For decades, Kiril Sokoloff has been an active yet very low-profile global investment strategist, thought leader and visionary. He founded 13D Research & Strategy in 1983. Howard Marks, Co-Chairman of Oaktree Capital wrote that “Many professional investors include What I Learned This Week from 13D Research among their highest-priority reading. Kiril Sokoloff seems more likely than most to cover the big market-movers of tomorrow.” Barton Biggs said “Kiril Sokoloff is a breath of pure, fresh investment oxygen. He is invaluable because he is an original thinker and is not afraid to take extreme views.”
Sokoloff foresaw before others the five great secular trends of the last 40 years that have defined investment performance and business opportunity.
He was one of the first “supply-siders”, joining Jack Kemp and others in 1977 to spread the word that cutting tax rates and de-regulating the U.S. economy, would cause an economic boom in the U.S. Kemp’s “supply-side” cut in tax rates was the basis for the Reagan Revolution, which launched the massive 40-year boom that we all benefited from.
As a result of his early involvement in “supply-side” economics, Sokoloff fully understood how big the boom would be and how it was one of the greatest paradigm shifts in world history and the global economy.
In the late 1970s, it became clear to Sokoloff that an inflationary blow-off was coming and that commodities would surge, stagflation would ensue, bond markets would crash and the world would suffer one of the greatest capital losses in history.
Sokoloff then saw that another paradigm shift was coming. All the pundits, money managers and business people in America had come to believe that inflation would last forever. Having studied financial history, Sokoloff understood that a parabolic blow-off usually marks the end of something not the beginning, and the crash in bond prices, the election of Ronald Reagan and the appointment of Paul Volcker as Fed chair would usher in a long-term period of disinflation.
Knowing full well that no one believed disinflation was possible, and given the enormous skepticism in the investment and business community, Sokoloff authored the seminal book in 1982 entitled, Is Inflation Ending? Are You Ready? The book in effect argued that equities would soar, bonds would enter a long-term bull market, commodities would crash, the U.S. dollar would get much stronger and cost-control would be the new order of the day.
By the early 1980s, U.S. equities were selling significantly below break-up value due to the highest interest rates in the history of capitalism, stagflation and poor corporate governance. Sokoloff foresaw a massive takeover boom and became the world’s expert on 13D filings, which was an S.E.C. filing required to disclose an ownership position of 5% or more. Between 1983 and 1986, 175 of his firm’s recommendations were taken over.
In May 1984, 30-year U.S. Treasuries had an ugly retest of their September 1981 low of 15%. Sokoloff saw the 14% yields that were available as one of the greatest investment opportunities in his lifetime and subsequently gave over 500 speeches making the case for buying 30-year Treasuries on margin.
The next opportunity Sokoloff saw was the rise of China. With the Hang Seng at 4,900, his March 31, 1992 article entitled China Awakens: The Premier Investment Opportunity of the 1990s? is one of the classics of investment history. Also, at that time, Sokoloff co-founded the first pure Asian hedge fund. In 1994, with the Hang Seng at 12,000, he resigned, believing the Hang Seng had risen too far too fast, too much capital had flowed into the region and that soon the Asian stock markets and economies would shift from boom to bust.
Sokoloff moved back to the United States and switched his focus to technology. He fully understood how big the coming technology revolution, the rise of the Internet and e-commerce, and the resulting disruption would be to the world. He advised his clients to go big in tech. In 1994, he cofounded one of the first pure technology funds, resigning later that decade as he thought price increases, speculation and complacency had reached a dangerous level.
In the fall of 1996, noting that Malaysia had built the world’s highest building—historically the sign of a major top––and stock markets were breaking down from two-year trading ranges—Sokoloff turned bearish on Asian stock markets. He wrote over 100 memos predicting the crisis would move from emerging Asia to the emerging world to the developed world and would eventually cause a severe bear market and a massive IT bust in America.
Having been bearish on commodities for the entire decade of the 1980s and 1990s, Sokoloff was looking for a change and he noted that commodities were not going down and in some cases were actually rallying despite the global recession. This was where his theory of anomalies—what should be happening and isn’t—came to the fore. On March 14, 2001, he authored a timely work entitled Buy Gold: Before Central Banks Reflate, which was followed by an epic bull market in gold and commodities in the following decade. Gold was selling at $262.8 at the time.
This was followed by a six-year deep involvement in oil, which he turned bullish on at $20 in 2002. He remained bullish all the way up to June 2008.
In December 2015, Sokoloff saw another paradigm shift. The extreme deflationary trends of the previous eight years, he believed, had reached such an extreme that they would reverse with a vengeance and he launched his famous investment thesis––“The last will be first”––meaning that all those investment sectors that had been destroyed in the past deflationary period would be the leaders of the next investment paradigm.
He is a big fan of Oriental Wisdom. One of his favorite quotes is from Tao Te Ching (Lao Tzu): The best of men is like water; water benefits all things and does not compete with them. It dwells in the lowly places that all disdain, wherein it comes near to the Tao.