Note: This is the first of TB’s blogs for 2020. That wasn’t his intention but a lot has been happening personally. First, we decided to sell our condo in Dec. 2019, and have moved to a beautiful, luxury apartment, in Edina, MN. Of course, we will miss our lakeside home of the past nine years but there were several reasons for the move. We are only 20 minutes away so we will be there frequently.
Until 2019, TB had another website here (traderbill.com) but as a result of his retirement is no longer active. We are in a great crisis, one that not only affects the wine industry but everything in our lives, so, rather than re-opening the financial blog, both will be here as the financial markets affect every aspect of the wine business as with everything we do!
This first blog is about how we got here, and begins with the financial markets. The next will add in observations TB has made of various sectors of the economy. TB welcomes any and all comments.
Thanks for reading and hope you find it useful,
TB is not a seer…or a genius… but for his own sanity he is resurrecting Trader Bill and perhaps creating a dialogue with his friends and former followers (not in the disciple sense…just following the blog!). Whatever it takes to get us through this crisis, one of the worst mankind has endured…and as the late Walter Cronkite used to say, “you are there.”
Crisis, panic, fear, lack of consistent leadership, denial, and loathing are just some of the adjectives that have crossed old TB’s mind. No, this isn’t his first rodeo, and perhaps that is why he, as a former bond geek for 45 years – yes, back in the last century. When he was in San Francisco, he loved going to hear Ed Yardeni speak. Ed would open up with some of the above adjectives and then gaze around the room silently. Then, a slight smile would emerge and he would say, “now that we have identified where all the bond guys are seated (they were the only ones smiling), we can begin.” Followed by laughter of course.
I bring this up as I have always admired Ed’s thinking. He only made one wrong call that I can recall: doom following y2k! But was he wrong…or did he act as a stimulus to thinkers to solve the problem?
You see, Dr. (not Mister) Ed’s premise was based on computers and the degree to which businesses used COBOL (Common Business-Oriented Language), developed in 1959 and based on the work of Grace Hopper. TB is old enough that in a finance class he took at UCLA in 1969, he can recall putting data, punching it in to IBM cards , stacking them , and feeding them into the hopper for input into a mainframe somewhere on the campus. Due to storage and ease of programming the year was simply two digits with the first two ‘19’ already in the computer. It was probably assumed (remember assume makes an ass of u and me!), that long before the year 2000, a new system would be in place but it wasn’t and thousands of COBOL programmers would be obsolete.
Soooo…back to Dr. Ed. He produced scenarios for different industries and one of them was railroads where all scheduling and locating of rail cars was done on computer. Where would those cars be on 1/1/2000? Lost, that’s where, and the entire economy would come to a halt due to this and other forms of commerce…including banking, stock exchanges, etc.
So was Ed wrong? No, but he underestimated (or did he bring it to their attention), that business would rehire thousands of COBOL programmers to take on the gargantuan job of fixing the coding. TB knows this because Kim Fawcett, wife of his partner in bonds, was recalled, and told him about it. Unfortunately for them, they were let go again after solving the problem. They were heroes – except for Dr. Ed and his followers as y2k came without a hitch…globally, as far as we know. It is even entirely possible that Ed’s proclamation of the problem saved the global economy trillions of dollars. Ed’s insightful thinking is still available at yardeniresearch.com.
In the mid-19‘70’s, small (computer) calculators came onto the scene. One of the most significant was Compucorp’s (later acquired by Monroe) Bond Trader and selling for around $1,500! This eliminated calculating bond prices by hand using a Basis Book, but was extremely time consuming. It meant when bids were due on a new bond offering, the data fed into the computer and could be stale due to an unexpected event…a Fed rate cut for example. By the way, COBOL-based computers are still in use today, primarily in the banking system and other areas finance such as insurance.
By the early 1980’s Microsoft had proposed to IBM that they combine and make small computers, but in what was perhaps the biggest blunder IBM ever made, the Bill Gates/Paul Allen proposal was rejected, and shortly thereafter Steve Jobs introduced the Apple computer which by no means was portable, but could be used on a desktop…the rest is history. How many desktops made by Microsoft or Apple are there today (although Apple now makes laptops and tablets exclusively) vs mainframe computers? How many, Watson? By the way, the first Apple desktop was auctioned off in 2014 for $905,000 and others are now in the $500,000 range…that for a clunky, slow by today’s standards, computing system?
The point is that the world was incapable of preventing the Bubonic Plague, and of preventing the Spanish Flu of 1917, but was able to ‘react to’ and limit the effects of the Hong Kong Flu and all the subsequent ones (while not curing Ebola, limiting its spread)– until now – to limit the effects thanks to inoculations. Even those are hit or miss, however, as scientists try to predict which strain will be the prevalent one each year. In 2020, they missed but still lessened the effects, and may even safe lives from COVID-19 – one can hope, that’s all we have but remember the phrase: “there are no atheists in foxholes.”
Lastly, as a Rotarian, TB became aware of the extent to which Bill Gates. whose father was a Rotarian, has teamed up to eradicate Polio nearly worldwide. TB can’t help but think of the damage that has been done by people – especially American politicians and evangelicals who have shunned science, many for their own benefit, to try to make vaccinations voluntary throughout the U.S., a pity. Today, even as the price of oil implodes, President Trump is relaxing emissions requirements for automakers? What kind of wisdom is that? Beats the hell out of TB, as well as why 40% of so of American voters still approve him. (NOTE: that is the last political comment TB will be making in this series except as it pertains to markets and the overall economy.
Tomorrow: thoughts on the markets (finally!)
Thanks for reading and God Bless Dr. Fauci,