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How more than $402 million in taxpayer money got locked away in a forgotten government fund — and lawmakers won"t spend it or return it

Republicans, Democrats, charities, and special-interest groups all have different designs for the languishing money. A pool of more than $402 million contributed by taxpayers is waiting for Congress to decide how best to use it.DigitalStorm via Getty Images The money is supposed to publicly fund presidential campaigns. But it doesn't. Republicans and Democrats in Congress can't agree on what to do with the ever-growing pot. Charities told Insider the money could do great good for suffering Americans. See more stories on Insider's business page. Holed away in a government account is a massive cash stash most anyone — from depleted federal programs to coronavirus-throttled charitable causes — would love to tap.But it sits idle and untouched.The intended beneficiaries of the taxpayer-fueled Presidential Election Campaign Fund — presidential candidates — don't want it, as they're soured by its restrictions on their election fundraising and spending.Other prospective recipients, meanwhile, can't have it.Congress is what's preventing this. Conservatives would prefer to disband the fund and repurpose its money. Many Democrats want the money to seed a reimagined public campaign-finance program contained within a broader "democracy-reform" agenda that's hamstrung on Capitol Hill. Neither side will budge.Meanwhile, the Presidential Election Campaign Fund's pot had topped more than $402.5 million as of October 31 — a record amount during the fund's nearly 50-year history, according to US Treasury records reviewed by Insider. The fund grew by about 1.14 million in October alone, according to federal records.If current trends continue, the fund will continue to grow each month by six- or seven-figures thanks to the financial heft generated by American taxpayers who check that little box on their annual tax return that directs $3 to the fund.'Help people and communities recover'In a year when lawmakers are measuring economic relief and infrastructure bills in the trillions of dollars, a few hundred million deserted federal greenbacks may seem comparatively paltry.But some charitable organizations that serve people often possess next to nothing. Several nonprofit leaders told Insider that Congress could use the Presidential Election Campaign Fund money to immediately ease suffering."The best possible use of $400 million would be to provide funds for charities to help people and communities recover," Steve Taylor, United Way Worldwide's senior vice president and counsel for public policy, said, citing a looming eviction crisis, a burdened childcare system, education challenges, and mental-health needs among urgent pandemic-era problems. "Charities are leading the way in addressing these problems, and $400 million in new funding would be a game changer."While the federal government has directed significant funding toward its COVID-19 response, the pandemic is far from over, and people around the world will endure its aftereffects for a long while, said Judy Monroe, the president and CEO of the CDC Foundation, an independent nonprofit that supports the Centers for Disease Control and Prevention's health-protection work."Additional federal funds that are not actively being utilized could, as deemed appropriate by Congress, be repurposed and brought to bear to address critical needs from COVID-19 to health inequities to strengthening the nation's public-health system to be prepared for the next, inevitable outbreak," Monroe told Insider.Erika Cotton Boyce, a Habitat for Humanity spokesperson, declined to speak specifically about the Presidential Election Campaign Fund but broadly said Congress should "find resources to fund critical programs that will address housing supply and housing affordability, especially homeownership programs for low-income families."Congress has various mechanisms for directing public funding to nonprofit entities. A bill introduced this year by Sen. Amy Klobuchar, a Minnesota Democrat, hopes to further help charitable nonprofits "provide services to meet the increasing demand in community needs caused by the coronavirus pandemic, preserve and create jobs in the nonprofit sector, reduce unemployment, and promote economic recovery."Sen. Joni Ernst, a Republican of Iowa, wants the money sent to the US Treasury's general fund and used to help reduce the federal budget deficit.Andrew Harnik-Pool/Getty ImagesDebt reduction, pediatric care, Alzheimer's researchSome lawmakers and special-interest advocates have other designs on the $400 million.During the 2019-20 congressional session, two Republican lawmakers sponsored similar bills that attempted to kill the Presidential Election Campaign Fund.Rep. Tom Cole of Oklahoma sought to transfer the campaign fund's cash balance to a pediatric-research initiative administered by the National Institutes of Health.Sen. Joni Ernst of Iowa, meanwhile, wanted the money sent to the US Treasury's general fund and used to help reduce the federal budget deficit.Neither bill received a hearing, let alone a vote.In September, Ernst tried again with a similar bill that so far has garnered little support.That's a shame, said Joshua Sewell, a senior policy analyst at the nonpartisan Taxpayers for Common Sense who deemed the campaign fund "a vestige of a bygone era." He recommended its money be used to help pay down the country's national debt, which stood at more than $28.5 trillion as of June, according to the Treasury Department. Bradley Smith, a former Federal Election Commission chairman who now leads the nonprofit Institute for Free Speech, said Congress should repeal the law establishing the fund and direct its money to the Treasury's general fund.  Cole plans to reintroduce a new bill targeting the presidential fund, he told Insider. And he's open to broadening where the $400 million might go."If the money were to be redirected somewhere other than pediatric-disease research, Alzheimer's research would certainly be a worthy cause," Cole said.Resist and reformCongressional Democrats this year made voting, ethics, and campaign-finance reform a chief priority, which is enshrined in bills known as HR 1 and S 1 — colloquially, the "For the People Act of 2021."A historically robust public financing system for federal elections is part of the For the People Act.But Senate Republicans filibustered the For the People Act, effectively killing it. Democrats then floated a similar, but slimmed-down bill called the "Freedom to Vote Act," which does not include strong public financing language.Supporters of publicly funded campaigns say this is no time to give up — or to give away $400 million that's already earmarked and available for the public financing of elections.The For the People Act "represents the boldest democracy reform since Watergate, and any funds currently available for the old system should be used for the new system of federal citizen-funded elections, which must pass so we can get big money out of politics," Beth Rotman, the director of money in politics and ethics for Common Cause, said prior to the bill's stall-out."Getting rid of the money at this point would send the wrong signal," said Meredith McGehee, the former executive director of the nonprofit group Issue One, a self-described "crosspartisan movement for political reform."The pro-Democrat organization End Citizens United, which takes its name from the Supreme Court's 2010 decision that unleashed gushers of new political money into elections, also backed keeping the cash in place."The existing presidential system was designed following Watergate for anti-corruption purposes," the group's spokesperson Bawadden Sayed said, "and we would be supportive of potentially using it for future anti-corruption purposes."Former President Barack Obama campaigns for Joe Biden in Atlanta on November 2.Elijah Nouvelage/AFP via Getty ImagesThanks, Obama?Public presidential-campaign funding wasn't always so derelict.From the late 1970s to the late '90s, the Presidential Election Campaign Fund enjoyed a heyday, distributing eight or nine figures of public money to candidates each election cycle.Supporters lauded the program as an elixir to big-money politics and a defense against corruption. Candidates from both parties routinely opted to use it. Doing so allowed them to spend less time fundraising and more time campaigning.And since both sides participated, neither side engaged in the kind of political money arms races emblematic of contemporary presidential elections.But the détente wouldn't last. Citing financial advantages, George W. Bush rejected public matching funds during the 2000 Republican presidential primary. Both Bush and eventual Democratic nominee John Kerry declined public funding in their 2004 presidential primaries. Come 2008, Democrat Barack Obama rendered the Presidential Election Campaign Fund functionally obsolete by becoming the first major-party presidential candidate in post-Watergate politics to reject public funding during a general presidential election. Obama even broke a campaign promise to do so — he previously said he'd use public funding. The future president knew he could privately raise and spend hundreds of millions of dollars more than the public program would afford him. Republican presidential nominee John McCain accepted public money — and lost.No Democratic or Republican presidential nominee has since used public funding. Only a smattering of minor-party and longshot Democratic-primary candidates have patronized the Presidential Election Campaign Fund, who drew about $3 million combined since the 2012 race.The fund didn't distribute a single dollar to any presidential candidate during the 2020 presidential election.It last provided funding to presidential nominating conventions in 2012, as Congress two years later passed, and Obama signed, a law that axed public funding of conventions.Congress siphoned tens of millions of dollars from the presidential fund that otherwise would have gone to party conventions to a pediatric-research fund — the same one that Cole, the Oklahoma congressman, wants to fill with the account's full balance.Until that or any other repurposing decision comes down, the FEC continues to spend taxpayer resources keeping the Presidential Election Campaign Fund alive.The agency's audit division has administrative, oversight, and enforcement responsibilities over the program, Judith Ingram, an FEC spokesperson, said. The independent, bipartisan FEC, which regulates and enforces the nation's campaign-finance laws, employs about 300 people. Its projected 2022 budget is about $76.5 million, meaning the balance of the Presidential Election Campaign Fund could theoretically fund the agency for a full five years.This article was originally published on July 13, 2021, and has since been updated to include new financial data and legislative developments.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 4th, 2021

El Salvador Is Betting on Bitcoin to Rebrand the Country — and Strengthen the President’s Grip

Will the country's adoption of the digital currency help its people, or just its president? When Roman Martinez was growing up in El Zonte, a small coastal village in El Salvador, the American Dream loomed large. Beyond the local fishing industry, which Martinez’s parents worked in, there weren’t a lot of opportunities. “Young people just wanted to leave, to go to the U.S.,” he says. “But now we have a Salvadoran dream.” It’s a dream about Bitcoin. Two years ago an anonymous American donor sent more than $100,000 in the decentralized digital currency, or cryptocurrency, to an NGO that Martinez works for in El Zonte to pay for social programs. As the team began encouraging families and businesses to use Bitcoin, many of the town’s residents, most of whom had never had a bank account, began saving their money in the currency, making gains as its value surged. Curious tourists flooded into the town and foreign businesses set up shop. The project gave El Zonte the nickname “Bitcoin beach,” simultaneously a philanthropic endeavour and one of the world’s largest experiments in cryptocurrency. [time-brightcove not-tgx=”true”] “People with little income, who didn’t have access to a financial system, with $5 worth of Bitcoin they can start building something that can be the legacy they leave to their children,” Martinez says, over video call, wearing a black T-shirt emblazoned with Bitcoin’s orange logo. It was partly El Zonte’s experiment that inspired El Salvador last month to become the first country in the world to adopt Bitcoin as legal tender—alongside the U.S. dollar, which El Salvador has used as its currency since 2001. The Bitcoin law, which came into force on Sept. 7, makes taxes payable in Bitcoin, obliges all businesses to accept it, and paves the way for the government to disburse subsidies in it. The government has built a network of 200 Bitcoin ATMs and a digital Bitcoin wallet app, called Chivo, through which it has distributed $30 worth of Bitcoin to every Salvadoran citizen in a bid to kickstart the Bitcoin economy. Salvadoran President Nayib Bukele claims 2.1 million Salvadorans have used Chivo so far, in a country of 6 million people. Bukele is touting Bitcoin as a way for Salvadorans to reduce the fees they pay to send and receive remittances—which make up 22% of El Salvador’s GDP, mostly from the U.S.—and as a way for the 70% of Salvadorans who are unbanked to access financial services. He’s not alone in advocating for cryptocurrencies as a way for developing economies to bypass a global financial system in which access to services and investment are geared towards the world’s richer countries and individuals. Crypto has achieved its highest penetration mostly in countries where banking systems are costly and complicated to use, or where local economies and currencies are unstable. But critics say making Bitcoin—notoriously volatile and not subject to controls by any central bank—into legal tender is an unjustifiable gamble for El Salvador’s already ailing economy. The $200 million of taxpayer money congress has devoted to the project equates to 2.7% of the government’s total budget for 2021, or almost three times the agriculture ministry’s budget for the year. The uncertainty introduced by the Bitcoin policy has sent the price of government bonds tumbling, and halted negotiations for a deal with the International Monetary Fund (IMF) that the country is seeking to plug a $1.5 billion hole in its public finances. ‘The coolest dictator in the world’ For the President, a 40 year-old with the casual wardrobe and cheeky communication style of a tech entrepreneur, Bitcoin is about more than its immediate economic impact, though. It’s a chance to rebrand El Salvador, from a country known primarily for gang violence and a sluggish economy that drives emigration to the U.S., to an independent, modern crypto pioneer. For young Salvadorans like Martinez, that means creating a Salvadoran dream. For the international community, it’s a rebuke to a world order that casts El Salvador as the backyard to the U.S.—which Bukele has increasingly railed against since taking power in 2019. Instead, he casts El Salvador as an independent hub of innovation, aligned with the anti-establishment crypto community, members of which have flooded and celebrated the country in recent months and will return for a large crypto conference in November. Envisioning the transformation he witnessed in El Zonte taking place across the country, Martinez is excited—despite doubts among the wider population. “We’re used to new things happening in the U.S. or Canada or Europe,” Martinez says. “Now we’ve changed the narrative about El Salvador and started moving forward. Michael Nagle—Bloomberg/Getty ImagesNayib Bukele, El Salvador’s president, speaks in a prerecorded video during the United Nations General Assembly via live stream in New York on Sept. 23, 2021. But there’s another narrative unfolding in El Salvador. Since Bukele’s party, New Ideas, won a landslide victory at parliamentary elections in February, he has moved rapidly to undermine the structures of El Salvador’s democracy. In May, parliament voted to replace opposition-linked judges on the supreme court with Bukele allies, bringing all levers of power under his control. In September—a few days before the Bitcoin launch—the same court ruled that Bukele can run for a second term in 2024, in defiance of El Salvador’s constitution, triggering sanctions from the U.S. He has also stepped up attacks on the media, including launching criminal investigations into news organizations and kicking critical journalists out of the country. Analysts say the Bitcoin experiment is part of Bukele’s proto-strongman trajectory. “He’s fallen in love with his own power and wants to nurture this cool millennial President image through this adventure into the Bitcoin world,” says Tiziano Breda, a Central America analyst at the International Crisis Group, a think tank. It’s working for him, largely. The Bitcoin law has sparked the first major protests of his presidency, with 8,000 people marching in San Salvador on Sept. 15— a significant number of people in a country where street protest is unusual. But the President’s approval ratings still stand above 85%. With that backing, Bukele is deeply dismissive of global concern about his leadership. On Sept 18, he changed his bio on Twitter to “Dictator of El Salvador,” clearly trolling the international press. Then, a couple of days later he changed it again, to “The coolest dictator in the world.” El Salvador’s rapid transformation On the night that Bitcoin launched in El Salvador, Nelson Rauda, a reporter for independent newspaper El Faro, went to a party. At a sleek hotel bar next to an infinity pool overlooking the pacific ocean in the department of La Libertad, crypto enthusiasts and internet celebrities from the U.S., including YouTuber Logan Paul, danced and let off fireworks to celebrate a major moment for the cryptocurrency. Some wore headdresses and carried orange signs featuring Bitcoin’s white B logo. Almost everyone was speaking English. ”The scenery, and the location was a beach in El Salvador, but it could have been anywhere else in the world,” Rauda says. “[The crypto community] want to portray themselves as bringing a future and development to El Salvador through Bitcoin— a kind of white saviorism in that sense. But most of them are not interested in the country, just business.” Bukele’s government welcomes their business. The President claims that if 1% of the world’s Bitcoin were invested in El Salvador, it would raise GDP by 25%. He has offered permanent residency to anyone who spends three Bitcoin (currently around $125,000). He has also highlighted the fact that, since Bitcoin is legal tender, rather than an investment asset, foreigners who move to El Salvador will not have to pay capital gains tax in the country on any profits made if the cryptocurrency’s value increases. To that he adds, in English, “Great weather, world class surfing beaches, beach front properties for sale” as reasons that crypto entrepreneurs should move to El Salvador. This pragmatic, salesman-like tone is something that Salvadorans appear to appreciate from their President. Though he served as mayor of the capital, San Salvador until 2018, Bukele ran for the presidency in 2019 as a political outsider. He used his direct link with millions of followers on social media to pit himself against the right and leftwing parties that had ruled the country since its civil war in the 1980s. That conflict, in which the U.S. played a decisive role by funding opponents of leftist rebels, sowed the seeds of many of El Salvador’s current problems: chronically low economic growth, weak institutions vulnerable to corruption, the world’s worst rates of gang violence and one of the lowest rates of direct foreign investment in Central America. Bukele argued, convincingly, that the postwar governments had failed to meaningfully address those woes over three decades. Since taking office, Bukele has projected an image of ruthless efficiency. In February 2020, he and a group of armed soldiers stormed into parliament in order to pressure lawmakers to pass his budget plan. He has slashed rates of gang violence, with the country’s homicide rate falling from 51 per 100,000 in 2018 to 19 per 100,000 in 2020 (Experts debate whether this is a result of Bukele’s security policy, gang trends independent of him, or a secretive quid pro quo deal he may have struck with gang leaders). He adopted a hardline response to COVID-19, ordering one of the world’s most stringent lockdowns and giving security forces the right to put any rule-breakers in detention centers, a move human rights watchdogs say led to violent repression. The unprecedented popularity Bukele has enjoyed has allowed him to move faster than Latin America observers expected to take anti-democratic steps, such as intervening in the judiciary, Breda says. “For many other sort of authoritarian governments in the region, it took [many] years to do the things that Bukele has done in such a sweeping way. The pace is definitely surprising.” Marvin Recinos—AFP/Getty ImagesIlluminated drones form figures inspired by the Bitcoin logo in El Sunzal Beach, El Salvador, on Sept. 7, 2021. ‘Bitcoin is costing the country dearly’ Those who are most sceptical of Bukele—conservative economists—see his Bitcoin law as new packaging for an old move for populist authoritarian leaders in Latin America. The policy was labelled a “Bitcoin scam” in a Wall Street Journal op-ed. “They’re always trying to pull a rabbit out of a hat,” says Steve Hanke, professor of applied economics at the John Hopkins University and director of the Troubled Currencies Project at the libertarian think tank, the Cato Institute. “They say: ‘We’ve had all these financial problems because of all these irresponsible leaders we’ve had in the past. And now here I am riding a white horse and I’ve got some new gimmick that’s going to solve it all. It’s called Bitcoin.’” Hanke helped advise the Salvadoran government on the country’s dollarization, when it adopted the U.S. dollar as its sole currency in 2001. From 1993 the Salvadoran colón had been pegged to the U.S. dollar on a fixed exchange rate, in a successful effort to keep previously rampant inflation under control. After eight years, the government opted to fully replace the colón with the dollar. That made the economy more stable and lowered the cost of borrowing, but limited Salvadoran governments’ freedom to spend money, particularly in times of financial crisis. Hanke and others have speculated that the Bitcoin move is a first step towards scrapping dollarization altogether and issuing a national digital currency. That would both enable looser public spending, and reduce the impact of U.S. sanctions. But for local economists, the immediate concern is how Bitcoin could complicate El Salvador’s path out of a deep pandemic recession. “Public finances in El Salvador are on a knife edge. Public debt stands at close to 90% of GDP and the government needs to find almost $1.5 billion to close the year and pay its obligations,” says Alvaro Trigueros Arguello, director of economic studies at FUSADES, a San Salvador-based development thinktank. Though El Salvador’s economy is growing—with the Central Bank saying Sept. 29 that GDP is on course to surge by 9% this year—Trigueros Arguello says this is mostly due to a temporary factors, including the reopening of businesses after COVID-19 restrictions and a surge in remittances after the disbursement of pandemic aid packages in the U.S. The Bitcoin rollout has complicated El Salvador’s relationship with the IMF, from which it is seeking a $1 billion assistance package. In June the fund denied a request by El Salvador to assist in its Bitcoin rollout. It cited the lack of transparency in cryptocurrencies, arguing that the difficulty of tracing who makes Bitcoin transactions has facilitated criminal activity elsewhere, as well as environmental concerns about widening the use of Btcoin, which requires vasts amount of energy to produce. Fears over the cryptocurrency’s impact on El Salvador’s macroeconomic stability have stalled negotiations between El Salvador and the IMF, Trigueros Arguello says. “The government needs international credit and because of Bitcoin, it’s not getting it,” Trigueros Arguello says. “Bitcoin is costing the country dearly.” Camilo Freedman—Bloomberg/Getty ImagesDemonstrators hold signs during a protest against President Bukele and Bitcoin in San Salvador on Sept. 15, 2021. The backdrop to El Salvador’s experiment hasn’t undermined the excitement for those who want crypto currencies to be more widely used. Bitcoin Twitter has filled with tweets celebrating how easy it is for Salvadorans to use the currency in places like Starbucks, and praising Bukele’s foresight. “I’m totally excited about what’s happening in El Salvador. [Particularly] the fact that it’s happening in Latin America,” says Cristóbal Pereira, CEO of Blockchain Summit LatAm, a regional conference covering the blockchain technology that underlies Bitcoin, which will host events at El Salvador’s own Bitcoin conference in November. “If people end up using it widely, there’s a good chance other countries and people will end up using it more too.” It’s too early to tell if the buzz will be matched by the significant investments Bukele is hoping for. Analysts say businesses will likely wait and see how the bitcoin rollout affects El Salvador’s economic stability before striking any major deals. Mike Petersen, an American who moved to El Zonte in 2005 and helped found the Bitcoin beach, says he’s received a “a huge flood of [enquiries from] businesses that want to set up shop here, because, for the first time they are realizing, hey, Salvador is a forward looking country.” Those include companies in the Bitcoin space, such as exchanges and ATM networks, but also real estate developers, manufacturing companies and “some lighting and architectural companies that are now outsourcing, hiring architectural students here to do design and and put together bids for them. Because they can pay them in Bitcoin.” Peterson says he doubts that concern about the political situation in El Salvador will have any impact on investors. “Elite media circles are the ones that are more focused on that. I think, in the business climate, people are more pragmatic and practical about things. And they see that Bukele is extremely popular.” What’s not necessarily popular, so far, is Bitcoin. Bukele claims that a third of Salvadorans are actively using Chivo, but it is unclear how many are only using the app to access the initial $30 gift from the government. Media outlets in El Salvador reported long queues for the ATMs, where most people were converting their Bitcoin to take dollars home with them. In the first week of the rollout, one of the country’s largest banks told The Financial Times that the cryptocurrency accounted for fewer than 0.0001 % of its daily transactions. Rauda, the El Faro reporter, says he knows “no one” who’s using Bitcoin on a regular basis. Teething troubles The government gave itself just three months after parliament approved its Bitcoin law in June to introduce the currency, leading to a series of technical issues with the Chivo wallet app. Crypto bloggers reported cash taking days to show up in their Chivo accounts after being transferred by other users, bugs making the app unusable, and an initial inability to transfer any sum below $5. Bukele, who took to Twitter throughout the launch to offer emoji-laden tech support messages, claimed most of the technical problems were resolved within a few days. The bumpy rollout helped trigger a 10% fall in the value of Bitcoin against the day it became legal tender, and further falls since. On Sept. 20 Bukele said his government had “bought the dip” and acquired 150 more coins, bringing the country’s total holding to 700 (around $22 million). Chaotic rollouts of new government programs are not unique to El Salvador. But some in the Bitcoin community have concerns about the structure of the country’s experiment, beyond the initial hiccups. Marc Falzon, a New Jersey-based Bitcoin YouTuber who visited San Salvador to document the rollout, says he became concerned about Salvadoran taxpayers footing the bill despite opposition to the policy, and about Article 6 of the Bitcoin law, which says that all economic actors in the country must accept Bitcoin if they have the technical capacity to do so. “Forcing people to accept a decentralized currency from a centralized authority ebbs away at the legitimacy of not just Bitcoin, but cryptocurrency in general,” he says. Supporters of the project point out that Salvadorans don’t have to keep their money in Bitcoin if they don’t want to, with the government guaranteeing their ability to transfer them into U.S. dollars via its national development bank and a range of services allowing businesses to make that transfer automatically. But Falzon says that the positive image of EL Salvador’s rollout generated by Bitcoin influencers on Instagram and Twitter didn’t reflect what he saw. In a health store near his hotel, for example, the shopkeeper said she couldn’t afford to restock because so many Bitcoin payments made by customers had simply never shown up in her Chivo app account. “For people in the Bitcoin and crypto community, El Salvador is a ‘told you so moment,’ proof that this isn’t just a fad. And I think that in that enthusiasm, we can lose sight of both the bigger picture—in how future countries may start to follow suit—and also of the individual experiences of the people that are in these countries.” Some individuals are happy though. Martinez, the community activist who grew up in El Zonte, says the town’s experience suggests hesitancy to use Bitcoin—and opposition to the Bitcoin law—will fade as Salvadorans become more used to the technology, and become widespread within a few years. He’s not concerned, he says, by how Bitcoin may play into Bukele’s larger political project. “As an NGO, we’re apolitical. We support anything that can make a better El Salvador. And I think we’re walking towards a better future.”.....»»

Category: topSource: timeOct 1st, 2021

Political potholes await Buttigieg as he starts a new year implementing Biden"s infrastructure law

Pete Buttigieg will be delivering hundreds of billions of dollars in grant money for roads, bridges, ports, and tunnels. Sounds easy? It's not. Transportation Secretary Pete Buttigieg joined President Biden and other officials during the White House signing ceremony for the bipartisan infrastructure law.Drew Angerer/Getty Images Transportation Secretary Pete Buttigieg enjoyed his best political year in 2021. Experts say 2022 will be harder for Buttigieg to navigate as he implements the infrastructure law. If Republicans win back the House, he could get buried in document requests and scandals. When he visited the White House in November for the signing of the bipartisan infrastructure law on the South Lawn, former Transportation Secretary Ray LaHood huddled with the current occupant of his old Cabinet agency.But amid the celebratory atmosphere and some 800 guests, LaHood had advice—and a warning—for Pete Buttigieg that laid bare the stakes of this political moment for the former 2020 presidential contender."Pete, you got to be the decider," LaHood told him, referencing the hundreds of billions of dollars in grant money that Buttigieg will soon be delivering around the country for big projects like roads, bridges, ports, and tunnels. "Take all the recommendations you want, but in the end, you have to make the decision on every one of these grant programs and projects, because if they're going to be successful, President Biden will get the credit. If they're not successful, you're going to get the criticism."  History is replete with examples of Cabinet officials getting caught in the bureaucratic muck and seeing their career paths go haywire because of it: former Secretary of State Hillary Clinton, for example, spent much of her 2016 presidential campaign answering for her time in the Obama administration. That's why LaHood was talking to Buttigieg and suggesting he assemble a task force within his department of political and career staffers, as well as an infrastructure coordinator, that can be his eyes and ears for any potential obstacles. Buttigieg knows he'll be held to a high standard, and appears to have taken the advice to heart. Even before the law's passage, he held an internal DOT town hall focusing on implementation. In the weeks following, he would act on most if not all of LaHood's suggestions, setting up a DOT working group while partnering with another former mayor—Mitch Landrieu of New Orleans—who is serving as Biden's senior adviser and infrastructure coordinator. In the post, the White House said, Landrieu would "oversee the most significant and comprehensive investments in American infrastructure in generations." (Landrieu and Buttigieg have been allies; the fellow former mayor endorsed Buttigieg's unsuccessful 2017 bid to become chairman of the Democratic National Committee; the White House declined to make Landrieu available for an interview.) But Buttigieg is also well aware of the political stakes he's facing at the moment. "He knows he's very vulnerable over the next year," a person close to Buttigieg told Insider. Buttigieg got off to a fast start in 2021By almost any measure, 2021 was a banner year for Buttigieg. In February, Biden's former 2020 Democratic primary rival had become the first openly gay Cabinet secretary to be Senate-confirmed. At the apogee of his still-young political career, Buttigieg, who turns 40 on January 19, has ensconced himself as one of the most visible members of the administration, racking up appearances on cable news, Sunday shows, and even late-night television. He's also saturating local media markets through his travels to red states and blue states. He's built bipartisan relationships with members of Congress via some 300 calls to secure the bipartisan infrastructure law's passage, according to his office. He's jet-setted to Glasgow for COP26, the United Nations climate summit, posing with former President Barack Obama. Buttigieg even enjoyed the global release of an Amazon documentary chronicling his 2020 presidential campaign. And the supply chain crisis some expected to delay Christmas gifts never quite materialized. Buttigieg in mid-December toured the Georgia Ports Authority's Garden City Terminal in Savannah, Georgia. The supply chain crisis has largely not prevented Christmas gifts from arriving on time, though Buttigieg has said this is not a "mission accomplished" moment.Drew Angerer/Getty ImagesEven at the mercy of the most partisan members of the GOP, Buttigieg's Midwestern demeanor and McKinsey-honed competency haven't attracted the kind of heat-seeking GOP missiles elicited by other Cabinet secretaries. In October, a Punchbowl News analysis showed that only one Congressional Republican had called for his resignation, fewer than any other Biden Cabinet member. However rosy 2021 proved to be for Buttigieg, 2022 could prove a bumpier road for the Rhodes Scholar, as his day job turns from selling the infrastructure bill to steering its implementation. With $550 billion in new infrastructure spending about to go out the door, Buttigieg faces a series of potential political pitfalls in the coming months—including learning how to say "no" to projects that don't make the cut, according to experts in both congressional oversight and transportation policy. In many ways, Buttigieg's political career is just beginning. But the coming years could test his mettle more than the crucible of a 2020 presidential campaign ever did.Buttigieg's political exposureFollowing the infrastructure law's passage, Buttigieg finds himself as a possible target of both the right and the left. Democrats—particularly those in the party's progressive wing—may quibble with some of Buttigieg's moves, said Beth Osborne, a former Obama-era DOT hand and one of Buttigieg's former presidential campaign advisers. She told Insider she's disappointed in the infrastructure legislation that finally passed, based on its delivered-versus-promised impact on climate change and Black citizens of historically divided communities. "He does have a very hard job because he's made promises," said Osborne, director of Transportation for America, an advocacy group for more equitable transportation policies, who last spoke with Buttigieg by phone in February after his Senate confirmation. (Through a round of grants issued to projects to two dozen states in June, Buttigieg's DOT considered climate change and racial equity in their analysis of each project's merit). Osborne added: "I think he needs to be careful about the promises he's making when he's dependent on people who might not have the same priorities he has." That's because much of the law's provisions around reconnecting communities historically divided by highways or railways allow states discretion on how to spend it — something not likely to happen in red America. Take remarks by Republican Florida Gov. Ron DeSantis, a potential presidential candidate in 2024, for instance.Transportation Secretary Pete Buttigieg and Arizona Sens. Mark Kelly and Kyrsten Sinema listen during a November roundtable about infrastructure and supply chain problems at Mesa Community College in Mesa, Arizona.AP Photo/Jonathan J. CooperIn November, DeSantis derided Buttigieg's talk of using infrastructure to help end systemic racism. "I heard some stuff, some weird stuff from the Secretary of Transportation trying to make this about social issues," DeSantis said. "To me, a road's a road." Ahead of 2024, rejecting such moves from Buttigieg's DOT appears poised to become a litmus test for any GOP presidential candidates who serve now as governors, as accepting Medicare expansion did for 2016 Republicans.GOP oversight coming soon?Buttigieg also needs to be mindful of Capitol Hill and the prospect that Republicans could be wielding subpoena power and the ability to drive the investigative agenda should they win back control of the House or Senate in November.Recent history suggests he has reason to be concerned. Several experts pointed to the Obama-era Solyndra scandal, which saw the FBI launch a criminal investigation of the California manufacturer of solar cells that had connections to an Obama donor. The company filed for bankruptcy in 2011 despite receiving $528 million in government-backed loan guarantees via the 2009 American Recovery and Reinvestment Act. While its downfall was the byproduct of rapidly-changing global market conditions for renewable energy products, Solyndra nonetheless exposed the previous Democratic administration to oversight-hungry Republicans who held countless hearings aimed at embarrassing the president and some of his most prominent Cabinet members. If Republicans take back the House in November, they are likely to ramp up oversight on Buttigieg much the same way their predecessors did with Obama and Solyndra. In a statement to Insider, House Oversight Committee ranking member James Comer said Republicans plan to keep close watch over the infrastructure law's implementation, even as they're in the minority. House Minority Leader Kevin McCarthy is also telegraphing that GOPers will take a tougher approach on oversight should they win the majority, having already sent the Biden administration preservation requests for documents related to the chaotic Afghanistan withdrawal. Such actions remain little more than talking points unless House Republicans control the chamber and have subpoena power. A DOT spokesperson said the agency isn't tracking any preservation notices—legal requests to keep documents that may later lead to oversight investigations—at this time.  "It is unclear how these taxpayer dollars will be used, and as we have seen in the past with debacles like Solyndra, there is plenty of room for waste, fraud, abuse, and mismanagement," Comer told Insider. Solyndra was written off in many quarters at the time as a manufactured scandal. But it still drew blood, putting the Obama White House on the defensive and creating a literal campaign backdrop for Mitt Romney and Republicans to use in their ultimately unsuccessful bid to stop Obama's second term. Most relevant for Buttigieg, Solyndra also tarnished the reputation of Steven Chu, the Nobel Prize-winning physicist who was one of the celebrity members of the Democratic president's Cabinet as the secretary of energy. In the same way the 2009 Recovery Act put Chu's Energy Department at the center of its plans to overhaul the economy, more than half of the bipartisan infrastructure law falls under the aegis of DOT. And Democratic and Republican veterans of political battles around the implementation of Obama's Recovery Act—the most analogous cash infusion into public projects to the infrastructure law—paint a picture of a perilous path ahead for Buttigieg, particularly if Republicans take back the House amid the 2022 midterm elections. "He basically has now until the fall campaign season to go out there and get the nice and easy press," a veteran of the Obama administration's efforts to promote and defend the Recovery Act told Insider. "And then the waters are going to get a lot rougher."Mitt Romney in May 2012 held a news conference outside the shuttered Solyndra solar power company's manufacturing facility in Fremont, California.Justin Sullivan/Getty ImagesDOT staffing up by the hundredsThere's a big incentive for GOP lawmakers to score political points at Buttigieg's expense and try to sully his future political prospects in the long term, said Kurt Bardella, who handled press for Rep. Darrell Issa when he chaired the House Oversight Committee and led one of two big GOP congressional investigations into Solyndra. To prepare, Buttigieg seems to have followed LaHood's advice down to the letter. The administration and the DOT have been staffing up. Working with Landrieu will be Katie Thomson, Amazon's former vice president and associate general counsel for worldwide transportation and sustainability. In the new year, she will return to DOT as director of the bipartisan infrastructure law implementation."She understands transportation. She understands people," said a DOT veteran who worked with her during the Obama administration when she served as the department's general counsel under LaHood. A DOT spokesperson told Insider there are plans to hire hundreds of additional staffers to implement the law. According to the DOT spokesperson, Buttigieg also joins weekly calls with Landrieu and his Infrastructure Implementation Task Force. Buttigieg recently invited Landrieu to join a DOT staff call to discuss next steps and take questions from political appointee staff about implementation, the spokesperson said. And the secretary established an internal working group that meets weekly. Ultimately, Buttigieg is the one who will become the decider on infrastructure projects nationwide. And that puts Republicans in position to comb through every aspect of the various projects' backgrounds for threads on which to pull and cause problems for one of the most well known members of the Biden Cabinet. "The Republican effort will be merciless and repetitive because they see him as a threat," Bardella said. "They see him as someone that they need to attack and that puts some dents in his armor because they see him as a potential and future adversary. It will be a hyper-political and partisan effort, and it will be a relentless smear campaign designed to try to injure the political future of the secretary." The Democratic strategist who helped guide the Obama administration through Solyndra said it's almost impossible for Buttigieg and his team to prepare for the storm that's coming.Every single day for a year-and-a-half, a reporter from a Washington newspaper would email him at 3:30 p.m. with a new trove of documents among millions selectively released by the Republican Solyndra investigators, he recalled. The reporter wanted a reaction for a story that was going to run by 4:30 p.m, acknowledging that he still has "nightmares about the daily routine." "I don't know that he or the people around him are really prepared for that level of oversight or scrutiny," the Obama veteran of Solyndra said. "That's not even a knock on him. There's no way you could be, having lived through it."What's more, the Democratic strategist said, Landrieu may not fully insulate Buttigieg from all the blowback in an investigation. "What's gonna end up happening is that you're going to have a big push to spend the money," he said. "And then at that point, once the money is out the door, Mitch Landrieu's portfolio will either evolve or move, or he'll be less front and center. The folks who are gonna be left behind are the heads of the agencies that are implementing and overseeing these grants. So when they find the inevitable scandal, because there will be one—manufactured or not— Mitch will probably be gone. It will be on Pete or whichever agency is in the crossfire, but most likely Transportation."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 3rd, 2022

Buying a House Feels Impossible These Days. Here Are 6 Innovative Paths to Homeownership

A dozen Grade-A eggs will run you about $0.40 more than they did a year ago, and you’ll have to fork over $0.66 more for a pound of ground beef. At the gas pump, a gallon of unleaded is now $1.23 higher than it was in 2020. But few year-over-year price increases compare to what’s… A dozen Grade-A eggs will run you about $0.40 more than they did a year ago, and you’ll have to fork over $0.66 more for a pound of ground beef. At the gas pump, a gallon of unleaded is now $1.23 higher than it was in 2020. But few year-over-year price increases compare to what’s happened to the American housing market. The sale price of a median home in the U.S. has ballooned by more than $67,000 in the past year, according to the Federal Reserve Bank of St. Louis — surging from just under $338,000 to nearly $405,000. There’s lots of reasons for this. In the past year, a combination of low interest rates and COVID-19, which forced tens of millions of people to work from home, fueled demand for houses. Longtime renters began looking to buy a place with more space, while those who were already homeowners began looking for secondary vacation residences. (Mortgage applications for second homes spiked 84% between January of 2020 and 2021.) [time-brightcove not-tgx=”true”] That jump in demand was compounded by a nationwide slump in housing supply—the result of both nationwide labor shortages and disruptions in the supply chain of crucial building materials, like copper and lumber. These recent issues have been exacerbated by lags in new housing construction over the past twenty years, according to a June report from the National Association of Realtors. The end result is that millions of American families across the income spectrum are now effectively locked out of homeownership. The problem is particularly acute for young people and people of color. The homeownership rate among millennials, ages 25-34, is 8 percentage points lower than it was for both baby boomers and Gen Xers in the same age cohort. Black homeownership, meanwhile, remains at just 45%—30% lower than that of white families and nearly unchanged since 1968, when overt housing discrimination was outlawed. It’s more than just a housing dilemma. Since home ownership remains the best way for an average family to accrue wealth over a lifetime, it’s a prosperity issue, too. Homeowners in the U.S. have, on average, forty times more wealth than renters, according to a September 2020 report from the Federal Reserve. In light of this crisis in home ownership, here are six ways that communities and companies around the country are legislating and innovating to help Americans buy a house. 1. A narrow case study in reparations for Black families Like most cities in the U.S., Evanston, Illinois has a long history of racist housing laws. For decades, Black residents were segregated into poor neighborhoods where occupancy rates were estimated to be 150% and some units lacked crucial amenities, like heating. While hundreds of vacant homes were available in more desirable parts of town, landlords and real estate agents explicitly barred Black families from renting them, and banks blocked Black families from financing. “Owners and agents of vacant property plan to prevent the negroes from spreading from their own quarters,” a 1918 Evanston News-Index article read. Housing segregation fueled wealth inequality: Black families in Evanston earn $46,000 less than their white counterparts on average. Former Evanston Alderman Robin Rue Simmons sought to address that sordid history. While in office in 2019, she created the first-ever taxpayer-backed reparations fund in a U.S. city. It sets aside $10 million in revenue, raised by the city’s tax on recreational marijuana, over a 10-year period. The first $400,000 out of that reserve will go to victims of racial housing discrimination and their descendants, divided up into $25,000 grants which can be used this year for down-payments on new homes, mortgage payments or renovations on existing homes. That initial $400,000 will hardly solve the problem. There are more than 12,000 Black residents in Evanston and the initial outlay will provide just 16 households with funding. But, Simmons argues, “it’s better than zero”—and the program also sets a key precedent. In the years since Evanston stood up its reparations fund, several other locales, including Detroit, Michigan and Amherst, Massachusetts, have voted to explore or start similar programs. “If you think of any significant, transformative national or federal legislation, it started with localities and grassroots efforts organizing and pushing their local leaders,” Simmons says. “This is no exception.” 2. Community Land Trusts: Buying the home but not the land The most unique part of the two-story home in Winooski, Vermont that Sarah and husband Colin Robinson bought for $172,000 in 2008 wasn’t its quaint terrace garden or the funky bunk-room upstairs. It was the fact that the Robinsons didn’t own the land that it was built on. That’s because the house is part of what’s known as a community land trust (CLT)—a non-profit, community-controlled collection of properties. The first CLT in the U.S. was created in Albany Georgia in 1969. Now there are more than 220 nationwide, offering more than 12,000 homes total. While the particular rules of each CLT are a little different, the idea is the same: aspiring homeowners share the cost of purchasing a house with the CLT, which owns the land the home is built on. When the homeowner sells, he or she returns a share of the appreciation with the CLT. Champlain Housing Trust—the CLT that helped the Robinsons become homeowners—is the largest in the country, with 636 properties in the Burlington area. Under its rules, the purchase price of an average home is offset by about 30%, and upon selling, the homeowner keeps a quarter of the home’s appreciation price, plus the cost of any major renovations invested into the property. The average Champlain Housing Trust member keeps their home for 7.5 years and walks away $25,000 richer—money that they can then put toward purchasing more expensive homes on the regular market. A 2010 Urban Institute analysis of Champlain Housing Trust, founded in 1984, found that 68% of those who left CLT went on to purchase market-rate homes. The Robinsons are a model of how it’s supposed to work. When they sold their first, CLT home in 2014, they walked away with $40,000 in equity, which they rolled into the purchase of their second home on the regular market. “We were able to bring that money with us, and that was really what made it possible,” says Sarah. “It really changed the trajectory of our lives.” 3. Zoning overhaul: Ending de-facto redlining Nowhere in the country is the racial housing gap wider than in Minneapolis, Minnesota, where more than 70% of white families own, compared to just 20% of Black families, according to a 2021 Urban Institute report. One big reason for this disparity is an insufficient supply of affordable homes: the state is 40,000 housing units short of demand, according to a Minnesota Housing Finance Agency estimate. Restrictive zoning rules built on decades of discriminatory policies worsen this shortage. After the federal government outlawed explicit racial housing discrimination in the 1960s, local lawmakers scrambled to bolster different regulations—namely single-family zoning ordinances that would maintain the homogeneousness of their neighborhoods. Under those rules, construction companies were banned from building anything other than standalone homes—including more affordable row homes, condominiums, duplexes, triplexes—in most upscale neighborhoods, which had the effect of pricing Black and brown families out of the market. Lisa Bender, president of Minneapolis’ City Council, argues that changing those rules is “the very bare minimum first thing” that policymakers can do “to fix centuries of racial exclusion.” In 2018, she spearheaded a City Council effort to rescind regulations reserving 70% of the city’s residential land for single-family zoning—a move that could effectively triple the housing supply in some Minneapolis neighborhoods by prompting construction of new, more cost-efficient multi-family units. The rule change went into effect in 2020. Portland, Oregon and the entire state of California have since enacted policies that effectively end single-family zoning too. Most Popular from TIME 4. 3D printing: Construction meets environmentalism and efficiency Jason Ballard, who grew up in an oil-soaked East Texas town, was always interested in environmental sustainability. But it wasn’t until college that he realized the best way he could explore environmentalism was not by becoming a biologist, but by becoming a builder. “Buildings are the number one user of energy. Construction is the number one producer of waste,” he says, adding that construction is also one of the top users of water behind agriculture. In 2017, he cofounded ICON, a construction technologies company that builds affordable, structurally sound, environmentally resilient single-family homes using a 3D printing method that creates far less waste than traditional building processes. While the startup is just getting off the ground—its first four homes sold this year—its cost of construction appears to be 10-30% less than traditional builders, thanks largely to reductions in labor and supply needs. In October, ICON announced a project to use its technology to break ground on 100 homes in the Austin area in 2022, creating the largest community of 3D-printed homes to date. Ballard predicts costs will continue to decrease as ICON automates more components of the construction process. The method also has the potential to be unbelievably speedy. While constructing an average American home the normal way takes 7.7 months, according to a 2018 U.S. Census Bureau survey, a Boston-based 3D printing construction company, Apis Cor, says it can make a move-in ready three-bedroom, two-bath in less than a month. Illustration by Wenjia Tang for TIME 5. Modular housing: building houses like Henry Ford built cars There’s no way that Sara and Jon Comiskey, both in their mid-20s, would have been able to afford a house in the Buena Vista area of Colorado, where median home prices hover around $515,000, if it wasn’t for a start-up called Fading West. In 2016, Fading West began building homes that were constructed off-site, in a factory, streamlining the production in the same way that manufacturers build cars. Workers complete most components of a house—house siding, flooring, and walls—at scale, then attach them to a foundation on site. Final features, like garages and porches, are added once the home is at its final resting place, says Fading West founder Charlie Chupp. “You wouldn’t build a Camry in someone’s driveway,” he says. Why do it for a house? Chupp says his company’s lean production model reduces waste by eliminating weather-related damage to materials like is typical during outdoor construction, requires fewer skilled laborers, and significantly reduces the time required to make a home. “With 100 people on a traditional system, you might be able to build between 100 and 150 homes a year,” he says. “We think we can do between 600 and 700 homes a year.” There are downsides. The need to transport the house components from factory to foundation curtails how large the end-product can be, and the standardization of the process means homeowners must accept limited design options. Customers get two cabinet choices, three tile options, three window sizes, and one color carpet. “We offer a standard quartz countertop in any color you want,” Chupp jokes, “as long as it’s white.” But Chupp also offers something that many other real estate developers don’t: affordability. He estimates his off-site produced houses are at least 25% cheaper than comparable models in the area. In April 2021, the Comiskeys bought a 900-square-foot Fading West townhouse in Buena Vista for $240,000. 6. Divvy: A fresh take on rent-to-own Adena Hefets grew up listening to her parents’ stories of how difficult it was for them to purchase a home in the early 1980s. As an immigrant from Israel, her dad didn’t have an established credit score and so couldn’t get a mortgage. Eventually, her family was able to buy a seller-financed home—a rare home-buying mechanism where a seller allows a buyer to pay for a home in increments, rather than making mortgage payments to a bank. In 2017, Hefets started Divvy, a tech company, that offers prospective homebuyers a very similar model. Divvy purchases homes on the open-market and covers closing costs, taxes, insurance and repairs in exchange for the client paying monthly rent that is approximately 10-25% more than what they would pay for comparable rentals in the area. The differential goes toward equity in the home. The client can then buy back the home with the equity they accrued through paying the rent, or cash out the equity at the end of their lease. It’s not a universal solution. Divvy requires that buyers have moderate credit scores and clients must be able to pay above market-rate rents. But in the last five years, the company has entered partnerships with thousands of families, roughly 47% of whom end up purchasing their home back from Divvy. LaCresa Hooks, who works as an accountant, couldn’t find a traditional mortgage because she was working as a short-term contractor. In October 2020, she signed a lease with Divvy and less than a year later, she’d bought back her 3-bedroom, 2-bath Georgia home with bank financing thanks to the equity she accrued. Now, she looks forward to something most people loathe: Paying her mortgage. “I’m building something now,” she says. “With rent, you aren’t building anything. You’re just paying your landlord and that’s it for the next 30 days.”.....»»

Category: topSource: timeNov 22nd, 2021

Babies are increasingly dying of syphilis in the US - but it"s 100% preventable

Babies with syphilis may have deformed bones, damaged brains, and struggle to hear, see, or breathe. A newborn baby rests at the Ana Betancourt de Mora Hospital in Camaguey, Cuba, on June 19, 2015. Alexandre Meneghini/Reuters The number of US babies born with syphilis quadrupled from 2015 to 2019. Babies with syphilis may have deformed bones, damaged brains, and struggle to hear, see, or breathe. Routine testing and penicillin shots for pregnant women could prevent these cases. This story was originally published by ProPublica, a Pulitzer Prize-winning investigative newsroom, in collaboration with NPR News. Sign up for The Big Story newsletter to receive stories like this one in your inbox.When Mai Yang is looking for a patient, she travels light. She dresses deliberately - not too formal, so she won't be mistaken for a police officer; not too casual, so people will look past her tiny 4-foot-10 stature and youthful face and trust her with sensitive health information. Always, she wears closed-toed shoes, "just in case I need to run."Yang carries a stack of cards issued by the Centers for Disease Control and Prevention that show what happens when the Treponema pallidum bacteria invades a patient's body. There's a photo of an angry red sore on a penis. There's one of a tongue, marred by mucus-lined lesions. And there's one of a newborn baby, its belly, torso and thighs dotted in a rash, its mouth open, as if caught midcry.It was because of the prospect of one such baby that Yang found herself walking through a homeless encampment on a blazing July day in Huron, California, an hour's drive southwest of her office at the Fresno County Department of Public Health. She was looking for a pregnant woman named Angelica, whose visit to a community clinic had triggered a report to the health department's sexually transmitted disease program. Angelica had tested positive for syphilis. If she was not treated, her baby could end up like the one in the picture or worse - there was a 40% chance the baby would die.Yang knew, though, that if she helped Angelica get treated with three weekly shots of penicillin at least 30 days before she gave birth, it was likely that the infection would be wiped out and her baby would be born without any symptoms at all. Every case of congenital syphilis, when a baby is born with the disease, is avoidable. Each is considered a "sentinel event," a warning that the public health system is failing.The alarms are now clamoring. In the United States, more than 129,800 syphilis cases were recorded in 2019, double the case count of five years prior. In the same time period, cases of congenital syphilis quadrupled: 1,870 babies were born with the disease; 128 died. Case counts from 2020 are still being finalized, but the CDC has said that reported cases of congenital syphilis have already exceeded the prior year. Black, Hispanic, and Native American babies are disproportionately at risk.There was a time, not too long ago, when CDC officials thought they could eliminate the centuries-old scourge from the United States, for adults and babies. But the effort lost steam and cases soon crept up again. Syphilis is not an outlier. The United States goes through what former CDC director Tom Frieden calls "a deadly cycle of panic and neglect" in which emergencies propel officials to scramble and throw money at a problem - whether that's Ebola, Zika, or COVID-19. Then, as fear ebbs, so does the attention and motivation to finish the task.The last fraction of cases can be the hardest to solve, whether that's eradicating a bug or getting vaccines into arms, yet too often, that's exactly when political attention gets diverted to the next alarm. The result: The hardest to reach and most vulnerable populations are the ones left suffering, after everyone else looks away.Yang first received Angelica's lab report on June 17. The address listed was a P.O. box, and the phone number belonged to her sister, who said Angelica was living in Huron. That was a piece of luck: Huron is tiny; the city spans just 1.6 square miles. On her first visit, a worker at the Alamo Motel said she knew Angelica and directed Yang to a nearby homeless encampment. Angelica wasn't there, so Yang returned a second time, bringing one of the health department nurses who could serve as an interpreter.They made their way to the barren patch of land behind Huron Valley Foods, the local grocery store, where people took shelter in makeshift lean-tos composed of cardboard boxes, scrap wood, and scavenged furniture, draped with sheets that served as ceilings and curtains. Yang stopped outside one of the structures, calling a greeting."Hi, I'm from the health department, I'm looking for Angelica."The nurse echoed her in Spanish.Angelica emerged, squinting in the sunlight. Yang couldn't tell if she was visibly pregnant yet, as her body was obscured by an oversized shirt. The two women were about the same age: Yang 26 and Angelica 27. Yang led her away from the tent, so they could speak privately. Angelica seemed reticent, surprised by the sudden appearance of the two health officers. "You're not in trouble," Yang said, before revealing the results of her blood test.Angelica had never heard of syphilis."Have you been to prenatal care?"Angelica shook her head. The local clinic had referred her to an obstetrician in Hanford, a 30-minute drive away. She had no car. She also mentioned that she didn't intend to raise her baby; her two oldest children lived with her mother, and this one likely would, too.Yang pulled out the CDC cards, showing them to Angelica and asking if she had experienced any of the symptoms illustrated. No, Angelica said, her lips pursed with disgust."Right now you still feel healthy, but this bacteria is still in your body," Yang pressed. "You need to get the infection treated to prevent further health complications to yourself and your baby."The community clinic was just across the street. "Can we walk you over to the clinic and make sure you get seen so we can get this taken care of?"Angelica demurred. She said she hadn't showered for a week and wanted to wash up first. She said she'd go later.Yang tried once more to extract a promise: "What time do you think you'll go?""Today, for sure."The CDC tried and failed to eradicate syphilis - twiceSyphilis is called The Great Imitator: It can look like any number of diseases. In its first stage, the only evidence of infection is a painless sore at the bacteria's point of entry. Weeks later, as the bacteria multiplies, skin rashes bloom on the palms of the hands and bottoms of the feet. Other traits of this stage include fever, headaches, muscle aches, sore throat, and fatigue. These symptoms eventually disappear and the patient progresses into the latent phase, which betrays no external signs. But if left untreated, after a decade or more, syphilis will reemerge in up to 30% of patients, capable of wreaking horror on a wide range of organ systems. Marion Sims, president of the American Medical Association in 1876, called it a "terrible scourge, which begins with lamb-like mildness and ends with lion-like rage that ruthlessly destroys everything in its way."The corkscrew-shaped bacteria can infiltrate the nervous system at any stage of the infection. Yang is haunted by her memory of interviewing a young man whose dementia was so severe that he didn't know why he was in the hospital or how old he was. And regardless of symptoms or stage, the bacteria can penetrate the placenta to infect a fetus. Even in these cases the infection is unpredictable: Many babies are born with normal physical features, but others can have deformed bones or damaged brains, and they can struggle to hear, see, or breathe.From its earliest days, syphilis has been shrouded in stigma. The first recorded outbreak was in the late 15th century, when Charles VIII led the French army to invade Naples. Italian physicians described French soldiers covered with pustules, dying from a sexually transmitted disease. As the affliction spread, Italians called it the French Disease. The French blamed the Neopolitans. It was also called the German, Polish, or Spanish disease, depending on which neighbor one wanted to blame. Even its name bears the taint of divine judgement: It comes from a 16th-century poem that tells of a shepherd, Syphilus, who offended the god Apollo and was punished with a hideous disease.By 1937 in America, when former Surgeon General Thomas Parran wrote the book "Shadow on the Land," he estimated some 680,000 people were under treatment for syphilis; about 60,000 babies were being born annually with congenital syphilis. There was no cure, and the stigma was so strong that public-health officials feared even properly documenting cases.Thanks to Parran's ardent advocacy, Congress in 1938 passed the National Venereal Disease Control Act, which created grants for states to set up clinics and support testing and treatment. Other than a short-lived funding effort during World War I, this was the first coordinated federal push to respond to the disease.Around the same time, the Public Health Service launched an effort to record the natural history of syphilis. Situated in Tuskegee, Alabama, the infamous study recruited 600 black men. By the early 1940s, penicillin became widely available and was found to be a reliable cure, but the treatment was withheld from the study participants. Outrage over the ethical violations would cast a stain across syphilis research for decades to come and fuel generations of mistrust in the medical system among Black Americans that continues to this day. People attend a ceremony near Tuskegee, Alabama, on April 3, 2017, to commemorate the roughly 600 men who were subjects in the Tuskegee syphilis study. Jay Reeves/AP Photo With the introduction of penicillin, cases began to plummet. Twice, the CDC has announced efforts to wipe out the disease - once in the 1960s and again in 1999.In the latest effort, the CDC announced that the United States had "a unique opportunity to eliminate syphilis within its borders," thanks to historically low rates, with 80% of counties reporting zero cases. The concentration of cases in the South "identifies communities in which there is a fundamental failure of public health capacity," the agency noted, adding that elimination - which it defined as fewer than 1,000 cases a year - would "decrease one of our most glaring racial disparities in health."Two years after the campaign began, cases started climbing, first among gay men and, later, heterosexuals. Cases in women started accelerating in 2013, followed shortly by increasing numbers of babies born with syphilis. The reasons for failure are complex: People relaxed safer sex practices after the advent of potent HIV combination therapies, increased methamphetamine use drove riskier behavior, and an explosion of online dating made it hard to track and test sexual partners, according to Ina Park, medical director of the California Prevention Training Center at the University of California San Francisco.But federal and state public-health efforts were hamstrung from the get-go. In 1999, the CDC said it would need about $35 million to $39 million in new federal funds annually for at least five years to eliminate syphilis. The agency got less than half of what it asked for, according to Jo Valentine, former program coordinator of the CDC's Syphilis Elimination Effort. As cases rose, the CDC modified its goals in 2006 from 0.4 primary and secondary syphilis cases per 100,000 in population to 2.2 cases per 100,000. By 2013, as elimination seemed less and less viable, the CDC changed its focus to ending congenital syphilis only.Since then, funding has remained anemic. From 2015 to 2020, the CDC's budget for preventing sexually transmitted infections grew by 2.2%. Taking inflation into account, that's a 7.4% reduction in purchasing power. In the same period, cases of syphilis, gonorrhea, and chlamydia - the three STDs that have federally funded control programs - increased by nearly 30%."We have a long history of nearly eradicating something, then changing our attention, and seeing a resurgence in numbers," David Harvey, executive director of the National Coalition of STD Directors, said. "We have more congenital syphilis cases today in America than we ever had pediatric AIDS at the height of the AIDS epidemic. It's heartbreaking."Adriane Casalotti, chief of government and public affairs at the National Association of County and City Health Officials, warns that the US should not be surprised to see case counts continue to climb."The bugs don't go away," she said. "They're just waiting for the next opportunity, when you're not paying attention."Syphilis has fewer poster children than HIV or cancerYang waited until the end of the day, then called the clinic to see if Angelica had gone for her shot. She had not. Yang would have to block off another half day to visit Huron again, but she had three dozen other cases to deal with.States in the South and West have seen the highest syphilis rates in recent years. In 2017, 64 babies in Fresno County were born with syphilis at a rate of 440 babies per 100,000 live births - about 19 times the national rate. While the county had managed to lower case counts in the two years that followed, the pandemic threatened to unravel that progress, forcing STD staffers to do COVID-19 contact tracing, pausing field visits to find infected people, and scaring patients from seeking care. Yang's colleague handled three cases of stillbirth in 2020; in each, the woman was never diagnosed with syphilis because she feared catching the coronavirus and skipped prenatal care.Yang, whose caseload peaked at 70 during a COVID-19 surge, knew she would not be able handle them all as thoroughly as she'd like to."When I was being mentored by another investigator, he said: 'You're not a superhero. You can't save everybody,'" she said.She prioritizes men who have sex with men, because there's a higher prevalence of syphilis in that population, and pregnant people, because of the horrific consequences for babies.The job of a disease intervention specialist isn't for everyone: It means meeting patients whenever and wherever they are available - in the mop closet of a bus station, in a quiet parking lot - to inform them about the disease, to extract names of sex partners, and to encourage treatment. Patients are often reluctant to talk. They can get belligerent, upset that "the government" has their personal information, or shattered at the thought that a partner is likely cheating on them. Salaries typically start in the low $40,000s.Jena Adams, Yang's supervisor, has eight investigators working on HIV and syphilis. In the middle of 2020, she lost two and replaced them only recently."It's been exhausting," Adams said.She has only one specialist who is trained to take blood samples in the field, crucial for guaranteeing that the partners of those who test positive for syphilis also get tested. Adams wants to get phlebotomy training for the rest of her staff, but it's $2,000 per person. The department also doesn't have anyone who can administer penicillin injections in the field; that would have been key when Yang met Angelica. For a while, a nurse who worked in the tuberculosis program would ride along to give penicillin shots on a volunteer basis. Then he, too, left the health department.Much of the resources in public health trickle down from the CDC, which distributes money to states, which then parcel it out to counties. The CDC gets its budget from Congress, which tells the agency, by line item, exactly how much money it can spend to fight a disease or virus, in an uncommonly specific manner not seen in many other agencies. The decisions are often politically driven and can be detached from actual health needs.When the House and Senate appropriations committees meet to decide how much the CDC will get for each line item, they are barraged by lobbyists for individual disease interests. Stephanie Arnold Pang, senior director of policy and government relations at the National Coalition of STD Directors, can pick out the groups by sight: breast cancer wears pink, Alzheimer's goes in purple, multiple sclerosis comes in orange, HIV in red. STD prevention advocates, like herself, don a green ribbon, but they're far outnumbered.And unlike diseases that might already be familiar to lawmakers, or have patient and family spokespeople who can tell their own powerful stories, syphilis doesn't have many willing poster children. Breast Cancer survivors hold up a check for the amount raised at The Congressional Womens Softball Game at Watkins Recreation Center in Capitol Hill on June 20, 2018. Sarah Silbiger/CQ Roll Call "Congressmen don't wake up one day and say, 'Oh hey, there's congenital syphilis in my jurisdiction.' You have to raise awareness," Arnold Pang said. It can be hard jockeying for a meeting. "Some offices might say, 'I don't have time for you because we've just seen HIV.' ... Sometimes, it feels like you're talking into a void."The consequences of the political nature of public-health funding have become more obvious during the coronavirus pandemic. The 2014 Ebola epidemic was seen as a "global wakeup call" that the world wasn't prepared for a major pandemic, yet in 2018, the CDC scaled back its epidemic prevention work as money ran out."If you've got to choose between Alzheimer's research and stopping an outbreak that may not happen? Stopping an outbreak that might not happen doesn't do well," Frieden, the former CDC director, said. "The CDC needs to have more money and more flexible money. Otherwise, we're going to be in this situation long term."In May 2021, President Joe Biden's administration announced it would set aside $7.4 billion over the next five years to hire and train public health workers, including $1.1 billion for more disease intervention specialists like Yang. Public health officials are thrilled to have the chance to expand their workforce, but some worry the time horizon may be too short."We've seen this movie before, right?" Frieden said. "Everyone gets concerned when there's an outbreak, and when that outbreak stops, the headlines stop, and an economic downturn happens, the budget gets cut."Fresno's STD clinic was shuttered in 2010 amid the Great Recession. Many others have vanished since the passage of the Affordable Care Act.Health leaders thought "by magically beefing up the primary care system, that we would do a better job of catching STIs and treating them," Harvey, the executive director of the National Coalition of STD Directors, said.That hasn't worked out; people want access to anonymous services, and primary care doctors often don't have STDs top of mind. The coalition is lobbying Congress for funding to support STD clinical services, proposing a three-year demonstration project funded at $600 million.It's one of Adams' dreams to see Fresno's STD clinic restored as it was."You could come in for an HIV test and get other STDs checked," she said. "And if a patient is positive, you can give a first injection on the spot."'I've seen people's families ripped apart and I've seen beautiful babies die'On August 12, Yang set out for Huron again, speeding past groves of almond trees and fields of grapes in the department's white Chevy Cruze. She brought along a colleague, Jorge Sevilla, who had recently transferred to the STD program from COVID-19 contact tracing. Yang was anxious to find Angelica again."She's probably in her second trimester now," she said.They found her outside of a pale yellow house a few blocks from the homeless encampment; the owner was letting her stay in a shed tucked in the corner of the dirt yard. This time, it was evident that she was pregnant. Yang noted that Angelica was wearing a wig; hair loss is a symptom of syphilis."Do you remember me?" Yang asked.Angelica nodded. She didn't seem surprised to see Yang again. (I came along, and Sevilla explained who I was and that I was writing about syphilis and the people affected by it. Angelica signed a release for me to report about her case, and she said she had no problem with me writing about her or even using her full name. ProPublica chose to only print her first name.)"How are you doing? How's the baby?""Bien.""So the last time we talked, we were going to have you go to United Healthcare Center to get treatment. Have you gone since?"Angelica shook her head."We brought some gift cards..." Sevilla started in Spanish. The department uses them as incentives for completing injections. But Angelica was already shaking her head. The nearest Walmart was the next town over.Yang turned to her partner. "Tell her: So the reason why we're coming out here again is because we really need her to go in for treatment. [...] We really are concerned for the baby's health especially since she's had the infection for quite a while."Angelica listened while Sevilla interpreted, her eyes on the ground. Then she looked up. "Orita?" she asked. Right now?"I'll walk with you," Yang offered. Angelica shook her head."She said she wants to shower first before she goes over there," Sevilla said.Yang made a face. "She said that to me last time." Yang offered to wait, but Angelica didn't want the health officers to linger by the house. She said she would meet them by the clinic in 15 minutes.Yang was reluctant to let her go but again had no other option. She and Sevilla drove to the clinic, then stood on the corner of the parking lot, staring down the road.Talk to the pediatricians, obstetricians, and families on the front lines of the congenital syphilis surge and it becomes clear why Yang and others are trying so desperately to prevent cases. J.B. Cantey, associate professor in pediatrics at UT Health San Antonio, remembers a baby girl born at 25 weeks gestation who weighed a pound and a half. Syphilis had spread through her bones and lungs. She spent five months in the neonatal intensive care unit, breathing through a ventilator, and was still eating through a tube when she was discharged.Then, there are the miscarriages, the stillbirths, and the inconsolable parents. Irene Stafford, an associate professor and maternal-fetal medicine specialist at UT Health in Houston, cannot forget a patient who came in at 36 weeks for a routine checkup, pregnant with her first child. Stafford realized that there was no heartbeat."She could see on my face that something was really wrong," Stafford recalled. She had to let the patient know that syphilis had killed her baby."She was hysterical, just bawling," Stafford said. "I've seen people's families ripped apart and I've seen beautiful babies die." Fewer than 10% of patients who experience a stillbirth are tested for syphilis, suggesting that cases are underdiagnosed.A Texas grandmother named Solidad Odunuga offers a glimpse into what the future could hold for Angelica's mother, who may wind up raising her baby.In February of last year, Odunuga got a call from the Lyndon B. Johnson Hospital in Houston. A nurse told her that her daughter was about to give birth and that child protective services had been called. Odunuga had lost contact with her daughter, who struggled with homelessness and substance abuse. She arrived in time to see her grandson delivered, premature at 30 weeks old, weighing 2.7 pounds. He tested positive for syphilis.When a child protective worker asked Odunuga to take custody of the infant, she felt a wave of dread."I was in denial," she recalled. "I did not plan to be a mom again." The baby's medical problems were daunting: "Global developmental delays [...] concerns for visual impairments [...] high risk of cerebral palsy," read a note from the doctor at the time.Still, Odunuga visited her grandson every day for three months, driving to the NICU from her job at the University of Houston. "I'd put him in my shirt to keep him warm and hold him there." She fell in love. She named him Emmanuel.Once Emmanuel was discharged, Odunuga realized she had no choice but to quit her job. While Medicaid covered the costs of Emmanuel's treatment, it was on her to care for him. From infancy, Emmanuel's life has been a whirlwind of constant therapy. Today, at 20 months old, Odunuga brings him to physical, occupational, speech, and developmental therapy, each a different appointment on a different day of the week.Emmanuel has thrived beyond what his doctors predicted, toddling so fast that Odunuga can't look away for a minute and beaming as he waves his favorite toy phone. Yet he still suffers from gagging issues, which means Odunuga can't feed him any solid foods. Liquid gets into his lungs when he aspirates; it has led to pneumonia three times. Emmanuel has a special stroller that helps keep his head in a position that won't aggravate his persistent reflux, but Odunuga said she still has to pull over on the side of the road sometimes when she hears him projectile vomiting from the backseat.The days are endless. Once she puts Emmanuel to bed, Odunuga starts planning the next day's appointments."I've had to cry alone, scream out alone," she said. "Sometimes I wake up and think, 'Is this real?' And then I hear him in the next room."There's no vaccine for syphilis A health worker tests a migrant from Haiti for HIV and syphilis to in Ciudad Acuna, Mexico, on September 25, 2021. Daniel Becerril/Reuters Putting aside the challenge of eliminating syphilis entirely, everyone agrees it's both doable and necessary to prevent newborn cases."There was a crisis in perinatal HIV almost 30 years ago and people stood up and said this is not OK - it's not acceptable for babies to be born in that condition. [...We] brought it down from 1,700 babies born each year with perinatal HIV to less than 40 per year today," Virginia Bowen, an epidemiologist at the CDC, said. "Now here we are with a slightly different condition. We can also stand up and say, 'This is not acceptable.'" Belarus, Bermuda, Cuba, Malaysia, Thailand, and Sri Lanka are among countries recognized by the World Health Organization for eliminating congenital syphilis.Success starts with filling gaps across the health care system.For almost a century, public health experts have advocated for testing pregnant patients more than once for syphilis in order to catch the infection. But policies nationwide still don't reflect this best practice. Six states have no prenatal screening requirement at all. Even in states that require three tests, public-health officials say that many physicians aren't aware of the requirements. Stafford, the maternal-fetal medicine specialist in Houston, says she's tired of hearing her own peers in medicine tell her, "Oh, syphilis is a problem?"It costs public health departments less than 25 cents a dose to buy penicillin, but for a private practice, it's more than $1,000, according to Park of the University of California San Francisco."There's no incentive for a private physician to stock a dose that could expire before it's used, so they often don't have it," she said. "So a woman comes in, they say, 'We'll send you to the emergency department or health department to get it,' then [the patients] don't show up."A vaccine would be invaluable for preventing spread among people at high risk for reinfection. But there is none. Scientists only recently figured out how to grow the bacteria in the lab, prompting grants from the National Institutes of Health to fund research into a vaccine. Justin Radolf, a researcher at the University of Connecticut School of Medicine, said he hopes his team will have a vaccine candidate by the end of its five-year grant. But it'll likely take years more to find a manufacturer and run human trials.Public-health agencies also need to recognize that many of the hurdles to getting pregnant people treated involve access to care, economic stability, safe housing, and transportation. In Fresno, Adams has been working on ways her department can collaborate with mental health services. Recently, one of her disease intervention specialists managed to get a pregnant woman treated with penicillin shots and, at the patient's request, connected her with an addiction treatment center.Gaining a patient's cooperation means seeing them as complex humans instead of just a case to solve."There may be past traumas with the healthcare system," Cynthia Deverson, project manager of the Houston Fetal Infant Morbidity Review, said. "There's the fear of being discovered if she's doing something illegal to survive. [...] She may need to be in a certain place at a certain time so she can get something to eat, or maybe it's the only time of the day that's safe for her to sleep. They're not going to tell you that. Yes, they understand there's a problem, but it's not an immediate threat, maybe they don't feel bad yet, so obviously this is not urgent.""What helps to gain trust is consistency," she added. "Literally, it's seeing that [disease specialist] constantly, daily. [...] The woman can see that you're not going to harm her, you're saying, 'I'm here at this time if you need me.'"Yang stood outside the clinic, waiting for Angelica to show up, baking in the 90-degree heat. Her feelings ranged from irritation - Why didn't she just go? I'd have more energy for other cases - to an appreciation for the parts of Angelica's story that she didn't know - She's in survival mode. I need to be more patient.Fifteen minutes ticked by, then 20."OK," Yang announced. "We're going back."She asked Sevilla if he would be OK if they drove Angelica to the clinic; they technically weren't supposed to because of coronavirus precautions, but Yang wasn't sure she could convince Angelica to walk. Sevilla gave her the thumbs up.When they pulled up, they saw Angelica sitting in the backyard, chatting with a friend. She now wore a fresh T-shirt and had shoes on her feet. Angelica sat silently in the back seat as Yang drove to the clinic. A few minutes later, they pulled up to the parking lot.Finally, Yang thought. We got her here.The clinic was packed with people waiting for COVID-19 tests and vaccinations. A worker there had previously told Yang that a walk-in would be fine, but a receptionist now said they were too busy to treat Angelica. She would have to return.Yang felt a surge of frustration, sensing that her hard-fought opportunity was slipping away. She tried to talk to the nurse supervisor, but he wasn't available. She tried to leave the gift cards at the office to reward Angelica if she came, but the receptionist said she couldn't hold them. While Yang negotiated, Sevilla sat with Angelica in the car, waiting.Finally, Yang accepted this was yet another thing she couldn't control.She drove Angelica back to the yellow house. As they arrived, she tried once more to impress on her just how important it was to get treated, asking Sevilla to interpret. "We don't want it to get any more serious, because she can go blind, she could go deaf, she could lose her baby."Angelica already had the door halfway open."So on a scale from one to 10, how important is this to get treated?" Yang asked."Ten," Angelica said. Yang reminded her of the appointment that afternoon. Then Angelica stepped out and returned to the dusty yard.Yang lingered for a moment, watching Angelica go. Then she turned the car back onto the highway and set off toward Fresno, knowing, already, that she'd be back.Postscript: A reporter visited Huron twice more in the months that followed, including once independently to try to interview Angelica, but she wasn't in town. Yang has visited Huron twice more as well - six times in total thus far. In October, a couple of men at the yellow house said Angelica was still in town, still pregnant. Yang and Sevilla spent an hour driving around, talking to residents, hoping to catch Angelica. But she was nowhere to be found.Read the original article on Business Insider.....»»

Category: personnelSource: nytNov 2nd, 2021

Top-Ranked Material ETFs to Bet on This Year

Let's look at a few material ETFs that are sizzling with opportunities as the sector is anticipated to remain a hot space for investments amid the global health crisis. The materials sector has performed decently in 2021. The S&P 500 Materials sector has gained 26.2% in the past year. In addition, the space is expected to remain strong as improving labor market conditions, growing consumer confidence, accelerated coronavirus vaccine rollout and the passage of the much-awaited $1.2-trillion infrastructure bill are pointing toward a faster recovering economy.According to the White House, the bipartisan Infrastructure Investment and Jobs Act would allocate $550 billion in new money to transportation projects, the utility grid and broadband (as stated in a CNBC article). The legislation also provides $110 billion for roads, bridges and other major projects along with $66 billion for passenger and freight rail and $39 billion for public transit.The bill will also channelize $65 billion into broadband, a priority for many lawmakers after the pandemic brought into notice the unequal division in Internet access facilities for households and students across the nation (per a CNBC article). The bill will also invest $55 billion in water systems, including initiatives to replace lead pipes.Commenting on the bill, President Biden has said that it would “create millions of jobs, turn the climate crisis into an opportunity, and put us on a path to win the economic competition for the 21st Century,” as mentioned in a CNBC article.The coronavirus vaccine rollout is gradually helping control the spread of the outbreak across the globe. The optimism surrounding the gradual reopening of global economies and increasing demand is painting a rosy picture for cyclical sectors. The progress in coronavirus vaccine rollout presents a strong case,favoring a faster return to normalcy and economic recovery.Moreover, the emergency use authorization (EUA) for Pfizer Inc.’s (PFE) antiviral COVID-19 pill, PAXLOVID, has relaxed concerns regarding Omicron to some extent. Pfizer can begin delivering PAXLOVID in the United States on an immediate basis. In November, Pfizer had informed about signing an agreement with the U.S. government to supply 10 million treatment courses of PAXLOVID. The delivery will be completed in 2022. The FDA had also granted a nod to Merck’s antiviral pill for COVID-19.Material ETFs to Bet OnAgainst this backdrop, let’s look at some top-ranked material ETFs that can outperform in the coming weeks:iShares U.S. Basic Materials ETF IYMiShares U.S. Basic Materials ETF tracks the Russell 1000 Basic Materials RIC 22.5/45 Capped Gross Index and holds 37 stocks in its basket. It has AUM of $763.9 million and charges 41 basis points (bps) in fees and expenses. The product is heavily skewed toward specialty chemicals and commodity chemicals, with the two sectors making more than 30% of the portfolio. VAW carries a Zacks ETF Rank #2 (Buy).The Materials Select Sector SPDR Fund XLBThe most-popular material ETF follows the Materials Select Sector Index. The Materials Select Sector SPDR Fund manages $8.18  billion in its asset base. The ETF charges 12 bps in fees per year from investors. In total, the fund holds about 28 securities in its basket. In terms of industrial exposure, chemicals dominate the portfolio with around 69% share, while metals & mining and containers & packaging round off the top three positions. XLB carries a Zacks ETF Rank #1 (Strong Buy) (read: 7 ETF Predictions for 2022).Vanguard Materials ETF VAWVanguard Materials ETF has amassed about $4.15 billion in its asset base and offers exposure to 117 stocks by tracking the MSCI US Investable Market Materials 25/50 Index. The ETF has 0.10% in expense ratio. Specialty chemicals and industrial gases take the largest share at 29.8% and 18.2%, respectively, while others offer single-digit exposure. VAW carries a Zacks ETF Rank #2.Fidelity MSCI Materials Index ETF FMATFidelity MSCI Materials Index ETF provides exposure to 119 materials stocks, with AUM of $530.4 million. This is done by tracking the MSCI USA IMI Materials 25/50 Index. The ETF has 0.08% in expense ratio. FMAT carries a Zacks ETF Rank #1. Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Materials Select Sector SPDR ETF (XLB): ETF Research Reports Fidelity MSCI Materials Index ETF (FMAT): ETF Research Reports Vanguard Materials ETF (VAW): ETF Research Reports iShares U.S. Basic Materials ETF (IYM): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksJan 5th, 2022

Sen. Paul Details $52 Billion Federal "Waste" In Annual "Festivus Report"

Sen. Paul Details $52 Billion Federal "Waste" In Annual 'Festivus Report' Authored by Joseph Lord via The Epoch Times, Sen. Rand Paul (R-Ky.) has unveiled his annual “Festivus Report,” which tracks what he sees as “waste” spending by the federal government. According to the libertarian-leaning Kentuckian, that waste topped over $52 billion in 2021. Since arriving in the Senate amid the Tea Party wave of 2010, Paul had made the federal budget one of his foremost concerns. Like his father, 2008 and 2012 presidential candidate and former U.S. Rep. Ron Paul (R-Texas), the younger Paul has decried U.S. military adventurism, the excesses of the post-9/11 surveillance state, and the perpetually unbalanced budget of the federal government. The Festivus Report has been a staple for Paul since 2015, when he released his first edition of the report. In the 2021 report, Paul calculated that federal boondoggles added up to a total of $52,598,515,585 - an amount Paul says could have been used to give everyone on Earth around $6.78, build 13,149 miles of four-lane highway, operate Veterans’ Affairs facilities for 4.5 months, or to fund the Department of Energy for nearly two years. From ground-up ferrets to border walls for Middle Eastern countries to a federally-funded dinosaur film, these are some of the most striking examples of bizarre spending revealed by Paul. Misappropriation of COVID-19 Funds Cost $40 Billion Since January 2020, the U.S. government has spent more on relief packages for the CCP (Chinese Communist Party) virus than it spent on World War II. And these relief packages have cost taxpayers tens billions in waste and misappropriated funds, Paul argues. By far the largest expense listed was a $36 billion loss to “improper CARES Act unemployment payments.” The CARES Act, signed into law in March 2020, was the first major pandemic stimulus bill. At the time, when uncertainty about the disease was at its peak, the bill expanded eligibility opportunities for unemployment, allowing those who normally would not qualify to receive unemployment payments. Though it has since become clear that most healthy adults under 50 years old are at little risk of severe disease, federal expenditures authorized by the CARES Act have lagged behind the science. While employers across the nation are desperate for more employees, many not-at-risk Americans have continued to collect unemployment checks under CARES Act guidelines despite being able to work at workplaces enforcing their own COVID-19 safety measures. The second largest expense detailed by Paul was also the result of COVID stimulus legislation. In total, Paul claims that the federal government spent around $4.3 billion on duplicate or ineligible Paycheck Protection Program (PPP) loans, another relief policy that allowed employers to take loans from the federal government to ensure that their employees got paid. DoD Spends Billions on Scrapped Planes, Abandoned Buildings, and Middle Eastern Border Walls The next largest expenses come from the Department of Defense (DoD). According to Paul, the DoD has invested $3.4 billion into replacing the Bradley Fighting Vehicle, one of the military’s go-to tank-like assault vehicles that are used in part as troop transports. Efforts to replace the Bradley began in 2003, but the DoD has still not managed to build a viable replacement. The DoD also lost quite a bit of taxpayer money during the chaotic and controversial withdrawal from Afghanistan. Ordered to leave immediately by President Joe Biden, the military left behind not only hundreds of American citizens and billions of dollars in military equipment, but also billions of dollars of U.S.-financed infrastructure and buildings. The evacuation has left around $2.4 billion of buildings sitting unused. “Why are we spending all this money to build them in the first place?” Paul wrote. “What was once a mission to seek out and destroy the people who perpetrated the 9/11 attacks has become an exercise in—well, it’s unclear exactly what.” Additionally, $549 million was spent by the DoD on military aircraft for the faraway desert nation, but these were “later thrown away” and sold as scrap for $40,257, Paul found. Since 2017, the DoD has lost $773 million on uncollected debts for allies’ use of U.S. aircraft. “DoD is responsible for billing and tracking countries’ usage of these goods and services,” Paul said of the discovery, noting that these aircraft were not supposed to be offered for free. “However, DoD apparently forgot about that part,” Paul quipped. One of the DoD’s most bizarre expenditures involves a $250 million investment into building border walls around several Middle Eastern and North African countries. At the same time, the Biden administration has left the U.S. southern border de facto open. Upon taking office, Biden canceled several non-refundable U.S.-Mexico border wall contracts negotiated by Trump, leaving the wall’s materials sitting unused along the border. Since then, illegal crossings at the southern border have reached unprecedented levels. One Million Trees for NYC, Solar Panels for Africa, and Other Climate Initiatives Still, these expenditures are relatively tame compared to others on Paul’s list. Paul also exposed how federal money has been used for several odd climate initiatives, both in the United States and abroad. For example, the federal government offered a staggering sum of $400 million to plant one million trees in New York City between 2007 and 2017, which comes out to around $400 per tree. Proponents said that the project would “make New York City more sustainable” and “protect our planet.” MillionTreesNYC Director Morgan Monaco said that there was an additional goal: “to have New Yorkers form an emotional connection to trees.” Some African nations also made off with a windfall in U.S. taxpayer funding. The Department of State, Paul says, devoted $179 million to funding green energy programs in Africa. Paul argued that this investment will actually hurt African nations more than help them. “Operating renewable energy sources like solar and hydroelectric remain more costly to [African] citizens,” Paul said. “So, by … providing $179 million for renewable energy, we’re actually going to be sticking Sub-Saharan African consumers with hefty electricity bills.” The U.S. Agency for International Development (USAID) has also advanced some questionably costly climate programs. According to Paul’s findings, USAID has spent $11.3 million on “telling people [in Vietnam] not to burn their trash.” Another $88 million USAID went to efforts to build irrigation systems in Afghanistan. Despite the nearly $100 million investment, these have gone mostly unused by Afghan farmers. Ground-Up Ferrets for COVID Vaccines and Other Government-Funded Research Projects The federal government has also been busy in the domain of scientific research. While some federally-financed research involves things like military technology, health care innovations, and space travel, some of its projects push the frontiers of human knowledge much less than others. One of the most bizarre research projects highlighted by Paul involves $4.5 million in funding for a vaccine facility that ground up ferrets, among other inhumane tests. “Since 2010, the American taxpayer has given Triple F Farms $4.5 million [to breed and transport ferrets] to COVID-19 and influenza vaccine testing laboratories,” Paul explained. A 2011 investigation into their facility included “video recordings of ferrets dying in feces, run over by carts, thrown alive into incinerators, hanging from wire.” After these abuses became public, Triple F Farms received a $44,000 fine from the U.S. Department of Agriculture (USDA), which Paul called “a minor slap on the wrist compared to the millions of dollars of your taxpayer funds they received before and after the investigation.” Recent USDA inspections have shown that these problems are ongoing. But Triple F Farms still receives federal funding despite its inhumane and illegal treatment of animals. Another federally-funded study by the National Institute on Aging, at a cost to taxpayers of $1.3 million, found that “hearing bad news decreases happiness levels.” In the same vein, the federal government financed a $352,000 experiment which concluded that “kids crave junk food and gain weight if they’re exposed to it.” Finally, the National Institutes of Health spent $465,000 on an experiment involving pigeons playing slot machines, while the Food and Drug Administration spent $337,500 on an effort to fatten eels for human consumption. Translating Books Into Georgian and Other Cultural Initiatives A slew of odd cultural initiatives are also on the federal government’s bloated checkbook. For example, the Department of State has spent $182,741 on an initiative to translate classic American books into Georgian, the language of a small central-Asian state with a population of around 3.7 million people—less than the population of Los Angeles alone. “The books used are not objectionable,” Paul emphasized, “some economics textbooks, children’s books, and American classics like All the King’s Men and Invisible Man.” “But,” he asked, “when did this become the federal government’s job?” “In the United States, nearly one third of fourth-graders are not proficient in reading,” Paul noted. “‘Some 36 million adults in the U.S. don’t have basic reading … skills above a third-grade level,’ according to estimates,” the report reads. “In case the bureaucrats have forgotten: your constituents are the American people, not foreign citizens,” Paul wrote. Similarly, the State Department has spent $200,000 on an initiative to teach French people about American culture, despite the fact that U.S. culture already has an outsized effect on French culture and language. USAID, in the same vein, has also spent $150,000 on funding free field trips to Washington for Korean children. But Paul notes that not all of the federal government’s cultural spending has been international. New York City, for instance, got a grant of $25 million as part of a COVID-19 relief program to display art projects across the city. With the money, then-Mayor Bill DeBlasio introduced the “City Arts Corps,” which paid around 3,000 artists to publicly display creative works in an effort to “resurge the cultural scene,” DeBlasio said. Another $14 million went to funding the Wilson Center, an upscale venue that’s often the scene of what Paul described as “swanky parties” for members of Congress. “If you’ve not heard of the Wilson Center, it’s a small nonpartisan foreign policy think tank in Washington D.C.,” Paul wrote. “It’s the same as a private think tank, like the Heritage Foundation or the Center for American Progress, except it receives about $14 million a year from the Federal government.” And the Wilson Center has gotten a lot of taxpayer money over the past several decades. According to Paul, this congressional party hub has received $300 million since 1976, while its aforementioned peers have received none. Finally, the National Science Foundation spent $2.5 million on “a film about dinosaurs to inspire middle schoolers.” “Yes, the government used $2-million taxpayer dollars to create a dinosaur-centric film in 2D and 3D, a 3-episode TV series, a fictional book and museum exhibits to ‘inspire’ middle schoolers to build interest in STEM,” Paul wrote. Paul’s Plan to Balance the Budget In his report, Paul also detailed what could be done to balance the budget. A few years ago, Paul introduced his “Penny Plan Balanced Budget.” According to Paul, the plan would have cut “only one penny off every dollar spent by the Federal government.” But amid record spending by the Democratic Congress, that plan will no longer be enough to balance the budget, Paul said. Now, the federal government is spending so much money that it would need to cut five pennies off of each dollar it spends to balance the budget. During early debates on democratic socialist Sen. Bernie Sanders’ (I-Vt.) $3.5 trillion budget draft, Paul introduced an amendment to the bill that would have done just that. However, the amendment was defeated by a supermajority, with several Republicans joining with Democrats to strike down the proposal. Still, Paul said he would keep doing what he could to fight the problem. “The speed in which our debt is growing means we need ever more vigorous solutions to solve this growing problem,” he wrote. Tyler Durden Thu, 12/23/2021 - 15:45.....»»

Category: blogSource: zerohedgeDec 23rd, 2021

The Catalyst for The Great Rotation – Crescat Capital

Crescat Capital’s commentary for the month of November 2021, discussing the catalyst for the great rotation. Q3 2021 hedge fund letters, conferences and more The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an […] Crescat Capital’s commentary for the month of November 2021, discussing the catalyst for the great rotation. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Walter Schloss Series in PDF Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Catalyst for The Great Rotation Based on the firm’s current equity and macro models, and our investment team’s analysis, we believe we are in the explosive first wave of an inflationary cycle in the US and globally that will elevate consumer prices at a much higher annualized rate and for significantly longer than priced into financial markets today. The factors driving our view include structural shortages in primary resource industries due to chronic underinvestment, incipient wage-price spirals, and unsustainably high government debt-to-GDP imbalances which make a new inflationary trend the policy path of least resistance. As an overarching macro investment theme at Crescat today, we are calling for what we have dubbed the Great Rotation. This theme is a highly probable and pending shift, in our view, out of crowded, hyper-overvalued, long-duration financial assets, including mega-cap tech and negative-real-yielding fixed income securities, and into the less populated and more undervalued segment of the market that is focused on the tangible assets at the core of the global economy. In our analysis, the companies involved in these industries are driven by both intrinsic and calculable fundamental value and offer some of the best value and appreciation potential in the market. Rising inflation expectations and the Fed attempting to tighten financial conditions are the catalyst for this critical inflection point. Policy makers are far from doing what is necessary to halt what is already the most inflationary environment since the 1970s when they are instead: Running twin deficits at double digit percentages of GDP. Holding the Fed funds rate at 0% for another seven months. Planning to add $400 billion more in QE before beginning to raise rates. Restricting commodity companies from exploring, developing, and producing natural resources.   Crescat’s Global Macro and Long/Short Equity strategies are hedge funds with significant short positions in the overvalued areas that we believe the investor masses will be rotating out of, as well as long positions in the undervalued areas, where we believe the smart money will be rotating into, in this likely-to-be epic regime change. At Crescat, these two strategies are the most comprehensive ways to play the Great Rotation. Large Cap and the Precious Metals strategies, on the other hand, are ways to play the long side of the Great Rotation without the short component. Note how the relative fundamental valuation, using enterprise value relative to sales, between the Russell Growth vs. Value indices is re-testing the peak tech bubble levels that we saw in 2000. Tech Looks Ready to Roll Over Technology stocks have retained the limelight in the press and investor consciousness year to date as well as price momentum but are now facing an outlook of significantly deteriorating growth and profitability. Meanwhile, primary resource stocks in the energy, materials, and industrial sectors have had equally strong momentum since the March 2020 Covid crash but possess eminently better intermediate-term growth, value, and appreciation potential as the world continues to emerge from the pandemic. The real aggregate free-cash-flow yield among tech companies in the S&P 500 is now even lower than it was at the peak of the Tech Bubble. With three of the big-five mega cap tech stocks (FB, AMZN, AAPL) missing Q3 revenue and/or earnings expectations and warning of a weak Q4, this is a fundamental signal of a major US market top in the making. Add to that Elon Musk boldly cashing in on $6.9 billion worth of his Tesla shares this week, the largest sale ever by a CEO. This at the same time as one of the best performing and most persistent hedge fund short sellers of the last decade was forced to throw in the towel due to client redemptions. Those clients are fools. Russell Clark is a legend and so is his performance on this much needed and now almost vacant side of the market. Hat tip to him. Our research shows that, across a composite of valuation metrics, the stock market is more overvalued than it was in 2000, as well as any other time in history, including 1929. However, our models also show that we are headed towards an inflationary bubble burst, like that of 1973-74, when popular large cap growth stocks were decimated at the same time as commodity prices and resource stocks exploded to the upside. This is a unique type of bear market and economy that we envision, because it is much different than the deflationary-style meltdowns of 1929-32 or 2008-09. The 2000-02 tech bust and 1973-74 stagflationary shock are much better case studies for the type of macro environment we envision and want to be positioned for over the next one-to-three years. These were abrupt regime shifts in macro environments where bubbles burst in overpopulated segments while new secular bull markets began in others. There was much money to be made on both the long and short side of the market by being in the right industries on each side. There was also much pain for those who ignored valuation, changing fundamentals, and macro indicators in their approach and just kept hanging on, or worse if they bought the dip of the prior popular trend instead. Crypto Software based crypto assets, in the CIO’s opinion, are in a broad speculative mania along with the entire software industry akin to the Dotcom bubble on steroids. No doubt, distributed ledger technologies and tokenization are brilliant innovations that have value and will have endurance, just like the Internet did at its investment craze peak in early 2000. Crescat is not short crypto assets though the idea has been tempting due to the excessive level of speculation, along with their abundance and questionable intrinsic value. They are not securities with underlying fundamentals that can be valued based on a discounted-free-cash-flow model or with macro data that makes any sense to us today. For now, we see too much risk to being short crypto assets due to their crazy popularity and dogmatic following, including as a form of inflation protection. We couldn’t agree more with the need for inflation protection, but fervently believe there is a much more prudent way to get that when one’s nest egg is considered. Primary Resources Industries According to our macro and fundamental models, the most desirable assets to own in today’s changing investing climate, are the hard and soft commodities that are the core building blocks of the global economy. In our analysis, some of the best prospective risk-adjusted performance in the financial markets over the next three years (our target investment horizon) should accrue to the companies that own and produce these resources. These firms offer some of the highest relative revenue, earnings, and free cash flow growth for the foreseeable future along with low stock price multiples today, a powerful setup. These companies are spread throughout the energy, materials, industrial, and agricultural sectors of the economy. Based on a discounted free cash flow valuation approach, they predominate the list of highest appreciation potential stocks in Crescat’s fundamental equity model. We expect the leadership in primary resource industries of the economy to continue over the next several quarters and years due to acute raw material shortages at the root of the supply chain, as well as increased demand due to fiscal and monetary policies, including the resource intensive push to a cleaner and greener economy. Heightened environmental and social pressure have only made the supply and demand imbalances more extreme. Strong fiscally driven tailwinds including the new $1.1 trillion Infrastructure Investment and Jobs Act just passed by Congress, and about to be signed by the president, add fuel to this fire. Supply-side constraints to producing the materials needed to run the new as well as the existing economy are not easily reversed due to long lead times and the multiple years of declining capital investment trends. We are already experiencing a domino effect among natural resources. It started with spikes in lumber prices, then oil and gas, lead, zinc, and coal. If we look at ammonia prices, a key ingredient in fertilizer, agricultural commodities are a whole new set of commodities likely to be spiking next, potentially creating food shortages. Crescat’s Large Cap, Global Macro, and Long/Short strategies own many positions in the broad resource sectors identified by our models. Among our favorites is precious metals. The Fundamental Opportunity in Precious Metals Gold and silver producers are trading at historically low free-cash-flow multiples and strong near-term growth prospects. We love them. But even more, we are enamored with high-quality gold, silver, and select copper and base metal explorers with high-grade targets who are aggressively growing new resource ounces in top mining jurisdictions globally. The companies with competent management and technical teams in this segment offer unbelievable value and appreciation potential according to our DCF model. Owning gold in the ground in a carefully constructed portfolio of these firms is one of the most asymmetric reward-to-risk opportunities we have ever seen. Precious Metals, A Key Focus Today With inflation continuing to surprise to the upside, precious metals mining stocks are ripe for a major breakout after taking the strong early lead among all S&P industry groups in the immediate four months after the March 2020 Covid crash. Until last month, gold and silver stocks had been consolidating, but with their underlying fundamentals only getting better, we believe they are poised for another major leg up. We are constructive regarding our potential to deliver a strong finish to 2021 based on the incredibly strong fundamental and macro set-up. That is our goal. At Crescat, we recently became so excited about the deep-value opportunity for precious metals ahead of a likely new secular bull market, that we created two focused strategies based on it, the Precious Metals separately managed account strategy launched in June 2019 and the private Precious Metals Fund in August of 2020, both industry specific mandates. Here is some quick math to illustrate the set up likely ahead of us. The monthly price of gold is now above its 2011 highs. If miners were to re-test the same levels, it would imply a 61% appreciation from here. More importantly, the fundamental story behind these companies today is unquestionably better than back then. Precious Metals Fund Description The Precious Metals Fund is an activist private fund. It is a macro and fundamental-driven industry specialist fund focused exclusively on the precious metals. This fund can short, in addition to going long, but chooses to be long-only today, given where we believe we are in the precious metals cycle, early in a new secular bull market. It also has an active futures account associated with it. The Precious Metals Fund participates in private as well as public transactions and holds a substantial equity warrant portfolio. We have partnered with renowned exploration geologist, Quinton Hennigh, PhD to help us manage the precious metals portfolios across the firm. He has been advising Crescat for the past two years and has recently joined the team full-time as an equity owner/member of the firm and its geologic and technical advisor. We remain locked and loaded with an extensive portfolio of undervalued gold and silver in the ground. We have significant copper and other base metal exposure too where gold and silver are significant byproducts. Our activist precious metals portfolio companies are focused on substantial organic growth in high-grade resource ounces through exploration and drilling. We expect industry M&A to heat up significantly over the next several quarters and our companies to be coveted. In a segment that has seen declining exploration spending for a decade,we have over 300 million target gold equivalent resource ounces in our portfolio which is thanks to Quinton’s expertise. Total global gold production in not even 100 million ounces. Global Macro Fund Description Crescat Global Macro remains the firm’s most comprehensive strategy and can trade any asset class globally, long and short, across currencies, commodities, fixed income, and equites. The Global Macro Fund was launched in 2006 to express investment themes via a broad set of instruments in addition to equities. The Global Macro Fund includes an active futures account and as well as equity account and several ISDA relationships with large bank counterparties to trade swaps that are not otherwise traded on an active exchange, such as our Chinese yuan and Hong Kong dollar put options that we own today. Long/Short Fund Description Long/Short is a classic equity hedge fund and is our second broadest mandate. It also exploits Crescat’s firmwide themes but is focused exclusively on equities. Long/Short is Crescat’s second longest running strategy. It was launched in 2000 and has persistently delivered strong alpha through multiple business cycles. Large Cap SMA Description Large Cap is a separately managed account strategy also focused on equities, but in the large and mid-cap realm. Think of it as a souped-up, blue-chip portfolio. Like all Crescat strategies, Large Cap is driven by our firmwide models and themes. It is focused on the best large and mid-cap long equity opportunities therein. It is diversified across select industries without being “diworsified” across all of them. Large Cap is Crescat’s longest running strategy. It was launched in 1999. It has been through the Tech Bubble, Tech Bust, Housing Bubble, Global Financial Crisis, and the longest bull market ever followed by both the Covid Crash and recovery. Precious Metals SMA Description The Precious Metals separately managed account strategy is a long-only separately managed account strategy designed for investors who do not qualify for our private fund, but who still want exposure to our management and publicly listed holdings. The Precious Metals SMAs do not participate in private placements and pre-IPO investments, nor do they get the warrants frequently associated with those investments, but they can still participate in our favorite public gold and silver stocks in a managed portfolio. We are long a selective basket of miners in the precious metals industry across all five strategies at Crescat today due to rising actual and expected inflation worldwide and ultra-cheap valuations. However, it is important to understand that Crescat is more than a precious metals focused investment firm. We remain a comprehensive, value-driven investment firm guided by fundamental equity and macro models across five differentiated strategies. In addition to the two precious metals strategies, we manage a Large Cap long-only SMA, a Long/Short Equity hedge fund, and a Global Macro hedge fund. Each of these three strategies has an increasingly broader mandate in that order. Crescat Hedge Fund Term Sheet Crescat SMA Term Sheet Fundamental Equity Quant Model Both Crescat Large Cap and Long/Short have beaten their benchmarks since inception, net of fees, on an absolute and risk-adjusted basis over multiple business cycles. One constant behind these strategies has been Crescat’s fundamental equity quant model. The CIO originally began developing it in 1995. He, along with Crescat and its predecessor firms, have continuously refined and applied the equity model to managing client money since 1997. The equity model has always been an important tool in driving the firm’s stock picking in addition to helping define macro themes. Crescat has invested heavily in improving our equity model over the last year. We are more excited than ever about its current condition and potential to continue to help the firm deliver alpha. Macro Models Crescat also relies on macro models for developing its investment themes. Co-portfolio manager, Tavi Costa, helped take Crescat’s macro modeling to a new level after he joined the firm in 2014. Today, Crescat applies a variety of its own macro models in addition to our equity model to source and support its firmwide investment themes and positions. Global Macro Positioning Crescat Global Macro, being our most comprehensive strategy, maintains exposures to Crescat’s themes and most of the positions in our equity-oriented mandates, but it will also add exposures to currencies, commodities, and/or fixed income asset classes. Today, Global Macro holds two substantial fixed income short positions in asymmetric reward-to-risk put options, because we are at the lowest level of real yields in post-World War II history without a bond bear market already having occurred. One is overdue, in our view, and most investors are not ready. The first fixed income position is a junk bond short via the iShares iBoxx $ High Yield Corporate Bond ETF which long investors today are effectively paying, in the form of negative real yields at an historic level, for the dubious privilege of accepting default risk. The second is a significant put option position in 10-year Treasury Note futures. With rising inflation in the form of both CPI and expectations, the Fed must do something credible to fight the steep rise in the price of consumer goods and services. It has already announced that it will be tapering its fixed income asset purchases. At the same time, the Treasury department is in extreme deficit spending mode relative to GDP while aggressively extending its maturities post a record Covid-T-Bill issuance. With the Fed out of the game, who is going to take-up the slack to digest the increased supply of long-duration Treasuries in a rising inflation environment? Shorting UST 10s from a starting nominal yield of 1.5% with CPI running at 6.2% simply makes a ton of sense to us here. China is the Black Swan trade of the century that the market still just doesn’t get in our view. We remain committed to Plan A here in Global Macro, an asymmetric trade with minimal downside risk through low volatility option premium paid and large upside potential through long USD calls versus short CNH and HKD puts. We have been risking about 1 to 1.5% quarterly with notional upside to devaluation and de-peg that has ranged from 500 to 1000%. China has been melting down before the world’s eyes all year. We believe its currency is the ultimate shoe to drop. We are continuing with this strategy. Summary The Fed is trapped into moving forward with its plan to scale back its debt monetization. For now, this includes pressure from the yield curve to raise rates next year. The taper matters big time as the catalyst for financial asset bubbles to burst along with actual inflation. This reduction of monetary stimulus is a huge liquidity drain on the margin given the formerly outrageous QE levels and asset bubbles they have created. Whether it is now or within just several months from now, we believe we are very close to a major twin top in US equity and credit markets. We need to be ready and positioned for it now. Across the firm, we are doing everything we can on that front. We are determined to make money on short side of the market in Global Macro and Long/Short when the Great Rotation burst gets going in earnest. The shorts have been holding those funds back YTD but we strongly believe that will not be the case forever. Many fund managers are precluded from shorting. We are not. The team here is working extremely hard and focused on delivering value across all our strategies. October Performance Crescat delivered robust performance in October across all strategies with precious metals long positions being the biggest driver. These holdings comprise our highest conviction forward-looking expected return vs. risk macro theme at Crescat. Thus, precious metals, and gold and silver mining equities, are widespread positions across all Crescat’s strategies. November has started off extremely well MTD, with short positions adding value in Global Macro and Long Short on top of strong gains in precious metals. Download PDF Version Sincerely, Kevin C. Smith, CFA Member & Chief Investment Officer Tavi Costa Member & Portfolio Manager For more information including how to invest, please contact: Marek Iwahashi Client Service Associate miwahashi@crescat.net Cassie Fischer Client Service Associate cfischer@crescat.net Linda Carleu Smith, CPA Member & COO lsmith@crescat.net © 2021 Crescat Capital LLC Article by Crescat Capital Updated on Dec 20, 2021, 3:29 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 20th, 2021

Transcript: Maureen Farrell

     The transcript from this week’s, MiB: Maureen Farrell on the Cult of We is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.   ~~~   RITHOLTZ: This… Read More The post Transcript: Maureen Farrell appeared first on The Big Picture.      The transcript from this week’s, MiB: Maureen Farrell on the Cult of We is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.   ~~~   RITHOLTZ: This week on the podcast, I have a special guest. Her name is Maureen Farrell, and she is the co-author of the book, “The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion.” I read this book a couple of weeks ago and just plowed through it. It’s a lot of fun. Everything you think about WeWork is actually even crazier, and more insane, and more delusional than you would’ve guessed. All the venture capitalists and — and big investors not really doing the appropriate due diligence, relying on each other, and nobody really looking at the numbers, which kind of revealed that this was a giant money-losing, fast-growing startup that really was a real estate play pretending to be a tech play. You know, tech gets one sort of multiple, real estate gets a much lower multiple, and Neumann was able to convince a lot of people that this was a tech startup and, therefore, worthy of, you know, $1 billion and then multibillion-dollar valuation. It’s fascinating the — it’s deeply, deeply reported. There is just an incredible series of vignettes, and stories, and reveals that they’re just shocking what Neumann and company were able to — to fob off on their investors. Everything from ridiculous self-dealing to crazy valuations, to lackluster due diligence, and then just the craziest most egregious golden parachute in the history of corporate America. I found the book to be just fascinating and as well as my conversation with Maureen. So, with no further ado, my conversation with Maureen Farrell, co-author of “The Cult of We.” VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My special guest this week is Maureen Farrell. She is the co-author of a new book, “The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion.” The book has been nominated for a Financial Times/McKinsey Business Book of the Year Award. Previously, she worked at the Wall Street Journal since 2013. Currently, she is a reporter, investigative reporter for The New York Times. Maureen Farrell, welcome to Bloomberg. FARRELL: Thank you so much for having me. RITHOLTZ: So, let’s start a little bit with your background and history. You — you covered capital markets and IPOs at the Wall Street Journal. What led you and your co-author Eliot Brown to this story because this was really a venture capital and a startup story for most of the 2010s, right? FARRELL: Exactly. And for me, personally, I was covering the IPO market and — and capital markets the sort of explosion of private capital. So, I was looking at WeWork from both angles, basically, you know, in the small cohort of the most interesting companies that were going to go public, along with Uber, Airbnb, Lyft. And it was also part of this group that had raised more capital than anyone ever before. I was looking at SoftBank and its vision fund a lot. And then — I mean, take within this cohort, there were some pretty interesting companies, but I mean, just along the way kept on hearing, you know, Adam Neumann stood out. That’s like a little bit of a different entrepreneur that the — the stories you would just hear over time just became more and more interesting a little and vain. RITHOLTZ: So when did you decide, hey, this is more than just a recurring series of — of articles? When did you say this is a book? We have to write a book about this? FARRELL: So, we were — around August 2019, by then we were writing more and more about the company as it was clear that it was, you know, made it known that it was going to go public. Suddenly, it’s S-1, the — the regulatory documents you file publicly to go public were out there, and they were completely bonkers. They sort of captivated, I think, the imagination of the business reading public. But then over the next few weeks, WeWork was on its way to finally doing this IPO. And my co-author Eliot and I who had been cover — he had covering the company long before me. He’s a real estate. He had been covering them since 2013, then he was out in San Francisco covering venture capital. And it just became the most insane story either one of us had ever reported, like day by day there’s a playbook for IPOs. And they — you know, things are different, but they sort of follow a formula and nothing was making sense. And it just was getting more and more insane until this IPO was eventually called off. And Adam Neumann, the founder and CEO was pushed out of the company for all sorts of crazy things that were given to. RITHOLTZ: So, we’re going to — we’re going to spend a lot of time talking about that. But you hinted at something I — I have to mention. Your co-author covered real estate. Hey, I was told WeWork was a tech startup, and an A.I. company, and everything else but a real estate arbitrage play. How did they manage to convince so many people that they weren’t a Regis. The CEO of Regis very famously said, “How was what they do any different than what we do?” FARRELL: Well, they tried to convince Eliot Brown, my co-author, of the same thing. He — he had heard about Adam Neumann and his company. He started seeing the valuation. Back then I think it was $1 billion, $1.5 billion, and he was … RITHOLTZ: Right. When that became a unicorn, suddenly it was like, “Wait, this is just a real estate play.” FARRELL: Exactly. And he was covering other commercial real estate companies like Regis. And he had followed them and he was like, “Wait, they only have a couple of locations even still at that point.” So, he went in to meet Adam Neumann for the first time, and he’s got great stories. But as part of it, Adam was like really horrified. He was, you know, very nice, his charming self, but also saying, “Hey, you’re a real estate reporter … RITHOLTZ: Right. FARRELL: … for the Wall Street Journal. You’re the last person who should be covering this company. Do you have someone who covers like community companies?” RITHOLTZ: Right. FARRELL: And Eliot said, “No, and I’ll be following you from here on out.” RITHOLTZ: We’ll — we’ll talk about community-adjusted EBITDA a little later also. But — but let’s talk about the genesis of this because Neumann and his partner McKelvey had a — a legit business Greendesk, the — was the predecessor to WeWork. It was sold. I don’t know what the dollar amount was. Was that ever disclosed? FARRELL: Ah. RITHOLTZ: But — but it was not — nothing. It was real. And the two of them rolled that money plus a third partner who is also — Joel Schreiber is a real estate developer in New York, not coincidently. And in 2010, they launched WeWork with the first site in SoHo. So why is this real estate assign long-term leases and sell shorter-term leases at a significant markup? How is this not possibly a real estate concern? How? What was — what was the argument they were making to people that, “Hey, we’re a tech company and we deserve tech company valuations.” FARRELL: Sure. So exactly as you said, they have this Brooklyn business that was the genesis of WeWork. It was — it had a lot of that business, and it was what they took to make WeWork. It has a lot of innovation to it in terms of architecturally the aesthetic of it. I mean, we probably all have been to WeWork. They’re just — they’re beautiful buildings. RITHOLTZ: Funky, fun … FARRELL: Yeah. RITHOLTZ: … open … FARRELL: Light coming through … RITHOLTZ: … with a beer tap and lots of glass. FARRELL: … we had light streaming through the windows. You put — you pack people very close together. So, something they started in Brooklyn, it took off, but then their — the landlord there didn’t want to grow it, so they — they split up, they moved on. Adam and his — his co-founder Miguel McKelvey. And from the very beginning, the idea was something so much bigger. They say they created — they like sketched out something and it was like essentially WeWorld. It would be, you know, schools, and apartments, and this whole universe of we. But basically, as you said, I mean, throughout for the most part, it was this like arbitrage building, arbitrage company in terms of getting long-term leases and splitting it up. RITHOLTZ: All right. So, by 2014, they have a pretty substantial investor list, J.P. Morgan Chase, T. Rowe Price, Wellington, Goldman, Harvard Endowment, Benchmark Capital, Mort Zuckerman. Was this still a rational investment in 2014 or when did things kind of go off the rails? FARRELL: By then it still seemed like the valuation was really getting ahead of itself, and it was very much predicated on this idea that you said being a tech company. And I mean, at Adam Neumann’s genius was in marketing and fund raising. And what he had the ability to do really each step of the way and it’s — it’s masterful was sort of take — take the zeitgeist, like the big business idea of the moment that was captivating investors and put that on top of WeWork. So, he’s very into — a little bit before this like sort of acquainting it to Facebook. You know, Facebook was the social network. This is like a social network in person. RITHOLTZ: In real life, right. FARRELL: In — yeah, real life social network. And he didn’t manage to kind of convince people bit by bit. I mean, it’s interesting, Benchmark, you know, as you know, is like one of the top … RITHOLTZ: Legit — right, top shelf V.C., absolutely. FARRELL: Yeah, that’s been some — behind some of the biggest tech companies. RITHOLTZ: Bill Gurley, Uber, go down the list of just incredible … FARRELL: Snap. RITHOLTZ: … yeah, amazing. FARRELL: eBay. Yeah, they’ve had — through — for decades, they’ve been behind some of the biggest companies. So, they were willing to take a gamble on them, and then they saw red flags, but just decided to jump in anyway. But for Benchmark, I mean, we see and they ultimately — they get in at such a low valuation, it’s … RITHOLTZ: Doesn’t matter. FARRELL: … exactly like — you know, they want their homeruns. And I mean, it’s still — they still ultimately got out at a pretty good — really incredible return, but it’s … RITHOLTZ: Right, $600 million to $10 billion, something like that, something (inaudible). FARRELL: Yeah, something like that. RITHOLTZ: So — so just to clarify because I — I’m — I’m going to be trashing WeWork for the next hour, but this wasn’t a Theranos situation or a Bernie Madoff, this is not an issue of fraud or anything illegal or unlawful. Fees just were insane valuations. Somebody did a great job selling investors on the potential for WeWork, and it didn’t work out. FARRELL: I’m glad you brought that up because a lot of people do ask about the differences and the parallels between Elizabeth Holmes and Adam Neumann. And I — I mean, I almost think the story, in some ways, is more interesting. I mean, the Theranos story is, obviously, the craziest and — and horrifying in so many ways. But with Adam Neumann, on the margins, there are questions about, you know, some of them (inaudible). RITHOLTZ: They’re self-dealing and there’s some — a lot of avarice. And he just cashed out way, way early, so you could criticize his behavior. But, you know, you end up with the VCs and the outside investors either looking the other way or turning a blind eye. It’s not like the stuff wasn’t disclosed or anything, he was very out front. No, I need — I need a private jet because we’re opening up WeWorks in China and in 100 other countries, and I have to join around the world. FARRELL: Yeah, and maybe you (inaudible) thing. RITHOLTZ: Now, you need a $65 million (inaudible) is a different question. But, you know, there — they didn’t hide this. They were like proud of it. FARRELL: No, and I think it is every step of the way, you see. I mean, the investors and these were some of the most sophisticated investors in the world and some of the — you know, they are thought of as the smartest investors. They saw the numbers that WeWork was putting forth and they were real, real numbers. They also saw their projections and the projections were mythical, and they never quite reached them. But you could see, if you are going to invest in any round of WeWork, you could see what their prior projections were, how they failed to hit them. But instead, the thing that we saw time and time again to this point was, very often, Adam Neumann would meet the head of an investment company, whether it’s Benchmark or SoftBank or T. Rowe Price, like the — the main decision-maker totally captivate this person. You know, it’s usually a man. The man would become kind of smitten with Adam and all his ideas and what he was going to do, totally believing it. The underlings would look at the numbers, raise all these red flags, point them out. And then the decision-maker would say … RITHOLTZ: Do it anyway. FARRELL: … yeah, he’s amazing. (COMMERCIAL BREAK) RITHOLTZ: So I want to talk about the rapid rise of WeWork and their — their really fast growth path, but I have to ask, what sort of access did you have to the main characters in the book? Were people forthcoming? I have to imagine there were some people who had grudges and were happy to speak. What — what about the — some of the original founders, Adam and his wife Rebekah? Who — who did you have access to? FARRELL: Sure. So, you know, in the interest of privacy, I can’t get into specifics. But what I will say, the interesting thing was, I mean, when we really got access for hours and hours to the vast majority of players at every step of the way in this book. And the — one of the funny things was, I mean, the pandemic really started right as Eliot and I took book leave. We started a book leave in late February 2020. And we had both planned to sort of be and all around the world, meeting people in person. Eliot had moved to New York to meet a lot of the players in person. Obviously, the world shut down and, you know, was kind of nervous about what that would mean in terms of conversations. And the funny thing was I think people are home, bored, feeling pretty reflective. So, there are a number of people that said … RITHOLTZ: What the hell. FARRELL: … I didn’t know if I wanted to talk to you and … RITHOLTZ: But what the hell. FARRELL: … these — some of these people I probably had like 10 conversations … RITHOLTZ: Really? FARRELL: … for hours with. RITHOLTZ: And — and there are 40 something pages of endnotes. It’s — I’m not suggesting that this isn’t deeply researched because a lot of these conversations that you report on like you’re fly on the wall. Clearly, it can only be one of two or three people. So, it looks like you had a ton of access to a lot of senior people and I guess, we’ll just leave it at that. So — so let’s talk about that early rise in the beginning. They were really ramping up very rapidly. I mean, you could see how somebody interested in investing in a potential unicorn in 2012, ’13, ’14 coming out of the financial crisis. Hey, the idea of all these startups just leaving a little bit of space and not a long-term lease, it looks very attractive. It looks like, hey, you could put WeWorks wherever there’s a tech community, and they should do really well there. FARRELL: Yeah, there — and it was — the marketing was — it was very viral at that point. It was, you know, people would tell their friends about it, and they would fill up very rapidly. And they were building more and more. I mean — and this is one of the — you know, as part of the genius of Adam Neumann was, you know, he was telling people from day one they were really struggling to even secure the lease on the first building. And he was like, oh, we’re going to be global, we’re going to be international. He would set these goals of how many buildings they would open and people internally, and even investors, would say, “Oh, this is impossible.” RITHOLTZ: Right. FARRELL: And he would — and he would hit that. He kept on sort of defying gravity, defying disbelief or questions. So, the growth was incredible and they were filling them up. We could talk about, you know, the lack of the cost of doing so. RITHOLTZ: Right. They — they were paying double to — to real estate agents when everybody else was paying. They were going to competitors and saying, “We’re going to reach out to your tenants, and we’re going to offer them free rent for a year.” I mean, they were really sharp elbowed and very aggressive. FARRELL: Especially as time went on. We did find that there is one year we got all their financials. We — you know, we got our hands on a vast trove of documents, but there was one year — I think it was 2011 — that they, I think, made $2 million in profit. RITHOLTZ: Wow. FARRELL: We were — we were kind of shocked to see that. We don’t think they had ever made a profit. And then from there, they did not, and the billions and billions just added up in terms of losses. RITHOLTZ: So — so the rapid rise, we — we mentioned, they peaked in 2019 at more than $47 billion. Neumann recently did a interview with your fellow Times correspondent Adam (sic) Ross Sorkin, and he was somewhat contrite. He — he had admitted that all the venture money and all the high valuations had — went to his head, quote, “You lose focus on really the core of the business and why the business is meant to be that way. It had a corrosive effect on my thinking.” That’s kind of a surprising admission from him. FARRELL: It was. Yeah, I mean, his mea culpa is very interesting. And I mean, one of the things that people said along the way was, you know, the — the higher the valuation, the more out of touch she became. I mean, he — he had a narcissist. And I don’t know what you want to call it, but … RITHOLTZ: Socio-pathological narcissistic personality disorder? I’m just — I’m not a psychologist, I’m just guessing, or a really successful salesman/CEO. There’s like a thin line between the two sometimes, it seems. FARRELL: And some of it — I mean, it seems insane. It was like, oh, he thought of himself in this like same — like with along with world leaders, but world leaders were really sort of … RITHOLTZ: Tailing him. FARRELL: … really wanted to meet him. RITHOLTZ: Yeah. FARRELL: Yeah. And he was like — we have a scene in the book that he was debating whether or not he was going to cancel on Theresa May because he had promised his wife that he would teach a class on entrepreneurship to their new school, so it was like a few of their kids and a few of their kids’ friends were in the school. RITHOLTZ: Right. FARRELL: And they’re about five years old, five or six. And he had promised — and his wife … RITHOLTZ: Prime Minister, a five-year-old, that’s it. So, when you talk about losing touch with reality, some of the M&A that the startup did. Wavegarden or wave machine was a — like a surf wave machine, meetup.com, Conductor, they ended up dumping these for a fraction of what they paid for them. But what’s the thought process we’re going to become a technology conglomerate? I don’t — I don’t really follow the thinking other than will it be fun to have a wave machine at our buildings, like what’s the rationale there? FARRELL: OK. So, there were — there were two parts to that, and part of it was like it was the world was Adam Neumann’s playground, and he loves surfing, and he thought that — you know, that he found out this company has wave-making mission. They would make waves. So, him and his team went to Spain to surf on them and test them out, but he could basically convince his board, in general … RITHOLTZ: Right. FARRELL: … who had to approve these that anything made sense, whether it’s the jet, the wave pool company or friends of his. I mean, Laird Hamilton, the famous surfer … RITHOLTZ: Right. FARRELL: … was a friend of his. They invested like in his coffee creamer company. But then the second — so it was so many unseen investments that I really didn’t necessarily make any sense. But then on the other side, one of the things that we thought was interesting, he had this deal with Masa who — Masayoshi Son. He’s the CEO of SoftBank, became WeWork’s biggest investor, biggest enabler, you might say. RITHOLTZ: Yeah. FARRELL: And one of the — they were going to do this huge deal that would have actually kept WeWork private forever. It never came to pass, and that’s why it was sort of the beginning of the end when this deal fell apart. But as part of it, a lot of the deal is predicated on growing revenue. So, Adam also became obsessed with acquisitions like whatever they could possibly do to add more revenue to the company. I mean, he was talking about buying Sweet Cream, and he had like got pretty far along in the salad company … RITHOLTZ: Yeah, amazing. FARRELL: … in conversations with them. So, it was this idea of like let’s just throw in anything, we have money, and let’s just grow our top line. Who cares about anything else? RITHOLTZ: Let’s talk about Rebekah Neumann. She was Adam Neumann’s wife. What — what what’s her role in WeWork? How important was she? FARRELL: Her role is just so fascinating throughout. So, I mean, he — he met her right as he was starting Greendesk. And I think she just sort of opened his eyes. She’d grown up very wealthy. She’s Gwyneth Paltrow’s cousin. She had always ties to Hollywood. She gave him a loan early on, a high interest loan, I think even after they were married that we report about in the book. But as time went on, she — she really want a career in Hollywood, decides to — at one point, she — she was trying to be an actress and she tells someone that she’s done with Hollywood. She’s producing babies now. They’ve gone on to have six kids. But she sort of always kind of dabbled in the company, and they retroactively made her a co-founder. RITHOLTZ: Right, she wasn’t there from day one. It was only later she got pretty active. FARRELL: Yeah, she told people like giving tours early on that she help pick out the coffee in the — in the early WeWorks. But — so she became more active, but she was sort of jumped in and out. And it was by the — one of the things that she had a big focus on their kids were growing up, she didn’t really like their choices of private or public schools, so she decided to start — she helmed sort of the education initiative that’s something … RITHOLTZ: And she was deeply qualified for this because she — she was a certified yoga instructor, right? FARRELL: Yeah, she had been. RITHOLTZ: And — and I know she went to Cornell, which is certainly a good school. What bona fide does she bring to technology, real estate, education, like I’m trying to figure it out. And in the book, you don’t really go into any details that she’s qualified to do any of these things. FARRELL: I mean, especially with — with education, it’s like she didn’t — she want this — essentially she wanted a school for her children, and she wanted very specific things in that school. And once again, they decided that that would be the next like frontier for WeWork. They’re always adding different things. But no one really — then they let them do this. They started this school in New York in the headquarters, and they were going to teach the next-generation of entrepreneurs. And … RITHOLTZ: Right. FARRELL: … I mean, they — one of the things — I mean, it was the education arm more than — as much or more than other parts of it is just so tragic because they had a lot of money. She’s — she, like Adam, can just speak like — speak so — like eloquently and with this vision. So, she attracted all these very talented teachers. She sort of wooed them from the schools that they were in before and told them that they were going to start this, you know, new enterprise and change education forever. And it’s just really devolved so quickly. It became very like kind of petty. I mean, if you pull so they have PTSD from her like obsession with like the rugs like … RITHOLTZ: Right, just … FARRELL: … it was a Montessori-type school. And yeah, she obsessed over like the color of white of the rugs and made them like send back 20 rugs. RITHOLTZ: What was the most shocking thing you found out about him or her or both? FARRELL: So, one — one of these was — I mean, there is a lot of the — their personal lives, as we said, whether it was a school or other — other things where their kids are educated in, just the way in which the personal entanglements, you know, small and huge levels, but I’ll give two examples. I mean, one of the things that people said in the school, so within the WeWork headquarters was a whole … RITHOLTZ: Right. FARRELL: … floor and it’s beautiful if you see pictures of it, like it just this – like really incredible school. RITHOLTZ: Money was no object. FARRELL: Yeah. And they had Bjarke Ingels, this famous architect designed the school. And — but they basically, on Friday nights, would have dinners with their friends there. And according to many people would — the team would come in Monday morning … RITHOLTZ: It’d be a disaster. FARRELL: … it will be a complete … RITHOLTZ: Right. FARRELL: … disaster. So, it was like really on so many levels like everything was their personal … RITHOLTZ: So, entitled. FARRELL: Yeah. And the second thing that really shocked us was she was very — she had a lot of kind of like phobias around like health and wellness. And she says — I mean, she had a — a real tragedy in her family. Her brother died from cancer, and so she was always — she’s very focused on and she said it as much in podcasts and things. But she was very fixated on 5G. And she’s worried about vaccines for their kids. And — but the 5G of like what that could do for — you know, these signals. She wouldn’t let them have printers on the floor, like any printers on — wireless printers on the floor of the school. But there is a — they bought this … RITHOLTZ: Can you — can you even by 5G printers today? What — what was the … FARRELL: Oh, no, it’s a wireless. RITHOLTZ: … yeah, just Wi-Fi? FARRELL: Yeah, the wireless like freaked her out, so the teachers of that are like run up and downstairs to just print everything. It seems ridiculous. But the 5G towers, there was one, either being built or built right near there, across the Beam Park. RITHOLTZ: (Inaudible) City Park. FARRELL: Yeah, right nearby. So, she was so obsessed with it. She didn’t want to move in there. They had bought like six apartments in this building that she — the CFO — this is around the time they’re preparing for the IPO. I used to work at Time Warner Cable, who is the CFO of Time Warner Cable. So, she said, “Can you, Artie Minson, help us get rid of the 5G tower and have it moved?” And basically, he deputized another aide who used to work for Cuomo and worked for Governor Christie, the — both former governors. And they — like that was something they — they actually worked on. So, the — yeah, that interplay was just kind of insane. RITHOLTZ: Seems rational. There was a Vanity Fair article, “How Rebekah Neumann Put the Woo-Woo in WeWork,” and — and what you’re describing very much is — is along the lines of that. I’ve seen Neumann described as a visionary, as a crackpot, as — as a grifter, but he thinks he’s going to become the world’s first trillionaire, and — and WeWork the first $10 trillion company. Is — is any realistic scenario where that happens or is he just completely delusional? FARRELL: I mean, it seems insane and like he seems completely delusional, but he had a lot of people going along with him, including the man with one of the biggest checkbooks in the world who is Masayoshi Son, the CEO and Founder of SoftBank, who had just — I mean, the timing of the story, it’s like there’s so many things that happened at the first enrollment. RITHOLTZ: Saudi Arabia wanting to diversify, giving a ton of money. You — you call Son the enabler-in-chief. He — he put more than $10 billion of capital showered on — on to WeWork. How much do you blame Son for all of this mayhem at least in the last couple of years of WeWork’s run as a private company? FARRELL: It seems like he was the main — you know, the main person kind of pushing all of this. And when you talk to a lot of people around Adam, they just said they were just such a dicey match like that Adam was crazy to begin with. Everyone thought that. You know, it can go both ways, but … RITHOLTZ: Yeah, but people drank the Kool-Aid. It — it reminded me — you don’t mention Steve Jobs in the book, but very much the reality distortion field that Jobs was famous for, I very much got the sense Neumann was creating something like that. How did he get everybody to drink the Kool-Aid? Was he just that charismatic and that good of a salesman? FARRELL: I think so. And it was just he could talk about things and make you feel like the reality was there, this reality of distortion field. He was — he was masterful in that. Yet the thing that he did was he always found new pots of money … RITHOLTZ: Right. FARRELL: … all over the world. I mean, it was the time — it was the time when the private capital markets were getting deeper and deeper, the Fidelitys and the T. Rowe that like normally kind of sober mutual funds … RITHOLTZ: Right. FARRELL: … were jumping into startups. And they — they were — we call one of the chapters FOMO. It was like the … RITHOLTZ: Right. FARRELL: … fun FOMO. They were fearful of missing out on the next big thing. So that we’re sort of in this climate where there is an appetite to go after, to just take a chance for the chance of getting the next like maybe not trillion-dollar company, maybe no one but him and Masa believe that, the next big thing. RITHOLTZ: But the next 100X — right. And that’s really — you know, it’s always interesting when you see these stayed, old mutual fund companies that have literally no experience in venture capital or tech startups, but happy to plow into it because they — they — they want to be part of it. And maybe that’s how we end up with community-adjusted EBITDA. Can — can you explain to us what that phrase means? I don’t even know what else to call it. FARRELL: Sure. So WeWork was losing every — every step of the way. They were growing revenue more than doubling it. You know, they’re expanding all around the world. And with that, they were losing just as much, if not more every single year than they were taking in. So, they had this brilliant idea, really a lot stemming from the CFO and Adam Neumann love the CFO’s creation. His name is Artie Minson, the CFO. And it was this idea that you essentially strip out a lot of the costs of kind of creating all the — building out all the WeWorks and, you know, marketing and opening up new buildings. You strip it out, and then you’re suddenly a profitable company. It’s like the magic. RITHOLTZ: Wait, let me — let me make sure I understand this. So, if you eliminate the cost of generating that profit, you suddenly become profitable. How come nobody else thought of this sooner? It seems like a genius idea. FARRELL: Oh. RITHOLTZ: Just don’t — it’s profits, expenses. It’s fantastic. FARRELL: And the — the conviction with which certain people inside, especially on the finance team, believe this. I mean, they were saying throughout that like, oh, we will be a profitable company if we — the idea was if we just stop growing, we could be profitable right now. We take in more per building. (COMMERCIAL BREAK) FARRELL: Then we spend on it. But, you know, that never was the case. RITHOLTZ: So, let’s stick with the delusion concept. We talked about WeGrow, and we talked about WeLive a little bit, crazy stuff. What made this guy think he can help colonize Mars? Right, you’re laughing. You wrote it yourself, and it’s still funny. FARRELL: It is still … RITHOLTZ: By the way, I found a lot of the book very amusing, like very dry, like you guys didn’t try and crack jokes. But clearly, a lot of the stuff was just so insane. You read it, you start to laugh out loud. FARRELL: I’m — I’m glad to hear that because I think that we would joke that like every day. I mean, we’re in different places writing it. We are on calls constantly, and we would call each other. And it was often multiple times a day we would call each other and say, “You will never ever believe what I just heard.” And we would crack up, and we — we had a lot of fun writing it because it’s just — it was — the truth of the story was like more insane than … RITHOLTZ: Right. FARRELL: … anything we could have made up ever. RITHOLTZ: That’s the joke that, you know, the difference between truth and — and fiction is fiction has to make sense, and truth is under no such obligation. So, let’s talk about Neumann colonizing Mars. FARRELL: Yeah. RITHOLTZ: I mean, was that a serious thing or was he just, you know, on one of his insane (inaudible) and everybody comes along? FARRELL: There — there — speaking of fine lines, I mean, he just — I think he — he started to believe more and more of like these delusions. And so, I think he really did, and yeah, he got this — he secured a meeting with Elon Musk, and he – Elon Musk — he always — Adam was always late to every meeting, would make people wait for hours, like even like the bankers in the IPO would just sit around. There’ll be rooms of like dozens of people waiting for Adam, and he’d show up like two hours late. But Elon Musk made him wait for this meeting. They sat and sat and sat, and then he told Elon Musk that getting — that he thought — like building a community on Mars is what he would do and he would help him with. And he said, you know, “Getting — getting to Mars is the easy part. Building a community is the hard part.” RITHOLTZ: Right. Because, you know, it’s very hard to get those beer taps to work in a … FARRELL: Yeah. RITHOLTZ: … low-gravity, zero atmosphere environment. It’s a challenge, only WeWork could accomplish that. FARRELL: The – the fruit water. RITHOLTZ: Right. So — so I want to talk about the IPO, but before I get to that, I — I have to ask about the corporate offsites, the summer camp, which were described as three-day global summits of drinking and drug consumption. It was like a Woodstock event, not like a corporate retreat. How did these come about? FARRELL: So, Adam would say that he never — he grew up in Israel and he moved to the U.S. He lived for a little while the U.S., but move later in life. So, you said he never got to go to American summer camp, so he was going to recreate summer — American summer camp literally. They started at his wife’s family’s had a summer camp in upstate New York. That’s where they started. They just got bigger and bigger, eventually going to England and taking over this like huge like field — this huge estate there and bringing every single member of the company flying them from all over the world. RITHOLTZ: And there were thousands of employees? FARRELL: Thousands upon thousands, and the cost was unbelievable of every piece of it. I mean, every year, they just got bigger and bigger. I mean, the flew at the height of his fame not that he’s far off of it, but Lin-Manuel Miranda like, at the height of Hamilton, they flew him on a private jet. He — he performed on stage. The Roots came, and — and they would pay these people like … RITHOLTZ: Million dollars, right. FARRELL: … a million dollars, yeah. So, the money is no object. RITHOLTZ: That’s a good gig for an afternoon. FARRELL: Yeah, exactly. And they were — you know, especially at the beginning, it was like a younger group of people, in general. And — I mean, these — these were crazy. There’s tons of alcohol sanctioned by the company, handed out by the company. Drugs were in — you know, in supply not handed out by the company, but they were everywhere and … RITHOLTZ: And he talks about drugs. He says, “Well, we — it’s not really drugs, just, you know … FARRELL: He — so yeah, I think it — it got to a point and it was also mandatory to come to these events. So, I mean, the — they were … RITHOLTZ: And they were like meetings where there are shots, everybody has to do shots. FARRELL: Yeah. RITHOLTZ: This — this wasn’t just at these retreats, like hard partying was pretty common throughout the company or anywhere Neumann seemed to have touched. When — when he was there, everybody was expected to step-up and — and party hard. FARRELL: Including the investors. I mean, you’d walk into the office at 10 A.M., according to so many different people. And he’d insist on taking tequila shots with you in the morning in his office. And … RITHOLTZ: You didn’t have a shot before this? You — don’t you … FARRELL: Right. RITHOLTZ: … isn’t that — isn’t how every meeting begins? FARRELL: The breakfast … RITHOLTZ: Right? FARRELL: … of champions. RITHOLTZ: That’s — that’s right. So — so I got the sense from the book that they always seemed to be on the edge of running out of money, and they would always find another source, but it was all leading towards the IPO, but the S-1 one filing, the disclosures that go with an IPO filing, that seemed to be that they’re undoing the — the public just — investing public just torn apart. FARRELL: Exactly. I mean, the interesting piece of that, as you said, it was there’s always a new pool of capital like just when he thought that he was going to have to go public. And the board — and the board — I mean, one of the things we found time and time again was the board would say, you know, he’s really like crazy, things are getting out of hand. But like we won’t say no to him, but eventually he’s going to have to go public. This was back in like 2016-2017. RITHOLTZ: Right. FARRELL: We thought he was going to run out of money, the only place to go because they’re burning so much cash with the public markets. And the public markets will take care of it, which — that kind of floored us each step of the way. But yes, as you said, he — he — he knew how to captivate on — in one-on-one or bigger meetings to convince you of this future to tell you we always describe him kind of as a magician and think of him like this, like don’t look here, look here, like the sleight of hand. He could — then this S-1 came out. It was a regulatory document. You have to follow rules. RITHOLTZ: There’s no sleight of hand in S-1 filing. FARRELL: No, like you have to see. And people suddenly saw the — the broad public the revenue, the losses of a lot, not even all of these, you know, the questionable corporate governance, I mean, the — the … RITHOLTZ: The self-dealing. FARRELL: … the self-dealing, only pieces of that were even in it because the jet wasn’t in the S-1. They didn’t have to disclose it. The — and the interesting thing about this, I think there’s always like this distinction that people try to make between like, oh, the smart money and the dumb money. And it’s like the smart money is like the Fidelitys and the T. Rowes, and the SoftBanks. And then the dumb money, you know, it’s like — or the, you know, the average retail investor. And so, it’s just so interesting that like he — he captivated the — the quote-unquote, “smart money.” And then the minute this was all made public, everything was there, the world saw it and just said like what is — like this is insane. RITHOLTZ: I’m nursing a pet theory that it was Twitter that demolished him because people just had a — I remember the day of this filing, Twitter just blew up with — like a — a million people are taking an S-1 apart sentence by sentence and the most outrageous things bubbled up to the top of Twitter. And it was very clear that they were dead in the water. There was going to be no IPO, and the dreams of these crazy valuations seemed to crash and burn with the — the IPO filing, which — which kind of raises a question about, you know, how was all of this corporate governance so amiss. All the self-dealings that were allowed, so my — my favorite one was he personally trademarked the word We and then charged the company $6 million to use it. Again, he — he’s given these sort of crazy disclosure explanations. Hey, I’m only allowed to say this. But it seems he bought a bunch of buildings in order to flip them to WeWork at a profit. I don’t understand how the board — we mentioned Theranos — here’s the parallel. How did the board tolerate just the most egregious, avarice, lack of interest in the company and only enrichment of oneself? How does the board of directors tolerate that? FARRELL: I know that was — I think, if anything, from this whole story that just floored us was exactly that this board, I mean, it was a — it was a real like heavy-hitting board of directors. They’re not — and all financial people as opposed to Theranos, you know, it was like people who didn’t really know … RITHOLTZ: Politics and generals, and … FARRELL: Yeah. RITHOLTZ: … secretaries of states, right? It was a — and a lot of elderly men who were smitten with her. I mean, like men in — what was Kissinger on the board? He was 90 something. FARRELL: Yeah. RITHOLTZ: So — so with this though, the other thing that’s shocking is, you know, most founders of a successful company, they live a — a reasonably comfortable lifestyle, but the thought process is, hey, one day we’ll go public and my gravy train will come in, and I’ll have a — a high, you know, eight, nine, 10-figure net worth. Early in this time line, he was paying himself cashing out stock worth tens of millions, in some cases, hundreds of millions of dollars way, way early in — in — the company was five years old and he was worth a couple 100 million liquid, and god knows how much on paper. Again, how — how does the board allow that to take place? FARRELL: Yeah, that was — and a board, investors kind of signing off on this were jumping into it, I mean, seeing that he’s going to sell a lot of stock each round. I mean, now there does seem to be a shift and it’s kind of a scary one that this is like more private companies, the founders are selling more and more. But back then, you didn’t really see this very much. And one of the things I find very interesting is he was very much following the Travis Kalanick that — for Uber CEO’s playbook, and literally like following it that like going after the same investors, going around the world. Travis had raised more money than anyone before. Travis, every step of the way, made a huge point of, “I’m all-in. I’m never selling any stock” … RITHOLTZ: Right. FARRELL: … until he was kicked out of the company basically. So, Adam followed his playbook, but each step of the way was — said he took money out and was like prepare about it. RITHOLTZ: I mean, he was very wealthy for a — a scrappy startup founder, 14, 15, 16. You would think, hey, he’s — maybe he’s making a decent living, but not hundreds of millions of dollars, it’s kind of amazing. FARRELL: Or like having many, many, many houses. RITHOLTZ: Right. FARRELL: And they were like he didn’t hide the way in which he was living, having houses all over the world, jet setting all over the world. You know, and, in fact, he almost like, you know, wanted everyone to know that was part of his like a lure. RITHOLTZ: So, when the IPO filing in 2019, when — when that blows up, it seems to have a real impact on Silicon Valley for a while. Suddenly, high-spending, fast-growing, profitless companies looked bad, and now we’re back to we want profit growth and revenue, but that really didn’t last all that long, did it? FARRELL: No, it was unbelievable. I mean, we also — Eliot and I joked that we rewrote the epilogue like five times because, at first, we wrote it saying like this is the fallout. RITHOLTZ: Oh, look at the impact, right. FARRELL: Yeah, and it was — I mean, Masayoshi Son had his own mea culpa like, you know, I believe in Adam, I shouldn’t have, I made mistakes. But also, I want my companies to be profitable now … RITHOLTZ: Right. FARRELL: … like I’m going to invest in these companies or the companies have invested already, they should be profitable. IPO investors, public market investors were totally spooled by money-losing companies. Then — you know, then came the pandemic, then came the Fed pumping money into the system. And then, you know, now, in some ways, it’s like, wow, WeWork always like made — generated revenue and losses. It’s like now today we have Rivian … RITHOLTZ: Right, Rivian and … FARRELL: … pre-revenue … RITHOLTZ: … Lucid and, you know, it’s all potential. Maybe it works out, maybe Amazon buys 100,000 trucks from them, but that’s kind of — that’s a possibility. And, you know, more — more than just the Fed, you had the CARES Act, you had a ton of money flow into the system, but it doesn’t necessarily flow to venture-funded outfits, it’s just a lot of cash sloshing around. Is that — is that a fair statement? FARRELL: Oh, completely. RITHOLTZ: So how quickly were the lessons of WeWork forgotten? FARRELL: Incredibly quickly. I mean, it felt like it had — it like it changed everything for a few months. I mean, the other part of it was Masayoshi Son had — had raised a $100 billion fund, biggest fund ever to invest in tech companies. He was literally about to close his second fund. It was … RITHOLTZ: $108 billion, right? FARRELL: Yeah, another $100 billion fund to just go and like pour into companies. RITHOLTZ: More, right. FARRELL: And then I mean, we’ve heard from all these people who are out meeting sovereign wealth funds, Saudi Arabia, and they were just like every meeting, it was like what about WeWork. And, you know, one of the things we’ve heard was he was pushing for it to just go public, you know, or to — or not to — to not go public because he didn’t want to take the mark. He didn’t want to make … RITHOLTZ: Right. FARRELL: … all of this public. And we have a scene in the book about this that Masa tries to tell him to call off the IPO and tried to force his hand, and Adam is kind of like … RITHOLTZ: Confuses. FARRELL: Yeah. RITHOLTZ: Right. It’s — it’s — it’s really quite — it’s really quite astounding that we end up with — what did he burn through, $20 billion, $30 billion? FARRELL: More than $10 billion, I think. RITHOLTZ: Wow. FARRELL: Yeah. RITHOLTZ: That — that’s a lot of cash. FARRELL: Towards him essentially. RITHOLTZ: So — so here’s the curveball question to ask you. So, you’re now a business reporter at the Times. WeWork obviously isn’t the only company led by an eccentric leader. What are you reporting on now? What’s the next potential WeWork out there? FARRELL: You know, I’m — I’m just getting started. This is just a couple of weeks in, but — so it’s — I don’t quite know what the next WeWork is. I almost feel like there’s a lot of mini WeWorks out there, whether it’s — you know, the company is in the SPAC market. Some of these unicorns, I mean, there’s so many — so many red flags around these companies like I was saying before like if founders taking money out very early and, you know, investors are not really caring and just wanting to get into them, getting these massive packages — pay packages, compensation. So, I think there’s — there’s so many different places to look. I don’t get the sense that there’s one company now that’s sort of — of size of Adam Neumann. I think there are just a lot of many ones. I mean, he was a pretty like captivating and just insane in so many — larger than life in so many ways. But I have no doubt we’re going to find one of them fairly soon. There’ll be more. RITHOLTZ: And — and what do you think the future holds for Adam Neumann himself? He — we — we have to talk about the golden parachute, so not only does SoftBank refinance a couple hundred million dollars in loans that he has outstanding, they give him $183 million package and essentially purchased $1 billion of his stock, so he leaves WeWork as a billionaire. FARRELL: Yeah, it was — I mean, it was just an incredible thing. And I mean, then he got this pay package that they agreed to as part of the bailout. I mean, WeWork, once the IPO was called off, was on the verge of bankruptcy. They were going to run out of money in a couple of months so they had to do this very quickly. They were laid off thousands upon thousands of people. But basically, as part of the negotiations to get Adam Neumann to give up his super voting shares, these potent shares that would have let him continue to keep control of the company to do that, they struck this pay package. And I mean, it’s kind of interesting when we talk about the power founders right now that it wasn’t a wakeup call for Silicon Valley to be more wary of giving this power to founders, like when you saw the price tag that Adam Neumann extracted the cost of pushing out a founder who’s kind of a disastrous founder at some point. RITHOLTZ: Yeah. I — I remember reading that and thinking Son played it terribly. He could’ve said, “Hey, listen, I got $100 billion worth of other investments. If I take a $10 billion write-down, it’ll hurt, but I still have plenty of other money. If this goes belly up, you’re broke, you’re a disaster except I’ll give you $50 million or else you’re just impoverished. Good luck finding the lawsuits for the rest of your life.” That would have been the play, but he didn’t — I guess, it was the other second fund he didn’t want to put at risk. Why — why didn’t he hardball Neumann because I thought Son had all the leverage in that negotiation? FARRELL: That was one of the — like the enduring mysteries, I think, of this whole story because all the things you said are right, plus Adam had taken out so much money in terms. He had so much lent against his stock at $47 billion. I mean … RITHOLTZ: Right. FARRELL: … J.P. Morgan, UBS, Credit Suisse, they have lent him hundreds of millions of dollars, and he would have gotten to default. He like didn’t necessarily have the liquidity to pay back everything … RITHOLTZ: Right. FARRELL: … he had borrowed. So, it was — I mean, it’s kind of amazing in terms of his negotiating skills that Masa and SoftBank. It was led by Marcelo Claure who’s now the WeWork Executive Chairman. They blinked first. RITHOLTZ: Right. FARRELL: They gave Adam a lot. And I totally agree with you, one of the things I’ve heard it was just like the interest of time. They just wanted it done $10 billion or whatever. It doesn’t mean that much. They want to just keep on moving, keep on … RITHOLTZ: Right. FARRELL: … spending, not distract too much and just get this done, but it’s crazy. I mean, the … RITHOLTZ: So … FARRELL: … the time value of money … RITHOLTZ: … could be the greatest golden parachute in the history of corporate America. I mean, I — I’m hard pressed to think of anybody who, on the way out of a — a failing company, and it was a failing company at that moment, squeeze more money out of — out of their board. FARRELL: And just to say, I mean, Andrew Ross Sorkin at — in this first big interview with Adam that he gave was — I mean, Adam defended it in different ways. I mean, Andrew very much pushed him on like why that was okay and … RITHOLTZ: Very aggressively. FARRELL: Yeah. RITHOLTZ: That was early November. And he was sort of contrite and, you know, a little shifty, but for the most part surprisingly transparent. I was — when I was prepping for this, I watched this and, you know, you could see how he constructs that, you know, reality distortion field. But there was definitely more humility than we have seen previously. I don’t want to say humble, but just closer on that spectrum. Clearly, he wants to have a future in — in business, and he needs to offer a few mea culpas of his own. FARRELL: It does feel like this is the first step on the come back toward … RITHOLTZ: Yeah. FARRELL: … Adam Neumann. RITHOLTZ: I think that’s going to be a pretty big uphill battle. That’s going to be quite the Kilimanjaro to — to — to mount given what a debacle … FARRELL: The interesting thing just so in terms of his next step is I — I agree with you, there’s an uphill battle in terms of maybe getting people to — to give him money, but he now has a lot of money and from … RITHOLTZ: Family office, yeah. FARRELL: Exactly. Anecdotally, it sounds like a lot of people are very happy to take his money. So, to begin, that’s, you know, he’s seeding a lot of things that you — who knows where they’re going to go. RITHOLTZ: Interesting. So, I only have you for a limited amount of time. Let me jump to our favorite questions we ask all of our guests starting with, you spend a lot of time researching and writing during the lockdown. Did you have any time to stream anything on Netflix or Amazon Prime? FARRELL: There — I mean, there’s still a lot of like downtime. I — I probably watched not much. You know, there — there was downtime, and I did have a few shows that were … RITHOLTZ: Give us one or two favorites. FARRELL: … Little Fires Everywhere. I really liked Never Have I Ever. RITHOLTZ: I just started watching the last week, it’s quite charming. FARRELL: Yeah, it’s really good. RITHOLTZ: Anything Mindy Kaling does is quite amusing. FARRELL: She is amazing. Schitt’s Creek, we got through the whole — that was with my favorite pandemic. RITHOLTZ: So, the — the funny thing about that is the first episode, too, were like – it’s like — it’s like succession. You don’t like any of these people. The difference being in Schitt’s Creek, you quickly start to warm up to them and they start to reveal their own path to rehabilitation of — of themselves. FARRELL: It just gets better like ever — and then it’s so devastating at the end. RITHOLTZ: So, it was really great, right? That – that was one of my favorites. Let’s talk about your mentors, who helped shape your career as a business journalist. FARRELL: I guess, my earliest mentor as a journalist, in general, was in college, I’d always thought about journalism, and I got an internship with then, I think, a septuagenarian journalist. He — his name was Gabe Pressman. I grew up in New York. He was an NBC … RITHOLTZ: Sure. FARRELL: … journalist. This is sort of the political head honcho of local journalism. I worked for him for a summer. He was in his, I think, late 70s. And he was just the most energetic, passionate journalist I’ve ever met. He was still like chasing after mayors, grilling them. It was — with the Senate race it was Hillary in the Senate race. And it was like the most fun summer I’ve ever had and seeing his energy. And — and he — he passed away a few years ago, but literally, he started blogging into his 90s. And he would joke. He would say, “You know, my wife really wants me to like take a step back and work and teach at Columbia Journalism School,” where he had gone. And he was like, “I’m just not ready like, at some point, like scale back, and he never really did. So, he — I would say he was my first mentor. Just seeing like that, it is the most fun job in the world. He just was seeing that day in and day out. RITHOLTZ: Let’s talk about books. What are some of your favorites and — and what are you reading right now? FARRELL: Sure. I’ll start, you know, I always wish I read more fiction, but it’s like I always get pulled in, especially the business, genre. RITHOLTZ: Sure. FARRELL: So right at this minute, I’m reading “Trillions” by Robbin Wigglesworth. It’s really good. It’s about like index funds, sort of I’m learning a lot from it, the rise of Vanguard. RITHOLTZ: He was my guest last week just so you know … FARRELL: Oh, awesome. RITHOLTZ: … or two weeks ago. FARRELL: I’m midway through, but I’m, yeah, learning … RITHOLTZ: Really interesting. FARRELL: … a ton from it. I just read Anderson Cooper’s book about the Vanderbilts. It’s — I thought it was really great and it’s so interesting. You know, he talks — it starts like the Gilded Age. And you just see so many like eerie and kind of parallels between our age right now and just like the level of like wealth creation and what it leads to. So, I really enjoyed that. I read — this is a little bit dated, but “Say Nothing” by Patrick Radden Keefe. It’s about the troubles in Northern Ireland. It is — I mean, it’s — it’s very sad, but I — and it’s pretty long, and I just could not put it down. It’s … RITHOLTZ: Really? FARRELL: … so great. Yeah, I can’t recommend that one highly enough. RITHOLTZ: Quite, quite interesting. What sort of advice would you give to a recent college grad who was interested in a career in either journalism or — or business? FARRELL: In terms of journalism, I would just say jump in. I mean, it’s such a — as opposed to business, I felt like when I graduated from college, you know, so many people had jobs that they were going to make, you know, a decent amount of money. And with the journalism, you just have to find your way in and a lot of its internships. And it just — the path is hard. There’s no straight line. So, I would just say for journalism, it really helps to just jump into the first job you can get. Work really hard in it. And you just always have to keep — there’s no straight line, but jump and learn from it, meet people, find your mentors everywhere you go, and just keep going. You learn so much on the job. I went to Journalism School at Columbia. It was a super fun year, but it’s like within two days of working as a journalist, you just learn so much you can never learn in school. RITHOLTZ: And our final question, what do you know about the world of IPOs, capital market, business journalism today that you didn’t know 15, 20 years ago when you were first starting out? FARRELL: Okay. What I think have learned and probably the most in writing this book is you think people are rational players, and you think that titans of business are supposed to behave in sort of a rational way, and that these, you know, these checkmarks, these — like a T. Rowe Price or something or Fidelity that they’re going to do a certain amount of work looking at things. And I think the level of irrationality in business of just relationships of people, sort of not necessarily making rational decisions and just going with their gut and going with the people they like, I think, are cool like that that overrides a lot of things. I think it’s just so much less rational than you think it would be. And sometimes the things that are on their face seem really crazy and insane, maybe are. RITHOLTZ: Quite, quite fascinating. We have been speaking with Maureen Farrell. She is the co-author of “The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion.” If you enjoyed this conversation, well, be sure to check out any of our previous 400 interviews. You can find those at iTunes, Spotify, wherever your podcasts from. We love your comments, feedback, and suggestions. Write to us at mibpodcast@bloomberg.net. Follow me on Twitter @ritholtz. You can sign up for my daily reads at ritholtz.com. I would be remiss if I did not thank the team that helps put together these conversations each week. Charlie Vollmer is my Audio Engineer. Atika Valbrun is our Project Manager. Michael Batnick is my Director of Research. Paris Wald is my Producer. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: Maureen Farrell appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureDec 15th, 2021

David Solomon: Inflation Could Be Above Trend For A Period Of Time

Following is the unofficial transcript of a CNBC exclusive interview with Goldman Sachs (NYSE:GS) Chairman & CEO David Solomon on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, December 7th. Following is a link to video on CNBC.com: Q3 2021 hedge fund letters, conferences and more Goldman Sachs CEO David Solomon Says Inflation Could Be […] Following is the unofficial transcript of a CNBC exclusive interview with Goldman Sachs (NYSE:GS) Chairman & CEO David Solomon on CNBC’s “Squawk Box” (M-F, 6AM-9AM ET) today, Tuesday, December 7th. Following is a link to video on CNBC.com: .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Ray Dalio Series in PDF Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Goldman Sachs CEO David Solomon Says Inflation Could Be Above Trend For A Period Of Time ANDREW ROSS SORKIN: Joining us right now to talk all about all of this and the market risk, vaccine mandates, return to work and so much more. David Solomon is here, Chairman and CEO of Goldman Sachs and thank you for having us. We are here now, this is the 12th floor, you guys just redid this place. DAVID SOLOMON: Well first of all, Andrew, thank you for coming down to, to our office this morning. I'm delighted to be here with you this morning. We did redo this over the course of the last couple years. We started before COVID and then we paused for a little while but we've moved our executive team down here into the sky lobby on the 12th floor just so we can be more present, be more visible and I must say, we've been here about six months and we're really enjoying it. It just it keeps us much more connected to what's going on in the building. It's SORKIN: It’s pretty cool. I got a little tour early, early morning tour. Let's talk markets though and try to just understand where we are and what's going through your brain as we're dealing with both the Fed on one side and this variant on the other and then the markets and the valuation as you see them. SOLOMON: Well, there's a lot of uncertainty. And you know, I know that we're all looking for answers, but I think we need more time to see how this all plays out. I'm encouraged by what I'm hearing around the variant and the trajectory of that, but I think it's still uncertain. Yet the market certainly, the market certainly and this morning is another indication is kind of looking past the variant as something that's going to be slowing down economic activity. But we're still not completely out of the pandemic. There's uncertainty that comes from that and that uncertainty is going to affect economic activity and we're going to have to deal with that in some way. Against that, we clearly have real inflation in the economy. We've got a variety of problems, headwinds, issues that have occurred because we went into a pandemic, we shut the economy down, and we're now, we're turning it back on. That's really unprecedented. And, you know, on top of that, we have shifts going on in fiscal and monetary policy to try to balance that. And so there's no, there's no question that this has been an unprecedented period and so it's very hard to predict how we're going to come out of this. SORKIN: So, one of the singular questions we've been asking on the program this past week or so, given the emergence of this variant is if the variant is mild and it's not something that we're, we need to be as concerned about as I think the worst case outcomes would have been, does that mean that the market rifts, if you will, or is the Fed on the other side going to keep that from happening, meaning what's more important right now? SOLOMON: My, my base case, Andrew, is we're going to continue to find a path past the, past the pandemic broadly. This will be endemic in society, we're gonna have to live with it, but we're going to find a way to live with it effectively and economic activity will flourish. I don't believe we're in a new paradigm where the world will be fundamentally different, but it's going to take some time to move forward. In the context of that, I think that monetary and fiscal policy on a go forward basis, while the bigger impact on the trajectory of markets than the pandemic will from this point forward. That doesn't mean there won't be periods of time where in the short term, the variant can flare up. There's, there's news that affects markets in the short term but the bigger issue to focus now is we've had unprecedented monetary and fiscal policy for a meaningful period of time and we're going to emerge from that and unwind that and that's going to have an impact. It's had a big impact on asset prices, market activity, and a variety of things. It's going to have an impact on those things as we unwind it and find the balance and the thing that I don't have the answer to, none of us have the answer to, is can that be done in a smooth way where we take a little bit of the air out with, with not a lot of bumps in volatility, are we gonna have some bumps in volatility along the way? SORKIN: Okay. You spend a lot of time talking to the CEOs of corporate America and around the world. And so, when you talk to them about this and really talk to them about the issue of valuation, oftentimes about their own stocks because they're thinking about whether they should be pursuing different transactions, what their own values are, what are you telling them at this point? Is this a fairly valued market? Do you say look, things are, you're, you're valued very highly, take advantage of the currency now? I mean, what's the thought? SOLOMON: Well, there's no question that that looking at the market broadly, valuations are full in any historical context. And so, if you're talking to companies that have a very, very strong currency, you're certainly encouraging them if they have aspirations to deploy capital and put that capital to work. This is an interesting time to think about it. Also, for most companies, borrowing rates and the ability to access capital through debt finance has never been cheaper. And so, it's been a very, very good time to think about investing in business and deploying capital. I think it depends on the company and the particular company that you're talking to. I think the market has been very enamored with growth at all costs and I think we're seeing a little bit of the momentum come out of that over the course of the last couple of weeks. A lot of these businesses that have very, very strong top line growth, but haven't yet proven whether or not the business model really generates earnings over the long term, I think those are going to be a tougher slog, and I, you know, I'd encourage those companies to make sure they have the capital in place to execute on their growth plans while that capital is available. I think some of that can rebalance in the coming months, you know, over time, but it's not one size fits all. And you can look through the spectrum of the market and you can see different valuations for different businesses. SORKIN: When you look though at what's happening for example in the IPO market or frankly the SPAC market, is that something that persists and continues at pace? Do you feel it's slowing down? Do you feel it's speeding back up again? I mean, we've sort of had this, this, this undulating roller coaster. SOLOMON: It's, there's, there's been some undulation to use your word. But there's no question SPAC activity has come way off its peaks. SPACs are good capital markets innovation, they're not perfect. There's been an evolution in disclosure and the process around SPACs. I think SPACs are here to stay but I don't think we're going to regularly see the volume of activity and the surplus of activity that we saw in the early part of this year. SORKIN: And when you talk about inflation again with clients, are you in the category of cash is trash and inflation is gonna make that cash, you know, not just worthless but worth less, or you in the category of you might actually want to keep a little bit because there might be an opportunity coming? SOLOMON: Well, once again, not black and white. I do think that we've lived for a long time with inflation below trend. And I think one of the things that I'm concerned about or I think about a lot is people have kind of lost a historical perspective on what markets look like and what is normal. From a, from a monetary policy perspective, what we've had over the last decade is truly unusual. And I remember and I know historically, I've been around doing this, you know, since the 1980s, I remember when we had a very, very different environment and we could have a different environment again. And so, I do think that while we've had inflation below trend for quite a significant period of time, there's a reasonable chance that we're going to have inflation above trend for a period of time. Doesn't mean it has to be like the 1970s, could be, doesn't have to be, but when you think about periods where there's inflation, inflation hurts asset prices, and it slows down your ability to make money with almost any asset. From 1970 to 1980, there was almost nothing you could own where you made money. Basically, during that 10-year period, oil and gold, cash you lost money. If you owned US equities during that 10-year period, you lost nearly 50% of the value of your holdings. So, people forget the historical perspective. It wasn't too long ago in 2004 to 2006 I think it was June 2004 to June 2006, that as the Fed normalized rates, they hiked 17 times in that two-year period. Now I'm not saying that's going to happen, but I think we're living in a world where people are forgetting the history and this might be, you know, a period that's different. We could go back to another period that looks materially different from this. And so, I think you've got to be cautious and manage your risk appropriately for the distribution or the chance that that might happen. SORKIN: What do you think about bank valuations? Your bank’s done quite well recently. SOLOMON: Like any other CEO, you know, I think that my company and my stock is underappreciated and undervalued. There's no question there's been a, there's been a mark up in bank valuations. I think the earnings power of the traditional financial services sector is quite powerful and we get a very, very low multiple on those earnings. I think there's a perception because of the last 10 to 15 years, that there's greater volatility in that earnings stream than I think there is at this point, that doesn't mean that there can't be volatility in those earnings streams. But I think that as a group, there is much, much more fee based, durable, recurring revenue. I think, you know, that we're working on shifting our mix to continue to increase that and I think at some point in time, there's still upside because the earnings power of these institutions, the franchises that they, that they hold is really quite powerful. SORKIN: What do you think about FinTech valuations on the other hand? SOLOMON: I think that FinTech valuations at the moment project a view of the future because there are very few FinTechs that actually make money at this point in time to the degree that some of these platforms turn out to be sustainable platforms that really have business models where they can make a lot of money, some of them will look to be cheap over a period of time. To the degree that they can't convert to a business model that can actually make money, they'll be absorbed or they'll go away, but I think it's, I think it's a, it's a mixed bag. And what's clear to me is some of them will be a huge success, some of them won’t, but I also think the incumbent players, there’s a big disruption going on in the digitization of financial services and how they're delivered, whether it's the institutions, or to individuals, and I think the incumbents are going to play a big role in that and I think upstart FinTechs are going to play a big role in that. Not everybody's going to be a winner in every way, but the market’s probably ahead on some but not ahead on others. SORKIN: I want to talk crypto in just a moment, but Becky's got a question. Becks? BECKY QUICK: Hey David, great to see you this morning. Thanks for joining us. We had a big debate in the last hour just about back to work and whether getting back to work or working from home is going to be the future. There's differing opinions out there. I know you have been somebody who thinks it's really important to be in the office so I'd like to ask where you think the majority of office places are going to be, let's say a couple of years from now, maybe when the job market shifts a little bit and it's not quite as competitive and will those offices be in places like New York City? SOLOMON: So, first Becky it's great to see you and appreciate you having me on. I think this is a complex question and my view on this and I talked to Andrew about this a couple of months ago when we were together at an event. I've been very focused on Goldman Sachs and what's right for Goldman Sachs and what Goldman Sachs needs to do to continue to serve its clients and be super competitive in our business. For our organization, which is an organization where 50% of the people who work at Goldman Sachs are in their 20s, we need to come together. We're an apprenticeship culture, we collaborate and we need to come together. That doesn't mean that there can't be flexibility. That doesn't mean that technology can't lever that flexibility but generally speaking for our organization, we need to come together. I think in most businesses, collaboration is important but every business has to determine what's best for that business to serve their clients or their customers, to compete, to retain their talent. I'm talking to a lot of, you know, our employees are in their 20s. They don't want to be sitting at home in a small apartment. They want to be with other people their age, they want to be collaborating, they want to be learning, they want to be in touch and so every company is going to choose its journey along a path to how to get back to work. I'm not good. I don't have a crystal ball to say where everyone comes out. But generally speaking, we're social creatures and I'd be, you know, I'd be cautious about interpolating forward, you know, a permanent state based on what we see at the moment. QUICK: What about New York City? SOLOMON: Well, I think in New York City, one of the reasons why I'm an advocate here in New York City, I think it's very important for the economic vitality of New York City to get people back into the city and get people back working. If you go through Midtown during the day, it's getting a little bit better but think about all the small businesses and all the organizations that are still, you know, under enormous pressure because we don't have that economic ecosystem where people come during the day. So I think for big urban centers, they have to be attractive, you have to bring people in. There's got to be a balance. I think technology allows more flexibility, but generally speaking, you know, I think it's important for New York to continue to bring people together and I think one of the strengths in New York is that young people want to be here. And I don't think young people want to be locked in their apartments. I think they want to be here. They want to participate, go out at night. The city's very, very busy and so, I think we're in a transition to getting people back engaged, and hopefully we'll make more progress over the next six months. But I think it's very, very important for economic vitality in the city. SORKIN: By the way, what do you think of Eric Adams? SOLOMON: I'm excited about Eric Adams and, you know, very, very hopeful that he’s going to— SORKIN: I know you were worried about the city though. SOLOMON: Lead the city forward. Well, I'm concerned, and I said this, you know, publicly, you know, recently, you know, history will tell you that no city’s place in the world is permanent and it's important that, that all cities are attractive for business and for people to live and cost of living, the vitality of the city, you know, what the city offers, taxes, all those things go into an equation that either attracts and retains and sustains people or at times put pressure on that. And so safety— SORKIN: What’s your bet on New York? SOLOMON: Well, my bet on New York and I said this clearly when I was interviewed about this, New York is not going away. But there's no question that safety, security, cleanliness, these things matter and I'm really hopeful and I've heard from, from the mayor elect directly that, you know, he's gonna be focused on these things. I think these things matter in any urban center. SORKIN: Before when we were talking about FinTech, I said I’d get to crypto. Has the Solomon family changed its view on crypto? Do you own Bitcoin or Ethereum personally? SOLOMON: I don't, I don't personally own Bitcoin or Ethereum and I don't, I don't have a strong view. When you say I've changed my view, I don',t I don't know what you think my view is. My view on, on Bitcoin for example is I really don't know but it's really not something, you know, individually that's important to me. I'm a big believer in the digitization that is occurring and the disruption that's occurring in the way financial services are delivered as I said to you both for institutions and for individuals. I think it's a massive shift. We're trying to participate in it based on what we're doing around Goldman Sachs, Marcus and our digital banking platform— SORKIN: But do you want your clients in it? SOLOMON: I'm sorry? SORKIN: Do you want your clients in it? SOLOMON: I want our clients to, to, to do what they think they want to do. As a speculative asset, is it interesting and are some of our clients participating? Absolutely. But whether it goes up or down, my guess is, look at the last week it's going to go up, it's going to go down. I don't know what the permanent state of Bitcoin is. But I think Bitcoin is really not the key thing. The key thing is how can blockchain or other technologies that are not developed yet accelerate the pace of the digitization of the way financial services are delivered? And I, you know, I just talked to you about our digital bank, you know, that we just made an announcement out of AWS re:Invent about a platform, the financial cloud that we're building in partnership with AWS for institutional clients. All of that is the changing of the digital processes that kind of lubricate the way financial services are delivered and I think that's a big opportunity and we're excited about that. SORKIN: And that gives your clients almost direct access through APIs and such into the dataset that is Goldman Sachs. Joe’s got a question for you. JOE KERNEN: Andrew, I know you got a lot of places you want to go, we could. David it's good to see you. We could do this for probably longer than an hour but just real quickly, so rates are probably after years of what we've seen, they're probably headed the other way, someday. Is Goldman Sachs factoring in a lower average return for equities over the next three or four years than we've seen for the past three or four. It's just a simple question. Do you think it has to be that way? Are we back to like mid-single digits, maybe? SOLOMON: So, so, Joe, I would never say it has to be because has to be as is, is stronger than I would make it but it's certainly we would expect that we're not going to see the same rate of returns in equities and many other assets over the next few years that we've seen over the last couple of years. It's been an extraordinary disruption in markets and in the context of that you've seen some skewed results. And so, I'm not a believer that double digit equity returns compounding in perpetuity is something as an investor you should expect. My, I've been involved in a number of investment committees and, you know, charitable foundations, college board, etc. And certainly, my mindset is the returns we've received over the course the last three to five years are different than what we should expect as we go forward from here. SORKIN: What we have here also wanted to ask you a little bit about China because it's a controversial topic. Goldman Sachs has spent a lot of time trying to build a business and you're committed to building a business in China. And yet we're at this moment where a lot of people are looking at the human rights issues that are taking place in that country and thinking about what is the role of an American business, oftentimes vocal American businesses here when it comes to ESG or voting rights or, or all sorts of other issues? You've been very outspoken about gender equality, for example, and yet doing business in China at the same time. SOLOMON: So the geopolitical relationship between the US and China is, is very complex and that's going to continue for sure. We've been investing in our business in China for a long time because China's a very important part of the economic vitality of our world broadly. And we have clients that we serve around the world that are clearly exposed to economic activity all over the world and we want to continue to serve them. I think when you think about policy actions, it's not our job as a private enterprise to set policy actions, but we watch appropriately, and we obviously will respond to policy actions as I've said. I obviously don't like the human rights violations that I see in that part of the world. But I think that from a policy perspective, we have to strike a balance across this because we're very economically entwined and it's not simple. There are places where I think we have to cooperate and I would point to climate as a great example and I can highlight, for example, a green finance working group that were involved in establishing that's got both public and private sector leaders coming together with a particular focus on China's transition and then there are places like human rights violation where we have to confront and try to get a different result. But if people are looking for a black and white answer, I think that's that's going to be a very, very hard execution. But we've got to continue to focus on this because we're very economically entwined. SORKIN: What do you think the role though of business is to speak out or not? Can they speak, can a business leader speak out on a human rights issue for example in China? I think, you know, for example, Adam Silver at the NBA has tried to thread this needle. Ray Dalio was on our air last week trying to thread the needle and it didn't work. Elon Musk was speaking at a Wall Street Journal event last night, very pro-China. And I think there were a lot of people critiquing him saying, does he feel he can't say something critical of China because he has so much business in China? SOLOMON: So, I can't speak for everybody else, but I generally try to stick to business, and I leave policymakers to set policy. And, you know, I just commented, I said to you, I don't approve of the, of the human rights violations that are going on. And so that's a point of view, but it's not my job to set policy. We need government to set policy, we need them to legislate, we need them to interact in that geopolitical relationship, and it's our job to balance and run business based on the parameters that are set up. And I think, you know, I think Joe said this, or somebody said this on your show earlier this week, if we got into a debate of everything that goes wrong somewhere in the world every day and how businesses responsible for that we got ourselves to a very complex place. I don't think any of you are advocating that's where we want to go. SORKIN: We gotta let you go. I know you’ve got a big conference today. SOLOMON: We do. We've got our Financial Services Conference here where we've got a broad group of financial services companies here with, with investors and so that should be an interesting day and a lot of discussion about some of the things you and I were talking about, digitization, crypto, changes in disruption to the way those services are delivered so we're looking forward to that. SORKIN: They're playing the music out. You're a better DJ, I do, Barry Manilow that's what I listened to the podcast. He did a podcast last week guys, and Barry Manilow is your— SOLOMON: No, my dad loved Barry Manilow and unfortunately my dad's not with us and so sometimes when I hear Barry Manilow, I think about my dad. It’s a great memory. SORKIN: David Solomon, thank you for joining us this morning. SOLOMON: Thanks a lot. Good to be with you all. Thank you very much. Updated on Dec 7, 2021, 10:45 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 7th, 2021

Transcript: John Doerr

   The transcript from this week’s, MiB: John Doerr, Kleiner Perkins, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This… Read More The post Transcript: John Doerr appeared first on The Big Picture.    The transcript from this week’s, MiB: John Doerr, Kleiner Perkins, is below. You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ BARRY RITHOLTZ, HOST, MASTERS IN BUSINESS: This week on the podcast, I have, yes, an extra special guest, John Doerr of the famed venture capital firm Kleiner Perkins is here to discuss all things venture capital and climate related. He has a new book out that’s really quite interesting. We talk about everything from crypto to Tesla to beyond me, to all of the opportunities that exist in order to help moderate and reduce carbon in the atmosphere and the potential climate crisis that awaits us if we don’t change our ways. So, Doerr is a venture capitalist. He invests money in order to generate a return. These aren’t just finger-wagging-be-green-for-green sake. He describes their venture fund which they put nearly a billion dollars into it 10 years ago and now, it’s worth over three billion. That’s how successful the returns have been. He describes the climate crisis as a multitrillion dollar opportunity. Yes, we need to do something in order to make sure we leave our children and grandchildren a habitable Earth. At the same time, there is a massive opportunity in everything from food to electrical grid, to transportation, on and on and on. It really is quite fascinating somebody like him sees the world from both perspectives, from the, hey, we want to make sure we have a habitable place to live but he can’t take off his VC hat and he sees just massive opportunities to do well by doing good. Really, a fascinating conversation. With no further ado, my interview with Kleiner Perkins’ John Doerr. ANNOUNCER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio. RITHOLTZ: My extra special guest this week is John Doerr. He is the famed venture capitalists known for his work at Kleiner Perkins Caufield & Byers. The venture capital firm operates 32 funds. They’ve made more than 675 investments, including such early-stage funding for companies like Google, Twitter, Amazon and too many others to list. Doerr still holds a substantial stake in his initial investment in Google. His most recent book is “Speed & Scale: An Action Plan for Solving our Climate Crisis Now.” John Doerr, welcome to Bloomberg. JOHN DOERR, CHAIRMAN, KLEINER PERKINS: It’s thrilled to be here with you, Barry. Thank you. RITHOLTZ: And I’m thrilled to talk to you. Let’s go back to the early parts of your career before we start to get current. You originally joined Intel because you couldn’t land a gig as a venture capitalist. Tell us a little bit about that. DOERR: I came to Silicon Valley with no job, no place to live and incidentally, no girlfriend. The lady I’ve been dating decided I was too persistent and dumped me. So, I — my real goal was to win my way back into her heart and to join with some friends to start a company. I wanted to start a company and I heard that venture capital had something to do with that. So, I cold called all the venture capitalists and some of them returned my call in the mid-70s and they looked at my experience and uniformly included that I should go get a real job. That was their advice. I remember Dick Gramley (ph) said, we just backed a small new chip company called Intel, why don’t you interview for a job there, and I did. And lo and behold, unbeknownst to me, my former girlfriend, Ann Howland, now Ann Howland Doerr, has gotten a job at Intel. I got a job there and when I arrived that first summer day, I was surprised to see her there and she was not happy to see me. So, it took the rest of the summer to put our relationship back together again. But I love Intel, it was a dynamic place. They just invented the microprocessor and I’ve seriously considered abandoning my graduate education in business as it turns out to just stay at Intel. But I returned there after graduating and worked for, I guess, four or five years helping democratize computing as to get microprocessors used in everything from traffic lights to defibrillators, to nuclear resonance magnetic imaging systems, and it was all because I wanted to be part of new rapidly growing companies. RITHOLTZ: How did you work your way from Intel to venture investing? How did you find your way to Kleiner Perkins? DOERR: I got a phone call one day from a friend who said, hey, John, I just finished interviewing for job at a venture capital firm, Kleiner Perkins Caufield & Byers. It sounded to me like a law firm. I really didn’t know them. But he said, you should go interview there because what they want to add to their team is someone younger professional with a strong technical background, a good network in Silicon Valley, and a passion for startups. I think you and they would make a great fit. So, I didn’t — they ran an ad actually in the “Wall Street Journal” for this position which I didn’t see. But I called up, I interviewed and got a job there as an entry level professional, a gofer, I did everything. I carried people’s bags. I read business plans. But there was one important condition that I had and that is I made them promise that they would back me with my friends in starting a company. I went to work there because, honestly, I wasn’t interested in venture capital. I wanted to be an early ’80s entrepreneur. And they had — they agreed to that and pointed out that they had backed other young partners at Kleiner in writing business plans. Bob Swanson had written a business plan for Genentech that led to the whole biotech industry and Jimmy Treybig had done the same thing with Tandem Computers. My current partner, Brook Byers as the young partner at Kleiner wrote the business plan for hybrid tech. So, Eugene Kleiner and Tom Perkins were unusual and I’d even say mythic or epic figures in that they had technical backgrounds. They started their own companies and they felt that was part of what their venture capital firm ought to do. RITHOLTZ: So, here’s the key question, how come you never left Kleiner Perkins? Why didn’t you launch your own startup? DOERR: Well, I did. They backed me in doing it. The first was one called Silicon Compilers. I became the full-time CEO and founder of that with a Cal Tech professor, Carver Mead. RITHOLTZ: Sure. DOERR: Then as I worked with companies like Compaq, Sun Microsystems, they were growing really rapidly, I realized I was not at all qualified to advise these entrepreneurs. So, I took another 18-month leave of absence from Kleiner to run the desktop division of Sun and almost left Kleiner permanently to do that. But Ann and I wanted to start a family and she said, you know, you’re doing this Sun thing and keeping involved in Kleiner, it’s just not going to work, we have to make some choices here. And so, I left my operating role at Sun. But never gave up an interest in starting new companies and did that again at a later time with a company called @Home. You may remember that they … RITHOLTZ: Sure. DOERR: … standardized and commercialized the cable modem to access the Internet. Before the @Home venture, access to the Internet was really very slow and cable modem swept the United States and our company was key in making that happen. RITHOLTZ: So, I like this quote from you, “If you can’t invent the future, the next best thing is to fund it.” And so, I guess that helps to explain your move from Sun over back to Kleiner Perkins. DOERR: Exactly. It was Alan Kay, the Chief Scientist at Apple, who said the best way to predict the future is to invent it and while I’ve made some inventions, they’re modest, my better fortune has been to find amazing entrepreneurs, identify them and then help fund and accelerate their success. RITHOLTZ: Quite interesting. Amazon, Netscape, Applied Materials, Citrix, Intuit, Genentech, EA Sports, Compaq, Slack, Uber, Square, Spotify, Robinhood, that is just an amazing, amazing list of startups that you guys were fairly early investors in. Any of them stand out as uniquely memorable to you? DOERR: Well, two of the standouts got to be Amazon and Google, now, Alphabet, because, what are they, they’re two of the four or five most valuable companies in the world and I think both of them have profoundly changed the way that we live, communicate, educate, inform, conduct commerce, see the world. They both — what they both have in common is exceptional founders and really strong management teams who have a sense of urgency and a focus on either large new markets or large existing markets that deserved and have benefited from disruption. So, I remember when I was first offered a position at Kleiner Perkins, I told them that I thought it was kind of unfair that they would pay me to do the job. I would pay them for the privilege of working with these amazing entrepreneurs and founders. RITHOLTZ: So, when you’re thinking about putting money into the Amazon in the mid ’90s or Google in the late ’90s, at any point in that process, are you thinking, sure, these can become $2 trillion companies soon? DOERR: Well, I had no really good idea how big they could be. So, I put the question to Jeff Bezos and his response was, well, John, I don’t know but we’re going to get big fast. At that time, I kicked up something of a firestorm by proclaiming that the Internet had been under hyped and it might be the largest legal creation of wealth in our lifetimes. But I was more clear and explicit with Larry Page when I met with him and Sergey and I asked Larry, how big Google would get. I’ll never forget this, Barry. He responded to me without missing a beat, 10 billion, and I said, just to test myself, I said, surely, you mean market capitalization, don’t you, and he said, no, John, I mean revenues. We’re just beginning in the field of search and you cannot imagine how much better it’s going to get over time. And sure enough, he was, he was more than right. RITHOLTZ: To say the very least. So, let’s talk a bit about Google. You are known for introducing to both Larry and Sergey your concept of, OKRs, objectives and key results. What was the impact of that on Google? How did they respond to your suggestion on come up with objectives and come up with ways to measure your progress? DOERR: So, for everyone in your audience, objectives and key results or OKRs is a goalsetting system that Andy Grove invented at Intel and that’s because in the semiconductor industry, I’m a refugee from the semiconductor industry, you got to get tens of thousands of people to get lines that are a millionth of a meter, one micron wide, exactly right or nothing works, the chips fail. So, you need exceptional discipline, attention to detail, focus and execution. And so, Andy came up with the system. I was so enamored of it. When I left Intel, I took it everywhere I went from nonprofits to startups to large companies. The Gates Foundation in the nearly days, for example, how — they were — I mean, they were a very large nonprofit startup and an important one for the planet. So, I took Andy Grove’s system to Larry and Sergey, the founders of Google, in the very early days and I went through it with them and at the end of it asked them, so, guys, what you think, would you use this in growing Google, and Larry was — had no comment whatsoever. But Sergey, he was more like brilliant. I’d like to tell you, Barry, that he said, we love this, we’re going to adopt it wholeheartedly. Well, the truth of the matter is what he said was, we don’t have any better way to manage this Google company. So, we’ll give it a try, which I took as a ringing endorsement because what’s happened since then to this day, every Googler, every quarter, writes down her objectives and key results and publishes them for the entire company to see and interestingly, they never leaked. So, there’s 140,000 Googlers who are doing this four times a year. They’re graded. But at the end of each quarter, they’re swept aside because they’re not used for bonuses or promotions. They serve a higher purpose and that’s a collective social contract to get everybody focused and aligned and committed in tracking their progress to stretch for almost impossible to achieve goals. And I’m telling you this story because the same system that Andy Grove invented has now spread pretty broadly through the technology and other sectors of the economy and it’s at the heart of this plan that we have called speed and scale to deal with climate crisis. RITHOLTZ: Quite interesting. I want to stick with some of the early investments that you made and ask a really broad general question, how likely is it that a company you made in early stage investment in ends up looking like the company you thought you were investing in, meaning, how often do companies iterate or pivot into something totally different from what you thought you were getting involved with? DOERR: Well, I was going to say not often if it’s totally different. But if it’s meaningfully different, that happens all the time. And that’s why in the venture capital work that we do, it’s so important to back — to find fund and build a relationship with the right people because the people and the quality of the team is going to affect how they pivot, how they adapt their business plan to changing markets, changing technologies, changing opportunities. RITHOLTZ: Very interesting. So, you mentioned Amazon and Google as just uniquely memorable startups. What about some memorable ones that you thought would work out that didn’t or I know VCs love to talk about look how silly we are, we had an opportunity to invest in X and we passed and now X is fabulously successful, what stands out in that space? DOERR: Well, the standout in that space is the bad decision we made to invest in Fisker instead of in Tesla and at that time, they had similar strategies, which was to enter the electric vehicle market with high-end luxury, pretty expensive car and then to drive the cost of that vehicle down over time. Both companies were struggling to raise money. One of them had experienced executive from the automobile industry, fundamentally a designer by the name of Henrik Fisker as its founder and CEO. The other had Elon Musk who had no automobile industry experience but was determined to reinvent every part of the automotive car doing it more as a machine to run software than a collection of subsystems procured from the automobile industry. We made the wrong call and the rest is history. RITHOLTZ: That Fisker, that first Fisker car was just a gorgeous design and at that time, Tesla was taking old Lotus convertibles and filling them with laptop batteries. Between the two, it’s pretty easy to see how the Fisker opportunity really looked more intriguing than Tesla did way back when. How typical is that for the world of venture? DOERR: It happens all the time. RITHOLTZ: All the time. DOERR: That’s what makes the job of finding funding and accelerating the success of entrepreneurs hard. RITHOLTZ: To say the very least. So, there was just a new report that came out. It said, renewable energy in the U.S. has quadrupled over the past decade. So, we’re all good, right? There’s nothing else to worry about with the climate? DOERR: I wish that was true. I came to this project, this passion back in 2006 when Al Gore’s movie, you remember “An Inconvenient Truth” appeared. RITHOLTZ: Sure. DOERR: And I took my family and friends to see it and we came back for a dinner conversation and went around the table to see what people thought. When it came turn for my 16-year-old daughter Mary Doerr, she said, I’m scared and I’m angry. She said, dad, your generation created this problem, you better fix it. And, Barry, I was speechless, I had no idea what to say. So, I set out with partners at Kleiner Perkins to understand the extent of the climate crisis, even hired Al Gore as a partner and over time, over three funds, invested a third up to a half of the funds, total about $1 billion in some 70 climate ventures, most of which failed and, in fact, it’s hard, it’s very hard to grow a climate tech or green tech venture. It’s pretty lonely in the early days of doing that. And we almost lost all of our investments but we stood by these entrepreneurs and they produced companies like Beyond Meat or Enphase or the NEST smart thermostats and today are worth some $3 billion. But that was then, this is now. I think what’s important about now is we need way greater ambition and speed to avert catastrophic, irreversible climate crisis. I mean, the evidence is all around us. We’ve got devastating hurricanes and floods and wildfires and 10 million climate refugees. The IPCC says that if we don’t reduce our carbon emissions by 2030 by 55 percent, we will see global warming overshoot by more than 2°C, nearly 4°F. And the Paris accords, which were agreed to in 2015, if we were achieving them, it would still cause us to land at around 2°C. The bad news is we’re not close to achieving any of those goals. So, the latest report from the UN said this is a code red problem and I also see all problems as opportunities. Barry, I think this is going to be the greatest opportunity, human opportunity, social opportunity, economic opportunity for the 21st century. RITHOLTZ: So, let’s talk a little bit about that opportunity. You talked in the book about cutting emissions in half by 2030 and net zero by 2050 and you referenced six main areas of attack, transportation, the electrical grid, food, protecting nature, cleaning up industry, and then removing carbon from the atmosphere. Let’s talk a little bit about each of those because they’re all quite fascinating. We were talking about Tesla, how quickly do we think that we’re going to be past internal combustion engines with a fully electrified transportation network? DOERR: Well, that’s a great question and we can — I want to put this in context. Every year, we dump 59 gigatons of carbon, greenhouse gas emissions in the atmosphere as if it’s some kind of free and open sewer. And so, the book and the research behind it has built a plan in electrifying transportation and the other five for which each of the objectives has three to five key results. These are Andy Grove Intel style, very measurable specific steps in transportation. It says that electric vehicles will achieve parity, price performance parity with combustion engines in the U.S. by 2024. It says one of two new personal vehicles purchased worldwide are electric vehicles by 2030. So, what I’m trying to say is this is a global plan. RITHOLTZ: Right. DOERR: We’ve seen some nations of the world, some states like California say they’re going to ban the sale of internal combustion vehicles. And there’s also key results for buses, for trucks, for miles driven, for airplanes and maritime and this whole plan is available for free. You can download it at the website speedandscale.com. So, it’s pragmatic, it’s ambitious, it’s almost unachievable. It’s a total of 55 key results for the world, numeric time bound, and we’ve got to get after them all at once. We can’t take turns. We’re not going to achieve all of these, Barry. It’s — but if we fall short on one, we can make ground faster in others. Now, I don’t want to intimidate people by how big — how tall an order this is. The book also includes 35 stories from entrepreneurs and policymakers and leaders and innovators, leaders of indigenous tribes that describe in their own words their struggle, their successes, their journey to change the world. One of my favorites is of a cross-country team who got together to petition their school district to go to cleaner busses. They were sick and tired of running behind diesel buses with polluted air and it shows that something that I deeply believe and that is we’re fast running out of time. And so, yes, we need individuals to take individual action to eat less meat, use photovoltaic solar and buy an electric vehicle if you can afford it. But I’ve really written this book for the leader inside of everyone, their inner leader, and that’s their ability to influence others to act as a group like this cross-country team of runners in Maryland who got their school district to adopt electric buses. What the book shows is that we can get this job done but, as I said, we’re fast running out of time. RITHOLTZ: So, let’s talk a little bit about — by the way, the bus discussions in the book are quite fascinating not just because China leapt out to a big lead and have been very aggressively replacing diesel buses with electric buses but you helped fund an entrepreneur in the U.S. that’s gone around and has done a great job getting cities to purchase electric buses. The transportation grid is clearly an issue but as you point out, that’s only six gigatons. A bigger issue is the grid, the electric grid, which produces 21 gigatons of emissions. Tell us about what we need to do to decarbonize the electrical grid. DOERR: 100%, you’re right. If we move to electric vehicles but we still use coal to generate electricity, we won’t have reduced emissions. And the biggest opportunity is to decarbonize the grid and that’s to take today’s 24 gigatons of emissions mostly from goal, also natural gas to generate electricity. Take that 24 down to three gigatons. So, the first key result, the biggest of them, is to get 50 percent of our electricity from zero emission sources globally by 2025 and get it down to 38 percent — get a 90 percent by 2035. That would save us 16.5 gigatons. Simply put, we need to move to renewable sources like wind and solar and invest in longer-term durable storage so that we have reliable energy when the wind isn’t blowing and the sun isn’t shining. RITHOLTZ: So, let’s talk about that battery technology a little bit. We’ve seen a series of incremental improvements over time but nothing has been like an order of magnitude improvement. Will we be able to get there soon enough? Do we need a Manhattan project for batteries or are all those incremental improvements compounding and we’ll get there eventually? DOERR: Much of the improvement that is needed in all of these technologies is lowering their costs. And so, batteries today are still too expensive for electric vehicles in India and in China. They’re barely affordable in the U.S. marketplace. RITHOLTZ: Right. DOERR: And so, the book tells the story of QuantumScape, I’ll disclose, a public company that I’ve invested in and served on the board of, an entrepreneur by the name of Jagdeep Singh and he is going for a quantum improvement in batteries to more than double their energy density. The energy density of a battery is how much energy you’ll get out of it for a pound of weight of a battery and it’s especially important in electric vehicles because the most expensive part of the vehicle is the battery and it’s the heaviest part and you got use energy to move the weight around. So, if you double the energy density of a battery, you can get a three or four times systems improvement in the vehicle itself. I’m not expecting, I don’t think anyone is forecasting an order of magnitude improvement. We’ve seen considerable lowering costs of batteries over time. But the QuantumScape innovation, which is an all solid-state battery, would be a genuine breakthrough. RITHOLTZ: Let’s talk a little bit about food, another key source of emissions. How can we become more efficient in growing the food affecting the menu of what we eat and reducing enough food waste to make a difference? DOERR: There’s three big things t to do about food. The first is to reduce the meat and dairies in our diet and I’m not saying cut them out entirely but to replace some of that with delicious, healthy plant-based proteins. And the book tells a story of Beyond Meat and the crusade of its founder. He struggled and mortgaged his house to lead the revolution in plant-based protein. It turns out that there’s a billion cows on the planet. The book tells you their story as well. If they were a nation, it would be the third largest country in terms of the emissions. The second big thing to do about food is to reduce food waste. Globally, 30 percent of the food that we produce is wasted and taking some straightforward measures we think that can be reduced. Our goal is to reduce it to 10 percent of the food that we produce, particularly when you consider the population will grow to 10 billion by the end of the century. Finally, we got to get more efficient with how we grow food and we can, for example, apply fertilizer much more precisely with new technologies. All in all, the food sector is a way for us to reduce nine gigatons of emissions to two gigatons by 2050 or a net gain of seven out of the 59 gigatons that we got to drive to zero. RITHOLTZ: So, we’ve spent a lot of time talking about beef and agriculture generally. But let’s talk about commercial fishing, what’s the impact of our fishing practices on the health of the oceans and its ability to absorb carbon and reflect heat? DOERR: Well, over fishing together with over drilling and over development have released huge amounts of carbon from the ocean floor and life and if we prevented the destruction of mangroves and other ocean life, we could prevent a gigaton of emissions from entering the atmosphere every year. Our plan calls to eliminate deep sea bottom trawling, which is an especially destructive practice. Bottom trawling releases one and a half gigatons of CO2 equivalent emissions. It also calls for increasing the protection of oceans to 30 percent by 2030 and 50 percent by 2050. I want to call out, this is an area of climate ambition that Walmart is staking out an important and powerful leadership position. Not only that they said they’re going to have their supply chain be carbon neutral by 2040 but they are going to preserve, protect millions of acres of land and ocean water in the effort to become the first scale regenerative company. RITHOLTZ: Really, really interesting. So, very often, the average person listening to a conversation like this thinks, well, what can I do, I’m just one person. What’s the balance of responsibility between individuals on one side and government and institutions on the other? DOERR: We need all the forces in our economy, in our society to come together and work on this. We need innovators. We need entrepreneurs. We need policymakers. We need investors. We need to hear more from impassioned youth. In 2018, Greta Thunberg was a single high school student skipping school on Fridays. A year later, in 2019, in December, she organized a million-person march in a hundred cities around the world and specifically, she made the climate crisis atop two voting issue in the nations in Europe. Barry, it is not a top voting issue in the U.S. It is not a top issue in China or even in India. So, we have work to do and that’s one of our accelerants, the ways we get all this done faster and that’s to turn movements into specific actions. We really need individuals to lead others in powerful ways. That’s, for example, employees, pushing your employers to make net-zero commitment or shareholders and investors demanding changes in the board rooms. It turns out that changing the lightbulbs and eating less meat is important but we’ve got to go further. We’ve got to change our laws or even our lawmakers in order to avert this climate crisis. RITHOLTZ: Quite fascinating. I want to talk about some of the things you’ve said in the book that apply everywhere but are especially applicable to the climate crisis. Let’s start with, quote, “It seems every dozen years we witness magical ever-exponentially larger waves of innovation.” So, let’s start first with climate, how and where are those waves of innovation coming that’ll help ameliorate the climate crisis? DOERR: Well, the innovations are happening on many fronts, the material sciences, electrochemistry, biology. The opportunity that the climate transition to a clean energy the economy represents is the largest of our lifetime. It’s a bigger mobilization than even the effort of the allies to defeat the Nazi Axis in World War II. You’ll remember then, we shut down for four years all manufacturing of automobiles and appliances and instead, created 268,000 fighter aircrafts, 20,000 battleships. It was a monumental effort dealing with an existential threat. And that same level of innovation and ambition is required to win in this climate campaign. Other areas of breakthroughs or innovations, I’m even becoming a believer that we’ll see nuclear fusion. That’s the kind of clean energy that comes from the sun, practical within a decade. Concrete and steel that’s carbon free, long duration storage, the opportunities to reimagine and reinvent how we create, share, transmit and use energy in every facet of our lives is as big an opportunity as we’ll see in our lifetime. RITHOLTZ: So, let’s stay focused on that opportunity for a minute. This isn’t a charity or a foundation that’s doing this for free. When we look around, there are actual venture investments that you’ve been making successfully. So, you past on Tesla but somebody put money into Tesla. Wind turbines, solar, Beyond Meat is now public company. You are an early investor into that. You’re looking at this as more than just, hey, we have to do this in order to make sure that we don’t have a runaway greenhouse effect and Earth turns into Venus and becomes uninhabitable. But there are also very legitimate economic opportunities here also. Expound on those a little bit. DOERR: Well, there’s no better example than Tesla which had gone from a struggling company reliant on loans, thank you, United States taxpayers, to the sought most valuable company in the world. And by some measures, Elon Musk is the most — is the richest individual in the world. He took on huge risks and he delivered for his customers and shareholders, his country and his planet. And the best of the work that Elon has done is inspire, perhaps, through fear but certainly by example the rest of the automobile industry to accelerate their shift to clean and electric vehicles. So, this is, how I like to say, the mother of all markets. It’s a monster market. Batteries alone, the batteries to move from internal combustion vehicles to electric vehicles, are estimated to be $400 billion per year, Barry, for 20 years. We are going to — we must recreate all the infrastructure that we use to power out planet. RITHOLTZ: Let’s talk about something we haven’t gotten to when we were talking about those larger waves of innovation. Lots of folks are excited about blockchain and crypto and Web 3.0. But when we look at things like Bitcoin, it’s a big energy hog, how do we reconcile all the wealth that’s being created there with its massive electricity consumption? DOERR: Its electricity consumption is sustainable and so, we’re going to have to move to clean Bitcoin, green Bitcoin and we’ll get there by regulation, if not, by other market forces I would predict. Today, I believe that Bitcoin uses as much energy as the entire nation of Sweden. So, Bitcoin, I believe, is here to stay but it — we can’t fuel it through dirty electricity. RITHOLTZ: You mentioned concrete earlier and I also read in the book that you want to end single-use plastics. What does the world of material science promised us for replacing things in those spaces? How do you replace concrete? How do you replace single-use plastic? DOERR: Concrete is probably the hardest problem of all because in the production of the concrete, you almost must create carbon emissions. We can reduce the energy use to make concrete. There are some concrete innovations that absorb the CO2 into the material. But that’s an area where we need more innovation. What was your second area? RITHOLTZ: Single-use plastics. DOERR: Single-use plastics. The plan calls for the banning and really the replacement of single-use plastics. The banning of single-use plastics and in general to replace plastics with compostable materials that can be recycled and I am confident that with investment and entrepreneurial work, we can get that done. RITHOLTZ: So, we haven’t really talked about pulling carbon out of the atmosphere. I get the sense from some people that they’re expecting some technological magic bullet that’s going to solve climate change. Tell us about how we can remove carbon from the atmosphere and is there a magic bullet coming. DOERR: The speed and scale plan calls for us to remove 10 gigatons of carbon dioxide per year. I emphasize remove. This will be gigatons of CO2 emissions that we were not able to eliminate, we were not able to cut, we were not able to slash. They’ll be some uses of aviation fuel as an example or other stubborn carbon. Two approaches to this, one of which is to innovate around nature-based ways of removing CO2. For example, growing greater kelp forest in the oceans. But the other that has captured a lot of attention is called direct air capture or that’s engineered removal of carbon. Think of them as kind of mechanical trees and this technology works today but only at small scale. It sucks the CO2 out of the air. It requires a lot of electricity in order to do that. And so, it’s very expensive today, some $600 per ton. If we’ve got to remove five gigatons per year at $600 per ton, that’s $3 trillion a year and it’s hard to see how that’s affordable. So, entrepreneurs are hard at work to lower those costs and I hope they do. RITHOLTZ: So, there’s a quote I like from another venture capitalist who said venture capital properly deployed can solve the biggest problems, filling the void left by shrinking scientific ambitions of governments, foundations and international organizations. What are your thoughts on that approach? How crucial is venture capital to our future and can it replace these other entities? DOERR: Venture capital is crucial and it’s stepping up to the challenge. There will be an estimated $30 billion invested venture capital in climate technologies this year. Our plan calls for 50 billion this year. But venture capital is not going to get this job done on its own. We need government-funded research and development to grow in the U.S. alone to 40 billion a year. Other countries have got to triple their funding. We need project financing. We need philanthropic investing. Jeff Bezos’ commitment of $10 billion to the Bezos Earth Fund is the largest philanthropic commitment to climate crisis that we’ve ever witnessed or enjoyed. There’s really four accelerators that will get this job done. One of them is investing. Another is innovation, the work of entrepreneurs. But I think the hardest are going to be to turn our movements into actions so we get the politics and the policy correct because it’s going to take a massive, collective, coordinated effort to achieve our ultimate OKR and that’s to take 59 gigatons of emissions to net zero by 2050. RITHOLTZ: That’s an ambitious target and if we miss that target, what are the ramifications? DOERR: We’ll leave our kids and our grandkids an uninhabitable planet. We’ll see the Arctic sea ice surely melts away. We’ll have — estimates are up to a billion climate refugees. There’s 10 million of them already. Hundreds of millions of people will starve. It’s unthinkable. And so, we must get this done. RITHOLTZ: So, let me turn this back to what’s going on in the world of venture now. When the early decades of you work at Kleiner Perkins was into a very friendly IPO market, how much does timing matter broadly, meaning, hey, if there’s an exit available, if there’s a big IPO market that makes it more likely people are going to invest in these companies and have a successful exit. Tell us a little bit about timing. DOERR: Well, investors, myself included, will stop at nothing to copy success. So, the timing of today’s markets for climate technologies whether it’s Tesla or Rivian or better batteries or Beyond Meat, it’s good and I would say in the long run, it’s going to continue to be good because the size of the markets and the need, the economic need, the opportunity, and the planetary pressures. RITHOLTZ: So, if a younger venture capitalist or a newfound venture fund came to you and ask for advice, what would you tell them about this opportunity? DOERR: There’s so many different venture firms and strategies. I would say to them that this is the greatest opportunity with 21st century that they should be strategic about their contribution. Is it to work with early-stage entrepreneurs and removing technical risks or at the other extreme, is it to be smart and sharp about project financing? But the overall costs of the transition from a dirty fossil economy to a clean new energy economy is $4 trillion per year, per year. That sounds like a big number until you compare it with the cost of dirty energy, the social cost, the disruption, the premature deaths. One in five deaths are premature due to carbon pollution. Those come in at about $10 billion per year. So, it’s literally cheaper to save the Earth than it is to ruin it. RITHOLTZ: And there’s just seems to be endless amounts of cash pouring into the venture capital sector. Arguably, it’s never been higher. What are your thoughts on this? Does it worry you? What’s the driver of all this money sloshing around? DOERR: Some people say that we’re experiencing a bubble, a bubble in fintech or Bitcoin or climate technologies. I see it very differently. I think it’s a boom and historically, whether it was the advent of transcontinental railroads or the automobiles, we saw booms which led to full employment, overinvestment, rapid innovation. And, no, not all those car companies survive. But I think the same will be true of the other fields of innovation. I think one of the things that gives me great hope is the power of human ingenuity. We got ourselves into these specs and, Barry, I’m betting, we’re going to figure our way out. RITHOLTZ: So, what do you say to people who sort of posture Silicon Valley’s best days are behind it? Do you have a response to any of those folks? DOERR: I think they’re wrong. I think provided we deal with this existential threat, the climate crisis, and that is not guaranteed, but provided we do that and we get a 50% reduction in the next decade, I think we’re on track for a wonderful, prosperous, healthy planet. RITHOLTZ: Can I tell you and I should have mentioned this earlier but I read a ton of books for the show and I found the book really quite fascinating and it’s pretty obvious to me that an engineer was behind this. There’s just a lot of great slides and charts and graphs and it’s not just all texts. Parts of it are narrative and parts of it are historical and it reminds me of a well-made slide deck. So, nice job on the book. DOERR: Well, thanks for sharing that. I want to send you a bound version of the book if you’ll email me your physical mailing address. There’s one other thing — other story I might tell you about the book. RITHOLTZ: Sure. DOERR: I was talking the other day with a reader, a mom who told me that every night, she takes two or three pages of the book and she reads them together with her daughter and then they talk about together what that means for the world her daughter is going to inherit, and I thought, wow, that’s the use of the book I never imagined and one that I’m honestly proud of. RITHOLTZ: How — it looks like this was the work of a lot of different people. How did you end up researching and writing this? DOERR: We talked to hundred different leaders in the field, policymakers, researchers, modelers, activists and from those, selected some 35 stories. We ended up with a thousand different data points that we needed to verify and collected those into 500 end notes, which are in the book. And I did it with an amazing small team of three or four on research and writing stuf. I’m an engineer as you know and so I’m not so good with words and I had the benefit of a writing team that helped make this much more readable. RITHOLTZ: Well, it shows, you can see the book is a fast read. I sat down with a bunch of stickies and highlighter and found myself just plowing through chapter after chapter. It was a relatively quick read and very easy to put down and then pick back up again. Each chapter is very distinct and you’ve really laid out a plan to prevent climate catastrophe from taking place. So, thank you for that. DOERR: One thing I want to make sure your audience know is this, they can get a free infographic, it’s a single poster-sized piece of paper that has on both sides of it all the objectives, all the key results, all the measures. And it’s reassuring for people who are fearful that there is a plan and that if we do these things, we can find a way to a habitable planet. That’s what we’ve got to do. RITHOLTZ: So, I know I only have you for a limited amount of time. Let me jump to my favorite questions that I ask all of my guests starting with tell us what you’ve been streaming these days, give us your favorite Netflix or Amazon Prime or whatever podcast you’re listening to. DOERR: So, I haven’t had time for streaming on Netflix. I’ve been doing research, reading books and papers on the climate crisis itself. But getting this word out, I’ve listened to a — I’ve started listening to a couple of new podcast, John Heilemann’s Hell & High Water … RITHOLTZ: Sure. DOERR: … and Tim Ferriss Show, both of which, I think, have a distinctive imprint from their hosts (ph). RITHOLTZ: Tell us about your mentors who helped to shape your career. DOERR: So, the biggest influence on my life was my dad Lou Doerr, an engineer, entrepreneur and hero and I’ve been blessed by a number of mentors, perhaps most notable of them, Andy Grove, and what I learned from him at Intel prompted me to write a first book called “Measure What Matters” and that tells stories of a dozen different organizations using OKRs, which is what then I applied to the climate crisis. I would tell you Al Gore is a hero of mine. He’s wonderfully resolute man who’s impassioned, effective and funny. He and I talked regularly about the climate crisis. RITHOLTZ: Tell us about some of your favorite books, what are your all-time favorites and what are you reading right now. DOERR: So, my current reading, no surprise, is largely around the climate crisis. I love Elizabeth Colbert’s “Under a White Sky” which described climate futures. And two other books are “How to Avoid a Climate Disaster” by Bill Gates, very accessible book, and a profile — a new profile of Winston Churchill called “The splendid and the Vile.” RITHOLTZ: Two good recommendations. What sort of advice would you give to a recent college grad who wanted to pursue a career in venture investing? DOERR: I would say to her gain experience as an entrepreneur. I’d repeat the advice that I was given early in my career which was go get a real job in a real growing tech company and sharpen your skills in the real hard world of business economics and then take that experience to help other entrepreneurs succeed. RITHOLTZ: And our final question, what do you know about the world of venture investing today that you wish you knew 40 years ago? DOERR: I wish I knew 40 years ago how important the team is, the leadership of the team, the recruiting of the team, the growing of the team because in the end, it’s more than large market, it’s more than compelling technologies. It’s teams who know how to execute well. RITHOLTZ: Really, really fascinating stuff. Thanks, John, for being so generous with your time. We have been speaking with John Doerr. He is a partner at famed venture firm Kleiner Perkins and the author of the new book, “Speed and Scale: An Action Plan for Solving our Climate Crisis Now.” If you enjoy this conversation, be sure and check out all of our previous discussions. You can find those wherever you find your favorite podcast, iTunes, Spotify, Acast, wherever. We love your comments, feedback and suggestions. Write to us at mibpodcast@bloomberg.net. Sign up for my daily reads @ritholtz.com. Follow me on Twitter, @Ritholtz. I would be remiss if I do not thank our crack staff that helps with these conversations together each week, Michael Batnick is my head of research, Atika Valbrun is our project manager, Paris Wald is our producer, I’m Barry Ritholtz, you’ve been listening to Masters in Business on Bloomberg Radio.   ~~~   The post Transcript: John Doerr appeared first on The Big Picture......»»

Category: blogSource: TheBigPictureDec 6th, 2021

Exxon Mobil CEO: Latest Spending Plan Puts Earnings Goal ‘Back On Track’

Following is the unofficial transcript of a CNBC exclusive interview with Exxon Mobil Corp (NYSE:XOM) Chairman & CEO Darren Woods on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM ET) today, Wednesday, December 1st. Following is a link to video on CNBC.com: Q3 2021 hedge fund letters, conferences and more Exxon Mobil CEO: Latest […] Following is the unofficial transcript of a CNBC exclusive interview with Exxon Mobil Corp (NYSE:XOM) Chairman & CEO Darren Woods on CNBC’s “Squawk on the Street” (M-F 9AM – 11AM ET) today, Wednesday, December 1st. Following is a link to video on CNBC.com: if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Exxon Mobil CEO: Latest Spending Plan Puts Earnings Goal 'Back On Track' DAVID FABER: Welcome back to “Squawk on the Street.” I’m David Faber on the Houston campus of Exxon Mobil joined now by the company's Chairman and CEO, Darren Woods. A nice background behind you, by the way, I'm told Darren it’s the drilling fluids analysis that's going on. There's some people actually working on that. Important part of the business, figuring out new fluids that will actually help obviously optimize the drilling process, not what we're here to talk about today though but very glad that we could join you. We are here to talk about the release out this morning in which, you know, you codify many of the targets that you shared to a certain extent during your last quarter. So, what is different about today in terms of why people should think about these numbers again if they already sort of saw you talk about them a few weeks back? DARREN WOODS: Well, let me just extend my welcome. Glad to have you here, David, and glad to share the view of the lab and some of the discussions and things that we're doing there. With respect to the release today, what we did and our third quarter earnings call in October is we had just had a preliminary review with the board, shared some of the perspective of the things the board was looking at as part of our plan. In November, we finalize that plan and in this release, basically puts in a lot more detail behind the initial numbers that we shared in October. And it's a plan frankly that we’re very, very proud of. If you think back in 2018, we set some fairly aggressive targets like for 2025 to double earnings and cash flow. Pandemic got in the way of that and obviously set those plans back. This plan basically achieves doubling the earnings by 2025 back on track, nearly doubles cash flow and by 2027 basically double earnings and cash flow very soundly so very proud of the progress that we've made despite the setback of the pandemic. FABER: Yeah, a lot of focus is also going to be on the $15 billion number, again, a number that we had seen previously, but a bit more detail behind it as well. You know, you're talking about 15 billion on greenhouse gas emission reduction products over the next six years. There are those who want to know what's the return going to look like on that expenditure and how are you going to go about spending it? WOODS: Yeah, so it's a mix and what we've tried to do here, and I think one of the things that board has brought to this year's plan in the discussion is challenge us to take a lead in how Exxon Mobil can help society address this challenge of reducing emissions. That portfolio, $15 billion, includes projects that today generate good returns with existing policy. There are other aspects of that portfolio where we are developing projects, seeding projects, large scale projects, in anticipation of policy and trying to develop those projects in a way that can inform policymakers to help them think about how best to shape policy— FABER: So, what would be an example of that Darren? WOODS: So, the Houston hub that we proposed is a great example of that where we've got 11 companies collaborating to make a significant step change in emissions 50 million tons per annum by 2030, 100 million tons per annum by 2040, very high concentrations of CO2 and do that at a cost which is cheaper than essentially any other programs or initiatives that the government is currently funding. So that's a great example but it needs some policy to help support that project. FABER: What’s the policy then? WOODS: So, you need, you need policy, which frankly, the infrastructure bill has helped with to regulate pore space and allow access to pore space. We're going to need infrastructure and pipeline, we need some additional 45Q, some additional incentives for carbon reduction that's being considered in the Build Back Better legislation, so I think there's the, you know, the, the policy makers are receptive to the ideas and the constructs that we're trying to put together to table opportunities, make significant reductions in a cost-effective way. FABER: So, if you see those policy changes that you're talking about, is it possible that you will choose to increase that number or is that number going to be what your shareholders should expect for the next six years? WOODS: If you look at that number, last year, we've more than quadrupled it and it's really a function of the organization focusing and finding the opportunities around the world. We're working with governments around the world. So, I would expect that if those policies come into play and provide the necessary incentives to drive that investment, you'd see that investment level go up. Absolutely. FABER: And you talked about the use in the hub, and you talked about, you know, carbon capture obviously. There’s a lot of carbon that comes out of there. But we're not in a technological place where we can actually suck it out of the air in an efficient way and just store it somewhere or are we? WOODS: No, that's the holy grail if you think about if you could leave the existing infrastructure in place which is very efficient today and find a way to extract CO2 out of the air cost effectively, that's the holy grail because you get your cake and you eat it too. There are a lot of people working on that technology and I think we will make advances there, but I would say you need to spend money on that technology have some breakthroughs there and you also need to develop a broader set of portfolios because as you know, predicting when you're going to have a breakthrough and the magnitude of that breakthrough is often challenging so you better have a portfolio of opportunities that you're pursuing. But I think direct air captures is an important technology. FABER: You do, you know, when you talk about carbon capture which is becoming an important component of your product portfolio for lack of a better term, I mean, you say, unique capability that Exxon Mobil has. You talk about leveraging your advantage in science and technology. Give our viewers some sense as to what you're talking about when you say that. What is it about Exxon Mobil that gives you the confidence that that's where you should be focused and that that's where you can distinguish yourself, as you say, in terms of being sort of unique? WOODS: So, if you go back and look at our history over 135 years, I mean, our job has been to discover and develop hydrocarbon and then to transform that hydrocarbon into products that consumers need and to manage the impact of that hydrocarbon. What we're talking about with carbon capture is just a variation on that theme of managing carbon and managing hydrocarbon molecules. And so today, we're the largest sequester of carbon in the world today, we've captured more anthropogenic CO2 than any other entity in the world and, so we've got a lot of experience in that space. It's going to require large scale projects, which we have an expertise in. It’s going to be needed all around the world where we have the relationships with governments and had done that work in the past, requires technology and advances in technology which is where we spend a lot of money and it requires an understanding of how to integrate those projects into existing facilities which obviously, we have a very large facility footprint. So, there's a lot of aspects of what we do today that lend itself and support what we can do tomorrow with carbon capture and the beauty of carbon capture hydrogen and biofuels, all those lower emissions investment opportunities draw on the same sets of skills and capabilities, and in fact, are competitive advantages. So as the world transitions and we have this uncertainty as to exactly when it's going to happen, we have the optionality and the flexibility to shift from the traditional investments in what we're leveraging are those skills to the alternative investments and we can pace that as the world transitions and as we work with governments, and if that accelerates faster, we can ship those resources faster. If it slows down, we can keep those resources balanced. FABER: What’s your guess right now, you know, based on what you see right now and our ability to actually combat climate change, come to some sort of agreement by the way within our own country, not to mention with nations around the world, what's your best guess in terms of how that shift is going to take place and when? WOODS: You know, I think it's hard to predict and that is not, in fact, very different than what the price of crude or any of our other products can be very difficult to predict so the plan is to basically build an optionality, so you're prepared irrespective of what direction that goes in. It's challenging to put that policy in place. The fact of the matter is today, the alternatives to replacing the existing energy system are expensive, and consumers will have to pay for that. We're working hard to bring that cost down. I think that's the best solution is to invest in the technology, provide alternatives that don't require consumers to give up the standards that they’ve become accustomed to and don't require them to spend a lot of money. I think that's the work that has to happen, and how quickly that technology evolves to get those costs down will help drive the pace of the transition. FABER: But people are going to have to potentially be willing to spend more is what I hear you saying. WOODS: I think, you know, there will be a cost for moving to what is today a very efficient to a new alternative. The more that we do that cost will come down obviously and the better the technology becomes that that cost will come down but that there will be a transition cost. No doubt about it. FABER: You know, speaking of that transition of course, we're focused on Europe to a certain extent this winter because the wind hasn’t been blowing quite as hard in the North Sea, the sun doesn't always shine and there has been a transition that has taken place more, more so than here certainly in terms of power generation. Are you concerned at all about what you see in Europe and potentially what they're facing? WOODS: Yeah, no, I think, it's I am concerned and it is this, I think when you're moving from if you think about today's global energy system, it has developed over decades and billions of people around the world depend on it to support their modern living and so as you transition out of that, which has to happen to get the emissions down which I think is the right objective, you gotta be very thoughtful about how you do that because if you, if you don't have the same availability and reliability, that will translate into people going without energy, which is absolutely critical to their standards of living and obviously in the wintertime, it becomes very important with heat so we're going to have a challenge I think. It's going to be a function of how, how cold it gets and what the demand looks like. It's been compounded not just by the transition in the investments and the alternatives, but coming out of the pandemic, the industry saw a tremendous impact from that pandemic and a loss of revenue and prices being as low as they were and so investments had to pull back. The industry didn't have the money to make the investments that has in a depleting business has really constrained supply. Now the demand is picking back up again. So, there’s a number of dynamics there are influencing that, we got to get our, we got to get through that, frankly. FABER: Well, speaking of rising prices, I did want to get your response to President Biden a few weeks back when he asked the Federal Trade Commission to examine oil and gas companies and their role in rising gasoline prices. There seem to be this idea that there's potentially illegal conduct. What's your response? WOODS: I think, you know, if you go back in time in history, every time we see the supply and demand balances get tightened, prices rise. You see similar types of investigations. I think you're gonna find there's nothing, there's no there there. I mean, frankly, this is a commodity market. The prices are set by the amount of supply that's out there and by the amount of demand. If you restrict that supply and you don't do anything about demand, I promise you prices will go up. FABER: Can you give us any prediction on oil prices? WOODS: I can't do that, David. I wish I could. FABER: And finally though, how about cost reduction? You've taken four and a half billion out in costs since I think 18 or maybe 19, you have a $6 billion target, are you going to be able to exceed that? WOODS: Absolutely. I think, I've been very proud of the organization. The changes that we made starting in 2018, 2019, where we changed how the organization was configured and moved to value change that allowed us to really focus the organization in becoming more efficient, both from a capital deployment standpoint, if you look at the, the earnings and cash flow growth that I talked about, we're doing that with a lot less capital than we had before in large part because of the productivity we're getting out but it's also allowing us to significantly reduce our expenses and I expect to beat $6 billion easily. FABER: Alright, we'll hold you to that. WOODS: Okay. FABER: And look forward to future interview, as well when we discuss it. Darren, thank you for taking time. Appreciate it. WOODS: Thank you David. Thanks for coming down. FABER: Sure thing. Darren Woods, Chairman and CEO of Exxon Mobil. Carl, back over to you. Updated on Dec 1, 2021, 11:22 am (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkDec 1st, 2021

The Bitcoin Bond: El Salvador Makes History

The Bitcoin Bond: El Salvador Makes History Authored by Sam Klemens via exodus.com, El Salvador is planning to issue the world’s first Bitcoin bond and it’s a really big deal! This article will explain how the bond works, what El Salvador plans to do with the money and why other countries might start issuing their own Bitcoin bonds. Let’s dive in! The Bitcoin Bond El Salvador’s Bitcoin bond* will be worth $1 billion and it’s going to get split into two parts. Half the bond will be used to begin construction on a “Bitcoin city.” The second half of the bond will be used to buy $500 million worth of Bitcoin. *A bond is a way for a country or corporation to take out debt. Investors give money to an entity which then makes interest payments on a predetermined basis. At the end of the bond’s duration the bond must be repaid in full.   Once El Salvador purchases the $500 million worth of Bitcoin, most likely sometime in early 2022, the coins will get locked up for five years. That Bitcoin will provide the collateral for the bond, ensuring that all of the investors get paid off. Anyone who lends money to El Salvador is betting that five years from now Bitcoin will be worth at least twice as much as it is today. So long as that’s the case, even if El Salvador is completely broke they’ll still be able to sell the Bitcoin and repay the debt. For El Salvador the Bitcoin bond is a great deal. After five years they’ll start selling the coins to offer bondholders a special dividend (determined by the price of Bitcoin). However, El Salvador presumably won’t have to give all of the returns to the investors. If Bitcoin is way higher in the future, El Salvador will also benefit from the price appreciation. Any Bitcoin left over after the bondholders have been paid off will go to the government’s treasury. One question we might ask is: why would anyone invest in the El Salvador Bitcoin bond rather than just buying Bitcoin? One plausible explanation is that the Bitcoin bond can give investors a steady yield (the bonds are set to pay 6.5%) without exposing them to Bitcoin’s volatility. One of Bitcoin’s main problems is it’s volatility. From the tip of a blow-off top, to the bottom of a bear market, Bitcoin often drops 80% or more. That’s fine for the hodl gang, and certainly a great buying opportunity, but for large institutions, it’s just too much volatility. The Bitcoin bond is a way to bet on Bitcoin without getting exposed to all that volatility. The 6.5% return on the Bitcoin bond is well above the average market rate. While some have said that the bond is risky, so long as Bitcoin has doubled in price by 2027 there is not a significant amount of risk associated with this product. To summarize, the Bitcoin bond is a good deal for everyone involved because: Bondholders can get an above-average return given the perceived risk As long as BTC doubles by 2027, it’s unlikely that bond holders will lose any money If BTC more than doubles by 2027, El Salvador can also keep the additional Bitcoin after paying off the bond Why the Bitcoin Bond is a Big Deal When El Salvador first made Bitcoin legal tender, a couple of other countries in South and Central America announced that they might do the same. A few of the key advantages of Bitcoin as legal tender are: Significantly cheaper cross border payments and remittances. For countries like El Salvador or the Philippines, which rely heavily on foreign workers sending wages home, the difference between paying 2% or 15% on international payments is huge. Paying less in fees benefits the citizens of the country. It also benefits the government since more money flows into the country Bitcoin gives people the opportunity to save their money in an asset that can’t be inflated away. This is especially beneficial for anyone living in a country with a long history of monetary debasement, like Argentina Although these are two very real advantages of making Bitcoin legal tender, in themselves they’re not huge reasons for most countries to go all in on BTC. However… being able to use Bitcoin to get a billion-dollar loan, that’s the type of incentive that could drive countries to adopt the world’s most popular digital currency. While it’s almost nothing to the United States, $1 billion is still a lot of money to smaller countries. And who’s to say the next Bitcoin bond has to be $1 billion? The next bond could be $3 billion or $5 billion, there’s not really an upper limit so long as investors are willing to fund it. Other countries are likely to look into how they too can get money without having to deal with the rapacious bankers at the IMF. A Bitcoin bond is a great way to secure funding outside the bounds of the traditional financial system. El Salvador & the Bitcoin City El Salvador plans to use the second half of the bond to begin construction on a brand new Bitcoin city. The city will be located in the La Union region of the country. The new Bitcoin city will have a wide range of amenities, from bars and restaurants to movie theaters and even an airport. The main focus, however, will be on finance. According to president Bukele, “In Bitcoin City we will have digital and technological education. Geothermal energy for the entire city and efficient and sustainable public transport.” Bitcoin City will be located next to a volcano which should serve two purposes. The geothermal energy will be used to power the city, and president Bukele’s vision is for Bitcoin city to be powered 100% by renewables. The geothermal energy will also be used to set up sustainably powered Bitcoin mining facilities. Hence why Samson Mao, the chief strategy officer at Blockstream, has referred to this new deal as a volcano bond. Adam Back also does a good job of summarizing the situation.  Assuming that El Salvador’s Bitcoin mining operation is profitable, it could provide further assurance that the country will make all of its coupon payments and repay the bond when it matures.   Creating a city from scratch is a bold initiative and it would almost certainly not be possible without outside financing. Although the Bitcoin bond is set to be a great development for El Salvador, from a larger perspective the most exciting aspect of the bond is that it proves there’s a way for countries to get funding without having to grovel to the IMF or the World Bank. It’s likely that in 2022 or 2023, another country is going to announce their own Bitcoin bond, and then another. Then the floodgates could really open, especially if El Salvador’s bond is successful. All of this is pretty bullish for the crypto community, and it shows how Bitcoin can work as the backbone for a new financial system. Tyler Durden Mon, 11/29/2021 - 15:00.....»»

Category: blogSource: zerohedgeNov 29th, 2021

The timeline of Trump"s ties with Russia lines up with allegations of conspiracy and misconduct

Trump listens to a question from a reporter at a campaign fundraiser at the home of car dealer Ernie Boch Jr. in Norwood, Massachusetts August 28, 2015.REUTERS/Brian SnyderPresident Donald Trump and several associates continue to draw intense scrutiny for their ties to the Russian government.A dossier of unverified claims alleges serious conspiracy and misconduct in the final months of the 2016 presidential campaign.  The White House has dismissed the dossier as fiction, and most of the claims remain unverified. The timeline of major events, however, lines up.The document includes one particularly explosive allegation — that the Trump campaign agreed to minimize US opposition to Russia's incursions into Ukraine in exchange for the Kremlin releasing negative information about Trump's opponent, Hillary Clinton. The timing of events supporting this allegation also lines up.Editor's note: This article was updated after a Nov. 3, 2021 federal indictment accused Igor Danchenko, a Russia expert who contributed to the so-called Steele dossier, of lying to investigators about receiving information from Sergei Millian. Millian repeatedly denied he was a source for any material in the dossier.The timeline of claims made in an unsubstantiated dossier presented by top US intelligence officials to President Donald Trump and senior lawmakers last month has increased scrutiny of events that unfolded in the final months of the Trump campaign.The dossier alleges serious misconduct and conspiracy between the Trump campaign and Russia's government. The White House has dismissed the dossier as fiction, and some of the facts and assertions it includes have indeed been proven wrong.Other allegations in the dossier, however, are still being investigated. According to a recent CNN report, moreover, US intelligence officials have now corroborated some of the dossier's material. And this corroboration has reportedly led US intelligence officials to regard other information in the dossier as more credible.Importantly, the timeline of known events fits with some of the more serious alleged Trump-Russia misconduct described in the dossier. And questions about these events have not been fully answered, including the sudden distancing of Trump associates from the campaign and administration as the events and Russia ties became public.The dossier's allegations of Trump-Russia ties and conspiracyThe dossier was compiled by veteran British spy Christopher Steele, who was hired to investigate Trump's ties to Russia by the Washington, DC-based opposition research firm Fusion GPS. Steele developed a network of sources while working on the Moscow desk of UK intelligence agency MI6.Steele, citing these sources heavily, wrote a series of memos detailing alleged coordination between the Kremlin and Trump's campaign team. Fusion then compiled the information into a 35-page dossier that has been circulated among lawmakers, journalists, and the US intelligence community since last year. The dossier was published in January by BuzzFeed.Fusion was initially hired by anti-Trump Republicans to conduct opposition research on Trump in late 2015, and Democrats took over funding for the project after the Republicans pulled out. Fusion's cofounder, Glenn Simpson, a former investigative reporter for the Wall Street Journal, continued the project with Steele even after Democrats pulled funding when Trump won the election.Trump and his inner circle have condemned the dossier as "fake and fictitious."But US investigators, who have opened investigations into several members of Trump's inner circle and their ties to Russia over the past year, say they have been able to corroborate some of the details in the dossier by intercepting some of the conversations between some senior Russian officials and other Russians, CNN reported on Friday. That has given the investigators "greater confidence" in the credibility of the some aspects of the memos, CNN's sources said.Events that unfolded in the final months of the election — especially as they related to key players linked to and within Trump's inner circle — are illuminated by some of the allegations contained in the dossier. Four of these players and their role in these events warrant closer examination.Skye Gould/Business InsiderPaul Manafort: A language change on Ukraine, and a resignationAn American consultant named Paul Manafort, who was mentioned throughout Steele's dossier, served as Donald Trump's campaign manager until August 2016. He is said to have close ties to Ukraine and Russia. What the dossier saysThe dossier alleges that the Trump campaign made a secret deal with Russia in which Trump "agreed to sideline" the issue of Russian intervention in Ukraine. In return, the document claims, Russia promised to feed the emails it stole from prominent Democrats' inboxes to WikiLeaks to damage Hillary Clinton's candidacy.The "well-developed conspiracy of cooperation between [the Trump campaign] and the Russian leadership was managed on the Trump side by the Republican candidate's campaign manager, Paul Manafort," the dossier says.Manafort had advised Russia-friendly Ukraine leader Viktor Yanukovych, who he helped win the Ukrainian presidency in 2010. The dossier alleges that Manafort was still receiving "kickback payments" from the former Ukrainian leader last year, a charge Manafort has denied.What happenedIn July 2016, while Manafort was still Donald Trump's campaign manager, a change was made to the Republican Party's policy on Ukraine. The change fits with the dossier's assertion that the Trump campaign agreed to soften US support for Ukraine in exchange for the Kremlin releasing damaging information about Hillary Clinton.The Republican National Committee's original draft language on Ukraine proposed sending "lethal weapons" to the Ukrainian army to fend off Russian aggression. But after a sub-committee meeting at the convention, the "lethal weapons" line was softened significantly and changed to "provide appropriate assistance."In this July 18, 2016, file photo, Trump campaign chairman Paul Manafort walks around the convention floor before the opening session of the Republican National Convention in Cleveland.AP Photo/Carolyn Kaster, FileAs Business Insider has previously reported, the circumstances around this language change are controversial.  The reason for the language change has also not been well explained.The Ukraine language change was orchestrated by two national-security experts sent to sit in on the subcommittee meeting on behalf of the Trump campaign, according to the original amendment's author, Diana Denman, who was also in the meeting.One of the Trump campaign representatives present at the meeting, JD Gordon, has since denied intervening in the platform hearing. Gordon has also denied that Trump or Manafort were involved in the language change and that there was anything nefarious about it.A member of the Republican National Committee present at the meeting, however, confirmed to Business Insider that the change "definitely came from Trump staffers."The altered Ukraine policy amendment, with the softer language, ultimately was included in the new GOP platform. A few days later, WikiLeaks began publishing the emails stolen from the Democratic National Committee and Clinton campaign. The timing coincided with the start of the Democratic National Convention the following week.A month after the Republican convention, on August 14, The New York Times reported new details about Trump campaign manager Manafort's involvement with Ukraine. The paper reported that Ukraine leader Yanukovych's pro-Russia political party had earmarked $12.7 million for Manafort for his work between 2007-2012. Manafort has said he never collected the payments. The New York Times story thrust the Trump campaign's connections with Russia into the international spotlight. Five days later, on August 19, for reasons that are still unclear, Manafort resigned as Trump's campaign manager. The dossier further alleges that Russia's president, Vladimir Putin, became concerned when Yanukovych informed him on August 16 — two days after the Times report was published — of "kickback payments" being funneled to Manafort. This was three days before Manafort resigned from the Trump campaign.Michael Flynn: A trip to Moscow, a distraction from Ukraine, and secret phone callsMichael Flynn, the former head of the Defense Intelligence Agency, is now Trump's national security adviser. Flynn was paid by the Kremlin to speak at a gala in December 2015, and is believed to have regularly communicated with the Russian ambassador to the US before Trump was sworn in.What the dossier saysAccording to the dossier, a Kremlin official involved in US relations said that Russia attempted to cultivate US political figures by "funding indirectly their recent visits to Moscow."These political figures, the dossier alleges, included "a delegation from Lyndon LaRouche, presidential candidate Jill Stein of the Green Party, Trump foreign policy adviser Carter Page, and former DIA director Michael Flynn." The dossier went on to say that the effort to cultivate these figures had been "successful in terms of perceived outcomes."In this file photo taken on Thursday, Dec. 10, 2015, Russian President Vladimir Putin, center right, with retired U.S. Lt. Gen. Michael T. Flynn, center left, and Serbian filmmaker Emir Kusturica, obscured second right, attend an exhibition marking the 10th anniversary of RT (Russia Today) 24-hour English-language TV news channel in Moscow, Russia.Mikhail Klimentyev/Sputnik, Kremlin Pool Photo via APThe dossier alleges that the Trump campaign pledged to "raise defense commitments in the Baltics and Eastern Europe to deflect attention away from Ukraine." Recent reporting indicates that Flynn, now Trump's national security advisor, is poised to make good on that pledge.What happenedIn December 2015, Flynn, then recently retired from the Defense Intelligence Agency, traveled to Moscow to speak at a gala celebrating the 10th anniversary of state-sponsored news agency Russia Today.Flynn later told The Washington Post that he had been paid to speak at the gala, where he was photographed sitting next to Putin at dinner.Top Democratic lawmakers are now calling on the Defense Department to investigate whether Flynn ran afoul of the US Constitution by accepting money from the Kremlin. Since the dinner in Moscow, Flynn has toed a Russia-friendly line that's out of line with his more hawkish former US defense colleagues. He has appeared on Russia Today (RT) several times as a commentator. He also suggested last year that he saw no difference between the state-run RT and other news networks like CNN, MSNBC, and Al Jazeera.One of Flynn's appearances on RT in October 2015 ran under the headline: "Former DIA Chief Michael Flynn Says Rise Of ISIS Was A 'Willful Decision' Of US Government."Michael Flynn.Drew Angerer/Getty ImagesLast Tuesday, Politico reported that Flynn will recommend that Trump support the ascension of Montenegro, a small Balkan nation, into NATO. Russia officially opposes such a move. But it aligns with the dossier's suggestion that the Trump White House would support raising commitments "in the Baltics and Eastern Europe to deflect attention away from Ukraine."Last Thursday, moreover, both The Washington Post and The New York Times reported that Flynn had spoken with Russia's ambassador to the US, Sergey Kislyak, about the US economic sanctions on Russia before Trump was sworn in — including at least one call on the day President Barack Obama imposed new penalties on Russia for its election-related meddling.Both Flynn and Vice President Mike Pence initially denied that Flynn and Kislyak discussed US sanctions during these calls. But counterintelligence officials told the Times that they have transcripts of the conversations and that the sanctions were discussed. Flynn has since backtracked on his denial, saying that he doesn't recall exactly what they spoke about.Carter Page: Two trips to Moscow, and a 'leave of absence'Carter Page, a former investment banker with Merrill Lynch, was an early foreign policy adviser to Trump. Page also served as an adviser "on key transactions" for Russia's state-owned energy giant Gazprom before setting up his own energy investment fund, Global Energy Capital, with former Gazprom executive Sergei Yatesenko.What the dossier saysThe dossier claims that Carter Page was used by Manafort as an "intermediary" between the campaign and high-level Kremlin officials.Specifically, the dossier alleges that Page traveled to Moscow in July 2016, where he met with the president of Russia's state oil company Rosneft, Igor Sechin. An associate of Sechin's, the dossier claims, "said that the Rosneft President was so keen to lift personal and corporate Western sanctions imposed on the company, that he offered Page and his associates the brokerage of up to a 19 percent (privatised) stake in Rosneft."The dossier says that Page "expressed interest" in the offer but was "noncommittal." It also says that Page promised that "sanctions on Russia would be lifted" if Trump were elected.What happenedThe timing of the alleged meeting between Page and Sechin aligns with a Page trip to Moscow in July 2016, where he delivered the commencement speech for the New Economic School."Washington and other Western capitals have impeded potential progress through their often hypocritical focus on ideas such as democratization, inequality, corruption and regime change," Page said in the speech, which was heavily critical of NATO, the US, and other Western countries. In this Friday, July 8, 2016, file photo, Carter Page, then adviser to U.S. Republican presidential candidate Donald Trump, speaks at the graduation ceremony for the New Economic School in Moscow, Russia.Associated Press/Pavel GolovkinPage has criticized the US sanctions on Russia as "sanctimonious expressions of moral superiority," and he praised Rosneft CEO Sechin in May 2014 for his "accomplishments" in advancing US-Russia relations.Page was in Moscow for three days in mid-July. It's unclear what he did or who he met with before and after giving the speech, but Yahoo's Michael Isikoff, citing a Western intelligence source, reported in September that Page met with Igor Sechin during his trip.As happened with Paul Manafort, Page's role within the Trump campaign changed after news of his Russia connections became public. Page, who denied meeting with any sanctioned officials while he was in Russia, took "a leave of absence" from the Trump campaign shortly after the Yahoo report. The Trump campaign subsequently distanced itself from Page.Rosneft, meanwhile, ultimately signed a deal that was similar to the one the dossier described: On December 7, the oil company sold 19.5% of shares, worth roughly $11 billion, to the multinational commodity trader Glencore Plc and Qatar's state-owned wealth fund. Page was back in Moscow on December 8, one day after the deal was signed, to "meet with some of the top managers" of Rosneft, he told reporters at the time.Page's extensive business ties to state-owned Russian companies were investigated by a counterintelligence task force set up last year by the CIA, according to several media reports. The investigation, which is reportedly ongoing, has examined whether Russia was funneling money into Trump's presidential campaign — and, if it was, who was serving as the liaison between the Trump team and the Kremlin.Sergei Millian: From touting Trump to downplaying tiesSergei Millian, a Belarus-born businessman who is now a US citizen, founded the Russian-American Chamber of Commerce in 2006. He has described himself as an exclusive broker for Trump's family business, the Trump Organization, with respect to real-estate dealings in Russia.What the dossier saysOne of the dossier's sources, "Source E," told a compatriot in July 2016 that the "conspiracy of cooperation" between Russia and Trump involved hacking prominent Democrats. The hacking campaign "depended on key people in the US Russian émigré community for its success," the dossier states.The Kremlin recruited "hundreds of agents" both in Russia and in the US who were either "consciously cooperating with the FSB or whose personal and professional IT systems had been compromised," the dossier says, citing "a number of Russian figures with a detailed knowledge of national cyber crime.""Many were people who had ethnic and family ties to Russia and/or had been incentivized financially to cooperate," the dossier says. Source E allegedly told his compatriot that agents were compensated by "consular officials in New York, DC, and Miami," who issued "pension disbursements to Russian émigrés living in the US as cover...tens of thousands of dollars were involved."In return for this effort, the dossier says, Putin wanted information from Trump on Russian oligarchs living in the US, Source E said.  The same source is quoted in the dossier as saying the Trump campaign was "relatively relaxed" about the attention on Trump's reported ties to Russia "because it deflected media and the Democrats' attention away from Trump's business dealings in China.""Unlike in Russia, these [dealings] were substantial and involved the payment of large bribes and kickbacks which, were they to become public, would be potentially very damaging to their campaign."What happenedThe CIA established a US counterintelligence task force last spring to investigate whether the Trump campaign received funds from Russia. John Brennan, the former director of the CIA, also received a recording of a conversation last year from one of the Baltic states' intelligence agencies suggesting that money from the Kremlin had gone to the Trump campaign, the BBC reported."Source E," according to recent reports by the Wall Street Journal and ABC, is Sergei Millian.Millian, who attended several black-tie events at Trump's inauguration last month, denies this. Following the now-common Trump White House communications strategy, he told Business Insider that the author of the Wall Street Journal report "is the mastermind behind fake news." More doubt about Millian's connection to the dossier emerged in a Nov. 3, 2021 federal indictment that charged Igor Danchenko, a Russia expert who contributed to the Steele dossier, with lying to investigators about receiving information for the dossier from Millian.Millian described himself as an "exclusive" broker for the Trump Organization's real-estate dealings in Russia in an interview with Russian news agency RIA Novosti last April. "I think partnership is based on friendship, mutual respect and mutual understanding, and business is based on buyer-seller relationships," he said of his work with the Trump Organization.But Millian appears to have begun downplaying his ties to the Trump Organization after Western reporters started digging into Trump's Russia ties last summer. Whereas Millian told RIA that he had been in touch with the Trump Organization as late as April 2016, he said in an email to Business Insider that the last time he worked on a Trump brand project was "in Florida around 2008." He did not respond to a request to clarify the discrepancy.Millian, on his LinkedIn page, says he is the Vice President of the World Chinese Merchants Union Association. He wrote last April that he traveled to Beijing to meet with a Chinese official and the Russian ambassador to the Republic of San Marino. Millian has also worked with Rossotrudnichestvo, a Russian government organization whose "fundamental" goal is to familiarize "young people from different countries" with Russian culture through exchange trips to Moscow. The FBI has investigated whether Rossotrudnichestvo is a front for the Russian government to cultivate "young, up-and-coming Americans as Russian intelligence assets" — a theory Rossotrudnichestvo has strongly denied.In December 2011, Millian wrote to Dmitry Medvedev, then the Russian president, to thank him "on behalf of the fifty American entrepreneurs invited by Rossotrudnichestvo to attend the first edition of the Russian-American Business Forum in Moscow."Last month, however, Millian told Mother Jones he "never got any business with Rossotrudnichestvo." He did not respond to requests from Business Insider to clarify that discrepancy, either.Millian told ABC last July that he is "one of those very few people who have insider knowledge of Kremlin politics who has the ability to understand the Russian mentality and who has been able to successfully integrate in American society.""American citizens voted for President Trump and thus performed God's will," Millian told Business Insider in an email on Thursday. "Your salvation is to pray for good health for the US President Trump and give your best efforts to help him make our country great again."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 16th, 2021

Hazelton Capital Partners 3Q21 Commentary: REGI And MU

Hazelton Capital Partners commentary for the third quarter ended September 2021, discussing their top holdings; Renewable Energy Group Inc (NASDAQ:REGI) and Micron Technology, Inc. (NASDAQ:MU). Q3 2021 hedge fund letters, conferences and more Dear Partner, Hazelton Capital Partners, LLC (the “Fund”) declined by 7.8% from May 1, 2021 through September 30, 2021 and has returned […] Hazelton Capital Partners commentary for the third quarter ended September 2021, discussing their top holdings; Renewable Energy Group Inc (NASDAQ:REGI) and Micron Technology, Inc. (NASDAQ:MU). if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Dear Partner, Hazelton Capital Partners, LLC (the “Fund”) declined by 7.8% from May 1, 2021 through September 30, 2021 and has returned 7.0% year-to-date. By comparison, the S&P 500 returned 0.6% during the same quarter and 15.9% year-to-date. The Quarter in Review Hazelton Capital Partners ended the 3rd quarter with a portfolio of 16 equity positions and a cash level of less than 10% of assets under management. The top five portfolio holdings, which are equal to roughly 57% of the Fund’s net assets, are: Renewable Energy Group Inc (NASDAQ:REGI), Micron Technology, Inc. (NASDAQ:MU), Caesars Entertainment Inc (NASDAQ:CZR), Apple Inc (NASDAQ:AAPL), and DXC Technology Co (NYSE:DXC). Renewable Energy Group and Micron Technology were responsible for the majority of the portfolio’s quarterly decline, falling 18% and 14% respectively in the quarter. Both companies had earnings that beat expectations and in REGI’s case, guided for earnings slightly better for the upcoming quarter. In September, the S&P 500 declined nearly 5% as slowing supply chains, disappointing employment numbers, and the delta variant began to weigh on consumer spending. By October 19, the market had not only quickly recovered from the selloff but continued its upward climb. Market sentiment has become very reactionary as investors, fearful of a market reversal, are quick to sell stocks on any negative outlook. At the same time, not wanting to miss out on the upside, investors are crowding into technology names that have little exposure to supply chains or staffing issues (technology jobs pay well and are coveted), especially with the flexibility to work remotely. This bifurcated market will continue until market sentiment becomes less reactionary. Renewable Energy Group (REGI) - Current Holding Since the beginning of the year, Renewable Energy Group’s share price has declined over 35% and nearly 60% since February when Hazelton Capital Partners cut its position in half. During the 3rd quarter, Hazelton Capital Partners repurchased another tranche, returning REGI to the Fund’s largest portfolio holding with a share count greater than where the position started the year. Renewable Energy Group continues to execute well in a market where supply and demand pressures remain both dynamic and uncertain. Beneath the veneer of a company that has a track record of meeting/beating its revenue and profit guidance, lies a management team whose main focus is on its supply chain and logistic operations. REGI leverages its competitive edge at both procuring cheap feedstocks and delivering its refined biodiesel & renewable diesel to the highest value markets while growing downstream opportunities. The company recently announced partnerships with both GoodFuels, which supplies biofuels to the marine industry and Canadian National Railway. Both companies are looking to expand biodiesel into their fuel mix to reduce their greenhouse gas emissions. In October of 2021, Renewable Energy Group broke ground on its 250 million gallon/year (mmgy) renewable diesel refinery expansion at its Geismar, Louisiana refinery. The $950 million project is expected to come online by 2023, achieving a full run rate by 2024. With debt of $550 million and a net cash position of roughly $500 million, REGI’s balance sheet is prepared for the upcoming expansion. About 80% of the long lead items have been procured, and their prices locked in. The construction costs will be spread out over the upcoming years, with 15% of the total construction costs hitting in 2021, 45% in 2022, and the remainder in 2023. The nameplate capacity of the new refinery is 250mmgy but given that all of REGI’s refineries have an effective capacity that exceeds their nameplate, one can expect that Geismar will be producing over 400mmgy (Geismar 1st refinery effective capacity should benefit from site improvements as well). That will greatly change Renewable Energy Group’s renewable diesel mix from 17% to 46% of total production and have a meaningful impact on the company’s future margins and cash flows. Micron Technology (MU) - Current Holding It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides. Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve. Interest Rates are Still Driving the Boat In late August, the Federal Reserve Chairman, Jerome Powell, tried to calm inflation fears by reiterating that “longer-term inflation expectations have moved much less than actual inflation … suggesting that households, businesses, and market participants also believe that current high inflation readings are likely to prove transitory." Powell went on to frame “transitory” to mean that the recent rapid increase in both wages and cost of goods will continue in the near term but will “likely moderate.” For those of us not used to the often-obscure language of the Federal Reserve, let me try to translate: Expect prices of goods and services to be more expensive now and in the future. There are two key factors impacting inflation: the source and the speed of the price increase. The source of inflation, like all economic conditions, is generated by supply and demand imbalances. This was demonstrated during Covid, when people from the cities began to move to the suburbs and the demand for homes inflated suburban housing prices. Currently, the costs of goods have been rising due to inflated shipping and delivery costs. Reopening of the global economy has led to greater consumer demand, especially from the US, and US ports are currently seeing a 15-20% increase in shipments compared to 2019. In 2019, it took less than 40 days to get products from China to US store shelves vs. nearly 80 days today. The extended shipping times comes, in part, from overwhelmed US ports that are unable to unload ships at their prior cadence due to increased shipments and the lack of “free” workable space at the shipyards. A shipyard is a complex ecosystem that unloads, stores, delivers, and reloads shipping containers daily. The speed at which a yard can accomplish this choreographed dance is dependent on space. Because of the significant shipping imbalance that started during Covid (more products being shipped to the US vs. from the US) a glut of empty shipping containers has been building up at the shipyards, making it difficult to find working space to unload cargo ships and drastically slowing the unloading process. This, in turn, is causing a logjam of anchored ships just outside the port waiting for weeks to get a berth to unload. Once unloaded, getting shipping containers to the warehouse and distribution centers has also been a challenge due to a shortage of truck drivers. It is estimated that there are currently 22,000 fewer truck drivers in the US than in 2019 and to attract drivers, trucking companies have had to increase their wages and benefits. In addition, as shipyards are limiting the amount of empty shipping containers they are willing to stockpile, truck drivers/trucking companies are scrambling to find places to store the empty containers in order to return to the shipyard, slowing down the delivery process even further. All of these headwinds are causing delays in addition to the higher shipping and transportation costs that most retailers and businesses are forced to pass along to their customers. The rate at which these costs are rising is also impacting consumers and the economy. Most consumers are used to the idea of “creeping” inflation, where goods and services have an upward bias over time. Business can often adjust their expenses or structure deals with their suppliers to offset the impact. However, when costs continue to spike higher most businesses have no alternative other than to pass those higher costs of goods onto their customers. In the short-run, consumers may be accepting of the higher costs but, over time, even consumers flush with cash will begin to reduce their spending habits, decrease restaurants visits, pause monthly subscriptions, and cut back on holiday travel. Although it appears that we are not at that stage just yet, continued higher expenses and uncertainty could cause the US consumer to recoil. In addition to inflation, the US economy is also facing headwinds in the form of an exploding national debt (~$29 trillion), ongoing domestic and geopolitical conflicts, and the continued overhang from the Covid-19 pandemic. In the past, any one of these headwinds would have easily disrupted the stock market’s upward glide path. So how is it that the stock market continues to appreciate unabated? The one economic variable yet to be mentioned is interest rates. What the last twelve years have taught investors is that cheap and accessible money can overpower most economic and geopolitical headwinds. Providing cheap and accessible money is like pouring lighter fluid on a barbecue, it will create an intense fire, but the only way to keep that towering fire going is to continue dousing the flames with lighter fluid. That is exactly what the Federal Reserve’s “zero” interest rate policy and monthly bond purchases (~120 billion/month) were designed to do. “Winter is Coming” The Federal Reserve is expected to begin tapering its monthly bond purchases by year’s end in advance of raising interest rates. Consider the Fed’s tapering to be a clear indication that the carefree days of summer are coming to an end and it’s time to start preparing for the change in seasons. In the HBO series, “Game of Thrones,” the phrase “winter is coming” is used throughout the series as a reminder that challenging times lie ahead. The ongoing uncertainty surrounding geopolitics, interest rates, and inflation will have an impact on the markets, but will this affect the way Hazelton Capital Partners manages its portfolio? The short answer is no. The more involved answer is that market headwinds will not change the Fund’s investing criteria, but they may influence the margin of safety required before investing. It is a lot easier to ride a bike when the wind is at your back. Riding into the wind requires more energy, focus, and time to get to your destination. A strong investing headwind, all things being equal, will require a greater margin of safety as more uncertainty is created as to when the company’s share price will reflect its future intrinsic value. In the short run, headwinds can disrupt a company’s business model, negatively impact its profit margins, and, if left unchecked, reduce its competitive edge. It is important to remember that a company’s value today is a discount of its future value based on its expected revenues, margins, earnings, and cash flows. Since those future metrics are uncertain, the company’s stock price today is more a reflection of changes in market sentiment. However, over a longer period of time a company’s share price will reflect management’s ability to improve revenues, margins, and profitability. Embedded in Hazelton’s core strategy is a 5–7 year investing horizon, reflecting the historic business cycle which is roughly 5-1/2 years long (trough to peak). Given that Hazelton Capital Partners tends to be early in its investments, the Fund rarely initiates a full position from the start, choosing instead to invest gradually in tranches that reflect a growing margin of safety. Having a long-term outlook helps the Fund weather the periodic financial storm, flood, and hurricane. However, these supposedly infrequent events have been occurring with chronic regularity and disruption making it difficult for investors to remain calm and anchored to a longterm plan. Winter is always coming. It has been a long time since the US economy has had to deal with inflationary pressures, let alone the possibility of rising interest rates. Investors have naturally forgotten that companies can continue to prosper even during economic headwinds, it will just take more focus and time. Having cheap and easy access to capital has been a huge tailwind for the equity markets and the main reason why the stock market has appreciated to its current level. Unfortunately, a company’s ability to borrow cannot offset the current supply chain bottlenecks and labor shortages that inflate prices and impact corporate margins. Hazelton Capital Partners fully expects there to be continued disruption and downward pressure on the market and its portfolio as assets move from the weak hands of reactionary investors to the strong hands of long-term investors. As long as there is a meaningful margin of safety between the current price of a stock and its future intrinsic value, Hazelton Capital Partners will continue to invest for the long-term and not try and time the market. Investing in Hazelton Capital Partners Hazelton Capital Partners was created as an investment vehicle, allowing those interested in long-term exposure to the equity market to invest alongside me. With a substantial portion of my own capital in the fund, I manage Hazelton Capital Partners’ assets in the same way I manage my own capital. The best source of introduction to potential investors in the Fund has come from those that have invested or followed Hazelton Capital Partners progress over the years. Introductions are both welcome and appreciated. If you are interested in making or increasing your contribution to Hazelton Capital Partners or just learning more about The Fund, please feel free to contact me. Please do not hesitate to call me at (312) 970-9202 or email me bpasikov@hazeltoncapital.com with any questions or concerns. Warm Regards, Barry Pasikov Managing Member Hazelton Capital Partners Updated on Nov 15, 2021, 2:03 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 15th, 2021

Money, Funny-Money, & Crypto

Money, Funny-Money, & Crypto Authored by Alasdair Macleod via GoldMoney.com, That the post-industrial era of fiat currencies is coming to an end is becoming a real possibility. Major economies are now stalling while price inflation is just beginning to take off, following the excessive currency debasement in all major jurisdictions since the Lehman crisis and accelerated even further by covid. The dilemma now faced by central banks is whether to raise interest rates sufficiently to tackle price inflation and lend support to their currencies, or to take one last gamble on yet more stimulus in the hope that recessions can be avoided. Politics and neo-Keynesian economics strongly favour monetary inflation and continued interest rate suppression. But following that course leads to the destruction of currencies. So, how should ordinary people protect themselves from currency risk? To assist them, this article draws out the distinctions between money, currency, and bank credit. It examines the claims of cryptocurrencies to be replacement money or currencies, explaining why they will be denied either role. An update is given on the uncanny resemblance between current neo-Keynesian monetary inflation and support for financial asset prices, compared with John Law’s proto-Keynesian policies which destroyed the French economy and currency in 1720. Assuming we continue to follow Law’s playbook, an understanding why money is only physical gold and silver and nothing else will be vital to surviving what appears to be a looming crisis in financial assets and currencies. Introduction With the recent acceleration in the growth of money supply it is readily apparent that government spending is increasingly financed through monetary inflation. Those who hoped it would be a temporary phenomenon are being shown to have been overly optimistic. The excuse that its expansion was only a one-off event limited to supporting businesses and consumers through the covid pandemic is now being extended to seeing them through continuing logistics disruptions along with other unexpected problems. We now face an economic slowdown which will reduce government revenues and, according to policy planners, may require additional monetary stimulation to preclude. Along with never-ending budget deficits, for the foreseeable future monetary inflation at elevated levels is here to stay. The threat to the future purchasing power of currencies should be obvious, yet few people appear to be attributing rising prices to prior monetary expansion. David Ricardo’s equation of exchange whereby changes in the quantity of money are shown to affect its purchasing power down the line has disappeared from the inflation narrative and is all but forgotten. That the users of the medium of exchange ultimately determine its utility is ignored. It is now assumed to be the state’s function to decide what acts as money and not its users. Instead, we are told that the state’s fiat currency is money, will always be money and that prices are rising due to failures of the capitalist system. Central to the deception is to call currency money, and to persist in describing its management by the state as monetary policy. And money supply is always the supply of fiat currency in all its forms. That these so-called monetary policies have failed and continue to do so is becoming more widely appreciated. It is the anti-capitalistic attitude of state planners which absolves them from the blame of mismanaging the relationship between their currencies and economies by blaming private sector actors when their policies fail. Instead of acting as the people’s servants, governments have become their controllers, expecting the public’s sheep-like cooperation in economic and monetary affairs. The state issues its currency backed by unquestioned faith and credit in the government’s monopoly to issue and manage it. Seeming to recognise the potential failure of their currency monopolies many central banks now intend to issue a new version, a central bank digital currency to give greater control over how citizens use and value it. Without doubt, the dangers from fiat currency instability are increasing. Never has it been more important for ordinary people, its users, to understand what real money constitutes and its difference from state-issued currencies. Not only are new currencies in the form of central bank digital currencies being proposed but some suggest that distributed ledger cryptocurrencies, which are beyond the control of governments, will be adopted when state fiat currencies fail, an eventual development for which increasing numbers of people expect. The currency scene is descending into a confusion for which policy planners are unprepared. Fiat currencies are failing, evidenced by declining purchasing power. Not only is it the lesson of history; not only are governments resorting to the printing press or its digital equivalent, but it is naïve to think that governments desire monetary stability over satisfying the interests of one group over those of another. By suppressing interest rates, central banks favour borrowers over depositors. By issuing additional currency they transfer wealth from their governments’ electors. The transfer is never equitable either, with early receivers of new currency getting to spend it before prices have adjusted to accommodate the increased quantity in circulation. Those who receive it last find that prices have risen because of currency dilution while their income has been devalued. The beneficiaries are those close to government and the banks who expand credit by ledger entry. The losers are the poor and pensioners — the people who in democratic theory are more morally entitled to protection from currency debasement than anyone else. The true role of money In the late eighteenth century, a French businessman and economist, Jean-Baptiste Say, noticed that when France’s currencies failed during the Revolution, people simply exchanged goods for other goods. A cobbler would exchange the shoes and boots he made for the food and other items he required to feed and sustain his family. The principles behind the division of labour had continued without money. But it became clear to Say that the role of money was to facilitate this exchange more efficiently than could be achieved in its absence. For Keynesian economists, this is the inconvenient truth of Say’s law. The division of labour, which permits individuals to deploy their personal skills to the greatest benefit for themselves and therefore for others, remains central to the commercial actions of all humanity. It is the mainspring of progress. A medium of exchange commonly accepted by society not only facilitates the efficient exchange of goods produced through individual skills but it allows a producer to retain money temporarily for future consumption. This can be because he has a surplus for his immediate requirements, or he decides to invest it in improving his product, increasing his output, or for other purposes than immediate consumption. Whether it is a corporation, manager, employee, or sole trader; whether the product be a good or a service— all qualify as producers. Everyone earning a living or striving to make a profit is a producer. Over the many millennia that have elapsed since the end of barter, people dividing their labour settled on metallic money as the mediums of exchange; recognisable, divisible, commonly accepted, and being scarce also valuable. And as civilisation progressed gold, silver, and copper were coined into recognisable units. These media of exchange in their unadulterated form were money, and even though they were stamped with images of kings and emperors, they were no one’s liability. Nowadays, humans across the planet still recognise physical gold and silver as true money. But it is a mistake to think they guarantee price stability — only that they are more stable than other media of exchange, which is why they have always survived and re-emerged after alternatives have failed. This is the key to understanding why they guaranteed money substitutes, notably through industrial revolutions, and remain money to this day. Britain led the way in replacing silver as its long-standing monetary standard with gold, relegating silver to a secondary coinage. In 1817 the new gold sovereign was introduced at the exchange rate equivalent of 113 grains (0.2354 ounces troy) to the pound currency. A working gold standard, whereby bank notes were exchangeable for gold coin commenced in 1821, remaining at that fixed rate until the outbreak of the First World War in 1914. By 1900, the gold standard had international as well as domestic aspects. It implied that nations settled balance of payment differences with each other in gold, although in practice this seems to have happened relatively little. Many smaller nations, while having domestic gold circulation, did not bother to keep physical gold in reserve, but held sterling balances which, again, were regarded as being as good as gold. The Bank of England had a remarkably small reserve of under 200 tonnes in 1900, compared with the Bank of France which held 544 tonnes, the Imperial Bank of Russia with 661 tonnes, and the US Treasury with 602 tonnes. But even though remarkably little gold was held by the Bank of England, over 1,400 tonnes of sovereign coins had been minted in Australia and the UK and were in public circulation. Therefore, some £200m of the UK and its empire’s money supply was in physical gold (the equivalent of £62bn at today’s prices). The relationship between gold and prices Metallic money’s purchasing power fluctuates, influenced by long-term factors such as changes in mine output and population growth. Gold is also held for non-monetary purposes such as jewellery though the distinction between bullion held as money and jewellery can be fuzzy. A minor use is industrial. The degree of coin circulation relative to the quantity of substitutes also affects its purchasing power, as experience from nineteenth century Britain attests. The economic progress of the industrial revolution increased the volume of goods relative to the quantity of money and money-substitutes (bank notes and bank deposits subject to cheques), so the general level of producer prices declined, even though they varied with changes in the level of bank credit. That generally held until the late-1880s, when bank credit in the economy expanded on the back of increased shipments of gold from South Africa. Furthermore, a combination of rising demand for industrial commodities through economic expansion of the entire British empire and more currencies linking themselves to gold indirectly via managed exchange rates against pounds and other gold-backed currencies all contributed to reverse the declining trend of wholesale prices between 1894—1914. Consequently, wholesale prices no longer declined but tended to increase modestly. This is shown in Figure 1. Figure 1 also explodes the myth in central bank monetary policy circles that varying interest rates controls money’s purchasing power by “pricing” money. Demand for credit is set by the economic calculations of businessmen and entrepreneurs, not idle rentiers as assumed by Keynes who named this paradox after Arthur Gibson, who pointed it out in 1923. The explanation eluded Keynes and his followers but is simple. In assessing the profitability of production, the most important variable (assuming that the means of production are readily available) is anticipated prices for finished products. Changes in borrowing rates, reflecting the affordability of interest that could be paid therefore do not precede changes in prices but follow changes in prices for this reason. While fluctuations in the sum of the quantities of money, currency and credit affect the general level of prices, there is an additional effect of the value placed on these components by its users. History has demonstrated that the most stable value is placed on gold coin, which is what qualifies it as money. It has been said that priced in gold a Roman toga 2,000 years ago cost the same as a lounge suit today. But we don’t need to go back that far for our evidence. Figure 2 shows WTI oil priced in dollars, the world’s reserve currency, and gold both indexed to 1986. Clearly, the dollar is significantly less reliable than gold as a stable medium of exchange. So long as gold is freely exchangeable for currency, this stability is imparted to currency as well. When it is suspected that this exchangeability is likely to be compromised, coin becomes hoarded and disappears from circulation. The purchasing power of the currency then becomes dependent on a combination of changes in its quantity and changes in faith in the issuer. Bank deposits face the additional risk of faith in the bank’s ability to pay its debts. In summary, the general level of prices tends to fall gradually over time in an economy where gold coin circulates as the underlying medium of exchange, and when faith in the currency as its circulating alternative is unquestioned. The existence of a coin exchange facility lifts the purchasing power of the currency above where it would otherwise be without a functioning standard. Even when gold exchange for a fiat currency becomes restricted, the purchasing power of the currency continues to enjoy some support, as we saw during the Bretton Woods Agreement. The distinction between money and currency So far, we have defined money, which is metallic and physical. Now we turn to what is erroneously taken to be money, which is currency. Originally, the dollar and pound sterling were freely exchangeable by its users for silver and then gold coin, so state-issued currencies came to be assumed to be as good as money. But its exchangeability diminished over time. In the United Kingdom exchangeability of sterling currency for gold coin ceased with the outbreak of hostilities in 1914, though sovereigns still exist as money officially today. They are simply subject to Gresham’s law, driven out of general circulation by inferior currency. The post-war gold standard of 1925-32 was a bullion standard whereby only 400-ounce bars could be demanded for circulating currency, which failed to tie in sterling to money proper. In the United States, gold coin was exchangeable for dollars in the decades before April 1933 at $20.67 to the ounce. Bank failures following the Wall Street crash encouraged citizens to exchange dollar deposits for gold, and foreign holders of dollar deposits similarly demanded gold, leading to a drain on American gold reserves. By Executive Order 6102 in April 1933 President Roosevelt banned private sector ownership of gold coin, gold bullion and gold certificates, thereby ending the gold coin standard and forcing Americans to accept inconvertible dollar currency as the circulating medium of exchange. This was followed by a devaluation of the dollar on the international exchanges to $35 to the ounce in January 1934. The entire removal of money from the global currency system was a gradual process, driven by a progression of currency events, until August 1971 when President Nixon ended the Bretton Woods Agreement. From then on, the US dollar became the world’s reserve currency, commonly used for pricing commodities and energy on international markets. But following the Nixon shock, the dollar had become purely fiat. Unlike gold coin, which has no counterparty risk, fiat currency is evidence of either a liability of an issuing central bank or of a commercial bank. It is not money. The fact that money, being gold or silver coin does not commonly circulate as media of exchange, cannot alter this fact. Since the dawn of modern banking with London’s goldsmiths in the seventeenth century, who deployed ledger debits and credits, most currency entitlements have been held in bank deposits, which are not the property of deposit customers, being liabilities of the banks and owed to them. It started with depositors placing specie with goldsmiths or transferring currency to them from other accounts on the understanding a goldsmith would deploy the funds so acquired to obtain sufficient profit to pay a 6% interest on deposits. To earn this return, it was agreed by the depositor that the funds would become the goldsmith’s property to be used as the goldsmith saw fit. Goldsmiths and their banking successors were and still are dealers in credit. As the goldsmiths’ banking business evolved, they would create deposits by extending credit to borrowers. A loan to the borrower appeared as an asset on a goldsmith’s balance sheet, which through double-entry book-keeping was balanced by a liability being the deposit facility from which the borrower would draw down the loan. Thus, money and currency issued by banks as claims upon them were replaced entirely by book-entry liabilities owed to depositors, encashable into specie, central bank currency or banker’s cheque only on demand. Through the expansion of bank credit, which is matched by the creation of deposits through double-entry book-keeping, commercial banks create liabilities subject to withdrawal as currency to this day. That there is an underlying cycle of expansion and contraction of bank credit is evidenced by the composite price index and bond yields between 1817 and 1885 shown in Figure 1 above. But so long as money, that is gold coin, remained exchangeable with currency and bank deposits on demand, fluctuations in outstanding bank credit only had a relatively short-term effect on the general level of prices. And as explained above, the expansion of the quantity of above-ground gold stocks from South African mines in the late 1880s contributed to the general level of prices increasing in the final decade of the nineteenth century until the First World War. Following the Great War, the earlier creation of the Federal Reserve Board in the United States led to the expansion of circulating dollar currency, fuelling the Roaring Twenties and the Wall Street bubble, followed by the Wall Street crash and the depression. These calamities were the inevitable consequence of excessive credit creation in the 1920s. The error made by statist economists at the time (and ever since) was to ignore what caused the depression, believing it to be a contemporaneous failure of capitalism instead of the consequence of earlier currency debasement and interest rate suppression. From then on, this error has been perpetuated by statists frustrated by the discipline imposed upon them by monetary gold. The solution was seen to be to remove money from the currency system so that the state would have unlimited flexibility to manage economic outcomes. With America dominating the global economy after the First World War, her use of the dollar both domestically and internationally had begun to dominate global economic outcomes. The errors of earlier currency expansion ahead of and during the Roaring Twenties, admittedly exacerbated by the introduction of farm machinery, led to a global slump in agricultural prices the following decade. And the additional error of Glass Stegall tariffs collapsed global trade in all goods. Following the Second World War, secondary wars in Korea and Vietnam led to exported dollars being accumulated and then sold by foreign central banks for American’s gold reserves. In 1948, America had 21,628.4 tonnes of gold reserves, 72% of the world total. By 1971, when the facility for central banks to encash dollars for gold was suspended, US gold reserves had fallen to 12,398 tonnes, 34% of world gold reserves. Today it stands officially at 8,133.5 tonnes, being less than 23% of world gold reserves — figures independently unaudited and suspected by many observers to overstate the true position. The consequences of currency expansion for the relationship between money and currency since the two were completely severed in 1971 is shown in Figure 3. Since 1960 (the indexed base of the chart) above-ground gold stocks have increased from 62,475 tonnes by about 200% to 189,000 tonnes — offset to a large degree by world population growth.[iv] M3 broad money has increased by 70 times, the disparity in these rates of increase being adjusted by the increase in the dollar price of money, with the dollar losing 98% of its purchasing power relative to gold. By basing the chart on 1960 much of the currency expansion which led to the collapse of the London gold pool in the mid-1960s is captured, illustrating the strains in the relationship that led to the Nixon shock. The rival status of cryptocurrencies Over the last decade, led by bitcoin cryptocurrencies have become a popular hedge against fiat currency debasement. Bitcoin has a finite limit of 21 million coins, having less than 2¼ million yet to be mined. And of those issued, some are irretrievably lost, theoretically adding to their value. Fans of cryptocurrencies are unusual, because they have grasped the essential weakness of state-issued fiat currencies ahead of the wider public. Armed with this knowledge they claim that distributed ledger technology independent from governments will form the basis of tomorrow’s money. It has led to a speculative frenzy, driving bitcoin’s price from a reported 10,000 for two pizzas in 2010 (therefore worth less than a cent each) to over $60,000 today. If, as hodlers hope, bitcoin replaces all state-issued fiat currencies when they fail, then the increase in its dollar value has much further to go. In theory there are reasons that bitcoin and similar cryptocurrencies can become media of exchange in a limited capacity, but never money, the basis that all currencies referred to for their original validity. Indeed, some transactions following the original pizza purchase have occurred since, but they are very few. The reasons bitcoin or rival cryptocurrencies are unlikely to be accepted widely as currencies, let alone as a replacement for money, are best summed up in the following bullet points. To replace money, as opposed to currencies, bitcoin would have to be accepted as a replacement for both gold and silver. Beyond the imagination of tech-savvy enthusiasts, making up perhaps less than one in two hundred transacting humans, it is impossible to see bitcoin achieving this goal, because they represent a vanishingly small number of the global population. There can be little doubt that if fiat currencies lose their utility the overwhelming majority of transacting individuals will desire physical money, and not another form of digital media, which currencies in the main and cryptocurrencies have become. Despite the advance of technology not everyone yet possesses the knowledge, media, or the reliable electricity and internet connections to conduct transactions in cryptocurrencies. Remote theft of them is easier and more profitable than that of gold and silver coin. Cryptocurrencies are too dependent on undefinable risk factors for transactional ubiquity. The number of rival cryptocurrencies has proliferated. It is estimated that there are now over 6,800 in existence compared with 180 government-issued currencies. They represent both an inflation of numbers and values, which if unsatisfied already makes the seventeenth century tulip mania look like to have been a relatively minor speed bump in comparison. In only a decade they have grown to $750 billion in value based on an unproven concept stimulating unallayed human greed at the expense of considered reason. By way of contrast, gold’s strength as money is its flexibility of supply from other uses combined with its record of ensuring price stability. As we saw in Figure 1’s illustration of the relationship between prices and borrowing costs, assuming the factors of production are available the stability of prices under a gold standard permits an assessment of final product values at the commencement of an investment in production. There is no such certainty with bitcoin or rival cryptocurrencies because a strictly finite quantity would make it impossible to calculate final prices at the end of an investment in production. Without providing the means for economic calculation, any money or currency replacement will fail. Unless they disappear with their currencies, central banks will never sanction distributed ledger currencies beyond their control acting as a general medium of exchange. This is one reason why they are working to introduce their own central bank digital currencies, allowing them to maintain statist control over currencies while extending powers over how they are used. Furthermore, central banks do not own cryptocurrencies, but they do officially own 35,554 tonnes of gold, having never discarded true money completely.[vi] Events have proved that they are even reluctant to allow monetary gold to circulate, not least because it would call into question the credibility of their fiat currencies. But if there is a fall-back position in the demise of fiat, it will be based on central bank gold and never on a private-sector cryptocurrency. We should also consider what happens to cryptocurrencies in the event of a fiat currency collapse. The point behind any money or currency is that it must possess all the objective value in a transaction with all subjectivity to be found in the goods or services being exchanged. It requires the currency to be scarce, but not so much that its value measured in goods is expected to continually rise. If that was the case, then its ability to circulate would become impaired through hoarding. We are left with questioning whether bitcoin can ever possess a purely objective value in transactions. Their potential role as a transacting currency will also evaporate along with fiat because these will be the circumstances where all currencies which cannot be issued as credible gold substitutes will become valueless, because if any currency is to survive the end of the fiat regime it will require action by central banks combined with new laws and regulations which can only come from governments. The nightmare for crypto enthusiasts is that central banks will be forced eventually to mobilise their gold reserves to back credibly what is left of their currencies’ collapsing purchasing power. We are providing an answer to another question over the fate of cryptocurrencies in the event that central banks are forced to mobilise their gold reserves, turning fiat currencies into credible money substitutes. Admittedly, it is unlikely to be a simple decision with the problem beyond the understanding of statist policy advisers and with competing interests seeking to influence the outcome. But, there can be only one action that will allow the state and banking system to retain control over currencies and credit, which is to back them with gold reserves, preferably with a gold coin standard. When that moment is anticipated, cryptocurrencies as potential circulating currencies will become fully redundant. They are then likely to lose most of or all their value as replacement currencies. Furthermore, it is hard to find anyone who currently holds a cryptocurrency who does not hope to cash in by selling them at higher prices for their national currencies. They have been bought for speculation and investment with little or no intention of ultimately spending them. Therefore, we can assume that the demise of fiat currencies, far from inviting replacements by bitcoin and its imitators, will also mean the death of the cryptocurrency phenomenon in a general return towards a money standard, which always has been physical and metallic. The progression towards currency destruction In last week’s article for Goldmoney I suggested four waypoints to mark the route towards the ending of the fiat currency system. The similarity of current events with those of John Law’s inflation and subsequent collapse of the Mississippi bubble and of the French livre so far is striking, but this time it’s on a global scale. The John Law experience offers us a template for what is already happening to financial assets and currencies today — hence the four waypoints. Briefly described, John Law was a proto-Keynesian money crank who operated a policy of inflating the values of his principal assets, the Banque Royale and his Mississippi venture, by issuing shares in partly paid form with calls due later. Ten per cent down translated into fortunes for early subscribers as share prices rose from L140 in June 1717 to over L10,000 in January 1720, fuelled by a bitcoin-style buying frenzy. But when calls became due in January 1720 and a scheme to merge the Banque Royale with the Mississippi venture was proposed, shares began to be sold to pay the calls and take up rights to new issues. Law used his position as controller of the currency to issue fiat livres to buy shares in the market to support prices, measures that finally failed in May. Priced in livres, the shares fell to under 3,500 by November. In sterling, they fell from £330 in January to below £50 in September. After October, there was no exchange rate for livres against sterling implying the livre had lost all its exchange value. By injecting cash into investing institutions in return for government bonds, central banks are following a remarkably similar policy today. Quantitative easing by the US’s central bank, which since March 2020 has injected over $2 trillion into US pension funds and insurance companies to invest in higher risk assets than government and agency bonds, is no less than a repetition of John Law’s policy of inflating asset values to ensure a spreading wealth effect, while ensuring finance is facilitated for the state. Last night (3 November) the Fed was forced to announce a phased reduction of quantitative easing to allay fears of intractable price inflation. The question now arises as to how many months of QE reduction it will take to deflate the financial asset bubble. And what will then be the Fed’s response: will QE be increased again in a repetition of the John Law proto-Keynesian mistakes? There comes a point where the prices of goods reflect the increased quantity of currency in circulation. Increases in the general level of prices inevitably lead to rising levels for interest rates, and the creation of credit in the main banking centres begin to go into reverse. John Law found that share prices could then no longer be supported, and the Mississippi bubble burst in May 1720; a fate which equity markets today will almost certainly face, because price rises for goods and services are now proving intractable. The outcome of Law’s proto-Keynesianism was a collapse in Mississippi shares, and the complete destruction of the livre. The similarity with the situation in financial markets today is truly remarkable. There are now no good options for policy makers. Hampered by similar neo-Keynesian errors and beliefs, central bankers and politicians lack the resolve to stop events leading inexorably towards the destruction of their currencies. The first waypoint in last week’s article for Goldmoney is now being seen: a growing realisation that major economies, particularly the US and UK, face the prospect of a combination of rising prices accompanied by an economic slump, frequently diagnosed as stagflation. Stagflation is a misnomer. Monetary inflation is a con which in smaller doses provides the illusion of stimulus. But there comes a point where the transfer of wealth from the productive economy to the government is too great to bear and the economy begins to collapse. While it is impossible to judge where that point lies, the accumulation of monetary inflation in recent years now weighs heavily on all major economies. The conditions today closely replicate those in France in late-1719 and early 1720. Prices were rising in the rural areas as well as in the cities, impoverishing the peasantry and asset inflation was running into headwinds, about to impoverish the beneficiaries of the bubble’s wealth effect as well. Conclusion If central banks decide to protect their currencies, they must let markets determine interest rates. With prices rising officially at over 5% in the US (more like 15% on independent estimates) the rise in interest rates will not only crash all financial asset values from fixed interest to equities, but force governments to rein in their spending to eliminate deficits. This will involve greater cuts than currently indicated, because of loss of tax revenues. Indeed, mandatory spending will put socialising governments in an impossible position. But even these measures are unlikely to protect currencies, because of extensive foreign ownership of the US dollar. Foreigners hold total some $33 trillion in financial assets and bank deposits, much of which will be liquidated or lost in a bear market. Long experience suggests that funds rescued from overexposure to foreign currencies will be repatriated. Alternatively, attempts to continue the inflationary policies of Keynesian money cranks will undermine currencies more rapidly, but this is almost certainly the line of least policy resistance — until it is too late. It has never been more important for the hapless citizen to recognise what is happening to currencies and to understand the fallacies behind cryptocurrencies. They are not practical replacements for state-issued currencies and are likely to turn out to be just another aspect of the financial bubble. The only protection from an increasingly likely collapse of the fiat money system and all that sails with it is to understand what constitutes money as opposed to currency; and that is only physical gold and silver coins and bars. Tyler Durden Sat, 11/13/2021 - 09:20.....»»

Category: blogSource: zerohedgeNov 13th, 2021

The Threat of Hyperinflation and Why You Should Be Concerned

If you have visited a car dealership, gas station, or grocery store recently, there is a strong chance you’ve noticed a significant increase in prices. Similarly, if you look into consumer goods, investments, real estate properties, and even utility bills, you will see a huge difference in prices compared to previous years. This unfortunate phenomenon […] If you have visited a car dealership, gas station, or grocery store recently, there is a strong chance you’ve noticed a significant increase in prices. Similarly, if you look into consumer goods, investments, real estate properties, and even utility bills, you will see a huge difference in prices compared to previous years. This unfortunate phenomenon is called inflation. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The definition of inflation has changed throughout the years. Central banks and economists, who support the bank’s monetary policies, will define it slightly differently than its detractors. But something everyone seems to agree upon is that inflation is the loss of a currency’s purchasing power. What Is Hyperinflation? Hyperinflation is declared when inflation rates surpass a 50% monthly rate. Currently, the Federal Reserve stated that for September, inflation rose to 5.3%. That number might seem minuscule compared to the 50% rate a country must hit before mentioning hyperinflation. Many top-level investors still fear that's where we are heading. The Fed seems incapable of controlling the devaluation of the dollar after years of unlimited printing. With the combination of problems that usually hurt the economy on a good year, the world is facing a definite problem. Currently, we have an oil crisis that has stifled production and increased the energy crisis significantly. Secondly, we have a labor shortage, where over 5 million people have not returned to work. Combine those issues with a mounting supply chain issue, and the larger picture becomes clear. This is why economists worry about a possible hyperinflationary crisis reaching our shores soon. Many people believe hyperinflation can't happen in the U.S. but they are wrong. Some of the largest economies of the world have faced this issue before. Holy Roman Empire's Crisis Of The Third Century Inflation can come about in several ways. Back in the Roman Empire, there was a period when the Roman government overspent on wars and other expenditures. They tried raising taxes but it wasn’t enough to pay for the empire’s military. The Romans decided to reduce the amount of silver in their coins. When word got out to the public and other nations of this change, the value of the Roman currency dropped significantly. In reaction to the knowledge of a devalued currency, merchants raised prices and wealth inequality hit record highs. This created a crisis that wrecked the Roman Empire's sphere of influence. From the years 27 BC – 14 AD of Emperor Augustus’ reign, the Roman currency called the denarius, contained 95% silver. By 265 AD the denarius had only 5% silver. Many price control policies were implemented, and unfortunately, this drove people towards the black market. After years of economic struggle, the Roman Empire couldn’t shake off the effects of inflation. The loss in its currency’s value hurt its military, society, and gave the perfect opportunity to its enemies to make great advances on Rome’s dwindling territory. As a result, the Roman Empire slowly crumbled. Germany's Weimar Republic Hyperinflation Disaster Before WW1, Germany’s currency was pegged to gold, giving it a reputation of strong stability. When WW1 broke out, Germany decided to take their currency off of the gold standard so that their central bank could print unlimited amounts of money to fund their war efforts. Germany went from having 2 billion marks in circulation to 45 billion after the conclusion of WW1. Disastrous mistake. After Germany’s surrender in WW1, the country was left in financial ruin. Due to their defeat, Germany was forced to pay reparations to the Allied Powers. As a result, Germany printed without end, extraordinary amounts of marks to pay reparations and other debts. This brought the nation into a hyperinflationary catastrophe that brought poverty and strife to an already defeated society. Since the German government couldn't afford to pay back its reparation obligations, France sent troops into the Rhineland and occupied Ruhr. The occupation of Ruhr hurt Germany significantly since a large source of income came from mines that were located in that region. The central bank of Germany continued to print bills uncontrollably. The mark went from 160,000 per dollar to 4,200,000,000,000 per dollar in one year! Finally, the United States offered a loan to Germany for purposes of paying reparations. The German central bank became a separate entity and created a new currency, the Rentenmark. The production of the Rentenmark was strictly limited. This helped Germany return to a much more stable economy for a couple of years until the Great Depression. Source: Wall Street Mojo The Velocity Of Money And Its Effects On Inflation Another factor that causes hyperinflation is called money velocity. If a significant amount of currency enters the economy at a high rate, you will get a high money velocity rate. When GPD is high and the economy is doing well, you will see higher rates of money velocity. But when the economy shrinks, with high unemployment and higher prices, this is an indicator of hyperinflation. Many economists overlook the effects money velocity has on inflation. At the beginning of the COVID-19 pandemic, governments and central banks around the world increased the money supply. Then, they froze debt payments and shut down many industries. This led to a significant amount of people beginning to hoard large amounts of money. Once COVID-19 restrictions eased and the economy opened up for business, a flood of money rushed into the economy. This flood of money overcharged the demand for goods to unprecedented levels. The Fed said that the reason for inflation is a supply chain issue due to the pandemic. He is partially right, but not in the context he is presenting. The Fed blames the supply chain crisis on shutdowns. Plus, slow recovery from manufacturers due to labor shortages and other issues. Others suggest that the reason why manufacturers are struggling is that they can’t keep up with the extremely high demands for products. If you have a population of people that are hoarding large amounts of cash and credit with nowhere to spend it,  you will have an extreme amount of money flooding the system at once. This is where you will start to see inflation spikes. As demand increases, supply decreases. This is why we continue to see high prices in cars, real estate, gas, groceries, clothes, electronics, etc... So the higher than normal demand is a significant reason for our energy, chip, food, staff, and shipping crisis. When Can Hyperinflation Set In And How To Protect Your Wealth Against It? Inflation rates can compound at an extremely fast pace. As you read above, hyperinflation took less than a year to set in and cause havoc. The best thing you can do to prepare for the possibility of hyperinflation is by protecting your wealth in assets used to hedge against currency devaluation. Precious metals, like gold, silver, platinum, and palladium, have been used for centuries to protect your wealth. Currently, gold and silver have gained tremendous strength over the past couple of years, as investors look for asset protection. Bitcoin and other cryptocurrencies have also arisen as a new vehicle for hedging against inflation but come with certain risks. Summary Only time will tell if the US dollar will survive this stint of hyperinflation. In the meantime, protecting your wealth and stocking up on nonperishable foods should be of utmost importance when preparing for an economic downturn. Precious metals have passed the test of time as a means of wealth protection. Diversifying your portfolio with Bitcoin can help you with liquidity. Make sure you plan before the tide comes. It's better to be safe than sorry. Updated on Nov 12, 2021, 1:59 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 12th, 2021

How Long Can Lies & Control Supplant Reality & Free Markets?

How Long Can Lies & Control Supplant Reality & Free Markets? Authored by Matthew Piepenburg via GoldSwitzerland.com, The facts of surreal yet broken (and hence increasingly controlled and desperate) financial markets are becoming harder to deny and ignore. Below, we look at the blunt evidence of control rather than the fork-tongued words of policy makers and ask a simple question: How long can lies & control supplant reality? The Great Disconnect: Tanking Growth vs. Supported Markets It’s becoming harder to keep up with the increasingly downgraded GDP growth estimations from the Atlanta Fed. As recently as August, its GDPNow 3q21 estimates for the quarterly percentage change was as high as 6%. But within a matter of weeks, this otherwise optimistic figure was cut embarrassingly in half. Last month their GDP forecast sank much further to 0.5%, and as of this writing, it has been downgraded yet again to 0.2%. Needless to say, 6% estimated growth falling to effectively 0% growth is hardly a bullish indicator for the kind of strengthening economic conditions which one might otherwise associate with risk asset prices reaching all-time highs for the same period. The current ratio of corporate equities to GDP in the U.S. (>200%) is the highest in history. This growing yet shameful disconnect between market highs and economic lows is getting harder to explain, ignore or deny by the architects of the most artificial, rigged and dishonest market cycle in modern history. In short, it is no longer even worth pretending that stock markets are correlated to such natural measurements as natural supply & demand or a nation’s economic productivity. After all, who needs GDP in the New Abnormal? By now, even Fed doublespeak can’t hide the fact that the only market force which the post-08 markets require is an accommodative central bank—i.e., a firehose of multi-trillion liquidity on demand. But as for this most recent GDP downgrade, it is being blamed on tanking US export data. More Fantasy: Bogus Taper? In the meantime, the much-anticipated taper has been announced. As predicted, it’s as bogus as a 42nd Street Rolex. Taking $15B off a $120B/month QE rate and sending the Fed’s balance sheet to over $9T by year end while keeping rates at zero is hardly the kind of “tightening” that signifies a “healthy” market.  Add to that the liquidity provided by Standing Repo Facility and the FIMA swap lines and you quickly see that the bond market will see more, not less, “support.” In short: This was a bogus taper and nothing has changed. Even if central banks allow rates to rise one day, it will only be when inflation is rising faster. And as discussed in prior reports, gold markets can and will rise if rates rise, so long as inflation rises faster, which for all the reasons we’ve addressed elsewhere, convinces us that a future of negative real rates is the only future these duplicitous central banks can allow. More Inflationary Tricks (i.e., Fantasy) Why? Because short of default, the only and time-tested trick left up the sleeves of debt-soaked policy makers to dig their way out of a nightmarish and historically unprecedented debt hole (which they alone created) is by pursuing policies of deeply negative real rates. This twisted inflationary playbook, so familiar to rigged insiders yet unknown to the vast majority of retail investors, boils down to a policy play by which our “experts” solve debt with more debt and hide truth behind more complex policy adjectives (i.e., lies.). Specifically, this means the “experts” will:  1) deliberately seek more inflation while 2) lying about true inflation levels and then 3) repress interest rates in order to partially inflate their way out of debt with 4) increasingly debased currencies. Take the U.S. Dollar’s purchasing power, for example… Keeping the Serfs Down—The Policy of the New Feudalism Needless to say, more inflation is a direct tax on the increasingly poorer middleclass. Sadly, too many are too busy trying to make sense of months of lockdowns, illegal vaccine mandates, movement restrictions, crime waves and inflating rent payments to notice that they have been made into serfs in a Brave New World where greater than 80% of the stock market wealth is held by the top 10% of the population. Let’s be clear: I’m a screaming capitalist, but a pandemic world in which Bezos, Musk and other billionaire wealth has increased by 70% while 89 million Americans have lost their jobs is NOT capitalism, but a symptom of a rigged system in which the anti-trust rules I learned in law school, or the social and economic principles I learned in economics are simply gone. Then again, when I was in school, we were once taught how to think, not what to think. With each passing day, we see increased evidence of what I wrote (and described) elsewhere as a new feudalism marked by grotesquely distorted notions of truth, reporting, data, natural market forces and political/financial accountability. In order to keep this report objective rather than an op-ed, let’s just consider the facts and case studies right before us. Yellen & Dimon—Two Classic Lords Spinning Familiar Yarns Take, for example, the aforementioned tanking of GDP, now being attributed to openly tanking export data out of the U.S. and the undeniable supply chain disruptions impacting the global economy. To address this, none other than two of the most media prolific “lords” of the new feudalism, Fed Chairwoman-turned-Treasury-Secretary Janet Yellen and current JP Morgan CEO and 2008 bailout-beneficiary-turned-Fed-Crony, Jamie Dimon, assure us not to worry. How nice. Yellen, for her part, has recently said: “I don’t think we’re about to lose control of inflation.” “As we make further progress on the pandemic, I expect these bottlenecks to subside. Americans will return to the labor force as conditions improve.” Again: How nice. But let’s not let warm words get in the way of cold facts. Yellen, like every Fed Chair since Greenspan, has a long history of buying time with comforting words that have nothing to do with hard reality: “You will never see another financial crisis in your lifetime.” -Janet Yellen, spring 2018 “I do worry that we could have another financial crisis. ″ -Janet Yellen, fall 2018 Despite a long and well-documented history of outright dishonesty spewing from the mouths of financial media darlings and policymakers like Yellen and Dimon, both are now pushing a bullish “be calm and carry on while we profit and control” meme. They recently seized upon Biden’s move to run the Ports of Los Angeles and Long Beach on a 24/7 schedule to alleviate bottlenecks, which increased throughput by roughly 15% (3,500 containers/week v. 950,000 containers per month.) That’s nice, and sure, it helps. But despite such band-aid measures, supply chains won’t normalize until early 2023, at the earliest…and that assumes no further disruptions, which frankly, is a naive assumption. Folks, it’s not up to Yellen or Dimon to give us honest guidance as to whether supply chains will normalize in 2021. It is up to China and Biden’s entirely Orwellian vaccine mandate. Speaking of Yellen, Dimon et al, aren’t we all a bit curious about the now undeniable marriage of the Federal Reserve (an illegal private bank) and the U.S. Treasury Department? And as for bank CEO’s like Dimon, have we not forgotten other bank CEOs like Goldman’s Hank Paulson, who made a similar “marriage” to the Treasury Department just in time to bail his former bank out of the Great Financial Crisis that it helped create? Are these the honest brokers we want deciding our economic fates or signaling/controlling our economic future? Vaccine Passes and Mandates—The Great Smokescreen And as to the mandate… Note Yellen’s careful yet semantic magic of hiding autocracy behind humanitarian lingo. Her comment above regarding bottlenecks “subsiding” once “we make further progress on the pandemic” is very comforting, no? But it’s just another veiled way (i.e., smokescreen) of pushing a vaccine mandate which defies every principle of the social contract our founding fathers achieved in that silly document I revered as a 1L and known otherwise as the U.S. Constitution. As I’ve said many times before, I’m no source for medical advice, and my circle includes many who are vaccinated and un-vaccinated alike—with equal respect for the choices we’ve made and equal disgust for the notion that such choices should be imposed rather than voluntary. Simple Questions, Cold Math, Global Control But should we not at least be asking ourselves if the pandemic discussion is less about global health and more about global control? Without seeking to offend anyone’s COVID stance, can we nevertheless agree that C.J. Hopkins makes an undeniably clear and common-sensical point by simply asking a few basic questions. For example, why has so much political, social and economic power been given to a minority of policy makers to scare/distract the world into ignoring a now obvious global power-shift justified by a virus which causes mild-to-moderate symptoms in 95% of the infected and whose case fatality rate is quantifiably somewhere in the range of 0.1% to 0.5%? Yet despite such simple math, tens of thousands of firemen, police officers, nurses and military personnel—the very heroes who have placed themselves on the front lines of our increasingly criminalized, sick and psychologically damaged population– are now being forced out of work for not agreeing to a forced jab imposed by anti-heroes? One has to at least wonder why so much effort has been made by a government-influenced/co-conspired media to spend its time criminalizing the unvaccinated rather than making front-page noise pointing out the obvious criminalization of our global financial system? The Real Criminals By that, I’m thinking of the years of recently revealed insider trading at the Fed and in Congress, the anti-trust violations of the non-tax-paying Amazon robber-baron (whose warehouse employees are on food stamps) or the open media-censorship and just plain shady that occurs daily at Facebook—an entity so blatantly shameful that it thinks a name-change can hide its dark “face”? Or how about years of open price manipulation by bullion banks, the BIS and other dark corners of the OTC to deliberately force the natural price of gold and silver to the floor in order to illegally price-fix and protect globally debased currencies from the embarrassment of what a natural gold price would otherwise confirm, namely: Your currency has died, thanks to the white-collar criminals otherwise touted as experts. In case you think this is mere sensationalism or speculation, I’ve written hundreds of pages and countless reports of graphical/mathematical/objective evidence of the same, and even an entire book on the rigged-to-fail system otherwise passing as normal to make this clear distortion of economic rules and political laws objective rather pejorative. Nor am I/we alone in pointing out the objective truth. From the honest minority in controlled markets to an honest minority in politics, plain-spoken facts are fighting for free expression. More Honest Voices Take, for example, the recent press-conference (ignored, of course, by the main/muddy stream media) held by key members of the European Parliament to openly defy the insanely autocratic notion of a health pass to distinguish the compliant from the free or the “safe” from the “unsafe”. As one brave parliamentary member from Germany, Christine Anderson, candidly observed, if you think the vaccine pass was made because the government cares about you, you are clearly ignoring its real motive—which is to control you. And this straight from the European Parliament. Control, of course, only works if enough people are scared, tired or uninformed enough to be controlled. As for the financial system, signs of its increasingly obvious attempt at more controls to mask increasingly shameful policies are literally everywhere. And yet… and yet…the media, the masses and the majority of investors continue to follow their murky and shady “guidance.” Again, just keep it simple and factual rather than partisan or medically-controversial. Criminal Evidence In the last 20 years, for example, policy makers have tripled the global debt levels yet made no commensurate progress with global GDP, which is literally 1/3 of this embarrassing debt pile. That is shameful. Debt like this always destroys economies. Always. Instead, those same “experts” have mouse-clicked more instant money out of thin air in the last decade than all the money ever created by all the combined central banks since their inception. They actually want you to believe that a debt crisis can be solved with alas…more debt. Such staggering money creation has led unequivocally and directly to the greatest and most inflated risk asset bubble in the history of capital markets. Yet rather than admit to the open failure of such monetary expansion, which has simply crushed the natural purchasing power of fiat currencies… …the architects of this failed experiment will now try to blame such excessive debt and currency destruction on a severe flu pandemic rather than years of their own pre-COVID policy crimes. Today, politico’s and their central bank masters are literally comparing the Pandemic’s death toll to the unthinkable disaster which was the +75M killed in World War 2. They then employ this pandemic narrative to justify another Bretton Woods-like reset. To any who have studied, or far worse, experienced the second world war, do you think it’s even remotely fair to compare it to the “war on Covid”? The Carefully Telegraphed “Reset” And what is this “needed” reset? In a nutshell, it’s more fake money in the form of CBDC or even digital SDR’s from that shameless control center of failed monetarism otherwise known as the IMF and a central bank near you. Those Who Control Money & Information In an open and free system, rather than criminalizing police officers, nurses, or even athletes who refuse a jab, should we not be pointing our headlines, adjectives and subpoenas at the bankers, experts and policy makers who put the global financial system at this horrific, debt-soaked and socially destructive turning point? Are you waiting for Mark Zuckerberg, Don Lemon, Wolf Blitzer or the censorship boards at YouTube, FaceBook or Google to guide you? Sadly, those who control money as well as information have immense and undeniable power. Thus, a media that controls deliberate COVID distraction, supported by the lords who created this financial serfdom, continues. That is, the feudalists responsible for such grossly mismanaged financial markets are all too aware (and nervous) that they have equally created the greatest wealth transfer and wealth disparity ever witnessed, akin to the pre-revolutionary era of Marie Antoinette France, Romanov Russia, Batista Cuba or Weimar Germany—none of which ended well… Such otherwise immoral and corrupt wealth disparity, wealth transfer and wealth creation explains why the very architects of the same would rather have the masses fighting about jabs, schoolboards, and “woke” SJW’s gone wild rather than at themselves–the root cause of the fracturing we see all around us. Why? Because controlling serfs with lies, fear and division is better than letting those serfs replace you with truths and/or pitch-forks. Truth Still Matters—Fundamentals Too For that select yet blunt and independent-thinking minority who thankfully prefer candor over propaganda, reality over fantasy and genuine rather than hyped solutions to the problems and problem-makers all around us, all l/we can do is trust history, facts, natural market forces and each other. As for us, our candid solution to the foregoing string cite of distortions, controls and historical tipping points remains the same. Regardless of the tricks, re-sets, and digital new bluffs of the new feudalism, enough free-thinkers, nations, informed investors and wealth managers understand that they hold a better (and golden) hand to combat the dirty hands and dirty currencies unraveling all around us. If there’s one thing history and free market forces have taught us it’s this: In the end, broken systems die and real money returns. Tyler Durden Tue, 11/09/2021 - 06:30.....»»

Category: smallbizSource: nytNov 9th, 2021

In one day, Elon Musk made $37 billion and slammed Democrats" plan to tax billionaires. Here"s what he meant when he said the government will "come for you."

Musk said the government could "run out of money" and "come for you." Yet the government has run a deficit for years without billionaires paying much. Elon Musk. Mario Tama/Getty Images Elon Musk railed against Democrats' "billionaires' tax" proposal, but it would still leave him as the world's richest person. Musk warned the government could "come for you" when it runs out of cash, but the US has spent more than it taxes for decades. The new tax would still allow Musk to keep $28 billion from his $37 billion surge in wealth this Monday as Tesla's market cap exploded. Elon Musk this week critiqued Democrats' latest plans to tax billionaires to pay for their social spending plans, saying on Twitter, "Eventually, they run out of other people's money and then they come for you."But who are the "other people" and the "you" here? For the majority of Americans, income taxes have long been a reality, making up nearly half of the money collected by the US government. America's wealthiest, on the other hand, have largely paid a lower rate of taxes by seeing their wealth accumulate in the form of asset worth, not an annual salary. Musk's argument plays on illogical fears that lawmakers will target everyday Americans next, when the reality is that after the rich have used loopholes for decades, some of those are starting to close.The wealthiest pay less in taxesThe US has used a progressive tax system since 1862.Tax brackets and top rates have changed over time as Americans earned more, but the top rates have grown ineffective from an explosion of loopholes. The plan from Sen. Ron Wyden of Oregon doesn't mark a new era of strict taxation, it just forces billionaires to pay tax on their biggest source of income: soaring stocks.The world's richest man ripped into the tax proposal on Monday, saying it unfairly shifted wealth away from America's richest citizens. The issue comes down to "who is best at capital allocation - governments or entrepreneurs," Musk wrote in one of several tweets on tax policy. Yet the richest Americans have long paid a smaller share of their income than those who earn far less. Many billionaires shield their wealth by taking a relatively low salary and placing most of their net worth in assets like stocks, which are only taxed when they are sold and the profit is locked in, or "realized." But billionaires often hold stocks throughout their lives and pass them on after death, leaving the majority of their net worth completely untaxed, while using their wealth to get ultra-cheap loans from banks where they park their assets.Musk, for example, saw a $37 billion spike in his net worth on Monday when Tesla's stock price surged nearly 13%. Under the current system, he isn't required to pay taxes on any of those gains.Wyden's proposal would levy the usual 23.8% capital gains tax on the increased value of unsold assets, meaning billionaires like Musk, Jeff Bezos, and Bill Gates would have to pay taxes on their massive stock profits. For Musk, the initial bill on his stock gains would amount to roughly $50 billion, according to an analysis by Gabriel Zucman, a left-leaning economist at the University of California Berkeley. Wyden's proposal would allow Musk to pay that sum over a five-year period.-Gabriel Zucman (@gabriel_zucman) October 26, 2021 That would mark a stark change from the tax rates billionaires have paid for several years. Analysis of IRS tax return data published by ProPublica in June showed some of the richest Americans - including Musk - paying nothing in income taxes for a handful of years. Musk in particular paid $455 million in taxes from 2014 to 2018, just 3.27% of his wealth, according to the report.If the tax becomes law, Musk would remain the world's richest man by a healthy margin, at a net worth of roughly $202 billion, as of Tuesday's market close. Bezos would be the second-wealthiest American with a net worth of about $149 billion.Musk's Monday stock windfall would still be worth more than most Americans make in their lives. A 23.8% tax on the jump would turn the $37 billion profit into a $28.2 billion gain.If that sum made up Musk's entire net worth, he'd still be wealthier than 99.5% of Americans.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderOct 27th, 2021

Green Energy: A Bubble In Unrealistic Expectations

Green Energy: A Bubble In Unrealistic Expectations Authored by David Hay via Everegreen Gavekal blog, “You see what is happening in Europe. There is hysteria and some confusion in the markets. Why?…Some people are speculating on climate change issues, some people are underestimating some things, some are starting to cut back on investments in the extractive industries. There needs to be a smooth transition.” - Vladimir Putin (someone with whom this author rarely agrees) “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of its citizens.” – John Maynard Keynes (an interesting observation for all the modern day Keynesians to consider given their support of current inflationary US policies, including energy-related) Introduction This week’s EVA provides another sneak preview into David Hay’s book-in-process, “Bubble 3.0” discussing what he thinks is the crucial topic of “greenflation.”  This is a term he coined referring to the rising price for metals and minerals that are essential for solar and wind power, electric cars, and other renewable technologies. It also centers on the reality that as global policymakers have turned against the fossil fuel industry, energy producers are for the first time in history not responding to dramatically higher prices by increasing production.  Consequently, there is a difficult tradeoff that arises as the world pushes harder to combat climate change, driving up energy costs to painful levels, especially for lower income individuals.  What we are currently seeing in Europe is a vivid example of this dilemma.  While it may be the case that governments welcome higher oil and natural gas prices to discourage their use, energy consumers are likely to have a much different reaction. Summary BlackRock’s CEO recently admitted that, despite what many are opining, the green energy transition is nearly certain to be inflationary. Even though it’s early in the year, energy prices are already experiencing unprecedented spikes in Europe and Asia, but most Americans are unaware of the severity. To that point, many British residents being faced with the fact that they may need to ration heat and could be faced with the chilling reality that lives could be lost if this winter is as cold as forecasters are predicting. Because of the huge increase in energy prices, inflation in the eurozone recently hit a 13-year high, heavily driven by natural gas prices on the Continent that are the equivalent of $200 oil. It used to be that the cure for extreme prices was extreme prices, but these days I’m not so sure.  Oil and gas producers are very wary of making long-term investments to develop new resources given the hostility to their industry and shareholder pressure to minimize outlays. I expect global supply to peak sometime next year and a major supply deficit looks inevitable as global demand returns to normal. In Norway, almost 2/3 of all new vehicle sales are of the electric variety (EVs) – a huge increase in just over a decade. Meanwhile, in the US, it’s only about 2%. Still, given Norway’s penchant for the plug-in auto, the demand for oil has not declined. China, despite being the largest market by far for electric vehicles, is still projected to consume an enormous and rising amount of oil in the future. About 70% of China’s electricity is generated by coal, which has major environmental ramifications in regards to electric vehicles. Because of enormous energy demand in China this year, coal prices have experienced a massive boom. Its usage was up 15% in the first half of this year, and the Chinese government has instructed power providers to obtain all baseload energy sources, regardless of cost.  The massive migration to electric vehicles – and the fact that they use six times the amount of critical minerals as their gasoline-powered counterparts –means demand for these precious resources is expected to skyrocket. This extreme need for rare minerals, combined with rapid demand growth, is a recipe for a major spike in prices. Massively expanding the US electrical grid has several daunting challenges– chief among them the fact that the American public is extremely reluctant to have new transmission lines installed in their area. The state of California continues to blaze the trail for green energy in terms of both scope and speed. How the rest of the country responds to their aggressive take on renewables remains to be seen. It appears we are entering a very odd reality: governments are expending resources they do not have on weakly concentrated energy. And the result may be very detrimental for today’s modern economy. If the trend in energy continues, what looks nearly certain to be the Third Energy crisis of the last half-century may linger for years.  Green energy: A bubble in unrealistic expectations? As I have written in past EVAs, it amazes me how little of the intense inflation debate in 2021 centered on the inflationary implications of the Green Energy transition.  Perhaps it is because there is a built-in assumption that using more renewables should lower energy costs since the sun and the wind provide “free power”.  However, we will soon see that’s not the case, at least not anytime soon; in fact, it’s my contention that it will likely be the opposite for years to come and I’ve got some powerful company.  Larry Fink, CEO of BlackRock, a very pro-ESG* organization, is one of the few members of Wall Street’s elite who admitted this in the summer of 2021.  The story, however, received minimal press coverage and was quickly forgotten (though, obviously, not be me!).  This EVA will outline myriad reasons why I think Mr. Fink was telling it like it is…despite the political heat that could bring down upon him.  First, though, I will avoid any discussion of whether humanity is the leading cause of global warming.  For purposes of this analysis, let’s make the high-odds assumption that for now a high-speed green energy transition will continue to occur.  (For those who would like a well-researched and clearly articulated overview of the climate debate, I highly recommend the book “Unsettled”; it’s by a former top energy expert and scientist from the Obama administration, Dr. Steven Koonin.) The reason I italicized “for now” is that in my view it’s extremely probable that voters in many Western countries are going to become highly retaliatory toward energy policies that are already creating extreme hardship.  Even though it’s only early autumn as I write these words, energy prices are experiencing unprecedented increases in Europe.  Because it’s “over there”, most Americans are only vaguely aware of the severity of the situation.  But the facts are shocking…  Presently, natural gas is going for $29 per million British Thermal Units (BTUs) in Europe, a quadruple compared to the same time in 2020, versus “just” $5 in the US, which is a mere doubling.  As a consequence, wholesale energy cost in Great Britain rose an unheard of 60% even before summer ended.  Reportedly, nine UK energy companies are on the brink of failure at this time due to their inability to fully pass on the enormous cost increases.  As a result, the British government is reportedly on the verge of nationalizing some of these entities—supposedly, temporarily—to prevent them from collapsing.  (CNBC reported on Wednesday that UK natural gas prices are now up 800% this year; in the US, nat gas rose 20% on Tuesday alone, before giving back a bit more than half of that the next day.) Serious food shortages are expected after exorbitant natural gas costs forced most of England’s commercial production of CO2 to shut down.  (CO2 is used both for stunning animals prior to slaughter and also in food packaging.)  Additionally, ballistic natural gas prices have forced the closure of two big US fertilizer plants due to a potential shortfall of ammonium nitrate of which “nat gas” is a key feedstock.  *ESG stands for Environmental, Social, Governance; in 2021, Blackrock’s assets under management approximated $9 ½ trillion, about one-third of the total US federal debt. With the winter of 2021 approaching, British households are being told they may need to ration heat.  There are even growing concerns about the widespread loss of life if this winter turns out to be a cold one, as 2020 was in Europe.  Weather forecasters are indicating that’s a distinct possibility.   In Spain, consumers are paying 40% more for electricity compared to the prior year.  The Spanish government has begun resorting to price controls to soften the impact of these rapidly escalating costs. (The history of price controls is that they often exacerbate shortages.) Naturally, spiking power prices hit the poorest hardest, which is typical of inflation whether it is of the energy variety or of generalized price increases.  Due to these massive energy price increases, eurozone inflation recently hit a 13-year high, heavily driven by natural gas prices that are the equivalent of $200 per barrel oil.  This is consistent with what I warned about in several EVAs earlier this year and I think there is much more of this looming in the years to come. In Asia, which also had a brutally cold winter in 2020 – 2021, there are severe energy shortages being disclosed, as well.  China has instructed its power providers to secure all the coal they can in preparation for a repeat of frigid conditions and acute deficits even before winter arrives.  The government has also instructed its energy distributors to acquire all the liquified natural gas (LNG) they can, regardless of cost.  LNG recently hit $35 per million British Thermal Units in Asia, up sevenfold in the past year.  China is also rationing power to its heavy industries, further exacerbating the worldwide shortages of almost everything, with notable inflationary implications. In India, where burning coal provides about 70% of electricity generation (as it does in China), utilities are being urged to import coal even though that country has the world’s fourth largest coal reserves.  Several Indian power plants are close to exhausting their coal supplies as power usage rips higher. Normally, I’d say that the cure for such extreme prices, was extreme prices—to slightly paraphrase the old axiom.  But these days, I’m not so sure; in fact, I’m downright dubious.  After all, the enormously influential International Energy Agency has recommended no new fossil fuel development after 2021—“no new”, as in zero.  It’s because of pressure such as this that, even though US natural gas prices have done a Virgin Galactic to $5 this year, the natural gas drilling rig count has stayed flat.  The last time prices were this high there were three times as many working rigs.  It is the same story with oil production.  Most Americans don’t seem to realize it but the US has provided 90% of the planet’s petroleum output growth over the past decade.  In other words, without America’s extraordinary shale oil production boom—which raised total oil output from around 5 million barrels per day in 2008 to 13 million barrels per day in 2019—the world long ago would have had an acute shortage.  (Excluding the Covid-wracked year of 2020, oil demand grows every year—strictly as a function of the developing world, including China, by the way.) Unquestionably, US oil companies could substantially increase output, particularly in the Permian Basin, arguably (but not much) the most prolific oil-producing region in the world.  However, with the Fed being pressured by Congress to punish banks that lend to any fossil fuel operator, and the overall extreme hostility toward domestic energy producers, why would they?  There is also tremendous pressure from Wall Street on these companies to be ESG compliant.  This means reducing their carbon footprint.  That’s tough to do while expanding their volume of oil and gas.  Further, investors, whether on Wall Street or on London’s equivalent, Lombard Street, or in pretty much any Western financial center, are against US energy companies increasing production.  They would much rather see them buy back stock and pay out lush dividends.  The companies are embracing that message.  One leading oil and gas company CEO publicly mused to the effect that buying back his own shares at the prevailing extremely depressed valuations was a much better use of capital than drilling for oil—even at $75 a barrel. As reported by Morgan Stanley, in the summer of 2021, an US institutional broker conceded that of his 400 clients, only one would consider investing in an energy company!  Consequently, the fact that the industry is so detested means that its shares are stunningly undervalued.  How stunningly?  A myriad of US oil and gas producers are trading at free cash flow* yields of 10% to 15% and, in some cases, as high as 25%. In Europe, where the same pressures apply, one of its biggest energy companies is generating a 16% free cash flow yield.  Moreover, that is based up an estimate of $60 per barrel oil, not the prevailing price of $80 on the Continent. *Free cash flow is the excess of gross cash flow over and above the capital spending needed to sustain a business.  Many market professionals consider it more meaningful than earnings.  Therefore, due to the intense antipathy toward Western energy producers they aren’t very inclined to explore for new resources.  Another much overlooked fact about the ultra-critical US shale industry that, as noted, has been nearly the only source of worldwide output growth for the past 13 years, is its rapid decline nature.  Most oil wells see their production taper off at just 4% or 5% per year.  But with shale, that decline rate is 80% after only two years.  (Because of the collapse in exploration activities in 2020 due to Covid, there are far fewer new wells coming on-line; thus, the production base is made up of older wells with slower decline rates but it is still a much steeper cliff than with traditional wells.)  As a result, the US, the world’s most important swing producer, has to come up with about 1.5 million barrels per day (bpd) of new output just to stay even.  (This was formerly about a 3 million bpd number due to both the factor mentioned above and the 2 million bpd drop in total US oil production, from 13 million bpd to around 11 million bpd since 2019).  Please recall that total US oil production in 2008 was only around 5 million bpd.  Thus, 1.5 million barrels per day is a lot of oil and requires considerable drilling and exploration activities.  Again, this is merely to stay steady-state, much less grow.  The foregoing is why I wrote on multiple occasions in EVAs during 2020, when the futures price for oil went below zero*, that crude would have a spectacular price recovery later that year and, especially, in 2021.  In my view, to go out on my familiar creaky limb, you ain’t seen nothin’ yet!  With supply extremely challenged for the above reasons and demand marching back, I believe 2022 could see $100 crude, possibly even higher.  *Physical oil, or real vs paper traded, bottomed in the upper teens when the futures contract for delivery in April, 2020, went deeply negative.  Mike Rothman of Cornerstone Analytics has one of the best oil price forecasting records on Wall Street.  Like me, he was vehemently bullish on oil after the Covid crash in the spring of 2020 (admittedly, his well-reasoned optimism was a key factor in my up-beat outlook).  Here’s what he wrote late this summer:  “Our forecast for ’22 looks to see global oil production capacity exhausted late in the year and our balance suggests OPEC (and OPEC + participants) will face pressures to completely remove any quotas.”  My expectation is that global supply will likely max out sometime next year, barring a powerful negative growth shock (like a Covid variant even more vaccine resistant than Delta).  A significant supply deficit looks inevitable as global demand recovers and exceeds its pre-Covid level.  This is a view also shared by Goldman Sachs and Raymond James, among others; hence, my forecast of triple-digit prices next year.  Raymond James pointed out that in June the oil market was undersupplied by 2.5 mill bpd.  Meanwhile, global petroleum demand was rapidly rising with expectations of nearly pre-Covid consumption by year-end.  Mike Rothman ran this chart in a webcast on 9/10/2021 revealing how far below the seven-year average oil inventories had fallen.  This supply deficit is very likely to become more acute as the calendar flips to 2022. In fact, despite oil prices pushing toward $80, total US crude output now projected to actually decline this year.  This is an unprecedented development.  However, as the very pro-renewables Financial Times (the UK’s equivalent of the Wall Street Journal) explained in an August 11th, 2021, article:  “Energy companies are in a bind.  The old solution would be to invest more in raising gas production.  But with most developed countries adopting plans to be ‘net zero’ on carbon emissions by 2050 or earlier, the appetite for throwing billions at long-term gas projects is diminished.” The author, David Sheppard, went on to opine: “In the oil industry there are those who think a period of plus $100-a-barrel oil is on the horizon, as companies scale back investments in future supplies, while demand is expected to keep rising for most of this decade at a minimum.”  (Emphasis mine)  To which I say, precisely!  Thus, if he’s right about rising demand, as I believe he is, there is quite a collision looming between that reality and the high probability of long-term constrained supplies.  One of the most relevant and fascinating Wall Street research reports I read as I was researching the topic of what I have been referring to as “Greenflation” is from Morgan Stanley.  Its title asked the provocative question:  “With 64% of New Cars Now Electric, Why is Norway Still Using so Much Oil?”  While almost two-thirds of Norway’s new vehicle sales are EVs, a remarkable market share gain in just over a decade, the number in the US is an ultra-modest 2%.   Yet, per the Morgan Stanley piece, despite this extraordinary push into EVs, oil consumption in Norway has been stubbornly stable.  Coincidentally, that’s been the experience of the overall developed world over the past 10 years, as well; petroleum consumption has largely flatlined.  Where demand hasn’t gone horizontal is in the developing world which includes China.  As you can see from the following Cornerstone Analytics chart, China’s oil demand has vaulted by about 6 million barrels per day (bpd) since 2010 while its domestic crude output has, if anything, slightly contracted. Another coincidence is that this 6 million bpd surge in China’s appetite for oil, almost exactly matched the increase in US oil production.  Once again, think where oil prices would be today without America’s shale oil boom. This is unlikely to change over the next decade.  By 2031, there are an estimated one billion Asian consumers moving up into the middle class.  History is clear that more income means more energy consumption.  Unquestionably, renewables will provide much of that power but oil and natural gas are just as unquestionably going to play a critical role.  Underscoring that point, despite the exponential growth of renewables over the last 10 years, every fossil fuel category has seen increased usage.  Thus, even if China gets up to Norway’s 64% EV market share of new car sales over the next decade, its oil usage is likely to continue to swell.  Please be aware that China has become the world’s largest market for EVs—by far.  Despite that, the above chart vividly displays an immense increase in oil demand.  Here’s a similar factoid that I ran in our December 4th EVA, “Totally Toxic”, in which I made a strong bullish case for energy stocks (the main energy ETF is up 35% from then, by the way):  “(There was) a study by the UN and the US government based on the Model for the Assessment of Greenhouse Gasses Induced Climate Change (MAGICC).  The model predicted that ‘the complete elimination of all fossil fuels in the US immediately would only restrict any increase in world temperature by less than one tenth of one degree Celsius by 2050, and by less than one fifth of one degree Celsius by 2100.’  Say again?  If the world’s biggest carbon emitter on a per capita basis causes minimal improvement by going cold turkey on fossil fuels, are we making the right moves by allocating tens of trillions of dollars that we don’t have toward the currently in-vogue green energy solutions?” China's voracious power appetite increase has been true with all of its energy sources.  On the environmentally-friendly front, that includes renewables; on the environmentally-unfriendly side, it also includes coal.  In 2020, China added three times more coal-based power generation than all other countries combined.  This was the equivalent of an additional coal planet each week.  Globally, there was a reduction last year of 17 gigawatts in coal-fired power output; in China, the increase was 29.8 gigawatts, far more than offsetting the rest of the world’s progress in reducing the dirtiest energy source.  (A gigawatt can power a city with a population of roughly 700,000.) Overall, 70% of China’s electricity is coal-generated. This has significant environmental implications as far as electric vehicles (EVs) are concerned.  Because EVs are charged off a grid that is primarily coal- powered, carbon emissions actually rise as the number of such vehicles proliferate. As you can see in the following charts from Reuters’ energy expert John Kemp, Asia’s coal-fired generation has risen drastically in the last 20 years, even as it has receded in the rest of the world.  (The flattening recently is almost certainly due to Covid, with a sharp upward resumption nearly a given.) The worst part is that burning coal not only emits CO2—which is not a pollutant and is essential for life—it also releases vast quantities of nitrous oxide (N20), especially on the scale of coal usage seen in Asia today. N20 is unquestionably a pollutant and a greenhouse gas that is hundreds of times more potent than CO2.  (An interesting footnote is that over the last 550 million years, there have been very few times when the CO2 level has been as low, or lower, than it is today.)  Some scientists believe that one reason for the shrinkage of Arctic sea ice in recent decades is due to the prevailing winds blowing black carbon soot over from Asia.  This is a separate issue from N20 which is a colorless gas.  As the black soot covers the snow and ice fields in Northern Canada, they become more absorbent of the sun’s radiation, thus causing increased melting.  (Source:  “Weathering Climate Change” by Hugh Ross) Due to exploding energy needs in China this year, coal prices have experienced an unprecedented surge.  Despite this stunning rise, Chinese authorities have instructed its power providers to obtain coal, and other baseload energy sources, such as liquified natural gas (LNG), regardless of cost.  Notwithstanding how pricey coal has become, its usage in China was up 15% in the first half of this year vs the first half of 2019 (which was obviously not Covid impacted). Despite the polluting impact of heavy coal utilization, China is unlikely to turn away from it due to its high energy density (unlike renewables), its low cost (usually) and its abundance within its own borders (though its demand is so great that it still needs to import vast amounts).  Regarding oil, as we saw in last week’s final image, it is currently importing roughly 11 million barrels per day (bpd) to satisfy its 15 million bpd consumption (about 15% of total global demand).  In other words, crude imports amount to almost three-quarter of its needs.  At $80 oil, this totals $880 million per day or approximately $320 billion per year.  Imagine what China’s trade surplus would look like without its oil import bill! Ironically, given the current hostility between the world’s superpowers, China has an affinity for US oil because of its light and easy-to-refine nature.  China’s refineries tend to be low-grade and unable to efficiently process heavier grades of crude, unlike the US refining complex which is highly sophisticated and prefers heavy oil such as from Canada and Venezuela—back when the latter actually produced oil. Thus, China favors EVs because they can be de facto coal-powered, lessening its dangerous reliance on imported oil.  It also likes them due to the fact it controls 80% of the lithium ion battery supply and 60% of the planet’s rare earth minerals, both of which are essential to power EVs.     However, even for China, mining enough lithium, cobalt, nickel, copper, aluminum and the other essential minerals/metals to meet the ambitious goals of largely electrifying new vehicle volumes is going to be extremely daunting.  This is in addition to mass construction of wind farms and enormously expanded solar panel manufacturing. As one of the planet’s leading energy authorities Daniel Yergin writes: “With the move to electric cars, demand for critical minerals will skyrocket (lithium up 4300%, cobalt and nickel up 2500%), with an electric vehicle using 6 times more minerals than a conventional car and a wind turbine using 9 times more minerals than a gas-fueled power plant.  The resources needed for the ‘mineral-intensive energy system’ of the future are also highly concentrated in relatively few countries. Whereas the top 3 oil producers in the world are responsible for about 30 percent of total liquids production, the top 3 lithium producers control more than 80% of supply. China controls 60% of rare earths output needed for wind towers; the Democratic Republic of the Congo, 70% of the cobalt required for EV batteries.” As many have noted, the environmental impact of immensely ramping up the mining of these materials is undoubtedly going to be severe.  Michael Shellenberger, a life-long environmental activist, has been particularly vociferous in his condemnation of the dominant view that only renewables can solve the global energy needs.  He’s especially critical of how his fellow environmentalists resorted to repetitive deception, in his view, to undercut nuclear power in past decades.  By leaving nuke energy out of the solution set, he foresees a disastrous impact on the planet due to the massive scale (he’d opine, impossibly massive) of resource mining that needs to occur.  (His book, “Apocalypse Never”, is also one I highly recommend; like Dr. Koonin, he hails from the left end of the political spectrum.) Putting aside the environmental ravages of developing rare earth minerals, when you have such high and rapidly rising demand colliding with limited supply, prices are likely to go vertical.  This will be another inflationary “forcing”, a favorite term of climate scientists, caused by the Great Green Energy Transition. Moreover, EVs are very semiconductor intensive.  With semis already in seriously short supply, this is going to make a gnarly situation even gnarlier.  It’s logical to expect that there will be recurring shortages of chips over the next decade for this reason alone (not to mention the acute need for semis as the “internet of things” moves into primetime).  In several of the newsletters I’ve written in recent years, I’ve pointed out the present vulnerability of the US electric grid.  Yet, it will be essential not just to keep it from breaking down under its current load; it must be drastically enhanced, a Herculean task. For one thing, it is excruciatingly hard to install new power lines. As J.P. Morgan’s Michael Cembalest has written: “Grid expansion can be a hornet’s nest of cost, complexity and NIMBYism*, particularly in the US.”  The grid’s frailty, even under today’s demands (i.e., much less than what lies ahead as millions of EVs plug into it) is particularly obvious in California.  However, severe winter weather in 2021 exposed the grid weakness even in energy-rich Texas, which also has a generally welcoming attitude toward infrastructure upgrading and expansion. Yet it’s the Golden State, home to 40 million Americans and the fifth largest economy in the world, if it was its own country (which it occasionally acts like it wants to be), that is leading the charge to EVs and seeking to eliminate internal combustion engines (ICEs) as quickly as possible.  Even now, blackouts and brownouts are becoming increasingly common.  Seemingly convinced it must be a role model for the planet, it’s trying desperately to reduce its emissions, which are less than 1%, of the global total, at the expense of rendering its energy system more similar to a developing country.  In addition to very high electricity costs per kilowatt hour (its mild climate helps offset those), it also has gasoline prices that are 77% above the national average.  *NIMBY stands for Not In My Back Yard. While California has been a magnet for millions seeking a better life for 150 years, the cost of living is turning the tide the other way.  Unreliable and increasingly expensive energy is likely to intensify that trend.  Combined with home prices that are more than double the US median–$800,000!–California is no longer the land of milk and honey, unless, to slightly paraphrase Woody Guthrie about LA, even back in the 1940s, you’ve got a whole lot of scratch.  More and more people, seem to be scratching California off their list of livable venues.  Voters in the reliably blue state of California may become extremely restive, particularly as they look to Asia and see new coal plants being built at a fever pitch.  The data will become clear that as America keeps decarbonizing–as it has done for 30 years mostly due to the displacement of coal by gas in the US electrical system—Asia will continue to go the other way.  (By the way, electricity represents the largest share of CO2 emission at roughly 25%.)  California has always seemed to lead social trends in this country, as it is doing again with its green energy transition.  The objective is noble though, extremely ambitious, especially the timeline.  As it brings its power paradigm to the rest of America, especially its frail grid, it will be interesting to see how voters react in other states as the cost of power leaps higher and its dependability heads lower.  It’s reasonable to speculate we may be on the verge of witnessing the Californication of the US energy system.  Lest you think I’m being hyperbolic, please be aware the IEA (International Energy Agency) has estimated it will cost the planet $5 trillion per year to achieve Net Zero emissions.  This is compared to global GDP of roughly $85 trillion. According to BloombergNEF, the price tag over 30 years, could be as high as $173 trillion.  Frankly, based on the history of gigantic cost overruns on most government-sponsored major infrastructure projects, I’m inclined to take the over—way over—on these estimates. Moreover, energy consulting firm T2 and Associates, has guesstimated electrifying just the US to the extent necessary to eliminate the direct consumption of fuel (i.e., gasoline, natural gas, coal, etc.) would cost between $18 trillion and $29 trillion.  Again, taking into account how these ambitious efforts have played out in the past, I suspect $29 trillion is light.  Regardless, even $18 trillion is a stunner, despite the reality we have all gotten numb to numbers with trillions attached to them.  For perspective, the total, already terrifying, level of US federal debt is $28 trillion. Regardless, as noted last week, the probabilities of the Great Green Energy Transition happening are extremely high.  Relatedly, I believe the likelihood of the Great Greenflation is right up there with them.  As Gavekal’s Didier Darcet wrote in mid-August:  ““Nowadays, and this is a great first in history, governments will commit considerable financial resources they do not have in the extraction of very weakly concentrated energy.” ( i.e., less efficient)  “The bet is very risky, and if it fails, what next?  The modern economy would not withstand expensive energy, or worse, lack of energy.”  While I agree this an historical first, it’s definitely not great (with apologies for all the “greats”).  This is particularly not great for keeping inflation subdued, as well as for attempting to break out of the growth quagmire the Western world has been in for the last two decades.  What we are seeing in Europe right now is an extremely cautionary case study in just how disastrous the war on fossil fuels can be (shortly we will see who or what has been a behind-the-scenes participant in this conflict). Essentially, I believe, as I’ve written in past EVAs, we are entering the third energy crisis of the last 50 years.  If I’m right, it will be characterized by recurring bouts of triple-digit oil prices in the years to come.  Along with Richard Nixon taking the US off the gold standard in 1971, the high inflation of the 1970s was caused by the first two energy crises (the 1973 Arab Oil Embargo and the 1979 Iranian Revolution).  If I’m correct about this being the third, it’s coming at a most inopportune time with the US in hyper-MMT* mode. Frankly, I believe many in the corridors of power would like to see oil trade into the $100s, and natural gas into the teens, as it will help catalyze the shift to renewable energy.  But consumers are likely to have a much different reaction—potentially, a violently different reaction, as I noted last week.  The experience of the Yellow Vest protests in France (referring to the color of the vest protestors wore), are instructive in this regard.  France is a generally left-leaning country.  Despite that, a proposed fuel surtax in November 2018 to fund a renewable energy transition triggered such widespread civil unrest that French president Emmanuel Macron rescinded it the following month. *MMT stands for Modern Monetary Theory.  It holds that a government, like the US, which issues debt in its own currency can spend without concern about budgetary constraints.  If there are not enough buyers of its bonds at acceptable interest rates, that nation’s central bank (the Fed, in our case) simply acquires them with money it creates from its digital printing press.  This is what is happening today in the US.  Many economists consider this highly inflationary. The sharp and politically uncomfortable rise in US gas pump prices this summer caused the Biden administration to plead with OPEC to lift its volume quotas.  The ironic implication of that exhortation was glaringly obvious, as was the inefficiency and pollution consequences of shipping oil thousands of miles across the Atlantic.  (Oil tankers are a significant source of emissions.)  This is as opposed to utilizing domestic oil output, as well as crude from Canada (which is actually generally better suited to the US refining complex).  Beyond the pollution aspect, imported oil obviously worsens America’s massive trade deficit (which would be far more massive without the six million barrels per day of domestic oil volumes that the shale revolution has provided) and costs our nation high-paying jobs. Further, one of my other big fears is that the West is engaging in unilateral energy disarmament.  Russia and China are likely the major beneficiaries of this dangerous scenario.  Per my earlier comment about a stealth combatant in the war on fossil fuels, it may surprise you that a past NATO Secretary General* has accused Russian intelligence of avidly supporting the anti-fracking movements in Western Europe.  Russian TV has railed against fracking for years, even comparing it to pedophilia (certainly, a most bizarre analogy!).  The success of the anti-fracking movement on the Continent has essentially prevented a European version of America’s shale miracles (the UK has the potential to be a major shale gas producer).  Consequently, the European Union’s domestic natural gas production has been in a rapid decline phase for years.  Banning fracking has, of course, made Europe heavily reliant on Russian gas shipments with more than 40% of its supplies coming from Russia. This is in graphic contrast to the shale output boom in the US that has not only made us natural gas self-sufficient but also an export powerhouse of liquified natural gas (LNG).  In 2011, the Nord Stream system of pipelines running under the Baltic Sea from northern Russia began delivering gas west from northern Russia to the German coastal city of Greifswald.  For years, the Russians sought to build a parallel system with the inventive name of Nord Stream 2.  The US government opposed its approval on security grounds but the Biden administration has dropped its opposition.  It now appears Nord Stream 2 will happen, leaving Europe even more exposed to Russian coercion.  Is it possible the Russian government and the Chinese Communist Party have been secretly and aggressively supporting the anti-fossil fuel movements in America?  In my mind, it seems not only possible but probable.  In fact, I believe it is naïve not to come that conclusion.  After all, wouldn’t it be in both of their geopolitical interests to see the US once again caught in a cycle of debilitating inflation, ensnared by the twin traps of MMT and the third energy crisis? *Per former NATO Secretary General, Anders Fogh Rasumssen:  Russia has “engaged actively with so-called non-governmental organizations—environmental organizations working against shale gas—to maintain Europe’s dependence on imported Russian gas”. Along these lines, I was shocked to listen to a recent podcast by the New Yorker magazine on the topic of “intelligent sabotage”.  This segment was an interview between the magazine’s David Remnick and a Swedish professor, Adreas Malm.  Mr. Malm is the author of a new book with the literally explosive title “How To Blow Up A Pipeline”.   Just as it sounds, he advocates detonating pipelines to inhibit fossil fuel distribution.  Mr. Remnick was clearly sympathetic to his guest but he did ask him about the impact on the poor of driving energy prices up drastically which would be the obvious ramification if his sabotage recommendations were widely followed.  Mr. Malm’s reaction was a verbal shrug of the shoulders and words to the effect that this was the price to pay to save the planet. Frankly, I am appalled that the venerable New Yorker would provide a platform for such a radical and unlawful suggestion.  In an era when people are de-platformed for often innocuous comments, it’s incredible to me this was posted and has not been pulled down.  In my mind, this reflects just how tolerant the media is of attacks on the fossil fuel industry, regardless of the deleterious impact on consumers and the global economy. Surely, there is a far better way of coping with the harmful aspects of fossil fuel-based energy than this scorched earth (literally, in the case of Mr. Malm) approach, which includes efforts to block new pipelines, shut existing ones, and severely restrict US energy production.  In America’s case, the result will be forcing us to unnecessarily and increasingly rely on overseas imports.  (For example, per the Wall Street Journal, drilling permits on federal land have crashed to 171 in August from 671 in April.  Further, the contentious $3.5 trillion “infrastructure” plan would raise royalties and fees high enough on US energy producers that it would render them globally uncompetitive.) Such actions would only aggravate what is already a severe energy shock, one that may be worse than the 1970s twin energy crises.  America has it easy compared to Europe, though, given current US policy trends, we might be in their same heavily listing energy boat soon. Solutions include fast-tracking small modular nuclear plants; encouraging the further switch from burning coal to natural gas (a trend that is, unfortunately, going the other way now, as noted above); utilizing and enhancing carbon and methane capture at the point of emission (including improving tail pipe effluent-reduction technology); enhancing pipeline integrity to inhibit methane leaks; among many other mitigation techniques that recognize the reality the global economy will be reliant on fossil fuels for many years, if not decades, to come.  If the climate change movement fails to recognize the essential nature of fossil fuels, it will almost certainly trigger a backlash that will undermine the positive change it is trying to bring about.  This is similar to what it did via its relentless assault on nuclear power which produced a frenzy of coal plant construction in the 1980s and 1990s.  On this point, it’s interesting to see how quickly Europe is re-embracing coal power to alleviate the energy poverty and rationing occurring over there right now - even before winter sets in.  When the choice is between supporting climate change initiatives on one hand and being able to heat your home and provide for your family on the other, is there really any doubt about which option the majority of voters will select? Tyler Durden Tue, 10/26/2021 - 19:30.....»»

Category: worldSource: nytOct 26th, 2021

Greenwald: Pierre Omidyar"s Financing Of The Facebook "Whistleblower" Campaign Reveals A Great Deal

Greenwald: Pierre Omidyar's Financing Of The Facebook "Whistleblower" Campaign Reveals A Great Deal Authored by Glenn Greenwald via greenwald.substack.com, It is completely unsurprising to learn, as Politico reported last Wednesday, that the major financial supporter of Facebook "whistleblower” Frances Haugen's sprawling P.R. and legal network coordinating her public campaign is the billionaire founder of EBay, Pierre Omidyar. The Haugen Show continues today as a consortium of carefully-cultivated news outlets (including those who have been most devoted to agitating for online censorship: the New York Times’ "tech” unit and NBC News's “disinformation” team) began publishing the trove of archives she took from Facebook under the self-important title "The Facebook Papers,” while the star herself has traveled to London to testify today to British lawmakers considering a bill to criminally punish tech companies that allow “foul content” or “extremism” — whatever that means — to be published. Pierre Omidyar, Founder of eBay, and Publisher of the Intercept looks on during the final session of the annual Clinton Global Initiative meeting in New York, on Thursday, September 23, 2010. (Photo by Ramin Talaie/Corbis via Getty Images) On Sunday, Haugen told The New York Times that her own personal Bitcoin wealth means she is relying on “help from nonprofit groups backed by Mr. Omidyar only for travel and similar expenses.” But the paper also confirmed that the firm masterminding Haugen's public campaign roll-out and complex media strategy, a group "founded by the former Barack Obama aide Bill Burton,” is “being paid by donors, including the nonprofit groups backed by Mr. Omidyar." He is also a major donor to a shady new group calling itself “Whistleblower Aid” — bizarrely led by anti-Trump lawyer and social media #Resistance star Mark Zaid, who has been one of the most vocal critics of actual whistleblowers Edward Snowden and Julian Assange, both of whose imprisonment he has long demanded — that is now featuring Haugen as its star client. Omidyar's net worth is currently estimated to be $22 billion, making him the planet's 26th richest human being. Like so many billionaires who pledge to give away large parts of their wealth to charity, and who in fact do so, Omidyar's net worth somehow rapidly grows every year: in 2013, just eight years ago, it was “only” $8 billion: it has almost tripled since then. Omidyar's central role in this latest scheme to impose greater control over social media is unsurprising because he and his multi-national foundation, the Omidyar Network, fund many if not most of the campaigns and organizations designed to police and control political speech on the internet under the benevolent-sounding banner of combating "disinformation” and “extremism.” Though one could have easily guessed that it was Omidyar fueling Frances Haugen and her team of Democratic Party operatives acting as lawyers and P.R. agents — I would have been shocked if he had no role — it is still nonetheless highly revealing of what these campaigns and groups are, how they function, what their real goals are, and the serious dangers they pose. Any time I speak or write about Omidyar, the proverbial elephant in the room is my own extensive involvement with him: specifically, the fact that the journalistic outlet I co-founded in 2013, and at which I worked for eight years, was funded almost entirely by him. For purposes of basic journalistic disclosure, but also to explain how my interaction with him informs my perspective on these issues, I will describe that experience and what I learned from it. When I left the Guardian in 2013 at the height of the Snowden/NSA reporting to co-found a new media outlet along with two other journalists, it was Omidyar who funded the project, which ultimately became The Intercept, along with its parent corporation, First Look Media. Our unconditional demand when deciding to accept funding from Omidyar was that he vow never to have any role whatsoever or attempt to interfere in any way in the editorial content of our reporting, no matter how much he disagreed with it or how distasteful he found it. He not only agreed to this condition but emphasized that he, too, believed the integrity of the new journalism project depended upon our enjoying full editorial freedom and independence from his influence. In the eight years I spent at The Intercept, Omidyar completely kept his word. There was never a single occasion, at least to my knowledge, when he attempted to interfere in or override our journalistic independence. For the first couple of years, adhering to that promise was easy: he was an ardent supporter of the Snowden reporting which consumed most of our time and energy back then and, specifically, viewed a defense of our press freedoms (which were under systemic attack from multiple governments) as a genuine social good. So our journalism and Omidyar's worldview were fully aligned for the first couple of years of The Intercept's existence. The arrival of Donald Trump on the political scene in 2015 changed all of that, and did so quite dramatically. As Trump ascended to the presidency, Omidyar became monomaniacally obsessed with opposing Trump. Although Omidyar stopped tweeting in March, 2019 and has since locked his Twitter account, he spent 2015-2019 as a very active user of the platform. The content he was posting on Twitter on a daily basis was utterly indistinguishable from the standard daily hysterical MSNBC panels or New York Times op-eds, proclaiming Trump a fascist, white nationalist, and existential threat to democracy, and depicting him as a singular evil, the root of America's political pathology. In other words, the Trump-centric worldview that I spent most of my time attacking and mocking on every platform I had — in speeches, interviews, podcasts, social media and in countless articles at The Intercept — was the exact political worldview to which Omidyar had completely devoted himself and was passionately and vocally advocating. The radical divergence between my worldview and Omidyar's did not end there. Like most who viewed Trump as the primary cause of America's evils rather than just a symptom of them, Omidyar also became a fanatical Russiagater. A large portion of his Twitter feed was devoted to the multi-pronged conspiracy theory that Trump was in bed with and controlled by the Kremlin and that its president, Vladimir Putin, through his control over Trump and “interference” in U.S. democracy, represented some sort of grave threat to all things good and decent in American political life. All of that happened at exactly the same time that I became one of the media's most vocal and passionate critics of Russiagate mania, frequently criticizing and deriding exactly the views that Omidyar was most passionately expressing on Twitter, often within hours of his posting them. My dissent on Russiagate became so vocal, just as Omidyar was devoting himself to it with greater and greater zeal, that liberal outlets began publishing lengthy and highly critical profiles of me that had little purpose but to expel me from Decent Liberal Society due to my Russiagate heresy and to cast that dissent as the byproduct of mental instability rather than genuine conviction. This extreme divergence between my public profile and Omidyar's core views expanded for years. Often Omidyar would promote and herald a view on Twitter in the morning, and I would then publish an article on The Intercept attacking that same view in the afternoon, and then go on television that night to attack it some more. Perhaps most extraordinary was that Omidyar became convinced that salvation from the evils of Trump and Russia was to be found primarily in propping up the faction of #NeverTrump Republicans — led by people like neocon Bill Kristol, career CIA operative Evan McMullin, and the consummate scumbags of the Lincoln Project — who he regarded as uniquely patriotic and noble for putting country over party (even though their influence was confined to cable news green-rooms and major newspaper op-ed pages). Omidyar began funding many of the #NeverTrump groups overseen by Kristol — who I often denounced and still regard as one of the most toxic and deceitful figures in American political life — as well as groups whose sole purpose was to hype the Russian threat and who claimed they were united in patriotic bipartisan unity to combat Russia-and-Trump-fueled disinformation on the internet. To underscore how deeply ensconced Omidyar became in the very political faction for which I harbored the greatest scorn and expressed the most unbridled contempt, his very last tweet since he stopped using Twitter in 2019 was an approving re-tweet of the Lincoln Project's Rick Wilson, claiming for the ten thousandth time that conclusive proof had emerged of Trump's criminality. That Omidyar's political activism and my journalism did not just diverge, but became polar opposites, was so glaring that it began attracting the attention of journalists who contacted us to tell us they intended to write stories on this strange situation. It was indeed extreme: there were times when I was publishing investigative articles or scathing denunciations of the very groups Omidyar was funding and promoting, putting him in the situation in which the U.S. government often finds itself: essentially funding both sides of the same war. It was an irresistible story to journalists: at the time, I was the most prominent and the highest-paid journalist associated with The Intercept, which relied almost entirely on Omidyar's annual multi-million dollar largesse, and yet my primary political and journalistic focus at The Intercept was tantamount to a war on Omidyar's most cherished political beliefs and core objectives. On at least two occasions, journalists with major outlets contacted each of us to let us know they wanted to write about this glaring split. Yet neither ended up doing so for a simple reason: Omidyar made it emphatically clear that I had the absolute right to express whatever views I wanted, and that my doing so would never create a problem with him, let alone cause him to re-think his funding of The Intercept. To underscore the point, Omidyar told me privately on both occasions that he knew when he decided to fund The Intercept that the day would come, likely soon, when not just me but other journalists there would be publishing articles with which he vehemently disagreed or even undermined his other interests. When he decided to fund The Intercept, he told me, he was supporting independent journalism, not promoting a particular ideology or political agenda. And indeed, no matter how much my attacks escalated on his core beliefs and the other groups he was heavily funding — and escalate they did! — I never received any remote signal that my outspoken journalism and commentary were imperiling his ongoing funding of The Intercept. I recount all of that for two reasons. First, I want to make clear that my analysis of Omidyar's role in this scam Facebook "whistleblower” campaign and the dangers it presents is in no way motivated by personal animus toward him. Indeed, I harbor no personal hostility toward him; to the contrary, I genuinely respect that he kept his word for all those years by honoring our editorial freedom even as he was funding my journalism and the journalism of others with which he vehemently disagreed. As I made clear when I quit The Intercept in protest over their censorship of my pre-election article about Joe Biden, I viewed the degradation of The Intercept as the fault of its senior editorial management team, who had no involvement in the outlet's founding, did not share its core mission or values, and had reduced it to little more than a trite ideological mouthpiece for the liberal wing of the Democratic Party. But the second point is the more important one. When it comes to billionaire funders of political and journalistic projects, Omidyar — despite the long list of political views and activities of his that I regard as misguided or even toxic — is, for the reasons I just outlined, as good as it gets. And yet despite all that, it is simply unavoidable — inevitable — that the ideology, views and political agenda of a billionaire funder will end up contaminating and dominating any project for which they are the exclusive or primary funder. Omidyar is not some apolitical or neutral guardian of good internet governance; he is a highly politicized and ideological actor with very strong views on society's most debated questions. And that is why it is so dangerous that the campaign to control and police the internet — to launch pressure campaigns to further centralize the control over what can and cannot be said online, and to further restrict the range of views that is deemed permissible — is being funded almost entirely by a small handful of multi-billionaires like Omidyar. No matter how benevolent and well-intentioned they may be, the power and control they will inevitably wield, even if they try not to, will be limitless. And when it comes to a free internet, few things are more dangerous than allowing a tiny number of like-minded billionaires to use their vast wealth to control the contours of permissible speech. Yet that is exactly what has been happening. And the obviously orchestrated, well-planned and well-financed campaign centered around this new high-tech Joan of Arc, ready to be martyred to save us all from an unsafe internet, is merely the latest example. To understand the dangers of a small group of billionaires funding campaigns like this Facebook "whistleblower” spectacle and other “anti-disinformation” and “anti-extremism” groups, put yourself in the place of senior editors of The Intercept. Despite Omidayr's genuine affirmation of editorial independence, they live in complete captivity to, and fear of, Omidyar's whims and preferences. As is true of so many billionaire-funded NGOs and “non-profits,” editors and senior writers at The Intercept receive gigantic, well-above-the-market salaries. Because the site depends almost entirely on Omidyar's infinite wealth, it does not sell any subscriptions or ads and it therefore does not have any pressure to produce at all in order to generate revenue. It is a dream job for most of them: enormous salaries, endless expense accounts, a complete lack of job requirements, and no need even to attract an audience. For years, outside of three or four journalists, articles published by The Intercept produce almost no traffic. With rare exception, nobody reads the site. They have a massive budget to create highly-produced videos and yet their videos almost never exceed even 10,000 views: most tiny, from-their-garage, zero-budget YouTubers attract larger audiences. And nobody cares, because the money flows in from Omidyar no matter what. It does not get better than that, and that is why almost nobody ever quits The Intercept. Why would they? They just stay for years and years, collecting a huge salary, with no need to do anything but avoid angering one man. They work in an industry where jobs disappear with astonishing frequency, where layoffs are the norm, where the very existence of most organizations is precarious, and where the slightest dissent from liberal orthodoxies can render someone permanently unemployable. Those who work in outlets funded by billionaires have essentially won a type of lottery, at least temporarily, and very few people are willing to risk losing a winning lottery ticket, especially if they know they have no alternatives in the event that their security blanket is taken away. That means that the entire news organization has a constituency of one: Pierre Omidyar. If you were an Intercept editor who knows you could never get anywhere near that high salary working anywhere else — and that is true for virtually the entire senior editorial staff at The Intercept other than its Washington Bureau Chief Ryan Grim — you will of course be desperate to keep the sinecure going. That is not really corrupt as much as it is just basic self-preservation. If remaining in Omidyar's good graces is the only way to pay your large mortgage and maintain your lifestyle — which is true for most of them — then that will be all you ever think or care about. And you will know that your ability to keep the money spigot flowing depends on one thing and one thing only: keeping Pierre Omidyar happy or, at the very least, never displeasing him. Consider the power that bestows on Omidyar in the lives of those dependent on him. He is literally like a god to them: for those unlikely to find any similar position if The Intercept shuts down, his every whim can mean life or death for their careers and their happiness. They wake up knowing every day that one man has the power, on a whim, to destroy their livelihood. That desperate dynamic produces a climate where catering one's worldview and work product to Omidyar's ideological preferences becomes the overarching imperative. The only thing that matters to them in their work is keeping their sole benefactor happy and avoiding his wrath. I want to avoid the caricature here. This need to please Omidyar is often more subliminal than conscious. There are numerous journalists who work at The Intercept who do great work and rarely think about Omidyar in any conscious or direct way. They produce valuable reporting and investigations. But the inescapable reality is that the senior editorial management absolutely knows that their only real job is to foster a climate that will keep Omidyar happy, which means only hiring or publishing voices that will not offend him, ensuring that The Intercept's political and journalistic posture is aligned with his ideological worldview and, most of all, prohibiting anyone or any journalism from remaining at The Intercept if it strays too far from Omidyar's political project. And when my journalism and Omidyar's vocally expressed views began to diverge so radically and publicly, that is precisely what they began to do. In response to my increasingly vocal heretical views on Trump, Russia, and Russiagate, The Intercept's senior editors started hiring mainstream journalists from places like The New York Times to do nothing but produce the most hysterical Russiagate fanaticism and anti-Trump agitprop: in other words, they did everything possible to bring The Intercept's journalistic brand in full alignment with Omidyar's Twitter feed and political funding. Thus did The Intercept begin routinely publishing and aggressively headlining #Resistance dreck from these former New York Times reporters and others under Omidyar-pleasing tabloid headlines like “IS DONALD TRUMP A TRAITOR?” and “Reporters Should Stop Helping Donald Trump Spread Lies About Joe Biden and Ukraine” and “Democrats Need to Wake Up: The Trump Movement Is Shot Through With Fascism,” the latter of which peddled a slew of false claims found in the sewers of anti-Trump Twitter that Trump had ordered “involuntary hysterectomies conducted on people in a migrant detention center” and ignored reports of Russian bounties on the heads of U.S. soldiers. They were one of the outlets which published and ratified the CIA's lie in the weeks before the election that the Biden emails published by The New York Post were "Russian disinformation” (and they are also one of the outlets that has refused even to acknowledge the new book by Politico reporter Ben Schreckinger proving that the documents were authentic and the CIA lied, because they know that their only reader who matters — Omidyar — does not mind that they circulated lies in order to help defeat Trump). As a reward for these scripts, perfectly tailored to Omidyar's Twitter feed, The Intercept was gifted with appearances on MSNBC's most deranged prime-time shows. Just a couple of months before Chris Hayes hosted New York Magazine's Jonathan Chait to explore whether Trump had been a Kremlin asset since the 1980s, the DNC-loyal host invited James Risen on to discuss his Intercept article accusing Trump of treason: MSNBC's Chris Hayes speaks to the former New York Times reporter James Risen about his Intercept article accusing Trump of treason on Feb. 17, 2018 Though The Intercept was originally designed to be a platform for voices too anti-establishment and radical for mainstream corporate outlets, the site under its new editorial management entirely stopped publishing any writers who could remotely be described that way, relying instead solely on journalists who could be and are published by at least a dozen of other standard, inoffensive left-liberal publications. Ever since I left, there has been barely a syllable published … To read the rest of the article, click here and subscribe. Tyler Durden Mon, 10/25/2021 - 16:29.....»»

Category: blogSource: zerohedgeOct 25th, 2021