Andy Kessler

WSJ: RIP Big Bull Market (1982-2022)

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https://www.wsj.com/articles/rip-big-bull-market-1982-2022-bear-stocks-investors-productivity-tax-rates-supply-side-innovation-apple-ibm-intel-silicon-valley-machine-intelligence-11659889307

The bull market started 40 years ago this week. I say “the” bull market, not “a” bull market, because even though we’ve had several bear-market drops of more than 20%—the 1987 crash, dot-com implosion, post-9/11 drop, 2008 financial crisis and Covid—this was the Big One, a secular, interest-rate-plummeting, multiple-expanding, earnings-exploding market bonanza that ushered in the modern digital era.

On Aug. 12, 1982, the Dow Jones Industrial Average bottomed at 776.91, around where it was in January 1964, though it had bounced off 1000 five times in the interim. It peaked on Jan. 4, 2020, at 36800, a gain of 47 times, or a 9.6% annual rate, until inflation slew the super bull. I’m really going to miss it.

Were there any clues that a rip-roaring bull market was starting? In 1982 the federal-funds rate was 10%, down from a peak of 19% a year earlier, and it began a long, steady drop until hitting zero in December 2008. It was still zero this March. Not anymore. The price-earnings multiple in 1982 was 7.7.

The biggest clue was that most investors in 1982 were either complacent or had sworn off owning stocks after years of awful returns. Reminder: Bear markets are no fun. Stocks often go up in the morning and down in the afternoon. And there are bull traps—stocks rally for months, enticing gullible momentum investors, only to be followed by gut-wrenching drops.

The bull born in 1982 got some help. Investors started to seek higher returns than bonds. President Reagan cut taxes, especially on capital gains, driving capital formation. Lower interest rates meant a lower cost of exploring new ideas. And explore we did.

It is no coincidence that the IBM PC was introduced exactly a year earlier, with its whopping 16 kilobytes of memory standard.

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WSJ: You’d Be Stupid Not to Evaluate Risk

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https://www.wsj.com/articles/youd-be-stupid-not-to-evaluate-risk-crypto-financial-crash-high-yield-ge-price-earnings-interest-rates-dividends-11659270592

Before the 2008 financial crisis, one of my neighbors took out a home-equity loan from Wachovia, paying around 5%. Wachovia never sent an appraiser to the house, but that isn’t the weirdest part of the story. My neighbor asked his financial adviser what to do with the money left after he’d paid some expenses. The adviser suggested a money manager who guaranteed 12% returns, explaining “you’re borrowing at 5% and getting paid 12%—you’d be stupid not to do this.”

It was stupid, all right. The money manager was buying homes and hockey teams, and his Ponzi scheme soon collapsed. No warning label said: “The more enticing the interest rate, the higher the risk.” Risk is often nebulous, hazy, unmeasurable—so it is usually ignored. Years of zero interest rates have caused havoc, but with the Federal Reserve raising short-term rates, investors should be extra careful shuffling money around.

Bernie Madoff promised an 11% average annual return and faked brokerage statements before he made off with investors’ money. You can almost hear the cocktail-party conversations in New York and Palm Beach: “You’d be stupid not to do this.”

Same for the crypto scheme known as Anchor Protocol, which offered 19.5% yields—practically screaming risk—with tokens backed by nothing but hot air. It soon imploded. So did crypto hedge fund Three Arrows Capital whose founder told the Journal, “The Terra-Luna situation caught us very much off guard.” The word lunatic is too kind.

Recently, bankrupt crypto lender Celsius was offering interest of up to 18.6% annually to attract deposits. Celsius’ assets reached $25 billion last October. You would have been stupid not to invest—except, well, the company now has $4.3 billion in assets and $5.5 billion in liabilities, mostly owed to depositors.

It reminds me of July 2007, when Citigroup CEO Chuck Prince told the Financial Times, “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

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WSJ: ‘Effective Altruism’ Is Neither

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https://www.wsj.com/articles/effective-altruism-is-neither-bankman-fried-givewell-philanthropy-taxes-capitalism-artificial-intelligence-pandemic-pet-projects-11658658039

Talk of movements makes me nervous. The latest swirling in tech world is “effective altruism.” Elon Musk had a brush with it. Its biggest proponent is crypto king Sam Bankman-Fried, CEO of FTX, who very quietly was the second-largest donor in support of the Biden campaign at $5.2 million. Be warned, he said on a podcast, he might donate $100 million to $1 billion in the 2024 election cycle.

So who is this guy? Mr. Bankman-Fried, 30, made his first killing doing bitcoin arbitrage, taking advantage of different prices in Japan and the U.S. He also leveraged a “kimchi premium”—a 30% gap between the American and South Korean prices. Then he created one of the largest crypto exchanges. Profiles of him dutifully note he’s a vegan, drives a Toyota Corolla, and sleeps on a beanbag next to his office chair. FTX bought the naming rights to the Miami Heat’s arena and lots of umpire and referee uniforms. Since May, he has been bailing out failing crypto firms, and he noted recently that FTX has a “few billion” left to help. Hope that’s enough. Oh, and he plans to give away everything except for 1% of his annual income to “long-termist” causes, guided by effective altruism.

Others active in this movement include Facebook founder Dustin Moskovitz and his wife, Cari Tuna. So what is effective altruism? In 1972 philosopher Peter Singer suggested using metrics rather than emotion to direct charitable giving. On the surface it makes perfect sense. There is even a framework to be effective: Giving must scale, be aimed at causes neglected by mainstream philanthropy, be directed at solvable problems, and be a good personal fit for the giver. Sounds great so far.

But like everything else, high thoughts often devolve to personal biases. While claiming that effective altruism is a worldview and a way of life, Mr. Singer also said “there are glaring things wrong with the way people are living.” Effective altruism also seems to be related to the “work to give” movement. Workers will rationalize high-paying jobs by giving most of their income away. Actually, when you work, you already give to society, but that is too complex for some to understand. Animal rights and veganism are big in the movement as well.

For true believers, it must be hard to find worthy projects. No problem! An organization known as GiveWell will tell you what charities are effective. I did a little digging, and I’m not so sure they’re effective at all. Yes, they direct money toward malaria nets and treatments for parasitic worms, but they also supply supplements for vitamin A deficiency, though genetically modified “golden” rice already provides vitamin A more effectively. Hmmm, seems like a move backward. GiveWell also suggests direct cash transfers to solve extreme poverty, similar to universal basic income.

William MacAskill, a major effective-altruism booster, told the Washington Post that more should be spent on “preparing for low-probability, high-cost events such as pandemics.”

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WSJ: The Lesson of Carlin’s Dirty Words

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https://www.wsj.com/articles/the-lesson-of-carlins-dirty-words-social-media-censorship-profanity-comedy-language-discourse-offsense-television-cancel-culture-11658059965

“Now everyone is walking around wondering what they can say and censoring themselves and, as a result, lowering the standards of discussion and thought.” Sounds like 2022, but the guy who said this was arrested 50 years ago this week on a charge of “disorderly conduct, profanity.” We’ve come a long way but seem to be looping back.

Comedian George Carlin was performing at Summerfest in Milwaukee on July 21, 1972, doing his then-current routine noting the absurdity that “there are more ways to describe dirty words than there are dirty words: dirty, bad, filthy, foul, vile, vulgar, off-color, blue, naughty, bawdy, saucy, raunchy, street language, gutter talk, locker-room talk, barracks language, indecent, in poor taste, suggestive, cursing, cussing, swearing, profanity, obscenity, and all I could think of were . . .” He then listed what will forever be known as the “seven words you can’t say on television.” I won’t repeat them, but I bet many of you can rattle them off from memory.

The Summerfest arrest wasn’t his first. For refusing to show his ID, he was thrown in the same paddywagon as Lenny Bruce in 1962. Maybe that’s why Carlin developed a routine to push free-speech rights even further. The new HBO documentary “George Carlin’s American Dream” chronicles these stories, although like most documentaries it eventually devolves into political hackery. Skip the final 30 minutes—the rest is comedy gold.

The Milwaukee district attorney asked a policeman, “Was it disorderly?” Getting no answer, he turned to an assistant district attorney and asked, “You were there, what did the audience do?” “Well, they gave him a standing ovation.” During the trial, the judge apparently hid his face to cover his laughter. Mr. Carlin was acquitted.

In 1973 a man complained to the Federal Communications Commission that his 15-year-old son heard Carlin’s famous routine on WBAI-FM, a noncommercial station in New York. Eventually, FCC v. Pacifica Foundation made its way to the Supreme Court, and Justice John Paul Stevens’s 1978 opinion, which still stands, ruled that to protect children from “inappropriate” speech—add that to Carlin’s list of dirty descriptors—those seven dirty words shouldn’t be heard on public airwaves.

Though antiestablishment, Carlin’s politics were hard to pigeonhole. On the illusion of choice:

 

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WSJ: The Many Reasons ESG Is a Loser

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https://www.wsj.com/articles/esg-loser-funds-costs-basis-points-blackrock-500-environment-green-sec-11657461127

A few years ago, a guy with a famous last name who ran a socially responsible investment fund asked me to lunch. I was hesitant because I figured he was planning to yell at me for a column I had recently written: “Stocks Weren’t Made for Social Climbing.” I wrote, “Profits are the best measure of a business’s value to consumers—and to society.” Instead, he was quite pleasant, though while I ate, he complained that most other environmental, social and governance funds weren’t all that socially responsible compared with his—“not ESG enough.” I asked him what was in his portfolio, expecting Tesla or some oat-milk company. He answered, “ General Motors. ” OK then.

These days ESG is big business, with $2.77 trillion in “global sustainable fund assets.” The average expense ratio is 0.41%. And sure enough, apparently some funds aren’t ESG enough. Police in May raided the European offices of Deutsche Bank’s DWS unit in an investigation of “greenwashing”—saying its investments were more sustainable than they were. The authorities claim, “We’ve found evidence that could support allegations of prospectus fraud.” In June the Securities and Exchange Commission announced an investigation into Goldman Sachs for claiming some of its funds were sustainable and ESG when they really weren’t. This is a fight over branding. What has the investment world come to?

Then there’s this: On May 18, the S&P dropped Tesla from its S&P 500 ESG Index. Exxon is still in. The S&P explains why, unconvincingly citing “Tesla’s (lack of) low-carbon strategy.” Tesla CEO Elon Musk tweeted, “ESG is a scam. It has been weaponized by phony social justice warriors.” Those are strong words. Let’s investigate.

Larry Fink, CEO of BlackRock, which has around $10 trillion in assets under management, wrote in a letter to CEOs, “We focus on sustainability not because we’re environmentalists, but because we are capitalists.”

Let’s look inside. BlackRock’s ESG Aware MSCI USA ETF has almost the same top holdings as its S&P 500 ETF with Apple, Microsoft, Amazon, Alphabet, Tesla, Nvidia, JP Morgan Chase, Johnson & Johnson and United Healthcare, dropping Berkshire Hathaway and moving Meta and Home Depot to higher weightings. Fees on ESG Aware are 0.15%, or 15 basis points. BlackRock’s plain-vanilla iShares Core S&P 500 ETF index fund charges only 3 basis points. That’s right, BlackRock charges five times as much for juggling a few names and slapping ESG on the name. Capitalists indeed. As of June 30, ESG Aware was down 23.7% vs. down 20% for the S&P 500 index.

Look away if you’re squeamish, but BlackRock helpfully notes that the S&P 500 has investments of 0.92% in controversial weapons, 0.59% in nuclear weapons, 0.68% in tobacco and 0.12% in United Nations Global Compact violators. Yikes. But not the BlackRock Sustainable Advantage Large Cap Core Fund

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WSJ: The Alzheimer’s Cure Conundrum

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https://www.wsj.com/articles/alzheimers-disease-cure-funding-pharmaceutical-research-foundation-judy-fund-congress-part-the-cloud-drug-11656261539

Chances are you know someone or have a loved one with Alzheimer’s disease and its slow-progressing dementia. An estimated 6.5 million Americans—and 44 million people world-wide—suffer from it. Scientists are still unsure of its causes: Amyloid protein, tau tangles, inflammation, fat protein complexes, high cholesterol and low bile acids, and even gum disease have all been conjectured. We see headlines that declare a “Cure Breakthrough” and “Reversing Dementia in Mice,” but still, if you get sick, there is no treatment. Why?

There was a glimmer of hope in June 2021, when the Food and Drug Administration approved Biogen’s drug, Aduhelm. But studies since then have been mixed, and Medicare announced that it will only pay the $28,200 annual cost for patients enrolled in clinical trials, of which there are few. This month we learned of disappointing results from a trial in Colombia for Roche’s new amyloid-protein-targeting Alzheimer’s drug, crenezumab.

Still, those I spoke with who are funding Alzheimer’s research, to a person, are surprisingly hopeful. They see a pipeline populated with potential, though they point to some flaws in the system.

My friend Elizabeth Gelfand Stearns, whose mother lived with Alzheimer’s for eight years, has raised almost $10 million over the years for the Judy Fund, which provides research funding and supports advocacy. Government spending on Alzheimer’s and related dementia research was $448 million when President Obama signed the National Alzheimer’s Project Act in January 2011, the aim of which was to “prevent and effectively treat Alzheimer’s disease and related dementia by 2025.” Ms. Stearns tells me, “Our pitch changed from ‘this is an awful disease’ to ‘90 million baby boomers are entering the prime age for Alzheimer’s and will swamp Medicare and Medicaid.’ ” It worked: This year the National Institutes of Health received $3.5 billion in research funding for the disease. Sadly, the NAPA now needs reauthorization through 2035. Patience is a virtue.

So why is there no cure after all this money has been spent on research? I could spend a dozen columns rattling off compelling theories and drugs that still need investigating. But drug approval by the FDA via trials funded by pharmaceutical companies can take eight to 10 years and cost more than $2 billion.

It turns out there is a huge flaw in the drug-discovery process—namely, a wide gap between government research funding and private pharmaceutical company spending on drug trials. Another friend, Mikey Hoag, says this is known as the “valley of death” where drugs often die. She is involved because her father showed signs of Alzheimer’s at 65 and lived with it until he was 79. A couple of months after he died, her mother showed Alzheimer’s symptoms. She lived to 88.

What is the valley of death? The Catch-22 is…

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WSJ: Bees Are Fish and Other Fake Narratives

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https://www.wsj.com/articles/bees-are-fish-and-other-fake-narratives-progressive-partisanship-woke-1619-project-words-11655650274

A friend recently told me he asked the management at a vegan restaurant why they didn’t have honey on the menu. “It’s from an animal, so it’s not vegan,” he was told. He tried to explain that honey isn’t part of a bee but instead nectar that bees carry back to a hive, mix with enzymes, heat, dehydrate . . . Exasperated, he finally said, “It’s bee barf!” (It’s not, but it isn’t prime rib either.) He didn’t win the argument.

I mention this because last month a California court ruled that bumblebees are actually fish and can be protected by the California Endangered Species Act. This is as silly as the Environmental Protection Agency trying to define puddles and drainage ditches as “navigable waters.” Yes, they were saying that a puddle should be regulated like a lake or river. Even before this, the Army Corps of Engineers had a “glancing geese” test, meaning if a migratory bird ever looked at a wet spot, that spot was under federal jurisdiction.

Meanwhile, we have oat milk and almond milk, even though they obviously aren’t milk. Similarly, oxymoronic “plant-based meat,” which isn’t meat, is really fake meat. Even worse, it’s nasty, chock full of salt, and not even good for you. Be warned, we’re being trained that anything can be anything. The truth has taken a back seat. I don’t like it one bit.

In June 2020, in the middle of coronavirus lockdowns, tens of thousands marched in American cities in protest of the police. In the protesters’ defense, 1,200 health and medical professionals signed a letter “in response to emerging narratives that seemed to malign demonstrations as risky for the public health because of Covid-19.” It went on: “Instead, we wanted to present a narrative that prioritizes opposition to racism as vital to the public health, including the epidemic response.” Ah, the narrative. How have the signers not been summarily fired and barred from the healthcare industry? We know why: If a bee is a fish, then protests provide immunity.

This is the world we live in today. Who actually believes this stuff? George Orwell said it best in his 1945 “Notes on Nationalism”: “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool.” Bertrand Russell had a similarly great line: “This is one of those views which are so absurd that only very learned men could possibly adopt them.”

It wasn’t only protests. I spent the week after Memorial Day 2020 flipping between CNN and Fox News. I watched Chicago Lake Liquors in Minneapolis repeatedly looted—even the safe was dragged out.

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WSJ: Who Pays for Crypto’s Collapse?

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https://www.wsj.com/articles/who-pays-for-crypto-collapse-class-action-lawsuits-bitcoin-ethereum-losses-investors-coinbase-luna-xrp-11655056359

Is anyone liable for the $1.5 trillion in recent crypto losses? Maybe so. After every market downturn, the class-action crowd canvasses the carnage looking for whom to blame—and then sues the pants off them. With so many stocks down 80% to 90%, such as Carvana and Robinhood, the pickings are plentiful. But most public companies have smart lawyers who sprinkle protective legalese like “safe harbors” and pad their registration statements’ risk section. Most securities suits are settled, basically to pay lawyers to go away.

But this cycle had something new: crypto craziness. The Federal Trade Commission reports that 46,000 people have reported losing $1 billion in crypto to scams since January 2021. Bitcoin is down more than 50% since its 2021 peak, Ethereum is down 65%, XRP 78%. And of course, the Luna token is down from $116 on April 5 to essentially zero. Is anyone liable? Binance, FTX, Coinbase, Kraken, Bitfinex and Crypto.com are some of the largest exchanges for crypto trading.

Class actions will follow the money. Kim Kardashian and boxer Floyd “Money” Mayweather Jr. are being sued for false statements promoting crypto. But that’s nothing! The trillion-and-a-half-dollar question is: Are cryptocurrencies securities or not? Selling unregistered securities can be a felony, with up to five years in jail, and damages could include the dollar amount of an investors’ losses or more.

A 1946 Supreme Court case, Securities and Exchange Commission v. W.J. Howey Co., established the test that determines whether something is a security under the Securities Act of 1933 and subject to registration and reporting requirements. It is a four-criteria test, summarized as: A security requires an investment in a common enterprise with expectations of profit via efforts by others.

I don’t think any cryptocurrencies have registered as securities. But crypto creators can’t say they weren’t warned. In 2017 then-SEC Chairman Jay Clayton cautioned “market participants against promoting or touting the offer and sale of coins without first determining whether the securities laws apply to those actions.”

In 2019 the SEC ruled in a letter that bitcoin specifically failed the Howey test, meeting only the “investment” criteria. I see it differently, but no matter—the rest of crypto is still in flux.

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WSJ: Chesa Boudin’s Lawless City

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https://www.wsj.com/articles/chesa-boudin-lawless-city-district-attorney-recall-san-francisco-homeless-drugs-11654439544

San Francisco

As I walked to lunch last week in Little Saigon, a few blocks from City Hall, I hurried across Eddy Street to avoid an obvious group of drug dealers. The sidewalks were filthy, filled with homeless tents and a god-awful smell. Distracted, I almost tripped over a squatting man sticking a hypodermic needle between his toes. Two cops leaned against a police car nearby. Meanwhile, pedestrians lawfully waited at a traffic light before crossing. Why bother?

No wonder Chesa Boudin, if polls are correct, will be recalled as San Francisco district attorney on Tuesday via Proposition H. He’s a big source of the city’s current rot.

I’m reluctant to convict someone based on his parents’ background, but Mr. Boudin’s provides many clues. Former members of the Weather Underground domestic terrorist group, his parents were jailed and convicted for being getaway drivers in the 1981 Brink’s robbery and murders. He was then raised by the Weather Underground’s Bill Ayers and Bernardine Dohrn, who, you may remember, were friends with Barack Obama. Mr. Boudin says he didn’t learn to read until age 9, later graduated from Yale, Oxford and Yale Law School, and even served as an interpreter for Hugo Chávez, Venezuela’s socialist president, although that somehow was left off his LinkedIn profile. He supports San Francisco as a “sanctuary city.”

In November 2019, with help from George Soros, Mr. Boudin was elected district attorney after running on a platform of “decarceration” and ending cash bail. Asian-Americans were big supporters. Not anymore. After leading a successful February recall of three school-board members—one member, Alison Collins, said that merit is “racist”—Asian-Americans in San Francisco are now fed up with increased personal and property crimes against them that often go unprosecuted. Flaw and disorder.

San Francisco has seen a rash of robberies. Stealing items valued at less than $950 is considered a misdemeanor. Last fall, organized “smash and grab” looters hit Louis Vuitton and other luxury stores. Eleven Walgreens have closed since 2019. In a remarkably still-open CVS near Eddy Street, nearly every item is locked behind plexiglass. Is this the future?

Don’t be fooled by the Orwellian newspeak of the “unhoused” that completely ignores the problem of mental illness and addiction rampant in San Francisco.

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WSJ: Dear Grads - A To-Do List for the Class of ’22

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https://www.wsj.com/articles/class-of-2022-graduation-advice-college-university-workforce-reputation-higher-education-11653236765

Dear Grads of 2022,

I bet when you heard there’d be lots of test-taking in college, you didn’t think that meant twirling swabs up your nose. But you made it! Your multitasking-from-anywhere skills are perfect for today’s work world. You deserve your reputation for resilience under dire conditions. Meanwhile, the reputations of experts are in tatters.

But be warned, you’ll forever be the Zoom-groomed Corona crew. No matter what you say or do, like drinking Blueberry & Açaí Truly Hard Seltzer or bragging about your now near-worthless NFT collection, you’ll be put in a box, stereotyped. Others will say behind your back, “Oh, that’s so on brand.” As you enter the real world from the conformities of the college cocoon, think hard about your reputation, your personal brand. Like it or not, wherever you go, your reputation precedes you.

People will probe to construct your story: “Where are you from?” “Where’d you go to college?” “What did your parents do?” Yes, life is like your college application on steroids. But you can break free. Don’t think worse of me for quoting the movie “Dirty Dancing” and suggesting “nobody puts Baby in the corner.” Take charge of your own reputation.

Hyperconnected Wall Street traders and bankers, analysts and salesmen do trillions in transactions every day based on the reputations of folks they often have never met face to face. You can lie to a customer any time but only once. And then word gets out, goes viral and everyone knows it. It’s a short walk from great rep to out of the business. On Wall Street, all you have is your reputation. Same for you.

If all goes well, you’re about to begin a job—you better, there are now five million more jobs than job seekers. “Influencer” doesn’t really count, but congrats anyway. You’ll figure out how to do well, get promoted, earn raises. Of course, there are always shortcuts—maybe cut some corners, trade in a bit of integrity to move ahead. Don’t do it! In this ever-connected world, everyone will find out. Everyone. People will stop dealing with you, and you’ll never really know why. Bad reputations are hard to shake.

Here’s a little story. A friend of mine was a bartender in college and famous for performing flaming shots that lit up the bar.

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WSJ: When Will the Selling Stop? Crypto to go-go...

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https://www.wsj.com/articles/when-will-the-selling-stop-crypto-bitcoin-stocks-market-terra-hype-value-debt-11652624704

In the past six weeks, $1 trillion in cryptocurrency value has evaporated—yes, trillion. Since there was nothing of economic value driving up crypto prices, only mass delusion, there hasn’t been much to cushion their descent. It’s as if a giant bellows has been blowing hot air into bitcoin and others, and it suddenly stopped working. Fanboys yelling “store of value” and “fiat hedge” can’t seem to explain why bitcoin is falling as inflation rages.

This column noted a few weeks ago the risks of “algorithmic stablecoin” Terra, backed by the Luna token. Terra was designed to stay at $1, and Luna tokens would be issued to buy Terra if it dropped below $1. Well, it did last week, dropping to below 20 cents. So many Luna tokens needed to be issued that Luna’s price dropped more than 99% in 24 hours and it is now worth 3/100ths of a cent, down from $60 seven days ago. Ouch. Things happen fast. Remember the initial public offering last year for Coinbase, the crypto exchange, which traded at close to a $100 billion valuation? It’s now $18 billion. Too many momentum investors late to the crypto party traded real money for fake currency and lost.

The same thing is playing out in stocks, which are at least backed by future earnings. The market selloff has been nasty—down, down, down for seven weeks in a row. And it’s not only the hyped, memed, freshly IPOed and SPACed, like DraftKings and Beyond Meat, it’s real stuff. Facebook is running out of new customers. Netflix, PayPal, Lyft—all are enduring relentless stock sell-offs. It’s certainly less bubblicious out there, but is it over?

I asked an old Wall Street buddy when we’d know the selling is over, and I thought I heard him say, “After we seek redemption.” I suppose he’s right, so I asked, “You mean a spiritual awakening, atonement for the guilt of overpaying for Rivian and Carvana, deliverance for the sin of thinking NFTs were real? For . . .” “No,” he interrupted, “what I said is the selling stops after we see redemptions.” Oh.

We need to see capitulation. That’s when those newbie investors who bought crypto and stocks via Robinhood or piled into Cathie Wood’s ARK Innovation exchange-traded fund, ARKK—and “held on for dear life” with “laser eyes” and “diamond hands,” to use some Reddit lingo—finally dump what they own and swear to the almighty Elon Musk never to buy crypto or stocks again. It’s coming. By the way, Robinhood stock is down 85% from its August peak; ARKK is down 74% from its February 2021 peak.

In Wall Street speak, it’s known as the puke.

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WSJ: The Biden Loyalty Machine

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https://www.wsj.com/articles/the-biden-loyalty-machine-democrats-dgb-disinformation-sec-climate-risk-fauci-covid-lockdowns-biden-inflation-supply-equity-federal-reserve-military-russia-11652025653

In her 2014 book, “A Fighting Chance,” Elizabeth Warren describes advice she received from Lawrence Summers when he was Harvard’s president: “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People—powerful people—listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders.”

Want to see this in action? In his 2021 book, “A Plague Upon Our House,” about his time as an adviser to the Trump administration on Covid-19, the Hoover Institution’s Scott Atlas describes “a functioning troika of ‘medical experts’ composed of Drs. Birx, Fauci, and Redfield.” He “noticed that there was virtually no disagreement among them. It was an amazing consistency, as though there were an agreed-upon complicity—even though some of their statements were so patently simplistic or erroneous.” Loyalty! But was that for the best? After two years of Covid restrictions, obviously not.

Loyalty is overrated. Harry S. Truman, worried about communist infiltration, instituted a Loyalty Program in 1947 via executive order, expecting “complete and unswerving loyalty” from federal employees. Seventy years later, FBI Director James Comey insisted that President Trump, at a private dinner, asked him for his loyalty. Mr. Comey declined. Mr. Trump then asked for “honest loyalty,” which Mr. Comey agreed to, knowing it didn’t mean anything.

Judge Ketanji Brown Jackson wrote in a 2019 ruling: “Presidents are not kings. . . . This means that they do not have subjects, bound by loyalty or blood, whose destiny they are entitled to control.” Amen.

But the Biden administration doesn’t want to hear this. Today’s insiders all seem to be singing from the same hymn book, imposing a strict ideology on us, their subjects. As an outsider I can insist: This isn’t healthy.

Treasury Secretary Janet Yellen, a monetary dove who helped get us into today’s runaway inflation mess, launched “a Treasury-wide equity review”…

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WSJ: Debt Can Be a Killer

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https://www.wsj.com/articles/debt-can-be-a-killer-investments-stocks-loans-elon-musk-twitter-economic-cycle-inflation-downturns-stock-prices-11651420308

The arrest last week of the founder of the investment firm Archegos, charged with securities fraud, is a great reminder of hidden debt. In March 2021, Archegos was overleveraged, allegedly hiding its debt from Wall Street firms as it used funky “total-return swaps” to manipulate stock prices. The inevitable collapse destroyed $100 billion in stock value. (Archegos’s lawyers have denied the allegations.) Separately, supply-chain financier Greensill used what Fitch described as a “hidden debt loophole” and collapsed around the same time.

Are there more of these out there? I ask because we’re in the most dangerous part of the economic cycle. Interest rates are rising to combat inflation, and there could be all sorts of leverage we don’t know about. There always is. A slowdown (and especially a recession) would expose these hidden horrors. In 2018 this column argued that “in downturns, equity hurts but debt kills.” We’re about to find out if that’s still true.

More than $850 billion in credit-card debt and $800 billion in margin debt are high but off their peaks, and at least they are known amounts. It’s always hidden debt that comes back to bite when things fall apart. In June 1929, banks had $82 in deposits for each dollar in cash on hand. Bank runs followed. The 2008-09 financial crisis resulted from mispriced collateralized loans and weird derivatives on the balance sheets of Lehman Brothers, Bear Stearns and many others. Citibank used “structured investment vehicles” loaded with mortgages and who knows what else essentially to hide $100 billion in debt by keeping it off its balance sheet.

Now debt is fashionable again. Tesla’s last proxy statement shows Elon Musk owning 73 million options and 170 million shares, of which more than 88 million were “pledged as collateral to secure certain personal indebtedness.” Even assuming a 20% loan-to-value ratio, that’s a lot of personal indebtedness. In the pending Twitter deal, Morgan Stanley is providing a $12.5 billion margin loan against another 62 million of his Tesla shares.

Tesla sold around a million cars in 2021 and was worth $1 trillion last week at the time of the Twitter deal. Ford Motor Co. sold almost two million vehicles in 2021 and is currently worth just under $60 billion. I’d rather have Tesla’s business than Ford’s, but perhaps Tesla’s valuation is a tad fluffy. Netflix stock has fallen 72% in six months. Carvana is down 84% since August. Valuations are fleeting, and we aren’t even in a recession. Now may not be the time to borrow against Tesla shares.

There are reports that Mr. Musk may take out a loan against his current 9.2% stake in Twitter. Yes, borrowing against Twitter to buy more Twitter.

Read the rest here.

WSJ: Why Does Hollywood Hate Silicon Valley?

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https://www.wsj.com/articles/hollywood-hates-silicon-valley-theranos-uber-wework-neumann-kalaniick-television-holmes-11650817560

Has streaming peaked? Netflix stock dropped 37% last week after the company’s loss of subscribers, and CNN+ was dead on arrival. Are viewers finally revolting? Maybe it’s the shows and content. It’s hard to find a movie, series or newscast that doesn’t push a social or political agenda, from “Bridgerton” to “Squid Game” and “The Handmaid’s Tale.” Even formerly family friendly Disney is getting too preachy. Elon Musk calls this the “woke mind virus.”

The agenda list is too long, so I’ll focus on the current rash of shows about entrepreneurs: Showtime’s “Super Pumped” on Travis Kalanick and Uber; Apple TV’s “WeCrashed” on Adam and Rebekah Neumann and WeWork ; and Hulu’s “The Dropout” on Elizabeth Holmes and Theranos. Their debuts curiously coincided with the Netflix’s “Inventing Anna” about the con artist Anna Sorokin. Hollywood seems to equate entrepreneurs with scammers, almost as if filmmakers have a vendetta against success.

As I watched these entertaining series, I mostly laughed instead of cried, knowing this is how many people will think about entrepreneurs going forward. It’s a shame the entertainment industry is bent on destroying the reputation of Silicon Valley, which is keeping Hollywood alive.

Watching these series was fascinating but also a bit spooky, because I’ve known or met many characters in these shows. So it was fun to compare their real-life looks and personalities with the portrayals. Most weren’t even close. The opening line of each episode of “Inventing Anna” could apply to all the series: “This whole story is completely true. Except for all the parts that are totally made up.”

Here is the common thread: Silicon Valley entrepreneurs are misogynistic, adolescent, narcissistic tech bros running cults—even Ms. Holmes with her black turtlenecks and deepened voice. They consume only tequila, mysterious green juice or kombucha. Every company party has a bounce house. Bankers are idiots, and venture capitalists can be manipulated easily. Board members are rubber-stamping cretins. Every startup founder travels on private planes. (Note to venture capitalists: If a startup uses a company jet, then you’ve invested too much money and have lost control.) Finally, everyone’s motivation is the same: “We’re saving the world” or “making the world a better place,” a generational delusion. While there’s always a smidgen of truth to tropes, these are all clichés.

Anna Sorokin was a con woman.

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WSJ: Oprah, Pavlov and Gavin Newsom

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https://www.wsj.com/articles/oprah-pavlov-and-gavin-newsom-gas-tax-rebate-debit-cards-california-oil-reserves-gasoline-prices-electricity-11650205836

California is a mess and Gov. Gavin Newsom is sending treats to its citizens. It has the nation’s highest gasoline prices—over $6 a gallon for premium. The Western States Petroleum Association explains, “The first $1.27 a gallon we pay at the pump now is for taxes and regulatory programs.” Pretty easy to fix, but not for Mr. Newsom, who proposed, Oprah-like, sending Californians $400 gas-tax-rebate debit cards: You get a card. You get a card. Everybody gets a card!

The Legislature may vote on it this week. Of course, $400 is barely a month of fill-ups for many commuters. California, which has the fifth-largest oil reserves of any U.S. state, should have some of the cheapest gas in the country. Plus, Mr. Newsom’s gift cards aren’t really a gas-tax rebate. Electric-vehicle owners, who don’t buy gas, get a card too, even though they already get up to a third off their electricity bill via California’s Home Charging EV2-A electricity rate.

So if it isn’t a rebate, what is it? Simple: a bribe for Californians to forget who got them into this mess. And it’s a brazen step toward a universal basic income program, following the federal government’s blatant attempt to get citizens hooked on receiving money: $1,200 stimulus checks, $600-a-month unemployment supplements, $300-a-month child tax credits. Like Pavlov’s dog, Americans are asking “Did the mail come yet?” as they wait for government checks. Yes, money that people need to survive due to massive policy screw-ups by the same government giving them the money. Here’s a treat. Good dog.

Same with electricity. California has steep progressive pricing—the more you consume, the more you pay per kilowatt-hour, from a baseline 24 cents to 60 cents in peak hours. Yet the state still gets rolling summer blackouts because of renewable-energy mandates and cap-and-trade carbon taxes. California forces power plants, natural-gas providers, and other large greenhouse-gas-emitting industries to buy carbon-pollution permits. But Californians get some of that money back as—you guessed it—a rebate, another treat.

Instead of developing low- or zero-carbon energy such as nuclear or geothermal, the state forces utilities to buy carbon credits, runs them through the Sacramento money-shaving machine, and then trickles a few bucks back to consumers to make it look as if it’s doing something. Many Californians this month will get climate credits for electricity and natural gas worth $87 and another in October worth $39. Everyone gets a rebate, and the credits are per household while rates are usage-based, another distortion.

Water is another puddle of muddle.

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WSJ: Major League Baseball’s Respect Problem

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https://www.wsj.com/articles/major-league-baseballs-mlb-respect-strike-lockout-salaries-sports-money-players-canceled-games-cancellation-contract-dispute-11649613926

The Major League Baseball lockout delayed Opening Day until April 7 this year. I passed on attending. Long ago in grad school, I postponed graduating until August so my neighbor and I could do a driving baseball trip. The schedule was almost perfect: a game in St. Louis, the next night Kansas City, then Seattle, the Bay Area, Southern California and Dallas. Right as we were about to leave, the players went on strike. Aargh! Ultimately 713 games were canceled in 1981. I’ve never forgiven the players or their union.

I’m still a fan. Back in my New York days, I tried and failed to get tickets to opening day at Shea Stadium between the St. Louis Cardinals and the New York Mets. Fortunately, I scrounged up tickets for the next day. Rodney Dangerfield threw out the first pitch—marketed as “No Respect Opening Day.” Just my speed.

That’s how I feel about baseball: I love the game but have no respect for the money side of the business. As NBC producer Don Ohlmeyer told reporter Tony Kornheiser when asked about the problems in sports, “The answer to all your questions is: Money.”

The constant bickering over revenue sharing and minimum salaries and luxury taxes is tiresome. It’s not as if players are exploited workers sweating on an assembly line—the lowest-paid player got $570,500 last year. It’s now $700,000. Yes, I’m aware there’s no crying in baseball, but every strike and work stoppage ups salaries, and then prices spiral higher—tickets, beer, dirty-water dogs, Cracker Jack, media rights—to pay outrageous contracts such as newly minted Met Max Scherzer’s $130 million three-year deal.

Meanwhile, baseball is struggling to get fans out to the old ballgame. Forget the Covid years: Total attendance at regular-season games peaked in 2007 at almost 80 million, and in 2019 only 68.5 million went to games. Maybe that’s because average ticket prices in 2007 were $22.77 and are now up 50% to $34.21. The Yankees raised nosebleed ticket prices 40% between 2018 and 2020.

Because of this and media rights sales, Major League Baseball revenue nearly doubled, from $5.4 billion in 2007 to $10.4 billion in 2019. Good luck maintaining that. Eventually price hikes stop working.

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WSJ: Here Come the Price Controls

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https://www.wsj.com/articles/here-come-the-price-controls-oil-reserves-rent-consumers-joe-biden-inflation-drugs-11648998374

On the 2020 campaign trail, Joe Biden declared, “ Milton Friedman isn’t running the show anymore.” Wrong! In March 2020 the money supply was $16 trillion, it’s now $21.8 trillion. Lo and behold, inflation is running at 7.9%, supply chains are tight, and many store shelves are empty. Friedman’s adage “Inflation is always and everywhere a monetary phenomenon” has stood the test of time.

But what scares me most is the likely policy responses by the Biden administration that would pour salt into this self-inflicted wound. It feels as if price controls are coming. Don’t trust my Spidey senses? Joe Biden’s own words from March 16: “Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans.” And in last month’s State of the Union address he said, “As Wall Street firms take over more nursing homes, quality in those homes has gone down and costs have gone up. That ends on my watch.”

And the worst offense: “Cut the cost of prescription drugs. We pay more for the same drug produced by the same company in America than any other country in the world. . . . let’s let Medicare negotiate the price of prescription drugs. They already set the price for VA drugs.” That sounds good on the surface, but don’t fall for it. As Tomas Philipson noted on these pages, companies would “face a tax as high as 95% on sales if they don’t concede to the government price.” These aren’t negotiations. They are price controls.

Prices set by producers are signals, and consumers whisper feedback billions of times a day by buying or not buying products. Mess with prices and the economy has no guide. The Soviets instituted price controls on everything from subsidized “red bread” to meat, often resulting in empty shelves. President Franklin D. Roosevelt’s National Recovery Agency fixed prices, prolonging the Depression, all in the name of “fair competition.” Watch for the resurrection of that phrase to rationalize price controls.

In 1971 President Richard Nixon announced, “I am today ordering a freeze on all prices and wages throughout the United States.” We got new government entities: a Pay Board and a Price Commission. Americans paid for this mistake for another decade. Farmers drowned chickens rather than send them to market. Store shelves emptied. Price controls contributed to long lines at gasoline stations in 1973 during the Arab oil embargo. It’s pretty simple: When you freeze prices too low, producers stop producing.

Price controls don’t work. Never have, never will.

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WSJ: Ukraine’s Asymmetric War

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https://www.wsj.com/articles/ukraine-asymmetric-war-technology-starlink-mariupol-theater-collapse-russia-explosives-internet-drones-weapons-11648400672

Reports from Ukraine are filled with stories of Javelin antitank missiles and Turkish Bayraktar TB2 unmanned aerial vehicles taking out Russian tanks and armored vehicles. The Biden administration has announced $800 million in defensive weapons for Ukraine, including Javelins, Stinger antiaircraft weapons and Switchblade drones. More amazing is what Ukraine has also been doing on the cheap. And I don’t mean Molotov cocktails.

Wars are increasingly asymmetric—the lesser-armed side can put up a strong fight. The U.S. learned this in Iraq with insurgent use of improvised explosive devices, basically roadside bombs triggered with cellphones. Similarly, Ukraine has been deploying inexpensive, almost homemade weapons and using technology to its advantage.

The Times of London reports that Ukraine is using $2,000 commercial octocopter drones, modified with thermal imagers and antitank grenades, to find and attack Russian tanks hiding between homes in villages at night. Ukraine’s Aerorozvidka, its aerial reconnaissance team, has 50 squads of drone pilots who need solid internet connections to operate.

When the internet was cut in Syria in 2013, enterprising techies set up point-to-point Wi-Fi connections to bring internet access from across the border in Turkey. You can do this with Pringles potato-chip cans and $50 off-the-shelf Wi-Fi routers. Ukraine may be spared this ad hoc setup as Elon Musk and his firm Starlink have donated thousands of satellite internet-access terminals to Ukraine, including to the Aerorozvidka squads, which come with warnings to camouflage the antennas. They typically cost $499 each and $99 a month for service.

Ukraine also effectively jammed Russia’s long-in-the-tooth wireless military-communication technology, which apparently uses a single-frequency channel to operate. Former Central Intelligence Agency Director David Petraeus told CNN that Russians were then forced to use cellphones to communicate until Ukraine blocked the +7 country code for Russia and eventually took down 3G services that Russia uses for secure connections. Russian soldiers were forced to steal Ukrainian cellphones to communicate with one another. That’s no way to fight a war.

Ukraine also has taken advantage of crowdsourcing.

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WSJ: War Always Muddles Markets

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https://www.wsj.com/articles/war-always-muddles-markets-stocks-volatility-investing-11647783501

Wars perplex investors. I’m always slow to react. Back in my days as a Wall Street analyst at Morgan Stanley, we would bus top investors around Silicon Valley to see Apple, Intel, Adobe, plus Jim Clark at Silicon Graphics, Scott McNealy at Sun Microsystems and even Steve Jobs at NeXT. Breakfast on Aug. 2, 1990, was disrupted by news of Iraqi tanks rolling into Kuwait. Even though the 1990s proved to be paradise for technology, most investors rushed back to New York. The stock market dropped 6% over three days.

My office in Manhattan was next to Wall Street’s top oil analyst. That fall, he studied data from the world’s producers and spoke at Morgan Stanley’s morning meeting. Armed with tables and charts, he basically declared that world demand was X million barrels a day, but without Iraq, there was only Y amount of oil production, so prices were going to rise for the next decade. Sound familiar? I watched salesmen peel out of the room to call their clients. It turns out he was spectacularly wrong.

The rest of 1990 was awful. The market dropped 21% from its July peak to its October low. Fearing terrorists, few were flying. The economy went into a recession. Companies missed on earnings. Uncertainty hung over markets. On Jan. 16, 1991, the companies I was recommending with buy ratings, such as Intel and Motorola, reported awful earnings. That night, like everyone else, I watched Operation Desert Storm unfold on CNN. Still, I dreaded the next day’s morning meeting, where I would have to cut my earnings estimates and eat crow as my stock picks tanked.

As I got off the elevator, the head of sales grabbed me by the arm and started shouting, “It’s dawn in America. We’re shooting missiles right down chimney stacks. Cruise missiles are making left turns down city streets. The market’s going higher. Tech is king!” Sure enough, the market was up before the open. All my stocks were bid up 20% or more. Dawn indeed. It certainly cheered me up.

Markets during wartime are confusing. Baron Rothschild’s line about buying when there is blood in the streets and selling to the sound of trumpets is a great contrarian battle cry. Sometimes it works, often it doesn’t. Although I know some Russian banks today that you can buy real cheap.

The New York Stock Exchange closed from July to November 1914. Stocks dropped nearly 25% when they finally started trading on Dec. 12.

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WSJ: Is the Dollar in Danger?

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https://www.wsj.com/articles/is-the-dollar-in-danger-china-russia-ruble-yuan-reserve-currency-foreign-sanctions-11647195545

The U.S. is sitting on top of a horizontal empire, capitalism’s self-organizing, incentive-based structure with its layers of value. It’s not the Marxist mush of “to each according to his needs.” You gotta earn your spot. Think of the U.S. dollar as the thread or even the duct tape that binds the layers together. Nearly 60% of the $12.8 trillion in worldwide currency reserves are dollars. Is America’s “exorbitant privilege”—the almighty dollar as the world’s leading reserve currency—under threat? Should you even care?

Sanctions have bitten Russia. A huge chunk of its $630 billion in foreign reserves are frozen. Oligarchs’ yachts have been seized. Visa, Mastercard and American Express suspended service in Russia. Apple and Google Pay stoppage stranded cashless travelers on Moscow’s metro. From Netflix to Nike, voluntary sanctions are in force.

Was cutting Russia out of the global financial system the right move? Naysayers think this is the beginning of the end of the dollar as the reserve currency because Russia will cozy up to China and adopt the yuan or pivot to cryptocurrencies. China may start dumping dollars. In fact, since 2014 China and Russia have severely reduced their dependence on the dollar for bilateral trade.

The dollar has been the world’s reserve currency since the Bretton Woods Agreement in July 1944, with the dollar pegged to gold and other allied currencies pegged to the dollar. This wasn’t some bureaucratic pronouncement. The U.S. was in a position of strength after funding the allied effort in World War II. America almost lost this privileged status in 1971 when deficits from war and welfare led President Richard Nixon to drop the gold standard.

Today countries still keep America’s virtual Benjamins in their virtual bank vaults—modern banking’s gold. China has more than $1 trillion in Treasurys. Russia has about $100 billion in dollars of about $500 billion in their increasingly frozen foreign exchange.

But why do these countries keep dollars? What backs the currency?

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WSJ: Putin’s ‘Vertical’ Empire Will Fall

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https://www.wsj.com/articles/putins-vertical-empire-fall-ukraine-russia-business-kleptocrat-oligarchs-value-companies-11646581296

Vladimir Putin obviously didn’t get the memo. The kleptocrat handbook has changed. You don’t invade countries anymore because after the smoke clears, you have to fix their plumbing and heating and cell service. Instead, you hire them.

Some estimate Mr. Putin may be worth $100 billion via hidden holdings in Gazprom, Russia’s state-owned energy company. But Jeff Bezos and Bill Gates are worth more and they don’t control any tanks. Their success shows the world is now divided into horizontal slices, with the most productive sitting on top. The American empire, if you want to call it that, is a horizontal empire. Mr. Putin’s attempt to re-create the Soviet Union’s vertical empire is doomed to fail.

As digitization allowed design and control to be separated from manufacturing, the world got horizontal, organizing into stacks of companies, industries and even countries to which markets provide capital based on their value-add.

IBM vertically integrated computers, while Microsoft, Intel, Dell, Singapore-made disk drives and Japanese memory chips dominated slices of the personal-computing stack. AT&T was vertical, the Internet horizontal, with Google and Amazon sitting on top of the data-center, fiber-optics and cable-modem slices. Apple adds its operating system to smartphones after paying Foxconn to assemble Korean screens and Taiwanese chips in China. Successful companies give up owning everything to expand opportunities.

As long as the U.S. provides the stuff at the top, its horizontal empire will endure, creating societal wealth and enough technology and taxes to defend itself and its allies. These include Japan, South Korea and Taiwan, all of which have far higher gross domestic product per capita than vertical commodity-dominated Russia. Especially in trade, horizontal topples vertical.

Under the guise of reuniting the Soviet Union’s footprint, Mr. Putin wants to control oil and gas distribution to clueless nuclear-reducing, wind-dependent, energy-deprived European countries.

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WSJ: Make Populism Pop Again (The Biden Bonuses)

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https://www.wsj.com/articles/populism-biden-approval-rating-rapid-testing-homelessness-nfl-foreign-policy-state-of-the-union-sotu-11645977952

Tuesday night’s State of the Union address arrives with Joe Biden’s approval rating in the dumps at about 42%. Chaos continues. There’s pain in Ukraine. Inflation rages. “I did that” stickers with Mr. Biden pointing at high prices are showing up on gasoline pumps across the country.

But with so many issues most Americans roll their eyes—sanctions, antitrust, climate, zzzz. Out of sight, out of mind. For 79-year-old Joe Biden’s political survival, he needs a new slogan: “Out with the old, in with the bold.” He should forget the Beltway babble and pivot hard to do something right in front of our faces.

Here’s what I’d do: Announce the Biden Bonuses, a set of gestures providing “everyday Americans,” as Hillary Clinton called us, exactly what we want. Yes, it’s time to put some pop into populism.

Use the bully pulpit. Start with masks. A few control freaks still love them, but the rest of us know they’re a charade—spit diapers, beard hats, facial disgracials. Encourage masking but declare it completely optional, especially on planes. HEPA filters and rapid circulation probably make planes the safest place to be near other people. At the same time, flood the zone with Covid tests to prevent hoarding. Make them as plentiful as green M&Ms. Every home and office should have a bowl of rapid Covid tests. Two years on, this should have happened already.

Speaking of travel, stop making us remove our shoes and belts or take our laptops out at airport security checkpoints. Everyone knows it isn’t effective. Let’s do random screening—every 20th passenger or so gets a thorough exam. And have the Federal Aviation Administration stop requiring that seat backs be returned to their upright uncomfortable position for takeoff and landing, though it’s no problem if there’s at least 37 inches of legroom, like in United’s Economy Plus. Make standing up before it’s your row’s turn to exit a misdemeanor. And while travelers can wear headphones and eye masks to dull the senses, please forbid enchiladas, tuna-fish sandwiches or any olfactorily offensive meal on planes. Nearly all Americans will agree.

Speaking of food, announce the end of calorie labeling at restaurants.

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WSJ: Who Built That Spaceship?

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https://www.wsj.com/articles/spaceship-exploration-entrepreneurship-elon-musk-jeff-bezos-innovation-and-competition-act-nasa-friendship-7-r-and-d-spaceflight-intel-11644766616

Sixty years ago on Feb. 20, astronaut John H. Glenn orbited Earth three times. The Mercury capsule Friendship 7 placed on top of an Atlas LV-3B launch vehicle (a modified intercontinental ballistic missile) reached a height of 162 miles and a speed of 17,544 miles an hour. After 4 hours and 55 minutes, it splashed down 800 miles southeast of Bermuda. Soviet cosmonaut Yuri Gagarin did a single orbit the year before.

So yes, the space race was on. “Come on Space Truckin’.” By the 1969 moon landing, it was clear the U.S. had beaten the Soviets, though oddly by using a Soviet-like command-and-control structure, which “Star Trek’s” Romulans and “Star Wars’ ” Galactic Empire would endorse.

Remarkably, Glenn had no computers on board, only a few thrusters controlled by gyroscopes. There were a few issues and Glenn briefly took control of the spacecraft. Semiconductor-based computers were later used in the Gemini program, and the National Aeronautics and Space Administration became an important early customer of Silicon Valley. The invention of integrated circuits lowered costs for commercial computers and the space program. In the 1980s, the military funded the Very High Speed Integrated Circuit to develop fast chips, leading to talk that the U.S. government created Silicon Valley. Hardly. Even though semiconductors are now a more than $500 billion industry and computers in the multitrillions, we still hear echoes of Barack Obama’s July 2012 campaign speech: “If you’ve got a business, you didn’t build that, someone else made that happen.” That thinking is as outdated as phone booths.

Last year Jeff Bezos ’ Blue Origin took 90-year-old William Shatner—Captain Kirk!—into space, though not into orbit, and they surely didn’t “boldly go” on a “five-year mission to explore strange new worlds.” A few months before, Richard Branson’s Virgin Galactic pilots flew slightly off course during a July flight. Even still, I’m trying to reserve an economy-plus seat. The Mercury program cost $2.2 billion in current dollars, more than $300 million a launch. Elon Musk’s SpaceX announced last week that launches into orbit will cost $10 million within two or three years. Could a Bezos-like private company have funded the space program in the 1960s? It’s doubtful, but that doesn’t make the space program a model for public or private investment decisions.

Let’s look at the numbers. In 2019 U.S. research and development spending was $656 billion—three quarters by business, the remaining $170 billion divided among the federal government, universities and nonprofits. Google spent $26 billion on R&D in 2019, Microsoft about $17 billion, Apple $16 billion, Intel $13 billion. I guess they did build that. For the record, federal money for research goes, in order, to the departments of Health and Human Services, Energy, and Defense, and then NASA.

A lot of that nonbusiness R&D spending is for basic research, as it should be.

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WSJ: Wealth Is Knowledge

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https://www.wsj.com/articles/wealth-is-knowledge-information-economics-industry-computers-george-gilder-capitalism-musk-zuckerberg-11644175297

The stock-market carnage came fast and furious, wrecking GameStop -like memes and get-rich-quick crypto schemes and cracking SPACs. The ringleader, Robinhood, fueled by stimulus checks, is a good proxy for the excess. Its stock is down almost 80% from its August peak. It is a fine time to ask: What is wealth? Is it Justin Bieber dropping $1.3 million on a Bored Ape Yacht Club nonfungible token? Ha! More important, how do you keep wealth?

How to create lasting wealth is surprisingly simple: Do more with less. Always has been true, always will. The Industrial Revolution resulted from applying knowledge to replace messy horses with steam power, lowering both the cost of comfortable clothing and global shipping. Computers, with information embedded in cheap silicon, still aren’t done displacing librarians, secretaries, doctors and more. These productivity gains are the engines of progress, much to the chagrin of degrowth, sustainability-soaked, divvy-up-pieces-of-the-pie anticapitalists.

Here’s a paradox. If you didn’t sleep through Econ 101, you were taught about supply and demand curves and that when prices drop, supply needs to come down to reach equilibrium. Yet in today’s digital economy, when costs go down, we actually get more supply, as with silicon chips, data storage and bandwidth.

I asked the author and economist George Gilder about wealth creation. “Wealth is most essentially knowledge,” Mr. Gilder says. “Let’s face it, the caveman had access to all the materials we have today. Therefore, economic growth is learning, manifested in ‘learning curves’ of collapsing costs driven by markets.” Yet these learning curves get waved away by economists. Mr. Gilder says information, not materials, drives growth: “Crash a car and all its value disappears, though every molecule remains.”

Another paradox is the belief that entrepreneurs like Tesla CEO Elon Musk and Meta CEO Mark Zuckerberg are driven by greed despite capitalism’s charitable characteristics. Rep. Alexandria Ocasio-Cortez of New York, showing her misunderstanding of economics, said in 2020, “No one ever makes a billion dollars. You take a billion dollars.” Have you ever noticed that those who criticize capitalists the most are too lazy to be capitalists?

Mr. Gilder counters:

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WSJ: "Get Smart" About Biden's Chaos

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https://www.wsj.com/articles/get-smart-about-bidens-chaos-exaggeration-conspiracies-existential-threat-11643557700

What’s with all the chaos conspiracies lately? In President Biden’s Atlanta speech earlier this month he said that on Jan. 6, 2021, “a dagger was literally held at the throat of American democracy.” Literally? Sorry about that, Chief. And of his opponents: “They want chaos to reign.” Last Memorial Day, Mr. Biden declared, “Democracy itself is in peril, here at home and around the world.” He constantly warns of “the existential threat” of climate change. Always chaos!

Why does that ring familiar? Ah yes, it reminds me of Kaos vs. Control from the TV series “Get Smart” which ran from 1965 to 1970. Mel Brooks and Buck Henry wrote the wisecracking spoof of James Bond—one episode was even named “Bronzefinger.” Maxwell Smart, Agent 86 played by Don Adams, kept a straight face delivering the best lines: “Missed it by that much.” “Sorry about that, Chief.” “I asked you not to tell me that.” My favorite? “And loving it!”

In “Get Smart,” like Mr. Biden’s dagger, exaggeration rules. Chained to a wall with Agent 99, played by Barbara Feldon, Smart tells doubting Kaos agents that the warehouse was surrounded by 100 cops with Doberman Pinschers. “Would you believe 10 security guards and a bloodhound?” Smart asks. “I don’t think so,” a Kaos agent replies. “How about a Boy Scout with rabies?”

Kaos was billed as an “international organization of evil” bent on world domination with a vice president of public relations and terror and the Contrived Accident Division. To fight Kaos, the counterespionage organization Control had the greatest technology, most unfathomable in the 1960s. Most famous were Maxwell Smart’s shoe phone and the cone of silence for secret conversations.

Entrepreneurs today could still make a living inventing all the show’s gadgets: Pocket Disintegrator Pen, Sleeping Dirt, Invisible Chalk, Sleeping Foot Powder and New Face Spray. Sadly still missing from store shelves: the Absorbo pill to soak up alcohol.

No one actually likes chaos. Well, I do, having spent most of my life in the mosh pits of Wall Street and Silicon Valley, where stasis is death.

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WSJ: 90% of Everything Is . . . Take a Guess

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https://www.wsj.com/articles/90-percent-of-everything-is-crap-venture-capital-marc-andreessen-mosaic-web-silicon-valley-tech-investment-innovation-11642970894

It used to be that 90% of the time, you accessed stuff only on your computer’s local network. Then in 1993 at the University of Illinois, Marc Andreessen developed Mosaic, the first internet browser, which allowed users to wander around the World Wide Web 90% of the time. He moved to Silicon Valley and founded Netscape. Mr. Andreessen is now a general partner at a top-decile venture-capital firm, better than 90% of its peers. Andreessen Horowitz recently raised $9 billion in new funds.

Last week I spent some time sitting on Mr. Andreessen’s back porch pondering the magic of 90% and how it created Silicon Valley and continues to rule it. “In venture capital, you think a lot about so-called adverse selection,” Mr. Andreessen says. “ ‘Why am I so lucky as to be the person you’re trying to raise money from?’ You want to get to positive selection, the best people coming to you.”

But how? Mr. Andreessen starts with the replication crisis in scientific studies, especially in psychology—over half of studies can’t be replicated. I suggest “studies show” are the two most dangerous words in the English language. Mr. Andreessen quickly adds, “The corollary is ‘experts say.’ ”

Mr. Andreessen’s friend in the scientific research world told him about a historical study of heart and lung drugs that were approved but were not effective. Mr. Andreessen learned that “one of the things you do to counter a replication crisis is a ‘preregistration of hypothesis’—instead of pretending after the fact that you have a hypothesis, that you’re cherry-picking data to prove.” The result of this preregistration? There were fewer new drugs approved because researchers could no longer fudge the data. “Of course, what this implies is that most drugs that are already on the market today probably don’t work.” His friend agreed and said forget 50%, it’s 90% of research that is bad to begin with.

Then Mr. Andreessen says, “I had heard of this, aha, Sturgeon’s law!” Theodore Sturgeon (1918-85) was a science-fiction author annoyed that people were saying all sci-fi was bad and wanted to stand up for the 10% that was good, saying, “90% of everything is crap.” Mr. Andreessen says “90% of music is crap.” The same is true of “paintings, writing, TV shows and movies.” I would add ideas, stocks, opinions, politicians—the list goes on.

That is “the nature of creative work. There are only a few people in each field that know what to do,” Mr. Andreessen says.

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WSJ: Is Climate Change in Your Problem Top 10?

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https://www.wsj.com/articles/is-climate-change-in-your-top-10-urgent-issues-gop-democrats-problems-worry-global-warming-environment-don't-look-up-11641741976

At a recent dinner, I sat between two men talking past each other. “Mr. Redd” was complaining about our borders and how President Biden’s policies have led to the arrest of nearly two million illegal immigrants. “Mr. Bleu” jumped in, “First of all, they’re unauthorized migrants. Second, I can’t believe you’re worried about that. It’s not even on my top 10 list.” Not one to let a good brawl whimper out unnecessarily, I asked sheepishly, “What’s No. 1?” “Climate change,” he replied. I couldn’t resist. “Really, over failed schools? The homeless? Opioids? Structural unemployment? China?” I asked. “Yup, follow the science,” he said. Ugh. He probably thought the dim-witted eco-allegory “Don’t Look Up” on Netflix was a documentary.

Sure enough, if you check the latest Quinnipiac poll of “the most urgent issues facing the country today,” you get the same divide. For Republicans, the answer is immigration (28%), the economy (24%) and the federal debt (10%). For Democrats, it’s Covid-19 (28%), healthcare (14%) and climate change (13%).

A few years ago, my family was hiking in Point Reyes, north of San Francisco, with our Rhodesian Ridgeback off-leash. Yes, I know, a politically incorrect canine. We spotted a coyote up in the hills and quickly leashed our dog. As we approached another group with a dog, we warned them about the coyote. Instead of a “Thank you,” we got a smug “Well, they were here first.” Really? I may have wished the coyote would eat their mutt for breakfast.

To me, that exchange sums up the current state of environmental thinking. They were here first; let’s go back to the old days. I have no time for this “degrowth” movement. Progress, not retreat, solves problems. While the climate may be changing, meteorologists can’t even model snowfall in Virginia accurately this winter, let alone over decades. We should adapt to change, not slam the brakes on growth. Climate change is the latest manifestation of a tiresome throwback—shift-into-reverse thinking. It’s all back to nature, rewind the clock, fear of overpopulation, and let coyotes roam. This “limitarianism” may prove to be as deadly as other 20th-century “isms.”

Americans have plenty of other problems. Crime is on the rise, and cities are a mess. I asked a resident of Manhattan’s Upper West Side what she thought about New York’s new mayor, Eric Adams, a former captain in the New York Police Department. “We hope he’s like Michael Bloomberg, ” she said. “Isn’t he more like Rudy Giuliani, law and order?” I asked. “Ick,” she replied. “So, you like crime?” I asked sarcastically, knowing that murders in New York City were up over 50% in 2021 compared with 2019. Her answer? “Hey, we live in New York City, we expect it. Plus, we don’t have much crime in our neighborhood anyway.” Right.

When was it that we gave up? San Franciscans gladly struggle to drink through paper straws but divert their gaze from brazen smash-and-grab robberies.

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WSJ: Can Social Media Alter a War?

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https://www.wsj.com/articles/can-social-media-alter-a-war-nato-russian-bots-colonial-pipeline-national-security-ukraine-cyberwarfare-hack-invasion-11641130267

The Cornell-Harvard hockey matchup is legendary. Harvard home fans used to play square-dance music and throw hay on the ice making fun of bumpkins from upstate New York. In retaliation, Cornell fans at Lynah Rink in Ithaca would throw fish on the ice (they still do despite being searched on entry), and for many years they even tied a live chicken to Harvard’s goal. I spoke with a recent graduate who explained how students have modernized taunting. Using fake social-media accounts with pictures of attractive coeds, hecklers would inevitably “friend” Harvard’s goalie and learn details about his personal life. During the game, the crowd would taunt him about his aunt Millie, dog Muffin or recent breakup. Eventually the goalie would turn and stare at the crowd in confusion. Successful psy-ops!

The same tactics are leaking into war planning. Psychological operations are nothing new: We’ve had Tokyo Rose, pamphlets dropped from planes, and Iraq’s Information Minister Baghdad Bob’s spewing lies on CNN. Now Instagram? In February 2012, I wrote a column titled “When Will Social Media Elect a President?” Most readers said never. Well, that ship has sailed. It’s time to ask: When will social media alter wars?

In 2019 during a military exercise, the North Atlantic Treaty Organization’s Strategic Communications Center of Excellence deployed a “red team” to see if it could disrupt 150 soldiers. Spending only $60 on Russian bots and using only open-source data, researchers were able to learn the usernames, phone numbers, emails and identities of soldiers. They also engaged with them on Facebook and Instagram, mapped their connections with other armed-forces members, determined their location within a kilometer, and even got soldiers to send selfies with their equipment. Apparently even soldiers believe that if it isn’t on Instagram, it didn’t happen.

According to the report on the exercise, they could “pinpoint the exact locations of several battalions” and track troop movements. Here’s the scariest part: “The level of personal information we found was very detailed and enabled us to instil [sic] undesirable behaviour during the exercise.” Janis Sarts, a director of NATO StratCom, told me: “Every time we attempted to manipulate behaviors, we succeeded.”

Facebook did shut down some of the researchers’ fake accounts due to suspicious activity. But many groups and fake profiles weren’t suspended. This raises the question: Is Facebook ready or even willing to help during a hot war?

Let’s say, hypothetically, that Russia invades Ukraine and the U.S. sends in troops.

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WSJ: The Metaverse is Already Here

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https://www.wsj.com/articles/the-facebook-mark-zuckerberg-metaverse-is-already-here-virtual-reality-headset-oculus-11640525817

Are you ready to live in a 3D-navigable, socially connected, conscience-curving, carefree virtual world? Facebook’s pursuit of this metaverse dream as its next platform is bold, though it may be like swapping out a car’s engine while it’s going 100 mph—hard to do without crashing. Look at Apple as it transitioned from computers to iPods and iPhones. Facebook even changed its name to Meta. “The dream was to feel present with the people we care about,” CEO Mark Zuckerberg explained. He also promised “immersive all-day experiences.” Facebook may need a new platform anyway if the Biden administration dismantles its current one in the name of antitrust.

This has been tried before. A virtual space called “Second Life” launched in 2003. You could buy digital property and clothes with real money and hang out with other blocky avatars. It was early days. Naysayers in Silicon Valley liked to say that “Second Life” was for those who didn’t have a first one.

The metaverse marks another interface transition. Green and amber text monitors gave way to Apple’s and Windows’ graphical user interface, making computers much easier to use. Then slow modems connected us to the internet and we used the barren search-page interfaces of Yahoo and Google. Eventually graphics and photos sneaked in, especially as blogs and social networks boomed, and smartphones with cameras turned many into photo bugs. Then video was added, peaking this year with TikTok and multi-tile Zoom calls. Each interface iteration means humans spend less time navigating the computer and more time harnessing its power.

Think of the metaverse as another change of perspective. Videogames have 3D worlds already, a big jump from 2D Tetris. Epic Games, maker of “Fortnite,” has more than 350 million registered users. Roblox, for younger gamers, has more than 160 million active users. There are thousands of 3D games on smartphones. An estimated 2.5 billion people play videogames daily, a $150 billion market. My guess is this is where Facebook will go shopping—after it begs for permission from the Federal Trade Commission.

No one reads a videogame instruction manual; players learn by doing. Entire generations have learned how to interact with computers by playing videogames, even if they were mostly killing one another virtually.

Facebook paid $3 billion for virtual-reality headset maker Oculus in 2014 and likely has poured in billions more.

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WSJ: Back to the Office in 2022

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https://www.wsj.com/articles/back-to-the-office-in-2022-work-booster-omicron-meetings-lockdown-11639943352

A Chicago Tribune headline declares: “Experts warn of brutal flu season.” Of course. With never-ending lockdowns (in California especially), working from home, and even people alone in cars wearing masks, we’ve probably lost immunity to many illnesses—and patience for many former day-to-day annoyances.

I hate to break it to you, but with last week’s news that booster shots reduce the severity of the Omicron variant and the success of Paxlovid, Pfizer’s new antiviral pill, it’s back to the office in 2022 for most of us. But are we again vulnerable to a host of diseases, plus many inconveniences we’ve long forgotten? Life moves pretty fast. I don’t know if most folks are ready.

Let’s face it, after more than 20 months of the roll-out-of-bed commute, many have zero tolerance for traffic—remember rubbernecking delays? Or wearing pants, let alone clean clothes. Or drinking industrial-grade office coffee mellowed by nondairy creamers. Your body will reject that like week-old fish.

It’s the broom for Zoom. Welcome back to conference rooms and crowded in-person meetings, including that marketing associate who subtly coughs while you’re talking, and you always fall for it and exhibit common decency and pause only to be interrupted by the cougher and have the meeting hijacked. Yeah, bet you don’t miss that.

Remember cubicles? Or open-office layouts—the vast sea of desks? There was no privacy, and employees would have to crawl under their workstation to make personal phone calls. During lockdowns, your kids might have run noisily around your apartment or house, but you could yell at them to stop, unlike annoying co-workers.

I think one of the greatest abilities the human mind has is its tolerance for small talk. What was with Pete Davidson’s hot pink hoodie when Steph Curry set the record for career 3-pointers?

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WSJ: Old Wisdom for Today’s Markets

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https://www.wsj.com/articles/old-wisdom-for-todays-markets-wall-street-meme-stocks-interest-rates-crypto-inflation-bubble-11639323322

I love Wall Street adages—find all 30—that help explain today’s crazy markets. One that keeps popping into my head lately is “bulls make money, bears make money, but pigs get slaughtered.” I’ve called this market bubblicious, and markets still push relentlessly higher. My mentor, the famed investor Barton Biggs, explained, “A bull market is like sex. It feels best just before it ends.” And now as coronavirus variants come and go, we see 500-point yo-yo swings. Be warned, no one rings a bell at the top of markets.

Near-zero interest rates fuel the fire. Don’t fight the Fed! But rates may rise this spring, which is why high flyers and meme stocks have been reined in. A good proxy is the ARK Innovation ETF, down 38% from its February peak. It is smart to leave early before everyone rushes for the exits.

Maybe stocks will revert to the mean, but what is normal anymore? I remember a Wall Street strategist who claimed stocks go from 25% undervalued to 75% overvalued. Sensible but wrong—the price is always right. Stocks end every trading day valued correctly. Yes, even in the past few weeks, with stocks rising and falling like a runaway roller coaster. Billions of shares traded balance millions of bullish and bearish thoughts to reflect consensus expectations. Or as Efficient Market Hypothesis believers say, “Asset prices reflect all known information”—emphasis on known.

Correct compared with tomorrow? Heck no. In the long term, the consensus is always wrong. In the past 40 years, the S&P 500 has ended the trading day unchanged only 10 times. Inputs change. Expectations change. Macro information changes. Industries change, sometimes ever so slightly. Markets move up or down to reflect new information and investor moods and stuff out of left field. Bull markets climb a wall of worry and top out when there is nothing left to worry about and all the good news is baked in.

My advice is to figure out in which direction the consensus is wrong. Warren Buffett says, “Be fearful when others are greedy and greedy when others are fearful.” Sure, but the hardest part of investing is figuring out what everyone else thinks. Finding the pulse of the market is harder than waiting to buy when there is blood in the streets.

That pulse gets harder to gauge when bull markets turn everyone into momentum investors shouting, “The trend is your friend!”

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WSJ: cool Bond video

WSJ: James Bond’s License to Kill Fun

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https://www.wsj.com/articles/james-bond-license-to-kill-fun-daniel-craig-no-time-to-die-sean-connery-media-hollywood-11638713465

I’ve proudly seen every James Bond movie ever made, even the George Lazenby, Timothy Dalton and Pierce Brosnan doozies, plus Woody Allen’s 1967 “Casino Royale” spoof. As a kid, I even inhaled Duco Cement fumes assembling a plastic model 1964 Aston Martin DB5—with a working ejector seat!

Bond films delivered a feeling of sophistication and fun. The original James Bond was suave and sassy while he resolved sinister plots. He exemplified cool: He drank vodka martinis but never to excess, was impeccably dressed and, though flirty, was a gentleman. The early films were filled with innuendo and scenes that were simultaneously exotic and a touch campy. Sean Connery’s Bond had a joie de vivre. Roger Moore’s was less serious and a little over the top, but the audience was in on the joke.

Scholars love to analyze Bond creator and author Ian Fleming’s work as an allegory: Bond is the new Churchill, saving the British Empire from its inevitable postwar decline. Bond’s motivation in Her Majesty’s Secret Service is always God and country, epitomized in the opening scene of “The Spy Who Loved Me” when he skis off a cliff and unfurls a parachute emblazoned with the Union Jack.

But since Daniel Craig took over in 2006, things have turned strange, especially with his final Bond film, “No Time to Die,” which I recently watched. It was dark and gloomy like 2012’s “Skyfall.” Billie Eilish practically whispers the theme song, seemingly from a shrink’s couch. Bond was brooding, with a constant scowl on his face. What was he so depressed about, Brexit? No wonder Mr. Craig reportedly couldn’t wait to finish his run as 007.

What the heck is going on? After paying for $15 movie tickets plus overpriced and overbuttered popcorn, I expect to escape the drudgery of real life for a couple of hours. I want to come out of a dark theater with a huge smile on my face, not feeling as if I got hit by a sad sack of potatoes.

Why does Hollywood sulk so much these days? Is it simply reflecting society?

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WSJ: A California Attempt to Repair the Crumbling Pillar of U.S. Education

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https://www.wsj.com/articles/the-crumbling-pillar-of-education-california-dave-welch-vergara-school-choice-charter-11638115242

Public-school education has gone from bad to worse. In the Chicago Public Schools, only 26% of 11th-graders were at grade level in reading and math in 2019. Remarkably, the school system had a record-high graduation rate of nearly 84% in 2021. Those students must have had strong senior years! This is why over half of first-year community-college students in the U.S. take at least one remedial course in reading or math. In the U.S., 43 million adults are illiterate. This is a disgrace.

In pre-pandemic California, only 32% of fourth-graders were at or above proficient for their grade in reading. Only 19% of eighth-grade Hispanics read at grade level, and only 10% of eighth-grade blacks did. Those who find disparate impact everywhere should be screaming from the rooftops that public education is racist. Instead, silence.

Despite these poor results, spending per student goes up each year. New York spent $25,139 per student in fiscal 2019. In California, it’s over $20,000. So why haven’t outcomes improved? Parents know why. Bad teachers don’t get fired. Because of tenure, even some capable teachers mail it in. Bad school districts don’t get fixed. Caps on charter schools, even those with proven records, limit their ability to put pressure on public schools. Teachers unions are all-powerful.

Silicon Valley entrepreneur Dave Welch is trying to improve California’s education system. He tells me we need “accountability of quality education.” You may recall the 2014 Vergara v. California decision, a suit Mr. Welch and others funded. Filed on behalf of nine public-school students, the ruling found that five California statutes related to teacher tenure, firing bad teachers and layoff policy violated the state’s Constitution. In his ruling, Los Angeles County Superior Court Judge Rolf M. Treu noted, “Evidence has been elicited in this trial of the specific effect of grossly ineffective teachers on students. The evidence is compelling. Indeed, it shocks the conscience.”

No matter. The California Court of Appeal reversed Vergara in 2016 stating: “With no proper showing of a constitutional violation, the court is without power to strike down the challenged statutes.” In the court’s view, the California Constitution guarantees merely a free public education.

So Mr. Welch was back where he started, with, he says, an “educational system that doesn’t prioritize its actions to educate the children to a degree necessary to function in our society.”

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WSJ: Politicians Have Earned Your Distrust

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https://www.wsj.com/articles/politicos-earned-distrust-biden-inflation-reconciliation-cuomo-covid-deaths-nursing-homes-11637504680

Each day government bombards Americans with reasons not to trust it. It has been only 616 days since the Trump administration’s “15 Days to Slow the Spread.” From the Fauci dance—no mask, one mask, double masks—to the airport mess known as the Transportation Security Administration. If it’s OK for travelers under 12 and over 75 to keep their shoes on through airport security, then surely it’s OK for everyone. Americans aren’t stupid. Each time we’re spun or deceived or outright lied to, trust in government melts away.

Case in point: President Biden’s speech at the Port of Baltimore about the recently enacted bipartisan infrastructure plan, in which he said “this bill is going to reduce the cost of goods to consumers.” Spend more, prices go down? Not likely. A few breaths later: “I’m going to create good-paying union jobs—union . . . not $12 an hour, not $15 an hour—$45 an hour and up with good benefits.” And that will somehow reduce the cost of goods to consumers? C’mon, man. Is Sen. Joe Manchin the only one who understands the wage-price spiral? Inflation is “transitory,” we’re told. Uh-huh. Meanwhile, some Californians are pumping $5 gas.

Mr. Biden also claims the $1.75 trillion social-climate-porkfest reconciliation bill—really more than $4 trillion without accounting gimmicks—“costs zero dollars.” The administration must be using that new “equity” math I keep hearing about. A third-grader could see the deception. Any wonder why Mr. Biden has a 41% approval rating?

White House press secretary Jen Psaki declared the chaotic Afghan withdrawal the “largest airlift in U.S. history . . . so no, I would not say that is anything but a success.” That’s like saying the Titanic was a success as the largest lifeboat deployment in history.

California government becomes less trustworthy by the minute. It lifted most Covid restrictions in June based on 70% of adult Californians receiving at least one vaccine dose, meaning you could go maskless in Trader Joe’s. By August, however, health officials, blaming the Delta variant, reimposed mask mandates in California’s big cities. Then in October, the same health officials said that restrictions will be lifted when 80% are vaccinated. No problem, 80% of adults had gotten jabbed. But wait, the new target is 80% of the entire population, including children under 12, who weren’t eligible for shots. Talk about moving the goal posts.

Sen. Amy Klobuchar and others are going after Facebook, claiming its products are addictive. Maybe they are.

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WSJ: The Chip That Changed the World

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https://www.wsj.com/articles/the-chip-that-changed-the-world-microprocessor-computing-transistor-breakthrough-intel-11636903999

The world changed on Nov. 15, 1971, and hardly anyone noticed. It is the 50th anniversary of the launch of the Intel 4004 microprocessor, a computer carved onto silicon, an element as plentiful on earth as sand on a beach. Microprocessors unchained computers from air-conditioned rooms and freed computing power to go wherever it is needed most. Life has improved exponentially since.

Back then, IBM mainframes were kept in sealed rooms and were so expensive companies used argon gas instead of water to put out computer-room fires. Workers were told to evacuate on short notice, before the gas would suffocate them. Feeding decks of punch cards into a reader and typing simple commands into clunky Teletype machines were the only ways to interact with the IBM computers. Digital Equipment Corp. sold PDP-8 minicomputers to labs and offices that weighed 250 pounds.

In 1969, Nippon Calculating Machine Corp. asked Intel to design 12 custom chips for a new printing calculator. Engineers Federico Faggin, Stanley Mazor and Ted Hoff were tired of designing different chips for various companies and suggested instead four chips, including one programmable chip they could use for many products. Using only 2,300 transistors, they created the 4004 microprocessor. Four bits of data could move around the chip at a time. The half-inch-long rectangular integrated circuit had a clock speed of 750 kilohertz and could do about 92,000 operations a second.

Intel introduced the 3,500-transistor, eight-bit 8008 in 1972; the 29,000-transistor, 16-bit 8086, capable of 710,000 operations a second, was introduced in 1978. IBM used the next iteration, the Intel 8088, for its first personal computer. By comparison, Apple’s new M1 Max processor has 57 billion transistors doing 10.4 trillion floating-point operations a second. That is at least a billionfold increase in computer power in 50 years. We’ve come a long way, baby.

When I met Mr. Hoff in the 1980s, he told me that he once took his broken television to a repairman, who noted a problem with the microprocessor. The repairman then asked why he was laughing.

Now that everyone has a computer in his pocket, one of my favorite movie scenes isn’t quite so funny.

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WSJ: A Long Time Since ‘Zeppelin IV’

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https://www.wsj.com/articles/a-long-time-since-zeppelin-iv-music-era-70s-1971-classic-rock-stairway-to-heaven-11636303100

“It’s been a long time since” . . . 1971. Fifty years ago on Nov. 8, the album “Led Zeppelin IV” was released, which included the eight-minute classic “Stairway to Heaven.” It was a year of transition from turmoil to modernity, a songwriter’s paradise. And yes, I’m a sucker for anniversaries.

Back in 1971 we listened to music on LP records—for the uninitiated, 20 or so minutes of music pressed into vinyl, spun at 33 1/3 rpm and amplified from a scratchy needle to giant speakers. Without TikTok, my generation wasted time poring over album-cover art in search of hidden meaning and reading the liner notes printed on the album sleeves.

More legacy-defining albums were released in 1971 than in any other year by my count. As proof, let’s play a game: I name the album, you name the artist, and no googling. “Sticky Fingers,” “Who’s Next,” “L.A. Woman,” “Aqualung,” “Tapestry,” “What’s Going On,” “Fragile,” “Imagine,” “At Fillmore East,” “Madman across the Water,” “Pearl,” “Anticipation,” “Shaft,” “The Low Spark of High Heeled Boys,” “The Concert for Bangladesh.” How many did you get? Now add the Grateful Dead’s first gold album, and of course “Led Zeppelin IV,” sometimes known as Zoso.

Nineteen seventy-one is still considered “the ’60s,” which started when JFK was assassinated and ended with Watergate. The antiwar Democratic Convention riots defined chaotic 1968. Woodstock embodied 1969. In 1970, the Beatles disbanded and Apollo 13 proved failure wasn’t an option. But what was it about 1971?

The sound of Vietnam protests and smell of tear gas still hung in the air, along with a hippy-dippy free-love ethos perfectly parodied by the TV show “Rowan & Martin’s Laugh-In,” which ran until 1973. Although Richard Nixon was in the White House, there were hints of modernity. U.S. astronauts landed on the moon six times between 1969 and 1972. Nineteen seventy-one was the perfect segue between past despair and future hope and dreams, which were sadly delayed by the inflation and smog-filled skies of the 1970s.

Led Zeppelin captured this transition. Singer Robert Plant’s lyrics had mystical musings and a Tolkien-esque feel—“bustle in your hedgerow.”

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WSJ: Nine Theories of Progressive Power

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https://www.wsj.com/articles/nine-theories-of-progressive-power-weath-distribution-tax-socialism-biden-aoc-11635705664

Go ahead, try to tax the unrealized stock gains of billionaires, a wealth tax of questionable constitutionality. Or wear a “Tax the Rich” dress with the same font as a Chick-fil-A takeout bag to a gala for millionaires and billionaires. Or expand the idea of “infrastructure” to include social giveaways—free stuff for all. But what do progressives get out of it?

They must know that massive wealth redistribution and public spending crush the economy if they have ever studied the failures of Lyndon B. Johnson’s Great Society or Franklin D. Roosevelt’s New Deal. Progressives often invoke Europe as an economic model knowing full well that the U.S. outstrips almost all European countries in economic output per capita—15% higher than Germany’s, 43% higher than France’s.

Surely former law professor Elizabeth Warren has studied enough history—I mean, Harvard, right?—to understand the fallacy of her socialist leanings. Her government-controls-everything policies usually lead to Venezuela-style ruin. Why pursue these policies? What is the end game? Here are nine answers.

The obvious yet unsatisfying answer is to gain and then stay in power—to buy votes. That is understandable, but then why take it to the extreme, like they did with ObamaCare, which anyone with a revenue-vs.-expense spreadsheet knew would fail?

A better explanation is the shakedown theory. Even Honest Abe Lincoln’s administration was rife with patronage. The goal of single-payer healthcare recalls the opening scene from “The Godfather” when Don Corleone meets with a favor-currying constituent. Bonasera wants justice for an assault on his daughter. Now imagine he’s asking his senator for permission to have gallbladder surgery.

Then there is the “noblesse oblige” theory that the privileged should use government to improve the lives of the less privileged. Hooey, but everything sounds smart in French.

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WSJ: Crypto Is Shedding Its Tether

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https://www.wsj.com/articles/crypto-shedding-tether-stablecoin-backed-john-law-11635103866

The launch of the first bitcoin-focused exchange-traded fund last week proves crypto bulls need to meet John Law. The Scottish gambler, economist and financier is likely why why so few top French banks have Banque in their name. Instead, there is Crédit Agricole, Société Générale and Crédit Mutuel. Law’s Banque Générale, later renamed Banque Royale, issued bank notes out of thin air, then royally blew up in 1720 and destroyed the French economy. The reputation of French banks has never fully recovered.

Law’s connections gave him exclusive rights to trade between France and its Louisiana Territory. The Mississippi Co. was funded by selling new shares of Banque Générale that could be paid for with bank notes issued by—wait for it—Banque Générale. Shares took off, rising from 500 livres to 10,000 livres from January to December 1719. Soldiers had to be sent in to keep order in the frenzied financial district.

Law’s flaw was issuing bank notes willy-nilly, without real backing for their value, to keep the stock price rising. The French government eventually made the huge mistake of making these bank notes legal tender, doubling the French money supply. Inflation raged, hitting a 23% monthly rate in January 1720. By September 1721, shares dropped back to 500, and the French economy imploded.

Fast-forward 300 years. Crypto had a big October, with bitcoin rising from almost $44,000 to a $66,000 peak in anticipation of the ProShares Bitcoin Strategy ETF, which actually doesn’t buy bitcoin—it buys bitcoin futures. Meanwhile the stablecoin issuer Tether Ltd. paid a $41 million penalty after the Commodity Futures Trading Commission found the company had falsely claimed it had adequate dollars in reserve to back its tokens.

The New York attorney general’s office ran a similar investigation over Tether’s claim of 1-to-1 backing with U.S. dollars. It ended, unsatisfactorily if you ask me, with an $18.5 million settlement paid in February and an agreement to produce reports on reserves for tether. Why not dig further? Tether neither admitted nor denied the attorney general’s findings.

I wanted to know more, so I submitted a Freedom of Information Law request with the New York attorney general’s office requesting reserve statements, ledgers and bank records from Tether. It was denied, citing disclosure that would “constitute an unwarranted invasion of personal privacy” and “interfere with law-enforcement investigations or judicial proceedings.” Hmm. And thanks for nothing.

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WSJ: Failure Was Always an Option for Elizabeth Holmes

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https://www.wsj.com/articles/failure-entrepreneur-innovation-failing-upward-startup-11634480558

As the Elizabeth Holmes trial for alleged fraud at her startup Theranos winds on, the biggest question is: When the company’s blood testing machines didn’t work, why didn’t she change tactics? Real entrepreneurs fail early and often. Ms. Holmes instead was stubborn and chose deception over failure. That’s a shame. Despite today’s IPO and SPAC fireworks, the truth is that in Silicon Valley most ideas fail. Heck, most companies fail. More than half of venture-capital investments are smoking holes in the ground. Fortunately, success often rises from the ashes of ruin.

Some history of failure: Thomas Edison, the “Wizard of Menlo Park” (New Jersey, not California), had the hardest time finding a filament for his incandescent lightbulb. He tried bamboo, cedar and flax until he found that carbonized cotton worked. “I have not failed. I’ve just found 10,000 ways that won’t work,” Edison said. Fail until you succeed beats fake it till you make it.

Then there is the computer mouse. The Douglas Engelbart version of 1968 was a crude wooden block on two wheels with three buttons. Xerox PARC came up with a better mouse using a metal ball and motion sensors. Steve Jobs wanted one, so Apple hired a design firm, which came up with over 25 prototypes, all failures, until a design in 1981 worked. Think of all the failed mice it took to create today’s curved mouse with multiple buttons, a scroll wheel and optical sensors. Speaking of failures, James Dyson made 5,127 prototypes over four years for his “cyclone” vacuum cleaner.

Entrepreneur Stewart Butterfield once tried to build a multiplayer online game but switched to photo sharing, selling Flickr to Yahoo in 2005 for $25 million. Success, but not a home run in Silicon Valley. Mr. Butterfield left Yahoo in 2008 to help found a company called Tiny Speck and build another multiplayer online game called “Glitch.” Persistence! “Glitch” attracted tens of thousands of gamers, but not enough to cover its costs, so Mr. Butterfield killed it in 2012.

Tiny Speck pivoted, which in Silicon Valley means fail and scramble to do something else. The company had built its own crude internal communications system for employees to chat digitally during the development of “Glitch.” Maybe others would use it. Seven months after they started work on Slack, the company announced its preview release. On the first day of the press blitz, 8,000 people requested the preview version. In February 2014 Slack had 16,000 users and by November it had 285,000, with 73,000 paying for it. Now more than 10 million people use it daily. Mr. Butterfield sold Slack to Salesforce for $27.7 billion last year. That’s failing upward!

Then there’s Elon Musk, who very openly noted, “My proceeds from the PayPal acquisition were $180 million. I put $100 million in SpaceX, $70m in Tesla, and $10m in SolarCity. I had to borrow money for rent.”

Read the rest here.

WSJ: Catch Society’s Meltdown on HBO

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https://www.wsj.com/articles/society-meltdown-hbo-white-lotus-mike-white-connie-britton-progressive-woke-11633884922

The best writer in Hollywood right now is Mike White. In 2003 he wrote the film “School of Rock” for his friend Jack Black to star in. After a stretch competing in reality shows like “The Amazing Race” and “Survivor,” Mr. White is back where he belongs. He created, wrote and directed the recent HBO series “The White Lotus.” Set in Hawaii, it chronicles the dysfunction and competing narratives of staff and guests at a luxury resort. It is funny, biting and eye-opening. Mr. White so perfectly dissects society’s mental meltdown, I’m worried he might end up canceled.

Mr. White really shines when writing about the Mossbacher family. The mom, Nicole ( Connie Britton ), is chief financial officer of a search company. The dad, Mark ( Steve Zahn ), has health issues, and their daughter, Olivia ( Sydney Sweeney ), and a friend are pitch-perfect judgy college sophomores, dreaming of utopia while dripping in mockery and ridicule. The dinner conversations are priceless.

After Olivia accuses her mom of “old tribal thinking,” Nicole pushes back. “My feeling is most of these activists, they don’t really want to dismantle the systems of economic exploitation, not the ones that benefit them, which are all global, by the way. They just want a better seat at the table of tyranny.”

Olivia sneers: “Hmm, no, that’s just you, mom.” Nicole then puts her daughter back in her place—something mothers don’t seem to do anymore: “And what’s your system of belief, Olivia? Not capitalism. Not socialism. So just cynicism?”

In another conversation, about expensive jewelry and who deserves wealth, Olivia declares, “Mom, good news. I’m looking around the hotel, and it seems like all of the white, straight men are doing just fine. They are still thriving.”

The mom responds: “Point taken. I just think it’s funny that now it’s OK to reduce everybody to their race and gender, but isn’t that the kind of thinking that we’ve been fighting against all these years?”

Finally dad pipes up. “I agree,” Mark says. “I mean, for years, I was the good guy, you know. I was the one in the room, saying, like, ‘Hey, that’s not cool,’ to all the chauvinists and bigots. But now I’m the bad guy, or at least I shouldn’t say anything on account of my inherited traits. I mean, why do I need to prove my antiracist bona fides? It seems wrong.” How many of us think this but are too afraid to say it out loud these days?

Olivia, with her daughterly venomous scorn, then lets this perfect line rip: “Yeah. It’s not all about you, dad. It is time to recenter the narrative.” Mark shoots back, “That’s fine by me. I don’t want to be the center of the narrative. Believe me. Let’s center the narrative around, uh, Paula.” That’s Olivia’s friend, who happens to be, as today’s narrative calls it, a person of color.

WSJ: Will China Save Evergrande?

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https://www.wsj.com/articles/china-save-evergrande-bankruptcy-real-estate-housing-bubble-market-collapse-11633275348

Is China about to get a lesson in “Too Big to Fail?” Its second-largest real-estate developer, China Evergrande Group, with 1,300 projects in 280 cities, has some $300 billion in liabilities. Evergrande owes investors as many as 1.6 million unfinished apartments, and as far as financial debt, it owes $88.5 billion to banks and bondholders with $37 billion due within a year. It already missed an $83.5 million coupon payment on Sept. 23 and a $47.5 million payment last Wednesday. Evergrande does have a 30-day grace period, so the clock is ticking toward a default.

Is Evergrande too big? Is there an implicit guarantee for Chinese real-estate investments similar to the foolish U.S. implicit guarantee of Fannie Mae and Freddie Mac debt? No one knows—yet.

China is littered with ghost developments and half-finished projects. On a visit to Shenzhen more than a decade ago, I saw empty buildings with homeless people living in the rubble of the lobby. Debt financing is always treacherous.

The press keeps touting a “Lehman moment” and predicting financial collapse. I doubt it—it’s more like Bear Stearns, a loud warning to others heavily in debt. Evergrande’s short-term debt is about 1% of China’s foreign reserves, so a bailout is possible. But China has dozens of large debt-laden real-estate companies, including Sunac, whose bonds investors are busy selling off. Will China let real estate blow up?

The answer is typically this: China doesn’t have a safety net or a robust retirement system, so most Chinese households—as many as 70% (but like most statistics in China, who knows if that’s right?)—put their wealth into real estate. When new buildings are announced, there is a frenzy to buy apartments, even if many remain vacant for years. The thinking goes: Hong Kong prices more than tripled since 2004; surely the same can be true going forward for mainland China. That’s bubble logic.

So while Xi Jinping and the Chinese Communist Party can hammer internet companies and make them pledge allegiance to a “common prosperity” policy, limit videogame play, decimate the after-school tutoring business, and even denigrate television celebrities as “sissypants,” they can’t let real estate fail.

WSJ: Ilhan Omar’s Idea of Progress

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https://www.wsj.com/articles/ilhan-omar-progress-gross-domestic-product-squad-11632672223

Rep. Ilhan Omar (D., Minn.), along with five other Democrats, recently introduced H.R. 4894, the Genuine Progress Indicator Act of 2021. The bill, only six pages long, is a glaring example of why Congress has a meager 28% approval rating.

The goal is a progressive alternative to gross domestic product, which presumably is an unjust tool to prop up big bad business. “The world needs new economic indicators and economic policies that will prioritize and encourage truly sustainable and equitable development,” Ms. Omar claims. The bill requires that “the head of each Federal agency, the President, the Chair of the Federal Reserve, and Congress shall” use both the genuine progress indicator and GDP when budgeting or forecasting economic activity.

The new measure, a cousin of the United Nations’ squishy World Happiness Report, is likely being proposed to rationalize the progressive multitrillion “infrastructure” spending blowout. The genuine progress indicator aims to blur the lines between entitlement and investment. This is dangerous. As Sen. Kirsten Gillibrand (D., N.Y.) tweeted, “Paid leave is infrastructure. Child care is infrastructure. Caregiving is infrastructure.” No, they’re not.

So what is genuine progress? A 2018 paper in Ecological Economics—regrettably, my subscription has lapsed—defines it as the net of benefits and costs neglected in GDP, things like “inequality, regrettable defensive expenditures, uncounted environmental externalities, depletion of natural resources, and trade-offs with non-work uses of time.” Squishy indeed.

In H.R. 4894, benefits that don’t show up in GDP but would in the genuine progress indicator include “environmental and social factors” addressing “ecological scarcities” and directing “resources to sustainable development without degrading the environment,” you know, things like carbon sequestration and “maintenance of biological and genetic diversity.” Probably on purpose, these are not as easy to measure as lemonade sales or how many widgets roll off an assembly line. I would guess when Democrats are in control, genetic diversity and social factors would rise, and when Republicans are, environmental degradation would send genuine progress spiraling.

WSJ: What Super Bowls Teach Us About Capitalism

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https://www.wsj.com/articles/super-bowl-capitalism-market-brady-buccaneers-tech-antitrust-innovation-11632069545

As they used to say in Oakland, Calif.: The autumn wind is a Raider. Football is back! This season’s NFL championship will be played at SoFi stadium in Inglewood, Calif., the new home of the Los Angeles Rams and Chargers (bye-bye San Diego). On Feb. 3, 2002, Tom Brady appeared in his first Super Bowl—XXXVI, that is 36 for you non-Romans. The New England Patriots beat the St. Louis Rams. U2 played at halftime.

U2 hasn’t put an album out since 2017, St. Louis no longer has a football team, and see if you can spot a trend from some of the companies that each paid $2.2 million to run 30-second Super Bowl ads in 2002: Blockbuster, Circuit City, AOL, CompUSA, HotJobs, RadioShack, Yahoo! and Gateway. Yes, they are the ghosts of Super Bowls past.

The technology companies driving change in 2002 got run over by, well, technology changing. It wasn’t overnight, like a championship team losing its opening game the next season. Technology changes slowly enough that it creeps into our lives, often unnoticed, until you open your junk drawer and pull out that old BlackBerry. Or a 64-megabit flashcard for your one-megapixel Sony camera (later this month you will be able to buy an iPhone 13 with a terabyte of storage.) Or the six-pound IBM ThinkPad with the weird red nub you were issued when you started at McKinsey.

But technology is also about expectations. It is easy for tech investors to get lulled into complacency when they see what is growing, extrapolate forever and, as far as stocks go, pay for future earnings that may never materialize. Some like RadioShack were obvious disasters in the making. Heck, in 1996 Cosmo Kramer conspiratorially asked Jerry Seinfeld, “Why does RadioShack ask for your phone number when you buy batteries?” It doesn’t anymore. Same for Blockbuster. Netflix started mailing DVDs in 1998, and while video streaming was small and blocky at the time, it was clearly coming.

Tom Brady is from San Mateo, Calif. in Silicon Valley and went to—warning: canceled person alert!—Junípero Serra High School. Famously, Mr. Brady was the 199th pick in the sixth round of the 2000 NFL draft out of the University of Michigan. Low expectations at a time of peak stock-market expectations.

Another graduate of Serra High, Barry Bonds, hit his 756th career home run on Aug. 7, 2007, passing Hank Aaron’s record—more of a juiced-player era vs. juiced ball like today’s juiced stock market era.

WSJ: The Market Fails a Breathalyzer

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https://www.wsj.com/articles/low-interest-rate-dow-35000-joby-aviation-carvana-coinbase-beyond-meat-investing-11631464939

Joby Aviation, which plans to begin an electric air taxi service in 2024, is worth more than Lufthansa, EasyJet or JetBlue. Does that seem right? In this market, why not? Heck, earlier this year, Tesla was worth more than the next nine car manufacturers combined, though now only the next six. Beyond Meat, made with pea protein, is worth more than the entire market for peas eaten globally—like the bumper sticker says: Imagine whirled peas. Do fundamentals even matter?

I can go on. Used-car sales platform Carvana is worth more than Volvo, Honda, Ford or Hyundai. Airbnb is worth more than Marriott and Hilton combined. Crypto-exchange Coinbase is worth more than the Nasdaq. I live at the intersection of innovation and disruption, but when companies are worth more than any possible reality, watch out.

How about those meme stocks still getting hyped on Reddit’s WallStreetBets? Those who bid GameStop shares into the stratosphere waved at Virgin Galactic Holdings as they soared by. A year ago, the stock was $6 and it is now $190—some dupes paid $483, game over. Short sellers Melvin Capital, Point 72 and D1 Capital focused on fundamentals and got their assets handed to them. Shorts lost more than $9 billion between January and June.

New Chairman Ryan Cohen, who is driving change at GameStop, may be a retail genius for turning around Chewy, but Redditors may want to put in a call to hedge-fund manager Eddie Lampert, who bought Kmart and merged it with Sears in 2005, as a highly touted “integrated retail” play, combining stores and online sales, eerily similar to the argument for investing in GameStop today. The stock peaked at $135 in 2007. It is now at $0.30 as the company languishes in bankruptcy. A 1970s Sears Johnny Miller leisure suit is worth more.

AMC Entertainment’s stock was scraping $2 at the end of 2020. It is now $50 thanks in part to Robinhood speculators, and the company has smartly raised cash. But what about fundamentals? Theaters are still sparse, and Disney and others are willingly putting blockbusters directly onto their streaming services—ask Scarlett Johansson about Black Widow’s ticket sales. Theaters are the new roller rinks.

Venture capital is cuckoo.

WSJ: A Lesson From a Howler Monkey

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https://www.wsj.com/articles/howler-monkey-travel-dominance-masculinity-parenting-siblings-costa-rica-11630271847

I miss travel, though I definitely don’t miss airports. But slow security lines and overpriced paninis will be worth it again soon, because great life lessons emerge in the oddest places. Way back, my family took a trip to Costa Rica. They have beaches, volcanoes, rafting, ziplines, horseback riding, hikes, hanging bridges. What’s not to like?

Early in the trip, my wife and I, along with our four sons, stayed at an “eco-hotel.” The rooms had little cardboard placards bragging about how much water and carbon they didn’t use, and there were plenty of vegan choices at the buffet breakfast, next to the eggs and bacon. I asked the front desk what “eco-hotel” meant and was told that it was just branding to get Americans and Germans to stay there—they weren’t doing anything different than before they adopted the moniker.

On our first morning, our guide, Alberto, picked us up in his van and unloaded us at some important rainforest, grabbing a tripod-mounted Swarovski spotting scope. He marched us maybe 50 yards in, stopped to set up the scope, and launched into a long-winded description of the very rare and elusive three-wattled bellbird, a favorite of birdwatchers because of its clanging metallic voice. He stared into the telescope, spun it around, huffing and puffing and searching so long that I began to suspect the bellbird was extinct.

The rest of us were bored to tears. After 20 minutes, my eldest started flicking something at No. 2. Yes, sometimes it is just easier to number them. He didn’t like having things flicked at him, but his older brother was bigger, so he started poking at No. 3, who started screaming, “Don’t touch me because I don’t like being touched.” Then No. 3 started picking on our youngest, pushing in the back of his knees so he couldn’t stay standing up.

Alberto kept droning on about mating habits and migratory patterns. As my youngest kept getting bullied, he started sobbing to my wife. This went on for a while until she turned to me and told me to do something about it. I didn’t think she was actually paying attention to Alberto or even interested in the mythical three-wattled bellbird. None of us were. She just wanted the bickering to stop. So what did I do? I reprimanded my eldest for starting the chain reaction. It didn’t matter; within minutes the flicking, touching, sobbing and “do something about this” pleading continued. Ah, the circle of dominance and submission.

Alberto finally found the dumb bird, and we all looked in the field scope at some fuzzy white-and-brown thing that sounded like the banging exhaust pipes of a Ford Pinto.

WSJ: Those Punching-Bag Elites

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https://www.wsj.com/articles/scape-goat-elites-politics-billionaires-taxes-coastal-technocrats-expert-class-obama-clinton-trump-populism-progressives-11629641837

Who are these elites I keep hearing about? Is there some superior set that run everything? “It’s time to hold American elites accountable for their abuses,” former Chicago Mayor Rahm Emanuel blared in the Atlantic on the college-admissions scandal in 2019. Best line: “America’s middle class is Cinderella, and the nation’s elites are her evil stepsisters.” OK then.

So who are they—the “sophisticated, vaccinated crowd” at the Obama birthday bash a New York Times reporter gushed about? Maybe. “You know, I always hear ‘the elite, the elite,’ ” Donald Trump told a 2019 crowd in Grand Rapids, Mich. “I have a better education than them, I’m smarter than them, I went to the best schools, they didn’t. [I have a] much more beautiful house.” Mirror, mirror . . .

America hasn’t had royalty since tossing King George III, but is there some secret cabal of rich, like-minded elites who control everything? An American Illuminati? I keep looking. What I’ve discovered is that “elites” are mostly made-up groups everyone uses as punching bags of envy for whiny complaints.

A federal criminal filing notes that many Oath Keepers, a right-wing group, believe “government has been co-opted by a cabal of elites actively trying to strip American citizens of their rights.” Hillary Clinton wanted to collect “taxes in an equitable manner, especially from the elites.”

Ancient Rome had patricians and plebeians too. Look what happened to them. Same for Florence’s grandi, made famous by Machiavelli. The French foolishly funnel university elites into government. The Chinese Communist Party elites are now cracking down on their rich entrepreneurial elites. And the British still have hoity-toity duchesses and lords and knights and dames.

But we Americans? This is the land of meritocracy, for now anyway. Maybe we just dream up our elites.

WSJ: A Chinese Warning for U.S. Tech

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https://www.wsj.com/articles/china-tech-ant-didi-alibaba-ccp-censorship-antitrust-neo-brandeis-biden-khan-kanter-wu-11629036761

Big U.S. tech companies must be watching with glee as China cracks down on its homegrown technology companies. They are thrilled not only because they are seeing potential global competitors in e-commerce, music licensing, ride sharing, food delivery and more weakened, but because they now have a powerful card to play at home.

It started last October when Jack Ma, founder of Alibaba and its affiliate Ant Financial, complained at the Shanghai Bund Summit that regulators were too cautious: “There is no innovation in this world without risk.” He also said Chinese banks have a pawnshop mentality, requiring collateral before they lend, unlike Ant, which was about to go public, which uses algorithms to assess creditworthiness. Mr. Ma’s criticisms were correct, but he angered the powers that be. Even though shares for Ant Financial’s initial public offering were 870 times oversubscribed, the Shanghai Stock Exchange effectively canceled the IPO in early November. Alibaba stock is down more than a third since then. Ouch.

Never bite the hand that feeds you. Back when Alibaba was private, Mr. Ma benefited when Chinese regulators and the Chinese Central bank forced a spinout of their payment system, Alipay, basically taking away value from existing Alibaba shareholders, like Yahoo and SoftBank, and giving it to Chinese investors. That was a money heist.

Killing the Ant IPO likely damaged the company’s ability to raise capital. It was a dumb move given how fickle global markets are about government control. Ever wonder if capitalism and communism/authoritarianism are compatible long term? We are finding out.

The purge continues. Food-delivery company Meituan was fined $1 billion for abusing its market position. Ride-sharing leader Didi Global was warned to delay its U.S. IPO listing over cybersecurity concerns. It went public anyway, at $14, and then the China State Council announced new rules and a probe of overseas listings. Didi stock is now under $9.

Tencent shares plummeted after a state-owned newspaper said online gaming was “opium for the mind.”

WSJ: To Lie Is Human

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https://www.wsj.com/articles/lying-human-politics-parenting-flatten-the-curve-riots-11628433108

We all tell lies. Some are forced: “It must have gone to my spam folder.” Others mislead: “15 days to flatten the curve.” Some are corrupt: “You can keep your doctor.” Others are dangerous: “mostly peaceful protests” and “destruction is not violence.” Have we finally gone overboard with all the lying?

I’m guilty too. On my youngest son’s 7th birthday, my wife and I explained that he was still 6 until 7:24 a.m., the actual time of his birth. We were in Lake Louise, Alberta, and we all wanted to ride horses. But the minimum age was 9. He was big for his age so, undermining years of careful parenting, I told him, “Listen, when they ask how old you are, I know you’re 6 and 7 today, but you have to say that you’re 8.” It was touch and go. Children are often refreshingly honest, but he lied and got to ride.

Later that day, we went to a ski resort to ride the lift to the top of the mountain and look for bears, moose and elk. The cost was $35 each, though 5 and under rode free. So I told my son, “Forget what I told you this morning, when they ask, you now have to say you’re 5.” So yes, my son was 5, 6, 7 and 8 on the same day. In retrospect, I feel awful for having made my son lie for access and money, though I now realize I may have started training him for a career in politics.

We know politicians lie, and trust in government is near an all-time low. A recent Rasmussen poll said only 40% of voters thought Anthony Fauci was telling the truth about gain-of-function virus research funding of the Wuhan Institute of Virology. That is not a lot of credibility.

Urban Dictionary’s third definition (there are six) for the word “Fauci” is “someone that everyone should know is a liar, but somehow maintains credibility with some despite obvious duplicity.” Heck, Elizabeth Warren is still a senator, despite lying about her purported Native American heritage.

The Washington Post “fact checkers” say that Donald Trump made an uncannily precise 30,573 false or misleading claims during his presidency, though in his first 100 days only 78 for President Biden. That sure feels like at least one thumb on the scale. Oh, and “if you’ve been fully vaccinated, you no longer need to wear a mask” came on day 113.

WSJ: August Is Full of Surprises

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https://www.wsj.com/articles/berlin-wall-arab-spring-color-tv-internet-innovation-investing-11627829703

It’s August—the hazy, lazy days of summer. People are either at their vacation homes or wishing they were at Burning Man, virtual again this year. The future’s on hold, so you might as well head to the ballpark or the beach, shut your brain down and read Lizzy Dent’s novel “The Summer Job.” Nothing ever happens in August. Except . . .

Surprise! On Aug. 11, 1951, New York’s WCBS-TV broadcast the first baseball game in color, a double-header from Brooklyn’s Ebbets Field. The surprise was that television could do color at all—maybe 100 color sets existed at the time. Yes, “The Wizard of Oz” stunned theatergoers with color in August 1939. But television? Around 20% of U.S. homes had black-and-white TVs, often to watch Rocky Marciano’s almost monthly boxing matches, which my dad called the Bum of the Month club. By 1960 almost 90% of homes had sets. As broadcasts in color ramped during the ’60s, color-TV sales boomed. Someone paying attention 70 years ago would have seen the future.

Surprise! On Aug. 13, 1961, the world woke up to 32,000 troops in the Soviet sector of Berlin installing 97 miles of barbed wire and eventually building concrete fences—not to keep people out, but to keep anyone from leaving. The Berlin Wall stood for 28 years, as the icy Cold War proved that capitalism in the West, especially West Germany, completely outdistanced the stagnant communist Five Year Plans and neighbor turning in neighbor via East Germany’s Stasi secret police. The only question is why it took so long to implode.

Surprise! On Aug. 15, 1971, President Nixon ended the international gold standard set up at the 1944 Bretton Woods Conference. Most didn’t see that coming. After years of funding Lyndon B. Johnson’s Great Society and the never-ending Vietnam War, the U.S. couldn’t afford both guns and butter as other countries began demanding physical gold instead of printed dollars for trade imbalances. Subsequent inflation was definitely not “transitory.” Oil embargoes and economic “malaise” followed. Real assets soared, stocks flatlined. This was broken only when President Reagan had Federal Reserve Chairman Paul Volcker’s back as he slew inflation with punishing interest-rate hikes.

Surprise! On Aug. 5, 1981, Reagan fired more than 11,000 striking air-traffic controllers, members of the Patco union. Union membership as a percentage of the U.S. workforce peaked in 1945, but the decline slowed in the 1960s and 1970s. It’s been steadily falling since Reagan’s action. That and capital-gains tax cuts, encouraging capital formation, set up U.S. companies for rapid and profitable growth. A massive bull market began in 1982—Aug. 13 actually—with the Dow Jones Industrial Average at 777. We’ve rarely looked back.

Surprise! On Aug. 6, 1991, British scientist Tim Berners-Lee published the first ever website, with information on his World Wide Web project. Hardly anyone noticed. And then a double whammy—on Aug. 18, 1991, hard-line communists attempted a coup against Soviet leader Mikhail Gorbachev but were foiled by Boris Yeltsin, marking the beginning of the end of the Communist Party. On Christmas Day Mr. Gorbachev resigned, the U.S.S.R. dissolved and Yelstin took over the Russian state. Capitalism won. In 1993 Marc Andreessen put out the Mosaic browser at the University of Illinois, then came to Silicon Valley and started Netscape, which went public in, yes, August 1995. Stuff happens fast! These surprises were both world-altering.