Investment Biker, Jim Rogers

Key take aways

  • Central investment thesis:
    • Always bet against the central banks and with the real world
    • truly down trodden people do not rise, but hell hath no fury like suppressed peoples whose expectations have been aroused
    • people don’t change their ways until their are forced to
    • while it is easy to figure out an investment is cheap, the real work is figuring out if a change is about to occur in the near future. It is important to study markets and their history
    • when seeing a big change coming (the opening of the trans Siberian railway), consider the economic, political and social shift
  • modus operandi
    • Why buy a new sofa when it could be put to work in the markets
    • Only invest in what I can sell quickly
    • do nothing until you can see the money to be picked up around the corner
  • key areas of study
    • geography
    • politics
    • economics
    • history
  • Company assessment criteria
    • Price to book value
    • sound balance sheet
    • pay dividend
    • Price to earnings ratios
    • Viable industries
    • start with largest soundest enterprises
      • banks
      • mines
      • news papers
  • On assessing countries
    • Watch out for statism – governments getting in the way of an organic market
      • democracy does not equal prosperity
      • US government piling more and more regulations
      • SnL crisis of the 1980s
      • Artificially suppressed prices
        • 1970s gold in America
        • 2019 prices of pork in China
      • Foreign aids (IMF, UN and Peace Corps) just props up a system that does not work and delays the actual rebuilding process. Have faith in the locals to rebuild themselves in a configuration that works for them as opposed to a system suited to foreigners liking (hubris)
    • On ethnic strife and separatism
      • Some geographical boundaries don’t make sense.
      • no borders remain stable for long
      • economic hardship will bring to surface these fault lines as they get used as a vehicles to get more
      • Wait till wars are fought and border issues sorted out. It might then become a great investment opportunity to enter at the bottom
      • examples
        • Rise of Islam and Christianity in Siberia prior to Soviet collapse
        • Hong Kong riots
        • Barcelona declaration of independence
        • XinJiang, Tibet
    • black markets as signals: difference between black markets rates and official exchange rates provide an indicator of how much the central bank has propped up the exchange rate. Minimal to no differences are signs of a strong economy
    • major red flags:
      • currency controls, import taxes, export restrictions. Makes it hard to pull funds out
      • is country trying to devalue its way out of its internal problems instead of doing a proper fix?
      • frantic purchase of gold in local jewelry store
    • Positive signal:
      • Is the country trying to get foreign hard currency by making things other people want to buy – quality goods
      • Is the country learning to compete and out innovate its competition
      • an educated population
  • On centrally planned economies
    • the market feedback mechanism is missing
    • resources get ruined due to misuse
    • it would have thrive if it was a sound economic theory
  • On China
    • while Russia abused their resources, China having nowhere to go were more deliberate and took better care of their resources
    • success had a lot to do with economic and political organization
    • example
      • took bees to blooming flowers to work them 5-7 times harder than their foreign counterparts
    • Hong Kong, Guangzhou and Shanghai being captured by the capitalist spirit generally ignores capital’s policies
  • Note worthy collations
    • China (labor) / Siberia (natural resources)
    • Australia (natural resources) / Japan (capital)
    • US (capital) / Canada (natural resources) / Mexico (labor)
  • On commodities
    • most local markets will eventually get assimilated into the global market
    • diamonds have artificially propped up prices that will be hard to maintain in the long run. DeBeers will eventually run out of cash buying up supplies from the black market and it will lead to sudden price collapse. Opt for gem and rubies instead
    • when gold gets too cheap companies will figure out ways to use it thereby depleting its supply driving up price. Same could be said of oil
    • underlying structural issues within a country can stay hidden for long during times of a commodity boom
  • The key to success
    • out of every 1000 people who wants to be rich only 6 can master the discipline to do so
    • stay focus on a single goal for five, ten, twenty years

Related readings

Lee Kuan Yew, Interviews and selections by Graham Allison and Robert D Black Will with Ali Wyne

Key take aways

  • An political system that yield’s inferior economic performance will ultimately be discarded
    • leadership succession is the most part of any political system
    • contest between great powers in the 21st century will over economy and technology as opposed to military
    • The war for talent is the most critical competition in the 21st century
  • Three attributes vital in competition between nations and companies
    • entrepreneurship
    • people’s innovativeness
    • management
  • Core competencies for workers in the future
    • own control system
    • self supervision
    • responsibility to self upgrade
    • self discipline
  • Globalization cannot be reversed
    • the underlying driver is technology
    • better and cheaper transportation and communication will only accelerate its pace
  • On leadership
    • learn to ignore (quasi) experts and their pet theories
    • ignore how people will judge you, especially news
    • a popular government does not need to be popular all the time. Just make at the end of each term sufficient benefits have been realized from the unpopular decision
    • if no one is afraid of you, you are meaningless
  • On balancing society
    • when a society is too geared towards competition then group solidarity becomes weak
    • when a society has wealth that is too evenly distributed there is no incentive for the individual to make progress
    • no two individuals are equal
  • Elements needed for social progress
    • determined leadership
    • efficient administration
    • social discipline
  • On governing
    • find practical, not doctrinal, solutions to our problems of growth and development
    • get things done and leave others to extract principles from my successful solutions
    • if same solution is observed to work multiple times then it makes sense to spend time extracting the underlying principles (quite similar to George Soro’s practice of invest first and research later)

On China

  • China will reorganize, reeducate and train themselves to become a high tech society within 50-100 years. Main advantage is in economic influence
  • Key challenge for China over the next 30-50 years is the ability to attract talent
  • China’s official language is Chinese is a very arcane one. The world’s knowledge is all encoded in English. This presents a great barrier to China’s ability to attract and assimilate talent

On America

  • Its key advantage is its frontier society mindset.
    • An entrepreneurial culture of continuous self disruption
    • 1980s Japan and Germany eclipsed America in manufacturing before it came roaring back
    • individualistic and nonconformist society which encourages more extreme and random behavior which results in more creativity and inventiveness
  • Ability to attract and assimilate talents from around the world

On India

  • Too much red tapes

On terrorism

  • Is less a concern of Muslim versus the west but more modern Muslims versus radical muslims

Related references

  • The Fatal Conceit: Errors of Socialism, Friedrich Hayek
  • The alchemy of finance, George Soros

Federal Reserve chairman testifies before Congress 20191113

Economic indicators

  • Inflation is at all time low
  • Unemployment is at all time low
  • Consumer confidence is at all time high
  • Productivity has slowed down
  • Business  investments and manufacturing has contracted

Key take aways

  • China is doing a responsible job deleveraging it’s economy. This is one of the key drivers of economic slow down around the world apart from the ongoing US/China trade war
  • Global deflationary trend drivers
    • partly driven by worldwide aging population which sees increased savings rates and lesser consumption
    • automation and globalization
  • Ballooning US debt is a concern. Need to bring debt growth rate below productivity growth rate to be sustainable in the long run
  • The effects of the sugar rush from the 2017 tax cut is still evident within the economic system
  • Negative interest rates only makes sense in a large economies where growth is really sluggish. That is not the case for US where growth is strong and productivity is still high.
  • Need to focus on education to prepare work force for the global economy
  • US GDP is growing at 1.5% of which 0.5% is contributed by immigration

Related references

 

Examples of various networks failing at scale

Most solutions will inevitably break when used at scale. These are two recent examples.

AirBnB’s network scales to extend it starts disrupting entire neighborhoods

https://www.bloomberg.com/news/articles/2019-11-06/miami-beach-airbnbs-top-market-in-u-s-as-charlotte-grows-rapidly

Political campaigning on social media gets way out of control after politicians attempt to scale up the method which got President Obama elected to office 

https://www.bloomberg.com/news/articles/2019-11-07/google-considers-changing-its-political-advertising-policy

Technology eco-system scales up operations in California thereby triggering the housing crisis.

https://www.bloomberg.com/graphics/2019-california-housing-crisis/

Moderation and self restrain is not common when caught up in a winner takes all situation

 

Federal Reserve interest rate cut decision 20191030

Outcome

Core inflation at 1.8% continues to run below target 2%.

Federal reserve decides upon another 0.25% cut in interest rates, targeting range of 1.5% to 1.75%.

Action is taken to provide meaningful support to the economy in response to global economic slowdown and the increasing disinflationary pressure felt from around the world. The special characteristics of this particular slow down is a lack of any large imbalances in the economy.

Dual mandate of the federal reserve

2% symmetrical inflation target

  • Stable prices
  • Low unemployment rates

economic indicators

  • Consumer confidence remains strong
  • Unemployment rate is at historic low
  • Business fixed investments has slowed
  • Global exports has slowed
  • Manufacturing compared to a year ago is down

macro environment risk

  • protracted US/China trade risk is down
  • No deal Brexit risk is down

economic health monitor

  • Leverage in financial system: low
  • Funding risk in banks and non-banks: low
  • Asset prices: no major bubble, high in some
  • Leverage in non-financial sector
    • households:  gone down
    • businesses + corporate debts: historic high

Liquidity concerns

  • Concerns in Overnight Repo markets persist.
  • Banks have liquidity in excess of required reserves level but choose not to participate in the markets.
  • Federal reserve will seek to inject short term liquidity into the system
    • build up short term treasury reserves
    • buying into short term treasury bills thereby boosting treasury reserves
    • opposed to the standard QE mechanism which entails buying up of assets and securities with longer maturity periods

Related readings

Bloomberg is a laggard for trend reporting

It’s been observed there is an average time lag of around one to three months before obvious trends observed to insider becomes apparent to mainstream media.

Examples

New Blow to Hedge Funds as Software Darlings Start to Crumble
https://www.bloomberg.com/news/articles/2019-10-19/fresh-blow-to-hedge-funds-as-software-darlings-start-to-crumble

 

https://www.bloomberg.com/amp/news/articles/2019-08-07/home-prices-decline-in-some-of-the-costliest-markets-in-the-u-s

 

https://www.bloomberg.com/news/articles/2018-01-24/san-francisco-s-sky-high-office-rents-to-slip-as-building-peaks

 

 

 

 

Growth Leaders Cocktail Hour & Modern CMO Panel

Panelist

  • Todd Wilms, Fractional
  • Lauren Vaccarello, Talend
  • Matt McAllister, Mobile Tech RX
  • Carilu Dietrich, Classy

Key take aways of being a CMO

  • Counter-intuitively – the higher you are in the hierarchy the more silo-ed you become
    • average tenure 18 months
  • Alignment is the most important thing
    • your primary team is the executive team
    • Always figure out what the CEO is reading
    • Start thinking about needs of board, investors and C-Suit
  • strategic mindset:
    • start thinking in terms of framework
      • step away from the minute details
      • it is the job of the VP of marketing to fill in the details within the framework
    • look across various functions for solutions
    • move beyond your own functional area when required
    • as opposed to marketing which is
      • minding the day to day activities
      • moving the levers to drive conversion rates
  • Growth mindset
    • be ready to go where the business needs you
    • Be hypothesis driven
  • market focus
    • actively monitor the markets
      • define a new category
      • size of market
      • competitors
      • disruptors
    • read earnings report of company and competitors
    • read more Wall Street Journal
    • Understand the P&L so as to understand how money is flowing through the company
  • Important allies
    • Someone on the sales team
    • Someone on the finance team
      • they know where money comes from and where money is spent
  • Brand values
    • clarify the narrative for your team to do their job
    • quite similar to core values
    • the personality that will dictate how interaction occurs at all touch points
  • Creating the customer communications play book
  • Analytics
    • on users
    • secondary data from researchers
    • to gain influence to own the P&L
  • Perpetual learner
    • The new paradigm
    • AI disruption: Department of defense using AI to parse through PHD thesis to figure out new technology to defend against
    • start utilizing the services of coaches for private help as the stakes are high
  • Marketing
    • demand generation
    • digital marketing
  • On hiring
    • ask about topics not related to their area of interest
    • see if they crumble under pressue
    • how did they turn a crisis into an opportunity.

Related readings

  • The hard thing about hard things, Ben Horrowitz
  • Beyond Product, Todd Wilms

General thoughts on Mark Zuckerberg’s warning of the internet’s role in Authoritarianism displacing Democracy

  • The polarization between democratic systems and authoritarian systems is becoming more apparent as China leverages its growing middle class to project it’s influence on the world stage a strategy that US has been utilizing for the past decades.
  • Facebook is a vehicle for projecting American values overseas.
  • The African continent remains a land grab for the two different regime types. Thus far, China has won out on the physical infrastructure and government level while FaceBook has won out on the community grassroots levels.
  • For the C Suite especially CMOs to execute their jobs well they need to be focused on what’s happening out there in the world as opposed to what’s happening within their own functional organization. It’s the VP of marketing’s job to handle what is within their own marketing organization.
  • Its a time when US companies will need to navigate the international markets while managing the challenges to their American values.
  • The Chinese government has done a better execution on that front with their One Belt Road initiative by clearing the path at the government level to facilitate the unhindered expansion at the commercial level by its enterprises.
  • Western media is working at full Rev to control the narrative frames that drives public opinions.
  • Mark Zuckerberg has masterfully leverage recent trends to reframe Libra as a champion of democratic ideals as opposed to a disintermediation force on central banks around the world.

Related references

Zuckerberg Warns China’s Censored Internet Could Still Win Out
https://www.bloomberg.com/news/articles/2019-10-17/zuckerberg-warns-china-s-censored-internet-could-still-win-out

Apple bows to China by removing Taiwanese emoji

https://qz.com/1723334/apple-removes-taiwan-flag-emoji-in-hong-kong-macau-in-ios-13-1-1/

Christian Dior apologizes for omitting Taiwan from Chinese map

https://www.breitbart.com/national-security/2019/10/17/china-bullies-christian-dior-apologizing-omitting-taiwan-map/

China exerts pressure on NBA to fire key executive for tweet on Hong Kong unrest

https://www.nytimes.com/2019/10/17/sports/basketball/nba-china-adam-silver.amp.html

Solomon island switches relationship to China from Taiwan

https://www.nytimes.com/2019/09/16/world/asia/solomon-islands-taiwan-china.amp.html

Kiribati switches relationship to China from Taiwan

https://amp.theguardian.com/world/2019/sep/20/taiwan-loses-second-ally-in-a-week-as-kiribati-switches-to-china

Southeast Asia balances between Chinese Markets and US defense

https://www.nytimes.com/interactive/2018/03/09/world/asia/china-us-asia-rivalry.html

Facebook Warns Washington That Beijing Wins If Libra Plan Fails
https://www.bloomberg.com/news/articles/2019-10-17/facebook-warns-washington-that-beijing-wins-if-libra-plan-fails

 

 

Constrains on world GDP levels

Absolute constrains

  • Break throughs in fundamental science
  • Level of human population
  • Size of geographical mass under occupation – currently Earth

Transient constrains

  • monetary and credit supply levels
    • inflation
    • deflation
  • proliferation of scientific techniques
    • full proliferation results in zero or negative ROI when further credit is employed
  • ease of population, trade and credit/money flows around the world

Related references