More Than a Little Thankful This Year

This edition of Musings finds us at the onset of the holiday season that begins with Thanksgiving Day taking stock of our manifold blessings. After all, there are life-enhancing and occasionally palliative effects to be had from having an “attitude of gratitude”. And even if this should be a more or less daily habit, having a holiday designated to focus us in that direction, and so near the end the year no less, is not a bad idea. So I have come up with a list, over and above the usual items that come to mind each year, that pertain to this oh so quickly used up year.

Yes, I am thankful not only that I was born in what is all but certainly the greatest country ever, but have lived a life that has enabled me to see so much of it. My life’s work made it possible for me to be able to visit nearly all fifty states, usually in a rental car down highways and by-ways rarely traveled by tourists. It is a vastly sprawling, intricately marvelous place. The “going out and meeting real people who do real work”, tapping into the passions of not a few of the individuals out there who make material progress possible, was perhaps the best part of my long working life. That said, based on what I am reading, I am glad I am not traveling as much as I used to. If what we are reading about recent “enhancements” to airport security is reasonable accurate, the allure of such adventure has been seriously diminished. To be honest, I was not particularly vexed with the security regimen as implemented post 9/11. While the phony posturing to avoid the appearance of profiling has been annoying, how bad was it to take off one’s shoes and belt and otherwise add about ten minutes to an hours-long journey that for most of human existence would have been fraught with danger and taken days if not weeks, if it were possible at all? But now it appears that even though the terrorists have, in 9+ years since the incident that finally got our attention, managed to successfully target an aircraft exactly, umm, not even once, we have take it up a level. This latest spasm of mindless risk aversion is not how you wear down a determined foe. It is more like how a brand new public employees union asserts its place at the trough. We should all be thankful come Thanksgiving 2011 if Congressional oversight reels these clowns in, and re-directs what passes for a war of terrorism (just because the Administration won’t refer to it as such doesn’t mean that isn’t what it is.) in more efficacious directions.

And speaking of Congress, this was a year to be thankful that however corrupt it often seems, the electoral process can still send clear signals of voter discontent. Indeed, for as long as any of us can remember, the invulnerability of Congressional incumbency has been one of those noxious things that everyone laments and no one expects to ever change. Not so much in 2010! With the dismemberment of “news” oligopolies, this diminished security for incumbents looks to be a durable trend. We should be profoundly thankful that the “system” has once again proven to be not nearly as corrupted as we have been tempted to believe. Of course, gerrymandering and set-asides being what they are, there will probably be at least 100 of the 435 seats that even a corpse could keep. We should not be surprised to see the Progressive Caucus as a percent of Congress continue to approximate the just under 20% of voters who self-identify as Liberal. The Red/Blue map should remain about the same, with red taking up far more space but blue holding onto its enclaves of dependency large and small. (Blue seems to dominate where water transport or power once provided economic advantage and so established the sort of quasi-feudal power structures that can hang on by cultivating a culture of dependency.)

This consideration of the national map brings us to an item that I am each year even more thankful for, that I was able to exit the “happening place 150 years ago but its been downhill ever since” that was the Hudson Valley and move to the great Republic of Texas. There are very good reasons, having nothing to do with oil wells, that Texas, which is really like a whole country, has held up much better than so much of the rest of the country these past few years. It also doesn’t hurt that November can be denoted by picking the last of the melons, planting cool weather crops and taking my grandson swimming in the river. However, thinking about how good we have it here in Texas gets me thinking nervously of evolving notions of federalism. I find myself suddenly sympathetic towards Germany, another State that has gotten things relatively right and finds itself digging deep to have to bail out the likes of Greece and now Ireland (a not so long ago bucolic land now badly debauched by a dozen or so wise-guys). Who the heck knows how long California can live of Revenue Anticipation Notes? It is not hard to see traditional notions of federalism being strained as the 45 or so most responsible states get dragged into the role of enablers of the five or so most profligate. We should be very thankful at some future Thanksgiving if the new Congress manages to shape our federalism in ways that minimize the degree to which the rest of us have to share in consequences of perpetually-adolescent fiscal behavior.

As I shift my focus to the recent “commoditization” of the Markets, I find myself intensely grateful that I am not one of the poor saps who have to manage sourcing for the world’s sweatshop we call China. It has never been easy to manage the planning and acquisition of material inputs to support even moderate growth. The problem for China is not so much the rapidity of its growth, much of which is coming from the inclusion of activities that didn’t get counted or simply didn’t happen in the subsistence portions of the economy (e.g., basic hygiene, light bulbs and the electricity they use). What is really making it tough for the folks who have to keep the factories going and the trucks running is the recent emergence of such vast pools of risk capital that by virtue of instantaneous communications and computing power stand ready, willing and able to jump onto or off of anything their algorithms tell them might be a trend. In light of how much this “speculative interest” seemed to aggravate things the last time the global economy boomed and then hit a bump, this should concern us all. For all the song and dance around “financial reform”, the power of the algo to vex purchasing managers, jazz the price of tortillas in Mexico and otherwise unleash torrents of unintended consequences seems to have been unaffected by our collective near death experience of 2008. That so many asset classes are correlating so tightly has not gone unnoticed, but the price we all seem to pay (as consumers and participants in the “real” economy) when the tail that is speculative interest starts to wag the dog that is the economy seems to have been quickly forgotten. I’ve got a hunch that if the bets I currently have on, mostly around Web 2.0 and the aerospace cycle, do not live up to my expectations it will have had something to do with the increasingly difficult task of acquiring commodities for actual use in production.

That said, however disruptive market forces can be when they get out of hand, we should be thankful indeed that the animal spirits that drive the dance between price and value are alive and well. How alive and well was amply demonstrated this past week by the reception accorded the IPO of Government Motors. It was kind of fun to watch, if one was willing to let one’s cynicism off its leash. The bankers and the publicists all played their parts and yet despite some very ominous references along the lines of “lack of internal financial controls” and a going on eleven year experience with equities that you would think would produce distaste if not revulsion, the public waddled up to the trough and dug in. This “fear of missing out on something” is elemental to the human condition, never really going away but more or less evident as “herd” factors ebb and flow. It bolsters my sense that a decade past when the last Tech Bubble popped, we are in the early stages of yet another silly season for Tech (buzzwords: apps, cloud, advertising).

That animal spirits short circuit what would otherwise be powerful forces of informational efficiency is what makes it possible for adept investors to buy low and sell high, and for this we need to be grateful. It’s like thanking God for the sun and rain and the turn of the seasons, and so much else so easily taken for granted. Sure, that (hopefully) once-in-a-generation stampede of roughly two years ago put me in a seemingly precarious place. (When I got blown out of a job much earlier in life, I took consolation that “at least I wasn’t one of those 55 year olds!”) Despite the untimely loss of what I had thought would be the last job I would ever need and the severe erosion inflicted on retirement accounts that were pretty much 100% in equities, it wasn’t the end of the world. Indeed, the freedom of action made possible by said job loss allowed me to make a few decisions that have since made our financial situation better than ever. A major element of this would be the subject of the last subject of gratitude I will mention before I head off into holiday mode, one of those lessons in investor mental hygiene that need to be occasionally re-learned. To wit, not getting too caught up trying to buy at the exact bottom or sell at the exact top, and not beating oneself up for being what only feels like being way too early (as long as one has kept some buying power in reserve). This was driven home by one of my stocks getting a takeover bid this past week. I have followed Ladish Corp. (LDSH) for a very long time and felt fairly confident paying $13+ back in early 2009 that unless the world really was coming unglued, it was worth a lot more than that. I had the opportunity to buy more at around $10. By time I was adding even more at about $7.50, I was feeling at least a little chastened about the impulsive initial buy and second guessing myself. Fast forward about eighteen months, and a bid valued at about $48 from long time supplier Allegheny Technologies (ATI -$50) makes all that self recriminating agita about markedly less than perfect execution seem silly. Especially considering that half of the consideration that is ATI stock is likely to at least double in value over the next few years, in my estimation.

So many things to be thankful for, but who’s counting? Having a happy holiday.