Dana Blankenhorn

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.

Wild America Stores

There is no difference between the wild environment and the built environment.

Cities and suburbs are as much a part of the ecosystem as any national park or wetland.

In the last few years my Atlanta backyard, a few hundred feet from a MARTA rail station, has been visited by deer, rabbits, and while turkey vultures, as well as a host of predatory and preying birds and other animals.

If you want to know where the environmental war is being fought, it’s around your house. Millions of people are fighting it. They’re putting up bird feeders, planting trees, running beehives, and letting their plants grow wild.

They’re doing it without retail support. That needs to change.

You will find seed and wild animal chows in hardware stores, pet shops, and even some specialty bird stores. What I’ve yet to see is anyone offering a full set of products and services targeting homeowners who want to create a more natural ecosystem where they live.

There are products for such a store, from feeders to water gardens, from birdbaths to salt licks. Such a store could also sell services. It could send out people to inspect yards and certify habitats. It could provide environmental education and learning products to young people.

Until now, environmentalism has mainly been pursued through non-profit channels, and politics. This is one reason why the environment is losing. The market’s will is all on the other side.

Drop me a line and let’s launch this puppy.

When Inflation Strikes

People are always fighting the last war. This is never truer than when talking about inflation.

Prices are rising. Oil producers are making a killing. Employees have their bosses over a barrel. There are supply chain disruptions.

There are also idiots responding that “inflation is theft” and demanding that the dollar be protected. This response made sense in 1979. Oil and other resources were the primary sources of wealth, and the only way to slow their takeover was to raise interest rates and cut the money supply.

This makes no sense today.

That’s because technology is much more effective than manufacturing was in fighting inflation. Just to give one example. Upstart uses artificial intelligence to decide whether someone should get a loan. Instead of just using credit scores, they use 1,000 variables that let banks more than double their lending without increasing their credit risk. The software does a better job than a loan officer. Why have loan officers?

Carter University

Southern governors have a simple strategy for creating jobs.

They buy them.

The move by Rivian to locate its second car plant in Georgia is just the latest example. Governor Brian Kemp paid out a (so far) untold number of billions to get 1,700 manufacturing jobs. It’s like a deal former Governor Sonny Perdue signed 15 years ago to bring Korea’s Kia to West Point. 

The idea has a history. It’s just what southern states did 100 years ago with textile mills. Offer “incentives” and cheap labor so manufacturers score a quick profit. Then hide when they find a better deal somewhere else and leave. There are two such mills within 5 miles of my office.

There’s a better way to economic growth, which is to build it.

For what Perdue and Kemp paid to get a few thousand blue collar jobs, Democrat Stacey Abrams could create a revolution in southern Georgia. Just announce that you’ll turn Georgia Southwestern College into a research institution, like Georgia Tech, Georgia State, and the University of Georgia.

A Non-Standard Story of Solar Shingles

When I first covered renewable energy a decade ago, solar shingles were the Holy Grail. It was what everyone said they wanted to make. A solar shingle would be as efficient at creating electricity as a solar panel but would go on just like a regular roof, with a nail gun.

A lot of people tried and failed to create the product. Home Depot tried selling homeowner-installed solar panels. Elon Musk built a billion dollar “Gigafactory” in Buffalo, New York, supposedly to make solar shingles.

But at the truncated Consumer Electronics Show (CES) in Las Vegas this year, a game-changing solar shingle finally debuted. Its story is almost as interesting as the technology.

The shingle is called Timberline. Sandia Labs helped develop it. The manufacturer is GAF Energy.

The shingles are slightly bigger and much heavier than conventional roof shingles, but they go on the same way, with a nail gun. GAF says it has invested $1 billion into the product, which converts 22.3% of solar energy hitting it into electricity. 

GAF itself may be more interesting than its shingle. It was once the U.S. arm of I.G. Farben, the Nazi chemical company seized after World War II.  Under Jesse Werner, it became a big roofing company in the 1980s. This included an outfit called Rubberoid, which owned an asbestos mine in Vermont. (Oops.) Under the name G.I. Holdings, it went bankrupt in 2001 but was still paying out to victims in 2011.

Investments of 2022

There’s too much money running around looking for assets.

When money decides to go to work, this means some asset values will fall, hard.

There were many voices over the holiday worrying about a stock market crash. It wasn’t just the usual cranks. Houses cost too much. Cars cost too much. Stocks cost too much.

There are many ways fake assets can be siphoned off into the real economy. Real interest rates are one, inflation is another. When you need money for stuff you want, you Marie Kondo your assets and dump what doesn’t give you joy.

Idiots think this makes Bitcoin a winner. Bitcoin is designed to always rise in value because there’s an upper limit on supply. But Bitcoin isn’t real. Just like gold isn’t money.

Contradictions of 2022

As we enter 2022, the distance between markets and Washington pundits has never been greater.

The markets keep rising. They point toward continued growth, with more of it concentrated in fewer corporate hands.

The pundits keep screaming about inflation stealing our savings, making everyone poor.

Both can’t be true at the same time. Blue skies don’t fall.