Circle of Competence Issue #92

QUOTE OF THE WEEK

"Time and tide wait for no man." - Geoffrey Chaucer

FOOD FOR THOUGHT

Looking Back

Someone recently asked me what word I would use to describe 2019. I responded that 2019 was an incredible year of transition both personally and professionally. I experienced highs and lows and everything in between - all in transition:

I moved into my first (owned) home.

I retired from professional baseball in my fifth season after playing baseball for 22 years straight (since I was 4 years old).

I lived in or visited 12 states.

I traveled to 4 different countries.

I began my 'second' professional career in real estate.

I will be a dad in May 2020.

Talk about an insane year.

I have also had the pleasure of meeting countless like-minded people through my blog that I'd never have the opportunity otherwise to meet. I'm thankful for these new relationships and hope to cultivate more in 2020. For all of you who reached out in 2019, a huge THANK YOU for your kindness in introducing yourself and I look forward to staying in touch in 2020.

Lessons Learned in 2019

In addition to all of the craziness of 2019, I have 4 lessons I wanted to share from 2019 that hit home for me:

1. When you say "yes" to someone or something, you are saying "no" to someone or something else.

2. Concentration wins over diversification (in investments, time commitments, relationships, and the list keeps going).

3. The madness of crowds surfaces in mundane industries (real estate - WeWork) and movements (political polarization since 2016) just as much as it does with new and innovative industries (cannabis, technology, tech-enabled services, cryptocurrencies, etc.).

4. It's important to eat your own cooking up front because at some point you'll be forced to taste it or be thrown out of the kitchen (alignment of incentives).

Looking Forward

Finally, I'd like to share a few 2020 predictions (and hedges) just for the heck of it:

1. The Yankees (aka Gerrit Cole & Co.) will win the World Series in 2020. If the Empire doesn't win in 2020, I'd like to see some of my former teammates win a ring with Tampa Bay. They're young, hungry, and fresh off of a post season appearance in 2019.

2. The economy, running on adrenaline from fiscal and monetary stimulus, will continue to perform well deep into 2020. However there is the chance that a recession will begin prior to the end of 2020 - historically, a recession has occurred between 12 to 24 months later each time the yield curve inverted over the last 50+ years. Given that the yield curve inverted in May 2019, this could signal a recession anywhere between May 2020 and May 2021. I personally don't see a recession until 2021, but am positioned cautiously in my own equity and real estate portfolios (high cash position and low leverage, respectively).

3. WeWork will run out of cash unless it restructures a substantial majority of its lease obligations. However, flexible space and flexible use of fixed assets is a trend that isn't merely a fad in my humble opinion. New businesses will continue to be started around the nexus of extra "x" (space, rooms, cars, etc.) and the internet. The sharing economy will be an interesting space to watch.

4. Trump will win reelection in 2020 regardless of House impeachment unless the economy is in shambles. If this is the case, Elizabeth Warren or Bernie Sanders will take the White House (see point 4). I may eat crow, but I do not see Joe Biden, Pete Buttigieg, or Amy Klobuchar beating an incumbent with a good economic record. Michael Bloomberg could put up a fight given his ability to win middle ground voters, but is polling too poorly to make a difference at this point in the primaries.

LINKS

Investing

Jeffrey Gundlach talks stocks, economy, Fed policy, recession, millennials, & more (Yahoo! Finance)

Robert Shiller and Cathie Wood on how to spot the next tech bubble (Forbes)

How to find growth investments in today's stock market (Barron's)

Visualizing US energy consumption in one chart (Visual Capitalist)

Technology

Softbank funded Katerra promised to revolutionize the construction industry, but so far has disappointed (The Real Deal)

Startup growth and venture returns analysis (Angel.co)

Amazon's free cash flow (Behind the Balance Sheet)

Measuring the progress in fusion energy (Fusion Energy DB)