November 11th, 2019

What is “the biggest, most urgent threat facing human civilization?” Ouch, we thought it was Martina Navratilova.

Bonus unfun: VDH has a piece on the intergenerational nuts versus one of the oldsters, and it won’t brighten your day. More serious unfun here.

With Veterans Day approaching

November 10th, 2019

Scott Johnson has a very nice piece on one of our favorite movies, The Best Years of our Lives, and then another on the ups and downs of TCM’s creation. Wow! We’ve often said that to get a college degree, or maybe even high school, you would have to do two things, if we were running the show: (1) watch maybe 30 of the TCM favorite movies referred to above, and (2) spend a few weeks living and working in a re-created 1854 farmhouse. Milk that cow, slop those hogs, yeah! The snowflakes would melt at first, but maybe something good would come to pass.

Some things are better today

November 9th, 2019

cough, cough. HT: MF

August 15, 2016

November 9th, 2019

Insurance policy.

Thoughtful long piece

November 9th, 2019

The Secretary of State:

I always prefer if I get the applause after I speak – (laughter) – because then you know how – then you know how you did. And Rupert, you reference the Senate race and book publishing. I’m pretty sure those are both felonies if I talked about them – (laughter) – so I’m not going to mention either tonight. Thank you so much for those kind words, Rupert, for your generous introduction.

Distinguished guests, ladies and gentlemen, it’s great to be with you all tonight. It’s remarkable I’m sitting at the table with Dr. Kissinger and Hank Greenberg, the Sterns – amazing people who have done amazing things for America. Thank you all so much for your remarkable service. I’ve been fortunate to get a chance to know Dr. Kissinger. He’s in his mid-90s. Secretary Shultz is mid-90s. I’ve got a lot of runway left. (Laughter.) Must be something about Foggy Bottom that keeps you going.

Thanks, too, Ken, and the board of trustees here for taking such good care of us. I’m humbled by your generosity and the receipt of this award tonight. My son often reminds me there’s much for me to be humble for. He – I actually told him about this, and he got online, he looked up all the previous recipients, and he wondered if the institute hadn’t might lost its way. (Laughter.)

He’s also famous for having sent out a note to the entire team that takes care of me when I travel saying, “When my dad got off the plane tonight, he looked like he was half dead. Would somebody put makeup on him?” (Laughter.) It was like 3:00 in the morning in some far-off place.

I thought I’d take you back just a minute to talk about something that’s very much on my mind. I remember I had hoped to be sworn in on January 20th, 2017 as America’s CIA director right – a few hours after President Trump’s inauguration. But Senator Wyden had a different idea about timeline, and so I was held up on that Friday.

But I had asked the President to come out to CIA headquarters on Saturday morning, out to Langley. So when I showed up there that day and the President showed up there that day, I was still the congressman from the 4th District of Kansas hoping that I could scrounge 51 votes on Monday.

I mention that because I will never forget what President Trump was focused on. Literally less than 24 hours after he had been sworn in, he was sitting with me and the senior counterterrorism team at the CIA, and he told – he said three things. He said: I’m going to give you everything you need to do; I’m going to give you the authorities you need to conduct this campaign in a way that will keep Americans safe; I want to make sure that we destroy the caliphate, and I want to get the guy who’s the leader of ISIS. And – (applause) – and we worked for two and a half years – the team was fantastic. The work that was done will absolutely make an important contribution to America’s national security. The President led that effort. He was committed to it. He supported everything that I did and then my successor, Director Haspel, and the amazing work of the Department of Defense and all the teams that brought Baghdadi to eternal justice. (Applause.)

I hope you all know when you – when you get a chance to see someone who is in uniform or someone who is an intelligence officer, you wouldn’t know. There’s actually some of you all sitting out here tonight. You wouldn’t know. Please thank them. It was amazing work that they did and important.

There’s still much work to do. The threat from radical Islamic extremism certainly is not gone, but the work that was done to lead that shows the excellence, the uniqueness, and to the point that was mentioned earlier, the exceptionalism that we have here in the United States of America.

I think it’s true that we can think long about history. Half a century ago your founder charged your institution to think about the future in unconventional ways. President Trump, when he selected me to be the Secretary – the director of the CIA was certainly thinking about something unconventional. Who would have predicted that this kid from Southern California would have this amazing privilege?

He also knew – Herman knew – that in the interest of furthering and protecting this great and noble experience that we call the United States of America, that there was no higher mission than to getting that right.

That’s why I thought I’d focus in the few minutes today before I take some questions, I thought I’d focus on something that is central to what the Trump administration is working on that is different from previous administrations. That’s not political, we have just – we have taken on the challenge from the People’s Republic of China in a way that the time is calling for.

Look, we have a long-cherished tradition of friendship with the Chinese people. We continue to do so today. We have a Chinese American community here in America that we love and treasure. I’ve known them through business and personal ties; I’ve known many of them.

But I must say that the communist government in China today is not the same as the people of China. They’re reaching for and using methods that have created challenges for the United States and for the world.

And we collectively, all of us, need to confront these challenges from the PRC head-on, and along each of the many facets.

There are many opportunities, to be sure, but it is no longer realistic to ignore the fundamental differences between our two systems and the impact, the impact that those two systems have, the differences in those systems have on American national security.

This is a departure, for sure. It might be viewed as unconventional. It’s not what you’ve heard from leaders for the last two decades plus. Frankly, we’ve been slow to see the risk of China – the risk that it poses to American national security, because we wanted friendship with the People’s Republic from the very start. And because we, as Americans, always continue to hope for that.

But frankly, in our efforts to achieve this goal, we accommodated and encouraged China’s rise for decades, even when – even when that rise was at the expense of American values, Western democracy, and security, and good common sense.

We downgraded our relationship with our long-time friend, Taiwan, on the condition that the “Taiwan question” would be resolved peacefully, to normalize relations with Beijing.

We all too often shied away from talking directly about the human rights issues there and American values when they came into conflict, and we downplayed ideological differences, even after the Tiananmen Square massacre and other significant human rights abuses.

We encouraged China’s membership in the World Trade Organization and other international organizations, premised on their commitment to adopt market reforms and abide by the rules of those organizations. And all too often, China never followed through.

We hesitated and did far less than we should have when China threatened its neighbors like Vietnam, and like the Philippines, and when they claimed the entire South China Sea.

Frankly, we did an awful lot that accommodated China’s rise in the hope that communist China would become more free, more market-driven, and ultimately, hopefully more democratic. And we did this for a long time.

There’s another reason we adopted these policies: We didn’t realize how China was evolving. Frankly, the American people didn’t get the full story.

I’ve talked to so many business leaders. U.S. companies that invested heavily in China were forced to comply with China’s terms. This includes just about any topic that the Chinese Communist Party deemed controversial.

Beijing’s intransigence creates a permanent class of China lobbyists in the United States. Their primary job is to sell access to Chinese leaders and connect business partners.

And frankly, whenever there was a dispute or tension in the relationship, many of our scholars blamed the United States for misrepresenting the nature of the Chinese Communist Party.

Meanwhile, Beijing controlled and limited access to our diplomats, journalists, and academics to the main – when they were traveling to mainland China. They still do that today. If you saw the difference – if you saw the difference in how Chinese diplomats are treated and how American diplomats and the access they have, you too would find the absence of reciprocity deeply inconsistent with American values.

And China’s state-run media and government spokespeople filled the gaps, routinely maligning American intentions and policy objectives. They still do that today. They distorted how Americans view the People’s Republic and how they review General Secretary Xi.

These bad outcomes were all too predictable. They were predictable byproducts of dealing with a secretive regime that doesn’t respect fairness, the rule of law, and reciprocity.

Today, we’re finally realizing the degree to which the Chinese Communist Party is truly hostile to the United States and our values, and its worse deeds and words and how they impact us. And we’re able to do that because of the leadership of President Trump.

The President sounded this issue, this alarm, since his very first day. I remember one speech he gave back in Pennsylvania when he called China’s WTO membership “the greatest job theft in history.” A lot of people laughed. I don’t think so many of them are laughing now that they can see the reality.

It’s the case that now we know China weakens America’s manufacturing base by conducting massive intellectual property theft. I had a group of Fortune 500 CEOs in my office last week. The stories are staggering.

Now we know too that China threatens American freedoms by demanding our companies self-censor to maintain access to that Chinese market. We’ve all seen the stories recently of the NBA. The truth is Beijing ought to be free to run its own PR campaign; they’re a sovereign nation. But if we disagree, our companies ought to be permitted to have that disagreement. Silencing dissent simply is not acceptable.

And now we know – now we know that China threatens America’s national security by developing asymmetric weapons that threaten our strategic assets too. The list goes on. And these aren’t just our problems. They’re problems for all nations that share our values.

When we see Beijing use coercion as a preferred tool of statecraft, it’s not good for those of us who believe in democracy and sovereignty as the fundamental norms that ought to dominate world commerce and the way nations interact. These ideas, they threaten the free and open international order by making extrajudicial territorial and maritime claims in places like the South China Sea and the Taiwan Strait.

We know too that Beijing entwines its neighbors and others in its state-led economic model, often closing deals with bribes, often trapping many in debilitating debt levels, threatening their own sovereignty.

And now we know too and we can see China’s regime trampling the most basic human rights of its own citizens – the great and noble Chinese people. We’ve seen this in Hong Kong, where they need to live up to their promises and commitments, and we’ve seen it in the gross human rights violation of ethnic minorities in Xinjiang.

We know too that the Chinese Communist Party is offering its people and the world an entirely different model of governance. It’s one in which a Leninist Party rules and everyone must think and act according to the will of the Communist elites. That’s not a future that I want, I think it’s not a future that anyone in this room wants, it’s not a future that other democracies want, and it’s not a future that the people of China – the freedom-loving people of China everywhere don’t want this model.

President Trump’s National Security Strategy lays this out. It recognizes China as a strategic competitor. That means there’s challenges and there’s real opportunities, and we hope that we can engage with them in ways that are constructive. But it’s reality. It’s the truth. It’s also the case that we didn’t choose some of these issues. China forced them upon us.

In the coming months, I’m going to give a series of sets of remarks. I’m going to talk about each of these in some more detail.

I’ll talk about the competing ideologies and values and the impact that has on America and the world. The Chinese Communist Party is a Marxist-Leninist Party focused on struggle and international domination. We need only listen to the words of their leaders.

I’ll discuss too how they interfere with the things we take most for granted here in the United States. The party’s intelligence agencies, the United Front Work, and its propaganda outlets have embarked on a global campaign to change public opinion in favor of Beijing. We want to preserve our freedoms – our freedom of speech and we want to make sure that information flows freely everywhere.

And I’ll discuss too the impact on the international order. Beijing is actively creating its own international space and it participates in international organizations to validate its authoritarian system and spread its reach. We in the United States, and I think the good people who are part of the Hudson Institute, want to preserve the existing free and open international order that the United States has helped create and continues to lead.

And I’ll too – talk too about the economy. China has engaged in unfair predatory economic practices and it’s utilizing state assets to build its economic footprint all around the world. We want China to be successful. We want it to have a successful economy. We want a transparent, competitive, market-driven system that is mutually beneficial for all involved.

You can see the first steps towards that in the Phase 1 deal that we are close to signing. I’m optimistic we’ll get there. It’s a good thing, a place that we can work together. We want to make sure that we get that right and we want to make sure that the economic relationships are fair, reciprocal, and balanced as between us as well. I think this will show that there is common ground to be had, and the Trump administration will work tirelessly to find it wherever we can.

And I’ll get a chance too to talk about how our militaries compete and the capabilities that China has built up that far exceed what they would need for self-defense.

There’s lots of discussion, lots of think-tank discussion, lots of academic discussion about what the relationship will look like between the United States and China in the years and decades ahead. I’ll be clear about what the United States wants: We don’t want a confrontation with the People’s Republic of China. In fact, we want just the opposite.

1) We want to see a prosperous China that is at peace with its own people and with its neighbors. 2) We want to see a thriving China where the Chinese business community transact business with the rest of the world on a fair set of reciprocal terms that we all know and understand. 3) And we want to see a liberalized China that allows the genius of its people to flourish. 4) And we want to see a China that respects basic human rights of its own people, as guaranteed by its own constitution.

But above all, it’s critical that as Americans, we engage China as it is, not as we wish it were. Herman Kahn used to remind us, he would urge us to think unconventionally to create persuasive arguments for policy and make those arguments consistently to the American people. We have to think anew, and unconventionally, about the People’s Republic of China. I hope you will all join me in that. We will learn together and we will develop a strong relationship between these two nations.

I’m going to now stop and take a few questions from mister – Ken. Thank you. God bless you all. (Applause.)

All well and good, but he has been the worst boss in the world (ha ha!!!).

11,000 on the “emergency”

November 8th, 2019

As you know, we think this so-called climate emergency is among the stupidest things ever on our planet (11,000 “geniuses” here and here and here) and here. Yawn, but it is pretty funny. Help, Professor Lindzen!


November 8th, 2019

Re that, how about 2 trillion galaxies. That “GOD” is quite a dude. Very impressive.


November 8th, 2019

Christianity seems to be questionable without direct proof. For starters there are 200,000 galaxies, with maybe 100 billion planets, give or take. We loved learning the prayers at the foot of the altar etc as a young fellow, but what are the chances that the New Testament’s exclusivity is correct? It does not seem nice to the hundreds of trillions of people in the universe who have not been exposed to the New Testament’s special message. Just asking.

Smart Move

November 7th, 2019

Much better choice than the Pennywise impersonators currently running.

New China Chapter 11, but not so much Chapter 10

November 7th, 2019

Via WSJ:

In the trenches of China’s debt-addled economy, the government has made a startling decision: Let companies fail. That has left creditors angry, debtors fighting to save their businesses and judges on a mission to promote the benefits of bankruptcy.

After years of pumping out financial support to keep the economy humming and workers happy, China has embarked on a debt reckoning. Beijing is building a bankruptcy system to take on a significant pickup in corporate defaults. The country now has more than 90 U.S.-style specialized bankruptcy courts to help sort through a morass of corporate debt that, until recently, would have been swallowed by state banks and other creditors.

It is a sign that Beijing is worried about the number of failing companies and trying to find a fix. The system is helping, many lawyers, foreign investors and lenders say, as it takes some pressure off local governments that lack the resources for so many bailouts.

The bankruptcy system in China, drawing on U.S. chapter 11 provisions, aims to allow companies to restructure under court protection to keep businesses alive and pay creditors over time.

China’s system differs significantly in at least one respect: Bankruptcy courts here sometimes are inclined to protect shareholders over debtholders — with the aim of averting social unrest.

Reorganizing or liquidating companies is proving to be a messy process in many cases, marred by disagreements, protests and disarray in a country with a steep learning curve in the bankruptcy process.

Last year more than a thousand people, including judges, bankers, home buyers and employees packed into a university auditorium here in China’s northwest to hear how a court-appointed law firm would sort through more than 7.5 billion yuan ($1.07 billion) in claims against a failed real-estate company.

Failure Is an Option Chinese courts are processing more bankruptcies at a faster pace. Number of bankruptcy cases, by year Source: Supreme People’s Court of China
Accepted/Completed: 2008 ’10 ’12 14’ 16 ’18 — 5,000 – 10,000 – 15,000 20 – 20,000

Hundreds of police officers and security personnel stood watch because of fears that grievances would turn to violence. About 7 miles away, a 21-building complex had stood unfinished since late 2014 after the company sold thousands of apartments and storefronts and then defaulted on its debts.

Liu Changyun, now 50 years old, paid roughly 600,000 yuan ($84,700) in 2013 for a storefront in the hopes of opening a small restaurant in the complex. She is still waiting, selling food from a cart nearby. “I own nothing in my whole life but this,” she said recently.

China introduced formal bankruptcy laws in 2007. But courts routinely rejected applications from struggling businesses and their creditors because of concerns over potential social unrest and large-scale layoffs.

Many insolvent companies chugged along with state subsidies and loans from state-owned banks. Some simply walked away from their debts, leaving creditors hanging.

Beijing is trying a new tactic. Most of the country’s bankruptcy tribunals have opened since 2015. New courts were added this year in Beijing, Shanghai and Shenzhen. Court-appointed administrators—law firms and accounting firms that help verify claims, organize creditors’ meetings, list and sell assets—increasingly make use of China’s online culture, as authorities look to handle more cases and process them faster.

After a decade of rapid expansion and heavy borrowing, China’s growth is slowing. Courts nationwide accepted close to 19,000 corporate bankruptcy filings in 2018, more than triple the number two years earlier.

They included the reorganization of steelmaker Bohai Steel Group Co., which buckled under more than 200 billion yuan ($28 billion) in debt—the largest failure of a state-owned Chinese enterprise in years. Some of Bohai’s assets will be taken over by another steel company and creditors are in the process of being repaid partially or in full.

Authorities “sensed the economic slowdown and that weaker companies would not survive, and needed a mechanism to deal with that,” said Ron Thompson, a managing director of restructuring and advisory firm Alvarez & Marsal who has worked in China for close to three decades.

Concerns grew last year amid the U.S.-China trade conflict. In an opinion piece published in a state-run media outlet, Du Wanhua, a high-ranking official at the Supreme People’s Court of China, said higher trade tariffs could lead to more bankruptcies. The courts should start “repairing the house before it rains,” he wrote, using a traditional Chinese phrase.

We’ll follow this pretty closely and have more to report shortly. Non-relevant updates: (1) Xi and Lam get together. (2) fentanyl equals jail, which is excellent, though we don’t know what that drug really does. (Hey man, put on those Grateful Dead and Pink Floyd albums again.)

Other than that, how was the 302, Mrs Lincoln?

November 6th, 2019

A 30 year FBI agent via AT:

There were two sets of notes, one long, neatly written, and detailed, and the other seemingly scribbled, as one would expect in an interview setting. Van Grack’s explanation is this: by switching the attribution of the two sets of notes, he’s saying that the long, detailed set of “notes” belongs to Pientka – the “primary note taker” – rather than Strzok, as we’ve been told up to now. That’s supposed to solve the difficulty of the lead interviewer – Strzok – also taking remarkably detailed notes. But that switch doesn’t really solve the credibility problem. Here’s why: The long set of notes actually looks like a handwritten draft of a 302.

I spent about 30 years doing interviews, taking notes, reading (or attempting to read) notes taken by other agents. I guarantee you that in my experience no notes looked like the “notes” you’ll see at the link. As I said – they look like like a rough draft done after the interview.

Why would Joe Pientka – or Peter Strzok, as the case might be – bother to produce a handwritten draft (if we accept that what we’ve been shown are simply not “notes”).

This is why. Because that handwritten draft could be changed at will, whereas nowadays, once you save something under a case file number – even as a draft – that’s recoverable. There’s an audit trail, which is what Powell keeps asking for. So, if you’re an “investigator” and you’re not sure how you want to make that interview sound, then you delay creating that discoverable digital trail. And that’s a sure indicator of dishonest intent.

Powell is doing a heck of a job, but she has a lot to work with.

Gut level

November 5th, 2019

Interesting Conrad Black piece on his disagreements with his friend Peggy Noonan. It’s part of the reason we went back to the deplorables remark in a scripted speech, because in our view the speechwriter thinks pretty much all the Orange Man’s supporters are deplorable, and truly feels it on a gut level. “All those smelly Walmart shoppers without graduate degrees,” and so forth. And it’s gut level on both sides today, since emotions are running so high currently. For our final point, we’ll note that it probably makes it easier to do really nasty things if you can think it’s just a necessary part of serving humanity’s highest goals.

Half right

November 4th, 2019

The problem with basket of deplorables was that it was only half. Given the silliness and even craziness of the critiques of Orange Man, we’re pretty sure that the number approaches Ivory Soap: 99 and 44/100’s percent deplorable.


November 3rd, 2019

Ave Maria, Gee it’s good to see ya – was playing in the background, and we were pleasantly surprised to learn that Tom Lehrer was still around. Bonus question: what are the chances that a newly authored history book for high school students would today be called The American Pageant?


November 3rd, 2019

(1) Ancient history at the end of Bulgarmarsh Road. (2) More ancient history. (3) Ancient Friday lunches with g’pa. (4) A pleasant read. (5) RLS does 711 words so we don’t have to.

End of the week

November 2nd, 2019

We thought line 3 was Concentrated Birdy Feet, Oops! Bonus: looks like an interesting read.

Bonus question: if Mary had a little lamb and she wanted to change it to either human or ram, which side would win in court?

Second thoughts

November 1st, 2019

We’ve been interested in, and concerned about, high debt levels in China, for a number of years, and these concerns are valid. And we saw another small regional bank in China collapse the other day, after an explosion in improper lending. However, we’re rethinking at least part of our concerns.

We met with some very bright and experienced people at the Horasis China symposium, including representatives of KraneShares, PeakCapital, Arca, Tapestry, and quite a few others. Everyone is acutely aware of the big conflicts between openness and control in corporate reporting, lending, accounting, and so forth in China.

Our second thoughts arise from that piece at the top of this post on another regional bank bailout, to wit: in a closed system, with no international exposure, who cares if the government is converting the bad loans to equity? The government still has control; its basis is now different. To be sure, none of this works in an international setting, where currencies have to be traded at fair marketplace values (give or take). But a little regional bank has none of that going on. Anyway, we’ve got to think about this some more…

Somebody’s crazy

October 31st, 2019

It’s either we or thee. RLS: it’s thee. And here’s proof: woof!


October 30th, 2019

Ditto. The screaming will only get louder as Durham and Barr close in on these evil men.

Some fun

October 30th, 2019

Just chaired a discussion at the Horasis China Meeting in Las Vegas. Very cool. The (frankly brilliant) discussion group included new-tech asset managers, as well as IB’s and PE’s from the older world, all with deep experience in Asia.

The discussions of China’s conflicts between AICPA type reporting and government control were highly informative and frank. In short: China is at a crossroads in the next decade or so; the government wants control of lending, and of “reported numbers”, and so forth, but…

when a country gets really big in GDP ($15T or so) it can’t keep fudging or frauding or ignoring numbers without ultimate huge backlash from lenders and big 4 accountants, and so will eventually be forced to do the right things. Tick-tock – we’ll see who wins this one, even though there is only one winner consistent with sustained growth.

Update: also an interesting discussion of cryptocurrencies and related topics, of which we knew little. The advocates were concerned with creating permanent value and skeptical of developments in a world of tech bubbles, sub-prime, negative interest rates, unrestrained M1 and M2 growth, etc. Hey, the Gold Standard and Silver Certificates are making a comeback.