The Problem with Brussels Sprouts

This really touched a chord with me as I think about my own career path. I LOVE investment research. Real research, that is, not research! (a.k.a smart-sounding marketing material and simple statistical rankings of manager performance a sufficiently motivated admin or intern can run after a quick tutorial). Research! is soul-killing. Nothing more so than the manager selection merry-go-round.

Writing for ET and my own blog has been a kind of pressure release valve in that regard.

More and more I think the way to go is either find a very special investment organization (likely one with permanent capital) focused on Things That Matter, or go the financial planning and expense management route with individuals. The research! world is a wasteland.

Sorry to be a bit of a downer but I wrestle with this constantly.

I’m with you. I’m at something of an inflection point in my career, and looking to move from business valuation to a more investment management type role. In looking at firms, there are so many advertising the cartoon of expertise with no substance. There is such a need for investment management with integrity, reflecting the qualities Rusty listed, yet all I see are product shills disguised as “Advisors”.

My question is, I’m currently in the CFA program (for the knowledge, not just for the letters) – going forward, will CFA-type skills/knowledge be more valuable, or CFP-type skills? It seems like the latter.

Glad to know someone else is wrestling with this. I have both credentials, and I think you’re right. Going forward you’re going to want to be closer to the client. As close as possible per Ben’s comments in the Pricing Power series. The CFP-type skills are the ticket there (and, ironically, the oft-derided “soft” skills like writing and communication). From my experience the CFA/CFP combo is nice if you don’t mind taking tests and jumping through hoops.

Couldn’t agree more, and thanks for your insight. I’m ~10 years into my career, and the decline in soft skills coupled with advances in “hard” skills of those coming out of college has been noticeable. Which is ironic, since the soft skills are what will set people apart going forward (in my opinion, and has been discussed around ET often). In the business valuation world, a DCF is a DCF – anyone can set that up in Excel. Give me someone who can understand and communicate the limitations of a DCF any time.

I wrestled with it for most of my career, too. It’s a bit cheeky of me to only speak as boldly about it as I do now considering how much more influential it would have been to do more about it when leading an investment organization. Still, there’s a clarity you can only get from removing yourself from the ‘do well by doing well’ logical loops that we permit ourselves. Writing, as you say, is one of the ways to achieve that (whether anonymously as you do or independently as I do).

FWIW I still think the CFA has much stronger signaling value, just because it is so much more difficult. If the measure and your aim is “what will actually help me be effective adding value for clients” it’s probably the CFP.

This is as usual, great analysis, but for the past 10+ years BTFD, the Fed Put and financialization of the stock market has led us one the path to perdition. Index funds where people figure, correctly that the vast majority of “advisers” can’t beat the “Market” so go with Vanguards 7 basis point costs.

As Raoul Paul just pointed out Ford, GE, GM T and Dell alone have borrowed over $750 billion in BBB rated debt to buy back shares. Shale oil? Over a trillion alone and none of it sold has made a profit, Ok maybe some, but they lose money on every gallon, but they pump so many they make up for it. LOL. $4 Trillion borrowed to buy back shares; no productivity gains, no R&D, CAPEX, just increases in stock prices. Next recession 10-20% of this debt gets downgraded to Junk and pensions can’t hold it anymore. The market will lock up, freeze like Ice-9 in Cat’s Cradle, where will the money to buy that debt come from? Baby Boomers start selling as they get deep into their 70’s (10,000 a day turning 70 every day since 2016, and will until 2034. What will be the effect of that? Lower. Equity. Prices. What a revoltin’ development this is!

Just my opinion but I feel its part of a larger trend where younger people essentially interact with other’s via their ‘screens’. And are therefore almost always in their heads….
The soft skills so essential to human interaction come from actual human interaction……
Our bodies have to learn this. Not our logical minds. And our bodies only learn through experience. Whether is learning to play tennis, the piano, or interacting productively with other humans.

And even internalizing the lesson that experience matters takes, well, experience. Every bright young professional has an aha! moment of this kind. I think the trick is to have it as soon as humanly possible so that you can actually be productive.

You describe a world of Ice (everything freezes) There is another path…a world of Fire (everything heats up).

Our leaders decide to follow Japan and the EU of excessive easing (Japanese CB has a balance sheet at 100% of GDP, ECB at 40% of ECB vs 24% for the Fed. Japan is growing, EU is stable, Fed is shrinking - for now).

This will send the $ into freefall and send people scampering for scarce resources. The number of shares available on the US stock exchange (and the number of companies as well) have shrunk dramatically since 2000 (by nearly 50%).

So, if we go to negative interest rates and printing money…what do you do with your cash in the bank? Well you try and buy something that is hard to replicate, scarce and that others may want to own in the future.

A global platform lie Amazon delivering computing, entertainment and goods (amongst other things) might be an attractive place to store cash.

Not making a prediction, just observing that if money becomes even more cheap and plentiful the asset that is likely to get cheap is money not equities.

Why do I think this path is probable? Because of the work Ben and Rusty have been doing. It was through their lens that I was finally able to understand that the world has shifted and the old monetary regimes are dead because they no longer server political interests. We are in the world of bread and circuses.