Dana Blankenhorn

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.

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.

Electric Scion

I am keeping my 2005 Scion xB. (I tell everyone it stands for eXtra Boxy.)

The xB gets 30 miles to the gallon, which was sweet in 2004. For the first year I had it, so many people wanted to check out the interior I felt like a dealer.

The Scion now has 168,000 miles on it. As I have aged, I have started to notice the lack of seat padding. The inside feels tinny because it is – it’s all sheet metal and plastic to get the best mileage from a Corolla chassis.

Point is I should be in the market for an electric car. But I’m not.

I blame the car companies.

There’s no good reason an electric car should cost what it does. There is a reason, however. The reason is Tesla. They started with the luxury end of the market and have gradually moved down toward the mass market. But a Tesla is still pricey. So is every other electric.

Mini-Kitchen

About 25 years ago, we re-did our kitchen.

Technology is now making that re-do look obsolete.

Kitchens are still being built as ours was. They’re energy hogs. There’s a big oven, a four-burner cooktop, and a dishwasher standard. These are built into the walls and counters. They take up a lot of space.

Meanwhile, there are a host of new mini-appliances that can replace all that. It’s going to be a hot niche this Christmas. We’re talking about air fryers, sous vide devices, “Instant Pot” devices and grill-griddle-air fryers. Plus, there are those ubiquitous Keurig machines and multi-purpose microwaves.

Two things are happening. One is that counterspace is now at a premium. So is shelf space for that matter. The other is that people are saving both money and energy. An electric oven like my Dacor can cost $3,000. All the devices I’ve mentioned above cost $1,000, total. They also use a lot less electricity.

The Inflation Scare

Politicians, and those with political motives, want you to believe inflation is back to stay. They call inflation “theft,” and harp on the size of the national debt.

This is bullshit, and there’s an easy tell.

Markets rose after the government announced prices rose 6.5% in the month of October. Not only did markets rise, but Bitcoin fell. If Bitcoin were the great inflation hedge that’s claimed, it would have skyrocketed.

Prices are up because the pandemic is ending. This created a sudden rush of demand, in areas where demand had been slack. This is especially true in the case of oil and natural gas. I thought they would rise with the pandemic’s end and indeed they did.

Technology Can Whip Inflation Now

Bankers, reporters, and politicians are all focused on inflation right now.

Markets know better.

It’s true prices are rising. Wages are rising, too. Working conditions are even improving. I fail to see a problem here.

But just as some prices rise, other prices fall. Lumber prices have already rolled over. As electric cars begin to roll off lots next year, gas prices should ease.

A generation ago, it was hard to counteract rising commodity prices. Macro analysts are still locked into that mindset.

But now there’s software. Software scales. Software fights inflation with productivity. Clouds also fight inflation, helping scientists and engineers create substitutes for resources.

The Electric Car Revolution

It amazes me how many people still underestimate the electric vehicle revolution.

The chip shortage means there’s not much product in 2021. The Trump counter-revolution is tamping down demand. Millions drive their gas guzzlers like oil was King. They sit at drive-throughs rather than get vaccinated. They go racing in the streets. A 16 year old ran over 6 cyclists in Texas while rolling coal.

That won’t stop change. The irony is that self-driving isn’t even the revolution.

Electric motors are simple to make, just two parts. They can be made in any size. A generator is just an electric motor running in reverse, turning mechanical power (as from a windmill) into electricity. You can make an electric motor small enough to run a watch. They’re also nearly twice as efficient as motors using fossil fuel.

The Inflation Opportunity

A lot of people are complaining about inflation right now.

In our technology age, this is nonsense.

Consider energy prices. Oil and gas prices are rising fast. But this creates an enormous incentive for anyone building solar panels or wind turbines. It blows through political objections to their installation. It brings capital to start-ups with new ideas that will dramatically increase harvesting efficiency. Harvesting energy, and increasing efficiency in our use of electricity, drive down demand and, thus, prices. The end of oil is one of the decade’s great opportunities and now is the time to seize it.

Electrify My World

When we moved to our current house in 1983, the heavy rail MARTA station next door seemed futuristic. Between 1983 and 2020 my wife took the train to work nearly every day, while I worked from home.

Today MARTA and the urban design it was meant to serve are obsolete.

Electric motors can be made in any size. Batteries are more efficient and cheaper. The cloud means warehouses can break bulk for less than physical stores. The pandemic let my wife recapture 3 hours each day, for chores and for living. She’s not giving that time back.

Work can happen anywhere. The world I wrote about 30 years ago in my book A Guide to Field Computing has arrived. An iPad can do the work of a PC, a phone, and a TV, plus it’s rugged enough for use in a manufacturing plant or warehouse.