Earthquakes in Paradisio
Even the
investment industry takes a bit of a breather over Christmas with a number of
exchanges limiting hours to half days, and almost everywhere shuts down for one
or two days. Thus a good time to take
off especially as volumes are light and executing orders can become more
problematic starting in the second half of December. Tax loss selling, if required, should be
complete, and while the tag end of window dressing still carries on right up
until the closing bell on the 31st, most of that activity also is
over. If you want/need to get something
done it is best to use limits during this period as market orders may result in
an unpleasant surprise when the fill gets reported.
Still the
very last couple of days of the year can be interesting. If someone is caught out and leaves it late
on either the buy or sell side, and for some reason absolutely has to complete
before year end, prices can move by more than usual creating opportunities to
be on the other side of said trade. Thus
I usually try to have a few orders in place, with defined price limits outside
the spread, to take advantage of any extreme gyrations that might affect my
positions. Most will go unfilled and require
rebasing come January 2, but each year one or two deep bids or above market
offers get hit or lifted usually delivering a nice trading profit : always
welcome even for value investors.
This is not
a good period to be a market marker, and recent regulations have made that role
less rewarding. Combined with the antics
of the High Frequency Traders, you can experience tricky price moves. The HFT industry is a topic in its own
right. Suffice it to say here that as a
fund manager I see them as parasites that undermine market integrity and at the
very least distort prices, even if most of the main Stock Exchanges around the
world favour them at the expenses of normal investors.
Back in the
days when I was in Corporate Finance, Christmas was often a miserable time as
you tried to get deals done before the artificial year end deadline; as if it
made any real difference whether something was closed two or three days earlier
or later. One Scrooge like tactic was to
launch a hostile takeover a day or two before Christmas. This had a number of advantages, starting
with catching the opposition off guard and putting them in a bad mood. People in a bad mood are more likely to make
bad decisions.
In addition
rounding up the required team of advisors is always harder over the
holidays. Those at their desks are
likely to be working all hours of the day and night to get something done that
probably should have been done earlier; and all those involved feel obliged to
give existing matters priority. Then
assembling the key corporate managers can be a non trivial task if they have
gone abroad to spend that time of year with family members living overseas; or
simply have taken their own family somewhere nice such as the Caribbean or on an
African safari; and in the days before ubiquitous mobile coverage there were
plenty of places where communications ranged from difficult to non-existent. So you could usually count on a degree of
chaos let alone dismay if you launched a bid on say December 23rd. Your side has its story prepared and it is a
slow period for financial news so you could usually get your argument across
and secure good coverage with only a weak response. At the very least you got to set the tone of
the debate. That could worth a lot if
the vote is like to be close.
Meanwhile
the countdown of the regulatory clock commences. Still the most effective launch I can recall involved
Forte Hotels timed so that the CEO was on a grouse moor shooting the day of the
announcement. Reporters ringing for
comments were delighted to publish that they had tracked down senior management
indulging in an expensive and elitist past time away from their offices : a
terrible message and entirely the wrong image to send shareholders whose
loyalty was in play. It helped portray
the management as out of touch and failing to focus on the business. Surprise, surprise. That bid was successful.
No seasonal
greetings and a lump of coal in the bottom of the stocking for the target, but
then charity is not how the M&A world works. I hope your holidays were not disrupted and
that you were able to enjoy a happy few days and avoid the killjoys.
Even the
most dedicated value investor has to take time off. It is important to step back every so often,
clear your head, relax in whatsoever way works best, and then return to the
fray. And Christmas is one of the best
times of the year to do precisely that since so many are out of the office and
newsflow dies down to a trickle. For now
Voyaging for Value is going to stand still for a week and savour the
quiet. Or at least I thought we would
stand still in the wonderful Tuscan hill town of Panzano, otherwise known as
Paradiso.
This year
not much was standing still. On the
second day after our arrival the first earthquake hit. That was the afternoon of the Thursday before
Christmas. At first few people realised
what had happened. The epicentre was a
long way off. The Chianti area of
Tuscany has a history of earthquakes, but nothing significant has happened in
the lifetime of those alive today. And
indeed nothing happened for a while after the big bang up north.
To be woken
at 1 am in the morning because your bed is vibrating is rather disconcerting,
and on balance not an experience you would choose to repeat : except that
Friday we got to repeat the experience several times to differing degrees; and
by morning we were sensing a series of tremors of varying intensity, many so
small you barely noticed them, others accompanied by clear movement and rumbles
underground.
By this
point the epicentre had moved a lot closer.
Indeed as we consulted relevant websites that morning we could see we
were living less than 10km from the latest movement. Something was going on almost every thirty
minutes. The majority were in the 2 to
2.5 band on the Richter scale, hence no cause for concern. One or two were touching 4 and a bit of a
worry.
I had only
experienced an earthquake once before, during my student days at Stanford
Business School. I was driving up to San
Francisco when one hit with sufficient force to cause cars to change lanes :
slightly scary to say the least. These
were no fun but no cause for alarm until the one at 11.00 am that Friday. I was on the phone sitting down when my desk,
a sturdy object, literally lifted off the ground for a brief moment as the
whole house shook. There was no major
damage but we have found a few cracks in the stucco that were not there before. This tremor lasted a few seconds but it was
intense enough that your whole body is shaken and your sense of balance shifts
off centre. You feel strange for some
time afterwards, as if everything is not quite right.
My wife was
in Greve, the next door town, when the quake hit, buying our Christmas turkey
at the famous butcher Falorni. She was
even closer to the epicentre, only 2km away it turned out later; and this one
was measured at 4.1 : definitely non trivial.
The shock caused customers to spill out of shops into the main
square. There was a degree of chaos as
children cried while people wondered what would happen next.
Tuscany
contains many notable old buildings, but most of those were better built back
then even without an earthquake code than many of the newer buildings,
especially those constructed in the 1950s through the 1970s that are often
shoddy sub-standard work completed at a time when builders could persuade inspectors
to look the other way.
All credit
to the authorities in 2014. They reacted
promptly; and understandably so as aftershocks continued all through the rest
of the day and night, at irregular intervals and through a good part of
Saturday as well. Schools were promptly
closed. Some areas were condoned off
such as the Campo in Sienna. Our plumber
and his family were required to evacuate their apartment, and spent the night
in a shelter. Reports vary but it looks
as if we were visited by well over 50 separate earth movements, around 4 of which
were of sufficient intensity to be unpleasant.
2014 has
been an uncomfortable year for Panzano with an unusually large number of deaths
and at an age when people now do not expect to die. For me too it was an extraordinary year with
22 deaths among people I had connections to - or nearly two a month, and more
in just this past year than all previous years cumulatively up until 2013. Hopefully 2015 will be a yarborough. Back to Panzano the main topic of
conversation during this period, as you might expect, has been the
earthquakes. One theory is that as the
rumblings moved down south, they took the bad year with them. Speriamo.
This Tuscan outburst
of “Terremotos”, a nice evocative word, received relatively little media
coverage. The one up north resulted in
some 15 deaths. As far as I know we got
off lightly. The worst experience I
heard about was a friend of a friend who suffered a dislocated shoulder when a
large lamp came off the wall of an old tower.
Nothing too serious though enough to spoil her Christmas. It is hard to describe what it feels
like. Weird is the word that springs to
mind; but does not do justice to a complex sensation. Apart from anything else
the impact is so sudden and so rapid; but not knowing what might happen next is
unsettling. So you go about your
business with a small part of you thinking about what to do if the next one is
larger. Notably our cat was completely
unconcerned. We are told animals are
more attuned to a potential natural disaster than humans. We took some comfort from the fact that he was
totally laid back the entire time, and never showed the slightest sign of being
indisposed or worried. Perhaps he even
enjoyed the earth movements? We did not.
Hopefully
your holidays were not disrupted by anything so disconcerting. A belated Happy Christmas to all my
followers.
I would like
to end this blog with a small detour into the world of artichokes. December is fresh artichoke season in
Italy. To my mind when fresh they are
about as delicious as anything I know.
One reason why most people do not get to enjoy the full flavour and
chewy leaves is that an artichoke is a pain in the ass to clean; and not so
easy to cook and get the consistency right.
Best then to order when out at a restaurant. We did at almost every opportunity. Fried at Camillo in Florence, they are
delicious. Sauteed in olive oil at
Enoteca Baldi in Panzano and you think you have ascended to culinary
heaven. They are so good it is worth
making a special stop if you are in the area.
I think we tucked in to sauteed artichokes no less than six times over
the holidays : every occasion was bliss.
