Dana Blankenhorn

Assets vs. Investment

The recent fall in the stock market makes now a good time to talk about the difference between assets and investment.

Assets, as you’ve seen, are worth only what someone will pay for one of them.

If you bought Apple at $300 and now have a share worth only $240, it’s because the last guy to buy Apple bought it at that price. One sells for that, they’re all worth that. Collectively, they’re all worth that. So it was that nearly $300 billion got wiped away.

Spending, investment, is something else. Buying something, building something, improving something creates value that lasts. Facebook began investing in cloud data centers, at $1 billion/quarter, before it had $1 billion/quarter in sales. Amazon.Com invests nearly everything it brings in. It leads its financial records with the cash flow statement, which includes the amount of money it spent on data centers, on delivery vans, and on warehouses.

Getting Through Today’s Crisis

For the last few years, I’ve made a living talking about stocks. Let me start with that.

Don’t look at your retirement account. It won’t do you any good to sell right now. Unless you must. If you must, and you’re in a taxable account, sell your worst losers first. If you’re in a tax-free account, sell your strongest stocks first.

I have been expecting something like this for a long time. About 25% of my retirement account consists of cash, or equivalents like a three-month government note. I’m going to need to do some bargain hunting to get back to even.

That said, I’m not grabbing a falling knife. So long as the panic is ongoing, don’t get in front of it. The best time to buy, it turns out, is near the end of a down day. The best time to sell, meanwhile, is at the end of an up day.

There are three types of stocks to look at once we hit bottom. Some stocks involved in virus research, like Moderna, Inovio and Regeneron, are up on the virus. That’s stupid. Once the panic subsides, sell them and wait for them to return to normal values.

Some stocks should bounce back quickly. The Internet stocks are going to do great business, yet they’re falling with everything else. Grab them once the storm subsides. I’m talking about companies like Amazon.Com, Microsoft, Nvidia. I’m talking about Salesforce.com, Workday, and ServiceNOW. If anything, the move toward these companies will accelerate, as companies find telecommuting works.

The Gating Factor

Why will liberals win in 2020, why should they win, and why should businesses applaud?

It has to do with the gating factor. 

The gating factor is whatever is limiting something. In an Internet session, it’s the speed of the slowest connection between server and client. This is true on a micro level as well. Chip companies put memory on-chips because the speed of data movement into processing is the gating factor. 

In an economy, the gating factor changes, usually every generation. In the early days of the Republic, the gating factor was labor. That’s why owning slaves made economic sense for Washington, Jefferson, and Madison. Then the gating factor became transportation, and then capital had to be organized. When manufacturing dominated, demand was the gating factor. Failure to grow demand by expanding the money supply caused the Great Depression.

In my generation, resources were the gating factor to growth. It made sense to invest in troops and military hardware who could control vital resources like oil.

In today’s technology economy, the gating factor is brains. Not just people, but smart, motivated, empowered people.

We’re just starting to understand what this means in terms of economic policy.

After the War on Oil

As the war drums beat post-war planning isn’t given a second thought. (To the right, the Air-Gen, which pulls energy directly from the air.)

We can do better. We need to do better regarding the War Against Oil.

Make no mistake. The War Against Oil, which I first wrote about over a decade ago, is behind our current crises. Saudi efforts to destabilize the Middle East are funded by oil. Russian efforts to destabilize the U.S. are built on oil. Trump is all about oil.

But oil is losing. Oil is doomed. The coronavirus, COVID-19, proves it. The International Energy Agency now sees falling global demand for oil at the end of the year.

We should have seen this coming. While Democrats were arguing about “banning fracking,” the frackers were flaring off more natural gas than ever before. Even with that, they couldn’t get $2/mcf for it. The UAE recently said it found a giant pool of gas, close to its export terminals. Texas gas is losing what markets are left.

The Virus

The Coronavirus is Donald Trump’s Iran Hostage Crisis.

Just as I said the week he was elected, Trump is the Bizarro Carter. 

Analysts who think we’re too dumb to open a history book keep harping on how Trump reverses every Obama action. But the contrasts with Carter ring even more true, because they’re so stark, and make the future so clear.

Carter was the last exemplar of what I called the FDR Theory of Unity. It was something he used to fight the Depression and World War II. Democrats kept running on it for the next generation.

Trump is the ultimate expression of the Nixon Thesis of Conflict. There was the friendly side in politics, and there were the enemies. Over time Republicans, to maintain internal unity, defined more-and-more people as enemies. Today it’s anyone who defies Trump, by word or deed, in even the smallest way. He acts like the Sun God, but he’s more like the later Mao Zedong, the one who spawned the Cultural Revolution.

The Nixon Thesis killed a lot of people. It was used to justify a generation’s wars for oil, transforming the Cradle of Civilization into a charnel house. This is fine with Trumpublicans, who don’t see pain felt by others as meaningful.

But as Mel Brooks said, “Tragedy is when I cut my finger. Comedy is when you fall in a sewer and die.” A lot of Trumpublicans are about to cut their fingers, and worse, on the altar of Trump’s stupidity.

Say what you will about how China handled the virus. They got it under control. Once they became convinced of the reality, they took extreme measures, poured in immense resources, and within a month the number of cases was dropping.

Jim Crow America and the Second Battle of Atlanta

A lot of ink is being spilled asking what’s the key state in the 2020 election.

Is it Florida? Ohio? Maybe Wisconsin?

No. It’s Georgia.

I wrote almost three years ago how Republicans are taking the Jim Crow approach to power.

Before Jim Crow, most southerners were black. They held power during Reconstruction and should have held power after it. Instead, Southern whites destroyed their franchise and murdered blacks with impunity. This injustice system existed for almost 90 years, giving southern whites the same level of federal power, as their fathers and grandfathers held under slavery, when black people were counted as 3/5ths of a white person. Under Jim Crow, black people were still counted, but they didn’t count.

The Trump strategy is Jim Crow writ large.

The late George Carlin might say we’re all Trump’s niggers now.

Eyes Wide Open

When idealists and pragmatists are scared, they react differently.

Idealists want what’s best for everyone. When attacked, we ask why and seek compromise. When the attacker rejects compromise, we panic.

Pragmatists will look to protect themselves. They’ll look for the enemy’s weakness and seek to take them down.

The difference between white and black Democrats is just that. White Democrats are idealists. We can afford to be. Black Democrats are pragmatists. They won’t let the perfect become the enemy of the good. Or even the barely OK. 

My black neighbors never loved Joe Biden. They supported him for practical reasons. He was Barack Obama’s “Uncle Joe.” Polls said he could win. But they also knew that Biden is a white liberal, always ready to compromise, to say “yeah, but,” to seek the good in everyone. Even a snake like Trump.

The failure of other white liberals to back Biden shook these voters hard. They were left adrift. They have one great desire, which is to win, to get rid of Trump. They’re also much more realistic than we white liberals about what might follow a Trump victory.

It’s not that Trump is a Nazi. It’s not that he’s a Confederate. These are the clothes liberals like to put on Trump supporters. That’s not what Trumpublicanism is about.

It's Jim Crow.

The Avalanche

Between the Iowa caucus debacle and the rocketing stock market, a lot of Democrats spent the first week of February in a very depressed mood.

Rising stock prices, and low unemployment, have the Trump approval rating as close to 50 as it can get. He is certain to be even more unhinged, and unbound, by the Republican Senate’s refusal to even censure him for his theft so far.

Lincoln said it best. “The hen is the wisest of all the animal creation, because she never cackles until the egg is laid.” 

The tide is still running out on Trumpism. Demographically, it stands no chance. In terms of issues, the same. It’s only the market that’s with him. That, too, may be about to change.

That’s because the stock market, like the housing market, is made up of assets.

Generation Gap

I’m writing this before any caucuses, before any primaries.

But it’s clear to me what the story of the Democratic Primary is going to be.

The Generation Gap.

It’s back, baby.

The mystery of Bernie Sanders’ rising in January’s polls, to the top of the Democratic stack, is all about the Generation Gap. It’s now wider than it’s been at any time since Bernie here was on the other side of it, in the 1960s.

Iowa voters are well aware of how they're talking past one another. While Bernie was beloved of the young folks on Tuesday, Pete Buttigieg, the youngest candidate in the field, was favored by the olds. 

The Big Secret of 2020

The stock market is not the economy.

The fall of Trump is secure because of that.

Trump has long confused the health of the stock market with the economy. But 84% of stock is held by people in the top 10% of income. The bottom 80% own just 6.7% of shares. 

Whether it’s true or not that most Americans own some stock, as the nit-pickers at Politifact want you to believe, the fact is that prosperity is going to fewer-and-fewer people. (Thanks to two careers in tech, some of it is flowing to me.)

This trend has accelerated during the Trump time. Among the hottest stocks today are companies that cater to the needs of poor people. Dollar General is up from $60 to $160 since Trump’s election. A former Dollar General CEO, David Perdue, is a Senator from Georgia as a result. The other Georgia seat is held by Kerry Loeffler, whose husband runs Intercontinental Exchange, Atlanta-based owners of the New York Stock Exchange.

You may think Trump’s base consists of racists and mullahs, but it’s really moolah. A Goldman Sachs client survey shows 87% expect Trump to be re-elected. Hedge fund billionaires love this market, and they love Trump, even though they know his pumping of stock prices must end. 

I’m one of very few reporters working today who was doing this job in 1980. I’m on the same business beat I was on then. I was also politically active in 1980.