Pro-growth Trump is horrible for markets

There seems to be a slight dissonance in US equity markets with positive price action and a possible pro-growth agenda by President-elect Trump. If his policies do turn out to be fiscally stimulative, it’s going to hurt equities, big league.

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Disney should really create an MLP type yield vehicle for the IP it owns

If there’s a single investment that would be highly desirable for a buy and hold situation for decades to come, and if I could have a say in designing it – it would be Disney IP, based on Disney’s Consumer Products division (FY 2015 revenues $4.5B, operating income $1.7B), specifically on the licensing part of it (FY 2015 revenues $2.8B). It would be sort of like a MLP that owns and operates all the IP ever generated at the Walt Disney Company, with the WDC acting as a general partner.

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European dairy bottom is in

While irrefutable evidence is still scarce and it may be too early to call, auxiliary signals like global price developments for dairy products, European product prices (Excel link) and supply drop, indicate that the European dairy market has begun to see signs of life. Some optimists agree.

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The do’s and don’ts of investing in commercial real estate

I’m a HUGE fan of investing in commercial real estate, for various reasons:

  • Predictability of value and cashflows
  • Low beta compared to the stock market
  • Low liquidity is a minor issue for me (money management is something you do BEFORE investing, not after)
  • Perhaps most importantly, smarter people than me have said that real estate is one of the very few industries where mediocre people can succeed 🙂

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Why investing in infrastructure (and the land beneath it) is a good idea

Right off the bat: I’m a firm believer and committed investor in vital infrastructure. Railroads, ports, pipelines, wireless towers, gas stations, airports, roads, electricity transmission lines and stations, you name it. For clarity – while the land that carries it, is not technically infrastructure itself, usually they’re bound together by decades-long leases (or short term leases that give more power to the landowner) that effectively make the ground underneath a senior tranche in the asset. More on that below. The majority of my portfolio is invested in land with infrastructure, but my appetite is insatiable.

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Opportunity in illiquid investments

All types of assets in the same asset class are not created equal. Although in general, markets tend to be more or less efficient (at least if you can wait by the river long enough), there are peculiarities in the efficiency. One of the most prominent of these peculiarities is the liquidity premium.

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In commercial real estate, buying below market is essential

During my intermittent career in commercial real estate investing, i’ve found that entry yield is important, but lease rates and the price level relative to market value are occasionally even more so. Especially important in sale and leaseback (SLB) deals. The pitfall is, that frequently the deal being offered is not so much a real estate deal as a structured financing deal with inadequate collateral.

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A bit about my investment preferences

A little bit insight into what kind of asset classes i like and don’t like. Things to keep in mind:

  • Safety of cash flows is paramount.
  • Capital preservation is more important than capital growth.
  • This is not other people’s money so messing up and moving on isn’t really an option. You have to get more right than wrong, constantly.
  • My investment horizon is years to decades. The longer, the better. Liquidity for capital deployed is relatively unimportant, but money management is not.
  • Something that doesn’t provide a relatively predictable cashflow while maintaining it’s value, is not really a possible investment instrument. At best, it’s a hedging instrument. At worst, it’s a zero sum game with me as the lemur in a room with 700-pound gorillas who are smarter than me.
  • I operate in – and exclusively invest in – safe regions, where bureaucratic, tribal and warlord relations don’t affect property rights.

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