Streetwise Professor

Reuters reports that Deutsche Bank and Commerzbank have begun merger talks. The German government has been pushing for such a merger. In part, Berlin is hot for a combination because it wants to create a “national banking champion”:

And as Mr Scholz and Mr Kukies’ clandestine London meetings show, the idea is now gaining traction in Berlin. Policymakers and corporate bosses see a stable national banking champion as the backbone of their export-led industrial policy, vital if the country is to weather the next downturn that many economists warn looms large.

This is hilarious and infuriating on so many levels.

First. Hmmm. “National champion” sounds kinda, uhm, I dunno, nationalist, doesn’t it? And Frau Merkel keeps telling us only bad people are nationalists, and nationalists are bad people.

Again–German hypocrisy knows no bounds.

Second, by what financial alchemy does merging two horribly underperforming banks create anything of championship caliber, unless you mean a national champion clusterf*ck? Both banks are priced at a huge discount to book–for good reason. Both have returns on equity that are at the bottom of league tables. Merging two manure piles will not improve the smell.

Further, Deutsche Bank in particular is already a bloated monstrosity. Successive CEOs have failed to rationalize it. Every merger faces huge integration challenges, which would only complicate the task of rationalizing and downsizing DB.

Moreover, Deutsche Bank is already a huge systemic risk, given its size and dodgy balance sheet. Mashing it together with Commerzbank will only increase its systemic importance, and its complexity, and hence its systemic risk.

And this is yet more hypocrisy: the Germans are always lecturing everyone (especially the Italians and Greeks) about financial imprudence, and the risks that they impose on Germany. Speak for yourself, Fritz. DB is the poster child for financial imprudence. So why not make it bigger? What could possibly go wrong?

Maybe sanity will prevail, and the merger will not go through. But the very fact that it is being thought of, and indeed pushed by the German government, tells you everything you need to know about how hypocritical, and how clueless, the German government is.

According to this Seeking Alpha post, Chinese buyers are furious at the Tesla price cuts. The WSJ concurs.

And with good reason. In my post yesterday, I wrote that Tesla cut prices by 6 percent–which was another of the company’s half-truths. Or maybe fifth-truths, because for the pricier models the price cuts are on the order of 30 percent. The Model 3 Performance version price cut is 8 percent in China, and the pricier the car, the bigger the percentage discount. So no wonder buyers are furious. They look like suckers because if they’d waited, they would have saved as much as $50K.

A 6 percent price cut by an ostensibly demand constrained growth company is bad enough. 8-30 percent price cuts is Armageddon time.

As I noted in yesterday’s post, this is a sign of a truly desperate company. Or maybe a completely delusional one. Because anyone in their right mind would know that price cuts–especially of this magnitude, and especially on what should be the most profitable vehicles–vaporize customer goodwill. Especially the goodwill of the type of customers who are vital to making the company profitable by buying the high margin vehicles.

You only do that if you are so desperate for cash today that you say f-the-future, it will have to take care of itself: if I don’t get cash today, I won’t have to worry about the future.

But they’re not done with incinerating their credibility faster than a flaming Model S that lost a wheel and hit a tree! The company also cut prices on its “Autopilot” function–and won’t refund those who pre-ordered and pre-paid. And oh, it just said that what it had previously said about self-driving capability was, what’s that old phrase?–no longer operative.

Suckas.

But hey. Why listen to me? Elon’s got some really, really cool stuff coming . Trust him! What could go wrong?

Covington High’s Nick Sandmann–you know, the alleged evil smirker–is suing the Washington Post for defamation. It should be a pretty open and shut case, given that pretty much everything that the WaPo wrote about him was false. But no! Like all media, the WaPo has an ace card: for a public figure to prove libel, s/he has to show that not just was the story factually incorrect, but that the publication acted in reckless disregard of the truth.

Still you are probably thinking: How does that help the WaPo? Nick Sandmann was just an anonymous kid from Kentucky waiting in front of the Lincoln Memorial with his classmates for the bus to pick him up when a fraud got in his face. How can he possibly be a public figure?

Well, obviously you are not in possession of a sharp legal mind. According to the Atlantic, and the legal sources it quotes, Sandmann may indeed be a public figure–in large part because the WaPo wrote an article about him.

Wrap your head around that pretzel logic for a minute. An anonymous 16 year old can’t sue the WaPo for libel because he went from being anonymous to a public figure . . . because the WaPo wrote about him and therefore made him into a public figure.

Catch-22 logic at its best! Paging Joseph Heller!

Perhaps I overstate, but only slightly. Maybe it wasn’t the WaPo who made it a public figure, but people who talked smack about Sandmann on Twitter, and posted grossly misleading videos about him on YouTube (without getting permission to use his image, I might add). So once Internet trolls talk about you, you are a public figure, which gives the Post and other media outlets carte blanche to talk ridiculous smack about you without consequence, because, voila!, you’re a public figure and you have to prove not just that the smack was untrue, but the WaPo published the smack in reckless disregard of the truth. Good luck with that!

This is really a distinction without a difference. By this standard, everyone is a public figure, or one Tweet away from being one, especially in the social media age. Meaning that the least among us has no real recourse against a lying reporter.

It’s interesting to read the original Supreme Court decision–NYT v. Sullivan–which gave the press the “public figure” defense–or at least is credited with doing so. In fact, that phrase does not appear once in the decision: “public official” or “public servant” appear 40 times, making it clear that the intent of the ruling was to prevent government officials from deterring press scrutiny of their misconduct by threat of libel suits. The idea of “public official” has morphed into “public figure,” including private individuals who “thrust themselves” into the public eye on matters of public controversy.

But Nick Sandmann didn’t thrust himself–he was unwillingly thrust into the public eye by utterly mendacious people, of whom the WaPo was at the top of the food chain. Who now claim that they cannot be touched because he is in the public eye (because they thrust him there!) and hence a public figure.

It’s worth noting that the Atlantic quotes “thrust themselves to the forefront of particular controversies in order to influence the resolution of the issues involved,” but then says without quotes “Or Sandmann could be considered an involuntary public figure who has been thrust into the public spotlight against his will. This can apply to anyone at the center of a public controversy despite whether or not that person willed it.” This suggests that although the “thrust themselves” standard has been established in court (as is indeed the case, in one of the sordid Bill Cosby-related matters), the “involuntary public figure” standard is something the media would dearly like to assert is the law. Because if it is, then the Catch 22 pretzel logic applies universally: no matter how insignificant you are, if anyone publishes anything about you, even if it is totally false, you have little practical legal recourse because by virtue of their writing or speaking about you, you are a public figure. Which would make libel law a dead letter.

So why should the media be–what’s the phrase these days?–oh yes, privileged in this way? Well, they shouldn’t be, but they exert tremendous influence that they use to their benefit. The judiciary has been, for all intents and purposes, captured by the media.

I have personal experience in the way the media operates, based on my run-in with the New York Times a little over 5 years ago. The day after the story ran, a reporter who had won multiple Pulitzers with the Times emailed me and asked me to call. He told me that he was outraged by the story. He asked me a few questions, and after hearing my responses, told me that the Times had flagrantly violated its own written standards. He encouraged me to read them. So I did.

They said that because an adverse article in a prestigious publication like the NYT can have such devastating consequences for individuals (who knew?), reporters should strive to make sure their reporting is fair. Specifically, prior to publication, they should contact those mentioned in stories, read what will be said about them, and give opportunity for correction and comment.

Of course, David Kocieniewski never did this. Perhaps even worse, when I brought this to the attention of his editor, the response was . . . no response. Meaning that the “standards” are just so many high sounding words, that mean precisely diddly squat.

So I know how these motherfuckers roll.

And how do they roll, you ask? Like Ted Kennedy behind the wheel of an Oldsmobile, and for exactly the same reason: they know they are totally unaccountable, and can get away with murder. They can leave wrecked lives in their wake, and face no consequences for their behavior.

Clarence Thomas has called for a revisiting of the libel laws in the US. It is long past time. The laws are out of balance and reasonable exceptions for public figures have metastasized into a system in which journalists are a protected, privileged caste. Perhaps the Sandmann case can restore some sanity, but given the direction the courts are going, I am deeply skeptical.

It’s been an eventful few weeks for our Elon. His new corporate counsel departed after barely enough time to warm his seat, because Elon (whose Twitter free associations the GC was charged with monitoring) tweeted a forward looking statement (“clarified” after a few hours) about 2019 output without the GC’s approval. The SEC then moved post haste to get a judge to rule Elon in contempt of his previous settlement agreement. Then, apparently believing he hadn’t twitted the SEC enough, held an invitation only call with select analysts–a facial (in the Marv Albert use of the term) violation of the SEC’s Regulation FD (“Fair Disclosure”) .

But we’re not done. Tesla announced–at long last!–that the long-promised $35K Model 3 would soon be available.

Yay!

Not so fast. In typical Elon fashion, this was just a garnish on a crap sandwich: in addition to the Model 3 announcement Tesla said, oh-by-the-way-we’re-closing-all-our-sales-outlets-and-laying-off-thousands-and-cutting-prices-6-percent-bye.

This is hardly what you would expect to see from a demand constrained growth company. In typically weasely Tesla fashion, the company said that the closing of sales outlets cut costs and allowed it to cut prices. Uhm, that’s not the way it works.

The price cut is particularly telling. This wreaks of a company that needs to generate cash in a hurry (and is hence willing to burn some goodwill), and has an overhang of inventory on its hands. This price cut has also infuriated recent buyers. And the future effects may be quite damaging: people may well hold off buying, in anticipation of buying cheaper later.

The Wall Street Journal said that Tesla is going into “uncharted territory” by closing its showrooms. Not really: bankruptcy is pretty well-charted.

And of course, desperate times call for desperate measures. So right on cue, Elon/Tesla said that an announcement regarding the launch of the long-awaited crossover Model Y was only weeks away.

Just where is the cash for the capex necessary to build a new vehicle going to come from? How to reconcile this with the capex diet that Tesla has been on in recent quarters?

Methinks that this is really another financing ploy intended to keep the balloon aloft a little longer. With the announcement, the company will be able to take deposits, use the cash for other purposes, and then dawdle on actually, you know, building and delivering cars. (Check out the lag between deposit and delivery on Model 3s, and the difficulty those trying to get back their deposits face.)

This act is getting a little old, but it still works to some degree. So expect Elon to continue his muskapades until reality inevitably rears its ugly head.

My daughter alerted me to this interview of Rhiana Gunn-Wright, “one of the architects of the Green New Deal.” It’s annoying–I swear I would have gone completely mental had she said “right?” one more time–but educational. Not because you will learn anything about the way the world works, but you will learn the way the minds of the Green New Dealers work.

The interview is hosted by ex-Obamaite Jason Bordoff, now of Columbia University’s Center on Global Energy Policy. Given Bordoff’s current gig, he was obviously interested in the GND’s implications for energy. After all, the supposed raison d’etre of the GND is that our current energy system, dependent on fossil fuels as it is, is causing us to hurtle towards catastrophic warming.

But whenever Bordoff asked a question about energy, or climate policy, Gunn-Wright couldn’t even feign interest. Her responses were in the vein of “whatever”, and then she launched into impassioned monologues about what really interested her–a laundry list of progressive dreams from health care to child care to labor policy.

What’s clear from Gunn-Wright’s performance is that “climate change” is merely a Trojan Horse for a hard-core leftist agenda. The plan is to use climate alarmism to stampede voters into electing hard-left politicians who, once ensconced in power, will implement what good (I use that term ironically) socialists have been drooling to implement for decades–since before the original New Deal.

Meaning that if you think the GND as presented by the likes of AOC and Sen. Ed Malarky–excuse me, Markey–would be ruinously expensive–you ain’t seen nothing yet!

Speaking of AOC, thinking of her reminded me of Mark Twain: “First, suppose you are an idiot; now suppose you are a member of Congress. But I repeat myself.” I think even Twain would be gobsmacked by the stupidity of Ocasio-Cortez. It’s beyond disturbing that such a moron promoting such a malign program is taken seriously, and has indeed bamboozled virtually every Democratic presidential candidate into endorsing her program.

But maybe that’s the good news. I think that it is highly likely that as enthusiastically as the coastal elites have embraced GND, it will prove toxic at the ballot box. Trump’s full-throated attacks on socialism certainly indicate that he believes so. And he has an innate sense for these things, as the very fact that he is president demonstrates.

One last thing. If you think I was scathing about the GND, I had nothing on Richard Epstein. He about jumps out of your computer in this podcast from a few weeks back. Worth a listen–especially as an antidote to the leftist bromides of Rhiana Gunn-Wright. Right?