Investing journey update -- nasdaq correction of March 2021

It's noon on Sunday-- Lindsay and I are sitting on the couch. She's reading 'braiding sweetgrass' and I'm writing this now. What a wild ride its been since March 2018 when I first started investing-- its only been 3 years but they feel like a life time with the number of events that have transpired since. 

I saw the Dec-2018 decline which was largely driven by Fed wanting to kick up rates, US-China trade war, fear of economic slowdown. My first substantial downturn of sorts which I think did well on, and cruised through. 

In 2020, i saw the pandemic and the subsequent large ~30% crash in the nasdaq -- my all in cash contribution of ~$400k went to ~$160k which was a real scare. I levered up and went longer -- to come out with all in cash inv. of $490k by Dec and total value of $630k+ later. 

In Sept-20, I saw another 12% nasdaq fall which, by this time in March 2021 now-- I don't even remember amid all the action and volatility since. Vix has been surprisingly steady between $20-25 since March 2020, although pre-covid it maintained a range of $12-16. So yes, the volatility has been extreme and these have been unprecedented investing conditions. 

I have been surprisingly stable through this, except times like the last couple of weeks when the vix jumped to $37 and my anxiety levels spiked along with the pretty large drop in nasdaq (~12% again). This time, compared to Sep-20 however, I felt it much more mainly because in Sep, I was probably 70% long and 30% cash sitting on mid to large cap growth names. And my portfolio had massively recovered from my ~$160k low. My bar was different. 

This time, I'm long 100%, no cash, all invested in very high beta mid cap tech growth stocks. So I took a good 22% hit on the portfolio in the last 2-3 weeks. Which has wiped out pretty much all my gain since December. 

Either way, I'm staying invested through this cycle -- given we have $1.9tn of stimulus which the Senate passed yesterday, dovish and supportive Fed w $120b/month program, visibility into strong economic recovery, positive vaccination news, even Yellen pitched in this weekend saying she thinks spike in ust 10y yield is sign of growth expectations and not inflation scare. 

Yes, while inflation is expected to rise up to 2.25% in the short term, this was expected and Powell says its a one-time reset. Fed is ok to let is run hot for some time as long as average is 2% over the long term. It has been sub 1.5% for years so I take this to mean he's ok for a couple of years of over 2%. Historically, in the last 10-11 years since the bull run in 2009 began, stocks have gained despite ust yields shooting up-- that correlation of high yields and fall in high growth long duration tech stock prices --and associated market fear should be temporary. 

The bull run is expanding to value names -- at the cost of growth for now-- and its ok. Wider bull run is better than spikes in specific sectors. I'm a buyer the more it falls. Just cant see conditions which would drive a more than 15-17% overall nasdaq correction.. so I dont care if its falls 3-5% points from where we are today. I'm long and will be gross ~130% long on margin, if it falls more. 

Anyone wanting to buy banks and energy stocks has already seen incredible returns this year-- and they won't grow too much from here. How do you compete with tech assets growing 30-50% yoy? Sooner or later, the tech rally will come back -- there's only one place the world is going. And its the tech way.  

Amit’s leadership class summary

Key takeaways  from the executive presence workshop:

1. For every one, their name is the most powerful word in the universe. Hence, we should try and  address people by their names more frequently.  Eg. "Thank you Sanya " as opposed to just a plain "Thanks".

2. We are in the business of building trust and relationships.  Which requires effective communication.  The biggest conversation killers are the following  words:
A. "No"
B. "But"

We can try to replace a "no" with "yes and" during conversations. Basically start with a yes but use the" and" to say that we shouldn't be doing that thing immediately.

Similarly when using "but", try to use the syntax of (negative clause)  + but+( positive clause).
Eg." I cannot hire you at the moment but you were really impressive in the interview.", " our internal constraints prevent us from taking this mandate but you have built a very impressive company."  Try saying the above sentences in reverse order and you can feel the difference.

3. Life is a series of transactions. To get something, we need to be clear about what we are willing to offer in the trade. Successful leaders make their offer upfront. Eg. "We will offer you a meritocratic, politics free and high growth environment, hence come join us."

4. All of us really want to be treated by others as a "VIP". So why shouldn't we try and treat everyone around us like a VIP. That  should help build warmth and a connection.

5. Use eye contact and your eye brows effectively.  Direct eye contact is important for connecting.  Also when removing eye contact, in order to focus on a different person/ speaker, then do so slowly. Almost appear reluctant to break eye contact with the first person. Makes people feel that they are important to you.

6. All relationships- personal or professional follow an "AIM" cycle. Attention, Interest and Maintenance ". First someone gets your attention, then you build a joint interest and then the relationship moves into maintenance mode. Its important to recognize that AIM is not a linear model but is a cycle. Relationships in maintenance mode needs to be moved back into Attention mode, else they will wither. Eg. Give your spouse and children the attention that they deserve and not leave things in the low touch maintenance mode.

7. Transition pauses are very important. These are nothing but the pauses between a change of state.  Eg. Someone should stop speaking before we jump in to say something. While negotiating, pauses can strategically increase anxiety of the opponent and can induce them to give up their position etc. Waiting for others to stop speaking, before we speak will help us listen better.

8. Be alert and focus on the details. Colour of people's eyes, their watch, socks etc. It can give us clues to further our conversation and to build connections.

9. Taking a break or allocating "me" time can enhance your productivity and efficiency. Eg. Closing one's eyes and just focusing on one's breathing for 5 minutes. Taking a power nap. A walk post lunch etc. The key elements to focus on are silence, stillness and solitude depending on one's preference. Eg. Taking a quiet morning walk addresses silence and solitude but not stillness. All three together are not necessary.

10. When meeting someone after a long time, a common problem is in remembering the other person's name. Two hacks:

A. Introduce yourself by name first.  Eg. "Hi, I am Amal from Avendus. We have met in the past." It could prompt the other to do so.

B. Take a judicious call,  whether you want to be transparent and tell the other person that their name is slipping your mind. Eg. "Sorry, I am just blanking out at the moment, and your name is just eluding me." Make them know, that the problem is at your end. But if you believe your honest confession would not be well received, by the other, then try to fake recognition, while seeking clues about their identity.  Eg. If I meet Deepak Parekh at an airport,  i cannot possibly tell him that i have forgotten his name!

Think about these points and let me know, if you want me to elaborate on anything.

11. Description of executive "presence"
A. It's a learned behaviour.  People are not born with charisma.

B. One can switch it on/off. The objective should be to keep it on, for as long as possible, during the day.  Taking a break, power nap etc. during the day, allows us to prolong it.

C. Executive presence allows us to influence people.

12. To influence people, one needs to demonstrate a combination of the following :

A. Focus/Attention  : helps improve likability 

B. Power : helps build credibility 

C. Warmth : helps build trust

13. One needs to get comfortable with silence. No need to rush in with an answer/rebuttal/suggestion all the time. Strategic pauses and momentary silence can help in effective negotiation as well.

14. Listening and observing go hand in hand.

15. Make it a point to shake hands with everyone around. 

16. The handshake should be firm with hands comfortably extended forward. No sudden hand movements. Shake hands long enough for you to at least note the colour of the eyes of the other person. You can ofcourse hold on to the other's hand, a bit longer, till the pleasantries are over.

17. Remember that :

A. People like people, who like them and;

B. People like people, who are like them

18. People get a lot of random thoughts in their mind during the day. 80% of the thoughts are negative and give rise to self doubt. Negative thoughts are so common that, according to some study , a 2% increase in positive thoughts is all that it takes to move a person into a thought leader category !

19. Good leaders focus on moving their mind from being an inner critic to an inner coach by employing means like meditation, positive thinking, positive actions, espousing social projects etc.

20. At leadership level, it's always mindset over skillset.

21. The tools to project power are :

A. Occupy more physical space. Erect spine, horizontally extended arms and open shoulders, etc. 

B. Stare !

C. Silence !

22. Warmth in a relationship is the gatekeeper and warmth is also the game changer.

23. We judge ourselves by our intentions, while we judge others by their actions. However, to be a good leader, we should judge ourselves by our actions and judge others by their intentions. Will immediately build trust.

24. Scan your body posture every 10 minutes. No slouching. 

25. Don't hold back on giving compliments to family/colleagues/clients. Everyone craves for compliments. 

26. The summary is to focus on the following "QUESTION"

A. Ask Questions
B. Focus on "U"
C. Make Eye contact
D. Smile 
E. Touch
F. Show Interest in others
G. Observe
H. Take people's Name

Business ideas and the rush and the dreams

It is 4.30pm on Thursday, 22nd November, Thanksgiving Day. I'm sitting at the desk in my bedroom of my LIC apartment overlooking the Queensborough bridge. 

On Sunday, i was wondering how i should spend my week, since today/tomorrow are holidays and its a long weekend. I don't have much to do, i didn't want to plan anything because i'm trying to save, and i don't have any company. 

I got to thinking about maybe taking a last minute weekend trip, and realized there are no firms/companies who do weekend trips bringing strangers together through the year. Dave does the social network thing but it is not scale-able. I came up with the idea of creating a 'curated social travel experience company' which would, purely through an app (no human interaction from company side), create an experience for travelers going from one specific city into another for a weekend. 

They would meet fellow travelers from their own city in advance (say on Thursday eve before Friday departure), and for brunch/dinner in destination city. Everyone gets to know each other, and maybe spends the weekend together. They are all from same city, so they can be friends and keep in touch when they come back. 

We, as the company, would facilitate the experience through bookings accepted on our app (linked into another booking system or hand-picked choices - this is fuzzy) so we can control the experience. The app would also be linked into local events websites, to-do lists, and generate recommended itinerary for the weekend including must-dos and fun-dos specifically for that weekend ie. what's hot. 

When they meet for brunch, app would throw ice-breakers at them - to help mingle - and then show an itinerary for discussion. Idea seems obviously more execution focused than true novelty, but the market is ripe and there are no real competitors. 

If Remote Year can raise $12m, this feels like a better pick - i thought this to myself as i was debating the touch-points each year. And how many people would truly use this service again, or more than once a year. 

Spoke to Omar about the idea and he was pretty excited too. I then called two app dev companies in India who quoted a range from $10k to $75k depending on what we want to do, with timeline of 3-5 months. Omar said he could do for free, but will need to involve friends, and will take 6-8 months.
I trust Indian app dev company more than Omar's resolve but i will bang this out with him when i meet him next. 

Separately, i spent yesterday with Ruchi hanging out. We were talking about different ideas we have and how we can implement them to create something of our own. I dont think either of us are meant for a job in the longer term - dont have the temperament - and will eventually want to run our own business. 

As we were talking, i thought of the AMNH Sensory Experience exhibit i went to with Kristina. I realized that can be a pretty cool idea for a bar in NY - fun theme, and people are always looking to pay for experiences. And what better than distilling an experience into a night of the 5 senses with some booze. Booze being 'taste', among others. Bar can be modeled on the exhibit and maybe designed by some visual illusion artist, sound artist, etc. 

I have been researching the idea of opening a bar heavily today, and i like it and see this as being real. If not now, perhaps in the future. Maybe i'll talk to Jai who deals with retail much. 

I was at Amazon Books in Flatiron yesterday when i came across this quote which resonated with me, and has been playing in my mind. And if this is not true, and is not the essence of existence, what is? 

'Life expands or contracts in proportion to one's courage' - Anais Nin 

Obviously, i also had boyish thoughts and dreams about how if i do open a bar, i can name drinks after my lovers and friends. Amity, for example, who showed me the soul of an artist. Or Amma, who bared her inner beauty and depth. Then i googled bartending schools and i'm now trying to sign up to be a bartender so i can learn the trade. 

I have not been this alive, internally, in a while. I feel like i have found what i am meant to do and be. Frendo might have been on point. 

Investment process/discipline

I was just listening to Whitney Tilson's interview on the Seeking Alpha podcast - he had some marvelous things to say about investing.

Following is critical, which make sense and i have thought about for some time:

• Strategy: setting specific strategy where you have competitive advantage (like sub-$1bn banks in US, or digital tech in India, etc.) and playing only that with deep, expert knowledge 
• Stock-picking: thorough and diligent research on each company in that space 
• Portfolio management: deciding, and adhering to, specific allocations set up front (like 10 stocks 10% each, or 5 stocks 10% each, then 10 stocks 5% each, or whatever)
• Duration: buying slowly over a year and having min. holding period of 3-5 years 
• Leverage: not using unless highly compelling negative movements in stocks which make them attractive investments (not compromising any of top 4 priorities) 

Good advice was don't make something 20% of your portfolio because it's hard to come back from that if the investment fails.  

There's significant amount of research saying the more one trades, the lower the returns have been. Few trades, few ideas, and just wait. Time is money. 

FB/GOOG seem very attractive at these levels.

August 01, 2018 - quick project at work

I'm in the office and had a couple of hours to kill today - have been thinking about current state of the market and wanted to get my head around this clearly.

Took a look at following over the last ~50 years, out of curiosity, to form some sort of first-hand view (in addition to synthesizing existing material in books and in magazines). Note these are all charts up to July, 2018, from FRED.

1. Unemployment rate (wage growth i didn't see much info) 
2. Inflation 
3. Fed rate
4. Yield on 10yr t-bonds 
5. Shiller PE and earnings yield 
6. Real GDP growth 

Market doesn't seem like the 2000/01 bubble, but is expensive on PE - more so than in 2007 before the mortgage crisis and than in 2011/12 before the Greek debt crisis... 

Inflation seems to lag unemployment. So if unemployment decreases (employment increases), inflation increases. On that basis, we should see some upward movement in inflation in 2019/20... 

I also assume increased inflation (or vice versa - chicken egg?) will lead to wage growth. Unless inflation is very high and then real wage growth can be low (since interest rates will be high and slow growth)     

Fed rate is gradually being increased, in order to counter expected rise in inflation stemming from increasing employment rate, fiscal stimulus produced by tax reform, and 3 QE's earlier in this decade... 

Also seems like in times of high inflation, capital flows to bonds which may be considered an inflation hedge (like TIPS)... so it is also fair to say that increasing interest rates imply increases in discount rates since all discount rates are based on risk-free which is 10Y bonds...  

Again confirming that 10Y yields move in line with Fed rates... 

Since discount rates dictate returns, which is classical finance theory, we see that earnings yields (or inverse Shiller PE in this case) move in line with T-bonds. Which is to say that higher the yield, lower the market PE (S&P500 in this example). So as, in today's environment, we see bond yields rise, we may expect PE re-rating downwards.. 

As a side note, i wanted to see if there is meaningful correlation between unemployment and real growth - seems like there is some - i want to leave this to another time for now... 

Logging work life

Someone from Dallas F&P (LP) reached out to Latz yesterday to help with few funds managed by a couple of managers. Poor returns, and struggling with tail ends. We did some research and sent an intro doc out this morning ahead of a 5pm call. Other than that, week is generally quiet with small stuff to do. Like assess strategy for CMGP and divestment, so we can get our head around fund debt and liquidity to closing. Or look at fund filters and start calling LPs.

The CAIA has been in my mind, in addition to potentially an MBA so i can eventually transition into a general buy-side role if i wanted. And to help me build a truly local, and real network - personally and professionally. Here, i can start my own EMEA and Asia EM focused shop doing distressed fund advisory. 

If i dont do that, i've been thinking about going back into banking. Money is good, i know what i'm doing, i can just network, and focus on other aspects of life and say this is the best i can do career-wise.

Consideration is that MBA opens up opportunities which can be exciting but that comes at a large cost (cash and time). Banking is good money, and i can retire in 5 years, if i wanted, but doesn't give me comprehensive benefits of longer-term career.

Status quo doesnt sound stimulating enough.

I gotta decide what i truly want from my career, apart from 'growth'. Growth has been a key-word for me for years now but i dont know what that means anymore. Growth for the sake of growth? How do i connect dots? I'm all over the place.

Maybe i'm crazy and I'm focusing too much on my career and job because i have nothing going on personally, really. If i had a full life outside, perhaps i wouldnt be wasting time thinking about all this.

I need to figure shit out. Is this SPIRALING??? I dont know anything anymore. 

July 16, 2018

I woke up at 7.50 but got out of bed at 8.15. Reached office at like 9.40, later than i would have liked but there hasn't been much going on.

Spent the morning reading, and just generally working on Platinum and BD. Drafted an NDA, got on a call with buyers of secondaries, looked at valuation, liquidity CF for CMGP, and then met a couple of LPs from R&I Japan today, which was interesting. I need to learn more about Japan's state sponsored pension plan management. Apparently it is complex.

The hedge funds strats class was great, again, and i learnt a couple of things. Zach harped on how alpha comes solely from discount rate, vs anything else. We had a healthy debate, and i felt good speaking up in class. I need that right now.

He's given us a list of books to read. In addition, Dalio's Principles lists some books on page 104 which i will add here, to my reading list.

I feel like this is it - reading more on history of money and finance, learning about macro/markets, and just generally being a good investor is all i want.

The time to focus is here.