Friday Night Links

• Value has failed its disciples for thirteen consecutive years, with its struggles intensifying into the COVID-19 pandemic. This challenge to one of investing’s sacrosanct assumptions has shaken and fractured the investment community. Iconoclasts point to the secular economic transformation that has occurred since the days of Graham. Meanwhile, value apologists urge us not to repeat the sins of our fathers, who abandoned the faith in the late-1990s only to be crushed when the tech bubble burst. Regardless of one’s beliefs, the value-growth spread has reached such extremes that investors simply cannot ignore it anymore. Whether you are an asset allocator or stockpicker, this phenomenon looms over markets. Entire careers are likely to be made or broken on this single call. [Sparkline]
• In the twenty years I’ve been reading investor letters, I have never once seen someone boast that they’ve invested in a terrible business, with corrupt and incompetent management. Oddly, those tend to be the sorts of stocks that have the best upside as minor improvements can dramatically impact the future value. I’m not arguing that you should go look for D companies that could become Cs (though I do my fair share of that). Rather, I would argue strongly that the valuation gap between A and B companies has never been wider during my career. B’s are still genuinely good businesses—just maybe not software good. [Kuppy]
• Public equities have halved in count in the U.S. between the mid-1990s and today, with a paucity of small stocks limiting access to high-growth opportunities for common investors. The paper finds that the decrease in listed equities is more likely to be attributable to a lack of new entrants via IPOs than it is to be due to increased de-listing activity via mergers and acquisitions, liquidations, and involuntary de-listing. Furthermore, this shift is shown to be driven by micro-cap stocks, which once drove initial public offering volume. [SSRN]
• Considering the fact that it has now come to light that the CCP provided a false genetic sequence of the Wuhan coronavirus (Covid 19/SARS2) to international infectious disease experts and destroyed the samples from Wuhan, we really have limited knowledge of how many strains were released from the CCP's Wuhan bioweapons laboratories and disseminated throughout the World. Reseaerchers are catching up as time goes on. We now are coming to realize that there are no legitimate studies demonstrating that Hydroxychloroquine use results in heart arrhythmias, but we do have plenty of evidence that Hydroxychloroquine and Zinc are effective as a prophylactic and pre-ARDS (pre-Cytokine storm) treatment. In hindsight, it is likely that over 100,000 lives could have been saved if the political fight over using Hydroxychloroquine had not occurred. [MR]
• Two months later I found myself in a discussion with a senior White House staff member who was explaining how extensively they were struggling to get basic work done because they were severely short staffed. I replied that that was odd since thousands of people across the nation had sent in their resumes to greatagain.gov. Surely there were plenty of applicants to choose from and they would likely all be incredibly invested in the President’s agenda and his success. The staffer turned to me with an eye roll and a dismissive chuckle saying “Oh that database was accidentally lost…some computer glitch.” I knew of three former Trump campaign staffers who had been hired into the new Administration, one at State and two others in the General Service Office (GSO). All three were let go by March, without explanation, at the same time it was becoming increasingly apparent in social media revelations that the highest levels of the Administration itself were being purged of high profile Trump supporters and replaced with clearly identified members of the Establishment elites from both sides of the aisle. [link]
• Over time the distribution of the rum ration acquired a fixed form. At 11 AM, the boatswain's mate piped "Up spirits", the signal for the petty officer of the day to climb to the quarterdeck and collect the keys to the spirit room from an officer, the ship's cooper, and a detachment of Royal Marines. In procession, they unlocked the door of the spirit room, and witnessed the pumping into a keg of one-eighth pint of rum for every rating and petty officer on the ship aged 20 or more and not under punishment. Two marines lifted the keg to the deck, standing guard while a file of cooks from the petty officers' messes held out their jugs. The sergeant of marines poured the ration under direction of the chief steward, who announced the number of drinking men present in each petty officer's mess. The rest of the rum was mixed in a tub with two parts water, becoming the grog provided to the ratings. At noon, the boatswain's mate piped "Muster for Rum", and the cooks from each mess presented with tin buckets. The sergeant of marines ladled out the authorised number of tots (half-pints) supervised by the petty officer of the day. The few tots of grog remaining in the tub ("plushers"), if any, were poured into the drains (scuppers), visibly running into the sea. [Wiki]
• I would imagine that seeing blacks parading through white neighborhoods with drums and horns at 2am telling whites "No justice, no sleep" and demanding they give their homes to black people is undermining Black Lives Matter's claim that black people are just absolutely terrified of police. If you're marching through white neighborhoods threatening violence and demanding that whites give you their houses, that tends to suggest you're not the Oppressed hounded by the state, but instead the Oppressor given carte blanche license by the state. That in turn may contribute to whites' declining estimation of how much racism blacks face. You can't claim "We're totally repressed" as you march like an invading army through white neighborhoods telling them they are not allowed to sleep and must give their houses to you. [link]