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Swimming With Sharks – Part 1

Swimming With Sharks: Part 1

Imaging for a moment you are a portfolio manager, say, managing a mutual fund. You have mandate and rules to follow that are designed to keep you close to your mandate. Now, let’s add to this the fact that you are what is known as a “bottom-up” investor, meaning that your investment decision-making process is one that requires that you (a) rely on your economist(s) for views regarding the overall economy, (b) rely on your investment strategist(s) for overall market views, and, above all, (c) you analyze companies and make investment decisions on them based on the companies growth and profitability and how these data make their way from the company’s financial statements to your financial model and then, ultimately, to your valuation model.

Question: Where in the above scenario does something like the recent (and on going) Cyprus crisis fit?
Answer: It doesn’t – at least not as it pertains to what you are charged to do.

This description is how one facet of what we call the financial markets’ structure is how our trusty bottom-up portfolio manager operates. His/her’s scope is narrow and

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Financial Innovation: An Essential Part of the Innovation Process

It may not seem like an important enough topic and certainly one that some would say has questionable relevance to the more clear cut areas of innovation (technology, processes, managerial, to name a few), but I would argue that Financial Innovation should be at least on the radar screen of every policy maker charged with the responsibility of understanding and then administering public policy decisions. For Financial Innovation – the creation of products and services designed for use in the financial markets and real economy – has the power to alter an essential lifeblood of the global economy: the capital raising function of the financial markets.

To the degree that companies seeking to access the capital markets are enhanced or impaired has a direct impact on their ability to manage their existing capital and contemplate their future capital. And herein lies the issue of most direct relevance. For, if a company’s ability to fund its present and future operations is impacted (e.g. through a higher cost of capital) due to the fact that investor confidence has declined, then all other facets of innovation are impacted.

It is in this regard

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