NOTE: These are the much more informal and indepth notes. If you want to read a short clean summary click on the following link to see what I posted earlier-

Invest for Kids – conference notes


No specific predictions or recommendations – 25 mins instead of 15.

General outlook – “when the situation was manageable it was neglected…” – Churchill

There’s nothing new in finance; today is no difference. EMU is a flightless bird today known as the European Monetary Union. Unit labor costs in Europe could have predicted what happened – German labor costs so much lower in Greece or Ireland so of course unemployment is higher in those countries. Europe holds the answer to its own problem. It’s too dispersed. Most countries least susceptible to problems are in n Europe; most susceptible in S Europe. N Europe could subsidize S but difficult challenge from within.

Talking about 1) perception v reality 2) capital markets

Start w one of most impt questions in history: which came first chicken or egg, c impossible to know – most hands c, b, a – answer is b. Didn’t say chicken egg; reptiles were laying eggs long before chickens existed; and, first chicken was born from two birds that weren’t quite chickens.


Asking the wrong questions

What country has increased oil production the most? A: USA


Commodities have not been a good inv’t relative to inflation … energy … ?

Real estate – mobile / internet, not physical.


Manaus, Brazil – based on 1960s – set-up trade zone, 35% cheaper to produce than elsewhere in Brazil. Foxconn wants to invest 12bn and 100K new jobs. Tax policy works.

Likelihood of change in exotic cities – Shanghai and Beijing will bypass Munich and London. Center of econimic activity moving east. 60% World share of 20-34 year olds will be living in Asia by 2030. Middle class in growing in Asia. China Malaysia Thailand Philippines and India will have growing shares of population in Asia’s middle class.


Capital markets: what is the American dream? Outside US dream is alive and well – equal opportunity, not based on background – and access to capital based on ability.

Prosperity is a function of access to financial capital which multiplies human capital, social capital, and real assets (on balance sheets).

Raw materials were 60% of cost of car but 2% cost of microchip. Rest reflects human capital. Can be increased by –, — and education.

E.g. Elias Zarhouni born poor in Algeria, became director of NIH, now head of global R&D for Sanofi. Importance of immigration.

Of 20 leading science uni’s for science and medicine 5 are foreign, 2 in Canada (u of t, u of BC) – Asians are going there instead of US; 2 in Australia, Melbourne and Sydney; and u Singapore, country built on human capital. 5 in UK, all these ppl would have gone to US if they could.

Warsaw could have been capital of entertainment industry –founders of all major entertainment company was born w/in 500 miles of warsaw but came to US. Viacom, Comcast,, etc predecessors.

½ of all econ growth of last 50 yrs can be traced to medical advances (?) – ½ of all costs related to how you live your life. In us 42% of women and 36% of men are obese, much higher than other countries. Change in Us population weight from 1991/1998 and today costs more than $1 trillion annually à a major part of our deficits. Milekn Inst (?) went to state fairs – for next year choc covered bacon will come out. French fries cooked in bacon fat coming out next year. Deep fried butter can be eaten off a stick, dipped in bacon fat for a little extra taste. [David wanted to be sent to Us but would be returned looking fat.]

Future of US human capital lies in education. US 50%+ of income of housing and education, 2% on tutoring / supplemental education. In 11 asian countries after food @23%, supplemental education is 15% of budget.

Touch on credit for a moment; 6 elements. Over a long time they repeat, we’ve learned very little

  1. Not leveraged and leverage is not the answer, answer is finding a better way to run a business. Today many of the top banks are leveraged 50-100 to 1 (assets to value of equity)
  2. ???
  3. Loans to real estate – not every RE loan is good – Woody Allen ”carried it with him wherever he went” … “it has a house on it” –  not one Texas bank survived the 80s, even residential prices have gone down in 63 of last 120 years. Focus on owning RE should shift to family health and education.   4 companies are AAA but S&P rates 16,000 securities AAA. History has shown sovereign debt to be one of the worst inv’ts Adama Smith: :When national debts have been accumulated … never fairly paid”   Greece – temple of delos in 4th century took 80% haircuts on loans to 13 cities. Greece has frequently defaulted before.


1974 most imp’t year is US financial history, interest rates doubled, stock market, different types of credit. What event occurred in 1974? Creation of hedge funds. Nifty fifty pe multiple went from 66 in 72 to 11 in 81. Investors lost a lot, then moved money to money managers incl hedge funds seeking a return.


Milken family is focused on human capital, education and moving cancer to the history books.


Margaret Mead: never doubt that a group of thoughtful, committed citizens can change the world, in fact it’s the only thing that does.


Barry Sternlicht


“Robin” — One of most successful hotel and RE investors in US via Starwood capital in 1991. Structured over 400 transactions with asset values over $40bn. CEO of starwood hotel chain for over 10 yrs, bought westin, formed W brand. Retired from starwood 2005 and now full time private investment funds plus chairman of starwood property trust, large publicly trade commercial REIT (the largest?).


Starwood has bought a lot of residential land. Recovery is a when, not if, question. Now, lowest housing starts in 50 years even with 50 million for ppl than in 1960, even with record affordability of mortgages. Renting vs buying cost lines are crossing. Rents will go up with demand, yet housing market looks moribund. Ppl have been doubling up in residences, highest multigenerational living since the ‘40s.


Around 1.3 million households are formed a year, recently slowed down. 2.1 ppl per household. Need about 1-1.2 mn new homes for years at equilibrium accounting for renting, but now numbers are sub-500,000. B/c of ppl moving in with each other there is 1.5 million in pent up demand that will be unleashed with consumer confidence.


Foreclosure rates differ widely among states – TX always did fine – and foreclosures nationally are trending down. Funds own “Independence” community in Orlando. Appraisals are hard b/c of comps with distress sales. Projects growth in housing based on population growth.


Not gonna recommend a housing stock but stocks to avoid. Hovnanian or Beazer are high-beta, leveraged. He chose 4 horsemen, Toll (top choice), Horton, Lennar, NVR – equity market caps close, Toll top b/c  haves/have-nots divide and caters to higher end customers, see Neiman sales up Walmart down. NVR has better inventory turns.


Also likes Lowe’s though stock is up in past week. Reduced shs outstanding, dividend, reasonable multiple (15

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