January 20, 2024

As I sit here watching President Trump's inauguration, there is a mix of hope and grievance. We knew the grievance part was par for the course, and no matter how you feel about Trump, a guy his age isn't changing. But the hope part, I have to say, is nice, and it got me thinking about the immediate winners and losers, at least in this first year. 

That thought then led me to the sectors that will likely benefit - again, short-term thinking here - financially. From there, one advances to the companies and stocks that could likely pop, and that rabbit hole is a big one. 

Investing in art, similar to real estate, has always been an attractive investment alternative. I recently wrote about a shifting dynamic in the art market. In summary, big pieces (at public auction sales) are selling less frequently while overall volume is up. 

Being from Southern California with family directly in the line of the terrible fires, I then thought about the tens of thousands of affected people. One guy on the news spoke of his vast art collection and the charred remains of not only a hobby and passion but an investment as well. Like real estate, art is tangible, all the NFT talk aside. It also appreciates, in general, quite well. But, unlike a mutual fund, you need to store it somewhere. You immediately run the risk of all the normal risks one takes with anything valuable that is physical in nature. 

Folks will continue purchasing art, and I am happy to see younger generations are engaged. But I do hope in California we can flesh out how we assess risk in a more rational manner where the government is not overly involved. Onerous regulations require new homes in LA to be fire-resistant but a vast majority of homes aren't new. Regulations make building extraordinarly difficult so the housing stock is jam-packed with homes that pre-date the modern building code. 

They're also very flammable.

Dense urban development could be more fireproof but LA is overwhelmingly zoned for single-family homes. A sprawl ensues, pushing homes into the foothills and upon flammable undergrowth. Environmental objections delay controlled burns so clearning or thinning flammable vegetation isn't completed at the rate it should be. 

Many insurance carriers bailed from CA as there was too much market disruption from state actors. 

In 1988 Californians voted to give an elected insurance commissioner the power to stop insurance firms from raising prices. Instead of being able to assess risk and adjust premiums in real-time, providers were forced to use historical wildfire data. Reform finally arrived to allow them to use model-based estimates of risk on ... wait for it ... January 2nd. 

The fires hit January 7th.

A high number of folks were not only uninsured, but they also lost a considerable amount of art.

Finally, that Washington / Detroit game was something else. As most avid and even non-avid NFL fans this year expected was Detroit in the Super Bowl. Even if that was a stretch, it wasn't losing to a rookie QB for a team predicted to finish in the middle of their division. You get the feeling that this was Detroit's year, and those certain years don't come around often. 

On the flip side, we're witnessing a great one in the making in Jayden Daniels.