Category: 3. Business

On this episode of The Long View, Lawrence Lam, author, investor, and managing director and founder of Lumenary Investment Management, breaks down the differences in founder-led companies, what red flags to look out for, and three key pillars to assess whether founders are motivated to build their companies for the long term from his new book The Founder Effect.

Here are a few highlights from Lam’s conversation with Morningstar’s Dan Lefkovitz.

Why Motivation Matters More Than Vision

Dan Lefkovitz: What do you make of the common criticism of founders that sometimes the visionary, the entrepreneur, isn’t the right person to manage the company or to take the company to the next level?

Lawrence Lam: I’d say it’s not about whether they can make an assumption between them being a visionary and them not being able to take it to the next level. It’s not so much about that. It’s more about motivation. It’s about distinguishing the different types of motivation, the ones who want to truly build a company for a very long period of time, or the ones who are interested in flipping the company. So, I call them flippers or the builders. And for investors, you need to stay vigilant—motivations can change over time because it’s human nature, and to watch very closely what’s happening with companies.

I would argue a good recent example is Elon Musk moving into government. One could look at that as a sign that, “Hey, he’s putting his personal ambitions ahead of the companies that he’s involved in, and that motivation has changed.” No doubt that when he first joined DOGE that he would dedicate a significant effort to that and therefore take away the effort with his existing companies. The best founders can replicate their operating system, but they’re not so much of an app, they’re actually the operating system, and they design it. And that’s how they structure the organization. A lot of them have this flexibility to do things differently. They own a significant share, so they can problem-solve in a unique way.

There, of course, are red flags that you want to look for, and in particular, large equity sell-downs; that’s a red flag. And all those Palantir investors out there, keep your eyes open and stay vigilant. And then looking at that changing person versus company motivation, or one that has an org structure that is bottlenecked by the founder. All these considerations are red flags to look for. But of course, as investors, you can mitigate against that. You can rotate companies; you can trim some profits and move capital to another company. Founders are good at hyping up their business, so you don’t want anything that’s too overhyped, and maintain a deep bench of founder-led companies that you switch between. And then, of course, monitor the portfolio closely, monitor the equity movements closely.

Avoid Getting Caught Up in the Hype of a Company’s Charismatic Founder

Lefkovitz: How do you look through hype? I imagine a lot of these guys are very charismatic. How do you avoid being lured by their charisma?

Lam: They’ve started their business because of their ability to influence the market. And I outline some objective key things that investors can look for. I have a framework that’s based on three pillars that I’ve observed in a lot of successful founder-led companies and their objective. Because the question of things like motivation, cognitive biases, and alignment with investors are very subjective types of topics. But if you have some objective things to look for, you can really solve that in a scientific way.

So, I think that in terms of looking for founders that are genuinely there to build for the long term, you really want to look at not just the hype, but all the underlying facts that even an outsider can see and identify. In the book, I identify three key pillars. One is judgment and decision-making and being able to make bold decisions. The second is being aligned with investors. Their motivations are in line with what investors want over the long term. And the third thing is to be able to influence internally their staff, the organization, and therefore influence externally the media, shareholders, and customers to actually want their product. And the best of the best can do that.

How to Find Founders Who Are Motivated for the Long Term

Lefkovitz: You mentioned some metrics earlier that you look for and how you quantify these things. It would be interesting to hear a little bit more about the types of indicators that you use to assess each of these pillars of the framework.

Lam: The evolution of my process has always started with the quantitative side of things first. I’m always looking for companies that produce those continual growth in earnings, the conservative balance sheet, all those traits that we mentioned that are prevalent with founder-led companies that show up actually in the financial statements. And then once you identify those, and you may have thousands of those companies, you can very quickly see through the share register if they are founder-led quite quickly. And from the couple of thousand that you see, you narrow down quickly. I narrow down to thousands, 2,000 stocks very quickly on a global level out of, say, 40,000 to 50,000 global companies. And then next comes a qualitative analysis that any investor would do and have their own checklist and process for monitoring.

For me, what’s important is that the founder and the management team definitely need to follow the framework that I’ve written about in the book and score very highly in that. I want them to have a strong market position, and a very diversified customer base and supply base. And to really capture that essence of the founder effect to really be involved in new products and services. What I’ve seen in the past happen is some companies that I’ve invested in are fantastic companies growing, but then they’re in some old-generation businesses like producing caliper brakes for cars, producing petrochemical products, and producing fertilizers. And that can be a trap too, because then some of these companies are just content with doing what they’ve always been doing and almost a bit too stagnant. That’s why you want the new products and the new services, and trying to find the companies with that pricing power and that opportunity where they can compound and fully achieve their potential under the founder.

Find Good Businesses ‘Before an Idiot Starts Running Them’

Lefkovitz: I’m reminded of that famous Peter Lynch quote, “You should invest in a company that’s so good, even an idiot could run it because sooner or later, one will.” I think Warren Buffett has quoted it as well. So, the idea is you should look at the structural features of the company and maybe its competitive advantage. We use the economic moat framework here at Morningstar. What do you make of that, that it’s less about the people and more about these structural features of the company?

Lam: I love Peter Lynch’s quotes, especially the one about not watering the weeds and pulling out your flowers. Love that.

Lefkovitz: I don’t know that one.

Lam: For me, it’s about these businesses—get them before an idiot starts running them. Someone started that business. Someone founded that company. Get in at that time while they’re still running it, before the idiot gets in, and invest early when they’re still running it. That is the essence of The Founder Effect, and really spotting when that motivation changes, if it does, then get out and then let the idiots take over.

(Bloomberg) — Jerome Powell sent the US bond market up on Friday by telegraphing his Federal Reserve will resume reducing interest rates as soon as next month.

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Beyond September, it’s up to the economy how much further he cuts — and how much more Treasuries can rally.

The central bank chief on Friday delivered his strongest signal yet that he’s ready to end an eight-month pause, saying the downside risks to the labor market may “warrant adjusting our policy stance.” Treasury bonds jumped, widening the gap between short- and long-term yields by the most in four years — a typical reaction to a more dovish Fed.

Yet for all the sense of the relief, there are some lingering doubts about how much rates will come down. Futures traders don’t see a quarter-point cut at the Sept. 17 meeting as a sure thing, pricing in the odds at around 80%. And even with Friday’s gains, bond yields still haven’t pushed below lows from earlier this month as investors wait for employment and inflation data that come in before the next meeting.

The restrained response reflects the vexing cross-currents that are facing the Fed, which is balancing a softening labor market against the risk that inflation will rise from still elevated levels as President Donald Trump’s tariffs ripple through the economy.

A case in point: this week, the Fed’s favored inflation gauge may show price pressures remain strong. The auctions of two-，five- and seven-year bonds will test investors’ demand. And even with Powell’s pivot, there’s the possibility of a repeat of last year, when the Fed started easing policy, only to stop in January when the economy kept exhibiting surprising strength.

Powell “solidifies market expectations of a cut in September,” but “it’s less about whether the move comes in September or October,” said Gregory Peters, co-chief investment officer at PGIM Fixed Income. “We don’t know what the next six months will look like. It’s still going to be an environment of mixed data, keeping the bond market on edge.”

The policy-sensitive two-year yield tumbled 10 basis points Friday to 3.7%, near its early August low – which was set after the employment report showed job growth was far weaker than expected. Interest-rate swaps showed traders started pricing in two quarter-point reductions by year-end, with a small chance given to a third such move.

Story Continues

Sharon Chuter, the founder of the inclusive makeup brand Uoma Beauty died on Aug. 14 according to the Los Angeles Medical Examiner’s officer at the age of 38. Representatives for Chuter confirmed her death toThe Business of Beauty on Friday; the news was first reported by Kirbie Johnson’s Ahead of The Kirb newsletter.

Chuter founded Uoma Beauty in 2019, and the line was carried in the likes of Selfridges in the UK and Ulta Beauty in the US. The brand was known for its broad range of foundation, offering more than 50 shades, as well as Chuter’s activism for women of colour in the beauty industry. She started the “Pull Up or Shut Up” movement in 2020, calling on retailers and other beauty companies to publicly release the amount of Black employees they had in the wake of George Floyd’s murder.

The brand’s assets were acquired by private equity firm MacArthur Beauty and the investor BrainTrust in late 2023. In February, she initiated a lawsuit against the two companies, alleging that its sale was unauthorised and had been below market value.

Sign up to The Business of Beauty newsletter, your complimentary, must-read source for the day’s most important beauty and wellness news and analysis.

(Bloomberg) — The Federal Reserve’s annual gathering in the Rocky Mountains is usually a time for central bankers and their wonky friends to kick back, discuss a few complicated economic topics and then go for a hike in the shadow of Grand Teton.

This year, the Fed’s Jackson Hole symposium, which wrapped up Saturday, was at times a tense affair and drove home how difficult the path ahead is for the US central bank.

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On Friday, Chair Jerome Powell used his keynote speech to signal the Fed is headed for an interest-rate cut as soon as its next policy meeting in September. Yet there are clear divisions among policymakers over whether that’s the right call. Powell, himself, noted the economy has handed Fed officials a “challenging situation.”

Policymakers are grappling with inflation that’s still above their 2% goal — and rising — and a labor market that’s showing signs of weakness. That unnerving reality, which pulls policy in opposite directions, is made worse by a high degree of uncertainty about how each of those factors will evolve over the coming months.

“We’re getting some cross-currents and it’s in a difficult environment,” Chicago Fed President Austan Goolsbee said in an interview on the sidelines of the conference. “I always say the hardest job the central bank has is to get the timing right at moments of transition.”

The conference also highlighted the political pressures weighing on the Fed. Those are likely to intensify in coming months as President Donald Trump looks to put his stamp on what may be the most prominent federal institution to have so far escaped his overhaul attempts.

As Powell delivered his speech Friday morning, Trump said he would fire Fed Governor Lisa Cook if she didn’t resign over recent allegations that she committed mortgage fraud. It’s the latest attempt by the administration to pressure the Fed from multiple angles as Trump relentlessly pushes for lower interest rates.

Security for the event was noticeably heightened compared to recent years, adding to the tension at the gathering. Officers from the Fed Police, US Park Police and Teton County Sheriff’s Office, some in military-style fatigues and carrying weapons, were a constant presence.

Earlier Friday morning, officers had to remove one person, the Trump-backer and Fed gadfly James Fishback, after he confronted Cook in the lobby of the lodge and shouted questions about the mortgage controversy.

Rate Path

Powell, in what was likely his final Jackson Hole speech at the helm of the Fed, detailed the cloudy signals coming from the economy.

While the effect of tariffs on prices is now visible, there are still questions about whether that will reignite inflation in a more persistent way, he said. He called the labor market’s current status — with both falling demand for, and declining supply of workers — “curious.”

Even with those uncertainties, Powell opened the door to a rate cut at the Fed’s Sept. 16-17 meeting, though it wasn’t as clear a signal as at last year’s conference. Then, the labor market was deteriorating but inflation worries had receded, and many policymakers shared a desire to cut soon. The backing is not nearly as strong this year.

Recent data have shown inflation has stalled above the Fed’s 2% goal, with some measures indicating that price pressures may be spilling over to products and services not directly impacted by tariffs. Meantime, while hiring has slowed significantly over the summer, other labor market indicators, like the low level of unemployment, paint a more stable picture.

Without much clarity on how the economy will unfold, disagreements over how to proceed are festering among policymakers. Already, two governors dissented at the Fed’s July meeting, when officials didn’t cut rates. If they do cut in September, others may dissent in the opposite direction.

Policy disagreements could grow in the coming months as Trump names new officials to vacancies at the Fed and Powell’s term as chair ends in May.

Under Pressure

The discord comes at a time when the central bank is facing intense scrutiny from the White House. The topic seeped into conversations over coffee, during meals and in between sessions, even if there wasn’t much outright discussion of it during official conference proceedings.

Karen Dynan, an economics professor at Harvard University and frequent attendee of the conference, said she wasn’t surprised that central bankers didn’t want to wade into conversations about politics. Still, she said the conference set an example of how big-picture economic issues should be approached.

“This year it feels particularly meaningful that we have a bunch of papers that are grounded in good economics done by people who are prominent experts,” Dynan said. “These are not problems that can be solved by thinking about one’s intuition or talking to just a circle of people around you — you really need this sort of expertise.”

A New Framework

One issue that received less attention was the new framework Powell unveiled in his speech.

The document, which will guide policymakers as they pursue their inflation and employment goals, is the culmination of a months-long review of the previous one, implemented in 2020. The new strategy removes some of the language that more narrowly focused on the pre-pandemic challenge of persistently low inflation.

It’s a return to basics and sets the Fed up to more clearly focus on its mandates of maximum employment and stable prices, said Carolin Pflueger, associate professor at the University of Chicago Harris School of Public Policy.

In his remarks, Powell “emphasized that his job is inflation and unemployment, and that can only be achieved within an independent Fed,” Pfleuger said. “I think people appreciate that.”

Global Impact

That appreciation became apparent when Powell was greeted Friday morning with a standing ovation from economists and policymakers from around the world — and not for the first time this year.

For them Fed independence is not only a matter of principle but also practicality, since decisions taken in Washington inevitably come with consequences that spread far beyond.

The euro strengthened by 1% against the dollar following Powell’s remarks, adding downside risks to euro-area inflation that’s already seen falling to 1.6% next year.

“If a cut does come and reflects slower US growth, that probably means slower growth for them given the size of the US,” Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics and the former chief economist at the International Monetary Fund, said of the euro area and other economies.

–With assistance from Matthew Boesler.

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(Reuters) -HSBC’s Swiss private bank has launched a cull of more than 1,000 wealthy Middle Eastern clients, as it faces scrutiny from regulators over high-risk customers, the Financial Times reported on Sunday.

The bank will terminate its relationships with several customers from countries such as Saudi Arabia, Qatar, Lebanon and Egypt, many of whom have assets of more than $100 million, the FT said, citing people familiar with the matter.

In a statement to Reuters, HSBC referred to plans announced in October last year to reshape the group and added: “As part of this, we are evolving the strategic focus of our Swiss Private Bank.” It gave no further detail about any client accounts being closed.

In a separate emailed statement to Reuters, Barry O’Byrne, CEO of International Wealth and Premier Banking at HSBC, said the bank continued to have an “absolute commitment” to both its Middle East and Swiss Wealth businesses.

He said Switzerland plays a key role in how it supports clients globally – “it’s one of our core wealth hubs”.

The FT said HSBC’s Swiss private bank had informed the affected clients they will no longer be able to use its services, and will send out letters advising them to move their accounts elsewhere in the coming months.

Bloomberg News had on Saturday reported that HSBC’s Swiss private bank would cut 1,000 Middle East clients.

Swiss financial watchdog FINMA said in 2024 that the HSBC unit had breached its obligations in the prevention of money laundering in connection with two politically exposed persons.

The regulator found that suspicious transactions were carried out involving prominent personalities between 2002 and 2015 with a total value of $300 million.

HSBC had said last month that law enforcement authorities in Switzerland and France were in the early stages of investigating its Private Bank (Suisse) SA unit in connection with alleged money laundering offences in respect of two historical banking relationships.

(Reporting by Gursimran Kaur and Dave Graham; Editing by Jan Harvey and David Holmes)

A jump in the share of foreign-born workers after the pandemic helped Europe bring inflation down without sharply slower growth, European Central Bank President Christine Lagarde said Saturday.

The treatment of mantle cell lymphoma (MCL) has advanced significantly in recent years, largely driven by the development of novel targeted therapies such as Bruton’s tyrosine kinase (BTK) inhibitors. However, despite these advances, significant challenges and unmet needs persist in the clinical management of this disease.

Tycel Phillips, MD, an associate professor in the Division of Lymphoma, Department of Hematology & Hematopoietic Cell Transplantation at City of Hope, explored the current clinical landscape and the pressing questions that are being addressed in ongoing research. Phillips outlined a 2-pronged approach to these challenges, focusing first on the need for a universally accepted definition of high-risk MCL. He highlights the importance of accurately identifying patients with aggressive disease characteristics, such as blastoid morphology, high Ki-67 proliferation rates, and TP53 mutations, to better guide therapeutic decisions. He then addresses the critical issue of what to do when BTK inhibitors fail, a situation that leaves many patients with limited treatment options.

Phillips concluded with the urgent need for more accessible, “off-the-shelf” therapies to improve outcomes for patients who relapse or are unable to access CAR T-cell therapy.

Transcript:

The biggest [challenge to research] is a 2-prong [approach]. One is with patients who are high-risk. One of the issues that has come up is the accurate definition of patients with high-risk mantle cell lymphoma. That is a focus moving forward that will be tackled sooner than later, to get a universal definition of what is considered high-risk, and then, thereafter, the best way to manage these patients. If we look at most of the clinical trials that have been reported out in the last couple of years, we see a vast majority of the patients are responding to treatments and are having durable responses, but there is a subset of patients who unfortunately seem to be more difficult to treat and are not necessarily having the great responses. Patients with blastoid or pleomorphic morphology, there’s a lot of debates and discussions about the proliferation rate, how fast the cancer cells are growing. The Ki-67 and additionally, we discuss, TP53 mutations and how they are impacting clinical care. Having an accurate definition and then conducting more clinical research specifically focused on trying to help these patients will be important.

In certain situations, we have very effective treatments, such as Bruton’s tyrosine kinase inhibitors, or BTK inhibitors. What do we do when these drugs fail the patient? Because when the patients unfortunately stop responding to these medications, it presents a conundrum, because historically, we have seen there are few treatments that can help patients who have lost response to BTK inhibitors. Outside of CAR T-cell therapy and pirtobrutinib [Jaypirca], we do not have any other FDA-approved options. Two of the CAR T-cell therapies appear to be a much more durable response for patients [where a BTK inhibitor fails them]. We need more treatments to help support patients when [a BTK inhibitor fails them], especially those who cannot afford to or have a reason why they cannot get to the CAR T-cell center. We need more options available in community situations to help these patients, so we can improve their overall survival.

By Bill Peters

Earnings Watch: Nvidia reports, as do retailers like Gap and Ulta Beauty

People attend a Nvidia production preview exhibition in Taipei on May 21, 2025.

Wall Street, collectively, may be wondering about the future growth prospects of the Magnificent Seven stocks, as they invest in artificial intelligence but burn cash in the process and question whether business and customers are willing to pay for the technology.

But as artificial-intelligence chipmaker Nvidia Corp. (NVDA) prepares to report quarterly results on Wednesday – amid questions about its ability to meet demand and drama between the U.S. and China – analysts keep getting more bullish.

As MarketWatch reported last week, an analyst at Cantor Fitzgerald said AI demand was “seemingly insatiable,” as its big-tech customers heap potentially hundreds of billions into building out the technology and its infrastructure. But as the focus shifts to so-called AI inference – or making new observations or predictions when presented with data – Wall Street may have questions, as they have in the past, about whether Nvidia can supply enough chips to meet that demand.

Wall Street’s focus will also likely center on China, where things have gotten a bit messy, as the two nations try to elbow each other out of the AI race and as each claim the other represents a security threat.

Nvidia said last month that the U.S. would allow the company to sell its less-sophisticated H20 AI chips – made specifically for China to comply with export controls – to the nation, after the U.S. effectively banned them in the spring. But the U.S., as part of a recent deal, will also get 15% of Nvidia’s AI chip sales from China to get the license to sell there.

Meanwhile, China has discouraged businesses there from using Nvidia’s chips, with state media claiming they were a security risk, according to reports. The Information reported that Nvidia, in turn, ordered a stop to the production of H20 chips.

Elsewhere, after Walmart Inc. put up a rare profit miss amid lofty expectations and Target’s investors fled over its new CEO pick, smaller retailers report quarterly results this week. Expectations are low. The prevalence of the usual suspects for why – tariff anxieties, higher costs of living, the flight to value, weaker clothing and home-goods demand, competition in prestige beauty – is still high.

This week, we’ll get reports from Ulta Beauty Inc. (ULTA), Gap Inc.(GAP), Kohls Corp. (KSS), Abercrombie & Fitch Co. (ANF), Williams-Sonoma Inc. (WSM), Victoria’s Secret & Co. (VSCO) and Urban Outfitters (URBN). Bath & Body Works Inc. (BBWI), Best Buy Co Inc. (BBY), Dick’s Sporting Goods Inc. (DKS) and Petco Health and Wellness Co. Inc. (WOOF), also report.

Elsewhere, results are due from discounters Burlington Stores Inc. (BURL), Dollar General Corp. (DG), Ollie’s Bargain Outlet Holdings Inc. (OLLI), as the bargain hunt remains alive and well but low-income shoppers struggle more with inflation.

Still, Deborah Weinswig, chief executive of Coresight Research, said that the second-quarter results from retailers so far – Home Depot Inc. (HD) and Lowe’s Cos. (LOW) also reported last week – showed that consumers were in better shape than expected. Results for the smaller retailers this week, she said, would be all about consumer traffic.

Those retailers might not have the size and bargaining power of Walmart, and some have struggled to keep up with ever-accelerating fashion cycles. But she said that they still have the sourcing expertise and organizational makeup to pivot quickly when needed.

However, value and convenience, as they have for the past few years, continue to reign supreme. Chances that Walmart took on technology investments in the prior decade continue to help it widen its lead over its other retail rivals, raising questions about what place Target and smaller retailers have in the current shopping landscape.

“Is part of the issue that they’re always taking the safest path? Could be,” Weinswig said of Target. “That’s how they kind of ended up where they are versus Walmart.”

-Bill Peters

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