investing · The book

You Named Your Fund What?

Back when I was writing my book, I decided to start a chapter on the wild, wacky, and frequently value-destroying world of “alternative investments” by playing around with the Hedge Fund Name Generator. It usually combines a color, a geographic feature and a corporate moniker. For example, I just came up with “Red Road Partners.”

For the purposes of the book, I kept trying until it spit out some bizarre or offensive sounding ones like YellowRoad Associates, SolidOcean Markets and, best/worst of all, Black Street Brothers.

The fashion used to be names from Greek mythology and I wrote a LinkedIn post a while back, Letter From a Failing Hedge Fund Manager, in which the author’s fund was called Oedipus Capital. But while you use up the acceptable classical names pretty quickly, the current trend has a ways to go. Just do the math: Six primary or secondary colors times 30 geographic features times seven corporate types gives you 1,260 fund names — way more than you’ll glean from the index in Edith Hamilton’s Mythology. Throw in street or town names and you have tens of thousands of choices.

But we have now jumped the fund name shark. An article today by my colleague Cara Lombardo is titled: “Far Point To Buy Global Blue From Silver Lake.”

Doesn’t this confuse people? “Hey man, was I supposed to wire that billion dollars to Golden Lake or Silver Lake?” Isn’t it at least getting a bit old? I know that there is some reflected glory here — BlackRock and what have you — but how about just gaming the system the way the way a plumber does to get to the top of the listings in the Yellow Pages: “2 & 20 Management” or “AAA Amazing Returns Capital?”

Alternatively, just get to the point. “Gigantic Stacks of Money Partners,” for example. It isn’t like there are truth in advertising rules for hedge funds. One of the best funds ever, by the way — though it existed only on paper — was Andrew Lo’s “Capital Decimation Partners.” It gained 2,560% over seven years, though it contained the seeds of its own destruction because it simply sold out-of-the-money puts. In today’s return-hungry world, I bet he could start a real fund, name it that, point out in bold text how it could all end in tears, and still attract huge inflows. What a time to be alive!

investing

Can Glampers Save RV Makers?

I wrote about the RV industry again. It’s a fascinating business, and apparently I’m not the only one who thinks so if online reader engagement is any indication.

One thing you’ll notice immediately about RV life is that the buyers and enthusiasts are mostly white baby boomers, but that’s changing.

Walk around a typical RV park and you’ll meet mostly white baby boomers lounging around hulking vehicles that offer nearly all the comforts of home. Look at the glossy reports of a recreational-vehicle manufacturer such as Winnebago Industries or a retailer such as Camping World Holdings, though, and you’ll see fit, outdoorsy millennials, families with children and racial minorities in rugged, picturesque locales.

That imagery isn’t pure marketing fiction—younger, more diverse buyers have embraced glamping and #vanlife in the past decade, helping to boost interest in RVs—especially lightweight, towable models. The industry needs a lot more where that came from after enduring a second year of slumping sales with forecasts for another dip in 2020. 



investing

Billion, trillion, schmillion

Don’t tell you know who, but, by some measures, the $2 trillion valuation of Aramco only puts it in fairly middling company.

Saudi Arabia’s de facto ruler Mohammed bin Salman wanted to see his country’s crown jewel, Saudi Arabian Oil Co., or Aramco, valued at $2 trillion. Market reality got in the way and he had to settle for a mere $1.7 trillion in last week’s initial public offering, which also was limited to regional investors.

But the first day of trading Wednesday saw the shares limit up—a rise of 10% on the local Tadawul exchange. Another performance like that—and strong social and financial incentives not to sell make that a distinct possibility—will see the sought-after $2 trillion mark breached.

Looked at another way, though, the company’s value is absolutely pedestrian. Aramco’s 1.5% free float means shares owned by the public are worth only $28 billion. By contrast, Microsoft and Apple have floats worth $1.08 trillion and $1.06 trillion, respectively, if one excludes insiders.

In the energy world, North American exploration and production companies Occidental Petroleum, Marathon Petroleum and Canadian Natural Resources are all larger on this metric. Super major Exxon Mobil has a float worth 10 times as much as Aramco at nearly $300 billion.

Now that is a princely sum.

Columns · investing

The Oracle of Qaqortoq

On his 89th birthday, I asked a question that the Oracle of Omaha is well-equipped to answer: How would we value Greenland?

Warren Buffett ’s 89th birthday is a good occasion to revisit a question that has been weighing on financial minds lately—what price to put on Greenland.
As far as we know, President Trump hasn’t contacted the Oracle of Omaha on the question of valuation, much less negotiating tips. But one of Mr. Buffett’s earliest letters to investors has an interesting way to think about such outlays. He quipped that Queen Isabella of Spain, who gave Christopher Columbus the equivalent of $30,000 to find the New World, could have instead invested it at 4% interest and had $2 trillion by 1963—nearly $18 trillion today.
Denmark spurned an offer from President Harry Truman of $100 million in 1946 to sell Greenland. It is unlikely that a then-17-year-old Buffett, already a budding value investor, would have made the offer. The same sum invested in the S&P 500 would have compounded since then, with dividends reinvested, to a whopping $163 billion.

Denmark may have missed a huge opportunity, but don’t judge too harshly—the future author of “The Art of the Deal” was only born that year.

Columns · investing

Buy the “Wrong” Stock, Hit the Jackpot

I wrote about the phenomenon of tech stock doppelgängers showering riches on people who can act quickly, but mostly parting fools from their money.

Zoom Technologies is carrying on a long American tradition: making people rich by accident.

Not to be confused with Zoom Video Communications, a unicorn that went public in April, making its backers truly wealthy, the similarly named penny stock appears to have benefited from mistaken identity. A $1,000 investment in late March would have been worth over half a million dollars by mid-April. Even now, assuming one were able to find a buyer, it would be worth $175,000.

Zoom joins the likes of doppelgangers Tweeter and Snap Interactive. Similarly confusing episodes happened in the last tech bull market. For example, penny stock Appian Technology surged by nearly 19,000% because it shared a ticker with a hot initial public offering on Nasdaq, AppNet, in 1999.

Of course all of these scenarios enriched people already owning the shares of the “wrong” company, and only if they acted quickly. Buyers fooled by similar names or tickers usually regret it. Not always, though. Mistaken buyers of food company Sysco back in March 2000—when red-hot Cisco Systems briefly the world’s most valuable company—have made 571% since then compared with a loss of 12% by owning the “correct” stock.

investing

Is Crypto Ready for Stephen Moore?

If you can’t beat’ em, join ‘em. And if you can’t join ‘em?

Pundit Stephen Moore withdrew last month from consideration for a position on the Federal Reserve Board. Now he is joining a group that wants to “perform Fed-like duties,” but not for traditional money. He will, according to Fox Business, join Decentral, which aspires to be “the world’s decentralized central bank,” performing a stabilizing role for cryptocurrency.

This raises a few questions. Bitcoin, the most valuable cryptocurrency, is hugely volatile in dollar terms, but its supply is famously limited by design. Its appeal lies in the lack of a central bank.

But supposing Mr. Moore’s outfit were able to stabilize values, would it be hawkish or dovish? Back when Barack Obama sat in the White House, Mr. Moore decried the Fed’s “easy money policy” as the recipe for the next crisis and advocated a return to the gold standard. When he was hoping to be nominated by Donald Trump, though, he advocated cutting rates by half.

Crypto investors eager to see their purchasing power maintained would prefer the 2015 version of Stephen Moore.