tag:blogger.com,1999:blog-7643217757806189045.post261286741329784429..comments2017-11-07T07:45:22.507-05:00Comments on The TRE Observer: Appropriate Compensation #8: Once RemovedCharles R. Lightnerhttp://www.blogger.com/profile/01254023008022127852noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7643217757806189045.post-76113678329483574852011-07-20T13:04:46.921-04:002011-07-20T13:04:46.921-04:00Thanks for your thoughts!
Clearly a comparison to...Thanks for your thoughts!<br /><br />Clearly a comparison to alternate investment opportunities is reasonable approach and a necessary part of a reality-check. <br /><br />The approach I've been taking has been to attempt to construct a likely loss estimate for TRE auction purchases and then build a top-line pricing range that accounts for TRE fees, credit losses, operating costs, cost of money and net return on invested funds.<br /><br />But testing both the top line and bottom line figures against expected performance of other asset classes makes a lot of sense. And I certainly wouldn't argue with the "bracketing" you suggest.<br /><br />Regards,<br /><br />ChuckCharles R. Lightnerhttps://www.blogger.com/profile/01254023008022127852noreply@blogger.comtag:blogger.com,1999:blog-7643217757806189045.post-85396752178806129342011-07-20T00:38:20.011-04:002011-07-20T00:38:20.011-04:00Great thinking, Mr. Lightner. These are substantia...Great thinking, Mr. Lightner. These are substantial risks, and possibly one way to frame the appropriate pricing is by comparing other potential investments, or essentially the opportunity cost. <br /><br />Are these risks greater than standard equity risk? I believe that most people would say "yes", and demand a higher risk premium to buy on TRE than to make a stock market investment. <br /><br />Are these risks greater than venture capital risk? In buying invoices both individually and collectively, I would probably argue "no". It is difficult to pinpoint an exact venture capital risk premium, but I would say something in excess of 25% annualized sounds reasonable. <br /><br />In other words, logical pricing would generally seem to be greater than a stock market return or earnings yield, and less than an expected return on high-risk investments such as venture capital.Nicholas E. Radicenoreply@blogger.com