The best thing that’s ever happened to me

-Vi Reser Alltid

When I was 8 years old my family moved to a fancy part of a mid-sized Swedish city, Västerås, not very far from the capital, Stockholm. There I became bullied for my northern accent, cheap clothes and mental state (my big brother drowned before my eyes the same summer we moved, my parents got divorced [toxically], and I had a slight autism spectrum issue).

It took some time, but being bullied was the best thing that ever happened to me. It didn’t kill me, it made me stronger. With time I became impervious to just about everything, extremely resilient and calm, which helped forge a successful career in finance.

As the 40 ensuing years passed by, I often reflected over my luck in life. Everything seemed to go my way. Sure, I had a few minor setbacks, but I always quickly bounced back up a lot higher than before. Every single year was better than the year before – and they were pretty good from the start.

For example, when I was 18, I dated an incredibly pretty girl, and I received something akin to a small Nobel Prize in mathematics and physics for being the best performing student in middle Sweden over three years, and I was admitted to Sweden’s most prestigious University. From there, everything improved each year in an accelerated fashion: materially, relationship-wise, my subjective experience and so on.

I have very good reasons to assume my particular life configuration, including physical health, brain chemistry, cultural and socio-economic starting point etc., makes me perceive every year as better than the preceding years.

So, whenever I encounter a setback of any kind, I kind of expect a reward in due time. Everything that happens to me is simply regarded as a harbinger of bliss. Which brings us up to date.

Retiring in 2014 definitely was a genius move, the best thing that ever happened to me up till then. Now that retirement is drawing to a close. As fed up as I was with finance in 2014, just as excited I am today about both sharing my knowledge (through the Swedish course in fundamental equity valuation: Finanskursen) and practicing it again as a professional hedge fund manager. You’ll get the details about my getting back to work during the first quarter of 2020.


Per Ardua Ad Astra

However, that wasn’t what I set out to share today, but the following. By midsummer of 2019 by life kept setting new all time highs at a frantic pace. I almost expected to be diagnosed with a brain tumour, like John Travolta in “Phenomenon” (1996). In June I went as far as to say, the last five years, and in particular the last 5 months, have been so good to me, life could throw anything my way, including death, and I still would consider the total package a great deal.

And, boy, did I get what I asked for! Considering my gruelling experiences the last 5 months after that, i.e., since the day after midsummer, which started with my dog passing away, I’m expecting some major breakthroughs coming my way in due course.

Everything I’ve gone through in my life has ultimately proven to be the best thing that’s ever happened to me – perhaps not causally, but with uncanny synchronicity. So, why should my experiences with pain, loneliness and hearthache this fall be any different? Given what I know to be true about my history and my constitution, these experiences are bound to morph from hellish torture into the best things that’s ever happened to me. 

What doesn’t kill you makes you stronger, and I’m still kicking.

Here’s to looking forward immensely to getting to know in which way the twists and turns of summer and fall of 2019 were the best things that ever happened to me, objectively, materially, relationship-wise, perceptionally etc.

Remember, we’re always travelling (Vi Reser Alltid — my motto in Swedish), and that’s a good thing. Being static is being dead.

Everything is awesome

Theme: Peak everything. Stop living in denial and enjoy it.

The best music is yet to come.

Executive summary: I’m not talking about an imminent stock market crash*. This article deals with the constant advances of human culture, arts and science. We are at all time highs, but have really only started.

awesome

*or am I? Check the summary


Personal peak

I don’t want to “look good for 45″*

I just want to be healthy

Well that and a few other things:

We have to end apartheid for one. And slow down the nuclear arms race, stop terrorism and world hunger. We have to provide food and shelter for the homeless, and oppose racial discrimination and promote civil rights, while also promoting equal rights for women. We have to encourage a return to traditional moral values. Most importantly, we have to promote general social concern and less materialism in young people.

Joking aside, apart from being healthy; looking healthy as well doesn’t hurt. In addition it can inspire others, which is what most of my current life is about regarding health, wealth, happiness, purpose and productivity, among other things.

*Actually, I’m not 45, I’m just 44 (and a half)

Looking good

-That’s not me. It’s Christian Bale in American Psycho.

The Retarded Hedge Fund manager Karl-Mikael Syding at Skandia 1994

-That’s me (in 1994)


Health and keystone habits

Anyway, over let’s say the last five to seven years, I’ve almost lost all interest in building my body for show, and have become almost completely focused on health and strength instead.

It’s working.

Not only do I feel great, today was probably my best weight lifting session ever and the trajectory I’ve been tracing this summer promises much more to come. I’ll soon write a post on how a few simple keystone habits can transform your life by creating a framework that makes everything else easily click into place.


Awesome!

Everything is awesome

July 2016

Other things are awesome too

Never before have humans produced higher quality and value within the realms of, e.g., math, physics, athletes, art and music.

Several factors account for that: There are more of us, a higher proportion exposed (incl. over the Internet) to relevant information and stimulus, we are standing on the shoulders of the giants that came before us (building progress upon progress).

I recently learned that* the second quartile of admitted applicants for Juilliard in the 1980s wouldn’t even have gotten in today, i.e., they would have slipped below the fourth quartile, due to a lack of technical skills (and possibly artistic as well).

*something like that. I think I got it from Freakonomics or TED Radio Hour.

I too like listening to old masterpieces, to look at masterly paintings, statues and buildings. I too sometimes get stuck enjoying the same old songs and artists. However, I make it a point to sometimes deliberately discover new favorites. Just this weekend, e.g., I went to see an opera.

Can’t get no satisfaction?

I actually pity those who cling to the movies, songs and artists of yore (or of their youth); or only deem music and art by long since dead masters worthy of their attention.

They miss out on so much.

I mean, as if Elvis, Beatles or the Stones produced the best pop/rock music of all time. As if Mozart or Bach produced the best classical music ever, or Sergei Rachmaninov was the best piano player ever.

One thing is personal taste and childhood memories, another is actual technical skill. Regarding the latter, there is no contest. Deliberate practice and building on past findings make sure the best today outshine the best of yesterday. You just have to open your mind to it.

vermeer

A Vermeer

Did you know that Hermann Göring, nazi extraordinaire nr 2, reacted as if he discovered evil for the first time, when he learned that his favorite painting (Supper at Emmaus), his treasured and exquisite Vermeer, the painter’s best work of all, was a forgery (Telegraph story here) made by the art broker himself?

evil

That story in itself puts into perspective what we like, enjoy or love. Apparently it wasn’t the painting Göring liked, but its narrative. That’s a story for a different post on feelings, bonding, oxytocin, ownership, the human super ego narrative and much more.


Summary

Everything is awesome. So, be awesome. Don’t leave your supposed peak behind you. Summit another one.

Urban Deli Awesome

Break out of homeostasis. Discover. Listen to new music, enjoy new things. You can be certain you haven’t experienced the best, because the best is constantly being reinvented. Try painting, or (Big Wave) Stand Up Paddleboarding. I made my first two oil paintings over the course of the last two weeks.

Admittedly, my paintings were joint projects

Admittedly, my paintings were joint projects

The market is crashing. It’s just that it might be upward.

Everybody knows money printing can’t kick start the economy, given the state with too much debt already. It’s been proven now.

The central bankers, however, can’t admit defeat so they’ll just print ever larger amounts and distribute it in new and clever ways. More money and more or less the same assets (probably slightly less due to malinvestment) mean higher asset prices. I’m sticking to gold in that scenario, but stocks could very well work too.

Be positiveEverything is awesome anyway, so any other approach would just be ridiculous

A few good reasons for higher stock market valuations

…and many more for lower valuations!

Surprised? No, I didn’t think so.

(this article has only 1275 words, so you’ll have to scroll down to the end for the executive summary)


Let’s put it this way, no matter what I promise you, never let me hitch a ride on your back over the water (The scorpion and the frog)

J’ACCUSE

Okay, let’s get serious. I’m not a perma bear. Actually, back in the 1990s, I was accused of being a naive perma bull regarding tech stocks. And back in 2004-2007 I was a die-hard bull on Swedish banks. I’m a realist, not an optimist or pessimist. Then again, everybody says that about themselves.


 

Higher valuations warranted

Well, why not? There is no law saying valuations should be this or that. If valuations are where they are now, they can always move upward yet some. Sure, it’s uncharted territory but so is all of the future anyway.

With rates approaching zero or even going negative, discount rates are approaching zero too, so valuations could in theory go to infinity. The least you could expect is that valuations go a little higher to start with. Forget about the risk of inflation or rates going higher anytime soon; nobody could afford such a development, least of all governments and central banks.

Increased debt equals (necessary) buying power. Lower rates carry a second order boon, in terms of higher willingness to borrow, as well as increased need to borrow to pay for more expensive assets.

Money printing means more money for the same amount of assets. Ergo: higher prices for all assets. And if growth stays low, and consumer prices continue to deflate, there will be even more money over for stocks and other assets.

Tech progress is accelerating, which promises much higher productivity and growth rates. More and more industries are becoming digital and thus subject to Moore’s law. We have only seen the beginning of that process. Higher future growth potential warrants higher valuation multiples today.

Increasing margins. In addition, digital industries means almost zero production cost and thus higher margins. We’ve already seen proof of that in terms of record high corporate profit margins, as well as a market response in terms of record high Price/Sales-type valuation metrics (see Hussman’s median non fin m.cap to GVA e.g.)

To summarize the case for higher valuations: It’s a new era, a new era of higher growth, higher margins, lower rates, more base money, more credit, and not least a new era in terms of simply a continuation of the already clear trend toward higher valuations (the “why not” argument)


 

Arguments against higher valuations…

Increased competitive pressure: The churn of companies among the Fortune 500, e.g., have increased steadily in parallel with the last 50 years of technological progress. The reason is that increased digitalization, open source culture and the proliferation of infrastructure companies (like Amazon Web Services) has lowered the barriers to entry in almost all industries to close to zero.

Increased risk of brand disasters: The share of companies suddenly losing 20% or more of their brand value has increased in much the same way as the churn of top tier companies.

The sharing economy: It’s a good thing for the environment to share resources, and it’s very good for the trail blazers such as Uber and AirBnB, but the competing companies lose more than Uber gains. So go ahead and give Uber and AirBnB a high valuation but you have to subtract so much more from other transportation and hospitality companies.

Automation: Oh, yeah, it’s great with robo-hamburger flippers, driverless cars, trucks, planes etc., with travel and banking/insurance chat bots and so on. Just remember that for every person losing their job to a machine, there is less purchasing power around. In time, competition will drive down margins again to whatever the toughest competitor is willing to swallow, so higher margins from automation are very temporary. Well, unless, we’ve seen the end of capitalism itself.

Uncertainty: Due to general monetary madness and political scrambling, the regulatory uncertainty is the highest in many decades. That leads to hoarding and lower investment which in turn causes lower growth. Lower potential growth of course means lower warranted valuation of near term sales and profits.

Currency and trade wars in the wake of slowing growth, higher debt burdens and increasingly imbalanced economies that have made beggar-thy-neighbor policies more or less the only alternative exacerbates the problems with regulatory uncertainty and low growth.

Exhausted resources: Unless you accept the pollyannaish notion of technology-driven productivity, perhaps it’s the other way round. It could be that the low hanging fruits of globalization, of urbanization, of emerging markets of on-line education, of population growth etc. have already been harvested. In that scenario, growth will continue to fall.

Pollution: Oh, I almost forgot the environment. There will always be islands of opportunity, not least for environmental plays (clean energy, pollution clean-up, carbon capture etc.). However, companies are increasingly burdened by demands on clean production, of emission compensation, of fair wages… It’s a good thing of course, just not for sales, profits, growth and valuations. At least not for the investment horizons I consider (years and a few decades).

Cycles. An last but not least, during all of investment history, margins, valuations, growth, rates and crises have exhibited more or less clear cycles of highs and lows. Right now, most gauges are at screaming extremes, and like coiled springs they are ready to both return to their means and show some inversion too while they’re at it (in order to preserve historical averages). That does not bode well for the buy and hold with leverage crowd.

Summary of the case for lower valuations: Time Tested Truths. If you accept the “old man’s view” of the world, we’ll continue to see cycles of high and low valuations, just as we’ll see highs and lows in rates, in growth, in greed, in margins, in debt. As a final nail in the proverbial coffin, we’ve already rehearsed what’s coming twice in the last 15 years.

As an optimist I think we’re headed downward (soon)

As a final word, please note that you’re a pessimist if you think we’re doomed to think the current high valuations (and thus low future returns) are permanent. And you’re an optimist, if you think some kind of natural pullback is imminent, leading to lower valuations and thus higher return prospects going forward:

Is 15% annual return over 10 years something you might be interested in?

 

Summary – New era or Old truths?

Are higher or lower valuations warranted? What will be the next step?

Money printing, negative interest rates, automation and productivity, new era growth, margins and thus new era valuations?

Or…

Will the world and the psychology of the people in it stay mostly the same, with cycles cycling back again from the current perverse levels?

-Make no mistake, authorities will fall over themselves in trying to prevent a re-set. The problem is that they’ve already done that and they are most likely soon about to be exposed for the frauds they are.

It’s all a confidence game, and right now confidence too is at an extreme high where even highly intelligent people consider the possibility that Yellen, Kuroda etc. can actually pull it off….

“What were they thinking” is the future’s most likely judgement of us all


PSST, liked the article? Why not do me a solid and share it with somebody? And take a look at my free e-book and newsletter too. I think you’ll enjoy them.