can all learn a thing or two from Adam Neumann. Neumann’s words suggest he’s a foolhardy windbag, but his personal financial statements reveal the financial acumen of a guy who knows a bubble when he sees one. It takes more than an egomaniac cheerleader to inflate a bubble... It takes billions of dollars in capital. Since 2017, the capital that inflated the WeWork bubble has primarily come from one man – Masayoshi Son. Now, the bubble has burst. Masa is left holding a bag full of garbage that nobody wants to buy. But Neumann has six houses, stakes in other startups, commercial real estate investments, and still owns 20% of WeWork. You can call Neumann a foolhardy windbag... But you can’t call him stupid. Neumann was wrong in so many ways. His business model didn’t work. He believed Masa’s ill-conceived hype. He misjudged the market’s willingness to put up with his control-freak tendencies. But as his behavior became more erratic, his rhetoric became more outlandish, and his ego became impossible to manage... he just kept clipping profits . There’s a lesson here. If you’re bullish on an investment that keeps going up... maybe you should “pull a Neumann” and continue to clip profits along the way. After all, your bullish stance may be wrong. Here’s what that means for you... ... We’re 10 years into a raging bull market. All long-term market participants are sitting on
huge gains. Is there more to come? Heading into 2020, I think there’s a great chance that the market remains strong. My optimism could be misplaced... A correction could be imminent. The market could be headed for a full-blown collapse (though I doubt it). As I weigh these options, I find myself thinking of Neumann – He was wrong... He was always optimistic about WeWork’s prospects, but he took profits along the way. For a value investor like me, Neumann is an odd market exemplar. But here we are... As the calendar turns to 2020, you should take a hard look at your portfolio’s winners and ask some tough questions. Has the easy money been made? Is it possible that the current price reflects undue optimism? If you still like a company whose shares are up substantially, does it make sense to sell a partial position? And, perhaps the most important question: If I’m not selling today, at what price would it make sense to sell this stock ? The WeWork debacle was epic... Business schools will be talking about it for years. Neumann will go down as the biggest financial bozo of 2019. To some extent, that’s deserved. I’ve laughed at Adam along with the rest of you. But I submit that Masa, not Neumann, was the real bozo. And so, as you head into 2020, giddy from riding a 10-year market move... it’s time to look at your portfolio and ask yourself: Would I rather be a Neumann or a Masa ?
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