Dana Blankenhorn

Lean Into $100 Oil

Markets are being spooked right now by Saudi Arabia’s decision to join Russia in cutting oil supplies. 

If oil prices stay high or go higher, analysts say, the economy may go into recession, and President Biden’s re-election will be threatened. 

I think there’s one weird trick that can prove a decisive point in world history.

Lean into it.

Accept higher oil prices. Note that American oil companies benefit. Explain that higher prices, and lower consumption, are essential in the fight against climate change. Highlight the growing cost disparity between fossil fuels and renewable energy, which continues to grow.

The Sauds and Russians think they have us over an oil barrel.

We should make this a decisive moment for putting them over one. 

There will be short-term pain because the analysts are right. Higher oil prices could tank the economy. They could cause a recession.

But, like the song says, your creature comforts aren’t the only things worth fighting for. The point of Biden’s economic policy has been to create American supply chains in energy, transportation, and manufacturing. The money to build these supply chains is being spent, supported by billions in private investment.

Meet the New Slum

Building a 21^st century city means ditching late 20^th century street plans in favor of the era before World War II.

That’s because 21^st century cities demand density, and mixed uses. The idea of fixed use zoning – offices, stores, homes separate – needs to go away. The most bike-able parts of Atlanta are on the east side, where Atlanta, Decatur, and Avondale Estates all had established street plans before Pearl Harbor. Outside that, roads are a half-mile apart, everyone is on a cul-de-sac, and you need a car to go anywhere.

Decatur can be a model, if area parking decks are organized so streets like Clairmont and Ponce de Leon can become car-free. What’s left are rows of four story blocks with homes or offices upstairs, restaurants and retail on the ground floor. This leaves room for small parks, which the nearby MARTA station delivers. It’s the best planned urban space in the Atlanta region.

DeKalb County had a chance to replicate this a few miles to the east, at the Kensington MARTA station. Instead, what’s going up are Stalinist rectangular blocks surrounded by street-level parking. It’s a 21^st century Pruitt-Igoe that will, by 2035, have the highest crime rate in the region.

Detroit Gets a Clue

Two facts have stood out in my coverage of Chinese Electric Vehicles (EVs) for InvestorPlace.

First. The most successful luxury brand in China is a hybrid. Li Auto has surged past rivals Nio and Xpeng by using a gas engine to extend range. Its latest SUVs go far enough on a charge, a few hundred miles, to do daily chores, recharging overnight. There’s a gas engine powering the battery and electric drivetrain, however, that can deliver a range of 800 miles. The Plug-in Hybrid (PHEV) approach answers the objections of families who want an electric, but also want range and all the size, bells, and whistles they’re used to.

Second. The most successful Chinese EV company serves the mid-market. That would be BYD, whose electrics sell in the range of $25,000 each. They may outproduce Tesla this year.

Biden’s Plan Worked. Get Over It

Business reporting should be about telling people what they need to know, not what they want to know.

That’s not businesses are buying. Sad. It’s not what they’re getting, either.

Too many businessmen only want their egos massaged, and their political inclinations confirmed. This is true when it comes to reporting, my own field, where we have Forbes, Fortune, Business Insider, and a host of other Republican-leaning publishers spinning the news. It’s doubly true for CNN and CNBC. The latter has an on-staff “wealth reporter” specifically hired to fluff the egos of his betters.  

Sadly, it’s also true for economists, those “experts” hired by big banks and brokerages to figure out where things are headed.

Over the last month I’ve been treated on TV to a parade of so-called financial experts, each one confidently predicting that a recession is imminent, that it’s baked in, that it will likely be severe. These jamokes have insisted this will end the drive for working from home, that it will end demands for higher pay, that it will bring employees crawling on their knees to their bosses for a crust of bread, a revived dress code, and a two-hour daily commute.

It was all bullshit. It was spin. It was politics. It was telling people what they wanted to hear.

The evidence is in. GDP grew 2.4% in the last quarter. The economy isn’t slowing. It’s speeding up.

Want to know why? I’ll tell you.

Food Riots

I wish I had better news today, but how can you grow food at temperatures that kill germs? 

You can’t.

Food riots are coming, all around the world, in the wake of the “new normal” that is 2023. 

With temperatures averaging over 100 in the growing regions of Europe and North America, I can’t see a big crop coming in. Those temperatures are going to move to the southern hemisphere this winter, burning Brazil, Argentina, and Australia. Everyone’s talking about El Nino. Fewer are talking about this new normal.

Food may be an inflationary story in the west, but it’s a survival story in the global south. Few are paying attention to the coming starvation. Wars, even “good wars” like the one in Ukraine, are environmental disasters on many levels. That war needs to be ended, quickly, which means a deeper involvement in the near term, and greater risk.

Car Evolution

For the last several months my editors at InvestorPlace have had me on the Electric Vehicle beat.

It’s one of the three themes for this decade, described here in 2019. 

Oil is going away. This must happen. The world can’t survive otherwise, at least the part that humans inhabit. We’re already seeing evidence.

The key to getting there is by replacing oil with renewable energy for transportation. That requires a lot of innovation.

Back in 2019 Elon Musk claimed he had the answers. He didn’t, at least for most of us.

That’s because even Tesla batteries have a problem (beyond catching fire). Their energy density is low, much lower than gasoline. A gas car is lighter than an electric and goes further on a fill-up.

This will change, but it will remain a problem for years.

America’s Two Car Markets

The U.S. has two car markets. Its auto industry serves just one of them.

This was made crystal clear recently when General Motors said it will discontinue the Chevy Bolt, its electric sedan. It did the same with gas-powered vehicles years ago.

Sedans, crossovers, and mini-SUVs are what people drive in cities. Where roads are thin, families are small, and trips are short, you don’t need anything more. A city car will sit in a driveway 23 hours out of 24. This is what I call the mid-market, cars costing $25-35,000, plus tax, title, and license.

Contrast this with the suburban and exurban car markets, which U.S. makers do serve. They’re huge, like tanks. They’re ridiculously overpowered. When they’re electric, they weigh several tons. They destroy roads, and anything else they’re driven on.

The Other Urban War

A lot of people want to say American cities are a war zone. They’re not. The whole country is.

But there is a form of warfare happening in our cities. It’s a development war, a transport war.

It’s happening for two reasons.

First, cars don’t scale. Each car takes up space, whether moving or parked.

Second, demographics and economics are creating urban density. A research university, and the businesses that spin off from it, cluster together. The people who work there don’t always make a lot of money.

The Missing Middle of the American EV Market

GM’s decision to axe the Chevy Bolt has me pissed.

It’s further evidence, as if any were needed, that the incumbent U.S. car companies are run by idiots and deserve to go under.

This comes just months after the Administration put forward its regulations under the Inflation Reduction Act.  They want cars assembled in the U.S., with U.S.-made batteries. They also want mid-market vehicles. That means sedans and coupes priced under $30,000.

Guess what Detroit isn’t going to produce?

We have too many electric Cadillacs in the U.S. market. Every damned start-up that followed the success of Tesla has an ultra-expensive car. Rivian, Lucid, Fisker. None will be able to get under the Administration’s price limits.

China White

When the history of our time is written, 20-30 years from now, it will be clear how China beat the U.S. in the race for the electric car market.

It was China’s industrial policy that done it.

China used policies best described by Joe Studwell in his book “How Asia Works.” It’s what Japan, South Korea, and Taiwan did. Government sets the strategy and tells business what it wants. It creates incentives allowing business to ignore short-term losses and do it. Then it pulls those incentives once the mission is accomplished, consolidating the market in the strongest hands.

Chinese policymakers also knew, from the beginning, that lithium would be to electric cars what the operating system was to PCs, the point of control for everything above. Lithium has become the world’s China White. 

There is only one big winner in the electric car sweepstakes. China’s CATL dominates the battery space and is almost entirely home grown. Founder Robin Zeng is now richer than Alibaba’s Jack Ma, thanks to assuring ample supplies of lithium from his home country, but also Indonesia and the Congo.