In yesterday's FT Alphaville Further Reading post Jemima put together a very wide-ranging assortment of links.
Two that may be of particular interest to our readers were an in-depth discussion of the recent goings-on in the copper market at the LME: "Copper points, Overnight lending at the LME" from Professor Neilson's "Soon Parted" substack" (thanks Jemima) and a Twitter thread from former Goldman hedge fund manager and current cryptocurrency evangelist Raoul Pal. The latter reminded me of something written over fifty years ago by journalist and author George Goodman dba "Adam Smith".
Here's Mr. Pal:
Crypto is a bubble! Tech is a bubble! VC is a bubble! Biotech is a bubble! Passive investing is a bubble! Web 3.0 is a bubble! Green energy is a bubble! The Metaverse is insanity! Cant they see??!! They are all wrong!
— Raoul Pal (@RaoulGMI) October 31, 2021
They were fucked.
— Raoul Pal (@RaoulGMI) October 31, 2021
They had occupied Wall St and no one gave a shit.
— Raoul Pal (@RaoulGMI) October 31, 2021
Now they don't give a shit about how you or I think you should invest or run markets. We let them down.
Why the fuck should they care? They were sacrificed to the altar of debts, leverage and greed.
If we were given a free stake at the casino, we would do the same.
— Raoul Pal (@RaoulGMI) October 31, 2021
But they didnt buy our precious gold miners, or our discounted value businesses. Why? Because they don't care about 10% returns. The only way to level the playing field was to take MASSIVE risk.
....MUCH MORE, THREAD
And here's Adam Smith via a 2012 post "Transports, Small Caps Hit New Highs" (Quick! Hire a kid!):
There's an interesting dichotomy developing in the markets, one that we've seen before.
The old pros are cautious, befuddled and a bit scared. Folks with less than a decade at the market are making money.
Adam Smith noted it in the 'sixties bull market (The Money Game via Contravest, January 22, 2000):
There is one wonderful chapter where the consummate pragmatic speculator, the Great Winfield, is lamenting his performance problems in a wildly speculative bull market.
“My boy,” said the Great Winfield over the phone. “Our trouble is that we are too old for this market. The best players in this kind of a market have not passed their twenty-ninth birthdays. Come on over and I will show you my solution.”
So Adam Smith goes over and finds three new faces in the Great Winfield’s office.
My solution to the current market,” the Great Winfield said. “Kids. This is a kids’ market. This is Billy the Kid, Johnny the Kid, and Sheldon the Kid.” The three Kids stood up without taking their eyes from the moving tape, shook hands, and called me “sir” respectfully.
“Aren’t they cute?” the Great Winfield asked. “Aren’t they fuzzy? Look at them, like teddy bears. It’s their market. I have taken them on for the duration.”
Winfield then describes how much money Billy the Kid is making in computer leasing stocks like Leasco Data Processing and Randolph Computer that he has heavily leveraged with bank borrowing....And the really spooky bit, for me anyway, SHALE:
...Sheldon the Kid waved his hand for recognition.In late 2006 both Bloomberg and Raymond James' Jeff Saut were reminded of the above:
“This one will really take you back,” said the Great Winfield. “Sheldon’s Western Oil Shale has gone from three to thirty.”
“Sir!” said Sheldon. “The Western United States is sitting on a pool of oil five times as big as all the known reserves in the world – shale oil. Technology is coming along fast. When it comes, Equity Oil can earn seven hundred and fifty dollars a share.
It’s selling at twenty-four dollars. The first commercial underground nuclear test is coming up. The possibilities are so big no one can comprehend them.”
“Shale oil! Shale oil!” said the Great Winfield. “Takes you way back, doesn’t it. I bet you can barely remember it.”
“The shale oil play,” I said dreaming. “My old MG TC. A blond girl, tan from the summer sun, in the Hamptons, beer on the beach, ‘Unchained Melody,’ the little bar in the Village.”
“See? See?” said the Great Winfield. “The flow of the seasons. Life begins again. It’s marvelous. It’s like having a son! My boys! My Kids!”
The Great Winfield had made his point. Memory can get in the way of such a jolly market, that malaise that comes with the instantly gone, flickering feeling of déjà vu. We have all been here before.
“The strength of my kids is that they are too young to remember anything bad, and they are making so much money they feel invincible,” said the Great Winfield.
“Now you know and I know that one day the orchestra will stop playing and the wind will rattle through the broken window panes, and the anticipation of this freezes us. All of these kids but one will be broke, and that one will be the multi-millionaire, the Arthur Rock of the new generation. There is always one, and maybe we will find him.”...MORE [link rotted]
Bloomberg, Aug. 3, 2006
Go Short, Mildred -- the Kids Are Taking Over: Susan Antilla
Saut, Nov. 20, 2006
“A Kid’s Market?!”
When dredging up this memory we sometimes hear the Electric Light Orchestra supplying the soundtrack:
