By Charles Wyndham.

I am feeling a bit miserable having just finished the third instalment of Stig Larsson’s trilogy ‘Millenium’, normally it would be less a  case of  angst and merely one of frustration on my part as I waited for whatever he chose to write next, but unfortunately he is most inconsiderately dead.

My torpor was however slightly relieved by reading John Kay in The Financial Times about ‘Tail Gaiting’, normally used to describe those that like to drive glued to the bumper of the car in front at high speed; but, in this context Kay uses it in a financial sense, referring to “a distribution of returns that produces frequent small profits punctuated by occasional very large losses.”

This distribution Kay refers to as the Taleb Distribution after the author of ‘Black Swan’ that I have so often rabbited on about before.

It is this ‘distribution’, which his article of 19th January points out, was a central cause for much of the recent financial melt down.

What was deemed the impossible happened and down everything went.

Kay continues in his piece that the lesson of tail gaiting which is that it might get you to your destination faster, that is till it doesn’t, has not been learnt.

Not only has it not been learnt, but Government intervention is actually making it much worse as they go out of their way to remove all obstructions to get to the next pile up quicker.

It was in this context that I was a bit perplexed by the latest DTC media release about their annual cocktail party in London.

I quote, “Mr Penny focused his remarks on what is increasingly being called the ‘new normal’.  He suggested that the response of businesses since the economic collapse at the end of 2008 could continue to offer a useful template for managing operations in 2010.

"Both Mr Penny and Ms Shine noted that, just as they did in the downturn, businesses in the diamond industry must continue to focus on strategy, finance, operations, people and stakeholder management. They stressed the importance of acting decisively, managing costs, driving innovation and undertaking scenario planning."

Apart from simply not understanding what the ‘new normal’ (amongst other things) is, should be, or, is claimed to be, I am in addition confused that such words should come from a company which has clearly failed in managing its own scenario.

De Beers have entered this crisis being strangled by debt used to buy or develop underperforming assets, e.g., Snap, and, in some instances, even where the asset was and could be performing, e.g., Venetia, by some magical feat of incompetence they have managed to screw that up.

Again I hear in disbelief that boxes from the current sight are selling at 10% to 20% premiums, De Beers having decided to have only a marginal price increase, despite the market for rough running away like some bolted horse.

Naively, I would have thought that De Beers itself and as the custodian for those for whom it sells would be particularly interested in top dollar at the moment.

A counter argument that has been thrown out in the past, when a similar set of circumstances has arisen, has been that to increase prices significantly would add fuel to the current situation.

The simple fact is that failing to do so certainly has not damped the conflagration and events are following the previous patterns or should I say ‘normal’; in fact, the opposite is more likely as the quick trading profits will only feed the flames.

The juxtaposition of prices from BHP’s tenders which are now de facto the benchmark for the industry, and the major producer insisting on selling below market price is curious in the extreme.

You could argue that this is in fact normal as this in essence has been going for year after year and was even justified by Penny in his speech in Tel Aviv in 2005.

So what the ‘new’ normal is, I have not the faintest idea, but perhaps like tail gaiting, whatever the propaganda, things are pretty much exactly where they were before.