Hey friends,

We hit a big milestone, 1,001 subscribers as of yesterday. One commenter said, “should be 10,000”. 

If you have been enjoying this weekly mailout, please forward to your friends and family. It’s been a real pleasure writing this for nearly two years, +100,000 words written and 91 issues published. You are among a top drawer group of individuals, from students just starting out, young professionals learning the ropes, new parents looking at securing their children’s futures, and seasoned investors who are far wealthier and wiser than me.

Assuming you forward this email to a friend, the Journal is simple: in 5 minutes or less, I share personal finance tips, stock market insights, and commercial real estate learnings. Sometimes it’s a story from my experience in capital markets or portfolio management. Sometimes a good rant on the smart ridiculous ways businesses target consumers, and how to counteract that. Often it’s a dialogue with readers, which are usually the most interesting.

All that said, thank you to everyone supporting this Journal, and here’s to the next 9,000.

PS. I would be remiss if I didn’t include an important and courageous essay on Canadian Anti Semitism. I hope people read and share.

Personal Finance

Presenting next week to a group of 155 students (plus teachers) at my alma matter.

The topic: How Not to Go Broke by 40 Personal Finance.

General headers below:

• Time and Money

  • You can always make more money; you cannot make more time.

• Importance of Starting Early

  • These kids have an enormous advantage over the rest of us, simply due to time. Be consistent for 45 years and it’ll be hard not to retire rich.

• Compound Interest

  • Double $100,000 just 5 times, you get $3.2 million.

• Inflation

  • Slowly but surely, cash value goes to 0—you must invest.

• Assets vs Liabilities

  • Acquire things that put money in your pocket, not take it out.

• Opportunity Cost

  • Those $200 Nike shoes didn’t just cost you $200 bucks. They cost you thousands.

• What to Invest In—Stocks & ETFs

  • Buy stocks of companies you are customer of. Why the heck not?

• Patience and Impulse Control

  • The greatest investors are not the smartest. They are patient and resist temptation.

The rules of the game are simple—earn more, spend less, invest the difference—doesn’t mean it’s easy—it falls on you to make the right choices, right now.

If anyone has any quick one liners I can use for next week to keep the kids engaged, let me know! I will try and record the presentation and provide the video replay for you next week.

💝 Newsletter subscribers get 10% off the Simply Investing course with the code: SIMPLYINVEST

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Stock Markets

Bubble talk is upon us.

Jamie Dimon told the BBC that he is more wary of a stock market correction than most people, suggesting the market is due for a bust.

Jeff Bezos also noted in a Keynote speech that the AI bubble will eventually burst (he follows to say that it is exactly what the world needs, quite interesting actually).

Below is an interesting chart showing how much money is being thrown into the AI world. Notice all the arrows going back and forth between these major players, representing capital flows.

Take OpenAI (Chat GPT), which does a $300 billion deal with Oracle. Then Oracle spends tens of billions on NVIDIA Chips. Then NVIDIA agrees to invest $100 Billion into Open AI. If you had to read that twice, you’re forgiven. It’s a spider web of interrelated revenues, expenses, and cross company investing, so it’s hard to decipher what all is going on.

But neither of them could confirm when, exactly, the roof will come falling down. Dimon himself admitted that trying to time the market is so, extremely, difficult.

Maybe the bubble does burst in two years, as he suggested. What if over the next two years the market falls 30%, like COVID. But what if, up until that proverbial “POP”, the stock market runs another 50%? So a 50% run up from today, followed by a 30% burst, and you are still “up” 10%.

What if no bubble bursts and the stock market roars until 2030? Bears would be even more mad than they are today (see the most hated V shaped bull rally),

All of these events are entirely possible. So too are they entirely unpredictable, timing wise, that is (broken clocks are right twice a day).

While it might be agreeable that AI is showing signs of a bubble, that doesn’t factually imply the stock market is about to burst.

The “best play” for this game is to be consistent, don’t take on unproductive debt, don’t spend more than you earn, and stick to your monthly dollar cost averaging schedule.

Basically: don’t get too far over your skiis and you’ll be just fine.

Real Estate

It’s been pretty quiet on the new business / opportunity front. One reader asked, why is that?

Well since 2022 when interest rates started marching upwards, owners of real estate think their properties are worth more than buyers are wiling to pay. This is what we call a bid ask spread. And today it is large. Perhaps the largest it’s ever been. Ergo, overall transaction volume is orders of magnitude lower.

When we get pitched a property from a broker, who represents the seller, we have to consider that the property owner probably interviewed a number of broker firms before going to market with the chosen shop. They would consider things like scale, brand/reputation, network, expertise, etc.. But typically, the broker that whispers the highest price usually gets the assignment. That’s usually how that dance works.

The next dance comes when the winning broker starts to market the property to it’s various buyer groups, including us.

But just because something “is for sale”, doesn’t mean it should be bought. At least not at that offer price. We have to look at it from a perspective as investors, how can we realistically achieve our desired return threshold of 15% annualized?

It’s our job as market participants on the buy side to ‘educate’ the broker our position on value and why, so they can take that feedback to the property owner. At the very least, a data point from the market.

If there’s a nice asset with a stable tenant mix that is already achieving market rents, meaning, not much room for outsized growth, then the only way we can get our levered IRR towards 15% is strictly on buying it at the right price. Especially given elevated interest rates and a softening demand outlook; if rents are already at market, pushing them too far can result in your tenant’s business failing, and all of a sudden your stable asset purchased a too expensive a price is underwater.

And lately, that bid ask spread, or price differential, is several millions of dollars lower than the offer price from our perspective.

Same thing is happening in the residential market.

We’re seeing more and more used inventory all over the place and weak buyer demand (they too are ascribing lower values), which is leading to very slow transaction volumes. And in many cases, properties that are transacting are selling for lower than assessed values, much in the contrary to 2020/2021 when it was common for properties to sell far over assessed values.

All part of the swing.

We will see how things play out.

1 Quote

“When the dust settles, and you see who are the winners, society benefits from those inventions”

—Jeff Bezos

A Question

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