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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

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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

 

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Microsoft university penetration strategy

Tools of the trade

  • content marketing like documentation and tutorials on how to use tools
  • Speaking at events as first point of contact for lecturers and TAs
  • Sponsorship through hackathons
  • direct outreach to educational TAs
  • support for student mentorship programs

Acquisition

  • Reach to TAs to try out tools for free
  • Setup booths at hackathons and conducting workshops
  • Train student on the use of MS tools so that they can become successful mentors – GitHub strategy
  • Provide budget for student groups who want to organize learning sessions involving how to use the tools

Feedback mechanism /

  • track the conversion rate of documentations visit to corresponding sign up levels
  • track time on documentation
  • listen for feedbacks when interacting with students during hackathons to figure out portions of the documentation that are confusing

Metrics

  • track YoY student traffic usage during lull periods to determine if baseline is improving.
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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
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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

 

 

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An unchanging constant as the source of trust

Trust is the ultimate source of wealth in any society. The level of manifested physical wealth correlates positively with the level of perceived trust members of society have for an entity.

When an entity, be it a phenomena or a behavior, is observed to be consistent across time without much falter, it soon becomes accepted as the norm. Overtime this norm gets deeply embedded within a society and becomes an integral part of its culture. It thus becomes trusted and a source of credibility.

Societal commerce is built on trust. Trust accumulated through consistency overtime can be converted to other forms of tangible currency. These currencies can then be used to direct resources within the society towards the achievement of very material goals.

When comparing between two entities that are embedded within the cultural fabric of society, the one that exhibits a higher level of consistency inevitably gains more trust. This explains why while fiat currencies comes and goes, the value of gold remains consistent across time.

While it might be tempting to equate trust with value, there is a subtle difference. While trust elicits value, value need not necessarily elicit trust.

Expressing the entire civilization’s undertaking at any point in time as an linear equation, any essential variable that happens to be the most restrictive in supply at that point inevitably becomes the most valued. However wide fluctuations in value does not elicit trust in the long run.

Sources of trust

  • the rotation of seasons and our subsequent practice of agriculture
  • the constant speed of light and it’s use in Einstein’s theory of relativity
  • gold with its scarcity and it’s persist use as a store of wealth
  • well run institutions with well defined constitutions
  • fiat currencies with under sound government regimes
  • individuals who exhibit consistent behavior overtime

Qualities of viable currencies

  • Ability to be divisible
  • Ability to be moved
  • Ability as a store of wealth overtime
    • consistent levels of supply
    • scarcity

Functions of currencies

  • a means to facilitate transactions
  • a store of wealth

Examples of trust erosion

Example 1: Michigan Pulls $600 Million From Ken Fisher an individual After Lewd Remarks

https://www.bloomberg.com/news/articles/2019-10-12/michigan-pulls-600-million-from-ken-fisher-after-lewd-remarks

Example 2: 1918 Germany as an institution, towards the tail end of WWI.

When it became evident that the country will loss the war, it experienced increased inability to raise debt to in domestic currency denomination to continue financing its war efforts. It’s currency soon lost it’s reserve currency status and it was increasingly forced to denominate debt in foreign reserve currencies.

Post WWI debts denominated in domestic currency where inflated away through printing of cash by the  German government to pay of debts denominated in foreign currencies.

Example 3: Africa use of glass beads as a failed form of currency

Europe was able to cheaply produce this in abundance . Europeans for a period were able to exploit this asymmetry by exchanging cheap glass beads for valuable natural resources. When value within the African society became depleted,  Europeans were eventually able to subjugate the entire African population and exploit them through the slave trade.

Example 4: Wall Street crash and the Great Depression of the 1930s.

Bankers increasingly became concern of easy credit driving share prices to stratospheric valuations. An eventual tightening of credit lead to rapid deleveraging within the system. The lack of trust within the system prevented the circulation of money and credit. The central bank ultimately had to step in to restore trust.

It did so by first preventing the flight to value. This was achieved through the banning of conversion of USD dollar to gold.

Example 5: An ongoing slow erosion of fiat money

With the deliberate pursuit of constant 2% yearly inflation by central banks around the world current fiat money are failed stores of wealth .

The currency of the Roman Empire is a perfect example of where we will be headed. Overtime less gold per coin is used. Their currency was ultimately replaced by paper which allowed rampant printing by the government during times of war. The effects of inflation eroded the Roman empires currency as a long term store of wealth.

Examples of persistent sources of trust

  • The institution of the Catholic Church
  • The consistent adherence to a set of sound principles by Berkshire Hathaway’s reinsurance business over multiple decades. 
  • Federal reserves consistent adherence to the dual mandate of 2% inflation and low unemployment rates

Conclusion

To build trust is to build wealth. The key to doing so is to adhere and operate on a consistent set of sound principles over across time and in all environments. Being slow and steady is a pre-requisite of this process.

Related readings

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Observed unwinding of credit in the market

Priori

  • Federal reserve starts reducing debt bought and brought onto their balance sheet during 2008
  • Federal reserve went on a series of interest rate hike from the period of 2016 to 2018
  • Trump starts Trade war in 2017 resulting in reduced global demand for American exports

Liquidity concerns experienced in sections of the markets around the world

Riots and unrest

Related readings

 

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Oil’s relationship with the macro economic environment

Price of OILU jumps 34% following news on 50% Saudia Arabian refining capacity destruction by Iranian drones.
At the height of the Oil crash in 2016, USO traded at USD8.33 per share on 2nd August 2016. It has since recovered

The price of oil has an positive correlation with likelihood of war and a booming economy. It has a negative correlation with recession and oversupply.

The price of oil did not hit zero even during the height of the oil crash.