Business Articles, Investing, Investment Adviser, Investment Adviser Arizona, Investment Adviser Kansas City, Investment Adviser Representative, Investment Vehicles, Money Manager, Venture Capital

Why VC Firms Are Turning To Investment Advisers?

VC and other Partnerships have a big problem. Some are not evolving with the changing Financial Landscape.

Many Venture Capital Funds and Private Partnerships are literally risking their capital to risk. It’s not difficult to observe the Capital they have worked tirelessly to raise is diminishing from sitting for long periods. It’s also apparent from the current VC Partnerships without a Investment Adviser the accounts they keep their funds in do nothing to serve the developing Risks. Which in return silently and maliciously erodes the Funds Purchasing Power and additionally? Diminishing the capital. Discounting continuity and Preservation of Principle. Investment Advisers know how to minimize risk, strategically Preserving Capital, while at the same time implementing Growth of Funds. The bottom line is this! Not evolving to the changing ecosystem. Will diminish your Partnership Performance and diminish your returns and capital performance for your clients.

Exemption for Venture Capital Funds for Investment Advisers

Currently the Investment Advisers Act of 1940 has an Exemption for SEC or State Registered Investment Advisers who manage Private and or Venture Capital Funds. This is a Gift to the VC Partnership and Private Fund world. However based on my experience and research only the serious Professionally managed Firms are quietly utilizing Investment Advisers skills to help manage their VC Funds. After reading a Post on Medium about this Topic. It seemed prudent for me to give my Professional opinion as a new Investment Advisor Representative. You can read the article the Attorney who wrote about Compliance of RIA’s turned Venture Captial Firms “HERE“.

Market Conditions Always Changing

The SEC is very strict in it’s Regulations, and the Finance Laws are extremely complex in the Investment Adviser money management world. However the Laws and Regulations can be used for good. Especially for PROFIT AND FUND GROWTH. If you have a small team of Advisors and Attorneys who are experienced and trained in how to use their skills to navigate the complex Regulations and laws for the Benefit of your Partnerships Fund. Your ahead of the Curve of Diminishing Funds. Making your Clients capital grow and keeping your Clients Happy with your Fund or Partnerships performance. There is one certainty in Business. That is “THINGS ARE CERTAIN TO CHANGE! EVLOVE OR DIE.”

Founders Fund Registered Investment Adviser?

Peter Thiel Founders Fund is now a Registered Investment Adviser. (Image BELOW)

Which recognizable VC Firms are Investment Advisers Currently? Sequoia Capital registered recently as a Registered Investment Adviser to begin investing in the Capital Markets and Crypto Assets. Andreessen Horowitz is another Venture Capital Fund that recently registered as an Investment Adviser. This list is growing. And it seems more and more VC Firms who are serious in the space are turning to Investment Advisers for their Funds. It’s likely they have so much money under management they need to distinguish themselves and account for risk vs. returns to add a layer of Preservation of Capital. It also must be shared it’s just good business acumen to have a Money Manager who can give peace of mind to the Fund Manager and Client’s personal Asset Allocators.

If you stop to fully read the SEC.Gov website on Exemptions for Advisers to Venture Capital Funds (BELOW). You will likely conclude this is certainly the future of VC Funds who are leaders in the VC Space. Having a Professional manage your Firms Funds is added security. The benefits far outweigh any downsides. When your thinking strategically as a Investment Committee. Recently a College PH.D Finance Professor shared with me at Arizona State University, “He feels the future of Investment Advisers will begin to morph into a fragmented space where VC funds become Powerhouse VC Investment Adviser Run groups.” I honestly can see myself it’s likely to expand into other Partnership Funds as well. Interestingly this is already taking place.

Did you know..? “It is against the Professional Standards and Regulations of the Uniform Securities Act and Investment Advisers Act of 1940 for any Investment Adviser Representatives to make guarantee’s or promises related returns.”

Venture Capital Firms Turning Into Investment Advisers

Traditionally many Private Funds or Venture Captial Funds have used a REG D offering for their Funds framework. However based on evidence in the space and growing sums of Capital under management? Times are changing and VC Firms are turning to or into Investment Advisers. To leverage Capital Markets for Preservation of Capital and Growth.

A Reg D offering and a (RIA) Registered Investment Adviser are completely two different things. A RIA is a Firm that Manages Funds for a percentage of Assets Under Management. Usually 1.5percent. A REG D offering is a “Exempt Offering”. The Law and Regulations all RIA’s Registered Investment Advisers have to adhere to professionally. Includes a long list of seriously strict responsibilities, Regulations and Policies. It’s serious business. Some of the rules of the road address Portfolio Management, Custody, Investment Discretion, Record keeping and lots lots more. However this is not a Post about Laws, Regulations or the differences of a REG D offering vs. a Registered Investment Adviser. This is meant to share more in depth examples of the complexity of Managing Funds.

Venture Capital Teams Under Pressure to Evolve From Competition

With many Venture Capital Firms under pressure to out perform each other and evolve from their competition by performing with their Clients Money. These Venture Capital Funds are feeling the squeeze of having Capital sit for long periods inside accounts without proper preservation policies implemented. This causes the Capital to be inactive on the Firms Balance Sheet. There are strategies Investment Advisers can execute to minimize Purchasing Power Risk and begin to grow Funds implementing a preservation of capital as it’s Objective. Several large VC Firms have seen the Value Investment Advisers bring to the Balance Sheet using Advisers. And more and more Venture Capital firms are on the look out to Recruit Investment Adviser Representatives for their Skills. One thing is certain in this Asset management Business. You should always be looking to gain the edge by utilizing Investment Advisers Skills to help grow the Firms Funds.

Conclusion Clients Impressed By Increased Returns

In conclusion after sharing the above examples. It looks to be completely clear the Venture Capital space is turning to Investment Adviser Representatives and utilizing their money management skills. It’s absolutely clear the Value and increased performance Advisers can bring to a VC Firm and their Investment committee. Traditionally speaking? Investment Advisers do 3 things incredibly well. Preserve Capital, Manage Capital while managing risk, and strategically use Capital Markets to Grow funds, for the purpose of beefing up a Company’s Balance Sheet.

Have you read my post on the Three Financial Statements “HERE“.

Risk will always be apart of Professional Investing at every stage. However many Investment Committee’s and Investment Professionals would most likely agree. “Having a Professional Money Manager on your Firms Team will likely give your Company an Edge in the Market while making your Clients very happy from seeing a improvement ROIC.”

Thank you for reading.

JS

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Asset Management, Business Articles, Financial Adviser, Investment Adviser, Investment Adviser Arizona, Investment Adviser Kansas City, Investment Adviser Representative, Money Manager

News: Series 65 Law Exam Investment Adviser

Professional Investment Adviser Representative Law Exam “PASS”

After studying and taking on the challenges that lasted for nearly 2 years. Monday March 11th 2024 I passed my Professional Series 65 Uniform Investment Adviser Representative Law Exam.

Passing this difficult professional exam allows me to register with a State Securities Administrator as a Licensed Investment Adviser Representative, through a Federal Registered Covered Investment Adviser or State Investment Adviser. Investment Advisers are hired as Fiduciary’s to give Institutions and Individuals Investment Advice, and are also able to Manage large pools of money inside Investment Funds. To read FINRA’s description of what this Exam does for a Professional Money Manager click this link, HERE.

Investment Adviser Examples: Some give Investment and Securities advice to Corporations, Institutions, Boards of Directors, Individuals planning for Retirement, work as Hedge Fund Managers, Pension Consultants, Sports & Entertainment Management, Asset Managers, Wall Street Private Bankers, and also High Net-Worth Wealth Advisors. It’s a serious Profession. That comes with serious responsibilities. Investment Advisers are considered Fiduciary’s.

This is a Huge Victory for me professionally. And it’s only fair that I Thank the people who helped push me to achieve this life long professional goal. The list of people who have helped prepare me to pass this difficult exam is small. As soon as I left the exam office I took some time and shared the special news firstly with my Dad. To the others who did help me? You know who you are and I am whole heartedly eternally grateful for your confidence and trusting in me to perform.

Cheers to you all. I am very excited of what’s is to come next on my journey.

The mission continues.

JS

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Business Articles, Investing, Investment Vehicles

“Exchange Traded Fund” ETF Basics

Many Business professionals would be shocked to find out that a basic Exchange Traded Fund on the NASDAQ, New York Stock Exchange or on Japans 225 funds that make up the Nekkei Index are all either UIT’s or Open-Ended Funds (Mutual Funds). This article’s purpose is meant to identify and educate more executive business leaders about ETF’s you likely see daily listed on TV or on the many Stock exchanges.

Before we are able to begin listing the different key components that make a Exchange Traded Fund. It’s a good idea if I share some basics to help you understand the ETF’s are complex Financial Vehicles. And for today’s article we will be touching on UIT’s, and Open-Ended Funds. Because that is what the majority of ETF’s are! Unit Investment Trusts and Open-Ended Funds. Interesting stuff right? Lets breakdown the basics of UIT’s and Open-Ended Funds.

Unit Investment Trust “UIT”

What is a Unit Investment Trust? Great question! According to FINRA‘s Website:

“Unit investment trusts, or UITs, fall in the same category as mutual funds and closed-end funds. All three are investment companies, which means they pool money from many investors and invest it based on specific investment goals. The key difference with UITs, however, is once a UIT sets its portfolio, it remains the same for the life of the fund (barring any major corporate events, such as a merger or bankruptcy proceeding) and the term is fixed.”

Investment Company Act of 1940

The key to understanding ETF’s is the fact all ETF’s are Investment companies. If I share more descriptively. A ETF is a Pool of Money that has been legally established as an Investment Company. Now we need to dive slightly deeper into what is “The Investment Company Act of 1940?” The S.E.C. Securities and Exchange Commission. The S.E.C. states on it’s website :

Additionally The Act was signed in to law by President Franklin D. Rosevelt who felt the need for Regulation after the Stock Market Crash of 1929 destroyed so many and especially after the Great Depression left its mark on America’s tattered Finances. The biggest thing I would like to leave you with to know and recognize about the Investment Company Act of 1940 is the fact this Law is a regulatory framework for retail investment products and vehicles. Most importantly the Act leaves Fund Managers and Financiers with three categories of Investment Companies to make offerings. These Company categories are “Unit Investment Trusts” UIT’s, (Mutual Funds) Open-Ended Management Investment Funds and Closed Ended Management Investment Funds. It’s very important to discern the Requirements for Investment Companies are based on their categorization and offerings of Investment products or vehicles.

Open-Ended Management Investment Fund

All a Open-Ended Management Investment Fund really is in most cases is a Mutual Fund! It’s very simple. A collection of Securities or Investments organized into a Pooled Investment Vehicle as a Investment Company. Here are some facts about Mutual Funds. An Open-Ended Fund continuously makes new Shares available to the Public for purchase. These funds are professionally managed and often are able to negotiate and procure Investment vehicles at a discounted price that is not available to Retail Investors. Most Retirement Funds and Retirement Accounts prefer the ease and efficiency of Mutual Funds for Investment Vehicles. Open-Ended Funds can be Growth Oriented, or even Mixed with Alternative investments used as Products inside the Fund. And this is why they make a excellent vehicle for Exchange Traded Funds.

Exchange Traded Funds

By now I think your catching on to the fact Exchange Traded Funds can take many forms or basically be a Investment Company formed into one of three categories Unit Investment Trusts, Open-Ended Funds, Closed Ended-Funds. It is remarkable that when you breakdown the basics of “What a ETF is?” you find that most Exchange Traded Funds are a unmanaged UIT or a Mutual Fund. I do hope you learned some things reading this week’s article. And in conclusion stay tuned! I feel it’s only fair for me to revisit expand on Closed-Ended Investment Management Companies in the near future. But for today? After doing some heavy studying. I felt it was really interesting to write about the fact that 70% of the ETF’s in the OTC and Big Blue Chip Markets? Are UIT’s and Open-Ended Funds are just Mutual Funds. I hope you found this article interesting and educational. This was something I felt could be useful and I felt it would make for a great little article. In conclusion. I would say, stay tuned. Big NEWS next coming week. Thanks for stopping by. Please feel free to contact me. HERE.

Godspeed

JS

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Business Articles, Investing

Howard Marks 6 Investing Principles

Recently while listening to Oaktree Capital’s Co-Founder Howard Mark’s it was clear I needed to pull up my notes and write down for you these 6 Investing Principles which give Oaktree’s Team an Investing Edge in the Market.

Like most value investor’s we all know the steps of using Benjamin Grahams strategy from the Book Intelligent Investor when valuing a Stock of Investment that is trading at a steep discount. Well like Graham, Mr. Howard Marks puts his own personal twist and strategy to work while adhering to a few universal Basics Graham has taught us all as Value Investors. It is said when Mr. Marks writes an Annual Letter or his famous yearly Memo and releases it? Warren Buffett himself stops what he is doing and reads it.

During an interview recently Mr. Marks shared; ” I wrote my yearly memo for nearly 12 years and knew that not many people would read it. But one day after the 15th year or so? It basically became an overnight success.” That gives me hope that maybe one day my little Investment Blog will also be as interesting as Mr. Howard Marks annual Memo’s. Just maybe.

These Principles Guide Our Investment Process

  1. Risk Control. Managing Risk should be a Investment Managements Greatest Investment Objective. Without managing risk through extensive Due Diligence and heavy research and planning? Our Investment thesis maybe unproven.
  2. Consistency. When thinking about making Bad Investments to Knocking one out of the Park like a Baseball Player, an Investor must be consistent with the performance of their investments. On a scale of 1-10? It’s great to be hitting Home Runs with Investments that always win. But when things go bad and they often due with unforseen Risk with Investments? It’s better to be averaging a success rate range in the upper middle of 3-6max. And not allow the bad beats of Bad Investments to bring down your Median Average of Consistency. Very Important.
  3. Be Selective and Look inside the less efficient markets for opportunities. Most markets are highly efficient. But there are places within markets where efficiency is lacking. Those are the spaces where you will be able to apply the Value Investor Graham basics and WIN! Finding Investments that are Cheap and look over leveraged? Maybe just exactly what you have been looking for to apply the skills we have learned over the years. Emerging Markets where information is not as transparent and is also not as available? Marks say’s this is where you will find Deals.
  4. Focus on a High Degree of Specialization. Mr. Marks say’s “Our people at Oaktree do a few things well. We are not Generalists.”
  5. Investment Decisions are not driven by Macro Forecasts. Don’t allow the wind blowing over the markets to catch your sails and take you off course to far away lands. We are Fundamental Analysts. We use Bottom Up Strategy.
  6. We are not Market Timers. Mr. Marks emphasizes “If it’s cheap today? We buy it! We don’t need to wait six months and see if it will be cheaper. That makes no since.” I tend to agree with Mr. Marks. When your looking for investments? Your Thesis is proven correct or it’s not. Apply the Rules and Skills we have been taught.

Did you catch my last Article on Commercial Real Estate HERE.

Additional Notes from Mr. Marks that are very relevant to Investment Management and Investing for Success.

“You Can’t Predict. But you can prepare.” “Have a Large number of Good Investments is our Mantra.” “Find Good Companies with correctable Bad Balance Sheets” “Distressed Debt holds opportunities” “Find Good Companies that have fallen on Hard Times.” “Look for Companies with Good Managment with Too Much Debt.” “How do we fix this?” “Our Credit committee during the Bankruptcy process can fix and raise the value. We get profit from our efforts.” “We reject Onerous Debts” “We are not turnaround artists.” “All we focus on is Senior Secured Debt obligations.”

In the End? Our team Avoids Losers and Bad Companies!

In Conclusion

In conclusion to this week’s post on Investing Philosophy, If you do adhere and adopt the unique and proven principles in this post for your own purposes? It’s very likely you will be happy with the results that follow. I do hope you learned something from Mr. Howard Marks Investing Principles. And do feel free to share todays article. With that I personally Thank you for stopping by and reading. And I hope you will come back and visit my Investment Blog soon.

Godspeed.

JS

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Business Articles, Value Investing

Current Yield of Brown & Brown Stock?

Computation of Current Yield for $BRO

When forming the computation for the Current Yield of any Stock or Bond it’s necessary to understand what Current Yield Means and “Why we use this measurement of Yield?” “According to the Financial times: Current Yield does measure and examines the current price of a bond or stock, rather than looking at its face value. Current yield represents the return an investor would expect to earn, if the owner purchased the bond and held it for a year. However, current yield is not the actual return an investor receives if he holds a bond until maturity.”

Black Rifle Coffee Company $BRCC : NO DIVIDEND

I wanted to do an actual Current Yield computation of one of my investments to demonstrate the importance of minding your investments. While searching I came across something that truly raised my eyebrows! I am astonished that my SOF Veteran Brothers over at $BRCC Black Rifle Coffee Company has an annual Net Revenue in December 2023 175.4 Million. That is 30% higher YOY than last January. I will be watching closely as time moves on this year. If I see additional movement in the earnings later? This may be placed on my Defensive list. I am also astonished BRCC has so little Shares outstanding on it’s Balance Sheet! Only Sixty One Million Nine Hundred Sixty Four and One Hundred Fifty Seven shares outstanding. BRCC does not pay a cash or stock dividend. So this was in observation only.

The Computation of “Current Yield”

The Stock I am choosing for today Current Yield Computation is Brown and Brown Insurance. Amazingly B&B has seen 30 years of increased Dividends! That’s incredible. Making it certainly a stock that does pay a healthy Dividend. According to Brown & Browns 10K the Company’s Outstanding Shares equal Two Hundred Seventy Nine Hundred Million, Nine Hundred Thousand Shares Outstanding. (279,900,000.)The Current market price of the Stock is: Seventy Six dollars eighty eight cents. $BRO $76.88. Wikipedia say’s “Brown & Brown, Inc. is an insurance brokerage firm, specializing in risk management. Headquartered in Daytona Beach, Florida, Brown & Brown has 450+ locations worldwide”. And currently has an annual revenue of 3.051 Billion. They pay an Quarterly Cash Dividend of $13.00per 100 shares.

So let’s find the Current Yield of Brown and Brown? With all the information provided we need to get back to our basics and decipher “What exactly Current Yield measures?” Current Yield measures the Annual Dividend divided by the Current Market Price and equals the Yield of the Investment. Our computation should look like: We take the $13.00 and divide by 100 equal .13 per share. Then take Annual Dividend $0.13×4= Annually dividend of $.52c. Then we divide our .52 by Current Stock Price of $76.88 which equals after all the math is done? = .676 or a( .7% Current Yield). This is our Current Yield explained for Brown and Brown.

I do hope you learned something in todays post? It was fun to write, and breakdown all the different elements to the computation of Stock Brown and Browns Current Yield. I needed a little practice for CY for my Investment Advisor curriculum. And thought writing an article would help me in ths area. I appreciate you stopping by to read this small Fundamental Analysis of $BRO.


Godspeed

JS

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Business Articles, Investment Vehicles

Treasury Inflation Protected Securities (TIPS)

What is (TIPS) Bonds/Fixed Income and How do Investment Advisors, Investment Banker, Stock Broker Professionals Calculate TIPS Payments?

Very interesting Topic has come up on my Study Plan this week inside the Fixed Income topic and Investment Vehicles. This post will go on to explain and demonstrate exactly “How” and “What” Treasury Inflation Protected Securities are used for as Investment Vehicles and the math that we use to calculate the Payments.

To make this simple according to the United States Treasury “(TIPS): are marketable Treasury securities whose principal amount is adjusted for inflation. They were first auctioned in January 1997 after the market expressed a strong interest in the inflation-indexed asset class. In 2009, 20-year TIPS were discontinued in favor of 30-year TIPS. Treasury now offers 5-year, 10-year, and 30-year TIPS.”

TIPS are used in Investment Portfolio’s for the purpose of staying ahead or keeping pace with inflation happening on the Consumer Price Index. The following article is “How Investment Professionals calculate and do the math for TIPS for your Portfolio. But first let’s watch more for The Money Guy Show explaining TIPS and How they are bought and used by Retail Investor and Investment Management.

TIPS are not just another Investment vehicle we use in Portfolio Management or as Investment Fund Managers. We must be highly selective on what make since at the time when we are building Investment Portfolios. Like other Treasury securities, TIPS are exempt from state and local tax. But! The TIPS interest and income on the principle are still taxed at the Federal Level for that year. Please have your Investment Counsel or Investment Advisor give you more information related to the Taxation of your own Investments. This post should not be used as Investment Advice and is strictly a informative guide to math of TIPS.

How to Calculate Treasury Inflation Protected Securities

It’s true when calculating TIPS that there is a part of this method that does involve compounding of the Coupon Rate and the Principle Semiannually. This is how we Make the Math Make Since. You need to know first, That we use the Nominal Yield as the Coupon and we also use the Principle value for our computation/calculations.

Let’s say for instance we have (TIPS) that pay’s 6% annually and then Inflation Rate is 4% for the next 3 years? Here is what happens Mathematically and how we see this Investment Vehicle work and keep pace with Inflation.

Let’s say you bought the 6% TIPS BOND and the Inflation Rate is 4% for the next three years.

You first need to understand the Coupon/Nominal Yield of 6% will be paid in two installments of 3% semiannually. And the 4% will be compounded and paid on the Principle of the Bond.

BOND is $1000 at par.

6months pass by… We are paid as the Bond Holder $1020.00,(2%+1000=1020.00) the first semi annual Dividend we are paid is $30.60.

6months later? We are paid another 40.20. Which now added brings our Bond Principle to ($1040.40). Our Second semi annual Dividend paid to us is $31.21

Year 1 Complete.

Year 2 after 6 months We are paid on the Principle and now Principle increases to (1,061.21). The math to get to this number is (1,040.40×102%=1,061.21) Our first Dividend for this year is paid to us $31.84. How we arrive at this dividend number? We take 1,061.21×3%=31.84

Six Months later our Principle is paid again (1,061.21×102%=$1,082.44) Our final semi annual year 2 Dividend is paid out. (1,082.44×3%= $32.47)

Year 3, six months pass and our Principle is paid (1,082.44×102%=1,104.09) Our first year 3 Dividend is paid out (1,104.09×3%=$33.12)

Six Months later our final year three semi annual Principal is paid (1,104.09×102%=1,126.17) Our final year 3 Dividend is paid out (1,126.17×3%=$33.78).

The Math is clear and so is the method we use to calculate (TIPS) Treasury Inflation Protected Securities. It’s easy, clean math. If you had trouble calculating the math here? Please feel free to email me and I would be happy to walk you through the math in a Video. You may be wondering why I wrote and posted this? Well truth is? I love this stuff and do it for fun. I know I am slightly bizarre. But in all fairness Mr. Bill Gross who is a fellow Navy Veteran and Bond Bad Ass who built the Bond Company PIMCO is also a life long student of Fixed Income and Investing Wisdom. Please do feel free to watch this video Documentary of Mr. Gross. It’s certainly is worth the watch!

However the proof is in the numbers. And rolling up your sleeves and learning new things is the backbone of what makes a Great Investor and Investment Professional. I hope you enjoyed todays post and learned something. Thank You for stopping by.

Godspeed

JS

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Business Articles, Investing, Value Investing

2023 Annual Letter & Investment Performance

The following post is my personal Investment Portfolio’s 2023 Performance and How I achieved a 19.9% Real Rate of Return. This in depth investment post will also include incredibly in depth personal thoughts, and thought processes from my Education as a Value Investor from this year. It’s likely to surely strike a chord with many out there who are in the Investment Management, Family Offices to the Entrepreneurial space. Thank you for spending a few minutes reading my annual Investment Notes. Let’s begin.

It’s been a good year, I learned a lot more about being a Investment Portfolio Manager and what it takes to build your skills as a Value Investor and as Howard Marks would share “What is the most important thing?”. With all the distractions in this world working against us and our Investment performance? I still managed to pull off a great victory. Achieving a stable 19.9% Real rate of return for my personal Investment Portfolio. As I posted to the Value Investors I am connected with? I shared, “I will take it!”

This post will be about my personal Investment Portfolio and I will take you trade by trade “The Good and The Bad” and show you how I ended up with a stable 19.9% Real Return at the end of the year.

Charlie Munger May G-D Rest His Soul, was right! “There are only a three ways a smart person can go broke: Liquor, Ladies, and leverage.”

-Charlie Munger (Jan 1st 1924 – Nov 28,2023)

In January 2023 I wanted to begin Earning and training a Series 65 Investment Advisor/Investment Fund Manager Course. This career move will pay massive dividends in my life. And already is beginning to as I write this. There are about two dozen Investment Professionals on Wall-Street watching me closely. Along the way I have developed attracted a little community of Commercial Real Estate Brokers as well. I am positive they will be awesome to know as well. But back to studying as a Investment Advisor Rep. It’s true there have honestly been times I have experienced complete and embarrassing failures. Like failing practice tests. And then times I have overcome obstacles and demonstrated incredible resilience. If I am being honest? Sometimes because progress is slow? I feel absolutely Retarded! LOL It feels like my brain is not absorbing the content I am reading. It’s incredibly frustrating. But you put the book down. And the next day at the same time? You begin studying again. It’s only a matter of weeks before I am able to officially say I conquered this latest stepping stone.

Militant discipline, I use? Is precise and plainly works. When you feel your unable to continue? You stop for a break. Then get back after it. And then you feel better. Because you begin to internalize the information and content your supposed to absorb. I do admit I have had to learn to forgive myself. A. Because I have had a Massive Head injury while serving in the Military. And B. Because my Metabolism Illness/Disability plays havoc on my Body and emotions at times. And this does cause my brain to have concentration issues on some days. But as one of my Veteran Brothers from the Army Ranger Special Operations community always tells me after a failed evolution? “Lets just Keep Rangering On Doc!” And thats the key to learning in life! Wether your learning as a Value Investor. Or as a Competent and Dangerous Investment Portfolio Fund Manger. This Discipline just makes you a Bad Ass in general. You just keep marching forward regardless of your repeated failures.

A Foundation of Conservative Investments

There have been many ups and downs during the 2023. Most people were afraid of full on Recession and others were very Greedy riding the never ending train of the Bull market. But when I began in January 2023 and opened a new Brokerage Account to build a new Experimental Value Portfolio, I was reading Seth Klarman’s famous book “Margin of Safety” just one more time. Because admittedly there is so much in his book that I learn something new as I go deeper into his Books Lessons. And I feel that can be said in life in general. We all start off from a place of sheer ignorance to finding which direction makes since. I must share I am not much of a Speculative Investor. I like to keep my foundation very Conservative when investing. So that is why the First Stock I bought in my portfolio was a Deep Value Real Estate Company “Howard Hughes”.

Buying Howard Hughes?

After doing a Deep Dive, and considering the Management and reading the Annual Report or 13k? This is a great company that is being discounted in the Market because of the fact it is a Real Estate Development company. All my research told me it’s going to be a great investment. Little did I know in later in February? Famous Investor Joel Greenblatt made the same call. And posted inside the Value Investors Club website, which I am a member of, that he too has taken a large position in this undervalued Company. After learning this? I knew I was on to something. I guess it does help that Bill Ackman is the Chairman of the Board. This was another deciding factor. 100%

Insight Enterprises

I have been a long time Investor in the Company Insight Enterprises. So it would seem nautural that I would add this incredible little IT company to my Portfolio’s foundation. The companies management are genuinely “Truly Fantastic!” and I revere the Brothers who started as Entrepreneurs and built this incredible Company. Fact. The continued value of this company speaks for itself. And I am pretty sure just like Berkshire Hathaway it will be foundation for many Investment Portfolios to IT Professionals Retirement Accounts. It’s just that damn good. The end.

Pershing Square Hedge Fund

Im pretty sure everyone knows by now “How much I admire Bill Ackman as a good man and community leader.” I was going through a very dark time when I watched Bill’s Father’s “Larry” Career Leadership Award Ceremony and listened to Bill and Larry talk about life as a Entrepreneur and more importantly. Larry’s entrepreneurial Journey as a Mortgage Broker in New York City. It really brought some direction to my Emotional turbulence as a Entrepreneur during that time. I was really going through just terrible things from my illness. Made me question my sanity and my direction as a Entrepreneur. But! Larry and Bill straightened me right out. And for the fact Bill has personally been very generous with me? Pershing Square was a Buy! I really did not care about the value. I just knew I had to Support Bill. I am glad I did. Bills Fund is a Value Investing Powerhouse this year. If I may leave you with one thought? Invest in the People you genuinely Adore as Mentors and Community Leaders. The good faith will always come back to do nothing but good things. Live by the Golden Rule.

Blackstone Group

Next on my list of Investments that I have been invested in for a few years is Blackstone Group. It’s abundantly clear Mr. Schwarzman and President Jon Gray and the Team are building a phenomenal Business. Even during the Interest Rates and Inflation Crisis early this year? It was clear Blackstone’s Portfolio was more than capable of handling the bumps in the road. I should add, Jon, and Mr. Joe Dowling has personally been very generous with me personally. So Blackstone? Was a no brainer. It must be in my new Portfolio. So I invested. I owe all these Guys on this Investment list Success. And I am gonna give it to them.

Palantir | Artificial Intelligence for the Future

Did you know when I was deep inside Politics I flew across the country and brought certain Community Leaders who are Running for US Congress to a small office in Washington D.C. that was Peter Theil’s Club for Growth PAC? It was a-lot of fun. And I thank the Club for Growth team for being very generous with me.I never spent much time with Mr. Peter Theil except one time at a conference about Tech and AI. And that was before I began my role as Club For Growths guy out in the field. LOL The only reason I bought Palantir for this Investment Portfolio is becuase I can see the good it it doing with AI. It’s a incredibly undervalued Company in the Tech/AI space. And Dr. Alex Karp and team are doing incredible work. I am certain the way this team is collecting contracts from Allied Governments this small investment will pay off very well during the next decade. It’s that simple. During the 3rd Fiscal Quarter Palantir earning were so good? The market rewarded the Company for it’s growth. If I can mention someone else I truly like is Joe Lonsdale. His views are no nonsense and are very close to my own. The fact that Joe, Peter, and Dr. Alex Karp teamed up for Palantir? Makes this company a winner.

Inverse ETF’s and X3 Leverage.

It’s only fair for me to share that on occasion I did experiment with certain speculative ETF’s that were x2 and x3 inverse levered on certain days. For the most part. I had mixed results. And although my results were more Positive than negative. More in depth? Meaning I did sustain 6 days of loss minimal loss during 2 months using this method of speculation. I won’t be using any of these ETF’s with inverse leverage moving forward. But I am grateful for the experience. Buffett was right. No need to use leverage.

During December we saw 15% growth in the Market

During December when the Market was off to the races and rising near Christmas, I felt it prudent to rebalance. My actions were more Defensive than speculative. The rising prices in the market just did not seem sustainable and felt a little overvalued. So I did implement some harvesting of Profits and Rebalanced this Conservative portfolio. I am glad I did. I am happy to report I did not lose anything by this action. And remained true to Gharam’s and Buffet’s rules of “Never lose money!”

Conclusion to 2023

The list of Value Investors who I feel have influenced me the most is growing yearly. But it’s a small group. All have taught me to share in a Annual Letter. So here I am. I would like to Thank, Warren Buffett, Li Liu, Tim C., Bill Ackman, Howard Marks, Guy Spier, Mohnish Pabrai, William Green, Rick Reider, Stanley Druckenmiller, Jon Templeton, Jim Rogers, Bill Gross, Lauren Templeton, and many more. Thank you for the lesson and teaching me a fantastic frame work of how to express myself and share a professional investment philosophy, to sharing the many business decisions I have made throughout the year.

Howard Marks has taught me much through his Annual Letters and Memo’s and interviews online. But there is one Quote that I feel sums up a direction for all of us while Investing during turbulent markets. And if you listen closely he is often heard sharing this quote again and again. During the 2008 financial crisis. When the world was burning. And everyone had thought that all is lost. Mr. Marks said a little qoute that is fitting for all of us during those times we feel uncertain in our investments. And that quote is?

“Keep Calm and Invest On!”.

If you are still reading. I think I know what your saying?.. “This guys writing sucks!” LoL Admittedly Yes. I am not the best writer. I apologize in advance if this is hideous and embarrassing writing. I am not the best at many things in life. I could probably use a professional writer to screen my posts and first annual letter. But since I am just a upstart? I am forced to just keep marching forward without a professional team to help me. So I do feel that does account for something.

I feel the same thing will apply to this years new Investment Portfolio. I am giving it my best! And in conclusion I would like to leave you with 2 thoughts. During 2023 there were many ups and downs. The market was hysterical at times. And was greedy at times. But I kept my focus and kept learning while doing deep dives on many companies. In the end my new personal Investment Portfolio did clear a healthy 19.9% Real Return after inflation. And if I include my other Portfolio? The Return rises for both Brokerage Accounts at just under 24.5% for the Year. That is a fact. If you would like to see the report images? I can email them to you directly.

If I can leave you with my last thought for this years Annual Letter? I would like to share a Post by Guy Spier. Guy shares. 2024: Begin. Just Begin. Put your pen to paper. Fire up that laptop. Put on the running shoes. Say that thing. Call that person. Write that note. Open that book. Just begin. The rest will be history. Thank you.

Godspeed.
JS

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Business Articles, Corporate Finance, Finance Articles, Investing, Securities

Corporate Secured & Unsecured Debt Securities

Lending Money to Corporations using Corporate Secured and Unsecured Debt Securities could be a risky opportunity for Institutional Lenders and for the Banks and Private Credit Investors. If your not up to date on the legal hierarchy or priority of claims for repayment? Allow me to share that Priority list below. Familiarity with a Corporate Balance Sheet will likely make this list easy for you.

  1. Liquidation/bankruptcy fees and charges – this does not include court fees.
  2. Debts due to preferential creditors – those entitled to certain payments in priority over other unsecured creditors – including wages owed in the four months before the date of the insolvency order, as well as all holiday pay and contributions to occupational pension schemes.
  3. In company cases, any creditor holding a floating charge over an asset, such as a debenture. This is where a class of goods or assets – eg the debtor’s stock – are named as security for a debt.
  4. All unsecured creditors.
  5. Any interest payable on debts.
  6. The shareholders in company cases.

The hierarchy of Credit starts with Secured Creditors then Unsecured Creditors. However for this Post I would like to focus on deliberately on Secured and Unsecured Debt for Institutional Investing. This small list is meant to be used in order and will help Retail Investors, Students, and Business Executives who need to brush up on this topic of interest. As a value investor we are laser focused at looking on a Companies Balance Sheet and focus directly and early on a Companies Solvency. If the company is Debt heavy? This usually indicates we need to consider the use of the Debt in order to make a informed decision on “How we arrive at a Companies Valuation”. If the Company we are investigating has no Debt on the Books? This is a good sign. And tells us as Value Investors “This maybe a very profitable Business to investigate further.”

Secured Debt

Corporate Debt Securities are like any other Loan, and are backed by various types of assets of the issuing Corporation. This list is a Seniority list. Meaning they are Secured Debt options in order.

Mortgage Bonds

Just as a Individual would go to the Bank to ask for a Loan backed by the Home and Land as Collateral for the Mortgage, a corporation will borrow money backed by Real Estate and Physical Assets that belong to the Corporation. If the Corporation fails and is unable to repay the Long Term Debt Obligation “Mortgage Bondholders”. The Assets pledged are liquidated by Court Order when the Corporation is insolvent and goes through the Chapter 7 Bankruptcy process. For further explanation? This video should help.

Equipment Trust Certificates

Interestingly Railroads and Airline companies, finance the acquisitions of their Rolling Stock, Train Rail Cars, Airplanes, by issuing an Equipment Trust Certificate. The Company provides a Down payment of usually 20% Twenty Percent of the cost of the rolling stock, and finances the balance over the course of time. For example, 20 years time. Because equipment has wear and tear from daily use in the operations of the Business, the Railroad will pay off a portion of the loan on an annual basis. Interestingly at no time, theoretically, is the value of the assets (rolling stock, rail-cars,Jet Aircraft) worth less than the amount of the principal remaining on the loan. When the company finishes paying off the loan it receives a clear title for the equipment pledged from the Trustee. If a company does fail to make the payments for the loan? The lender can then repossess the collateral and sells it for his benefit. It’s the same concept of financing a new Car.

Did you catch my post here on: Pooled Investments What you need to know?

Collateral Trust Bonds

Sometimes a Corporation doesn’t have real estate, Equipment, or assets to pledge as collateral for a Mortgage or Loan. Instead the Board of Directors or Management can pledge Company Securities like Stock or other Negotiable Securities from a Parent Corporation into a Trust as a form of secured collateral. This is useful because the Securities are readily liquidated in case of default. Obviously the better quality of Securities deposited as collateral the better the Rating of the Bond. Sometimes these are also referred to as Collateral Trust Certificates.

Unsecured Debt Securities

Debentures

A Debenture is a Debt Obligation of a Corporation backed by only the Corporations word and general creditworthiness. Debentures are written promises of the corporation to pay the principal loan amount back its due date with interest on a regular basis.Debentures surprisingly are not secured by any pledge of property. They are considered safe when the Lender has trust or a credit relationship with the Corporation. This is sort of like a Revolving line of Credit for Commercial Banks and their clients who are the Corporations. Example: Similar to Consumers who use a Bank Credit Card and have great credit worthiness.

Guaranteed Bonds

A Guaranteed Bond is a Bond that is guaranteed as to payment of interest, or both principal and interest, by a corporate entity other than the issuer. The guarantee is only as good and valued if the company providing the guarantee has a strong business. Guaranteed Bonds were popular in the Railroad industry in which Major Railroad Companies sought to ease the trackage rights from a short line Rail lines, and would guarantee the smaller Rail Lines companies debt. A more recent example would be Exxon Mobile Corporation guaranteeing a subordinate companies debt issue.

Senior Debt

This is used to describe the seniority of a Debt Issue. Or the relative priority of repayment claim of a Debt that has been issued. Every preferred stock has a Senior claim to Common Stock. Every Debt security has a senior claim to preferred stock. Secured Bonds have a senior claim to unsecured debt.The term senior securities means bonds and preferred stock, because they have a claim senior to common stock. If you would like to see the Seniority of Debt and Equity? Please refer to the Chart Above below the opening paragraph.

Subordinated Debt

Subordinated Debt is just that! “Belonging to a lower class or rank.” Please refer to above list of Ranked Repayment Obligations.

Credit Ratings

It would be unprofessional of me not to include Ratings and Credit Ratings Agencies in this Post. When evaluationg a Bonds Ratings? You should refer to the Bond Ratings are defined by the Creditworthiness of a Companies Debt. These are issued by Standard & Poors and Moody’s and Jefferies Investment Bank. All these are fantastic Companies who hand Credit Worthiness of Debt Issues and Companies Debt History.

For Credit Ratings This Image Below Will show my Notes on Bond Ratings.

High-Yield Bonds

Since I would have a difficult time explaining in detail High-Yeild Bonds. Investopedia has shared and described High-Yield Bonds as?

High-yield bonds (also called junk bonds) are bonds that pay higher interest rates because they have lower credit ratings than investment-grade bonds. High-yield bonds are more likely to default, so they pay a higher yield than investment-grade bonds to compensate investors.1

Issuers of high-yield debt tend to be startup companies or capital-intensive firms with high debt ratios. However, some high-yield bonds are fallen angels, which are bonds that lost their good credit ratings.

In conclusion I hope you learned a few things about Corporate Secured and Unsecured Debt Securities. In the end Bond Investing can fail. So it’s vital to know the basics of Bonds and Credit. This Wall Street Journal Animated Video should help you understand this fact.

These are basics we use as Investing and Finance professionals. Feel free to share and if you learned something? Fantastic! “

This post is for Educational purposes only. And should not be construed, implied, or taken as Investment Advice.”

Godspeed! Thank You.

JS

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Business Articles, Index Investing, Investing, Value Investing

Index Investing is More Art Than Science

I am about to share some Value Investing information that will make your jaw drop. If your anything like myself and the gang of us on Twitter who are Value Investors? You are a Junkie for information so you can put your research to work for the purpose of outperforming your latest Investment Portfolio’s compounding unrealized gains. Today’s Post is special for Investment Professionals.

You know that S&P 500 Growth Index your about to invest in? It’s likely there is a better index option with higher returns. FACT! By the way THIS IS NOT A SALES PITCH. NOR INVESTMENT ADVICE.

Hear me out! Thank you. I would like to introduce a well known Investment Advisor who has focused his career on Institutional Investing in the North East, and for the last 10 years has lived and practiced in Tucson Arizona, I listen to his fantastic Podcast while I work at night driving around town listening to his Podcast, “Money for the rest of us“.

Mr. Stein has a gift explaining complex and sophisticated Financial Products, and Investing Topics that make it very easy to compute. Furthermore one of the Episodes he recorded recently was fundamentally explosive for me as a fellow Investor. He went on to explain that not all Index Investing is created equal. Now I do see this will begin to shift opinions with what I am about to share. But before I begin addressing the Questions you may have about this Morally Hazardous Claim. First I have to share why we came to this conclusion.

Data Mining Index Markets on to a Software Application

Mr. Stein and his small Investment Team and a few Software Developers and Architects of Digital Computer Programs recently released a secret project that details charts and tons of Data of Index’s across the globe in different Markets. They measured different ETF’s, Value Index’s, Growth Index’s, Growth ETF’s, ETN’s, Japan Index’s, UK Index’s, US S&P Index’s and tons more.

What did they find?

They found that not all Index Investing is the same. A very valid argument for Investment Advisers and Money Managers can be made that with this new DATA? The old practice of Value Investing is very much alive and out performing it’s counter part of Growth Funds. This post is general findings I heard on the podcast. However I suspect if you listen to the exact episode I listened to you will find it fascinating all the data and inflection points to that Index Investing is a Art not a Science. The following points of interest and listed topics will keep you on topic as you listen to Mr. J. David Stein share some incredible Data about “how to make your Index Research interesting? And how you should begin looking at data with his latest Software Application for Investing. This is what you will learn?

Index Providers divide the stock universe into large and small, growth and value.

The Difference Between the price to earnings ratio and earnings yield and which is better?

How earnings volatility can impact annual earnings growth and what to use to estimate future earnings?

How value stocks often grow earnings faster than growth stocks

How value has outperformed growth in the last three years?

Click the Photo below for Access to the Episode about Asset Camp and the Points and Topics shared above.

If your like me and would like to see these Data and Research Points? I would recommend sign up for the Data Suite Software for Investment Advisors and Sophisticated Professional Investors Asset Camp

Listen to the Episode with J. David Stein

https://moneyfortherestofus.com/443-surprising-stock-index-insights/

Thank you for reading, I am very happy to share this. You will learn a few amazing topics that make Value Investing hard to beat as a Investor.

Godspeed
JS

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Business Articles, Finance Articles, Investing, Law, Securities

National Securities Markets Improvement Act

Wether your a Financier, a curious investor or a even new Stock Broker/Dealer Agent, If your not up to speed on the NSMIA of 1996? This short post will give you a brief overview of what the National Securities Markets Improvement Act is and what it is used for.

Here is a question? What is the National Securities Markets Improvement Act of 1996 (NSMIA)? The National Securities Markets Improvement Act is a law passed in 1996 that sought to simplify securities regulation in the U.S. by apportioning more regulatory power to the federal government.

NSMIA is a List of Securities that are Federally Listed on the NSMIA Website.

NSMIA Securities are Federally Covered Securities.

The National Securities Markets Improvement Act (NSMIA) amended the Investment Company Act of 1940 and the Investment Advisers Act of 1940 and went into effect on Jan. 1, 1997. Its main consequence was to increase the authority of federal regulators at the expense of their state-level counterparts, a change that was expected to increase the efficiency of the financial services industry. 

What Changed after NSMIA was Introduced?

NSMIA caused a material impact on the responsibilities of federal and state regulators. Ultimately, it reduced the overlap between federal and state power. State security laws no longer oversaw the following topics:

1. Capital

2. Margin

3. Bonding

4. Custody requirements

N.S.M.I.A

  • The National Securities Market Improvement Act (NSMIA) was introduced to more efficiently allocate capital in financial markets.
  • NSMIA amended the Investment Company Act of 1940 to promote more efficient management of mutual funds, protect investors, and provide more effective regulation.
  • Nationally traded securities, securities of registered investment companies, sales to qualified purchasers, and securities issued in certain exempt offers are exempt from state regulation.

There are a-lot of Securities that are listed on the N.S.M.I.A website. To catch up on the latest case by case basis? Here is the List HERE.

I do hope you learned something here, If you did not catch my Invesment Fund Article Here, Id highly recommend you go read it. It’s all about Investment Funds.

What are covered securities under NSMIA?

Today, most stocks traded in the U.S. are considered covered securities. In addition to the offers and sales of certain exempt securities, the NSMIA defines “covered” securities as securities that: Are listed on national securities exchanges such as the New York Stock Exchange and the Nasdaq.

Thanks for Stopping by,
Godspeed

JS

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