Andy Kessler

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.

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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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