Categories
Economics Future Investing Politics

Seven Industries That Will Shape the Future

This morning before the closing bell of the stock market, I released the first baseline number for the Vagorithm Index. Today on October 24, 2018 it was 381.33(+1.64) with the number in parenthesis being my societal volatility index number. On scale 381.33 is our baseline for societal change and and radical disruption. A lower number means that innovation and change are happening at a slower pace, a higher number means that change is happening at a faster pace. The volatility number is the daily deviation from a steady technological growth rate. I do not use the Dow Jones Industrial Index or any other index in determining this value. Instead, I look at the rate of change and appreciation of companies that are working within the seven sectors that I believe are shaping the future around us. We do not see how rapidly the world is changing – but from day to day – the rate of change is faster than the annual rate of change less than a hundred years ago. The sectors below are the sectors which are shaping the future.

1. Bioengineering and Genetic Engineering – At the moment, this sector is moving relatively slow in comparison with others because of the important regulation that constrains what would otherwise be volcanic growth. Our ability to change life itself is moving faster than the regulation can keep up. Not only does this affect things like disease and aging but also the ability to grow food, to repair(or destroy) the environment, and much more. Not only can we change the world, eventually when regulations are satisfied or bypassed, we will be changing ourselves and will no longer be Homo Sapiens of any kind.

2. Distributed Ledgers and Blockchain – IBM is doing amazing work with blockchain and food production – as well as many other sectors. While the jury may seem to be out on Bitcoin and other cryptocurrencies – players behind the scenes are building the future of finance, ownership, and wealth. Do not underestimate the power of distributed ledgers to topple governments and corporations.

3. Renewable Energy – our world was built on fossil fuels. It was fossil fuels that gave the greatest wealth and power to men and nations. Now, like it or not, they are being phased out. Renewable energy on a massive scale is coming and it will being new power structures, new ways of living, and new problems.

4. Artificial Intelligence (and Augmented Intelligence). We already walk around with assistants in our pockets that know everything. The interfaces are getting better. Our brains no longer function like the brains of our grandparents but we still use the same structures – not for long. And then there is the singularity – A.I. will surpass our ability to do everything – and will make everything happen much much faster than it already is.

5. Industrial and Labor Automation. In all liklihood, you are going to lose your job. We are all going to lose our jobs. Things will become cheaper and information will become more expensive. Our entire concept of economics will have to undergo a radical transformation.

6. New Materials. Nano-carbon fibres, lab grown meat, more conductive materials, better building materials. A.I. and automation along with renewable energy sources and bioengineering will change the materials we use in almost every instance. Legacy materials will be like hand made woks, a luxury or oddity – not the norm.

7. Virtual Reality, Artificial Reality, Augmented Reality, Combined Reality. In the not too distant future, you won’t have to put on a headset to enter a virtual world and there is a pretty good chance that the virtual/artificial/augmented world will spill over into the ‘real’ world. Will your self driving car be able to crash into the giant billboard – no, because it won’t physically be there – but it will be there – as real as your cousin that you have only seen on Facebook for the past ten years.

These are the main factors that I’ve incorporated into the Vagorithm. There are a couple of other factors that seem important to me. Is this a financial tool? Maybe. Over time you may be able to use it to chart good entry and exit points for the stock/forex/crypto markets – but my main purpose in creating it and sharing it, is to be able to quantify the level of future that exists in the now over time. For what it’s worth – since I began keeping track of these factors (shortly after the election of 2016) – the level of innovation has decreased by 42%. So, by my reckoning – right now – we are in a period of doldrums when heavy resistance to technological and societal change is feeling it’s power. Ignorance is at its most powerful level since the McCarthy Era when people wore blinders and feared what they didn’t understand. The good news is – when the forces of ignorance are defeated – the level of change is going to be  almost blinding in its speed.

Categories
Investing

Mental Market Manipulation – Investors Beware!

Every good investor knows that there are two keys to success in the stock market – luck and knowledge. The two are intimately connected – the luck portion comes down to being in the right place at the right time so that you can discover the knowledge. There’s a lot you can do to increase your luck – most of it consists of research, finding great news sources, being part of social networks that share infromation about the stocks or investments you are interested in, and generally just doing the work. There’s truth to the statement that luck is where opportunity meets preparedness. When you do the work, the research, the networking – it increases your odds of being lucky.

So…knowledge often leads to luck and even if it doesn’t lead to that big lucky break – you are more likely to do better in the market if you are an informed investor than if you are not. Although, lately, I’ve noticed some very disturbing patterns that require me to give some words of warning about the knowledge you gather and what you do with that knowledge.

Investors are being mentally manipulated and they don’t even know it. Many of the major news analysts, stock pickers, chartists, and news sources are being used to drive market sentiment up or down so that institutional investors can sell at ridiculous highs and scoop up bargains at incredible lows. I’ve been watching for a while now as articles on Seeking Alpha, CNBC, Investing.com, Motley Fool, Reuters, Zacks, and Business Insider all seem to be lining up with either a very negative story or a very positive story – which is then picked up and echoed by the mainstream media, thousands of twitter accounts, and other social media. The interesting thing is that these narratives usually come before earnings announcements, dividends, or other important news – and – here’s the kicker – the news is usually wrong.

I’m aware that this isn’t a new phenomenon – but the size and scope of it are much broader than previously and there is a new and explosive market dynamic which didn’t used to be an important factor. The new dynamic is the rise of instant phone trading – Robinhood alone has millions of inexperienced investors who don’t act on fundamental or technical details but instead act on their ‘gut’ and make decisions on whims. These investors are easily manipulated to buy and sell themselves out of whatever money they have put in the market. AND – and this is very important – most of the institutional big money is now being controlled by bots, roboadvisors, and algorithms –  these programs are able to execute millions of trades per second.

So, let’s say IBM is about to make a big announcement that earnings were far greater than expected. Insiders want to be able to purchase shares as cheap as possible prior to the announcement. They pay a small army of analysts and financial writers to express negative opinions about IBM in the weeks running up to their earnings announcement. That negative message is then disseminated to the media, the inexperienced investors, and the public. It is amplified by the social media accounts. The gut/whim investors feel the negative force and dump IBM. The robos, algos, and bots then see this trend of IBM dumping – they follow suit. The price tanks – more negative press follows.

A few honest analysts see the negativity and call out the bad news. They generally are ignored. The insiders scoop up shares. The announcement is made. Everyone talks about what a surprise the events were. The price goes up and up.

The market has been mentally manipulated. No laws were broken. Opinions were only presented. Analysts are allowed to be wrong. The narrative changes. Wealth has shifted from the bottom to the top – again.

Do your own research my friends. Learn both technical and fundamental analysis. Look at the financials. Buy into great companies and hold. Don’t believe the hype. Good luck!

 

Categories
Economics Politics

Marriott Hotel Workers in Hawai’i Strike Protesting Tourism Job Automation

Hawaii may be paradise for people on holiday but for those who live and work here it has long been unaffordable. The money flowing into the islands flows out as fast as it flows in and what stays has never been shared fairly. Hotel companies, like Kyo-ya Hotels and Resorts (a Japanese company) which own many of Hawaii’s hotels, and large mainland based corporations, like Marriott, are profiting from Hawaii’s tourist economy and making their investors (who mostly do not live and work in Hawai’i) rich. Meanwhile, the cost of living in Honolulu is skyrocketing, rents are increasing and real estate prices are exploding upward constantly. Health care and insurance costs are rising quickly and food prices (along with everything else) are more expensive daily. Working people in Hawai’i now must work two or even three jobs to make ends meet. This is not new, but it’s getting worse.

In addition, automated tour desk, front desk check-in kiosks, cellphone enabled room keys, robot room service delivery, and guests opting out of housekeeping (green-washing) are taking away some jobs. Wages have not gone up in Hawai’i for a long time – the cost of living goes up and workers give an increasing share of their wages to the ‘paradise tax’.

Workers are picketing five Marriott hotels in Hawaii: Sheraton Waikiki, Royal Hawaiian, Sheraton Princess Kaiulani, Westin Moana Surfrider and Sheraton Maui. About 95 percent of the 3,500 workers in Local 5 authorized a strike last month. The hotels are working with ‘contingency plans’ but guests at the hotels as well as other visitors in Waikiki are being impacted.

Marriott is the largest and wealthiest hotel company in the world. The company earned $22.9 billion dollars in revenue in 2017 and has a net worth of $46.8 billion dollars, almost twice that of it’s nearest competitor, Hilton. As a giant in the hospitality industry, Marriott has the resources to lead the way in creating good, life-sustaining jobs. Instead, the company has refused to meet the modest demands of its employees, and now these workers are on strike.

Workers want a say in how new technological changes can improve working conditions rather than lead to the elimination of jobs. In addition, they want better pay and benefits which are more in line with the high cost of living in Hawai’i. While wages might seem high to workers in other states, Hawaii’s wages are roughly 10% lower than the national average across a broad spectrum of careers. In addition, Honolulu is among the top five most expensive cities in America. Median price for a 2-bedroom, stand alone home is roughly $1.2 million dollars with 2 BR condos and townhouses at a median of about $800,000. Rents have soared skyward with the advent of AirBNB, vacation rentals, and foreign investment in ‘affordable houseing’. Hawaii has the lowest rate of home ownership in the USA. Tourism workers in Hawai’i often are hired on a part time basis so that company owners do not have to pay healthcare costs.

The strikers in Hawai’i are not alone. This is a national hotel strike taking place from coast to coast in the USA. The strike is growing and the issues the workers are striking about will not be going away.

Nothing will be won through isolated, individual strikes. Hotel workers are forming independent workplace committees to expand the strikes, linking up the struggles of workers in different cities as part of a broader mobilization of the working class. These committees must formulate demands that meet the real needs of workers for livable wages, full healthcare coverage and job protections.

The workers who clean, cook, and serve in Hawaii’s hotels want to be able to survive and live in a state where costs are rising. They want to see their incomes rise, they want have access to year-round health insurance, and they want to retire with dignity rather than in to poverty.

Housekeepers want Marriott to end or change its greenwashing program called Make a Green Choice. This program gives guests incentives to refuse housekeeping – a cynical move to remove housekeepers from the schedule and keep labor costs down. The program leaves many room attendants waiting by the phone at night to see if they have work in the morning.

Finally, Marriott workers want to have a say in how new technologies will change their jobs. With robotics, algorithms, and digital apps flooding the hospitality industry, Hotel workers want job security protections that allow them to be part of the innovation economy rather than victims of it. They want to be able to have a voice in how and where technology is implemented, be retrained for jobs in the digital age, and have severance protections if jobs are eliminated.

Honolulu workers are striking for all tourism workers who believe that one job should be enough. They are demanding that the largest, wealthiest hotel company in the world take responsibility for creating jobs that allow working people to live and survive in our state. In doing so, they are providing an example of how working people, united and with a clear vision, can solve some of the economic problems of our society.

One thing for sure, the Hawaii Convention and Visitors Bureau is nervous as hell – next week 10,000 dentists will descend on Honolulu for their annual convention – and everyone knows you don’t want to piss of a dentist on holiday. Hell hath no fury like a dentist whose vacation was ruined by striking workers. They’ll make the hurricanes and volcanic eruptions look like nothing in comparison.

Categories
Cryptocurrency Economics Investing

BALDER AIEAS The Market Crash Test Balloon – This Week in Investing

I know this week in the stock and crypto markets has been difficult for many people. I’m not one of them. My stock portfolio and my crypto portfolio both lost quite a bit of value over the past month – this week was more of the same. I feel good about every decision I made this week – with one exception – after taking sharp declines in my shares of TVIX, I sold a little above break even and missed 80% growth the past two days…in this case, I let my fear of losses outweigh my desire for gains. And, let’s be honest – I was drinking the kool-ade, I was mostly believing the narrative that the markets would simply keep going up and up and that the crash would come sometime in late 2019 or 2020.

The pullback hit a lot of the rising tech stars of 2018 the hardest. Yext, AMD, Square – along with some old favorites like Ali Baba, Amazon, Google, Netflix. Oddly, Tesla didn’t suffer much, maybe because a bottom was already in. McDonalds and Starbucks both weathered the storm nicely, with both companies actually taking gains in a sea of red. Gene editing, industrial automation, electric self-driving cars, and marijuana stocks all took hard hits.

With all the blood in the equity markets, I thought cryptocurrencies might stage a rally but there was some news timed just right – Gemini, the crypto giant created by the Winklevoss Twins, was denied their bitcoin ETF, again by the SEC. So, crypto dropped significantly.

At this point, I”m grateful to crypotcurrency for making me a better investor. Yes, my investments are down by large margins compared to a year ago, but bitcoin and alt-coin losses have made it possible for me to suffer 20% losses (or 90% losses) and not lose my head. I’ve seen the massive volatility, the rise and fall of shares and all of that has brought me back to the fundamentals. Invest in companies for the long term. Find quality companies with quality management. Watch for buying opportunities. Let winners run. Ditch losers early. Take profits when you can.

The hardest part of this week was controlling the urge to cash in my savings and invest it in more shares of Amazon, Square, AliBaba, and Yext. I’m still bullish on IBM, but sold most of my shares a few weeks ago at the highs. My investing goal right now is to take enough profits to step out of my margin account. This week demonstrated the danger of margin – luckily, I avoided a margin call, but essentially a margin call would have meant 2x the loss.

I’m still drinking the Kool-Ade, by the way. I think the markets are going to rally through the next 12 months with a couple little down turns. I’m hopeful that we’ll see a bitcoin/crypto rally in the next few months as well. The market is going to come down – but the policy makers have enough control at the moment to keep it bouncing back. The range on that is narrowing, however.

My strategy moving forward is to continue scooping up quality companies at bargain prices. I don’t think that Amazon, IBM, Editas, AliBaba, or Square are going anywhere but up from this point. I’m calling this the AIEAS strategy. I live near the town of AIEA, Hawaii. It’s the only U.S. city with no consonants.

For my consonants, my crypto strategy. Bitcoin (BTC), Cardano(ADA), Litecoin(LTC), Digibyte (DGB), Ethereum Classic (ETC), and Ripple (XRP) – or BALDER.

I’m not a classic conspiracy theorist, but I do think that there are great powers pulling the strings behind the scenes. We see some of what they are doing, but most of it is obfuscated. I believe that this past week was a test balloon to see how markets would react and what they could make them do. Yes, rising interest rates, yield curve, inflation, and more were at play – but the bottom line is – nobody that I’ve heard or read, has given a compelling arguement for why this massive crash happened – there was no obvious catalyst. More crashes will come and more bull runs. The invisible hand is at play here. We don’t know what it is heading towards, why it is making the moves it is making, or when they will happen – only that they will happen.

So, my AIEAS BALDER strategy is designed with that in mind. Quality companies and crypto projects. The bulk of my investment will be in Bitcoin and Amazon. They aren’t pure safehavens, but they are the best we have at the moment.

Categories
Politics

The 2nd American Civil War – What will it look like?

When I was in gradeschool during the 1970s and 1980s – it was fascinating to look at the American Civil War. What made it so fascinating was the unthinkable concept of ‘brother versus brother’- my teachers, my classmates, and me – none of us could imagine political ideologies so strong that they could rip families apart and cause brothers to shoot guns at brothers. It was simply unthinkable and thus – fascinating. It remained unthinkable throughout my life – until the election of 2016.

When I say it was unthinkable, what I mean is that I couldn’t conceive of any cause or concern that would create enough animosity between Americans that they would risk ripping up our 200+ years of democracy and take up arms against each other. Sure, there were stark differences about the environment, labor, corporatism, civil rights, and things like abortion – but only a small fringe of nutcases actually took these differences to a violent level. It was rare to hear about families who no longer talked to one another over their political differences.

It’s not rare anymore. We may not (yet) have brothers taking up arms against one another, but there are countless families where people no longer speak to each other, friendships have ended, people have moved to different regions because of political concerns (my family did) and never since the 1850s has there been such polarization in the United States of America. We may be bound together by our government, but we are no longer united. And that’s just the way it is.

More than anything – the division seems to be about the power of Christian white people in the United States. One camp feels that Christian white people are being disempowered unfairly and the other side sees the playing field as being leveled as disempowered people of color, LGBQT, women, latinos, and non-Christians are given an equal voice in determining who and what the USA is. It’s not a coincidence that the major Trump policies have been about empowering white ‘prosperity’ Christians and disempowering immigrants, Muslims, women, Asians, African Americans, the poor, LGBQT, Latinos, and other groups that rose in political power during the Obama years.

I am not saying that this is a strictly racial divide. It’s a religious divide as well. It’s also a profits versus people divide as one side believes that as long as business prospers the citizens will do well and the other side believes that the government’s primary objective should be to take care of citizens directly. But mostly, all of that is a bit like saying the civil war wasn’t about slavery but about state’s rights versus federal rights – it’s true, but the civil war was mostly about slavery – we all know that. The next civil war will be about white privilege. Since the colors have already been assigned – we can say that instead of blue vs. grey or North vs. South – the next civil war will be Red vs. Blue and unfortunately for the blue side – there is no cohesive geographic area. If anything it seems to be a Northeast Coast and West Coast vs. Interior and South.

In general, it’s something like this 2018 map of state legislatures:

So, what sets it off? Personally, I think the John Brown moment will be the moment that Donald Trump refuses to give up power if he loses the 2020 election or retains power through 2024 or gets impeached. I don’t believe he has any intention of stepping down. His refusal to step down will cause the State of California to secede. This will cause chaos as there are a number of important U.S. bases in California. What happens in that situation? Do all the California loyal troops rise up and take the bases? Are the Californian troops on those and other bases rounded up and put in camps? Does the U.S. evacuate California? Do the troops turn on each other? I have no idea. It’s almost inconcievable except that the catalyst event is not hard to imagine. It’s such a confusing situation that it’s not hard to imagine shots being fired as U.S. troops and California loyal troops try to navigate through the situation.

I believe that Hawai’i, Oregon, and Washington would quickly side with California. It’s not unthinkable that Illonois, Massachussets, Rhode Island, New Jersey, New York, Connecticut, Vermont, and Maryland would follow. Politically, the city of Washington D.C. is much more aligned with blue states but since it is the U.S. capital and currently held by Red – it could easily be a major flash point. None of it would be as simple as this. From Redding, California all the way up to Eugene, Oregon and everything east of the Cascade and Sierra Nevada – this is all deeply red territory. Cities like Miama, Atlanta, and Austin are solid blue.

So, the flashpoints and battle fields are probably going to be military bases in blue territories and areas like those mentioned above where red people are in blue territory or blue people are in red territory. If actual hostilities break out – red sympathizers will quickly form ad-hoc militias. It’s no secret that most of the anti-government, gun hoarding, militia forming preppers are either vocal Trump supporters or at the least fundamental Christians with sympathy towards white nationalism. These folks won’t wait for orders. They’ve been waiting and training for decades. The Northern California/Southern Oregon region would probably quickly secede from California and create their long desired State of Jefferson.

So, here’s the big question. How ugly does it get? Fire fights in the streets of Sacramento? Bombs from F-18s leveling the skyline of Los Angeles? Washington D.C. in flames? One side using nuclear weapons? Yes, that’s a very real danger in an American Civil War. The militias might be the biggest danger of escalation.

So, all of that is conjecture. The hard and fast truth of the matter is that we have reached a point – in 2018 where it no longer seems impossible that brothers would take up arms against one another. The college educated brother in the city versus the brother who stayed on the farm. The brother who goes to church versus the brother who is agnostic. The brother who votes Republican versus the brother who doesn’t.

God help us all.

Categories
Politics

Trumpism is Winning. What if Donald Trump won’t step down?

I’m sorry to tell my liberal friends, but the American system of government has failed. This is not a process that is happening, it’s something that has already happened. The American system of checks and balances, representative democracy, and a constitutional republic have failed and they have failed completely. Donald Trump and the forces aligned with him are in complete control. Sorry, I know it’s not pleasant, but it’s the truth. Unless, you accept the truth now it’s going to make the future much more difficult to understand. Here are the facts:

1) Despite breaking with the norms of transparency (tax returns etc), decency (groping women, cheating on his wife, racism etc), and honesty (documented evidence reveals that Trump has told more than 2000 verifiable lies since being elected) – Donald Trump has not only been elected President with the faulty electoral collge system but also remained in power despite scandals that would have previously brought down any President.

2) Russia meddled in the election. We don’t know how much power they gained as a result. We don’t know if they hold something over Trump. We don’t know if there is ongoing collusion and collaboration.

3) Both houses of congress have shown where their loyalties lie. At the beginning of the Trump presidency there was a chance for Senators and Representatives to resign or resist – a small number of those in the Republican party did. With the death of John McCain, the remaining Republican congress members capitulated to Trumpism. They are either Trumpists or they are leaving at the end of their term.

4) Democrat Party congress members have shown themselves to be ineffective at resisting. Over and over again they have bowed to the pressure of their corporate masters or to the uneducated, angry, and vocal supporters of the president. In addition, Democrats have repeatedly turned on their own party members and created opportunities for Trumpers to build their base in traditional Democrat territory.

5) Trump and his Justice Department have stacked the judiciary with unqualified, right-wing, toxic male judges. This includes the Supreme Court where Trump has pushed through two Supreme Court Justices who will back him and his administration from dawn to dusk and then through the night.

6) Trumpism – which I define as seeking victory by whatever means possible including race baiting, racism, lying, cheating, stealing, and screaming to drown out dissent – as well as fostering a sort of exhaustion through constant media attention – is winning. The Democrats, who have worked for decades with Republicans to destroy and assimilate any viable third party, have no working defense against Trumpism. Currently elected Democrats are almost all vulnerable to attack because they have been part of the system that created the current mess. They can’t point fingers without being charged with hypocrisy. There is no possibility for Democrats to win because they are constrained to be fair, honest, ethical, and saint-like while no such standard is used on Trumpers. There is no way for Democrats to win.

7) The military and law-enforcement leadership have nearly whole-heartedly bought into Trumpism. While there are many women and people of color in these careers who are not Trumpists, the leadership has mostly used military and police indoctrination to put the military firmly in support of Trumpism. Loyalty to the President has been tied to loyalty to the flag and the national anthem and thus the country. We cannot expect the military to rescue the Republic.

There is much more, but that brings me to the question. Imagine that 2020 comes and Donald Trump loses to some candidate – any candidate. It could be Joe Biden or Bernie Sanders or Oprah or Jamie Dimon or even Michelle Obama – we have an election and Trump loses.

Breaking with the tradition of a peaceful transition of power, Trump declares the election invalid. The left has already built this narrative but didn’t act on it with Trump’s (probably) illegal election. {The reason I say it was probably illegal was because if there was Russian meddling which gave Trump the election than he should not have been allowed to take power – but it’s too late for that now}. So, Trump loses – he steps on stage and he says that the justice department has reason to believe that there was meddling from the Russians, the Chinese, the North Koreans – anyone – and that as a result, he will be appointing a taskforce to look into the results and determine what happened. To protect the country, he refuses to give up power until we have answers.

Who will stop him? The congress? He will scream and accuse them of being part of the conspiracy. Will the judiciary step in? No, he has already taken control of the most powerful courts in the country and has built the basis of a partisan (and loyal to him) Supreme Court. Will the military step in? No, they will look to their leadership and the military leadership is almost completely Trumpist.

So, that leaves the people. The people take to the streets with signs and chants. The protests grow. And guess what? The police are on the side of the Trumpists. The protests will be crushed. The National Guard will be called in and breaking with tradition, the US Military will be called in. Trump will denounce any opponents, he will tell lies, he will mock and destroy the credibility of anyone who challenges him. His police will round up those who oppose him. He will lie and he will build a case for retaining power and he will not step down. Ever.

I’m sorry my friends. I appreciate your efforts to effect change with voting and activism. I love what you are trying to do. I, too, want to see our country saved. But it is too late. The United States of America cannot be saved. It is not my desire to discourage you from the noble work you are engaged in, but the truth is that your efforts are not going to work. They cannot. And, as a result – your efforts are wasted. You are beating your fists against a brick wall.

So, what can you do?

To save the United States? Nothing. It can’t be done. It’s too late.

Instead, people and states who are not Trumpists need to be making other plans. Getting out might be one option. Heading to states like California, Hawaii, Vermont, New York, Washington, or New Mexico might be another option. It’s my opinion that the secesion of California might be the only viable option to save the values that made America great and eventually defeat Trumpism.

I know, that’s an ugly thought because it leads to a second American civil war. I’m not without hope for the future but a positive future for the United States no longer exists. The sooner we accept that, the sooner we can focus on an alternative to an America completely under the control of a madman.

Categories
Economics Politics

Andrew Yang’s The War on Normal People – An Honest Review

Andrew Yang is running for President of the United States in 2020. He’s a smart, driven, and successful guy who you should vote for and who you should follow on Twitter at @andrewyangVFA – the VFA there stands for Venture for America – a non-profit he started during the great recession which aims to encourage would-be entreprenerus to build innovative startup businesses in underserved cities across the United States instead of taking jobs with banks and insurance companies. He is the author of two books – Smart People Should Build Things (2014) – which paints the case for Venture for America, and The War on Normal People (2018) which looks at the very real danger of the coming wave of automation, the societal disruption it might cause, and the way that the United States can survive and move forward.

I read Smart People Should Build Things a couple of weeks ago. The book’s main point is that the financial industry – consisting of banks, brokerages, insurance companies, and hedge funds has become the dominant recruiter and employer of the top talent in all fields coming out of American Universities – and this massive recruitment is sucking talent away from entrepreneruial and start-up ventures. VFA was started to create an alternative career path where young innovators are mentored in thriving startups and given the training and encouragement they need to innovate and start businesses of their own. The book was a pitch for Venture for America, but also a very real warning about the power of the financial industry to stifle innovation. I”m not going to review the book here except to say it was worth reading and opened my eyes to some problems I hadn’t been aware of before. I mention the book because it was Yang’s experience in working with Venture for America that led to his awareness of the problems he details in The War Against Normal People.

Yang sees the world as being composed of two sets of people. Those who have a Bachelors degree or higher and those who do not. He easily admits that he lives in a bubble. He grew up in a middle class family that put a strong value on education, went to good schools, made a lot of money, and moves between the wealthy bubble worlds of Silicon Valley and Manhattan. VFA put him in a subset of those two extreme bubbles – he was working with young entrepreneurs and young companies in less lofty settings like Detroit, Cleveland, New Orleans, and Las Vegas. Working in those places, he met a wide range of non-University people who were struggling to survive in a world that is increasingly automating and eliminating their jobs. That is what The War on Normal People is about.

In Part I of the book, Yang describes what life is like for ‘normal’ people and defines who ‘normal’ people are. Essentially, normal people are people that have less than a Bachelor’s degree or people with Bachelors who work in jobs where the work is routine and face the danger of automation taking away their livlihood. As in his previous book where ‘smart people’ are defined as people who have degrees and can or do work in finance, there is an edge of elitism in Yang’s definition which he acknowledges – he’s writing about people who don’t exist in his normal circles. He is more likely to fly from San Jose to JFK to watch an NBA game than he is to encounter a truck driver or factory worker – and he admits it. Yang, however, has temporarily left his bubble and looks at the life of truck drivers, factory workers, Uber drivers, pizza makers, young men on disability, and people in America’s out of the way places who are struggling to make ends meet.

Yang shows that it’s not just those without degrees such as call center and fast food workers that are in danger of losing their jobs from automation with robots and artificial intelligence but also those who perform any sort of routine such as lawyers, accountants, doctors, and stock brokers. As Part I continues, the definition of ‘normal’ broadens out to those who aren’t the ultra-rich. Essentially, everyone who relies on a paycheck is in danger of losing their means of support through automation and technology.

In Part II, Yang looks at how we got to where we are, what went wrong in the United States over the past forty years, and where the greatest danger for societal collapse lies. Much of this section looks at how the system has failed men. It looks at how blue collar jobs and lifetime employment with pensions have dried up, it looks at how the educational system has turned its back on regular guys, and it looks at what happens when a booming industry that provides good family wage jobs dries up and disappears. I have to admit, that despite my political and educational sensibilities being mostly aligned with Yang, the jist of this section jarred me. I’m not saying that Yang is wrong in his supposition that unmarried, unemployed, middle-age white guys are the greatest danger to our future peace and prosperity – but the bluntness of his conclusion jarred me. If I boil it down it goes something like this – white men used to have good jobs where they worked with their hands and got paid well, those jobs have disappeared and not been replaced, the white men who previously did or would have filled those jobs are now off the radar, collecting disability, addicted to opiates, and playing video games (sometimes in their parents basements), they own more guns than anyone else, many of them have military training, they are bored and those who have jobs mostly work in trucking. Next, he points out that trucking jobs are going to be one of the first to get automated along with Uber and Lyft jobs which have become the main gig of many of the middle-aged white men (disclosure: I am a middle-age white man). Finally, at the end of Part II, Yang lays out a plausible but bizarre dystopian collapse fantasy where a trucker displaced by automation leads a revolt against the government which descends into a nationwide white nationalist riot. I felt that this small deviation from the otherwise alarming and very real statistics and facts was the weakest part of the book. Honestly, I would have probably been able to imagine a similar picture without Yang’s help and his brief departure into telling the future diminished the overall impact of his facts.

Part III is where Yang lays out his presidential campaign platform. The cornerstone of how Yang sees us avoiding the dystopia he imagines is the creation of a Universal Basic Income of $1000 per month given to all American citizens. He calls this the Freedom Dividend. This $1000 would ostensibly replace all other forms of welfare and act as a base support for all Americans. It’s a good idea and he lays it out in a logical way without going off the deep end in dreaming up ways to pay for it. His solution, a 10% Value Added Tax (VAT) which would primarily come from those that spend the most. Universal Basic Income is a good idea and Yang goes into the right amount of detail to explain why it is necessary, why it will work, and how to go about enacting it. This is not an easy task and he doesn’t mince words about that – instead, he lays out a very good case for why it is an essesential task.

The rest of Part III is equally inspiring and thought provoking. At one point in the book, Yang lays out a choice that appealed to the geek in me on every level – do we want the future to look like Star Trek: The Next Generation or would we prefer it to look like Mad Max? In the latter, people are primitive savages scrambling for resources. If you’re familiar with the genre, the choice is obvious though if you like dystopian machine culture you might feel pulled to the dark side.

Yang’s vision is laid out as the best world possible with time banking where people are paid social credits for helping each other out and a new kind of capitalism that puts the developement of people over the building of profits – he calls it Human Capitalism – and while some would argue that he’s putting a new face on an old idea – either way it’s an idea that is worth putting some effort into. A big part of the problem with our current system is that it rewards politicians while they are in office and for the rest of their lives when they get out of office which keeps them working for the big financial interests all along. Yang proposes a solution to political corruption and proposes methods that will make politics a game  where the constituents come first – not an easy fix but an important one.

He doesn’t stop there though – Yang has ideas about how to fix medicine and a big part of it is taking away the profit incentive and havinga conversation with prospective doctors that goes something like this “You can heal people or you can get rich, but you can’t do both” – again, not an easy fix but one that needs to happen.

Finally, Yang devotes a very short chapter to the problems with higher education (and education at lower levels as well) – in my opinion, this is where Yang really shines. His critiques of universities and learning institutions are powerful and his proposed fixes are simple and logical. He quotes Malcolm Gladwell in his famous quip about Yale being a Hedge Fund with a universtity attached to it which it needs to drop and then proposes solutions from new types of schools to new ways of thinking about education. This chapter could be his next book. I hope it is.

In summary: Andrew Yang is a smart guy with some very good ideas. I think he’s an ideal person to become our next president (if we actually get the option to vote again). His critiques are spot on and demonstrate what has gone wrong with America and offers a pretty bleak vision of what is going to go wrong next. Thankfully, he also offers solutions. Yang, early on, admits he is trapped in a bubble and points out that those reading his book are probably in similar bubbles, college educated, decent income, technologically minded – he’s right. I’m not sure how we can get past that fact – you, if you’re reading this – probably the same. I applaud Andrew Yang for his courage and vision – he will get my vote. Every American should read this book – but they won’t. Not even close – and I’m not sure what anyone can do about that. That’s the problem- ultimately. So, last words on this from me. Buy the book, read the book, vote for Andrew Yang in 2020.

Categories
Economics Investing Politics

The Age of Irrational Exuberance – Equity Markets in a Time of Chaos

First – let’s get the facts out of the way:

Fact 1: Share prices keep climbing and indexes keep hitting new all time highs

Fact 2: Past results do not guarantee future returns

Fact 3: If the price of something rises but the underlying value doesn’t increase, then the unit of monetary measure has actually decreased in value

Fact 4: As the value of the monetary measure decreases, the price of everything will rise (inflation)

Fact 5: Price and value will balance against monetary measure unless markets or currency are being manipulated with hidden actions

And now let’s get the bullshit out of the way:

BS 1: Trade wars benefit economies overe the long term

BS 2: Free markets need regulation

BS 3: Interest is ‘free’ money

BS 4: Fractional reserve creates ‘new’ money

BS 5: Equity markets can keep moving upwards indefinitely

Whew. Now that we’ve got all that out of the way, I’d simply like to point out that there is some serious bullshit going on with the United States equity markets and economy right now. Example one would be the SEC announcing after the close of trading on Friday that they were suing Elon Musk and Tesla – and then Tesla, Elon Musk, and the SEC agreeing on a settlement before the open of trading on Monday morning. This is some BULLSHIT – here’s why: the net result of all of this was to create an astounding arbitrage opportunity for massive institutional money that shifted profits from main street investors into institutional coffers. Mom and Pop investors had no opportunity to take part in this armed robbery – only to be the victims of the entire fiasco. Example 2: the fake news and FUD around the Canadian NAFTA deal and once again – the making of an announcement during closed markets which allowed insiders to profit and outsiders to lose.

Here’s what I’m getting at. The current US administration is manipulating the markets on a scale never seen before to generate massive profits for insiders. The timing of tweets, deal announcements, controversies – all of this has been carefully orchestrated to create the biggest ripoff in world history. Every day there is more evidence that this administration is robbing Peter and Paul to pay Donald and friends. Here’s what is happening: they are playing a penny slot machine and making the public into the punters who keep feeding dollars into it. Penny slots work like this – if you bet a penny, you might win 50% of the time. If you bet ten pennies your odds of winning go up to 75% of the time but the losses are heavier when you lose – so you win a penny, win a penny, lose four pennies, win a penny…and the net result is that you have won three out of four pulls of the handle but you actually lost a penny out of the deal – but you don’t notice because you still have pennies to lose – so you are winning, winning, winning – but suddenly you are out of money but as a ‘winner’ you know that you can make it back so you put more in (more on= moron) and the cycle continues until you have to go find a better job.

That is what is happening with US monetary policy, trade deals, the US equity market, and more. Is it a coincidence that Donald Trump is a casino owner? He knows that the reason the casinos are filled with penny slots is because penny slots are where the most money gets made. He and his buddies are bleeding all of us dry. You, the one reading this, might think he is on your team – but unless you are a corrupt billionaire oligarch – he isn’t on your team – he sees you as his mark. Ask the people of Atlantic City what he did to them? Here’s a great article about that:

9 Ways Donald Trump Might Have Ruined Atlantic City

It’s actually mindblowing how stupid we (collectively) are. Everything he has done and continues to do makes perfect sense if you look at him as what he is – a guy who is out to make money for himself and his friends – and his friends are only valuable to him as long as he sees a way to make a buck off of them. Like no other President before him, he has used and continues to use his presidential powers to make money and to create profit. He has spread out like a virus in the various departments and agencies of the United States government – while we watch distractions about immigration he filled the courts with his people. While we watch trade wars he reduced the tax burdens of his billionaire class. While we stare at election results and confirmation hearings, he takes control of the tiny capillary branches of government that make larger seats of power irrelevent. This is death by a million paper cuts.

The markets go up and up and up. Your 401k is worth more than ever. Except it’s not. Inflation is rampant and being hidden. You’ve noticed that your dollar buys less, but you don’t want to think about it. It buys a lot less but you don’t want to think about it. Those markets are going to keep rising and your dollar will keep going down…win a penny, win a penny, win a penny….and where did your money go? But it’s not that bad…it’s okay…things are prosperous and you just got a raise…and everything is so cheap on Amazon…a smart microwave for only $69!

The thing is…that microwave isn’t $69. It’s more like $1000 in labor, costs, material, shipping, the technology cost, the cost of running the companies that make it…so where is the other $931? That’s a good question and it’s one we might ask of the economy as well. Where is all this money in the markets coming from? How is it possible that the markets keep going up and up and up?

Nearly ninety years ago, prominent economist Irving Fisher exclaimed joyfully that the stock market had reached a new permanent plateau – at the time – Americans had taken on more debt than ever before to enjoy the benefits of nearly a decade of a booming economy. The same conditions were in place a decade ago before the 2008 financial collapse. They also exist now. Fisher and the talking economic heads we see today…all of them exuberant about the rising tide of success and winning. Win a penny, win a penny….

“After witnessing nearly a decade of growth, most economists, investors, and captains of industry believed that the market’s natural direction was up. The beginning of the crash struck them not as a sign of financial doom, but as an opportunity for bargains.” – http://time.com/3207128/stock-market-high-1929/

And then, on October 24, 1929 – the unthinkable happened. The markets went down and people bought. They went further down and people bought more. They crashed and people bought more and then they went into panic. Suicide, bank runs, inflation, madness.

So, all of that is something to think about. Now, where does that extra cost of the microwave come from? It comes from all the debt you and I are carrying. Americans are more indebted than EVER before. Our credit scores are higher than ever before and the amount of debt we carry is higher. The stock markets are higher than ever before. The markets are creating the illusion of complete chaos – but never before has there been as much insider regulation, insider knowledge, and orchestrated heists – this is the most controlled market in the history of the American stock markets. While it gives the illusion of chaos – it’s no more chaotic than the penny slot machines that generate billions of dollars in revenue for casinos. There is nothing random or chaotic about it. It’s a scam and if you believe the marquis in front of the casino that declares “Double Your Paycheck” then I’ve got a stock I’d love to sell you…

(full disclosure: I’m investing in this market just like everyone else…I love slot machines even if I recognize they are rigged against me)