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GP 20 February 2008: Tipping Points I

First You See It, Then You Don’t.  In “First You See It, Then You Don’t,” Keith Austin has posed for us one version of the modern dilemma.  The world we confront is so complex that we cannot get our arms around it.  Strange anomalies appear in our everyday world that tell us we just don’t know what’s going on.

To further contribute to your uneasiness, we intend to bring you little bulletins in today’s letter of odds and ends that might be worth knowing about for one reason or another.  Do expect in future letters many more “Tipping Points,” a term we have appropriated from Malcolm Gladwell.  Many of these items have appeared on the Global Province, but often they have escaped the readers of these Letters.

Michel Couvreur. We recently have had occasion to open a ‘single, single’ circa 1969 of Michel Couvreur, a malt we first had at a little noticed restaurant in Boston perhaps 15 years ago.  Only gradually did we learn that he hangs his hat in Burgundy and that he has provided some instruction on what makes for the finest.  His thoughts deserve your attention, and his incantation will even give rise to pleasure even in those who have no liking for whiskies.

The Kennedy Blessing.  On January 28, 2008, the Kennedys endorsed Senator Barack Obama for President.  This ceremony surely is the high point of the whole 2008 nominating process—and may become the most remembered moment of the 2008 presidential elections.  None of the news accounts even remotely capture the power of the fanfare at American University: one must watch the video.  This was public theater of the best sort.  It was more than a Last Hurrah for the Kennedys.

Further, it illuminates the critical difference between the Obama and Clinton campaigns.    Mrs. Clinton, who started in life as a Republican, bears an eerie resemblance to Richard Nixon.  Vice President Nixon, as you will remember, did much better than Kennedy on the radio.  But Senator Kennedy simply devastated him on television.  Mrs. Clinton rattles off details that delight Beltway types, but comes across as a wonkette to many Americans, as she rehashes warmed-over plans.

The Checklist.  We know of a chap who awoke in a university hospital in New York to discover he was receiving chemotherapy in both arms due to egregious errors by the staff.  Amongst the fine stable of health writers at The New Yorker (health writing being that magazine’s best feature) is Atul Gawande, an ethically motivated Boston surgeon and a fine medical writer who has a passion for reducing hospital error.  Basically he has discovered that hospitals that implement and police detailed lists for complex medical processes can virtually extinguish medical errors—a huge problem that plagues hospitals. He recently talked about this in “Checklists,” New Yorker, December 10, 2007.  Needless to say, it is commonsense measures like this that have more to do with improving the quality and cost of healthcare than all the prescriptions for health coming from the pols of either party.  We call it ‘reducing the swelling.’  You will find several comments about Dr. Gawande in our Stitch in Time and Letters sections.

Swensen’s Compass.  The superstar of investing for the last few years has been David Swensen, who heads up Yale’s endowment.  He has helped turn Yale into a bank, not unlike Harvard, Princeton, and Stanford—all of which have somewhat lost sight of education and society as they pile up assets.  He has written a long, cumbersome, boring, very useful book called Pioneering Portfolio Management: An Unconventional Approach to Institutional Management, which you do not have to read, that shows how he pulled it off.  And he’s followed up with Unconventional Success: A Fundamental Approach to Personal Investment.  Basically he has pushed Yale out of run-of-the-mill common stocks into ‘alternative’ investments.  And he has brought some discipline to his diversification of assets, which Wall Street types call ‘asset allocation’ in order to make it seem arcane and hard.  Now as the U.S. economy goes into a ditch and runs up magnificent deficits, you will have to do the same.  To cut to the quick, read Geraldine Fabrikant’s “Keep It Simple, Says Yale’s Top Investor,” New York Times, February 17, 2008, p. BU6.  Skipping by his caveats, we can sum up his observations for now: “30 percent domestic stocks, 15 percent foreign stocks, and 5 percent emerging-markets stocks … 20 percent in real estate and 15 percent each in Treasury bonds and Treasury inflation-protected securities.”  Swensen, by the way, is an interesting fellow who has resisted the siren call of Wall Street, accepting the more modest compensation afforded in a university environment.  We can’t imagine he has made much off his books—but who knows.

China’s New Economy. Eric Bethel of Chinavest is out with “The Chinese Government and Its Relevance to Foreign Multinationals,” February 2, 2008.  Chinavest is a merchant bank staffed with both Chinese and Americans, one that has long and deep knowledge of the political climate for business in China.  The conclusions of the report are important for anyone who wants to make a nickel there.  First, as in America, different agencies in Beijing and in the provinces can rule on what a company can and cannot do: the roadblocks to doing business may be many and the sundry agencies involved may be in conflict as to what each will permit.  “The second theme is that China no longer needs capital.”  Thirdly, there’s no clear book of procedures or regulations to follow when doing business in the People’s Republic.  One must patiently get approvals from all the right people.  The report has not yet been posted on the Chinavest website, but we hear it is in the works.  Often in the People’s Republic the old adage applies: Make haste slowly. We track of some of the twists and turns in Chinese business on Two Rivers

Divine Response.  The elegant Alistair Cooke once said: “All prayers are answered but frequently the answers is no.”

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