Let the Roaring 2020s Begin...

December 30, 2019

A. As the decade comes to a close and I reflect back on what I’ve learnt, firstly I have to look back and smile at just how stupid I was ten year ago. You may still feel this way :-)

Secondly, it was definitely the hard times where the learning and growth happened and this decade had it’s fair share of them.

Summarizing 10 Years of Life in to Three Points:

1) Hedonic Adaptation is Real: nothing is as big a deal as you think it is at the time. Angry or sad emotions from life traumas will fade remarkably quickly, but so will the positive surprises from one-time life upgrades. What’s left is just you.

So remember: This Too Shall Pass. Be happy with who and what you have today. The present is all there is.

2) Habits Are The Only Things That Matter: most of your day & life is comprised of repeating the same set of behaviors over and over. The way you get up, your thoughts. Your job. The way you interact with other people. The way you eat and exercise.

Unless you give all of this a lot of mindful attention and work to adjust it, it stays the same, which means your life barely changes, which means your level of happiness barely changes.

3) To Change Your Life, Change Your Habits: The easiest and best way to have a happier and more satisfying life is to figure out what ingredients go into a perfect day, and start adding those things while subtracting the things that create bad days.

For me the perfect day includes: positive social interactions where I learn something new, helping people, outdoor physical activity, making something (however small), problem solving, and some good old-fashioned hard work thrown in for good measure ;-).

A schedule will help, as author Annie Dillard said:

“How we spend our days is, of course, how we spend our lives. What we do with this hour, and that one, is what we are doing. A schedule defends from chaos and whim. It is a net for catching days.”

Thanks to Mr Money Mustache for the inspiration.

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B. Which brings us to markets….

Below is the report card on the total returns per asset class via BofAML.

In 2018 cash was the top performer at 1.8% while every other asset outside of US Treasuries was down on the year.

This year, everything was positive with stocks turning in a blockbuster performance with the SPX returning over 30%. 

What’s interesting though is that cash — the lowest returning asset this year — happened to be the asset class that investors loved most. Over half-a-trillion dollars flowed into cash this year while investors sold over $160 bn net of equities (chart via BofAML). Wow !!

So what about 2020 ?

To paraphrase what Stan Druckenmiller said recently: with central banks printing again, fiscal stimulus starting in size, $13 trn of negative yielding debt and positioning not very long, you have to be bullish on stocks here.

Here are some of the smart ideas I’ve heard for next year:

Core bets: US$ down and Value, Global & Small Caps should finally start to outperform US Large Cap.

A lot of asymmetric bets: Offshore drillers, Shipping, Gold & Silver miners, Uranium miners, venture capital (seed stage) - each anywhere from 5-20% of the portfolio.

What about yours ?

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C. Real wealth is not about money.

Real wealth is:

-not having to go to meetings

-not having to spend time with jerks

-not being locked into status games

-not feeling like you have to say “yes”

-not worrying about others claiming your time and energy

Real wealth is about freedom. Money can help achieve these things, but there are plenty of people who make lots of money yet aren't free.

- James Clear

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D. A Few Things Worth Checking Out:

A. The amazing Mike Maples @ Floodgate has started a podcast - Starting Greatness. Mike was an early investor in companies like Twitter, Twitch.tv, Chegg, Okta, and Demandforce. His episode with Andy Rachleff (co-founder of Benchmark Capital and Wealthfront) on Product-Market Fit is amazing. Particularly the discussions around Crossing the Chasm (Gordon Moore), running experiments & looking for surprises, and insight development vs customer development. Amazing.

B. Graham Allison (author of Thucydides Trap) wrote a deeply researched article on - “Is China Beating America to AI Supremacy?” Answer: Yes.

C. If Sapiens by Hariri was a blog post…..

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E. Quotes I’m Thinking About:

“The future has many names.

For the weak, it’s unattainable.

For the fearful, it’s unknown.

For the bold, it’s ideal.”

- Víctor Hugo

Happy New Year from Richmond.