A children’s story for us investors

I’m wandering the Lake District as the summer holidays come to a close. The 4 year old is obsessed with all things Peter Rabbit by Beatrix Potter while the 7 year old loves “Swallows and Amazons”. Both books are set up here in The Lakes.

And how you ask, is Mallika going to come up with a decent connection between children’s stories and finance? 

The Wonderful Wizard of Oz (the book the movie The Wizard of Oz was based on), was published in 1900 by Frank Baum. It was written as a political allegory condemning the troubling financial markets and monetary policy in the US at the time.

The yellow brick road represented the gold standard. 

Dorothy represented the solid Kansas Midwesterners caught up in the populist tornado of the era.

The Scarecrow were the farmers who mindlessly followed politicians. The Tin Man the industrial workers in factories taken advantage of. The Cowardly Lion the politician William Jennings Bryan who roared from the pulpit but had no bite. 

The lost crew led by Dorothy of Kansas embark on the gold standard (follow the yellow brick road) to the emerald city of Oz - the greenback dollar controlled by Washington politicos. Oz stands for ounce, the measure for gold in those days.

On their way to Oz they encounter the wicked witch of the east - the Wall Street bankers!

On reaching Oz, they find the wizard isn’t all powerful as politicians make themselves out to be. They find just a puffed-up man who doesn’t know much more than they do. 

See, I told you it’s a great investment analogy, 

What would a 2018 version of The Wizard of Oz look like? We should definitely give Donald Trump the role of the wizard, scaring everyone via his big Twitter machine.

The Tin Man could be the programmers and quants who run our investment machines. The starting role of The Wicked Witch of the East would still be retained by Wall Street. Some things never change!

Perhaps the final lesson to us investors from this children’s story is to like Dorothy, stick to finding out own way home without relying on magic and wizardry. 

At the end of the movie, Dorothy is told by Glinda that her magic slippers could have gotten her out of trouble at any point, by just clicking them together. 

“You’ve had the power all along my dear. You’ve just had to learn it for yourself.” - Glinda the good witch of the South