Old Dog. New Tricks.

The Wall Street Journal recently came out with a profile on Sharmin Mossavar-Rahmani, a well-respected figure in the Wealth Management industry. She has spent over 2 decades as Chief Investment Officer for Goldman Sachs and works regularly with both their financial advisers and traders. She’s also an astute macro-view investor.

This piece mainly focused on her distaste for digital assets as a viable investment class. A woman with strong opinions, she was quick to share some of those with the author. Two of them in particular jumped out at me:

There’s really no other way to say this, but in my opinion she is just…

There are certainly viable reasons for Goldman not wanting to wade into the crypto waters at this time. Volatility, foggy regulatory views, custodial challenges and overall lack of adviser education are often cited across the wealth management industry. What stuck with me from this interview was an obscure comment made recently by Michael Saylor in an interview discussing Bitcoin. (NOTE: The interview is long, but fascinating)

When Saylor sought board approval for his company MicroStrategy to add Bitcoin to its balance sheet, he sent his board members 10 hours of “homework”, consisting of some video interviews and articles. He wanted them to come to the meeting with a basic framework of understanding of Bitcoin so that they could make educated decisions. Saylor went on to say further that to get a truly firm understanding of Bitcoin, it requires about 100 hours of research and experience interacting with the digital asset.

The most critical point he made though, was that as humans, once we get into our mid 40’s, we are less interested in learning a completely new skill, hobby or topic. Therefore, without a desire to learn how the digital asset ecosystem works, could growth be stymied?

My opinion is….yes…but to a degree. Broadly speaking, 70 year old millionaire investors are unlikely to want to expend the time needed to be comfortable allocating to this space….but they command the lions share of the retail investable assets. However, the next generation IS spending the time learning this ecosystem, they just have much less “dry powder” to deploy. But, as time passes and these next generations (X, Y, Z) accumulate wealth via inheritance or self-creation, then the investment friction begins to fade away.

Final Point: Goldman Sachs has over 2,000 financial advisors, almost all of them over the age of 40. How many of them will invest the requisite 100 hours to get comfortable discussing Bitcoin & cryptography with their clients? What about the 13,000 advisors at Merrill Lynch or the 17,000 at Morgan Stanley?

You get the idea…

Finally, here is what’s on my radar:

lending & credit

Generative AI is an incredible tool that will take many years to harness, but some early applications are causing some to suggest the potential demise of industry sectors altogether. Just this week a good friend told me how Generative AI is replacing a lot of the core functions performed by junior level architects at larger firms and the potential cost savings are significant. In banking, this AI tech might be able to help you continuously shop for the best deposit rates…leaving less tech-savvy banks in the dust.

macro

It looks like more of the “experts” are waking up to the reality that a flurry of rate cuts this year was mere folly. We’ve gone from 6 projected cuts to perhaps 3, and the probabilities on that decline as each month continues to show sticky inflation.

I wrote about my gripes with inflation reporting last time and why the general public simply does not agree with what economists & politicians are saying that (“Inflation is dead” LOL).

Anthony Pompliano sums up the issue well with this tweet:

real estate

The bifurcation of American real estate continues to amaze me. Banks refuse to sound the alarm while Jay Powell hums a different tune. Meanwhile, a 24 story office tower in downtown Denver recently transacted for about the same price as a house in Miami purchased by Jeff Bezos.

Clark Gaines focuses on alternative investment strategies at Almanack Investment Partners, and is based in Charleston, SC.

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