Happy New Year!!! Greetings and salutations!!!!...and all of the et ceteras. My new years resolution is...no resolution. My goal is to continue my path towards 100% clarity and good mental health.
So, here's a list of goals that I will attempt to achieve in the glorious new year -
1. Less News -
American news is terrible. It can be downright atrocious, resembling a sitcom. Try watching Fox News, CNBC or MSNBC, and compare it with Bloomberg, France 24 or Al Jazeera. With news and the ubiquitous data that accompanies news segments, there's an influx of noise, i.e., information that has no bearing on your day to day living. Case in point, the Bernanke spawned "fiscal cliff". As a businessman, I only care for clean information. Clean information is data that could bring me closer to making a binary decision. Decision making becomes precarious when there's an abundance of insignificant variables. Insignificant variables? Such as "taxes", regulation, budget deficits and monetary policy. The media and their "allegedly seriously smart pundits" use random data and doomsday theatrics to bombard viewers with useless information. Leave me alone...
2. Less Corporate Spending -
I've learned during the last three years that living BELOW your means is better than living WITHIN your means. Why? It allows me to adapt quickly and take MORE risk in my business and life. After all, risk taking is the only way to achieve returns. Trying earning market returns from US treasuries or stabilized real estate...Good luck.
3. Lower Tolerance for Ignorance -
There's nothing scarier than someone who believes his/her own ignorance. Like the i/banker who wanted me to offer his client an earnout for revenue from a non-existing line of business that the CEO had no plans for generating. My response to ignorant people will be either, "I believe you believe that", or, "You're right". Meh.
4. More Mixing Business + Pleasure -
Why not? Kill two birds with one stone...preferably one drink. More business (and even better, information) is taken care of during "non-working" hours, than the typical government agency office hours.
5. Buy when the Market Is Selling -
Very simple thesis, but hard to sustain due to behavioral reactions, typical of human beings. We all want to blend in and feel among a peer group or even worse, make significant others approve of our decisions. However, such is never the case. When everyone is buying an asset, prices go up. So the person making money is the seller. At least theoretically.
6. Low Volatility -
Hedge funds had a horrible 2012 thanks to the evaporation of volatility. We can thank the Federal Reserve, but more directly, market participants. Low volatility means lack of price differentials for hedge funds, i.e. less arbitrage opportunities. Hedge funds typically need wider price differentials to take advantage of volume and speculative short-term trading. Value investors, including investors of distressed assets have made a fortune since 2009-ish. The VIX (as of today) remains at ~14, and this is bad news for traders. So who is this good for? Good old fundamental investors smart enough to take advantage of interest rates-induced asset pricing. With rates so low, the artful investor should be able to take advantage of interest rate arbitrage - borrow money and buy an income-producing asset. For the deep-pocketed investor, distressed assets is where to make pretty penny. One can borrow, for example, $10M at 12% (vulture money ;) ), buy a distressed asset, use equity to service the debt in the short term (let's assume 9 months), and divest the asset. Depending on the haircut at time 0, the astute investor should make a pretty penny...However, illiquid assets are enemies of investors with high costs of capital, and fear of being trapped without a favorable exit. Caveat...