Newsletter: Published Tuesday, 11 September 2018.
- Ego, investing and the FIRE movement;
- Tesla, Alibaba and BWX.
Frugality and FIRE
There is an uncomfortable amount of ego when it comes to investing.
Ah look, let’s be honest.
It's an enormous appendage measuring competition: magnified by the house measuring, car measuring, ring measuring, and all kinds of material consumption, compounded by our diet of aspirational imagery.
Really, investing should be just a numbers-over-time game. But in Australia (and throughout the world) investing has instead been hijacked by ego.
I've been thinking more about Spaceship Voyager, and at its heart, our app is essentially for people who don't want to let their ego get in the way of long-term investing.
It's not for the traders, the short sellers, the gamblers or the speculators.
Instead, the two managed funds offered by Spaceship are for the careful, smart mob; those who have the wherewithal to gain exposure to the share market and maybe even make investing a habit by establishing a regular investment plan.
They're the type that invest for the long term, and aren't the type to hysterically yank their money out of the market at the first signs of distress.
They like learning about the curious world of capital allocation and business strategy, and small gyrations in the share market don’t fill them with indignation or alarm.
It’s got me thinking about ego and personal finance and how we - individual managers of our own small empires - can begin recalibrating how we see the world in such a way as to give ourselves some breathing space.
Small actions and mental models that allow us to become owners rather than renters.
Become those who aren't beholden to the sticky label of consumer, and instead be one of those who can see the world objectively and calmly, and can leverage its growth to suit ourselves.
Getting rich quickly is an aberration at best, and unreliable at worst.
Investing - such as by investing in a Spaceship Voyager managed fund - can help to grow wealth slowly over time. (Please note, investment returns can sometimes be negative or non-existent but over the long-term the overall market generally trends up.)
And while that’s bubbling away, another way to build wealth is through a thoughtful brand of frugality. During the week a New York Times piece did the rounds about the FIRE movement. It stands for Financial Independence, Retire Early and the story had the delicious title of “How to Retire in Your 30s With $1 Million in the Bank”.
The movement promotes communities of people laying out precisely what they earn, what their goals are and how they are orienting themselves towards achieving them, through the rejection of consumerism and the adoption of moderation.
Now certainly, there is something naff (dare I say entitled?) about a bunch of folks who were possibly working too hard at $200,000 a year jobs and have decided to peel out of the rat race. (Even though, you go Glen Coco!)
But at its heart the movement is about frugality; about being economical with one’s money, stretching it further and ignoring the glaring lights of Buy More Stuff.
That this is a movement unto itself is powerful and heartening for our generation, in my opinion.
Benjamin Franklin was a superb fruglar. He was never thought of as a cheap man, but instead as a smart allocator of capital in both his home and his businesses. He and his wife were masters of home economics, you might say.
In a bid to look more critically at combating affluenza in Australia, we’ve started reading some books on frugality, talking to people about it and writing some posts.
Each week we are going to bring you some Real Money Talk stories with Real Australian People about How They Manage Their Money. The first one is on Caitlin who lays out how she built a net worth of $3.9 million and where her assets are now distributed.
Thanks for the notes on ESG (environmental, social, governance) investing last week. We are in the process!
Also my apologies for stating incorrectly that Tencent was the maker of Fortnite. Tencent has a 40% holding in Epic Games, the maker of Fortnite. Thanks for those who emailed that in.
Enjoy your week.
Ps. Also how’s this! The first frugality book I picked up gave me some earnest advice about how to select fresh roadkill to save on protein costs.
That level of frugality is kind of overkill for me. But again, if that’s your bag, you go Glen Coco!
Tesla’s CEO Elon Musk smoked a joint weirdly in an interview and shares took a 6% dive, according to Bloomberg data.
Spaceship’s investment team are kind of disappointed the focus was all on the fact he was having a (totally legal) toke, when the rest of his conversation with Joe Rogan was really interesting. They talk about AI, electric planes, social media and the possibility we all live in a simulation.
More broadly, of the securities within the Spaceship Universe Portfolio, Tesla shares are the most volatile (which generally means it’s more risky). Tesla is currently scaling its production so it’s not profitable yet, analysts generally compare Tesla to typical car companies – like General Motors which trades on a market value to sales ratio much lower than Tesla.
We think, Tesla’s branding, software and growth mean it should be valued more like differentiated brands such as Ferrari (which trades on a much, much higher market value to sales). As of last night the shares were up 8% more than recouping last week’s podcast fall. This is why we focus on long-term investment trends and not day-to-day volatility.
We also learned that there are heaps of Tesla Easter Eggs - small technical surprises - like this car ballet dance.
Jack Ma is stepping down as executive chairman from Alibaba in 12 months time, almost 20 years after he founded the e-commerce giant. Ma says he plans to focus his time on philanthropy and education.
Ma has been backing away from Alibaba over the past few years, stepping down as chief executive officer in 2013. The current chief executive officer, Daniel Zhang, will succeed him and Ma will remain on the board until Alibaba's annual meeting of shareholders in 2020.
In 2016, Ma joined Bill Gates and a few other tech luminaries in a clean-tech investment fund called Breakthrough Energy Ventures and has long advocated for educational reform that would help produce more entrepreneurial students both inside and outside of China.
BWX is the biggest natural beauty business in Australia and its main brand is Sukin (which represents 85% of company sales).
The CEO and CFO are currently on leave after they teamed up with Bain Capital to try and take the whole business private and off the ASX. (The bid is worth $803 million and values the company at $6.60 a share).
The CEO already owns just under 8% and it’s up to the board if they will have them back if the deal falls through. BWX has extended the amount of time for it to consider the bid and maybe find other buyers.
When the bid was announced on 21 May 2018, the share price jumped just over 35% (for a closing price of $5.97) on close of the market the next day according to Bloomberg data, but has since drifted to $4.00 (as at close of markets on 7 September) - which is lower than the asking price...this indicates the market doesn’t think it will happen.
Important! We’re sharing with you our thoughts on the companies in which Spaceship Voyager invests for your informational purposes only. We think it’s important (and interesting!) to let you know what’s happening with Spaceship Voyager’s investments. However, we are not making recommendations to buy or sell holdings in a specific company. Past performance isn’t a reliable indicator or guarantee of future performance.
The Spaceship Universe Portfolio invests in Alibaba, BWX and Tesla.
The Spaceship Index Portfolio invests in Alibaba.