The Beginner's Mind

The investment quote of the week:

If your mind is empty, it is open to everything. In the beginner’s mind there are many possibilities; in the expert’s mind there are few.

Shunkyu Suzuki, Zen Mind, Beginner’s Mind

Technology and Industry

For insight into how innovation and technology are moving forward today, Marc Andreesen, one of the leading angel investors in Silicon Valley, gives this interview:

http://www.charlierose.com/view/interview/10093

Natural Resource Development & FDI

A couple of interesting articles in the NY Times on FDI for natural resource development in this recession. The first concerns China:

Beijing said on Friday that one of its big state-owned banks, the China Development Bank, would lend the Brazilian oil giant Petrobras $10 billion in exchange for a long-term commitment to send oil to China. China signed similar deals this week with Russia and Venezuela, bringing Beijing’s total oil investments this month to $41 billion. They represent an important investment.

The second concerns the French Oil Company, Total. As their CEO states:

“I make a big distinction between being risky and being bold,”

Capital Structure

We are studying how business models affect financial performance and capital structure over the next two weeks. The blog site Seeking Alpha reviews the mining industry in this way:

Last year should have made just about every CFO in the world take out their old text books to review the Modigliani-Miller theorem in order to review proper capital structures. Most Business models that relied extensively on debt financing were destroyed in 2008 and those not officially destroyed in 2008 are going to be struggling for the foreseeable future. I am not sure that debt driven business models will ever come back, let alone come back in the next 10-15 years.

other references:
http://www.reuters.com/finance/stocks/overview?symbol=RTP.N

http://commodities.thefinancials.com/

FDI and Google

Google latest FDI involves the purchase of a paper mill? Why a paper mill????

Read the following to find out: http://www.washingtonpost.com/wp-dyn/content/article/2009/02/12/AR2009021200587.html?dlbk

China FDI

China's state owned Aluminum company just made a $19BN investment in Rio Tinto, one of the largest mining companies in the world. For details go to FT.

Technology

I am not in the season of technology, but if you are interested in seeing how a great technology company thinks and acts, go here and see the interview of Jen-hsun Huang, CEO and Founder of Nvidia. a $4BN semiconductor that is enabling the next frontier of visual computing. His sheer intelligence and where he is driving the Company are impressive. Makes me want to go buy the stock and hold for the long term--but it's near its post-crash (Sept 15) high.

Barrack Obama and the Way of Business

I feel that I know Obama--even though I have never met him. I feel that I know how he thinks and acts. And I was not surprised that other people feel the same. The below quotes of other people who feel that they know Barrack Obama bring home that we only have our time and how we use it (as cited in the NY Times):

“I keep thinking about how I squandered my education and youth,” the New
York lawyer wrote to me. “I went off to college from high school being
completely community-minded, doing a lot of volunteer work for the homeless and
for hunger and tutoring poor kids. Then I got to college and forgot my ideals.
Barack was my year at Columbia. Why wasn’t I hanging out with him and being
serious and following my ideals instead of hanging out in clubs? Same with law
school. I partied my way through instead of taking advantage of all that I could
have. Both Obamas were there when I was. I feel like if I’d been a better person
I would have gotten to know them.”

And another writes:

“I feel like I know Barack, that I have worked grassroots and have created change in the way that he has. I [also] have feelings of a mom who had possibility but ended up running school auctions and mediating family business matters rather than having the opportunity to be out there on a national level creating change. So when I watch Barack I feel like: I can do that … and what am I doing with my life? Even though he is way smarter and more articulate than me."

Martin Wolfe

Martin Wolfe, a commentator for the Financial Times, is among the most intelligent observers of the global economy. He is interiewed by Charlie Rose here. Quite a provocative thinker on the degree of change that we can expect--things will never be the same. In thinking forward, we must, particularly now, not look back. Maybe this is why the economy freeze and managers look like "deer in headlights"--general confusion, an inability to benchmark or rely on traditional guideposts, and a lack of a clear view of what lies ahead.

George Soros

George Soros is a legendary investor--one whose reputation rivals Warren Buffet. There is an interesting profile of him in this weekend's Financial Times. FTwrites this scenario:

On Friday, August 17 2007, 21 of Wall Street's most influential investors met for lunch at George Soros's Southampton estate on the eastern end of Long Island. The first tremors of what would become the global credit crunch had rippled out a week or so earlier, when the French bank BNP Paribas froze withdrawals from three of its funds, and in response, central bankers made a huge injection of cash into the money markets in an effort to keep the world's banks lending to one another....

The discussion focused on a single question: was a recession looming? We all know the answer today, but the consensus that overcast afternoon was different. In a memo written after the lunch, Wien, a longtime friend of Soros's, wrote: "The conclusion was that we were probably in an economic slowdown and a correction in the market, but we were not about to begin a recession or a bear market." Only two men dissented. One of those was Soros, who finished the meal convinced that the global financial crisis he had been predicting - prematurely - for years had finally begun.

And there was a quite provocative detail about his investment in Russia in the late 1990s. It goes like this:

Some Soros-watchers intimate that his vast network of international contacts might be an important source of his market prescience. But it was in the one part of the world where Soros really did have an inside track - the former Soviet bloc - that he made his most disastrous deal. In Russia, as in much of the former Soviet Union, he was intensely engaged with the country's political and economic transformation. In June 1997, as the Kremlin struggled to pay overdue wages, Soros extended a bridge loan to the Russian government, acting as a one-man International Monetary Fund.

He came to believe in Russia's commitment to reforms, and to see himself as an insider - two convictions that were his financial undoing. He invested $980m with a consortium of oligarchs who acquired a 25 per cent stake in Svyazinvest, the national telecoms company, deciding to participate because "I thought that this is the transition from robber capitalism to legitimate capitalism". But instead, the Svyazinvest privatisation turned out to be the moment when the oligarchs redirected their energies from fleecing the state to fleecing one another. Soros, as an outsider, was an obvious casualty. "Never have I been screwed so much since Russia. For them, they get a satisfaction out of doing it.

"It was the biggest mistake of my investment career. I was deceived by my own hope." In his most recent book he dismisses Russia with a single sentence, further diminished by parenthesis: "(I don't discuss Russia, because I don't want to invest there.)"

So if George Soros gets fooled like this, how can the rest of us find a way in FDI?