Friday, December 09, 2005

Look back in Anger

I don't know if you were around for the fun that was 2000, but check out this passage from the book by Tom Evslin. Its available online and will be publish in early 2006.

“I was just explaining,” says Larry, “that we are going to talk to several firms before we decide who will manage our ‘personal wealth’.”

“Well, certainly, dear, you ought to do that,” says Hattie. “But time’s awasting and, as they say, time is money. You won’t find any better than Merrill. There are several investment opportunities that will close just this week and I’d hate for you two to miss the opportunity—”

“We’re going to have to pass on those,” says Larry. “We’re not going to make our minds up that quickly.”

“I’m not sure that’s wise, dear,” says Hattie. “You have a big responsibility now to manage all that liquidity wisely.”

“I also have to manage my company,” says Larry. “Remember, most of our net worth — the vast majority of it — is tied up in the stock we still own. We haven’t even sold five percent yet.”

“Well, dear, of course; but that’s something we can help you with as well. I’m not the expert in this, but Merrill has put together programs for other executives to assure that they will realize most of that locked-in value. We know you can’t sell all of that stock now but you should be protected against a possible decline. We could arrange synthetic ‘put options’ or various kinds of ‘straddle’ or ‘collars’ I think they’re called. We could lend you money using the locked up stock as security. These are the discussions we need to be having.”

“Why in the world would we want to be in debt when we’re rolling in cash?” asks Larry. “I just paid off our mortgage this morning.”

“You what? Oh, no. You see, this is just the kind of thing we can help you with. That’s not a good use—”

Louise interrupts before Larry can: “That’s something we both wanted to do. We don’t like being in debt.”


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