The price of everything

F*** the World

The State of the Markets podcast Christmas charidee single is OUT NOW

*Certificate 18 Parental Advisory

https://www.youtube.com/watch?v=aV6BOitL-zY

Merry Christmas Everybody !

Wrongco is proud to bring you the following Christmas bangers..

 

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Night of the Wrong Wives

Its codeword was ‘Kolibri’ (the German for Hummingbird) – the instruction given to the death squads on the day of the purge. The ‘Night of the Long Knives’ was actually nights plural, taking place between 30^th June and 2^nd July 1934. At least 85 political opponents to Adolf Hitler were liquidated; some estimates run as high as 1,000. The purge established Hitler as the pre-eminent and unchallenged administrator of the German state. The rest is dark history..

 

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The Crony Virus Chronicles

The story so far. How did half the world end up in lockdown ? A plausible timeline is as follows:

1. Winter 2019 – a new virus emerges in Wuhan, China.
2. While China dithers, the WHO – a Chinese-sponsored bad actor – exaggerates the fatality risk. See The Price of Panic for more.
3. China adopts PsyOps to exaggerate the threat of the virus via social media. See China’s Global Lockdown Propaganda Campaign.
4. The emergence of the Chinese virus triggers a tsunami of mainstream media bedwetting. The BBC is notably complicit. Ofcom forbids UK media from varying from the party line, at the risk of media players having their licences withdrawn.
5. As the virus spreads internationally, Chinese bad actors visit the affected regions and encourage the deployment of regional lockdowns.
6. Western politicians panic..

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Ghost train

Halloween in central London was a more than usually subdued affair this year. No bands of over-excited children roaming the damp streets in pursuit of a sugar rush. A handful of indifferently carved pumpkins squatting sourly on doorsteps. Boris Johnson fatuously conducting another lockdown dance of the seven veils. How could it have been otherwise, when the irrational, arbitrary and totalitarian behaviour of our current government is infinitely more terrifying than any confected festival of the dead ? When the murderous groupthink of our traditional media is more ghoulish than anything that a Hollywood film director could possibly conjure up ?

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The Great Reset

“If you’ve ever wondered which side you’d be on in 1930s Germany, now you know.”

• Tweet by Creative Deduction, @CreativeDeduct, 25^th October 2020.

We can probably all agree by now that “Have you tried turning it off and then back on again ?” is no way to run a country. That may be the only thing we might come close to agreement on, given that the Great PCR Test Pandemic has managed to drive a wedge through the entire nation (if not an even wider community), dividing people into either lockdown sceptics or shrieking Karens respectively.

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The Demon-Haunted World

“We’ve arranged a global civilization in which most crucial elements profoundly depend on science and technology. We have also arranged things so that almost no one understands science and technology. This is a prescription for disaster. We might get away with it for a while, but sooner or later this combustible mixture of ignorance and power is going to blow up in our faces.”

• Carl Sagan, The Demon-Haunted World: Science as a Candle in the Dark.

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In the mouth of madness

“I became insane, with long periods of horrible sanity.”

• Edgar Allan Poe.

 

It is nearly a year since a new virus emerged in China and rapidly spread around the world. During those months, what have we learnt ?

• China cannot be trusted.

• The World Health Organisation is politically compromised by its association with China and cannot be trusted.

The medical establishment cannot be trusted..


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A brief history of economic policy triumphs

“If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.”

• Milton Friedman.

 

Shortly before President Trump was diagnosed with coronavirus last week, two Boeing E-6B Mercury planes took off from each of the US coasts. The planes in question can be used to send ballistic missile commands and form part of the US defence system. The history of US nuclear defence, however, is not exactly flawless. On 24 January 1961, for example, a United States B-52 Stratofortress carrying two nuclear bombs lost altitude over Goldsboro, in rural North Carolina. The plane had sustained a fuel leak in its right wing, so the crew were advised to maintain a holding pattern along the coast to conserve fuel. But the leak soon worsened, and the plane was running out of fuel. The crew were advised to return immediately to Seymour Johnson Air Force Base..

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Power Failure

“But to-day we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.”

• John Maynard Keynes, The Great Slump of 1930.

 

Metaphors are powerful. Powerful words and images matter, because they are a distillation of fundamental beliefs. Keynes spoke of the economy as a delicate machine, and the idea of the ‘economy as engine’ has long been popular with Keynesian and neo-Keynesian economists (i.e. unscienced morons). One of the great corrective insights of the classical economic school, however, is that the economy is not an engine and it cannot be modelled. It cannot be modelled because it is us – the economy comprises the all but infinite interactions of billions of people. So perhaps the most dangerous fallacy frames the very nature of our economic and financial system the wrong way. Garbage in; garbage out. The damage wrought by bureaucrats and their economic aides who believe that pulling this imaginary lever or flipping that imaginary switch can direct the path of something as tremendously complex as the economy is then compounded by the actions of those unelected bureaucrats as they transform the order of the free market into the chaos of a planned economy. Misguided actions have undesirable consequences.

Enter, stage left, coronavirus.

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Flu d’état

The great national debate that was ‘Brexit’ ended up lifting a giant rock that had been resting on our society, and to this day nobody can quite believe the kind of ugly pond life (a.k.a. “the Establishment”) that was revealed, scuttling evilly around underneath it. What ‘Brexit’ began, the rolling Coronavirus fiasco has continued. While explicit political interference and overreach have been all too visible, much of the Public Sector, behind the scenes, has quietly taken advantage of the lockdown and attendant chaos to implement an unofficial General Strike. Teachers won’t teach; general practitioners refuse to see their patients; the police use drones to eavesdrop on remote hill-walkers. The prospect of anything approaching a normal Christmas now hangs in the balance; the economy remains in an induced coma; the country is now a powder keg. As some wag on social media nicely put it, we are experiencing a Flu d’état.

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Tulips !

Amsterdam, September 1637 (Ruyters): The latest Dutch tulip harvest is in, and experts confidently predict another bumper year for tulip growers and tulip investors alike. Billionaire hedge farmer Jon Paulsen is rumoured to have added hyacinths to his multi-strategy offering and has just launched a fund denominated in daffodils. Visionary entrepreneur Elon Müsk has just unveiled his new tulip-powered car, the model T, and launched a dedicated electric tulip subsidiary, Tul-IPO. Tulip stocks climbed by a few millimetres, as they are prone to every day if they grow at their normal organic rate; Couleren bulbs rallied another 2 guilders in heavy Antwerp trading; Rosen and Violetten bulbs ended the trading session more or less unchanged, albeit a bit squashed, at record highs. The market has been further buoyed in recent weeks by a tide of manure issued by the leading tulip advocate Pol Kruygman from his op-ed column in the New Amsterdam Times, 'Witterings of a Tulip Fanatic'.

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Ghost Stories

M.R. James’ Casting the Runes also casts a long shadow. A short story written by one of the finest practitioners of the ghost story in English, it deals with a scientist (named Dunning in the original), investigating an occultist, Julian Karswell. Karswell’s book, The Truth of Alchemy, has been scathingly reviewed by one of Dunning’s colleagues, who dies in mysterious circumstances shortly afterwards. The scientist begins to suspect that Karswell’s powers might be real, and that he himself has become the victim of a curse. Once the victim is unwittingly passed some runic symbols by Karswell in person, it would appear that his days are numbered.. In addition to Tourneur’s (quite brilliant) 1957 film, Casting the Runes would also go on to be adapted several times for television and radio, and more recently it has inspired or influenced films including the Japanese (and US) horror franchise Ring and the 2014 horror film It Follows. It draws its fundamental strength from a slow and uncanny sense of psychological disintegration: is the world going mad, or is it just me ?

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UNIDOS HACIA EL FUTURO

“The markets are the product of 1999 & 2007 hooking up for a one night stand.”

• Tweet by Danielle DiMartino Booth (@DiMartinoBooth), 25^th August 2020.

“In the middle of the journey of our life, I came to / Myself in a dark wood, for the straight way was lost.”

• Dante, Inferno.

“Zoom is now worth more than IBM.”

“I don’t know if that says more about Zoom or IBM.”

• Tweets by Morgan Housel (@morganhousel), 31^st August 2020.

By the mid 1970s, film director William Friedkin was on a roll. 1971’s The French Connection bagged him an Oscar and widespread critical acclaim; 1973’s The Exorcist became the highest grossing Warner Bros film of all time. How did Friedkin follow up on all this monstrous success ? He decided to adapt Georges Arnaud’s novel The Wages of Fear (Le Salaire de la peur), in which down-on-their-luck truck drivers in Latin America attempt to ferry nitroglycerine across a treacherous mountain range in order to extinguish an oil well fire. The resultant 1977 release was called Sorcerer. It sank more or less with all hands.

 

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Winning the wrong game

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” Thus did Benjamin Graham, the godfather of value investing, distinguish between the ‘business’ of investing and the ‘game’ of speculation. We don’t think Graham was casting moral judgments upon speculators, so much as simply trying to codify the nature of capital allocation and define some of the ground rules. We have no problem with shorter term speculation either, and indeed we incorporate it within our bespoke managed account  service in the form of systematic trend-following managers. We would argue that there are, in essence, only really two ways of attempting to secure enhanced returns versus the market itself with any reasonable chance of success: value investing, which we would define briefly as “obtaining superior cash flows cheaply”, and momentum investing, or exploiting the various price trends manifest in markets, but doing so without any concern as to underlying valuation during the process, albeit incorporating a defined algorithmic approach and a selection of standardised rules in the context of price evolution, position sizing and risk management. Pretty much everything else, we would argue, comes down to gambling.  

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Into the Twilight Zone

“The 2019 General Election threatened us with the prospect of a Big State socialist authoritarian who wanted to treat “our” NHS as a deity, shut down our liberties, and tank the economy. Unfortunately, he won.”

• The biggest disappointments of 2020. A tweet by @SirDanofC, 14^th August 2020.

“Bliss was it in that dawn to be alive..” Boris Johnson’s honeymoon period as the ‘surprise’ Brexit prime minister lasted for roughly three months. It began, with hindsight ominously enough, on Friday 13^th December 2019, and lasted until Imperial College released its infamous forecast on 16^th March 2020, of 250,000 Britons dying of Covid-19, after which the government abandoned any aspirational policy of herd immunity it might once have had – and decided simply to concentrate on destroying the economy instead. Since March and “the lockdown”, the honeymoon has soured into a bitterly dysfunctional divorce-in-the-making, a ‘game of chicken’-style tug of common sense between the Johnson government and the people, with Boris practically daring the electorate to vote him out of office as he deploys the very latest policies epitomising the acme of pointless, inconsistent, dangerous, counter-productive farce. The pantomime of hygiene that is mask-wearing is only the tip of the iceberg of Big Government (sunk costs fallacy) cretinocracy.

 

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The Quick and the Dead

Charles Zelmanovits was murdered in Piteå, Sweden in 1976. Johan Asplund was murdered in Sundsvall in 1980. Marinus and Jannie Stegehuis, a Dutch couple on a camping holiday, were murdered in Appojaure, Sweden in 1984. Yenon Levi, a tourist from Israel, was murdered in Rörshyttan, Sweden in 1988. Therese Johannesen was murdered in Drammen, Norway in 1988. Trine Jensen was murdered in Oslo in 1981. Gry Storvik was murdered in Oslo in 1985. All of these murders went unsolved until Sture Bergwall, who would subsequently change his name to Thomas Quick, confessed to every one them in the mid-1990s. He was convicted of all eight murders and would ultimately spend 20 years in a locked psychiatric clinic, Säter Hospital, which has been likened to a Swedish Broadmoor. Just one problem: he made everything up. This extraordinary story was made into a documentary film in 2015 – The Confessions of Thomas Quick.

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Hearts of glass

In his 1992 book The End of History and the Last Man, Francis Fukuyama argued that the fall of the Berlin Wall just a few years beforehand marked the definitive end point of any rivals to ‘enlightened’ Western liberal democracy. Eight years later, Robert Shiller in his analysis of 2000 era stock markets, Irrational Exuberance, cited widespread investor pride at the apparent triumph of free market western capitalism against all comers as one of the defining factors behind stretched millennial era stock valuations. Both of those narratives look somewhat ridiculous now. According to the Bureau of Economic Analysis, US second quarter GDP in 2020 fell by an annualised 32.9 percent. To put that figure into context, that is broadly the equivalent of the first three years’ worth of the Great Depression accelerated into just three months. That slowdown is almost entirely a real world reflection of deliberate government action – if you can even call it that. This correspondent normally finds little common ground with most writers at The Financial Times, but it is difficult to argue with their US editor, Edward Luce, when he suggests that

We are witnessing the biggest governance failure in modern US history.

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When satire dies

“If this is the best of possible worlds, what then are the others ?”

• Voltaire, Candide.

2020 to date has been no laughing matter. For roughly 52% of the audience of alleged comedian Marcus Brigstocke, the years 2016 to 2020 have hardly been a laugh riot either. Unfunny woke comedian Brigstocke, long a fixture of the BBC “comedy” schedule, was one of the first to report to the media that his stridently anti-Brexit “humour” wasn’t working. It turns out that roughly half of audiences outside the London metropolitan bubble resent paying to be insulted by a “comedian” whose views they simply don’t share. Now, however, there are early signs of a rapprochement between Remainers and Leavers, if the latest edition of Geoff Norcott’s excellent What Most People Think podcast (parental advisory rating for some occasional fruity language) is any guide. Brigstocke is a guest on this week’s edition.

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Ever Get The Feeling You’ve Been Cheated ?

“Reality is that which, when you stop believing in it, doesn’t go away.”

• Philip K. Dick.

In his book Sapiens, the historian Yuval Noah Harari posits the provocative theory that a crucial factor behind mankind’s evolutionary advantage over our ancient predecessors and biological competitors has been our capacity for, and appreciation of, the power of narrative. The thinking goes as follows. A small village of perhaps 100 people has no need of external administration. It organises itself. But a country of perhaps 70 million people requires some form of exogenous coordination, if only to provide those services that the free enterprise system cannot or will not provide itself (street lights and armies, for example). In extremis, the country has to provide a cohort of young men – it will be, invariably, men – willing to fight and, if need be, die in defence of said country. How does it achieve this ? By telling stories. National myths.

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