There They Go Again…Again
In his most recent memo, Howard Marks does a tremendous job highlighting his thoughts on everything ranging from elevated valuations and low prospective returns, to the issues he has with digital currencies and the lack of skepticism surrounding venture capital. We’ve highlighted a few quotes that resonate well with us:
“There’s no easy answer for investors faced with skimpy prospective returns and risk premiums. But there is one course of action – one classic mistake – that I most strongly feel is wrong: reaching for return.”
“I think it’s better to turn cautious too soon (and thus perhaps underperform for a while) rather than too late, after the downslide has begun, making it hard to trim risk, achieve exits and cut losses.”
“The discussion of innovative investments brings me to Bitcoin, Ether and other digital currencies. I’d guess these things have arisen from the intersection of (a) doubts about financial security – including the value of national currencies – that grew out of the financial crisis and (b) the comfort felt by millennials regarding all things virtual. But they’re not real.”
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Simon Sinek on Millennials in the Workplace
To begin with a caveat – we actually don’t agree with all of the ideas in this video. Our entire team at Capitalize for Kids comprises a group of tremendously talented millennials. This quote widely attributed to Socrates (469-399BC) shows the bias that has long existed between generations:
“The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise. Children are now tyrants, not the servants of their households. They no longer rise when elders enter the room. They contradict their parents, chatter before company, gobble up dainties at the table, cross their legs, and tyrannize their teachers.”
All that said, Sinek presents some succinct ideas about why this generation seems particularly challenged in the workplace. There is little doubt that technological change and shifting societal norms have impacted this generation more than any before.
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Death and Life of the Shopping Mall
The death of retail has likely been greatly exaggerated. Amazon has had a massive impact, but the often underappreciated killer of malls has been a much more simple culprit – overbuilding. There is 25 square feet of retail space per capita in the U.S. versus 2.5 square feet per capita in Europe.
Without a doubt, there are many assets trading well below their true value given the hype around the sector’s demise. That said, separating out quality investments is a tall task and we have yet to uncover the right opportunity.
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The David Rubenstein Show: Paul Singer
Paul Singer is the Founder of Elliott Management, one of the U.S.’s most successful hedge funds, having lost value in only two years since inception. Over the course of 36 years, Paul’s flagship fund has achieved a compounded net rate of return of over 13%, earning him the reputation as “one of the smartest and toughest money managers” in the hedge fund industry. What’s equally as impressive is the fact that these results were achieved with about a third of the volatility of the overall market.
In his interview with David Rubenstein, Singer speaks to losses sustained early in his career that led to a ‘risk aversion that still guides his investing today’. By moving away from arbitrage towards a multi-strategy approach, Singer put risk control at the center of his investment philosophy. By doing so, Elliott has been able to smooth returns, reduce volatility and decrease asset-class and single-strategy risks. Today, more so than in almost any other period, this kind of approach to money management is crucial.
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Why Won’t Millennials Embrace the Stock Market
We don’t think the title of this article reflects the content appropriately. A more applicable heading would be Why Won’t Any Generation Embrace the Stock Market? Today, 13% of millennials view the market as the best place to put money for 10 years, with that figure being 28% for U.S. adults. This is despite the stock market returning 75% over the last five years, compared to the more comfortable choice of real estate at about half that figure. Looking at longer term data, a study by professors at the London Business School found that from 1900 to 2011, the housing market returned 1.3 percent per year after inflation, while stocks tended to perform more than four times better.
Data points like this just go to show how important psychology is in investing – tangible assets we can see and touch simply make individuals more comfortable.
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