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The Financial Turing Test (Of Dollars and Data)

I really like this idea.

What would be the one question that you could ask anyone proclaiming to be a “financial expert” in order to find out if they were truly one? Maggiulli makes a good point that perhaps the question to ask is:

Imagine we could simulate the universe where each time you are born to different set of parents with a different genetic makeup.  Sometimes you are born a man.  Sometimes you are born a woman.  Sometimes black.  Sometimes white.  Sometimes smart.  Sometimes not.  Etcetera etcetera.  What would you do to have the highest probability of becoming financially secure regardless of your background?

I’m going to think hard about how I would answer this.

Are We Near a Recession? The Godfather of the Inverted Yield Curve Says It’s ‘Code Red’ (Fortune)

Nice to read about how the inverted yield curve came about.

Runaway Story or Meltdown in Motion? The Unraveling of the WeWork IPO (Musings on Markets)

Prof. Damodaran gives a brilliant breakdown on the WeWork IPO. Some choice quotes from the post:

To the question of whether WeWork could be worth $40 billion, $50 billion or more, the answer is that it is possible but only if the company can deliver well-above average margins, while maintaining sky-high growth. That would make those values improbable, but what should terrify investors is that even the $15 or $20 billion equity values require stretching the assumptions to breaking point, and that there are a whole host of plausible scenarios where the equity is worth nothing.

As WeWork stumbles its way to an IPO, with the very real chance that it could be pulled by its biggest stockholders (Neumann and Softbank) from a public offering, the question of what to do next depends upon whose perspective you tak.

1. If you are a VC/equity owner in WeWorks, your choice is a tough one. On the one hand, you may want to pull the IPO and wait for a better moment. On the other, your moment may have passed and to survive as a private company, WeWork will need more capital (from you).

2. As an investor, whether you invest or not will depend on what you think is a plausible/probable narrative for the company, and the resulting value. I would not invest in the company, even at the more modest pricing levels ($15-$20 billion), but if the price collapsed to the single digits, I would buy it for its optionality.

3. If you are a trader, this stock, if it goes public, will be a pure pricing game, going up and down based upon momentum. If you are good at sending momentum shifts, you could take advantage. 

4. If you are a founder/CEO of a company, the lesson to be learned from this IPO is that no matter how disruptive you may perceive your company to be, in a business, there are lessons to be learned from looking at how that business has been run in the past.