This week in charts
A rough year for the Bloomberg Global Aggregate Index
How gas rationing at Germany’s BASF plant could plunge Europe into crisis
Should the German state be forced to ration gas for industrial use this winter, [German chemical firm] BASF says it can reduce its consumption to a degree, by throttling individual plants or swapping gas for fuel oil at some production stages. It has already lowered its on-site production of ammonia, instead shipping in the chemical from abroad.
However, because the 125 production plants at Ludwigshafen are an interconnected value chain, there is a point where a drop of gas supplies would lead to a site-wide shutdown.
BASF-produced chemicals are used to make anything from toothpaste to vitamins, from building insulation to nappies. It is one of the world’s biggest manufacturers of ibuprofen for painkillers, and its single largest customer industry is the automobile industry, meaning sputtering pipelines in Ludwigshafen would directly affect carmaking regions such as Emilia-Romagna, Catalunya or Hauts-de-France.
One of the few remaining end products still produced at Ludwigshafen is AdBlue, a liquid used to reduce air pollution from diesel engines. It is a legal requirement for heavy goods vehicles, so a shortage could bring lorries to a standstill across Europe.
There is no world in which even the most talented comedians are consistently good.
Many things are governed by that truth.
Every investor knows, or should know, the truth about money management: More than 80% of professional investors underperform their benchmark (more depending on how you calculate it). Those stats are used in an often cynical way to show how the industry is broken, crowded, and ineffective.
The thing to keep in mind is that in any endeavor that has the potential to deliver big rewards, the best you can do is put the odds of success in your favor, which means recognizing that if you make 100 attempts at something, 99 of them might be failures but one might be an enormous win.
Comedy works like that, too.
The Chris Rock I see on Netflix is flawless. The Chris Rock that performs in dozens of small clubs each year is just OK. No one is so good at comedy that every joke they write is funny. So every big comedian tests their material in small clubs before using it in big venues. Rock explained:
When I start a tour, it’s not like I start out in arenas. Before this last tour I performed in this place in New Brunswick called the Stress Factory. I did about 40 or 50 shows getting ready for the tour.
The World’s Hottest Housing Markets Are Facing a Painful Reset
“We will observe a globally synchronized housing market downturn in 2023 and 2024,” said Hideaki Hirata of Hosei University, a former Bank of Japan economist who co-authored an International Monetary Fund paper on global house prices. He warns the full impact of this year’s aggressive rate hikes will take time to play out for households.
“Sellers often overlook signs of shrinking demand,” he said.
How exposed borrowers are to rising rates varies notably by country. In the US, for instance, most buyers rely on fixed-rate home loans for as long as 30 years. Adjustable-rate mortgages represented, on average, about 7% of conventional loans in the past five years. By contrast, other nations commonly have loans fixed for as little as a year, or variable-rate mortgages that move closely in line with official interest rates.
Australia, Spain, the UK and Canada had the highest concentration of variable-rate loans as a share of new originations in 2020, according to a May report from Fitch Ratings.
Focus and Finding Your Favorite Problems
“The greatest entrepreneurs had one idea. They built everything around that one idea. There might be things that spawn off of that idea later on. There are other businesses that can grow out of that, other business lines, other products. But fundamentally, they start with an idea.”
“Take a simple idea and take it seriously.” Charlie Munger
First, to get to financial security, let alone wealth, one needs at least a basic understanding of the rules of game, of the economic machine that rules our world. Investors (and entrepreneurs) are nothing if not dedicated students of that game and its repeating patterns and ideas. Learning their frameworks and methods can be immensely valuable.
Second, I personally don’t aspire to be the next Warren Buffett. But I view investing as a metaphor for life. Great investors tend to be students of the past, strive to see the present clearly, and have to place bets on an uncertain future. Great investing is also all about temperament, learning, and self awareness. I think studying their stories and mindsets is very valuable when we design our operating philosophy for life.
This week's fun finds
Japan launches campaign urging young people to drink more booze
The Japanese government wants the nation’s youth to get drunk for their country.
Officials have launched a campaign to lure more young people into buying booze so the debt-ridden country can reap tax revenue from liquor sales, according to reports.
The campaign comes as tax revenue from alcohol sales in Japan has dried out in recent years — potentially caused by an aging population and shifting tastes among young people.
The Trait That ‘Super Friends’ Have in Common
So what is the distinguishing quality of super friends? It’s secure attachment.
Attachment is the “gut feeling” we project onto ambiguity in our interactions. It’s driven not by a cool assessment of events but by the collapsing of time, the superimposition of the past onto the present. Understanding our attachment style is invaluable, not so we can mentally flog ourselves for biased interpretations but so we can gain more control over our social worlds. When we recognize how we contribute to our own relationship problems, we can try to change course—toward greater security and stronger friendships.
According to attachment theory, there are three major attachment styles: secure, anxious, and avoidant. (A fourth—disorganized attachment—is a mix of anxious and avoidant, but it’s under-researched in adults.) Secure people assume that they are worthy of love, and that others can be trusted to give it to them. People who are anxiously attached assume that others will abandon them—so they cling, or try too hard to accommodate others, or plunge into intimacy too rapidly. Avoidantly attached people are similarly afraid of abandonment; instead of clinging, though, they keep others at a distance. Attachment is a spectrum, and it can change over time; it’s common, for instance, to exhibit more insecure attachment when stressed. But we each have a primary attachment style we demonstrate most often.
We develop our attachment styles based in part on our early relationships with our caregivers. If our caregivers were warm and validating, we become secure. If they were unresponsive or overprotective, then we develop insecure attachment, wherein we believe that others are bound to desert or harm us. To protect against the mistreatment we expect, we act anxiously or avoidantly (or both). But attachment isn’t all our parents’ fault. Although early experiences with caregivers establish expectations about how we’ll be treated, these expectations likely evolve in other relationships. And they shape those relationships in turn.
How Do You Make the Perfect Toy?
Kids get older, and fads come and go. But some toys persist, almost stubbornly—artifacts passing from one generation to the next. In the toy business, these products are considered “classics.” It’s an amorphous category filled with all sorts of games and toys that have just a few things in common: namely, they are survivors in an industry where trends rule all. The Rubik’s Cube is, in many ways, the perfect example of a classic toy. More than 450 million are estimated to have been sold since 1978, with up to tens of millions of units still moving in a year. Etch A Sketch (180 million sold since 1960), Lego, Potato Head, Barbie, and, of course, Play-Doh are classics too. These toys are instantly recognizable but rarely advertised. They’re often low tech or analog. In fact, in a world full of screens, their tactility is increasingly part of the draw. Often, classic toys encourage what academics say is high-quality play, like problem solving or imaginative thinking. And, as some experts have found, such toys are highly nostalgic—conjuring warm, fuzzy memories in the parents who do the buying. This is how toys turn into tradition.
Most toys burn hot, bright, and fast, making Paw Patrol’s nine-year reign something of an anomaly. But, eventually, even Paw Patrol will fade. So why is it that some toys don’t? Many companies are trying to figure out the answer to this question, because as great as it is to invent the must-have toy of the season, it’s even better to create one that kids will be playing with 100 years from now.
