Havens in a Storm

ha•ven hā′vən►

• n. A harbor or anchorage; a port.

• n. A place of refuge or safety; a sanctuary.

Value is always relative, depending on a myriad of factors at that point in time and space.

A bottle of mineral water in a desert. A beautiful home in a country that has just declared war on a neighbour 2 miles from the front porch. You get the idea.

The utility that things provide us usually don't change that much, however the sudden shift in scarcity of that item, or risks associated with that utility can strongly impact valuations.

Why would millions leave the most advanced of civilisations to conquer and settle lands overseas? Is the technology and stability on offer no longer of utility, or had the price (risk) to pay for that advanced lifestyle suddenly become too onerous?

We all love Mr Leonardo DiCaprio, and I hear that his performance in "The Revenant" was awards worthy.

Source: PosterSpy - Igancio RC

According to Wikipedia, the plot (spoiler alert) goes something like this:

Plot

During late 1823, Hugh Glass guides Captain Andrew Henry's trappers through the territory of the present-day Dakotas. While he and his half-Pawnee son, Hawk, are hunting, the company's camp is attacked by an Arikara war party which is seeking to recover its Chief's abducted daughter, Powaqa. Many of the trappers are killed during the fight, while the rest of them escape onto a boat. Guided by Glass, the survivors travel on foot to Fort Kiowa, because he believes that traveling downriver will make them vulnerable. After docking, the crew stashes the pelts near the shore.

While scouting game, Glass is mauled by a grizzly bear and left near death. Trapper John Fitzgerald, who is fearful of another Arikara attack, argues that the group must mercy-kill Glass and keep moving. Henry agrees, but he is unable to pull the trigger; instead, he offers money for someone to stay with Glass and bury him after his death. When the only volunteers are Hawk and the young Jim Bridger, Fitzgerald agrees to stay for money, to recoup his losses from the abandoned pelts.

I assume Mr Glass and his mates were probably not indigenous to the Dakotas, and probably found themselves on the N.American continent due to immigration. I would also assume that he or his forbears did not undertake what was a dangerous journey to cross the Atlantic for pleasure, and he probably did not choose his day job for the excitement factor either.

So why would one leave pre 19th century Europe, the paragon of civilisation at the time? They had the arts, produce from their colonies to enjoy and the best that technology had to offer. Heck, they even had a government to watch over them.

Taken from worldhistory.us:

The 18th century saw the arrival of large numbers of Swedes, Germans, Swiss, Scotch-Irish, Africans and other cultures as they arrived or were brought into the colonies.

Most immigrants arrived from Europe in waves following some episode in Europe, such as a drought or famine, a period persecution against a particular group or an economic recession in Britain. Immigration to the Colonies after 1683 since Europe was at war for almost thirty years, but picked up after 1710 with a wave of Scotch-Irish and German immigrants. Regardless of when they came or where they cam from, almost all immigrants arrived in the colonies in an effort to leave something behind and a hope to better their circumstances in the new American Colonies.

"Better their circumstances."

Mr Glass was living through "Better-ed circumstances" in the Dakotas by fighting bears, natives and traitorous colleagues in freezing temperatures. HOW BAD MUST IT HAVE BEEN IN THE DEVELOPED WORLD? This trailer should help to give much needed context:

If I may, I'd invite you to put the popcorn down for a moment and switch gears with me. The news of the day for the markets was quite sensational and is said to be 'historic': “Biden will seek tax increase on the rich to fund child care and education”.

So President Biden wants to help the poor, by taking more from the rich. We have seen these movies before, and the plot is usually repetitive. It is also a tale that plays more often in social democracies or unstable authoritarian states. The poor outnumber the rich, and as an electorate or collective, the "poor" provide significant power to those at the reins if properly pandered to. The fact that these policies have been shown empirically to be ineffective does not prevent them from being tried again and again. In this case, "The science" is apparently not to be trusted.

There is an old saw that states: "capital flows to where capital is treated best." Human (intellectual) capital has been shown to be fluid. They flow to where they have the best opportunities to flourish, bears and deadly voyages be damned. The question is, are we at the cusp of yet another flowing of capital globally? Do remember that many of the barriers to immigration in the past are now largely lowered. Language, cost and levels of uncertainty are now way lower to an aspiring immigrant.

An anecdote perhaps from Radigan, a former member of the US special forces who has served overseas and who writes beautifully on his blog here: Radigan Carter. Today he tweeted:

My first thoughts:

• It is gut wrenching when good people believe they have to leave their places of birth. Motherlands are supposed to nurture her children and offer a canvas to grow and bear fruit

• A similar dynamic and sentiment has been in play in all western nations, accelerating strongly in recent years.

• Usually only the smartest and most resourceful move (until strife hits then everyone moves), since it is the smart that manage to overcome short term pain for long term gain. The smart are also usually the ones that control capital today, or in the future through their productivity.

• There are currently very few oases globally that offer 'freedom' via low taxation, rule of law and strong private property rights.

See above for a list of countries rank ordered by GDP, taken from Wikipedia. We can assume roughly that most of the world's capital currently resides in these nations.

Besides China and perhaps Australia in the list above, most of the nations listed are having a tough time with the current pandemic. If lockdowns, infringement on civil liberties and heightened taxation continue in these economies, a very possible reaction would be a fleeing of capital, both financial and intellectual. Capital controls can take many forms. From the taxing of capital preservation vehicles through "capital gains taxes" to the erection of the Berlin wall and the Iron Curtain in extremis. People on a whole do not like being more taxed, or more exposed to deadly microbes, and therefore move when able.

This hit the tape a few days ago. Why would this idea be floated? What is the importance of Crypto in this context? You see, when a nation goes through a strong inflationary period, nearly everything rises in nominal terms. As such, everything one owns then becomes subject to a tax, even items that do nothing but protect purchasing power from the ravages of inflation. In the eyes of the taxman, you had a "capital gain". I would assume such a statement would be made to disincentivize market participants from leaving the casino (capital flight).

So back to the title of the post. As the storms continue to brew economically and geopolitically, one wonders where the green pastures of the Dakotas might lie today? I cannot be certain as to where capital will flow in the coming years, but if we were to shortlist jurisdictions that are at least stable, and have proven to be able to handle the pandemic with some form of coherence and competence, possible 'havens' are few and far between.

If one can successfully identify these jurisdictions, one might be able to profit handsomely front running modern day settlers looking to trap for furs in peace. The corollary is also true for "developed" economies that are becoming too burdensome on their Radigans. I will leave you with some interesting tweets as I sip my coffee in a cafe on a rainy afternoon here in Singapore.

Till next time, Jason.

P.s. Luke Gromen @ https://fftt-llc.com/ does a tremendous job of joining many of the important dots. Highly recommend getting exposure to his work, it has helped me form many of my own views.