I’ve known Bob Mnuchin on and off for thirty years, I suppose – maybe longer. Notwithstanding that he was close to the top of Goldman Sachs in the bad old days of Gus Levy, he’s a cultivated, decent guy, obviously smart, with a good eye. How he could have spawned an idiot, tone-deaf son like our Secretary of the Treasury beats me!


We’ve been watching Ken Burns’s “The Vietnam War” very closely. There’s a lot there, but the good, saintly stuff overwhelms the bad and villainous – and there was a lot of that. Hard to disagree, significantly, with this: http://www.theamericanconservative.com/articles/ken-burnss-vietnam-war-is-no-profile-in-courage/

My wife, coming from her UN job via ferry, calls to say the boat is being held at South Williamsburg. No explanation. A little online research by me yields the probability that riverwise shipping is being held up because of the threat to navigation posed by a giant turd: “8:45 PM Depart Wall Street Landing Zone en route to John F. Kennedy International Airport.” (From President Dickhead’s schedule for today. My wife’s destination is one stop away from the Wall Street dock.)


Even if the mere thought of reading about trading strategies causes your eyes to glaze, I think this is a MUST, if only for the glimpses it gives of a Brave New World: https://www.bloomberg.com/news/features/2017-09-27/the-massive-hedge-fund-betting-on-ai?cmpid=BBD092717_TECH&utm_medium=email&utm_source=newsletter&utm_term=170927&utm_campaign=tech



Give me a break! https://news.artnet.com/art-world/so-whats-really-going-on-with-that-disturbing-dog-video-at-the-guggenheim-1100417?utm_content=from_&utm_source=Sailthru&utm_medium=email&utm_campaign=US%20newsletter%20for%209/29/17&utm_term=New%20US%20Newsletter%20List

Agree: 1000%: https://www.wsj.com/articles/partisanship-is-breaking-both-parties-1506640056

Here’s my friend Dizard stressing what he thinks (as do I) will crack the Recovery Bull Market: inflation. The Ft operates behind a firewall so I’m simply cutting and pasting: FT 09/29/17 by John Dizard “There seems to be something wrong with our bloody ships today.” Admiral David Beatty at the 1916 Battle of Jutland after two British warships exploded

Federal Reserve chairwoman Janet Yellen’s remarks last week on “Inflation, Uncertainty, and Monetary Policy” were not quite as sharp as Admiral Beatty’s. She used the words “may” or “may have” 26 times in describing how the Fed’s models have not been working very well. She made clear, though, that the consequent uncertainty, if not queasiness among the board members, should not lead to any significant change in course. After Jutland, the supposedly rigid Royal Navy did make changes in ammunition handling, shell manufacture and training, but the Fed appears to be more set in its ways. The same problematic analyses and actions we saw in 2000 and 2007 are repeated with a few tweaks. Excessively loose monetary conditions are allowed for too long, followed by an untimely series of planned tightenings, which is interrupted by a panicked reversal after asset price crashes . . . you feel like fiddling with your programme and yawning. Based on past form we can be reasonably sure that five years from now the dynamic stochastic general equilibrium model that central bankers worship like Baal will still be there. There will be a few changes to the parameters, and maybe a constraint or two added like temple lamps, but apparently they never learn. As a mere humble observer of passing macro events, rather than a model builder, I have been noticing a series of unexpected supply-side shocks coming in one business after another. Unlike the technology and globalisation changes of the previous two decades, these are leading to one set of price increases after another. All of these rises can be explained, for a while, as idiosyncratic, isolated supply-chain issues against a deflationary backdrop. At some point, though, you have to wonder if there is something wrong with our bloody ships. Within the past month, for example, the cost of adjusting property losses for US insurers has roughly doubled. To send an adjuster to look over a damaged house in Houston cost the underwriter $2,000 in July and $4,000 today. Overall, what the insurers call the loss adjustment factor has increased from about 9 per cent of losses in the recent past to something closer to 20 per cent. On top of that, the cost of used cars is going up as people need to replace ones destroyed in one hurricane or another. Tiki torches and replacement palm trees for Florida, Texas and Caribbean hotels are going through the roof, if there is one left. Those are called “post-event price surges”. Insurers say that will probably lead to reinsurance premium increases of 25 per cent for US wind, and a general increase of 5 per cent for reinsurance across all lines in the country. They want their capital back, and they believe the price rises will stick. Of course the impact of three major storms in one season should be an unusual coincidence, one of those idiosyncratic causes. Or was risk underpriced thanks to inefficient capital markets? Then there is the increase in dry cargo rates, roughly measured by the Baltic Dry index. Economists and macro speculators used to watch the BDI as a leading indicator. It received less attention in recent years as shipping rates dragged lower and lower below the operators’ costs. Starting last year, though, the BDI has been on a tear. It has risen by more than 60 per cent this year, and has continued to increase even as prices for dry cargoes such as iron ore and coal have slipped from recent highs. Apparently there just are not as many ships to go around, after banks and government agencies pressed owners to scrap more tonnage after years of forbearance. Big steel ships are a legacy technology, of course. Then we have inflation in the price of the technologies of the future, such as electric cars. Cobalt, used inNo comment: tensively in lithium-ion batteries, has more than doubled in price over the past year. Again, an unexpected supply-side constraint, as environmental mandates in China, Europe and the US have come up against the long lead time required for new mines. Then there is the big daddy of all supply-side constraints: skilled labour. It now appears that it is not that easy to turn media studies graduates into IT department coders, even if the latter are paid three times as much as the former. At one time it seemed as though there was an unlimited supply of well-educated Indian software engineers, but no. And do not ask about pipeline welders, particularly sober ones who turn up on Monday. Maybe the Fed’s economists are right, and we should not be paying too much attention to these one-off signs. The free-market commercial paper rate has already reacted, though, rising like the BDI, cobalt or propane (a yearly rise of around 80 per cent). So perhaps you should raise your commodities hedge ratios, or shorten bond duration. And build your next beach house out of cement and steel.

No comment: https://www.project-syndicate.org/onpoint/how-stable-is-the-global-financial-system-by-benjamin-j–cohen-2017-09


Well argued – although I can’t get out of my mind that the raising or presentation of the flag at the time the National Anthem is played carries a certain patriotic resonance. I vividly remember being in Yankee Stadium on October 28, 1962, Giants v. Redskins. The Cuban Missile crisis had just ended with Khrushchev’s announcement that morning that Soviet armaments would be removed from Cuba. When the National Anthem was played, the entire Big Ballpark erupted with a single voice, triumphant and yet edged with relief. Still: https://www.nakedcapitalism.com/2017/09/gaius-publius-american-flag-stands.html 

No comment necessary: https://newrepublic.com/article/144940/trump-tv-post-literate-american-presidency?utm_source=esp&utm_medium=Email&utm_campaign=The+Long+Read+-+Collections+2017&utm_term=245896&subid=23770632&CMP=longread_collection

Absolute BS on this level is so rarely encountered, it must be cherished: https://www.theguardian.com/news/2017/sep/29/we-should-have-seen-trump-coming?utm_source=esp&utm_medium=Email&utm_campaign=The+Long+Read+-+Collections+2017&utm_term=245896&subid=23770632&CMP=longread_collection


Good to see that technology isn’t winning all the battles. WSJ (paywall) reports that in Australia wedge-tail eagles, a protected species, are attacking and knocking drones out of the sky. Not since the RAF did for Jerry over Britain has a more heart-warming account of aerial combat been published.

A contrarian view that makes a compelling overall point. Being a person who has his hair cut every month, I’ve been a regular reader of Playboy,  along with Clubman Talc an indispensable appurtenance for every tonsorial parlor worth its clippersfor ever so long. Fellow members of one of my clubs (nice touch that, eh?) curse with me the scoundrel who pinched from our barbershop the most memorable single issue  ever published by any magazine:the December 1988 Playboy (I checked the date online) starring Olympic champion Katarina Witt in the altogether – and I mean altogether!  When I heard that the issue was no more to be savored along with the tang of witch hazel, gone for a Burton, the first words that flew into my mind were Joe Welch’s famous riposte to McCarthy: “At long last, is there no decency!”  Anyway, I think Douthat has a point, and he might have added one grace note: a large number of Hefner encomia published in recent days dwell on how reading Playboy got many a brave lad through Vietnam. True perhaps, but I wonder how much the current attention being paid to the Burns-Novick multipart documentary put this on the front burner. Anyway, here’s Douthat: https://www.nytimes.com/2017/09/30/opinion/hugh-hefner.html?ribbon-ad-idx=5&src=trending&module=Ribbon&version=context&region=Header&action=click&contentCollection=Trending&pgtype=article


City Hall lends its hand to the ongoing war on the poor: http://gothamist.com/2017/09/29/affordable_housing_study_nyc_2017.php

As if the human toll in Las Vegas isn’t terrible and tragic enough, there’s this: https://www.bloomberg.com/news/articles/2017-10-02/fake-news-fills-information-vacuum-in-wake-of-las-vegas-shootingMoney Quote (from a spokes person for what we should designate as a new category, First Disseminator): “Unfortunately, early this morning we were briefly surfacing an inaccurate 4chan website in our search results for a small number of queries,” a Google spokeswoman said in an emailed statement. “Within hours, the 4chan story was algorithmically replaced by relevant results.This should not have appeared for any queries, and we’ll continue to make algorithmic improvements to prevent this from happening in the future.” Years ago, in what must have been the worst-attended monthly talks at a club to which I belong, I argued that letting computers drive and determine the style and content of our thinking could pose terrible dangers. “Algorithmic improvements, anyone”?

As we appear to be living in a Golden Age of Agnotology, it helps to be up on that very useful word: http://ritholtz.com/2016/06/frightening-global-rise-agnotology/













The kleptocracy marches on. https://www.nakedcapitalism.com/2017/09/wall-street-owns-main-street-literally.html

So now what? Crosstown streets narrowed to half-a-car-width?https://www.dnainfo.com/new-york/20170915/midtown/citi-bike-injury-30th-street-crosstown-bike-lanes?utm_source=Manhattan&utm_campaign=3f9a411aa7-Mailchimp-NYC&utm_medium=email&utm_term=0_7456974fe2-3f9a411aa7-139053101


My pal Alexander sent the following. Seldom read anything I agree with more.  http://www.philly.com/philly/opinion/commentary/paying-the-price-for-breakdown-of-the-countrys-bourgeois-culture-20170809.htmlThen, because I didn’t get to Kunstler yesterday, I turn to him today and find him citing the same article with some interesting added gloss: http://kunstler.com/clusterfuck-nation/pushback/ Naturlich, the asshole set, who profit most in terms of their purse and their looking-glass (through which a great many of them have passed) from “identity” politicking, reacted to the piece with the expected Pantone dudgeon: http://www.phillymag.com/news/2017/08/11/penn-amy-wax-op-ed/ Or this, from a site called, with an opacity that would delight a Freudian, “Above the Law”: http://abovethelaw.com/2017/08/dog-whistling-bourgeois-values-op-ed-gets-thorough-takedown-from-other-law-professors/

I must say, the only positive I took away from Trump beating HRC was the real possibility that we’d never be forced to hear another word from the latter. Boy, was I wrong! Oh, I expected the book, the sort of everyone-else’s-culpa that was as inevitable as the dawn. But the rest of it?   https://medium.com/@caityjohnstone/the-real-reason-hillary-cant-just-shut-the-fuck-up-and-go-away-4e481b3edf84

The Net and usual suspects are bubbling with speculation that AMZ’s second-headquarters project, with its purported 50,000 new jobs and infinite need for space, is considering Brooklyn. You can hear the real-estate development sharks,  lowest species of American commerce,  licking their lips at the prospect of being bailed out of the gross overbuilding of recent years by Jeff Bezos. AMZ has the power to rescue great but fallen-on-tough-times cities like Detroit or St. Louis. Why waste that ability on a city laid morally wasted by development greed?




http://www.wqxr.org/story/why-do-orchestras-play-behind-beat/This is something I’ve often wondered about.


The following, by Eric Newcomer from today’s Bloomberg Technology, struck a responsive chord. Private Equity, with David Swensen of Yale in the role of Moses leading his children to The Promised Land, has become the most lucrative racket Wall Street (and affiliated satellites and co-conspirators) has ever confected for itself.  Fees based on assets under management (including intermittent suspicious valuations of portfolio holdings for which there is no market and therefore no way of getting out), calculation of rates of return concocted by Mickey Mouse, “costs and expenses” charged to specific portfolio assets that should properly be counted in the overhead of the PE firm: you name it, and they’ve figured out how to stick “the limiteds” with it. I’m affiliated with an endowment that has a number of “alternative” assets in its portfolio, and I now insist that these be looked at strictly on a “cash in/cash out” basis. Forget the reported internal rate of return: these generally reflect strict adherence to my famous formulation of the Clinton Principle: if everyone’s lying, no one is.

A master of the universe-type figure graced Bloomberg’s offices recently, chatting about some of the day’s big business themes, particularly as it relates to Silicon Valley. There was some soothsaying about the regulatory backlash that big companies like Amazon.com Inc., Facebook Inc. and Alphabet Inc. might face for their increasingly anti-competitive postures. There was a discussion of whether the stock market has overestimated the chances of tax reform.

But I thought the most interesting point of discussion was: Will the federal government more tightly regulate private companies?

The argument went as follows: Private tech deals were once limited to sophisticated investors, mostly venture capitalists. Then endowments joined the party, then pension funds, and now sovereign wealth funds. At this point, the money in companies like Uber Technologies Inc., WeWork Cos, and Airbnb Inc.—it’s not just rich people investing in these startups. Your retirement savings might be mixed in there, if you have a Fidelity 401(k). Or if you live in Saudi Arabia, $3.5 billion of your government’s ability to thrive post-oil is on the line.

So now we have a lot of money tied up in private companies. Yes, it is managed by sophisticated stewards of capital (sometimes), but they’re playing with money that some people can’t afford to lose.

And giving private companies all that money creates its own problems. It allows them to stay private longer, so they might have to figure out how to let early employees and investors sell their shares before the company is public. More money means the stakes are higher.

The current regulatory regime effectively creates an incentive for companies to stay private. Why go public when you can raise cash like a public company without the scrutiny? Why go public when you can avoid handing over information to your competitors?

And if your business is doing poorly, or you’re keeping some big secrets, the answer to that question becomes even easier. Public companies must disclose material events—like Justice Department probes. Public companies are obligated to provide audited financials that adhere to generally accepted accounting principles. Public companies often need independent directors.

Not everyone seems to think reform is on the horizon. Technology news site the Information wrote Thursday that the Securities and Exchange Commission is making it easier, not harder, to be a secretive private company. The SEC is relaxing the rules (that are already rarely enforced) around when companies need to share their financials with their employees. The SEC under President Donald Trump has also expanded the number of companies that are allowed to file privately for an initial public offering to include those with more than $1 billion in revenue.

But I find it hard to believe Silicon Valley could play much faster and looser than it already is. These are minor changes around the edges. I think the biggest factor is a single company—Uber.

I’ve been wondering over the years when the SEC would step in and make reforms: After Theranos faced myriad issues and had to pull out of pharmacies, it drew an SEC investigation. Increasing the required disclosures of material facts at the company would certainly have put pressure on Theranos to own up to its problems sooner. Zenefits, another troubled company, ousted its chief executive officer after the company failed to properly license insurance brokers. An independent board member probably would have helped bring some much-needed scrutiny to the company’s practices sooner. Though, obviously, no single solution fixes everything: Theranos had an abundance of non-executive directors.

At $69 billion, after raising more than $15 billion, I think Uber is big enough to warrant scrutiny. Shareholders who buy in at one price are typically left with no option to sell, or if they do, it’s limited to whatever price the company picks. Executives and board members are at a substantial advantage when it comes to information driving investing decisions. The question is just how bad things get.

Possible reforms are simple because they already exist for public companies: Require more standardized disclosures, stronger board controls and more transparency. As far as things go, there’s a pretty good system in place for publicly traded companies. Some of the regulations are too onerous for a small company, but if a business has raised more than $1 billion in outside capital, it might be time to treat it more like a public company in some ways.

These reforms would have an added bonus. It might encourage companies to go public. If you’re already doing some of the hard work of being a public company, why not get the benefits of a liquid stock?

Change has happened before, but it takes a big, embarrassing disaster. It took Enron and Worldcom for Sarbanes-Oxley. The financial crisis brought about Dodd-Frank. Subprime mortgage bonds—well, change doesn’t always come. If you want to see reform in the private markets, I think you have to hope the situation at Uber gets much worse. —Eric Newcomer

And the Clintons weren’t the only ones in the pocket of the money men. Lest we forget, so was Obama – from Day One: https://www.nakedcapitalism.com/2017/09/gaius-publius-obama-follows-clinton-boards-millionaire-speech-train-wall-street.html



This addresses a question that has perplexed me for some time: what’s with it with Ta-Nehisi Coates? He’s glib, a talented wordsmith, but it all adds up to blahblahblah, what a gambler might call “a rhetorical overlay”, like betting a 1-2 favorite. https://www.nakedcapitalism.com/2017/09/ta-nehisi-coates-limited-art-interpretation.html

Trump and No.Korea: https://www.washingtonpost.com/news/animalia/wp/2016/11/17/two-moose-locked-antlers-in-a-fight-then-froze-together-in-a-stream/?utm_term=.3f1642472a33

The first time I saw paintings by Basquiat 30-plus years ago, I said to myself (and anyone else who would listen), “This guy is the real thing.” Now he’s having his first show in London at the Barbican. About time – one wonders where Tate Modern and its blabbermouth founding director were all this time: https://news.artnet.com/art-world/basquiat-nairne-interview-1070477?utm_content=from_&utm_source=Sailthru&utm_medium=email&utm_campaign=Saturday%20newsletter%20for%209/23/17&utm_term=artnet%20News%20Daily%20Newsletter%20USE

The upcoming New Criterion, the magazine with a truly marvelous arts and culture section that redeems an often jejune political arch-conservatism inherited from its founder, my former NY Observer colleague the late Hilton Kramer, has a wonderful review by Karen Wilkin (who, even if we weren’t chums, I consider the best art writer-critic of our time, along with Jed Perl, another friend) of a show that sounds like a real dilly: “Casanova: The Seduction of Europe”. It’s now at the Kimbell in Ft.Worth, and will travel next year to San Francisco and Boston (where I intend to see it – if the Acela’s still running).

Needs no comment: https://www.nytimes.com/2017/09/22/opinion/business-war-trump.html

The best I have read on this subject, not least for its implied criticism of Obama as a bullshitter: http://prospect.org/article/how-she-lost

The coward, liar and fool who occupies the White House has finally achieved something remarkable: proof that NFL Commissioner Roger Goodell  has a backbone.







Let’s start with this interesting interview with my slightly tarnished (because of the CNN mess) hero Tom Frank. https://www.nakedcapitalism.com/2017/09/thomas-frank-corporate-democrats-vested-interest-not-listening-workers.html

I think this is particularly interesting. Frank is asked about “blunders” in the 2016 election:  In terms of blunders, if you talk about unforeseen blunders, wait, remember, first back up. The main impact that the WikiLeaks emails had, and they were covered in the American press, was Hillary Clinton’s speeches to Goldman Sachs. You remember, that was I believe almost the only item from those emails that made it into the press, and it was far overshadowed by Trump’s extremely vulgar comments. Remember, when he was on the Access Hollywood tape which came out at almost exactly the same time. So in terms of blunders, I mean, Trump’s blunders were so much bigger than Hillary’s, and just in terms of, as long as we’re just talking about mistakes that might’ve cost the Democrats the election, there’s so many other things that you have to mention other than that. I mean, the James Comey stuff where he appeared to reinstate the investigation against Hillary Clinton, which was so shocking.But also, you think of Barack Obama trying to get, remember this? Trying to get the Transpacific Partnership passed all the way through the election? That’s an incredible blunder while Hillary’s trying to distance herself from it, remember? And Trump is hitting her, hitting the Democrats for this every day, and here’s Obama saying, “No, we’re going to get it done. We’re going to get it done through Congress.” That really hurt, and another one, raising Obamacare premiums two weeks before election day. What were they thinking? Just ask yourself, I mean, you and I are old enough to remember Lyndon Johnson. Would Lyndon Johnson ever have made a move like that? No, it’s just like these are beginner’s mistakes. Or not beginner’s, it’s because they had such contempt for Trump. They didn’t think he had a chance, so Obama could take what was the most explosive issue in the election, trade deals, Trump was hitting the Democrats for trade deals at every speech all the time, and Obama could just disregard that. It’s not a threat, it’s not a problem.And here’s poor Hillary, remember, trying to backpedal backpedal backpedal, get out of this, saying “Oh, I’ve changed my mind about the Transpacific Partnership, I used to say it was the gold standard but now I know different,” and Obama just subverting her. It was a terrible blunder. Which confirms my view that in spite of all the mock heroics and fancy, come-let-us-reason-together rhetoric, Obama was a phony, very much the kind of narcissist the narrator of that great political novel FIXERS describes him as being.


This explains why I’m pretty much outta there. A one-week back-roads rental lets my step-family flee the city.  And I’m not alone. Assholes to money like flies to honey. http://www.institutionalinvestor.com/article/3750215/asset-management-macro/booze-drugs-and-fistfights-another-summer-in-the-hamptons.html?ArticleId=3750215&utm_source=hs_email&utm_medium=email&utm_content=56217951&_hsenc=p2ANqtz-92JTocuAcQCutaFHq3qYAxMqSIa3DLOlTLFA9pS6A9s9AGqqJBs_Dyo5TO_JTzqI6HVRqUzIaQ4fQf_LpE3OH05qnb-g&_hsmi=56217951#/.WbbkWtOGNE5 


First day of high school for my twin grandsons. Quite a lot of excitement about what to wear and how to wear it.

I suspect Dimon’s right about Bitcoin: http://www.businessinsider.com/bitcoin-price-worse-than-tulip-bulbs-2017-9nr_email_referer=1&utm_source=Sailthru&utm_medium=email&utm_content=10ThingsSAI&pt=385758&ct=Sailthru_BI_Newsletters&mt=8&utm_campaign=Post%20Blast%20%28sai%29:%2010%20things%20in%20tech%20you%20need%20to%20know%20today&utm_term=10%20Things%20In%20Tech%20You%20Need%20To%20Know%20-%20Engaged%2C%20Active%2C%20Passive%2C%20Disengaged&r=UK&IR=T

This is as disgusting as it is amazing: https://www.bloomberg.com/graphics/2017-anna-nicole-smith-billionaire-in-laws-court-lobbying/

I have always wondered whether there isn’t a bit less to “Saint Warren” than meets the eye: https://www.ft.com/content/fd27245a-9790-11e7-a652-cde3f882dd7b?utm_source=hs_email&utm_medium=email&utm_content=56267010&_hsenc=p2ANqtz-8sVXdWNZcXItmWwJqrHmFzmdkX60TGUqopfuG8TFY5g2zyj5Ll2a38uUUm4btGGDoTdhBfGIwf_CWRzqexeMbsIhxViQ&_hsmi=56267010

A friend reminds me that FT is behind a paywall, so here’s this text (I’m well within FT limits on cut-and-paste done by subscribers):

YESTERDAY by: Robin Harding
Growing up, I admired nobody more than Warren Buffett, the greatest investor ever. His achievement is towering. The market is an implacable opponent but here was a man who beat it year after year, making $75bn out of nothing but wisdom and charm. There was moral purity in his modesty, his ethics and his quiet attachment to home in Omaha, Nebraska. What footballer, politician or thinker could compare? 

Now 87, Mr Buffett wields huge influence over US business and finance, usually positive. He pushed companies to expense stock options, warned of danger in derivatives and taught the public to invest long term in low-cost index funds.

But how ever much you admire the man, his influence has a dark side because the beating heart of Buffettism, celebrated in a thousand investment books, is to avoid competition and minimise capital investment in the real economy. 

A torrent of recent studies show how exactly those forces — diminished competition, rising profits and lower investment — afflict the US. Economists Jan de Loecker and Jan Eeckhout chart a rise in corporate mark-ups, a measure linked to profit margins, from 18 per cent in 1980 to 67 per cent today. In a paper presented at the Brookings Institution last week, Germán Gutiérrez and Thomas Philippon show how investment has fallen relative to profitability. Mr Buffett did not cause these trends. However, they are central to his fortune. When you celebrate him, you celebrate them. 

If he had found a few truly unusual companies and bought them on the cheap there would be no issue. But acolytes are taking his methods economy-wide

Mr Buffett is completely honest about his desire to reduce competition. He just calls it by a folksy name — “widening the moat”. “I don’t want a business that’s easy for competitors. I want a business with a moat around it with a very valuable castle in the middle,” he said in 2007.

He tells Berkshire Hathaway managers to widen their moat every year. The Buffett definition of good management is therefore clear. If you have effective competitors, you are doing it wrong. 

As with many aspects of his career, Mr Buffett used to act more visibly. An example is his 1977 purchase of the Buffalo Evening News. He bought this newspaper for $32.5m, a high multiple of its $1.7m operating profit, then launched a Sunday edition and drove the competing Buffalo Courier-Express out of business. By 1986, the renamed Buffalo News was a local monopoly making $35m in pre-tax profit. At the time, it was Mr Buffett’s largest single investment. 

His concept of a moat is linked to his views on capital investment: the beauty of one is you do not need the other. One of his most celebrated purchases is See’s Candies, a company he bought for $25m in 1972. Every year, Mr Buffett raised prices. So strong was its brand that despite sales growing little, profits grew mightily, with barely any need for capital investment. “The ideal business is one that takes no capital, and yet grows,” he said last year. 

His statement is unquestionably true for an investor. For an economy, it produces the pattern above: low investment relative to higher profits. A line attributed to business partner Charlie Munger in Alice Schroeder’s biography of Mr Buffett, The Snowball, is revealing: “Munger had always kidded Buffett that his management technique was to take out all the cash from a company and raise prices.” That does sum it up. 

If Mr Buffett in his brilliance had found a few truly unusual companies and bought them on the cheap there would be no issue. But acolytes are taking his methods economy-wide.

These days, Mr Buffett has two main ways of putting his money to work. On one hand, he is finally investing in physical assets, although only in regulated industries such as electricity and railroads where returns are largely guaranteed. On the other, he is working with Brazilian private equity firm 3G as it slashes costs to the bone and drives up margins at Burger King and food company Kraft Heinz. 

Kraft now makes a 23 per cent operating margin and an enormous return on tangible capital. In a competitive market, those high margins ought to present an opportunity for rivals to invest and steal market share. Instead, Kraft competitors such as Unilever and Nestlé are under pressure from their owners — a mixture of index funds and Buffett-like activists — to match those sky-high margins. If rivals also cut, rather than invest and compete, Kraft can cut even more. A kind of Buffett equilibrium is taking hold. 

To be clear, this is not the only reason for declining investment and higher profits in the US. Nor is there a simple solution. Better antitrust enforcement would help, but recent proposals for a complete revamp of competition policy are not well founded. Although research linking lack of competition to cross-ownership by institutional funds is interesting, it does not capture the reality of private equity operators such as 3G.

We can decide who to admire. Mr Buffett is brilliant at buying into monopoly profits, but he does not start companies or gamble on new ideas. America is full of entrepreneurs who do. Elon Musk is investing in two wildly risky and competitive sectors: automobiles and space. Even the much-reviled Koch brothers built most of their fortune on investment in the real economy. Celebrate that kind of business. It is the kind America needs.


Trump voters aren’t the only idiots at large – and at the polls: http://nypost.com/2017/09/12/hillary-clintons-book-signing-was-as-insufferable-as-youd-expect/

Another add-on to the pukeworthiness of Silicon Valley: http://gothamist.com/2017/09/13/bodega_startup_millennials.php?utm_medium=email&utm_campaign=Daily%20Gothamist%20Daily%20Winter%20Storm%20Warning%20In%20Effect%20As%20NYC%20May%20See%206-12%20Of%20Snow%20Possibly%20More&utm_content=Daily%20Gothamist%20Daily%20Winter%20Storm%20Warning%20In%20Effect%20As%20NYC%20May%20See%206-12%20Of%20Snow%20Possibly%20More+CID_8444ebb8b233ed5a53d5de285a143d62&utm_source=CM&utm_term=A%20New%20Startup%20Called%20Bodega%20Wants%20To%20Keep%20You%20Out%20Of%20Bodegas

After the CNN flap. Tom Frank gets his groove back: https://www.vanityfair.com/news/2017/09/hillary-clinton-memoir-what-happened-thoughts?mbid=nl_th_59b9aca9e4b3ca2c1bc6abfc&CNDID=42793573&spMailingID=11918520&spUserID=MTQzOTExNDk1OTIxS0&spJobID=1241177768&spReportId=MTI0MTE3Nzc2OAS2

Here, for all Trump-haters, is a good solid recap of Reasons Why. https://www.bloomberg.com/view/articles/2017-09-13/when-trump-slams-the-media-it-s-an-act-of-love?utm_medium=email&utm_source=newsletter&utm_term=170913&utm_campaign=sharetheview

Oscar Wilde strikes again. The unspeakable in pursuit of the uneatable: Mercer vs. the Kochs. http://washingtonmonthly.com/2017/09/13/quick-takes-the-battle-of-the-oligarchs/

Another Hat Tip to Naked Capitalism: https://wolfstreet.com/2017/09/12/the-terrible-facts-about-the-real-earnings-of-men/


This is exactly what’s happened in “duh Hamptons.” http://www.bostonglobe.com/business/2017/09/14/berkshires-locals-struggle-tourism-booms/Qhv33VbNtAF9HHxASiPo4L/story.html?s_campaign=breakingnews:newsletter


Once again, the unspeakable in pursuit of the uneatable (O.Wilde): https://qz.com/1076357/hillary-clintons-what-happened-amazon-just-deleted-over-900-reviews-of-hillary-clintons-new-book/?mc_cid=8b782b7097&mc_eid=0e98215088

My friend Amara Bhide gets to the point of a culture taken over by algorithms:  https://www.wsj.com/articles/equifax-critics-are-missing-the-bigger-point-1505343139?shareToken=std9b26e4b54814844a99cf4745add6658&reflink=article_email_share


Golly! https://www.lrb.co.uk/v39/n16/john-lanchester/you-are-the-product No wonder I quit FB. Lanchester has this gem: “Flaubert was sceptical about trains because he thought (in Julian Barnes’s paraphrase) that ‘the railway would merely permit more people to move about, meet and be stupid.” A precursor to my own anti-FB apothegm: the trouble with the Internet is that it gives millions of people with nothing to say a place to say it.















welcome back! http://kunstler.com/clusterfuck-nation/perturbations-anon/


Sorry to see Thomas Frank tarnished by the CNN reporting mess. I have always found Frank to be a clear-eyed, commonsensical commentator on issues of the day, and really never thought of him as a reporter. Wonder why he allowed himself to be put in this position, reporting a single-source rumor as news and thereby playing into the hands of the lying hypocrite in the White House.

Both parts of an interesting interview: https://news.artnet.com/art-world/thomas-campbell-interview-metropolitan-museum-art-1070084  Part Two: https://news.artnet.com/art-world/mutiny-at-the-met-thomas-campbell-on-modernization-at-americas-greatest-museum-1071464?utm_content=from_&utm_source=Sailthru&utm_medium=email&utm_campaign=US%20newsletter%20for%209%2F6%2F17&utm_term=New%20US%20Newsletter%20List


Practically nothing I’ve read recently better expresses the deterioration of what we might call the “example setting” strata of American affluence better than this letter to Slate’s “Dear Prudence” agony-aunt column. Credit for calling it to my attention goes to my darling wife. Here we go:    Q. Daughter’s friend being in wedding: My 27-year-old daughter and her best friend, Katie, have been best friends since they were 4. Katie practically grew up in our house and is like a daughter to me. My daughter recently got engaged to her fiancé and announced that Katie would be the maid of honor (Katie’s boyfriend is also a good friend of my future son-in-law). The problem is that Katie walks with a pretty severe limp due to a birth defect (not an underlying medical issue). She has no problem wearing high heels and has already been fitted for the dress, but I still think it will look unsightly if she’s in the wedding procession limping ahead of my daughter. I mentioned this to my daughter and suggested that maybe Katie could take video or hand out programs (while sitting) so she doesn’t ruin the aesthetic aspect of the wedding. My daughter is no longer speaking to me (we were never that close), but this is her big wedding and I want it to be perfect. All of the other bridesmaids will look gorgeous walking down the aisle with my daughter. Is it wrong to have her friend sit out? Needless to say, “Prudence” was as dumbstruck – and acid in her critique – as we were.

Another commentator I like, Doug Henwood (Left Business Observer). There is no political capital in maintenance and upkeep. Period – end of report: https://www.jacobinmag.com/2017/09/infrastructure-crumbing-public-sector-spending

Of course, it’s probably ungracious to point out that during this period of acute underinvestment and under-maintenance, the capital that might have supported proper upkeep has gone – through stock buybacks etc. – to maintain a generous maintenance of the wellbeing of corporate and political insiders.


This is why I quit social media (with the exception of Instagram, where I only look at family stuff). https://www.vox.com/conversations/2017/9/8/16266496/silicon-valley-google-apple-facebook-amazon-monopolies


Sitting here watching Sloan Stephens play Madison Keys in finals of US Open at what I insist on calling “Forest Hills.” Stephens beat Venus Williams in a semifinal. So that was three of the four American semifinalists who are African-American, and where’s the tribute to Althea Gibson? Did I miss it?


If you’re like me, this Equifax f***up is puzzling. Only one thing seems certain to me: the credit report companies will do the minimum they can get away with and charge the maximum for it! This might help: https://www.nakedcapitalism.com/2017/09/bill-black-equifax-data-breach-10-10-scandal.html

I’ve just finished John Le Carre’s new novel A Legacy of Spies, which is basically an extended, richly detailed (some might say overly detailed; indeed I reread the last third of the book, which I had sort of skipped through the first time) backstory to The Spy Who Came in from the Cold. If you like this sort of stuff – the tradecraft, the scheming, the geography – and can put up with the odd pomposity or longueur, you should like this book, net net net. I did.

I’ve suspected this for some time: A POLITICO review shows that the criteria used in the U.S. News rankings – a measure so closely followed in the academic world that some colleges have built them into strategic plans – create incentives for schools to favor wealthier students.POLITICO interviewed more than 20 current and former college presidents, administrators and federal education officials, and all agreed, often in fiery terms, that the lack of economic diversity is a critical problem. Many cited a common culprit – the U.S. News rankings, which began in 1983 and quickly grew to become, in the magazine’s own words, “the 800-pound gorilla of American higher education.””I think U.S. News has done more damage to the higher education marketplace than any single enterprise that’s out there,” said F. King Alexander, president of Louisiana State University.Read more: http://politi.co/2wRqUQC

I believe anything this doctor writes: https://www.vox.com/2017/9/8/16270370/atul-gawande-opioid-weeds