Dana Blankenhorn

The Climax of the Story

Most Americans are taught that the climax of the Civil War came at Gettysburg, and that of World War II on D-Day.

These were turning points. Just as last November was a turning point.

Contemporary accounts tell a different story.

The climax of the Civil War came when Atlanta fell in September 1864.  Atlanta was the center for Confederate manufacturing. Birmingham hadn’t been invented yet. Wars are won by logistics. Without weapons or ammunition the Confederacy was toast. Lincoln was an underdog for re-election before Atlanta. After that he romped to victory.

The climax of World War II came with the Battle of the Bulge. News of the result didn’t come until practically the New Year. Even then the headlines were filled with the bloodier battles of the Pacific, which high school historians now ignore.

I believe we’re now at that point in the current struggle with fascism.

Kherson will be our Atlanta.

Staying Optimistic

Wall Street is having a typical bear market. Stocks are down about 20%. There is an ongoing effort to re-test the lows.

But all the data is pointing to growth. Inflation is declining. Companies are hiring. While a recession is still possible, it’s probably priced into most stocks.

The biggest problem is that we’re an outlier. China is falling. Europe has fallen. Developing markets have ceased developing. If anything, the dollar is too strong. It means we’re importing deflation, but we’re exporting inflation. The U.S. is the world’s unquestioned economic leader, and even if things were a bit worse, they’d be pretty good.

So why are people like Robert Kiyasaki and Michael Burry predicting doom? Two reasons.

Junk Tech

Imagination is in a constant competition with Moore’s Law.

Imagination often loses.

Moore’s Law makes many things possible. Not all these things are worth doing.

I call things that aren’t worth doing junk tech.

Bitcoin is junk tech. Web3 is junk tech. Blockchain is junk tech. So is the “metaverse,” in the sense that we should all live in a virtual world rather than the real one.

Good applications can come from junk. The home shopping service I supported in 1984 became an Electronic Data Interchange (EDI) format. The map CD-ROM I worked on in 1989 became a format for geographic data. Creating lemonade from lemons is always a great opportunity.

The IBM Car

In my work covering the electric car market for InvestorPlace, I have noticed a big hole in the mid-market.

There is no electric equivalent of a Chevy or Ford. All we have are Cadillacs and Lincolns.

There are two reasons for this.

First, American car companies abandoned the mid-market decades ago. They abandoned sedans and functional cars for overloaded SUVs and pick-ups. It’s what they said their customers wanted. It’s where the profits were. The mid-market was left to the Japanese and Koreans. Most of the sedans in my middle income Atlanta neighborhood are Toyotas or Kias.

Second, everyone wants to be Tesla. Tesla made a luxury product, they got top dollar for it, and they got big profits from it. Every other U.S. and European car company is following that path. You can hardly blame them. GM tried small cars with the Volt and Bolt. Both failed.

The Last Dance for Oil and Gas

Oil prices have been falling in recent weeks, and analysts have been telling investors to “buy the dip.”

They’re wrong.

The current “energy crisis” is a short-term phenomenon, caused by Russia’s invasion and falling production. Few people seem to comprehend that the falling production has a cause. The cause is a clear understanding that renewable energy prices are coming down. 

The new buzzword is “grid parity.” The definition is that solar and wind energy equal the cost of fossil fuel energy, without subsidy. That doesn’t just require panels and turbines. It also requires storage, so power levels can be boosted and lowered at will.

Economic Precipice

Today is the calm before an economic storm.

The Federal Reserve is hiking interest rates to slow inflation. Many commodity prices are already coming down. But if it hikes too fast, economic activity will slow and that will be a recession.

To Nouriel Roubini (right), the economist known as “Dr. Doom,” a recession at this time could quickly become a depression, because public debt remains at historically high levels. If you owe $43 trillion at 1%, it costs $430 billion to carry it for a year. At 3%, it’s $1.3 trillion. Your budget just got broken. That’s his reasoning.

But debt owed to yourself isn’t real. We can print that $1.3 trillion. The risk then is that the dollar falls off a cliff. That’s not happening. If anything, the dollar is too strong. We’re importing deflation. Every western nation, and China, has massive debts.

It’s why the doomsayers were wrong in 2009, and again in 2020. It’s why we couldn’t fight the Trump tax cuts. They didn’t create inflation. They didn’t sink the dollar.

Positives of a Bear Market

Every bear market starts with the same picture.

It’s a bunch of guys, average age 40. They’re staring up in horror. These days it’s a flat screen. Before that it was a TV screen and, before that, a blackboard high over their heads.

It’s why we never learn the lessons, and positives, from a bear market.

It’s always different guys. The guys who could have taught the lesson have aged out.

Even our longer lifespans don’t help. There are lots of people in today’s market who remember the bear markets of 2000-2002 and of 2007-2008. Most have been shunted aside for younger faces. It’s part of the rotation in market cycles. The market doesn’t want a memory and eliminates it.

An Oilpatch Memo

President Biden’s move to cut gasoline taxes is doomed to failure.

That’s not because Congress won’t like it, or that it will take money from infrastructure. It’s because price is how we ration short supplies. No one has suggested an alternative rationing mechanism.

My family has done its bit for conservation. We bought a Toyota hybrid. We keep the thermostat at 77 during the summer. Except for our recent vacation, we’re not driving much because we’re working from home.

Privileged people can do this. Those without privilege, or those who think they’re without it but are, have a harder time. Poor people who live far from work get chewed up by inflation at times like these. Middle class folks who’ve bought giant pick-ups, boat trailers and homes in the exurbs are also hurting. There’s rising anger on both sides. Conventional wisdom says Republicans benefit as the “out” party.

I don’t want this to be about politics, however. I’m a finance reporter.

Counterculture

Here is the most important point about Trump, his acolytes, and the Christianist forces allied with him.

They’re a counterculture.

They’re not the culture.

The dominant culture of the West is tolerant. It’s tolerant because that’s in the best interest of technology, where creativity is the gating factor to economic growth.

The economic facts aren’t changing. China isn’t going to beat us because you can’t get mass creativity from slaved minds. Russia remains tied to the old economy of resources, money coming out of the ground. Even the Middle East is liberalizing, because the Sauds and their fellow sheikhs can see the handwriting on the wall, can see Israel becoming more powerful than they can ever hope to be. They know they must get on the right side of the new economy. It’s where they’re investing their oil wealth.

We are at War

The simplest explanation for this year’s events is one we don’t want to admit.

We are at war.

We are at war with Vladimir Putin’s Russia.

We were in a state of Cold War with Russia for years. Trump was part of it. Brexit was part of it. Putin subverted democratic processes, subverted the Internet, and subverted markets long before his invasion of Ukraine.

The invasion made this a hot war.

There is no alternative to Ukraine’s complete victory. Anything that leaves Putin in power only means we’re going to be here again. He isn’t like Hitler. Putin IS Hitler. It no longer matters that he has nuclear weapons. He may use them if we retreat, he may use them if we advance. We can’t limit our response to his threats. Putin’s victory would destroy humanity in any case, wrecking the climate in a global conflict of all-against-all.

It's time to go all-in.