The price of everything

Big Deal

“So not a deal of Rooseveltian ambition ? Perhaps not. As both the FT and union boss Len McCluskey acidly observed, Roosevelt’s New Deal spawned mega projects such as the Hoover Dam; [Boris] Johnson’s list includes the reannouncement of repairs to a bridge in Sandwell.”

• Simon Wilson on ‘Boris Johnson’s New Deal’ in MoneyWeek, 10^th July 2020.

There is a pivotal sequence in Steven Spielberg’s 1977 sci-fi classic Close Encounters of the Third Kind. Having been herded into an army helicopter near Wyoming’s Devils Tower with a number of other seeming eccentrics, electrical maintenance worker Roy Neary (Richard Dreyfuss) suddenly twigs that the cover story they have all been fed by the government – an accidental toxic nerve gas spill – is just that, a cover story. He takes off his gas mask and encourages his fellow masked passengers to escape. While they stare wide-eyed in horror, he gratefully gulps in lungfuls of oxygen and tells them,

There is nothing wrong with the air !

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A four-letter word

“Risk is what’s left over after you think you’ve thought of everything.”

• Carl Richards.

What is risk ? James Ball in his piece ‘Anatomy of a fiasco: how Britain’s pandemic defences failed’ for The Spectator offers, essentially, one currently relevant practical example:

In October, a panel of 21 experts from across the world gathered for the first of what promised to be a series of reports assessing readiness for pandemics. ‘Infectious diseases know no borders,’ warned the Global Health Security Index. ‘So all countries must prioritise and exercise the capabilities required to prevent, detect and rapidly respond to public health emergencies.’ Every country was called to be transparent about its capabilities ‘to assure neighbours it can stop an outbreak from becoming an international catastrophe’. Two countries were held up as the best examples: Britain and the United States.

If a league table were drawn up of countries that most failed to contain Covid deaths, the US and the UK would be pretty near the top. Yet both spent huge amounts of money on their pandemic preparedness and flattered themselves that their experts had built the strongest defence. The UK was ranked best in the world for its ability to stage ‘rapid response to and mitigation of the spread of an epidemic’. It was given 92 points out of 100. Six weeks later, the first Covid-19 case was recorded in China and the real test began.

That is to say, one instance of risk is a wildly inflated and wholly unjustified sense of overconfidence. Overconfidence is not exactly unheard of in fund management circles either.

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On wealth, greed and happiness

“I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.

“That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.”

• Jason Zweig, investment writer, The Wall Street Journal.

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A Year to Remember ?

“Andrews: “The pumps are keeping the water down in this boiler room, but the first five compartments are flooding.”

Captain Smith: “Well, what’s the answer ?”

Andrews: “She’s going to sink, Captain.”

Captain Smith: “But.. She can’t sink. She’s unsinkable.”

Andrews: “She can’t float. Look.. She could float with any three of her first five compartments flooded. She could even float with four of them gone. But she can’t float with all five full up.”

Captain Smith: “Yes, but..”

Andrews: [cuts him off]: “These watertight bulkheads only go as high as E Deck. The weight of the water in the bow is going to pull her down by the head. So, you’re going to get the fifth compartment overflowing into the sixth; the sixth into the seventh; and so on, as she goes lower. It’s a mathematical certainty. With that amount of underwater damage, she can’t stay afloat.. How many people are there on board ?”

Captain Smith: “2,200 or more. And room in the boats for.. ? How many ?”

Andrews: “1,200.”

Captain Smith: “I don’t think the Board of Trade regulations visualized this situation.
Do you ?”

• From Eric Ambler’s screenplay for the film A Night to Remember (1958)

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EMH ? WTF ?

“My son just told me that he can only play @FortniteGame in the evening... because half of his squad started trading. He is 10. @RobinhoodApp #TrueStory”

• Tweet from Joseph S. Mauro (@jsmauro13), 11^th June 2020.

“Dave Portnoy, an internet celebrity, has posted daily trolling videos about his profits from the rally to his 1.5m Twitter followers. “The people on the internet are debating who is the better investor right now, myself or Warren Buffett?”, he said in a post this week. “It’s no debate. I killed him. He’s dead.””

• Miles Johnson, ‘Myths can make ‘smart money’ act dumb’, The Financial Times, 12^th June 2020.

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We are all Ozymandias

“Wendell: ‘It’s a mess, ain’t it, sheriff ?’

 Sheriff Ed Tom Bell: ‘If it ain’t, it’ll do ‘til a mess gets here.’”

• Cormac McCarthy, No country for old men.

The English poet Percy Bysshe Shelley wrote the sonnet Ozymandias in a good-natured contest with rival Horace Smith. Shelley apparently began writing the poem after the British Museum announced that it had acquired a huge fragment of a statue of the Egyptian pharaoh Ramesses II, which was shipped over to London in 1821. Many believe that Shelley was inspired by this seven ton portion of that original statue.

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Pet Rock Star

“About one hundred years ago, John Ruskin told the story of a man who boarded a ship carrying his entire wealth in a large bag of gold coins. A terrible storm came up a few days into the voyage and the alarm went off to abandon ship. Strapping the bag around his waist, the man went up on deck, jumped overboard, and promptly sank to the bottom of the sea. Asks Ruskin: ‘Now, as he was sinking, had he the gold ? Or had the gold him ?’”

• Peter L. Bernstein, The Power of Gold: the history of an obsession.

There are two distinct pleasures at this time of year. One is to see, and hear, the swifts back from Africa, weaving through the summer air, diving, wheeling and screeching like sooty little Spitfires. The other is to welcome the annual release of Incrementum AG’s magisterial research note on the most misunderstood asset in the world, In Gold We Trust.

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Three little words

“As I’ve written in past memos, I have an indelible recollection of the first book I read as a Wharton freshman in 1963. The book was Decisions Under Uncertainty: Drilling Decisions by Oil and Gas Operators by C. Jackson Grayson, Jr. (who in 1971 would take on the role of “price czar” in the Nixon administration’s efforts to get inflation under control).

“The best and most lasting thing I took away from Grayson’s book – and the first thing I remember learning in college – was the observation that you can’t tell the quality of a decision from the outcome. This revelation had a profound influence on me as a 17-year-old and represented the first critical building block in my understanding of how the world works.

“As Grayson explained, you make the best decision you can based on what you know, but the success of your decision will be heavily influenced by (a) relevant information you may lack and (b) luck or randomness. Because of these two factors, well-thought-out decisions may fail, and poor decisions may succeed. While it might seem counterintuitive, the best decision-maker isn’t necessarily the person with the most successes, but rather the one with the best process and judgment. The two can be far from the same, and especially over a small number of trials, it can be impossible to know who’s who.”

• Howard Marks of Oaktree Capital, You Bet !

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The Covid-19 Crisis in Movie Quotes

“Nobody knows anything.”

• The opening line from Adventures in the Screen Trade by William Goldman.

On the back of last week’s commentary by way of lines from John Carpenter’s The Thing, this week’s commentary is comprised, more or less entirely, of movie quotes.

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Man is the warmest place to hide

Of all of John Carpenters’ films, his 1982 offering The Thing may still be his most under-rated. A remake of 1951’s The Thing from Another World, by way of a treatment from Bill Lancaster (son of Burt), the film pits the team of a US research station in Antarctica against a shape-shifting alien recently thawed out from the permafrost, able to replicate anything it takes over perfectly. Its special effects, courtesy of Rob Bottin, have lost none of their power to shock over the ensuing four decades. Had it not been released at the same time as a more uplifting alien narrative – Steven Spielberg’s family-friendly blockbuster E.T. – The Thing might have enjoyed the box office reception it deserved. In the years following its release, it has amassed a cult reputation amongst cineastes with a penchant for ghoulish cold war paranoia. In this respect it is the perfect metaphor for the world environment in 2020.

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