About Jack Rivkin

Jack Rivkin retired in 2008 as EVP, CIO, Head of Private Asset Management of Neuberger Berman(NB) and from NB's Executive Management Committee. He was also on the Lehman(LB) Council on Climate Change(CC) and the NB CC Fund Advisory Board. He has been engaged with the United Nations and other entities on policy issues related to Private Capital and CC. He is an Associate Fellow of the Asia Society. He has continued on the NB Mutual Fund Board and with his CC responsibilities. He began his investment career in 68 as an analyst at Mitchell Hutchins(MH), and became Director of Research(DOR) there. After Paine Webber(PW) acquired MH, he served as DOR; CFO of PW; CEO of PWMH-the equity trading and investment arm of PW; Chmn of MH Asset Management and President of PW Capital. 87-92 he was DOR and, subsequently, Head of the Worldwide Equities Division of LB. 93-95, he served as a Vice Chairman and DOR at Smith Barney (now Citigroup). He was an EVP with Citigroup Investments 94-01, responsible for private equity investments. He was also an adjunct professor at Columbia University teaching a course in Security Analysis. He joined NB in 2002. He is the co-author of “Risk & Reward—Venture Capital and the Making of America’s Great Industries,” Random House, 1987. He is a regular guest on various media. He is the principal subject in a series of Harvard Business School cases describing his experience as DOR and Equity Head at LB. He has served as a director of a number of private companies and the NYSSA. He is currently a director of Idealab, Dale Carnegie, Operative, World Policy Institute and other private companies. He is a member of the Economic Club of NY, the Anglers Club, Theodore Gordon Fly Fishers, and a lifetime member of Trout Unlimited. He continues to be an active private equity investor when he isn’t fly fishing. Mr. Rivkin earned his Professional Engineering degree from the Colorado School of Mines and his MBA from the Harvard Business School

Accenture’s Downes, Altegris’s Rivkin Assess Disruptors (Podcast – April 11, 2014)

Apr 11, 2014

Larry Downes, co-author of “Big Bang Disruption: Strategy in the Age of Devestating Innovation,” and research fellow at the Accenture Institute for High Performance, weighs in on developing trends in the world of media, technology, the internet, and commerce broadly to identify which embody game-changing “big bang disruption” and which do not. Downes speaks with Bloomberg’s Kathleen Hays, and guest host Jack Rivkin, chief investment officer at Altegris Advisors LLC and a member of the board of directors of Idealabo, on April 10 on Bloomberg Radio’s “The Hays Advantage”.

Listen to podcast here: http://media.bloomberg.com/bb/avfile/Economics/On_Economy/ve9LOITvSObM.mp3

Altegris CIO Rivkin Discusses Stocks, HFT, Fed (Podcast April 10, 2014)

Apr 10, 2014

Jack Rivkin, chief investment officer at Altegris Advisors, discusses the direction of the stock market, Federal Reserve policy, and the complexities of high frequency trading. Rivkin speaks with Bloomberg’s Kathleen Hays on Bloomberg Radio’s “The Hays Advantage”.

Listen to podcast here: http://media.bloomberg.com/bb/avfile/Economics/On_Economy/v3fW4XPODeWA.mp3

Action Economics’s Englund: Fed Dug Itself in a Hole (Podcast – April 10, 2014)

Apr 10, 2014

Mike Englund, chief economist at Action Economics, says the Federal Reserve is trying so hard to be transparent, e.g., by providing a list of economic indicators it’s watching to decide when to move interest rates, that it may have dug itself into a hole where markets expect a move on policy when one may not be forthcoming. He also says the drop in jobless claims last week to the lowest level since 2007 is a legitimate sign of labor market improvement. Englund speaks with Bloomberg’s Kathleen Hays, and guest host Jack Rivkin, chief investment officer at Altegris Advisors LLC, on Bloomberg Radio’s “The Hays Advantage”.

Listen to podcast here: http://media.bloomberg.com/bb/avfile/Economics/On_Economy/v_l8eQ8bAtOI.mp3

Altegris’s Rivkin Discusses 2014 Fed, Investment Views (Podcast)

Summary: Dec. 18 (Bloomberg) — Jack Rivkin, chief investment officer at Altegris, says he’s concerned retail investors may be inclined to start buying stocks in 2014 just when stocks are set to plateau or post only very small gains. He says volatility may increase, especially as the Federal Reserve starts to taper its bond purchases, which is another obstacle investors will have to navigate. Rivkin speaks with Bloomberg’s Kathleen Hays and Vonnie Quinn on Bloomberg Radio’s “The Hays Advantage.” (Source: Bloomberg)

Listen to the podcast here – http://www.digitalpodcast.com/items/24717879

Altegris CIO Rivkin Discusses MSFT, GOOG, AMZN (Podcast)

Summary: Jan. 31 (Bloomberg) — Jack Rivkin, chief investment officer at Altegris Advisors, discusses reports that the board of Microsoft Corp. is getting ready to name Satya Nadella, executive vice president of Cloud and Enterprise, to replace Steve Ballmer as chief executive officer. He says it will help the software giant shift its focus from consumer to enterprise products and services. He also discusses recent earnings reports and new developments at Amazon and Google. Rivkin speaks with Bloomberg’s Kathleen Hays and Vonnie Quinn on Bloomberg Radio’s “The Hays Advantage.” (Source: Bloomberg) 

Listen to podcast here – http://www.digitalpodcast.com/items/26278078

What to Expect in 2014 (And Beyond)

This outlook is being written a good 45 days later than when “What to Expect in 2013…” was written over a year ago. It is amazing how much can happen in that short time frame and can influence one’s view of the next year. If I let another 45 days pass I am sure there would be some things that would change. I believe the risks are to the upside on more positive news on the economy but at some point that news could affect Fed action.  Much of what could happen this coming year is influenced by what is going on in the energy sector. Middle East economies, of course, but also inflation, GDP growth, and geopolitical events will affect markets and the US economy specifically. These points will become clear as I spell out some of my expectations. Understand that these expectations follow the Byron Wien formula where I believe there is greater than a 50% chance they happen when the rest of the world may not agree. The “Expectations” are designed to stimulate thought. Some of them can relate directly to the securities markets, but some do not, and this year, a little whimsy. Hopefully, you can figure out which one that is. Let’s begin:

  1. After printing two 4% GDP quarters in 2013 and seeing a 1 percentage point drop in the unemployment rate, there is finally some recognition that, maybe, the Fed’s actions really did produce some stimulus. This could lead to self-sustaining growth in the US economy in 2014 with at least one more 4% print this year. Less noise from the crazies in Washington adds to business confidence and, ultimately, capital expenditures.
  2. Economic growth and job creation become more apparent with forecasts for a decline in the unemployment rate possibly approaching 6% before the end of the year. The Federal Reserve begins making noise about speeding up tapering and hints at reducing the time the Funds rate would remain anchored at its current level. This is in spite of limited evidence, at least early in the year, that the inflation rate is approaching the targeted 2% level. This ultimately has a dampening effect on the markets.
  3. We begin seeing some academic work and, of course, the pundits talking about an acceleration of the technological revolution making the case that low inflation or maybe even some signs of deflation are actually a good thing in this technologically driven environment. The low inflation picture is reinforced at the headline level by energy supplies expanding within the US, in the Middle East from Iraq and, ultimately, Iran. As other countries embrace fracking the potential for even more supply keeps downside pressure on energy prices.
  4. The negative elements on inflation, which are not sufficient to cause major concerns, come via erratic supply in soft commodities from continuation of drought in certain areas combined with weather abnormalities which, more and more, are blamed on climate change. As we get into the latter part of the year, the improving developed market economies combined with growth in Asia put some upward pressure on hard commodities. Investors must make the decision to invest in the extraction companies that have suffered from low prices or directly into the commodities themselves.
  5. The positive change in US trade balances from lower imports of energy combined with rising energy exports adds more than a percentage point to US GDP and reinforces the case for a strong dollar relative to almost every other currency except possibly the Chinese yuan. Asia shows growing signs of a currency war fueled by the impact of further weakening of the Japanese yen beginning to very seriously affect the export trade of its Asian competitors.  While this has a tendency to push up inflation rates in many of the Asian countries, the developed markets benefit from lower prices on many imported goods further softening their inflation rates.
  6. The impact of the currency wars raises questions about the stability of some of the emerging markets, particularly in Asia. There are also concerns about the pace of wage increases in these heretofore attractive locations for outsourcing. Manufacturing and some service corporations begin making different strategic decisions on the best places to locate manufacturing and processing centers.  The decisions are reinforced by a growing belief that technological advances will continue to allow capital to substitute for labor, or at least keep pressure on wages. More business activities find their way back into the developed countries of the world. China moves cautiously in the same direction, taking advantage of its own technological progress. It begins marketing itself as a technological leader as opposed to a low-cost labor market. This is not easy as China, at the same time, continues to push toward a more consumer-oriented society. Incomes have to rise and, politically, the population needs to be kept content. It will not be a smooth year for China.
  7. Coming elections in India point to a possible loss of leadership for the Congress party. Combined with continued economic difficulties and some strife associated with the potential leadership change, the country moves further down the path of being even less attractive for foreign direct investment. It loses another year to the relative growth of its Asian neighbors and finds itself participating in the currency wars as a possible way to salvage elements of growth.
  8. With the exception of Chile, Colombia, Mexico and Panama, the rest of Central and South America flounders. The US begins to pay more attention to its southern neighbors. Out of desperation, Argentina reaches a settlement on its outstanding debt and begins a focus on building its energy sector with some help from outside sources. A Menem-like regime change becomes a more likely political outcome.
  9. The changing energy picture outside the Middle East, combined with likely increased production out of Iraq and, ultimately, Iran, result in a change in the relative importance of Saudi Arabia and, to some extent, Israel. This could produce some positive movement in the Palestinian situation, and some changes in the relationships of Saudi Arabia with the rest of the Middle East and possibly Asia as the US becomes an even smaller market for its oil and an export competitor. On the other hand it raises the risk of some turmoil in the region as the power picture changes and attempts are made to preserve the old order in  a possibly military fashion.
  10. The fading newspaper industry surprises the street with its earnings in the early part of the year and benefits from contentious congressional races in the third and fourth quarters as well. The advertising related to Academy Award nominations and ultimately selections reaches new heights in print and social media. Studios advertise some small (but not cheap) movies to extremes to compete with some very high quality films and performances. We actually walked out of a couple of the most highly advertised ones. Aren’t two-page spreads a little extreme? Unfortunately, the correlation between the advertising and the nominations and awards becomes very direct leaving it up to the audiences to hopefully, make their own decisions after the fact. The quality and audience continue to rise for television productions and the associated delivery mechanisms for these performances leaving 3-D sequels and prequels to the movie industry. Can’t wait for “Inside Llewyn Davis Today–in IMax.”

So what does this all mean for the markets? I wish I knew. History says that the kind of equity market we had in the US in 2013 is usually followed by a decent year.  I don’t think it is that simple. We could see some re-allocation by institutions whose US equity portfolios have been pushed above their target percentages. At the same time, if we are beginning to return to a more normal relationship between earnings yields and fixed income yields, traditional debt doesn’t look that attractive. It may mean that markets outside the US are more attractive–maybe Europe and maybe some of the emerging markets if the currency is hedged out. There are some risk elements in the geopolitical situation. I think we will have to look harder for returns this year and the risks are high enough to look for some less correlated investments. I wouldn’t reduce my equity exposure, but I might change the mix.

We’ll have to see if another 45 days sets us up for totally different surprises. If nothing else I hope this has provided some food for thought.

I have some longer term expectations including a carryover from past years which, one of these days, will actually come to pass. I include these as additional repast for the brain. As has been the case since the millennium, the year will likely be more interesting than we anticipated.

  1. Contrary to normally quiet years during a transition of leadership, to some extent in reaction to some elements of an “Asian Spring” in the region, China takes further steps in response to a more activist populace upset with corruption, the environment, and some areas of economic stress. Externally, this includes significant acquisitions in other countries as well as the opening of manufacturing and service facilities where there is a receptive government. At home, R&D is accelerated, particularly in alternative energy, space and IT processing. Subsidies for hydrocarbons are reduced and an explicit carbon tax is put in place.
  2. As the US economy grows, corporations find qualified hires difficult to come by.  Enlightened corporations become educational institutions to provide skills and basic knowledge to a work force that has been idle and undereducated by the public systems. Corporations become much more vocal about creating paths to bring more immigrants into the US system, expanding visa programs and finding other mechanisms to add talented labor to the domestic pool. The tide shifts significantly on immigration issues. The skill match is aggravated by decisions on the part of some US corporations to bring business operations back into the States. Labor costs are rising elsewhere and the elements of control, rule of law, productivity, available feedstock and relative safety lead to better economics for manufacturing and service operations.
  3. Moore’s Law, driven primarily by Intel driving down the nanometer scale and introducing other innovations,  continues to march on. The use of Big Data becomes ubiquitous. This produces technological advances that enhance the opportunities in health care, manufacturing, extractive industries, media and services beyond even the imagination of some of the best speculative fiction writers. These advances, on balance, are positive but continue to raise concerns about the environment and quality of life and opportunity for those at the lower end of the economic and educational spectrum.
  4. Breakthroughs in stem cell research particularly led by work coming out of the New York Stem Cell Foundation change the nature of disease management and eradication and move general therapeutic advances away from animal models to direct testing on human cells. Targeted therapeutics driven by DNA analyses tied to narrower classes of patient recipients change the nature of drug and health delivery. It becomes apparent that the US FDA model is slowing the pace of US therapeutics development by the cost and time required to bring solutions to market. Much as financial services regulation was geared to the benefit of larger entities, it becomes clear that therapeutics development has been on the the same path. Change occurs in response to other countries moving more rapidly in bringing solutions to market.
  5. Away from continual ups and downs in financial assets as the world works its way through the hangover from the 2008-2012 financial crises, the general march of human progress is positive. I hope to be around to observe it. Maybe the breakthroughs suggested in the previous expectation will help that.

Adding to the Knowledge Base–Distinguishing What You Know and Communicating It in Today’s World

An acquaintance of mine, Tom Brakke, has an interesting blog, ResearchPuzzle.com. He is pulling together an e-book  based on letters he has posted to a young analyst giving advice on what it takes to be a great analyst.  Tom asked for any contributions that some of his friends might wish to make on the topic. Tom’s letters cover most of what an aspiring analyst needs. I would urge those interested in the topic to visit his site and stay tuned for the book.  While the book will be about analysts involved in the investment business, I think many of Tom’s observations have significantly broader application to anyone who does research of almost any type with the desire or obligation to make that available to an interested audience.  These days almost everyone is an analyst to some degree, collecting information in 140-word bites or more or from some visual or verbal media and then adding his or her thoughts via various media in return.  Some of the opinions offered actually add value to the dialogue, but many don’t.  I think what Tom is pulling together, if incorporated,  will raise the  value-add to garbage ratio of almost any dialogue.
I sent Tom a few of my thoughts on the topic, which, for the most part simply reinforced what he has already written.  My comments relate directly to investment research, but I also think they have application to a broader analytical universe.  Here are my comments to Tom:
One of the first things you might want to have a budding analyst do is read the HBS Lehman A Case about the rebuilding of that department back in the days when Lehman was alive as a part of American Express. It is about management, but also focuses significantly on what an analyst has to do to succeed.
I would also suggest that any analyst read Decision Traps by Paul Shoemaker and Ed Russo. Lots of good case studies in there, and some fun exercises that really stimulate the thought processes and make us realize how our mind and what it sees in front of it, can lead us to some very wrong conclusions.
Further thoughts: Any analyst of companies needs to get to the point where the companies are asking him/her questions. One learns more from a question than an answer. This requires thinking strategically and understanding the history of the company and the industry, not just what’s happening at the moment.  I also agree wholeheartedly that a good analyst wants to be surrounded by other good analysts and share wisdom and questions. I also think a good analyst, once a conclusion is reached, should immediately begin looking for disconfirming information. In the course of that, one will find confirming information, but the search is for disconfirming info.
 In addition, the thought process has to be out-of-the-box. With the info flow these days everyone starts with the same data. It’s what one makes of it that is key. One also has to look at both sides of the picture–positive and negative.
Don’t become an advocate too soon. When I taught Security Analysis at the Columbia Exec MBA program, the “final exam” consisted of preparing two reports on the same company–one positive and one negative.  This was to get the budding analysts to understand that the differences many times are not significant. A stock is being priced at any moment reflecting that.
I also always suggested to the analysts (and did this myself) to communicate with their toughest/smartest clients first. Thus, the gaps and uncertainties of whatever analyses have been done come into stark relief,  making the next calls, and the next report, that much better.
Your points, Tom,  about communication skills, written and oral, are key. Becoming recognized as a very good analyst (content, communication, presentation, visibility) feeds on itself. Companies and clients want to communicate with you if you are perceived as knowing your stuff and, subsequently,  that enhances one’s knowledge. One cannot sit in a room and slip reports under the door.  An analyst has many audiences—the companies, the investing clients, the salespeople who help deliver the message, the investment bankers, the media–each requires different packaging.  Don’t be too stuck on the purity of the analytical aspect of what one does. Packaging and delivery become key and provide the best feedback loop for even better analysis.  We are living in a different world where the tools for analysis are ubiquitous and the means of delivering the conclusions are vast.  What happens inside the mind becomes the differentiator. Not as easy as it used to be, but equally, if not more rewarding. I am eager to see Tom’s more complete thoughts on this topic.