So FT paper on a sunday cannot get more depressing...it is all about financial crisis and jobs lost. Their favorite topic or pet peeve so to speak. One of the biggest despair for a CEO, or a Managing Director is to run the boat in an economy that is infected by the global financial crisis. Lehman Brothers collapse is not going to create global warming...will it?Banks and Regulators are locking horns with each other. At such times it is knowledge and professor's take on the situation that helps honest people afloat. Spring term classes are not forgotten and i woke up thinking about portfolios. Asset Pricing Theory and Portfolio Construction in MBA classes help in giving information to the dummies in us (who cannot imagine what finance means across so many nations)...I did learn some quantiative models for portfolio expansion across industries. Risk-level and Beta are the indicators for industries to invest and flourish. By research and analysis, the areas of investment and valuation for industry leaders in the current times of despair are areas with high return and less risk. Post issuance IPOs always underperform , even after adjusting for risk using some of teh quantitative models.
Beta of a portfolio is the weighted average of individual asset betas....and so technically speaking if Hun Fang in China wants to issue an IPO or a trader in Philippines want to start his business , he needs to look at industries with high portfolio returns that is proven well on a global level. Some of the high asset industries are: Airlines, Real Property, Travel, Outdoor Recreation, Electronics, Business Machines, Retail, Media, Insurance, Trucking and Freight. ( Betas of 1.8-1.3)...precisely and that's the math.
They seemingly look non-glamorous and pretty unorganized areas to be in and surely 'brandless' but quick 'wealth-generators'. So all underdeveloped and poor nations need to look at and think of matching returns with asset value to invest in these industries quantitatively. CEOs maybe need to diversify and create more airmileage...skywatching will help in movement. Air fleet can help.
Now if I look at Hong Kong market and the way the real estate is organized, I realize the wealth management concepts are already known.....they have been there and done that...the buy-in and sell-in of homes is such an efficient business. It amazes me how honest they are in their transactions. They are fairly transparent in their prices and luxury and the prices are listed in the local newspaper. That's what market efficieny is all about. Keeping things and NPV good in uncertain times. On that note as of today real estate prices went up when a chinese star sold property for 300 million on the peak. Well...prosperity feels good and it makes the poor nations hopeful about the concept of private wealth management...it is a complex topic but certainly can be dumbed down....There are things in life for the dummies. One of them is this...Netizens can build assets at a price that can hold a strong portfolio...
Lowest on the asset value chain are Banks, Tobacco, Telephone, Energy, Utilites and Gas. Having said that we can(not) live without them. The value chain and people in the chain are way too many to AXE these industries. There are business side of things and sustainability side of things...so nations that invest in these industries look at the sustainability side and will continue to be low on the asset pricing.
Pick your Portfolio...I still want real estate in Hong Kong...since the construction and architecture is beautiful. Its like going around Venus. Venus Williams need to give me that nod.
''Greed is Good- Michael Douglas...'' and he is old perhaps but quite prudent.
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