Strong business laws; low probability of confiscatory taxation/regulation;
A well-developed investment banking industry;
A well-developed system of brokerage and financial transactions;
Well-developed media, particularly financial reporting.
These characteristics are found in (and make for) a well-developed financial market.
Progress in securitization facilitates the shifting of default risk from the intermediates to the investors of such a security. Since the intermediates no longer bear the default risk, their role and motivation in assessing and monitoring the quality of the borrowers is mitigated. For example, when the national market in mortgage-backed securities becomes highly developed, local banks can easily sell their claims on mortgages to the issuers of mortgage-backed securities and then use the money they receive to create more mortgages because the local banks make profits both from making loans and selling loans to the issuers of mortgage-backed securities. This way the local banks are incentivized by the volume of the loan that they lend out and not by the quality of the loan, and thus they become less cautious in originating subprime mortgages.
(answers will vary)
Mutual funds accept funds from small investors and invest, on behalf of these investors, in the national and international securities markets.
Pension funds accept funds and then invest, on behalf of current and future retirees, thereby channeling funds from one sector of the economy to another.
Venture capital firms pool the funds of private investors and invest in start-up firms.
Banks accept deposits from customers and loan those funds to businesses or use the funds to buy securities of large corporations.
Even if the firm does not need to issue stock in any particular year, the stock market is still important to the financial manager. The stock price provides important information about how the market values the firm's investment projects. If the stock price rises considerably, managers might conclude that the market believes the firm's future prospects are bright (and generally supports the actions of management). This might be a useful signal to the firm to proceed with an investment such as an expansion of the firm's business.
Since shares can be easily traded in the secondary market it makes them more attractive to investors since investors know that they will be able to sell their shares quickly. This makes investors more willing to buy shares in a primary offering, and thus improves the terms on which firms can raise money in the equity market.
Treasury bills serve a purpose for investors who prefer a low-risk investment. The lower average rate of return compared to stocks is the price investors pay for predictability of investment performance and portfolio value.
You should be skeptical. If the author actually knows how to achieve such returns, one must question why the author would then be so ready to sell the secret to others. Financial markets are very competitive; one of the implications of this fact is that riches do not come easily. High expected returns require bearing some risk, and obvious bargains are few and far between. Odds are that the only one getting rich from this book is its author.