The Bear’s Lair: Take the half-loaf Brexit, then come back

Teresa May’s Chequers Brexit proposal is a pathetic thing, which will doubtless be made more pathetic by Brussels before next March. Yet the crucial factor is momentum. Once even a Chequers-Brexit has taken place, Britain will be separated from the European Union, the “Remainers” will no longer have an option to offer and Britain will be able to enter partial trade deals with other countries. Brexiters should take their half-loaf on March 29, 2019, unattractive though it is, knowing that time and momentum will enable them to work for more. Continue reading

The Bear’s Lair: The corporate governance model is broken

John Schnatter, founder of the solidly profitable Papa John’s (Nasdaq:PZZA) was forced out last week for using a naughty word, while Elon Musk remains CEO of the eternally loss-making Tesla (Nasdaq:TSLA) despite tweeting one. The last three decades have supposedly made massive improvements in corporate governance. Well, whatever that is, it doesn’t seem to work in any rational fashion. Continue reading

The Bear’s Lair: EU is a foe to its people, not just to the U.S.

In his World Tour of Tact and Diplomacy last week, President Donald Trump caused a stir by announcing that the EU was “a foe, what they do to us on trade.” This caused outrage among the usual people who are paid very well to be outraged by everything Trump says. Yet for thoughtful observers, Trump’s statement was wrong only that it did not go far enough. Because of its self-frustrating structure, voter-hostile bureaucrats and imperious, Marxist-central-planning leadership, the EU is a foe not just to the U.S. and to Britain as it struggles vainly to break free from it, but to its own member countries and their citizens. Continue reading

The Bear’s Lair: Towards a better banking system

It is likely that the over-leverage of the last decade and the lack of true reform in the banking system will lead to another financial crisis, in which taxpayers will once again be strong-armed to bail out the banking system. To prevent this from happening yet again in ten years’ time, I propose a novel banking structure, following a road taken two centuries ago and separating the deposit function of banks from their lending function. Only by such separation can we achieve a sound economy. Continue reading

The Bear’s Lair: Engineering must beat financial engineering

Michael J. Dell is said to be bringing Dell Computer back to the stock market, at a valuation several times that at which it went private. GE has been thrown out of the Dow Jones Industrial Index, after a sorry saga of share buybacks, financial manipulation and forced asset sales. Tesla is unable to meet its production goals except for the occasional week, and must build automobiles in a tent to do so, yet its share price continues to defy gravity. All these stories have a single theme: financial engineering for the last two decades has paid very much better than actual engineering. For the health of the U.S. and other Western economies, this needs to be reversed. Continue reading

The Bear’s Lair: Time for Mexico to bring back Diaz

Picture of Porfirio Díaz, Former President of Mexico

Porfirio Diaz, who had ruled Mexico with multiple re-elections almost continuously since 1876, was ousted from power in 1911. In 107 years, you would think Mexico would have found another equally competent ruler, but it hasn’t, and Andres Manuel Lopez Obrador seems very unlikely to break that track record of failure. Maybe it is time the Mexicans re-evaluated their most successful ruler and ceased venerating the revolution that removed him and the corrupt statists that succeeded him. Continue reading

The Bear’s Lair: The AI revival of Thomas Mun

Thomas Mun (1571-1641) wrote the mercantilist classic “England’s Treasure by Forraign Trade” arguing that the country should run a trade surplus and thereby build up “treasure.” It was derided by classical and Keynesian economists alike. However, almost 400 years after its writing, it may be coming back into fashion in the world of Artificial Intelligence, with the “treasure” concerned being what one might call “Robo-IQ.” Continue reading

The Bear’s Lair: Germany must stop beggaring its neighbors

Picture of Wilhelm II, German Emperor

German Chancellor Angela Merkel’s staff published a photo taken at the recent G7 summit that showed Merkel glowering at a defiant President Donald Trump, suggesting that Trump was isolated and alienating America’s allies. Yet when we examine actual behavior, it is Germany that is beggaring its neighbors and failing to live up to international obligations. Worryingly, this is a reversion to a long-established pattern of behavior. Continue reading

The Bear’s Lair: An honest world without hedge or PE funds?

Hedge funds and private equity funds have been the big winners in attracting money over the past 20 easy-money years. Yet more and more investors are choosing indexed portfolios, which take out the investment manager’s skill entirely. If you believe mutual funds can’t beat the market, why should you believe hedge funds and private equity funds can do so – without cheating? With indications that indeed some cheating has occurred, and that returns have become mediocre, these structures may well be headed for the ash-heap of history. Market integrity will benefit. Continue reading

The Bear’s Lair: Globalization has become political poison

Since 1991, globalization has been touted as the solution to all the world’s problems, that will pull emerging markets out of poverty while making rich countries more efficient and competitive. Yet in the last few years, public opinion has soured on it; whenever new measures of globalization are proposed, voters oppose them vehemently. There are good reasons for this. Continue reading