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TIPS, value investing, long bets, arbitrage , double 'yo money$$ weekly, life analysis
01/30/2018 ZYNE Issue 11 - The luck of the draw and its exponential gains
---Greetings :-D ---------
Welcome all new readers! A fine month to start the year of great investing. Things are moving fast in this world, value will keep us steady.
---General <>< -- General market
Cutthroat man, Market did some 4-6% drops. Keep your cash heavy (60-70%) and stock positions light(30-40%) . Ride the downstream with ammo ready to fire! Regardless
of how the market acts, we are in Position due to sizing. Position sizing is how you kubernetize your risk :>
---Growth _____-- Under Armour makes lots of shoes
% of total revenue Year Revenue
14% 2014 431M Shoes/3008M Total
17% 2015 678M Shoes/3960M Total
Lot of shoes and getting much bigger, Shoes is a good business to be in where only a few brands can compete in, You wouldn't catch yourself wearing Pablo's shoes.
To be in this market you need to have a baller brand. Nike, Adidas , UA.
---Growth _____-- The luck of the draw and its exponential 4x-10x gains
The stock market goes up by 20% but looking around, our staples and housing has risen by 20% as well! Seems kind of useless when all of it is just monetary expansion.
To beat this tit for tat gain, the luck of the draw must be in play, To beat the tit of lets say 20%, we need at least 30%.
We arrive in 2010 with $100k in capital which can buy 1 room for $100k.
A room costs $100k in new york city.
2 rooms costs $200k in new york city.
3 rooms (2 bedrooms + 1 living room) costs $300k in new york city.
Fast forward to 2018 with $200k in capital and 10% s&p500 gains per year
A room costs $200k in new york city.
2 rooms costs $400k in new york city.
3 rooms costs $600k in new york city.
10% return at most will stabilize your purchasing power + 8 years of tedious market worry.
If we were to actually grow our capital while also doubling our purchasing power, 18% gain a year is the mininum.
100k in capital @ compounded 18% for 9 years ends up with $440k
$440k , you have doubled your purchasing power and 4x'd your money.
You can now buy a 2 room apartment for $400k.
I don't need to be a math wizard to know that 18%+ is no easy feat in managing risk, you either pulling rabbits out of hats or stuck on inflation.
Hereby comes the luck of the draw for the win o_o
---Growth _____-- RMB: the products, goods and labour currency
Population 2017 / Percentage of world population
China: 1,400,000,000 / 18% of world population
Europe: 740,000,000 / 8%
US: 350,000,000 / 4.3%
Europe + US : 1,000,000,000 / 12.3% of world population
Most of a manufacturing price is based on labor costs. Labor costs are based on the country's GDP / population count.
Europe and U.S.'s manufacturing efficiency is around 95% for the end product (estimated) while priced at full price $1.00 . China manufactures at around 85% efficiency(guessed) while priced
at 1/3rd of the price $0.30, It's no surprise almost everything in china is priced at 1/3rd of western countries. The population is 4x of the U.S and 2x of Europe
The expansive Chinese population forces all products to be priced at 1/3rd normal costs to have a smooth running country
GDP per capita China = $9000 // if multiplied by 4 = $36,000 (U.S. population / China population = 4)
GDP per capita E.U. = $35,000
GDP per capita U.S = $56,000
For goods to be produced at 85% efficiency while costing 0.30$ it's a competitive product against goods produced at 95% efficiency costing $1.00 to the consumer.
Goods , products, and labor. An American company who want to source end products in china, they will need to exchange USD for RMB to start hiring employees, renting warehouses, building factories,
paying health insurance to employees.
China which corners the 1/3rd priced market , customers who wants to buy products or goods at 1/3rd price needs to convert to RMB first.
There is almost a limitless demand for 85% efficiently produced products at cheap prices.
RMB is the products and labor currency, USD is the power currency.
---Risk Management \0_0/ -- One is money saving, Two is one , Three is a company that can sell inventory
Starting out, one quantity of the product should always be purchased at most to contain risk.
When the product is proven useful & reliable, two should be had of the same product to reduce downtime if the 1st one breaks.
Even if Japanese made with machine flexed testing , it will breakdown one day!
If zero to 0.01 downtime is required, a backup of the same equipment must be on hand and waiting. The switch out can be done fast while the first is sent out for repairs.
3 of the same product is useful only if you want to sell this product to people, if it's not being sold, it's being sat in storage as inventory. Storage takes up 5% of profits!
"Two is one"
Sourcelink: U.S. Navy SEALS/Jocko Willink
Until next week or the week after... Zyne Letters.