Category Archives: Fashion

Mood Board

Last week my quarterly investment statement arrived. I flipped to the last page and there in italicized mouse-type was the tally. Given the recent lacklustre performance of the markets, I was not surprised by the soggy number.

It’s foolish to expect investments to only go up. Pundits will even say that for accumulators a down market is a boon. Your favourite mangoes now sell for 75-cents a piece instead of a dollar. But emotionally it’s a downer. And, like a bout of melancholy, the sluggish stock market invites introspection, not only about mundane things like asset allocation, but also about the hazards of tying one’s personal worth, or at least daily mood, to the vagaries of global finance.

I have an unproved theory that people who are prone to melancholia may be better equipped to withstand the ups-and-downs of the market than those who feel compelled to be commercially, relentlessly cheery. Melancholics don’t expect the world to always be filled with unicorns and cotton candy. Thus down market days are not exactly welcomed but nevertheless accepted  as old friends bringing sad news.

In her recent essay in The New York Times, Laren Stover writes about melancholy perfumes and how “rainy” scents can be matched to our wistful moods. Given our society’s current fascination with happiness, (judging by the raft of books on the subject), it’s not easy to find one of these gems. One has to reach back to some of the Guerlain classics from the early 20th century like L’Heure Bleue, Jicky, and Mitsouko (my favourite), as well as some new-ish ones from niche “noses” Serge Lutens (Iris Silver Mist) and Frédérick Malle (En Passant). Stover neglects to mention Guerlain’s Après L’Ondée, literally, “After the rain shower”, a green fragrance with top notes of aniseed and rose and heart notes of violet and hawthorn.

Some years ago I took a perfumery workshop in Grasse, the heart of France’s fragrance industry. Each member of our small group had her own station equipped with a miniature “fragrance organ” of different essential oils. Our guide, a charming older gentleman who had worked for leading French perfumeries, gave us some basic instructions and off we went.

I already knew the fragrance I wanted to create: the olfactory expression of looking out a window on a rainy day in London, a good book and a tray of strong black tea (with milk) on the nearby table. It was to be a wisp of a scent composed of bergamot, chypre, licorice, lavender, lemony rose de mai, and a dash of iris root for that powdery, flinty touch.

My little masterpiece was coming along nicely, one tender drop at a time. As we were all novices, the instructor was free with praise. Until he came to me. He took one sniff and immediately reached for the aldehydes to “brighten” the scent. It was the equivalent of a burst of fluorescent bulbs where previously there had only been soft candlelight. I’m sure he meant well but I think he couldn’t imagine that I wouldn’t want an “up” scent.

This is like a lot of investors. We imagine that the market can only go up, up, up. When it pauses or reverses, panic sets in. You could say that quantitative easing, the US government’s program of printing money to buy bonds, was the financial equivalent of dosing perfumes with aldehydes, synthetic compounds that juice a scent giving it sparkle and fizz like popped Champagne. (The 1980s blockbuster fragrance Giorgio Beverly Hills is the Frankenstein of aldehydes.) Come December, when U.S. interest rates are likely to go up, equity markets may wilt like meadow flowers under a cool, steady rain.

When this happens it will be good to remember that there’s a season for everything. Much of the recent market froth was related to abnormally low interest rates, highly-leveraged trades and speculation. When the bubble bursts—and it will—say ‘Ciao, Giorgio Beverly Hills’ and ‘Bonjour, L’Heure Bleu’.

Ghost Story


lp-haunted-isles-leeds-invertimgThe ghosts of Proust are those brittle couture-clad creatures that haunt the salons of fine hotels where they sip ballet pink Champagne. Perpetually enrobed in an air of melancholy, they climb the spiral staircase to the sacred solitude of their tiny perfect rooms. Drawing the papal purple velvet curtains they turn away from the the noise and the ill-mannered hordes and take to their beds. What else is there to do? As their heavy eyelids close on yet another day, the ghost damask wallpaper shimmers like a spectre.

Oh, the horror of imperfection. If only everyone behaved well and all the flowers were arranged just so life would be so much sweeter. Those who expect perfection and cannot tolerate anything less, suffer.

Take French fashion designer Yves Saint-Laurent. As his lover and business partner Pierre Bergé once said, “Yves was born with a nervous breakdown.”  Saint-Laurent would often retreat to their chateau in Normandy to sketch new collections and to recover from the excesses of Parisian night life. One afternoon Saint-Laurent returned to the chateau and noticed that the housekeeper had placed a bouquet of flowers in the dining room. It pained him to see the uninspired arrangement. He took a pair of nail scissors and painstakingly snipped the tops off each stem, a hundred tiny decapitations. Then he took to his room for the rest of the day.

Just as it’s unrealistic to expect perfection from our housekeepers—and even our fashion designers, after all Saint-Laurent was a great designer but not always a good one—it’s equally juvenile to expect that markets will behave the way we wish them to. As the industry mantra goes: past performance does not predict future returns. Yet many investors mentally latch onto past success and expect history to repeat itself.

After the crash in 2008 it took several years for the markets to regain momentum after which they went on a tear. Investors regularly boasted of 15-percent and up returns. DIY investors felt like geniuses and portfolio managers behaved like kings of the universe. But the wheel turns…These days it’s unlikely our quarterly reports show anything like those stellar returns. Where did all those investing geniuses go, I wonder?

According to John Bogle, the famous value investor and founder of Vanguard, we’ll be facing a tough decade ahead. His math is simple but hard to refute.

He divides total return into investment return and speculative return. Investment return is approximately 2-percent. That is the average dividend yield on U.S. equities. Corporate earnings growth adds another 6-percent for an 8-percent return. Pretty good so far.

Speculative return is how the market values a company’s earnings growth (price/earnings). Right now the P/E ratio is 20 but the historical average is 15. A lower P/E means lower stock prices, unless earnings skyrocket. So, based on Bogle’s back-of-the-napkin calculations, that 8-percent investment return plus a negative speculative return of, say, 3-percent, leaves us with an average return of 5-percent before inflation and before portfolio management fees. Throw in a couple of ghosts-in-the-machine like hedge funds, high-frequency traders and massive short-trades and things can get pretty hairy, pretty fast. (Hello Valeant!)

To mix my holiday metaphors, to avoid a fright upon finding a lump of coal in your retirement stocking, consider factoring a lower real return, somewhere between 1-to-4-percent, into your nest-egg calculations. Many companies today are priced for perfection but they could hit a snag.Don’t let your fantasy of perfect get in the way of a perfectly nice arrangement. Save a bit more, (or spend a bit less), as insurance against a decade of fair-to-middling market returns.

But, darlings, whatever you do, never skimp on pink Champagne.

Rich Face Folly

photo courtesy of Getty Images

photo courtesy of Getty Images

Who remembers the 1973 film Ash Wednesday starring Elizabeth Taylor as a 50-ish housewife who goes to Switzerland for a face-lift to save her marriage? Taylor, draped in furs and marital sorrows, secretly hoofs it to a ritzy clinic in Gstaad, has the surgery, then eats, drinks, gazes at the mountains, flirts with a fashion photographer, has an affair with a hunky German, stares at reflections of her restored beauty, but, alas, never reconciles with her husband, played by Henry Fonda, who’s still boinking a much younger woman. The film is notable in two ways. First, it stars the incomparable Taylor, who is watchable in any old schlock; and, second, it marks the first time that plastic surgery came out of the closet, complete with stomach-turning scenes of an actual surgery.

The film is terribly quaint by today’s standards when practically everyone is getting shot-up with Botox and hyaluronic fillers, or sandblasted with lasers and chemical peels. The latest trend, “richface“, is especially popular with millennials.  It involves extreme dermatological procedures meant to proclaim affluence, if not common sense. Selfies of swollen lips, a la Daffy Duck, puffy cheeks or pneumatic mammaries are posted quick-as-a-bunny for comment and applause.

Far be it for me to frown on the pursuit of beauty through personal grooming. No one would accuse me of being low-maintenance in that department (or any). But hyper-grooming is a risky business subject to the law of diminishing returns. (Exhibits A: Melanie Griffiths, Joan Rivers (RIP), any TV Real Housewife…)

Insecure millennials and reality-show celebrities are not the only ones who would benefit by leaving well-enough, or mediocre-enough, alone. Investors, too, are a restive lot prone to over-grooming, or in this case, excessive trading. This proves costly, both in the short-term (frictional costs of trading and taxes), as well as in the longer-term through poor market timing and weakened compounding benefits.

In his book The Single Best Investment, Lowell Miller makes the distinction between investors and traders. He states that long-term investing is about character, depth of vision and the cultivation of patience. By contrast most “investors” are whipsawed by the drone of economists, stock-pickers and other pontificators who populate the airwaves and provoke the “Three Sirens”: greed, fear, and conformity.  This compels us to constantly tweak our portfolios, jumping from one investment to another. Market liquidity, especially for mid-and-large cap stocks, and ETFs, makes trading as easy as a few keystrokes. This is a different kind of liquidity trap and one that I’ve fallen into more often than I care to admit. It’s also why I found Miller’s book such a welcome relief. It provides a counterpoint to investment industry hysteria.

As a 6th-degree black belt in Aikido, it should come as no surprise that Miller abides by a Spartan code in investing. Hold your ground. Become neither overly excited when your portfolio is up, nor excessively gloomy when it’s down.

Feel your feelings, but don’t feel you need to act on them!

Miller is a strong proponent of investing in high dividend-paying companies, with good cash flow, and growing dividends. You’re unlikely to make a killing with them but, on the other hand, you’re unlikely to get killed. Over time, as the power of compounding takes effect, these investments show their superiority over fixed-income, such as bonds or T-bills.

Alas, time is the friend of the dividend portfolio but not of the human who owns it. Warren Buffett is fond of saying that his holding period is “forever” but he tweaks like everyone else. What’s the sweet spot? Aim to tweak somewhere between Buffett and any one of the Kardashians.

Bye-Bye Birkin

photo courtesy of Telegraph UK

 

Some years ago at a hotel press luncheon, a distinguished silver-haired gentleman from Hermes boasted to the assembled fashion journalists, “At Hermes we are highly selective about the skins we use for our leather goods. We can even identify which particular calf supplied the hide by its unique markings.”

Given the Hermes’ reputation for quality control and that ole-time, artisanal approach to manufacturing, it’s more than a little surprising to see that their public response to accusations of animal torture at the farms that supply “exotic” skins for the famed Birkin bags—costing upwards of $220,000— is a Gallic shrug.

The style was created for British actress and singer Jane Birkin in 1984 after a serendipitous meeting with Hermes chief executive Jean-Louis Dumas during a flight from Paris to London. However, recently, after seeing brutal footage of the cruel slaughtering practices, Birkin has requested that her name be removed from the bags. Hermes says they have no business connection with the reptile farm, despite years of swirling rumours long before the actual videos turned up.

It’s been a bad week for animal killers. Take Walter Palmer, a dentist from Minnesota, who paid $55,000 to maim and murder Cecil, a protected lion in Zimbabwe. (Palmer has a criminal record of illegal hunting.) The discovery of Cecil’s skinned and decapitated body has sparked a global outrage. A whiz with a bow and arrow, the good dentist seems to have momentarily misplaced his courage.  Zimbabwean police have issued an arrest warrant for illegal poaching and now Walter’s closed his practice, River Bluff Dental in Bloomington, folks, and is on the run. Long may he be.

Hermes, on the hand, can’t hide. They have an obligation to address these allegations promptly and in an honest and forthright manner. One of the implied benefits of making purchases from a respected European manufacturer who charges full freight and then some, is the assumption of responsible and humane behavior toward employees and community, as well as animals and the environment. (The discussion about whether any animal should be made into a handbag, wallet, carpet or umbrella stand in the first place, is an important question but beyond the scope of this piece.)

Just like I disbelieve Walter, who, when he realized the wrath of the world was against him, whimpered that, had he known Cecil was so beloved, he never would have killed him. Rubbish. He knew exactly what he was doing and to whom when he lured Cecil away from the protected area by dragging an animal carcass off the back of a truck as bait.

Ditto for Hermes. Knowing the firm as I do and the inordinate pride they take in controlling every facet of the manufacturing process, I cannot believe they didn’t know about the appalling mistreatment of animals at the Texas farm. After all there are long waiting lists for these bags and most people who buy them don’t give a toss how the skins are obtained, they just want the status symbol on their arms. Despite the artsy la-di-dah of their marketing, Hermes, like every other manufacturer, is in business to make money. They have no great interest in stopping the flow of exotic skins—unless it becomes bad for business.

As painful as it is to become aware of animal suffering, casting the perpetrators out of the shadows is the first step to stopping the misery.

As for me, I’ve just saved myself $220,000.

Grounded

Celine Fur Shoes

Celine Fur Shoes

While visiting Paris recently, I was sipping café au lait and munching on lightly toasted Poilâne bread with butter and apricot jam at my favorite breakfast spot on Rue Cherche-Midi when I came across this breaking news: Cannes Red-Carpet Ban on Women Wearing Flat Shoes.

Well, there goes my chance to gate-crash the Croisette. Flat shoes are the tops for me. What started out as “troubled” feet, gradually, with time, jogging, and far too much footwear-inflicted abuse, morphed into end-stage arthritis. A good day means walking the dog—or the winding, cobblestone streets of Paris—without wincing with each step. A bad day, (scratch that, a very bad day), would be being forced to walk in high heels—or, in other words, not walking at all.

It so happened that my career in fashion magazine publishing coincided with a vexing trend in women’s footwear. Designs veered into the realm of S&M with spiked-metal studs and thigh-high, stiletto boots. Nicknamed “limo” or “taxi” shoes, the only way to get around was to hobble into a waiting car. A limited few rose to the occasion, the rest were fashion roadkill. Let’s just say that with my flat, lace-ups, I stood out in a fashion crowd.

But there’s always an upside. My limitation means that I can walk into any shoe store and immediately eliminate 90% of the offerings, so decision-making is faster. In a city like Paris, with great shoe boutiques on practically every corner, this means more time to visit museums and to eat and drink.

On the 8-hour flight home I read The Einstein of Money, a terrific book on Benjamin Graham, the father of value investing. Graham’s rules for disciplined investing have inspired millions, including legends like Warren Buffett and Charles Brandes, and other “superinvestors”.

Graham developed screening methods to assess the intrinsic value of a company based on such metrics as size, earnings growth, dividend records, and ratios of price-to-assets, and price-to-earnings. This allowed him to know whether a company was a bargain or overpriced. Unlike others who base investment decisions on predictions of price movements, Graham peered into the income and balance sheet statements to discern value (not price).

Starting out as a bond salesman, at which he failed miserably, Graham eventually became a financial analyst. In 1916 he strongly recommended to his boss Alfred Newburger that the firm make a substantial investment in a company called Computer-Tabulating-Recording, Corp. that was selling at $45-per-share but whose intrinsic value Graham had estimated at closer to $130. His boss told him, “Ben…I would not touch it with a 10-foot pole.” In 1926 that firm changed its name to IBM.

Graham’s strict investment guidelines meant that he missed many hot stocks and gains through momentum investing. Yet, I admire his ability to eliminate thousands of potential investments into a select few that were highly likely to be “sure bets”, particularly if one was patient enough to let the market eventually weigh a company’s true value.

Today, like a woman shoe shopping in Paris, an active investor has an infinite number of decisions to make. Even product categories like ETFs and mutual funds that should, in theory, simplify investment selection, have exploded in recent years. When I began investing 25 years ago, ETFs didn’t exist and mutual funds were very costly so I began to cobble together a portfolio of individual equities. The process is stimulating and rewarding but can be very time-consuming, and quite harrowing when you add global, and emerging market equities into the mix. Lately I’ve been wondering if there aren’t better uses of my time—like learning French or writing a book?

Though I’m not ready to pull the trigger on my individual holdings, after reading The Einstein of Money, I know what Graham would do. Simplify the selection process.

Oh, and if you have troubled feet and happen to be in Paris and want to simplify your shopping, here are some brands to try: Accessoire Diffusion, Fausto Santini, Gelati, and Prada Sport. Then, with all the time you’ve saved, treat yourself to a glass of Chablis at Café de Flore and watch the pretty people.

To Have and Have a Lot


Courtesy of Tumblr
Youth has never been my cup of tea. During my years as a magazine editor whenever I had the opportunity to interview a “hot young thing” or an icon, no contest. Thus, one balmy afternoon in September I was in a midtown hotel room sitting across from Miss Betty Bacall who was in town promoting a film. Well into her 80s she was more than a little hard of hearing but was remarkably well-behaved and game to answer questions. Her beloved Papillon, who she swore had psychic powers, was nestled in her lap.

Never one for mincing words, Miss Bacall had a few choice ones for the late Frank Sinatra, (a former lover), as well as limo drivers in general, (her backseat manners led both her and her luggage to be left on the sidewalk on more than one occasion by irate chauffeurs.)

Miss Bacall passed away last year and a few weeks ago Bonham’s auctioned her estate. Like that of the late Jacqueline Kennedy Onassis, the Bacall sale reflected variegated tastes and a lifetime of accumulation. (The Yves Saint Laurent/Pierre Bergé sale they were not.)  The lots included sculptures by Robert Graham, (Angelica Huston’s late husband), and Henry Moore, as well as a pair of nut dishes decorated with nibbling squirrels, a brown toga dress from Yves Saint Laurent, and an army of comfy pantsuits.

Judging by the state of Miss Bacall’s apartment in Manhattan’s Dakota building, the lady was less a curator than a pack-rat. And, why not? In most cases she bought things from people she had a personal relationship with and was, no doubt, deeply attached to the pieces.

It’s a little different for investors though. Few of us have “personal relationships” with National Oil Varco or Baker Hughes or any of the other companies in which we may invest. Still, we get attached. These leads us to hang on to our “favorites” long after we should have pressed the ejection button.

When I started investing there were no ETFs and mutual funds came with exorbitant fees. Instead, over the years, I built up a portfolio of individual securities. Each year I find that as the number of securities grows, I wonder if, instead of diversifying, I’m “diworsifying”.

Diversification is an effective way to reduce portfolio risk. By holding securities and asset classes that are negatively correlated with each other, in theory, when one class goes up, the other should do the opposite, thus reducing some of the volatility of returns.

Trouble is we tend to get emotionally attached to our holdings and are reluctant to part with them even when it would be prudent to do so. “Buy-and-Hold” is only one investment strategy and it is by no means a one-size-fits-all. Sometimes it works, other times it don’t.

For me, one advantage of online trading is the relatively low-cost way I can observe my patterns of behavior and attempt to change the unproductive ones. For example, at only a few dollars a trade, I take small positions in promising companies, make small profits (hopefully), and then move on.  This type of dalliance would be much more costly at my full-service brokerage, which is why there, I hew to the “buy-and-hold” philosophy and risk “securities sprawl”.

A bonus of my online trading is it’s making me more disciplined and less emotional when it comes to general portfolio management. I still have my favorites but I’m more inclined to part with them sooner when a better opportunity beckons. As a concession, I keep a watch list with my past holdings, the way someone might keep tabs on a former lover on Facebook. (I wish them well, but not too well!)

In How to Marry a Millionaire, Bacall, Betty Grable and Marilyn Monroe played women who wanted to snag rich husbands. In the end, they married for love. Except that Bacall’s beau was secretly a scion—love & money, honey.

R.I.P. Miss Betty Bacall

Post Taste

courtesy of what to wearOne of the most interesting luxury brands is—still—Prada. Unlike the tiresome antics of some other tip-top names like Louis Vuitton, and even Hermes, with their collaborations with artists, Prada is art. Full stop. Love it. Hate it. Can’t afford it. Whatevs.

Next month in Milan Muiccia Prada and her husband and business partner Patrizio Bertelli will launch Fondazione Prada that will focus on contemporary art. The café is designed by American director Wes Anderson, the creator of such indelible and delectable films as The Darjeeling Limited and, recently, The Grand Budapest Hotel. And the opening program will feature Roman Polanski discussing how a Doris Day film influenced the opening of Rosemary’s Baby.

People, what’s not to love?

Michael Rock, author of Pradasphere, writes about the ‘Prada Vision’ and how the brand plays with issues of gender, power, taste, luxury, beauty, vanity and embellishment. But why stop there? The Prada ‘experiment’ could apply to investing.

Referring to their total freedom in creating and running the foundation, Bertelli says, “Looking for consensus is a form of mediocrity, and that is one of the worst of human weaknesses.”

I suppose one could say that the rise in popularity of index-based ETFs represents our human need to cling to the median. There are many fine arguments for investing in index-based ETFs but, obviously, outperforming the index, (or standing out from the crowd), is not one of them.

You see this herd mentality play out on the investing blogs too. (I confess that I spend way too much time lurking on stockhouse.com.) This blog is full of ‘pumpers’ and ‘bashers’ and it seems to take no time at all for posters to clump around a trending narrative for what are typically small, highly speculative companies on the Canadian Venture (or, as some call it, Vulture) exchange. The value of these postings is mediocre at best because outliers, some no doubt with interesting views, are reluctant to be the object of other bloggers’ wrath.

Which brings us to the subject of clashes and conflicts. For me, one of the delights of Prada is the constant friction in the designs. The clothes and accessories are gorgeous. Or are they? They’re beautiful except when they’re ugly. They’re sexy and then not at all. They look expensive and cheap too. It’s all a crazy mash-up, not terribly unlike the markets.

Though there’s a subversive snobbery inherent in Prada, I appreciate the Prada wink. Take it seriously, or don’t. Next season there’s a whole new storyline. Gliding this idea into the markets, one can think of large caps stocks as head-to-toe Chanel. Expensive, good liquidity, universally understood, easy-to-price. Lovely, valuable, yet somewhat predictable. It takes no guts to wear a a quilted 2.55 Chanel on your arm. Good taste, absolutely.

The small caps, or micro-caps. Now that’s a different story. Good taste? Hmmm. Bad taste? Maybe. Post taste? Definitely. Investing in micro-caps is like dressing like Miuccia Prada: lime-green printed dress, short, black ankle socks, masculine shoes, no make-up, and emeralds the size of duck eggs. “What interests me, profoundly, are not certainties but doubts, clashes, and conflicts,” she has said. There is nothing patrician about micro-cap investing. It is the lime-green printed dress worn with black ankle socks—and, if you choose your ponies poorly, forget about the duck egg-sized emeralds.

Many investors cling to one group or another and in doing so miss out on potential gains (and losses too, of course.) The large cap people often hold their noses at the micro-cap types, for example. Yet small cap stocks can be terrific performers and be used to create satellite, high-growth portfolios within a more conservative framework.

Prada makes a case—fashion and otherwise—for mixing high-and-low. For the artists it means showing the rest of us where the world is going. And for investors it means making money, sometimes in “exquisite” taste, other times in “bad” taste.

Welcome to the Pradasphere!