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Baptized into the world of business and travel at a young age I’ve subsequently lived in multiple countries, traveled to many more and built myself a small fortune investing in businesses and markets that I spend an extraordinary amount of time doing due diligence on. People sometimes ask me... More
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  • Did Someone Say Deleveraging?

    By: Chris Tell at

    For reference I should mention that I recently wrote about debt in a post titled Debt Chart Porn, and we are about to mail out our comprehensive debt report to our registered readers. All of this has led me to thinking a lot about debt and the state of the world geopolitically, currencies, commodities, and all the interconnected pieces that make up our global economic ball of yarn.

    When discussing the global financial crisis (NYSE:GFC) and what I call a global debt crisis, what is really terrifying is how well the media have pulled the wool over the eyes of well-educated people.

    "Well, the banks, governments and businesses learned a hard lesson and are far more stable today."

    That isn't an exact quote, but it is something like that which I hear all too often - from people who's businesses are in finance, banking, and investment.

    No, they're not more stable, I scream. People everywhere should be soiling their pants at the numbers.

    The world is still leveraging up. After the 2008 crisis it didn't take long to get right back on that particular wagon and continue this absurd path. Just because the wagon's wheels fell off seemed no reason to stop using it - just get a new set of wheels. Contrary to what seems to be widely held views, global deleveraging has yet to start. The debt ratio continues rising to all-time highs.

    Japan, a country we've spoken about in these pages at length, is just simply off the charts. Japan is that wild guy at college who you were convinced would kill himself. Every time you bumped into him it was something new and more terrifying. He's still around and his death defying stunts are more daring than ever. Right now he's at the controls of a runaway train, and for those of you who've never been on a train, it runs on tracks which ostensibly means it can't turn. On the tracks ahead are 127 million Japanese citizens. Remember, he can't turn so he's just going to keep going until his windscreen is all meaty and red. They are calling it Abenomics. It's insane.

    Staying on that side of the globe for a minute we have China. China has become a driving force of leverage post 2008. Mark Hart, the legendary but secretive hedge fund manager behind Corriente Advisors believes that China may well be the next major problem. Even more terrifying than breathing Beijing air is the speed of this leveraging process in China.

    Take a look at the below chart on corporate debt as a % of GDP.

    (click to enlarge)

    Now, I'll concede that in the main Anglo Saxon economies - you know, where "round eyes" live - the corporate, household and financial sectors have reduced debt levels, though this has come at the expense of the government sector. A quick view of the chart below provides ample fodder for underwear soiling.

    (click to enlarge)

    Federal Reserve balance sheet as a % of GDP

    Here we sit six years on from the beginning of the GFC in the advanced economies, and despite all the trouble that crisis inflicted on the global economy, the world is not yet deleveraging. Indeed, not only is the world NOT deleveraging but it has kept increasing leverage at an unabated pace and it's breaking new highs - up 38 percentage points of GDP since 2008 to 212%!

    (click to enlarge)

    All of this should be of absolutely no concern to you if you're unfathomably rich or perhaps living on a desert island, with monkeys for companionship. For the rest of us it's going to affect us one way or another over the coming decade.

    Have a great weekend!

    - Chris

    PS: I'll be meeting up with a few friends in Hong Kong on the evening of the 17th. If any readers are in the area and would like to join me please send me a message through the contact box and I'll let you know the details.

    "When an accident is waiting to happen, it eventually does. When countries become too deeply indebted, they are headed for trouble. When debt-fueled asset price explosions seem too good to be true, they probably are." - Carmen M. Reinhart and Kenneth Rogoff, This Time is Different

    Tags: Debt, Macro
    Oct 10 11:44 PM | Link | Comment!
  • Replace These People With An App Already

    By: Chris Tell at Capitalist Exploits

    I spent a recent weekend looking at some real estate. It used to be a favourite way for me to spend time and I realized how much I really miss it. I was reminded of how 99% of real estate agents are completely useless.

    No, I mean not just incompetent but really useless and thick... really thick. Sometimes it's easy to tell thick people apart. You can ask them random questions or just initiate conversation, and when their knowledge fails to extend beyond what's on TV and the weather, you've probably got yourself a thickie.

    Alternatively, you can measure the distance between their eyes, measure their arm length to height ratio, count the number of times they repeat the same meaningless words such as "fab" or "retro" when trying in vain to describe a crappy box of a house, or you can leave them in a room full of banana skins and see what happens. I say this because it's important to try to steer clear of thick people. Your sanity demands it.

    To be fair, I had one great experience amongst 4 dismal ones. Pareto's law seems to run true.

    Normally, I don't pay a heck of a lot of attention to peoples attire, what car they drive or such things, just ask my wife. That said, some things stand out, and like a goat in a fish tank you can't help but notice.

    The first agent I met for the day was such a "goat". He arrived 20 minutes late, pulled up in a 20 year old Ford Falcon complete with a purple sparkly paint job, lowered suspension, darkened windows and a Fatboy number plate. I was immediately worried. The car screamed "I want to be a Fatboy but can't afford a Ferrari and I have no style."

    Of course, driving around in a Ferrari for work as a real estate agent, selling anything other than multi-million dollar mansions screams, "I am a shark" and would probably distract clients from the houses they're meant to be buying, while they instead glare at the car thinking ill thoughts about the agent. Let's just say that as a salesperson's appearance matters.

    When it comes to looking at the property, whether it be land or buildings, any monkey can look around and see what there is to see. What an agent needs to be able to do is to explain what can't be seen by the naked eye. In this instance any modicum of knowledge outside of "there is the dishwasher" would have been useful. Clearly my expectations were too high.

    I looked at 4 properties, all in the same area, and asked the 4 different agents the same questions:

    1. What is the areas growth rate?
    2. Who is coming to live here and why?
    3. Are there any major projects in the area that are going to affect demand - either positively or negatively?

    I'd done a bit of research prior to stepping out the door. I referred to this earlier in "6 Ways to Improve Decision Making". I hate wasting time so I'm not going to bother looking at something which I haven't got at least some level of knowledge about. As such I could have answered all of the 3 questions above but wanted to use them as a starting point to find out more. Alas, I completely flummoxed all 4 of these "experts".

    It would have come as a gigantic surprise that a 14 ha development was already underway for a very exclusive private school just 2 kilometers away. A simple Google search would reveal this but that might interrupt getting Facebook updates. Growth rates in the area have been off the charts for the last 10 years and employment opportunities have been opening up causing demand growth. Anyone living in the region should have some level of knowledge of this but don't go expecting to be educated by most real estate agents.

    This is far from my first encounter with real estate agents and it is not unique. What this means is that the buyer has to do the work themselves. This is a good thing really for the buyer, especially if you're an educated buyer and know what you want.

    I recall for example buying a property some years back. I wanted to put a contract to the vendor and the agent was unaware how to proceed. I walked out to my car, and 5 minutes later came back with a signed contract. I always used to keep a few copies complete with the relevant clauses I needed. The agent, a middle-aged woman, obviously completely in a flap as to what she was meant to be doing, began recoiling and actually trying to dissuade me from buying. She'd probably never had a sale before and had no idea what to do. I helped her out in a big way. I explained to her how difficult it would be to drive home without legs and that, unless she took my contract to the buyer immediately, that was the only way she'd be traveling.

    Back to my weekend fun. The absolute best agent by far was a woman who clearly was running multiple things in her life. Namely being a mum as well as selling real estate.

    How do I know this? Well she drove one of those chest freezers on wheels as the car salesmen call it. People mover. The only reason anyone would drive such a horrible box is to transport screaming, messy kids around. I know, trust me.

    This woman was awesome. She knew the demographic because she lived in the area and her kids went to local schools, she also knew about the new school coming in, she knew what arterial roads bordered the property she was showing me, she knew what traffic was like, what demographic was living in the area, what zoning existed and where, she knew that 80% of people living in this area were home owners not renters, she knew what the typical yield on properties was, what it had been in the past and how cap rates have collapsed, and she had a list of recent comparable sales drawn up to provide me. Hallelujah, I was in love!

    What then is the solution?

    Well, I propose using technology. Everywhere I look people are far more engaged with their phones than with real people. Let's further this trend and profit from it. Heck, why fight the trend?

    App Cartoon

    Let's develop an app for real estate buyers. At the push of a button we can find out area details, historic growth rates, median incomes, median sales prices, strategic plans such as highways being built etc. In short, let's take that wonderful woman, driver of the chest freezer, and put her onto your smart phone. We could even use her voice to guide you through the topics you browse. That will take care of the generic statistic driven data.

    Then what we'll do is combine that technology with another technology which is far from fictitious and a company we have invested in via our Seraph private syndicate. This technology is augmented reality. Check it out here.

    Now imagine for a minute what can be done with this technology. In the real estate space you could "virtually" walk through that property you want to view while augmenting yourself into the picture, or perhaps augmenting your furniture in the lounge, your dog chasing the cat in the garden. I'm sure you can think of a number of amazing uses yourself. Let's get it done before Google snaps up this company making shareholders, yours truly included, very happy indeed.

    Most importantly we'll do away with countless unnecessary real estate agents and we'll have our own virtual agent at our fingertips. Like it or not, this is coming. Based on my weekend experience I can't wait.

    - Chris

    "Any sufficiently advanced technology is indistinguishable from magic." - Arthur C Clarke

    Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 08 11:21 PM | Link | Comment!
  • Passion - It's Not Just What Happens Between The Sheets

    By: Chris Tell at

    Most of the really big returns made by investors and entrepreneurs come from companies which seem to have one unmistakable element.

    We look at a mountain of deals and consequently the filtering process is very rapid. In fact over 90% of the deals that hit our respective desks are pre-filtered deals coming from our colleagues and internal networks. We look for some specifics in a deal; I've spoken repeatedly before about management, ideas, and execution. What I've not spoken about before, and for this I realise I should be chastised, beaten, ridiculed, and forced to watch an episode of the Kardashians, is PASSION.

    Passion is the single fastest way to spur yourself to massive success. This is what makes it is possible to get up early, stay up late, remain inspired and engaged and to forgo other pleasures. It's what keeps you going when from the outside looking in, the decision appears foolish.

    Founders who see a problem and then build a business to solve that problem are very different from founders who simply say to themselves, "Hey, I want to be an entrepreneur so I don't have to work for someone else." The former are likely entering an industry which they may know something about. The latter may do OK, they may even do well, but they will rarely build a legacy, a titan, a formidable company which changes the way things are done or the way people act.

    In other words, typically the "Unicorns" come from passion. What are unicorns? They are the investments that run thousands or tens of thousands of percent... Companies like Uber, Facebook, LinkedIn, The Body Shop... They are investments where a $10,000 stake changes your life, and your kids, kids lives...

    Most every entrepreneur finds out that creating something is hard. You'll work harder and longer than you've ever worked in your life.

    Years ago when still in the corporate world, working for the man, I used to hate "mission statements". They were, or seemed like a complete bunch of baloney trumpeted by empty suits. I think for the most part that's still true in many large corporate organizations.

    In a start-up or small company however that "vision", that "mission statement" can be much more powerful. The mission, not the mere statement of it, is what makes a company great. It may not be written on a wall or even on any corporate documents, websites or the like but it is known by the company and those running it.

    This may all sound cliché but bear with me. Man's search for meaning and purpose is answered by a "mission". Passion is the accelerator to that mission.

    Meaning is an incredibly powerful thing. Without it we die. Literally. Many people die at age 25 and simply inhabit their bodies until they're 80 or more at which point they slide into a box. It's no way to live. Persistence is the stepchild of passion. It requires persistence to become great at anything. Persistence in anything will make you good but persistence together with passion can make you great.

    It's easy to see the start-ups where the founders are really passionate about what they're doing. The energy created inspires those around them to help them.


    Have you ever been in a room where you felt inspired about someone or some idea and were willing to help?

    This is it. This is where a "mission" is important. This is where passion is important. A mission is also important because it is the what keeps those involved, involved when they could easily be doing something else which will likely pay them more, cause less headaches and be more "comfortable".

    Passion however is not enough. The idea needs to be sound, the team needs to be capable and the execution needs to be great. Put all of these factors together and you have a crack at a Unicorn.

    Like him or loathe him Steve Jobs clearly had massive passion. His success is legendary. He was put up for adoption at an early age, dropped out of college after 6 months (something I recommended in these pages a few times), slept on friends floors, returned Coke bottles to collect the 5 cent deposits to buy food, then went on to start Apple Computers and Pixar Animation Studios.

    "Find your true passion and do what you love to do," said Steve Jobs. "Sometimes life hits you in the head with a brick. Don't lose faith. I'm convinced that the only thing that kept me going was that I loved what I did."

    Another rouge... Tiger Woods success in golf is unparalleled. He calls his love for the game and "obsession, an addiction". Sounds like the words of passion to me.

    In every successful business person, athlete or generally happy person you will find passion. What's your passion?

    - Chris

    "If you love what you do, there are no difficult tasks, only interesting ones." - Adim Kotelnikov

    Sep 26 3:19 AM | Link | Comment!
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