“I always tell my students that if they do good valuation work, the market will eventually agree with them. I just don’t tell them when the market will agree with them.”
- Joel Greenblatt
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WARREN BUFFETT: “We've always known that the dream business is the one that takes very little capital and grows a lot. Apple and Google and Microsoft and Facebook are terrific examples of that. I mean, Apple has $37 billion in property, plant and equipment. Berkshire has $170 billion or something like that, and they're going to make a lot more money than we do. They're in a better business. It's a much better business than we have… they're the best businesses, but they command the best prices too. And there aren't that many of them, and they don't always stay that way… that's what capitalism is about, people getting a return on capital. And the way you get it is having something that doesn't take too much capital. If you have to really put out tons and tons of capital, utility business was [an example] - it's not a super high-return business. You just have to put out a lot of capital. You get a return on that capital, but you don't get fabulous returns. You don't get Google-like returns or anything remotely close to it.” YouTube – May 1, 2021
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JEFFREY GUNDLACH: “There’s plenty of indicators that suggest that inflation is going to go higher, and not just on a transitory basis, for a couple of months. So we’ll see how the Fed is trying to paint the picture, but they’re guessing. Who’s going to buy all these many trillions of dollars of bonds? Foreigners have been selling for years and they’ve accelerated their selling in the last several quarters, domestic buyers are not exactly selling, but they’re not adding to their holdings. So what’s left to absorb all of the spawn supply is the Federal Reserve. I bought European equities a couple of weeks ago, literally for the first time in many years. I can’t remember the last time I did it. And that’s largely because I think the U.S. dollar is almost certain to decline over the intermediate to long term." Bloomberg – April 27, 2021
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ROBERT SHILLER: “I was surprised by the strength [of the housing market]. I think the housing market is hard to predict, just as the stock market is hard to predict. It has more momentum than the stock market but it’s still driven by psychological factors. So somehow, the COVID-19 experience has boosted our demand for housing. And the supply isn’t up there to match that, so we have home price increases and eventually, I think there’ll be a supply response – there’ll be more houses built and the prices will ease a little. But right now, it is still a very strong market. I am a little concerned now, it reminds me a little of 1929. I don’t mean to be an alarmist by that. I read history, and in the late 1920s, the market just kept going up. And people were saying it’s too expensive, but it just kept going up. And we’re in a mood like that now. I call it an uncomfortable feeling.” YouTube – April 27, 2021
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HOWARD MARKS: “Fundamental investors need to thoroughly examine all situations – even those with dependency on intangible assets and growth into the distant future – with the goal of achieving insight. This needn’t be antithetical to the value investor’s mentality. Open-mindedness is something we should strive for. There shouldn’t be such a big distinction between value and growth, and without attaining real knowledge, it’s impossible to justify the dismissiveness that many of us exhibit early on in the face of innovation. Stocks should not be automatically excluded just because they’re from tech companies, or rapidly growing companies, or because they carry above average valuations.” YouTube – April 29, 2021
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SAM ZELL: “I think the real issue with the office market was that it was significantly in oversupply before COVID. In other words, it was facing a significant oversupply, primarily because WeWork and other space sharing companies that thought that they had figured out a new solution. And the result was that an enormous amount of space was leased in anticipation of subleasing it. That never happened… it's going to take quite a while, I think, for that new space or the orphans that that new space created get readjusted and re-rented. But it's going to be a long haul and there's going to be a lot of office buildings that are going to end up being residential or I don't know, maybe vertical farms. I don't know what, but some other usage other than office space because we have too much of it.” CBRE – April 27, 2021
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INSIDE THE DIRTY BUSINESS OF HIT SONGWRITING: “As songwriters have seen their leverage eroded by streaming — which pays a larger royalty for recorded music than publishing — artists, managers, producers and even executives have amped up their demands for credit and/or a percentage of the songwriters’ publishing in exchange for the artist cutting the song, or even simply for bringing the song to the artist. Multiple industry sources tell Variety that the practice involves some of the biggest stars in music and their teams; one major manager has even called the practice a “tax” for his artist recording a song. Pact co-founder Emily Warren (who has written hits for Dua Lipa and the Chainsmokers) and her manager, Zach Gurka, tell Variety that a standard ask ranges from 1% to as high as 20%, with an average of 15%; other sources speak of requests for 30% or even 50%. Songwriters often go along, on the premise that a smaller percentage of a hit song by a major artist is better than a large percentage of the same song when it isn’t a hit — and by that same logic, the writer’s publisher or manager may advise them that the tradeoff is better for their career than saying no. (The same situation can also lead to non-songwriting artists getting lucrative publishing deals.)” Variety – April 7, 2021
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THE SECRETARY WHO TURNED LIQUID PAPER INTO A MULTIMILLION-DOLLAR BUSINESS: “At the time, IBM had just come out with a new line of electric typewriters that were faster than previous models and used carbon film ribbons. But as Graham soon learned, the invention had several downsides: The sensitive keypad lent itself to more typographical errors. The carbon ribbons made these errors impossible to erase without leaving smudges all over the paper. Graham had to find a way to fix her numerous typos. Soon, an idea struck. She’d previously had a side hustle painting window displays at the bank. “An artist never corrects by erasing but always paints over the error,” she later recalled. She whipped up a white-colored liquid in her kitchen blender, poured it into an empty nail polish bottle, and started covertly using it at work to cover up typos on documents. To meet demand, she turned her garage into a mini packing plant, paying her son and his friends $1/hour to fill the little glass bottles and affix them with handwritten labels. She called her product “Mistake Out.” Graham knew that to expand her reach, she’d need to improve the quality and consistency of her product. With help from her son’s chemistry teacher and an employee at a paint shop, she constantly iterated the formula." The Hustle – April 23, 2021
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HOW ROBINHOOD MADE TRADING EASY—AND MAYBE EVEN TOO HARD TO RESIST: “Eyal says the most engaging designs work like this: A good product has triggers that pull users in. Then it needs actions—particularly simple and easy ones—that remove friction and help users accomplish what they came to the app for. Variable rewards build anticipation and leave the consumer fulfilled yet wanting more. Getting people to commit things like time, effort, or social capital, what Eyal calls “investment,” increases the likelihood they’ll return. Repeat enough times, and a feedback loop is formed. The activity becomes a habit. Other experts also see the Robinhood app exerting an unusual pull. “It’s a different technology of high stimulation and high distractibility,” says Brett Steenbarger, a professor of psychiatry and behavioral sciences at SUNY Upstate Medical University in Syracuse, N.Y. “With the traditional brokers, you haven’t had that.” Although Robinhood doesn’t charge commissions, like other brokers it makes money each time its users buy or sell a stock, based on payments from financial middlemen who execute the trades and earn profits on small differences in market prices.” Bloomberg Wealth – April 21, 2021
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ALBUQUERQUE IS WINNING THE STREAMING WARS: “Netflix’s acquisition and expansion in Albuquerque comes after the streaming wars triggered a TV production boom. An FX network tally of primetime TV shows in production has gone from about 250 a decade ago to 532 in 2019. Netflix, which now claims 20% of the streaming market, is arguably more responsible for that growth than anybody else; in a move akin to its New Mexico move, Netflix has also developed a massive content hub outside of Madrid, Spain. “They spend so much money that they’re driving the industry,” said Robert Marich, author of the book Marketing to Moviegoers. “The vertical integration is unprecedented. They’re changing customs and industry practice for hiring talent, and spend so much money, everyone has to pay attention.” Bloomberg Citylab– May 3, 2021
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