“If you simply do what everyone else has already done, you will be rewarded with the same mediocre results everyone else has already gotten. The only model for success is to avoid most of the world’s models for success.” – Mark Manson

We were mostly in place back in Utah for August, after being on the move from essentially mid-May through July.  However, not too much notable to report.  Lots of riding mixed with a bit of Coursera studying (Contract Law 1 by Yale).  Online learning has to be a major component of the future of our education system – to expand access to larger portion of the population and reduce the costs and other impediments to education.  The admissions practices of elite private universities and student loan forgiveness are a distraction.

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

1. Common Probability Errors to Avoid – “If you’re trying to gain a rapid understanding of a new area, one of the most important things you can do is to identify common mistakes people make, then avoid them. “
2. The Intel Split – “Intel’s factories, denied monopoly access to cutting edge x86 chips, will now have to compete with TSMC to earn not just 3rd-party business, but business from Intel’s own design team.”
3. On the business, strategy, and impact of technology – “Smartphones, though, provided a reason to build up the software layer from scratch, with efficiency, not performance, as the paramount goal.”
4. Blackstone ❤️ private credit – “the simple fact is that institutional investors like the smoothness of private markets.”
5.  The Tide of Price over Volume – “There are very few chances to find the elasticity of demand. And – for the time being – there are ample excuses to figure it out.”
6. Bear market investors think different – “And it is this lack of overoptimism why investors who have learned their trade in a bear market have slightly better performance on average than investors who have learned their trade in a bull market, as I have discussed here.”
7. A giant wealth transfer is why the economy isn’t responding to Fed – “it is virtually certain that central governments’ fiscal deficits will be large, and it is highly probable that they will grow at an increasing rate as the increasing debt service costs plus increasing other budget costs compound upward, and, as they increase, governments will need to sell more debt, so there will be a self-reinforcing debt spiral that will lead to market-imposed debt limits while central banks will be forced to print more money and buy more debt as they experience losses and deteriorating balance sheets”
8. John Eastman Comes Clean: Hell Yes We Were Trying to Overthrow the Government – “The Declaration of Independence has no legal force under American law.”
9. Guest Contribution: “The End of Zero Interest Rates” – “US short-term rates had been near-zero for nine years [2009-15 and 2020-21] out of the preceding 13 years, since the Global Financial Crisis of 2008. “
10. Have Bonds Finally Reached Escape Velocity? – “In short, bonds with a duration under 5 have likely already reached escape velocity. T-notes in the 5-10 year duration range are close to escape velocity, but not quite there yet. And long bonds are still far from escape velocity.”

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.

Updated stats:

“Luck doesn’t just happen, it’s created. You can do things to increase the odds of serendipity. Meeting more people makes you lucky. Learning more skills makes you lucky. Being willing to fail makes you lucky. Offering to help others more often makes you lucky.” – Mark Manson

We are ensconced back in Utah as of a few days ago.  Amongst our travels included eight days in Colombia.  It is humbling and exhausting to not speak the language.  Regardless, our trip was amazing.  Some notes on that are forthcoming.

Finally finished Against the Gods: The Remarkable Story of Risk.  I had started reading a hard copy and then went traveling around and the book didn’t make the packing list.  What a good book?  Why did it take me this long to find this? I need to review and write up my notes.

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

1. Is Cash the Best Insurance Asset? – “In other words, when cash yields a high real return it becomes the ultimate insurance instrument because it gives you a risk free inflation beating return in the short-term. And that is the ultimate form of financial certainty.”
2. Against Cassandras: Inflation – “In essence, what we have seen in the decade between 2010 and 2020 is what you expect to see in a low interest rate environment with global financial markets and no capital restrictions. You create high-flying financial assets and persistently high valuations that look nothing like the valuations we were used to in the past.”
3. Musings on Markets: Market Resilience or Investors In Denial? A Mid-year Assessment for 2023! – “The Fed has raised the Fed Funds rate multiple times this year, but those rate increases have clearly done nothing to slow the economy down and inflation has stabilized, not because of the Fed but in spite of it.” SMS here: A must read; so many insights in this piece.
4. Identifying Investing’s Anti-Patterns – ” Learning how not to lose money is more important than learning how to make money.”
5. Naval on Twitter: “How to Get Rich (without getting lucky)” – “Ignore people playing status games. They gain status by attacking people playing wealth creation games.”  SMS here:  Is this a tweet?  An X?  Maybe they’re history?
6. How to Read: Lots of Inputs and a Strong Filter – “Similar to dating, a book you’re not into after 10 minutes of attention has little chance of a happy ending. Slam it shut and move on.”
7. Threadzilla – ” There has never been a firm in the modern economy that’s fallen this far, this fast that has not been accused of fraud.”
8. How Fortunes Are Made: Revisiting From Predators to Icons – “Instead, they argued, great fortunes arise from a set of favorable initial conditions (perhaps today they would use the term ‘privilege’) in combination with Strategic Intuition, the ability to recognize and take advantage of extraordinary opportunities that lead to an “intense accumulation of capital.””
9. Dynamic MTB Fit – “A RideLogic dynamic MTB fit focuses on out-of-the saddle handing. We position your bars relative to your feet. This is critical for technical/expressive riding. Independently, we position the saddle relative to your feet. The saddle-to-bar relationship is incidental.”
10. Crest and Oral-B have a new way to get rid of your old toothbrushes and dental products – “All you have to do is pack up a box with your used oral care products, print the free label, and ship it out to the recycling facility. “

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.

Updated stats:

“The people who didn’t do any work at home never did any work in the office. They’re just easier to identify when they work from home. Hard workers are hard workers no matter where they operate.” – Farnam Street Brain Food

More books, less articles appears to be a by-product of traveling.

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

1. Jim Grant Warns of ‘Long Cycle’ of Rising Interest Rates, Bond Bear Market – “It would not surprise me at all if we were embarked on something resembling a generation-length bear market in bonds, meaning rising yields and falling prices. That would fit the form.”
2. How to spot a house price bubble – “First, they show that until the 1970s, house prices were mostly determined by the cost of materials and labour to build a house, the supply of houses and population growth. But since the 1970s the drivers have shifted. Between 1970 and 2012 about 70% of the house price increase can be explained by the increase in capital and the cost of capital, while an additional 20% is explained by population growth.”
3. The Great US Treasury Bond Rout Is Far From Over – “I have what might be disconcerting news: It’s not over.”
4. Chart of the Week: Commercial Real Estate Collapse – “According to the Green Street Commercial Property Price Index prices are now down by 15%. That’s the largest decline we’ve seen since the GFC. “
5. Enough with Interest Rates Already – “So, to sum up: for at least 40 years, the level of real policy rates has had no discernable effect on changes in the level of inflation.”
6. The new way of work – “The pandemic didn’t create distributed work, the laptop did. Human interaction is critical, but the office isn’t actually the most effective way to create that.”
7. The Lesson to Unlearn – “Tests can be divided into two kinds: those that are imposed by authorities, and those that aren’t. Tests that aren’t imposed by authorities are inherently unhackable, in the sense that no one is claiming they’re tests of anything more than they actually test”
8. The brave new world of probability and statistics – “The sobering consequence is that a significant portion of the models, funds and strategies employed in the investment world, including many of those marketed to individual investors, may be merely statistical mirages. “
9. Change Your Perspective – “My colleague Ben Carlson likes to point out that average annual returns for the S&P500 is 8%, a number that market almost never returns on an annual basis.”
10. What Would Happen if the Fed Caves to 4%-5% Core PCE Inflation, Gives up on 2%, as some Folks are Clamoring For? – “Long-term yields will explode.”

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.

Updated stats:

“When you first start to study a field, it seems like you have to memorize a zillion things. You don’t. What you need is to identify the core principles – generally three to twelve of them – that govern the field. The million things you thought you had to memorize are simply various combinations of the core principles.” — John T. Reed in Succeeding

Apologies for the silence.  As I alluded to earlier, my family and I embarked on a six week trip to the Pacific Northwest and Alaska in early May.  

We’re back now and “decamping” a bit.  And starting to get ready for our next trip.

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

1. The Great Pandemic Mortgage Refinance Boom – “Approximately one-third of outstanding mortgage balances was refinanced during the seven quarters of the refi boom, and an additional 17 percent of mortgages outstanding were refreshed through home sales during a time of high demand for housing.”
2. DoubleLine’s Gundlach warns of echoes of S&L crisis at regional banks – “This is kind of the same phenomena, and I don’t really see what’s going to make it stop, unless the Fed is going to cut interest rates, which there’s no inclination of cutting interest rates at the next meeting,”
3. These 4 free apps can help identify every flower and tree around you – “The easiest to use is Seek.”  SMS: We used this a bunch on our trip and it was super fun.
4. Despite Fed Tightening and Bank Collapses, It’s Still an Astoundingly Loose Financial Situation in La-La-Land – “So, despite the rate hikes and QT by the Fed, financial conditions are still looser than the long-term average, though they have become somewhat less loosey-goosey than during the free-money era.”
5. Press Pause – “What we do know is the fastest set of rate hikes in modern times have been breaking things, and if it continues, it’s likely to get worse.”  SMS: I would argue we broke things on the way up (i.e., housing prices); people just tended to find those outcomes more fun.
6. The Spectrum of Financial Dependence and Independence – “Congrats. You are no longer reliant on bosses or clients. You can deal with them if you want, and you probably will. But only if you want, when you want, with who you want. Which feels good.”
7. The Druck hates to lose money – “If I get an idea and I think it’s attractive for whatever reason . . . I generally go ahead and buy it, and then tell the analysts to poke holes in it and if it turns out I was wrong I get out. I don’t like to wait around. “
8. Some Things I Think – “A big problem with bubbles is the reflexive association between wealth and wisdom, so a bunch of crazy ideas are taken seriously because a temporarily rich person said it.”
9. The Fed’s Interest Rates Are still Fueling Inflation rather than Dousing it, and People Getting Used to this Inflation – “When we look back 60 years, we see what an extraordinary period this QE and interest rate repression since 2008 has been. During almost the entire 14 years — except for a few months in 2019 — the Fed’s policy rate was far below the rate of core CPI.”
10. How to Make Friends as an Adult – “Therefore, fairly late in life, you have to teach yourself to deliberately make time and space for friendships. “.

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

Updated stats:

“Often, we get what we tolerate.” – Seth Godin

Lots of reading this month!  Some of that was cleaning out a bunch of older articles – that either needed to read or passed over.  Generally, I have around 200 or so saved articles in my queue.  See a bit more on my reading system here.

Also, got through a few books, which is nice.  Again, my eyes here tend to be larger than my pace of reading.  Check out my latest note: The Go-Go Years

This month was a bit more interesting as well event-wise.  The Fed has done exactly what they said they would.  Take that for listening to them!  And, Congress has embarked on a course of stupidity and political suicide by holding the debt ceiling / default gun to their own heads.  Again, no surprise.

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

1. Read Old Books – “Yet, as sobering as this all may be, there is a silver lining. If the majority of people (and therefore investors) continuously fail to learn from others’ mistakes, shouldn’t there be significant value in being in the minority that does? Of course, but how? One way to start is by reading old books.”
2. Mohamed El-Erian, Citing Hamilton, Says the Fed Should Talk Less – “I’m more worried about economic contagion than financial contagion—namely, that the banking tremors we’ve had will lead to a reduction in credit to the economy over the course of this year and early next year, increasing the risk not just of recession but stagflation.”
3. My Most Valuable Season – “Outside of the energy sector, it has been a long time since any part of the economy has truly lost. This means that most 20- and 30- year old’s have never truly felt job insecurity.”
4. The Phillips Curve is Still Working Just Fine – “The Phillips Curve is a very simple idea and a very powerful model. It  simply says that when labor is in short supply, its price goes up”.
5. How 3% Mortgages Altered the Housing Market for Years to Come – “So they’re not selling, and they’re not buying. They’ve left the market.”
6. Walk with me… – “A short, 20-minute stroll around a friend’s neighborhood at sunset became the highlight of my day.”  SMS: We had a very similar experience during the early part of the pandemic.
7. Why I am not investing in a buyout for a long time to come – “Inflated returns, denial of volatility, high prices and fees, excessive leverage, absence of covenants on buyout debt — all this together represents fantasy thinking. It is what happens when a successful investment model becomes too popular.”  SMS: FT continues their critique of private equity.
8. Why cutting your personal carbon footprint matters – “The most impactful ways to reduce personal emissions are familiar by now: Fly and drive less, eat less meat, switch to electric cars, and install electricity-based home heating.”
9. The lies we tell ourselves – “It concerns me that it seems like markets, the Fed, and policymakers are operating under the assumption that eventually we’ll get our old economy back. Or after this rather unfortunate hiccup, inflation will fall to below 2% and we’ll go back to near-zero interest rates.”
10. Taxes – “But we can make a major step toward closing the gap between our spending and our revenue. By actually collecting the taxes we’re owed. The distraction is tax rates; the focus should be the tax code and enforcement.”.

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

Updated stats:

On Reading More “The solution I devised for myself is a simple one: 25 pages a day. That’s it. Just commit to that, and then do it.” – Farnam Street

Well, that is one way to start the new year.  Set a few goals.  Miss them all.

Certainly behind on the book reading front.  Also, want to maintain an average of writing one article a week.  And behind on that one.

So there is no where to go but up!

Big news is in the works on the career front.  That one is actually going according to plan here in February.  More to come once the fat lady sings.

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

1. After a Timeout, Back to the Meat Grinder! – “Now things get more complicated. While the most extreme froth has been wiped off the market, valuations are still nowhere near their long-term averages.”
2. Why the Federal Reserve Should Raise Rates by Half a Percent – “Financial conditions have loosened significantly in recent months and, by some measures, are around levels that prevailed last March when the Fed initiated this hiking cycle.”
3. Why Competitive Advantages Die – “The only thing harder than gaining a competitive edge is not losing that advantage when you have one.”
4. How to Get New Ideas – “The way to get new ideas is to notice anomalies: what seems strange, or missing, or broken?”
5. On Email and Horses – “The right question is not, is this useful? But instead, how do we want to use it?”
6. The Federal Reserve Is Trimming Its Assets. It’s Not Working – ” The Fed’s QT has had relatively little effect on financial conditions since it got under way last year. And in a surprising twist, the new battle over the nation’s debt limit will largely negate any impact QT might produce”
7. Inflation, Rising Interest Rates Brought End to Cheap Money – “Cheap money—an incredibly popular and influential feature of finance that led to a surge of wealth, speculative trading and booms in ridiculous investments such as   meme stocks and   digital images of cartoon monkeys—died suddenly in 2022. It was 14 years old. Cheap money is survived by its estranged relative, expensive money.”
8. Rental Housing Is Suddenly Headed Toward a Hard Landing – “Why has the rental market turned so weak? As rental housing economist Jay Parsons points out, new lease demand cratered in the second half of the year, and was negative for the full year for the first time since 2009.”
9. 2023 is the Year of _________ – “2023 is a pivotal year for many startups. Churchill once said, “Never let a good crisis go to waste.””  SMS here: SFTE could turn out to be a pivotal year for the family; need a moto.
10. The Critical Question – “They assume you’re price sensitive, and expect you to ask why something doesn’t cost less…but they are not expecting you to ask why something doesn’t costmore.”

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. Excel Tips: Football Field Chart
3. Excel Template: Bridge Waterfall
4. Book Report: The Hard Thing About Hard Things
5. Operating Model Tips

Updated stats:

“We tend to assume that the worst that has happened is the worst that can happen, and then prepare for that. We forget that “the worst” smashed a previous understanding of what was the worst..” – Brain Food: Figuring it Out (https://fs.blog/brain-food/december-11-2022/)

Happy New Year!

First post of 2023.  I’ve set a goal for posting more.  Competing priorities last year, especially the fourth quarter, hampered my ability to read, write, and post.  

However, we successfully sold the business to a new set of investors, delivering a great outcome for our prior shareholders.  So with that behind me, I hope to be spending more time here.

Note on the book reading front – I did knock out the entire Travis McGee series.

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

1.  Take Calculated Risks – “Making an unconventional decision can be a very lonely action. Yet, when the person making it has intimate knowledge of a situation and has calculated the risks involved, it often proves to be precisely the right one.”
2. 3Q 2022 GMO Quarterly Letter – ” Looked at in this way, it seems as if a value strategy in the U.S. should be avoiding the “shallow value” stocks that are mildly cheap relative to the market and focusing solely on the “deep value” quintile. “
3. Summary of My Post-CPI Tweets – “Overall Core ex-housing (which includes core goods) is down to 5.2% y/y. That’s the lowest since…well, September 2021. Going the right direction but unless core services start to decelerate, there’s a limit to how good this picture can be.”
4. The Fed is Dead – “In fact, rather than slowing corporate price increases, the Fed’s rate hikes seem to be having the opposite effect.”
5. Billionaire David Tepper Is Betting Against the Stock Market Because of the Federal Reserve – ” I think the upside/downside [risk here] just doesn’t make sense to me when I have so many central banks telling me what they are going to do”
6. Q&A with Scott Reardon: Great Investor Track Records – “Generally they were looking for companies where free cash flow yield + growth rate equaled 20% or more. In other words, they were looking for returns double the market average, which is exactly what all of them achieved over their long careers.”
7. How private markets became an escape from reality – “Private equity firms reported gains of about 3 per cent this year, when public markets were down 20 per cent or more and tighter money battered all markets similarly.”
8. How to Hedge Inflation and Avoid the Biggest Bond Risk – “Inflation is the biggest long-term risk for bond investors.”
9. BNP Paribas studied 100 years of market crashes – “A typical recession bear market is 1.5 years in length, with a median drawdown of 38% and a median peak in the VIX of 40.5. “
10. TeamDynamix Secures Investment to Deliver Rapid Innovation for IT Automation – ” TeamDynamix, a leading IT automation provider, today announced that it has secured an investment from New York-based Level Equity Management while existing investor, K1 Investment Management, will roll a material portion of its proceeds from its exit into the business.”

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.

Updated stats: