Saturday, January 3, 2009


Jeff is one of my tennis playing buddies and a far better athlete than I ever was but what I really admire is that he's also one of these guys who really knows financial markets; far better than I ever will, and has a simple yet powerful way of explaining things.

He's never satisfied just beating me in tennis and always has decimation in his eyes and on his mind. Aiding him is a wonderful ability to distract me with some pre-game business related chatter. Today's distraction was around a trend he calls 'permacheap'. He sees asset values being fundamentally reset for the foreseeable future and advises his people against holding assets just because they are so cheap today. According to him, cheap is an absolute expression and if you think of it relatively and start comparing values to yesterday you are chasing fools gold. The market today is just different. He's not optimistic or pessimistic, just a realist who is adjusting his game to market realities.

Between sets he took a new distracting tact. 'Charlie, did you know that US Government is now the largest mattress company in the world?' People are giving them money, for 30-90 days and asking for zero return. It's like stuffing money in a virtual giant mattress.

That's how much trust has left the market and why companies that embrace permacheap, (like at Pando where the selling proposition is 25% of the cost and the same or better SLA as competitive alternatives) resonates well in the market.

Back to tennis, my revenge is to lend him rackets whose strings are just about to break. When he calls me out on it, I calmly explain that restringing tomorrow will be much cheaper than restringing today. Bring it on, 'just bring it on Charlie', so he says.

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