Michael Milken

Doing good is good business.

Michael Milken

When I was on Wall Street, we rarely had more than 1:1 leverage, and the highest I recall in my career was 4:1. The idea of leveraging 30:1 or more, as many financial institutions did recently, is not a business.

Michael Milken

Finance is a craft that can become an art with skill and proper application.

Michael Milken

It’s hard to imagine when you’re young how you accumulate wealth. My experience indicates that most people who’ve accumulated a great deal of wealth haven’t had that as their goal at all. Wealth is only a by-product, not the original motivation.

Michael Milken

I’ve always believed that access to capital for entrepreneurial ventures should be based on ability, not who your parents were, your banking connections, your religion or your race.

Michael Milken

The sad thing about risk is that when you eliminate risk you also eliminate the future.

Michael Milken

It doesn’t matter whether a company is big or small. Capital structure matters. It always has and always will.

Michael Milken

The past is always triple-A. We can all remember what the past was. But if we try to make the future triple-A, we have no future. The future is always single-B.

Michael Milken

All investments have risk.

Michael Milken

The rest of the world is growing so quickly, they’ll be looking for anything to buy.

Michael Milken

Beauty is in the eye of the beholder, but the marketplace will later decide whether your eye was a good one.

Michael Milken

Book value alone is not usually a good measure of the future.

Michael Milken

With all this wealth, the problem is not who’s going buy assets, it’s are there any assets to buy with all the liquidity in the world.

Michael Milken

The best credit by far, history has shown, has been the private company. Sovereign countries have defaulted 30 times as often as private companies, both domestically and foreign. Individuals default five times as often as private companies.

Michael Milken

A true test of any financial executive is to be able to finance a company in tough times – not just in good times.

Michael Milken

Democrats don’t want to cut benefits. Republicans don’t want to raise taxes. These entrenched positions are endangering our economy and society. Do we, the people, have the will to vote for candidates who acknowledge that unrealistic promises are being made?

Michael Milken

Why are we in this financial crisis? There are several reasons, but two issues have arisen periodically over the past 200 years. One is credit ratings, which don’t necessarily reflect credit risk accurately. A second issue is the false belief that you can build a successful financial business through leverage instead of through unleveraged spreads.

Michael Milken

With people and with capitalism, the tincture of time is often the best medicine.

Michael Milken

When a company uses the proceeds from issuance of stock or an equity-linked security to deleverage by paying off debt, the perception of credit risk declines and the stock price generally rises.

Michael Milken

If we are to keep from repeating mistakes that exacerbate boom-and-bust cycles, we will have to define the lessons of history more accurately. The ongoing strength of capitalism depends on it.

Michael Milken

I’ve always found “junk” a peculiar term to use for virtually the entire body of American business outside of a small, elite group. Firms that have not achieved an investment-grade label are rated as “junk.” Yet virtually all net new jobs come from such firms.

Michael Milken

Most people approach corporate finance the way scientists deal with problems in the physical world: Plug in the right formula and you’ll come up with the solution. But as any surgeon will tell you, at the very highest levels, even the most technical pursuit becomes an art. In the same way that artists select from an infinite palette of colors, financiers choose from a broad palette to build the correct capital structure for a business. As conditions change over time, they modify the structure to keep the business strong.

Michael Milken

If the government is going to put money in financial institutions, it should require them to de-leverage over time.

Michael Milken

More than 1,000,000 jobs have been added to our economy in the 1980s by only 1,200 companies issuing high-yield bonds that have taken ideas and enterprise and put them to work.

Michael Milken

Despite their superior performance, high-yield bonds are seldom mentioned without pejoratives such as “non-investment-grade,” “speculative” or “junk.” While these designations are more emotional than descriptive, they provide a definite advantage to investors. By creating a false perception of risk, they increase the returns investors receive.

Michael Milken

In 2007, rating agencies gave almost 1,300 financial instruments triple-A ratings. They never legitimately deserved a triple-A rating, but that rating enabled the leverage that created the problem.

Michael Milken

The quality of investment-grade securities can deteriorate over time. With lower-rated securities, the opposite is often true.

Michael Milken

Proper management of a corporate balance sheet is like playing the piano with both hands: You must be able to manage both the right side and the left side.”

Michael Milken

Issuing new equity can of course depress a stock’s value in two ways: It increases the supply, thus lowering the price; and it “signals” that management thinks the stock price is high relative to its true value. Conversely, a company that repurchases some of its own stock signals an undervalued stock. Buying stock back, the theory goes, will reduce the supply and increase the price.

Michael Milken

Small- and mid-sized companies in this country historically have been responsible for creating the overwhelming majority of new jobs in the private sector. One of the most-common misconceptions about our private enterprise system is that large companies, such as the Fortune 500, are integral to the process of job creation in this country. The truth is quite the opposite.

Michael Milken

Junk bonds? Perhaps there’s a better name for the bonds that fuel 95 percent of American business. Perhaps something like Corporate Growth Bonds. Or State Development Bonds. Or Job Creation Bonds.

Michael Milken

When doctors tell patients to adopt healthier habits following a heart attack, the patients have no one to blame but themselves if they fail to comply. And when markets tell companies it’s time to deleverage following an economic downturn, the companies have no one to blame but themselves if they fail to change their balance sheets.

Michael Milken

Debt isn’t good. Debt isn’t bad. For some companies, close to zero debt is too much leverage. For other companies, nearly 100 percent much higher levels of debt can easily be absorbed.

Michael Milken

Just as you can’t make real money by putting a dollar bill on a copying machine, you can’t successfully copy the financing technique that once worked for a particular company and transfer it to another time or another company. That’s why I have always said that finance is a continuum with infinite variations and hybrids. It takes deep understanding of a company, its environment, and the financing tools available to build sustainable growth that will reward shareholders and create jobs.

Michael Milken

The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.

Michael Milken

Much of the controversy over high-yield securities centers on risk. But history demonstrates that corporate borrowers are far better creditors than countries or consumers. And empirical data compiled in numerous academic studies show that the yield premium on low-rated corporate debt has greatly exceeded actual credit risk throughout this century.

Michael Milken

It is important to understand global economic trends. Some claim that it is impossible to see the future. Yet we know as a fact that the majority of the world’s economic output a few decades in the future will come from people who have already been born. And most of those people live in Asia. According to projections by the Milken Institute, nearly 60 percent of the world economy will be based in Asia by mid-century – in large part because of a substantial increase in access to modern capital markets. Asia will also be home to an estimated 80 percent of the world’s scientists. Depending on your viewpoint, you may consider those facts alarming or simply indications of where to invest.

Michael Milken

People often say to me, “Well, I’m really not into junk bonds.” I’m not into junk bonds either. I’ve never been into junk bonds. I’ve been into people. I’ve always said that the best investor is a social scientist. People are the scarce resource. It’s not buildings, it’s not printing presses and it’s not factories that are the scarce resource.

Michael Milken

The history of credit has demonstrated that the rating agencies do a good job within an industry, but a poor job across industries.

Michael Milken

Not long ago, the most-valuable real estate in the world was in places like London, Moscow, New York, Dubai and Beverly Hills. No more. Today, the most-valuable real estate is found on the web pages of companies like Google, Facebook, Alibaba, eBay, Amazon, Baidu and YouTube.

Michael Milken

The best investor is a social scientist.

Michael Milken

We cannot have a strong private enterprise system without a strong society – we are all affected by the success, or failure, of each other.

Michael Milken

Amid all the changes since I first went to Wall Street 40 years ago, basic investing principles have not changed at all. Attractive opportunities still await those who do careful research; capital structure still matters; and the best investor is a social scientist who analyses markets from both macro and micro views.

Michael Milken

The experience of both periods highlights two fallacies that seem to recur in 20-year cycles: that any loan to real estate is a good loan, and that property values always rise. Fact: Over the past 120 years, home prices have declined about 40% of the time.

Michael Milken

I came to realize that civil rights wasn’t just about where you could sit on a bus; it also meant equal opportunity to pursue a dream, to own and build a business – the right to succeed.

Michael Milken

The United States is no longer the sun. We’re one of the planets that make up the solar system.

Michael Milken

When you go to a U.S. business school today, 90 percent of the courses still relate to the domestic U.S. market and what’s going on in the U.S. Yet the lives of most of these students are going to be most influenced by what’s going on outside the United States.

Michael Milken

The macro view sees the 21st century defined by global competition for the world’s most valuable asset, human capital. Nations build this by strengthening education, healthcare, access to scientific knowledge, opportunities for women and incentives that attract skilled immigrants.

Michael Milken

I predict three revolutions in the 21st century: the global democratization of capital; the democratization of health care to the remotest parts of the world; and nearly universal access to knowledge

Michael Milken

In financing growing companies, I always looked for human value that didn’t appear on the balance sheet – the quality of management, especially its entrepreneurial drive. I saw that quality in executives like Bill McGowan of MCI, Bob Toll of Toll Brothers Homebuilders, cell-phone pioneer Craig McCaw and hundreds of others, including Steve Wynn, Reg Lewis, Ted Turner, Steve Ross, Rupert Murdoch and John Malone. These talented leaders had passion, vision and the ability to execute a strategy. Once they were given access to capital, they built businesses that became amazing engines of job creation and wealth.

Michael Milken

Any analysis of capital structure should recognize that most balance sheets are dramatically inaccurate because they fail to include the value of human capital.”

Michael Milken

To be blunt, our leaders must stop telling us we can have it all and do a better job of allocating the resources we have available.

Michael Milken

In the 1920s, when automobiles became a huge industry, 60 percent of the cost of producing a car was in raw materials and energy. For today’s computer chips, it’s less than two percent of the cost. Brainpower has become the “raw material” for building companies.

Michael Milken

There are only three ways for a country to build human capital: Increase knowledge and skills, improve the quality and length of life so people are more productive, or import people with specific abilities.

Michael Milken

We should alter immigration restrictions that exclude many of the world’s brightest and most-creative students, entrepreneurs, artists and scientists. Their contributions as citizens would create millions of new jobs without threatening American workers.

Michael Milken

Empower the most talented people in each field and encourage them to pursue their passions.

Michael Milken

Tonight while we’re sleeping, hundreds of people are going to risk their lives to sneak over the border of Mexico in search of a better life for their families. It’s not much different from your ancestors who came to this country, took a chance, tried to make money and then sent over for other relatives to come. Someone didn’t sprinkle some dust on this person that made them work hard after they hit this country.

Michael Milken

It took 65 years from the invention of the airplane until 25 percent of Americans had flown in one. The same level of consumer penetration was reached 30 years after video recorders first appeared. For the Internet, it took only seven years.

Michael Milken

An asset that’s far greater than financial capital is knowledge. Even if you lost all your money, with knowledge you can start over and do a lot.

Michael Milken

An education leader once said, “If you think education is expensive, try ignorance.” I would paraphrase that as, “If you think cancer research is expensive, try paying for continued treatment of 100 million Americans.”

Michael Milken

Who wants to retire when you have fulfilling work, when you earn a good income and when you feel great?

Michael Milken

Although it has been our privilege to be able to provide financial support for a wide range of programs, we believe it’s just as important to donate time and transfer knowledge, not just money. The effect of large gifts is magnified when the giver contributes skills. There’s no substitute for rolling up your sleeves and working with the people who can make a difference. They get the benefit of your participation and you gain a direct understanding of the real problems and potential solutions, which makes you a more informed giver.

Michael Milken

I believe major cultural changes are coming. Today, Americans live in the world’s biggest houses. In the future, we will live in smaller houses.

Michael Milken

The real immigration issue is not only huddled masses yearning to be free – it’s smart entrepreneurs and scientists who can change the world. Any nation that fails to welcome them will fall behind.

Michael Milken

My mantra for decades has been, “Not just care – cures.” It recognizes that the best way to reduce healthcare costs is to
reduce or eliminate the burden of illness at all stages of life.

Michael Milken

A few brief points about credit:
1. Credit is what counts, not leverage. If you’re leveraged eight or 10 to one in an asset class that declines by five to 10 percent, you don’t have staying power in a mark-to-market world.
2. Most loans to real estate are not – and never have been – investment grade. They carry a great deal of credit risk.
3. Interest rates are never predictable. The idea of borrowing short and lending long is simply not a business.
4. Rating is not credit. Long-term ratings have not been a good predictor of credit quality among different sectors of the world economy. So you shouldn’t invest based on ratings.
5. Sovereign and government debt is, for the most part, not investment grade, particularly in emerging nations. Throughout history, governments regularly defaulted on their debts. Those countries that didn’t default often hyper-inflated their currencies, which had a similar effect.
6. The value of debt securities is the underpinning of all capital markets. As the relative yield on debt goes up, the value of equities goes down. This is the best independent verification of value in any system.

Michael Milken