Frank Boland's blog

Frank Thoughts: The Amazon Journey

An analyst at J.P. Morgan recently wrote about Amazon, “… next year its business will exceed Walmart’s and become the largest retailer in the world.” Jeff Bezos is already one of the richest men in the world. But what is more startling; his wealth of close to $200 billion or the short timeframe in which it was created? From the time of the industrial robber barons to the knowledge/service-based fortunes of today, no one has ever become so rich so fast. Tim Berners-Lee’s creation of the coding for the internet in 1989 had made it all possible.

Frank Thoughts: The Mortal Sin

Fortunately, it is rare to see anguish on someone’s face. One day in New York, near the end of 1987, I did. The October crash was still vivid in everyone’s mind. As I opened the door of an “upstairs” trading room, I saw a friend at the far end of the long trading desk. He was standing with a phone pressed up against his head gesturing frantically. Prior to going “upstairs,” he had been a specialist on the floor of the exchange. I had seen such behavior from him before, but I had never seen his face that flushed with anger.

Frank Thoughts: The Perfect Stock

It’s what we all hope to own. But if you don’t know what attributes it must have, you won’t find it. First, and foremost, it should be a fairly small business run by an entrepreneur. Personal pride and creativity drive a new business. Secondly, the founder must own a significant amount of stock. Such a C.E.O. has a different mindset than an executive of a large company. They’re also different skills. A large corporation needs business school graduates trained in managing people and product lines.  

Frank Thoughts: The Return of Active Management

The other day I came across an issue of Barron’s, dated January 10th 2015. The front page headline was titled, “Return of the Stock Pickers.” But it didn’t happened in the intervening six years nor has it in the past 15! The reason is, interest rates haven’t change. Fed funds have stayed at 0% because the two crises – financial and then Covid-19 – happen over that time period. For stocks, it’s been similar to the proverbial theater fire; each individual enters the theater one at a time, but when someone yells “fire,” they all get up and leave together.

Frank Thoughts: Fed Funds and The Impact of Valuation

My dinner guest had just come into the restaurant, with three attractive young women. As he headed towards me, I thought to myself, “Is this a scene from Charlie’s Angels?” It was late 1987 and we were in an upscale Italian restaurant in downtown Boston. People there probably assumed he was a rock star or professional athlete. He wasn’t. But he had done something no one else had been able to do that year. He was a mutual fund manager who was “sitting” almost entirely in cash during the market crash of October 1987. The financial press had made him a cultural hero. A market wizard.

Frank Thoughts: Pooled Account - Separate Account

Every significant bull market has at least one mutual fund manager who becomes rich and famous. A portfolio manager, such as Peter Lynch, can even achieve – for a period of time - cult status. But only, if he or she has the good luck to be at the right place at the right time. Such fame only occurs during a period of low correlation in the stock market. Then a manager can choose individual stocks based on their perceived uniqueness. But that has not been the experience in the market since the debt crisis ended 12 years ago.

Frank Thoughts: The Passive Mythology

According to Webster, “a myth is a popular belief that has grown up around something or someone.” That would make John Bogle and Vanguard’s “passivity” a perfect example of a mythology. There is a belief that John Bogle originated the concept of passive investing with his 1975 launch of the then eleven million dollar Vanguard Index Fund. No, not so. Wells Fargo and American National Bank both had launched index funds two years earlier in 1973.

Frank Thoughts: The Largest Portfolio/First Active Manager

Imagine if you had just become the chief investment officer of the largest portfolio in the world. While there was no strong objection to your appointment, there was tremendous public skepticism. This recently occurred not at Fidelity Investments, Wellington Management, or BlackRock. None of them has a single portfolio close to the size of this this one. It is a sovereign wealth fund, but not from a country you would expect. It is not Saudi Arabia’s, Kuwait’s or any Middle Eastern nation.

Frank Thoughts: The Blitzscalers

Blitzscaling is the business model of this 21st century’s knowledge/service based economy. The word comes from the German World War II attack concept called Blitzkrieg, meaning “lighting war.” This attack model always had high risk because of the necessity to combine surprise with a strong force.  Another risk: the supply chain had to keep up. It is now a concept used by varied businesses such as DoorDash, Airbnb and Uber. This attack model is moving into high cost businesses with tremendous speed and then rapidly scaling up.

Frank Thoughts: Same Movie, Different Cast

We tend to think of genre in terms of artistic composition. This is especially so with music or literature.  But it’s not that simple. Genre can also be illustrative of a broad context such as writing style … or subject matter. Moreover, every genre has subsets which can enrich the genre with nuance. I learned that years ago when - by chance - I met George V. Higgins. At the time, he was a struggling (had written fourteen books all rejected) writer who was about to become famous and rich.

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Learn how to take losses quickly and cleanly. Don’t expect to be right all the time. If you have made a mistake, cut your losses as quickly as possible.

– Bernard Baruch