Tuesday, November 29, 2016

How do you make money in the coming Trump administration ?

That's the question an acquaintance asked me yesterday.

Answer: Same way I do it every day. Avoid value traps. What those are it is up to you and your judgement. Why, Warren Buffet could care less that Trump comes to the office. Buffet stays put and knows how to play. He's steadfast, disciplined and calculated. Of course, you could think about which sectors will win and which will lose. Is there going to be a revival of the "old" industries, like oil, coal,  construction, [equipment] manufacturing ? Possibly, and related to the infrastructure investment initiative. Caterpillar (CAT) rose steeply in the last weeks and so did the private prison companies GEO and CoreCivic for example. Will renewables take a hit ? I don't know. The healthcare industry is in a nice bind, some pharma companies are poised to prosper with less regulatory oversight on drug prices. while others-hospitals, etc. stand to loose if ACA is repealed and they loose patients.

Repatriation of corporate earnings held overseas would be a welcoming relief.

Goldman Sach's 10 themes (via CNBC) are:
  1. "Expected returns: Only slightly higher."
  2. "US fiscal policy: A pro-growth agenda."
  3. "US trade policy: Concerns are likely overdone."
  4. "EM risk: 'Trump tantrum' is temporary."
  5. "Trump and trade: Hedge with RMB."
  6. "Monetary policy: Focusing the toolkit on credit creation."
  7. "Corporate revenue growth recession: Signs of inflection."
  8. "Inflation: Moving higher across DM."
  9. "The next credit cycle: Kinder and gentler."
  10. "The 'Yellen Call' 2.0: Now with contingent knock-in."
You get your pick.

Question: How good are those predictions ?

Saturday, November 26, 2016

Snap Inc. Valuation

Snapchat (recently renamed Snap Inc.) has filed for an IPO reportedly set for Q1 2017.  Snap is seeking a valuation of  $25 Bn according to reports at Bloomberg . While we do not have access to Snap's financials since it is not a public company, the question arises if such a rich valuation of 25X Forward Revenue makes sense at all.

"At $25 Bn, Snapchat would have roughly the same value as Linkedin and HP."

What is Snapchat and how exactly is making money ? Snapchat primarily sells video ads. It also sells branded "filters" and most recently, a Discovery feature for mass marketers. Snapchat selling point is its demographics where users ages 18 to 24 account for 70% of the reportedly 235 MM it now has. If that holds true, Snapchat is the first of the major social network that has built upon a targeted -in this case, youngest- demographic base. Is that worth paying more for? Facebook did not have such a demo base when it went public in 2012. 

It can be argued that any of those on Snapchat are already on the vaster platform (FB). Are they not consuming the ads on that platform ? If they're not, then Snapchat is a direct threat -competitor to FB.  

Tuesday, November 22, 2016

On Mind Training with the SEALS

I have to admit, I am a student of the mind. I think mind discipline is the foundation for critical success.

Physical endurance strength results in increased mental strength.

The BUD/S training is the 6-month training that Navy SEALS undergo before they graduate. The First Phase of BUD/S consists of 8 weeks of basic training culminating with "Hell Week." During Hell Week, recruits stay awake for five days straight (only up to 4 hrs total napping time allowed).

"Hell Week is a test of physical endurance, mental tenacity and true teamwork where 2/3 or more of your class may call it quits or “ring the bell ”. Physical discomfort and pain will cause many to decide it isn’t worth it. The miserable wet-cold approaching hypothermia will make others quit."
Source: Sealfit

Saturday, November 19, 2016

Do you have a bullshit detector?

How good are you at picking bullshit spewed by other people ? A reasonable question to ask yourself, if you're manager (and perhaps because you work for a manager).

Maria Popova picked up on Carl Sagan's Baloney Detection Kit, found in a Chapter in Carl Sagan's The Demon Haunted World book named "The Fine Art of Baloney Detection". The article has been rehashed by Barry Ritholz in his Big Picture blog. I still think it worthwhile to quote those 20 patterns. I will add some of my thoughts as well.

  1. Ad hominem — Latin for “to the man,” attacking the arguer and not the argument (e.g., The Reverend Dr. Smith is a known Biblical fundamentalist, so her objections to evolution need not be taken seriously)
  2. Argument from authority (e.g., President Richard Nixon should be re-elected because he has a secret plan to end the war in Southeast Asia — but because it was secret, there was no way for the electorate to evaluate it on its merits; the argument amounted to trusting him because he was President: a mistake, as it turned out)
  3. Argument from adverse consequences (e.g., A God meting out punishment and reward must exist, because if He didn’t, society would be much more lawless and dangerous — perhaps even ungovernable. Or: The defendant in a widely publicized murder trial must be found guilty; otherwise, it will be an encouragement for other men to murder their wives)
  4. Appeal to ignorance — the claim that whatever has not been proved false must be true, and vice versa (e.g., There is no compelling evidence that UFOs are not visiting the Earth; therefore UFOs exist — and there is intelligent life elsewhere in the Universe. Or: There may be seventy kazillion other worlds, but not one is known to have the moral advancement of the Earth, so we’re still central to the Universe.) This impatience with ambiguity can be criticized in the phrase: absence of evidence is not evidence of absence.
  5. Special pleading, often to rescue a proposition in deep rhetorical trouble (e.g., How can a merciful God condemn future generations to torment because, against orders, one woman induced one man to eat an apple? Special plead: you don’t understand the subtle Doctrine of Free Will. Or: How can there be an equally godlike Father, Son, and Holy Ghost in the same Person? Special plead: You don’t understand the Divine Mystery of the Trinity. Or: How could God permit the followers of Judaism, Christianity, and Islam — each in their own way enjoined to heroic measures of loving kindness and compassion — to have perpetrated so much cruelty for so long? Special plead: You don’t understand Free Will again. And anyway, God moves in mysterious ways.)

Tuesday, November 15, 2016

How To Deal with Trump type Question

A reader writes: "I have a boss that's like a twin clone of Donald. He's "larger than life", imposing, snappy and controlling and folks tremble when we are in a meeting with him. He's unhappy with my reports (I'm a Controller at a middle market company), gnashes his teeth at me and often says to me: "What's this? You call this a report ?", "I know what you're up to.", "Relax, we are the good guys", "We've got one for the ages.", "Do you catch a breath when I look at you?" "Shit storm ahead, what color is your parachute ?" "See what you made me do ?" or one morning "Did your wife wolf down your breakfast ?".

Even on the golf course where he generally is in a good mood, if he loses he likes to blame it me. "If you had your priorities straight...I lost my spine angle because you're terrible!" How do I deal with him short of handing my resignation ?

Answer: You have an easy job. Imagine you had the job of reporting Donald's holding positions to him. Reports say Donald's worth 3.74 Bn as of 2016 but he says is $10 Bn. "Snappy and controlling", if I had a dime every time I heard that...First, please note I'm not going to write you on how to be indispensable for your position or title or on how to deal with demanding bosses. Most if not all bosses are demanding. I can make some suggestions if you think you are being bullied. Also, I will not lecture office politics in this post. You should already have a handling on that. If you haven't established some sort of bonding with your boss outside of work, you should do that too. Women bosses can be just as nasty as this male boss, if not even worse.

1. Rearrange the setting or office environment if you can. Rearrange the furniture, maybe the room where you are having these interactions. Or next time you see him make it in a different office, not his, not yours. Bullying works on predictability. Familiarity breeds contempt.

2. If you are driving with him somewhere, slam on the brakes. If you're at a business lunch, lunge forward into his space. You can go into a frenzy saying stuff like "They're trying to poison me with a kilo of salt in these veggies" or "They distilled pee into this wine". At one point, your boss might try to calm you down, seeing that you're out of character. You need to thank him for saving your day.

3. Take your boss out on a hunting trip. Once there, leave him without a rifle and any help for five hours. Life is brutal and that is an unknown experience to powerful people. Power comes from having power over people. At the end of the day say you lost him. He will get mad but he may see you helpful. A hunting trip can be substituted for anything that is not a carefully scripted experience.

Saturday, November 12, 2016

Post election analysis

“A successful man is one who can lay a firm foundation with the bricks others have thrown at him.” – David Brinkley

The Presidential election came as a surprise to many, and the question is: How did Donald win ? Was it by taking the white majority vote of unsatisfied voters leery of the political establishment ? Here are some answers I offer:

  1. Masculinity is in. Trump won by being unapologetically Trump. Trump went into every rally and discussion knowing that he will win. Trump won by defiance. Trump won by being an alpha male. An alpha male will not stand back for a second. Trump won the vote of male millennials. There was no opposition. The youngest male voters saw a choice between the alpha Trump and a frail grandmother (Hillary). She never stood the chance. If the Democrats fail to cultivate an alpha personality they will continue to lose. Civility is out. 
  2. Trump won by having the frame of of a winner. Trump deflected every criticism that came his way. It was as if he had a a shield and everything they threw at him was going right past, not even touching. 
  3. Trump won on personality, "attack dog" type. A bully needs a bully. Hillary could not defend herself against the feral, incessant attacks of Trump.
  4. Trump was the Twitter candidate that used social media to stardom. Of course, it pays to be a celebrity. He was the star of the Celebrity Apprentice Show, taking it to the next level. Americans love their celebrities, and both critics and fans of Trump were fond of the former star. Trump loves the spotlight and it showed. 
  5. Trump's tactics unraveled the political norms. Trump sidestepped his GOP rivals with those same alpha male tactics (see 8.)  These are the same bare knuckles rules that work in the hood. Political appointees should study them to know how to fight rather then fall like feathers. How do you fight a bully, in your company, in your organization ? How do you fight a bully boss? How do you fight a Trump? I may write about it at a later date.
  6. Trump's brash salesmanship won over his supporters. His sometimes infantile remarks were the delight of the public. "Trump’s critics argue that he seems thoughtless and unreflective but that is precisely the source of his power. The impression Trump conveys of being out of control— but also uncontrollable— is better seen as a force emanating from the collective American id than as the babblings of an individual."-Eli Zaretsky . Trump's unabashed narcissism: people loved it. 
  7. Trump's bashing on P.C : the anti-P.C. vote
  8. Trump's re-framing of complaints: "You are worse than me because you ..." is precisely how the average person thinks and fights. No refinement there, no scripts.
  9. WWSJD ? What Would Steve Jobs [have] Done  I sometimes ask myself . I wish Steve Jobs were alive.  Don't you ? A New York real estate salesman vs. the tech supersalesman. But Jobs wasn't interested in the Presidency, not even remotely. He wasn't power hungry.
  10. During this election there was no mentioning of God, not even a whisper. Is this a harbinger of things to come ?
What's next:

Monday, November 7, 2016

Andrew Caspersen sentencing

Andrew Caspersen, a "scion" of Wall Street was recently sentenced to four years in prison for defrauding investors including friends, family members and a charity foundation out of $38.5 MM in a Ponzi-like scheme.

That sentence came out the lower end of the sentencing guidelines, as prosecutors have sought out a 15 2/3 years sentence.

Andrew Caspersen worked at Paul Taubman PJT Partners Inc before his arrest in March, Reuters reported.

Apparently, Judge Rakoff was swayed by arguments from the defendant's lawyer that Caspersen's addiction to trading stock options was "akin" to a gambling addiction. "In February, he made so much money that he could have payed back everyone and still had $60 MM left over." (NYT).

Unfortunately, this case again brings attention to an isolated bad actor in the finance industry. Already the finance industry is under intense scrutiny from regulators and the general public into example of "excesses" that all to often become the leading narrative. The [more than] 99% [to borrow the headlines] of finance workers are hard working individuals who work hard, have the highest ethics and morality and contribute to their community and constituency. Wall Street is the highest job generating engine that I know, its effects reverberating into the national economy on multiple levels.

When judging the fairness of a sentence, I look at:

Saturday, November 5, 2016

Attaining great function in life

The great book "The Book of Family Traditions on the Art of War" by samurai Yagyu Munemori gives a shrewd account of what attaining great function is:
"When marvels come forth immediately and naturally at the appropriate time because the potential is always there within, this is called great function."
"Encountering someone with the great potential ia like a mouse running into a cat." In the warrior's view, the mouse is mesmerized by the cat.

Have you ever encountered someone with great charisma, with stalking power?

Not talking about physical beauty and prominent features here, but that someone with an aura of seducing strength, warmth and comfort. Someone that's still in your mind long after they're gone. Where does that come from ? That comes from "great functionality" and the samurai tells us "All the great positions, grabbing a blade, kicking someone down, are great function when you attain independence, beyond what you have learned." 

In the battlefield,  "It is the swordless art of not getting killed when you have no sword."
If you have no sword, than what do you have ? You do have your mind, presumably. What kind of mind ?

"It is the mind,
That is the mind,
Confusing the mind,
O mind,
To the mind." -P. 101

This riddle of "no mind" can also be described as the flow mind or non-attached mind. "If your mind stops and stays somewhere, you will be defeated in martial arts."-page 105 

Do you have the "quiescent" sword ? 

"When you stabilize the spirit in situations where swords are quiescent, thereby all sorts of marvels appear in the hands and feet, causing flowers to bloom in battle.
The spirit is the master of the mind. The spirit resides within, employing the mind outside. This mind, furthermore, employs psychic energy. Employing psychic energy in external activities for the sake of the spirit, if this mind lingers in one place, its function is deficient.
Therefore it is essential to make sure that the mind is not fixated on one point."

It seems the mesmerizing mind is the "no-mind", not fixed to any particular destination, outcome or spatial thing. Can this be applied in today's world ?