Taking stock of my CV

What is a career? Why should you have one? Does it need to make “sense”?

I have a masters in finance and I’ve had three jobs in finance. Then I retired. Makes sense, right?

In my mind, I’ve only had three jobs: as a research analyst at SkandiaBanken (1994-1996), as a research analyst at Swedbank (1996-2000), and as a portfolio manager at Futuris (2000-2015). I studied for my masters in finance between 1990-1994.

In reality, however, I’ve been drawn to chemistry (my first choice for college after high school), translation, match making, programming and P2P lending (1984-1987):

—-

My job experiences

When I was 10-12 years old (1982-1984) I programmed my own simple computer games and charged my friends for playing it. I specifically remember a motorcycle game. I also performed a lot of unpaid programming in BASIC and machine code, which I think helped build enormous focus, logic skills and discipline.

Since around when I turned around 12, I started my own “bank”. I used to lend a dollar or two to my peers that lacked cash for candy or pastries in school. I gave my clients the choice of paying back for free the next day or at criminally steep charges for every extra day. It was very profitable. Often I charged 100% interest for a week. Today a kid doing that would probably be expelled or sued in some way.

When I was around 13-15 years I helped with my father’s accounting. I remember getting around 10$ an hour.

During our neighbor’s 40-year party (I was 12), I was put to work recording all the guests’ preferences to create the perfect seating scheme in real time. My take home pay for 4 hours of stressful work with dozens of drunk adults was a total of 4$.

As a 13-15 year old I had to do a week here and there on real jobs (obligatory job experience in school), such as a shoe department, a pizza restaurant and a machine leasing firm. Those experiences finally taught me to never, ever wanting to work in manual labor, in particular not having to stand up all day. Funny how I 20 years later had to re-learn the importance of not sitting.

I also remember some cold winters, around the same age, pushing physical ads down people’s mailboxes for a minimum pay.

—-

I even spent three weeks one summer in sales for personality tests in a company related to the Scientologists. I was paid a bonus for every sale, as well as a fixed weekly wage (around 300$, I think)

Later, around 1990, when I was 18) I was hired to automate that same personlity test in a pretty elaborate Excel macro for a few hundred dollars.

As an 18 year old in college (1990), I was lured by promises of extreme wealth into the romantic matching business Perfect Partners. My job was to get women to sign up for this membership based couples matching business. I was paid a commission per new active member and a monthly salary of around 1000$.

—-

Between 1990-1997 (18-25yo) I translated manuals, authored manuals, not to mention programmed database applications for my father’s company, all the while working long hours as an analyst. Some of those databases might actually still be in use in the pulp and paper industry.

My starting pay as an analyst was around 1400 USD a month before taxes. My moonlighting as a programmer and translator paid perhaps an extra 500 USD a month.

So, between 1982 and 1996, I spent a lot of time on more or less unpaid work. Then my real career took off, each year’s pay dwarfing the previous. Actually, just one single year at Futuris (2000-2015) often paid more than my entire career before Futuris.

In January 2014, however, the money wasn’t enough. I needed more intellectual challenges and consequently handed in my resignation. A year after that I spent my last paid day at Futuris on January 1, 2015.

—-

Since I retired when I was 41-42, I’m doing more than ever…

I run three podcasts, several newsletters, appear in podcasts, TV-shows, fintech debates, lecture, write articles and not least write on a book, not to mention juggle two dozen private equity investments. Fortunately, I spend considerably less effective time on my diverse activities than I would on a typical job.

My average over the last 10-12 weeks has been close to 25 hours a week on writing, producing and investment meetings. Add another 20 hours for dog walks and 5 hours lifting weights (plus a few more for getting there and back, and showering) and you quickly see the need for good organization not to be unnecessarily occupied all the time.

To make sure retirement feels like retirement, I’ve scheduled two full weekdays per week completely off “work”. Those days I just read books, take long walks, hang out with friends or my dog or girlfriend.

Be careful what career you wish for

So, what’s the point of all this?

Ask yourself what kind of career you really want, and why you want that career. What is the point of your career; how is it supposed to make your life in total more meaningful and enjoyable?

Tip: Regularly take stock of what you have actually done, what you currently seem to be doing, what you actually want out of life, and whether your daily actions are bringing you closer to those targets. If not, make a change! Quit that job, start that business, leave your family — if you think it will bring more meaning.

Other people’s money

How should you react to what other people are doing with other people’s money? Should you react at all?

How should you react to published insider trading (not the illegal kind)? As a case in point, the multinational apparel retailer Hennes & Mauritz dropped from 360 to 117 in three years during heavy insider buying.

By the way, IPOs, stock buybacks and insider purchases all peak at the market peak, so don’t confuse insider activity with opportunity

What about when an incumbent sells a large stake to a newcomer? Is it news when 5% of the company changes hands from one known entity to another? Which party could be assumed knows more?

What about large moves in the stock price. Do the sellers know more than you? Is there valuable information in the price move?

NB: Sometimes a changed price or price trend actually affects value (through better or worse access to capital, e.g., in banks or vulnerable companies in need of finance that can give a high return on capital)

How do you and how should you react to what other people are doing with their money?

  • on the stock exchange
  • privately (neighbor buys a car)

Do you buy a stock because you see it has increased in price?

Do you buy a car (or a kitchen) because your neighbor did? Or because you read in the paper that the kitchen renovation business is booming?

Conclusion

Actually, stock prices are a good gauge on general sentiment, on other people’s wants, needs, fear and greed. However, it’s mostly a game of group psychology and herding – in particular for single stocks which are prone to sectarianism (see Tesla for an illuminating example, where no profits and an endless stream of broken promisies and debunked claims of fantastical innovations haven’t deterred the company’s followers).

What does work very well in terms of other people’s money is patterns for entire markets. Money sloshes around the world from country to country, sector to sector, asset class to asset class. During bull markets investors become indiscriminate in their buying which creates strong trends, and convergence of valuations and price movements. But when investors start losing their faith, or their cash flow, convergence turns into divergence, the market narrows to fewer and fewer things that still “work”

In the end other people’s money show the way from the topping formation of entire markets down into a bear trend, through a set of signals of risk aversion and indecision: High yield bonds increse their spreads to less risky alternatives, an increasing number of companies set either 52 week lows or highs, fewer companies and sectors lead the overall market upward, the range of valuation multiples between industries, sectors and companies increases.

On the other hand, if you are a value investor with a strong view of the cash flow outlook for a specific company, it need not matter whether the market is turning bearish or not. Just make sure you don’t get surprised by profits turning to losses, dividends turning to requests for new share issues, or dwindling profits and cash unexpectedly activating expensive debt covenant clauses.

It’s not supposed to be easy.

Anti-elite clicks at your peril

Topic: gold, societal unrest, Davos, the credit cycle, macro reasoning

Summary: grab your gold and run for the hills when you see the Yellow Vests gathering

Reading time: 5 minutes? 10?


Kan du svenska? Är du intresserad av de praktiska tips om värdebaserade investeringar som jag sammanställt från mina 20+ år som analytiker och hedgefondförvaltare? Då är mitt veckovisa nyhetsbrev Finansbrevet värt att kolla upp. Ja, det är gratis.


When the Fed turned dovisher-er again last week, in order to stimulate the supposedly weak economy, expectations for economic growth in the US strengthened and the dollar consequently strengthened. A stronger dollar means cheaper imports and a lower trade deficit, and yet a stronger economy, reinforcing the stronger currency.

Alternatively, in the little longer run, the massive monetization of US deficits and debt leads to increasing inflationary pressures. More money chasing fewer goods in a stagnating economy, where the focus is turning toward finance instead of production, gradually leads to higher consumer prices and demand for higher wages.

It all comes to a head when the Yellow Vests of the world have had it with “the elite” leaving ordinary people behind.

Reasoning vs. the real world

Macro reasoning can take you in any direction you like. Financial market reasoning is even worse. There the logical jump from good is good to good is bad due to eventual overheating to good is good since the bad that comes from over-gooding will lead to policy measures that will turn all things good again is done in an instant.

The real world, however, doesn’t care about your reasoning, reflexivity be damned.

A Lööf in the eye of the storm

For now, we are enjoying a pause of sorts. We are in the eye of the storm, with more or less sensible political leaders like Trump, Macron and Löfvén-Lööf (the Swedish socialist leaning government that took five months of bickering to form) at the helm. Yes, sensible, moderate. Relatively speaking.

Just you wait and see what comes after if these boys and girls next door were to fail. Well, with “were to” I mean “when they will fail”. A deeper, more disturbing, nuance of populism is bound to color the political landscape in the wake of an increasing sense of injustice, where the crony-elite is perceived to be living off of the backs of ordinary citizens.

This is not a crisis of capitalism

There is nothing wrong with capitalism, nothing wrong with adults willingly agreeing to sell goods and services to each other, nothing wrong with the best producer, best satisfyer-of-wants, amassing huge wealth.

What is wrong, however, is when the banking elite is first allowed astronomical gains from risking other people’s money, and then after the inevitable crash are saved by the political elite in return for political funding in the next round. We are not experiencing a crisis of capitalism, what we’re seeing is a particularly nefarious brand of of socialism.

Crony central banking at the center

It may sound conspiratorical but it’s all the central bankers’ fault. Without their wanton manipulation of interest rates blowing bubbles in the economy and on the financial markets, and their setting the stage for subsequent crashes, politicians and central bankers wouldn’t be able to play the game they do.

Politicians want to win elections, so they promise more than they can keep. Central bankers willingly fund the difference between dreams and reality. The unrestricted money printing drives asset prices, which drives borrowing, which drives lending, which drives bank profits.

It doesn’t take many decades before the debts are too high to allow for a normal correction. Politicians and central bankers (as if they weren’t all politicians) then vow to do whatever it takes to salvage the situation they themselves created. And their solution is always the same: keep doing exactly what caused the problem — just at a bigger scale.

After longer time than a single human investor usually can or do care, the system re-sets. A new power, a new currency regime, new relative positions and prices. It’s not that the cycles are aeons, but half a human life is long enough to be forever on the financial markets.

You’re much too young boy

I personally know people who haven’t seen a single market crash and yet consider themselves market veterans. Imagine having only invested in stocks since 2009. You’d look upon ten years as a long time in the market, and twenty as looking back toward a completely and irrelevant era.

I first started talking about stocks sometime in 1985 when a friend told me about his investments. Around then I actually inherited a stock portfolio with some really old holdings: Aga, SKF, Asea, Sandvik and similar stocks. That’s 33 years ago. I have to look back an additional 33 years, to 1952, in order to feel what today’s newbies feel about the turn of the millennium.

Oz wizardry a case in point

Australia hasn’t seen a recession for 26 years. The continent has been riding the rising tide that is China, but that era might be coming to en end now. Imagine the unpreparedness of investors, banks and house buyers when a recession finally hits.

Try to imagine the repurcussions when one panicky domino hits another. Overleveraged consumers and house owners losing their jobs, banks failing, dividends being cut, pension funds falling underwater, selling begetting selling on the stock market, and cost cuts causing unemployment, in a vicious cycle not seen in more than a generation.

Try to imagine the policy response and the saving of the elite on unprecedented scales. Try to imagine the populism that ensues. That’s one more geographical win for the Yellow Vests.

The credit cycle is a cycle

Artificially low interest rates and money printing create a seemingly benign feedback loop over a handful of decades. But it’s just as misleading as the inflation leads to a stronger dollar narrative mentioned at the top of this article. Sooner or later the credit cycle shows why it’s called a cycle.

Healthy growth that was turned into a speculative boom and followed by stagnation and monetary magic morphs into deflation. Deflationary impulses are met with increasingly desperate fiscal and monetary policies that lead to a combination of populism and inflation. The latter wreak havoc with living standards and justice, not to mention financial markets, exchange rates and asset prices until a strong enough leader can set things “right” again.

Right meaning high enough interest rates to force fiscal prudency and a stop to rampant inflation.

At that point risk aversion peaks and liquidity (cash availability and willingness to lend and borrow) troughs.

At that point assets might be “cheap”, but only because you 1) truly can’t know how it will end, and 2) you don’t have any cash to buy assets for, and 3) banks won’t lend it to you. That’s the meaning of “it’s not your father’s market but your grandfather’s”. No matter, that‘s the starting point of another bull market, not the current multi-year topping process.

I hope. You never know. Perhaps buying stocks at 5x earnings won’t work. Perhaps social and political reasons force them to 3x before it’s over. Perhaps dividends will be illegal.

As Grant Williams pointed out in the latest Macro Voices podcast episode, what garners the most journalistic clicks these days are articles from Davos pointing out how much richer the elite has become since before the financial crash of 2008.

Pitchfork time

It’s all fun and games as long as the money illusion makes everybody feel rich. But when the wheels stop turning and you realize your increase was but a fraction of the increase in true prices, not to mention the multiples of that that befell the elite, then it’s pitchfork time.

The anti-elite clicks are accumulating. Populism is rising. You may not like what you see today, or support Trump, Macron and Lööf. But if they fail, Mordor and the winter of the seven kingdoms would be preferable outcomes to what’s in store.

The question is: will your holdings of physical gold (and mine) be a good or a bad thing in that environment?