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Goizueta Investors . February 28, 2008. Agenda. Market Recaps Domestic International Stock Market Game Update Book Review: Liar’s Poker GI Challenge Guess the Dow Contest Winner M&Ms Contest Winner Upcoming Events. Weekly Newsletter. Your one-stop shop for all things financial
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Goizueta Investors February 28, 2008
Agenda • Market Recaps • Domestic • International • Stock Market Game Update • Book Review: Liar’s Poker • GI Challenge • Guess the Dow Contest Winner • M&Ms Contest Winner • Upcoming Events
Weekly Newsletter • Your one-stop shop for all things financial • Published every Monday • Located at select GBS classes, all GI events • Features Weekly Market Recaps and Special Interest Articles • Available at www.GoizuetaInvestors.com
B C D E A Domestic Market RecapFebruary 2008 Dow 198.29, 1.6% 12,582.18 Nasdaq 18.34, 0.78% 2,331.57 S&P 13.71, 1.01% 1,367.68 DJIA: January - February 2008 A: UBS write-down (1/30) B: ISM disappoints (2/5) C: Buffett offer to bond insurers (2/12) D: Fed minutes (2/20) E: Bernanke testimony (2/28)
Economy • Crude oil at record prices • Weak economic data across the board • Stagflation back in investors’ vocabulary
Interesting News • Microsoft offers $44.6 billion for Yahoo (2/1) • Research in Motion sells more BlackBerries to consumers (2/21) • Delta and Northwest discuss merger, held back by disagreements (2/26)
Market Recap: International US Dollar Index
Market Recap: International • Commodities surge continues • Gold: $973.40 per troy oz. • Crude Oil: $102.49 per barrel • MGE Wheat: $24 per bushel • Inflationary pressures felt throughout the world • PPI: +7.4% year over year
Market Recap: International • Sovereign Wealth Funds • $3 trillion in total assets • ADIA: $900B • Govt. Investment Corp. of Singapore: $300B • Nearly $40B invested in US financials • Very little disclosure • No regulation, no disclosure requirements • IMF working on “best practices” code
Private Equity • What is it and what do they do? • Who are the big names? • How does a private equity fund make money? • What does a private equity deal look like? • Why has private equity been all over the news? • I want to work in private equity, what should I do?
What Private Equity Does • Buys private firms, or buys publicly traded companies and takes them private. • Leveraged buyouts (LBO’s) • Uses money from institutional or wealthy individual investors. • Borrows money against these investments for more capital. • Industry has $2 trillion under management (est.) • $782 billion of PE deals in 2007 (down 53% YTD 2008) • Largest PE transaction is the $45 billion buyout of TXU lead by KKR ($8b equity) • First PE buyout of a public company was done by KKR in 1979 in a deal totaling $355 million
How Private Equity Makes Money ($k) Effect of Leverage: Return w/o leverage: 66.7% Return w/ leverage: 300.0%
The Big Players • First firm to take a public company private • Henry Kravis made $51,369/hr last year • First PE firm to offer an IPO • Founder Steven Schwarzman richest man in private equity
Berkshire Hathaway • While not strictly considered a PE firm, Berkshire Hathaway is very similar • This makes it the largest PE firm, worth over $200 billion • A shares go for $140k, B for $4,675 • The Big Players won’t talk to you unless you have at least $10 million • Smaller middle market firms will want at least $500k • Warren Buffet is the only PE fund manager who will reveal his strategy • You can read his investor letters • Or go meet him next year, but still read the letters, there’s great stuff there
Book Review Liar’s Poker By Michael Lewis VS
GI Market Challenge DJIA on 2/22: 12,381.02 Max Ogienko 12,171.00 -210.02 M&Ms in the Bottle: 432 Rebecca Dodson 448 +16
GI Market Challenge • At what level will the Dow close on 3/21? • Email guesses to dow@learnlink.emory.edu • Check it at: Blog.GoizuetaInvestors.com • Deadline: 11:59pm on Thursday, 3/6 • Winner announced at next meeting
Upcoming Events • 3/6: Bowling Night • 3/10: Spring Break • 3/18: GI Day • 3/26: Movie Night: Boiler Room • Private Equity Seminar • Third General Body Meeting