This post has nothing to do with new paradigms in finance or markets or anything like that. It does however have a good dash of entrepreneurial zest. But mainly it’s about skiing and how following one’s passion is a great way to start a new business. And it’s also a reminder that not all startups fit the Y Combinator model and that venture capital can (and should) be a broad church…
Just last week I’m happy to say I closed on a modest personal investment in an exciting new ski company called the Faction Collective:
Faction. n. ‘A minority group working within, and in opposition to, a majority group.’
When we founded Faction, our manifesto was (and continues to be) to build the best high performance skis we can, without compromise. Our focus is on providing versatile, progressive products that answer the needs of freestyle and freeride skiers – designed by riders, for riders. Every person involved in Faction, from the people working here in the office through to the guys in the warehouse and the team riders on the hill as well as you the consumer, has a say in how we design, build and manage our products.
Now as many of you know, I am an avid skier, however my true passion is racing. Fast, hard, steep. 5,4,3… So when my friend Alex Hoye first approached me about Faction (where he is co-founder and Chairman) last year, I was skeptical. First, I didn’t know the first thing about investing in a consumer goods start-up and secondly, I didn’t feel I had any way to judge the quality / desireability / competitive position of their products as Faction is focused on freestyle, freeride and big mountain (off-piste) skis. Give me a GS ski, well that’s something I can have an opinion on… But I had a look, and the vibe – reminded me of my teenage skateboarding days, kind of like a 21st century Powell-Peralta for snow: the new Dogtown (and Z-Boys)? – felt great and so I asked him to send me a couple pairs of skis to test. I had them for 2 or 3 weeks and not only did I test them, but I let a number of my ‘local’ friends try them out too, including a teenage ex-racer, a ski instructor and a ski shop owner. Everyone, including me was blown away. Not only that, except perhaps for the teenager, we were all pretty skeptical in an old reactionary kind of way to these ‘newfangled’ funny looking “skis” (if you could call them that.) All of the sudden, I rediscovered the joys of off-piste skiing – powder, crud, bowls, glades – it was so easy and fun. And I’ve never seen skis turn so many heads in a lift-line. The final confirmation that these guys at Faction were on to something is when the teenager didn’t want to give back the skis and kept insisting he would buy them off me! I decided I better dust off the IM and take a closer look…
They are only making about 1200 pairs or so this season (and just the folks I know will probably put a dent in that limited number!) so if you want the ultimate Christmas gift for your teenage son or daughter who spends all day in the snowpark, or if you want to go off-piste or tear up the powder and feel like you are a teenager again, I definitely wouldn’t wait too long to order yours, once they are gone, they’re gone…Contact the good folks at Faction and they’ll tell you who sells them close to you.
And once you’ve kitted yourself out in the latest, greatest gear from Faction, you’ll probably be thinking I need to book a place to stay! That’s where my next set of (non-tech) entrepreneurs come in. Martine and Laurent are good friends, who are living their life’s dream and putting the finishing touches on the brand new 4-star hotel they have built and will run in Meribel. For those of you that don’t know it, Meribel is an absolute gem of a resort in the French Alps, sandwiched between Courchevel and Val Thorens at ‘the heart’ of Les Trois Vallees – the world’s biggest ski resort. We’ve been going there for over 15 years now and I can tell you there is something for everybody. However one of the things that is in short supply in Meribel is hotel beds – the resort has c. 40,000+ beds but most of these are in chalets and apartments. Until this year if you wanted to stay in a luxury hotel, you really only had a choice between two and they were booked up years in advance. With only 20 rooms, and an ideal location, modern infrastructure (the advantage of building from scratch!) I’m sure after this season it will be equally hard to get a room at L’Helios.
Trust me, I had a tour a couple weeks ago – it is going to be awesome! And unlike most alpine hotels it is ready made for families and groups, with many interesting interconnecting suites and modular grouping of rooms, including many with duplexes. Unfortunately you can’t book directly online yet (has to do with banking/payment laws and the fact they are just starting up, don’t ask…!) but contact them via their website and I’m sure you will get a prompt response (especially if you tell them I sent you!) Sadly I’m not an investor in L’Helios but I’m sure it will be a roaring success. And if you do go let me know and maybe we can have a drink together on the sundeck. (I might even be able to get the owners to let us have it on the house!)
And just to make sure you are counting the days until first tracks, here is a little Faction video to get the imagination going:
Corporate bonds to recover: didn’t get involved here as I didn’t have easy access to a leveraged play on this and was too busy/lazy to buy some iShares in my pension fund. Dumb miss, as market up 15-25% depending on the index from start of year.
Equity markets to go up and vol to drop:S&P is now c. 1020 (up from 890 at year end, c. 15%) but traded down to 666 first. I’ve kept my individual portfolio holdings throughout (AAPL, AIRV, RMG, EWZ) but was stopped out of a leveraged long on S&P at c. 800 and did not get the trade back on. Didn’t play on VIX which has come down to c. 25 from 40 at the end of last year.
Selective Emerging Markets will outperform (in particular Brazil, India and Sub-Saharan Africa): Brazil iShares (EWZ) has outperformed S&P by about 50%, I held my long position but didn’t add to it as my limit orders were a bit too greedy. As for India and Africa, my preference was for private plays but if public markets are a proxy, directionally these seem to have done well also, with India outperforming S&P by c. 30%, whereas Africa it’s less clear.
Buy long dated calls on Oil: really angry on this one, my size was too small so my broker didn’t want the hassle of doing the trade for me. Was looking at $65 to $75 Dec 2010 calls. Even with big brokerage costs these are up 5-6x… Note to self, get new broker.
GBP will stop going down: I am structurally very long GBP so my trade here was not to hedge. So far so good as GBP is up c. 10% against the major crosses so far this year, having been even a bit higher a few weeks ago.
So, where do we go from here? I know it’s not very exciting, but I suspect we go mainly sideways in most asset markets between now and year end. If you are holding the positions above, I would continue to run them but tighten stops and look to take profits if S&P approaches 1100, Oil gets above $85 and GBP re-tests it’s August highs vs USD or EUR. Would be more patient or less nervous with positions in corporate bonds and Brazil; although both would probably suffer in a generalized market sell-off, I’d be more inclined to add on dips. Generally, I think it’s not a bad time to be raising cash again and sitting on the sidelines waiting for a better opportunity to come in: choppy sideways – which is more or less what I expect – is a very dangerous market to trade unless you are doing it full time (in which case it can be profitable and fun.) My biggest regret? Not buying AMZN when it traded below $50 like I swore I would. Have raised to $60 but not too hopeful. Otherwise I’m pretty happy with how my portfolio weathered the financial hurricane of ’08/09. Learning? Don’t overtrade: fastest way not only to lose money, but also your sanity.
(Self-)Report card: Predictions A, Trading C+, Overall B- Trading is always harder than predicting.
A couple years ago I saw a great presentation (on climate change and business) that pointed out that while in every other country in the world ‘sex’ was the most common search term on Google, in the United Kingdom it was ‘weather’. And ‘property’ isn’t far behind (source: Google Trends):
(compare to results for ‘All Regions’:)
So you can understand why we invested in Weatherbill and Zoopla… (There were a few other considerations as well, but this makes for a more fun story.)
So where was I…? Oh, that’s right, I just wanted to draw attention to Zoopla’s nifty new property value widgets and what a great addition they would make to any website targeting a British audience. The great thing is that it’s not just UK or England or even London prices you can track but areas and postcodes. Local is the new global. (Or something like that.) Write a blog for hedge fund managers? Keep the readers coming back with a nifty NW8 price tracking widget for example:
Or appeal to their bonus envy with this cheeky London Dream Homes listings widget:
I’d be willing to bet it has more pulling power than showing the latest price on the FTSE100 index…
All part of giving the folks at Citi and BoA and elsewhere the tools needed to rebuild their balance sheets by leveraging their new capital in new assets….*(fictional(?) future press release)
But joking aside, I can only applaud this apparent breach in congressional insanity, having long railed at the ridiculousness and sheer hypocrisy of the current state of US law with respect to this industry. And indeed I always thought this day would come(February 2010, c. minute 4 in video, although in a dumb error, I changed my script from President Obama to Senator Obama at the last edit, as I thought reader/viewers in 2005 would find the former too far-fetched…)
* tried but failed to find a video of a great comedy sketch (Monty Python?? not sure) where the Board of the Bank of England bets all the country’s reserves on the “1:15 at Cheltenham” and loses, very funny, if you’ve seen it and know where to find it please post in comments!
Ok full disclosure: I just totally made up the silly marketing claim in the headline…but the good folks at Weatherbill have just launched a new, sexier, easier to navigate website. Check it out and please send them feedback – the good, but especially the bad and ugly – either in the comments here or on their blog.
I’m going to miss the farmer though…we hardly knew him at all.
When did you ever go to a drug dealer banker, and the drug dealer said, “you know, you should come back tomorrow, this is not very pure. a good deal.” It doesn’t happen.
Kind of a silly thing to do after the year we’ve just finished. If I’m right it’s dumb luck and if I’m wrong, well I’m wrong and don’t look too clever… And for those of you looking for specific numerical targets on liquid tradeable instruments, you don’t need to read further as I’m not sure these are useful at the best of times and I’m quite sure that I’m not going to put my name on what essentially are lottery ticket numbers… Besides any trader worth their salt knows that path-dependency and trading strategy is very often more important than actually predicting where something is going. And if I had forgotten this, 2008 served as a violent reminder as almost all my main macros calls turned out to be big winners and yet on my trading account I ended the year (in November when I essentially gave up pretending I had the time to properly manage any market risk or positions) more or less flat, and my best estimation of my overall net worth was approximately flat to down c. 10% in GBP – not too shabby but much less flattering when considered in EUR or USD… So what were these calls in 2008? In no particular order:
Short (UK/US) Banks, winner but…(too timid, took profits too soon – head faked by mid-year rally)
Short Oil / Long Gold (mid-year), winner but…(put position on too big, too quickly @ ratio of just over 7, stopped out just before giant move to current ratio of c. 21..)
Long Brazil (Bovespa), loser… (looked brilliant for a few months then didn’t react to change in Oil market sentiment and hedge fund deleveraging post-Lehman)
Short GBP, winner but… (too timid, too early, tried to be too clever…couldn’t figure out what to short it against – USD, EUR, CHF all looked like crappy alternatives, kept getting stopped out by ridiculous volatility, and was too busy with work to get much of the big December move)
So what do I think 2009 will bring? Here are a few ideas with a (short) summary of my thinking behind each.
A recovery in institutional credit markets – smart money will start the long and difficult process of separating the wheat from the chaff: ie the bonds that deserve to be priced at 10 cents will decay into default and those that are instrinsically worth par will start moving back in that direction. In fact this has already started to happen (you can see this by looking for instance at the performance of the iBoxx investment grade corporate bond indices(you need to register to drill down into data) which are mostly up 5-10% since hitting lows in mid-October) although to make really interesting returns means sifting through individual securities and names. So for the first time in the last 10 years a corporate fixed income investment manager will actually be able to create “alpha” (as opposed to just leveraged beta masquerading as alpha…)
Equity markets go up from here (for example S&P500 @ 890), and volatility drops… I think the late November low might hold, although we could possibly see one more down trade in 2009 to lower lows, I think this is unlikely and think the market will grind mostly higher through the year. I could bore you for an hour about why I’m thinking this way but boiling it down to three points will probably frame the foundation of this view. (1) Price action: market should have gotten killed on Madoff news. It didn’t. First time we’ve seen positive price action in more than a year… (2) Wall of money: in this world of instant gratification and the constant shrill drone of a CNBC inspired financial media, when the various central bank and government interventions didn’t miraculously fix everything instantly, the downward spiral continued and often accelerated; despite everyone knowing these things take weeks and months (sometimes years) to have an effect. This time will not be different. (3) More buyers than sellers. Cash was king in 2008 because it was a very scarce commodity. It isn’t so much anymore and real returns from holding cash in 2009 will be negative. Besides – even though they will be far fewer in number – many many people will still be paid to invest and holding 50% or more in cash is not what they are paid to do.
Selective Emerging Markets will outperform. Basically the ‘de-coupling’ thesis has some merits and the baby was thrown out with the bath water in the viciousness of the last 6 months bear market. I like Brazil (so I should probably buy more…), (sub-saharan) Africa and (selectively) India. Of these three the only one you can play via public markets is Brazil; for the other two the opportunities I like are venture capital / private equity plays so not easy to access.
Better to be long Oil rather than short. Haven’t had time to check pricing but best way to play this might be to buy long-dated deep OTM calls. Volatility is at record highs so this might look stupid to start, but I think the world is exactly at the marginal supply/demand fulcrum and will be for several years. Economics 101 tells me that the price will therefore be subject to massive, violent swings as demand moves up and down with the cycle. Basically, while 2008 might (we hope!) be an outlier in terms of volatility for many markets, I’m not so sure this will be true of Oil.
GBP will stop going down. Not because the government or the economy has improved, but simply because relative to the other major economies it isn’t actually that much worse off and the shorts will get too smug and the bargain hunters will come out. Only problem is I’m not sure what level it will bounce off of…are we there already or do we go to 1.25 vs USD and 1.10 vs EUR as has been suggested to me by a friend? I’ll admit to this view perhaps being wishful thinking (see above) but have tried to guard against that and after being an extremely vocal GBP bear a year ago, I can’t believe that I’m now finding myself in the bull camp. This discomfort actually makes me feel better about my view.
The next Microsoft/Google/JPMorgan*/General Electric*/Ford* (*the originals) will be founded in the next 1-3 years. The emperor has no clothes. The existing paradigm is not just bankrupt, but has been proven so. The massive barriers of inertia and incumbency have been breached and it is only a matter of time before smart, creative, energetic entrepreneurs and innovators take advantage. Of course I’m talking my book here as we’ve set up our new business to help find, finance and advise these entrepreneurs and Amy and I hope and expect to find one or two future Gates/Edisons/Morgans… Indeed I’m pretty confident this will come true even if (especially if?) all the above views turn out to be wrong.
In any event, I hope I’m right. Obviously it will be a nice boost to my ego and probably help pay the school fees, but mainly I think it will make the world a bit nicer place, especially for the vast majority of people who had no part in the (inevitable) excesses that led to this economic cleansing and yet are suffering its consequences. And if I’m right about the last point – we won’t know for a decade or so – the world will also be a better place. But that’s for another post, another day.
Happy New Year. All the best for a healthy, successful and fulfilling 2009.
I’ve just spent a bit of time going through the various suggestions you’ve all had for our new company name. I really appreciate the input, which also includes a few email entries as well for a couple people who were too shy to commit to their suggestions publicly.
Unfortunately, there hasn’t been one yet that has really stood out and elicited that “Yep, that’s the one!” moment… nonetheless the exercise has been very useful, not the least for giving us more confidence that we haven’t missed an obvious trick and underlining just how hard it is to come up with a good, original, meaningful name without degenerating into bullshit jargon bingo and/or having it not fit on a business card.
We haven’t closed the book yet (but will when the next milestone comes up in the next fortnight or so) so any last minute inspiration is still welcome. If however you are stumped, and want a new riddle to solve, we are trying to think up a punchy and pithy tagline that would work with Nauiokas Park to frame the venture and that plays on the double meaning of ‘Park’. Along the lines of:
A heartfelt thank you to the early entries into the ‘help-name-the-new-company-sweepstakes’! Not sure we have a winner yet but some great ideas and food for thought for sure. And my old friend Tres has definitely broken into the lead in the most ‘funny’ name category but unfortunately has been tripped up by the always nasty plausibility clause… (I feel for you man, I really do…)
Bet The Farm Investments LLP
Loaded Dice Investments LLP (A Risk Management Fund…)
Over/Under Investments
…although if it were up to me I might just go for Loaded Dice (without the Investments.) Amy?
Anyhow, still a week or so to get your suggestions in; I’ll send an other update next Friday.
I sometimes get asked why I decided to make a career change and – while I knew the reasons – until now I never had a concise and articulate answer. It’s about “singing and dancing while the music is being played.”
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Indeed I’m pretty confident this will come true even if (especially if?) all the above views turn out to be wrong.![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_c.png?x-id=8ac1274c-0788-4a16-8df8-d37de59ff731)
