When Satoshi Nakamoto created Bitcoin in 2008, it was not a scam but a very ingenious, potentially useful new invention, largely because of the “blockchain” by which transactions could be recorded in permanent form. When I spent six months in late 2017 recommending crypto-currencies for an investment service (very successfully, being fortunate indeed in my timing), the market was largely dominated by retail investors throughout the world and it was still possible to separate scams from cryptocurrencies that were legitimately used to launch new digital products. Alas, since that time financial institutions have entered the market, recently with the encouragement of President Donald Trump and his administration. As we cynics might have expected, as governments and institutional investors have entered the market, its scam percentage has got far worse. Continue reading
The Bear’s Lair: After Deglobalization, De-financialization
Wall Street trading titan Jane Street was last week banned from trading in India, having made a $5.2 billion profit from options trading apparently mostly at the expense of Indian retail investors, according to a Financial Times report. Jane Street, a trading house with $20.5 billion of net trading revenues in 2024, is an extreme example of the “financialization” that has overtaken the global economy since the 1980s. Just as globalization produced pathologies and is now being reversed, so too has financialization; it needs to be put back in its box. Continue reading
The Bear’s Lair: Is the West ditching cheap labor?
De Dion Quadricycle, 1898 — same price as the 1914 Model T!
Recent U.S. employment figures have seen a rise in the native-born workforce, a decline in the immigrant workforce and a rise in real wages. Some companies seem to have noticed – Home Depot’s $5.5 billion acquisition of the building supply contractor GMS indicates a move towards the contractor market, whose distribution pattern is less labor-intensive than the retail home improvement market. Electorates all over Europe are coming to notice that “globalized” economic policies have reduced their job opportunities and reversed their wage gains of previous decades, while well-connected corporations seek ever more immigration to lower labor costs still further, dumping the resulting social costs and maladies on taxpayers. Ditching the cheap labor impulse is a revolution that bodes well for the world, rich and poor. Continue reading
The Bear’s Lair: Mines Should Be Easy, Mergers Hard
I am currently a modest shareholder in Northern Dynasty Minerals Ltd. (NYSE:NAK) a company sitting on a huge copper/gold deposit on the south coast of Alaska that has been stymied from developing it for half a decade through Federal environmental holdups – an incredible waste of resources. Yet mergers that agglomerate businesses into ever larger and less accountable bureaucracies normally go through in a few months with little opposition. The Biden administration’s Lina Khan, who as Federal Trade Commission chair attempted to change this, was reviled by Wall Street and has now been replaced. This differential needs to be reversed. New investments in mining and elsewhere should be expedited as they add new wealth, whereas mergers, which normally subtract value, should be blocked except in special cases. Continue reading
The Bear’s Lair: The Hidden Costs of War
As Israel starts a war with Iran, and the U.S. considers how deeply involved it wants to get, one lesson from history is abundantly clear. Wars cost hugely in direct physical devastation, yes, but they also have a huge hidden economic cost, in distorting the market and encouraging policymakers to seize further power and narrow the economic space in which the market can operate. War is nearly always unattractive because of its direct costs, but wise policymakers will realize that its indirect economic costs may be orders of magnitude greater and hence decide against it on every occasion in which they can do so. Continue reading
The Bear’s Lair: The 1880s Should Be Our Model
When you look at the arc of global industrial progress and the emergence of new technology, one decade stands out: the 1880s. That decade saw the arrival of electric light and power, which revolutionized everyone’s lives. It also saw the automobile, the safety bicycle, the first process for large-scale aluminum production, the Hollerith tabulating machine, the arrival in common use of the telephone and the phonograph, the linotype, the first moving pictures, the first skyscrapers and the discovery of radio waves by Heinrich Hertz. Vaclav Smil in “Creating the Twentieth Century” (© Oxford University Press, 2005) argued that the apogee of technological advance came from 1867 to 1914; the 1880s formed the very pinnacle of that crest. So, what were they doing right in that decade, and how can we get closer to replicating it? Continue reading
The Bear’s Lair: Kill, Don’t Sell Fannie and Freddie!
President Trump has proposed to privatize the two housing finance agencies Fannie Mae and Freddie Mac, now in public ownership after their collapse in 2008. While the fisc might benefit in the short term from such a deal, the risk to taxpayers of a second collapse and bailout is high, for risk correlation reasons I will explain. The Fannie/Freddie structure is a relic of the dozy socialist New Deal; it is unnecessary and imposes excessive hidden risks on taxpayers, who would always be forced to bail them out in a crisis, as in 2008. Much better to kill them off and allow home mortgage finance to be provided by the market, as it should be. Continue reading
The Bear’s Lair: Bring Back Larry Summers!
President Trump’s threat to remove Harvard’s ability to take international students is appropriate. The university has admitted far too many dozy offspring of the Chinese Politburo and has allowed intellectual standards to collapse into a morass of woke incoherence. The first sign of sharp decline, as far back as 2006, was the university’s firing of its then President, former Treasury Secretary Larry Summers, for offenses against wokery. The quickest and least painful way for Harvard to recover its intellectual rigor would be to hire him back forthwith – he’s only 70 – with a free rein to discipline its recalcitrant faculty and slash its bloated and useless administration. Continue reading
The Bear’s Lair: A Confucian Approach to Private Equity
In research for my forthcoming book on global industrialization, I have been examining recently the career of the Japanese business titan Eiichi Shibusawa (1840-1931). Shibusawa, still something of a national hero in Japan, was effective head of the Dai-Ichi Bank from its founding in 1873 until 1917. More important, having while working for the Ministry of Finance introduced the concept of broadly held public companies to Japan, he was then involved as a private equity investor in the founding of nearly 500 of them. A superb networker, he both invested his own money and brought together resources and management for each new company, focusing always as his Confucian ethic demanded on the long-term interests of both the company and Japan. His approach, while difficult to pull off, would greatly improve the private equity business today. Continue reading
The Bear’s Lair: Is the EU nastier than China?
President Trump this week described the EU as “in many ways nastier than China.” The media responded with the usual shrieks of outrage, but he had a point. The EU bureaucracy has imposed a structure on Europe that is perpetually Socialist, deeply anti-democratic and utterly intolerant of dissent. Traditionally, the EU benefited from being democratic and having better civil liberties than China, but those benefits are rapidly being eroded. We should consider the possibility that Europe would be very much better without the EU superstructure. Continue reading