The Big Picture

10 MLK Day Reads

My 3 day weekend reads:

His bike was stolen in Virginia. His response was to collect bikes to fix and give away to people in need. Pruitt, an assistant rector at the Church of the Holy Spirit in Leesburg, Va., posted on a private Loudoun County Facebook page that he’d fix anyone’s bicycle free. In the post he also said he was accepting unwanted bikes, which he’d fix and donate to people in need. He ended with: “Hope and pray this bike met the need of the person who took it.” That day, he received about 30 bicycles at his townhouse. After his next post, about 500 people expressed interest in either donating bikes or having Pruitt fix them.  (Washington Post)
A New Film Details the FBI’s Relentless Pursuit of Martin Luther King Jr. Smithsonian scholar says the time is ripe to examine the man’s complexities for a more accurate and more inspirational history (Smithsonian)
Corporations’ Political Reckoning Began With a Newsletter One after another, major companies pledged this week to stop donating to politicians whose objections to America’s election results led to a riot at the U.S. Capitol. They were reacting to pressure that began with an article not in the New York Times or Washington Post, but a newsletter called Popular Information. (Bloomberg)
Analysis: TV news is realigning, with Fox’s ratings sagging and CNN’s soaring Furthermore, a big chunk of Fox’s base audience was demoralized by Trump’s loss in November and disheartened by the pro-Trump riot last week. Fox’s average viewership levels are about 20% lower than they were before the election, even though overall TV news viewership is elevated due to the current combination of crises. (CNN)
Welcome to the Roaring ’20s, but Maybe Not for Stocks When the world finally bids good riddance to Covid-19, courtesy of a bevy of novel vaccines, expect Americans to emerge from their lairs with a joie de vivre not seen since the 1920s. That’s marvelous news for the economy, which could use some cheer after a punishing year, and for the many companies that will help keep the good times rolling. Just don’t expect the party on Main Street to spread to Wall Street, which had a rollicking celebration of its own this past year. (Barron’s) see also The Rich Are Minting Money in the Pandemic Like Never Before Americans have become, by some measures, richer during the pandemic than ever before. It’s a difficult thing to fathom, what with the economic collapse and the surge in the ranks of the jobless, the homeless and the hungry. But the top 20% or so of earners have had to worry little about such matters. (Bloomberg)
How to Hold Social Media Accountable for Undermining Democracy While the blame for President Trump’s incitement to insurrection lies squarely with him, the biggest social media companies — most prominently my former employer, Facebook — are absolutely complicit. They have not only allowed Trump to lie and sow division for years, their business models have exploited our biases and weaknesses and abetted the growth of conspiracy-touting hate groups and outrage machines. (Harvard Business Review)
Rise of the Coronavirus Cranks: Long form look at how “Covidiots” became a movement.  And so I reluctantly support this lockdown for the same reason I initially supported the first one, as a last resort. It seems to me to be the only way to ensure that everybody is able to access healthcare, whether they have COVID or not. As soon as it has achieved its goal, I will press for it to be lifted. I am fully aware of the social and economic havoc lockdowns cause. We will spend much of the remaining decade picking up the pieces. (Quillette)
How will you actually know when it’s your turn to get the COVID-19 vaccine? When and how you’ll be notified about your place in the vaccine line—and how proactive you’ll have to be in finding the information—will depend heavily on the state and city you live in. (Fast Company)
41 minutes of fear: A video timeline from inside the Capitol siege At 2:12 p.m. on Jan. 6, supporters of President Trump began climbing through a window they had smashed on the northwest side of the U.S. Capitol. “Go! Go! Go!” someone shouted as the rioters in military gear streamed in. It was the start of the most serious attack on the Capitol since the War of 1812. The mob coursed through the building, enraged that Congress was preparing to make Trump’s electoral defeat official. “Drag them out! … Hang them out!” rioters yelled as they gathered near the House chamber. (Washington Post)
The Staying Inside Guide: Jazz, Live From Your Living Room With in-person concerts still shut down, a chance to improvise on the jazz-club experience—from virtual tours of Louis Armstrong’s house to performances that rework the music of Stevie Wonder and Erykah Badu. (Wall Street Journal)

Be sure to check out our Masters in Business interview this weekend with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and refund fees when they underperform.


5 different datasets concur that we just had warmest decade and warmest 6 years on record.

Source: @WMO


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GOP’s Familiar, Troubling Plan to Torpedo Biden’s Presidency

The Republicans’ Familiar, Troubling Plan to Torpedo Biden’s Presidency
Fiscally reckless GOP leaders are already laying the groundwork to attack spending under a Democratic administration.
Bruce Bartlett, October 26, 2020




“Like a phoenix, the deficit hawk will be back soon enough, as soon as it is politically convenient.” -Glenn Kessler, Washington Post fact-checker, October 17, 2020

“My party is very interested in deficits when there is a Democrat in the White House. The worst thing in the whole world is deficits when Barack Obama was the president. Then Donald Trump became president, and we’re a lot less interested as a party.”
—Mick Mulvaney, White House chief of staff, February 19, 2020



One reason Republicans are far more successful than Democrats in implementing their agenda is they have a long-term plan that actually anticipates Democratic victories from time to time; in fact, the occasional Democratic victory is essential to its success. The basic strategy here is called “starve the beast”: it involves big tax cuts when Republicans are in power and hardline deficit reduction when Democrats are in charge. (Occasional Democratic control is actually essential to give Republicans political cover for spending cuts that might otherwise prove politically painful for them.) It worked perfectly during the administrations of Bill Clinton, George W. Bush, Barack Obama, and Donald Trump, and Republicans are now preparing to keep it going through an almost-inevitable Joe Biden administration.

The theory, which first emerged in the late 1970s, is to continuously shrink the size of government by denying it necessary revenue. Ronald Reagan explained the basic principle of beast-starving succinctly in a February 5, 1981, address to the nation:

“Over the past decades we’ve talked of curtailing government spending so that we can then lower the tax burden. Sometimes we’ve even taken a run at doing that. But there were always those who told us that taxes couldn’t be cut until spending was reduced. Well, you know, we can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”

Tax cuts create budget deficits, which alarm Wall Street and put pressure on Congress to restrain and cut spending and raise taxes. Since Democrats are dependent for campaign contributions on the same class of ultrawealthy individuals who fund the GOP, Democrats are always quick to take up deficit reduction when they are in power. There’s nothing a Democrat hates more than being branded a tax-and-spend liberal. (The famous tax pledge that virtually every Republican officeholder has signed ensures that the bulk of deficit reduction will come on the spending side.)

Bob Woodward wrote a whole book, The Agenda, about how Bill Clinton pretty much abandoned all his campaign promises immediately upon taking office in favor of deficit reduction. Clinton forced a number of Democrats in Congress to cast agonizing votes in favor of spending cuts, tax increases, and budget controls that led many to defeat in 1994—a move that helped immeasurably in putting Republicans in control of Congress for the first time in 40 years. Republicans voted against Clinton’s deficit-reduction package, all the while proclaiming their fealty to a balanced budget and eternal opposition to budget deficits. Later, when the 1993 budget bill eliminated the deficit and created budget surpluses, Republicans falsely took credit.

The minute George W. Bush took office, his first order of business was a big tax cut. Fortunately for him, Clinton had bequeathed him projected budget surpluses that Bush could simply draw down to pay for the tax cut. It was possibly Clinton’s worst mistake in office to simply hoard the surpluses rather than using them to pay for Social Security or health reform, thus taking them off the table when Republicans regained power. A long-term Democratic strategy would have locked up the surpluses so that Republicans couldn’t piss them away on tax cuts.

According to the Congressional Budget Office, if Bush had left fiscal policy on autopilot—no spending increases for stupid wars, no programs to buy the votes of the elderly with a Medicare drug benefit, no tax cuts—the national debt would have been entirely eliminated. Over 10 years, there would have been a surplus exactly equal to the $5.6 trillion national debt Bush inherited. But he raised spending by $5.6 trillion and reduced revenues by $6.1 trillion below baseline, thereby increasing the debt by $11.7 trillion. (The Congressional Budget Office carried Bush’s policies that remained in effect over into the Obama administration in order to arrive at this 10-year total.)

The extraordinarily hypocritical Republicans treated the vast rise in debt as if it were entirely Barack Obama’s fault when he took office in 2009. They even blamed him for spending programs they themselves had created, such as the Troubled Asset Relief Program, which helped keep the economy afloat during the recession that began in December 2007—during the Bush administration—and didn’t end until June 2009. Republicans also voted en masse against Obama’s stimulus program in February 2009, illogically insisting that budget cuts would be more stimulative. (Notice that no Republican suggested that budget cuts would be stimulative when the coronavirus tanked the economy in early 2020.)

To his everlasting shame, Obama allowed himself to be railroaded into a budget deal in 2011. Vice President Joe Biden was his chief negotiator. At times, Obama and Biden were willing to go even further than Republicans toward the longtime conservative goal of cutting Social Security by altering the inflation formula that automatically increases benefits. In the end, Obama acceded to Republican demands that there be no increase in taxes. The Republican Speaker of the House John Boehner later said that he got 98 percent of what he wanted in the deal.

During the 2016 campaign, Donald Trump promised to pay off the national debt. As someone who had often stiffed those who lent him money and declared bankruptcy, he asserted that he was uniquely qualified to tame the national debt. But once Trump was in office, he quickly abandoned this promise as he splurged on higher defense spending and a huge tax cut in 2017. (Trump asserted that the government could simply print money to pay off the debt.)

Republicans nevertheless proclaimed their fiscal responsibility by consistently lying about it, saying the tax cuts would pay for themselves through faster growth and simply denying that the national debt had in fact risen. The only honest thing Trump has ever said on the subject was when he said he wouldn’t be around when the chickens came home to roost.

I repeatedly warned Democrats that they needed to put up a stronger fight against the tax cut to lay down a marker for when Republicans inevitably demanded spending cuts to pay for it during the next Democratic administration. Now the chickens are coming home to roost.
Republicans are preparing once again to make the deficit a major issue, to pin all the blame for it on the Biden administration—and to browbeat Democrats into putting aside their agenda and embrace deficit reduction. A Republican operative gave away the game in an interview with Bloomberg News a few days ago.

Said the report:

“A GOP strategist who has been consulting with Senate campaigns said Republicans have been carefully laying the groundwork to restrain a Biden administration on federal spending and the budget deficit by talking up concerns about the price tag for another round of virus relief. The thinking, the strategist said, is that it would be very hard politically to agree on spending trillions more now and then in January suddenly embrace fiscal restraint.”

I fear that Biden’s instincts will lead him to want to start his presidency with an outreach to Republicans and a bipartisan budget deal.

As Washington Post columnist Greg Sargent explained, the first step in this nefarious Republican plot is to deep-six any additional fiscal stimulus. This will bequeath Biden a flat economy when he takes office in January, which will dim hopes for a recovery by reducing economic growth. Deficit-mongering will at least force Biden to waste time and political capital cleaning up Trump’s messes and make it easier for Republicans to blame him for budgetary profligacy, just as they did so successfully with Clinton and Obama. I fear that Biden’s instincts will lead him to want to start his presidency with an outreach to Republicans and a bipartisan budget deal. (He is already making noises about putting Republicans in his Cabinet, and it’s too easy for me to envision former congressional Republican budget hawk John Kasich as his Office of Management and Budget director.)

I believe a Biden budget deal is a sure thing at some point. Republicans planted a fiscal time bomb that will go off automatically on August 1, 2021. They did this by suspending the debt limit in the Bipartisan Budget Act of 2019 until July 31, 2021. At that point, the debt limit would be whatever the debt is on that day, permitting no further increase. (The Treasury Department will have a little wiggle room through so-called extraordinary measures.)

It is a sure thing that Republicans will demand at least a pound of flesh to raise the debt limit, and many Democrats will be skittish about doing so even if they get control of the Senate. (There is also the question of whether the filibuster will remain in play, which would further strengthen the Republicans’ hand.)
The key issue in any budget deal will of course be taxes. Biden has said repeatedly that he wants to raise taxes on those making more than $400,000 per year and not a penny on those making less. This is unfortunate, because I think he needs to repeal the 2017 tax giveaway in its entirety just to make the point that it was completely unjustified in the first place. And contrary to Republican mythology, it had no stimulative effect. This is important because if it had no stimulative effect, then there can be no depressing effect from its repeal. (Republican dogma about the economically depressing effects of tax increases has been wrong on every occasion since at least the 1930s.)

Republicans have been playing Lucy-and-the-football with Democrats on the deficit for more than 25 years. It’s time for Democrats, at long last, to walk off the field.



Bruce Bartlett is a former Republican who served as a domestic policy adviser to Ronald Reagan and as a Treasury official under George H. W. Bush. A longtime observer and commenter on economic and political affairs in Washington, D.C., he has written for The New York Times, The Washington Post, The Wall Street Journal, USA Today, Politico, and many others. A bestselling author, his latest book is The Truth Matters: A Citizen’s Guide to Separating Facts From Lies and Stopping Fake News in Its Tracks.



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10 Sunday Reads

Avert your eyes! My Sunday morning look at incompetency, corruption and policy failures:

A premeditated lie lit the fire Trump’s refusal to believe the election results was premeditated. He had heard about the “red mirage” — the likelihood that early vote counts would tip more Republican than the final tallies — and he decided to exploit it. “Jared, you call the Murdochs! Jason, you call Sammon and Hemmer!” (Axios) see also Among the Insurrectionists The Capitol was breached by Trump supporters who had been declaring, at rally after rally, that they would go to violent lengths to keep the President in power. A chronicle of an attack foretold. (New Yorker)
• ‘Our souls are dead’: how I survived a Chinese ‘re-education’ camp for Uighurs After 10 years living in France, I returned to China to sign some papers and I was locked up. For the next two years, I was systematically dehumanised, humiliated and brainwashed (The Guardian)
What Was Donald Trump’s Twitter? “I’m going to be very restrained, if I use it at all,” Donald Trump told us in 2016. Something else happened.  (New York Times)
6 Months After Leaving the Hospital, Covid Survivors Still Face Lingering Health Issues A large study of patients from a Wuhan, China, hospital showed that a half-year later, three-quarters were struggling with problems like fatigue, depression and diminished lung function. (New York Times)
A ‘first family’ that warped America (Financial Times)  As the Trumps head to Florida, their influence is likely to continue in White House exile.
State Capitols Brace for Right-Wing Violence The FBI warns that pro-Trump protests are planned at U.S. statehouses before the presidential inauguration. Long targets of far-right militias, capitol buildings now face new security fears. (Bloomberg)
Most House Republicans Did What the Rioters Wanted The most dangerous thing that happened Wednesday occurred after the mob dispersed. (The Atlantic)
•  New York Post to Staff: Stay Away From CNN, MSNBC, New York Times and Washington Post The NY tabloid goes all in on alternative facts, pandering to a base of conspiracy-fueled extremists. The Murdoch media media empire has enabled the worst instincts of the President, including the insurrection to overturn the election, morphing into the pamphleteer of the alt right.  (New York Times)
The End of the GOP The United States is a nation founded in revolution — that’s what treason is called when you win — with a long history of resistance, sometimes violent, to duly constituted authority. The danger in the permanently revolutionary American ethic is that every Timothy McVeigh or Cliven Bundy thinks he is Paul Revere (National Review)
Records show fervent Trump fans fueled US Capitol takeover They came from across America, summoned by President Donald Trump to march on Washington in support of his false claim that the November election was stolen and to stop the congressional certification of Democrat Joe Biden as the victor. (AP) see also The ‘Shared Psychosis’ of Donald Trump and His Loyalists Forensic psychiatrist Bandy X. Lee explains the outgoing president’s pathological appeal and how to wean people from it (Scientific American)
Wealthy bankers and businessmen plotted to overthrow FDR. A retired general foiled it. Franklin D. Roosevelt’s elimination of the gold standard in April 1933 infuriated some of the country’s wealthiest men. Titans of banking and business worried that if U.S. currency wasn’t backed by gold, inflation could skyrocket and make their millions worthless. Why, they could end up as poor as most everyone else was during the Great Depression. So, according to the sworn congressional testimony of a retired general, they decided to overthrow the government and install a dictator who was more business friendly. (Washington Post)

Be sure to check out our Masters in Business interview this weekend with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and refund fees when they underperform.


Fund Managers Donated $1 Million to GOP Election Deniers

Source: Bloomberg



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MiB: Adam Karr, Orbis Investments



This week, we speak with Adam Karr, portfolio manager at Orbis Investments and head of the firm’s US division. Orbis manages $37B in assets, and has a unique fee approach, where they only are paid a fee when they outperform; not only that, they refund fees to clients when they underperform. The (long only) Orbis Global Equity is their flagship fund, accounting for 67% of their assets, and has compounded at 11% annually, outperforming its benchmark since its 1990 inception. The firm was founded in 1989 by Allan Gray, a former Fidelity Fund manager.

The firm and its employees are the largest investor in the fund.

Karr discusses why they are an “unconstrained and concentrated fund,” with about 60 positions in their core fund. They run over a 90% active share across their holdings. They describe themselves as “Contrarian, intrinsic value” managers. He explains the way the firm chooses new investment ideas: In a firm-wide meeting, analysts pitch their best ideas in what often becomes a freewheeling and contentious battle over the benefits and risks of every position. Even after a thorough beating in the debates, PMs can still buy those stocks, with the purpose of these raucous arguments to fully understand the company, and not merely to win a debates.

The firm’s fulcrum fee — introduced in 2004, and discussed here by me in 2018 — is unique in the industry. Institutions pay nothing unless the firm beats its global benchmark; when that happens, the clients pay 25% of the outperformance. Part of that fee goes into a trust, which is used to refund fees when the firm underperforms. Managers believe this fee structure fully aligns the firm’s interest with that of the clients’.

Allan Gray, the firm’s founder, went on to become the largest investment manager in South Africa. He became a billionaire and philanthropist, created the non-profit Allan Gray Orbis Foundation and Charitable Trust, and donated his stake in Allan Gray Investment Management into the foundation.

A list of his favorite books are here; A transcript of our conversation is available here Tuesday.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Andrew Beer, Founder and Managing Member of Dynamic Beta investments. The firm manages several ETFs that seek to replicate illiquid alternatives at lower costs, with full transparency and daily liquidity. Their hedge fund replication fund, iM DBi Long Short Hedge Strategy ETF (DBEH) is up 27.7% since it launched in December 2019.






Adam Carr’s Favorite Books

The Art of Learning: An Inner Journey to Optimal Performance by Josh Waitzkin

The Biggest Bluff: How I Learned to Pay Attention, Master Myself, and Win by Maria Konnikova

Excellent Sheep: The Miseducation of the American Elite and the Way to a Meaningful Life by William Deresiewicz




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10 Weekend Reads

The weekend is here! Pour yourself a mug of French Roast coffee, grab a seat by the fire, and get ready for our longer form weekend reads:

Elon Musk Loves China, and China Loves Him Back—for Now Tesla and its chief executive officer have done all the right things as far as Beijing is concerned. Musk, who didn’t respond to requests to be interviewed for this story, has effusively endorsed China’s talent pool and its ambitious plans for EVs, remarks that go a long way in a country whose leaders are intensely sensitive to foreign judgments. Tesla’s local unit has also aligned itself explicitly with President Xi Jinping’s economic policy goals and forced China’s vast array of EV manufacturers to up their game, a crucial step in the government’s efforts to dominate the age of electric mobility.(Businessweek)
Why People Believe in Conspiracy Theories (They’re not stupid). Conspiracy theories arise in the context of fear, anxiety, mistrust, uncertainty, and feelings of powerlessness. For many Americans, recent years have provided many sources for these feelings. There’s been employment insecurity, stagnating wages, and thwarted social mobility. (Slate)
Business travel: ‘We don’t know how many people will choose to fly’ The sector lost an estimated $710bn year-on-year loss of revenue to the industry. The question now is whether those travellers will return once the pandemic ends. And, if they don’t, what that means for a sector which directly and indirectly supports one in seven jobs worldwide according to the Global Business Travel Association, subsidizes mass tourism and had annual revenues of $1.4tn in 2019. (Financial Times)
Why ESG Funds Fail to Scale You’ve seen the headlines about the growth in environmental, social, and governance funds. Many investment professionals might read these and believe that launching a new ESG investment firm or ESG offering will be an automatic success. Our analysis of the data shows that this is far from the truth: Most of these efforts fail. (Institutional Investor) see also How Lemonade Hijacked the “ESG Movement” to Pull Off the #1 Stock Promotion of 2020  Lemonade is an egregious stock promotion disguised as a social impact company – the company is making a complete farce of the ESG investment movement  (The Friendly Bear)
The joys of being an absolute beginner – for life. The phrase ‘adult beginner’ can sound patronizing. It implies you are learning something you should have mastered as a child. But learning is not just for the young  (The Guardian)
Coronapolitics from the Reichstag to the Capitol Defying conventional political labels and capitalizing on widespread distrust, a range of new movements share the conviction that all power is conspiracy. (Boston Review)
The Lasting Lessons of John Conway’s Game of Life Fifty years on, the mathematician’s best known (and, to him, least favorite) creation confirms that “uncertainty is the only certainty.” (New York Times)
QAnon reshaped Trump’s party and radicalized believers. The Capitol siege may just be the start. The online conspiracy theory, which depicts Trump as a messianic warrior battling ‘deep state’ Satanists, has helped fuel a real-world militant extremism that could haunt the Biden era: It’s ‘a threat to our democracy, and we’re not nearly done’ (Washington Post)
The Unsettling Truth About the ‘Mostly Harmless’ Hiker The body of a hiker had been found in a tent in Florida in the summer of 2018, but scores of amateur detectives, and a few professional ones too, couldn’t figure out who he was. Everyone knew that he had started walking south on the Appalachian Trail from New York a year and a half before. He met hundreds of people on the trail, and seemed to charm them all. He told people he was from Baton Rouge, Louisiana, and that he worked in tech in New York. They all knew his trail name, but no one could figure out his real one. (Wired)
Why So Many Pop Stars Are Trying to Be Working-Class Heroes Now Artists including Justin Bieber, Drake, and Travis Scott are making clumsy plays at humble relatability during an era of deepening economic inequality. (Pitchfork)

Be sure to check out our Masters in Business interview this weekend with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and refund fees when they underperform.


Stocks Are Historically Expensive. So What?

Source: All Star Charts


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To learn how these reads are assembled each day, please see this.

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Succinct Summation of Week’s Events 1.15.21

Succinct Summations for the week ending January 15th, 2021


1. This Presidency is in its final days; I welcome a return to boring
2. Home mortgage apps rose 8.0% w/o/w.
3. Home refinance apps rose 20.0% w/o/w.
4. CPI rose 0.4% w/o/w.
5. Import prices rose 0.9% and export prices rose 1.1% w/o/w, above expectations.
6. Business inventories rose 0.5% m/o/m, above expectations.
7. Industrial production rose 1.6% m/o/m, above expectations.


1. We continue to learn a) how close we came to serious bloodshed in the Capitol; and b) that this might have have insiders as co-conspirators.
2. A free and open Democracy cannot continue when 20-30% of its population believe in nonsense spouted by fringe groups, conspiracy sites, Facebook, and Fox News.
3. Job openings came in at 6.527M in December, below the previous 6.632M.
4. Jobless claims increased 181k w/o/w from 784k to 965k.
5. Retail sales fell 0.7% m/o/m, below expectations.
6. PPI-FD rose 0.3% in December, below expectations.
7. Consumer sentiment is at 79.2 for January, below expectations.

Thanks, Matt!



YTD, the Small Cap Russell 2000 is up 9% vs a flat P500 & Nasdaq100

Source: YCharts

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Favorite Stories from the Least Favorite Year

click for video

Source: Asset TV



I spoke with Jenna Dagenhart of Asset TV about what a productive & miserable year 2020 was. We also go over what it was like launching RWM, along with some of my favorite posts from 2020.




Favorite Big Picture Posts of 2020 (December 31, 2020)


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10 Friday AM Reads

My end of week morning train WFH reads:

The Covid-19 Death Toll Is Even Worse Than It Looks: More than 2.8 million people have lost their lives due to the pandemic, as Deaths surged more than 12% above average levels. Less than two-thirds of that surge has been attributed directly to Covid-19 (Wall Street Journal)
Bitcoin: Magic Internet Money  Crypto violates core rules of investing: Always know what you are investing in; Not a capital asset or store of value; nearly certainly a bubble and likely manipulated. (Research Affiliates) see also  The Secret Pension Fund Manager: Bitcoin has no clothes Our columnist, a former portfolio manager at a major UK pension fund, gives a professional investor’s view on the crypto currency craze. (City Wire Selector)
Jack Ma was China’s most vocal billionaire. Then he vanished The richest person in China was about to orchestrate the world’s biggest IPO. His retreat from public life raises a number of questions (Wired)
Business travel: ‘We don’t know how many people will choose to fly’ The sector lost an estimated $710bn of revenue in the pandemic. Will hotels and airlines ever claw that back? (Financial Times)
Scott Sumner on the Princeton School of Macroeconomics and Overcoming Inflationary Fears Jay Powell and the Fed have worked hard to dispel inflationary fears rooted in the past, and this bodes well for a post-COVID economic landscape. (Mercatus Center)
What Japan’s Disaster-Proofing Strategies Can Teach the World The country’s infrastructure is already one of the world’s safest, and investment in risk management is ramping up. (Bloomberg)
Yes, the Pandemic Is Ruining Your Body Quarantine is turning you into a stiff, hunched-over, itchy, sore, headachy husk. (The Atlantic)
The Capitol Insurrection Was The End Result Of A Trump Presidency Defined By Violence: Crimes fueled by hate and online conspiracy theories over the past four years repeatedly offered warnings of the forces that drove last week’s attack on the US Capitol. (Buzzfeed)
Self-pardon? It might not go how Trump thinks. The president’s cherished Supreme Court majority has disappointed him before — and it might again. (Politico)
• The Catch They are strangers, arms outstretched, waiting for the boy to fall. Minutes earlier, three of them had tried to wrench open the apartment door. But it was too swollen by the heat of the fire. So the brothers, three and 10 years old, are trapped. They are crying at a window, 15m (49 feet) up, choking on thick black smoke billowing behind them. To their left, flames rage from a carpet draped over a balcony railing. (BBC)
After ‘Hamilton,’ Leslie Odom Jr. just wanted to be himself. Then the role of Sam Cooke came calling. “When ‘Hamilton’ is going to be released, you’re going to try to set up things around that,” says Odom, 39, who won a Tony and Grammy for playing Aaron Burr, Alexander Hamilton’s tragic foil. “Maybe I’m going to record a record, or maybe I’m going to get some meetings. This is maybe the biggest moment of my career, and I’m locked in the house — we’re all locked in the house.” (Washington Post)

Be sure to check out our Masters in Business interview this weekend with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and refund fees when they underperform.


Mortgage rates have moved up a bit, but are still very very low

Source: @lenkiefer



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To learn how these reads are assembled each day, please see this.

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1960 Maserati 3500 GT

In its early days, Maserati spent most of its time and effort with motorsports. Road cars were an afterthought. This changed in the late 1950s, with the introduction of 1960 Maserati 3500GT.

The 3500GT was a 2+2 coupé with elegant bodywork by Carrozzeria Touring. Hand-formed aluminum panels over a steel tubular frame. The straight-six engine displaced 3485 cc and featured an aluminum block, dual overhead cams, twin-plug ignition and three twin-choke Weber carburetors. Carbureted cars developed 230 hp and 254 lb-ft of torque, enough for a top speed of 130 mph.

The fast, comfortable Gran Turismo offered exhilarating performance but also day to day usability. The blend of performance and comfort attracted wealthy buyers, and the list of celebrity 3500GT owners includes Tony Curtis, Rock Hudson and Prince Rainier III of Monaco.

Just over 2,200 examples were built between 1957 and 1964, and only around 245 were convertibles. (For Maserati, this was a huge number). Despite their relative rarity, they sell for $150-250k (more for the Spyders). If these were similar era Ferraris, they would sell for 10X that amount.


Source: Daniel Schmitt Galleries




Source: Classic Driver

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The Unpredictable 2020

Source: How Much



I am otherwise occupied this morning on a few pressing matters, but I had to share this chart from How Much annotating the markets fall and recovery in 2020.

It is a reminder how much randomness and unpredictability is encountered by investors. It is very easy to get distracted. The Armageddonists who made their forecasts in March April and May learned this the hard way.

This is why it is so important to always stay focused on the long term, and not get caught up even in the wildest of the day-to-day noise.



The post The Unpredictable 2020 appeared first on The Big Picture.

10 Thursday AM Reads

My morning train WFH reads:

tHe fUtUrE oF mOnEy Don’t Forget Your Bitcoins: One thing that soothes this envy is reading about people who bought Bitcoin early for nothing and are now theoretical centimillionaires but lost their private keys and can’t access the money.  (Bloomberg)
SPAC Mania Gives Early Investors Steady Returns With Little Risk Hedge funds score gains when blank-check companies rise after announcing deals to take startups public (Wall Street Journal)
Who Said Art Is Only for the One Percent? Marian Goodman Gallery and MoMA are reviving interest in multiples — art produced in affordable editions for the ’60s middle-class. Now, some artists are taking up the cause.  (New York Times)
Is Tesla a car company, or a casino? In 2020, Tesla delivered fewer than 500,000 cars, but it added almost $750bn to its market value. General Motors sold 2.5 million vehicles in 2020 and has more than $200bn in assets, but its market capitalisation is a small fraction of Tesla’s, at $62bn. At its current price-to-earnings ratio it would take Tesla 1,600 years to make as much money as the stock market has invested in it. (New Statesman)
Why People Won’t Change Their Mind The concept of cognitive dissonance was developed by psychologist Leon Festinger in the 1950s. It arises when a person holds two different beliefs that are inconsistent with one another. The theory is that when this happens it causes our minds discomfort which we then seek to reduce. Whenever this inconsistency in our attitudes, ideas or opinions kicks in our default is to eliminate that dissonance. (Wealth of Common Sense)
Where MAGA Insurrectionists and QAnon Followers Will Post Now Pro-Trump extremists need a new home after the Great Deplatforming. This is where they are going (Slate)
Why Aren’t We Wearing Better Masks? Cloth masks are better than nothing, but they were supposed to be a stopgap measure. (The Atlantic)
After Deadly Capitol Riot, Fox News Stays Silent On Stars’ Incendiary Rhetoric Fox News, the network that has helped shape conservative politics in the U.S. for more than two decades has yet to acknowledge how the heated rhetoric radiating from its shows and stars may have helped inspire the pro-Trump rampage. Comments from prominent Fox News hosts and guests had helped stoke the MAGA mob’s fury for the two months following the November elections. (NPR)
A Black officer faced down a mostly White mob at the Capitol. Meet Eugene Goodman. For 85 tense seconds, Goodman tries to hold back dozens of rioters, twice retreating up a flight of stairs. Police experts say he wasn’t fleeing, but luring the mob away from the Senate chambers, where lawmakers were sheltering and armed officers — including one with a semiautomatic weapon — were securing the doors.(Washington Post)
Tasting neutrinos: Flavor changing in the cores of exploding stars When the iron core of a massive star collapse, neutrinos of such high energy and in such numbers are created that the infalling material just outside the star’s core actually absorbs vast numbers of them; it helps too that the material rushing downward is extraordinarily dense and able to capture so many. The amount of energy this soul-vaporizing wave of neutrinos imparts on the matter is enough to not only stop the collapse but also reverse it, sending octillions of tons of stellar matter exploding outward at an appreciable fraction of the speed of light. (Syfy Wire)

Be sure to check out our Masters in Business interview this weekend with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and refund fees when they underperform.


Is the vaccine roll out impressing or disappointing you?

Source: Deustche Bank


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To learn how these reads are assembled each day, please see this.



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Silicon Valley De-Platforming: Freedom & Censorship



I want to discuss some of the sillier hot takes on the “De-Platforming Trump” actions already occurring (Lots of companies have dropped Trump as a client or user).

The debate needs to be reframed in terms of Freedom & Censorship.

First, a quick note about the cries of First Amendment violations. Try this: Break the seal on the plastic wrapping on that little US Constitution you carry as a prop, and then read it. You will then learn that the First Amendment states:

“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Congress. Not private citizens, not companies. The constitution does not require you to turn over your home or businesses or any other property to allow anyone to communicate about anything.

Especially businesses. (There are very specific, very narrow exceptions, such as company towns. See Marsh v. Alabama). But the general principle is that companies are free to do whatever they want to pursue their business, so long as it does not violate other laws. If you are a baker, you don’t have to sell a wedding cake to someone you dislike. However, your decision cannot violate other people’s fundamental rights. If you decide not to sell to people who because they are black or Jewish, then your decision is discriminatory and therefor illegal.

Said differently, while no one has the absolute right to buy a wedding cake from any specific bakery, but they do have the right to not be discriminated against because of their race or religion.

So, too, goes the rights of social media platforms. They are not government actors, they are private companies trying to generate a profit. That gives them enormous latitude in how they manage their own business affairs. Courts have given corporate management broad rights  to operate as they see fit via a principle known as “The Business Judgement Rule.”

Some factions have tried “Working the Refs” instead. Since they cannot win through the courts, they are trying to make this a First Amendment issue: The Far Right (and even moderate GOP members) have made the claim of political bias. They have argued that Silicon Valley has the obligation to work against its own best interests.

The WSJ offers some of the very worst examples of this thinking, demanding we Save the Constitution From Big Tech. The authors seem to confuse decisions they dislike with violations of the Constitution. To do so, they make the ridiculous claim that “Google, Facebook and Twitter should be treated as state actors under existing legal doctrines.”

This is, of course, nonsense. Jonathan Last of the Bulwark noted, ToS Is Not a Suicide Pact. If a private company has bad actors on its platform hurting its business or reputation, they are free to de-platform them.

I was discussing this with my friend Perth Tolle, who runs the Freedom 100 Emerging Markets index/ETF (FRDM). Her approach is to use “quantitative personal and economic freedom metrics” as the basis for their index. She notes:

“This banning of Trump and other right wing extremists from social media platforms, cloud services, and payments (Stripe latest) is a sign that we are living in a place where there is freedom.

The people/companies who provide something of value (platforms) are able to exercise their freedom to work with or not work with certain actors. I see rule of law, private property rights, and contract law at work. The few who happen to be in power don’t call the shots, the people do.

And the people have decided to, and will continue to decide to work with these companies as long as they are providing something of value.

That’s freedom.”

I totally agree.

Get past the faux claims of constitutional violation and simply ask: Do you believe that private companies are free to do what they (legally) want? I hate Facebook as much as anybody, and even believe it is a threat to decent society, but I certainly don’t want to substitute the government’s judgement for the company’s.

We can and should pressure businesses to try to do the right thing. We can vote with our dollars and take out business elsewhere. But stop trotting out intellectually dishonest arguments to say the Federal Government should take away liberty and freedom of private companies.


This is a fascinating subject, with far reaching ramifications. I’d like to spend some more time thinking about what it means, exploring it in a more investor driven context…

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10 Wednesday AM Read

My mid-week morning train WFH reads:

How a Presidential Rally Turned Into a Capitol Rampage When President Trump railed against the election results from a stage near the White House on Wednesday, his loyalists were already gathering at the Capitol. Soon, they would storm it. We analyzed a crucial two-hour period to reconstruct how a rally gave way to a mob that nearly came face to face with Congress. (New York Times)
Investors’ Dilemma: Buy Stocks in Growing China, or Not? Beijing’s hard-line policies and investing hurdles complicate the decision. (CIO)
Lost Passwords Lock Millionaires Out of Their Bitcoin Fortunes Bitcoin owners are getting rich because the cryptocurrency has soared. But what happens when you can’t tap that wealth because you forgot the password to your digital wallet?  (New York Times)
The Most Important Thing Biden Can Learn From the Trump Economy It has become clear that the United States economy can surpass what technocrats once thought were its limits: Specifically, the jobless rate can fall lower and government budget deficits can run higher than was once widely believed without setting off an inflationary spiral. (The Upshot) see also Does economic optimism in the face of political nightmare make any sense? Actually, yes. (Krugman)
Behind the rise in fungi fashion lies a psychedelic revolution Gucci, Fiorucci, Stüssy and Marc Jacobs’ Heaven all helped dub 2020 the year of the mushroom. But here’s why the roots of mycelium mania run a little deeper, well into the new year and, no doubt, the rest of the decade.  (The Face)
Habit-Forming Home Workouts for Any Kind of Person Fitness is hard. Getting fit from home is harder. Let us do the heavy lifting and show how to make it work for you. (Bloomberg)
Vancouver Gave Homeless People $5,800. It Changed Their Lives. A single infusion of cash helped recipients pay their rent, get to work — and put their lives back on track. (Reasons to Be Cheerful)
Millipede Swarms Once Stopped Japanese Trains in Their Tracks A team of scientists say they have figured out the cicada-like life cycles of the many-legged arthropods (not insects). The creatures emit cyanide when attacked by a predator (New York Times)
Do Twins Share a Soul? An anthropologist—and identical twin—grapples with different cultural understandings of twinship. (Sapiens)
This man has given away 500 free pizzas. He lowers them from his apartment window. “I decided to make free cheese pizzas and lower them out my window to anyone who wanted one, with a suggestion that they make a donation to charities that help people who are hungry or homeless.” (Washington Post) see video Barstool Pizza Review – Good Pizza (YouTube)

Be sure to check out our Masters in Business interview this weekend with Sébastien Page, head of  T. Rowe Price’s Multi-Asset Division, which manages $363.5 billion. T. Rowe Price’s total AUM was $1.31 trillion.


SPAC Mania Gives Early Investors Steady Returns With Little Risk

Source: WSJ



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The post 10 Wednesday AM Read appeared first on The Big Picture.

“What is Wrong with These People?”



I published this in 2017 about people whose model of the world is off in some fundamental way. As it turns out, but for this minor error, they otherwise appear to be completely normal folks. This can apply to Flat-Earthers, Anti-Vaxxers, Investors, and (especially) hyper-partisans. 




“What the hell is wrong with those people?”

If the events of recent weeks (or years) have you asking yourself that, the answer is: not very much. They simply suffer from a small but crucial error in the way their brains create models of the world around them.

That is the conclusion of “The Unpersuadables: Adventures with the Enemies of Science,” 1  a 2014 book I reread this weekend. The insights of author Will Storr are applicable not only to the current political mayhem but to traders and investors. Indeed, anyone who makes important decisions based on their subjective understandings of the universe stands to learn something about themselves and their decision-making processes.

Storr interviews, and occasionally embeds himself with, people many of us might describe as rather eccentric if not disturbed. UFO abductees, Holocaust deniers, new earth creationists, Western medicine eschewing homeopaths, meditation gurus, extreme yogis, “skeptics” and past-life regression therapists are among those whose world views are closely examined.

What is so striking about all of the people embracing unorthodox views isn’t that they are insane, but rather that they seem so normal. They are high-functioning individuals, who for reasons that within the book are only hinted at, have a deep flaw in their psychological understanding of how the world works.

Indeed, what is wrong with these people? They are deeply tribal; they construct story lines to help make sense of the world; when evidence is presented in direct conflict to that narrative, they find ways to dismiss it or ignore it. Their compulsion for emotional narratives overwhelms any sense of data or evidence-based analysis. They are homo sapiens operating the way homo sapiens wetware has operated for hundreds of thousands of years. What is so shocking is not that these people are so awful or believe in awful things, but that they are otherwise rational and sane people.

As Storr writes, “Stories change us first, and then they change the world.”

All of our models are imperfect, which is a polite way to say wrong. But the mental images we create of the world we live in don’t have to be perfect; they need only be good enough to allow us to find food and water, avoid becoming someone else’s lunch, locate shelter, and generally survive long enough to procreate and perpetuate the species. Good enough is all we need for those purposes.

That, of course, isn’t good enough for deciding where and how to risk money in the capital markets.

And yet this may be counterintuitive: Having a complete and accurate 360-degree view of the world, a model with perfect comprehension of the objective universe, wouldn’t aid the purpose of sustaining human life. That sort of mental model would be a huge burden to create and maintain in terms of sensory perceptions and energy consumption. The human brain weighs three pounds, or about 2 percent of body weight, yet it is responsible for using 20 percent of our daily caloric intake.

From an evolutionary perspective, having a perfect model of the world wouldn’t help survival of the species; it might even make perpetuation less likely during times of limited resources or environmental stress.

Storr quotes Jonathan Haidt, 2  the New York University professor of ethical leadership, who notes that the world is “not really one made of rocks, trees, and physical objects; it is a world of insults, opportunities, status symbols, betrayals, saints and sinners.”

In other words, beliefs.

You can see this in the investing debates that take place every day. It is how people rationalize their current holdings. They “talk their book” because portfolios reflect their mental models. Whether you are a value investor or an active trader, you believe you have an understanding of how markets and economies function, and deploy your capital accordingly. You can explain your positioning with a quick story, one that is a product of your worldview. But you probably are unaware of how much your subjective inner narrative drives your rationalized views.

Regardless of where you fall in the Federal Reserve debate, or if you think stocks are cheap or expensive, or if this market is too old or has room to run, your mental models are at work. Be aware of how their imperfections might be driving your investing decisions.



Eventual Failure of False Belief Systems (January 7, 2021)

The Hidden World of Failure (October 23, 2020)

The Cult of Ignorance (December 17, 2020)



1. Outside the U.S.,  the book is titled “The Heretics: Adventures with the Enemies of Science.”

2. Haidt is the author of “The Righteous Mind: Why Good People Are Divided by Politics and Religion.”




I originally published this as: Our Inner Investing World Doesn’t Reflect Reality at Bloomberg, on August 21, 2017.



The post “What is Wrong with These People?” appeared first on The Big Picture.

10 Tuesday AM Reads

My Two-for-Tuesday morning train WFH reads:

Yes, It Was a Coup. Here’s Why. What Trump tried is called a “self-coup,” and he did it in slow motion and in plain sight. (Politico) see also Six hours of paralysis: Inside Trump’s failure to act after a mob stormed the Capitol “He was hard to reach, and you know why? Because it was live TV,” said one close Trump adviser. “If it’s live TV, he watches it, and he was just watching it all unfold.” (Washington Post)
What’s Behind Value Investing’s Long Losing Streak? The strategy has suffered a devastating drought for more than a decade, sending investors scrambling for answers. (Bloomberg)
The Top Stock Funds of 2020 Morgan Stanley’s Inception Portfolio, under Dennis Lynch, won the stock-fund race with a gain of 150% (Wall Street Journal) see also Dennis Lynch: Generating Performance via Concentrated Growth What if your investing process was to find attractive companies to buy, regardless of style, size, or location? Surprisingly, this is the opposite philosophy of how most mutual funds operate (The Big Picture)
Howard Marks: Something of Value The dichotomy of “value” and “growth” investing has become a sharp stylistic divide. But is it helpful? Howard Marks writes in his latest memo how he views the art and science of value investing, especially in the increasingly efficient and complex world we face today. (Oaktree Capital)
The Hot Alternative Investments to Watch in 2021 Whisky, music and the great outdoors are just some of the other ways to put your money to work. (Bloomberg) see also Stifel is worried that Hipgnosis Songs Fund is slipping out of tune By aggregating catalogues of songs into one fund, Hipgnosis can create a stream of cash flows that can be paid out to investors. In a world starved of yield, a 4.3 per cent dividend that is uncorrelated with other assets sounds like a pretty good deal on paper. (Financial Times)
Trump’s Brand Loses Its Luster in the Backlash Companies and institutions are shunning President Trump and many associates. His business, built on luxury hospitality, is contemplating a reinvention. (New York Times)
Every Deleted Parler Post, Many With Users’ Location Data, Has Been Archived In the wake of the violent insurrection at the U.S. Capitol by scores of President Trump’s supporters, a lone researcher began an effort to catalogue the posts of social media users across Parler, a platform founded to provide conservative users a safe haven for uninhibited “free speech” — but which ultimately devolved into a hotbed of far-right conspiracy theories, unchecked racism, and death threats aimed at prominent politicians. (Gizmodo) see also All the platforms that have banned or restricted Trump so far (Axios)
Coronavirus Today: The front-line workers turning down the vaccine Some Firefighters, EMTs, and healthcare workers in hospitals and care facilities are refusing to roll up their sleeves. Around 20% to 40% of L.A. County’s front-line medical workers who were offered the vaccine have turned it down. So have roughly half of their counterparts in Riverside County. (L.A. Times)
Hawley should resign. Silent enablers must now publicly condemn Trumpism. (St. Louis Post-Dispatch) see also Resign, Senator Cruz. Your lies cost lives. (Houston Chronicle)
How New York City Vaccinated 6 Million People in Less Than a Month When a single case of smallpox arrived in Manhattan in 1947, a severe outbreak was possible. A decisive civil servant made a bold decision. (New York Times)

Be sure to check out our Masters in Business interview this weekend with Sébastien Page, head of  T. Rowe Price’s Multi-Asset Division, which manages $363.5 billion. T. Rowe Price’s total AUM was $1.31 trillion.


The ‘Small-Cap Effect’ Isn’t Dead, After All

Source: WSJ


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To learn how these reads are assembled each day, please see this.


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MiB: Re-Optimizing 60/40 Portfolios in an Era of Low Yields


How can asset allocators manage risk assets when stocks are pricey and yields are low?

That is the challenge confronting Sébastien Page, head of T. Rowe Price’s $363.5 billion multi-asset division. He also sits on the firm’s executive management committee and its asset allocation committee, which oversees $1.31 trillion in assets. Page is the author of 2020’s “Beyond Diversification: What Every Investor Needs to Know About Asset Allocation.”

A portfolio mix of stocks and bonds face two headwinds: lowered yields limits the potential capital appreciation on bonds, and richly priced stocks lower expected returns for equities. That combination has led investors to embrace greater equity exposure and take on more risk than usual. A traditional “60/40” mix of stocks and bonds has morphed into something closer to an “80/20” portfolio.

Page believes investors should “re-optimize” model portfolios by shifting 12% of the allocation from bonds to low volatility alternatives, including 5% to risk premium or factor strategies. Within equities, he has been recommending shifting 5-10% of long-only stocks to a dynamic risk management or tactical strategy.

Page believes Treasuries no longer provide the same “volatility hedge” they used to. Instead, asset allocators should be looking at strategies such as absolute return, along with other diversifiers like Gold or Investment Grade Bonds, even low interest rate currencies like the Japanese Yen.

He cites his mentor as teaching him the secret to happiness: “Lower your expectations.” Page notes investors should apply the same approach to bonds.

A list of his favorite books are here; A transcript of our conversation is available here.

You can stream or download our full conversation on iTunesSpotifyStitcherGoogleBloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Adam Karr, portfolio manager at Orbis Investments and head of the US division. The firm, which manages $37B in assets, has a unique fee approach, where they only pay if they outperform, and refund fees when they underperform.


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