Streetwise Professor

One can understand the reason why a slim majority of the British electorate voted to divorce from the EU. They wanted out from under a condescending, arrogant, meddling, progressive, metropolitan, globalist elite that has no appreciation or respect for British (especially) English tradition (as indeed they scorn all national traditions, including not least religious ones).

There is only one problem with that plan: the UK governing class today is dominated by a condescending, arrogant, meddling, progressive, metropolitan, globalist elite that has no appreciation or respect for British (especially) English tradition. These are the people who are in apoplexy over the prospect of the UK departing from their soul brethren in the EU. Britons may be able to escape the grasp of the mandarins in Brussels, but they have little prospect of escaping that of the mandarins in London, who if anything are even more loathsome.

The incompetence of the British ruling class is manifest. The incompetence, oppressiveness, and intolerance of its social elite is plain. They make no attempt to conceal their antipathy for the traditionally, conventionally English. Brexit, in whatever form it takes, will do little to free those who voted for it from the tender mercies of those who hate them. And there will not be the consolation that it’s bloody foreigners doing them wrong: it will be their own fellow Britons.

I really find it hard to find any real difference between the behavior of the British government and ruling classes and that of their peers on the continent. Transnational progressive policies, political correctness, and extreme intolerance of dissent characterize British political and civil society as much, and perhaps more, than continental.

Britain was a pioneer in omnipresent surveillance on the streets and the denial of the right to self-defense, yet crime has become endemic. Speech is under constant threat. British police brag about punishing those who express disapproved thoughts: think of the Twitter censors, only with the power to arrest, fine, and jail, rather than merely shadow ban or suspend. Indeed, to an outsider it appears that British police pursue thought crimes with much greater zeal than they do personal and property crimes–because it’s easier, perhaps, or because it brings the police greater approbation from their social superiors? Regardless, that’s the distinct impression. Speaking ill of some religions–or even speaking unpleasant facts–brings down the full weight of the British state, which at the same time deems Christianity too violent, and hence bars entry by Christian converts from twisted theocracies.

As a consequence, I doubt that Brexit will enhance the freedom or sovereignty of ordinary Britons in any meaningful way, or allow them to restore more traditional British and English ways, institutions, and values. Indeed, not only will they not gain greater freedom, they will lose the psychological comfort of being able to blame Johnny Foreigner for the loss of it. It will end up being a Hotel California experience: they will check out of the EU, but they won’t check out of an establishment run by those with the EU mindset.

I have often written that the UK is like the US’s Ghost of Christmas Future, because it has gone much further down the progressive road than the US, and its increasingly dystopian present should be a warning to the US about proceeding down that road. That future, moreover, may be distressingly close, because virtually the entire Democratic establishment, including virtually every presidential candidate, would fit in quite well in the UK. What I view as dystopian that lot views as utopian, or at least a waypoint on the road to utopia.

Germany announced that because its economy has the sniffles or something, not only can’t it meet its commitment to spend 2 pct of GDP on defense, it won’t meet it’s halfway house commitment of 1.5 percent. (Snicker. I said “Germany” and “commitment” in the same sentence. I’m so funny.)

This was widely reported as another German rebuke to the Bad Orange Man. Because of course expecting someone to live up to commitments made when nobody even dreamed the Bad Orange Man would be president is totally outrageous.

The US ambassador to Germany, the openly gay Richard Grenell (whut? The outrageous homophobe Trump appointed a gay guy to be ambassador?) called out Germany on defense spending, and on Nordstream II too. Which caused a meltdown in Berlin. The deputy chairman of the ostensibly conservative Free Democrats called for Grenell’s recall, harrumphing that “Any US diplomat who acts like a high commissioner of an occupying power must learn that our tolerance also knows its limits.” The caucus manager of the almost-commies (aka the SDP) chimed in: “Mr Grenell is a complete diplomatic failure.”

I say that if they are going to bitch about being occupied, let’s give them something to bitch about, and occupy the bastards for real. They obviously didn’t learn their lesson the last time.

I figure that given the abjectly pathetic state of the German military, the relatively modest US forces there (augmented by this contingent) could wrap up the job in short order. The main problem would be processing all the POWs. After all, this is a country in which 17 percent–17 percent!–of the population says that they would fight to defend their country: this is the lowest rate in Europe, except for the Dutch who weigh in at 15 percent. So resistance is likely to be light. Cheese eating surrender monkeys?–bah! Schnitzel eating surrender monkeys will put them in the shade.

Just to rub it in, I suggest that we invite the Poles to participate. Maybe the Israelis too. See how Fritz likes his own medicine from those he gave it to in years past.

As I’ve said ad nauseum, it’s beyond annoying for the Germans to squeal like stuck pigs at being criticized for failing to live up to their commitments to joint defense, given their pretensions to be leaders of not just Europe, but the free world in the era of the Bad Orange Man. So Grenell should redouble his efforts and make them squeal even more.

And what is the point of providing for the common defense of a nation whose people can’t even be bothered to defend themselves–and admit it (i.e., the 17 percent number cited above)?

Bismarck once said that the Balkans were not worth the bones of one Pomeranian grenadier. Germans now think that Germany is not worth the bones of one Pomeranian grenadier. So why should they be worth the bones of a single American grunt?

A coda to yesterday’s post. The EIA announced that in 2018 60 percent of new US electricity generating capacity was fueled by natural gas. This outstripped wind by a factor of almost 3, and solar by a factor of almost 5.

But those ratios understate matters, given that capacity factors for natural gas are about double those for renewables. Thus, in terms of actual real generation, natural gas added about four times as much effective capacity in 2018 as renewables. Not to mention that combined cycle plants are available pretty much on demand, rain or shine, day or night. Unlike the wind and the sun.

This despite the continued subsidization of renewables.

So tell me again how renewables will permit the fossil fuel-free electrification of the economy. I like fairy tales.

So, remember that stuff about closing all sales outlets, selling exclusively on-line, and cutting prices? Tesla’s new CEO has an announcement:

So what’s “very different”? Here’s what the company says officially:

Over the past two weeks we have been closely evaluating every single Tesla retail location, and we have decided to keep significantly more stores open than previously announced as we continue to evaluate them over the course of several months.

So what you are saying then is prior to making the announcement that you were closing all retail locations you HADN’T evaluated every single location. Got it!

The company also reversed field on the price cuts.

To quote Casey Stengel: Can anybody play this game?

I mean really. A major, and arguably unprecedented in the industry, change in selling strategy and a major change in pricing policy are things that are not to be entered into lightly. Presumably they were the result of serious and sober consideration by serious and sober people. Right?

Serious and sober. Elon. Heh. Sometimes I crack myself up.

The initial decision was insanity. And the reversal validates that judgment. But too late to overcome the obvious implication of the initial decision: that the company is in dire straits. Further, the utterly botched process of pushing the panic button and then trying to un-push it answers Casey’s question quite definitively: No!

That is, the initial decision betrayed desperation. The decision plus the reversal betray the utter incompetence of the company’s management, and hence its incapacity to deal with its daunting challenges. And given that Tesla is a micromanaged company, that incompetence has a name: Elon.

I called Emily Litella the new CEO of Tesla in jest. But come to think of it, she could almost certainly do a better job. As could Rosanne Rosannadanna as head of investor relations and corporate affairs.

Natural gas has a lot going for it, especially as a fuel for electricity generation and home heating. It is low-carbon, as compared to coal and petroleum. It is also clean burning, producing less particulates than competitor fuels. It does not require extensive (and polluting) refining, like oil. It is increasingly abundant, and hence becoming cheaper, due to technological innovations like fracking. Liquefaction makes intercontinental trade feasible, breaking the previous barrier between production and consumption regions, and allowing more people to realize the benefits of gas. What’s not to like?

Short answer, according to environmentalists: it is a fossil fuel, and therefore it must die.

It is bad enough that there are concerted efforts underway to replace it with renewables for the generation of electricity. There is also a push to eliminate it as a home heating fuel, and replacing it with . . . electricity, generated by yet more renewables. That is, simultaneously to replace NG in electricity generation with renewables, and to increase the demand for electricity . . . to be produced with even more renewables. (Not to mention the desire to eliminate the internal combustion engine, and rely on electric automobiles and trucks.) All without any apparent thought to whether renewables actually scale (putting aside that they are already more costly than conventional fuels at their current scale).

The defects of wind and solar as power sources, especially for reliable baseload power, are manifest. They are diffuse and intermittent. Not a good combination where demand is geographically concentrated, and highly regular. Someday battery storage might mitigate this problem, but that day is a long, long way away Throw in the complexity of the electricity grid, i.e., the need for supply to match demand exactly at all times, and intermittency becomes eve more of a nightmare.

Further, the factors that drive electricity demand (temperature extremes) are often negatively correlated with renewables production. Supply negatively correlated with demand–Not a good thing! Using electricity for home heating will only exacerbate this problem: the wind often does not blow when it is extremely cold, which is when you might want to have the heat in your home working.

Renewables do not scale well–diminishing returns are inherent to renewables production. The footprint of wind and solar operations is huge, and increasing output by X percent requires more than X percent more land because developers locate facilities in the most favorable places first, and can only expand into progressively less windy/sunny locations. Moreover, pesky physical laws, like the First Law of Thermodynamics, lead to decreasing returns to scale. Downwind expansion is less efficient because existing upwind operations reduce the available energy in the wind. Renewables sprawl is not yet a thing, but if some people’s wishes come true, it will be.

Where the wind blows and sun shines does not match where power demand is. So substituting renewables for conventional or nuclear generation requires more transmission–which, perversely, environmentalists can be counted on to oppose.

It is not an accident, then, that the greater the reliance on renewables, the higher the cost of electricity. The diminishing returns inherent in renewables production mean that green dreams to reduce conventionally-fueled electricity supply while increasing electricity demand (not just in home heating, but in transportation) will make it even more expensive still (as these push us further up a likely very steep average cost curve).

Renewables have only penetrated to the extent that they have due to extensive subsidization. Which just means that the costs get shoved elsewhere.

It is perversely ironic that many of those who push the green agenda also claim to be deeply concerned about the poor–and yeah, I’m looking at you AOC, and the rest of the Green New Deal advocates. With friends like you, the poor don’t need enemies. They consume a far higher fraction of their income in the form of energy (both directly, and indirectly through goods like food) than the better-thans who claim to be their champions, and hence will suffer disproportionately from higher energy costs. And the poorer the person, the more they will suffer. This is not complicated.

When you get down to it, not only is the watermelon crowd completely unhinged from basic physical and economic reality, it is profoundly anti-human. Achieving their utopia requires that there be fewer humans, and that those humans whom they deign to let live be much poorer.

I wouldn’t mind so much if they did they put their beliefs that there are too many humans consuming too much stuff into action by offing themselves. Be a good example! Take one for the team! But no. They’d much rather volunteer you–or more accurately, the poorest among us–for death and poverty.

I’ve used the Jefferson Davis quote about his suggested epitaph for the Confederacy–“Died of a Theory”–on many occasions. It is sickly fitting in this context too, but worse in a way. Because it won’t be those pushing the theory who perish literally or politically (as was the case with States Rights fanatics 1860-1865). It will be those whom they claim to be helping.

The Troika Laundromat–a massive money laundering operation organized by the eponymous Russian investment bank–has been much in the news of late. Most of the coverage has focused on the western banks–including several in supposedly squeaky clean Nordic countries–that were the conduits for the money. But what is far more interesting to me about the story is what it says about Russia, and in particular how it illustrates with particular force what started me writing about Russia 12+ years ago.

Specifically, as a lower middle income country, with an educated populace and abundant natural resources, Russia should be a magnet for capital. Instead, it is one of the world’s all time greatest capital repellants. They say what happens in Vegas stays in Vegas: obviously, what is made in Moscow (and elsewhere in Russia) doesn’t stay, but gets out any way that it can.

So what overwhelms the forces that would otherwise draw capital to Russia?: the state, and the culture that supports it, and which it sustains. The predatory nature of the state, the predators the state protects, and the lack of basic legal protections make money vastly safer outside of Russia than in it. Put differently, although Russia is rich in human capital and resource capital, it is tragically poor in social capital. It is a low trust society, and one in which formal institutions do not compensate for the lack of trust, but exacerbate it.

Putinism has done nothing to encourage investment in social capital–the opposite is true. Yes, it arguably tamed the greatest excesses of the 90s, but this was essentially a matter of replacing roving bandits with a stationary bandit. An improvement, but hardly a launchpad for social and economic development.

This is a major reason why I consider all of the hyperventilating about the threat posed by Putin and Russia to be vastly exaggerated. It can raise Cain in its neighborhood, but beyond that the country suffers from debilitating weaknesses which are unlikely to change anytime soon. For all Putin’s strutting domestically, and on the world stage, to say that he (and Russia) have feet of clay is an extreme understatement. This is a country that is already far behind, and is doomed to fall even further behind with every passing year.

All the laundromats in the world cannot wash away that reality. Indeed, they are symptomatic of how filthy that reality is.

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.