Beyond The Headlines

Here we will post regular letters covering our current macro and micro views.

Asset rich, but income poor
September 4, 2019 | Bogumil Baranowski

With interest rates dropping and yields disappearing while asset prices hover at all-time highs, we find ourselves in a highly unusual predicament. Over the last few years, in many conversations with clients, friends and fellow investors, I have come across a recurring phenomenon. On one hand, over the last ten years they have witnessed an unprecedented rise in the prices of their assets. However, they see that it takes a lot more capital to generate the level of income they’re accustomed to. In other words, they are asset rich, but income poor.

Read More
August 16, 2019 | François Sicart

Part I of this paper (July 30, 2019) concluded that conditions have gathered for a “Minsky Moment” (the time when apparent financial and economic stability turns into instability and eventually financial crisis or recession). The wait may be long for that precise moment to materialize, but since, as the saying goes, “trees don’t grow to the sky,” education and experience can give us a pretty good idea of the ultimate outcome. Thus, the main challenge lies in determining the likely timing of that moment, which is what we are going to investigate in this Part II.

Read More
August 5, 2019 | François Sicart

A few weeks ago, I had lunch with my old friend and colleague Jean-Marie Eveillard, an investment manager whose career has been as long as mine and quite successful, including the stewardship of one of the first global funds from $15 million to $50 billion and a Lifetime Achievement Award from Morningstar. But his feat I envy most is his statement during the Internet bubble of the 1990s, which we both shunned, that: “I would rather lose half my shareholders than lose half my shareholders’ money”. Over lunch, we naturally wound up reminiscing about the speculative bubbles we had lived through and their aftermaths…

Read More
Fighting the currents; a metaphor for the next decade of stock investing
January 28, 2019 | Bogumil Baranowski

Scuba diving in treacherous currents of the South Pacific reminded me of Mark Twain’s words —“What gets us into trouble is not what we don’t know. It’s what we know for sure that just ain’t so.” In a warm atoll, all my experience could have gotten me in trouble because I was in an environment with many completely new conditions. And that’s exactly how we at Sicart feel looking at the stock market environment today. In some respects, it looks familiar, yet it’s different enough from the past to get us into real trouble if we don’t pay attention.

Read More
Where did my trillion dollars go?!!
November 26, 2018 | Bogumil Baranowski

In the last couple of months, the unstoppable, must-own FAANG stocks are down 30% from their highs, and a total of over $1 trillion in market value vanished. What happened? Not long ago, Amazon, Apple and Alphabet (formerly known as Google) each flirted with or surpassed historic trillion-dollar market value thresholds. Where did all that money go?

Read More
November 12, 2018 | François Sicart

In recent months, we have revisited the performances of some of our accounts as well as those of a few other portfolios managed by highly successful long-term investors. Our aim was to try and distillate some wisdom about how long-term performance is achieved and, especially, to dispel some widespread assumptions or preconceived ideas that may lead us to use less-than-optimal tools and techniques for achieving it.

Read More
Zeromania. From a trillion to zero in 10 days?
August 21, 2018 | Bogumil Baranowski

Two great contemporary companies hit milestones recently. Apple reached an astronomical trillion-dollar market capitalization. Meanwhile, Facebook lost 120 billion in a day (comparable to the annual gross domestic product of Warren Buffett’s home state of Nebraska). That made me realize that at Facebook’s record free-fall speed, Apple would need less than 10 days to get to zero… we discuss how the difference between making and keeping money has never been more striking that it is today.

Read More
What to do when nothing works?
May 16, 2018 | Bogumil Baranowski

After my recent TEDx Talk, a student asked me: “How do you invest when nothing works?” It’s such a good question that it deserves a longer answer than I could give that student on that day.

Read More
Buy the dip, don’t buy the dip?
April 6, 2018 | Bogumil Baranowski

Over the last few decades, we’ve been conditioned to buy each market dip, but is this a good strategy today?

Read More
The bull market crashed. Now what?
February 13, 2018 | Bogumil Baranowski

Over the last few days, we have seen about a 10% correction in major equity indices around the world. It definitely got everyone’s attention. Globally, estimated $5 trillion of paper wealth vanished in a matter of days. What happened though? No war, no impeachment, no lasting U.S. government shutdown either.

Read More
February 7, 2018 | François Sicart

In a comment on my recent paper (Picking daisies under a fuming volcano, 11/30/2017) a European colleague with some affinity for our investment style nevertheless reminded me that “for us, asset managers, timing is of the essence” and that “clients will resent our missing another year of rising markets.” This warning was sent before the recent rout in the global stock markets, but it does not affect my strong views on the difference between short-term and long-term investing.

Read More
When Bottom-Up Research Helps Top-Down Understanding
December 29, 2017 | Bogumil Baranowski

In our search for new ideas, we often come across companies we would never invest in. Steinhoff International is one of them. It’s a company we’ve encountered on a few occasions over the last year or two, and in each case, it triggered an immediate negative assessment. Nevertheless, there’s a story worth sharing here.

Read More
Picking daisies under a fuming volcano
November 30, 2017 | François Sicart

In July 2007, near the top of big real estate bubble and only weeks before the Lehman Bros. bankruptcy and the onset of the Great Recession, Charles O. Prince III, then CEO of Citigroup, notoriously declared: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Today’s markets echo this past episode and remind us that contexts may change, but human nature does not.

Read More
Sicart Associates Macro Views Presentation September 2017
October 2, 2017 | Bogumil Baranowski

Watching the high risk stock market, fragile growth, with limited pro-growth tools left available, we share some secrets to keeping a fortune in those perilous times.

Read More
The most unusual bull market
September 26, 2017 | Bogumil Baranowski

Our current, highly durable bull market is characterized by three qualities: it might be the least exciting bull market in history, it’s been possibly one of the hardest to beat, and when it ends, the resultant crash will have been anticipated for months if not years.

Read More
It’s easier to find someone to blame after the losses than to prepare for adversity
September 13, 2017 | François Sicart

“Shirtsleeves to shirtsleeves in three generations.” – The universality of the proverb above is the reason why, as investment advisers and family office to several generations, we view it as one of our primary missions to help our client families avoid the “curse of inherited wealth”. A good place to start is to try and avoid speculative bubbles and their fortune-destroying aftermaths.

Read More
Life in a shrinking economy, a forgotten concept
August 21, 2017 | Bogumil Baranowski

With everything build for growth, with all assumptions hoping for a never-ending expansion, we take a contrarian view and consider a world with a shrinking economy. We see tailwinds of the last 40 years turning into headwinds ahead, and changing how we think about investing, and wealth preservation.

Read More
How can we be wrong?
July 31, 2017 | Bogumil Baranowski

When we analyze an individual stock or the market as whole, we wonder how our conclusions can be wrong. Lately, we think the current market offers extremely low reward at an extremely high risk. How can it keep going up forever? Only if it finds buyers. Since the last financial crisis, debt-funded corporate share repurchases have amounted to almost 20% of market capitalization, and they offset net selling across most other investor types. Will anyone replace those buyers? And do they have the capital to do so?

Read More
June 29, 2017 | François Sicart

The asset bull market of the last eight years has been quite comfortable for the 20% of the population who own investment portfolios. This is no time for complacency, however.

Read More
The Emperor’s New Clothes – Understanding Today’s Financial World
June 23, 2017 | Bogumil Baranowski

Sometimes it seems that we learn all we need to know in life as children, and then somehow forget it all as adults. Recently, I had the pleasure of reading again Hans Christian Andersen’s tale – “The Emperor’s New Clothes”. Tricked by two enterprising weavers a vain emperor agrees to wear a suit made of invisible fabric. As you may remember, when the emperor chooses to parade his new attire, only a child in the crowd dares to say he is not wearing anything at all. Let us, for a moment, look at the financial world through the eyes of that child.

Read More
How to save a fortune, and make money in these perilous times?
May 24, 2017 | Bogumil Baranowski

Our clients are families, and our job is to take good care of their fortunes for generations to come. We are playing the very long term game. We can wait. Today investing may feel like shopping in a crowded department store at the peak of pre-holiday frenzy, but we all know what happens after New Year’s Day — fewer shoppers, better selection, better prices. It only takes some patience.

Read More
April 12, 2017 | Bogumil Baranowski

As much we avoid forecasting the market’s direction, we have reasons to believe the US stock market is too high. It’s not a question of “if” but “when,” “how much,” and “for how long” stock prices will drop. We believe that most asset prices could be subject to some of the biggest declines we have seen in decades, if not a century.

Read More
February 2017 Monthly Letter
March 1, 2017 | Bogumil Baranowski

Please enjoy our monthly letter. We discuss the higher highs for the market, the earnings seasons, Fed rates decision, car loan delinquencies, and we share thoughts on the government policies.

Read More
February 21, 2017 | François Sicart

In a previous paper, I argued that policy makers are being increasingly misled by statistics that were created to measure the 20th-century industrial economy. Our more virtual, 21st-century economy is hard to capture with such obsolete methods. I concluded with a question, which I promised to answer in a forthcoming paper:
“Faced with contradictory indicators that seem to be confusing policy makers, what should investors do?”

Read More
January 2017 Monthly Letter
January 30, 2017 | Bogumil Baranowski

Please enjoy our monthly letter. We discuss the impact of Trump’s policies, strong labor market, flat markets but still at record highs.

Read More
January 27, 2017 | François Sicart

“Consumer sentiment in U.S. hovers near highest in 12 years.” This cheerful headline from Bloomberg on January 13 reflects the general tone of the media during the recent “Trump Rally.” At the same time, the Gallup organization reports that “In the US, personal satisfaction [is] back to pre-recession levels.” But, as John Authers had pointed out in the Financial Times a few days earlier: Those strong consumer confidence numbers came as the new year dawned with some horrific announcements from the biggest department stores, traditionally the beneficiaries of consumer confidence and also big employers.

Read More
December 2016 Monthly Letter
December 20, 2016 | François Sicart

Please enjoy our monthly letter. We discuss the impact of US presidential elections, interest rates heading up, stronger dollar, and record highs for US equity markets among other.

Read More
With Nothing New To Buy Baby Boomers Are Ready To Cash Out
December 13, 2016 | Bogumil Baranowski

Insatiable appetite for stocks (over-sized demand) driven by baby boomers funding their retirement accounts has boosted the stock market for decades. Now a dry spell in new IPOs (shrinking supply) has helped propel stocks even higher to historic levels. Both of those trends are about to reverse. Baby boomers have already started upping their retirement account withdrawals (falling demand), and pent-up supply of innovation may inundate the market with a fresh wave of IPOs in the years to come.

Read More
Between Inflation and Deflation
November 15, 2016 | François Sicart

The 1970s and early 1980s were years of turmoil. From 1963 to 1969, US President Lyndon Johnson had pursued “Guns and Butter” policies that simultaneously financed an escalating war in Vietnam and his “Great Society” welfare programs at home.

Read More
Baby Boom Investors: Geniuses or Just Lucky?
September 2, 2016 | François Sicart

I founded Tocqueville Asset Management in 1985, with what turned out to be incredibly good timing. Since then, the S&P 500 index of the US stock market has risen from 210 to almost 2,200 — a more than ten-fold appreciation in just over 30 years.

Read More