Investment Advice from Seth Klarman and Cody Lundin

The Atlantic's Jeffrey Goldberg takes a break from the Israel beat to write an article on investing, "Why I Fired My Broker". Nothing earth-shattering here, but Goldberg takes advantage of the great perk of an established journalist and meets with George Soros's son Robert, Bill Ackman, Seth Klarman, and the survivalist Cody Lundin in the process of writing that article. Goldberg ends up being most impressed with Klarman and Lundin. Of Lundin, Goldberg writes,

Lundin himself eats mice and rats he traps at his off-the-grid passive-solar house in the wilderness, because “why waste free protein?”

Lundin is a freak [...] But in the event that the economy crumbles, and civilization with it, I would appoint him my financial adviser. He is my favorite survivalist, the author of a book on getting by in the wilderness and another on urban preparedness, and a teacher of primitive-living skills.

Goldberg writes that Lundin doesn't wish for disaster:

He says he enjoys electricity and indoor plumbing. He tends to think, though, that civilization is a thin film, and that in times of economic distress, it’s smart to be prepared for the day when Safeway runs out of milk. “This isn’t something I hope for. But what if the illusion does really crumble, and we have to move as a society to something else?”

Goldberg goes from interviewing Lundin in Prescott, Arizona, to having lunch with Seth Klarman in Boston:

When I told Seth Klarman, one of the country’s leading value investors, about my visit with Cody Lundin, he said, “It’s always smart to prepare for disaster. In investing, that means holding disaster insurance. In your personal life, it makes sense to have inexpensive disaster protection, so come what may, you’re ready for any eventuality. I like to store some extra bottled water in the basement, but my wife thinks it’s too much clutter. I told her I’d share my water with her anyway.”

Klarman goes on to advise against the use of leverage, argue that the average investor stands little chance competing with professionals such as himself, note that the average investor really can't trust anyone with his money, and offer a familiar test of temperament to decide if one is an investor. An entertaining read, if nothing else.

The image above, of Cody Lundin, comes from yowusa.com

Gaza versus Somalia

On his Atlantic blog, Jeffrey Goldberg notes a similarity between the Israeli operation in Gaza and the American one, years ago, in Somalia ("Does 'Black Hawk Down' Portray an American War Crime"):

At least nine hundred people, maybe half of them civilians, have been killed in Gaza so far, the overwhelming majority presumably killed by Israel

[...]

This number, nine hundred, is large, and it brought to mind another conflict between a Western army and a Muslim insurgency, the one portrayed in the book and movie "Black Hawk Down." Roughly one thousand Somalis were killed by American forces over the twenty hours or so of the First Battle of Mogadishu (eighteen American soldiers, of course, were also killed).

I couldn't get an accurate read on how many of those Somalis were civilians, so I called my colleague, Mark Bowden, who wrote the book ["Black Hawk Down"¹, ²]. He said that eighty percent of the Somali deaths were of civilians.

Goldberg goes on to quote Bowden directly. Here's an excerpt of Bowden on the nature of the sort of asymmetric warfare conducted in Somalia in the early 1990s and in Gaza now:

"If you feel the need to go to war against an enemy that is not as powerful as you are, one of the tactics of the weaker party is to hide among civilians, and use the global media to advertise the horror of the onslaught. People on the receiving end of the bombs greatly exaggerate the casualties and get photographers to take the most gruesome of pictures, and at the same time, the people in charge of the stronger power try to minimize the number of casualties. If you live in a democracy, then public opinion really matters, and reports of dead children swells the criticism of the war. If you live in a dictatorship, then you don't care what the people think."

[...]

"The parallel with Mogadishu is that gunmen in that battle hid behind walls of civilians and were aware of the restraint of the (Army) Rangers. These gunmen literally shot over the heads of civilians, or between their legs. They used women and children for this. It's mind-boggling. Some of the Rangers shot civilians, some of them inadvertently and some of them advertently. They made the choice to shoot at crowds. When a ten-year-old is running at your vehicle with an AK-47, do you shoot the kid? Yes, you shoot the kid. You have to survive. When push comes to shove, faced with the horrible dilemma with a gunman facing you, yes, you shoot. It's not just a choice about your own life. If you don't shoot, you're saying that your mission isn't important, and the lives of your fellow soldiers aren't important."

One might point out that the U.S. involvement in Somalia started out as a humanitarian one, but, as Bowden noted in his book, the mission evolved into a war against one of Somalia's main clans.


¹Mark Bowden's book "Blackhawk Down" was masterly. He gathered information from essentially every available source (e.g., transcripts of U.S. military radio traffic, interviews with local Somalis, etc.) and reconstructed the battle, the events leading up to it, its aftermath. Bowden also placed the events in their larger context, all the while making "Blackhawk Down" a page-turner. He's a first rate journalist.

²Ridley Scott's 2001 movie adapted from Bowden's book, "Blackhawk Down", featured a number of actors who went on to become much more prominent over the next several years: Ewan McGregor, Josh Hartnett, Eric Bana, Jeremy Piven, Jason Isaacs, and Orlando Bloom.

Sarah Palin, Todd Palin, and the benefits of Increasing Domestic Energy Production

Alaska Governor Sarah Palin, John McCain's surprise VP pick, is in at least one sense a refreshing change from the usual sort of politician we've seen on a national ticket: someone who has done some blue collar work in her life, when she worked in commercial fishing. Her husband has gotten his hands dirty as well, both as a fisherman and while working in the oil fields for BP (NYSE: BP) on Alaska's North Slope¹. According to this article in the Anchorage Daily News from last year, "Todd Palin Unique Among Nation's 5 First Husbands" (hat tip to Atlantic blogger Jeffrey Goldberg),

Until recently, he earned hourly wages as a production operator in a BP-run facility that separates oil from gas and water. Palin was making between $100,000 and $120,000 a year before he went on leave in December to make more time for his family and avoid potential conflicts of interest. London-based BP is heavily involved in the gas pipeline negotiations with his wife's administration.

That's good money for honest work, and, as I've pointed out in comments on some political blogs, it's another benefit of increasing domestic energy production: more high-paying blue collar jobs for Americans². To his credit, Mr. Palin has encouraged young Alaskans to consider the same line of work. From the article,

Like other first spouses around the country, Palin has been asked to champion an array of causes or institutions since his wife took office in December.

His favorite is steering young Alaskans toward stable jobs in the oil and gas industry. It's a singular choice among his counterparts, whose pet issues include schools, public health, domestic violence, poverty or the arts.

That's the sort of pragmatic career advice you don't hear much of from many politicians, particularly those on the left, many of whom seem to consider access to a college education to be a panacea for economic advancement. In reality, a lot of Americans don't have the interest or aptitude for college (hence the high dropout rates), or the sorts of jobs a college degree often leads to, and there are plenty of Americans with college degrees sitting in cubicles making a third of what Palin was making for BP, or serving lattes for $8 per hour.

Regarding the politics of the Palin pick, a flurry of comments on the Atlantic blogs argue that this is an attempt by McCain to woo women voters. I doubt that. Most single women vote for Democrats, and most married women vote for Republicans; I don't see this pick changing those trends much. If anything, McCain's selection of Sarah Palin is an appeal to the sort of Reagan Democrats that Barack Obama had difficulty winning over in states like Pennsylvania. While Republican politicians generally feel compelled to be seen hunting or clearing brush or otherwise acting as if they enjoy outdoorsy activities, Sarah Palin seems to be the real deal on that score, having grown up hunting moose with her father. She and her husband ought to be able to connect more easily with rural voters than, say, Mitt Romney. Louisiana's impressive young governor, Bobby Jindal, might have contributed more in policy terms, but Palin probably gives McCain a better shot of winning in November.

¹A royalty trust that pays out distributions based on production from BP's Prudhoe Bay field on the north slope is a holding of mine I've mentioned here before, BP Prudhoe Bay Royalty Trust (NYSE: BPT)

²There are other benefits, of course. Every barrel of foreign oil that we can replace with a barrel of domestic oil helps reduce our trade deficit and our fiscal deficit as well (by the increased tax and royalty revenues domestic energy production generates). No, increasing domestic energy production will not make us energy independent -- we will still need to import oil from Canada, Saudi Arabia, etc. But the more energy we can produce here, the better off we will be.