Beyond The Headlines

Here we will post regular letters covering our current macro and micro views.

Words Do Matter
July 1, 2021 | Bogumil Baranowski

I remember standing in front of Casino de Monte-Carlo in Monaco when I was a kid. I enjoyed looking at some of the cars parked in front of it. I have visited this sovereign city-state three times since. I like the windy roads, the vistas, the weather. I don’t recall ever being inside a casino in my life, though. I have never gambled in one, but I consider myself a lifelong investor, a stock picker, a business owner. It worries me how much the vocabulary, the words around investing, start to sound like something one would overhear among roulette players or slot machine enthusiasts. I believe that words do matter, and the more investing sounds like gambling, the more unwanted trouble you may get yourself into.

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It’s Always the Right Time
June 10, 2021 | Bogumil Baranowski

I remember getting introduced to a new client a while back. I was a novice portfolio manager. I was looking forward to our meeting, but I faced a bit of a challenge. I wanted to impress him with some new investment ideas that we could use right away. The stock market was reaching multi-year highs, everything looked pricey, and I had no immediate stocks I wanted to buy. The meeting went very well despite that, a nice lunch followed it, and I learned a lesson that day that I’ll never forget. It’s always the right time to starting investing. Let me explain. 

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Long Stories and Three Lessons
June 3, 2021 | Bogumil Baranowski

Catching up with friends and family recently, I noticed how there are no short and simple stories that cover the last 15 months. Any small question could be prefaced with “it’s a long story.” Some of us stayed put, some of us relocated. Some continued to travel to work; others turned our homes into offices. We’ve all seen many COVID peaks and a variety of responses to them. Though it’s been a long 15 months, with many long stories, there are at least three lessons that stood out.

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A Noisy Distraction
May 6, 2021 | Bogumil Baranowski

It’s been a long while since I watched any financial news channel. That changed last week, though. I was sitting on a plane (still a rare occurrence these days). The screen in front of me was split to accommodate half a dozen talking heads. Stock quotes were running in multiple lines at the bottom and headlines on the right with some charts. I didn’t have the right headphones with me, and I couldn’t listen to it, but I felt that this silent screen was screaming at me, desperate for my attention.

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Phantom Losses & Neighbors Getting Rich
April 22, 2021 | Bogumil Baranowski

What are “phantom losses?” — In investing, we have gains and losses, but how many types of both are there? Last summer, I wrote a short article about two types of gains. Some recent conversations with clients, colleagues, and fellow investors made me realize that there are more than two types of losses. There are realized losses, unrealized losses, and apparently also “phantom losses.” I like to learn new things, and this was definitely a bit of a discovery. I felt compelled to share it with you, so here it is!

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What’s Essential?
March 31, 2021 | Bogumil Baranowski

Last week, my wife Megan and I enjoyed the company of a German-Brazilian couple who also found refuge in our quaint seaside town. They sail and surf and have navigated the COVID travel realities getting stuck places and changing plans quickly. We compared notes and shared our experiences. We thought we pack light, but they pack even lighter. Megan brought up the topic of searching for what’s essential in the last 12 months. Beyond health, family, friends – what else is truly essential?

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Kicking the Tires: The Future of Due Diligence
March 18, 2021 | Bogumil Baranowski

I remember sitting in a pilot seat of a massive Boeing 777 cargo plane. It was just me with no co-pilot by my side. I wrapped my fingers around the control yoke; I reached for the throttle with my right hand. In my mind, I was ready for takeoff. It wasn’t a dream! It happened almost a decade ago. As a small perk of my research work investigating companies, I got to visit the FedEx facilities in Memphis, Tennessee. I shook hands and exchanged pleasantries with the founder and CEO, Fred Smith. Then I joined a group of portfolio managers on a small bus to the airport. I love planes and airports; they didn’t have to ask me twice. We got to see a new Boeing 777. We were kicking the proverbial tires and doing our due diligence, and those were some big tires to kick!

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Two More Cents
March 11, 2021 | Bogumil Baranowski

Last month, the New York Stock Exchange president penned a historic opinion piece in the Wall Street Journal with an attention-grabbing title: “The NYSE Isn’t Moving—Yet.” The author shared how the new local tax ideas could force this over 200-year-old New York institution to find a new home. NYSE wouldn’t have had this kind of freedom of location independence had the last 12 months of remote work never happened. He writes: “We’ve proved, by pandemic-driven necessity, that we can close the physical trading floor on a moment’s notice and maintain service without missing a beat. Similarly, the broader financial services industry shuttered offices and shifted workforces, without hiccups to remote locations.” – we can’t help but notice that something immensely important has changed.

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Deep Dive: The Biggest Disruption — The Remote Work Revolution
February 24, 2021 | Bogumil Baranowski

Megan and I are staying now in a quaint Caribbean fishing town a few hour flight away from our New York office. When it comes to time zones, I’m equidistant from the West Coast and London, which has been very convenient taking calls, and Zooms. In the morning, I’m more likely to see returning happy fishermen than running frantic commuters. I’m definitely outside of the traditional daily commuter radius. I’m working remotely, and our whole team is working remotely. All we need is reliable high-speed internet.  Maybe it would have been feasible years ago, but today, it’s not only feasible; it has become second nature and increasingly common practice. What happened?

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Not for profit
February 18, 2021 | Bogumil Baranowski

The last twelve months brought many new exciting IPOs; new companies got listed on the stock exchange and made their shares available to stock investors. Not all of them seem as promising as their prices would imply. They got me thinking of a conversation I had a few years ago when I met an enthusiastic entrepreneur. He started a venture, which provided a service that the local community enjoyed. The economics didn’t work, though. There was no profit. His solution to the problem was getting more investors. He openly admitted that profit is not the goal of this particular entity. Hearing that, I suggested he turns it into a non-profit and accepts donations. He laughed and said – “No, no, I want to grow it and sell it.” Interestingly enough, I believe that’s the mindset of too many entrepreneurs these days. Why earn a profit if you can grow it and sell it?

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Can we learn anything from GameStop?
February 1, 2021 | Bogumil Baranowski

In the last few weeks, everyone’s attention has been captured by unusual price action in a particular stock – GameStop. It rose many times over, and a few more times on top of it. It’s gone up about 20x in a matter of weeks, and most of it in days. The media gave small retail investors credit for this eye-popping price move, and it came at the expense of a small group of prominent hedge fund investors who were on the other side of that trade. At first, it may seem that we are looking at a biblical moment of David’s victory over Goliath – but is it really so?

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PERMA-BEAR, NO. BUT PERMA-SKEPTIC?
January 28, 2021 | François Sicart

In a 2016 article entitled “Why Does Pessimism Sound So Smart?” Morgan Housel mentioned the English philosopher John Stuart Mill. It was Mill’s observation,150 years ago, that the individual  most admired as a sage is “not the man who hopes when others despair, but the man who despairs when others hope.” At Sicart Associates, as convinced investment contrarians, we agree with Mill’s perception. Pessimists do often appear smarter than optimists because they acknowledge the complexity of situations and thus appear profound. Optimists, in contrast, tend to be perceived as superficial or naïve.

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The Three Disconnects
November 18, 2020 | Bogumil Baranowski

I often ask my partner and mentor, François Sicart, to share more about investing in the 1970s and the 1980s. We both like to find themes, parallels, lessons in the past that may help us understand today and the future. I can picture a younger client, or portfolio manager asking me in 2050 to tell him or her more about 2020. I will be a young 70-year-old at that point. I will refresh my memory and look for a theme or maybe even just one word. That word will likely be – the disconnect. There are at least three major disconnects occurring this year. First, the stock market has decoupled from the real economy. Second, a handful of mega-cap tech stocks took off and left the rest of the market behind. Third, those who were able to work from home have experienced a very different year than those whose jobs were lost because their work depends on the face to face interactions.

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The Other Unicorns
November 12, 2020 | Bogumil Baranowski

A unicorn might be the famous mythical creature with a spiraling horn projecting from its forehead, but in the investing vocabulary, a unicorn is a privately held startup priced at over $1 billion. The unicorn as a term with its Latin and Ancient Greek roots signifies something desirable but hard to find. CB Insights lists 495 unicorn companies in the world. There are 500 companies in the S&P 500, the US stock index that includes the 500 largest companies. If there are almost 500 unicorn companies, are they still that rare and hard to find? This revelation made me think of the other unicorns. Not the highly-priced new exciting companies that have yet to prove their business models, but the older, more established companies that trade at low valuations (less than ten times their annual earnings, for example). There aren’t many of them to be found.

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HOLD THE CHAMPAGNE…
September 30, 2020 | François Sicart

I was prompted to write this paper by a new book from Ben Carlson, author of the always-stimulating blog “A Wealth of Common Sense.”  Reading his book Don’t Fall for It: A Short History of Financial Scams (Wiley, 2020) reminded me what I really always knew: speculative bubbles do not need fraudsters to happen. The victims can both create and succumb to the schemes all by themselves — out of ignorance or greed, and sometimes both.

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An Apple, A Plague, and A Bubble
September 17, 2020 | Bogumil Baranowski

I imagine that almost everyone has heard the story of young Isaac Newton watching an apple fall from a tree, which inspired his theory of gravity. A story he shared himself in his memoirs. I will guess that a few would know that he was home at the time, away from school due to a plague going around. And I can bet that even fewer know that the same Newton made some money, but lost a fortune in a stock bubble of his time!

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Boring Stocks for Exciting Times
August 27, 2020 | Bogumil Baranowski

Recently we had the pleasure of hosting an investment idea Zoom call. Normally, we’d have an intimate “idea lunch” in our Manhattan high-rise overlooking Central Park and the Hudson River. This time, our team and a number of guests (friends of the firm) all tuned in from around the country and as far abroad as Mexico and Bermuda! Only their backgrounds of trees outside the window, beautiful bookshelves, and nautically themed paintings could reveal where they might be. Among the stocks we discussed, we came up with some interesting ideas that we call boring stocks for exciting times.

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Risk-Free Rate, Rattlesnakes, and the Revolutionary War
August 13, 2020 | Bogumil Baranowski

In these Covid-era days, we often have to make unfamiliar choices, many of which involve deciding among levels of risk. Megan and I like to break up our work routine and step away from our laptops now and then. Situated as we are in the woods, hiking has become a pleasant escape. Some trails pass right by our cabin, and we can reach others a short drive away. What we’ve learned is that we have a choice between busier trails and less-frequented ones. The former carry a risk of running into someone sick, so we carry masks. But the latter sometimes present the unpleasant surprise of big fat rattlesnakes basking in the sun. Either way, we have to accept a certain risk, and realize that even an innocent hike is not really risk-free!

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IF I EVER RETIRE, I KNOW WHAT THE REASON MIGHT BE
August 5, 2020 | François Sicart

Some years ago, I advised my clients: “Never invest in something where you can’t lose money”. This was the time when investors were beginning to mistake market volatility for risk, (which has now become a habit) and financial marketing departments were obliging the hungry crowd with a multitude of mathematicians-created products that promised to make you money whether the market went up or down. Face you win, tails you don’t lose.

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RCA, NIFTY FIFTY, AOL and FANGs
July 6, 2020 | François Sicart

Back in 1999, at the peak of the dot.com bubble, I wrote an article entitled “AOL, RCA and The Shape of History” (December 1999) and was inspired by the chart below, borrowed from that Thanksgiving’s issue of The New Yorker. It compared the 1920s bubble in the shares of RCA to the stock performance of AOL in the late 1990s.

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Liquidity vs. Reality
June 12, 2020 | François Sicart

As I began writing this paper, the following headline flashed on CNBC.com: Wall Street rally gains steam, with the Dow up 900 points after record surge in US jobs. It didn’t take long for the media to endorse a new narrative: Trump declares jobs coming back on heels of surprise labor report (FoxNews.com) and Trump: This is a ‘rocket ship’ recovery (Yahoo.com), for example.

To me, these are just the latest instances of how, in the last few years, financial markets have been interpreting any kind of good news, or even the simple promise of good news, as a signal to jump onto the bandwagon of the decade-old bull market and, in today’s language, to adopt a risk-on investment posture.

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Train wreck or a train you can’t miss?
June 11, 2020 | Bogumil Baranowski

To most of us, the March stock market sell-off might have felt like a train wreck, but today in early June the fast stock market rally may feel like a train you can’t miss. Which one is it then?

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Preparing to be prepared
May 27, 2020 | François Sicart

I began my investing career in 1969, following the value philosophy enunciated by Benjamin Graham in his seminal book Security Analysis (1934) and the later (and lighter) The Intelligent Investor (1949).

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Power out, lights out!
May 8, 2020 | Bogumil Baranowski

Whenever I speak about investing to audiences across the country and around the globe, there is a question that almost always comes up. For years now, I’ve been asked about the 2008/2009 financial crisis. Someone in the audience usually wants to know what I was thinking at the time and how investing felt in those days. In the coming years, if anyone asks me how March 2020 felt, I have my answer ready– power out, lights out!

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A sprint, a marathon or a very long hike
April 28, 2020 | Bogumil Baranowski

As I’m sitting today on the porch of a tiny rustic cabin situated next to a creek in thick woods, just a short walk from the Appalachian Trail (a 2,200-mile (3,500 km) hiking trail, the longest in the world, that stretches along the Eastern United States from Springer Mountain in Georgia to Mount Katahdin in Maine), I start to think about the sprints, the marathons, and the very long hikes in life and in investing.

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Are we there yet?
April 20, 2020 | Bogumil Baranowski

I remember taking long road trips with my parents as a kid. We would pack our small Fiat, and head out. Once we visited the lake country in the northwest corner of Poland, and another time it was the beautiful coast of the Baltic Sea. My favorite destination was the charming, often snow-covered Tatra mountains in the south. And like any other kid, the longer the drive, the more often I’d ask — Are we there yet?”

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Buying companies when they lose money
April 16, 2020 | François Sicart

One of my early and most influential mentors, Walter Mewing, began his career before the Great Depression as a messenger on Wall Street. Reportedly, just before the onset of the Depression, he sold all the stockholdings he had managed to accumulate from his small savings in order to buy a chicken farm. Upon returning to Wall Street in the early 1930s, he embarked on a career as a financial analyst and investor. Somehow, he became a partner with my other two (much wealthier) mentors and the much younger Christian Humann, who eventually became my boss and, ultimately, partner.

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Rethink, Reset, Restart
April 7, 2020 | Bogumil Baranowski

One way or another, we have all paused in the last few weeks. It’s been over a month since Megan and I were sitting on packed suitcases ready to fly first to Paris, and then to Warsaw. Our return flight would have been just a day before the ban on flights from Europe was imposed. Looking back, we are glad we decided to forego our trip. Since then though, with the first day of spring already behind us, we have all had a chance to rethink, and reset as we wait to restart our daily routines.

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Second-Order Thoughts
April 1, 2020 | François Sicart

First-order thinking is the process of considering the direct implications of a business decision or policy change. Second-order thinking is the process of identifying the consequences of actions prompted by first-order thinking.

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Investing in times of pandemic
March 23, 2020 | Bogumil Baranowski

The last few weeks have felt like years to most of us. Out of nowhere, we have been wakened from a low-volatility, 11-year-old bull market to a stormy market crash. We’ve seen record-breaking daily moves, mostly downward. Three years of gains have been erased from the major indices in as many weeks, a process that feels like taking a slow escalator up and a fast elevator down.

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Bring out the towels
March 18, 2020 | François Sicart

Warren Buffett famously quipped that we only find out who had been swimming naked when the tide goes out. During the spectacular bull market since 2009, many “professionals” and people relying on their advice had been insisting that we were holding too much cash in our accounts. Our guess is that many naked swimmers who followed their advice are now beginning to sell shares indiscriminately out of either panic or lack of liquidity. Nothing new there: this is what typically happens after periods of greed, thoughtless complacency or fear of missing out in a rising market.

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Dealing with Uncertainty
March 16, 2020 | Bogumil Baranowski

“Investing is dealing with imprecise assumptions tainted by an imperfect world haunted by uncertainty” – that’s how I described investing in my 2015 book – Outsmarting the Crowd: A Value Investor’s Guide to Starting, Building, and Keeping a Family Fortune. Uncertainty is always a part of investing…

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In Search of Calm
March 9, 2020 | Bogumil Baranowski

The last few weeks have been anything but calm. We keep on learning more about the coronavirus spread around the world, and the decisions made to address it. We certainly hope that all the right steps will be taken to not only slow it down, but also to provide sufficient help, and care to those in need.

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The Point and Challenge of Being Prepared
March 3, 2020 | François Sicart

Beyond the traditional choice of our investment management style between categories such as value or growth, fundamental or technical, trading or buy-and-hold, we have tried to abide by two precepts…

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Always keeping a steady course
February 28, 2020 | Bogumil Baranowski

We talked about it, we wrote about it, but now that it is happening, it’s never fun to watch. We knew that it’s a matter of time when the market catches up with the reality. What is always impossible to say is – when. We took the best approach that worked in the past, and was likely to work in the future. We took money off the table, pruned the most vulnerable positions, held excess cash, avoided the highest-flying stocks that have the most room to fall.

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We don’t time the market; we don’t know how
February 25, 2020 | Bogumil Baranowski

Recently I had a conversation with a prospective client who wanted to know about our experience managing family fortunes over generations. Coming from a money manager who always likes to be fully invested, he was intrigued by our choice of holding some cash on the sidelines, ready to invest. “So, you’re timing the market?” he asked. I answered with a smile that we don’t time the market, we don’t know how.

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Value and momentum: the tortoise and the hare
February 3, 2020 | Bogumil Baranowski

Chances are that you remember Aesop’s ancient fable about the Tortoise and the Hare. In case you need a reminder, in that tale the speedy Hare mocks the slow-moving Tortoise, who then challenges it to a race. The Hare sets a scorching pace and leaves the Tortoise far behind. Then, sure of its victory, it takes a nap, only to find out later that the Tortoise has slowly but steadily won the race! The investment terms “value” and “momentum” often remind me of the heroes of Aesop’s fable. Value investing is a steady tortoise, and momentum investing is a jumpy hare. Value investors buy cheap stocks, momentum investors buy stocks that have been going up.

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Tesla and the Dark Alleys of Investing
January 29, 2020 | Bogumil Baranowski

In investing, as well as in life, it pays to avoid dark alleys. Common sense and experience teach us what those dark alleys might be in life: dangerous places where trouble lurks and help might come too late. In investing, dark alleys are investments that can get us in serious trouble, and the worst of them can lose money for bears and bulls alike.

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What if this market will go up forever?
January 13, 2020 | Bogumil Baranowski

In a recent conversation, a prospective client asked me a timely question: “What if this stock market will go up forever?” There are no words that have created more investment opportunities on the one hand and investment trouble on the other than “never” and “forever.” Investing requires us to continuously make our best-educated guesses about the future. The stock market aggregates those guesses in the most efficient way, but it’s driven by fear and greed, and oscillates between those two absolutes of “never” and “forever.”

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When fortunes are made, when fortunes are lost
December 31, 2019 | Bogumil Baranowski

The worst investment advice I ever received was the recommendation to get out of stocks and buy U.S. Treasury bills at the bottom of the market. It was a cold winter evening in March 2009, at the deepest point of the most recent financial crisis (though we couldn’t know that then). I was four years into my investment career in New York City. I was invited to an idea dinner at a very pleasant midtown restaurant. It was a group of top-notch investors around the table, most of them a few decades older than me, and the general feeling was that it was time to abandon stocks for T-bills…

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The Ultimate Argument for Holding Cash
December 5, 2019 | Bogumil Baranowski

With the stock market at an all-time high, patient and disciplined investors have gone right out of fashion, but that’s how we at Sicart still proudly identify ourselves. We don’t just attempt to hold the best- quality businesses we can identify, which we seek to buy at the lowest possible prices. We also remain historically underinvested, holding substantial (and seemingly idle) cash.

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The Tale of Two Books
November 25, 2019 | Bogumil Baranowski

As readers of my articles, you probably know well that books are very important to me. This is an account of two that have been a great influence on me, in very different ways. I discovered both of them around 20 years ago. One has defined my career, and the other still defines stock markets and the economies around the world. The first one I bought, and cherish. The other one I browsed through carefully once, but never cared to own … was I wrong?

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The Art of Cashing Out
November 21, 2019 | Bogumil Baranowski

With stocks at all-time highs, some tech IPOs falling short of expectations, and one huge IPO spectacularly imploding before take-off, some investors may be wondering if there is an art to cashing out. This may be a good time to look at two examples from twenty years ago, during the Internet Bubble.

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Asset rich, but income poor
September 4, 2019 | Bogumil Baranowski

With interest rates dropping and yields disappearing while asset prices hover at all-time highs, we find ourselves in a highly unusual predicament. Over the last few years, in many conversations with clients, friends and fellow investors, I have come across a recurring phenomenon. On one hand, over the last ten years they have witnessed an unprecedented rise in the prices of their assets. However, they see that it takes a lot more capital to generate the level of income they’re accustomed to. In other words, they are asset rich, but income poor.

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EXPERIENCE, PRINCIPLES AND STRATEGY – PART II
August 16, 2019 | François Sicart

Part I of this paper (July 30, 2019) concluded that conditions have gathered for a “Minsky Moment” (the time when apparent financial and economic stability turns into instability and eventually financial crisis or recession). The wait may be long for that precise moment to materialize, but since, as the saying goes, “trees don’t grow to the sky,” education and experience can give us a pretty good idea of the ultimate outcome. Thus, the main challenge lies in determining the likely timing of that moment, which is what we are going to investigate in this Part II.

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EXPERIENCE, PRINCIPLES AND STRATEGY – PART I
August 5, 2019 | François Sicart

A few weeks ago, I had lunch with my old friend and colleague Jean-Marie Eveillard, an investment manager whose career has been as long as mine and quite successful, including the stewardship of one of the first global funds from $15 million to $50 billion and a Lifetime Achievement Award from Morningstar. But his feat I envy most is his statement during the Internet bubble of the 1990s, which we both shunned, that: “I would rather lose half my shareholders than lose half my shareholders’ money”. Over lunch, we naturally wound up reminiscing about the speculative bubbles we had lived through and their aftermaths…

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Fighting the currents; a metaphor for the next decade of stock investing
January 28, 2019 | Bogumil Baranowski

Scuba diving in treacherous currents of the South Pacific reminded me of Mark Twain’s words —“What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.” In a warm atoll, all my experience could have gotten me in trouble because I was in an environment with many completely new conditions. And that’s exactly how we at Sicart feel looking at the stock market environment today. In some respects, it looks familiar, yet it’s different enough from the past to get us into real trouble if we don’t pay attention.

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Where did my trillion dollars go?!!
November 26, 2018 | Bogumil Baranowski

In the last couple of months, the unstoppable, must-own FAANG stocks are down 30% from their highs, and a total of over $1 trillion in market value vanished. What happened? Not long ago, Amazon, Apple and Alphabet (formerly known as Google) each flirted with or surpassed historic trillion-dollar market value thresholds. Where did all that money go?

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IN INVESTING, BEING RIGHT IS NOT ENOUGH: THE OTHERS MUST BE WRONG
November 12, 2018 | François Sicart

In recent months, we have revisited the performances of some of our accounts as well as those of a few other portfolios managed by highly successful long-term investors. Our aim was to try and distillate some wisdom about how long-term performance is achieved and, especially, to dispel some widespread assumptions or preconceived ideas that may lead us to use less-than-optimal tools and techniques for achieving it.

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Zeromania. From a trillion to zero in 10 days?
August 21, 2018 | Bogumil Baranowski

Two great contemporary companies hit milestones recently. Apple reached an astronomical trillion-dollar market capitalization. Meanwhile, Facebook lost 120 billion in a day (comparable to the annual gross domestic product of Warren Buffett’s home state of Nebraska). That made me realize that at Facebook’s record free-fall speed, Apple would need less than 10 days to get to zero… we discuss how the difference between making and keeping money has never been more striking that it is today.

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What to do when nothing works?
May 16, 2018 | Bogumil Baranowski

After my recent TEDx Talk, a student asked me: “How do you invest when nothing works?” It’s such a good question that it deserves a longer answer than I could give that student on that day.

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Buy the dip, don’t buy the dip?
April 6, 2018 | Bogumil Baranowski

Over the last few decades, we’ve been conditioned to buy each market dip, but is this a good strategy today?

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The bull market crashed. Now what?
February 13, 2018 | Bogumil Baranowski

Over the last few days, we have seen about a 10% correction in major equity indices around the world. It definitely got everyone’s attention. Globally, estimated $5 trillion of paper wealth vanished in a matter of days. What happened though? No war, no impeachment, no lasting U.S. government shutdown either.

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CAPITULATE OR “PERSEVERATE”?
February 7, 2018 | François Sicart

In a comment on my recent paper (Picking daisies under a fuming volcano, 11/30/2017) a European colleague with some affinity for our investment style nevertheless reminded me that “for us, asset managers, timing is of the essence” and that “clients will resent our missing another year of rising markets.” This warning was sent before the recent rout in the global stock markets, but it does not affect my strong views on the difference between short-term and long-term investing.

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When Bottom-Up Research Helps Top-Down Understanding
December 29, 2017 | Bogumil Baranowski

In our search for new ideas, we often come across companies we would never invest in. Steinhoff International is one of them. It’s a company we’ve encountered on a few occasions over the last year or two, and in each case, it triggered an immediate negative assessment. Nevertheless, there’s a story worth sharing here.

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Picking daisies under a fuming volcano
November 30, 2017 | François Sicart

In July 2007, near the top of big real estate bubble and only weeks before the Lehman Bros. bankruptcy and the onset of the Great Recession, Charles O. Prince III, then CEO of Citigroup, notoriously declared: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Today’s markets echo this past episode and remind us that contexts may change, but human nature does not.

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Sicart Associates Macro Views Presentation September 2017
October 2, 2017 | Bogumil Baranowski

Watching the high risk stock market, fragile growth, with limited pro-growth tools left available, we share some secrets to keeping a fortune in those perilous times.

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The most unusual bull market
September 26, 2017 | Bogumil Baranowski

Our current, highly durable bull market is characterized by three qualities: it might be the least exciting bull market in history, it’s been possibly one of the hardest to beat, and when it ends, the resultant crash will have been anticipated for months if not years.

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It’s easier to find someone to blame after the losses than to prepare for adversity
September 13, 2017 | François Sicart

“Shirtsleeves to shirtsleeves in three generations.” – The universality of the proverb above is the reason why, as investment advisers and family office to several generations, we view it as one of our primary missions to help our client families avoid the “curse of inherited wealth”. A good place to start is to try and avoid speculative bubbles and their fortune-destroying aftermaths.

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Life in a shrinking economy, a forgotten concept
August 21, 2017 | Bogumil Baranowski

With everything build for growth, with all assumptions hoping for a never-ending expansion, we take a contrarian view and consider a world with a shrinking economy. We see tailwinds of the last 40 years turning into headwinds ahead, and changing how we think about investing, and wealth preservation.

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How can we be wrong?
July 31, 2017 | Bogumil Baranowski

When we analyze an individual stock or the market as whole, we wonder how our conclusions can be wrong. Lately, we think the current market offers extremely low reward at an extremely high risk. How can it keep going up forever? Only if it finds buyers. Since the last financial crisis, debt-funded corporate share repurchases have amounted to almost 20% of market capitalization, and they offset net selling across most other investor types. Will anyone replace those buyers? And do they have the capital to do so?

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DANGER FOR THE 20%
June 29, 2017 | François Sicart

The asset bull market of the last eight years has been quite comfortable for the 20% of the population who own investment portfolios. This is no time for complacency, however.

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The Emperor’s New Clothes – Understanding Today’s Financial World
June 23, 2017 | Bogumil Baranowski

Sometimes it seems that we learn all we need to know in life as children, and then somehow forget it all as adults. Recently, I had the pleasure of reading again Hans Christian Andersen’s tale – “The Emperor’s New Clothes”. Tricked by two enterprising weavers a vain emperor agrees to wear a suit made of invisible fabric. As you may remember, when the emperor chooses to parade his new attire, only a child in the crowd dares to say he is not wearing anything at all. Let us, for a moment, look at the financial world through the eyes of that child.

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How to save a fortune, and make money in these perilous times?
May 24, 2017 | Bogumil Baranowski

Our clients are families, and our job is to take good care of their fortunes for generations to come. We are playing the very long term game. We can wait. Today investing may feel like shopping in a crowded department store at the peak of pre-holiday frenzy, but we all know what happens after New Year’s Day — fewer shoppers, better selection, better prices. It only takes some patience.

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PREPARING FOR THE SALE OF THE CENTURY — OR JUST BEING PRUDENT?
April 12, 2017 | Bogumil Baranowski

As much we avoid forecasting the market’s direction, we have reasons to believe the US stock market is too high. It’s not a question of “if” but “when,” “how much,” and “for how long” stock prices will drop. We believe that most asset prices could be subject to some of the biggest declines we have seen in decades, if not a century.

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February 2017 Monthly Letter
March 1, 2017 | Bogumil Baranowski

Please enjoy our monthly letter. We discuss the higher highs for the market, the earnings seasons, Fed rates decision, car loan delinquencies, and we share thoughts on the government policies.

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OBSOLETE ECONOMIC STATISTICS, CONFUSED POLICY MAKERS: HOW SHOULD INVESTORS NAVIGATE THE MINEFIELD?
February 21, 2017 | François Sicart

In a previous paper, I argued that policy makers are being increasingly misled by statistics that were created to measure the 20th-century industrial economy. Our more virtual, 21st-century economy is hard to capture with such obsolete methods. I concluded with a question, which I promised to answer in a forthcoming paper:
“Faced with contradictory indicators that seem to be confusing policy makers, what should investors do?”

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January 2017 Monthly Letter
January 30, 2017 | Bogumil Baranowski

Please enjoy our monthly letter. We discuss the impact of Trump’s policies, strong labor market, flat markets but still at record highs.

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WOULD THE REAL ECONOMY PLEASE STAND UP?
January 27, 2017 | François Sicart

“Consumer sentiment in U.S. hovers near highest in 12 years.” This cheerful headline from Bloomberg on January 13 reflects the general tone of the media during the recent “Trump Rally.” At the same time, the Gallup organization reports that “In the US, personal satisfaction [is] back to pre-recession levels.” But, as John Authers had pointed out in the Financial Times a few days earlier: Those strong consumer confidence numbers came as the new year dawned with some horrific announcements from the biggest department stores, traditionally the beneficiaries of consumer confidence and also big employers.

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December 2016 Monthly Letter
December 20, 2016 | François Sicart

Please enjoy our monthly letter. We discuss the impact of US presidential elections, interest rates heading up, stronger dollar, and record highs for US equity markets among other.

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With Nothing New To Buy Baby Boomers Are Ready To Cash Out
December 13, 2016 | Bogumil Baranowski

Insatiable appetite for stocks (over-sized demand) driven by baby boomers funding their retirement accounts has boosted the stock market for decades. Now a dry spell in new IPOs (shrinking supply) has helped propel stocks even higher to historic levels. Both of those trends are about to reverse. Baby boomers have already started upping their retirement account withdrawals (falling demand), and pent-up supply of innovation may inundate the market with a fresh wave of IPOs in the years to come.

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Between Inflation and Deflation
November 15, 2016 | François Sicart

The 1970s and early 1980s were years of turmoil. From 1963 to 1969, US President Lyndon Johnson had pursued “Guns and Butter” policies that simultaneously financed an escalating war in Vietnam and his “Great Society” welfare programs at home.

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Baby Boom Investors: Geniuses or Just Lucky?
September 2, 2016 | François Sicart

I founded Tocqueville Asset Management in 1985, with what turned out to be incredibly good timing. Since then, the S&P 500 index of the US stock market has risen from 210 to almost 2,200 — a more than ten-fold appreciation in just over 30 years.

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