Sunday, July 31, 2016


Piling Up Losses in a ‘Self-Directed’ 401(k) Account - by Jason Zweig (LINK)

Three Bucket Framework - by Jana Vembunarayanan (LINK)

A Dozen Things I’ve Learned from Andy Grove about Business and Strategy - by Tren Griffin (LINK)
Related books: Only the Paranoid SurviveHigh Output Management
Jim Grant Is Bullish on Gold, Bearish on Kraft (LINK)

IMF admits disastrous love affair with the euro and apologises for the immolation of Greece (LINK)

Richard Duncan: Creditism Has Replaced Capitalism (macro podcast) (LINK)

Beyond Siri: The World Premiere of Viv with Dag Kittlaus (video) [H/T Will] (LINK)
Related previous link: Dag Kittlaus on Charlie Rose (video)
Book of the day [H/T Jack Schwager]: Endurance: Shackleton's Incredible Voyage (the audiobook also gets good reviews)


Some insightful comments from Howard Marks on the Oaktree call last week:
Well, I think that clearly, when the central banks take the risk fee rate to 0, all other rates kind of emanate from them -- from that in a capital markets line kind of phenomenon. So it's all a function of that. Now we have adjusted downward our client's expectations and our own expectations as to what our strategies can provide. As I recall, Bruce, when we started off 1988, we thought distressed could do 25% to 30%. And then we've had occasions since then when we said 30% or more. And we're not saying 30% anymore or 25% or 20%, but we're hoping, for example, to get 15%. And we're targeting 15% in the investment decisions we make. And we still believe we can make 15%. And we may fall a little short of that, but that's a goal, it's what we're underwriting to. Our hurdle is 8%. We still think we'll clear the hurdles. And it would be perfectly logical to go to the clients and say, look, 10 years ago, if the 5-year yields at 6%, today, it yields 1%, the hurdle should be lower. But we don't want to have that conversation. The client still need the levels of return in excess of our hurdles. And that's what they come to us for, and we still think we can get it. But of course, as the capital market line comes down, the achievement of any given return gets harder. And that's the world we live in. But I don't want to go in there and say, well, how about if we start getting incentives at 5% on distressed debt and so forth. And I don't think that's a necessary conversation. And we just haven't ever had the desire or felt the need to have that conversation. 
...Well, I mean by definition, we'll buy at 15%. And in prior cycles, we wouldn't buy at 20%. So back 15 or 18 years ago, I wrote a memo called, It Is What It Is, in which I said, the investment environment is what it is, it's a given, we can't change it, and we can't order up a new one. We have to work within it. And this investment environment offers us lower prospects than ever. But of course, makes our products more important than ever to our clients. And I dare say that most people have given up on getting the 7.5% that they require from mainstream stocks and high-grade bonds. Well, what does that leave? I think it leaves us in a pretty good position. Plus, we have adjusted to the change in the environment over the last, I would say, roughly 6 and 7 years by bringing out -- by continuing to bring out and increase our suite of products designed to produce returns around 10, which 10, 15 years ago, 10 looked like a modest accomplishment. And now, it looks like nirvana. And we're -- we have a number of products ranging from strategic credits, which Bruce mentioned, and direct lending to European credit solutions to mezzanine to enhance income to real estate debt, all of which we think will produce high single digits or in 10% or so, if we -- if things break right. And as I said before, now people say, oh, my God, 9%, wouldn't that be great? Believe me, nobody stood up and cheered for 9% 30 years ago. But that's the way things are today. It is what it is.