HOW DO PEOPLE MOVE ON TO MAKE TONS OF MONEY, EVEN MULTIMILLIONS OR BILLIONS AS AN INVESTMENT BANKER WITHIN AN INVESTMENT BANKING FIRM OR AS AN ENTREPRENEUR WITH THEIR OWN BUSINESS MAKING CLOSER TO BILLIONS?
Oct
6
2018
Peter Answers
How do investment bankers make billions?
Years ago I was briefly a flunky/assistant to the big cheese at Goldman Sachs. As he was the senior partner of this investment banker, I asked him just about the same question. He answered me with an example.
Suppose Ford Motor Company wants to build a huge new factory. They need a cool billion dollars to do it. They come to me as their investment banker and ask me to raise the money. We have a list of wealthy people who will invest their money in whatever good deals we suggest. So I put together a package deal of a new issue of Ford Stock that is expected to pay a 5% dividend, plus a bond that will pay 6% interest, plus a convertible bond that if things go as well as we hope they will, will yield 100% in 2 years. For putting together the package and getting the cash (for Ford) from the investors, my firm gets $50 million in the form of stocks, bonds, convertibles and a bit of cash to cover our expenses. With my help, as an active director of Ford, I show them how to produce a few new designs: The Mustang car and a Surfer Van that in the following years broke all prior sales records. Ford did well. Our $50 million in securities went way up in value. We sold half for $100 million. We kept the other half as a long-term hold.
We make deals like this twice a week. And that is how we make our billions. And then he went on to tell me about arbitrage–but that’s another tale for another answer.
After I learned many lessons from the Goldman guy and many more from another real estate tycoon I worked for, it was pretty easy to make my own deals . And so it came to pass that I made my own modest little pile so that I could retire (and go back to school) at the age of 23. Then I became an actor, detective, a publisher, an author, and a few other things.
I’m now 80. Life as an entrepreneur has been good to me (aside from those 5 disastrous divorces).
Category: Peter Answers
By P.T.
October 6, 2018
Source : http://www.petertaradash.com/how-do-peo ... er-to-bil/