OZARK season 3: Law of large numbers

Mar 31, 2020 | Jeremy Goldfarb


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As the options for extra curricular activities have dwindled these past few weeks, my Netflix consumption has jumped......and will continue to I think. Once we shut down for the day, and the kids are tucked in bed, it is nice to escape into a world where we don't have worry about social distancing, or physical distancing, or isolation, or whatever we are calling it now. Anyhow, one of the most watched Netflix series' released season 3 this week (Ozark), and I was waiting for this one. Why am I telling you this?

 

You see, Marty Byrd (I think that is how it is spelled, but feel free to correct me) made a statement in the first episode that got me thinking. He was talking to his "associate" about analyzing footage from the newly opened casino floor. Unable to identify federal agents, cheaters, or scammers in isolation, but over time, he knew that a certain percentage of these "people" would appear. It was a known data fact. The longer and larger the sample size, the more easily identifiable these "people" would become. Again....why am I telling you this?

 

Yesterday, I took a few calls (again), and one theme started to show up.

USA unemployment figures could be as high as 47,000,000 (yikes). Markets jump after Friday's losses (huh??!)

A good question, and a strange occurrence. Nevertheless, in isolation, irrelevant. A daily trading event that runs counter to the day's headlines is not all that uncommon, and as I was alluding to earlier....does not mean a trend. Market behaviour could have been responding to Donald Trump's higher approval rating, or new government stimulus announcements, or Abbot Labs new COVID-19 testing breakthrough. The unemployment headline was just one of many. Of course, it is important, but as investors we care more about trends, be they economic, fundamental, technical or otherwise. A single headline (while not unimportant) does not materially move the needle in one way or another for any length of time. It is a confluence of a number of things, a wave of information cresting into an identifiable direction, that will guide our decisions.

 

The LAW OF LARGE NUMBERS. (Martin Byrd, Ozark)