Stephen Grabiner - Richmond - The American International ...

ISSUE 16, VOLUME II
4/04/2011
Inside This Issue
Stephen Grabiner’s
guest lecture
Stephen Grabiner’s
guest lecture
Foreign Exchange
Markets
Jonny’s Chronicles
1
2
3
4
News Headlines
Americas:
S&P 500 Posts Longest Winning
Streak since February on
Faster Jobs Growth
US Unemployment rate Unexpectedly
drops to Two-Year
Low
Europe:
Russia’s SUEK seeking full London
listing
Europe rescue fund says ready
to help Portugal
Asia:
Japan says it might take months
to end radiation leaks
Saudi Arabia looks to solar, nuclear
power to reduce its oil
use by half
Africa:
Egyptian Stock Advance After
22% Plunge , Led by Developer
Six of October
Qaddaifi’s regime seeks Talks
with UK and US as Rebels fight
for Oil City
By Rukaya Umaru
Richmond, the American International University in London
Richmond Finance Society
Weekly Newsletter
The Finance Society hosts renowned venture capitalist :
Stephen Grabiner
Last Friday, the Finance Society was honoured to host renowned venture capitalist, Stephen Grabiner, as he engaged
us in one of the most fascinating lectures held in Richmond University. To say the least, Mr. Grabiner delivered
on the Society‟s promise to host an exclusive event, one that you could not afford to miss. The lecture started
promptly at 10am, and after a quick reference to April Fools‟ Day, Mr. Grabiner went straight to business.
To begin with, Mr. Grabiner introduced the topic of private equity, particularly discussing some of the key factors
that fund managers should consider before making any investments. Generally, this consists of identifying whether
or not the business will generate cash, and if so, to what degree because businesses are burning huge amounts of
cash every day and it is by far the most important component for their survival. Then, the fund manager must also
determine whether or not the business has the scope for growth, and finally, whether or not it has the potential to be
sold. According to Mr. Grabiner, these are basic, yet fundamental, aspects that any private equity firm must analyse
before making the decision to invest.
Our guest speaker then delved into venture capitalism and the risks involved with this type of investment activity.
One of the primary risks faced with venture capitalists is the fact that, in general, there are more start-up companies
that fail, than start-up companies that achieve their anticipated growth. This failure rate of about 30% means that the
venture capital firm would naturally have to assume high risk, despite the fact that the venture capitalist thoroughly
analyses the growth potential of any company before making an investment decision.
Furthermore, the low barrier to entry for many of these private firms means that the business concept can quickly be
replicated and “things grow out of nothing”. Mr. Grabiner gave the example of Google, where although it is an established
company today, there could be two guys in a garage somewhere in the world creating a concept very similar
to that of Google. This is a threat to a start-up company, and it makes it increasingly difficult for them to grow or
increase their value as quickly as they potentially could.
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ISSUE 16, VOLUME II
4/04/2011
Inside This Issue
Stephen Grabiner’s
guest lecture
Stephen Grabiner’s
guest lecture
Foreign Exchange
MArkets
Jonny’s Chronicles
1
2
3
4
-> From Page 1
To mitigate these risks, Mr. Grabiner suggested
investing in companies which already have a
considerable degree of value and those that have
good management teams already in place. Furthermore,
by incentivising staff and employees,
the rate of growth can be expected to change
positively. He gave the example of a company
which offered holidays to Blackpool (a seaside
town in Northwest England) to members of its
management team. Once this holiday destination
was changed to countries outside of the United
Kingdom, the company subsequently experienced
a growth in sales. In general, it is important
to devise a method for steadily increasing
the value of the company, so that it can then be
sold at a considerably higher value.
In fact, for Mr. Grabiner and his former company
(Apax Partners), one of the first steps taken after
making an investment is actually deciding upon
the „exit strategy‟. As the name suggests, this includes
outlining the potential buyers that Apax
Partners can expect to sell the company to once
they increase its value. Further, it is important
how the company‟s potential will be perceived
by the potential buyers - they would not like to
purchase something which has outgrown its potential
or it is a bad investment. Once this exit
strategy is constructed, it is then the responsibility
of each partner to monitor the growth of their
investments.
At Apax Partners, a monthly meeting takes
places where each partner must inform the other
Stephen Grabiner
partners of how their investments are performing
– this could be an embarrassing process for a
partner who‟s investment/company is not performing
as well as they had targeted. Nonetheless,
it makes each partner particularly focused
and thorough in making investment decisions.
Mr. Grabiner‟s speech was not only interesting,
but also inspiring. Therefore, students who suddenly
looked at venture capitalism as a field they
would like to explore also received some good
advice from our guest speaker. He explained that
the minimum requirement for entering the field
involves the ability to construct complicated
models (to help with analysing investment opportunities)
– in fact, not very different from the
skills you will pick up from taking Quantitative
Models in Finance [QMF] with Dr. Ivan Cohen.
However, he also referred to other key skills that
may help to determine how successful you become
within the field. This includes the ability to
make these complicated models look easy, and
the ability to conduct good interpersonal skills.
Then, as a venture capitalist, you would need to
decide on the best geographic location for enhancing
your career.
From Mr. Grabiner‟s perspective, South America
(and in particular, Brazil) is one of the most exciting
places to be because of the number of new,
high-growth companies evolving in the region.
He also suggested that China is another ideal location
(as long as you can create a good relationship
with the government), and India also has
some potential (with the exception of its infra-
www.richmondfs.com
structure). In contrast, the UK and most parts of
Europe have, in his opinion, exhausted most of
their opportunities for the present point in time.
“Europe is a wonderful old house which is about
to fade away.” High unemployment and iflation
are anticipated and this will eventually bring the
standard of living down.
At the end of the engaging lecture, Mr. Grabiner
accepted several questions, including a question
asking about his perspective on being a venture
capitalist in places like Russia and the Middle
East. He gave interesting examples when answering
all of his questions, and where possible,
gave us examples from his past experiences. A
written report of Mr. Grabiner‟s captivating lecture
does no justice to the actual event; with special
thanks to Dr. Cohen, the Finance Society is
proud to have hosted such an inspiring lecture,
by a venture capitalist who has worked with
some of the most well-established companies in
the world.
Richmond Finance Society
Weekly Newsletter
Page 2

ISSUE 16, VOLUME II
4/04/2011
Inside This Issue
Stephen Grabiner’s
guest lecture
Stephen Grabiner’s
guest lecture
Foreign Exchange
MArkets
Jonny’s Chronicles
1
2
3
4
By: Boyan Pavlov
Foreign Exchange Markets
Major movers this week EUR/USD
A big hit on Monday will be the Sentix Investor Confidence with predictions of more than 1 point lower. The expected market reaction is a negative
gap with a rise in EUR to fill it up followed by a drop 30 minutes after (Sentix). However, 23:15 Monday however Ben Bernanke is leading a speech
on financial stability, where it is the higher chance that the USD reacts negatively resulting in a higher EUR/USD.
The two other big fundamental
moves are on Thursday and Friday.
Thursday due to the increase
in the Minimum Bid
Rate by 0.25%, which will result
negatively on the banking
system and force a short term
shift in currency, followed by
Friday when the German Trade
Balance is again aimed at very
high increases and as the last
three times might not manage to
reach its targets. Both days are
big bear hits for the EUR, therefore
a slowdown or a drop is
expected at the end of the week.
Technical analysis indicates a
steady rise throughout the
week, as the 1.44038 target has still not been reached. It is still not evident if the market has reached wave 3 of wave 3 or wave 5 of wave 3. If is irrelevant
at this moment, as both provide the same directional analysis, which is the basic 161% Fibonacci at 1.44038.
Positions:
Entry BUY: 1.41483 (60%) / 1.40380 (40%)
Collect Profit: 1.44038
Stop: 20% at 1.38596 / 80% at 1.39763
www.richmondfs.com
Richmond Finance Society
Weekly Newsletter
Page 4

ISSUE 16, VOLUME II
4/04/2011
Inside This Issue
Stephen Grabiner’s
guest lecture
Stephen Grabiner’s
guest lecture
Foreign Exchange
Markets
Jonny’s Chronicles
1
2
3
4
By: Omar Elneser
Review
Jonny’s Chronicle
Last week the market hit our first and second targets. We did not get filled at our entry level of 1299.5 but the market traded just one point above that. It is important
to note that this is not a perfect science. We deal with
probabilities of the likelihood of events developing so while
hovering ±7 ticks, you look forward to entering the trade as
long as you are comfortable with it. Last week was very good
for stocks, especially in the US. We had solid unemployment
data showing sings of recovery in the job market driven by the
market sector this Friday. The unemployment rate in the US
has now fallen to 8.8% in March with 216,000 jobs been
added during that month.
Strategy
Looking ahead we think that this week the market will continue
to push higher. The S&P 500 futures consolidated at levels
between 1325 to 1320. Strong economic data from the US
is likely to be a trigger for a continuing rally in the S&P. The
main concern is still unemployment but this rate have been
decreasing consistently for the past months, which gives Bernanke‟s
quantitative easing gamble credibility. While our indicators
show that the market is long term overbought, we expect
this rally to extend for a period of two weeks before a
massive sell off.
Alternative scenario
Weekly Strategy
Strategy Entry Stop First Target Second Target
LONG 1320 1308 1338.5 1350
MENA region tensions continue to be a concern, with Syria
having internal problems now. Speculation on the severity of
Japan‟s nuclear plants may drive the markets lower. Also, seeing the recent positive economic data in the US we may have speculation on whether the quantitative
easing programme in the US should be discontinued earlier than expected or reduced.
www.richmondfs.com
Richmond Finance Society
Weekly Newsletter
Page 4

ISSUE 16, VOLUME II
4/04/2011
Inside This Issue
Stephen Grabiner’s
guest lecture
Stephen Grabiner’s
guest lecture
Foreign Exchange
Markets
Jonny’s Chronicles
1
2
3
4
Advisor: Dr. Ivan Cohen, Associate
Professor of Finance in Richmond,
the American International University
in London
Join the Society!
We welcome you all to become members of the Finance Society. Contact any of the officers
via school e-mail.
Feel free to submit a piece of work or article you have written to the Finance Society Weekly
Newsletter if you would like to be published to RUKAIYA.UMARU@students.richmond.ac.uk
If you have any questions, comments or suggestions for the Finance Society or its weekly
newsletter please send them to RUKAIYA.UMARU@students.richmond.ac.uk
Chair: Rukaiya Umaru Vice-Chair: Ashmin John
Treasurer: Dimitar Devedzhiev
www.richmondfs.com
Public Relations: Kári Olsen
Editor: Adriana Krusheva
DISCLAIMER:
The Finance Society at Richmond, The American International University in London (hereinafter referred to as the “Society”) assumes no liability for any loss arising from any investment based on a recommendation,
forecast, or other information supplied by any member of The Society, third party, or otherwise. All the information presented by the Society is intended for a purely educational purpose. It should not be
considered any sort of investment advice. The global financial markets carry varying degrees of risk. Before deciding to invest in any asset you should carefully consider your investment objectives, level of experience,
and risk appetite. You should seek advice from an independent financial advisor in order to fully understand the risks involved prior to making any investment.
Richmond Finance Society
Weekly Newsletter
Page 5