It’s how you get through the winter when every day is grayer and more freezing-cold than the one before. And the kids are going crazy, they’ve grown tired of or broken every toy in the house. So you start kicking a ball against a wall and you don’t stop until the sheetrock’s dented.
The little boy – we call him The Nugget – is fast and kicks hard. I’m the goalie and he whips it by me again and again. “Goal! Goal daddy, right?!?” Then it’s my turn. How hard can I kick it at him now? He’s five but he looks eight. And he’s fearless. Didn’t get that from me.
I kick it and he stops it. “No goal daddy!”
I turn 38 years old today and I find myself thinking a lot about scarcity these days. Scarcity as it pertains to investing and as it relates to living my own life.
Steve Ballmer bought the LA Clippers last year and the financial commentariat howled indignantly about how much he paid for it. “The Clippers aren’t even worth a fraction of $1.8 billion” they railed. To which I thought, well to Ballmer they are. There were actually articles detailing the return on capital required to justify that price, and lamenting the price-to-cash flow multiple. Imagine, talking about valuation multiples on a sports franchise to a billionaire with nothing to do and a few idle decades in front of him. You may as well be speaking Klingon.
We’re talking about a pro sports team in Los Angeles – which is one of the largest, wealthiest media markets on planet earth. And there aren’t ten basketball teams up for sale on the west coast. There aren’t even two. There was one. And it happened accidentally. The Clippers are the scarce resource – they’re worth whatever the guy who wants them is willing to pay.
Scarcity is driving so much of what’s happening right now. Ten thousand Baby Boomers will turn 65 years old today. Another ten thousand will turn 65 tomorrow and then every single day after that for the next fifteen years. I’m not exaggerating. They’re living way longer than their parents did and way longer than they’d originally expected to. 25 percent of them will make it into their nineties. What do they need more than anything? It sounds crazy, but they need stocks. Bonds aren’t going to cut it for a thirty year retirement, unless you include some supplemental income from Wal-Mart greeting or running retirement home affinity scams.
And stocks are scarce. The good ones anyway. There aren’t ten Disneys, there’s just one. There aren’t two Apples, there’s one. Buybacks have shrunk the quantity of S&P 500 company shares. Zero-percent interest rates have ballooned the demand for dividend-paying blue chips.
The stock market won’t go down because too many people need it to. It’s not rocket science.
Uber is worth $40 billion. Not the business, mind you, the private-market shares. The business is probably worth a lot, but not $40 billion. But the shares are because they are scarce. You can’t be a venture capitalist and not own them, or have access to them. What kind of a piker VC misses out on Uber? It’s like being at a monster truck rally and not having that t-shirt where the Ford pisses on the Chevy. You may as well go home. That’s why they’ll pay any amount.
Goldman Sachs struck a deal to get access to pre-IPO Uber shares for their wealth management clients. Those clients will never bring up performance, management fees or commissions ever again. The scarce resource covers a lot of ground and works magic wherever it goes.
Same with Shake Shack’s newly minted shares. There’s only one Shake Shack; if you manage a growth fund and miss out on what could be “the next Chipotle”, you’re fired. So you just pay for it. Seven times enterprise value to sales? YOLO. Eight firms on Wall Street initiated coverage of SHAK yesterday. All but one has it as a “neutral” or a “market perform” rating. Every single analyst said the same thing – I’m paraphrasing here – “God, we wish this thing would come down ten points.” That’s how you know it probably won’t, and they’ll be upgrading it later, higher. There’s only one.
Time is scarce. There isn’t enough of it by half. There’s so much I want to do, I have to do. It’s a good problem to have but it’s still a problem.
I guess I’m almost famous now. I sign autographs in airports and pose for selfies (ussies?) in steakhouses and bars where finance people hang out. I fly around the country and beyond meeting clients, potential investors and giving speeches to my industry. People read my books and actually take the time to write to me about them – emails, letters, postcards. I’m still amazed that anyone cares what I think. Not long ago, I had an empty bank account, two babies to raise and a ten-year career at fourth-tier brokerage firms with nothing to show for it. I’ll take my new problems over my old ones any day.
I’m getting much better at prioritizing my time, as circumstances have forced me to. I’m only doing the things where I can actually add value and derive some value back. I’m saying no to stuff too, finally. But every once in awhile something slips through. I just shot the cover for a Swedish airline’s in-flight magazine. OK, so I don’t have this down to a science yet.
I have a lot of help. My advisory practice is run by absolute ninjas. It’s scary how good we’re getting in such a short period of time.
And when I’m not working, I’m doing my best to keep everyone from getting mad at me.
My friends are getting older too. They’re getting cancer. What the fuck? Ten years ago I was drunk at all of their weddings. Now the only time we hang out is when one of their parents die, which is like every other week. I should spend more time with my parents, before…
Also, I should get to the gym. It’s been six days. I’ll go later. Always later.
More scarcity. Scarcity is, paradoxically, in abundance every where I look.
Back to soccer. The kid is winning – 18 goals to my 5 in a game to 21.
And then he starts losing. And then I realize it’s on purpose.
“Why are you letting me score, Nugget?”
“Because if I win, the game will be over and you’ll go back on your computer. And I want to play with you forever.”