SharperDingaan

The reality is that every job is only worth so much. To get the job done, the employers choice is to either use capital/technology - or people, and demographics largely drives the CSR decision. When your home has lots of young people (China, India, etc) needing a job, use people; when there aren't many young people (Canada, Japan), use technology. Why? Because if there are no jobs, there will be unrest, and your privilege is at risk. Riots happen in poor neighbourhoods, not rich ones - for a reason. For most people, comp is a measure of worth, and cash the settlement mechanism. At the lower rungs on the Maslow Hierarchy this benefits everyone, thereafter it becomes progressively more toxic as one rises up the pyramid. A few at the top, behaving well, is inspirational. 20% at the top, behaving like arseholes, not so much. Amongst the already rich, cash is just a counter. CSR would argue settlement via other currency - prestige, social standing, etc. The behaviour thing has long been recognized as critical, as in the divide between Old and New money. WEB, Munger, Gates, etc. behave very differently to an Ackman, and many HF managers. They know that their privilege is a social licence - granted by you and I, the people. Notable, is that this doesn't really change as you move across the cultures. It just executes differently, according to local custom. SD

CEO pay to the average/median/lowest paid, is an often cited stat - supposedly the higher it is, the more abusive the comp structure. But do any cursory dive into the numbers, and it's clearly not an apples-to-apples comparison. Most large companies prefer to use take-home pay - as it excludes bonuses, and keeps eyes focused on the size of the bi-weekly cash flow obligation. A 1OOk/salary, less 30% in payroll deductions, is $2,692/pay. A 50K/salary, less 25% in payroll deductions, is $1,442/pay. The difference in life-style is < 2x (2692/1442) the bi-weekly net pay. Most companies cap salary at 120K/yr and 33% deduction, or $3,076/pay - about 2.5x median bi-weekly net pay. The rich get richer because of the risk they take, and the incremental skill brought to the table - leadership is essential, but results reflect the collective effort of ALL employees - not just the leadership. We would ALL be a lot better off if 'company result' bonuses went direct to a locked-in pension plan, versus our pocket. Simple change, but it's impact is fundamental - as the biggest participants in the plan would be current/past managements, familiar with the risks the company is taking, and the current market. ALL members of the plan benefit. Small changes, straight-forward to execute - but they make a real difference. SD

Where you are matters. Much easier in a Germany, or a France (where this is more the norm) than in a US or Mexico. Size and structure matters. Much easier in smaller firms &/or private ones. Market composition matters. Most businesses (70%) are smaller businesses Instability matters. Nobody likes change, especially radical change. Typically 'change' progressively dams up behind a 'wall of resistance'. Eventually the wall fails, and the change overwhelms everything in its path. We then pick up the pieces and build something new. SD

It really comes back to Corporate Social Responsibility (CSR) - the responsibilities that a company has to its various stakeholders. Sadly, in most business schools - maybe a single class within a single 12 week course, and only in passing. In NA, even business ethics (as limited as it is) gets more time. The good news is that network businesses demand a focus on CSR. No CSR, no social licence to operate - and tomorrow's technologies are network based. For most, CSR will be a by-product of change management, and Covid-19 will remove much of the current resistance. In many companies, standard practice is six-months to adapt to Covid-19 related change, and thereafter a package. Black Lives Matter, Me Too, Defund the Police, etc. are all manifestations of CSR - disruption because there is no social licence to continue operating in the current manner. Guaranteed income (70K in the article) is terrifying to many as it removes cheap and desperate labour - forcing radical change in how a business operates, that many will not survive. In Europe, a bar/eatery is typically owned in partnership with full-time employees who also receive both a salary and full benefits - as it both spreads the business risk, and works better for the surrounding community. Very different approach in NA. Do you really see current NA bar/eatery owners being able to easily make such a transition? Everybody eventually has to grow up. Obviously, if you can do competent change management and CSR, you should do very well ;) SD

He's just talking his book. If nobody follows his advice the Q4/Q1 opportunities can be more reliably identified. https://markets.businessinsider.com/news/stocks/stock-market-outlook-sam-zell-invest-significant-opportunities-end-year-2020-8-1029537249# "One industry containing this uncertainty is retail. Zell said he used to be one of the largest retail owners in the US, but called the industry a "falling knife" that hasn't reached its bottom yet. The industry hasn't fully felt the impacts of ecommerce yet, and Zell is hesitant to invest in it right away. The pandemic has led to low transaction levels, but as activity picks up it will be easier to identify potential investments, the investor famous for buying distressed assets said." The obvious target is the retail heavy REIT's, and conversion of the surplus space into large condominiums - the mystery is to what extent 'burb WFH becomes the norm. Who is going to buy those condominiums, how many, why, and at what price. Then how do you move the remaining space when retail and office are over-saturated. SD

Think of the public ledger (PL) as a ledger that that any member of the public can access, but with only 3 or more copies distributed amongst private entities. New activity updating on each DB in real time, and independently. The individual DB's validating against each other multiple times/day, and resolving any differences via an algorithm. One of the DB's residing at either the Central Bank or the Industry Regulator. It's the ultimate 'toll-booth'. Think of any given nation having MULTIPLE public ledgers, and the worlds public ledgers together - as the Internet of Things (IoT). As with everything there will be consolidation, and the obvious first choice is money itself - the worlds reserve currency NO LONGER being the currency of just one nation (ie: USD). Disruption isn't just a word. SD

The reality is that there's just too much RE - and a lot of it is stranded. A NYC has so many bars/eateries, because so many travel in/out of the city every day - reduce flow by 20%, and you clearly don't need all the existing bars/eateries. The demand for bars/eateries didn't just displace to the 'burbs either - WFH people don't eat/go out anywhere near as much as they did when travelling to/from the city core. Rational capital allocators will simply asset strip RE, and reallocate the capital to 'hotter' categories of the utility segment. Less capital in the asset buy/sell cycle reducing prices. Growing unpopularity reducing sentiment, and compressing multiples. Hardly surprising that owners are very nervous - there's lots of uncertainty, and very little upside. The same $ for a place in the city, gets you a much bigger place in the 'burbs - and better schools/infrastructure. All you need to make it worthwhile, is good internet, good public transit, and ability to do WFH at least 2 days/week - not a big stretch. If a company allows 2 days/week WFH, it only needs 60-70% of the current space. Split that space between core and 'burb 'rent a space', and the annual rent expense comes down by HALF. Sure, industry will argue against WFH, but it's pretty much a done deal. Industry just doesn't want the disruption. SD

Crypto grew up in the tech community – as the shiny new toy, all very mysterious, very cool, and relatively simple to code. We think currency, because of the success of Bitcoin - the first practical, fully libertarian currency. Combined with options, BTC is by far the ultimate solution for low volume, completely off the grid, anonymous transactions. The innovations are the DL and the Smart Contract. By itself, at the volumes required for practical applications - DL is utter sh1te. Block verification takes too long, sucks up too much energy, and the mining community is not independent. It is technology with a VERY limited market – the $5 mouse-trap in a 10c market. Almost all practical applications run on a monopoly PL – a master data base integrated with smart contracts. The PL is just another business funded IT project - business ‘tells’, IT ‘executes’. There are no miners, no utility token sold for cash to pay the coders and developers, and no buy/sell of token as investments. Grown ups rule. For most businesses a PL integrated with smart contracts is becoming essential, and many will just outsource to a cloud provider. What used to require a cast of thousands, and millions of $ – is no longer a barrier to entry. However, the mind set is completely different – coders and developers just don’t have it. The deal-breaker is the corporate social responsibility around implementation. The initial annual cost for a very modest business may be the equivalent of 3 staff, excluding benefits – but save the cost of 5 staff including benefits and RE space. Assuming 50K/head and 25% benefits – about 162.5K/yr, excluding RE savings. With Covid-19 likely to be with us for some time, and most economies in various phases of ‘re-start’ – not enough to warrant laying people off tomorrow, and in quantity. Obviously, interesting times. SD

Just rolling in trim proceeds, and swing-trade gains from PD, where I have a long-standing position. It will be a while before drilling services return, but in the mean-time I can accumulate a meaningful quantity of shares. I'm fine with a 10x multiple, 7-years out, in a TFSA account. SD

ESI, CPG and MEG SD

The reality in a communist state, is that your lifetime collection of 'assets' can be taken away from you at any time - you enjoy the benefits because the party allows it. However, too much money concentrated in too few (& the wrong) hands - creates resistance that has to periodically be stamped out; fail to act, and you get Russia's oligarchs. Housekeeping. China/'The West' are just Yin/Yang in motion - separate cultures, that need each other, with influence waxing/waning as the wheel turns. Thing is, that whether you produce products or services - you will consume materials; IP, minerals, energy, etc. Maintaining IP is all about rate of innovation, either grow it yourself - or steal it from others. Cultures 'breathe' by temporarily exchanging people with other cultures. Students, merchants, diplomats , etc. is peaceful interchange, conquering the other guy (Genghis Khan) - not so much. But fail to 'breathe' ... your culture becomes irrelevant, and dies. China has been around for a very long time. Today's Hong Kong is a prize, very similar to the German rocket scientists at the end of WWII. Lot of very good (& mobile) brains, lot of people trying to grab them, hardly surprising that China is 'less than happy'. Best China can hope for in another Taiwan ... Bet on where those people go, the support they get when they arrive, and what they do with today's technologies. What was done with Huawei, can easily be done in 'the west' as well. People, NOT money, is the limiting factor. SD

If ‘investing’ was purely formulaic, we would all use an algorithm. The computer can do it a lot more reliably than you can, faster, and doesn’t make mistakes. We just don’t want to hear that WE'RE the liability, not the computer! Actual, and forecast, are of course - very different. You’re there because you can ‘handle’ the ambiguity better than the algorithm can - but thumb sucking is an indicator of process break-down … discomfort with the portfolio weighting, the roll in/out, consequences, etc. AND its risk management. Hard for the ‘diva’, everyday business for the ‘boiler-maker’. Ultimately, it comes down to what works best for you. Everyday, the computer gets better at handling ambiguity. You? Not so much – almost by definition, the ‘diva’ thing is a time-limited engagement. Comes the day the computer is better than you, use it – and switch to index trades. Put diva’s and boiler-maker’s together, and you get an investment firm. Put the ‘do more – whine less’ diva’s and boiler-maker’s together, and you get partnerships. Different strokes. SD

There are really only 2 cryptocurrencies of consequence, BTC and ETH. Neither of them useful as an actual currency to pay for things. BTC will get its day in the sun, because of collapsing global currencies. Gold is great, and anonymous (once everything is melted together) - but in quantity, not easy to move around. To facilitate movement, BTC is the obvious anonymous choice. ETH will shine, because of its versatile stack, and increasing business understanding as to how to use it - Covid is just accelerating the process. The biggest beneficiary is marketing - as you can't grow a business, until you can sell more product. SD

Everytime you buy/sell - 2 weeks after the transaction, you are either going to be right/wrong/no-difference. That's reality, and all the research/analysis in the world isn't going to change it. Munger just recognizes that whether 2 hours of basic analysis, or 1 day of sophisticated analysis, the outcome is the same. You just feel better about the decision. SD

Just keep in mind that you can buy that balance sheet later at a lower price, and with more historic data points. You also want SUSTAINED improvement, not just a short-term bump following border re-openings. Devaluation is just getting started - if the USD has to debase by 15%, do you really think that the Mexican Peso is going to able to debase by JUST 15% as well? (to keep the USD/Peso FX rate the same). When competing countries are also aggressively devaluing to promote both exports, and domestic production, as much as possible? SD

What's the rush ??? Mexico, LatAm, SA, etc. all have Covid-19 ... and are less able to deal with it than the US is. The US is also largely where it is, because of incompetence - which may well change from December onwards. Relative to the US - Mexico, LatAm, SA should be significantly devaluing as time goes on. Maybe 15-20% over 1 year? Airlines have to 1) get people flying again, and then 2) get people flying to Mexico, LatAm, SA, etc. How are people going to pay for those flights? US trial balloons have favoured tax credits for DOMESTIC travel/tourism, NOT international - winter sun breaks in the US, not Mexico of SA. Sure, there will be more flights - but Mexican/SA growth will depend primarily on DOMESTIC travel/tourism. Minimal growth for 1 year? 1 year out you KNOW if more people are flying again, AND where they are going. Devaluation has also very likely lowered the (USD) share price quite a bit. You will also know if airports are STILL the best infrastructure opportunity for your $. Just sit on your ass for a year, and let the thesis both evolve and de-risk. SD

Sadly there ain't many like 'smiling jack', and probably just as well - as the man was a hell of a salesman, and ahead of his time. Domes innovations contributed hugely to today's LAPES methodology - especially when the drop has to done in the dark, just above sea level, and at a tiny artificial island surrounded by flares! https://en.wikipedia.org/wiki/Low-altitude_parachute-extraction_system SD

Long time ago I had the good fortune to work in one of their companies. When they were younger they were very smart folks, but if you weren't family, or of the persuasion, your opportunities were pretty limited. Biggest takeaways were the difference between YOUR money, and other people's money - and the ability to swear competently in Yiddish! Ultimately everybody gets old, and families have to make a decision. Founders have to step away, and put down the kool aid. Sadly, for them it didn't go so well, and it was the family that paid. It would seem that THERE IS A TOXIC LIMIT as to how large a family business can become - and that the stronger the individuals are, the more toxic it becomes. When business stops being 'fun' - it's time to either walk away, or sell off parts of the business until it becomes 'fun' again (the tile store). Do something else with the proceeds. SD

Keep in mind that a crowd-funded RE platform is typically ‘last resort’ lending. The ‘opportunity’ you’re being offered is one that the banks (and their credit departments) have rejected. Many banks, not just one or two. As soon as the borrower is able, the highest cost debt is refinanced – your investment. You take a lot of risk, and if it works out – don’t get any extended benefit. Worse still is that many are NOT going to work out – and there is not going to be an exit market to sell into (ie: you ride to zero). REIT’s are professionally managed, and liquid investments. These? Not so much. Partner up to buy a place, most don’t crowdfund strangers they don’t know. What’s the real purpose? Income, gains, - or just something to do? SD

GMP vs DPM pretty much tells you everything. SD

A useful exercise is to download the Nymex WTI and Gold price history, from Mar-2020 onwards. Set the gold price at the Apr-17 close (day before the WTI price collapse), and recalculate the WTI history after PTD debasement (using gold prices as the inflation proxy). Adjusted WTI peaked at USD 39.70 on June-05, and has been in DECLINE ever since. As at close of trading yesterday (Aug-07), the adjusted WTI price since June-05 is DOWN 14% - which implies that incremental demand is drawing down inventory. The unadjusted WTI price (Aug-07) since June-05 is UP 10% - a 24% price gap! 124% of adjusted WTI, as at close of business yesterday, was USD 42.57. The closing WTI price of USD 41.22, implies that the sizeable global inventory of oil is lowering price by roughly 3.2%. Do the same thing with the leading economic commodities. Very different views ;) SD

The best, and most anti-fragile asset, is you - the IP in your head, and your remaining length of time in the workforce. If inflation comes back - simply collectively withhold your labor until you are better rewarded. If the economy craters en-mass, there is little choice for the authorities other than mass stimulus (make-work projects, benefit reliefs, skills upgrading, etc.) - free money to go back to school, and upgrade. Put bluntly - you have a long straddle on the economy, and the more volatile the economy, the more the straddle is worth to you. Fortunately, very few realize that ;) SD

I hear you, but for Canada/US border crossing purposes, TP is classified as an essential product along with food, medical, some manufacturing, minerals, and energy. Everything else is non-essential, even if it is a Canadian good (or imported into Canada) for Canadian use, just passing over US Rail as the most efficient way of getting from A to B. Try getting your hands on quantity of either cedar or pressure treated dimensional lumber, east of Manitoba - trees everywhere, yet shortages of wood! SD

Inflation is just incremental $ chasing the same TOTAL quantity of goods. $100 spent over 10 items is an average $10/item, $105 (5% inflation on $100), over the same 10 TOTAL items, and the average price/item is $10.50 (105/10). Pretty straight forward. So where's the inflation? Covid-19 and the global trade war, have reduced the TOTAL quantity of goods. Current spending (Covid-19 related) is clearly higher than it was months ago. If total spend is up 15% ($115) and total quantity is down 10% (9), the average price/item should be $12.78 (115/9) - and inflation should be 27.8%/yr (((12.78-10)/10)x100). ie: very high. There are only 3 possibilities .... 1. Current spend is not that much higher than it was under successive rounds of QE. Sure, there IS large incremental spend - but divided over the very large (QE spend inflated) base spend? % wise, it's just not that much. 2. The current total quantity of goods available is HIGHER than it was. Very unlikely, as there are shortages of goods all across the US and Canada. The US/Canada border has been closed for some time, and anything non-essential can only be met from existing inventory. 3. The inflation has been absorbed in global foreign exchange devaluations. If the US, and the Euro debase at the SAME rate, the RELATIVE US/Euro FX rate doesn't change much (what we see), if the compared country is debasing faster - we see a worsening in their FX rate (3rd world currencies) Gold is often viewed as a hedge against fiat currency debasement. Pick a date, as to when you think the adverse Covid-19 lock-down effects started. March-31-2020? The closing price of gold, 3/31/2020 was USD 1583/oz. The closing price yesterday was USD 2069/oz. If the total supply/demand of gold available for trading over the 4 months (Apr, May, June, July) did not change significantly - the price change must be due to inflation About 31% PTD ((2069/1583)-1)x100 - guess where the inflation went! If PTD debasement is this large - shouldn't you have heard about it elsewhere, as well? You have - all the discussion on US loss of reserve currency status, and any cursory scan of 3rd world FX rates over the last 6 months. The real question is why is it that 'retail' can see this - when apparently institutions cannot? SD

Comes back to ones options, and the time horizon thing: Short, Medium, Long. Short-term (0-5 yrs) the economics point to rent. Change in lifestage, commission/closing cost recovery, freedom restriction, etc. Medium-term (5-15 yrs) the economics point to RE management. Primary residence only, &/or a string of rentals. Long-term (15 yrs+) the economics point to FI investment only - REITs, bonds, prefs, div payers, etc. If you come primarily from the trades, &/or real estate - RE investment is a natural extension of what you already do (you have lower operational risk). If you come primarily from the professions, it's a different game. Trades vs Professions is not mutually exclusive -but in NA, the number of people who successfully straddle both worlds is small. North Americans have professionally managed pension plans - in many other parts of the world, your personal RE is your pension plan. RE as a vehicle to wealth and/or a risk management tool, is one thing - RE to use is quite another. It pays to be clear on your purpose. SD