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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Bond Market Beats its Chest … Invertedly/Upside Down Yield Curve …. R – Word Predictor (Recession)
Some on Wall Street say the Bond Market is the smartest due to the fact that participants are only focused on repayment risk and time of that repayment. Compared to the Equity (Stocks) market were there are flows of capital, tons of complication with financials and mood swings by participants.
Given the Bond Markets high IQ status, when it speaks people listen….
Inverted Yield Curve as Bond Market Beats it Chest with a Warning
As a quick refresher, a normal yield curve will have lower rates for shorter terms and higher rates for longer…. simply because the longer the term the greater chance of a problem/stress/default …
Pardon my free hand, but it looks like this… the longer the time the greater the cost/interest rate
When the Bond Market turns upside down/inverts, it has a very good track record of predicting a R- Word!
Note on this long term chart, as the line drops below zero, the Bond Market is Beating its chest and inverting…. also note the grey area that follow are R-Words…
Using a shorter term chart, last week marked a strong inversion of about -.25% and closed the week off at -.20% note those are point 25% and point 20%…. far right below the line…
So it looks like the R Word is in the cards, not to worry we have been talking slowdown since December of 2021… so we are prepared….
Remember, Equity Markets are forward looking and will sniff out the recovery before it is seen…. Also, recall, headlines are the worst near the end…. Still a Ways to Go though!
Next up — Why the Fed is in a pickle and may only have an R- Word way out!
Have a Great “Inverted Yield Curve” Update Day!
John A. Kvale CFA, CFP
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Posted in Clients/Clients Only, Economy, FOMC, Forecast, Interest Rates, Investing/Financial Planning, Market Comments
Tagged 10 Year Treasury, 2 Year Treasury, 2-10's, FOMC, Interest Rates, Inverted, Yield Curve