Brian Gongol Show on WHO Radio - April 27, 2014

Brian Gongol

The Brian Gongol Show can be heard on WHO Radio in Des Moines, Iowa on 1040 AM or streaming online at The show airs from 2:00 pm to 4:00 pm Central Time on Saturday afternoons. Podcasts of show highlights are also available.

What's wrong with the "conglomerate discount": Or, why Yahoo is too cheap

Yahoo is selling for less than the sum of its parts, which are pretty easy to tally based upon the values of the shares it owns in other public companies. That's widely regarded as the "conglomerate discount". And it doesn't make any sense at all.

People who have been fooled into believing in "modern portfolio theory" may argue that a basket of options is worth more than an option on a basket". Whatever. The reality is that a conglomerate is like a focused mutual fund, and is worth at least its net asset value. More, if the managers are any good at asset allocation. And they should be, or else they should be fired.

That's really the central role of executive management in any large company -- allocating resources (money, time, and people). If they aren't any good at it, they shouldn't be running the company. If they are, isn't that expertise actually worth a premium, not a discount?

It's silliness like the "conglomerate discount" that should cause us to look at modern finance with some serious suspicion.

Some boundaries

It's not fair to expect kids to construct their own learning...they don't know what they don't know. Heavy-handedness is bad, and freedom to discover is essential, but most people of all ages are overwhelmed if given no path to follow. If we expect people to emerge into adulthood knowing how to manage their finances or how to stay out of trouble and preserve their reputations online, we can't expect them to find it on their own. Curricula in both areas are essential.

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