I've been trying to wrap my head around how we headed up in this mess of multiple lockdowns
Don't buy the power grab(few exceptions) or incompetence arguments
Listening to @profplum99 interview @Gavekal a theory was outlined that makes a lot of sense
CYA=Cover your ass
Now CYA was always fairly prominent in democracies
Adding social media to the mix was like adding 100x leverage to a trade(makes it easy to blow yourself up)
So politicians were terrified of being held accountable for deaths
So obviously they have zero incentive to take risks
"Now that every policy choice is reviewed and debated in real-time by millions of people around the world, CYA has become all-important.
Politicians have to put policies in place to hedge against the wildest tail risks imaginable."
"Once Denmark and Norway had decided to follow Italy’s lead and lock down their populations, any western government that did not follow suit risked being accused of playing Russian roulette with people’s lives, regardless of
the epidemiological evidence."
The CYA theory also extends to monetary and fiscal policy as govts and central Bankers must be seen to do something.
This is quite the incentive when combined with being the path of least resistance for govts and central Bankers
"CYA principle and investing
Indexing is the new in-vogue form of socialism.
Capital is not allocated according to its marginal return—the foundation on which capitalism rests.
Instead, capital is allocated according to the size of
companies."
"In the 20th century, the goal of every socialist experiment was for everybody to earn the same salary
In 21st century, it seems that the goal of indexing
is for everybody to earn the same return
As we now know fixing everyone's return on labor at the same price was a disaster"
"People stopped working, and economic growth plummeted.
Fast forward to today, and why should we expect a different outcome if the end-goal of our investment strategy is to ensure that everyone gets the same return, not on their labor but on their capital?"
"And should we really be surprised if the growth rates of our economies continue to slip?
Why should we expect a positive growth outcome from an epic misallocation of capital?"
Hope you found Louis Gaves @Gavekal framework as interesting as I did.
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“Show me the incentives and I will show you the outcome.” - Charlie Munger
Ensuring incentives are aligned positions you for better outcomes.
At the minimum know what everyone's incentives are before entering any deal/investment.
2. Asymmetry
Position for ideally large (unknown) upside and small (known) downside
"If you ‘have optionality,’ you don’t have much need for what is commonly called intelligence, knowledge, insight, skills and these complicated things that take place in our brain cells"-N Taleb
Kazakh's can now sell their uranium at the spot price to their Swiss marketing subsidiary which can then market it higher aboard or pool inventory to sell at a higher price
No more direct selling into spot market as per Kazakhs transfer pricing laws
ISR Production
“It’s important to keep in mind that ISR production is similar to oil and gas production. It produces a lot when the well is first tapped and then production declines. As the production declines, new wells are drilled to offset the production decline rates."
First is mine exploration and mine development expenditures where Kazak’s have gone from spending $94m a year in 2011 to $18m in 2017. It's hard to imagine an 80% drop in mine exploration and development investment coinciding with increasing production (or even being maintained).