The Group Rooting for an Elon Musk-Twitter Trial: Charles Dickens Fans
The litigation has been playing out in a type of court that Dickens made a villain in ‘Bleak House’; ‘I wasn’t aware of there being one in America, I must say’
The litigation has been playing out in a type of court that Dickens made a villain in ‘Bleak House’; ‘I wasn’t aware of there being one in America, I must say’
What in the Dickens is happening in Twitter, Inc. v. Musk, et al.?
If the parties in one of the country’s most closely watched legal dramas fail to reach an agreement, a trial will follow in November—a prospect that is particularly fascinating to a very remote group: fans of Charles Dickens.
The fight over Elon Musk’s disputed deal to buy Twitter has been playing out in Delaware’s Court of Chancery, a judicial arm that every Dickens fanatic knows as the villain in the British author’s 1,036-page saga “Bleak House.” In the 1852 novel, an inheritance fight is so prolonged in a slow, expensive and corrupt chancery court that the only ones who win are the lawyers.
“Keep out of Chancery,” Dickens writes. “It’s being ground to bits in a slow mill; it’s being roasted at a slow fire; it’s being stung to death by single bees; it’s being drowned by drops; it’s going mad by grains.”
After months of negotiations and litigation between the world’s richest man and the social-media company he sought to buy in April, Mr. Musk said in a Thursday court filing that he was working to finance a deal and asked to delay the trial scheduled to start on Oct. 17. Though Twitter opposed his motion, citing the defendants’ “refusal to accept their contractual obligations,” the judge granted a stay of the trial, allowing both parties until Oct. 28 to complete a deal.
Mr. Musk may indeed keep out of chancery, if his recent move to reinstate his $44 billion offer to purchase Twitter succeeds. Today, chancery courts are largely used to settle disputes over contracts, trusts, estates and other noncriminal matters.
The latest twist in the Twitter-Musk case feels to some Dickens enthusiasts like one of the author’s classic cliffhangers.
“This is absolutely typical of a Dickensian plot,” said Mark Charles Dickens, great-great grandson of Charles Dickens, family genealogist and former board chair at the Charles Dickens Museum in London. “Everyone hopes that this is edging closer to resolution, but that can often be a false dawn.”
Some admirers of the Victorian novelist are quietly rooting against an out-of-court settlement. They are yearning for the nostalgic literary charms of an actual chancery-court saga. It barely matters to them that Delaware’s modern chamber, which has already acted swiftly in the Twitter-Musk case, has little in common with the “Bleak House” chancery court beyond the name.
The legal fight is a boon for the bookish on social media. “This is the Court of Chancery: Suffer any wrong that can be done you rather than come here!” Carleton College President Alison Byerly tweeted after reading about the case, citing lines from that novel’s first chapter.
“It struck me as funny that this avatar of modern technology was being linked with this very old-fashioned notion of the British legal system,” Ms. Byerly said later. “Elon Musk very much positions himself as being about the leading edge of the future, and to see this reaching back into the past, it was so completely incongruous.”
Delaware’s Court of Chancery declined to comment. Twitter and Mr. Musk didn’t respond to requests for comment.
Most chancery courts disappeared in England and the U.S. by the late 19th-century, their duties merging into the broader legal system. But a handful of U.S. states never got around to dissolving these courts. As a flood of businesses began incorporating in Delaware in the early 1900s, the state needed a judicial system to resolve corporate disputes and chose its chancery court to handle the workload. Hence, the Twitter-Musk litigation, playing out against the backdrop of the chancery court in 2022.
“I wasn’t aware of there being one in America, I must say,” Mr. Dickens, the great-great grandson, said of the Delaware chancery. “It would be disappointing if it is settled out of court and we are denied witnessing a little history being made.”
While Delaware’s court of chancery still handles issues such as guardianships, it is best known for what legal experts call speed and acumen in rulings relating to business equity. In the 1950s, one of the court’s pro-integration rulings became part of the larger Brown v. Board of Education decision outlawing segregation in public schools.
For a literary audience, Twitter v. Musk sounds too Dickensian to resist.
“There is a person whose name is a scent fighting a company whose name reminds one of birds—Dickens would just love that,” said Stephen Gillers, law professor emeritus at New York University.
Dominic Gerrard has read “Bleak House” twice, watched the 15-part BBC miniseries and listened to the 43-hour audiobook. The host of the podcast “Charles Dickens: A Brain on Fire” couldn’t help making a Dickens connection to the trial.
“The term ‘chancery’ makes me think of lives being ruined and wasted,” he said. “It’s pure delusion and an addiction.” Mr. Gerrard sees the author’s dim view of the chancery court in the bird names chosen by Miss Flite in “Bleak House.” “The little crazy old lady,” in the book’s words, gives many of her caged birds dreary names such as “Waste,” “Madness” and “Ruin.”
As a young man, Dickens worked briefly as a law clerk and then as a chancery-court reporter. He dealt with the chancery court in real life as well, when he filed a copyright suit involving an imitation of his newly released “A Christmas Carol.” Dickens won the case, but lost money after court costs.
In his books, Dickens reliably lampoons the lawyers. Mr. Vholes in “Bleak House” conjures an image of an actual vole, a small rodent. In “The Pickwick Papers,” the unethical lawyer Mr. Fogg is described as “an elderly, pimply-faced, vegetable-diet sort of man.” Sampson Brass in “The Old Curiosity Shop” is “an attorney of no very good repute” with a “cringing manner, but a very harsh voice.”
The legal system itself is under fire. Mr. Bumble puts it bluntly in “Oliver Twist.” “The law,” he says, “is an ass.”
Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual
Equities are often seen as expensive after promising start to 2023
A new trading year kicked off just weeks ago. Already it bears little resemblance to the carnage of 2022.
After languishing throughout last year, growth stocks have zoomed higher. Tesla Inc. and Nvidia Corp., for example, have jumped more than 30%. The outlook for bonds is brightening after a historic rout. Even bitcoin has rallied, despite ongoing effects from the collapse of the crypto exchange FTX.
The rebound has been driven by renewed optimism about the global economic outlook. Investors have embraced signs that inflation has peaked in the U.S. and abroad. Many are hoping that next week the Federal Reserve will slow its pace of interest-rate increases yet again. China’s lifting of Covid-19 restrictions pleasantly surprised many traders who have welcomed the move as a sign that more growth is ahead.
Still, risks loom large. Many investors aren’t convinced that the rebound is sustainable. Some are worried about stretched stock valuations, or whether corporate earnings will face more pain down the road. Others are fretting that markets aren’t fully pricing in the possibility of a recession, or what might happen if the Fed continues to fight inflation longer than currently anticipated.
We asked five investors to share how they are positioning for that uncertainty and where they think markets could be headed next. Here is what they said:
Cliff Asness, founder of AQR Capital Management, acknowledges that he wasn’t expecting the run in speculative stocks and digital currencies that has swept markets to kick off 2023.
Bitcoin prices have jumped around 40%. Some of the stocks that are the most heavily bet against on Wall Street are sitting on double-digit gains. Carvana Co. has soared nearly 64%, while MicroStrategy Inc. has surged more than 80%. Cathie Wood‘s ARK Innovation ETF has gained about 29%.
If the past few years have taught Mr. Asness anything, it is to be prepared for such run-ups to last much longer than expected. His lesson from the euphoria regarding risky trades in 2020 and 2021? Don’t count out the chance that the frenzy will return again, he said.
“It could be that there are still these crazy animal spirits out there,” Mr. Asness said.
Still, he said that hasn’t changed his conviction that cheaper stocks in the market, known as value stocks, are bound to keep soaring past their peers. There might be short spurts of outperformance for more-expensive slices of the market, as seen in January. But over the long term, he is sticking to his bet that value stocks will beat growth stocks. He is expecting a volatile, but profitable, stretch for the trade.
“I love the value trade,” Mr. Asness said. “We sing about it to our clients.”
For Richard Benson, co-chief investment officer of Millennium Global Investments Ltd., no single trade was more important last year than the blistering rise of the U.S. dollar.
Once a relatively placid area of markets following the 2008 financial crisis, currencies have found renewed focus from Wall Street and Main Street. Last year the dollar’s unrelenting rise dented multinational companies’ profits, exacerbated inflation for countries that import American goods and repeatedly surprised some traders who believed the greenback couldn’t keep rallying so fast.
The factors that spurred the dollar’s rise are now contributing to its fall. Ebbing inflation and expectations of slower interest-rate increases from the Fed have sent the dollar down 1.7% this year, as measured by the WSJ Dollar Index.
Mr. Benson is betting more pain for the dollar is ahead and sees the greenback weakening between 3% and 5% over the next three to six months.
“When the biggest central bank in the world is on the move, look at everything through their lens and don’t get distracted,” said Mr. Benson of the London-based currency fund manager, regarding the Fed.
This year Mr. Benson expects the dollar’s fall to ripple similarly far and wide across global economies and markets.
“I don’t see many people complaining about a weaker dollar” over the next few months, he said. “If the dollar is falling, that economic setup should also mean that tech stocks should do quite well.”
Mr. Benson said he expects the dollar’s fall to brighten the outlook for some emerging- market assets, and he is betting on China’s offshore yuan as the country’s economy reopens. He sees the euro strengthening versus the dollar if the eurozone’s economy continues to fare better than expected.
Even after the S&P 500 fell 15% from its record high reached in January 2022, U.S. stocks still look expensive, said Rupal Bhansali, chief investment officer of Ariel Investments, who oversees $6.7 billion in assets.
Of course, the market doesn’t appear as frothy as it did for much of 2020 and 2021, but she said she expects a steeper correction in prices ahead.
The broad stock-market gauge recently traded at 17.9 times its projected earnings over the next 12 months, according to FactSet. That is below the high of around 24 hit in late 2020, but above the historical average over the past 20 years of 15.7, FactSet data show.
“The old habit was buy the dip,” Ms. Bhansali said. “The new habit should be sell the rip.”
One reason Ms. Bhansali said the selloff might not be over yet? The market is still underestimating the Fed.
Investors repeatedly mispriced how fast the Fed would move in 2022, wrongly expecting the central bank to ease up on its rate increases. They were caught off guard by Fed Chair Jerome Powell‘s aggressive messages on interest rates. It stoked steep selloffs in the stock market, leading to the most turbulent year since the 2008 financial crisis. Now investors are making the same mistake again, Ms. Bhansali said.
Current stock valuations don’t reflect the big shift coming in central-bank policy, which she thinks will have to be more aggressive than many expect. Though broader measures of inflation have been falling, some slices, such as services inflation, have proved stickier. Ms. Bhansali is positioning for such areas as healthcare, which she thinks would be more insulated from a recession than the rest of the market, to outperform.
“The Fed is determined to win the war since they lost the battle,” Ms. Bhansali said.
Gone are the days when tumbling bond yields left investors with few alternatives to stocks. Finally, bonds are back, according to Niall O’Sullivan of Neuberger Berman, an investment manager overseeing about $427 billion in client assets at the end of 2022.
After a turbulent year for the fixed-income market in 2022, bonds have kicked off the new year on a more promising note. The Bloomberg U.S. Aggregate Bond Index—composed largely of U.S. Treasurys, highly rated corporate bonds and mortgage-backed securities—climbed 3% so far this year on a total return basis through Thursday’s close. That is the index’s best start to a year since it began in 1989, according to Dow Jones Market Data.
Mr. O’Sullivan, the chief investment officer of multi asset strategies for Europe, the Middle East and Africa at Neuberger Berman, said the single biggest conversation he is currently having with clients is how to increase fixed-income exposure.
“Strategically, the facts have changed. When you look at fixed income as an asset class…they’re now all providing yield, and possibly even more importantly, actual cash coupons of a meaningful size,” he said. “That is a very different world to the one we’ve been in for quite a long time.”
Mr. O’Sullivan said it is important to reconsider how much of an advantage stocks now hold over bonds, given what he believes are looming risks for the stock market. He predicts that inflation will be harder to wrangle than investors currently anticipate and that the Fed will hold its peak interest rate steady for longer than is currently expected. Even more worrying, he said, it will be harder for companies to continue passing on price increases to consumers, which means earnings could see bigger hits in the future.
“That is why we are wary on the equity side,” he said.
Among the products that Mr. O’Sullivan said he favours in the fixed-income space are higher-quality and shorter-term bonds. Still, he added, it is important for investors to find portfolio diversity outside bonds this year. For that, he said he views commodities as attractive, specifically metals such as copper, which could continue to benefit from China’s reopening.
Ramona Persaud, a portfolio manager at Fidelity Investments, said she can still identify bargains in a pricey market by looking in less-sanguine places. Find the fear, and find the value, she said.
“When fear really rises, you can buy some very well-run businesses,” she said.
Take Taiwan’s semiconductor companies. Concern over global trade and tensions with China have weighed on the shares of chip makers based on the island. But those fears have led many investors to overlook the competitive advantages those companies hold over rivals, she said.
“That is a good setup,” said Ms. Persaud, who considers herself a conservative value investor and manages more than $20 billion across several U.S. and Canadian funds.
The S&P 500 is trading above fair value, she said, which means “there just isn’t widespread opportunity,” and investors might be underestimating some of the risks that lie in waiting.
“That tells me the market is optimistic,” said Ms. Persaud. “That would be OK if the risks were not exogenous.”
Those challenges, whether rising interest rates and Fed policy or Russia’s war in Ukraine and concern over energy-security concerns in Europe, are complicated, and in many cases, interrelated.
It isn’t all bad news, she said. China ended its zero-Covid restrictions. A milder winter in Europe has blunted the effects of the war in Ukraine on energy prices and helped the continent sidestep recession, and inflation is slowing.
“These are reasons the market is so happy,” she said.
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