Some brief nice things

January 13th, 2019

Here’s a nice thing from Batman, which we never noticed at the time in 66/67, apparently missing Same Bat Time Same Bat Channel, and also a

A very very sweet piece from Thomas Lifson on his new puppy. Awwwww.

Finally, we were looking for something to say about Stanley Kubrick, but the near term opportunity appears to be way off in March, since he departed this world on 3/7/99. We saw 2001 in a Cinerama theater in 1968 – pretty amazing.

Dr. Strangelove – has anyone come close to this? The Shining (so odd that King did not like this). Full Metal Jacket with our favorite D’Onofrio. Barry Lyndon with that terrible actor. And the one about Dolores on the dotted line. Amazing good stuff.


January 13th, 2019

Via Clarice:

(1) Create an investigation — Just by creating the investigation it is then used as a shield by any corrupt FBI/DOJ official who would find himself/herself under downstream congressional investigation. Former officials being deposed/questioned by IG Horowitz or Congress could then say they are unable to answer those questions due to the ongoing special counsel investigation. In this way Mueller provides cover for ideologically aligned deep state officials.

(2) Use the investigation to keep any and all inquiry focused away from the corrupt DOJ and FBI activity that took place in 2015, 2016, 2017. Keep the media narrative looking somewhere, anywhere, other than directly at the epicenter of the issues. In this way, Mueller provides distraction and talking points against the Trump administration.

(3) Use the investigation to suck-up, absorb, any damaging investigative material that might surface as a result of tangentially related inquiry. Example: control the exposure of evidence against classified leak participants like SSCI Director of Security, James Wolfe; and/or block IG Horowitz from seeing material related to the FISA abuse scandal and “spygate”. In this way Mueller provides cover for the institutions and the administrative state.

The Corruptocrats outnumber their opponents by 97 – 3. It’s long past time to get rid of the Beltway.

DSM 2, 3, 4, 5, 6 or maybe just infinity

January 12th, 2019

Via PL:

“in the days after President Trump fired James B. Comey as F.B.I. director, law enforcement officials became so concerned by the president’s behavior that they began investigating whether he had been working on behalf of Russia against American interests.” The Times cites “former law enforcement officials and others familiar with the investigation.”

Apparently they really believe this insanity. No links here. Just tune in CNN or MSNBC.

Another weird and funny moment

January 12th, 2019

Via PL:

I’m surprised the New York Times did not have the details of Mueller’s expanding reliance on 28 USC § 2831, which makes it a crime to sell tickets to any dance at a convention center at which any French song is misleadingly presented as American.

It’s an obscure part of the criminal code known as the Trenet Provision.

In this case, of course, “My Way” was played at the Inaugural Ball, and was played without the paperwork being filed with DoJ disclosing that “My Way” is actually “Comme d’habitude.” According to four sources familiar with the proceedings, Paul Anka has appeared before the Mueller grand jury to explain his role in writing English lyrics for the song.

Anka’s attorney denied that the singer/songwriter was questioned extensively about any contacts he may have had with the late Charles Aznavour. But it suggests that the special counsel is broadening his inquiry into all French music with English lyrics.

Mueller said that he’s going to find Trenet and lock him up with Trump and all the others. Oops, too late.

Another good description

January 12th, 2019

We said by analogy that the Wall costs about as much as a cheap dinner from Dominos. Here’s another good one, a nickel a day. Actually it’s all free, since the government borrows like Wimpy: “I’ll gladly pay you Tuesday for a hamburger today.”

The question of what’s next

January 12th, 2019


Kodak, Polaroid and Sears are all examples from the recent past of companies that held too tightly to an old idea. Today’s tech giants, ranging from Netflix (having already reinvented itself to be dependent on advertising-free streaming video) to Google parent Alphabet Inc. (counting advertising as 86% of revenue), should take note of those painful demises to avoid the same fate.

Apple’s mousetrap is anything but broken. Representing 60% of Apple’s revenue, the iPhone outsells 96% of the companies on the Fortune 500. The phone carries the bulk of the $545 billion valuation that Morgan Stanley assigns to Apple’s wider hardware business.

Apple, for the better part of the 2000s, was the master of the next big thing: the iPod, the MacBook Air, the iPad, the iPhone. Apple wasn’t always first, but its products were easier to use, thinner, cooler.

With the success of the iPhone since it arrived on the scene, the next big thing has been harder to find.

So what’s the next discontinuity? If we only knew, that’s big bucks. Hey, the 2 guys who invented aircraft leasing in 1973 put up $50K apiece and sold the company for $8 billion.

We read somewhere that the greatest invention of the 19th century was the bicycle. Not for long……

And speaking of weird religions

January 11th, 2019

The ‘walls don’t work’ religion may not be the nuttiest, but it’s one of the funniest.

2 trillion galaxies and religion

January 11th, 2019

We’ve referred to the 2 trillion galaxies a number of times. We don’t know if the number is true but it’s a lot. This produces an estimate of 20,000,000,000,000,000,000,000 planets, give or take. The universe is 14-15 billion years old, give or take, and earth is 4-5 billion years old in current estimates.

So watching the earth and writing a paper on it is a kind of an alien fifth grader’s assignment for most of the universe, if the schools even care. Today, our subject is different. We’ve said we grew up in the old Latin altar boy Catholic tradition, and that a good friend from HBS converted from Judaism to Roman Catholicism, and has quite a lot of evidence from miracles on his side.

Our small thought for today is that in the 20,000,000,000,000,000,000,000 planets, there must be massive numbers of religions that claim exclusivity. Impossible that that’s true, QED. So there must be some kind of resolution.

We also have a problem with the small amount of post Good Friday narrative in the gospels, though the Resurrection of Jesus and hence humans was supposed to be the grand prize from believing, but that’s for another day.

For today, what? Perhaps this: there must be some kind of even grander resolution. If there is a supreme being of the 20,000,000,000,000,000,000,000 planets, grossly contradictory beliefs that make a big deal on the lower level must get ultimately resolved or simply just don’t matter in an afterlife.

Well, we’ll stop with this: if we can make a more informed report in a few years from netherland, we’ll connect with ET and phone home. Stay tuned.

How do you spell rubbish?

January 10th, 2019


The United States of America could lose its position as the world’s biggest economy as soon as next year — and once that happens, it is unlikely to regain the top spot as developing Asian economies power ahead.

According to research released this week by Standard Chartered Bank, China is likely to become the world’s biggest economy at some point in 2020, when measured by a combination of purchasing-power-parity exchange rates and nominal gross domestic product.

Using PPP alone, China is already considered the world’s largest economy, but on a nominal basis the US remains in the lead.

Not only is China likely to overtake the US in 2020, but by 2030 it will be joined by India, Standard Chartered said in its report, with annual GDP growth set to accelerate from about 6% now to almost 8% in the coming decade.

“India will likely be the main mover, with its trend growth accelerating to 7.8% by the 2020s partly due to ongoing reforms, including the introduction of a national goods and services tax (GST) and the Indian Bankruptcy Code,” Standard Chartered said.

India’s rise would also reflect Asia’s becoming the dominant economic region of the planet as the size of its output starts to match the size of its population.

“Our long-term growth forecasts are underpinned by one key principle: countries’ share of world GDP should eventually converge with their share of the world’s population, driven by the convergence of per-capita GDP between advanced and emerging economies,” a team of economists from the bank wrote in a note to clients.

By 2030, the bank said, Asian GDP will account for roughly 35% of global GDP, up from 28% last year and 20% in 2010. This would be equivalent to the combined output of the eurozone and the US.

We dealt with this PPP nonsense a long time ago, but this is the first time we’ve seen the greater lunacy, that “countries’ share of world GDP should eventually converge with their share of the world’s population.” Hmmm. Looks like cannabis is getting legalized everywhere.

No big deal

January 9th, 2019

Some guy

In the last two years, ICE officers made 266,000 arrests of aliens with criminal records, including those charged or convicted of 100,000 assaults, 30,000 sex crimes, and 4,000 violent killings. Over the years, thousands of Americans have been brutally killed by those who illegally entered our country, and thousands more lives will be lost if we don’t act right now.

Our southern border is a pipeline for vast quantities of illegal drugs, including meth, heroin, cocaine, and fentanyl. Every week, 300 of our citizens are killed by heroin alone, 90 percent of which floods across from our southern border. More Americans will die from drugs this year than were killed in the entire Vietnam War.

What a loser. Hey, chill out. Get with the AOC program. Sanctuary state! Free healthcare and Free Everything! Grooooooovy!!!

What’s going on?

January 8th, 2019

We’re not going to comment on this, except to say that things have gotten incredibly weird in the party of FDR and JFK (and HST, whom we add for the obvious reason).

Insanity or comedy

January 7th, 2019


Like all emergency powers, the laws governing the conduct of war allow the president to engage in conduct that would be illegal during ordinary times. This conduct includes familiar incidents of war, such as the killing or indefinite detention of enemy soldiers. But the president can also take a host of other actions, both abroad and inside the United States.

These laws vary dramatically in content and scope. Several of them authorize the president to make decisions about the size and composition of the armed forces that are usually left to Congress. Although such measures can offer needed flexibility at crucial moments, they are subject to misuse. For instance, George W. Bush leveraged the state of emergency after 9/11 to call hundreds of thousands of reservists and members of the National Guard into active duty in Iraq, for a war that had nothing to do with the 9/11 attacks. Other powers are chilling under any circumstances: Take a moment to consider that during a declared war or national emergency, the president can unilaterally suspend the law that bars government testing of biological and chemical agents on unwitting human subjects.

The president could seize control of U.S. internet traffic, impeding access to certain websites and ensuring that internet searches return pro-Trump content as the top results.

One power poses a singular threat to democracy in the digital era. In 1942, Congress amended Section 706 of the Communications Act of 1934 to allow the president to shut down or take control of “any facility or station for wire communication” upon his proclamation “that there exists a state or threat of war involving the United States,” resurrecting a similar power Congress had briefly provided Woodrow Wilson during World War I. At the time, “wire communication” meant telephone calls or telegrams. Given the relatively modest role that electronic communications played in most Americans’ lives, the government’s assertion of this power during World War II (no president has used it since) likely created inconvenience but not havoc.

We live in a different universe today. Although interpreting a 1942 law to cover the internet might seem far-fetched, some government officials recently endorsed this reading during debates about cybersecurity legislation. Under this interpretation, Section 706 could effectively function as a “kill switch” in the U.S.—one that would be available to the president the moment he proclaimed a mere threat of war. It could also give the president power to assume control over U.S. internet traffic.

The potential impact of such a move can hardly be overstated. In August, in an early-morning tweet, Trump lamented that search engines were “RIGGED” to serve up negative articles about him. Later that day the administration said it was looking into regulating the big internet companies. “I think that Google and Twitter and Facebook, they’re really treading on very, very troubled territory. And they have to be careful,” Trump warned. If the government were to take control of U.S. internet infrastructure, Trump could accomplish directly what he threatened to do by regulation: ensure that internet searches always return pro-Trump content as the top results. The government also would have the ability to impede domestic access to particular websites, including social-media platforms. It could monitor emails or prevent them from reaching their destination. It could exert control over computer systems (such as states’ voter databases)

How about both? HT: BB (And while we’re on the subject, here’s more.)

The problem is the “trade dispute”?

January 6th, 2019


Behind the scenes, officials in the gated Zhongnanhai leadership compound are coming to a stark conclusion, according to people involved in the discussions: The trade dispute is short-circuiting growth.

The Trump administration’s trade offensive, say the people and business executives, is hitting China’s export-oriented manufacturing sector especially hard, reducing new orders for business and forcing factories to cut production and delay decisions on investing and hiring.

Beijing has been trying for years to make the economy less manufacturing dependent and more oriented toward domestic services. Still, the factory sector accounts for a little less than a third of all economic output.

In December, both big, state-owned companies and small, private ones reported a drop in new orders, resulting in an official measure of factory activity hitting its lowest level in nearly three years. Profits from big Chinese industrial firms, official data show, also declined in November for the first time in three years.

In the southern province of Guangdong, the country’s export hub for electronics, chemicals and auto parts, the local government was recently forced by the National Bureau of Statistics to suspend publication of a monthly indicator of regional manufacturing activity that had been trending lower. Beijing said the province lacked permission to produce the local survey of factories, which has been publishing since 2011.

“The purchasing managers’ survey conducted by the Guangdong Department of Industry and Information Technology was an illegal activity,” the statistics bureau said in a statement.

Small, private entrepreneurs, already struggling with higher costs of funding compared with bigger state-owned enterprises, are bearing a large share of the manufacturing slowdown.

“We didn’t feel anything even during the 2008 global financial crisis,” said Shao Danping, an engineer-turned-entrepreneur who owns a Shenzhen factory that makes printing devices. Now machines in the three-story facility are largely sitting idle, and half of the factory’s first floor has been rented out to another company. Her products haven’t been hit directly by tariffs, but potential customers are looking outside China for suppliers, she said. “The trade war is really killing our business.”

The slowdown goes beyond manufacturing. Chinese consumers have cut back, resulting in a slump in sales of cars and other goods. Apple Inc. reported a sales shortfall last week in part because of troubles in China. Meanwhile, despite being prodded by Beijing to spend again on infrastructure and other big-ticket projects, many local governments are already stretched after years of spending on debt-driven projects.

Some government advisers and economists estimate that China’s officially recorded growth rate in the fourth quarter fell below 6.5%, a figure disputed by many analysts and investors. While that is high by global standards, it would be the weakest pace of growth since the financial crisis.

The slowdown could give Mr. Xi’s advisers a greater sense of urgency to hash out a trade deal with U.S. negotiators when the two sides sit down in Beijing this week. Just a few months ago, when the economy was still performing within expectations, Mr. Xi had adopted a largely bare-knuckle approach to Washington’s trade-clash escalations, vowing to match President Trump’s tariff threats dollar for dollar.

The “trade dispute” may be a little problem, but leverage is the bigger problem. It will be very interesting (interesting????) to see where this Taiwan talk goes.

Curious and Curiouser

January 5th, 2019


Chinese President Xi Jinping on Friday ordered the People’s Liberation Army to prepare for combat and war as the country faces unprecedented risks and challenges.

Xi’s speech was made at a meeting of top officials from the Central Military Commission (CMC), which he heads, and broadcast later on national television.

“All military units must correctly understand major national security and development trends, and strengthen their sense of unexpected hardship, crisis and battle,” he said.

At the meeting, Xi also signed off on the first military command of 2019, which will kick-start a year of enhanced military training and exercises.

China’s armed forces must “prepare for a comprehensive military struggle from a new starting point”, he said. “Preparation for war and combat must be deepened to ensure an efficient response in times of emergency.”

Earlier in the week, PLA Daily, the official newspaper of China’s military, said in an editorial that “there was no time for slacking in war preparation”.

Similarly, the CMC issued a series of guidelines to boost morale, saying military personnel would be promoted on the basis of merit, and promising greater leniency and understanding for mistakes made in training.

Shanghai-based military expert Ni Lexiong said the recent “high-profile gestures” were probably intended as a warning to those who sought to obstruct the mainland’s plans for the reunification of Taiwan. “[They] show how seriously Xi is taking China’s military training and its preparations for war, while also flexing its strength,” he said.

While Xi spoke of his desire for a “peaceful reunification” with Taiwan, few experts expect Beijing to ease the military pressure on the island, which it regards as a breakaway province.

According to a report by state broadcaster CCTV, the military command signed by Xi prioritises enhanced training, with the focus on combat readiness, drills, troop inspections and resistance exercises.

It applies to all units of the PLA, including troops, academies and armed police, and is designed to “ensure new challenges are met and battles are won”, according to a copy of the guidelines seen during the television report.

Yue Gang, a retired PLA colonel, said that as well as the rising tensions between Beijing and Taipei, Xi’s rallying call to the military was a response to the growing uncertainty over the geopolitical struggle between China and the United States.

“China is increasing its military training so that it has the best solutions for the worst outcomes, either related to the US or across the [Taiwan] strait,” he said.

As China tests military muscle, PLA warns Taiwan efforts to resist reunification with force are dead end. “Over the coming year, the US might use Taiwan and the South China Sea as bargaining chips to get what it wants from China with regards to the trade war,” he said

Hmmmm. Chinese admirals don’t make provocative statements on their own. Something new appears to be happening, and perhaps Taiwan (which we’ve only visited once BTW) is to become some sort of bargaining chip. Tip: for the next while, don’t buy an apartment in Taipei.

Oh, the outrage!!!

January 5th, 2019

Not only is that wall evil, it’s just so darn expensive. Behold the horror: if you were making a modest salary of $50,000 a year, the administration’s funding request would be the equivalent of getting a large pepperoni pizza and parmesan bread twists from Dominos. Oh, the humanity!!!

The Fed’s tune has changed

January 4th, 2019


Stocks rallied Friday after Federal Reserve Chairman Jerome Powell said mild inflation gives the central bank greater flexibility to set policy in the year ahead and that the Fed wasn’t on a fixed path to push its benchmark interest rate higher. “With the muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves,” he said

A heck of a turnabout, but not at all unexpected. In other news, this sort of charm and civility will be Rule #1 this year.

Seven down charts recording China’s economy

January 3rd, 2019

Very very interesting: retail sales, property sales, auto sales, consumption tax revenues, industrial profits, PMI (47-49), GDP by quarter, down, down, down, and on and on. Most are down big from a decade ago. So the stimuli provided by corporate debt 2x and family debt 3x since then, have now stopped working. But it’s even worse than that. Long time observers of China’s economy know that China’s government reported GDP and growth numbers are nonsense.

Slow growth and too much leverage – hey that sounds like 2008. (Sounds like Weimar or Venezuela without the crazy devaluations.) So what do you do if you are Xi Jinping? Maybe just try to cope with tough circumstances. However, we know what a Chinese admiral or two are thinking about. A charming little (or not so little) war would change the subject completely, focusing on the enemy outside as opposed to inside. We don’t see it, but the probability is not zero.

Party time for very small companies

January 3rd, 2019


China’s central bank tweaked its rules on bank lending to the country’s cash-starved small businesses, the latest move to support the private sector in an economy that faces growing headwinds.

The People’s Bank of China said in a statement Wednesday that enterprises with bank credit lines less than 10 million yuan ($1.5 million) now are seen as small and micro enterprises, and bank lending to these companies, if reaching certain amount, can make lenders eligible for lower reserve requirements.

Previously, only loans to companies with less than 5 million-yuan credit lines had been seen as small and micro loans. The latest rule tweak in effect encourages bank loans to more small companies, the central bank said.

In 2017, the PBOC said the reserve-requirement ratio for Chinese banks, whose lending to small and micro companies takes up to 1.5% of their annual new loans, can be lowered by 0.5 percentage point from the benchmark requirement. Banks with more than 10% of new loans to small companies are qualified for an additional 1 percentage point reserve-requirement-ratio cut.

China’s central bank, together with other financial regulators, has stepped up support for small private companies, which contributed the bulk of national economic output but have been disproportionately hit by Beijing’s deleveraging campaign.

Hey, leverage is fun – until it isn’t.

Slower still

January 3rd, 2019


In September, I talked about China’s Lost Decade: the golden age of Chinese economic growth was in the noughties, which has been followed by a slowdown. By 2010, the low hanging fruit had been picked. More recent successes have been harder won, such as modernising China and largely eliminating poverty. These are no less proud achievements, though less boast-worthy.

There is an immutable rule in nature and economics. The bigger you are, the harder it is to grow. The dinosaurs tried and failed. There are verbal reports of Chinese academics calculating China’s 2018 economic growth at as low as 1.5 per cent, rather than the official 6.5 per cent. That seems too low to me but when I tested it among my China-based investment management buddies, it caused little surprise. After all, we have seen substantial declines in many of China’s economic indicators in the past year. That slow pace would put China behind the US, which overstimulated its own economy through big tax breaks.

The wisdom of crowds is more reliable in China when it comes to slow growth. The Shanghai Stock Exchange Composite Index was the world’s biggest loser in 2018, posting a fall of 24.6 per cent. Indeed, any analyst anywhere who still believes that China has a 6 per cent growth rate should be thoroughly ashamed of themselves.

In other news, “promoted.”

Skate or Die

January 2nd, 2019

Yes, we know it’s a game, but it’s also a L&O episode from a decade ago, and a very funny one at that. It’s particularly funny today because the chief bad guy sees Russian plots and Putin everywhere. Another part of the reason it’s funny is that the plot is pretty nutty, just like the investigating coo-coo birds of today. If there’s a remake, the villain could well be played by Mueller, Comey, Rosenstein, Clapper, or perhaps actual commie Brennan.