From the Rolling Stone article by Sean Penn: “He is interested in the movie business and how it works. He’s unimpressed with its financial yield. The P&L high side doesn’t add up to the downside risk for him. He suggests to us that we consider switching our career paths to the oil business. He says he would aspire to the energy sector, but that his funds, being illicit, restrict his investment opportunities.”
This is fascinating for two reasons.
- It jibes with Alejandro Hope’s hypothesis that cartels pile up lot of their money in cash. It also jibes with my hypothesis that high costs mean that they overinvest in criminal activities: on the margin, they will accept a negative return from violent enterprises as long as the negative return is less than the cost of laundering money.
- Shorty clearly knows very little about the energy business (in blue, versus the overal S&P in red):
The energy business isn’t quite as profitable as Shorty Guzmán thinks it is. Nor are movies as bad. Starting in 2012 the S&P added a Movies & Entertainment subindex (in yellow below, compared to blue for energy and red for the overall S&P 500). When you do the comparison ...
... movies look pretty good!
Moral: don’t take investment advice from a capo.