Andy Kessler

WSJ: ‘It Ain’t Braggin’ if You Can Back It Up’

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https://www.wsj.com/articles/it-aint-braggin-if-you-can-back-it-up-11601238077

Hubris is deeply embedded in our culture, especially in social media, which 12-time Daytime Emmy Award-attending actress Moira Rose has called an “amusement park for clinical narcissists” and a “cauldron of self-absorption.” We’re inundated with mean bosses: Gordon “Yes, Chef” Ramsey made a TV career out of it. Even lovable talk-show host Ellen DeGeneres—who actually uses “Be Kind” as a marketing brand—is accused of running a toxic work environment.

Big egos are contagious, especially in sports. Barry Bonds, the home-run-record-holding San Francisco Giant, once told sportscaster Chris Myers, “You pay money to go to baseball games. Well, your ticket doesn’t say autographs. Your ticket doesn’t say that we’re role models. Your ticket just says pay to see the show.” Teammate Jeff Kent, who considered himself closest with Mr. Bonds, has said Barry had a “cocky, arrogant attitude.” Mr. Bonds thought a lot of himself, declaring, “I’m not afraid to be lonely at the top.” All this even though he was getting more than a little help from “the cream” and “the clear”—anabolic steroids.

Was that pride? Ego? Hubris? All of the above.

You know the type. At cocktail parties, they talk your ear off about themselves and if you try to interject with something about yourself—“Just got back from Brazil . . .”—they immediately personalize it and tell you about meeting soccer star Neymar’s agent’s sister at a golf outing where they birdied the 14th hole. The only question they ask is, more or less, “Enough about what I think about me, what do you think about me?” This is when I excuse myself and head to the bar.

The world is overfilled with bloviating, egotistical, one-track, braggadocious, arrogant, chest-pumping, self-important, pretentious know-it-alls. Politicians count these traits as features, not bugs. Wall Street is a hotbed of hubris, à la Tom Wolfe’s “Masters of the Universe”: investment bankers, traders (though a lot fewer of them these days) and, when their returns are good, many venture capitalists, private-equity folks and hedge-funders. All invincible, until they aren’t. Ray Dalio’s Bridgewater Associates, which managed $148 billion in assets, saw its flagship fund lose 18.6% through August this year. Now that’s humbling.

But what if you really are the greatest? Cardinals pitching great “Dizzy” Dean once predicted that he and his brother, Paul (nicknamed “Daffy”), would win 45 games and then famously said, “It ain’t braggin’ if you can back it up.” Fair enough —and to his credit, he only said it once.

WSJ: Clean Power, No Thanks to Al Gore

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https://www.wsj.com/articles/clean-power-no-thanks-to-al-gore-11600633749

Here’s a fun game. Ask an environmentalist about his top plan of action to fight climate change. You’ll likely get a quick answer urging a carbon-neutral or net-zero-emission clean-energy economy, usually by 2050, echoing the Paris climate agreement. OK, now ask if he’s for nuclear power, which has zero carbon emissions, at which point he’ll usually stare at his shoes and mumble something about high costs.

“The biggest problem with nuclear power,” activist Bill McKibben of 350.org told Techonomy, is that “it’s really expensive.” Al Gore, who sounds more and more like a revivalist preacher, told Reuters last month, “They’ve priced themselves out of the market. Electricity from nuclear power plants is by far the most expensive in the world,” while the cost of renewables “is continuing to go down.”

That’s funny, because in 1994 the Clinton-Gore administration canceled research funding for the Integral Fast Reactor, which sure could have helped us down the learning curve to lower-cost carbon-free electricity today. The U.S. has constructed a tiny handful of new nuclear plants in the past four decades. Yes, the same folks who fought nuclear energy tooth and nail are now complaining that it’s too expensive—like saying they’re orphans after killing their parents.

I mention all this now because earlier this month, and almost miraculously, the Nuclear Regulatory Commission approved the design and issued a final safety evaluation report for a Small Modular Reactor, or SMR, by NuScale based in Portland, Ore. NuScale’s design, funded by engineering firm Fluor and the U.S. Energy Department, joins six older federally approved designs. But it’s the first that looks as if it can scale and reduce costs.

In most nuclear fission reactors, uranium pellets are sealed in metal tubes known as fuel rods. These rods are submerged in water along with control rods that usually contain cadmium or boron, which absorb neutrons. When the control rods are removed, released neutrons cause a fission chain reaction, splitting atoms and releasing heat. This heats the water, which circulates through a heat exchanger with a separate water stream, producing steam to turn an electricity-generating turbine.

The NuScale reactor is smaller—only 65 feet tall and 9 feet in diameter, with much installed below grade.

WSJ: Newton’s Law of Stock Momentum

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https://www.wsj.com/articles/newtons-law-of-stock-momentum-11600013869

Does this sound familiar: Smart guy owns a stock in March at $200, sells it in June at around $600, but then buys it back in July and August for between $900 and $1,000. By September it’s back at $200. Ouch. Tesla this year? Yahoo in 2000? Nope. That was Sir Isaac Newton getting pulled into the great momentum trade of the South Sea Co., which cratered 300 years ago this month. He lost the equivalent of more than $3 million today. Newton, whose second law of motion is about the momentum of a body equaling the force acting on it, didn’t know that works for stocks too.

When bull markets get going, investors come out of the woodwork to pile in. These momentum investors—I call them momos—figure if a stock is going up, it will keep going up. But usually there is some source of hot air inflating stocks: either a structural anomaly that fools investors into thinking ever-rising stock prices are real, or a source of capital that buys, buys, buys—proverbial “dumb money.” Think of it as a giant fireplace bellows, an accordion-like contraption that pumps in fresh oxygen to keep flames growing.

Most simply blame the Federal Reserve—especially today, with its zero-interest-rate policy—for pumping the hot air that gets the momos going. Fair enough, but that’s only part of the story. Long market runs have always allured investors who figure they’re smart to jump in, even if it’s late. Everyone forgets the adage, “Don’t mistake brains for a bull market.”

In some ways, it used to be even easier to get carried away. In 1929 you could buy stocks with as little as 5% down payment, compared with today’s 50% margin limit. Even Groucho Marx, who wouldn’t join any club that would have him as a member, joined the momos and lost big in the crash.

The 1960s and ’70s had the Nifty Fifty bubble. In 1987 it was a rising dollar and the Japanese buying anything not tied down. I remember the story of an investor at a large Japanese insurance company asking a market strategist for a list of his favorite 20 stocks. Handed the list, the investor handed it back saying buy me 100,000 shares of each.

In 2000 it was comments like, “The internet is underhyped.”