TriLake Partners at the Movies

The viewpoint May 2019

TriLake Partners at the Movies

We tried to have a fun movie night this summer but we couldn’t agree on which movie to watch. For a small office, we are quite multi-cultural and our cinematic tastes vary widely. To settle the argument, we decided to have a Netflix party in Lucie’s house. The only problem was we had way too much alcohol and everyone was fighting for the remote so our memories of Movie Night are a bit flawed and heavily influenced by the CIO’s incessant droning about markets and geopolitical risk. With all that channel-flipping, here’s my recollection of the movies we watched:

The opening scene from “The Godfather of Omaha”:

Bonasera the undertaker: I believe in America. America has made my fortune. But with the stock market reaching all-time highs in a record-length recovery, I can no longer find any investment with a good margin of safety. I weep for the future. Why do I weep? When my wife and I arrived in America, there were over 7000 listed companies on the stock exchanges. Today there are half of that. Every industry is now dominated by an oligopoly. Then I said to my wife, “For advice, we must go to the Don, Warren Buffett.”
Warren Buffett: The most important thing is trying to find a business with a wide and long-lasting moat around it. So we look for economic castles protected by unbreachable moats and an honest lord in charge of the economic castle.
Bonasera: Moats. You mean competitive advantage? Pricing power? Oligopolies!
Buffett: Nothing wrong with monopolies, duopolies, whatever. Railroads, utilities, Visa, Mastercard, Apple, love them. Now if people ate only ketchup, our Kraft Heinz position would be golden.
Bonasera: But isn’t severe industry concentration ultimately bad for the economy? Practically every sector is now dominated by four or less players. These companies can dictate prices, squeeze suppliers, keep wages down. They buy out all the smaller companies and snuff out competition. Many promising startups don’t even make it to IPO because they get snapped up by the big boys. In a few years, there will only be a thousand listed companies left.
Buffett: Exactly. We will hold all of them. I too believe in America. And if America believes in unbridled capitalism, good for me. I’ve never pretended to be anything but a capitalist and capitalists don’t like competition.
Bonasera: But competition is good for the economy.
Buffett: “The economy” is not our shareholder. And neither are you. When did you ever buy my stock? What have I ever done to make you treat me so disrespectfully?

Bonasera: Be my holding company? Godfather? (kisses Buffett’s hand)
Buffett: Good. Some day—and that day may never come—I’ll look at the funeral home business and give you an offer you can’t refuse.

A scene from “Jolly Goodfellas”

Boris Johnson: I can get a no-deal Brexit through the Commons. I think that MPs on both sides of the House also understand that they will face mortal retribution from the electorate unless we get on and do it.
Philip Hammond: Really funny. You’re really funny.
Boris: Waddaya mean I’m funny?
Philip: It’s funny, you know, the… Commons agreeing with no-deal. And that mortal retribution stuff. It’s funny. You’re a funny guy.
Boris: Waddaya mean? You mean the way I talk? What? I mean, what’s funny about it?
Sir Nicholas Soames: Boris, no, you got it all wrong.
Boris: Whoa, whoa, Churchill’s grandson! He’s a big boy. He knows what he said. What’d you say? I’m funny, how? I mean funny like I’m a clown? I amuse you? I make you laugh? I’m here to f***in’ amuse you? Waddaya mean “funny”? Funny how? How am I funny?
Philip: I don’t know, just… you know, you haven’t won any vote since you got the prime ministership, you know?

Boris: No, I don’t know. You said it. How do I know? You said I’m funny. How the f*** am I funny? What the f*** is so funny about me? Tell me. Tell me what’s funny.
Philip: Alright. Your hair.
Boris: Give me that whip! (starts whipping all the Tories around him)
Tories (cowering from the whipping): Mr. Speaker! Mr. Speaker!
John Bercow, Speaker of the House of Commons: If I have been remotely ambiguous so far, let me make myself crystal-clear: The only form of Brexit that we have—whenever that might be—will be a Brexit that the House of Commons has explicitly endorsed.
Boris runs at the Speaker with the whip. The whole Parliament erupts in a whip fight.

A scene from “The Russian Empire Strikes Back”

Darth Vader: There is no escape! Don’t make me destroy you. Join me, and I will complete your second term. With our combined strength, we can end this destructive globalisation and bring order to the galaxy.
Trump: I’ll never join you!
Vader: If only you knew the power of the Dark Side. Obama-Wan never told you what happened to your father.
Trump: He told me enough! He told me you killed him!
Vader: No, I am your father.
Trump: No. No! That’s not true! That’s impossible!
Vader: Search your feelings; you know it to be true!
Trump: NOOOOOOO! NOOOOOOOO!!!

Kim Jong-un (coming out of the darkness): No. I’m your father. Come to daddy.
Mohamed Bin Salman: I’m your prison daddy.
Xi Jin-ping: Who’s your daddy now?
Vader removes his helmet to reveal that he’s Vladimir Putin.
Trump: Papa, I’m coming home!

A scene from “The Three Monetary Amigos”:

The townspeople are gathered to say goodbye to the Three Amigos.
Little Boy (Pablo): I’m going to miss you, Mr. Draghi.
Mario Draghi: I’m-a gonna miss you too, Pablo. Here, I want you to have my watch.
Pablo: I want to go with you.
Draghi: No, Pablo, there’s still much to be done here. Your village needs you. And your family needs you. We are men without homes. We were meant to wander. Our reward is that inflation has been restored.
Haruhiko Kuroda: And remember: Wherever there is deflation, you will find us.
Mark Carney: Wherever there is suffering, we’ll be there. We will ease your suffering. Quantitatively.
Draghi: Wherever employment is threatened, you will find…
Old Man: Hold everything! Inflation hasn’t been restored. Manufacturing PMIs are still down. The housing sector is soft. And the yield curve! It’s inverting!!! (Townspeople scream in terror.)
Carney: The yield curve has inverted, eh?
Old Man: Well, not right now… but it did… for a little while back there… and it’ll happen again!
Kuroda: Unemployment?
Old Man: It’s okay. Record-low in several countries.
Draghi: Consumer confidence? Stock markets?
Old Man: Consumers in the major economies are holding their own, except maybe in the UK and Japan. Stock markets are at record highs in many countries.
Carney: Ten-year bond yields? Commodity prices? Argentina contagion?
Old Man: Negative or scraping the bottom. No contagious outbreak.
Kuroda: So what’s the problem?

Old Man: The trade war! Inverted yield curve! The trade war! Brexit! The war on trade! We’re in serious pain!!!
Draghi: You sound like an opioid addict. Fine, take this prescription to the pharmacy: 25 bps rate cut now and another 25bps before every meal. Then let’s buy some more bonds—
Kuroda: And equity ETFs.
Draghi: Right. Negative rates are necessary instruments of monetary policy. It has created a lot of positive effects. How do we now speed up these effects so that interest rates can go up? The answer is fiscal policy.
Carney: Governments must step up!
Kuroda: Lower for longer!
Carney: So as I was saying: Wherever employment is threatened, wherever asset prices show the slightest sign of weakness, wherever you have dysfunctional governments, you will find The Three Amigos! Let’s ride!

The final scene of “Donald and Jerome”

The baby blue ‘66 Thunderbird is surrounded by law enforcement vehicles near the cliff’s edge.
Trump: Okay then, let’s not get caught. Let’s keep going.
Powell: What do you mean? I’m innocent! I just happened to hitch a ride with you back there.
Trump: You wanted to hitch a ride on my coattails, Jay. It was your choice to take the chairmanship of the Fed.
Powell: Only because we were all afraid you were going to nominate Stephen Moore or Herman Cain.
Trump: I hire only the best. But now I might as well just drive this car over that cliff. Look at that posse behind me—all the lawyers, the media, the congressmen, the Southern District of New York, the porn stars—no, no, don’t look! Pretend we’re just talking.
Powell: We’re not just talking, Mr. President. You’re seriously contemplating suicide by car. With me in the car!
Trump: That’s right. If only you’d done the right thing and given me that 100-basis-point rate cut I asked you to do. I mean, between you and me, who’s the stable genius? So we’ll see what happens…
Powell: I know exactly what happens: We die in a fiery ball at the bottom of the canyon!
The Thunderbird lurches toward the cliff as Donald steps hard on the accelerator but Jay reaches over with his foot to step on the brake, slowing their car. The car slowly inches forward in a cloud of exhaust and burnt rubber as both gas and brake pedals are pushed to the limit. From the line of pursuers behind them, former NY Fed President Bill Dudley walks out to the passenger side of the slowly moving car.
Bill Dudley: Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election. There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020. (Source: Bloomberg, 27 August 2019)
Powell: You’re right, Bill. Get me out of here. (Jay grabs Bill’s hand, steps off the brake and leaps out of the convertible.)
Trump: No-collusion-no-obstruction! I win! (as the Thunderbird hurtles off the cliff)

Thanks for a fun Movie Night, TLP. I still think we should have just watched Avengers: Infinity Trade War.

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