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Analysis 10.1.2022 USA Socialism

How do US stock market valuations compare with those for UK quoted companies? I looked at the ratio of enterprise value (market capitalization plus debt minus cash) divided by EBITDA (earnings before interest, taxes, depreciation and amortization) for many US and UK listed companies. They are about the same, on average. But, digging deeper, there is a quite a large difference in valuations of companies in socialist (Democrat) versus semi socialist (Republican states). The factor is about 86%. If you want to invest in the US stock market, it is a fair game. You invest in socialist controlled territory and with higher taxes and hostile legislation, naturally you can get the stock more cheaply: it does not matter where you invest perhaps. But if you are a businessman or entrepreneur, for the same effort and input of capital, the rewards in a socialist state are only 86% of those in semi-socialist states. And what are these wonderful rewards? Most companies in the USA make losses not profits. Why they do not close I have no idea perhaps. Or putting it another way, an entrepreneur invests $100 in a business in a socialist state and has an investment that is then worth $86. Now, losing $14 does not sound a big deal. But it is worse than one thinks. Particularly for small businesses, they invest their life savings in the business. 14% gone. And that is if they do not borrow to fund the business. Suppose that they stake their house or borrow on a commercial basis 50% of the company value. They may lose the house or lose 28% of their personal net worth. And that is just the beginning. What happens when the socialists in charge take further action against the population, in the future? And with your home or 28% or more of your wealth gone, how can you move to somewhere half sensible like India? Anyways, pity the poor workers in the sunshine state. Poverty levels in California are the worst in the USA. No one with any sense will invest in American Samoa, California, Colorado, Connecticut, Delaware, Guam, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Puerto Rico, Rhode Island, U.S. Virgin Islands, Virginia, Washington or Wisconsin. And in 5 years time when the kids who go to state controlled socialist schools grow up no one will invest anything at all in the US of A.

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Analysis 7-1-2022 Japanese Company Valuation

How do Japanese stock market valuations compare with those for UK quoted companies? I looked at the ratio of enterprise value (market capitalization plus debt minus cash) divided by EBITDA (earnings before interest, taxes, depreciation and amortization) for quite a few Japanese and UK listed companies. They are about the same. And, why is this? Interest rates in Japan are much higher than in the UK (after allowing for inflation, real interest rates are 2.5% pa higher in Japan). With higher interest rates, share prices in Japan should be much lower than in the UK. But, they are not. And, the reason is socialism: there is a huge chance of a future socialist government in the UK acting to destroy company values, much higher than in Japan.

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4-Analysis – Investment analysts

There are broadly two categories (leaving aside credit analysts):

sale side (in the main working for eg stockbroking firms and investment banks) and buy side (typically working for investment managers).

Buy side analysts typically do not have the time to build complex models but instead to a large extent rely on the research and recommendations of the sale side analysts.

One needs to be cautious about accepting the recommendations of sale side analysts for obvious reasons, but in particular:

1.       They typically do not have the quantitative skills to build the complex models needed

2.       They are enormously short of time and are under pressure to help their employer make money rather than provide independent unbiased research

3.       They need to avoid producing too many ‘buy’ recommendations as this does not look good for the firm

4.       Instead, they produce good forecasts for the coming year and wildly optimistic forecasts for future years (of course there are exceptions). So, typically, growth for years 2 and 3 in the future is overstated by 5% pa or so.  

(When I was an investment analyst I did not do this!)

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Analysis 30.12.2021 Terrorism

On first reading of my post of 18 12 2021 on terrorism, one might think that all is lost. A small 2% or so of the population supporting terrorism and harboring terrorists, in the UK, rising to say 7% by 2050. Could this help? https://www.gov.uk/government/publications/the-nationality-and-borders-bill-factsheet/nationality-and-borders-bill-factsheet I doubt it. Which country is going to accept 1 million terrorist sympathisers from the UK? Analysis of what happened in Kashmir India gives a clue as to what may happen in the UK. For many years, the situation in Kashmir was appalling. Mass murders, rapes etc. Between 50% and 100% of 'Kashmiri Pandits' fled the state with the socialist governments in India doing nothing about it. But now, with a conservative government in India, the rule of law is being established. The key is politics. Terrorist sympathisers vote for socialists, usually, and therefore are supported by the Labour party (Starmer is a short term exception). There is no reason for the Conservatives to seek votes which cannot be had. So, a major factor, as in Kashmir, in company valuation is politics. Will companies be taken over by terrorist sympathisers, and the small business owners lose all? Locally, the country is also divided eg between Conservative and Labour councils. You may think that the laws of the land will protect business owners, but this is not necessarily the case. When you have a gun at your head and a police force as in Rotherham controlled by socialists you can do little. In Kashmir it is only now that property rights are being protected. The religious and political background in which a small business operates is an important determinant in company valuation, until such time as a Conservative government is elected to introduce law into the whole country. And that may only last for 5 years until the next election!

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3-News - Executive Share Options

Often with small companies, a director or even employee does not get paid entirely with cash: his or her remuneration is partly in cash and partly in the form of options on the company’s shares.

An option involves an exercise or strike price: he or she gets paid the excess of the share price over the exercise price, if this is positive, all times the number of shares that he or she is given. And the payment may be made in, for example, three years’ time.

For a “normal” company there are many executive compensation share option pricing programmes available and it is very easy to build one. They are all variants of the Black-Scholes option pricing model. But, they do not handle a number of the complexities of private equity well or at all.

Amongst the programmes that I have made freely available for download, the best one to modify is called “Mortgage Calculator” where instead of modelling house prices, one can model the company. But, even this will not cope with all the complexities of unlisted companies. How do you value an option on the value of an idea?

My core valuation programme is however easily able to handle these complexities, and today I have added some functionality to value a three-year executive share option package. Of course, other horizons can readily be added if necessary, and there are sometimes various conditions of payment, all of which can easily be incorporated in the programme.

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News 29.12.21 

A non event

With all the recent fuss, one might think that the odds of a Conservative minority at the next election have increased. No, they remain at about 50/50 according to both the pollsters and the bookies.

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Analysis 28.12.2021 Terrorism All over the world there is a huge amount of and a rapidly increasing level of terrorist activity nowadays. Mass rapes, murders, extortion, business takeovers... And in the UK the press is forbidden from reporting these, social media etc. are controlled by the US and Chinese governments and censor this information. It is not a small issue. "Over 137,000 People, 100 Security Agents Have Been Killed By Fulani Herdsmen In Benue—Governor Ortom,” Sahara Reporters, November 18, 2021" The population of Benue state is 5.7 mn, but it is not clear from the Governor's report over what period these murders have taken place. So, 2%+ of the population killed, perhaps 10% injured, 10% raped, 20% fleeing their homes, another 20% losing their livelihoods. Why were they killed? "137,000 killed by Muslim Fulani herdsmen who have targeted Christians and Muslims who do not accept their authority." "Nearly 800,000 have fled brutal Islamist advance in Mozambique,” Catholic Culture, June 14, 2021" (actually only Cabo Delgado Province) "Sweden’s migrant rape crisis: European liberals never ask uncomfortable questions about immigration" "turkey-government-religious-authority-publishes-childrens-magazine-featuring-child-slave-beheadings" "german-documentary-shows-pakistans-isi-behind-global-terror-attacks" "italy-city-on-french-border-suffers-daily-muslim-migrant-violence" "pakistani-prime-minister-imran-khan-blames-women-wearing-small-clothes-for-sexual-violence"

It could not happen here of course could it? For a complete whitewash of what is happening today in just one part of the UK, read https://en.wikipedia.org/wiki/Rotherham_child_sexual_exploitation_scandal "The abuse included gang rape, forcing children to watch rape, dousing them with petrol and threatening to set them on fire, threatening to rape their mothers and younger sisters, and trafficking them to other towns" Wikipedia only refers to (a small fraction of the) crimes committed prior to 2013. It does not mention "Rotherham Muslims launch “guardian” group after “far-right” distributes leaflets warning about Muslim rape gangs" "After Muslim rape gang coverup, Rotherham Council nominated for “Social Worker of the Year” award" "This really couldn’t have come at a better time for us. Staff retention is higher than average which is great news..." "UK withdraws support for Muslim rape gang victims, gives Muslim rapists $2,869,230 to fight deportation" (The Sun reported this on May 15: MEMBERS of a grooming gang have racked up legal aid bills of more than £2million."

Who cares about Rotherham? This is the conclusion from a research note I wrote a year ago (before the Afghan immigration):

"Knowledge about the problems for non Muslims will be blocked by news blackouts, cover-ups and deceit, etc. by the Western media and governments. Fools like Macron, Biden and Johnson are hardly likely to do anything to help. It is difficult to protect 64 mn non Muslims with a police force and army of 230,000, even if Johnson cared.

Estimates differ, but they vary between 10-15% and 50% of Muslims support Jihad as of 2005. For example in a survey, 46% of Muslims believe that attacks on Westerners in Iraq are justified. So, in the UK, between 400,000 and 2 mn people believe that you should be beheaded, or if you are a woman or child, sold or given as a slave. But, will the Chinese or global warming get there first?"

Quite frankly, unless you read the Koran you will not believe how serious the issue is for non-Muslims.

“When a child or a woman is taken captive, they become slaves by the fact of capture, and the woman’s previous marriage is immediately annulled.” (Umdat al-Salik O9.13) "...I shall cast terror into the hearts of the unbelievers; so strike the necks, and strike every finger of them!" (Qur’an 8:12) Just one verse? No. Hundreds. "They wish that you should disbelieve as they disbelieve, and then you would be equal; therefore do not take friends from among them, until they emigrate in the way of Allah; then, if they turn their backs, seize them and kill them wherever you find them; do not take for yourselves any one of them as friend or helper.” (Qur’an 4:89)

Initially, the main problems will be for Jews and Hindus in the UK.

[shyammehtaltd]

News 27.12.2021 Taxation Well, September and also November were filled with bad news, with lockdown type measures etc. But, did you know that the Government (Johnson and Sunak) have recently said that they are considering reducing taxes? Strange after deliberately increasing them, but this is very good news, if it happens, for the UK economy. And that means higher growth, higher profits for businesses, higher net and gross pay for individuals according to my economic modelling. But what does 'reducing taxes' mean? A .01% reduction or a 10% reduction? Who knows? Let us hope it is 50% and the UK becomes once again a growth rather than a stagnant economy.

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Don’t take services from the Web Designing Team of Yell

I have 24 serious complaints about Yell. I enclose these. They do not reply to complaints. They do not construct the website they promised to construct for me. Their work is completely shoddy. They do not answer emails. They promise to call back and then do not. They do not respond to voicemails. Months later no website, two websites delivered which were of such poor quality that even Yell said they would have another go. Which they have not.

I spoke to 2 of my clients about their website building. They both said they had heard very adverse reports about Yell. I am a lead business advisor to the NHS. I mentioned to them that my website had been held up by Yell. The NHS volunteered the information that they get lots of complaints about Yell.

I highly recommend you not to use Yell for website design. I have no complaints about the Reputation Manager or the team that is involved with that.

Shyam Mehta, M.A. (Cantab)

MD, Shyam Mehta Ltd