Friday, March 31, 2023

"A Guide to Understanding the Hoax of the Century: Thirteen ways of looking at disinformation"

 From Tablet Magazine, March 28:

Prologue: The Information War

In 1950, Sen. Joseph McCarthy claimed that he had proof of a communist spy ring operating inside the government. Overnight, the explosive accusations blew up in the national press, but the details kept changing. Initially, McCarthy said he had a list with the names of 205 communists in the State Department; the next day he revised it to 57. Since he kept the list a secret, the inconsistencies were beside the point. The point was the power of the accusation, which made McCarthy’s name synonymous with the politics of the era.

For more than half a century, McCarthyism stood as a defining chapter in the worldview of American liberals: a warning about the dangerous allure of blacklists, witch hunts, and demagogues.

Until 2017, that is, when another list of alleged Russian agents roiled the American press and political class. A new outfit called Hamilton 68 claimed to have discovered hundreds of Russian-affiliated accounts that had infiltrated Twitter to sow chaos and help Donald Trump win the election. Russia stood accused of hacking social media platforms, the new centers of power, and using them to covertly direct events inside the United States.

None of it was true. After reviewing Hamilton 68’s secret list, Twitter’s safety officer, Yoel Roth, privately admitted that his company was allowing “real people” to be “unilaterally labeled Russian stooges without evidence or recourse.”

The Hamilton 68 episode played out as a nearly shot-for-shot remake of the McCarthy affair, with one important difference: McCarthy faced some resistance from leading journalists as well as from the U.S. intelligence agencies and his fellow members of Congress. In our time, those same groups lined up to support the new secret lists and attack anyone who questioned them.

When proof emerged earlier this year that Hamilton 68 was a high-level hoax perpetrated against the American people, it was met with a great wall of silence in the national press. The disinterest was so profound, it suggested a matter of principle rather than convenience for the standard-bearers of American liberalism who had lost faith in the promise of freedom and embraced a new ideal.

In his last days in office, President Barack Obama made the decision to set the country on a new course. On Dec. 23, 2016, he signed into law the Countering Foreign Propaganda and Disinformation Act, which used the language of defending the homeland to launch an open-ended, offensive information war.

Something in the looming specter of Donald Trump and the populist movements of 2016 reawakened sleeping monsters in the West. Disinformation, a half-forgotten relic of the Cold War, was newly spoken of as an urgent, existential threat. Russia was said to have exploited the vulnerabilities of the open internet to bypass U.S. strategic defenses by infiltrating private citizens’ phones and laptops. The Kremlin’s endgame was to colonize the minds of its targets, a tactic cyber warfare specialists call “cognitive hacking.”

Defeating this specter was treated as a matter of national survival. “The U.S. Is Losing at Influence Warfare,” warned a December 2016 article in the defense industry journal, Defense One. The article quoted two government insiders arguing that laws written to protect U.S. citizens from state spying were jeopardizing national security. According to Rand Waltzman, a former program manager at the Defense Advanced Research Projects Agency, America’s adversaries enjoyed a “significant advantage” as the result of “legal and organizational constraints that we are subject to and they are not.”

The point was echoed by Michael Lumpkin, who headed the State Department’s Global Engagement Center (GEC), the agency Obama designated to run the U.S. counter-disinformation campaign. Lumpkin singled out the Privacy Act of 1974, a post-Watergate law protecting U.S. citizens from having their data collected by the government, as antiquated. “The 1974 act was created to make sure that we aren’t collecting data on U.S. citizens. Well, … by definition the World Wide Web is worldwide. There is no passport that goes with it. If it’s a Tunisian citizen in the United States or a U.S. citizen in Tunisia, I don’t have the ability to discern that … If I had more ability to work with that [personally identifiable information] and had access … I could do more targeting, more definitively, to make sure I could hit the right message to the right audience at the right time.”

The message from the U.S. defense establishment was clear: To win the information war—an existential conflict taking place in the borderless dimensions of cyberspace—the government needed to dispense with outdated legal distinctions between foreign terrorists and American citizens.

Since 2016, the federal government has spent billions of dollars on turning the counter-disinformation complex into one of the most powerful forces in the modern world: a sprawling leviathan with tentacles reaching into both the public and private sector, which the government uses to direct a “whole of society” effort that aims to seize total control over the internet and achieve nothing less than the eradication of human error.

Step one in the national mobilization to defeat disinfo fused the U.S. national security infrastructure with the social media platforms, where the war was being fought. The government’s lead counter-disinformation agency, the GEC, declared that its mission entailed “seeking out and engaging the best talent within the technology sector.” To that end, the government started deputizing tech executives as de facto wartime information commissars.

At companies like Facebook, Twitter, Google, and Amazon, the upper management levels had always included veterans of the national security establishment. But with the new alliance between U.S. national security and social media, the former spooks and intelligence agency officials grew into a dominant bloc inside those companies; what had been a career ladder by which people stepped up from their government experience to reach private tech-sector jobs turned into an ouroboros that molded the two together. With the D.C.-Silicon Valley fusion, the federal bureaucracies could rely on informal social connections to push their agenda inside the tech companies.

In the fall of 2017, the FBI opened its Foreign Influence Task Force for the express purpose of monitoring social media to flag accounts trying to “discredit U.S. individuals and institutions.” The Department of Homeland Security took on a similar role.

At around the same time, Hamilton 68 blew up. Publicly, Twitter’s algorithms turned the Russian-influence-exposing “dashboard” into a major news story. Behind the scenes, Twitter executives quickly figured out that it was a scam. When Twitter reverse-engineered the secret list, it found, according to the journalist Matt Taibbi, that “instead of tracking how Russia influenced American attitudes, Hamilton 68 simply collected a handful of mostly real, mostly American accounts and described their organic conversations as Russian scheming.” The discovery prompted Twitter’s head of trust and safety, Yoel Roth, to suggest in an October 2017 email that the company take action to expose the hoax and “call this out on the bullshit it is.”

In the end, neither Roth nor anyone else said a word. Instead, they let a purveyor of industrial-grade bullshit—the old-fashioned term for disinformation—continue dumping its contents directly into the news stream.

It was not enough for a few powerful agencies to combat disinformation. The strategy of national mobilization called for “not only the whole-of-government, but also whole-of-society” approach, according to a document released by the GEC in 2018. “To counter propaganda and disinformation,” the agency stated, “will require leveraging expertise from across government, tech and marketing sectors, academia, and NGOs.”

This is how the government-created “war against disinformation” became the great moral crusade of its time. CIA officers at Langley came to share a cause with hip young journalists in Brooklyn, progressive nonprofits in D.C., George Soros-funded think tanks in Prague, racial equity consultants, private equity consultants, tech company staffers in Silicon Valley, Ivy League researchers, and failed British royals. Never Trump Republicans joined forces with the Democratic National Committee, which declared online disinformation “a whole-of-society problem that requires a whole-of-society response.”

Even trenchant critics of the phenomenon—including Taibbi and the Columbia Journalism Review’s Jeff Gerth, who recently published a dissection of the press’s role in promoting false Trump-Russia collusion claims—have focused on the media’s failures, a framing largely shared by conservative publications, which treat disinformation as an issue of partisan censorship bias. But while there’s no question that the media has utterly disgraced itself, it’s also a convenient fall guy—by far the weakest player in the counter-disinformation complex. The American press, once the guardian of democracy, was hollowed out to the point that it could be worn like a hand puppet by the U.S. security agencies and party operatives....

BIS: "The two-regime view of inflation"

TL;dr: don't let the genie out of the bottle. Do not let the genie out of the bottle

From The Bank for International Settlements.

BIS Papers  |  No 133  | 
20 March 2023
PDF full text
 |  53 pages

Foreword by Agustín Carstens, BIS General Manager


The global surge of inflation that started in 2021 took most observers by surprise. While unforeseen shocks played a key role, the surprise also highlighted limitations of the analytical frameworks typically used to understand and forecast inflation.


This study provides a new view of the inflation process. It characterises the process as two regimes – a low- and a high-inflation regime – with self-reinforcing transitions from the low- to the high-inflation one. The value added of this view is to highlight those elements that standard models downplay and to draw new implications for monetary policy.


First, inflation tends to be self-stabilising in a low-inflation regime but loses that property as it shifts to the high-inflation one. This reflects systematic differences in the co-movement of individual prices and in the behaviour of wage and price setters that determines them. As inflation increases above very low levels, it becomes a more focal point for workers and firms. This increases the likelihood of wage-price spirals.

Second, monetary policy has a smaller impact on inflation in a low-inflation regime, where individual price changes co-move little. It also operates through a quite narrow set of sectoral prices, typically in the services sectors that are more sensitive to economic activity.

As a result, when inflation has settled at a low level, monetary policy can afford to accept moderate, even if persistent, deviations from narrowly defined inflation targets. But it has to respond in a timely and forceful way when transitions to a high-inflation regime threaten....


Rage, Rage Is The Only Appropriate Reaction


Lots of nitrogen. Nobel, Haber and Birkeland would figure out how valuable this stuff is within minutes.

From CDR Salamander, March 30:

The Weapons Gap With the PRC the USA Created and Funded: it Goes Boom
chemistry matters 

If you don’t wake up every morning cursing those responsible for defense and China policy in the 1990s … the gobsmackingly short sighted arrogance of it all – then what use are you, actually?

With a few exceptions, from partially completed CV rusting in Ukraine, to teaching the Communist Chinese how to MIRV ICBM warheads, to opening up our best research institutions to spies an assets, the USA was beset internally by unserious people with the attention span of a hamster and the historical perspective of a newborn in serious jobs requiring long-term thinking and decision making.

The harvest of this decade of frivolity continue to ripen, and via Jeremy Bogaisky, at Forbes – get ready to rage – we have just one more example; one that if we actually come to blows with the People’s Republic of China or those who buy their weapons – will result in more dead American men and women – more mutilated wounded. 

People and perspective matter. It appears the PRC has known this for decades;

In 1987, U.S. Navy researchers invented a new explosive with fearsome capabilities. Named China Lake Compound No. 20 after the Southern California base where it was developed, it boasted up to 40% greater penetrating power and propellant range than the U.S. military’s mainstay explosives, which were first produced during World War II.

With the collapse of the Soviet Union, however, the Pentagon’s urgency evaporated. So did the expensive task of perfecting CL-20 and designing weapons to use it.

…and how did they get CL-10? Where was the CIA, the FBI? Oh, that’s right – playing around in domestic politics. 

Meanwhile, the PRC was sending grad students; inserting citizens in the right companies. Doing just plain good old fashioned espionage. 

China, however, saw the potential. The country has invested heavily in developing long-range missiles with the aim of forcing U.S. warships and non-stealthy aircraft like refueling tankers to operate at a distance if Chinese forces invade Taiwan. Some of those weapons are believed to be propelled by a version of CL-20, which China first fielded in 2011 and now produces at scale.

“This is a case where we could potentially be beaten over the head with our own technology,” Bob Kavetsky, head of the Energetic Technology Center, a nonprofit research group that does work for the government, told Forbes.

Kavetsky and other experts in energetics, the niche field of developing things that go boom, have been warning for years that the U.S., long the world leader, has fallen dangerously behind China. The Pentagon last year outlined a plan to spend $16 billion over 15 years to upgrade and expand its aging network of munition plants, but Kavetsky warns that doesn’t include developing the advanced manufacturing capabilities needed to mass produce new explosives like CL-20.

Criminal malpractice....


"German Monks Create World's First Powdered Beer"

Ha, shades of the Boca Raton stock fraudsters!

From New Atlas, March 22:

A monastic brewery in East Germany says it's created the first powdered beer. Just add water, and it'll froth up, complete with a foamy head and full flavor. The result promises massive savings on transport, because it can be shipped at 10% of the weight.

Klosterbrauerei Neuzelle worked together with "technology partners" and used funding from BMWi to create its first powdered product, a dextrin-rich zero-alcohol beer which has been brewed using conventional methods, then "processed and prepared into a water-soluble beer powder/granulate."

It's testing this powder on the market in small quantities until mid-2023, but the plan is to start making alcoholic beers soon, and scale things up – so long as people go for it. And the team believes there's a chance to ditch traditional brewing techniques as well, compressing the process to minimize the use of raw materials, labor and energy....


Huh. So I'm guessing this product doesn't adhere to the German Reinheitsgebot, the purity order governing ingredients and methods. 

And the Boca boys? The intro to a 2012 post:

"Can Powdered Water Cure Droughts?"

Some years ago I was approached by a company seeking financing for their powdered vodka.
When I was done laughing I had some research done on the principals and decided against doing anything with them.

As it turned out the SEC eventually shut down another of their enterprises, thus besmirching the otherwise pristine reputation of the Boca Raton investment community. The powdered booze however turned out to be real, albeit with a patent owned by General Foods rather than the scamsters.
Who knew?

From Modern Farming....

"Global population could fall to six billion with 'unprecedented investment' in tackling poverty, researchers say"

Some positivity from SkyNews, good on the global warming front as well.

March 27

The forecasts in the report are in contrast to UN predictions which show the population reaching 9.7 billion in 2050 and peaking at 10.4 billion in the 2080s.

The global population could fall to six billion by the end of the century if there is "unprecedented investment" in tackling poverty and inequality, researchers have said.

In a report assessing how different policies would have an impact across the world, the population could peak at 8.5 billion in 2040 before declining by 2100 - but only if "extreme poverty is eliminated" alongside the adoption of "successful policies for economic development".

On current economic trends, the experts said the population could peak at 8.6 billion in 2050 before dropping back to 7 billion in 2100.

Experts said economic development is associated to a fall in fertility rates because it improves access to education and health services.

The study was commissioned by the Club Of Rome, a non-profit organisation which addresses "the multiple crises facing humanity and the planet" - but its figures are in contrast to UN forecasts which show the population reaching 9.7 billion in 2050 and peaking at 10.4 billion in the 2080s....


Speaking of The Club of Rome, while I think they meant well, you can draw a straight line from their 'predictive modeling' in The Limits To Growth to Imperial College’s Neil Ferguson's criminally awful covid modelling about whom Professor Gellman, this Professor Gellman:

Andrew Gelman is Professor of statistics and political science at Columbia Uni., the guy who tells the other social scientists how to get their numbers right so they can at least give the appearance of being a science. He has a very tart tongue which, combined with a high level intellect is fun to watch taking on sacred cows and shibboleths. As long as you aren't the target of said intellect and/or sharp tongue.

wrote, May 30, 2020: 

So the real scandal is: Why did anyone ever listen to this guy?

Regarding the poverty paper, spending money this way is probably more effective at reducing carbon emissions than putting up wind turbines. Firstly, because fewer people should (note should) result in fewer emissions and secondly because if/when those impoverished people move to higher income societies, their carbon footprint grows dramatically to more closely resemble that of their new host countries.

Speaking of Washington State...

From hedgefunder (Elliot Management) Paul Singer's Washington Free Beacon, so all pronouncements come with a "grain of salt" caveat. He may have some sort of opiate/meth pair trade going on.

March 29
Seattle Installs Fentanyl Detectors on Public Buses as Drivers Get Sick From Fumes 
Seattle is installing fentanyl detectors on city buses after operators have gotten sick from fumes emitted by passengers' drugs.

The city this week began installing detectors on buses and trams in King County, the Seattle Times reported. Over 50 bus operators filed worker compensation claims for drug and chemical exposure in 2022, according to the Times. Many of the drivers became so sick they needed to stop driving and seek emergency medical treatment.

The city is installing the detectors as part of a University of Washington study whose researchers hope to "better understand drugs that are being smoked on the buses and trains." Symptoms of fentanyl exposure include dizziness and breathing difficulties.

While officials from the Washington Poison Center downplayed the risk of secondhand fentanyl exposure, local transit union president Kenneth Price noted to the Times that if the drug is dangerous enough to kill its users, it is likely potent enough to hurt those who are nearby. Typically, people smoke fentanyl by placing a pill on aluminum foil and heating it with a lighter, then sucking the vapor through a straw. It smells like engine oil mixed with peanut butter.

Seattle's detectors will monitor public transit air for heroin, methamphetamine, and oxycodone as well as fentanyl....


Yesterday's story was on Camas Washington-based Fisher Investments:

"Fisher Investments Moves to Texas Over Taxes"

Camas is down south, across the river from Portland Oregon, which has its own set of problems.

"Trump’s historic indictment: Five takeaways"

 From The Hill, March 31:

Former President Trump was indicted by a Manhattan grand jury Thursday, making history as the first executive — sitting or former — to face criminal charges.

The indictment comes after District Attorney Alvin Bragg (D) initiated a probe investigating Trump’s involvement in organizing hush money payments to adult film star Stormy Daniels during his 2016 campaign.

The charges, explosive in any context, are made even more so because Trump is running again for the White House in 2024, and leads the field by a huge margin in the nascent race for the GOP nomination. 

Here are five takeaways from Thursday’s extraordinary development.

Charges filed, but specifics unclear

The indictment — which contains the specific charges — will remain under seal until Trump appears in court for his arraignment on Tuesday, unless Bragg successfully asks a judge to unseal it early.

The specifics remain unclear, but a source familiar with the proceedings confirmed to The Hill that it includes a felony.

Bragg has been probing a $130,000 hush money payment that Trump’s fixer, Michael Cohen, made to Daniels in October 2016, just weeks before the presidential election.

A hush payment by itself is legal, but outside legal experts have suggested the indictment is likely to focus on charges of falsifying business records. Prosecutors would first need to show that Trump, with an intent to defraud, was personally involved in improperly designating reimbursements a legal expense.

That still amounts to a misdemeanor under New York law, carrying up to one year of jail time per count. 

But the inclusion of a felony charge suggests prosecutors believe they can make a case tying the record falsification to another crime, augmenting the maximum jail time to four years per count.

Trump has acknowledged the payment to Daniels, though he denies her claim the two had sexual relations. Trump’s attorneys have also claimed that Trump made the payment to protect false information from hurting his marriage. They have contended he did not make the payment to influence the election, nodding to the possibility that Bragg could seek felony charges by asserting the payments violated campaign laws in some fashion. 

Trump will be in court next week....


Sometimes it is rewarding to look beyond the action downstage that the director wants you to focus on and observe what is going on in the background.

Here Elon Musk's security detail give a perfect demonstration of ignoring the ostensible focal point to detect any incongruity in the field of vision that would otherwise be missed unless attention is deliberately directed away from the spectacle:

Musk is leaving the courtroom in the February "Funding Secured" trial. We used the above video in the post: "Jury find Musk, Tesla not liable in securities fraud trial following ‘funding secured’ tweets"

"A fake news frenzy: why ChatGPT could be disastrous for truth in journalism"

The Guardian is concerned about Truth In Journalism.

From the Guardian, March 3:

A platform that can mimic humans’ writing with no commitment to the truth is a gift for those who benefit from disinformation. We need to regulate its use now

It has taken a very short time for artificial intelligence application ChatGPT to have a disruptive effect on journalism. A technology columnist for the New York Times wrote that a chatbot expressed feelings (which is impossible). Other media outlets filled with examples of “Sydney” the Microsoft-owned Bing AI search experiment being “rude” and “bullying” (also impossible). Ben Thompson, who writes the Stratechery newsletter, declared that Sydney had provided him with the “most mind-blowing computer experience of my life” and he deduced that the AI was trained to elicit emotional reactions – and it seemed to have succeeded.

To be clear, it is not possible for AI such as ChatGPT and Sydney to have emotions. Nor can they tell whether they are making sense or not. What these systems are incredibly good at is emulating human prose, and predicting the “correct” words to string together. These “large language models” of AI applications, such as ChatGPT, can do this because they have been fed billions of articles and datasets published on the internet. They can then generate answers to questions.

For the purposes of journalism, they can create vast amounts of material – words, pictures, sounds and videos – very quickly. The problem is, they have absolutely no commitment to the truth. Just think how rapidly a ChatGPT user could flood the internet with fake news stories that appear to have been written by humans.

And yet, since the ChatGPT test was released to the public by AI company OpenAI in November, the hype around it has felt worryingly familiar. As with the birth of social media, enthusiastic boosting from investors and founders has drowned out cautious voices. Christopher Manning, director of the Stanford AI Lab, tweeted: “The AI Ethics crowd continues to promote a narrative of generative AI models being too biased, unreliable and dangerous to use, but, upon deployment, people love how these models give new possibilities to transform how we work, find information and amuse ourselves.” I would consider myself part of this “ethics crowd”. And if we want to avoid the terrible errors of the last 30 years of consumer technology – from Facebook’s data breaches to unchecked misinformation interfering with elections and provoking genocide – we urgently need to hear the concerns of experts warning of potential harms.

The most worrying fact to be reiterated is that ChatGPT has no commitment to the truth. As the MIT Technology Review puts it, large language model chatbots are “notorious bullshitters”. Disinformation, grifting and criminality don’t generally require a commitment to truth either. Visit the forums of, where those involved in murky practices trade ideas for making money out of fake content, and ChatGPT is heralded as a gamechanger for generating better fake reviews, or comments, or convincing profiles....


It was at this point I started laughing. 

That line "...has no commitment to the truth." followed by “notorious bullshitters” reminded me of a story in the Guardian in 2018.

They employ someone called Luke Harding who [co-]wrote a story that ran in the paper on Tue 27 Nov 2018 09.23 EST. Going on five years ago:

Manafort held secret talks with Assange in Ecuadorian embassy, sources say 
Trump ally met WikiLeaks founder months before emails hacked by Russia were published

Donald Trump’s former campaign manager Paul Manafort held secret talks with Julian Assange inside the Ecuadorian embassy in London, and visited around the time he joined Trump’s campaign, the Guardian has been told.

Sources have said Manafort went to see Assange in 2013, 2015 and in spring 2016 – during the period when he was made a key figure in Trump’s push for the White House.

In a statement, Manafort denied meeting Assange. He said: “I have never met Julian Assange or anyone connected to him. I have never been contacted by anyone connected to WikiLeaks, either directly or indirectly. I have never reached out to Assange or WikiLeaks on any matter.” It is unclear why Manafort would have wanted to see Assange and what was discussed. But the last apparent meeting is likely to come under scrutiny and could interest Robert Mueller, the special prosecutor who is investigating alleged collusion between the Trump campaign and Russia....


The thing to remember, for our readers who were going on about their lives rather than trying to figure-out a money-making angle in that day's headlines, was that what Harding, his editors and the Guardian claimed was impossible.

At the time the story was published the Ecuadoran Embassy in London was the most surveilled building in the world. The British had it staked out, both MI5 and MI6 were keeping tabs on who was coming and going, the Australians were down the block, the Americans had a plan for a CIA assassination team to supplant the watchers [Yahoo broke that story], Russia was there, I'm guessing Israel and maybe China too. The spooks were tripping over each other there were so many different groups.

And none of them saw what Harding reported.

The Ecuadorans didn't detect Manafort entering their embassy, no reports of sounds emanating from the sewers as a rather chonky Manafort made his subterranean way in, there were no articles about parachute drops/vertical insertions reported by the dozen or so media types that would come round to see if they could rustle up a story—though we did see this scoop from American public radio: 
There were police on the scene, quite a few actually. In 2015 the Telegraph reported:
Julian Assange's three-year stay in Ecuadorean embassy has cost taxpayer £11.1m
Three years ago the WikiLeaks founder fled bail and sought asylum in Ecuador - resulting in millions being spent on policing the embassy
But none of these, what may have been hundreds of watchers, saw what Luke Harding reported.
And to this day the Guardian has not corrected or even appended an editor's comment to the reporting.
If patient and long-suffering is interested, here is Mr. Harding as he "explains why he believes the Trump-Russia dossier is not ‘fake news’."

Capital Markets—"March: Going Out like A Lamb after Wrestling with a Lion"

From Marc to Market:

Overview: The banking stress that roiled the markets this month has eased. However, the emergency lending by the Federal Reserve, vias the discount window and new Bank Term Funding Program hardly slowed in the past week ($152.6 bln vs. $163.9 bln). Money markets took in more funds. Almost $305 bln has flowed to them over the past three weeks. The US KBW bank index is up 3.75% this week coming into day (after pulling back 1.2% yesterday). Europe's Stoxx 600 bank index is snapping a four-day advance today but is up nearly 6.2% this week. The Topix bank index in Japan rose 2% this week. 

Asia Pacific and European equities are finishing the month on a firm note, and US futures are slightly positive. Bond market are mostly little changed today. The 10-year US Treasury yield is near 3.56%, up a few basis points this week, while European yields are up 14-18 bp on the week. Two-year yields are up around 25 bp in Europe this week and about 16 bp in the US. The dollar is paring this week's losses today and is up again nearly all the G10 currencies. The Dollar Index is firmer but is poised to finish the week lower, and this would be the third consecutive weekly decline. Emerging market currencies are mostly higher against the dollar today, with the notable exception of eastern and central Europe. Gold is hovering near its best level for the week, reached today near $1985, before slipping toward $1973 as the US dollar recovered from its early weakness. May WTI is little changed around $74.25, which is near a two-week high and the (61.8%) retracement of the loss since the month's high (~$81) was recorded on March 7....


Thursday, March 30, 2023

Ray Kurzweil: "Humans will achieve immortality in eight YEARS..."

The Daily Mail headline continues: "....says former Google engineer who has predicted the future with 86% accuracy". That is a VERY problematic statement. Read more after the jump, if one is so inclined.

From the DM, March 28:

  • Ray Kurzweil predicts nanobots will help achieve human immortality
  • The technology will repair cells and tissues that deteriorate as the body ages

A former Google engineer has made a stark realization that humans will achieve immortality in eight years - and 86 percent of his 147 predictions have been correct.

Ray Kurzweil spoke with the YouTube channel Adagio, discussing the expansion in genetics, nanotechnology, and robotics, which he believes will lead to age-reversing 'nanobots.' 

These tiny robots will repair damaged cells and tissues that deteriorate as the body ages and make us immune to diseases like cancer.

The predictions that such a feat is achievable by 2030 have been met with excitement and skepticism, as curing all deadly diseases seems far out of reach.

Kurzweil was hired by Google in 2012 to 'work on new projects involving machine learning and language processing,' but he was making predictions in technological advances long before.

In 1990, he predicted the world's best chess player would lose to a computer by 2000, and it happened in 1997 when Deep Blue beat Gary Kasparov.  

Kurzweil made another startling prediction in 1999: he said that by 2023 a $1,000 laptop would have a human brain's computing power and storage capacity.

Now the former Google engineer believes technology is set to become so powerful it will help humans live forever, in what is known as the singularity....


 We have a lot of posts on Mr. Kurzweil. Here's one from 2012:

"The Ray Kurzweil Show, Now at the Googleplex" (GOOG)
Last year I mentioned some of the problems with Mr. Kurzweil's predictive abilities which a couple years ago he said were running "102 for 108".

The easiest critique is stuff like a linear extension of current trends. No real insight there.
(more after the jump)

One that he's going to have to put in the miss column is from June 2008: "Ray Kurzweil: Cost Competitive Solar Within Five Years". Here he makes a rookie mistake violating the admonition given to all junior analysts:
"If you are going to publicly call a price, for God's sake don'!"
When all is said and done though, Ray has a bigger brain than I and gets stories about him published under the subject heading:
Among the stranger things Ray Kurzweil will say to your face is that he intends to bring his father back to life. The famed inventor has a storage locker full of memorabilia—family photographs, letters, even utility bills—tied to his father, Fredric, who died in 1970. Someday, Kurzweil hopes to feed this data trove into a computer that will reconstruct a virtual rendering of dear old Dad. “There is a lot of suffering in the world,” Kurzweil once explained. “Some of it can be overcome if we have the right solutions.”

Kurzweil, 64, has spent many of the past 40 years exploring his theories on life extension and other matters from a lab in Boston. Now he’s taking the show on the road. In mid-December, Kurzweil announced he’s moving to California to begin his new job as a director of engineering at Google (GOOG). He’ll work on language processing, machine learning, and other projects. “I’m thrilled to be teaming up with Google to work on some of the hardest problems in computer science so we can turn the next decade’s ‘unrealistic’ visions into reality,” Kurzweil posted on his website.

He’s not the first senior technology celebrity Google has hired. Internet pioneer Vint Cerf often shows up at events in three-piece suits as an “evangelist” for the search giant, while Hal Varian, founding dean of the School of Information at the University of California at Berkeley, is now chief economist.

There are some practical reasons Kurzweil makes sense at Google. He was a coding prodigy who, as a youngster, taught computers to play music and predict the best colleges for high school students. Later he built a line of sophisticated music synthesizers and early scanners and then worked on artificial intelligence software for Wall Street equities traders. “Ray Kurzweil is the best person I know at predicting the future of artificial intelligence,” Bill Gates, the Microsoft (MSFT) co-founder, says on the jacket of one of Kurzweil’s books....MORE from BusinessWeek
And from our March 2011 post "Solar: Kurzweil Sees Energy Need Met In 16 Years":
...Here is some of the back-and-forth on Mr. Kurzweil's predictions. In 2010 he said he was batting 102 of 108 which raises the question: Is he predicting the inevitable?
A simple example would be "smaller computers". A prognosticator doesn't get any points from me on that type of prediction.

First up, the brainiacs at IEEE Spectrum:
Ray Kurzweil's Slippery Futurism

Techi's headline is:
Ray Kurzweil's Tech Predictions Have Been Eerily Accurate

Kurzweil fans SingularityHub write:
Kurzweil Defends Predictions for 2009, Says He is 102 for 108.

Finally, Next Big Future has a response from Ray and an update from a skeptic:
Ray Kurzweil Responds to the Issue of Accuracy of His Predictions
Update: Ray Kurzweil’s January 17th, 2010 response to this is posted below my initial post. He said, “your review is biased, incorrect, and misleading in many different ways”....
More than you cared to know?
There are many, many more:
...Instead, humans will assimilate machines.
And related:
"Are we heading towards a singularity of crime?"

"Fisher Investments Moves to Texas Over Taxes"

Though not as big a deal as Citadel leaving Chicago, this is still a signpost on the way to a very different country. Fisher has been over $200 Billion in Assets Under Management. 

$173,418,270,044 as of the most recent Form ADV, March 27, 2023

From Barron's, March 28:

Fisher Investments is relocating its headquarters from Washington state to Texas in the wake of a court ruling that paves the way for a capital gains tax in Washington.

The wealth and investment management firm announced Friday it was moving to Texas, where it already has an office in Plano, a suburb of Dallas. Since 2015, Fisher Investments’ headquarters have been in Camas, Wash.

Fisher Investments’ announcement came the same day that Washington’s State Supreme Court ruled that a capital gains tax approved by lawmakers in 2021 was constitutional. Implementation of the tax had been held up by legal challenges.

“In honor of the Washington State Supreme Court’s wisdom and knowledge of the law, and in recognition of whatever it may do next, Fisher Investments is immediately moving its headquarters from Washington State to Texas,” Fisher said in a statement.

A company representative did not respond to a request for additional comment.

The capital gains tax applies only to individuals and profits above $250,000 per year, according to the state’s Department of Revenue. The tax does not apply to real estate or assets held in retirement accounts....


Another shop we follow, deep value (sometimes very deep value) mavens Smead Capital Management left Washington State a few years ago:

Factor Investing: "When Quality Fails"

....Along the way we also had a story about Smead Capital with this introduction: 

Seattle Real Estate Not a Good Bet

The news that the city is going to shut-down CHAZ CHOP is not going to be nearly enough to save Seattle.
Amazon and Microsoft have been the engine of growth, in a way similar to Silicon Valley where the whole world is funneling money into a small geographical area and in the case of Amazon with coronavirus we've just seen the high-water mark for this cycle.
Like so many societies throughout history getting wealthy means getting flabby, with politics and programs that a poorer, hungrier society can't afford.

Looking at a third metro area, Minneapolis' heyday was roughly 1880 - 1980 with the northern tier railroads, Great Northern and Northern Pacific and the heavyweight ag businesses, Pillsbury, General Mills etc. giving way to first round tech, Medtronic and St. Jude Medical, Control Data and Cray Research and then stagnation into a violent* little backwater, coasting on accumulated capital and slowly becoming irrelevant on the world stage except as a chokepoint for soybeans and corn being sent down the Mississippi or up to Duluth and eventually the Atlantic.

Seattle was touted as heaven-on-earth with the $15.00 minimum wage for restaurant workers but the touts never mentioned that it was only because of Amazon that it was possible.
And now those jobs are no more and 50% of them will not come back.
For a while Seattle had more construction cranes than New York and even London but those days are gone and here's the rest of the story from Phoenix's KTAR news:

Due to Seattle’s unrest, billion-dollar investment firm moving to Phoenix....

When quality fails.

Media: Izabella Kaminska, Vulture Capitalist

Actually, vulture capitalist is just the term-of-art. What she is describing is the need for Job-ian patience combined with the reflexes of a rattlesnake when the time to strike is at hand.

From her Twitter timeline:

Tend to agree with @RobinWigg on this. It would be very cool if journalists could club together to create their own platform in a way that does not require dodgy billionaires, states or crypto to underwrite it. But Substack has too many legacy liabilities/sunk costs to make this work - new retail buyers will just be propping up the corp until an IPO (that will likely never happen). 

The writers would be better off starting afresh, ideally by forging a legal partnership that then waits on the sidelines until Substack collapses. Then they could sweep in to acquire the infrastructure, databases etc for $1 or less -- and restructure the business model in a way that makes it actually work....

....MUCH MORE, including a commenter who refers to Semafor without mentioning Bank-man-Fried or the Chinese influence group.

Like Warren Buffett in early September 2008, biding his time to make a bid for something, doing an hour's worth of research and swooping on Constellation Energy on the 18th of that crazy, crazy month, I too watch and wait, coiled and ready:

So there I am, glancing at NVIDIA, biding my time like the panther waiting to pounce, $135, come on now, just a little bit closer and What. The. Hell?
Okay, maybe not really waiting to pounce, maybe waiting for something to land within a few inches.
So I don't over-exert myself:

"A $3 Trillion Threat to Global Financial Markets Looms in Japan"

Do not forget about Japan.

From Bloomberg via Yahoo Finance, March 29:

Bank of Japan Governor Haruhiko Kuroda changed the course of global markets when he unleashed a $3.4 trillion firehose of Japanese cash on the investment world. Now Kazuo Ueda is likely to dismantle his legacy, setting the stage for a flow reversal that risks sending shockwaves through the global economy.

Just over a week before a momentous leadership change at the BOJ, investors are gearing up for the seemingly inevitable end to a decade of ultra-low interest rates that punished domestic savers and sent a wall of money overseas. The exodus accelerated after Kuroda moved to suppress bond yields in 2016, culminating in a mountain of offshore investments worth more than two-thirds Japan’s economy.

All this risks unraveling under the new governor Ueda, who may have little choice but to end the world’s boldest easy-money experiment just as rising interest rates elsewhere are already jolting the international banking sector and threatening financial stability. The stakes are enormous: Japanese investors are the biggest foreign holders of US government bonds and own everything from Brazilian debt to European power stations to bundles of risky loans stateside.

An increase in Japan’s borrowing costs threatens to amplify the swings in global bond markets, which are being rocked by the Federal Reserve’s year-long campaign to combat inflation and the new danger of a credit crunch. Against this backdrop, tighter monetary policy by the BOJ is likely to intensify scrutiny of its country’s lenders in the wake of recent bank turmoil in the US and Europe.

A change in policy in Japan is “an additional force that is not being appreciated” and “all G-3 economies in one way or the other will be reducing their balance sheets and tightening policy” when it happens, said Jean Boivin, head of the BlackRock Investment Institute and former Deputy Governor of the Bank of Canada. “When you control a price and loosen the grip, it can be challenging and messy. We think it’s a big deal what happens next.”

The flow reversal is already underway. Japanese investors sold a record amount of overseas debt last year as local yields rose on speculation that the BOJ would normalize policy.

Kuroda added fuel to the fire last December when he relaxed the central bank’s grip on yields by a fraction. In just hours, Japanese government bonds plunged and the yen skyrocketed, jolting everything from Treasuries to the Australian dollar.

“You’ve already seen the start of that money being repatriated back to Japan,” said Jeffrey Atherton, portfolio manager at Man GLG, part of Man Group, the world’s biggest publicly traded hedge fund. “It would be logical for them to bring the money home and not to take the foreign exchange risk,” said Atherton, who runs the Japan CoreAlpha Equity Fund that’s beaten about 94% of its peers in the past year....


Raghuram G. Rajan: "The Fed’s Role in the Bank Failures"

Professor Rajan is one of the few central bankers who seems to know what's what (except maybe for the RBI currency switcheroo of November 2016. That was a fustercluck).

I don't know his co-author (NYU-Stern) on this piece, from Project Syndicate, March 28:

There are four reasons to worry that the latest banking crisis could be systemic. For many years, periodic bouts of quantitative easing have expanded bank balance sheets and stuffed them with more uninsured deposits, making the banks increasingly vulnerable to changes in monetary policy and financial conditions. 

CHICAGO – The recent bank collapses in the United States seem to have an obvious cause. Ninety percent of the deposits at Silicon Valley Bank (SVB) and Signature Bank were uninsured, and uninsured deposits are understandably prone to runs. Moreover, both banks had invested significant sums in long-term bonds, the market value of which fell as interest rates rose. When SVB sold some of these bonds to raise funds, the unrealized losses embedded in its bond portfolio started coming to light. A failed equity offering then set off the run on deposits that sealed its fate.

But four elements of this simple explanation suggest that the problem may be more systemic. First, there is typically a huge increase in uninsured bank deposits whenever the US Federal Reserve engages in quantitative easing. Because it involves buying securities from the market in exchange for the central bank’s own liquid reserves (a form of cash), QE not only increases the size of the central-bank balance sheet, but also drives an expansion in the broader banking system’s balance sheet and its uninsured demandable deposits. 

We (along with co-authors) called attention to this under-appreciated fact in a paper presented at the Fed’s annual Jackson Hole conference in August 2022. As the Fed resumed QE during the pandemic, uninsured bank deposits rose from about $5.5 trillion at the end of 2019 to over $8 trillion by the first quarter of 2022. At SVB, deposit inflows increased from less than $5 billion in the third quarter of 2019 to an average of $14 billion per quarter during QE. But when the Fed ended QE, raised interest rates, and switched quickly to quantitative tightening (QT), these flows reversed. SVB started seeing an increase in outflows of uninsured deposits (some of which were coincident with the downturn in the tech sector, as the bank’s stressed clients started drawing down cash reserves).

Second, many banks, having benefited from the firehose of deposits, purchased liquid longer-term securities such as Treasury bonds and mortgage-backed securities, in order to generate a profitable “carry”: an interest-rate spread that provided yields above what the banks had to pay on deposits. Ordinarily, this would not be so risky. Long-term interest rates had not moved up much for a long time; and even if they did start to rise, bankers understand that depositors tend to be sleepy and will accept low deposit rates for a long time, even when market interest rates move up. The banks thus felt protected by both history and depositor complacency. 

Yet this time was different, because these were flighty uninsured deposits. Having been generated by Fed action, they were always poised to flow out when the Fed changed course. And because large depositors can coordinate easily among themselves, actions taken by just a few can trigger a cascade. Even at healthy banks, depositors who have woken up to bank risk and the healthier interest rates available at money-market funds will want to be compensated with higher interest rates. The juicy interest-rate spreads between investments and somnolent deposits will be threatened, impairing bank profitability and solvency. As an apt saying in the financial sector goes, “The road to hell is paved with positive carry.”....


Some of our posts on Professor (U.Chicago-Booth) Rajan:

February 11, 2022
Former Reserve Bank of India Head, Raghuram Rajan: "Central Banks Have to Start to Move"
«We sort of stopped thinking about countries like Italy. But if we come out of the pandemic and interest rates are not at 1% or 2%, but at 4% or 5%, what happens to public finances? Obviously, the biggest risks are always the ones you don’t see. But this is a risk we haven’t paid attention to for a long time»:
—Raghuram Rajan.

Long time readers may remember Professor Rajan from such hits as: 

Raghuram Rajan on The Boom and Bust in Farm Land Prices in the United States in the 1920s
India’s Central Bank Governor Discusses Robber-Baron Capitalism and a Fine Veg Cutlet 

Okay, I'm being a bit whimsical, the man is brilliant and I wish he was running the U.S. Fed rather than sitting in his comfy endowed chair at the Booth School of Business.

From Neue Zürcher Zeitung's, February 10:....


"The Banking Crisis Knock-On Effect Has Been a Stampede into Government Money Market Funds – Foiling the Fed’s Effort to Raise Market Interest Rates"

From Wall Street On Parade, March 27:

On Sunday, Financial Times reporters Brooke Masters, Harriet Clarfelt and Kate Duguid published an article under the headline: “Money market funds swell by more than $286bn as investors pull deposits from banks.”

This article needs some important clarifications. First is the fact that money market funds had to be bailed out by the government during both the 2008 financial crisis and the more recent financial panic of 2020 stemming from the COVID pandemic.

On September 19, 2008 (four days after Lehman Brothers was placed into bankruptcy), stocks were crashing and investors were in a panic, the Department of the Treasury announced that it would provide a guarantee for money market mutual funds, standing behind more than $3.5 trillion in money market fund assets.

In mid-March 2020, as the share prices of mega banks on Wall Street were plunging in price and investors were in another panic,  the Federal Reserve, with the required approval of the U.S. Treasury Secretary for emergency bailout programs from the Fed, established the Money Market Mutual Fund Liquidity Facility (MMLF). Under the facility, the Boston Fed made loans to various banks to purchase troubled assets from money market funds. When the Fed finally released the details of that program, Wall Street On Parade crunched the numbers and found that just six Wall Street firms received 72 percent of the $162.9 billion in cumulative loans made under the MMLF. The three largest recipients were Federated, JPMorgan Chase and Morgan Stanley. (See our full report here.)

MMLF Largest Borrowers

Most Americans are unaware that there are two vastly different kinds of money market vehicles. There is the “money market account” that one can hold at a federally-insured bank which is FDIC-insured up to $250,000 per depositor per bank. If you have multiple FDIC-insured accounts at the same bank (money market account, checking, savings, certificates of deposit), they all count toward the $250,000 insurance limit.

There is also the “money market fund” which is an uninsured mutual fund packed with short-term debt instruments of varying quality.

It was these uninsured money market funds that had to be bailed out during the 2008-2009 financial crisis on Wall Street and again during the March 2020 financial panic related to the COVID pandemic.

The Financial Times article is talking about the uninsured money market funds.

So why would Americans be flocking to these uninsured money market funds during the latest banking panic?

We found our answer in the data released by the Investment Company Institute ( According to ICI’s statistics, $276.49 billion of that $286 billion reported by the Financial Times (or a whopping 97 percent), went into a very specific type of money market fund – the kind that holds short-term debt instruments guaranteed by the U.S. government. These are referred to as “government money market funds.”....


Capital Markets: "Dollar Soft but Stretched"

From Marc Chandler at Bannockburn Global Forex:

Overview: While bank stress seems to continue to ease, the dollar languishes against most of the major currencies. The Japanese yen is the notable exception. It is off about 1.5% this week. The Dollar Index has given back the gains scored at the end of last week but remains inside the range set last Thursday and Friday (~101.90-102.35). Perhaps the participants are waiting for Friday. In addition to month-, quarter, and fiscal-year ends, it is jammed with important data points: China's PMI, Tokyo's CPI, eurozone's CPI, and US PCE deflator.

Outside of Tokyo, the large equity markets in the Asia Pacific traded with a firmer bias earlier today, led by Australia's 1% gain. Europe's Stoxx 600 is up nearly 1% as well and bank index is up 2.3% to bring this week's recovery to about 7%. US futures are extending yesterday's gains. Europe's benchmark 10-year yields are mostly 2-3 bp lower, while the 10-year Treasury yield is flat near 3.56%. In the foreign exchange market, only the Scandis are struggling to rise against the greenback. However, the intraday momentum indicators are stretched for most of other G10 currencies. Emerging market currencies are higher (Turkey and Thailand are the exceptions), led by central and eastern European currencies today, ahead of the Latam session. Gold is firm but still consolidating inside Tuesday's range (~$1949-$1975). May WTI is trading a little higher but holding below yesterday's high near $74.35. The $74.65 area corresponds to the (61.8%) retracement of the slide since the March 7 high (~$81.05)....


Wednesday, March 29, 2023

Real Estate (Virtual): Metaverse Property Values Collapse 89% On Realization That "Virtual" "Real" Estate Is Gibberish and Stupid

The last time I looked Bankman-Fried's FTX auditors were still anchor tenants in their virtual building.

From the Wall Street Journal, March 29:

The Metaverse Is Quickly Turning Into the Meh-taverse Disney and Microsoft both closed projects tied to the digital realm this month
The metaverse, the virtual world that was the hot thing in tech less than two years ago, is facing a harsher reality.

Walt Disney Co. has shut down the division that was developing its metaverse strategies, The Wall Street Journal reported this week. Microsoft Corp. recently shut down a social virtual-reality platform it acquired in 2017. And Mark Zuckerberg, who renamed Facebook as Meta Platforms Inc. to signal his seriousness about the metaverse, focused more on artificial intelligence on an earnings call last month.

Meanwhile, the price for virtual real estate in some online worlds, where users can hang out as avatars, has cratered. The median sale price for land in Decentraland has declined almost 90% from a year ago, according to WeMeta, a site that tracks land sales in the metaverse.

Meta’s name change in October 2021 spurred excitement about metaverse experiences, products and platforms. But slow user adoption, driven in part by expensive hardware requirements and glitchy tech, and deteriorating economic conditions have put a damper on expectations the metaverse will drive meaningful revenue soon....

....Smaller companies such as Decentraland and the Sandbox where users have been able to buy virtual land and build their own worlds have seen some of the most success so far. But even so, land sales are down. The median price per square meter in Decentraland has dropped from about $45 a year ago to $5, according to data from WeMeta, the firm that tracks the sales.

A spokesperson for the Decentraland Foundation, which oversees the platform, said land sales aren’t indicative of user growth. A spokesperson for the Sandbox said all of the new land they have put up for sale over the past six months has sold out....

Related, March 12: 

"Who Killed Silicon Valley Bank?" (SIVB)

Well, after all, it was you and me.

If only we had bought into Web3, those wannabe unicorns would have had revenue that SIVB would loan against (profits? pshaw) thus generating fees enough to buy some interest rate swaps. But no, you didn't buy an AR/VR headset did you.

Don't like that explanation? Here's one: King Charles III heard from Christopher Steele that Meghan and Harry had deposited all the proceeds from "Spare" at the depository his erstwhile employer, BetterUp—where the young Duke is Chief Impact Officer—uses.

No? I guess that's the last time I use Twitter for my sources, here's the Wall Street Journal, March 12...

Silicon Valley Bank Bankruptcy And Its Impact On Energy and Energy Transitions

A deep dive from Energy Musings, March 21:

It was not the Ides of March – a day Shakespeare’s soothsayer warned Julius Caesar about, but rather Friday, March 10th in Silicon Valley. That day had a similar history – especially for cleantech startups. On that “Black Friday,” Federal Deposit Insurance Corporation (FDIC) officials seized the assets of tech’s “artery for finance,” the Silicon Valley Bank (SVB), the nation’s 16th largest bank. Days before, the bank’s CEO Gregory Becker told a technology investment conference in San Francisco that the outlooks for technology and his bank were “bright.” At the same time, investment rating firm Moody’s called for a meeting to tell SVB management it was considering downgrading the credit rating to “junk” status. That call had set off a scramble to raise new capital to help stem a wave of depositor withdrawals and shore up SVB’s balance sheet. The day before Black Friday, the volume of withdrawal requests exceeded the cash and funding available to SVB, leaving it no option but to surrender to the FDIC.....
....As a key investor and funder of tech startups, SVB followed its customers and was active with clean and sustainable technology startups. According to Bloomberg, SVB was “leading or participating in 62 percent of financing in U.S. developments,” referring to community solar developments. About 5.6 gigawatts of community solar power have been installed in the U.S. This figure is projected to double over the next five years according to the Solar Energy Industries Association. SVB also noted, “it had more than 1,550 customers in the broader climate technology and sustainability sector, and it has committed $3.2 billion in innovation projects in the field.” Plans were to expand that commitment to $5.0 billion by 2027.

According to data firm Infralogic, SVB made about $1.2 billion of project finance loans to U.S. renewable-energy projects in 2022. That made SVB the sixth-largest lender in the space. The reason regional bank stocks have been slammed by investors is that many of them were also big lenders to renewable-energy projects and cleantech startups. KeyBank was the second-largest provider of U.S. renewable project finance loans last year. Zions Bancorp and East West Bank were also active in that lending space.

SVB has a report on its website titled “The Future of Climate Tech 2022.” The headline in the Executive Summary section is “Climate Tech Goes Mainstream.” When talking about the opportunities for climate technology, the bank wrote: “In order to achieve ‘net-zero,’ new technologies need to be developed and scaled, including sustainable aviation fuels (SAFs), carbon capture and sequestration (CCUS) systems and ‘green’ cement.” These are developing markets, but their emergence has been propelled by government subsidies.

The SVB report went on to discuss the success climate tech was experiencing. It wrote that “US venture capital investment in climate tech companies increased 80% between 2020 and 2021, reaching $56B. The energy and power sector experienced the fastest growth, increasing 180% year-over-year.” Without a doubt, this rapidly growing sector would include batteries, wind, solar, pumped storage, and geothermal energy, to name other prominent markets.

We thought it interesting that the report contained the following comment: “A cautionary note: the climate tech sector does not come without its challenges. Timelines for companies to scale are typically longer, talent is in short supply, infrastructure is lagging plus inflation and supply-chain pressures are increasing the cost of operations.” Add to that now financing disruptions.

The chart below from the report shows recent year totals of VC fundraising and investing in clean tech ventures. Notice the cyclicality of fundraising, but the surge in new funds closed in 2021. On the investment side, there has been a steady rise in amounts and deals with a spike in 2021. The columns to the right of the yearly investment totals show Transportation & Logistics accounted for the most money invested, but Agriculture & Food represented the largest number of deals.

Exhibit 2. Venture Capital Fund Raising And Investing In Clean Tech

Chart Description automatically generated with low confidence

Source: SVB

The SVB report commented on VC investing trends by noting that Transportation & Logistics requires substantial capital to build vehicles and infrastructure. The report pointed to Tesla having begun business in 2003 but did not produce its first electric vehicle until 2009. Tesla needed to raise just under $1 billion, with equity representing about 55% of the total and debt the balance, to fund the enterprise....


Also in this edition of Energy Musings

Offshore Wind’s Economics Questioned By A Big Player
New offshore projects continue to be proposed while the head of the U.S.’s leading renewable energy utility company warns his CERAWeek audience that “offshore wind is a bad bet.” READ MORE

The Cost Of Getting To Net Zero By 2050
States are mandating utilities reduce their carbon emissions to reach net zero by 2050. An analysis of Wisconsin’s plan shows its consumers will paying $248 billion (2022$) more. READ MORE

SVB And The ESG And Woke Attacks
Critics blame SVB’s ESG and DEI focus for its failure. They point to the directors’ backgrounds and associations. Their skills instead raise questions about the lack of management oversight. READ MORE

"The Cantillon Effect: Because of Inflation, We’re Financing the Financiers"

Following on yesterday's revelation that ten accounts at Silicon Valley Bank had an aggregate $13.3 billion on deposit.*

This article is going on five years old but rings truer today than when it was written.

From the Foundation for Economic Education, October 28, 2018:

Not to mention actively harming the living standards of low-income earners. 

It may come as a surprise to you that the United States has been financing a welfare program that takes money from the poor and gives it to the rich.

Inflation as a Policy Tool

If you read a lot of modern macroeconomic literature or major in economics in college, you’ll hear economists talk of the “multiplier effect” of monetary and fiscal stimulus. In times of economic slump, money injection (for monetary policy) or government spending (fiscal policy) greases the wheels of our complex economic machine, bringing unemployment down and output up.

In response to these policy proposals to change the level of unemployment or production, “real” metrics of the economy, Milton Friedman argued that money is “neutral.” In other words, changing the supply of money in the economy to manipulate relative price levels doesn’t actually change anything in the long run. When people realize their money is worth less than before, they adjust their mindset, demanding higher wages for higher prices. After these changes are made, unemployment and production end up in the same place as before.

While Friedman’s argument sheds light on many failed economic policies from the latter half of the 20th century, it doesn’t explain the mechanics behind rising price levels (from inflationary policy) once the newly created money travels through the economy, sector by sector.

Contextualizing the Cantillon Effect

Richard Cantillon first suggested in 1755 that money is not as neutral as we think. He argued that money injection—what we could consider inflationary policies—may not change an economy’s output over the long-term. However, the process of readjustment affects different sectors of the economy differently. This analysis, known as the Cantillon Effect, serves as the foundation for the non-neutrality of money theories.

Cantillon’s original thesis outlines how rising prices affect different sectors at different times and suggests that time difference effectively acts as a taxing mechanism. In other words, the first sectors to receive the newly created money enjoy higher profits as their pay increases, but general costs are still low. On the other hand, the last sectors in which prices rise (where there is more economic friction) face higher costs while still producing at lower prices. Because, as Friedman taught us, the real economic variables are still the same in the long run, the price of inflation is paid for by a “tax” on the sectors with more friction, which subsidizes more time-responsive sectors. In our modern economy, the Cantillon Effect is at play with a stratified socioeconomic impact, favoring investors over wage-earners.

For Example

Let’s say the Fed decides to lower interest rates (by expanding the supply of money in the economy). Soon after the Fed makes its announcement, investors anticipate new earnings from increased investment. In fact, once even a few people get wind of the Fed’s intentions, investors expect prices to rise, whether they rely on algorithms or rumors for their information. Investors flock to the financial markets, hoping to get there first; if they can buy stocks while the prices are still low, they can reap enormous profits once prices rise.

However, the sudden increased demand for stocks in the financial market bids up asset prices, and this happens rapidly. Within minutes—seconds, even—the expected increase in the price level has been factored into the financial markets. The first place where “inflation” is felt is in the financial marketplace.

This means that people who are most invested in the market are the first to benefit from inflation. They see their asset prices increasing, yet the prices in the rest of the economy are still low because this happens seconds after it’s clear the Fed is inflating the money supply....

As noted earlier today in the outro from "The Cantillon Effect and Populism": 

There are currently no pure-play pitchfork manufacturers and it has been a long-cherished dream (since 2008!) to fill the void and/or live up to my junior high school personal file description: the instigator was....

The Cantillon Effect and Populism

From some Austrians (real Austrians: Jasomirgottstrasse 3/12, 1010 Vienna):
Austrian Economics Center 

Monetary policy and everything concerning it has to be one of the most interesting topics out there. With monetary economics, there are quite a few interesting concepts which come with it. One is the so-called Cantillon effect.

Richard Cantillon was an economist in the 18th century who mainly wrote about money and how it circles around the economy.

The so-called Cantillon effect describes the uneven expansion of the amount of money. If a central bank pumps more money into the economy, the resulting increase in prices does not happen evenly. The Austrian economist Friedrich August von Hayek compared this monetary expansion with honey. If you pour honey into a cup, it won’t spread out evenly. It will clump in the middle of the cup first before spreading out.....
.... This theory doesn’t imply that money creation is always biased towards the powerful, only that how money travels matter. There is no inherent money neutrality, such neutrality must be constructed by institutional arrangements. Much of the New Deal in the 1930s and 1940s was designed to build alternative channels for lending so that small business, industry and individuals could have access to money as quickly as big banks.....

There are currently no pure-play pitchfork manufacturers and it has been a long-cherished dream (since 2008!) to fill the void and/or live up to my junior high school personal file description: the instigator was....

Media: "Substack Asks Writers For Money As VC Funding Freezes"

From ZeroHedge:

Substack is initiating a crowdsourcing funding round, allowing writers to invest as little as $100 in the company. On Tuesday morning, the startup emailed writers about the investment opportunity. The development comes amidst a freeze in venture capital funding markets, which followed the collapse of Silicon Valley Bank. 

"Today, we're starting a process that will let writers and readers invest in Substack and own a piece of the company. We are serious about building Substack with writers and readers and this community round is one way to concretize that ideal," the email said. 

Substack is using the crowdfunding service Wefunder to raise $2 million. Around noon on Tuesday, nearly $800k had been raised....


Pfizer vs The Undertaker (PFE)

Our quasi-periodic look at the performance of the stocks of Pfizer and the country's largest funeral home operator, Service Corp. International (SCI):


As can be seen in the above chart (one year, daily prints), SCI outperformance has widened to almost thirty percentage points.