Tiho Brkan Profile picture
Jan 22 13 tweets 9 min read
It has become quite clear that the growth stock bubble witnessed over the last 12-18 months, with an orgy of speculation has now popped and results are and might continue to be extremely painful.

$PLTR $FSLY $TDOC $PINS
$SHOP $SQ $MELI $SE
$NFLX $BABA $PYPL $ZM
$SMLR $NVCR $U $HUBS
$WIX $FUTU $BILI $RDFN
$TOST $PTON $AFRM $LMND
$DOCU $PATH $RSKD $NIO
$FVRR $HOOD $COIN $CPNG
$ROKU $STNE $BIDU $YNDX
$UPST $CELH $EXAS $TWLO
So, what's the summary?

• justification of low-interest rates did not save the speculators in growth stocks

• buying any asset at ridiculously high valuations rarely works (if ever)

• following social media gurus into the same stock is bound to have unintended consequences
• since we are all wrong, the only way to protect your capital is to ensure ample margin of safety

• when you're buying growth at any price, you're likely to see your portfolio drop meaningfully in price

• tops occur when the popularity in stocks & sectors reach a frenzy
If you thought there is a new paradigm shift, a new economy, and that you have discovered it — and will profit from it — before others was clearly an illusion of invulnerability & overconfidence (optimism bias on steroids).

There is nothing new under the sun, just another cycle.

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More from @TihoBrkan

Jan 22
What do you get when you mix academia of economics, perverse incentives, and the illusion of sophistication (overconfidence)?

You get a crisis with far-reaching consequences (2008) because central bankers don't think in second & third order effects.

What will happen this time?
It is truly astonishing to think just how much worse the fragility could be?

We have a situation patched up by years of artifical monetary policy.

The hidden risk could be multiples of that witnessed in 2008 because the excesses are multiples of those witnessed prior to 2008.
Expect it to get a little worse next time.

"When we bailed out banks that had created their own misfortune [in 2008], we called it a 'moral hazard,' because the bailout absolved the bank's bad acts & created an incentive for it to make the same bad loans again." — Eliot Spitzer
Read 4 tweets
Jan 21
I cannot stress enough just how important incentives are. When we look at an alternative asset opportunity, we always start there.

Who is paid what? Why?

Is there information asymmetry and could this be an adverse selection at play?

Is there a principal-agent problem at hand?
Where are we in the capital stack? Is there alignment of interest between us & other parties? What about a conflict of interest?

What’s the fee structure? Are there hidden fees?

“Everywhere there is a large commission, there is a high probability of a rip-off.” — Charlie Munger
As an LP it has been very difficult for us to find the right partners.

Whether we are talking about one-off syndications, alternative funds, JVs or even contracting GC for construction work.

While you cannot blame them, most people seem to be self-centred & short-term oriented.
Read 8 tweets
Jan 20
The difficulties in investing are everywhere, by they are compounded by the pressure to performance (fund management, short-term focus, benchmarking, etc).

The most wonderful thing about being a private investor is having a choice not to participate in those games.
Additionally, with age and experience, one begins to understand just how much of an advantage long term investment horizon offers.

Long-termism is a strategy of sacrificing immediate results, often those fund managers are chasing by next quarter, in favor of far-reaching ones.
The last piece of advice I’ve taken onboard is that the game of private investing — the one without short-termism — is a game of “no called strikes”.

Unlike many other people on Twitter, I’m open to admit just how wrong I have been on so, so many financial “calls” over the…
Read 5 tweets
Jan 20
On the lower end of the scale, small but very attractive real estate deals can be found for beginners which won't move the needle for HNWIs or institutions.

Yes, at the beginning of your financial journey you're going to have less competence, but you also have less competition.
Just looked at the UK deal with a rental yield of circa 17% (going in CAP), with room for improvement of the following:

• bathroom, kitchen & flooring
• painting the whole property
• landscaping improvements

Stabilized UYOC (yield on unlevered cost) could be north of 20%!
Additionally, those who are focused on other asset classes fail to comprehend how RE thrives with leverage (and dies with too much of it).

Such deals could easily service two or three turns of mortgage debt and thus increase the net annual returns to well over 40% p.a.
Read 6 tweets
Jan 18
It’s been great to take a month off from social media & completely disconnect.

Additionally, while disconnecting I also ran an experiment of meditating at least 60 mins per day for a whole month.

Did anything change while I removed social media and looked inwards?
It seems to be having a profound effect on the following:

• personal calmness (& lots of smiling)
• sleep quality (long time since I spelt more than 8 hrs)
• daily awareness
• reduction in anxiety (social media has an awful impact here)
• cognitive clarity (no brain fog)
• reduced decision fatigue (and increase in decision speed)
• improved memory (and ability to recall & retrieve more facts, events, data points, etc)
• consistency of focus during deep work sessions
• desire to read more long format work (books, white papers, etc)
Read 6 tweets
Dec 21, 2021
You buy a stock at $30 or a piece of property for $300k.

The stock goes down to $26.5 or your property trades at $265k so you remind yourself next time to be more patient.

Next time comes around, and you wait for prices to fall further, but they never do.

Opportunity missed.
This time, you remind yourself that you should not wait so long again, because too much patience has its price.

Eventually, another correction in asset prices comes around. Instead of patiently waiting too long, you decide after a certain point, it's time to buy.

But prices...
...keep sinking lower & lower after your purchase.

And then, a correction turns into a full-blown crash!

Prices decline so much further than you ever envisioned —not that you did any case scenario analysis anyway (because it's easier to act on hot trends & recent tips).
Read 7 tweets

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