SOMETHING INTERESTING

Something not often talked about is the escalating volume of venture capital money swooping in on the SMB market (that’s small/medium businesses, FYI). I can attest to this because we compete in the same market, vying for the same business buyouts.

Here’s a good thread around the psychology of starting & exiting.

MARKET MOVERS

  • Supreme Court VS Socialism. Last Thursday 8/26 they lifted the federal ban on evictions. Over the last year, investors & landlords have been bearing the financial risk of tenants’ inability to pay rent. This is important because prohibiting evictions caused a lot of inequality. As an investor, if you cannot remove a renter you have to turn to extremism, making sure you only rent assets to those with impeccable credit. That benefits the rich, hurts the poor. What the government should do, is expedite rental assistance measures to aid tenants — not burn the landlords. Read more here.

  • The U.S. hotel industry is in a bit of a quandary. According to STR, performance continues to decline and occupancy is down due to both seasonal demand patterns and concerns around the pandemic. We tried hosting two separate events at two separate hotels last month, both have raised their prices so much it no longer made sense to use them. Not a sound economic recovery strategy. What’s that mean? REITs and funds that manage hotel assets are likely going to go on sale OR, if travel rebounds they’re going to increase in value. Either option creates buying opportunity. Read more here.

  • Strong spending projected for Q4. The U.S. economy is still thriving - consumers feel more secure in their jobs, personal income has increased, and they have plenty of cash to spend. Signs point to a strong end of year (economy forecast to grow at a 7% annual pace in the current third quarter, read more here), but we will keep tracking correction data for 2022. IF interest rates jump, this will draw down spending a bit. If this is timed with holiday spending it will not cause a major correction, though. That’s likely what the Fed will do (46:55). Keep an eye on inflation, effects of delta variant, and tapering, as these could tip the scales.

  • Speaking of inflation...the rate hit a 30-year high - the highest since the first Gulf War in 1991. The global supply chain and logistics bottlenecks, along with growing labor costs have been pegged as the culprits. The bigger picture: markets aren’t really growing and the USD is crashing. Read more here.

  • Little guys are winning — and the big guys are copying them. Hedge funds have a new strategy: get their employees combing through internet forums and tracking the retail trading frenzy in search of trading opportunities. What we are seeing is the (further) decentralization of information, and the power of being able to parse LOTS of information at once. Reminds you of this newsletter, doesn’t it? Read more here.

WHAT YOU SHOULD WATCH

  • Elon is just… ugh… awesome. Long live Elon. Tesla’s moving to become a retail electricity provider in Texas (lucky Texans). Energy Ventures, a subsidiary of Tesla formed in late July, wants to sell power directly to customers. A pretty brilliant move, actually. Elon will be the first person since John D. Rockefeller to own an energy sector in near totality. Remember, it was the refinery for production, the railroads for transportation, and the stores for resale. Now it’s the solar for production, the storage for distribution, and the retail for monetization. Source.

  • Travel bouncing back, this is good for travel stocks. They gained as much as 11% through market close last Thursday before settling to between 5% and 7% returns (this surge powered by FDA’s approval of the Pfizer vaccine, fueling optimism about an approaching end to the current surge in COVID-19 outbreaks). This is when I'd start asking myself what Howard Marks would ask: “where’s the mistake? Is the mistake buying or not buying?” Question: do you believe travel will come back in force this Fall? If you DO, then you need to be in on a few of the travel stocks that are making a comeback. Read more here.

  • Investment Definition of the Day: Fractional Home Ownership - where the overall cost of a property is split among a group of owners or users. Adam Neumann (WeWork) tried to do this… but he was unsuccessful. Now it’s picking back up. This investment strategy is great for the economy because of its efficiency. Sharing ownership of extra homes rarely used helps with maintenance costs as well as the housing inventory shortage. This leaves more homes available in the market, instead of a number of homes being owned by only one person. Pair this strategy with blockchain (soon) and MIND BLOWN. Source(28:51)

  • Berlin REVOLTS. Something about being locked in their homes indefinitely bothers them (I can’t imagine why). Here’s why you should watch out for this: destabilizing events like massive government lockdowns will make their way around the globe and eventually hit close to home. Something to keep an eye on.

FINAL THOUGHTS

"But his underlying ambition isn’t to maximize his own wealth by building a financial empire. “I have nothing against making money,” he says. “But it’s not really what drives me. I have enough.”" (William Green, Richer, Wiser, Happier)


The quote above is about one of our favorite investors, Howard Marks. If you aim to be rich, be rich for a purpose. The truth is, you can’t do a whole lot without resources. Being poor isn’t useful. But greed rarely pays its dividends, it merely tempts with more. The key to attracting & preserving wealth is to remember why you’re doing it, and stick to it.

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