Capital Allocators Monthly – March 2020

Capital Allocators Monthly – March 2020

 

Announcements and Gratitudes

* The show might go on.  Capital Allocators LIVE!  is scheduled for June 18th.  We have a month before we need to decide what to do. If we postpone the event, all tickets holders will have the option to roll to the new date or get a refund.

* Calling all listeners for show quotes!  Every Thursday, I post quotes from each episode on LinkedIn and Twitter. Big thanks to Christopher Seifel, Sam Cates, and Cam McKendrick for loyally sending me their favorites and making this happen. Please join them – email me your favorite 3-5 quotes each week.

* We’ve been saturated by bad news on the health and economic crisis. What’s worse, bad news sticks with us far more than good news. I’m taking a different approach with this month’s email, focusing on silver linings, long-term thinking, and life lessons.

Reading (Ordered by reading time: tweets first, books last, and blog posts and articles in between) 

1a.Silver Linings.  No one has enjoyed our stay-at-home seclusion more than this guy.

1b, Silver Linings. A tweet of the current state of affairs, from Christie Hamilton (@roichristie):

“Update call quote of the day: “[Our quarantine] is like Vegas…we’re losing money by the minute, cocktails are acceptable at any hour, and nobody knows what time it is.”

1c. Silver Linings.  Three quotes of hope, from the world of podcasting.
“To ease your anxiety during the COVID-19 pandemic, remember, “We’ve done this as human beings before. We’re survivors. We have generations of ancestors behind us cheering us on, and saying, ‘Yep, we’ve lived through some tough stuff too.’” – Jack Kornfeld on Tim Ferriss Show

“We will defeat COVID-19; here’s why: “For the first time in human history, all the smartest people in the world are focused on the same problem at the same time and can communicate.” – Scott Adams on The Pomp Podcast

“This outbreak could be as much an accelerant for biomedicine as the internet was for software.” – Balaji Srinivasan on The Knowledge Project

2. Silver Linings. The economic stoppage cleaned up rivers in Italy (tweets here and here), dramatically reduced pollution in China, and decreased pollution in the US. These are small wins in the scheme of things, but perhaps will lead to more significant action to improve the climate when this is all said and done.

3. The Surprising Cost of Volatility. I wrote a piece ten years ago that described the flawed investment structure of leveraged ETFs. The punchline: don’t judge the book by its cover. Leveraged ETFs are day trading vehicles, lose money for investors over time, and are particularly damaging through periods of high volatility. It shouldn’t come as a surprise that Leveraged ETF Closures are Piling Up (free subscription required).  Then again, I wrote the piece ten years ago and these vehicles still exist.

4. Stock Buybacks from Matt Levine and Ben Hunt. Two very insightful pieces on opposite sides of the upcoming debate about stock buybacks – Matt Levine argues that American Airlines would require a bailout even without buybacks and did nothing wrong. Ben Hunt from Epsilon Theory dubs airlines a public utility that should be required to retain capital for cyclical downturns. They reach different conclusions, and yet their views are not mutually exclusive.

5. Nine-and-a-Half Myths on Investing. Larry Siegel discusses a set of consensus investment beliefs that he believes are wrong. Well worth a few minutes to think through each of these as you make investment plans through the turmoil.

6. The Road to Self-Renewal.  John Gardner delivered this speech about self-growth in 1993 at the age of 81, which Greg Fleming shared with me. This socially isolating time offers a wonderful opportunity to reflect on our life journey.

BONUS.  Making foods crispy.  Gorging on potato chips these days?  Here’s why.

Listening
Capital Allocators
First Meeting Episode 16:  Mike Mauzé – Escape Velocity for CPG Brands at VMG Partners. Mike heads a leading, tightly closed private equity firm that invests in consumer brands.  You’ve heard of the names of the products of their portfolio companies (Kind bars, Pirate Booty, Pretzel Chips, Perfect bars) even if you haven’t heard of VMG.

Episode 124:  Christie Hamilton – Tweeting on Allocation at Children’s Health.  Christie is the most followed allocator on Twitter (@ROIChristie) and sits for her first podcast.

Episode 125:  Greg Fleming – Building and Running Rockefeller Capital Management. A gifted leader in the asset management space, Greg speaks of his career and current seat at the helm of Rockefeller Capital.

Episode 126:  James Aitken – Systemic Risk in a Crisis.  James joins again for his real-time take on the impact of the pandemic on the financial system.

Episode 127:  Michael Mauboussin – Consilient Observations in a Crisis. Michael applies his frameworks of behavior and decision-making to the current situation.

First Meeting Episode 17: Ben Inker – Value Investing at GMO. Ben shares the continued case for value investing and the application of his thought in the current market turmoil.

Best of the Rest
Unlocking Us with Brené Brown.  Brown is incredible at articulating the experience of being human.  She’s just launched a podcast that I suspect will be extraordinary.

Invest Like the Best through the crisis.  Patrick did a terrific job putting out real-time episodes across energyventure capitalsmall cap value, and small business.

Have a good one,
Ted