Monthly Archives: April 2023

Three Take-Aways: The Go-Go Years: The Drama and Crashing Finale of Wall Street’s Bullish 60s

Reading Time: 4 minutes

“The structure is not genius; even for the exclusive hedge funds, genius turned out to have been a rising market.” – The Go-Go Years (pp. 348)

One of my goals with some additional time is to embark on “learning projects” across a few domains.  Capital market history is one of those domains.  That is where this book fits in.  Expect more notes along similar lines.

Overall, I personally found the writing style of the author to be difficult to follow, in spite of my interest in the content.  The story covers the period including the evolution of mutual funds and the stock exchanges, the rise in prominence of conglomerates, and the “Nifty Fifty” growth stocks.   

It is possible that I am over-fitting, but history does seem to rhyme.

Three take-aways from the book:

  1. The Cause of Investor Amnesia

“Indeed, by 1969 half of Wall Street’s salesmen and analysts would be persons who had come into the business since 1962, and consequently had never seen a bad market break.”  (pp. 113)

This sounds familiar to a theme I hear today.  Or maybe a theme I believe in today.  Many investors today, if they came of age post-Great Financial Crisis (2007 – 2008) have known mostly good times with few meaningful setbacks.  That has been a long period of time; close to 15 years, where any setbacks have quickly been reversed.

  1. Wall Street Crisis

“At the start of December, Wall Street hung by its fingertips.  Roughly one hundred Stock Exchange firms had vanished over the past two years through merger or liquidation.  Forty thousand customer accounts were involved in the thirteen cases of liquidation, and most of them were still tied up, the customers unable to get their cash or securities.” (pp. 341)

“Legislation to create a federal Securities Investor Protection Corporation, on the model of the Federal Deposit Insurance Corporation to protect bank depositors, was before Congress; it had no chance of passage until the present mess in Wall Street was cleared up, and thus, while it might help in future crises, it was powerless against this one.” (pp. 341)

The details on the crisis within Wall Street itself was all new to me.  See take-away #1.  And, so were the origins of SIPC.

There were brokerage failures during the GFC.  The causes of those were mostly characterized based on bad decisions and investments.  Whereas, the brokerage failures during the period covered in the book appear to be based more on a bad business model that was not keeping up with the times.

Regardless, the thought of investors losing their securities or not having access to them for an extended period was a “new” risk to consider (

  1. Fun With Accounting

“Where a series of corporate mergers is concerned, the current earnings per share of the surviving company lose much of the yardstick quality that the novice investor so trustingly assumes.  The simple mathematical fact is that any time a company with a high earnings multiple buys one with a lower multiple, a kind of magic comes into play.  Earnings per share of the new, merged company in the first year of its life come out higher than those of the acquiring company in the previous year, even those neither company does any more business than before.  There is an apparent growth in earnings that is entirely an optical illusion.” (pp. 157)

“Moreover, under accounting procedures of the late nineteen sixties, a merger could generally be recorded in either of two ways – as a purchase of one company by another, or as a simple pooling of the combined resources.  In many cases, the current earnings of the combined company came out quite differently under the two methods, and it was understandable that the company’s accountants were inclined to choose arbitrarily the method that gave the more cheerful result.”  (pp. 157)

“The conglomerate game tended to become a form of pyramiding, comparable to the public-utility holding company game that flourished in 1928, crashed in 1929, and was belatedly outlawed in the dark hangover days of 1935.  The accountant evaluating the results of a conglomerate merger would apply his creative resources by writing an earnings figure that looked good to investors, they, reacting to the artistry, would buy the company’s stock, thereby forcing its market price up to a high multiple again; the company would then make a new merger, write new higher earnings, and so on.  The conglomerate need neither toil nor spin – only keep buying companies and writing up earnings.  It was magic, until the pyramid became top-heavy and fell.” (pp. 158)

This is why my favorite financial statement is the Cash Flow Statement; a topic for another post.  At least investors during the period were focused on earnings.  That seems to be a novel idea for current investors.

And a bonus take-away:

“For example, those familiar old forces so long so helpful to business management in getting the most possible work out of low-level employees – company loyalty and personal competitiveness – scarcely seemed to operate on the new breed of back-office employees at all.” (pp. 196)

Apparently they had millennials back in the 1960s too.

A few other recent book notes:

  1. Titan: The Life of John D. Rockefeller, Sr.
  2. Range: Why Generalists Triumph in a Specialized World
  3. Principles
  4. That Wild Country
  5. Superforecasting: The Art and Science of Prediction


Reading Time: < 1 minute

Our neighbors are moving and starting to clean stuff out.

They had two skateboards from their daughters that they were giving away.

So, at the age of 47, I am the proud owner of a skateboard for the first time.

This should give the neighborhood plenty of entertainment.

Inspirational credit: An Ode To Falling On Your Ass In The Wintertime

2023: The Year Of Exploring

Reading Time: < 1 minute

We have decided that 2023 is the Year of Exploring.

Yes, we have a series of trips planned – to the Pacific Northwest, to Colombia, and to UK & Europe.

We also reached a major milestone – exiting my prior business. And I subsequently resigned my role to take a “sabbatical.” So, I plan to use that to do some exploring along some other lines as well.

Inspirational acknowledgement: 2023 is the Year of _________

Park City Weather & Snow Resources

Reading Time: < 1 minute

Here are the resources you need to monitor Park City weather & snow.

NOAA – Park City

NOAA – Salt Lake City Area Snow Reporting – snow reports for all Wasatch resorts

Utah Avalanche Center – informative even if staying inbounds

Keep in mind, this is mountain weather. The weather can be very location specific. What happened at 7,000′ is not necessarily what happened at 9,000′.

Pro tip: wind speed and wind direction are super important to monitor.

Bears Watching: Cash & Real Estate

Reading Time: < 1 minute

I love this chart produced by Capital Spectator on a monthly basis:

Two things I find interesting:

  1. Cash is still the best performing asset through the one year mark.  Actually, cash is the only positive performing asset (in nominal terms).
  2. And the poor performance of Foreign Real Estate over five years. Foreign real estate is the worst performing asset, at least in U.S. dollar terms.

Influential Reads – March 2023

Reading Time: 3 minutes

Influential Reads – March 2023

“If you’re going to panic, panic first.” – Old adage

Well, March was exciting.  Inflation and bank failures…a recipe for…the stock market to crush it?

In my first full month of semi (?) retirement, we had a bunch of house guests and made a short trek up to Ketchum, Idaho for some skiing at Sun Valley and skating at Galena Lodge .  

Here are my most influential reads for the month – in no particular order:

  1. Satyajit Das: SVB Collapse and Bank Turmoil – Latest Chapter in the Unwinding – “The assumption that raising rates and withdrawing monetary stimulus would result in a painless adjustment back to a new normal was naïve in the extreme.”  SMS here: It’s not just the change in magnitude, it’s the velocity.
  2. Dissecting Goldman’s gory $2.25bn SVB equity issue – “Second, the stock offering has to be underwritten. Hard-underwritten. Or already subscribed-for. Investors must assess the equity offering on the basis of a repaired balance sheet. They must know you don’t actually need them.”
  3. The Powell of Positive Thinking – “He clearly signaled (again) that once Fed overnight policy rates reach a peak, they would not be declining for a while. “
  4. Risk Capital and Markets: A Temporary Retreat or Long Term Pull Back? – “It behooves both investors and traders to therefore track movements in risk capital, since it is will determine when long term bets on value will pay off for the former, and the timing of entry into and exit from markets for the latter.”
  5. Highlights from Charlie Munger’s Conversation with Todd Combs (2022 Singleton Prize for CEO Excellence) – “It’s the nature of things that a bunch of democratically-elected politicians will eventually print too much money.”
  6. Free Money Turned Brains to Mush, Now Some Banks Fail – “And when I say “free money” with regards to banks, I mean it literally.  Since 2008, banks have been borrowing from depositors at 0% interest or near 0% interest. Even today, even as some banks are trying to attract more deposits by offering higher interest rates, even today when the Fed’s short-term rates are near 5%, the average interest rate on savings accounts is still only 0.4%. Even today, 0.4%.” SMS: This is nuts.
  7. Venture Catastrophists – “There are no libertarians in foxholes.”
  8. Is Inflation Mean-Reverting? – “What that means – and it is super important – is that inflation has momentum. Keep in mind that during most of the period shown here, the Federal Reserve was actively trying to make inflation mean-revert. And they didn’t succeed, at least on a one-year basis.”
  9. Banking Woes Hark Back to the S&L Crisis of the 1980s – “Former Fed Reserve Chairman Paul Volcker used high rates to squeeze inflation out of the economy four decades ago, and the savings & loan industry was among the unintended victims. “
  10. The easiest way to spot a market bubble – “New Metrics get invented while timeless investing principles become a thing of the past.”  See Cash EBITDA. SMS: During the sale of my business last year, the investment bankers wanted me to use “Cash EBITDA”, but they could not even provide a definition.

Note: This is based on when I read the article, not necessarily when it was first published.  Unfortunately, my backlog of things I would like to read always seems to dwarf the amount of time I can devote to reading.

Top clicks across the site last month:

  1. Financial Model vs. Operating Model
  2. Bears Watching: Short Yields & Fed Funds Rate
  3. Excel Tips: Football Field Chart
  4. Operating Model Tips
  5. Email: Don’t Fire & Forget

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