Interesting talk on capital preservation

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Hal
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Interesting talk on capital preservation

Post by Hal » Mon Jul 09, 2018 6:29 am

Any thoughts welcome! Enjoy, it runs for 2 1/2 Hrs.

https://www.youtube.com/watch?v=a4_U6bS-cU4
Pet Hog
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Re: Interesting talk on capital preservation

Post by Pet Hog » Tue Jul 10, 2018 4:26 pm

Thanks, Hal. I did enjoy the conversation. Lots of sanity in Deden's ideas. Definitely recommended for PP aficionados. In essence, his style is to invest in things that are scarce, permanent/enduring, and independent -- gold being a major example (35%), along with salmon farms, barrel makers, and other boring industries led by honorable people. Distrust of governments, finance, media, debt. No mention of his returns, but I guess his clients are happy. The goal is capital preservation, not growth. The video is beautifully filmed, with gorgeous scenery of the Swiss alps. I enjoyed watching for that alone!
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Xan
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Re: Interesting talk on capital preservation

Post by Xan » Mon Jul 16, 2018 6:03 pm

Fantastic interview. I haven't quite finished. But he captures a lot of the things we talk about here: how money isn't real but real things are real.

He's not in gold because he thinks it's going to go up: he considers gold to be his liquid asset so he can jump on other things. He certainly doesn't believe that his liquid asset should be a claim on anything else. He doesn't want it to be somebody else's debt, he doesn't trust governments or ratings agencies. So it's gold, which certainly is scarce, permanent, and independent.

He's really down on almost every company, certainly everything where finance is involved. The idea is that any public company's primary business is its stock. The actual business they're in is just an obstacle to the stock going up. He believes in being an OWNER, not an investor. He's in it for the really, really long term. He likes to buy 1, 2, 5, up to 10% of closely held private or semi-private companies which are primarily owned by one or two families.

Bic. Bel. The company that makes the exciter that is in every airbag. There are thousands of companies making whiskey, hundreds making whiskey bottles, but only one that makes machines that make whiskey bottles. He has an interest in that company.

He even said "freedom in an unfree world" at one point! Perhaps he's read the book?

Really the theme is the search for economic value rather than financial value.
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Re: Interesting talk on capital preservation

Post by barrett » Thu Jul 19, 2018 2:05 pm

Both Pet Hog and Xan have hit the nails on their heads with their summaries of the video. Just wanted to add that gold is discussed from roughly 1:38:10 to 1:48:20.

Not sure how much small, individual investors can take away from the video, but for PP influenced investors it's striking that someone who is only managing about $330,000,000 in assets owns three tons (metric, I assume) of gold.
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Re: Interesting talk on capital preservation

Post by Xan » Thu Jul 19, 2018 2:54 pm

barrett wrote:
Thu Jul 19, 2018 2:05 pm
Not sure how much small, individual investors can take away from the video, but for PP influenced investors it's striking that someone who is only managing about $330,000,000 in assets owns three tons (metric, I assume) of gold.
Towards the end he talks about how they're looking into listing their fund on the stock market. The irony is of course not lost. But the point is, it would allow them to be something other than a "rich men's club".

A fund such as this, made primarily of ownership interests in companies which are closely-held, intergenerational, long-lasting, independent, etc, could be an interesting "fifth leg" of a modified PP.

Mr Deden says that he treats the money he's entrusted with as though it's all the money somebody has in the world. He recognizes how hard it is to hold onto real value having acquired it, and that it may not be possible to reacquire it. He believes that "permanent capital" (the kinds of companies he buys) is the answer for "permanent savings". Come to think of it he says a lot of things that sound Browneian.
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Re: Interesting talk on capital preservation

Post by barrett » Wed Jul 25, 2018 3:59 pm

I have to say that I'm a bit surprised this thread hasn't had more posts due to Deden's insightful thoughts on gold.

One question I had after watching the interview was why he says (just after the 1:46 mark) that gold is cheaper in nominal terms than it was when he first bought it in 2001. At first I thought he must have meant real terms and that he just misspoke. But I'm curious if Deden might have a different measure for gold's value other than what it's actually priced at in USD. Technovelist, are you still out there?
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Re: Interesting talk on capital preservation

Post by boglerdude » Wed Jul 25, 2018 9:04 pm

2 hours of confirmation bias for goldbugs :) Natural human skepticism has to be shut off when it comes to passive investing. Not sure what other areas of life are similar.
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Re: Interesting talk on capital preservation

Post by hardlawjockey » Wed Jul 25, 2018 9:43 pm

boglerdude wrote:
Wed Jul 25, 2018 9:04 pm
Natural human skepticism has to be shut off when it comes to passive investing. Not sure what other areas of life are similar.
Religion comes to mind, and maybe politics, but I'm not sure what you mean when it comes to passive investing. Are you saying that we should be naturally skeptical of it but aren't?
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Re: Interesting talk on capital preservation

Post by boglerdude » Wed Jul 25, 2018 10:48 pm

Passive investing is painful cuz we're naturally skeptical, look at all the fruitless hand-wringing on Bogleheads about factors etc. Passive investors cant investigate the businesses they buy, its a leap of faith that the economy will grow

On the other hand skepticism and effort can yield results if you run a business or real estate. With the later you can research neighborhoods, fix it up, wait to swoop on deals etc.

All that said I cant stop reading Bogleheads xD
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Re: Interesting talk on capital preservation

Post by hardlawjockey » Wed Jul 25, 2018 11:06 pm

boglerdude wrote:
Wed Jul 25, 2018 10:48 pm
Passive investors cant investigate the businesses they buy, its a leap of faith that the economy will grow
Well, they CAN investigate the businesses they buy, but then they wouldn't be passive investors.

I don't see how it is a leap of faith to believe that economies tend to grow. Unless acted upon by external forces this would seem to be the norm to me.
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Re: Interesting talk on capital preservation

Post by D1984 » Wed Jul 25, 2018 11:35 pm

Xan wrote:
Thu Jul 19, 2018 2:54 pm
barrett wrote:
Thu Jul 19, 2018 2:05 pm
Not sure how much small, individual investors can take away from the video, but for PP influenced investors it's striking that someone who is only managing about $330,000,000 in assets owns three tons (metric, I assume) of gold.
A fund such as this, made primarily of ownership interests in companies which are closely-held, intergenerational, long-lasting, independent, etc, could be an interesting "fifth leg" of a modified PP.

Mr Deden says that he treats the money he's entrusted with as though it's all the money somebody has in the world. He recognizes how hard it is to hold onto real value having acquired it, and that it may not be possible to reacquire it. He believes that "permanent capital" (the kinds of companies he buys) is the answer for "permanent savings". Come to think of it he says a lot of things that sound Browneian.
Pet Hog wrote:
Tue Jul 10, 2018 4:26 pm
No mention of his returns, but I guess his clients are happy. The goal is capital preservation, not growth. The video is beautifully filmed, with gorgeous scenery of the Swiss alps. I enjoyed watching for that alone!
Here is a graph of this fund's return since inception in late 2001:

https://ibb.co/dcGQUT

Not bad; around 8.9% a year it looks like based on what I can scrape from the chart manually and estimate for CAGR. With that said, it still looks like this lost around 30% MaxDD from the mid-2008 high to the late 2008/early 2009 low and hit its highest value around March/April 2011 and still has yet to recover to where it was then.

I wonder how favorably or unfavorably it would compare to something like SGENX or SGOVX (international balanced to moderate/aggressive allocation equity funds ran by First Eagle that also always hold some cash and gold as "dry powder" to take advantage of sudden drops in stock/bond prices to buy more when said assets are "on sale" ) or even an annually rebalanced blend of, say, 70% OAKIX (Oakmark's international value fund), 15% gold, 10% ITTs, and 5% cash.
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Re: Interesting talk on capital preservation

Post by boglerdude » Thu Jul 26, 2018 3:12 am

> Well, they CAN investigate the businesses they buy, but then they wouldn't be passive investors.

Sort of, but IMO you need insider info to do that effectively. The OP video makes a good point indirectly, that you shouldnt be trading and expect to profit. If Deden's small basket of value stocks will outperform VTSMX is more complicated...especially after his fees ;)

> I don't see how it is a leap of faith to believe that economies tend to grow.

Agreed, but there's a lot of "omg the national debt" "this country is going in the wrong direction" sentiment out there.
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