won’t watch their presentations. If you don’t tune into their show then their ratings go down. If their ratings go down they get fired and their show gets cancelled.
This means that financial journalists are in the business of finding great stories and sounding like authorities no matter what. The stock market is a great place for them to dig up news ‘scoops’ to feed to the public. They don’t really check their facts very well and sometimes not at all. This means that if some insider wants to feed you a line of bull manure then all they have to do is maintain good connections with financial journalists, sponsor an investment show, or outright buy an investing TV channel like Jack Welch the CEO of GE did when he set up CNBC. What a great way for inside executives to control the flow of news information to the public then to actually own one of the only financial news channels…but not so great for you!
These journalists also kick up the fire by bringing in so-called ‘experts’ to talk about each side of some topic that real experts would not consider important.
This just makes it all the more confusing for the public to understand what is important when buying or selling a stock. Shows on CNBC like ‘Closing Bell’, ‘Kudlow & Company’, and ‘Mad Money’ do nothing but confuse and misdirect the attention of most individual investors in the public. Even worse this means that the financial news media allows overpriced stocks to be recommended through analysts in the inside web that inside executives are dumping on the public because they are trying to get out. This actually happened at the top of the bull market in 1999. For a great historical description of what happened read Maggie Mahar’s book entitled “Bull.”
The famous Yale University Economist, Prof. Bob Shiller, Ph.D. is particularly harsh on the media in his book “Irrational Exuberance.” Dr. Shiller is one the economists that Alan Greenspan respects most and where he got the term “Irrational Exuberance.” He portrays the media as sound-bite-driven where superficial opinions are preferred over in-depth analyses. I agree whole heartedly with him and contend that it is also done just because the industry would rather have the retail investor confused and emotionally pliable to get you to buy and sell when they want with total disregard for your best interests!
People who had invested their life savings in the stock market were ripped off in the stock market because the financial news media and analysts were hyping up what a great buy stocks were at the very top of the market in 1999 and 2000. At the same time inside corporate executives were selling out everything they had. What is amazing is that our federal government in the form of the Security Exchange Commission never did a thing about it. There was never a blanket case taken or an outcry that almost all of the inside executives had somehow magically sold out of the market six months before the market crashed.
Here is the valuable tip I want you to consider: when you are a beginner investor it is important that you DO NOT WATCH THE FINANCIAL NEWS OR READ THE FINANCIAL NEWSPAPERS! Don’t let the stock market industry lead you around by the nose like livestock to the slaughter house. Don’t listen to what they want you to listen to. You should focus on learning what is important in the stock market and the mass media will only confuse you until you have educated yourself.
Recommended reading:
1. Mahar, M. Bull! A History of the Boom, 1929-1999 (New York, HarperBusiness , 2003)
2. Shiller, R., Irrational Exhuberance, (New York, Broadway Books, 2000)
Read about tongue thrust therapy and strawberry tongue at the Normal Tongue website.
The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value
A widespread misunderstanding concerning leveraged buyouts (LBOs) is the belief that they accomplish little but the ruin of companies and the loss of employment. How else could it be? Until recently, journalists, including much of the business press, have depicted LBO specialists as generally greedy, if not sinister, forces whose activities compound the dislocations of modern American economic and social life. This kind of criticism reached a crescendo in the press and in Congress at the end of
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(out of 19 reviews)
List Price: $ 37.99
Price: $ 5.83
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Review by David K. W. Ma for The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value
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If you are looking at what I have written, you must be considering buying this book. So I guess it’s good for me to tell you what this book really is and where its strength lies. This book isn’t a gossipy account of interesting people; it isn’t (only) an account of what KKR did. It’s certainly not a moral debate of whether Henry Kravis is a ‘Barbarian’. My opinion is that this is a book which seriously attempts to tell us what leverage buyout really is; and the mentioning of KKR, its deals, its organizational strucuture etc, merely (in a sense) serve as illustrative examples. In other words, I think despite the fact that the authors have very meticulous account of things about KKR, they have something else in mind: the ‘leverage buyout story’ instead of ‘the KKR story’. This is the main difference between this book and others belonging to the same topic. So if you are serious about learning something about leverage buyouts, read on.The choice of topics and the quality of exposition of the book is truly unmatched by practically any business books I have ever read. That’s the main reason behind the five stars. The analysis throughout, especially the middle chapters, is not yet, but close to academic. But wait, before destroying the online sales of the book by using the word ‘academic’, I must add that the usual attachment of being boring is absolutely absent. It is so well-written and you’ll learn so much from the book that chapter 2 alone (or chp 3 or 4) is worth more than the price.Finally, to give you more information, this is not a book of pathbreaking insights. But who cares? Every new business book claims itself to be a revolution: the ‘everything you previously know about xxx is wrong’ kind of slogan. In an age awashed with the chic of being new, Geroge Baker offers the rare gem of simply ‘putting things into the right perspective’. You want to know somthing about buyouts? Here you are, crystal clear exposition, abundant historical background, good examples, careful documentation, serious analysis, and, well, maybe a little bit of gossip afterall.
Review by F. Lybrand for The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value
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This is an outstanding academic treatment of the investments made by KKR, all of which were some kind of leveraged buy-out. The authors focus their attention on the transactions themselves, not the way they were viewed by society or on the people that put them together – in this regard the book is a rare gem. It treats the period up to 1990 in some depth, with some very interesting case studies that show pretty good financial detail with outstanding qualitative descriptions of the transactions that were put together. As you walk through the various case studies, you are able to sit alongside with the KKR team and watch as the LBO goes from an unusual financial instrument to a mainstream product that is widely accepted in the marketplace. While growing acceptance of financial products is an established facet of Wall Street, to follow this evolution through the work of a single firm really is quite interesting. The manner in which the complexity, leverage and size of the transactions grow is laid out in plain English, making this a fascinating read.Only Chapter 5 “KKR as an Institutional Form” focused on the firm itself, and even this treatment was not nearly as obsequious as many other financial books (most notably “Goldman Sachs: the Culture of Success” by Endlich). Mr. Baker and Mr. Smith take a very level-headed approach and document the growth of the firm in a straight-forward manner, although they do inject a good deal of `positivity’ to their view, i.e. the revolutionary introduction of Monday Morning Meeting’s at KKR in the 1990′s (this is commonplace at most banks).I particularly enjoyed the second chapter “Recasting the Role of Debt” which talks about some of the earlier transactions that KKR did in some depth. The description of their LBO of Houdaille is very much worth reading, if only for the fact that traditional `Old Economy’ companies are again garnering such interest. Indeed, that is a very noteworthy aspect of the whole book, KKR focused on established companies with real cash flows. The one transaction which involved real growth financing was a near bust. This is very different than all of the financial maneuvering that has gone on over the past two years, and it is interesting to compare the sustainability of the two efforts (the many years of KKR’s existence surely triumphs over venture capital’s recent 15 minutes of fame). Chapter 4 on “When Risk Becomes Real” talks about some of the failed KKR transactions, EFB Trucking and Eaton Leonard in some detail. The reaction of KKR to these hiccups is very impressive, and while it is told with the same `positivity’ of the authors as mentioned above, the authors still do a good job of telling the story in an objective manner. The efforts of the partners to maintaining KKR’s reputation in the marketplace is nothing short of heroic, and while there was a clear financial incentive over the short term it is clear that the longer term reputation of the company also played a clear role in motivating their actions.It really is rare to get a book as good as this with detailed financial information (even if it is more than 10 years old) and a mostly unbiased view of the Company. Where the authors are biased, it is easy to pick up and interpret. This is very much an academic treatment of the firm, with some detail as to what the rest of the market was doing, but not a whole lot. There are just the right number of graphs, which is very nice. I would think anybody working in finance would enjoy this book, although given the depth in which it describes the transactions, it might not be the most leisurely read. This is an outstanding book.
Review by Rolf Dobelli for The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value
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This revealing book covers a highly charged and controversial period of American investment history. George P. Baker and George David Smith study the emergence of the investment house Kohlberg, Kravis, Roberts (KKR), and follow it during the decade KKR ruled the world of leveraged buyouts. The authors begin with the early days when the partners worked together at Bear Stearns. They track the men as they build their own firm and create their own success. In clear, straightforward language, the book presents KKR’s intentions and the economics of leveraged buyouts (LBOs). It discusses KKR’s role in structuring and managing the deals. We [...] recommend this book as a must read for anyone interested in LBOs or the history of KKR. Executives at all levels will find the KKR saga interesting and useful.
Review by Fabio L. Sattin (fabio.sattin@privateequitypartners.com) for The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value
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Very interesting and professionally written with significant technical aspects. Extremely useful to understand LBO’s rationale and their key success factors.
Review by for The New Financial Capitalists: Kohlberg Kravis Roberts and the Creation of Corporate Value
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Although the text is written in a nearly academic tone which sometimes gets boring it contains the wealth of factual informatiion not available anywhere else. Full of details on deal structuring.