tag:srvo.org,2013:/posts Sloane Ortel 2018-03-05T17:33:33Z tag:srvo.org,2013:Post/1257210 2018-03-05T16:51:17Z 2018-03-05T17:33:33Z Weird Ideas Conference

I’m thinking about organizing a weird ideas conference.

Its mission would be to embolden open curiosity in the field of investment management. Ideally, a spirit of “I might be crazy, but I’ve done the work” will permeate the whole thing. Any marketing intention will be judiciously screened out, and presenters will be held to strict standards of credibility, brevity, and clarity. 

I’ll do everything I can think of to make sure everyone present feels engaged and able to express themselves. 

The event would most likely be held on a weekday in Bushwick, Brooklyn, cost less than $100, and take a little more than a half day. 

Here are some subjects I’d like to discuss in particular:

  • The innate weirdness of investing.
  • Investment lessons from the crypto.
  • What is mainstream thinking, exactly?
  • Rumors, conspiracy theories, and other forces shaping geopolitics.
  • The cost of “status quo” policy in real terms.

I hope to add to the above, but also to intersperse a series of “lightning talks” throughout the programming. These would be ten minute presentations on an intentionally wide range of topics. 

If participating in this sounds fun to you, please fill out this brief survey

tag:srvo.org,2013:Post/1254393 2018-02-28T19:50:04Z 2018-02-28T19:50:04Z Who Owns the Assets Under Management? A casual observer of the markets could be forgiven for believing that asset managers run the show.

Their talking heads fill the airwaves, and their logos are everywhere from formula one cars to billboards and skyscrapers. But they wouldn't really be anything if not for their clients. 

Last week, I published a piece on the seven kinds of organizations which exist largely for the purpose of owning assets with my friend Tom Brigandi. It's a quick look at what motivates each of the seven largest types, which together control more than $71 Trillion, and how they differ from each other.

You can read it on the Enterprising Investor by clicking here

tag:srvo.org,2013:Post/1248226 2018-02-15T22:31:52Z 2018-02-15T22:32:29Z Joshua Gotbaum
The Hon. Joshua Gotbaum is a visiting scholar at the Brookings Institution in Economic Studies and a former director of the Pension Benefit Guaranty Corporation. That's the government-run insurer which covers private pension plans in the United States, effectively backstopping about 40 million retirees. 

It's not unusual to see dire projections associated with the PBGC. This chart is from their most recent projections report, and shows the probability that its multi-employer program will go insolvent. Things don't look good in 15 years or so. 
That scary tidbit is a common headline, but there's much more to the story. Josh and I spoke last week before his keynote address at the CFA Society of New York's US Retirement and Entitlement Crisis conference, and managed to cover a lot of nuance in just a few minutes.  
tag:srvo.org,2013:Post/1235908 2018-01-22T10:54:37Z 2018-01-22T10:55:36Z Seven Reasons India is Primed for Growth

I published a new piece with Sameer Somal, CFA, earlier this month: Seven Reasons India is Primed for Growth

It's a polite way of pounding the table. Global Investors and Indians alike appear to be significantly underinvested. The country has a smaller weight in the MSCI Emerging Markets index than Taiwan, but almost four times its GDP. Its homegrown businesses are increasingly global power players, and its diaspora is the largest (and arguably the most influential) in the world. 

We decided to put the reasons why the subcontinent is heading for a secular boom on paper. Here they are: 

  1. Real returns are available.
  2. A demographic dividend is due.
  3. The middle class is booming.
  4. A digital revolution is brewing.
  5. The India Stack is growing.
  6. India’s fintech opportunity is here.
  7. Institutions are strengthening.

The full piece is freely available, but you'll have to click over to the Enterprising Investor to read it.  

tag:srvo.org,2013:Post/1217170 2017-12-15T15:00:48Z 2017-12-15T22:05:37Z 4 Charts: Global Currency Crisis Count and Implications for Crypto

What's a currency crisis? The most straightforward definition I can find is this: if a currency's nominal exchange rate depreciates by 10% or more in one year and then 25% or more in the following year, it's a currency crisis. 

This definition originated (as far as I can tell) from a 1996 paper by Jeffrey Frankel and Andrew Rose, and has also been used in NBER materials. The numbers appear to have been picked somewhat out of thin air, but it's a useful rule of thumb.

The recent run up in cryptocurrency prices has led me to wonder how many people have had their lives shaped by these sorts of events. If I'd lived through one, I think I'd be more likely to see the volatility, opacity, and other risks associated with crypto-assets as acceptable. They might even seem typical of currency in general.

The links above list a number of crises, but are only updated through 2007. I pulled Nominal Effective Exchange Rate (NEER) data for 112 countries from the World Bank's Global Economic Monitor to do a quick-and-dirty update. Only 85 countries had data available in 1988, but by 1995 all 112 were included. 

Here's the number of countries in crisis each year. 

Here's the spreadsheet with the data

Using this sort of rule is imperfect, since depreciations need to align with the 12 month calendar in order to register. For instance, Indonesia's 69% depreciation in 1998 doesn't count because it happened fast. 

But with that said, roughly 1.3 billion people live in countries that have experienced this sort of currency crisis in my lifetime, many of them more than once. Here's a table of all of the countries that have. 

It would be difficult to establish a hard link between these events and openness to crypto-assets, because they have occurred much less frequently in recent years. That comes across in the first chart, but here is the YoY change in all of the currencies in the dataset. It's amazing how much things have calmed down. 

The contemporary picture is only placid compared to the chaos that surrounded the fall of the Berlin Wall, though. Since 2010, the percentage of countries in the sample that have experienced 10% or greater YoY depreciation has been rising steadily.

There isn't a clear link between this currency volatility and demand for crypto, but I think it's helpful to understand the dispersion of human experiences with currency. Most of the world's capital is concentrated in countries that have been insulated from these sorts of wild price swings, and perhaps as a result investors forget how frequent they are. 

Most of the bullish outlooks I've seen for crypto-assets are predicated on eventually capturing a material proportion of global market share. That seems moderately more plausible (though in no way preordained) after this exploration. And certainly it's easier to see why there might be innate global demand for a new kind of money. 

tag:srvo.org,2013:Post/1212368 2017-12-06T21:18:55Z 2018-01-15T18:46:33Z Pioneering in Wall Street: How Women Came and Stayed and Conquered (1927)

I spotted a remarkable artifact this weekend while vintage shopping: a 1927 copy of Century magazine with an essay by Eugenia Wallace entitled Pioneering in Wall StreetHow Women Came and Stayed and Conquered.

Her legacy is essentially un-googleable, but the perspective Wallace shares is stunning for both its optimism and the candor with which she recounts the entry of women into the investment business. All I know about her at the moment is what's said in the magazine: 

Eugenia Wallace came from the south to grow up around Columbia University, where she both studied and taught. In the pre-feminist day she braved the pits of Wall Street, as she describes in her article, and later became one of the leaders in the street's "woman movement." After the war Miss Wallace was vice-president of the committee that organized the National Federation of Business and Professional Women's Clubs, and served on the boards of many business, vocational, employment and other committees. In her leisure moments Miss Wallace delivers an occasional lecture, writes a short story, a magazine article or publishes a book. 

I haven't been able to find any of her other writings, but am looking for them and expect to write a longer piece soon. Century was at one point the most popular magazine in the country, so this was an early mainstream moment. Here is the cover: 

And here is the article she wrote: 

tag:srvo.org,2013:Post/1209304 2017-11-29T19:06:33Z 2017-11-29T19:06:33Z Active vs. Passive vs. Amazon et al. Tech giants have been great stocks to own this year, per Michael Batnick

Netflix, Facebook and Amazon are each up 60% in the first 11 months of the year. Apple, is up 50%. Google, the laggard, is up just 34%. These five stocks have added over $900 billion in market capitalization in the first eleven months of the year.

Their performance owes at least in part to their immense power in the marketplace, which has had spillover effects. Over at Enterprising Investor, I took a look at Amazon as a case in point of what this means for the broader competitive and capital allocation environments. Here is an excerpt: 

Sentieo shows 770 mentions of Amazon in SEC filings from 439 different companies in just the last three months, more than the president of the United States. Alex Lykken, writing for PitchBook, notes that Amazon competes directly with companies ranging from Ticketmaster to Banana Republic to IBM.

Lina M. Khan observes that Amazon’s influence is not easy to calculate “if we measure competition primarily through price and output,” the traditional way regulators have evaluated monopoly. Her 24,000-word essay was published before the company bought Whole Foods, and before CVS initiated a $66-billion buyout of Aetna that has been seen as “defense against Amazon’s potential entry into the pharmacy space.

What’s confounding is that bullish investors are the quickest to use “the M word.” Chamath Palihapitiya began his pitch at the 2016 Sohn Investment Conference with “We believe there is a multi-trillion dollar monopoly hiding in plain sight.”

You can read the whole thing here

tag:srvo.org,2013:Post/1205520 2017-11-15T23:00:00Z 2017-11-16T08:38:45Z Jack Bogle

John C. Bogle ("Jack") is probably the most influential investor of all time. I was lucky to interview him at the CFA Institute Annual conference, and even luckier to get his autograph on a copy of an article (Michael Porter's What is Strategy?) with the diagram below inside. 

And here is the interview:

This interview was first published on the CFA Institute website under the title Looking Forward after 40+ Years at the Vanguard

tag:srvo.org,2013:Post/1205513 2017-10-25T16:00:00Z 2017-11-15T16:53:46Z A Trillion Dollar Hedge against the US Retirement Crisis

I wrote this for CFA Institute and first published it on the Enterprising Investor

Most proposed solutions to the US retirement crisis boil down to a simple maxim: Spend less, save more.

That makes sense. “Enough money” is an important component of building a retirement system that works. Fiduciary oversight and high returns won’t do much for an underfunded system, so it’s easy to see why discussions about reform quickly land on a simple question: Where to send the bill?

There are more productive places to take the conversation.

Back in 2010, inspired by a Wall Street Journal article, an online commenter known as “Beowulf” observed that the US Treasury theoretically has the power to mint a trillion-dollar coin. Beowulf’s coin idea gained further currency amid the debt ceiling debates of 2011 and 2013. The Obama administration, coin proponents said, could forego negotiations with the US Congress by just minting a trillion-dollar platinum coin and paying off the debt.

Platforms as wide-ranging as The New York Times, the American Enterprise Institute, and MSNBC discussed the proposal. A former director of the US Mint even said that minting the coin was not only legal but (at the time) expedient.

My contention is that this “silly but totally legitimate” loophole could be used to endow a US sovereign wealth fund.

Just in Time

The US Government Accountability Office released a 173-page survey of our fast-approaching retirement crisis a few days ago.

Things are bad. The growing striation in US incomes contributes to a significant and widening disparity in retirement savings. Fidelity suggests that savers should seek to have 10-times their income stashed away by age 67.

Only the highest quintile of earners has anything near that.

Retirement Savings by Cohort

These private savings are a crucial buffer for retirees. The absolute maximum Social Security benefit a person retiring in 2018 can receive is $44,376. But that is still just 43% of the lowest base salary the person receiving such benefits would have earned prior to retirement. And most people are not so fortunate: The average Social Security benefit is closer to $16,000 a year and about three of five Social Security recipients rely on the program for at least half of their total income.

Moreover, accelerating changes to the US demographic structure will make Social Security’s income-based funding model less and less sustainable. By 2035, just 2.2 workers will be supporting each Social Security beneficiary, according to estimates, compared to 2.8 workers today.

And those figures assume that demographics aside, the nature of work won’t be much different in 2035 than it is today. But as Y Combinator president Sam Altman noted, artificial intelligence (AI) is developing rapidly with potential ramifications for workers. In particular, Altman referenced an OpenAI bot that recently defeated some of the top human Dota 2 players. Soon after the bot’s victories, a new version was created that exceeded the capabilities of the undefeated one. According to recent estimates, AI could outmatch humans at translation by 2024, and earlier this month, Google unveiled headphones that it claims can translate 40 languages almost in real time.

The technological shifts don’t need to be all that significant to significantly impair people’s ability to earn a living.

Cash Flows

As progress in AI marches onward and reshapes the nature of work, the elderly will continue to depend on a retirement system that requires many incomes to function.

Even without the forthcoming transformation of the workforce, the funding picture for Social Security doesn’t look great.

Screen Shot 2017-10-22 at 10724 PM

What happens if fewer people are working by 2025? What if, as PwC estimates, “fewer” translates to the elimination of 38% of US jobs by the 2030s? Peter Norvig, Google’s director of research, “certainly see[s] that there will be disruptions in employment.” Treasury Secretary Steven Mnuchin is not so worried, and I hope he is correct.

If he’s not, a cash flow of “just” negative $174 billion in 2025 will seem fairy-tale optimistic.

Learn from the Guardians

Other countries have felt these headwinds and done something about them.

New Zealand is a case in point, as I learned at CFA Society New York‘s 3rd Annual Sovereign Wealth Fund conference. (These forums are strictly Chatham House Rules, but I can still tell you what I googled afterward.)

The New Zealand Parliament recognized the mounting challenges the country’s demographic trends posed and in 2001 endowed a sovereign wealth fund to counteract them. The government will begin to withdraw money in 2035–2036, but the fund is expected to continue growing until 2073.

It has already served its purpose quite well.

Screen Shot 2017-10-22 at 21505 PM

A strong internal culture of alignment with beneficiaries — employees refer to themselves as “guardians” — has propelled this growth. So too has a remarkable governance structure and the innate advantages that sovereign wealth funds enjoy. These kinds of investing entities can be remarkably pro-social. They don’t just provide a direct link between market progress and social welfare, they also build, buy, and operate infrastructure; stabilize currencies; and prove up new asset classes.

Imagine how much economic anxiety in the United States could be soothed by such a mechanism.

Matthew O’Brien wrote in 2013, at the height of the debt ceiling debate, that the trillion-dollar coin “might just be the crazy solution Washington deserves and needs.” Today, if properly governed and given time to mature — a 30-year plus horizon would be ideal — a sovereign wealth fund bankrolled by that trillion-dollar coin might just be crazy enough to cushion the approaching impact of the US retirement crisis.

At the very least, it would give Americans a tangible reason to worry less about how they will afford to eat in their old age.

tag:srvo.org,2013:Post/1197460 2017-10-11T00:55:59Z 2017-11-15T16:52:00Z Out
Coming out of the closet sounds simple: 
  1. Open the door. 
  2. Exit the closet.
  3. Close the door behind you (optional).

There is a bit more to it than that. 

I was genuinely surprised at how many times I wound up coming out. I told my family I was transitioning in October of last year, started hormones in December, and updated my Facebook profile in January, but continued to present male professionally until the end of September 2017. I came out hundreds of times in the intervening period, and I have been lucky not to lose a friend or (to my knowledge) alienate a colleague in the process.   

When I posted my personal update on Sunday, that finally finished. I had sent a letter on the previous Friday to my colleagues at CFA Institute and was ready to make who I am all the way google-able.

So I did. 

People from all over the world have since written to express congratulations and support through social media and email. This torrent of affirmations coupled with the trickle of smaller ones i'd gotten in the prior months to entirely change my life. 

Buttoned-down, serious people have not hesitated to accept me. Some even went so far as to say "why would this change anything?"

Not everyone is met with so much positivity, and there is no question that I am lucky. But I think you should know how far this was from my expectations. In the echo chamber of the closet, I convinced myself that I would be forced to make a living as a sex worker if I opened the door. 

I never talked about it, and so I never examined that absurd idea. It started to seem non-negotiable, like death or taxes. 

We are capable of believing anything with our eyes closed to contradictory evidence. 

National Coming Out Day will be celebrated on October 11th 2017 for the 29th time. I am glad to share that the people who surround me have exceeded my wildest expectations, and my hope is that others who have edited their own dreams out of reality will give their surroundings a chance. 

I know it can be hard to find the words, and so I've reproduced the letter I sent on Friday below. 

I wish you all the best as you move forward on your own journey. 


I would like to share a personal detail with you: I am a transgender woman. 

This tends to come as a surprise, but that’s the nature of secrets. This is the only good one I had. I am thrilled to share it with you as a mundane fact. I’ll just ask one favor: please keep this to yourself until you see a more formal announcement in the next few weeks. This letter is just going to the people I've had closer contact with over the years. 

Some of you have known this was coming for months, and your support has been a remarkable source of strength and wisdom. For most of my life, I had assumed that I would have to leave any professional ambitions behind if I stepped out of the closet. I am overjoyed to learn that won’t be necessary, and indebted to you all for building a workplace that slowly chipped away at my own self-limiting assumptions. 

Of course, “colleague” does not have a gender, and so in a way I am announcing nothing has changed. I understand if you don’t quite see that yet, or if you are unsure about how to refer to me. The last bit is not complicated: I am a woman, which means I am “she” and the things I possess are “hers.” 

I’ll also be changing my name. Pleased to meet you: I’m Sloane Ortel. 

I understand many of you have known me for a while, and are not used to referring to me that way. It’s important you know I will always trust the intention in our interactions, and also that it’s very easy for me to separate an error from a slight. If you can respect me as a human, seeing me as a woman is a matter of time. 

I trust you will get there, but I also know that you may not know very much about trans issues or the broader ”queer” community. Clicking through a few of these comics might be a fun way to fill that gap if you’d like to. CFA Institute has also been predictably, wonderfully diligent in ensuring this doesn’t catch anyone off guard, and you can expect to hear from people who know more than I do in the coming months. 

I am happy to discuss the details of my own situation with you at an appropriate time, but the bigger hope is that you will see it as a reminder everyone has their struggles. 

Hiding my own has meant near-constant multitasking. 

I will discontinue it with pleasure, and look forward to putting my added capacity toward the work we’ll do together. Specific thanks are due to dozens of you, and you know who you are. Acceptance is due to everyone, and our privilege is to work so they get it.  

With admiration, excitement, and serenity —  

Will Sloane

Sloane Ortel 
Direct: (Phone number redacted)
Twitter: @sloaneortel
Writing: Enterprising Investor 

tag:srvo.org,2013:Post/1196889 2017-10-08T22:48:30Z 2017-11-15T16:51:50Z A Personal Update

I would like to share something with you: I am a transgender woman.

Earlier this month, I visited Brooklyn Civil Court to petition for a name that more closely matches my gender. With a few more months, a couple more forms, and probably a decent amount of waiting in line, my passport will identify me as a woman named Sloane River Veda Ortel just as this website does.

You can probably imagine that putting this out in the open is a relief. I can now look to the future with optimism I had not thought possible.

Though I have known something was different about me for most of my life, I was too scared to say anything until September of last year. The first person I told has been a close friend since I met her in fourth grade, and likely would have responded just as wonderfully at any time between now and then.

It was hating myself that kept me silent.

I believed only the meanest things that people said about others like me, and did everything I could think of to be someone else. I was hollowed out in the process and nearly destroyed entirely.

I spoke up in September because there was nothing else to do, and I’m speaking up here because I will absolutely never take those words back.

My gender is just one part of who I am to my family, friends, and colleagues, but it’s inseparable from the rest of me. It has taken a while to realize these remarkable people have been referring to the whole package when they say that they love or respect me.

Most of us are not so lucky, and I look forward to paying the love I have received forward. I also just can’t wait to see what i’m capable of without a hand tied behind my back. 

Thank you for reading, and best wishes in your own journey.


P.S. I wrote about the wonderful reaction that this letter generated here