Wandering Chill

Color Commentary

1. Chill Out, It’s February

It’s felt right these last two weeks to really relax and enjoy my investing practice.

January was SO busy, on top of such a travel-filled holiday season, on top of a crazy fall. I keep thinking of goals for my investing practice that I have not yet achieved, and remembering projects I haven’t had chance to even begin, and it’s been stressing me out. It felt wrong. Luckily, I took a breath, I noticed my practice felt wrong, and took a step back mentally to reflect.

Then, and only then, I remembered my basics of practice: chill, enjoy, and, most of all, focus on the experience instead of the results.

I was getting stressed out because I was focusing on the results. I was focusing on goals and outcomes and accomplishments. When I remembered that practice is about my experience, and about showing up every time, the cells of my body relaxed, I could breathe again, and I remembered how joyful investing practice really is.

For me, that joy has meant going back to my basics and doing Wandering Practices. Wandering Practice is when I bop around from interesting topic to interesting topic, wandering through articles, books, movies, podcasts, and conversations with cool people, learning about the world and the companies and people in it, and discovering what exactly I might want to spend more time on. There’s no goal. There are no requirements. It’s about following my nose and having fun with whatever I find and learn.

I found a bunch of interesting stuff.

2. Coronavirus

I am obsessed with this coronavirus situation and how it’s currently affecting and will continue to affect global markets. When I first started reading about it, I felt kind of like I was wasting my time following an event that, yes, was affecting markets, but probably would not end up being a major market crasher. After all, SARS didn’t create a crash. MERS didn’t create a crash. Why would coronavirus be different?

Yet, this one seems a little different. The response is much larger than with those previous two outbreaks. Now, let me say that I’m lucky that I live in a country that has barely been affected and I have not personally been affected, so I come at this topic from an academic point of view. If you or anyone in your life is being affected by coronavirus, I’m so sorry, and I hope you come through ok.

If, however, only your company or your investing is being affected by coronavirus, then let’s talk. I see a bit of a disconnect between the government stats coming out publicly, and the effect on and response from corporations. Governments have a strong interest in downplaying the sort of bad news like an outbreak – keep the public from panicking, try to keep business open and society operating, keep confidence strong in the government response. The Wuhan government even silenced a whistleblowing doctor, who has now sadly died of the virus, to try to keep news of the outbreak contained. Pretending the outbreak wasn’t, in fact, an outbreak, probably made it made much worse.

The Economist noted recently, in an article about the coronavirus, that an important lesson from the Ebola outbreaks in Africa is that quarantine only works if the people under the quarantine order cooperate. If quarantined people leave quarantine, then health workers don’t know where infected people have been and who they’ve been in contact with. Popular trust in government and health systems can make or break the containment of an outbreak. For example, “A heavy-handed attempt to quarantine West Point, a settlement of 70,000 people in Monrovia, Liberia’s capital, during the Ebola outbreak in 2014 was abandoned after residents responded with riots. By contrast, a similar but well-organized quarantine in Sierra Leone, in which traditional leaders were brought on board first, did not meet resistance.” The Economist, February 1-7 2020, “Prepare for the worst, hope for the best.”

In China and elsewhere in the world thus far, people under quarantine have cooperated. In China, though, has that cooperation been by choice?

Insane video showing the inside of a hastily built “hospital” for coronavirus victims: this is a must-see. It looks a lot more like a prison than a hospital. I hope you can still view the video by the time you get this, as the Chinese seem to have broad powers to take down info they don’t like. It seems to prove the Chinese have prefab prison components ready to go, and accidentally showed the world by using them to build a “hospital” with many elements of a prison. Doors that lock only on the outside. Two-way windows through which food is delivered. Small windows with large prison bars on them. It’s creepy and scary and begs so many questions. Why would a hospital need doors that only lock on the outside? Why do they have these terrifying prison-like building components ready and available? Are they building it to keep patients safe, or to keep patients contained?

Whereas, in contrast to a government’s incentives to keep an outbreak under wraps, the private sector has no such compunctions. The private sector is like, hey guys, we aren’t getting the parts we need to build our products, and we aren’t up for the liability of transporting passengers with a highly contagious virus. So, we’re going to make any alternate arrangements we can to ensure we can still build our products and provide our services, and we’re going to shut down transport in and out of the epicenter of the virus.

It’s the private sector’s response that I trust far more than an authoritarian no-free-speech government’s response which seems to be entirely about protecting “leader for life” Xi Jinping. Indeed, recently the Chinese government dramatically upped the numbers of coronavirus cases and deaths – showing that yup, the private sector was responding to reality, and “official” figures are, just like any statistics, malleable.

Yet, the response I see and hear from investors is largely complacency. Investors are fully invested, they are not particularly interested in the implications of the virus as long as it stays in China, and they have confidence that global supply-chain companies like Apple and Foxconn will find solutions to their Chinese factories being temporarily shut.

Airlines are clearly being affected by the outbreak. Major airlines have canceled flights to and from China and Asian airlines are being hit hard. Still, there seems to be confidence that they will recover as the virus wanes.

Basically, people seem pretty confident this is a blip and markets will go back to normal. Indeed, some hit recent highs. I don’t have a clue what the future holds and won’t try to predict it, but I am intrigued to continue to follow this crisis with my investing practice glasses on. Who knows, maybe it will cause one of the companies on your Wish List to get down to a reasonable price?

I also watched the Netflix series Pandemic, to try to get more insight into what could happen if this virus really expands. I didn’t particularly learn much from the series, so I’m don’t particularly recommend it as a learning tool. The series follows a few different public health players as they fight Ebola and other diseases around the world. It’s semi-interesting if you’ve got no clue about what institutions are out there to fight infectious diseases, but otherwise didn’t teach me much that was new.

3. WeWork

I’m continuously intrigued by how an office-sharing company convinced a heck of a lot of smart people that it was a high-growth technology company. I’m continuously angered that the guy who did the convincing walked away with over a billion dollars and left his investors, employees, and tenants holding the bag. The Guardian looked into it and wrote this extensive piece about how Softbank, Saudi Arabia, and other investors supported this farce

To add insult to injury? WeWork recently shut off the free beer and wine available to its remaining tenants, so the people providing WeWork’s revenue can’t even drown their sorrows on WeWork’s dime anymore. Tragic.

4. Exor

Exor is contemplating selling its reinsurance business, simply because they received a high offer and one doesn’t sniff at such cash infusions without considering it. Exor bought PartnerRe in 2016 for $6.9 billion and the offer from Covea to buy it is $9 billion, which is a nice profit in about four years. Reportedly Exor would use the cash to make more acquisitions. I’m going to watch this decision closely. Selling PartnerRe, removing themselves from Fiat Chrysler as much as they can through the merger with Peugeot, and buying some new companies would markedly change exactly what Exor, as a conglomerate, is. Maybe that’s a wonderful thing – maybe they feel the companies they own right now don’t represent who they want to be. Or maybe it’s a giant question mark.

Maybe it’s both.

5. Tampax

Great article on a product that has enjoyed mysterious ubiquity and longevity: Tampax brand tampons. I’ve never understood why Tampax is everywhere. Sure, it’s owned by Proctor & Gamble and therefore can command the good shelf space, but where is its major competitor? Coca-Cola has Pepsi. Apple has Microsoft. Budweiser has Miller. Who is the second brand to Tampax? I’d say it’s o.b., which is on many shelves next to Tampax around the world, but o.b. is weirdly not even mentioned in this article. Seems a rather glaring omission. Still, that aside, it’s cool to read the array of alternatives being created to try to topple the Tampax queen.

(I have to keep putting “femtech” in quotes because I just find it to be such a weirdly stupid term. Tampons are not technology. It’s like WeWork faking office-sharing as a technology company all over again. Argh!)

A takeaway from the Guardian article is that “femtech” still – STILL! – has a hard time garnering investors because the male investors in the room don’t get it, and there aren’t enough women in the room to balance out their ignorance. I laughed out loud at this: “One [potential investor] wondered why she was putting 18 tampons in a subscription box, given that he had never known a woman have a period for 18 days.”

On the level of being a human in the world, frankly a man should know why a woman needs more than one tampon per day. But, ok, fine, let’s accept that that guy didn’t know. Any woman who was a potential investor, sitting in a pitch meeting faced with a confusing product, would ask, curiously, eager to understand, probably with great humility: “Why put so many tampons in the box? I must be missing something.” Weirdly, an attitude of trying to understand, instead of arrogantly announcing your view, is something women get dinged for at work all the time. And then “femtech” doesn’t get investors because of mansplainers like that guy who tells instead of asks. It’s maddening.

Which is why I include this Tampax article in this issue. Much like Dollar Shave Club, feminine hygiene products are big business, and regardless of gender it would be nice for us investors to know the basics about them so we can at least ask decent questions. Let’s raise the bar.

LET’S GET PRACTICAL

We’re deep into February now, and that means holiday fun has worn off and New Year resolutions have settled into reality. How has your investing practice gone so far in this new year?

If you need a little pick-me-up, try a Wandering Practice. No pressure, no goal, no results needed. Just chill and read whatever interests you. Use the many links in this issue as a place to start, and then wander, following your curiosity. It could lead somewhere, or nowhere. Either way is completely fine, because simply by doing your practice, you showed up for yourself.

Ownership Disclosure: Danielle Town does not own shares in any company mentioned herein.

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