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

Updated stats:

	Read Articles	Books
January	80	0
February	62	2
March	67	2
April
May
June
July
August
September
October
November
December
Total	209	4

Reading Time: 3 minutes

Influential Reads – February 2023

“Standards apply not just to the quality of work you produce but the opportunities you work on. If you accept substandard work from yourself, you’ll only get average work from others. If you say yes to average projects, you’ll have no time for exceptional ones.” – Brain Food, Farnam Street

Big news in my world: I resigned my CFO role at a private equity backed software maker after selling the business to a new private equity group.  I will be taking some time off to “to evaluate, to collect, to dream, to wonder and to wander.”

Reading and writing more is definitely a goal.

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

1. Jim Chanos: The Golden Age of Fraud in Finance – ” One of the things that is as old as financial markets is that we don’t see oversight or new laws and regulations until after people lose money.”
2. “Disinflation” Hoopla Sunk by Spiking Prices – “Not only did all the relevant measures get a lot worse in January, but the prior three months, October through December, were revised higher – much like the CPI inflation readings a couple of weeks ago – showing substantially greater inflation momentum at the end of the year than originally shown.”
3. The Wisdom of Non-Effort – “Non-effort is letting yourself take a walk and notice what comes up for you as something to write about, and trusting that”
4. Just Twenty-Five Pages a Day – “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.”
5. Buffett Profile from 1979: “The investor’s investor” – “The essence of Warren Buffett’s thinking is that the business world is divided into a tiny number of wonderful businesses well worth investing in at a price and a huge number of bad or mediocre businesses that are not attractive as long-term investments.”
6. When TIPS Outperform and How I Invest in Them – “TIPS outperform regular Treasuries when the market underestimates future inflation.”
7. We Are All Bond Traders Now – “What this means is that if interest rates are low, you care a great deal about the interest rate. Any change to your numerator is easily wiped out by a small change in the interest rate you are discounting at.”
8. The Forgotten Lessons of 2008: Seth Klarman – “You must buy on the way down. There is far more volume on the way down than on the way back up, and far less competition among buyers. It is almost always better to be too early than too late, but you must be prepared for price markdowns on what you buy.”
9. Enough Part 2 – A Framework – Calibrating Capital – “Too many of us run too hard for too long, reaching a point of exhaustion (or worse) when we could have taken a breather (or several of them) long ago.”
10. Microsoft and the Metaverse – “I suspect that this is the path that virtual reality will take. Like PCs, the first major use case will be knowledge workers using devices bought for them by their employer, eager to increase collaboration in a remote work world, and as quality increases, offer a superior working environment.”

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. Sign of the Times: New Homes For Rent
2. Financial Model vs. Operating Model
3. Excel Tips: Football Field Chart
4. Operating Model Tips
5. Influential Reads – January 2023

Updated stats:

	Read Articles	Books
January	80	0
February	62	2
March
April
May
June
July
August
September
October
November
December
Total	142	2

Reading Time: 3 minutes

“If you stick to a path that is no longer worth pursuing, whether it’s a relationship that isn’t going well, or a stock that you’re invested in that’s losing money, or an employee that you’ve hired who isn’t performing, that is when you lose ground.” – Brain Food, Farnam Street

I have some thoughts here, but have not had the time to put them into writing.  So I am not sure if they are good thoughts or not.  

I continue to feel the risks here are massive and still mostly hidden, and there is a good chance of getting squished.  Which I would prefer not to have happen.  Squishing mechanisms include but are not limited to U.S. treasury market illiquidity, imbalances created by the currency market / massive USD strength, and real estate market trend changes.

Midterm elections will be interesting.  But I cannot watch.  There seems to be a faction of people that are “bat shit” crazy.  And there is not a rational middle ground between “bat shit” crazy and not “bat shit crazy”.  So, we should just stop trying.  But tolerating “bat shit” crazy is not a good option.

And, I think you have witnessed peak Zuckerberg and Musk, but for slightly different reasons.  Do you want to be bold and call peak Private Equity while we are at it?

Continuing to notch some “easy” reads:

And that got me to my objective:

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

1. Rare Skills – “People don’t like leaving opportunities on the table, and it’s counterintuitive to realize that you’ll likely end up with more than those whose appetite for more is insatiable.”
2. Brief amicus curiae of The Onion filed – “Rising from its humble beginnings as a print newspaper in 1756, The Onion now enjoys a daily readership of 4.3 trillion and has grown into the single most powerful and influential organization in human history.” SMS: Not a follower of the Onion, but this is some inspirational writing.
3. August JOLTS report: the game of reverse musical chairs in the jobs market is ending – “This is simply more confirmation that consumption leads employment, and we should expect monthly jobs numbers to decelerate further, and go to virtually zero m/m by early next year.”
4. Harvard predicts looming markdowns to private assets – ” Private funds, however, have not been adjusted to reflect new market conditions, and many have gained in value through to the end of mid-year — a disconnect Harvard predicts will hit portfolios later.”
5. What to Buy? Bonds. When? Now. – “Looking at the latter half of the 1970s, however, rates increased from 5% to 10%, yet bonds kept making money.”
6. Summary of My Post-CPI Tweets – “It’s a mistake, the same one people are making in rents & home prices. Rates of change could mean-revert. Prices will not. Prices are permanently higher, b/c the amount of money in the system is permanently higher. This chart shows the price level. Not going back to the old days.”
7. E-Bikes Need Their Own Classification System on Public Land – “Rapidly increasing E-mountain bike (eMTB) use on non-motorized trails is increasing these conflicts and impacts.”  SMS: Explain to me how a eMTB is not a motorized vehicle?  Is a Tesla not motorized?
8. You weren’t supposed to see that – “In total, the Federal government created $4.3 trillion in direct economic stimulus of which $3.95 trillion was dropped onto the economy, as if by helicopter, in a period of under 18 months.”
9. 3 Reasons International Investing Hasn’t Paid Off – “…the U.S. dollar has recently enjoyed its strongest run in 20 years.”
10. The bond market massacre of September 2022 – “The fear is that as central banks end the long period in which they systematically supported bond markets, deep cracks will be exposed. “

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. That’s a bunch of…
3. Influential Reads – September
4. EBITDA Is Not A Good Proxy For Cash Flow
5. Excel Tips: Football Field Chart

Updated stats:

	Read Articles	Books
January	89	1
February	110	0
March	102	3
April	103	2
May	134	3
June	74	0
July	82	2
August	112	7
September	72	4
October	61	4
November
December
Total	939	26

Reading Time: 3 minutes

“When you are a Bear of Very Little Brain, and you Think of Things, you find sometimes that a Thing which seemed very Thingish inside you is quite different when it gets out into the open and has other people looking at it.” ― The House at Pooh Corner by A.A Milne” 

Writers that can consistently and frequently write new and interesting pieces always impress me.  I am pretty thrilled if I have what I consider to be one new and unique thought a month.  Then have the luck to capture that fleeting moment down in writing. And, that generally turns into the Winnie the Pooh moment described above. 

That previous paragraph may be an awkward way of explaining why I have been fairly quiet these days, on top of just being busy at work.

For similar reasons, reading was a bit off this month – although I did notch some easy reads.

Correct, I am a touch out of order on the Travis Mcgee series, but that does not seem to matter too much.

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

1. You’re not good at this. – “Zero percent interest rates plus fiscal and monetary stimulus with housing up 40% and stocks at an all-time high was a ridiculous policy.”
2. Entering the Superbubble’s Final Act – “The current superbubble features the most dangerous mix of these factors in modern times: all three major asset classes – housing, stocks, and bonds – were critically historically overvalued at the end of last year.”
3. A Housing Bubble and Kim Kardashian: More Troubling News for Markets – “Pumped up by Federal Reserve expansionary policies, the public’s wealth in equities and residential real estate has ballooned, relative to the economy, even faster and more furiously than during the housing bubble of the 2000s and the dot-com daffiness of the 1990s.”
4. Three Things I Think I Think – It’s Breaking – “At 7% the math is totally broken. “
5. Grim (equity) tidings – “A Fed paper says tax and interest rates can’t fall much further, and that bodes poorly for stocks.”
6. Quantitative Tightening Is About to Ramp Up. What It Means for Markets. – “Market pricing is determined by supply and demand, and in the coming years, there is going to be a tremendous supply of Treasuries coming from two sources.”
7. Seeing Red – “Is China our enemy or competitor? The answer is yes.”
8.  Would You Still Buy A Tesla? – “I used to be a fan of Elon Musk, no longer. The guy is irrational, and he believes the rules don’t apply to him. And he acts like he’s the only one who owns the truth, who can move us into the future, and that’s just hogwash.”
9. Pillow fight – “That’s like going to a Dallas Cowboys football game at AT&T Stadium, seeing 80,000 fans dressed in silver and blue with stars painted on their faces, all cheering wildly when the Cowboys score. Then, based on that experience, determining everyone across the nation is a rabid Cowboys fan and the 82,500 people at MetLife Stadium cheering for the Giants simply just can’t be real.”
10. One Of The Smartest Things Anyone Has Ever Said To Me – ” I was finished with my Righteous Indignation phase and had settled more into a phase I would maybe call Please Just Don’t Hit Me With Your Car.”

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. Cash
3. Solamere Trail Loop
4. EBITDA Is Not A Good Proxy For Cash Flow
5. Excel Tips: Football Field Chart

Updated stats:

	Read Articles	Books
January	89	1
February	110	0
March	102	3
April	103	2
May	134	3
June	74	0
July	82	2
August	112	7
September	72	4
October
November
December
Total	878	22