Reading Time: < 1 minute

This was a bit overdue.

About

Reading Time: 2 minutes

History may not repeat, but it seems to rhyme.  I am totally plagiarizing that quote for somewhere, but I am being too lazy to go reference it.

But I feel like I have seen this story before.  And it ended fairly predictably last time.  Lots of publicity around high growth, but unprofitable business.  And asset classes with no inherent earnings power.

Remember, you cannot eat growth.  Growth won’t pay mortgages or tuition.  Or really anything else for that matter.

The focus on growth and sales, for the sake of growth and sales, feels eerily reminiscent of the late 1990’s and early 2000’s.  You can see some of that in metrics like the following:

The only part that seems to be missing is some metric like “eyeballs”.

The concept of scaling a business and taking market share is not lost on me.  However, many of these growthy businesses have no clear answer to when can you stop scaling and focus on driving operating leverage and creating economic profits.  Do not underestimate the operational challenges in turning that corner.

If you were running your own business that was your livelihood, would you prioritize sales growth or cash flow?  Why would you think about investments in other situations any differently?

At some point in the future, more investors are going to be forced to think about that and decide which one matters more – sales growth or cash flow.  

In February, there started to be some pullback in some of the growth oriented names, most evident in the pullback in the NASDAQ 100.

“There’s probably no one reason.  However, an increasing focus on future cash flows would be bad news for many of these names.  A change in speculative appetite is a change in the degree to which investors care about cash flows at all — the degree to which they believe that there will always be another person (the “greater fool”) who will pay more for an asset than they did.”

Focus on math and fundamentals.  Boring, yes.  A little FOMO, for sure.  But, unlikely to lead you astray.

Reading Time: 2 minutes

I got shut out on books.  Did I mention moving sucks.

Updated stats through July:

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

1. Creating Impeccable Structure for Your Life – “We deeply feel the messiness of our lives.”
2. Best Route to Wealth: Savings or Earnings, a Debate – “The things we own, and more broadly the lifestyle we lead, often end up owning us.”
3. The 100 hour asset – “We’re all so busy doing our work that sometimes we fail to build a skill worth owning.”
4. How a $30 digital product cleaned up at the Grammys – “YoungKio’s story shows that creating small digital projects is a fun, accessible, and “non” gatekept path for creative expression with a ton of optionality.”
5. 4 Surprising Steps to Achieve Your Long-Term Financial Goals – “A much better approach is to look directly at your wants and desires. Don’t ignore them. Instead, understand them.”
6. The Things We Take With Us When We Move – “Sparks Joy.”
7. Chris Wallace masterfully turned in what might have been the best TV interview ever with President Donald Trump – “Watch for yourself. Ultimately, how the president did is your call. But there’s not much debate about how Wallace did. He was excellent.”
8. Intel ‘Stunning Failure’ Heralds End of Era for U.S. Chip Sector – “Intel Corp.’s decision to consider outsourcing manufacturing heralds the end of an era in which the company, and the U.S., dominated the semiconductor industry.”
9. Low Real Yields – You Can’t Avoid Them – “Indeed, if you can figure out a way to buy an asset without locking in the fundamental reality that the real risk-free rate is -1%, please let me know.”
10. The Grifters, chapter 1 – Kodak – “I mean … I knew things were bad in Rochester, but I didn’t know they were that bad.”

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.