Apparently GE is now run by idiots

October 23rd, 2018

We’ve seen pictures of Thomas Edison joking around with Henry Ford. Alas those days are gone. We had the good fortune to spend a little time with Jack Welch and his wife a couple of decades ago; alas, Jack’s first appearance on CNBC after leaving GE as CEO was Monday September 10, 2001, and events took over after that.

Welch was succeeded by a GE CEO who was one year behind us in Ben Shapiro’s brilliant industrial marketing course at HBS. That guy apparently had a second private jet follow him around to various venues. Brilliant. He was fired, which seems right. But GE has not recovered, and its stock has fallen by 2/3 in the last couple of years.

Punchline. So recently we bought a new GE dishwasher. A dishwasher should have an On switch and an Off switch, but this monstrosity has so many dozens of complicated control switches that we can’t find a housekeeper to operate it. Errr, that’s wrong; ahem, we can’t figure out how to run it. We’re seriously not joking, since operating instructions that appear straightforward result in no dishwashing at all.

Now GE oh so fancily defines itself as a Digital Industrial Company. Edison would be so proud. Recommendation: don’t buy another GE product until it descends back to earth.

Harvard’s Sad, Sick Numbers – worst case is 25% versus 77%

October 23rd, 2018

HMD

Harvard caps the number of Asians it admits, allege the plaintiffs — a coalition of Asian-American groups called Students for Fair Admissions — in the lawsuit against the university. As a result, Asian applicants must present higher academic qualifications than any other racial or ethnic group in order to be considered for admission. According to Harvard’s own data,

test scores and a high school GPA that would give an Asian-American high school senior only a 25% chance of admission would provide a virtual admissions guarantee — 95% — for an otherwise identical black applicant, a 77% chance of admission for a Hispanic student, and a 36% chance of admission for a white student. Asians would make up more than 50% of the admitted class

if Harvard were colorblind, estimates Students for Fair Admissions, instead of the 19% Asian average maintained over recent years. The white student population would go down from 43% to 38%. Asians account for 6% of the national population; whites, 61%.

As part of our B-school Harvard’s defense, we call on the university to openly advocate similar discrimination for the NBA 75% black roster and the 51 Jewish recipients – 23% – of the Nobel Prize in Physics.

Not bad

October 22nd, 2018

If around half of the people said they liked you but nine out of ten of the stories they heard about you were awful, that’s not bad. Bonus: good VDH piece on the craziness of today.

Yawn

October 22nd, 2018

FA:

Another chronic effect of climate change is warmer winters. The small U.S. ski towns that host 55 million visitors each year depend on snow for their livelihoods. Last year saw a ten percent decrease in skiers due to low snow conditions and $1 billion in lost revenues. Aspen, Colorado, one of the wealthiest municipalities in the United States, opened its first soup kitchen last season because of lost revenues.

Scientific projections suggest those “low snow” periods are now a chronic condition that will worsen: a recent study indicates that by 2050 there will be a 50 percent decrease in the number of snow days across the country, and all regions will receive less snow than they do today.

In these same regions, a warming climate is causing pine bark beetle infestations that have killed enormous numbers of trees. Pine bark beetles and related pests die off in cold winters. When winters are warmer, pests destroy trees, leaving forests devastated. This puts mountain communities at a fire risk. In 2017, over 70,000 wildfires caused more than $12 billion in damages across ten million acres, mostly in the mountains. The 13 western states had a “very high” combined exposure risk exceeding $49 billion that encompassed four million homes.

Alaska has warmed twice as fast as the rest of the nation and is hit hardest by warm winters. One example is the shortened season for ice roads, which are used for almost all heavy equipment on the North Slope. In addition to avoiding environmental damage to the tundra, ice roads cost $400,000 per mile to build—construction that supports both local workers and industries. Average temperature in Alaska has increased 6.5 degrees Fahrenheit over the past century, mostly since the mid-1970s. Since that year, the season for ice roads has shortened dramatically—a 50 percent reduction, which translates into approximately 60 fewer days of reduced economic productivity.

Climate change affects permanent infrastructure as well, including pipelines and foundations. Melting permafrost, which causes heaving of foundations and settling, is the main culprit. Over 100,000 Alaskan citizens live on permafrost, and 87 communities with roughly 40,000 inhabitants are at risk of permanent damage. Associated costs are expected to add $3 billion to $6 billion over the next 20 years, including water and sewage disruptions.

You’d think that the writers would have something more productive to do with their time. Bonus: RLS on Adnan’s nephew. What a crazy world we have.

More insanity: 10,000 people are going to storm the border?

Brief career counseling

October 21st, 2018

Avoid being a Harvard professor, or even 1/1024th Harvard professor. Avoid being head of Interpol or an op-ed writer for the WaPo. Regarding the last one, there is something incredibly weird going on. “Oh yeah, let’s send two planes of killers to Turkey and kill a guy and chop him up. No one will notice.” Yeah, right.

Space Jam 2019, a warning

October 20th, 2018

Soon rational thought will be illegal. Hello USSR, 1984, or whatever. If you’re a guy who pretends he’s a girl, you get to win an athletic prize, YAY!!! We have a suggestion for Michael Jordan, Larry Bird etc. You can still maybe dominate the WNBA, but we have a great fear. If you make a sequel to Space Jam in our new improved USA, it may soon be illegal to beat cartoon animations in sporting events, since they will sue for being cruelly discriminated against.

Why aren’t they grateful?

October 19th, 2018

Some days we can’t understand why the youngsters are so ungrateful that they are 1000x richer than a couple of centuries ago, that their lifespans are 2-3x a lot of people in previous times and that they’ll never contract polio etc. These accomplishments are trivially easy to document. Instead, the present is taken for granted. Unbelievable but true. The kids’ lives in school have been ruined by a teaching establishment that dwells on minor this or that which results, statically, in one group doing a little better than that other group over there. 2 generations of Americans are mostly completely ignorant of the tremendous courage and sufferings of their forebears. Can things be fixed in time to avoid a complete meltdown? We don’t know, but the media’s and establishment’s genuine loathing of Darth Tweeter suggest that signs point to no.

Which is better theater?

October 18th, 2018

There is a group of people marching near the northern border and another group near the southern border. Which is better theater? BTW, we really fail to understand the southern border theater thing. We understand that the idea is media coverage will make Darth Tweeter look bad before the election, but you have to be a serious lunatic or a university professor to think that open borders are a good thing.

More of the same fun and unfun

October 17th, 2018

For fun, read the part about urban dog parks in Portland, Oregon. This thing about Sinema is fun too, but in a very weird way (how does this person have any kind of job?). We remember watching a TV show about the Saudi dead guy’s uncle 33 years ago, but when you read this unfun NYT piece, nothing about the story makes any sense at all. Nothing. Something really ultra creepy is going on unless the prince is a complete idiot, which, for all we know, he may be.

Bonus unfun: 9-11 was a billion years ago. The young have been ruined for almost two generations now.

Fun and not fun

October 16th, 2018

Fuaxcahontas fun. This one who we know nothing about, unfun. Outstanding analyst Cashill analyzes the disturbed and unfun Ford. A decade ago Professor Roubini was pretty correct about some problems ahead. Now he seems to be predicting that Darth Tweeter will start a 2020 war with Iran. Darth really has driven a lot of people crazy.

Bonus: faux faux fauxnier: “To make up for the dearth of Native American DNA, Bustamante used samples from Mexico, Peru, and Colombia to stand in for Native American. That’s because scientists believe that the groups Americans refer to as Native American came to this land via the Bering Strait about 12,000 years ago and settled in what’s now America but also migrated further south.” A charming and appropriate way for a phony to exit the stage.

Second bonus: fun VDH piece.

Only 60% GDP from the private sector

October 15th, 2018

SCMP:

“Why were there very significant reforms in its initial stage, then it turned stagnant or was even pushed back?” asked Zhang, a professor of economics at Peking University’s national school of development – which he co-founded in 1994 with five other prominent economists, including structural economics pioneer Justin Yifu Lin and free market advocate Zhang Weiying.

The 67-year-old Zhang attributed the country’s four-decade economic miracle to its institutional changes.

“The biggest one was the introduction of a market into a previously government-controlled economy,” he told the South China Morning Post. “It was truly uneasy.”A vast majority of economic activities are now generated by the market. According to official data, private firms contribute to over 60% of the nation’s GDP and more than 80 per cent of urban employment.

But in his latest academic book The Institutional Evolution of China: Government vs Market, Zhang warns of economic challenges ahead, such as restricting administrative power, breaking the state monopoly in upstream resource-intensified sectors, allowing farmers to transfer their land contracts and curbing corruption.

His research indicated that the pace of reform had actually slowed after Zhu Rongji, who once laid off millions of workers from ailing state factories, opened up the housing market and shook up the state banking system, stepped down as premier in 2003.

Very interesting: more saving than investing, consumer spending growth down. Very interesting. Not quite sure what it means though it seems clear enough that Xi’s policies have a lot of questioners and dissenters.

Provocative piece on China’s economy

October 14th, 2018

Gordon Chang in a piece that deserves a lot of thought and analysis:

This geopolitical recession is something really simple — it’s the end of the U.S.-led global order,” Ian Bremmer, head of risk advisors Eurasia Group, told the ANZ Finance & Treasury Forum in Singapore this week.

Bremmer’s message plays well, and not just to those attending financial conferences. Most American policymakers, for instance, have bought into his “declinist” predictions about China’s rise and America’s fall. At least two—and maybe all three—of President Donald Trump’s immediate predecessors accepted the premise of eventual Chinese dominance.

For a long time, those predictions were generally accepted. Most recently, however, there are even more reasons to challenge the assumptions underpinning the narrative of declinism.

Declinists make one fundamentally incorrect assessment. “So that is one big reason why we have entered a geopolitical recession,” Bremmer told the crowd in Singapore. “All of the major international underpinnings of the U.S.-led order have become unmoored over the last 25 years.”

The most important reason for the establishment of the U.S.-led order after the Second World War was the dominance of the American economy, and the most important justification for declinist views has been China’s stunning four-decade economic revitalization. There is no shortage of predictions when in dollar-denominated terms China’s gross domestic product will overtake that of the U.S.

The gap between the two economies is still wide, however. Last year, the U.S. produced $19.39 trillion of GDP. China’s 2017 GDP, at a reported $12.84 trillion, was only 66.2 percent of America’s.

And that gap is, in reality, widening. Beijing’s official National Bureau of Statistics reported 6.8 percent growth for the first half of the year, far in excess of the American rate.

Yet China’s number is surely exaggerated. Beijing claimed nearly identical 6.7 percent growth for 2016. The World Bank, however, has cast doubt on that figure by releasing a chart in the middle of last year.

So what was China’s gross domestic product increase in 2016 according to the World Bank? Answer: 1.1%

Shocked? The 1.1 percent figure is surprisingly close to the single best overall indicator of Chinese economic activity, total primary energy consumption. In 2016, total primary energy consumption, according to Beijing’s official numbers, was up 1.4 percent.

America’s economy, thanks to Trump’s deep cuts in taxes and regulations, is powering ahead. In the first two calendar quarters of this year, the economy grew 2.2 percent and 4.2 percent. The Atlanta Fed’s GDPNow forecast for the just-completed third quarter is 4.2 percent.

China’s economy is beset by excessive debt accumulation and other maladies, but the main factor inhibiting economic potential is not a systemic debt crisis—a concern to be sure—but the abandonment of reformist policies. Xi Jinping, the Chinese ruler, has turned his back on Deng Xiaoping’s “reform and opening up” program that is credited with sparking Chinese growth for almost four decades. Instead, Xi for a half decade has been reinstituting the Stalinist state model that Mao Zedong embraced in the early 1950s.

Xi’s reversal of liberal economic policies has been matched by his reversal of political and social policies. He has de-institutionalized the Communist Party, thereby heightening the risk of political instability. At the same time, he has demanded conformity—“absolute loyalty”—and tightened social controls. The institution of a nationwide social credit system , which will assign a score to every resident for all his or her actions, is but one example of the state’s attempt at total control of society.

China, as a result, is moving from authoritarianism back to totalitarianism, readopting a model that brought the People’s Republic to the brink of economic failure twice, once during the Great Leap Forward of the late 1950s and early 1960s and again during the Great Proletarian Cultural Revolution of the mid-1960s to mid-1970s. China’s economy cannot be expected to do well in an increasingly intolerant political atmosphere, as the country’s own history suggests.

And there is one more reason to doubt Chinese economic dominance: demography. China will soon join the ranks of shrinking nations. The population will peak somewhere around 1.44 billion people at the end of next decade according to the U.N.’s World Population Prospects: The 2017 Revision. By the end of the century, China will have a population of 1.02 billion.

China’s decline has implications for its competition with the U.S. In 2015, China’s population was 4.4 times larger than America’s. By 2100, China is projected to have a population only 2.3 times larger.

China’s projected decline—and we should remember the U.N.’s estimates seem to overstate that country’s demographic potential—does not mean the Chinese economy cannot succeed, but it does mean it will have to succeed in spite of demography. China’s four-decade burst of growth occurred during the reaping of the “demographic dividend,” an extraordinary increase in the size of its workforce.

China’s workforce, by the way, is already shrinking, first peaking in 2011 according to the official National Bureau of Statistics.

China has yet to show it can break through the dreaded “middle-income trap,” and if it does not, the country’s economy will not overtake America’s. If China’s economy does not overtake America’s, Beijing is unlikely to dominate the global system that is supposedly crumbling. Without a vibrant economy, China will not be able to modernize and build up its military, it will not be able to ensnare developing nations with its debt-trap diplomacy, and it’s One Belt, One Road initiative will go unfunded.

Bremmer in Singapore made the argument, as the CNBC headline told us, that “A ‘Geopolitical Recession’ Has Arrived and the U.S.-Led World Order Is Ending.” During a week when U.S. equity indexes are plunging, his conclusion looks prescient.

Yet by even that measure, the U.S. still looks strong. Despite this week’s carnage, the Dow Jones Industrial Average is up 1.4 percent this year, and the broader S&P 500 has gained 2.1 percent. Nasdaq has increased 6.2 percent.

Chinese indexes are going the other way, among the world’s worst performers this year. The Shanghai Composite is down 21.9 percent, and the Shenzhen Composite is off 31.9 percent. The tech-heavy ChiNext has dropped 28.0 percent. Chinese stocks would be far lower had Beijing’s so-called “National Team” not been buying shares like crazy in a centrally directed effort to avert meltdowns.

More tellingly, the onshore renminbi is down 5.91 percent this year against the greenback. It would be far lower than the current 6.89 yuan to the dollar if it were not for persistent state intervention.

So is Bremmer correct that the U.S. is in decline and the international system it leads is passing away? The Chinese people don’t seem to think so. Survey after survey show almost half the country’s wealthy have plans to leave China permanently.

And they are taking money with them. Money gushed out China in 2015 and 2016—about $2.1 trillion of net capital outflow those two years. The hemorrhaging would have continued but for the draconian clampdown in late 2016, with many of Beijing’s controls, banana republic-style, unannounced.

Many of the people and much of the money have ended up in the United States, as walks through most American cities—and my suburban neighborhood—suggest.

So the main underpinning of the American-led order, the American economy, is doing just fine. And the economy of the main challenger to that order is not doing well at all.

The comments on the piece are very interesting too. Of course Gordon Chang has been a China pessimist for a long time.

As for us, we’re not convinced by this analysis. For example, Shanghai’s stock market has been all over the place in the last decades. We’ve said that China’s big problems will happen when the credit markets vote a big NO on the often squirrelly debt arrangements with the SOE’s and others. When that happens it will be a world historical event, but it hasn’t happened yet. When it does, it will probably make 2008 look like a minor thing. Stay tuned.

Dum Dum Dum Dum

October 14th, 2018

No it’s not Dragnet’s music. It’s this and this and this and this. We forgot how to spell dumb. It’s unbelievable how much the media and others hate Darth Tweeter.

Creepy in so many ways

October 14th, 2018

We never heard of this Saudi guy but every aspect of the story is really creepy. All sides are horrible and indeed far worse than that.

Just for fun

October 13th, 2018

Roger Simon on the wisdom of the Kanye freakout. Kanye is a “white supremacist” who is 1) dumb; 2) mentally ill; 3) a house negro; 4) a token 5) a minstrel, etc. The insanity is really quite a funny thing. Re hysteria, we’re going to read this and report.

Lower and Lower we go

October 13th, 2018

We’ll add links when available, but they are a little hard to find outside TV. There are a number of ads in CA where candidates and propositions want to stop the evil capitalists and their price rises, but they never mention that government price controls never control prices; instead, they eliminate competition and supply here and here and here – a marvelous piece, and so on. Duh. Yet the opponents of the Leftists never address the issue directly and strongly, pointing out the idiocy of their opponent Leftists’ positions. Rather, they wimp and whine and make stupid tiny arguments. Stupid party indeed.

OH NO, who is coming to lunch?

BTW, we’ve been diligent students of the Fed and monetary policy since our first job as a corporate lender in 1974 at Citibank. We saw Fed Funds rates of 20% or so back in oil and hostage crisis days of 79-81. Darth Tweeter has it right, and we understand that maybe Jim Cramer agrees as well. Our current time is a lot more like Eisenhower and his 2.5% rates than anything else. Stop with the nonsense please, dear Fed.

Sigh

October 12th, 2018

NK in the NYT:

Prof. Michael E. Mann of Penn State told me that Hurricane Michael should be a wake-up call. “As should have Katrina, Irene, Sandy, Harvey, Irma, Florence,” he added wryly. “In each of these storms we can see the impact of climate change: Warmer seas means more energy to intensify these storms, more wind damage, bigger storm surge and more coastal flooding.”

OTOH: First ever audit of global temperature data finds freezing tropical islands, boiling towns, boats on land.

Mann should have been in paragraph one so we’d have an early warning system.

More insanity

October 11th, 2018

In evacuating the plane, it’s womxn and squirrels first. This is a “conservative.” Hey, what’s the newest law in NYC? Bonus fun: brief outbreak of sanity.

“People are either of Dar Al-Harb or not”

October 10th, 2018

We’ve covered this before. Lifson has updates.

FWIW

October 10th, 2018

We very much like the buzz that Nikki Haley would become a SC senator after The Newly Roaring Graham becomes head of the DOJ post 11/6. Even if it’s unlikely and just gossip, it’s gossip that at least makes sense for once.