Lining Up at the Buffet
Dear Friends,
In January 2021, citing the opinion of several very successful billionaire investors, I opined that we were nearing the brink of the next market collapse. In August 2021, I proposed that it would be a good time to prepare for The Opportunity of a Lifetime, suggesting that the time to ensure one’s ability to survive sustained adversity was before the market went into a freefall, not once it started. My advice at the time: “Doing so will require forsaking the final paroxysms of the bull market, which will seem expensive, painful, and lonely. Do it anyway.” In January 2022, I wrote Gut-Wrenching Volatility, to remind people of the serial terror of deep and relentless market corrections, and observed that the big mistake – the greatest destroyer of wealth – is having to sell stocks when the market is down, thus missing the inevitable rebound.
In my wealth management business, I have been committed to the efficient market hypothesis, active indexing, and, by creating robust financial structures, helping clients maintain both financial equanimity and the ability to be able to invest opportunistically with a subset of their portfolios. But with the world awash in liquidity and fixed income yields at rock bottom, finding value in the equities market in the last couple of years has been like trying to find bargains at Bottega Veneta.
Today, the carnage in the market is causing a reset in the balance between companies that need capital and investors who provide it. In my formative years at Salomon Brothers, they used to say, “you gotta buy ‘em when nobody wants ‘em.” Well, that day has dawned. It’s going to be a long one.
For the next couple of years, I believe adventurous investing will be the land of opportunity. I’m voting with my feet; I am moving to the transactional side of the business in capital markets with Sutter Securities as my venue. Patience will be important in this quest – this will not be the V-shaped deal we had last year. I’ve always remembered the advice of an old fraternity brother – a hugely successful real estate developer – when I asked him what he thought about opportunities in the real estate market, as we stood in a buffet line at the St. Francis Yacht Club one afternoon in 2009: “It’s like this buffet”, he said. “It’s a long table. Don’t load up your plate with the deviled eggs and potato salad.”
Rick
