Andy Kessler

WSJ: The Market Gets What It Wants

https://www.wsj.com/articles/the-market-gets-what-it-wants-11566755407

Are you talking to me? The market dropped 767 points Aug. 5 on news of China’s currency devaluation, then popped 311 points the next day on delayed tariffs, then sank 800 points eight days later after signs that the yield curve had inverted further. It’s been yo-yoing since then—up 275, down 623 on Friday. When the stock market goes through these spasmatic gyrations, it’s a desperate cry for attention. But what is it trying to say? Ya got trouble, with a capital T.

We had a great economy going. Tax cuts had led to 50-year-low unemployment, rising corporate profits, and a growth rate nearing 4%—almost twice the anemic level it hovered at during the Obama years. But like an “own goal” in soccer, the Navarro-Lighthizer-Mnuchin tariffs scored one for chaos, and now the stock market is reacting. Until recently the market was pretty silent on trade. Could the recent drop be its loud call to end tariffs?

President Trump delayed some of his Sept. 1 tariffs until Dec. 15, including those on iPhones and laptops, and the market traded up. But the tariff burden is still onerous, and stocks dropped again in sync with the bond market as 30-year Treasurys dropped below 2%, their lowest rate since . . . ever. This flight to safety may indicate structural problems in credit markets, triggered by tariffs. But it’s almost as if the bond market is demanding the Fed cut rates in September, or else. Why should the stock market do all the talking?

It reminds me of Sept. 29, 2008, when the House voted down a $700 billion financial rescue package after the Lehman Brothers implosion. The market dropped 777 points, losing $1.2 trillion in value, the first time more than $1 trillion was lost in a day. Congress got the message. The Emergency Economic Stabilization Act passed five days later and was quickly signed into law by President George W. Bush.

The market gets what it wants. Facebook traded down after its initial public offering because of concerns that it lacked a mobile strategy—then it quickly got one. Uber laid off 400 employees to try to stem its post-IPO slide, but the stock has kept declining, so expect even more layoffs. And it doesn’t take a crystal ball to see the day within a year of WeWork’s IPO that their stock sells off and they finally change their squishy cash-soaking business model. This is what public markets are good at: creating urgency.

Sure, this makes the stock market sound like a stubborn bratty child throwing a hissy fit. And that’s basically right.

WSJ: What Will California Ban Next?

https://www.wsj.com/articles/what-will-california-ban-next-11566158511

First they came for our plastic grocery bags. Then they came for our plastic straws. Now they’ve come for our plastic water bottles at SFO. Yes, you read that right. Starting Tuesday, the sale of plastic water bottles will be banned at San Francisco International Airport, one of the few places they actually make sense. California has many dumb laws and statutes and bans, but this one is especially brainless—spurred by futile self-righteousness.

After running late for your flight after a 30-minute security line only to have TSA confiscate your Fiji water bottle, you’ll now have to stop at a crowded water fountain to fill your own metal flask. Or buy an overpriced glass or aluminum bottle at the concession stand, paying another 10 cents for a bag. And your teeth will chatter if you drink through a paper straw. Of course you could risk dehydration instead: Men lose up to a half-gallon of water during a 10-hour flight. Oddly, you can still buy sugary drinks in plastic bottles at SFO; only healthy, calorie-free water is banned in plastic. You can’t make this stuff up.

Other fields are even worse. Starting next year, the California Building Standards Commission will require every new home to have solar panels. This will add $8,400 to the average cost of the state’s already expensive homes. With a shortage of about 1.4 million housing units, according to the California Housing Partnership, that’s a $12 billion unfunded mandate.

But maybe the housing shortage can be solved with yet another legislative “fix.” Last December state Sen. Scott Wiener introduced Senate Bill 50, which would allow developers to ignore certain local zoning laws within half a mile of train or subway stations and some bus stops. The bill would allow five-story buildings, high density and massive parking structures. Although the bill was tabled in May, many of its growing group of supporters argued it didn’t do enough to create incentives for affordable housing. That tells me another version of this bill will pass eventually. So here’s what may happen: Many towns will preserve local zoning pre-emptively by closing their train stations. Lose-lose situation.

So what? you might ask: Just take an Uber or Lyft. Not so fast. Also winding its way through Sacramento is Assembly Bill 5, which would reclassify “gig economy” workers as employees, entitled to full benefits and a $12 minimum wage. This means the cost of rides, deliveries and even manicures would go up, up, up. The bill is an overreach because most drivers truly are temporary workers. According to the delivery company Postmates, half of delivery workers quit after 80 days and about 45% work less than nine hours a week. Once again California legislators are trying for a trifecta: Fix a problem that may not exist, kill a very Californian innovation, and damage the employment prospects of the same workers they are trying to protect.

There’s more. Proposition 64, passed in 2016, allows Californians to grow six pot plants at home. Why not seven?

WSJ: Social Media and Hawley’s Folly

https://www.wsj.com/articles/social-media-and-hawleys-folly-11565551761

What does Missouri Sen. Josh Hawley have against Silicon Valley? On July 31 he tweeted (as opposed to sending by Pony Express) “Social media ‘innovation’? What innovation? Big Tech doesn’t deliver for the American people, and that’s the biggest problem of all.” The previous day the senator introduced S.2314, the Social Media Addiction Reduction Technology Act, which would smother with a giant pillow the innovation he claims not to see. Be warned: Regulation may soon arrive in Techland.

Who is this guy—and why does he think he can micromanage a trillion-dollar industry? Born in Arkansas and bred in the Show Me State, Mr. Hawley graduated from Stanford, then Yale Law. He became Missouri’s attorney general in 2017 and began investigating the classified-ad website Backpage. The site sued to stop the investigation, lost, and then Mr. Hawley sued it back. He was thwarted in gathering information by Section 230 of the Communications Decency Act, which I wrote about last month; the provision defines certain online services as platforms, not liable for the content their users post. The episode may have stoked Mr. Hawley’s disdain for social media and Big Tech. He also opened an antitrust investigation into Google the same year.

This antitech inclination hasn’t always defined Mr. Hawley’s persona. As attorney general he said, “American workers and American entrepreneurs can compete with anybody, anywhere if our government will stop making America a cost-prohibitive place to do business.” Hear, hear. When he won his Senate seat last year he ran mostly as a conventional conservative.

But even then he already had his enemies marked. His first Senate speech lamented the “cold and judgmental world of social media,” and things kind of went downhill from there. He even wrote a letter to Mark Zuckerberg more or less describing Facebook as one of the “forces parasitic on our national life.” Ouch.

Mr. Hawley’s new bill has all the worst instincts of the regulatory state—a disappointing achievement coming from a Republican. It would remove the autoplay feature from YouTube, end infinite scrolling on Twitter and Facebook feeds, limit scrolling time to three-minute sessions, set default limits on the use of platforms to 30 minutes a day, and outlaw Snapchat streaks (rewards for consecutive days of contact with friends) and most “gamification” (badges, rewards) for any online service. These diktats are the opposite of market freedom.

WSJ: Have No Fear of Facial Recognition

https://www.wsj.com/articles/have-no-fear-of-facial-recognition-11564955494

Englishman Francis Galton first noted the unique arches, loops and whorls in our fingerprints back in the 1880s. Thirty years later, Clarence Hiller confronted an intruder in his Chicago home and was fatally shot. The culprit fled, but not before leaving a fingerprint in fresh paint on a railing. Thomas Jennings became the first defendant convicted using fingerprints as evidence. This is now routine, but back then there was public hysteria over the fingerprint’s invasion of privacy and then questionable accuracy.

Today, with faces matched almost instantly via machine learning and artificial intelligence, fears of Big Brother have created similar hysteria—especially after Georgetown legal scholars discovered last month that Immigration and Customs Enforcement has access to driver’s license photos from 21 states.

So much so that the crime-ridden cities of San Francisco and Oakland, Calif., along with Somerville, Mass., have banned the use of facial recognition by law enforcement, even though local businesses can use it to track who enters and leaves their buildings. Pretty crazy.

Paranoid? Is someone watching you? Let’s get some constitutional rights out of the way first, especially “unreasonable searches and seizures.” In Katz v. U.S. (1967), the Federal Bureau of Investigation used an electronic eavesdropping device, attached to the outside of a phone booth, to record the defendant’s gambling transactions. Charles Katz won and the Supreme Court ruled that in a phone booth, “like a home, and unlike a field, a person has a constitutionally protected reasonable expectation of privacy.” On the flip side, the justices held that “what a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection.”

But we are still protected against dragnets (dum du dum dum)—the use of cameras or other surveillance to track collectively where everyone goes and what they do. Even in public, where you have no reasonable expectation of privacy, law enforcement can’t record everything in hope that someone commits a crime. The USA Patriot Act weakened some of these protections, but the 2015 USA Freedom Act fixed that.

There’s added hysteria around the potential bias in facial recognition’s mistakes.