Unconditional Love; VALUEx Vail

I am going take a week’s break from sharing excerpts from my summer letter about the market.

VALUEx Vail

My company, IMA, organized the first VALUEx Vail conference in 2011, after I attended my friend Guy Spier’s VALUEx Zurich/Klosters. I figured that since Vail was a better version of a Swiss village, we should host one in Vail. Spending three days in the beautiful Colorado mountains, discussing value investing ideas is a dream come true. (Take a look at?pictures ?from past conferences.) Hosting this conference has allowed me to build a large network of value investors, but even more importantly I’ve made many lifelong friends.

Sadly, we had to cancel last year’s conference due to the pandemic. Restarting it this year was anything but easy. Instead of June (the usual time) we had to organize it for September (9th-11th). (We have discovered that we are competing for venues and hotels with a year and a half of delayed weddings.) If you are a diehard investor and would like to attend, you can apply?here . We have only a few spots available. We limit attendance to 40. (IMA is not in the conference-organizing business, thus this is a not-for-profit adventure for us. We are highly selective as to who can attend.)

Unconditional Love

A few years ago, my older kids, Jonah and Hannah, and I went snorkeling in Fort Lauderdale. We went out on a big boat that could probably carry up to 80 people, but there were only eight snorkelers (including us) on board and two crew members. We went about two miles off the Fort Lauderdale coast. (We could still see the city skyline.)

The captain dropped anchor. We put on fins and inflatable life vests. The captain told us to inflate the vests only about a third of the way, so we would still be able to put our heads in the water and snorkel. We let other people in the group get in the water first, then in went Jonah (then 16), followed closely by Hannah (then 11). I was going to go in right after them, but my fin was loose and I had to adjust it. I was in the water maybe 30 seconds later, but I noticed that Jonah and Hannah were already 100 feet away from the boat. I swam to them, and by the time I reached them the boat was already four hundred feet away from us, and the distance was growing.

I am not sure if Jonah or Hannah realized what was happening. We were alone in the ocean, being washed farther away from the coast and the boat by a strong current. To make things a lot worse, almost as if on cue, as soon as we had dropped anchor, the weather had changed. The wind picked up and the dead-still ocean turned very unsettled.

Now we were engulfed by large waves. On the boat these waves were just slightly inconvenient, but in the water they seemed to be the size of multistory buildings and were throwing us around. I had never felt so powerless in my life. Nature was so much bigger than we were, and the current was quickly taking us away from safety. In moments like that, you have no control over your life. None.

I was scared. But this was the first time in my life that I experienced selfless fear. At that moment, what happened to me suddenly did not matter. All I wanted was for my kids to be okay. As we floundered in these huge waves, I forced myself to speak slowly and calmly. I did not want to scare the kids. Our vests were deflated, and the waves were threatening to pull us under. I told Jonah to fully inflate his vest. I inflated Hannah’s and then mine. (If I had been totally rational, I would have inflated my vest first. But what parent is rational when your kids are in danger?) Once our vests were full, I felt safer. The kids and I grabbed hands and held on to each other.

A crew member jumped into the ocean with a red?(Baywatch-type) floatie and collected all the snorkelers together. (The others were up to several hundred feet away from us.) The captain unhitched the anchor from the boat and tied its rope to a buoy to so he could find it later. Then he brought the boat around and collected us, and then picked up the anchor.

I cannot tell you how long that feeling of fear of losing my kids lasted; it may have been seconds and was probably less than a minute. But today I look at it as a period, not a moment, in my life. As I recall that feeling, my heart starts beating faster. I have never experienced that feeling before or since, and I really hope to never experience it again.

I talked to Jonah and Hannah about this trip recently, and they don’t remember being scared or even particularly excited. But this was not my first harrowing experience in the ocean. When I was 17 and a cadet at the Murmansk Marine College in Russia, I went with my class on a two-month journey around Europe on the tall ship Kruzenshtern*?(wiki ,?short video ). We left Tallin, Estonia, sailed to the Canary Islands, spent New Year’s Day 1990 in Greece, and finished our trip in Odessa. In the Mediterranean we faced a true storm, with our four-masted barque rolling through the sea as if it was a giant roller coaster. I remember working on the deck of the ship, repositioning sails and being hit by giant waves. I was 17, fearless, not too smart, and, most importantly, not a father (I only had to worry about myself).

As I am writing this I have realized that the Fort Lauderdale experience lacks Hollywood-level drama. Thank god! But for less than a minute, the fear of losing my kids was incredibly real. This was probably the first time I truly felt what the true, unconditional love of being a parent meant. The innate instinct of self-preservation was gone, replaced by another instinct that was dormant before: being willing to give up my life for my kids.

* As I was writing this, I found?this documentary ?about the Kruzenshtern. My experience onboard was very similar to that of these cadets; I even wore an identical uniform (though I did not have a mobile phone and had to send old-fashioned telegrams to my parents).

Crypto technologies

I want to do a small follow-up to my?previous article ?about cryptocurrencies. I received many emails from readers explaining to me that I had ignored the revolutionary nature of blockchain as a technology. I did not. I am actually fascinated by what blockchain may be able to accomplish. The more I learn about it, the more I realize that Bitcoin was a revolutionary invention as a technology, but far from a perfect one. There are many other strong rivals that are faster, more energy efficient, and smarter (programmable), which are trying to unseat it. This is why there are now thousands of “currencies” (technologies) out there with new ones coming weekly.

I have found that learning about them is fascinating; each one has a different philosophical and technological approach. But again, I look at them as technologies, not currencies. I found this?interview ?with Charles Hoskinson, creator of Cardano and co-creator of Ethereum (both are cryptocurrencies/technologies) very interesting.

(Drawing is by my brother,?Alex Katsenelson . Prints available on?ArtistUSA.com .)

Ballet "Giselle"

I wanted to share with you this coda (concluding passage) from the ballet Giselle composed by French composer Adelphe Adam (1803 - 1856). I love this?short piece ?(you can watch the?full ballet?here ).

As a bonus, I am including Mozart’s sonata for four hands performed by Evgeny Kissin and Martha Argerich.

Click here to listen.

Vitaliy Katsenelson, CFA

I am the CEO at IMA, an investment firm that designs all-terrain portfolios that survive the worst markets and thrive in good ones. (Get our company brochure?here , or simply visit?our website ).

In a brief moment of senility,?Forbes?magazine called me “the new Benjamin Graham.”?

I’ve written?two books ?on investing, which were published by John Wiley & Sons and have been translated into eight languages. (I’m working on a third - you can read a chapter from it, titled “The 6 Commandments of Value Investing”?here ).

And if you prefer listening, audio versions of my articles are published weekly at?investor.fm .