My friend Semil linked to a great post from investor Graham Duncan titled ‘The Playing Field‘ who dissected what separates the great investors from the rest. In short:

For investors, I’ve come to think of five levels of the game:

1. Apprentice — learning the game

2. Expert — mastering the game you were taught

3. Professional — making the game you were taught fit your own strengths and weaknesses

4. Master — changing the game you play as part of your own self-expression and operating at scale

5. Steward — becoming part of the playing field itself and mentoring the next generation

Yesterday I wrote about art over science in the business of investing, but this gem of a piece really hits home. Take the time to read the whole piece.

This chart about economists predictions for interest rates in 2019 is making the rounds…

Michael Batnick has a good post arguing that when he hears people say investing, drafting players or predicting the future is ‘more art than science’ what he really hears is ‘it’s just as much luck as skill’.

I think investing is more about following smart people and shutting off as much noise as possible. In the end though, no matter how good I get at doing this, every good decision and outcome is still a bit of art, science, luck AND skill.

I do as many things as I can to stack the odds in my favor by continually nurturing my network, curating my feeds and follows, reading writing and trying to stick to a consistent plan.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Happy Monday and I hope all my father readers had a great Fathers Day.

Ellen made me a great breakfast of french toast and a breakfast burrito with a huge extra portion of bacon. I can never get enough bacon. Max bought me a great new riding jersey and I had a great ride down the ‘Strand’ on Coronado. I then parked myself on the couch for five hours watching the final round of The US Open. For dinner, I treated myself to Omakase at my favorite san Diego restaurant Sushi Hane.

Onwards to the markets and Momentum Monday…You can watch/listen to this weeks episode right here.

Today’s episode is a little longer as I dive into how I go about pruning my portfolio to try and hold my winners longer.

Have a great week.

One the biggest technology stories of the week maybe the year is Facebook’s announcements around their token/payment/coin – Libra. Here is The Block’s coverage of it.

Long time Bitcoin bull and investor in all things crypto Barry Silbert had this to say:

The launch of Facebook’s cryptocurrency will go down in history as THE catalyst that propelled digital assets (including bitcoin) to mass global consumer adoption. Will be remembered as just as important — and transformative — as the launch of the Netscape browser

I liked my friend Chris Perruna’s more cynical take:

The Facebook crypto sounds to me like a centralized coin backed by corporations (looking to clean up on trillions in transaction fees), defeating the purpose of decentralized crypto.

I personally think it’s just more bad news for banks as their fees move to others. In a single year, the three largest banks earn/take the following in fees:

$1.1 billion in ATM fees.
$2.3 billion in maintenance fees.
$5.4 billion in overdraft fees.

Big tech and crypto are coming for those fees.

It feels like the Facebook crypto initiative has a great shot at getting traction. Hundreds of millions of people will get a taste of moving money in and out digital currencies as they pay for goods and services. I think it’s bullish for Bitcoin, Facebook, Visa and Mastercard and Paypal (I am long all but Visa).

These initiatives won’t stop in the coming years which is another reason bank stocks will likely continue to underperform.

Whenever I write about Goldman Sachs (like the other day) three things happen:

1. Ellen gets nervous because she thinks they are watching and may come for me. I say at least we will have this blog as evidence.

2. Bank lovers…like Fat Nixon supporters, troll me.

3. My Goldman friends who have left Goldman agree with everything I said.

My pal Josh does a better job than me explaining what I was trying to convey about the ‘new’ Goldman Sachs, with more words, in this EXCELLENT post titled ‘When everything that counts can’t be counted‘.

The gist: What if the cost of capital never rises again?

Josh concludes with:

In the battle for capital right now, the brands and intangibles and user bases and networks are winning by a landslide against the things that used to be important. And the companies that are rich in those old fashioned things, like Walmart, Disney and McDonalds, are spending all of their time and attention to transform themselves into the spitting image of their upstart competitors. Disney wants to look like Netflix, Walmart wants to retail like Amazon, McDonalds wants to be as habit-forming and celebrated for its freshness as its former protege Chipotle is. Goldman Sachs wants to grow up to be BlackRock. And in emulating these younger models, they hope, their multiples will soon be following suit.

And as for those stodgy old stalwarts of the 20th century that aren’t pursuing this transformation…it remains to be seen whether the rusty old assets they do possess will ever matter to investors ever again.

Howard here…

I do not think Goldman can become the next Blackrock, because Goldman will never give up the margins of pillaging and Marcus will eventually pay the price of the parent brand trying to hide behind Marcus. Like I said in my post, even Hasan doing Patriot on Netflix is on to them. If I am wrong, I can correct myself if the stock gets back above $250 and sticks.

I already own McDonald’s and Disney because they have been busy fixing their distribution and product for a long time. Both are well on the way with healthy margins still intact. The multiples have followed suit and should now play catch up if the cost of capital theme stays the same. As I have built my 8 to 80 list of stocks I own over the years, I have been taking the habit forming, network focused, high margin, low cost of capital enduring brands loved by 8 to 80 year olds into consideration only.

My biggest takeaway from Josh’s post and this era is every parent and kid should study to become an RIA because he/she or their friends is going to be rich and need a money manager. No joke. I have been.

Now go back and read Josh’s post (and my Goldman one) again.

It’s been a while since Toronto sports fans had anything to cheer about.

I grew up watching the Leafs lose (I was 2 years old the last time they won a Stanley Cup in 1967).

In 1993, I iced Ellen on the couch (I think our second date) until Joe Carter hit a walk off Homer for back to back Blue Jay Championships. Ellen has been my good luck charm ever since.

Last night it was fun to be with Max and his buddies (and Lindzee) at home in Coronado watching game 6 as the Raptors closed out the Warriors…

The Raptors were really fun to watch.

Before the series started I tweeted out that the Raptors would win in 6 and the trolling began. The comment thread is funny. This was my fave exchange:

I don’t gamble, probably because I grew up watching what it did to Fred Flintstone, but pretty soon making bets like this will be easy. The Raptors were huge underdogs and my bet would have paid nicely. Sites like The Action Network are making it sound like fun…here is one St Lous fan that turned $400 into $100,000.

I hope Kawhi stays in Toronto to try and repeat. Zillow missed a great chance to sponsor him saying ‘I used Zillow to find my new Toronto home’ as he held the Most valuable player trophy.

I’m looking forward to a great weekend of watching US Open Pebble Beach golf. I have no predictions.

Goldman Sachs CEO David Solomon told employees at a meeting attended by CNBC this week that “we’re getting absolutely no credit from anybody else in the investing community” on the firm’s digital banking efforts.

Boo Hoo David.

I do admit that a few years ago I thought Goldman Sachs might be able to break out of their banking era base above $250/share on trying to go all Google, investing in the future of finance. They have made some shrewd investments in the likes of Plaid and their own non bank bank savings app Marcus.

But, today at $69 billion that does not look to be happening. Here is the chart:

The question is why?

It seems that Wall Street prefers the good old days of Goldman being focused on the high margin business of pillaging nations and clients.

Here is the new ‘Vampire Squid Light’ Goldman today:

In its latest incarnation, Goldman appears to have figured out that rather than being pure altruism, the new fintech ethos of zero fees and pricing transparency is actually an advanced form of self-interest.

“Our promise is that in everything we do, we help customers save money,” Talwar said in a recent interview. “We are not doing it as a not-for-profit motive or something. We are doing it because we think it helps us win.”

I’m sure Goldman’s Harit Talwar ( quote above who runs the consumer finance division) will enjoy his post in Russia after that quote.

I doubt Goldman thought that after raising Netflix to a strong buy in 2019 that Netflix’s Patriot Act’s Hasan – loved by millennials – would not have devoted a full episode to Goldman Sachs bashing for it’s role in ripping off Malasysia.

Goldman is also now all in on another low margin business, paying top dollar for RIA’s that face a deflationary spiral.

Goldman Sachs seems all in on their move to go hipster banking and wealth management and until the stock can reclaim it’s all time highs of $250, let’s just say that nobody is buying the story…and that story is that a low margin business at any scale is not the old Goldman that people feared …or Vanguard.

Since winding down my hedge fund in 2006, I have been all about slimming down my stock market investing time. This meant getting off the idea that I needed eight screens on my desk to invest and follow the markets.

In hindsight it was a great timed trade.

While pulling away from eight screens on my desktop was not easy, the launch of the iPhone in June 2007 (not something I foresaw) from which I could get ideas, news, build a network, and execute trades with just a few taps made the move to one screen possible.

Starting Wallstrip in 2006 and StockTwits in 2008 than making angel investments in Business Insider, Tweetdeck, Etoro, Robinhood, YCharts, ChartIQ, Rally RD, StartStackin, Coinmine, SecFI and Koyfin I have run the screen gauntlet and am now now being twisted in a new direction that I am trying to grok and explain to others as Social Leverage invests out of fund 3 and eventually fund 4.

With the brilliant product and execution by team Robinhood the trade was commoditized to a few taps or swipes. Further, with the explosion of crypto and decentralized finance… we got the Big Bang on boarding of a new generation of investors.

While Robinhood, Coinbase, Binance and Etoro have been fantastic at onboarding and arming a next generation of investors and traders, we are now firmly headed into a world where those that want to be active need better and more modern tools.

As the trade is now commoditized, the battle for wallet share, education, fractionalization, engagement, media, and the mapping of our trades will begin.

Which brings me to some thoughts about the future.

The future of finance is not going to be about just the smartphone.

I have shrunk my view of the markets too far. My smartphone screen is no longer sufficient or fulfilling to my consumption and enjoyment of the markets and investing.

Furthermore, The iPad is a terrible one screen solution for investors. As for voice, I have yet to pace a trade using Alexa and don’t think that will become ‘a thing’ anytime soon.

Which means the desktop will be cool again and not just for ‘pros’.

The ‘Instividual’ investor wants more than an app and a one screen ‘Uber’ like trading experience.

For example, I continue to have AHA moments each day I use Koyfin on my desktop and iPhone. While Koyfin does not offer an app, there is a simple shortcut to appify the web version for your smartphone or tablet. It is a fantastic start.

I have so much more information at my fingertips in a very simple and lighting fast UI. I am driving the machine.

This is all happening while ‘passive’ funds pass 50 percent of all invested dollars and Vanguard owns more than 50 percent of the floats of the S&P 500 stocks.

In my personal opinion, this trend will end, but it does not need to as AUM might not be the measure for which the move to desktop products get measured by. People are over diversified, under educated and caught up in ‘free’. The next bear market will be a [email protected]#8er.

I am not sure if the next generation of investors and traders will use one or two desktop screens, but I doubt they should ever need more. If they do, they are literally free.

I went from eight screens in 2006 screens down to my iPhoneX in 2018 and now I am about to introduce more desktop market screen real estate back into my life.

Will it be for everyone? Of course not. But it will be a large market as we move from the smartphone back to the desktop for the next generation of investors.

Opportunities abound. I will never understand why Google has pulled away from being the Google Finance and being the ‘ maps of investing’ but I have a strong feeling they will be back one day soon. If not them, likely Amazon.

As always, feel free to email your thoughts on this future I see.

I have a whole separate set of thoughts about the RIA and wealth management opportunities that lay ahead and will share those in the coming days.

Back in 2007 Phoenix, a staggering 99 percent of the population were commercial real estate agents.

The crash of 2008 changed everything. Now just 89 percent of the Phoenix population is a commercial real estate agent.

Ok…not quite. I kid commercial real estate agents.

To set the record straight, I invited my friend Steve Schwarz (founder of ViaWest Group) on the podcast to discuss all things commercial real estate.

Steve has invested successfully through a few boom and busts over 20 plus years in the business and built a great Phoenix firm (they own and manage my favorite set of buildings in the city).

We walked back through the crash in 2008 (which rocked Phoenix like no other city) to the markets today.

Steve catches me up on the big changes that technology and WeWork are having on the industry and the ‘Opportunity Zone’ angle a lot of people are talking about.

You can watch our interview here on Youtube.

Here is the audio only version.

You can also just listen to the episode on Spotify or the Apple Podcast app (just search my name).

Here are the Show Notes:

Show Notes:

– How did Steven Schwarz start ViaWest Group?

– Why did Steven Schwarz move to Phoenix?

– What is “Sexy Money”

– How is the Phoenix real estate market?

– What is Howards take on the Phoenix real estate market?

– What is “absorption”?

– Pace at which Phoenix is “absorbing”

– What Steven is worried about in the market

– What other cities does Steven like working in?

– How did 2008 effect ViaWest?

– How did ViaWest get out of bank trouble?

– How did they start raising capital?

– What is Wework?

– What are problems with owning office space?

– How has Wework improved the business office model?

– How does Wework push innovation?

– What is an “Opportunity Zone”?

– Who does Steven trust to learn info from?

– How do people invest with ViaWest?

– How does Steven invest personally

Happy Monday…

It felt like the markets were ready to roll over last week, but stocks caught a big bid.

Ivanhoff and I put together our weekly Momentum Monday to get you the ideas that stand out to us this week. Briefly, I like seeing so many names in the momentum list that nobody has ever heard of. A few years ago it was FAANG that carried the markets and everyone worried what would happen when they stopped leading. We might have the answer. Right now software, restaurants, Brazil, payments, biotech, healthcare and aerospace are being represented on our list.

Have a great week.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.