- Fidelity is the world's largest mutual fund company and entirely private. Based in Boston,
- power is exercised through it's subsidiary, Fidelity Investments which controls the savings of millions of Americans.
- "By early 1995, Fidelity had more than 400 billion under its control - in mutual funds, corporate retirement plans, insurance programs, and private partnerships - in the United States, Europe, and Japan. It was one of the largest investors in the securities of bankrupt companies."
"The great thing about Fidelity was that you could propose funds and products that Ned wouldn't put five cents of his own money into," said one admiring former executive, money manager Mark Shenkam. "If Ned thought it would sell, he would do it." Ned Johnson has successfully made marketing the heart of Fidelity. Follow the largest mutual fund giant as it uses innovation to permanently change the economic landscape of America and the world.
Financial engineering has allowed firms to create many new products.
Many institutions use derivatives to increase profits by exploiting the direction or volatility or asset prices or interest rates while reducing their overall capital at risk. These products are rarely understood by large segments of the public as large losses have made the headlines of many newspapers. How are small investors going to obtain the financial resources to protect themselves from these types of devastating losses? When parties to a transaction don't have equal access to information about pricing and current value, gaps develop which can lead to abuse. "In most instances, trusts are irrevocable, and, unless there is fraud, which is almost impossible to prove, the banks can expect to continue to serve and collect fees as trustees, regardless of its investment performance. The security of the trust business may well be the reason for banks' traditionally poor investment performance. After all, in quite literal terms, they - unlike the beneficiaries - have nothing to lose. The trust contains "other people's money." Read More
How do unsophisticated investors get taken for a financial ride?
It’s the art of stock manipulation. Even if a company has little intrinsic value, they do have monetary value. Of course, this is only true provided someone will be around to take it off your hands at a higher price. Speculation takes on a whole new and scary meaning.
Full of countless stories about RCMP investigations and exerts on the marketers of the industry, you will learn why it’s now called the venture exchange.
Capital goes where it is appreciated and made to feel most welcome. Wealth, if not contained, ends up slipping away. It also must be protected from theft and mismanagement. Your money in the bank is paid a specific interest. The bank takes the money and lends it out at a higher interest, pocketing the difference, which is the profit. The biggest companies are owned by pension funds all over the world. The free flow of capital across borders is healthy for our economies. International investment continues to grow at double-digit rates. Countries with huge debts simply reschedule, they don’t go broke, and they eventually pay back all debts. Conflicts of interest arise when banks underwrite issues, collecting fees and then advising their clients to buy it. Banks are responsible to their shareholders. However, many of their products contribute to the country’s low savings rate, and over time this will kill our standard of living. The lowest cost of capital in the world is in Japan. Their corporate clients are treated as kings, and they are the slaves that serve them. They are always worried about high prices, because they must import nearly everything. When doing any deal, return on equity comes in as the last reason of importance. Japanese firms use their high stock prices to raise large amounts of capital in order to make huge acquisitions. They are very conservative with their money, and have a household savings rate of about 18 percent, as opposed to the U.S with less than 5 percent. It’s also interesting to note that in Japan, the housewives manage the investments. Investment products created by the brokerage firms are sold door to door.
Roy C. Smith worked in corporate finance at Goldman Sachs and oversaw the firms business in Japan for 15 years. He now teaches banking and finance at New York University
Mutual funds companies use an “investment program” or “contractual plan” in order to keep the money rolling in.
They also must keep expanding just to keep their ever-increasing fixed costs covered. Investment advisors make their money as a percentage of the investments they bring in. Walter Stewart also has an interesting opinion about the Toronto Stock Market. Learn about the TSE and how “ In point of fact, the exchange is owned by its seventy – four broker – members, who alone have the right to buy and sell the securities listed here, and who collect commissions on every share they buy and sell for their customers.” PG 115. Also at the end of the paragraph “ Still, it is the members who rule here, and the members want you to buy and sell stock as often as possible, because that is how they make most of their money.” (CHAPTER SIX: Nearer, Big Board, to Thee At the Exchange. PG 115. Hey, weren’t the exchanges designed to help companies raise money? Weren’t they designed for long term investing and not short term gambling? If you are as confused as I was, you had better get this book and read it now!!!
Author: Michael Useem - a professor of management at the Wharton School and a professor of sociology at the University of Pennsylvania. He also wrote 'The Inner Circle, Executive Defense and Liberal Education and the Corporation.
During the 1970s and early 1980s, hundreds of institutions acquired significant stakes in the largest corporations. Emerging from the revolution is a new reality...to grow and maximize shareholder wealth.
The shift changes throughout the century went from family owned to industrial and then managerial to investor capitalism. Ordinary people have placed money in the hands of the institutional investors. Political pressure is then applied on company managers to boost productivity. When growth hits a wall due to a downturn or recession, companies are pressured to boost profits.Read More
Healthy fortune five hundred firms are firing thousands in order to satisfy Wall Street's short-term profit agenda. The micro- managing of companies without the expertise and qualifications to do so can be counterproductive. Money managers are far removed from the daily pressures and challenges that face company management.
"Fund managers have no history to justify the exercise of increased influence on corporate management. I do not know of a single state or municipal pension that employs personnel who have a background in major corporate management....[W]e have a group of people with increasing control over the fortune 500 who have no proven skills in management, no expertise in selecting directors, no believable judgement in how much should be spent on research or marketing - in fact, no experience except that which they have accumulated controlling other people's money."
Charles Wohlstetter, Vice-Chairman of GTE Corporation
McDonalds has taken steps to successfully reduce institutional influence by implementing an employee stock ownership program. This ties performance to compensation. Loyal workers are more likely to vote with management on issues of importance. This allows the managers to focus on the long-term and not worry about next quarter's results. Millions of small investors are funding the invisible war for corporate change that has resulted in downsizing and workplace insecurity.
More book reviews will be showing here soon! Your patience is very much appreciated.