novelraw Chapter 581: Chapter 582: Very Safe
Chapter 581: Chapter 582: Very Safe
Chapter 581: Chapter 582: Very Safe[Chapter 582: Very Safe]
After enjoying a Thanksgiving dinner with the ladies in Malibu, Eric took Drew and headed to New York.
East Hampton was better suited as a summer getaway; in winter, it bore a desolate landscape, overrun with weeds and devoid of life. A heavy snowfall would only add to the bleakness. Once winter set in, Virginia and Joanna moved with the two little ones to the more populated and well-equipped Southampton.
Thanksgiving evening remained lively. Although the two women had given the household staff time off, Chris and Emily showed up, along with Ewa Pacula and Drew with her two twin companions, filling the dining room with a large party.
"In college, I specifically studied Buffett's story," Chris enthusiastically began discussing the recent media buzz surrounding Firefly's acquisition of ABC. "The main reason Buffett accumulated his wealth through diversified investments is his purity of purpose. He was able to dedicate himself entirely to perfecting his investment strategies.
Anyone familiar with Buffett knows that he treats investing as the singular pursuit of his life. Despite being a billionaire, he refuses to spend more than a penny to improve his lifestyle; he leads an incredibly modest life, his eating habits shockingly simple. The core of his existence revolves around sifting through countless financial reports, identifying suitable companies for investment.
This approach, which analyzes a company's fundamentals rather than relying solely on stock market trends, maximizes his ability to assess a company's growth potential. That is how Buffett consistently navigated the correct path for decades."
Everyone listened intently to Chris, but the little girl who sat next to Eric gnawed on turkey and suddenly exclaimed, "I heard he took down Solomon!"
In the 1980s, Solomon Brothers was indeed the king of Wall Street. While Solomon was at its peak, firms like Goldman Sachs, Morgan Stanley, and Lehman Brothers seemed like mere junior partners. However, in 1990, Solomon faced an SEC investigation due to a false bid scandal, leading to a swift decline. Less than four years later, Solomon Brothers had become a second-tier investment company. At the time of the scandal, Buffett's Berkshire Hathaway happened to be Solomon's largest shareholder. During the investigation, Buffett took over all management responsibilities for Solomon. On the surface, it seemed that Solomon had indeed collapsed under Buffett's stewardship.
Hearing the little girl's comment, Chris shook his head and chuckled, "It's not as simple as you think. The main issue was Solomon's overexposure. Take the false bid case from three years ago as an example. The Federal Securities Act dictated that an investment bank could underwrite a maximum of 35% of each national bond issue, yet Solomon managed to secure 85% of that distribution through false bidding, flipping them to other investment banks for hefty profits.
Such antics were common throughout the '80s, which led to the SEC investigation prompting other capital forces to strike back. Of course, Buffett's later handling of the situation was also a significant misstep.
Just after Solomon came out from the SEC inquiry, Buffett eagerly wanted to disrupt Wall Street's rules by slashing employee salaries and bonuses, causing a mass exodus of talent. Without those people, Solomon found it practically impossible to make a comeback. I've heard that Solomon has now become a target for Citibank and probably won't last much longer."
After Chris finished speaking, a brief silence fell over the dining room, even the two little ones sensed the unusual atmosphere, staring wide-eyed at their mother.
Eventually, the blunt Emily chimed in with a smirk, "Eric, you'd better be careful; the Firefly hype seems a bit much."
Eric took a casual sip of red wine and shrugged, "There are small and large investment firms going belly-up on Wall Street every year, but have you ever seen a major film studio toppled by its peers?"
Emily retorted without hesitation, "Isn't Orion, Universal, and even MGM about to go under?"
Chris turned toward his girlfriend, unable to hold back. Eric grinned at Emily and said, "True, but they had their own internal issues that prevented them from thriving in Hollywood." Chris added, "Most of the business of investment banks deals with virtual financial products, which mostly come from other companies. They earn profits through commissions from stock issuance, bond underwriting, and mergers and acquisitions but produce little themselves. When an investment bank faces a crisis, external companies usually withdraw their business to avoid risk, triggering a domino effect that can lead to rapid decline. However, companies like Time Warner, Firefly, and Viacom, which just acquired Paramount, have already formed comprehensive industry chains. They won't easily be taken down by outside forces unless a massive project leads to bankruptcy."
"I've recently seen some news," Emily argued a bit defensively. "A New York Times article from two years ago analyzed that if Firefly continues to expand, it might violate federal antitrust laws and face mandatory break-up."
If a company were to be broken up due to antitrust laws, the major shareholders would have to choose to retain shares in one company while being forced to sell shares in the other, instead of holding stakes in both like Eric could.
Emily's comment seemed to strike a chord, and Chris wore a worried expression as he looked at Eric and said, "I think this is indeed an issue that needs careful consideration, Eric. Before acquiring ABC, you must be completely sure that it won't lead to this problem."
Eric had also re
exuberant.
*****
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