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. 

Investing - raring to go

I think i'll still be with the firm for a couple of months and i don't want to invest and risk being investigated by SEC - i know how tightly they monitor. That means all my current research kinda becomes in-actionable immediately. However, it will help me lay the groundwork for when i can transact. Maybe i'll turn the pace down a notch - let's see.

In thinking through the overall strategy of value investing vs trading, i prefer value and that makes sense to me. Find a good, reasonably priced asset, and hold - even in the worst of times.

I also think, though, that there are some obvious short term trades (<1 year) which can provide significant value, at least in the current state of the market. If there is a massive crash, that may go down the drain. And you have to take that loss. These are mainly commodity driven - so steel prices are low now and on the way up - find a good steelco. Or event or earnings driven, like Match - upside from cuffing season and FIFA this year. Simple, short term stuff.

At current level of accessible capital, investing will have to remain a secondary exercise if i live in the US - i need to get a job. If i move to India, i think i can afford a couple of years to get invested. 

China debt - is it a problem?

From 2001-03, US lowered Fed rate so drastically that over the next few years credit flowed freely, more freely than it should. This led to the sub prime crisis in 2007/08. Broad strokes.

In the US, the TARP ($700b, of which ~$400b was actually used) was used mainly for capital purchase (buying book from banks/other investors) via reverse auction, and for injections into banks/FIs and auto companies. The other ARRA $790b was measured as tax cuts, extension of unemployment/edu/HC benefits, and job creation through fed grants, contracts, and loans. Effectively, all of this was channeled through fiscal spending. Yes, QE and low interest rates also followed - and rates are still at super low levels.

Keen to see what such consistent low rates mean for the US - are we in a longer term rally? Or does this implode somehow? Post 2001-era didn't end well. Probably my next post.

Anyway, during 2008 crisis, exports fell significantly and manufacturing stalled in China - like others, China introduced a stimulus package. But they did this out of lending the ~$600bn to local banks which in turn lent proceeds to businesses and individuals. Local govt's couldn't borrow from banks directly so they set up funding vehicles (LGFV) which did the borrowing. 

Chinese debt went from 150% to 250% of GDP from 2007 to now. Similar to US/EU level but far lower than Japan (350%ish). Most of this stems from corporate and household debt - not govt debt - which went from 110% to 225%.

NPAs at Chinese banks are currently ~$225b - two thirds of this debt is at state-owned banks, and lent to state-owned entities. With limited foreign debt (~15% of GDP and ~5-6% of all debt).
China currently sits on $3t of foreign reserves, and its savings rate is 40-45% of GDP.

Overall, given this debt seems manageable by the government, i don't see this as a concern.

However, China's LT bond yield is at 4% (higher than in a ~decade) and is expected to remain at these levels. To curb lending (which has fueled growth) - authorities have mentioned this is the intent - there may be a tighter monetary policy in place. Which means lower growth. 2016 showed us that. 

Low growth may mean lower than now, but still healthy and sustainable EM figure. Unless we see large impact on growth, flight of capital, very low yuan (leading/pre-event indicator, as opposed to growth from exports which becomes lagging/post hoc), there is no alarm here.

What happens if this chain of events occurs is a subject of another discussion.