Andy Kessler

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.