Before…

Many of the dance band’s future followers started with recordings from this early time.

A soundtrack for the roads that got so diligently traveled.

Perception, timing and efficiency

Perception and timing are forever interlinked in market valuations, which can drive and are driven by liquidity. Circularly this comes back again to timing and perception. That which cannot be escaped.

Perception: A seller of an asset, for example, might feel its value to be 2x +1, where x is some operating or financial metric, the multiple implies its future growth potential, and there is an added premium because the asset is perceived as scarce and special. The buyer disagrees and would pay x, best and final.

Timing: For a variety of reasons, the noted seller argues that it’s justified to accelerate value realization. The buyer does not see it the same way (or maybe can’t) and would defer that value transfer, or, if possible and better still, eliminate it altogether. The buyer would rather wait for proof of how it all plays out, the seller wants to lock it in.

In this way of seeing things, the asset’s liquidity will increase with the narrowing of timing and perception gaps. And liquidity itself may facilitate that narrowing. When money and resources are abundant, for the buyer or seller, either way, and when the choice of assets is diverse, there is a greater chance than not that some deal will clear the market. Conversely, when liquidity is thin, the gaps are much more difficult to bridge, and assets are more difficult to value in the absence of transaction evidence – which may circularly lead to illiquidity, as alluded.

That second case is referred to as market inefficiency by some, implying that the first case is efficient. What is or isn’t so, however, may more correctly be assessed by individual objective. When buyers and sellers all perfectly agree on timing and perception, there is no value realization opportunity for either side, though by conventional accounts that is a perfectly efficient market.

It’s good to disagree, it’s good for markets to be analytically (as opposed to operationally) inefficient. Timing and perception gaps drive risk, which leads to opportunity. The risk is in this case a healthy variety. The absence of a gap, by the same token, may lead to a collective shocks in unison, which is a different kind of risk entirely.

Alternative asset classes, which tend to be less liquid, are an interesting case.

WSJ

The swings of labor sentiment

The work-from-home instructions at many organizations may be indicative of two things, one of which is widely discussed (and no need to belabor the remote enablement aspect of software eating the world and its environs). The other, more nuanced perhaps and subject to interpretation, reflecting the speed, decisiveness, and permanence of such corporate moves, is the ease with which this has all happened.

WSJ

I’m kidding, by the way, as I often do around here, but it feels almost like a slight. “Stay home,” they say, “no, really, it’s ok. Forever.” This isn’t based on fact or data, obviously, not even hearsay or experience, it is entirely made up for purposes of speculation. The health concerns are obviously serious, the anxiety relief is critical all around, the crowd control will save so much grief that is avoidable.

A consequence, however, or perhaps a trend that has been underway, may be an accelerating impersonalization of the workforce. A time may come, perhaps, when we will miss the long commute, and when business labor practices will become centralized again as a point of differentiation.

The big cities, the main hubs, will maybe concentrate again if that should come to be, or possibly some new ones will emerge before the feeling passes.

Differences, parallels and crypto

The meltdown before last, that of the 2008 era, was in some ways the mirror image of the one we may still be in the midst of, depending on perspective. There are always two of these, the financial markets perspective and the economic one. The former would suggest we’re now in a bull market for equities, which is why most of us tend to focus on the latter. Because it’s hard to believe.

Regardless, there are two, usually in some semblance of lockstep, or a sort of dance in which one leads and the other follows. In 2008, the breakage originated in financial markets and flowed from there to the economy. In 2020, the damage has been economic (though damage is a ridiculous understatement) and dragged financial markets down, at first.

The bifurcation of a market on the rise and an economy on the wane isn’t necessarily of note, as markets after the initial shock can pull themselves together and start looking sharp more quickly. The economy takes longer, and markets understand its plight and are mindful of the load that must be carried. The rising tide of money flows, of course, may help to make the markets gracious, and in this, 2008 and 2020 haven’t been particularly different.

The difference now is one of the extremes. In 2008, the economic turmoil was contained and, with the benefit of hindsight, seems almost cyclical in nature, albeit steeper than a normal cycle: The Great Recession, it was called. In 2020, we don’t even know what to say. It all depends on what comes next, which no one can really even guess. But here and now, for all intents and purposes, it feels like there is no economy at all, or just a breath in any case. The money that is being printed makes the post-2008 installments seem playful in comparison.

In other words, the balance between fundamentals (economy) and liquidity (markets) was approximately as one might expect in 2008, with markets (liquidity) leading to a fundamental (economic) recovery. Fast forward to 2020, there isn’t any balance at all. The markets are just out there doing what they do, as though everyone is merely trading options, blindfolded. Sometimes there is chatter about a fundamental rationale, but that tends to vagueness and lip service.

The current parallel, rather than 2008, which isn’t, may more truly be that of cryptocurrency. So far, for better or worse, Bitcoin at least has seemed to be a speculation vehicle, where there is arguably a fundamental underpinning to the trade, but this is not altogether convincing. Or, rather, the fundamental argument is based on a loose set of promises that may or may not take form in the distant future, depending on some other things that may precede or follow. All the while, the price swings that are large and frequent are driven by market demand. Does this sound familiar?

Assuming this view to have some merit, another interesting contrast between 2008 and 2020 has emerged. Back then, institutional money was quick to jump into the activity, while retail watched the opportunity missed for it forever. Lesson learned… This time around, it feels as if the retail trade has acted fast to buy the dip, while the collective institution scratches its collective head and contemplates, like I am now.

Bloomberg

In this too, the pattern has been similar to crypto.

Time and expectation

Arguably, the big social media innovation was not the chatter and the sharing, which had been invented around the origin of people, but the possibility of chattering and sharing on one’s own time. A feed or any of its message elements can be followed, unfollowed, responded to or ignored whenever. It will be there for the recipient or the bystander to use or abuse on their particular schedule.

It may be that certain types are permanently tuned in, but that isn’t a pre-requisite. It may also be that some are tuned in permanently in one place but not another, and in these cases it’s possible to visit or revisit any of these places and not miss the moment. The moment and its value are of critical importance in all this, I think.

When moments are limited, the flexibility is a convenience. And despite the popularity of video or audio streaming – which are broadcast and one-directional in nature – the ability to interact on one’s own time has been facilitated by text. The text may have an image or a musical attachment, but its view or listen on the other end are backed by text to let you know what to expect. And the content is accessed at a time that is convenient.

Before social media there were letters, which served a similar function, and before letters there was the home or local market, say, where one could receive or kick out, stop and chat, or avoid, congregate or abandon. Presumably, one came or went on a particular timeframe and for a certain purpose, based on the need or want of the individual or the group. An organizing aspect of it all, in most important ways, I think, was time and expectation.

You wouldn’t go to the market when nobody else was there, not ordinarily, you wouldn’t knock on someone’s door if you thought another door would serve a better purpose because, you know, “time is money.” I bet they said that back then too. And before money there was still some notion about value, perhaps, so maybe they said “time is value,” or at least thought it before finding words to blurt our loud.

Still and all, time, convenience, and value in modern communication are enhanced by text, which allows for the best and most lasting transport and decomposition. I think this has been a staple of social media since its advent, to the extent that social is an interactive two-way thing.

The new social media vehicle that is purely voice-based and serendipitous, unscheduled, makes one wonder…

NY Times

One day, our time supply will be limited again, and even if it isn’t our attention will still be.

The formation of a thesis

It’s interesting to follow trains of thought among the medical authorities around this time. The progress that is made in tiny analytic steps, the statistical and probabilistic assessments, the hesitant conclusions subject to further testing and interpretation, all this in many ways resembles the formation of an investment thesis.

And the endpoint is more or less the same: a recommended course of action towards a desired outcome, predicated on the isolation and mitigation of risks that are identified along the way, balanced against tradeoffs and potential benefits that hopefully result.

Particularly as the subject matter is one of multivariate complex systems – organs that may react and interact in varying ways, groups of bodies that may do the same, externalities that skew outcomes, individual and group psychology, always a wildcard – the resemblance to economies and markets could not be more pronounced.

CBS News

As large economic managers and their counterparts in medicine consider their next steps and large directions, which in the current case also interrelate, we smaller ones may seek to do the same. That is to say, we’re all investors, even if not in financial assets, with positions that require monitoring and reconsideration at all times. Especially in turbulence.

Business strategy and execution, career planning and education, expenditures and downside protection, such things make up our non-financial portfolios (but so much boils down to finance at least indirectly, truth be told) which aren’t always liquid. A thesis helps.

A thesis helps to set a course, to watch for variances or fine-tune, as will likely be required. In many cases, the thesis will be one to modify outright as circumstances outright change. Under the guise of a business plan, a job, a degree, a stock purchase, and etc., there is consciously or unconsciously a thesis in any case; thinking this through formally, if you will, is probably not a waste of time and energy these days, as the givens and assumptions are said to be changing.

Real estate is also marketing

There was once an investment bank, back in the day, that spent lavishly on its meeting rooms where clients came to visit and were entertained, while letting all the remnant spaces of its office area crumble. Other investment banks took a different approach, but the meeting rooms, no matter the firm’s budgetary decisions or constraints, were sacrosanct. Understandably.

When the industry gave rise to many smaller firms of lesser fame and balance sheets, the practice persisted, even to the point of leasing a shared location that seemed expansive to the untrained eye, although behind the shared facade there was a cubicle and a closet. When the excitement shifted away from Wall Street and to innovative tech, the idea evolved but the principle was constant: Incubators, WeWork locations, and the such, were, among other things, the outward expression of the tenant’s profile and desires, as previously palatial gathering grounds turned playful, glass-walled and gadget-conscious.

For all the issues of efficiency and team culture now under consideration in the centralized vs. decentralized commercial real estate discussion, as the distributed work-from-home routine becomes a universally accepted standard, the referenced aspect of outward presentation remains a theoretic challenge.

Beyond the meeting rooms and glass and all of that, the physical location is a symbol and advertisement. Companies spent fortunes for their logos to be on display at the building entrance, cities that became a magnet for buildings and logo’d entrances had emerged and differentiated on the basis of the tallness of these structures and the logos that moved in.

Banks had opened and maintained branches around town, even as mobile applications reduced the need for that, in large part as a testament to status and to entrench a presence to the customer’s perception, while the logo in the window was a billboard ad for everyone to see.

If physical space, in this way of looking at it, is a marketing expenditure as much as (or arguably now more than) a real estate expense, and if the current trend to reconfigure real estate persists, what will replace the marketing? And, beyond the firm’s offered product – which may or may not sell itself, which may or may not require a physical presence, which may or may not be digitized – how will the deepest pockets outwardly differentiate? How will the smaller pockets pretend to be less small? A bookshelf and some flowers in the video background can be had by anyone.

NY Times – Manhattan Faces a Reckoning