Stock Trading

An initial pubic offering is an IPO. In effect what an IPO does it takes a private company public. It is also a means for an existing company listed on one of the exchanges to spin off or create a new company from its parent company. It all sounds pretty straight forward.

Reasons for going public:

The most obvious reason for a private company to enter the public market is raising immediate liquid assets by way of offering shares in the company. Most private companies would prefer to avoid all of the burden of complying with reporting and other regulations, but sometimes a company needs to expand or generate large sums of money to keep up with competition. The reasons are the advantage of offering a chunk of the company without losing control of the company.

IPOs Past and Present:

Before the acts of a few bad apples like Enron, WorldCom and others IPOs flourished on Wall Street. From the mid 1990s to the early 2000s each day brought a new public offering to the market place. Some weeks two or three new IPOs were introduced to the public market place. There were necessary compliance issues to deal with and prices to set and then the IPO hit the market and the exchanges decided what to do with the new kid on the block. Millions and sometimes more could be generated on the first day of trading.

That was then and now there is Sarbanes-Oxley a piece of legislation that was supposed to prospectively cure the market place of cooked books, fraud and make the investor feel more secure. There are aspects of this curative piece of legislation that has provided for more transparency in corporate America. The auditor independence section makes perfect sense. It seems like common sense you want your auditor to not have a conflict of interest. The area of corporate responsibility for subordinate acts of fraud, errors and omissions makes perfect sense. Disclosure regarding debt and other adverse actions involving the company almost seems like a redundancy with other securities laws.

The effect of the Sarbanes-Oxley and other methods to cut out bad apples is that it costs a great deal of money to take a company public these days. There is the need to hire top notch consultants and extra staff to comply with the ever increasing paper work and internal structural changes. It is not a bad piece of legislation, but it is burdensome for a heretofore small private company to be able to afford. The net effect is that the IPO is an infrequent event on Wall Street. There may be other reasons in addition to Sarbanes-Oxley.

Recently, the Blackstone Group introduced an IPO to the market place. It was priced well, but overall the event was lackluster. It generated some 20 billion dollars, but all of the expectations were overstated from the hoopla that preceded the offering. Perhaps we have simply become jaded.

The IPO is a launch of a newbie. The era of "what's next," may be part of our gilded past. It could be a good thing for the market place or it could signify a final epitaph to the Horatio Alger story which was overblown in the first place.

The simple answer to what is a Hedge Fund is that it is private equity funds which provide a hedge against market conditions. The Hedge Fund is not simple in practice. On a global basis there is over a trillion dollars of private investment capital that can literally invest in any commodity, currency indeses and stocks and bonds. Unlike traditional investing the Hedge Fund may go long or short the market. It is private equity and therefore the gains on transactions for fund owners is taxed differently that normal capital gains taxes.

Essentially the Hedge Fund is formed by individual investors who have a stake in the fund. The buy-in is in the millions. Noted Hedge Fund owners are George Soros and the Blackstone Group founded by Peter G. Peterson and Stephen A. Schwarzman.

The Blackstone Group is a fairy tale. The Blackstone Group was founded by Peter G. Peterson and Stephen A. Schwarsman. According to the Blackstone Group corporate biography the iniital private funds in 1985 were $400,000. By forging alliances and partnerships with some of the most well-heeled on Wall Street their assets under management are over 88.5 billion dollars.

The Blackstone Group is a world leader in alternative investment strategies and investment counseling. A recent IPO Blackstone Capital Partners raised an additional 21.7 billion dollars.

Hedge Funds are only a segment of the Blackstone Group Investments. The Blackstone Group has a stellar Hedge Fund management in the world market. Its group of Hedge Funds are uniquely tailored for a variety of investment strategies and goals. In fact the Blackstone Group can provide individualized tailoring of a Hedge Fund to fit the needs of large investment endowments and retirement funds. Anyone can purchase a unit of stock in the Blackstone Group through a licensed stock broker. It trades on the New York Stock Exchange under the stock ticker BX.

Any discussion about Hedge Funds would not be complete without mentioning the financial wizard George Soros. His ability to sense movements in the market place is known throughout the financial world. His Hedge Fund and investment company is Quantum Fund. He senses weaknesses and strengths as only a master financial investor/trader can. In 1992 his legendary move to short the British pound nearly broke the Bank of London is part of the lore of George Soros. He can play the upside or the downside of any market. Some may call it a sixth sense, but it is an all encompassing ability to assess with precision the reality of the market and stengths of the underlying values with the reactions of the wild and crazy speculator will do. It is this investor saavy that has placed him in the Forbes wealthiest category.

There are thousands of Hedge Funds available in the various market places. Lately some have not done as well due to the roller coaster ride that has occured. This is the time when the true test of a Hedge Fund manager is put to the test. The average mutual fund holder or retirement beneficiary may be surprised to learn that their funds are in part invested in low risk Hedge Funds. The most successful endowment funds have utilized the Hedge Fund investment to capitalize on market movement and volitility.

The professional that manage these funds are lightning quick and have the eccumen to know how and when to make grand plays. Any one who does not possess these combinations of skill and sixth sense does not last in the Hedge Fund for very long. The old adage, "If you snooze, you lose," applies to Hedge Funds.