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Wealth advisers at banks and independent brokerages generated billions of dollars in fees by steering individual investors into private market funds, which many retail investors are now trying to flee.

“The advisers themselves are stuck in this incentive structure where their behaviour is going to be aligned with pushing clients into these products,” said Shang Chou, the co-founder of the multi-family office Dishmi Capital. “It’s not a surprise that this stuff has been over-allocated to the retail investor base.”

As scrutiny of private credit has intensified, some on Wall Street have pointed the blame at incentive structures that herded rich investors towards these products as contributing to the asset class’s rapid growth. “Of course they’re incentivised by these fees,” said Bob Elliott, the co-founder of Unlimited Funds, referring to advisers at big brokerages, also known as wire-houses. “Any person who has a wire-house adviser knows that they’re constantly being pushed products that are financially [beneficial] for either the adviser or the wire-house, or both.”

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I’ve received a ton of feedback since releasing Low Risk Rules, including from commissioned advisors who claim that I was a bit too rough on them. It could have been even worse! At the last minute, I deleted an entire section that discussed the pervasive sales culture in our industry. It’s not in the book’s print version, but reproduced below.

“Eat what you kill.”

I first heard this expression in my early 20s when I interviewed at a prestigious bank brokerage firm. I’m not going to mention which one, but they had the nicest statements with a really upscale font, and I was excited to be considered for a role there.

“I don’t care if you’re the next Warren Buffett,” I was told. “If you can’t bring clients in the door, you’re not going to succeed.”

It was disillusioning to hear this because at this early stage in my career I still had this idealistic vision that if you did good work, you would naturally be rewarded for it. As I spoke with people at different brokerage firms, it painted a picture of a culture I just didn’t feel comfortable with. It was a numbers game. “Rookies” would be expected to make a minimum number of calls and at the end of each week the new assets each brought in would be posted up on the wall for all to see. The idea was to stoke competition among the recruits. The reality is that most wouldn’t make it out of year one.

“Come back for a second interview,” I was told, “and bring back a list of 50 friends and family you’re going to approach about becoming clients.”

For obvious reasons, the idea of using my friends and family as a launching pad for a sales position left a foul taste in my mouth. I never returned.

Another firm gave me an aptitude test, which I quickly realized was all about sales skills. I tried to fill it out with the answers I thought they would want, but still never heard back. The test was probably structured well enough to filter out the people only pretending to be status-seeking extroverts because they want a job as a broker.

Look, there are good people who work at these places. They have come up through the culture with their integrity intact and do the best for their clients. I know they exist, because I know many of them personally. But when you build a culture of incentives around selling, you make it hard for these quality people to survive and thrive. And you subtly change them over time. I’d love to tell you that if I worked in such an environment for a couple of decades I’d be the same person I am today, but the reality is that I probably wouldn’t.

In pursuit of profitability and efficiency, the brokerages are constantly thinning the herd, dismissing the least profitable advisors and reallocating their clients to the ones at the top. And so it becomes a literal fight for your business… each and every day.

As Upton Sinclair famously said, “it is difficult to get a man to understand something when his salary depends upon his not understanding it.” It’s easy to convince yourself that what you’re doing is best for your clients when your job depends on it.

As a prospective client, you should understand that the incentives this industry has put in place for advisors have nothing to do with helping you succeed.

Shuffle

Back in the ‘90’s, way before Spotify was a thing, the internet opened up a whole world of music. There was Napster, of course, but also the opportunity to stream some of the best radio stations on the planet. A friend introduced me to Triple J, which quickly became my favourite listen.

It just so happens that thanks to being featured in Morningstar FirstLinks a few times, I have a disproportionate number of readers in Australia, the home of Triple J. It’s pure coincidence, but as this week’s “shuffle” was chosen, I noticed that it’s not the first time I’ve featured an Australian artist. I’ve already written a bit about Nick Cave here, and this week I’ll keep the love flowing to our Commonwealth cousins.

This is a bit of an obvious one. As far as Australian music legends go, everyone knows INXS, but how well do you know Welcome to Wherever You Are, their 8th studio album?

It’s overshadowed by their 80s hits, and in my opinion it’s criminally underrated. Listen to the whole thing.

Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord.

— Matthew 25:23 (The Parable of the Talents)

In the Biblical Parable of the Talents, a master entrusts his servants with a certain number of “talents” before he embarks on a journey, each according to his ability.

The first receives five talents, the second is given two, and the last, just one.

The word talent in the parable was intended to connote a certain weight of silver, with each representing approximately 20 years worth of labour.

This is tremendous wealth, so you can imagine the level of fear and responsibility felt by each of the servants.

Upon the master’s return, the first two servants return to him double what they were originally given, receiving from him the blessing that opens this piece.

The third, however, was afraid of his master, and rather than risk the loss of that single talent, he buries it, and returns only what he had been given. The master becomes angry, and demands that the single talent be taken from that man and given to the first servant. “For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath.”

One of the things I always found most striking was the inequality of the distribution of talents to the servants. No explanation was given for this.

But an important clue is given at the beginning of the story. If the talents were distributed to each “according to their abilities,” it tells us that to the extent that we have been blessed with gifts, be they material or immaterial - we are expected to work to multiply them - not to bury them for our own benefit.

Basically, it doesn’t matter what you have, or what you are given. What matters is what you do with it.

Each of us is granted a set of gifts, and has a lifetime to put them to productive use. And ultimately, whatever we have worked for doesn’t belong to us - it’s returned to our master.

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This parable resonates with me because my career has given me the opportunity to help other people with the stewardship of their own gifts.

Done well, this work can have a powerful multiplier effect. Over years and decades, it can leave families more secure, charities on firmer footing, and the community and world I live in a little better off.

I feel like I’ve only just begun this work, and hope to pass the torch when the day comes that I’m no longer able. It’s part of the reason I wrote Low Risk Rules, and the reason I continue to write here.

My belief is that our job here on Earth is to make the most of our “talents,” in service to others. Whether unique skills, financial wealth, or both… on the last day, we will be called to account for what we’ve done with the gifts we’ve been given.

Blessed Pascha to all who celebrate the feast.

BlackRock Slashed Private Loan Value From 100 to Zero

BlackRock Inc. slashed the value of a private loan to zero at the end of 2025, just three months after assessing it at 100 cents on the dollar, marking the second sudden wipeout to recently hit its private-credit division.

“While a small loan in a troubled niche, its abrupt markdown highlights what critics describe as a key fault line in private credit: the lag between valuations on illiquid loans and the deteriorating performance of the companies behind them. Zips Car Wash was valued near par by its private credit backers in the months before it sought bankruptcy protection. And in November, BlackRock TCP slashed the full value of loans it extended to Renovo Home Partners, a struggling home improvement company.”

I wrote an entire chapter in Low Risk Rules about how private funds hide volatility. It’s an idea I keep coming back to here as well, particularly because it has become so timely. The book came out 4 years ago when private funds were all the rage, but this outcome seemed inevitable, only because we’ve seen it before.

This isn’t a blanket criticism of private funds. Rather, it’s about how they are marketed as “uncorrelated” and “low volatility.” If you’re not marking something to market every day, of course it will be uncorrelated and low vol. But then stuff like this happens, and it serves as a wake up call. Unfortunately for too many investors and advisors, it’s too late.

The Music Has Stopped in Private Markets

Semi-liquid private market funds suffer many flaws, but the most egregious is that they violate one of finance’s oldest principles: never fund illiquid assets with redeemable claims unless a lender of last resort stands behind the structure. Private market managers have not only defied this principle, but they have also amplified the risk by selling these structures to individual investors, who historically are far more prone to run when conditions deteriorate.

What is interesting and often under-reported is that the supply chain does not operate in isolation. It is reinforced by a network of amplifiers that includes trade media, trade associations, and academia. These amplifiers often repeat the prevailing narrative that private markets provide superior returns and diversification benefits. When these messages are repeated across multiple trusted intermediaries, the overall system gains momentum and skepticism becomes increasingly rare.

The run on private markets will likely accelerate and spread. Many investors will be affected, and the process has only begun.

The Fake Cartier and the Fake Rockefeller

“If you think about it, the family office rules the world,” said Rachel. “They are our most generous benefactors — they’re the ones who support funding for biotech or robotics.” Family offices control an estimated $5.5 trillion of capital, ranking them with Wall Street’s biggest banks. But in the financial world, they’re often the butt of jokes. There are notable exceptions, yet overall, family offices have a reputation for being somewhat unsophisticated — a sort of dumber money. Many of them make investments based on the whims of one very rich dude or, worse, the whims of his children who have no business experience or financial acumen of their own.

A joke among family offices goes, “You have a family, you have an office, you have a family office.” In other words, there are few specific qualifications or regulatory requirements for setting one up, making them both a potentially easy target for cons as well as ripe for fakers. When I spoke with people in the industry, many wanted to warn me about a roster of unscrupulous characters they believed to be scamming family offices.

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Bartzen’s professional life, however, was blossoming. She started landing speaking gigs in front of high-net-worth audiences. In May, she spoke on a panel at a Family Office Club summit in New York, where she was touted as an “angel investor.” “She said she was an angel investor and not raising capital, and we had no reason not to believe her,” said Richard Wilson, president and founder of the Family Office Club. She told many people on the party circuit that she’d been the “mastermind” behind the launch of several blockbuster drugs on the market, including Botox and the Merck cancer drug Keytruda.

Infinite midwit

I get a market update newsletter every morning, and over the years I have noticed that it has been afflicted by the insidious creep of “AI speak.” It’s a “free” newsletter for clients of this particular firm, but what you don’t pay in money, you pay in time. And I always get annoyed when I find myself reading something that was obviously put togehter by AI. If you as a writer can’t be bothered to write the words, why do you expect your readers to spend their precious time reading it?

It’s cool that AI can fold proteins, create websites, fact-check journal articles, etc. but it can’t write anything that I am interested in reading. The problem isn’t that it hallucinates or makes mistakes. It’s that everything it writes vaguely sucks. I drag my eyes across the words and I feel nothing. That’s not quite right, actually—I feel like, “I would like this to be over as soon as possible.” When I see the ideas that the machines think are insightful, I wince.

The computer doesn’t know any of this. It can’t know any of this. It can only read the cookbook; it can’t taste the meal. Objective knowledge can make your sentences true, but it can’t make them alive. Without access to subjective knowledge, you quickly hit a wall. And unlike all previous walls that AI has surmounted, you can’t overcome this one by scaling—either in the literal or metaphorical sense—because it’s a wall with a width you cannot describe and a height you cannot see.

As Montaigne put it back in 1580, “though we could become learned by other men’s learning, a man can never be wise but by his own wisdom”. What does it look like to have all the learning ever created, but no wisdom of your own?

Shuffle

And now for something completely different… (for real!)

My hopeful view on the tariffs was that the administration would see the folly of their ways and backtrack, and in many instances that is exactly what has happened. While never admitting they were wrong, the act of walking back imposed taxes and announcing “deals” to appease the market indicated that they knew that a country can’t tax its way to prosperity (despite the president’s proclamations to the contrary).

The tariff story is ongoing, but it has been eclipsed by the start of yet another war in the Middle East. Here, the stakes are higher, and the potential range of outcomes extraordinarily wide. This is what we call risk.

The dream of quick “regime change” has revealed itself to be illusory, but this only forces the US and Israel to double down. My own view is that this ill-advised adventure was prompted by surprising success in Venezuela, which emboldened another, significantly larger, gamble in Iran. So far, it’s not going as planned.

When you can’t just “cut your losses”

We warn against this in finance. Every trader knows that hot streaks always end, and loosening your risk management is a recipe for disaster. They also know that it’s a cardinal sin to turn a “trade” into an “investment.” The trader, unwilling to take a short-term loss, talks himself into believing that holding for a while longer is a good idea (“I’ll sell when I get back to even”). These adventures almost always last longer than expected, and often don’t work out at all.

The problem is, it’s not always as simple as hitting the “sell” button. In the case of Iran, it’s possible that an irreversible mistake has been made by people who were far too overconfident, and now committed to continuing along a path that has potentially catastrophic consequences for the entire world. A good dose of humility might have prevented this potentially misguided adventure. From this point, none of the options are good ones, and all leave us arguably worse off than we were a month ago.

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Move fast and break things

Now the president is an entrepreneur at heart, of that there is no question. And a recurring theme in Low Risk Rules is the idea that entrepreneurs think about risk far more differently than the rest of us (and especially us financial analysts).

Whereas the job of the analyst is to try to consider every possible thing that can go wrong with an investment, an entrepreneur simply can’t think that way. They would be unable to act, paralyzed by fear and anxiety. They have to get things done regardless of the risks. That’s how Donald Trump got here. Yes, he’s racked up a lot of failures, but he certainly doesn’t dwell on them, and this is a key to the success of the entrepreneur.

The problem is that I believe that this personality trait is fundamentally flawed when it comes to making irreversible decisions like potentially setting off another world war. If the Iran war was a stock trade, and Trump an astute trader, the right move by now would have been to sell out, take your loss, and move on.

But it’s not, and he can’t.

As I wrote in Low Risk Rules: “The famous Facebook corporate motto ‘Move Fast and Break Things’ is a great philosophy if your goal is to foster innovation. But it is the antithesis to intelligent investing.”

I guess the same thing might apply to global diplomacy at the highest level, and with the highest stakes.

The weight of your decisions

On a much smaller scale than the president, the investment decisions I make are actually reversible (often at the cost of incurring a capital loss). But they still weigh heavy, because enough bad decisions have the potential to impact the ability of people to retire comfortably, or to reduce the amount bequeathed to heirs or charities. I spend a hell of a lot of time wondering which of my assumptions are wrong, and trying to adapt my world view to the facts I observe as they unfold.

I feel like that kind of introspection might have saved the world from the current situation: another quagmire that has already cost too much money and too many lives.

This isn’t about politics. This is about allowing your pride to lead you over the edge into the abyss. As I wrote last year:

All that we can really do is hope that the president’s instincts are correct.

I fear that they may not be.

But of course, I could be wrong.

I hope I am.

What to do?

Love this excerpt from Tony Deden (thank you for the pointer):

It is easy and almost unavoidable to become caught up in the headlines of the day. We witness a raging war in the Middle East, having the potential to reshape energy flows, trade routes, and even more ominously, geopolitical alignments. It seems that it could even get much worse. The headlines command our attention, financial markets respond in real time, and narratives shift by the hour. It is natural to see each development demanding immediate interpretation. Yet, we are not served well by constant reaction. Instead, we need the kind of clarity that begins by stepping back from the noise and focusing on what actually matters over time.

Governments and politicians lie. The press lies. Treating official narratives as solid ground, especially in war, is a mistake. In wartime, truth is obscured by design. Information is delayed, manipulated, framed for effect, stripped of context, and turned into propaganda. Each side presents its own story. Reporters recycle claims they cannot verify and analysts mistake access for insight. The videos that circulate on social media are often AI-manufactured. As a consequence, we are left trying to build certainty out of fragments, contradictions, and deliberate distortions. There is no denying of this reality.

In such an environment, one can spend endless energy sorting claims, disputing events, parsing official statements, and chasing “breaking news,” only to discover days or weeks later that the underlying picture was very different. In my view, the more important discipline is not reaction but inference. If truth in the moment is obscured, consequences are not. They unfold with a logic of their own. Ergo, the essential task is to think forward.

Shuffle

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Shuffle!

Don’t you just love the serendipity that sometimes appears when you just put your music library on shuffle and let it take you where it may. Sometimes it launches you jarringly from Arvo Pärt into System of a Down and you swear you will never hit that damn button again.

But sometimes it knows exactly what to play.

It’s a flight home after vacation, and as we begin the descent, the cabin lights turn off and the first notes of Funkadelic’s Maggot Brain fill my ears. The song was timed perfectly to absorb the atmosphere of the dark cabin, the city lights below, and the somber mood of returning to the real world after a week on the beach, ending the exact moment we rolled into the gate. Perfection.

Maybe you’re attempting to dismantle Iran’s nuclear capability, with a side order of regime change, and then they go and close the Straits of Hormuz. Oops! Who could have seen that coming?

Or maybe you’re just headed on vacation with a draft of next week’s letter on your hard drive, when on day one you open up the computer to find the keyboard and trackpad unresponsive, leaving your computer disabled and your draft stranded. Oops!

Anyway, you won’t be reading what I was hoping to post this week. Instead, here’s a clip of me on Bruce Sellery’s Moolala podcast talking about Low Risk Rules. Bruce and I share a publisher (Page Two, who I can only say great things about) and he was gracious enough to host me on his show.

No promises when I can return to regularly scheduled programming. Fingers crossed!

The first time I did so, in December of 2022, a large Canadian mortgage lender with a sterling reputation decided that they would suspend redemptions on a fund that was marketed to investors as a safe, high-yielding fixed income alternative. As I write this in early 2026, the fund still has not resumed business as usual.

The investment returns, once reliably in the high single digits, since turned negative.

Oops!

But this was just the first of many. There are others. I have a client who owns one of these failing private funds from their prior advisor. We are trying to help them sell this thing, to no avail. Last quarter the fund manager was able to redeem 0.07% of the requested units for sale. That’s not a typo. That’s seven one-hundredths of one percent.

In other words, the client is effectively trapped.

And then this week news hit that yet another private Canadian real estate investment fund would be freezing redemptions, and is considering going public to grant their unitholders liquidity. This seems to be to be a fascinating opportunity to see what kind of value the public markets are willing to place on non-traded assets. I’m not sure exactly how this story ends, but it could accelerate the rush out of private funds.

(In case you’re wondering, I’m purposely leaving out the names of these firms to avoid dealing with the inevitable blowback from advisors who have client money in these funds. Let’s just say, if you know, you know. And you probably wish you didn’t.)

Look, there’s a clear pattern emerging here, and it’s not limited to the Canadian real estate market. South of the border, things are not going too great either. Blue Owl Capital (Redefining alternatives®) can’t seem to get its name out of the news.

But don’t forget about BlackRock, which limited redemptions in a flagship private credit fund for the first time ever.

Or Blackstone, which reportedly had to inject $400 million of its own capital into a fund to meet redemption requests.

Or this private German pension fund for dentists that blew up €1.1 billion speculating in private assets (oops!)

Meanwhile, this week the FT published a piece explaining how two private equity firms are offering UBS Wealth Management a cut of their performance fees in exchange for pushing their private capital products to their client base, made up of some of the world’s wealthiest private client investors. This isn’t unique, and it tells you a lot about whose interests your high end “wealth manager” is serving when he or she loads your portfolio up with these funds. While the current investors are clamoring to get out, your “trusted advisor” is using your wealth to provide exit liquidity.

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Tone deaf marketing (aka making stuff up and hoping they don’t notice)

And while these private funds increasingly show signs of cracking and buckling under a complete lack of liquidity, the salespeople do their best to keep the cash pouring in from new investors. Coincidentally, this week I happened to come across this slide from a Canadian institutional money manager’s marketing deck, outlining their expected returns under various economic scenarios.

I’m at a bit of a loss for words here, but here is one that comes to mind: bullshit.

The manager expects that in a stagflationary or recessionary economy, public market equities will get crushed. But private equity, and “non-traditional” income (private debt) will somehow, magically, do just fine.

Now, I just gave you examples of private debt funds around the world imploding, all while global stock markets are clinging near all-time highs. If the stock market falls 10-30%, as the manager believes will happen in these potential scenarios, there is no plausible scenario where these private assets go UP. None.

This goes beyond bad investing, or poor investor education. It’s misleading marketing. Less charitably, it’s a fucking lie.

Earlier this week, a young finance student reached out to me and asked if the story I told in my book about Ted was still how things were done. The idealistic student asked if advisors had become more transparent and honest with their clients. Sadly, I had to tell her that, if anything, things had gotten worse. And they will continue to get worse until yet another generation learns the lessons of the past.

It’s why I write this newsletter. It’s why I wrote this book. Help spread the word. Hit the like button below. Review the book on Amazon. Thanks for reading and thanks for your support!

People are worried about Blue Owl liquidity

Matt Levine has a way of cutting through the finance industry’s bullshit in a very lighthearted way.

As long as it’s not your money being lost or locked up in a private fund, it’s a fun read. As Homer Simpson was known to say, “it’s funny because it’s true.”

If you run an investing business, your main, existential job is to keep your clients’ money. One way to do this is by having consistently great returns, so your clients always want you to invest as much of their money as possible. That feels great, and if you can do it more power to you, but it doesn’t always work.

The other way to do it is structural: When times are good, you set up your investment vehicle in such a way that, if times get bad, you can keep the money. When times get bad, this approach doesn’t feel good. It is not fun when your clients complain about you on the front page of the Wall Street Journal. But your existential job, as an investment manager, is not to feel good. It’s to keep the money. And you can control your lockup terms more reliably than you can control your performance.

Private credit is in the middle of a giant push to manage trillions of dollars of retail money, and this is not exactly helpful for that effort. Logically or not, retail investors do want liquidity, and very public liquidity hiccups are bad for business. “The timing is especially awkward because Wall Street is rushing to bring private assets to the masses,” adds Markets Daily. “Trying to convince 401(k) retirement plans to add such funds gets tougher when investors are blocked from exiting.”

Once Wall Street’s High Flyer, Private Equity Loses Its Luster

For the past several years, private equity’s annual returns have been lower than the S&P 500’s.

Between 2022 and Sept. 30, 2025, U.S. private-equity firms have generated annualized returns of 5.8 percent, including investors’ fees. The S&P 500 generated 11.6 percent annualized returns over that same time period, according to the most recently available data from MSCI, a research firm.

And until the companies are actually sold or taken public, a private equity firm’s returns are only estimates of how their companies should be valued. Some investors are growing concerned that they are being left in the dark about the true value of their investments with these firms.

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Is it possible to invest ethically?

Great piece by that very much reflects my own beliefs around “ethical” investing.

Ethical investing does provide a benefit. It just isn’t a public one. It makes the investor feel good. It offers a sense of moral cleanliness and personal alignment. You get to look at your portfolio and feel like it reflects your values.

There’s nothing wrong with that, but we should be honest about what’s happening. The primary beneficiary of ethical investing, at least at this scale, is the person holding the portfolio. The personal satisfaction is real. The impact largely is not.

If you fundamentally cannot stomach investing in a large corporation because of ethical concerns, you should at least be honest about how deeply entangled these companies are in everyday life. Take a company like Procter & Gamble or Chevron. If you buy almost anything from a drugstore, you’re almost certainly giving money to P&G. If you drive a car and buy motor oil, you’re very likely supporting Chevron. Avoiding them entirely is close to impossible unless you opt out of modern life altogether.

At that point, refusing to invest in them doesn’t meaningfully change your ethical footprint—it just limits your own ability to build long-term wealth. You’re still participating as a consumer, just without the upside of ownership.

You only have to get rich once

In Low Risk Rules, I wrote:

Let’s use the example of Masayoshi Son, head of Japanese firm SoftBank, who has tech investments around the globe. A New Yorker article quoted a former SoftBank executive as saying, “Venture capital has become a lottery. Masa is not a particularly deep thinker, but he has one strength: he’s devoted to buying more lottery tickets than anyone else.”

The idea was that venture capital and angel investing, generally, are nothing more than fancy lotteries for tech visionaries.

In this piece, kicks off his essay by examining Son’s investment record as follows:

The ironic part about Son’s journey is that, despite the hundreds of billions of dollars that his company has gained and lost over the last 24 years, his net worth is still only $30 billion, or less than halfway back to his peak net worth. He would have been much, much richer had he exited the game in 1999 than he is now after spending 24 more years investing.

Lots of good stuff here, and it’s not really about Masa at all.

Why is it so hard to hold on to the money we made? Because hitting a home run on an investment is euphoric. And beyond the dopamine rush, it strokes your ego, making you feel smart. Those good feelings cloud your judgement.

Financial returns are a seductive feedback mechanism. When something you invest in goes up by a lot, you feel like a genius, and you want to experience that rush again. And because your last bet was correct, you grow more confident, so you decide to double down on another trade. Maybe that investment works out as well, so you repeat the process again. Positive reinforcement in the form of financial compensation is one hell of a drug.

Now, this essay was written in late 2024 (and I’m just getting to it now….) so some of the investment references are a bit dated (particularly his comment that “if you owned stocks (like, literally, any stocks) or crypto (like, literally any crypto) over the last couple of months, you’ve made money.” But let that be a lesson that when you read comments like that, the end is often near! I feel like this essay actually reads better with the benefit of hindsight, knowing that many of the massive crypto and tech winners he wrote about have been taken out back and shot.

Why Do Investors Play Low Probability Games?

We seem inexplicably drawn towards activities – such as timing the short-term fluctuations of markets or taking aggressive, concentrated bets – where the chances of positive outcomes are poor, yet we carry on regardless. Why can’t we resist playing what seem like the wrong games?

It’s short. Read the whole thing!

Read more books

This focused attention actively shifts your autonomic nervous system from the sympathetic “fight-or-flight” state toward the parasympathetic “rest-and-digest” state. As this happens, you experience measurable physiological changes: your heart rate slows, your breathing deepens and becomes more regular, and your muscle tension decreases.

Reading represents one of our most sophisticated yet accessible tools for nervous system regulation. In an age of constant stimulation and fragmented attention, books offer something incredibly valuable: an activity that simultaneously stimulates your brain and calms your body.

In order to “reduce risk” I will hire several of these faceless groups of suits. The mountain charts will look slightly different, but the overall pattern will be the same. I have a separate folder for each set of statements, and they live next to each other in my study desk drawer. I pull them out at tax time and send them to my accountant. And I move on with my life.

Occasionally the numbers will drop and won’t bounce back. One quarter, two quarters, now three… and the numbers don’t seem to be coming up. The notch in the mountainside is getting larger and larger. All of a sudden I’m feeling less confident in this particular faceless group of suits, and I start seeking an alternative. If an ad catches my eye, or a friend recommends a “great guy” he works with, I might consider switching to a new guy with a new suit. And the process starts anew. We pass this bump in the road, and I move on with my life.

This is one way to do it.

It becomes automatic and soulless. Like the morning coffee you chug every day on the way to work, sitting in traffic, preoccupied with the problems of the day ahead, the pick-up of the kids after school, and don’t forget to swing by the dry cleaner on the way home.  You drink the coffee by reflex, barely registering it as it passes your lips.

Do you remember the last time you really appreciated that morning cup of coffee? Because when you stop to truly enjoy it, that morning cup is magic in a mug.

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I’ll admit that I am a finance nerd, but hear me out on this one.  Have you ever stopped to consider the magic of investing in a company’s common shares?

You can own an actual piece of a company that you admire. A company that may have been founded generations ago halfway around the world. But now you can own a small piece of it. You are effectively hiring that company’s management to take care of the cash you invest with them.

Businesses aren’t static entities. They are living things, imbued with the spirit of their employees and leaders. They struggle. They adapt. They grow. They have cultures and personalities, which change over time. They stumble, and sometimes they fall. The proudest of them can decline and perish, and sometimes the ones left for dead miraculously rise from the ashes.

Most important in the current context, these companies will survive through all manner of presidents, to the left and right of the dial. They’ll survive through trade disputes, embargoes, and wars. They’ll survive through the periodic stock market manias and crashes, and the current investment flavour of the month.

Being able to invest in a business is an amazing thing, and there is a soul and a spirit to doing it well, and caring about it.

When you think about it this way, it changes everything. I’m not passively buying stocks as commodities. I’m buying pieces of businesses. I’m building my empire.

Perhaps the most important element to investment success is sticking with your plan through the inevitable downturns. Owning shares in companies with leadership teams you believe in is a phenomenal way to do that. You’ll ride through highs and lows with them. If you made the right choices, you’ll need to demonstrate patience and faith in their ability to weather the storms. The same management team you admire will use their ingenuity to solve problems and adapt as their environment changes. If you’re an entrepreneur, think of your own business and how many times you faced an uncertain outlook. How many times you had to pivot your strategy in response to changing conditions. But you made it through.

If you think about it like this, you’re not likely to be easily swayed in your opinion by financial news’ sensationalized clickbait headlines, linking to an article written by a reporter who has never run a business in their life.

The stock market is just a reflection of the business world you know so well. The faceless suits have it all wrong.

Did anyone expect Jeff Bezos to transform Amazon from an internet bookseller to a mammoth global retailer, a ubiquitous cloud software platform, a video and music service, and a grocery store?

Or Steve Jobs, resurrecting Apple from near death with the iPod, and eventually revolutionizing modern computing with the iPhone?

Remember Hurricane Katrina, when Walmart’s leadership and logistics proved more adept at getting supplies and provisions to New Orleans than the Federal freaking government, with all of its unlimited resources?

These management teams can be your partners. They find a way to survive and prosper.

They are the heroes. Invest in them.1 Forget the suits!

When you buy a share of a corporation, you’re recruiting their management team to manage your money for you. To find a way to prosper by maximizing long-term shareholder value. If they’ve proven the ability to do it in the past, you can have trust in them to continue to execute. Doesn’t that sound better than hiring a faceless suit to shuffle your money around while optimizing equations littered with Greek letters?

It’s not as complicated as the suits will have you believe.

The best investors are slowly building empires by investing in the heroes.

Is something supposed to change when you come into liquid wealth?

Those new to this world often don’t feel like they fit in anywhere… not with the wealthy, and not with the crowds they formerly felt part of. Some of them go to great lengths to keep their wealth a secret in order to preserve their prior life.

It shouldn’t need to be said, but there’s nothing special about rich people. Not even the ultra-rich. The problems can be somewhat different, but they are just the same as the rest of us.

Interestingly, there’s a perception that their wealth affords them a higher level of attention from professionals. That’s not always the case. Many of them have very average advisors, giving very average advice. Often this is because they don’t easily trust people, and so show loyalty to advisors they should have outgrown long ago.

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There’s also a common belief that there’s something special about the ultra-wealthy as individuals. People look up to them. Even other wealthy people!

I recall being forwarded an email composed by a successful serial entrepreneur. He was on a cross-country flight and apparently a few drinks in when he decided to pen what he thought was a profound collection of thoughts - his keys to living a successful life of achievement and happiness. He flipped the email along to a few of his friends, many of whom were also very successful people. And one of them forwarded along to me, noting that these were “very interesting thoughts from a successful person.”

I dove headfirst into the email, but was ultimately left surprised by the banality of it all. This wasn’t anything profound. It wasn’t even rehashed Munger-esque “worldly wisdom.” It was pablum. Stuff like “a person with Great Dreams can accomplish Great Things!” This shit made Tony Robbins sound like Tolstoy.

Over the years, getting to know some extraordinarily financially successful people, I came to realize that there is generally nothing terribly special about them. Sure, there’s a drive to work hard and succeed, but lots of people have that. There are just as many admirable and accomplished people of average means.

At the end of the day, a lot of the success comes down to a combination of luck and hard work. A singular focus on making money can take you a long way.

In non-self-made cases, it’s usually one extraordinarily talented family member who is able to plant the seed which becomes the tree which provides fruit and shade for several future generations.

There’s nothing extraordinary about the rich. They’re just like the rest of us.

I’ve written before about the loneliness and isolation caused by wealth, and the mental health struggles that often come with it.

More than that, as a certain batch of peculiarly redacted files released this past month hint, a lot of the people we may have admired might actually be terrible human beings, or at the very least, willing to turn a blind eye to the horrific actions of their “friends.” Sometimes, those associations were a key contributor to their financial success. This is nothing to admire.

I grew up on the day that I realized that the people I looked up to were still trying to figure it out, just like I was (and still am.) Don’t be intimidated by other people with money. Don’t feel like they have access to any special secrets or knowledge (most relevant to the themes I talk about here, that includes copying their investment portfolios.)

How to be rich? Don’t worry about auditioning for the role. Stay true to the values that got you here. Oh, and if a mysterious billionaire invites you to his private island for a wild party, say thanks, but no thanks.

You stumble upon this company because you were searching for dessert recipes. But you can’t believe what you see. The balance sheet is rock solid. The business is generating prodigious cash flows, which are being used to pay a fat dividend and buy back shares. As far as you can reasonably tell, the company faces little to no threat of disruption, and possesses advantages over competitors that should endure for at least next decade.

To top it all off, it’s trading at a very low multiple. Nobody, it seems, has heard of it. No analyst coverage. A Google news search turns up nothing. It’s just sitting there, making shareholders rich.

So you sell your other stocks, and buy shares. You borrow against your home, and buy more shares. You reinvest your dividends into even more shares. Every spare dollar goes into buying more of this absolutely amazing investment. Quarter after quarter, management delivers stellar results that consistently exceed expectations.

You can’t believe your luck.

Now here’s the question - do you tell anyone else about Parfait Corp? Or do you keep it to yourself?

For every buyer, there’s a seller

If this is such a great company, who is selling you all these shares?

It could be someone who doesn’t agree with your opinion on this company’s future (not everyone is as smart as you are).

Maybe they are just financially illiterate and can’t read the financial statements.

Perhaps they need to raise money to buy a boat or fund a divorce settlement.

Maybe it’s an estate being liquidated for distribution.

Whatever the reason, it doesn’t really matter. All that matters is that someone is willing to sell you these shares for far less than they are worth.

You want to keep it that way, right?

Can you keep a secret?

There will come a day when you’re ready to sell your shares of Parfait Corp. But that’s not today. Why would you? Why would anyone? It’s hard to think of a better use of your investment capital right now.

You’re not buying it to sell it, you’re buying it to accumulate it. If you end up owning the whole company, so be it.

So why would you screw up a good thing?

Someone is selling you the shares, cheap.

And there is very little competition in the marketplace - nobody else is interested in buying the shares that go up for sale.

This is a perfect setup for long-term wealth creation. And the way to keep it going is to keep your big mouth zipped and not tell anyone else about Parfait Corp.

Why would you do anything different?

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Ponzi economics

Before we continue with the story of Parfait Corp, a brief pivot to discuss the important issue of sardines (trust me, this is going somewhere).

In Margin of Safety, Seth Klarman made famous a story told in the 1986 Sequoia Fund Annual Report:

There is the old story about the market craze in sardine trading when the sardines disappeared from their traditional waters in Monterey, California. The commodity traders bid them up and the price of a can of sardines soared. One day a buyer decided to treat himself to an expensive meal and actually opened a can and started eating. He immediately became ill and told the seller the sardines were no good. The seller said, "You don't understand. These are not eating sardines, they are trading sardines."

Trading sardines are not for eating! It doesn’t matter what’s in the tin. As long as enough other people want to buy cans of sardines, you’re going to make money buying and flipping those cans.

It’s in your interest, as a sardine trader, to ensure that interest in sardines remains high. Tell your friends! Tell your neighbours! Tell your in-laws!

One can imagine a high profile CEO pivoting his whole company around buying up sardines. Perhaps that same CEO will spend all day on Twitter and CNBC telling people "The only use of time is to buy more sardines. Take all the money and buy more sardines... take all your time to figure out what you can sell to buy more sardines… and go mortgage your house and buy sardines with it, and if you’ve got a business, finance it and convert the proceeds into sardines.”

Interest in sardines cannot be allowed to wane, because then your cans of rotten sardines will be worthless. It is imperative for you to spread the gospel of sardines. “This is real wealth,” you will tell people. “Sardine cans are outside the purview of governments and central banks. Sardine cans are real money.”

Parfait or sardines?

You don’t want anyone to know about how good an investment Parfait Corp is. Parfait is going to do amazingly well for you, no matter what other people think of the investment. In fact, the longer it remains undiscovered, the more money you will make on it.

On the other hand, you need everyone to be convinced that sardines are the future. And the only way you escape with a profit is to sell your sardines to people at the same time you’re telling them how great sardines are and how they have to hold onto those fish for the long term.

Which asset would you rather own?

This isn’t about sardines

As you’ve probably guessed by now, this has nothing to do with sardines.

In other news, last week the price of Bitcoin fell below the average cost of Strategy, Inc.’s holdings in the cryptocurrency.

To a large extent, this pushback has disappeared, because investors in a few private funds that were assumed to be “safe” have seen their investments locked up, while promised returns turn into losses.

My basic point has always been that unlisted alternative investments can be a lot more risky than their marks to market let on, and that makes it very difficult for clients to distinguish between those that carry more or less risk. Even in something as low risk as residential rentals, I’m seeing private funds maintaining or increasing their NAVs, while equivalent public REITs have declined markedly. The truth, as far as valuations go, probably lies somewhere between the two extremes.

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If you’re an investment professional or a student of the craft, you understand this. But most clients are in the dark, and place far too much reliance on marketing materials. I’m talking to the investor who may not be aware of how these funds are hiding volatility (and potentially, the risk of permanent loss of capital). So I hope you don’t mind if I beat this dead horse just a bit more. Because if you allow them to, private investment funds can hide a multitude of sins. 

Warren and Charlie tell it like it is

At the 2019 Berkshire Hathaway Annual Meeting, Warren and Charlie received a question from a pension manager specializing in alternative investments. This cue was a prompt for a great discussion highlighting so much that’s wrong with the asset class (much of which I’ve already covered here and in Low Risk Rules). 

Dubious marks to market? Check.

High fees? Check.

Locking up investor funds? Check. 

The challenges of managing liquidity in order to meet capital calls? Check. 

Since they are both much smarter and more articulate than me (and frankly I’ve always admired Charlie Munger’s ability to summarize a situation in the most blunt terms possible), I thought I’d paste some of the discussion here (I’ve edited out the parts that are not relevant to private client or family office investing). 

I aspire to reach a point in my life and career where I can tell it like it is the way Charlie does - dropping truth bombs and not caring who gets offended. Stick around. You’re going to love this newsletter when I’m 99 years old. 

WARREN BUFFETT: “…we have seen a number of proposals from private equity funds, where the returns are really not calculated in a manner than — well, they’re not calculated in a manner that I would regard as honest.

And so I — it’s not something… I would be very careful about what was being offered to me.

If you can raise $10 billion in a fund, and you get a 1 1/2 percent fee, and you lock people up for ten years, you know, you and your children and your grandchildren will never have to do a thing, if you are the dumbest investor in the world. But —

Charlie?

CHARLIE MUNGER: Well, I think what we’re doing will work more safely than what he’s doing… but I wish him well.

WARREN: if you run a fund, and you get even 1 percent of a billion, you’re getting $10 million a year coming in. And if you’ve got the money locked up for a long time, it’s a very one-sided deal.

And you know, I’ve told the story of asking the guy one time, in the past, “How in the world can you — why in the world can you ask for 2-and-20 when you really haven’t got any kind of evidence that you are going to do better with the money than you do in an index fund?” And he said, “Well, that’s because I can’t get 3-and-30,” you know. (Laughter)

CHARLIE: What I don’t like about a lot of the pension fund investments is I think they like it because they don’t have to mark it down as much as it should be in the middle of the panics. I think that’s a silly reason to buy something. Because you’re given leniency in marking it down.

WARREN: Yeah. And when you commit the money — in the case of private equity often — you — they don’t take the money, but you pay a fee on the money that you’ve committed. And of course, you really have to have that money to come up with at any time. And of course, it makes their return look better, if you sit there for a long time in Treasury bills, which you have to hold, because they can call you up and demand the money, and they don’t count that. They count it in terms of getting a fee on it. But they don’t count it in terms of what the so-called internal rate of return is. It’s not as good as it looks. And I really do think that when you have a group sitting as a state pension fund

CHARLIE: Warren, all they’re doing is lying a little bit to make the money come in.

WARREN BUFFETT: Yeah. Yeah, well, that sums it up. 

We call this ESG. Which is not to be confused with “SRI,” (socially responsible investing), although the two terms have become synonymous. The “social” angle is really only one component of the broader whole.

As for the last three letters in the title: yes, I am referring to exactly what you are thinking.

Disclaimer before I get into this: these are my personal opinions only: not those of my employer or anyone I work with. Where my clients have different opinions (and many do), I put my beliefs aside and manage their portfolios in the way that they ask me to.

Let’s get the political stuff out of the way

I personally don’t place “socially responsible” considerations at the forefront of my investment decision making process. It does play a background role, because if you’re looking for a “low risk” investment, you want to reduce the odds of unpleasant situations in the future that may arise because of bad things the company might be doing today.

When you’re trying to do more than that, trying to decide what qualifies as “socially responsible,” context matters. To give one example: in the wake of Russia’s invasion of Ukraine, more than a few SRI portfolios decided it was OK to own defence companies, and that’s perfectly fine with me. Sometimes pragmatism is more important than ideology. But why wait until the war starts to decide it’s okay to invest in a defence company?

Speaking of ideology, I think it’s a mistake to let your politics impact your investment portfolio. Over the past few years, investors on various ends of the political spectrum have demanded that they be divested of companies like Disney, Pfizer, Unilever, United Health, Target, and Anheuser Busch. Oddly enough, when a company is the target of a political attack, and investors are selling for reasons that have nothing to do with a coherent investment case (can you believe they have rainbow flags up in the kid’s section?), it can be a great time to buy that company’s stock. Feel free to take advantage of other people’s various political derangement syndromes to buy solid companies cheap. But to do this, you have to leave your own biases behind as well.

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The reason ESG can be important

The way I look at it, evaluating a company’s ESG risk is all about hedging against hidden liabilities or costs that may arise in the future due to things that the company is doing today.

Perhaps there will be future costs to polluting waterways, selling your customers a carcinogenic product, or disregarding the basic rights of your employees. To the extent that there’s this kind of stuff going on, you want to understand the potential risks, and may decide to just sidestep the investment entirely. But you shouldn’t be blind to it.

Why governance matters

The bigger issue with ESG risks is that they can call into question the integrity of your management team, and whether the Board of Directors is actually doing their job of independently representing the long-term interests shareholders. It’s not political. It’s about protecting your investment. And it’s why the “G” is the most important letter in the acronym.

Evaluating a Board of Directors is tough work for the average investor. Start with considering who’s on the Board. What experience and expertise do they bring to the table? Has the Board proven itself to be effective in times of crisis, or is it just a bunch of the CEO or founder’s buddies?

Are they independent of management? Have they pushed back in the past? How many members are external? Is the Chairman role separate from the CEO?

Do they have a record of treating minority shareholders well? (This is particularly important in smaller cap companies where a controlling shareholder may exist.)

Lots of things to think about in this area. As usual, it’s an art, not a science. You won’t know how a Board will react to a crisis until you see them in action, and you can refine your judgment on their effectiveness based on that.

When numbers lie

Unfortunately, “ESG” has become a marketing term. And due to the opacity and judgement involved in determining what good governance actually is, the investment industry has created shorthand “ESG scores”: a rating out of 100 that tries to quantify how “good” a company is. I’m not a fan.

Does the board and upper management have a bunch of women and minorities on it? Does the company broadcast all sorts of feel-good information about how many trees they planted? Or how green their new packaging is? Up the score. There’s even a word for this: greenwashing. A company doing terrible things can score pretty highly, and get a pass from a socially responsible investing strategy, as long as they try to game their ESG scores in other areas.

Performance and values

Last decade, ESG and SRI funds were all the rage. Partially because of great feel-good marketing, but also because the funds performed very well. By eschewing energy names (which had a really rough ride) and loading up on technology, they benefited from the growth in stocks like Apple, Facebook, and Amazon. I was always skeptical, and I remain so. To the extent that a company like Facebook makes money by creating addictive apps that have almost certainly contributed to teenage depression and suicide, how “socially responsible” can they be? I’m not exaggerating when I say that if I could choose between my teenage girls smoking and never using social media, or the status quo, I’d hand them each a pack of Marlboros.

You hear less about these funds now, and it’s partially because their relative performance has not been great, which makes them a hard sell. Also because the political winds have shifted decisively to the right. But in Canada, being more left leaning than the US, I still talk to a lot of people who want to see an ESG element in their portfolios. I explain to them that the cost of doing so, by reducing your range of eligible investments, is almost certain to reduce returns and increase volatility over the long run (as any constraints on diversification would). And as I also say, there is no company that is without sin, and if you look hard enough, you’re sure to find something any company is doing that you’d find unappealing.

This is why I believe that a pragmatic approach to ESG is the right one. A company managed with the long-term best interests of all stakeholders in mind will have a better chance of surviving (and thriving) than a company with a culture of cutting corners and prioritizing short term profits. Your “low risk” portfolio should reflect that. And you’ll naturally end up with a portfolio built out of companies that are more responsibly managed than the average.

Past entries in this series

Part 1: Keep it simple

Part 2: Track record

Part 3: Industry analysis

Part 4: Capital allocation

Part 5: Intangible assets

Part 6: “Sticky” business

Part 7: Low Cost Rules

Part 8: The Industry Advantage

Part 9: Pricing Power

Part 10: Zoom Out

Part 11: Quality of earnings

Part 12: Check the numbers

Part 13: Fortress Incorporated

Part 14: Management quality

Of all of the Canadian banks, TD had an especially rough 2024. In October of that year, the bank plead guilty to conspiracy to commit money laundering and paid a $3 billion fine to the US Department of Justice.

It was bad news all around. US assets would be capped. The bank would have to spend at least another billion dollars on shoring up internal compliance measures, which would of course hit profit margins. As the stock plunged, many of the bank’s best employees looked for an exit as their stock options cratered in value. Nobody had anything nice to say about the company.

At that time I fielded a call from more than one client who insisted on liquidating all of their TD shares. And could you blame them?

Clearing out some files, I just came across a Globe and Mail opinion piece from December of ‘24 titled “Can TD Bank ever recover from its US money-laundering saga?”

The conclusion?

For TD, 2025 will be “a transition year” according to its leadership team. Indeed, it will be nothing like any year in the bank’s long and, until now, unblemished history.

The article was just a long list of everything wrong with TD. Who would be lining up to invest at the beginning of a “transition year” when there were several other similar companies one could invest in without the stink of corruption all over them.

So of course, one would assume that it would have been the most challenging Canadian bank to own over the past year.

Right?

Dude. Of course not. That’s why I’m writing this article.

TD shareholders earned a 75% return in 2025, including dividends. In a boring old bank stock. If you’re keeping score at home, that’s about double the return on AI darling Nvidia.

How did they do this? They were forced to sell off lower-ROI assets. They committed to share repurchases. They focused on cost savings. And they rode a bull market in bank stocks around the world.

If you were convinced to sell because you listened to the talking heads, or spent too much time absorbing the financial media, you missed out. Big time.

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Obviously, I’m not suggesting that TD stock went up because of the money laundering allegations. Rather, the negative news flow created the opportunity for investors to acquire the shares at a bargain price (or to sell your shares far too cheap).

The people who paid too much attention to the mainstream narrative lost out, selling their discounted shares to those with the foresight to look through to how management would react, and to the ultimate resolution.

As I wrote in Low Risk Rules,

If all of the news coverage you are reading is negative, chances are that this will already be reflected in investor outlooks, and so prices will be low. Any news that is “less bad” than most people expect will therefore actually result in higher prices. This means that, counterintuitively, the worse the news is, the better a time it is to invest. In that sense, saying “I’m optimistic, because how much worse can things be” is not just dark comedy but a viable investment strategy.

In retrospect, the story of 2025 was one of the “experts” being consistently wrong. Making investment decisions based on what you were reading in the media was a losing strategy. Tariffs didn’t create a second Great Depression. World War 3 didn’t erupt. The US market dominance everyone expected flipped on its head, with global markets outperforming (including some of those specifically targeted by Trump’s tariffs).

The lesson to take, then, is to root your investment decisions in your own observations and analysis… and not to let the hysterical financial media impact your decisions. It’s terribly difficult to do, because you need to keep yourself well-informed, but do so in a way that allows you to remain impartial and form your own opinions. Stick to the facts as much as you can, but for the sake of your portfolio, ignore the opinion pages.

What are the consensus views you’re reading today that might turn out to be wrong a year from now?

It’s far too easy to fixate on the numbers on a screen, or on a graph that points up and to the right, and to interpret that as “success.” When working with clients, and in particular younger next generation family members, we often have to emphasize that when we talk about successful people, what we really mean is that they are financially successful. Because we can never know their inner life, and you can have a lot of financial wealth and still be a miserable asshole.

Deden is writing from the perspective of the economist, lamenting the modern disconnect between money and value, and examining what it means for society. He writes:

The real advances of mankind—from cultivation to industry—were not the gifts of invention alone but of moral order: the discovery that property, family, and saving could bind effort to consequence and turn scarcity into sufficiency. Progress was an achievement of character before it was a measure of output. It was the steady improvement of life through virtues that bound action to consequence: thrift, property, responsibility, and the protection of what one built.

I love the line “progress was an achievement of character before it was a measure of output.” Because today, one’s character seems to have become an afterthought.

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For various reasons, I believe that the core of the changes Deden writes about came as a result of the abandonment of gold-backed currencies. This opened the door to politicians spending money that nobody had actually done work to earn. Perpetual government deficits, driven by the primary selfish goal of winning re-election, and paid for by future generations (theoretically). When money is “free,” by definition, it ceases to have value. And when the dollars we work so hard to earn cease to have value, why are we surprised when someone who puts in an honest day’s work can no longer earn enough to live a comfortable and secure life?

The goal, then, isn’t to be productive, or to add value. The goal has become to hoard financial wealth in any way necessary.

The old sequence—save, invest, produce, profit—was inverted. What had once been a measure of achievement became the object of it. The world entered an era in which the acquisition of money, detached from material purpose, was mistaken for progress itself.

So progress, now, means only that the chart goes up, and to the right. In that sense, the prime objective of those is power is only to ensure that the line keeps going up.

In this new order, even money lost its solidity. It became not the record of past effort but the anticipation of future policy. Credit creation, once a bridge between savings and investment, turned into a self-replicating process: new debt to sustain old, new liquidity to sustain valuations.

Perhaps what best epitomizes the emptiness of growth for the sake of growth is the use of Gross Domestic Product as a measure of progress.

Conceived in the 1930s to estimate wartime output and industrial capacity, GDP was never meant to represent human welfare or civilizational advancement. It counted production for the sake of mobilization, not prosperity. Yet over time, this emergency metric came to define progress itself.

To the politician who wants to boast about GDP growth under their watch, the path is clear. A dollar of wasteful government spending is worth as much as a dollar of true value created by innovation. Repairing existing infrastructure (that wasn’t built to last in the first place) is the same as investing in new productive infrastructure. And sadly, bombs are just as useful a purchase as school textbooks, or MRI machines. War, as they say, is good for business.

What does this mean about how markets work? And how do today’s markets reflect these values back to us? Look no further than the world of private equity.

Private equity is the purest expression of this new creed. Its tools—leverage, optimization, and exit—belong to a world where time has been conquered and consequence deferred. Businesses once built to last are now built to sell. The craftsman’s slow accumulation of goodwill is replaced by the manager’s quick extraction of yield.

And finally, Deden returns to the discussion of purpose. I’ve written about it here, and in the pages of Low Risk Rules. The idea of simplifying your investment portfolio is to make room for the things that matter, in the context of a world where those who own assets are at a significant financial advantage to those who don’t.

Here lies the moral inversion of our age. Money, which was once the servant of purpose, has become its measure. The larger yacht, the faster airplane, the greater “net worth”—these are not symbols of abundance but of dislocation. They mark the distance between possession and peace. The pursuit of more has displaced the question of what it is for. And when a civilization forgets to ask that question, it continues to advance in technique while it declines in wisdom.

Money is a tool, not the end goal. If you’re lucky enough to be one of the ones who has more than you need, the question of “what is it for?” is one that you should be asking.

I didn’t do it because I was forced to. Or because I was out of vacation time. Or because a big deadline loomed.

No, I did it because I wanted to. And I was inspired to write this piece on my drive into the office through quiet streets, savouring the slower pace of the liminal period between Christmas and the new year.

In my writing this past year I’ve hinted at the very difficult year I’ve observed others going through. What so many of these people wouldn’t do for the chance to get up in the morning, get dressed, and commute into work.

Instead, they drove spouses or children to chemo appointments.

Spent weeks recovering from surgeries.

Made funeral arrangements and administered a loved one’s estate.

Or didn’t make it through the year at all.

My ability to put on a suit, drive to work, and to sit down in front of my computer with a warm cup of coffee is a special privilege I too often take for granted. On this day, I don’t. And as we turn the page on a new year, it’s something I will try to remember more often.

It just might be that the privilege of work is the best form of wealth there is. Compare it to a lump sum of cash that comes with the stress of ongoing management, obligations to others, and often leaves owners with a sense of aimlessness that permeates their daily lives. I’m convinced that the curse of the lottery winner is a real thing.

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To do meaningful work that improves the lives of others. To be part of a team that both supports and elevates your own work. And to earn a living from that labour. I can’t think of anything more valuable than the opportunity to do just that.

The problem, though, is that this type of wealth rests on a knife edge. It presupposes we live in a peaceful and ordered society. It demands that we are able to secure a job we enjoy. And critically, it depends on our own health, and that of our closest family.

All things considered, it’s a precarious balance. Let’s all remember to appreciate it for what it is. And if you’re not there now, I hope you find that balance again soon.

Wishing a peaceful and healthy 2026 to you all.

Investors were right about the bright future ahead for the company. Since that peak, revenues are up over 5x, profits up 4x, and EPS up 8x.

The stock? Well, just last week, it finally broke up above the $80 split-adjusted share price it traded at almost 26 years ago…

Nobody knew that March of 2000 would be the peak of the internet bubble. But investors who bought the stock at that level went on to experience a 90% drawdown over the course of the next year.

The thing is, you were right to be optimistic about Cisco’s bright future back then. The company really did turn out to be one of the few big internet infrastructure winners. The only problem was the price!

Cisco 2000 is a classic example of why you don’t want to pay too much for a company - even a great one with a bright future ahead. There are perhaps more than a few stocks that fit this bill today.

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Investors who bought post-hype have actually done really well in Cisco stock. It’s a solid company that has compounded earnings and reliably returned cash to shareholders over the years. It’s been a strong investment. The key, though, was to buy it when most investors had soured on the story… not when they were clamouring to buy it at any price.

And for anyone who has been holding since March of 2000, it’s at long last time to celebrate a new high. Just in time for the holidays!

See you next year

I owe a debt of gratitude to those who take the time to read this newsletter every week. It means a lot to me that you take the time to read my random, unpolished ramblings. I hope I add value.

Wishing you all a fantastic Christmas season and all the best in 2026.

Many years ago, I remember interviewing a couple of young portfolio managers who had barely started shaving. Their entire strategy, as they articulated it, centered around buying companies with exceptionally strong management teams. And all I could think was that these two kids, barely out of school, had no business even trying to evaluate corporate management teams.

But really, how much business do any of us have? We as portfolio managers tend to be generalists. Trying to evaluate the management of a company in an industry that I am only a tourist in is akin to trying to trying to make out what you’re seeing inside a dirty frosted window… while not wearing your glasses.

At various times in the past some iconic corporate leaders were criticized by mainstream investment commentary.

Steve Jobs was too focused on design, not enough on profitability and compatibility with Windows. His stubborn belief turned Apple into what it is today.

Jeff Bezos prioritized growth and customer service over profit margins, and in the process built a retail, technological, and logistics powerhouse.

Bob Iger-led Disney has been criticized multiple times for expensive acquisitions (Marvel, Pixar, Lucasfilm), but he was ahead of the curve in identifying the need to own unique content.

Mark Zuckerberg overpaid for the money-losing Instagram app (in retrospect, one of the great corporate acquisitions of all time).

These are just a few off the top of my head. In all of these cases there were very credible and well-argued short cases against each company.

In most cases, I agreed with the common narrative.

In all cases, the narrative was dead wrong.

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So how do we evaluate the quality of a company’s management while keeping the necessary humility front and centre?

First, as a CPA, I want to put the numbers first. Don’t just tell me that a management team is strong - show me the money. Let’s see evidence of intelligent capital allocation over time. Flip back to my last two pieces on looking at a company’s financial statements for more on this.

Listen to how management talks. Are they straightforward, clear, and transparent? Do they own their mistakes? Or do they obfuscate and make liberal use of weasel words and phrases?

Listen to what employees say about corporate leadership. I’ve turned down otherwise attractive investments because of things I’ve read on glassdoor.com. Because a strong corporate culture means that the next CEO will likely continue to operate with the same values as the current CEO.

What else do we want to see?

I like a longer tenured senior management team. A lot of turnover can signal brewing troubles, or internal dissension.

Does the company emphasize maintaining strong long-term relationships with all stakeholders (owners, employees, suppliers, customers)? We want management focused on long-term success, not just meeting quarterly earnings numbers. However, I’d also like to see a shareholder-centric approach, which doesn’t neglect the need to deliver value to owners. There are a lot of successful businesses out there that are undoubtedly great businesses, but not necessarily great businesses to own.

As you can see, this is a bit of a messy checklist item. There is a lot to consider, and very few of the items have clear metrics to rank or evaluate. It’s a lot of judgment, and an imperfect science. As I said at the outset, I kind of hate this item. But it’s also critical to investment success, because ultimately, when you invest in a company, you are hiring their management team to execute on your behalf.

There’s an intangible quality to this factor that comes with experience. And too often, leaders say all the right things because they know that’s what investors want to hear. To be honest, if I hear them talking about Buffett and Munger, that’s a bit of a red flag for me. Your bullshit detectors definitely need to be fully operational at all times.

Focus on the business, be transparent, and be excellent. It might just be as simple as that… but as usual in this business, the simple common sense principles are extremely difficult to execute in practice.

Past entries in this series

Part 1: Keep it simple

Part 2: Track record

Part 3: Industry analysis

Part 4: Capital allocation

Part 5: Intangible assets

Part 6: “Sticky” business

Part 7: Low Cost Rules

Part 8: The Industry Advantage

Part 9: Pricing Power

Part 10: Zoom Out

Part 11: Quality of earnings

Part 12: Check the numbers

Part 13: Fortress Incorporated

I was in Copenhagen, with my daughter, expecting to attend the first two of four scheduled Radiohead concerts in the city. It was supposed to be a memory we would share forever.

Fate had other plans. We were in the merchandise line at the venue on the afternoon of the show when my phone pinged with a notification that I had to read a few times to process. That night’s show, and the next as well, unceremoniously postponed for two weeks (translation for those traveling from afar with return tickets booked: cancelled) due to a throat infection impacting lead singer Thom Yorke.

Traveling overseas for a concert is a risk, but a risk I thought worth taking. I was planning for this letter to write about the joy of attending these shows. About the value of sharing special experiences with loved ones. Of taking time away from the screens and spreadsheets, and spending those precious savings in irresponsible and foolish ways to create the memories that shape our lives.

It will be a memory. Just not the kind we were expecting.

So many things fell into place to get us here: winning the ticket lottery allocation. Scoring amazing seats. Travel dates lining up. It was hard to think anything other than this experience was meant to be.

And now it seems like some massive cosmic joke.

There’s a heaviness to the disappointment felt when an investment of time and money leaves you empty handed. Sometimes there’s no lesson to learn. Nothing to take away. The only thing you can do is try to convince yourself that there will be another chance. Hopefully.

“No alarms and no surprises, please”

In the classic song No Surprises, Thom sings “Such a pretty house, and such a pretty garden,” while his backing track wails “Get me out of here!” Chills.

Over time I’ve come to realize that I’m not sure whether the song’s protagonist is trapped in this perfect life that has become his prison, or whether he’s an overwhelmed man asking for a reprieve.

The “pretty house and pretty garden” version of this story is the two of us enjoying this show and heading back home in a glow of post-show bliss. The reality is messier. I truly wish there was no alarm and no surprise last Monday. But maybe someday it will turn into a better story.

After the show cancellation several Copenhagen bars were filled with shell-shocked Radiohead fans connecting over their shared disappointment. I met a few people, notably a fellow Canadian named Jill. We talked about what brought us there. I told her how disappointed my daughter was. And how I was crushed to have been robbed of the chance to share this experience with her. Jill reminded me how lucky we were to be in Copenhagen, having had the opportunity to miss out on the chance to see the world’s greatest living rock band play live. How the experience, however imperfect, was perfect in its own way. In the way that a father took his daughter across the ocean to share a special experience with her.

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As perfect as that life of no alarms and no surprises might seem, it can trap us into the perception of what perfect is supposed to be. We didn’t see the show we travelled across the ocean for. I watched my daughter cry in the parking lot of the Royal Arena on a cold and cloudy Scandinavian winter day. I felt the weight of crushed expectations.

But then I met some kindred spirits from around the world over a few drinks. I remembered how lucky we were to even be in a position to be able to experience that disappointment. And I know that if we do finally get to see Radiohead together, it will mean that much more to us. And just maybe the tears will be tears of joy.

“It’s gonna be a glorious day. I feel my luck could change.”