Captain's Blog, Stardate: 7/11/08
Is now the time to buy - or head for the hills? Plus: Econ lessons from Santa Fe.
(Fortune) -- "There ain't but one truth," said John Grady. "The truth is what happened. It ain't what come out of somebody's mouth." - Cormac McCarthy, All The Pretty Horses
A REASONABLE ECONOMY: I think what Cormac means here is to look at the sale, don't listen to the salesman. Usually after the market tanks like this, you have some folks saying that this is a buying opportunity and that we will bounce back shortly and most often within the next three months they have been right. Don't hear much of that now. Is it possible that conventional wisdom is actually correct? That we are in for a protracted period of at the very least, BLAH? I wonder. It seems inevitable that conditions stay as they are or worsen, but maybe that's what you always say the day before you are supposed to buy. What do you think the chances are of Lehman (LEH, Fortune 500) remaining as an independent firm? I would say 25%. There is no market for this on Intrade, by the way, though there is one on Yahoo (YHOO, Fortune 500) CEO Jerry Yang resigning, which is before the end of this year, 50%.
REPORT FROM THE ROAD: SAN JUAN ISLAND (Day 17,718 of the journey) Instead of hitting the obvious Western destination of Sun Valley with its teaming hordes, your captain decided to venture into waters less sailed. First I traveled to San Juan Island up in the Puget Sound, above Seattle. The island is an incredibly beautiful place - sort of like Maine meets Hawaii. The bottom line: If you only saw this, you would think all is well in America. Booming tourism. Healthy development, (too much of both for the locals), and, ahoy, some very serious net worth floating around. Spent the Fourth of July in Roche Harbor, which according to the Harbormaster is the busiest yacht port of call in the United States. (Hmmm?) But, in fact, the harbor was jammed with hundreds of yachts. (Wonder if any of them belonged to the customers?!) Some were huge and hugely expensive. Just to give you an idea, a modest affair say 40 feet, carried a 'For Sale' sign with a price tag of $1.5 million. How many boats were there that night? "Between 550 and 600," said a person in the marina office. "And that's only boats at the dock, we don't know how many more are moored out in the harbor." Believe me, that is many hundreds of millions of dollars of yachts. I know, there are lots of big boats in Florida etc, but this was an incredible collection. This gives you an idea.
SANTA FE: Next stop was the City Indifferent, as the ever to-the-quick Dick Stolley tagged it. New Mexico offers a rather different story, it seems to me. As in excess capacity. Too much artwork, too many casinos, too many houses for sale. Travel up Bishops Lodge Road up to Tesuque (pronounced tuh-SOO-key), and as you get down into this incredibly picturesque hamlet it appears that the whole street is for sale. Literally one third of the houses had 'For Sale' signs, many of them Sotheby's Properties. Not a good time to be selling. As for the artwork, I don't know who could possibly buy all that stuff. (Maybe the tourists from Europe, who seem to be numerous.) And it seems like every pueblo has a casino now. My favorite promo, I believe at San Felipe, was "Win free gas for life." You betcha!
SANTA FE, PART II: Rented a motor scooter and road it up to the ski basin (10,000 feet - got an altitude bug, yucko!). On the way up, I stopped at the Santa Fe Institute, where I attended a lecture by Doyne Farmer entitled "The Vices and Virtues of Equilibrium, and the Future of Financial Economics." Um, it was heady stuff to say the least. (Amazing hearing the discussion between Doyne and Geoffrey West, for example.) Spoke with Doyne a bit and also Shannon Larsen, executive director. Then, as I was leaving, who do I bump into but Cormac McCarthy! He asked what I was doing there and I told him visiting with Doyne et al. He told me they were his friends. I asked him if he was writing anything at this point. "As long as I'm above ground, I'll be doing that," he said. We talked some more and shook hands. Then I walked out into the blinding white light and the blue sky and rode off up the mountains.
LOOSE CHANGE: Loved the new "Donna the Buffalo" CD!....Is Stan Druckenmiller going to buy the Steelers? Who knows? Deep Blue has suggested that me and him buy the Maine Guides...."Do You know What I Mean," by Lee Michaels is the favorite 1970s song of the day.