Late Night Fantasies

It was fun to watch David Letterman on Jimmy Kimmel.

It was once a dream of mine to be interviewed by Letterman and make him laugh out loud. If only my mom had let us have a dog to teach a stupid trick too.

The early inspiration for my weird fantasy began with Johnny Carson.

I had a TV in my room when I was a teenager.

I don’t remember much other than watching Leaf games, Blue Jay games, and Johnny Carson each night.

I used to laugh out loud lying in bed listening to comics like Gary Shandling as they got their big breaks.

The late night genius of Carson and Letterman inspired me to try stand up comedy in high school. I sucked. It was still the hardest and dumbest thing I have ever done.

Because of Youtube, I was inspired to get creative again and I came up with Wallstrip. When CBS acquired Wallstrip in 2006, I hoped/fantasized that someone from Letterman would ping me and I would get my shot making Letterman laugh.

Crrrrrrickets!

I am excited David will be back with a Netflix show and plan on teaching Bagel and Lindzee (our two dogs) a really stupid trick to send to him.

When there is a will there is a way.

The Millennials Shall Inherit the Earth and The Financial Revolution

Here we are in 2017 and Millennials will inherit the largest amount of personal wealth of any generation — and personal finance apps are emerging to seize on this opportunity.

If you follow me, you know that for the last 11 years our Social Leverage funds are very long early stage financial services (fintech) founders and companies (Wallstrip, Stocktwits, Etoro, Chartiq, Apple Pie Capital, Produce Pay, YCharts, Robinhood, Civic, Lifelock, Stacks Media). We have a few more in our latest fund that we have not announced.

In 2014, after we invested in Robinhood, I wrote the following post with an interview I did with Baiju one of the founders. Recently Robinhood raised $100 million at a $1.3 billion valuation.

While I often mock the banks, I have been long PUBLIC financial service companies the last 5 years like Schwab, Paypal (here was my buy on this blog), Visa, Mastercard, NOAH, Interactive Brokers (no position today unfortunately) and recently Goldman Sachs.

My friend Vinny who is the founder and CEO of Civic (one of our investments), penned this incredible piece last week titled ‘The Financial Revolution‘. Everyone should read it top to bottom. Some of my favorite riffs:

The stock market has been largely closed to small cap, high opportunity IPO’s. Even when companies do IPO, venture capital & private equity funds have already loaded the companies up with so much capital pre-IPO, that the general public doesn’t really get to participate in the growth of company once it’s public. Companies do this to maintain control for longer, but by the time they go public the risks are mitigated to such an extent that you’re not going to get a mediocre returns, with albeit lower risks. Low risk, low reward.

Millennials, who saw how the financial system destroyed their parents savings and wealth in 2008, are eschewing it. Banks are unable to cater to this sector adequately and are quickly trying to attract this generation, but with products that are not serving the needs of the market.

Tech savvy millennials typically have high disposable incomes, and are happy to throw it all into projects that even have a slim chance of creating real wealth for them. It’s the mindset of younger folks who are trying to create asset bases for themselves — they don’t have kids or high overhead lifestyles, and don’t care if they lose their shirts as much as if they were 40+ with families, college savings, etc.

Global capital formation is changing, rapidly. Companies can do an ICO and raise tens or hundreds of millions of dollars within hours or days, without needing to be backed by a VC fund. So, where is this money coming from? It’s coming, in part, from millions of young, tech savvy kids worldwide who previously did not have any opportunity to participate in the high risk, high reward technology that has upside which could be life changing, like the value creation effects of Ethereum or Bitcoin.

People, anywhere in the world, are now able to build high upside crypto portfolios with hundreds or maybe thousands of dollars. These portfolios give them the opportunity to make hundreds of thousands or even millions of dollars. They don’t care if they lose the money, they don’t want 5% a year return either. They’re happy to buy hope, and take the risk because 5% won’t change their lives, but this could. The reality is that single digit returns are not going to help those who don’t have much to invest — so the mentality is akin to the notion of buying a lottery ticket when you don’t have enough to buy a single share of a quality company. Yes, it does start to look to more like gambling and not investing, but that’s pretty much what crypto has become, for now.

With enough high risk crypto assets, you can begin to construct an Efficient Frontier portfolio, that can eliminate much of the risk as a sector and still offer sufficient alpha. How much of your portfolio you choose to allocate to crypto is still your choice, but the point is that we need lots of high risks bets with the hopes that 1/10 or 1/50 pay off at a rate of more than 100–1 to make it all worthwhile. In some ways, this is what VC is supposed to do, but the shape and structure of VC prevents this as partners can only take on so many investments, nor do they have the ability to make smaller bets and spread them out more (although accelerator firms like YCombinator have managed to do something like this).

The global financial system has meant that stock markets and investment opportunities have been very regionalized for decades. When I was a 20 year old living in South Africa, I could only invest my money on the Johannesburg Stock Exchange and into South African technology companies. I couldn’t open a US account and invest in US stocks or bonds like Yahoo or AOL. The crypto world doesn’t work like that — crypto assets now have global audiences instead of regional ones, which means there is more money chasing these assets — through vehicles that don’t operate like traditional stock exchanges.

Obviously the smartphone is at the center of this revolution that Vinny speaks of and does not get enough credit.

One of my favorite investing millennials is Stefan ‘Avocado Toast’ Scheplick who is an editor at Stocktwits. He lives a frugal life and has learned to not just love the markets, but to take a little bit of money from them. He has the bug. He is fascinated by markets and learning the language. Yesterday he wrote this great post titled ‘What I Learned From the Investor Letter Warren Buffett wrote after the Financial Crisis‘.

The millennials have smartphones, zero cost investing, access to global markets and exciting new asset classes. They are also going back to study the investing greats and apply their techniques and strategies.

Obviously, a lot can and will go wrong as the inevitable next bear market returns.

But, I love what I see as this boom has onboarded millions to the joys of investing.

My Letter to Jamie Dimon

note – I apologize for the earlier screwup…somehow an older group of posts was sent instead of today’s piece below…

I have never written a letter to Jamie Dimon.

I have sent a few tweets his way.

The founder of Chain (a company focused on digitizing the world’s financial assets) did write a long letter explaining cryptocurrencies and the blockchain to Jamie.

Here is the letter.

Take the time if you are at all interested. It is a great read.

Tomorrow I will dive a little deeper again myself. I sat in on a great interview with Mike Novogratz the Fortress founder and now founder of a giant cryptocurrency hedge fund.

Have a great day.

The Nikkei and The 1987 Crash – A Historical Market Week

The Stocktwits team shared this Nick Leeson tweet the other day as the Nikkei hit 21 year highs:

Nikkei225 at highest level today since 1996 – probably not far off my break-even point. If only they’d waited!!

Who is Nick Leeson and what does he have to do with the Nikkei?

From his Wikipedia page:

The beginning of the end occurred on 16 January 1995, when Leeson placed a short straddle in the Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight. However, the Kobe earthquake hit early in the morning on 17 January, sending Asian markets, and Leeson’s trading positions, into a tailspin. Leeson attempted to recoup his losses by making a series of increasingly risky new trades (using a long-long future arbitrage), this time betting that the Nikkei Stock Average would make a rapid recovery. However, the recovery failed to materialise.

Leeson left a note reading “I’m Sorry” and fled Singapore on 23 February. Losses eventually reached £827 million (US$1.4 billion), twice the bank’s available trading capital. After a failed bailout attempt, Barings was declared insolvent on 26 February.

After fleeing to Malaysia, Thailand, and finally Germany, Leeson was arrested in Frankfurt and extradited back to Singapore on 20 November 1995, though his wife Lisa was allowed to return to England. While he had authorisation for the 16 January short straddle, he was charged with fraud for deceiving his superiors about the riskiness of his activities and the scale of his losses. Several observers have placed much of the blame on the bank’s own deficient internal auditing and risk management practices. Indeed, the Singapore authorities’ report on the collapse was scathingly critical of Barings management, claiming that senior officials knew or should have known about the “five eights” account.

Leeson pleaded guilty to two counts of “deceiving the bank’s auditors and of cheating the Singapore exchange”,[2] including forging documents.[10] Sentenced to six and a half years in Changi Prison in Singapore, he was released from prison in 1999, having been diagnosed with colon cancer, which he survived despite grim forecasts at the time.

While in prison, in 1996, Leeson published an autobiography, Rogue Trader, detailing his acts. A review in the financial columns of the New York Times stated, “This is a dreary book, written by a young man very taken with himself, but it ought to be read by banking managers and auditors everywhere.

He did say he was sorry!

While Japanese investors are cheering 21 year highs in the market, this week is also a historical one for the US at our markets continue to hit all time highs.

October has been a month to fear for investors since the 1987 Stock Market Crash.

Not this year!

Not to jinx the rest of October but Michael Harris remembers the crash well and has some lessons and charts.

‘Just Own the Damn Robots’ is The New ‘Feed Mayo to The Tuna’

This is a meatier post than most, but this is a meaty market…

Ivan and I put together a ‘Momentum Monday’ today. It’s a 20 minute tour around the markets.

Today we discussed the momentum in global indexes, specifically Asia (Chinese tech stocks and Japan at 21 year highs), financials and biotech. Hope you enjoy.

I can’t fully explain this bull market, but it won’t stop me from trying. I do know a trend when I see one and strong upward trends are everywhere.

Josh Brown is not shy about trying to explain this boom. He says ‘Just Own the Robots‘. It is a fun read with much truthiness.

We could be in the midst of the first fear-based investment bubble in American history, with the masses buying in not out of avarice, but from a mentality of abject terror. Robots, software and automation, owned by Capital, are notching new victories over Labor at an ever accelerating rate. It’s gone parabolic in recent years – every industry, every region of the country, and all over the world. It’s thrilling to be a part of if you’re an owner of the robots, the software and the automation. If you’re a part of the capital side of that equation.

If you’re on the other side, however – the losing side – it’s a horror movie in slow motion.

The only way out? Invest in your own destruction. In this context, the FANG stocks are not a gimmick or a fad, they’re a f***ing life raft. Market commentators rhetorically ask aloud what multiple should investors pay to own the technology giants. That’s the wrong question when people feel like they’re drowning.

What multiple would you pay to survive? Grab a raft.

Fred Wilson is traveling in Southeast Asia and I founf it interesting to hear his observations as it comes from the eyes of an investor with a great eye at spotting trends:

Throughout our trip in Southeast Asia over the last nine days, I was struck by the palpable feeling of economic growth and entrepreneurship. It felt like a region that is pulling itself out out of poverty by it’s bootstraps.

There is a long way to go for sure. Annual per capita GDP in Vietnam is roughly $7000US, that number is roughly $6000US in Laos, and roughly $4000US in Cambodia.

But there is a vitality everywhere you go. People are on the go. Construction projects abound. Commerce is everywhere. People have phones and motor scooters.

Most of all you see children and young adults. This is a region that lost much of my generation to war and genocide. But they are regenerating their families and societies. In Vietnam, 50% of the population is under 30. In Cambodia, 70% are under 22.

The people are nice. They welcome the tourists and understand the economic support it brings to their cities and country.

So I’m very optimistic about these countries. They are on the move. It was exciting to see that.

This great run in global markets will end, but not this week.

PS – If you have never heard ‘feed mayo to the tuna’ make sure to watch the classic 1982 movie Night Shift on Netflix. Michael Keaton at his best.

Sleep and Apple

Yesterday’s daily email was not sent for some reason. Here is my post yesterday on ‘Wedges and Billionaires‘.

I enjoy the monthly journal of Kevin Rose. Kevin covers interesting tech and lifestyle topics and always has some interesting takes on the mind and body. You can subscribe here.

Kevin is an owner of an watch company (media and watch products) and he has been using the new Apple Watch:

I was an Apple Watch hater, but I was wrong. The Apple Watch is awesome, but not for the reasons you might think.

Over the last year, you might have noticed that I’ve been on a mini-crusade to limit technology and find balance in my life. For that reason, the thought of a push notification jukebox beeping and buzzing on my wrist has always frightened me.

When the Apple Watch Series 2 was released last year, I was attracted to it because of its health and fitness functions. I love the breathing exercises and being water resistant meant I could take it to the gym and in the shower.

It started solely as a gym watch, but a few months later I setup Apple Pay and found it as a convenient way to disconnect, often taking trips to the grocery store and cafe without the distraction of my cell phone. I was starting to really like this thing.

With the release of the Apple Watch 3 (with LTE) I can now truly leave my phone at home for extended periods of time. The LTE plan allows me to receive phone calls (via wireless Airpods) and the limited functionality (no browser) and difficulty of use (it’s hard to type) makes me avoid texting and email unless it’s truly an emergency. I also made sure to deeply configure it, turning off all notifications except for calendar events, fitness reminders, and Uber.

I could have never imagined having an Apple Watch would make me use technology less, but it has.

I will get getting one of these new watches myself for the exact same reasons.

Now to sleep…

Kevin had a link to an article by The Guardian detailing the lack of sleep and the risks to a longer life.

The article freaks me out because I am that person with awful sleep numbers.

Please have a read of the article and share it with friends you know suffer from sleep problems. It is a serious American problem.

Owning Resmed, the purest play stock, is not going to help me live a longer life. The stock is one of those that can bought on all 15-20 percent dips because it is the one pure play public sleep stock. Institutions love it.

Here are all my posts on Resmed and the topic of sleep over the years.

Wedges and Billionaires

I’m back in New York after a quick trip across the country.

Stocktoberfest started Thursday afternoon on Coronado. It was another fantastic event.

The Stocktoberfest crowd continues to surprise me with their energy and enthusiasm. They are thirsty to try new financial products and learn the language of the markets.

People were most fascinated with Meltem . She lives on the financial edge with 100 percent of here assets invested in the crypto space. She works at Digital Currency Group and has been on the ground floor of the craze.

I loved this chart she shared comparing the internet bubble/boom of 1999 to the current crypto craze:

I spoke about trends as I always do, but these two ideas I shared with people resonated the most:

1. The best thing about the stock market is you can own your enemies..my example is that I am long Goldman Sachs.

2. I have never been wrong…but I have been early and underfunded.

Yesterday I was in Nashville speaking to about 400 investors brought together by my publisher Charles Street Research.

The audience skewed above 50 years of age and they enjoyed hearing we rant about millennials and the current crypto fever.

NO matter where I present, the following 3 visuals always get the most nods and chatter…

Nobody argues with me that being a pilot fish in the investing world makes sense. It has never been easier to pay for amazing mentorship or use the social networks to improve your investing. Swim close to the great whites and feed off them for free.

Next is this picture of the board game Risk:

The ‘you never win from Europe’ rule never ceases to get a laugh.

In a digital world, just like a flat world, winning happens at the edge or the corners. The less borders to protect the better.

Wedging into the world is a strategy that never gets old when I think about startups, even growth stocks.

Not to take anything away from founders with eyes towards global domination but Instagram, Whatsapp and Ethereum proved that wedges into the market can make you a billionaire.

Finally, my favorite… the peloton.

It has never been easier to keep up with the leaders of the pack. Vertical is the new horizontal and going deep can be just as lucrative as going wide. The peloton is about speed and sharing the workload.

I am grateful to have the continued opportunity to spread my message of investing for profit and joy and learning the language of the markets.

Bitcoin…FOMO or Foist

I’m on Coronado for Stocktoberfest (7). We will be livestreaming it tomorrow.

FOMO and Foist are in the air.

Bitcoin touched $6,000 tonight. FOMO (fear of missing out) seems to have set in.

In the words of Larry David, I sense a foist at hand…at least short-term.

In the spirit of the Bitcoin animal spirits, Justin created this badge for Stocktoberfest attendees:

Bitcoin’s market cap is now $86 billion which is bigger than 88 percent of the companies in the S&P thanks Charlie

One bitcoin is worth four ounces of gold.

The entire cryptocurrency market has grown from $16 billion to $160 billion in 2017.

Fear has a funny way of showing up in 2017.

The Greatest High of All …Congrats to The Investors and The Optimists

This Turtle vs. The Hare video is my new favorite investing reference…

The turtles and the rabbits are winning right now,

The market is making the majority of us look like genius’s the last eight years. I have met many people from the majority. We are not THAT smart.

Today these stocks made their greatest high of all-time…

Thank goodness I own a bunch of them.

I have long written here that Google is my technology ETF. I have owned Tencent out of China for a long time as well and they are my Tech, Bank/Payment and Gaming ETF for the rest of the world.

I’m not sure I am any wealthier from diversifying beyond these two great companies and stocks the last few years, but I will never stop trying to trounce the S&P.

As for what’s next?

As a ‘student’ of momentum, the coast is all clear based on the closing prices of pretty much every index in the world.

As an investor that has seen the other side of momentum, there is nothing wrong with ringing the register a smidge when things seem perfect.

Where Have All The Cowboys Gone?

Josh Brown asks this question today on his blog as it relates to the lack of volatility in the stock markets – Where have all the Cowboys gone?

The answer is probably wrapped up somewhere in the market structure conversation. The cowboys who used to swing markets with massive directional bets have largely replaced themselves with algorithms. Software programs don’t panic. They trade methodically or stop trading entirely given certain cues. They’re also inured to the psychological pain of new record highs – How could I not be in this? The market is running away without me! Oh my god what if I’m buying the top? etc
Nope. There’s much less of that than there otherwise would have been in another era. These days, it’s “close your eyes and allocate” coupled with relentlessly steady machine-buying.
For now.

Josh is right about that.

I would also argue that the ‘cowboys’ have moved on to where the bacon is good…private markets, small cap biotech stocks, marijuana and crypto assets (the new wild west is global, social, mobile and not on your daddy’s exchange).

Wall Street’s biggest ‘cowboy’ today is Jamie Dimon who promises to fire his traders if he finds out they are trading Bitcoin.

He’s no cowboy. He’s got an old prostate and probably hates bacon.

The real cowboys take out full page ads in the Wall Street Journal talking smack to Jamie Dimon…

PS – Bob Lefsetz had been asking this same question all year of the musicians…until tonight:

Eminem drew a line in the sand tonight, if you’re not with me, FUCK YOU!

This is everything today’s “musicians” are against. They don’t want to alienate a single potential audience member. Meanwhile, Marshall even takes the side of Kaepernick when Jerry Jones and the NFL want to keep teams down on the plantation.

But homey don’t play that no more.

This was unexpected.

We had an unjust war in Iraq.

We had a “moron” elected President.

And nobody in music said a word.

But those days are done.

Here is the Eminem video.

PSS – I would love to see Trump take an IQ test against Eminem right after Tillerson.