So let's get started with bonds and stocks. And today, we'll spend a lot of time on bonds and try to do as much as possible. The reason I do not want to spend hours on bonds is one thing, is very simple, I could teach a whole class on bonds. And the reason is bonds are typically peculiar to the US, especially in the private sector. Most bonds are loans, all bonds are eventually loans. And in most countries, loans are between you and the bank. Whereas bonds are things that are issued by entities when they borrow money. The one thing that the world does, and the US does too, is the governments issue bonds, and bonds are like IOUs. So we'll start with bonds, then talk about stocks next week. But this is where I have done most of my work, so I can get very excited. And that's the second reason I want to kind of keep it under control, is because this class is about value creation, and value creation happens through projects. The reason why we're doing bonds and stocks, as you'll see in a second, is to try to get at, what is my cost of capital? What is my little r, okay? So if you understand that, please start off with why we're going on financing. So the first thing you have to always keep in mind is value is created by ideas, projects, entities, you. It's the gray matter here that creates value. Financing cannot per se be value-creating, and the reason is very simple. If financing was value-creating in a fundamental way, I would just call you up, sell you a stock. You'd sell it back, make money, share it, and move on. It cannot be possible for financing per se to create value. There are situations in which financing can create value, but those tend to be man/woman made situations, artificial, or some frictions that create value, okay? How do you raise money to finance the idea? So now, though financing is not value-creating per se by itself, if you didn't have financing, you wouldn't be able to implement the idea. Remember, I talked to you at the beginning of this class that the one fundamental principle we are going to have is democracy. And the way it's going to be reflected is through capital markets, flow of money. The only thing that I have been disappointed, personally, over the years is how little impact it has had on the world, not how much impact. By that I mean the following. Markets are created for people, not the other way around. And if markets cannot serve democracy and do something to uplift poverty, then there's a problem. Of course, it's done a ton, but it could do much better, right? You always want to do better. Anyway, so the question here is, without markets, you can't get money. So the question is, how do you raise money? We could spend hours, in fact, months, weeks, years, whatever on this topic, as I said. But I'm going to fundamentally talk about two kinds of financing, one is bonds, one is stocks. So why am I only restricting myself to this? For two reasons. One, as I said, the focus of this class is on value creation. The second is, if you understand these two, you understand any other kind of financing because it's a mix of the two. Snapshot of identity is extremely important. And after that, I will take a break, and you should take a break too, because I think it's good to think about what we have been talking about. Real assets are on your left side. So we are not in this class talking about banks, because banks are financial assets and financial liabilities. We are talking about banks facilitating the creation of value. They do create value, but they're not the main engine drivers of new ideas and so on. Those come from creativity that requires financing so the rial assets are sitting. If you notice on your asset side one more time, they create cash flows and they require our. The primary reason I'm going to go to financing for this class is that I need to measure this rate of cost of capital. Remember, this is called Cast Capital. And you'll see later the advantages of having a market to figure out a cost of capital. It's not doesn't belong to you. Remember, it belongs to the next best competitors. The good news is, if you have publicly traded information about equity and debt, you can do cost of capital. You can't figure out and try to mimic the beauty of law and love on price, you can value things because you know what your comparables are doing. Okay, so but please remember the identity value on assets side financing a way of figuring out cost of capital and then financing has a lot of value on its own to learn about. I've done a lot of research in it, but I'm trying toe keep you very focused. So let's take a break. Now, I've given you a sense of where I'm going and why I'm ongoing. And next time, when we come back after a break, however long for you, let's get into talking about debt. And by the way, debt and bonds have the same thing. Equity and shares are the same thing. This is also called stock. Okay, See you in a little goodbye.
