Financial Analysis

I have been flooded lately with a new revelation. I cannot pinpoint the source; I can only say that I'm having one of those extended moment where months of education come into a broader epiphany.

After struggling through Foundations of Finance, I seem to be able to dog-paddle through Corporate Finance. Here, am finally applying Betas and CAPM and all that other fun stuff. I learned recently that Google Finance (and others, I am sure) provide Beta values, so now, calculating the valuation of firms is almost fun.

Actually, it is fun, I just don't have time for it as I've got a lot of reading to catch up on.

Another light came on today, when I attended an hourlong CapitalIQ presentation. I actually work for the company that owns it, so I've heard of it and am vaguely aware of what it is used for, but I never had an account. Now, in two weeks, I will. It is frankly amazing, the depth to which the data goes, and I honestly can't wait to use it - again, for fun.

Contrasting Quotes

I came across this for an internal newsletter I send out:

"You can never plan the future by the past." - Edmund Burke.

"The best of prophets of the future is the past." - Lord Byron


Note the distinction between planning and predicting.  It's easy to contrast these quotes, but I'm not sure they're in opposition. I would argue that both can be correct, in that Burke says, you can't define your future goal state in terms of the past state, while Byron is stating the a future state, left untouched by our own hands, will be best defined by the past; that is, if we do nothing, nothing will be changed.

In fact this is my own synthesis, and knowing what I know about these two figures, they probably would disagree. It's a philosophical question that everyone deals with, whether they put it in these terms or not: can we create our own future, or not? Do things stay the same no matter what we do?

Even businesspeople are conflicted. They stereotypical B-school grad says, yes, I can change the world, past performance is not indicator of present or future performance. On the other hand, the more conservative voices use all kinds of mathematical models to take historical data - even recent history - to predict a likely outcome of events. So which is it? A synthesis: here is what I believe will happen, and here is what I will do in order to affect that outcome.