News

I’m Back, Baby!

It’s been a while since I’ve posted, but that’s because I’ve been busy with a new baby!  Baby and Mom are happy and healthy.  This is a pretty big difference from our first child who spent a ton of time in the hospital during his first two years. There’s a pretty big gap between our two kids (almost 8 years!) so a lot of people are asking us if we are ready to go through all the newborn stuff again.  Are we ready?  We’ve been playing the child-raising game on hard mode for the past 8 years.  We are reveling in changing diapers, feeding, and just holding the newest member of our family. Our child-raising experience is anchored in years of NICU units, dialysis treatments, and navigating various hardware that came with having a baby with ARPKD.  While it’s not exactly a vacation to wake up at 2 in the…


Has the Dow Left You Dazed and Confused?

Let’s set aside the fact that the Dow Jones Industrial Average is a flawed measure of the overall stock market.  The media, your parents, and their parents have all accepted the Dow as the standard.  Besides, over time the Dow does move in line with the overall market.  So instead of arguing semantics, let’s talk about the headline: a 4-digit drop in the Dow today along with a 600+ point drop on Friday. While the average person associates the Dow with the overall market, we should also recognize that the media loves the Dow because of the potential for attention grabbing headlines.  To paraphrase Wooderson in Dazed and Confused: That’s what I like about the Dow, the points get bigger, but the size of the returns stays the same. On average, the S&P 500 experiences a drawdown of 14% every year.  If we apply that average to the Dow, it would…


Doing Good While (Hopefully) Doing Well

Each year, BlackRock’s Chairman and CEO, Larry Fink, writes a letter to CEOs of “leading companies” in which BlackRock’s clients are shareholders.  Last year’s letter encouraged long-term thinking in the context of a world that is increasingly focused on short-term volatility.  This year’s letter strikes a similar tone, but goes a step further in mentioning environmental, social, and governance (ESG) matters as factors CEOs should be considering in their long-term strategies.  Socially responsible investing (SRI) is gaining traction among investors.  Is this just kumbaya investing or is it for serious investors, too?  Why would anyone do this?  On the other hand, why would anyone NOT do this? The Basics ESG and SRI are sometimes used interchangeably, but they are different.  SRI is the broad overarching investment thesis of the movement.  ESG filters this mandate through three lenses, environmental, social, and governance.  SRI is open to personal interpretation just like the…


Are You More Likely to Cheat with Bitcoin?

I recently spoke with a client who wanted to know what could go wrong with bitcoin.  We talked about bitcoin and the monetary system (not a risk now, but who knows in the future) as well as black market applications (greenbacks work just as well or better here).  The question stuck with me, though.  What could go wrong?  I remembered attending a session at an IMCA (now the Investments & Wealth Institute) conference with Dan Ariely and something clicked.  Ariely’s research suggests that the further we get from money, the higher the likelihood that we will cheat. Check out his TED talk here.  He performed an experiment where subjects were given a limited amount of time to complete a number of math problems and would get paid based on the number of problems they completed.  Subjects who handed in their papers got an average of 4 problems correct. Lots of…


Bears, Beats, Bitcoin

In honor of my favorite vignette from The Office… Question:  What kind of bear is best? ‘Tis the season for market predictions (and forgetting last year’s predictions).  The optimists predict low single digit returns for equities.  The bears predict bear things.  Which means no one expects even decent stock market returns.  Now more than ever it makes sense to hold a portfolio that doesn’t require you to predict the future to be successful. Bears Eat Beets Schwab’s Jeffrey Kleintop points out that while stocks have gone up every month this year, so have earnings. Battlestar Galactica Bitcoin is going bananas yet again.  Charlie Bilello has tracked bitcoin sentiment via Twitter polls at major milestones which is fascinating.  He also occasionally marks bitcoin’s “market cap” (or whatever you want to call it) which has hit $214 billion.  OMG!  That’s more than Home Depot!!! Calm down, Apple’s cash hoard is around $270…


My Favorite Posts This Week

I try to share good posts via Twitter.  A bunch of people were writing solid stuff this week:   A Little Knowledge is Dangerous – Nick Maggiulli – Surprising stat about survival rates for people lost in the wild.  Kids six and under have a surprisingly high survival rate while one of the lowest is for kids seven to twelve.  Younger kids follow their instincts.  Older kids overthink and panic.  This maps over to investing in that knowing a little bit can lead to devastating over-confidence. Is Robert Shiller Right that Passive Investing is Dangerous? – Cullen Roche, Chicken Farmer – This is a sensible layout of one argument in the active/passive debate, pointing out that the sides often aren’t even debating the same points. How to Deal with Market Moving News – Ben Carlson – Binary thinking and single variable analysis are killers to long-term portfolio success. Backtested Strategies:…


Moar Bitcoin!

After my last post about Bitcoin, I got a lot of, “So… Bitcoin?”  No one has a concrete opinion on this thing except the evangelists, but everyone wants to discuss it.  Skeptics seem more concerned about staying in their lane than dragging down crypto – they don’t understand it, they don’t need it, and maybe it smells a bit fishy to them. I think crypto is an elegant solution in search of a problem and I am constantly reminded of the early internet.  We didn’t see the use of the internet at first, but today it’s a basic utility.  Here’s how I’m looking at Bitcoin right now. What is the Purpose? It’s a way to store wealth.  This is particularly handy if your centralized currency authority is devaluing/confiscating.  With fewer institutions between transacting parties (basically just the network), Bitcoin is a fast and cheap way to send money to someone…


I Changed My Mind On Bitcoin

I changed my mind on Bitcoin a few weeks ago.  A bunch of smart people had made public comments on it, generating buzz.  I was going to write up a short summary for our investment team with pros and cons, ultimately concluding that Bitcoin was garbage.  But then I did some research. I read this Letter to Jamie Dimon which is the best tutorial on crypto-currencies (maybe more accurately crypto-assets) out there. I got sucked in to Patrick O’Shaughnessy’s Hash Power podcast series and have listened to it twice now. I’m convinced that Bitcoin is a real thing that has value.  Is it worth $7,500?  I have no idea and neither does anyone else.  Crypto-assets are an uncharted territory, basically a new paradigm along the lines of the invention of the internet.  Like the internet’s early days, nobody knows where the value lies yet.  The hip thing to say now…


Update on Everyone’s Favorite $37 Billion Hedge Fund

It’s Harvard.  The $37 billion hedge fund is Harvard. More specifically, I’m referencing Harvard’s endowment.  When Harvard announced yet another management change last year, I was skeptical.  It seemed to me that Jane Mendillo inherited a mess created by an intellectual mercenary (who left his next employer under undesirable circumstances as well).  This began a management carousel ending with N.P. “Narv” Narvekar most recently taking over as CEO of the Harvard Management Company (HMC).  Reading the latest endowment report, I think Narv might be able to turn this thing around.  He is looking to improve HMC’s culture, structure, and incentives. The Changes Culture is difficult to change in any setting, especially after so much turnover in management.  Narvekar wants to build a singular team rather than insular tribes.  Getting buy-in from people who have seen several leaders come and go will not be easy.  Narvekar does have an advantage in…


H4ck3d

H4ck3d The big news this morning is the Equifax hack.  One of the handful of companies that compresses your financial life down into a single number got hacked, possibly exposing credit card numbers, social security numbers, names, and birth dates to unsavory characters.  While credit card issuers can just issue new cards, some of the information has no expiration date.  It’s not like you can just log in and change your date of birth or social security number. There are two parts to this story that disturb me beyond the actual hack itself.  First, it seems that Equifax was warned about possible weaknesses in its system and didn’t fix them.  Second, some senior executives sold company stock after the breach, but before it was public knowledge.  This just blows my mind.  I can’t see how these guys avoid jail. This video from CNBC is really informative.  Antiterrorism advisor Morgan Wright…