Les Billets de Monocle

Human stupidity: an illustration

24 April 2024

Meet Lina Khan, the young head of the US antitrust agency - the FTC, appointed by Biden to ensure that our 20's are not a repeat of those a century earlier, when the Rockefellers and consorts gave no chance to any competitor.

At first it seemed like a good idea - we needed to curb the appetites of Amazon, Apple, Google, Microsoft, etc. But how can we believe that this young person - 35 years old - terribly intelligent - from the looks of it she's carrying at least 5kg of books in this unretouched photo - could write the load of rubbish that the FTC has just published to torpedo the Tapestry-Capri deal?


Alright, I've got 4% of Capri in the fund, so this post can't be described as neutral.


But now, despite everything, my arms are falling off. Capri owns the luxury brands Mickael Kors, Versace and Jimmy Choo. Tapestry owns Coach and Kate Spade. So we're in an ultra-strategic sector in terms of society, living standards, defence and biotech: the handbag.

Here is an extract from the FTC text:

‘Indeed, despite the incorporation of the word “luxury”, “accessible luxury” is very different from what the parties and others in the industry call “luxury”, “true luxury”, “high-end” or “European luxury” (hereafter, “true luxury”), such as Chanel, Louis Vuitton, and Hermès, whose handbags sell for thousands of dollars, several times the price of Coach, Kate Spade and Michael Kors, and are made from the finest materials and leathers, often in Europe. These elite brands also claim affluent and wealthy consumers, unlike the millions of middle-class workers and employees who make up a large part of Coach, Kate Spade and Michael Kors' customer base.’

So Lina Khan has mounted her warhorse with a noble objective in mind: to ensure that American women who are not too well off or wealthy can afford their 'accessible luxury' handbag at a reasonable price - still, the handbag in question is worth $300. We thank her from the bottom of our hearts, because coming out of a period when food inflation has just risen 35% in 4 years, it's admirable to fight over the price of an 'affordable luxury' handbag.


Lina Khan was appointed three years ago. She has already tried to block several mergers, so far with little success. I don't think she'll get her way on this one either. And the market seems to have its doubts too, with CAPRI shares down just 4% yesterday at $36.5. If the deal goes through, the share will be worth $57, up 56% on yesterday. And Tapestry has already received the financing for the deal.


Our job as managers is to take risks, based on our reading of the situation. But we must always bear in mind the lessons of Carlo Cipolla, the Italian economist. In 1976, he published a book entitled The Basic Laws of Human Stupidity (the preface to the latest edition is by Nassim Taleb).

Here are Cipolla's rules:

Law 1: Everyone always and inevitably underestimates the number of stupid people in circulation.

Law 2: The probability that a person is stupid is independent of any other characteristic of that person.

Law 3. A stupid person is a person who causes losses to another person or group of people when he or she does not benefit and may even suffer losses.

Law 4: Non-stupid people always underestimate the destructive power of stupid individuals.

Law 5: A stupid person is the most dangerous type of person.

These are often the last rules we forget. For a week now, Mimoza has been sending me articles on the subject of the FTC and the Capri-Tapestry deal. And every time I replied: ‘Mimi... we're talking about handbags here...’.


I'm going to print out Cipolla's laws* and post them on my office wall.

I'm keeping the Capri.


* Nice (French) summary of the book here.


Market and portfolio focus

From 12/04 to 19/04, the fund lost 1.1%, while the CAC 40 rose by 0.1% and the S&P 500 fell by 3.0%. Tidewater (-0.4%), Vipshop (-0.3%) and Galapagos (-0.2%) were the main negative contributors to performance.

This week, we initiated a new line with Ouster, a company specialising in LiDAR technology (1% of the fund). We also strengthened our positions in Pernod Ricard (4%), Capri Holdings (4%) and Concentrix (2%).

In bonds, we opened a new position with Match Group (1%), yielding 6.7%.


I hope you have an excellent week,




This presentation is a promotional document. The content of this document is communicated by and is the property of Monocle Asset Management. Monocle Asset Management is a portfolio management company approved by the Autorité des Marchés Financiers under number GP-20000040 and registered with the ORIAS as an insurance broker under number 10058146. No information contained in this document should be construed as having any contractual value. This document is produced for information purposes only. The prospects mentioned are subject to change and do not constitute a commitment or a guarantee. Access to the products and services presented here may be subject to restrictions for certain persons or countries. Tax treatment depends on individual circumstances. The fund mentioned in this document (Monocle Fund SICAV) is authorized for marketing in France and possibly in other countries where the law permits. Before making any investment, it is advisable to check whether the investor is legally entitled to subscribe to the fund. The risks, costs and recommended investment period of the funds presented are described in the KIDD (key investor information documents) and the prospectus, available free of charge from Monocle Asset Management and on the website. The KIDD must be given to the subscribers before the subscription. Past performances are not a reliable indicator of future performances. Monocle Asset Management cannot be held responsible for any decision taken or not taken on the basis of information contained in this document, nor for the use that could be made by a third party. The investor may lose all or part of the amount of capital invested, as the funds are not capital guaranteed.

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