Frank Boland's blog

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.

Frank Thoughts: The Wall Street Research Analyst

It was a summer day as my new friend and I walked towards Quincy market to have lunch. He was considerable older than me and very definitely a Boston Braham. I had met him 15 minutes earlier. As we headed toward the market, it seemed as though every other passerby would acknowledged his presence with at least a nod. We were in Boston’s financial district and this man was very well known. He, and two of his former Harvard classmates, had managed what had become one of the largest mutual fund companies in the country. And no, it wasn’t Fidelity Investments. But it was as big.

Frank Thoughts: The Wizard of Oz

Ben Gaines and I approached the front door of the Union Club of Boston. Ben was a political commentator from Washington with a heavy Yiddish accent. And I was a 25-year-old Irish kid from public housing with a bad Boston accent. A butler opened the door for us. The club was a total bastion of Boston investment Brahmins. These people were from families that had cities named after them. Peabody. Lowell. Quincy. Once inside the club, we would hear nothing but prep school accents. The word God sounded like “Gawd,”In retrospect, we were both nervous. But I had more reason.

Frank Thoughts: Two Open "Secrets"

To me an open secret is something known but not acknowledged. Years ago, a client, who was an executive of Coca-Cola, invited me to the company in Atlanta, Georgia. I was surprised by two things. Firstly, that Robert W. Woodruff – the entrepreneur who built the company – had an apartment in the building and secondly, the formula for Coca-Cola was a secret.  I’ve since learned many businesses have, if not a secret, some inner knowledge. In the investment business they’re open “secrets.”

Frank Thoughts: The Consultant

Professor Peter Drucker was sitting on a hard wooden chair center stage. Below him, a large lecture hall was filled with middle age businessmen. They all looked as though they had attended elite business schools and ran major corporations. Most of them did. The professor was there not to give a lecture but to answer questions. It was totally unscripted. Dr. Drucker was the business consultant and they wanted to hear his insights. The respect these men showed when asking questions was astonishing. It was complete deference, exceeded only by the remarkable answers he gave them.

Frank Thoughts: The Constancy of Change

Change is the very essence of the investment business. Because of this reality, every portfolio manager I’ve known has a desk that can only be described as saved chaos. And that’s not including the piles of newspapers on the floor. Some managers even have a library behind their desk. Not in nice wooden cases as you would expect but stacks of books piled high lying sideways also on the floor. It’s because every investment manager knows change in the investment world is constant. After all, you never know when you might feel the need for supporting information to make a better decision.

Frank Thoughts: The Impact of Interest Rates

When interest rates start to move higher, it will be considered a negative for the economy and the stock market. This reality started in in the middle of the last century.  General Motors was the largest corporation in the world, but rising interest rates proved very difficult to overcome. That contrasts sharply with the cash Microsoft, Apple, Facebook and Google generate today… and how little they need it.  It’s the difference between an industrial and a knowledge economy. The former was driven by the cost of money. The latter by the cost of knowledge which is driven by stock options.

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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