Dana Blankenhorn

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Wall Street is Wrong Again

Wall Street is wrong again. But then, it usually is.

Wall Street is a casino. If no one trades, there’s no action. It’s in the Street’s interest to keep the action going. The way to do that is to convince investors that they’re wrong and the grass is greener somewhere else.

The latest myth to be smashed is in the direction of the economy. Wall Street placed big bets on slowing growth, on money costing money and on tech’s cash flows being discounted.

Wrong again. Fourth quarter GDP was again very strong. There are already indications the inflation storm is abating. The reason is technology, which continues to cut costs from manufacturing to the final sale.

I’ve now spent a decade covering markets, after three decades covering tech. My tech stories focused on the lessons of business, and my business stories focus on lessons from tech. I’m not trying to sell you anything. I’m a reporter. I’m telling stories, most of which happen to be true because I’ve been at this a long, long time.

What to Teach Journalists

I have always had a love-hate relationship with my journalism education, which came from the Medill School at Northwestern University in 1977-78.

Back then Medill taught that journalists were people who worked for people who bought ink by the barrel. The analogy has shifted (bits by the petabyte) but the idea remains the same. Journalists work for others. We have no real control over their career path. We’re dependent.

I can understand that. It’s a comfortable feeling, getting a paycheck and ignoring the market. But I didn’t get to be my class’s last man standing on his beat by being dependent. I’m a freelance. I have defined my own coverage area, which is the future with a business orientation. Following the Medill career path would have had me out of this business decades ago.

Real vs. Real

Analysts, and investors, are always fighting the last war.

The last war was the asset bubbles of the 1990s and 2000s. The first was in tech. The second was in housing.

Both fell after the bubble hit. Both times the government responded by juicing demand, first with the “forever wars,” then with a domestic stimulus and helicopter money.

Both times, this worked because the problem wasn’t related to what happened during the 1970s. Back then, resource inflation was to be feared. There was no substitute for oil. Now it’s just speculation and its aftermath.

The same kind of blow-off is happening now. There’s a fear that money will cost money, so speculators are pulling back, selling everything else to raise cash. (Cash is doing fine.) So far, it’s not nearly as bad as what came before. But fear is gripping the market because, this time, it’s accompanied by inflation.

Correction?

We’re not seeing a crash, but a correction in real assets.

There is a crash for garbage. Garbage cryptocoins. Garbage stocks. Garbage assets of all types.

Here’s why.

When money costs money, even a little money, things that were bought with free money are worth less. The punch bowl has been taken away. Those who benefitted from the party are throwing a hissy fit.

Inflation, they scream. Crash, they cry.

Uh, no. Markets adjust.

Imaginary Crisis

One thing I have learned reading American history is that every generation feels it’s in an existential crisis.

Usually, they’re right.

In the Founders’ generation, John Adams passed a Sedition Law against Thomas Jefferson and his supporters. Then James Madison, the “father of the Constitution,” lost a war and saw his Capitol burned. America was only saved by Bonaparte’s downfall, which caused Great Britain to lose interest in us.

Jackson Democrats saw Whigs as oligarchs, looking to destroy the poor for the benefit of a few. The death of Whig President W.H. Harrison in 1841 destroyed Nathaniel Hawthorne’s faith in democracy. Abraham Lincoln was a Whig, then 1 in every 50 Americans died during the Civil War, which was nearly lost.

March for Democracy

There is a way to make what I wrote about yesterday real.

March for it.

The King family got us rolling with this. Yesterday’s March for Voting Rights needs to grow in intensity, from now through the November election, everywhere across the country. In blue states, purple states, in the very reddest states.

Marching on behalf of causes is a common political tactic. Its results are proven over time. The problem is that it’s often done haphazardly. It’s not done consistently, strategically, with a definite aim in mind.

This year, democracy is the aim. Marching is how you make it a cause and, ultimately, the wedge issue that destroys the fascist right. (If at this point you want to pretend the fascist streak in today’s Republican Party is just cosplaying, or politics as usual, here’s your hood.)

Securing Democracy

“In the end we will remember not the words of our enemies, but the silence of our friends.”

 – Martin Luther King Jr.

This King Day, I’m angrier at Democrats than at Republicans. Millions share my frustration.

The Democratic Party made a mistake in 2021. They assumed democracy could be secured by elites. That’s not the case. It’s the people who secure democracy. No one else can do it for us. By pretending otherwise, Democrats from Joe Biden down did us all a tremendous disservice.

King Day 2021 was a celebration. It was assumed then that Democrats controlled the Congress and the White House. It was assumed that whatever Republicans tried, Democrats could checkmate it. It was assumed then that democracy had won.