“The elephant in the room” (2) – Shakespeare, Newton, Elon Musk and me?

2020-05-15

“Life was so beautiful
Then we all got locked down
Feel like a ghost
Living in a ghost town”

Rolling Stones – Living in a Ghost Town

Like most of us, I have just spent one of the most singular months of April that I can remember. “Comparaison n’est pas raison”, but let’s wind back a few centuries to see what we can learn from history!

 

When the plague hit London in 1592, theatres across the city closed down. They remained so for virtually the entire time of the outbreak, lasting from the autumn of 1592 to May 1594. During this period, the only option for Shakespeare’s company and other actors was to tour the provinces. With no demand for new plays, the 1592-94 plague led Shakespeare to turn his pen to poetry and it is thought that he wrote the narrative poems Venus & Adonis and The Rape of Lucrece during this time. 

 

A few decades later, in 1665, the Great Plague devastated England, including London.  The Washington Post recently reported in an article, that during the Great Plague, Cambridge University invented a version of “social distancing” and sent students home to continue their studies. For Isaac Newton, that meant Woolsthorpe Manor, the family estate about 60 miles northwest of Cambridge. Without his professors to guide him, Newton apparently thrived. The year-plus he spent away was later referred to as his annus mirabilis, the “year of wonders”. First, he continued to work on mathematical problems he had begun at Cambridge, with the papers he wrote becoming early calculus. Next, he acquired some prisms and experimented with them in his bedroom, even going so far as to bore a hole in his shutters so only a small beam of light would penetrate. From this sprung his theories on optics.  And right outside his window at Woolsthorpe, there was an apple tree. That apple tree. The story of how Newton sat under the tree, was hit on the head by an apple and suddenly understood the theories of gravity and motion, is largely apocryphal. But, Isaac returned to Cambridge in 1667, theories in hand. Within six months, he was made a Fellow and two years later, a Professor. So if you’re working or studying from home over the next few weeks, perhaps think of Isaac Newton. Having time to muse and experiment in unstructured comfort, proved life-changing for him.

 

“What about you, Pierre ?” you ask.  Well, I won’t pretend that by sitting under an apple tree this season I’ll get an Isaac Newton inspiration. I’m eating mostly humble pie, rather than apple pie. I’m listening to conference calls with companies we own in the Fund and am trying to assess the impact of “the elephant in the room” and its aftermath. I’m looking for signs & patterns, but it seems too early to me to do a stress test on each of the corporates at this point.  Furthermore, isn’t the constant intervention of the CBs (Central Banks) just pie in sky? I’m of the opinion that Mr. Market hasn’t copied yet that the economic downturn could be quite severe. We could see lower stock prices, as some valuations could be too high against revised earnings. We could use our larger than usual cash position to do some bottom fishing, but as already stated, the picture is too blurred at this point!

 

Talking about gravity & motion, since the lockdown I’ve gotten used to walking very early in the morning. A few mornings ago, I spotted Mr. Tesla’s Starlink train of satellites. Apparently the FCC (Federal Communications Commission) has granted Elon Musk approval for the launch of 12’000 satellites and he is seeking approval to launch an additional 30’000. That number will greatly outnumber the approximately 9’000 stars that are visible to the naked eye. Is that why Tesla’s stock valuation is sky-high?

 

Hard to see, hard to assess! Stay tuned!