As the professional podcast interviews for investors continue (this new found form of listening to long form personal visits) a most recent interview of famed investor Sam Zell hit the airwaves. Sam is candid, entertaining, humble, some what self deprecating and very interesting as he outlines his successes, failures and a few good ideas we could all add to our persona. This from the fantastic Grant Williams Podcast series.
On a personal note, after receiving permission from Grant to produce this and his statement to share with his vast network, the pressure is on for a good post… hope it lives up to the standard!
Hope you Enjoy reviewing as much as the creating of this post.
Sam Zell, Candid, Open, Background.. Take Aways’
A first question right out of the gate:
Do you see echo’s to 2007 and/or bubbles?
Yes, some inflation and not sure if it is transitory, but not necessarily bubbles. Tons of pressure on wages and do not know where workers have gone, but they are not there.
Zell on dealing with labor inflation…
Able to do lesser staffing without customers complaining. Expectations of service and services are going down.
Recent conversations about supply chain issues…
“A year ago, people would tear their hair out, but today an acceptance!”
Inflation thoughts…
“Inflation is an event and mindset!” So far only an event and has not turned into a mindset…. Yet.
Ask for a big enough price increase so you do not have to go back and ask again (specific to hospitals he owns, but good for all types of businesses.)
Background, childhood and education …
Immigrants son, born three – four months after coming to this country. Family fled Poland. “My Dad felt the streets of USA were paved with gold, due to opportunity!”
Tough family that was told to study and work hard. Sam not a great student.
First job, bought a Playboy for 50 cents in the city and sold it for $3 to his friends back in the burbs…. Starting his own import export with maintaining margins.
While Students in school, offered to let Sam and a friend stay for free if they would manage the building. Soon were managing a dozen of buildings while completing Law School.
Had 43 interviews and 43 rejections post law school graduation.
Finally accepted and offer, and four days later went to his boss
“This is not a good use of my time!” and his boss allowed him to go, but also asked to invest with him as Zell went back to real estate.
Zell on Business and his success and failures …
Self Confidence was very helpful in accomplishing his goals.
Businesses have changed every 3-5 years as no matter how good idea is, someone will copy.
Always very cautious towards risk and understanding things.
“Competition is great, for you … me, I want a monopoly or at least and oligopoly.” Too much competition is bad.
Example of We-Works… Zell watched from the 1970’s and all went bankrupt because at some point over supply kills the model.
In order to be the best, keep ideas simplistic and being scared, and willingness to let a great deal go by. Many times being wrong, but that is ok.
“Give me a guy with motivation and average IQ and I will turn him into a successful business leader!”
Build a better mouse trap and more will come to it, not true, everything is sold as an idea.
Staying Power is the name of the game… No surprises!
Given the high valuations of today, have you changed the way you do business? More cautious and conservative.
How do you narrow your deal opportunities? Do not see or do any deal that Zell does not understand. Does not want to run a business, but have had to over his career.
If you cannot tell me everything I need to know in two sentences, it’s too complicated.
Successful ideas, do not require multiple steps, just conviction and understanding and recognition the shortest distance is straight between two lines.
Real Estate Industry has a long history of lack of discipline. Appears safe and people let their guards down and then trouble.
No one has ever proved that scale works in Real Estate. Do not be afraid to be a small profitable company rather than a big less profitable, not all companies should be big.
Discipline keeps Zell safe.
Real money by long term holdings, be patient.
Mentions a company sold after holding for 37 years and another for 20 years that were not always profitable every year, but over longer term very successful. Sustainability is often times more important than constant success.
If market timing is selling something that some one will pay you too much for, so be it, next.
Many investors are assigning no risk to certain hard assets today, but history shows that is never the case, there are always risks.
Will you slow down? People ask me that all the time…”Slow down from what…I like what I do,”
There you have it, thoughts, habits, beliefs and ideas from a legendary investor…. some of which we could all integrate into some aspects of our life!
Have a Great “Sam Zell Review” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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REVIEW REWIND REPLAY – Shrinking the Balance Sheet Explained, Bulking and Lowering too
This post is clearly dated…. BUT it is actually what current chair Jerome Powell is doing today in addition to raising rates! Enjoy the replay review!
Last Wednesday Janet Yellen, FOMC (Federal Open Market Committee) chairperson released comments on their duty as Federal Reserve members but also introduced a term that may be new to many.
What is the Balance Sheet
Much to the happiness of all those bookkeeper, accountants, CPA’s and the like, present party included, entries must balance. Even the US Government as huge as it is, runs by the old adage
A basic accounting principal, that MUST always work…
If a change is made, it must be counted somewhere else, even on the USA’s balance sheet.
Bulking up the Balance Sheet
Post “Great Recession of 07-09” FOMC members smartly embarked on a successful but unknown effort at the time, of infusing banks and capital markets with Greenbacks aka $ Dollars!
The Federal Reserve led by FOMC members, with the click of a button created money in their checking account and created a contra account for balancing purposes then went out to capital markets and bought bought bought in HUGE quantities various capital instruments, but for the most part US Bonds of all maturities.
Their goal, again unchartered territory at the time was to infuse money into the system and also lower interest rates.
By purchasing large quantities of instruments the FOMC were putting dollars directly into the system … there were other programs as well, but for the sake of simplicity, their buys pushed money into, at the time, a much needed financial system.
The numbers of this chart are not as important as the line and dates.
As the FOMC clicked and bought and clicked and bought again in keeping their books “Balanced” the Federal Reserve Bank Assets Grew and Grew.
Finally the Sizzle, Shrinking the Balance Sheet
Take a peek at the far right of the line in the chart… Come on now you can do it …. this is important, and you have come this far …
What do you see? It’s flat lining….
Since most of the FOMC purchases were bonds of various types, and bonds mature, that line should begin to decrease. The FOMC holds such a huge portfolio of bonds, maturity occurs almost constantly.
Until now, the FOMC has re-invested or repurchased maturing bonds with new bonds, thereby holding that line flat. Yellen and crew are now signaling they may NOT re-invest those maturing bonds, which would lead to a VERY SLOW decline in the FOMC balance sheet or a …
These words have been carefully chosen. Eventually the FOMC may actually sell their bonds back into the capital markets, reversing the stimulus applied in the “Great Recession of 07-09” more quickly. That would not be called “Shrinking” that would be called lowering, reducing, or something similar, look for this type of cryptic rhetoric in the future …. for now, shrinking simply means letting the maturing bonds mature and NOT re-investing … Shrinking the Balance Sheet !
There you have it, this post turned longer than expected, but the background should have made for a clearer picture … if you made it this far, pat yourself on the back… You now know the current “Shrinking” step along with likely future announcements by the FOMC and committee members!
Have a Great “Deciphering Cryptic FOMC Rhetoric” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
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Posted in Economy, FOMC, Forecast, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Accounting Equation, FOMC Balance Sheet, Shrinking Balance Sheet