Andy Kessler

WSJ: Jamie Dimon’s Timely Warning About Socialism's Misery

https://www.wsj.com/articles/jamie-dimons-timely-warning-11555873352

Socialism is now woker than a two-for-one Che Guevara T-shirt sale, with Bernie Sanders leading the Democrats’ presidential primary polls and Alexandria Ocasio-Cortez dominating the party’s imagination.

In a rare calling-out of this bogosity, JPMorgan CEO Jamie Dimon warned shareholders this month that “socialism inevitably produces stagnation, corruption and often worse.” He was echoing Winston Churchill’s observation that socialism allows for “the equal sharing of misery.” Why is it only capable of generating misery?

Because under socialism, politics rather than productivity drives employment. Technological innovation is suppressed. Long ago, an Israeli explained to me that under socialism—Israel’s economic system until 1985—you would always hire two workers to do the job of one.

Of course, there is a spectrum of socialism. The textbook definition is government ownership of the means of production, as in the communist-run Soviet Union or Cuba, or the state-owned factories of China today. But socialism can also mean “owning” an industry by burying it in regulation (see education, Medicare, the overregulated auto industries and so on). 

Socialists are modern-day Luddites, destroyers of technology to preserve jobs. Article 4 of the current postal-workers’ union (sweetheart) contract states that “any new job or jobs created by technological or mechanization changes shall be offered to present employees capable of being trained to perform the new or changed job.” It’s one reason, even with automation, we still have 500,000 postal workers when the right number is zero. Similarly, Detroit was slow to use robots. It’s only recently that United Auto Workers union contracts did away with job guarantees.

Workers at the Port of Oakland went on strike to protest the use of RFID tags on shipping containers because it would kill lucrative clipboard-toting jobs. Productivity be damned.

And that phantasmagoria, the Green New Deal? It’s a productivity pallbearer, with its federal job guarantees and a new mechanism to support those “unwilling to work.” Where do I sign up for that?

WSJ: What You Need to Know to Pick an IPO

https://www.wsj.com/articles/what-you-need-to-know-to-pick-an-ipo-11554661746

It’s red-herring season for IPOs—so named for the red warning language on the left side of an initial public offering’s preliminary prospectus. Thanks to the Federal Reserve’s interest-rate pause, the IPO jailbreak is becoming a stampede. Last month Lyft raised $2.2 billion. Pinterest is next, and Uber, Slack, Postmates, Airbnb and others likely aren’t far behind.

How do you know which IPOs to buy? No, not to trade—you’d never get it right. Lyft priced at $72, traded at $85 on its first day, then closed at $78, only to fall to $67 on its second day. It’s now $74. I’m talking about buying and holding for a few years. Yes I know, how quaint.

The trick is to read the prospectus. What are you, crazy? That’s a couple hundred pages. Well, not the whole thing. But remember, where the stock trades on its first day is noise. There is usually a lockup of insider shares for 180 days, which are then, like a bucket of cold water, thrown on the market. So understanding long-term prospects are critical. Here are a few shortcuts.

First, glance at the underwriters along the bottom of the cover. On the top line are the banks putting their reputation on the line. If the one on the far left is Goldman Sachs , Morgan Stanley or JPMorgan , you’re probably OK, in that order. If it’s Soprano & Sons, run away.

Next, open the management section and study the directors. Forget the venture capitalists or strategic partners with board seats—they have their own agendas. Non-employee directors are the ones who are supposed to be representing you, the public investor. And their value depends on their experience.