The Bear’s Lair: Financial engineering fuels U.S. weakness

The sale to a Chinese company in 2016 of one of the world’s largest cobalt sources, controlled by a U.S. company Freeport McMoran (NYSE:FCX), is emblematic of U.S. national weakness, “wokeness” and decline. However, one underlying cause of that sale was the blizzard of stock buybacks and unsound acquisitions made by FCX in the years preceding its hurried liquidity-seeking selloff. The ability of corporate management to play games with the balance sheet to maximize its own rewards is a major source of U.S. competitive weakness and should be eliminated. Continue reading

The Bear’s Lair: Suppose Al Smith had won in 1928

Looking back on past critical elections, those readers generally agreeing with this column will have a number of “turning point” elections in which they could wish the more “conservative” candidate had won, although our definitions of “conservative” may differ. In one case, however, one could wish that the more liberal (in the American sense) candidate had won. That is the U.S. Presidential election of 1928, in which not only would the Democrat Al Smith have been a more satisfactory President economically than Herbert Hoover, but his probable re-election in 1932 would have deprived the world of the New Deal. Continue reading

The Bear’s Lair: We have passed Peak Productivity

The Bureau of Labor Statistics announced last week that U.S. non-farm business sector productivity unexpectedly fell 5.0% in the third quarter of 2021 and was 0.5% lower than its level in the third quarter of 2020. This returns the U.S. economy to a pattern of ultra-low productivity growth that first became evident in the Obama years, a dismal trend which seems likely to intensify in the next few years of President Biden’s term. Given the global environment, however, there may be an immensely depressing answer to an important question: was 2019 the peak of global productivity, with decline and decay in living standards inevitable for the future? Continue reading

The Bear’s Lair: Will the Metaverse kill civilization?

Facebook chairman Mark Zuckerberg announced last week that he was changing the company’s name to Meta, because he believed that the “Metaverse” of virtual reality would become the company’s most important business in the future. Whether Zuckerberg or someone else succeeds in creating a convincing Metaverse, it seems to me a wholly negative development for humanity. Electronic reality, already highly competitive with the world we live in for gadget users’ attention, may take over completely. Surely that would bring civilization to a miserable end, for economic as well as philosophical reasons. Continue reading

The Bear’s Lair: Invest away from the billionaires

The Biden administration and its allies in Congress are now considering a “billionaires’ tax” on the unrealized capital gains of billionaires’ stock holdings. Nothing is so well designed to collapse the whole house of asset-bubble cards, as the billionaires re-direct their investment towards areas that are not caught by this impost. It therefore seems worthwhile for us mere mortals to devote some thought to the concept of “investing without assets,” putting your money in areas that will be proof against the asset bubble’s collapse, mostly because they have not shared in the asset bubble’s hyper-inflation. Continue reading

The Bear’s Lair: Facilis Descensus Averno

Putin with his 1972 Zaporozhets

Putin with his 1972 Zaporozhets
Source: Kremlin.ru

“The gates of Hell are open night and day
Smooth the descent, and easy is the way:
But to return, and view the cheerful skies
In this the task and mighty labor lies.”

Book VI of Virgil’s Aeneid, translated by John Dryden, published in 1697 when poetry was poetry, is a useful window on China’s descent into renewed Communism – and indeed, the West’s tendencies in that direction. Residents of Eastern Europe and the former Soviet Union know how difficult and arduous it was to convert from Communism to capitalism, or even social democracy, but the road in the other direction is very smooth – at first. Continue reading

The Bear’s Lair: Extraordinary popular delusions and the prizes they bring

Economists David Card, Joshua Angrist and Guido Imbens won the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel” last week for their work on “real-world” experiments that drove a truck through market-driven economic theory. This was not surprising. Conventional wisdom among the “woke” intelligentsia is today a far more important driver of the world’s rewards than any amount of knowledge from our civilization-producing ancestors. Continue reading

The Bear’s Lair: Tech sector can’t do quality control

This column recognizes that new products and services can have technical hiccups. Stephenson’s Rocket ran over a Cabinet Minister at its inaugural ceremony, killing him. The Hindenburg’s new transatlantic airship service burst into flames in Lakehurst, New Jersey. The first jet airliner, the Comet 1, kept blowing out its windows at high altitude. But the Internet is nearly 30 years old and Facebook has been around since 2004, yet they have the quality control of something in its infancy. Possibly this is because the entire industry is run by and for infants. Continue reading

The Bear’s Lair: The palsied hand of capitalism

“Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention”

wrote Adam Smith, one of several “Invisible Hand” quotes in The Wealth of Nations. Regrettably, Smith’s model is just a model; it breaks down in extreme situations, and the complexities of modernity, particularly the meddling of governments, have rendered the Invisible Hand more and more palsied. It is worth examining why, and what to do about it. Continue reading

The Bear’s Lair: China should adopt Song Dynasty virtues

China can claim to have invented in its Song Dynasty (AD 960-1279) the policy of easy credit that has led to its recent real estate debacle. Yet the Song’s use of paper money was much more careful than that of today’s China (or of its decadent Western competitors). In other respects: its respect for merit, its generally pacific nature and its technological and cultural innovation, Song China was a model, far ahead of its contemporaries. A return to Song virtues would be a Chinese development we could all welcome. Continue reading