My coworker told me about an email his broker sent about tomorrow’s IPO on Jones Energy (ticker: JONE). Interested, I did some preliminary research, and here is my email to him almost verbatim:
A word of caution on this deal. The main reason you hold off for now is that you probably are not prepared to sift through the 250 page IPO filing over the next 24 hours. Also, I have no idea what each share is worth because they haven’t even disclosed how many shares are going into the float (i.e., outstanding shares available on the market). Also, they have the disclosed the following below their income statement:
Especially salient to my analysis on incentives is the following passage:
…research by the University of Chicago’s Casey Mulligan has suggested that because government benefits are lost when income rises, some people forgo poor jobs in lieu of government benefits—unemployment insurance, food stamps and disability benefits among the most obvious. The disability rolls have grown by 13% and the number receiving food stamps by 39% since 2009.
Dr. Robert Shiller is a leading authority on behavioral finance, a field that attempts to get at the heart of market economics. What’s at this heart? People, naturally. What’s the point? I argue that it behooves traders and investors alike to retain some degree of insulation from the general population’s view on value, and instead rely on a more rational definition of value. Schiller’s cyclically-adjusted Price-to-Earnings (CAPE) and Price-to-Earning-to-Growth (CAPEG) ratios are indeed very simple, rational, and hold a great degree of predictive power.