Posts Tagged ‘Economics’

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LinkSwarm for August 13, 2021

Friday, August 13th, 2021

Happy Friday the 13th!

This week’s LinkSwarm features Democrats behaving badly (a timeless theme).

  • Immediately after Senate Republicans caved on the pork-filled infrastructure bill, Democrats turned around and passed a highly partisan $3.5 billion budget bill. Good job, idiots.
  • Hunter Biden is the gift that keeps digging: “The Russians have videos of me doing crazy f***ing sex!’ Hunter Biden is seen in unearthed footage telling prostitute that Russian drug dealers stole ANOTHER of his laptops.” 1. Hunter has more Russian-related felonies in a single weekend than Donald Trump had in his entire lifetime. 2. I don’t lose pennies the way Hunter loses laptops…
  • “How Many Other Andrew Cuomos Are Elites Covering For?”

    The obvious fact is, however, that this corrupt corporate press and the Jennifer Rubin “conservatives” of the world are the ones who propped Cuomo up as “the gold standard,” to use Joe Biden’s words, even describing themselves as “Cuomosexuals.”

    Cuomo’s “radical transparency” made him a “terrific bureaucrat,” they said. Cuomo is “inspiring, uplifting, fascinating,” and truly “magnificent,” they insisted. He’s “honest, direct, brave,” and what “real leadership” looks like. Elites gave him an Emmy and blessed him with softball interviews and comedy-hour airtime, with left-wing activists working behind the scenes to discredit Cuomo’s accusers.

    Tuesday’s resignation signals it’s the end of the road for Cuomo — for now. But if the media can sit and twiddle its thumbs — or worse, kiss keister and perform comedy sketches with giant Q-Tips — while thousands of elderly folks die in New York nursing homes and women in the double digits tell of a gropey governor’s disgusting habits, we must ask: How many other Andrew Cuomos is the media covering for?

    Covering for elite misconduct is a perpetual problem in the media; it didn’t start with Cuomo. As Federalist Political Editor John Daniel Davidson wrote on Tuesday, the media did the same with Harvey Weinstein, Jeffrey Epstein, and Theodore McCarrick. Don’t forget Bill Clinton or Roman Polanski, either.

    “Everyone knew. No one cared. No one said anything until forced to. Then the feigned shock and outrage, the concern about the treatment of women, the hand-wringing and Me Too-ing, the performances on social media,” Davidson wrote. “As long as sexual harassment, assault, abuse, even the sex trafficking of underage girls stays quiet, then [the media] stay quiet, too.”

  • “New York’s Capital Is Crazytown”

    You read all this and think: The governor is a letch, a creep, a dirty old man. But also a nut—a high-functioning one, a politically talented one, but a nut. Only a nut would do these things, and only a nut would think he wouldn’t be found out.

    No one in New York is walking around saying “I don’t believe it” or “That’s not the Andrew I know.” It’s apparently the Andrew Cuomo a lot of people knew.

  • Cuomo could still end up in prison. (Hat tip: Stephen Green at Instapundit.)
  • “Arizona state Sen. Tony Navarrete resigns seat after arrest in child sex abuse case.”
  • Old and busted: Democrats want to segregate students by race. The new hotness: Democrats want to segregate students by race.
  • How inflation is undoing the four years of wage growth and price deflation President Trump brought to the economy.

    Read the whole thing, especially the parts on the EU and Canada.

  • Devin Hogan, head of the Minneapolis Democratic Party, said that burning down a police building was “an act of pure righteousness.”
  • “Swiss Police Threaten to Stop Enforcing COVID-19 Rules. Group warns in letter that lockdown laws violate fundamental rights.”
  • Oregon has decided that it’s going to stop requiring Oregon high school graduates to prove they can read and write.
  • Baltimore professor arrested for dealing math. “Prof. Edward C. Ennels taught math at Baltimore City Community College but appears to have been offering a running lesson on supply side economic theory. Ennels reportedly was selling grades on a sliding scale depending on your worth and your ambition: $150 for a C; $250 for a B; and $500 for an A. He has now earned jail time after pleading to 11 misdemeanor charges, including bribery and misconduct in office.”
  • Speaking of Baltimore schools failing their students: Some Baltimore high school students test at grade school levels.
  • Dan Crenshaw slams Jennifer Ruben for a huge mistake:

    That’s a big mistake even by her standards. How did she make it? The Texas Tribune screwed the pooch on the original story:

    That’s a hell of a correction. “When we wrote Nolan Ryan struck out 383 batters in a single game, we meant he struck out that many in a single season…”

  • YouTube takes down another video by Rand Paul.(Hat tip: Director Blue.)
  • Dumbass: Running from the police. Extra Dumbass: In a stolen vehicle. Super Turbo Dumbass: On a stolen ATV. (Hat tip: Dwight.)
  • “Mongo ist nur Schachfigur im großen Spiel des Lebens.” (Hat tip: Dwight.)
  • “Dems Considering Another Lockdown To Wipe Out The Few Small Businesses That Survived The Last One.”
  • “Bill Gates Announces He Too Will Go To Space Once His Rocket Is Finished Installing Updates.”
  • Golden throats:

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    Posted in Budget, Crime, Democrats, Economics, Media Watch, Social Justice Warriors, Waste and Fraud | 1 Comment »

    They’re Not Going Back

    Wednesday, June 2nd, 2021

    There’s a very early Laurie Anderson song called “Walk The Dog” where she riffs on (among other things) a Dolly Parton song:

    “I just want to go back to my Tennessee mountain home now.”

    Well, you know she’s not gonna go back home.

    And I know she’s not gonna go back home.

    And she knows she’s never gonna go back there.

    And that’s a good summary of many former office workers post-coronavirus: They’re never going back.

    With the coronavirus pandemic receding for every vaccine that reaches an arm, the push by some employers to get people back into offices is clashing with workers who’ve embraced remote work as the new normal.

    While companies from Google to Ford Motor Co. and Citigroup Inc. have promised greater flexibility, many chief executives have publicly extolled the importance of being in offices. Some have lamented the perils of remote work, saying it diminishes collaboration and company culture. JPMorgan Chase & Co.’s Jamie Dimon said at a recent conference that it doesn’t work “for those who want to hustle.”

    But legions of employees aren’t so sure. If anything, the past year has proved that lots of work can be done from anywhere, sans lengthy commutes on crowded trains or highways. Some people have moved. Others have lingering worries about the virus and vaccine-hesitant colleagues.

    And for [Portia] Twidt, there’s also the notion that some bosses, particularly those of a generation less familiar to remote work, are eager to regain tight control of their minions.

    “They feel like we’re not working if they can’t see us,” she said. “It’s a boomer power-play.”

    It’s still early to say how the post-pandemic work environment will look. Only about 28% of U.S. office workers are back at their buildings, according to an index of 10 metro areas compiled by security company Kastle Systems. Many employers are still being lenient with policies as the virus lingers, vaccinations continue to roll out and childcare situations remain erratic.

    But as office returns accelerate, some employees may want different options. A May survey of 1,000 U.S. adults showed that 39% would consider quitting if their employers weren’t flexible about remote work. The generational difference is clear: Among millennials and Gen Z, that figure was 49%, according to the poll by Morning Consult on behalf of Bloomberg News.

    “High-five to them,” said Sara Sutton, the CEO of FlexJobs, a job-service platform focused on flexible employment. “Remote work and hybrid are here to stay.”

    The lack of commutes and cost savings are the top benefits of remote work, according to a FlexJobs survey of 2,100 people released in April. More than a third of the respondents said they save at least $5,000 per year by working remotely.

    This is especially true in high tech. If you have in-demand skills (full-stack developer, AI expertise, etc.), lots of companies are vying for you, and all of them have remote-work infrastructure already in place. Chances are good you login into a VPN in the morning, communicate via email and Slack, have your meetings on Zoom, code on your laptop, then check your work into a remote repository running a continuous integration/continuous deployment platform (GitHub, GitLab, etc.) that builds and tests your software. There’s zero reason for you to spend your time commuting to the office. And if your current employer won’t let you work from home, another will. And that other company can be located anywhere, and they can hire the best talent for their position no matter whether they have a local office.

    I, for one, save just shy of an hour a day working from home rather than braving Austin roads, and my dogs are much happier.

    How can you keep them in the big city once they’ve tasted life back on the farm?

    Assuming the farm has Internet…

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    Posted in Economics, Uncategorized | 4 Comments »

    A Good Explanation of the Semiconductor Shortage

    Tuesday, April 6th, 2021

    A semiconductor shortage has been plaguing the automobile industry for several months, and this piece explains why:

    To understand why the $450 billion semiconductor industry has lurched into crisis, a helpful place to start is a one-dollar part called a display driver.

    Correction: The semiconductor industry itself isn’t in crisis, it’s making money hand-over-fist right now. It’s certain industries relying on semiconductors that have the problem.

    Hundreds of different kinds of chips make up the global silicon industry, with the flashiest ones from Qualcomm Inc. and Intel Corp. going for $100 apiece to more than $1,000. Those run powerful computers or the shiny smartphone in your pocket. A display driver is mundane by contrast: Its sole purpose is to convey basic instructions for illuminating the screen on your phone, monitor or navigation system.

    The trouble for the chip industry — and increasingly companies beyond tech, like automakers — is that there aren’t enough display drivers to go around. Firms that make them can’t keep up with surging demand so prices are spiking. That’s contributing to short supplies and increasing costs for liquid crystal display panels, essential components for making televisions and laptops, as well as cars, airplanes and high-end refrigerators.

    “It’s not like you can just make do. If you have everything else, but you don’t have a display driver, then you can’t build your product,” says Stacy Rasgon, who covers the semiconductor industry for Sanford C. Bernstein.

    Now the crunch in a handful of such seemingly insignificant parts — power management chips are also in short supply, for example — is cascading through the global economy. Automakers like Ford Motor Co., Nissan Motor Co. and Volkswagen AG have already scaled back production, leading to estimates for more than $60 billion in lost revenue for the industry this year.

    A bit of background here: Back in the dim mists of time, some major car manufacturers used to have their own captive wafer fabrication plants for automotive components. They were more art-of-the-state than state-of-the-art, as well as heavily unionized. (Your etch machine broke? Better figure out whether you need the union plumber or the union electrician to fix it…) GM shut down their last semiconductor plan in Kokomo, Indiana (which I think was running a 500 nanomemter process, which was beyond old even then) in 2017.

    The situation is likely to get worse before it gets better. A rare winter storm in Texas knocked out swaths of U.S. production. A fire at a key Japan factory will shut the facility for a month. Samsung Electronics Co. warned of a “serious imbalance” in the industry, while Taiwan Semiconductor Manufacturing Co. said it can’t keep up with demand despite running factories at more than 100% of capacity.

    “I have never seen anything like this in the past 20 years since our company’s founding,” said Jordan Wu, co-founder and chief executive officer of Himax Technologies Co., a leading supplier of display drivers. “Every application is short of chips.”

    The chip crunch was born out of an understandable miscalculation as the coronavirus pandemic hit last year. When Covid-19 began spreading from China to the rest of the world, many companies anticipated people would cut back as times got tough.

    “I slashed all my projections. I was using the financial crisis as the model,” says Rasgon. “But demand was just really resilient.”

    People stuck at home started buying technology — and then kept buying. They purchased better computers and bigger displays so they could work remotely. They got their kids new laptops for distance learning. They scooped up 4K televisions, game consoles, milk frothers, air fryers and immersion blenders to make life under quarantine more palatable. The pandemic turned into an extended Black Friday onlinepalooza.

    Automakers were blindsided. They shut factories during the lockdown while demand crashed because no one could get to showrooms. They told suppliers to stop shipping components, including the chips that are increasingly essential for cars.

    Then late last year, demand began to pick up. People wanted to get out and they didn’t want to use public transportation. Automakers reopened factories and went hat in hand to chipmakers like TSMC and Samsung. Their response? Back of the line. They couldn’t make chips fast enough for their still-loyal customers.

    Here’s the crux of the problem:

    Wu explained that he can’t make more display drivers by pushing his workforce harder. Himax designs display drivers and then has them manufactured at a foundry like TSMC or United Microelectronics Corp. His chips are made on what’s artfully called “mature node” technology, equipment at least a couple generations behind the cutting-edge processes. These machines etch lines in silicon at a width of 16 nanometers or more, compared with 5 nanometers for high-end chips.​

    ​The bottleneck is that these mature chip-making lines are running flat out. Wu says the pandemic drove such strong demand that manufacturing partners can’t make enough display drivers for all the panels that go into computers, televisions and game consoles — plus all the new products that companies are putting screens into, like refrigerators, smart thermometers and car-entertainment systems.

    There’s been a particular squeeze in driver ICs for automotive systems because they’re usually made on 8-inch silicon wafers, rather than more advanced 12-inch wafers. Sumco Corp., one of the leading wafer manufacturers, reported production capacity for 8-inch equipment lines was about 5,000 wafers a month in 2020 — less than it was in 2017.

    Hell, there are people still running some four inch fab lines out there, though usually it’s for something funky like gallium arsenide, old analog signal processes, etc.

    The problem is, no one is building any new capacity in those old geometries because fabs are too expensive to build and need 2-3 years of lead time to get up and running. Moore’s second law states that the cost of a new, cutting edge semiconductor plant doubles every four years. You can’t just take an existing building and turn it into a fab, it has to be specially built from the ground up with exacting standards for cleanroom air filtering, concrete slab level uniformity, etc. And equipment manufacturers like Applied Materials and LAM Research aren’t going to sell you old technology machines to build older geometry chips because they’re not making them anymore. And if you have to pay full price for the equipment, you might as well fab higher-value chips in current geometries anyway.

    TSMC is already spending $100 billion for expanded manufacturing capacity over the next three years, and Intel another $20 billion. That spiraling fab cost is why so many former integrated device manufacturers went to a fabless model, designing chips but letting the manufacturing be handled by foundries like TSMC, UMC and Global Foundries. (And Intel is expanding their own foundry business at the same time they’re paying TSMC to fab some of their top-end chips. You can’t tell the players without a scorecard…)

    The other problem is the extremely cyclical nature of the semiconductor industry. In booms, fabs make money hand over fist. During busts, some segments (like RAM) barely break even. The foundry model has smoothed the spikes out somewhat, but as the current shortage shows, not entirely.

    Just-In-Time delivery was one of the great disruptive business innovations. Leaner, more tightly-coupled computerized inventory lead to decreases in unused parts and faster times to market. But when there’s a hiccup in the supply chain, it makes it more immediately disruptive. It’s hard to obtain additional semiconductor parts if everyone’s fab is already at full capacity, so expect shortages to extend into the year.

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    Posted in Economics, Uncategorized, unions | 29 Comments »

    Followup: Is The Silver Squeeze A Ruse?

    Tuesday, February 2nd, 2021

    Following yesterday’s story, I got pushback from readers that asserted the supposed WallStreetsBets silver squeeze was, in fact, a ruse from hedge funds to distract retailer investors from the GameStop and AMC squeezes.

    That does in fact seem to be the consensus at WallStreetBets.

    If you haven’t been browsing WSB or doing your own research, you’d probably think that the people on Twitter are correct in saying there is a silver squeeze happening and we should all get in on it. There are quite a few wsb-logo Twitter accounts pushing this. This is BS & the straight up the ANTITHESIS of who we are.

    By buying silver/going long on silver, you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME 🚀 🚀 🚀 💎 🙌 The hedge funds are LONG silver NOT short silver.

    The media, Wall Street, normies, and every other non-WSB autist are trying to push you to buy silver. This would be a tragic, irreversible decision that not only will most likely not make you any money because the squeeze is fake, it will put you on the sidelines from this righteous and glorious war we are in.

    Another sign it’s a ruse: Citadel Securities, one of the primary hedge funds backers, evidently holds shares in 17 different silver companies.

    That’s one of the problems with a decentralized swarm attack: If nobody’s in charge, then it’s much harder to filter out the noise to determine the true direction of the swarm. That can be a strength, but it also makes the swarm vulnerable to ruses like this. Extracting a signal from the huge wave of noise in everyday financial transactions is a daunting problem under the best of circumstances even when giant hedge funds aren’t baiting friendly MSM outlets with elaborate ruses. (Or, I should say, when giant hedge funds aren’t baiting friendly MSM outlets with elaborate ruses even more than they usually are.)

    Whatever the source, many bullion dealers were reporting a huge run on silver due to a spike in demand, though physical silvere seemed to be doing much better than “paper silver” (i.e., the futures market). Today spot silver prices are back down in early trading.

    Remember, I said yesterday that a silver squeeze was unlikely to work.

    With that out of the way, here are some other WallStreetBets/GameStop/etc. news:

  • Adam Ford with Not The Bee explains the GameStop short squeeze, including more background detail on the origins of the squeeze than was in my original post:

  • Glenn Greenwald goes into more detail on the GameStop squeeze and Melvin Capital:

    The usual Greenwald leftwing caveats apply. (Hat tip: Zero Hedge.)

  • GameStop stock is back up this morning after Robinhood lifted restrictions on buying shares.
  • Texas Attorney General Ken Paxton has launched an investigation into “Robinhood, Discord, Citadel and other trading apps that put curbs on stock trading” in GameStop.

    • Noon Update: And now GameStop, AMC and Silver are all way down right now. Never invest what you can’t afford to lose…

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    Posted in Economics, Texas | No Comments »

    Hi Ho Silver, Away to the Moon!

    Monday, February 1st, 2021

    Evidently the WallStreetBets crowd that carried out the Great GameStop Short Squeeze have decided that silver is their next target for making money:

    Silver Bullion Market is one of the most manipulated on earth. Any short squeeze in silver paper shorts would be EPIC. We know billion banks are manipulating gold and silver to cover real inflation. Both the industrial case and monetary case, debt printing has never been more favorable for the No. 1 inflation hedge Silver.

    Inflation adjusted Silver should be at 1000$ instead of 25$.

    Signs that the silver market was about to get hit by a GameStop-style short squeeze emerged Wednesday.

    That’s when comments began appearing on the Reddit forum r/wallstreetbets — the investor board now famous for tripling the video game company’s shares this week. People started egging each other on to pile into silver’s largest exchange-traded product. Banks have been keeping silver prices artificially low, they said, masking an actual shortfall of supplies. Help put an end to “THE BIGGEST SHORT SQUEEZE IN THE WORLD,” one poster said.

    To say there was a strategy would be overstating things. At about 8:30 a.m. New York time on Thursday, day traders bent on teaching some banks a lesson began flooding iShares Silver Trust. Their buying drove up prices of the underlying metal by as much as 6.8%, the most since August. And just like that, an ETF became the Trojan horse that helped the Reddit hoards break through the gates of the commodities world for the first time since they began upending equities.

    It rippled across the entire silver complex. Miners of the metal rallied. Futures gained. A record 3.1 million iShares Silver Trust options contracts traded. The volatility was unlike anything James Gavilan, a commodities market consultant with over two decades of experience in precious metals, had ever seen.

    It was “mind-boggling, breath-taking, it’s shocking really,” he said as prices continued to rise further.

    Another sign that they’re having a real effect is yesterday’s email missive from gold and silver dealer APMEX:

    In the last week, we have seen a dramatic shift in Silver demand from our customers. For example, the ratio of ounces sold per day was running about two times earlier in the week and closer to four times the average demand by the end of the week. Once markets closed on Friday, we saw demand hit as much as six times a typical business day and more than 12 times a normal weekend day. Combined with the extremely high demand levels, we are also seeing a surge in new customers. On Saturday alone, we added as many new customers as we usually add in a week.

    This morning spot silver is up over $30 an ounce, various stock brokers are evidently breaking down on the volume, and physical silver rounds are sold out at various silver dealers, even at $6 over spot (which is nuts).

    Another sign that the effect is real is that silver is rising but gold remains flat, an unusual circumstance that never seems to hold long for precious metals whose prices have historically risen and fallen together.

    Silver has always been populism’s precious metal of choice, with the bimetallist “Free Silver” movement of the late 19th century culminating the William Jennings Bryant’s famous “Cross of Gold” speech in 1896.

    Unlike GameStop stock, I actually own physical silver as an emergency hedge against hyperinflation, so the Reddit raiders already made me a little money. And there’s more than a grain of truth to inflation being higher than government indexes are letting on, largely thanks to the huge liquidity the Federal Reserve and other central banks have pumped into the world economy. I do think it is prudent for anyone with sufficient capital (i.e., you’ve paid off your car and credit card debts and have, at an absolutely bare minimum, three months of living expenses in the bank) to keep a certain amount of physical gold and silver in a secure location (and I suspect at least half of you are immediately going to think “gun safe”) you can easily access, just in case.

    But color me skeptical that not only can they get silver up to $1,000 an ounce (barring a runaway hyperinflation takeoff), but that they can have any long-term effect on the market. Tangible commodities are fundamentally different than shorted stocks. A big rise in the price of silver would trigger the reopening of dozens of currently shuttered silver minds around the world to meet demand.

    Silver is a truly global commodity in a way that GameStop stock is not. I am skeptical that the WallStreetBets crowd has an adequate grasp of the size of the global silver options picture. Traders in Tashkent and Singapore probably never heard about GameStop until this year, but they’ve watched the rise and fall of silver prices for a long, long time.

    I’m old enough to remember that there have been several rounds of apocalyptic bullion hype over the years. My father lost quite a bit of money betting on gold futures in the early 1980s, sure than inflation would continue to rise, but instead Paul Volker and Ronald Reagan managed to kill it dead.

    This was about the same time the Hunt brothers tried to corner the silver market. Silver started 1979 around $6 an ounce, and briefly peaked above $49 in January of 1980. By June of 1981 Silver was back to trading in single digits, and the Hunt brothers lost their shirts. (There are some parallels with the GameStop squeeze, namely that the Hunt brothers were doing a lot of their buying using options and credits, like some (but not all) of the WallStreetBets crowd.)

    The bullion market also has a way of defying your expectations. I was sure that the subprime meltdown in 2008 would send gold and silver soaring. Gold jumped in September, then settled back down below it’s September rates before ending up modestly up for the year. Silver actually ended the year down.

    The world economy is an enormously complex organism. You can temporarily jolt some parts of it, but then other parts compensate. Rising and falling prices are timing signals that constantly shift money around to make sure supply meets demand. Investing in silver means opportunity cost in not investing in index funds, Apple stock, or even Dogecoin (way up for the year, but down off last week’s peaks).

    By all means, hold gold and silver as a hedge against inflation. But don’t bet the farm on silver hitting that moonshot target of $1000 an ounce anytime soon.

    Edited to add: Read the comments. A lot of people are saying this is jamming from the hedge fund backers to take the pressure off GameStop and AMC, and not an organic push for silver from the WallStreetBets core crowd.

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    Posted in Economics | 16 Comments »

    GameStop Short Sellers Refusing To Fold?

    Saturday, January 30th, 2021

    You might think that, having suffered billions in losses, hedge funds would want to get out of the GameStop short-selling game.

    You’d be wrong.

    The astronomical rally in GameStop has imposed huge losses of nearly $20 billion for short sellers this month, but they are not budging.

    Short-selling hedge funds have suffered a mark-to-market loss of $19.75 billion year to date in the brick-and-mortar video game retailer, including a nearly $8 billion loss on Friday as the stock kept ripping higher, according to data from S3 Partners.

    Still, short sellers mostly are holding onto their bearish positions or they are being replaced by new hedge funds willing to bet against the stock. GameStop shares that have been borrowed and sold short have declined by just about 5 million over the last week, marking an 8% dip in the short interest, according to S3. Most of the short covering occurred on Thursday, when the stock fell for the first time in six days.

    “I keep hearing that ‘most of the GME shorts have covered’ — totally untrue,” said Ihor Dusaniwsky, S3 managing director of predictive analytics. “In actuality the data shows that total net shares shorted hasn’t moved all that much.”

    “While the ‘value shorts’ that were in GME earlier have been squeezed, most of the borrowed shares that were returned on the back of the buy to covers were shorted by new momentum shorts in the name,” Dusaniwsky added in an email.

    Shares of GameStop were back up Friday after Robinhood and other retail brokers allowed trading to resume.

    The borrow fee on GameStop’s stock — or the cost-to-borrow shares for the purpose of selling them short — jumped to 29.32% on existing shorts and 50% on new short positions, S3 said.

    “If most of the shorts had covered, we would not be seeing stock borrow rates at these high levels — by now you would be able to borrow GME stock at single digit levels due to an increase in the lendable stock loan supply due to borrowed shares being returned after all the ‘supposed’ buy-to-covers,” Dusaniwsky said.

    GameStop remained the most-shorted name in the market as short interest as a percentage of shares available for trading stands at 113.31%, S3 said.

    (Supposedly Melvin Capital and Citron are out of their GameStop short positions. So who is still in?)

    Assuming all the above is true, the remaining hedge funds and their allies are still shorting more than 100% of the stock, despite the theoretically infinite risk involved. I can think of several theories to explain what appears to be apparently irrational behavior:

    1. Short sellers fully expect their friends in the Biden Administration and/or the financial regulatory apparatus to come to their aid and extricate them from the bind they’ve put themselves into by suspending or changing the rules. Huh. I wonder why they could possibly think that?

    2. Short sellers expect to use their power to force trading companies to bend to their will by forcing retail investors to sell their shares (as Robinhood was reportedly doing on Thursday).
    3. Short sellers expect one or more “whales” (i.e., rich individual investors) to flip and either sell their shares or lend them out to cover shorts once the temptation to take profits is too great.
    4. Deeper-pocketed short sellers expect the squeeze to force weaker rivals out of the game, either taking huge losses to liquidate their positions or going bankrupt. In either case, they expect this winnowing to drop shorted shares below the 100% threshold, relieving the pressure on the shorts for the remaining short sellers.

    Obviously, it could also be a combination of all these. (Or something else; feel free to float other theories in the comments.)

    It’s the first two possibilities that should worry us from a policy position: If the big players can break the rules at will to reverse their fortunes when they’ve been beaten at their own game by the little players, then it’s not a free market. And if it’s not a free market, what’s to keep ordinary Americans from getting out of the game entirely?

    (Hat tip: Director Blue.)

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    Posted in Democrats, Economics, Regulation | 3 Comments »

    The Great GameStop Short Squeeze

    Thursday, January 28th, 2021

    Here’s a Wall Street story that has everything to do with the current political moment.

    GameStop is the video game retailer that almost went out of business last year. This year, a whole bunch of powerful hedge funds bet on GameStop stock going by selling the stock short.

    Tiny problem:

    For those unfamiliar, a short squeeze happens when a rising stock price forces short-sellers out of their position. When panic strikes and those sellers buy back stock, they send shares even higher. Here, you have what InvestorPlace Markets Analyst Tom Yeung calls a powerful feedback loop.

    Yeung also sees GME stock as being a particularly relevant candidate for a short squeeze. Right now, 71.2 million of its shares are being sold short. That is even more than its total outstanding share count!

    This tweet thread explains what that means:

    So the short selling bear hedge funds are totally screwed. The result? Carnage:

    Across most of America, GameStop is just a place to buy a video game. On Wall Street, though, it’s become a battleground where swarms of smaller investors see themselves making an epic stand against the 1%.

    The funds serving the financial elite are starting to walk away in defeat. Big bets they made that GameStop’s stock would fall went wrong, leaving them facing billions of dollars in collective losses. All the wild action pushed GameStop’s stock as high as $380 on Wednesday, up from $18 just a few weeks ago.

    The stunning seizure of power gives some validation to smaller-pocketed investors, many of whom are encouraging each other on Reddit and are trading stocks for the first time thanks to brokerages offering free-trading apps. It’s also left more investors on Wall Street asking if the stock market is in a dangerous bubble about to pop, as AMC Entertainment, Bed Bath & Beyond and other downtrodden stocks suddenly soar as well. The S&P 500 set a record high earlier this week, though it fell Wednesday.

    Two investment firms that had placed bets for money-losing GameStop’s stock to fall have essentially thrown in the towel. One, Citron Research, acknowledged Wednesday in a YouTube video that it unwound the majority of its bet and took “a loss, 100%” to do so.

    Snip.

    Melvin Capital is also exiting GameStop, with manager Gabe Plotkin telling CNBC that the hedge fund was taking a significant loss. He denied rumors that the hedge fund will fail. The size of the losses taken by Citron and Melvin are unknown.

    Before its recent explosion, GameStop’s stock had been struggling for a long time. The company has been losing money for years as sales of video games increasingly go online, and its stock fell for six straight years before rebounding in 2020.

    That pushed many professional investors to make bets that GameStop’s stock will decline even further. In such bets, called “short sales,” investors borrow a share and sell it in hopes of buying it back later at a lower price and pocketing the difference. GameStop is one of the most shorted stocks on Wall Street.

    But its stock began rising sharply earlier this month after a co-founder of Chewy, the online seller of pet supplies, joined the company’s board. The thought is that he could help in the company’s transformation as it focuses more on digital sales and closes brick-and-mortar stores. Its shares jumped to $19.94 from less than $18 on Jan. 11. At the time, it seemed like a huge move for the stock.

    Smaller investors were meanwhile exhorting each other online to keep GameStop’s stock rolling higher.

    The raucous discussions are full of sarcasm, self deprecation and emojis of rocket ships signifying belief that GameStop’s stock will fly to the moon.

    Snip.

    There is no overriding reason why GameStop has attracted this cavalcade of smaller and first-time investors, but there is a distinct component of revenge against Wall Street in communications online.

    “The same rich people that caused the market crash in 2007/08 are still in power and continue to manipulate the market to get even richer, we are just taking back our fair share,” one user wrote on Reddit.

    “hey mom i can’t come up for dinner,” another user wrote. “i’m bankrupting a 10 figure hedge fund with the boys.”

    Beyond personal attacks, the battle has also created big financial losses for Wall Street players who shorted GameStop’s stock.

    As GameStop’s gains grew and short sellers scrambled to get out of their bets, they had to buy shares to do so. That accelerated the momentum even more, creating a feedback loop. As of Tuesday, short sellers of GameStop were already down more than $5 billion in 2021, according to S3 Partners.

    Much of professional Wall Street remains pessimistic that GameStop’s stock can hold onto its immense gains. The company is unlikely to start making big enough profits to justify its $22.2 billion market valuation anytime soon, analysts say. The stock closed Wednesday at $347.51. Analysts at BofA Global Research raised their price target Wednesday — to $10.

    All the mania is raising some concern that investors are taking excessive risks, and reporters asked Federal Reserve Chair Jerome Powell on Wednesday whether the Fed’s moves to support markets through the pandemic is helping to push stock prices too high.

    In short, the hedge funds suffered a serious bloodletting:

    Did the Wall Street titans laid low by retail investors shrug their shoulders over the loss and slink off quietly into the night to lick their wounds? They did not. Instead, our elites staged a fullbore freakout over being beaten at their own game(stop).

    Perhaps the most flagrant example was where noted CNN tool Chris Cillizza declared the GameStop short squeeze an example of Trumpism. Because how dare ordinary people think they can beat the elite at their own games?

    There was the “white supremacy” canard.

    (Babylon Bee: “Merriam-Webster Changes Definition Of ‘White Supremacist’ To ‘Anyone Who Wins In The Stock Market When They’re Not Supposed To’.)

    There’s even the “Russia! Russia! Russia!” cliche:

    And finally, a Berkeley professor wants you know they’re investing in GameStop because they’re not having sex:

    Secretary of the Commonwealth of Massachusetts William Galvin wants a 30-day trading suspension of GameStop, because retail investors can’t be allowed to make money off the mistakes of their betters.

    Likewise, NASDAQ head Adena Friedman says that they’ll halt trading in a stock if mere mortals are making money off it.

    And trading platforms Robinhood and Ameritrade halted trading in GameStop And AMC.

    Here’s Tucker Carlson:

    Here’s a Saagar Enjeti clip from The Hill:

    There are valid reasons for hedge funds and short sellers to exist. But no one, least of all our corrupt political establishment, should let them get away with the classic “I keep my profits private but force the government to underwrite my losses” con game.

    The memes and Tweets are something to behold:

    And this morning?

    This may all seem extremely irrational. But thanks to the Federal Reserve’s endless money pump, the market has been irrational for a long time. And the biggest irrationality was short-sellers shorting more stock than actually existed.

    I should point out that I have no money in GameStop, AMC, or Nokia stock (unless there’s some tucked away in one of my various 401K funds, which I rather doubt). Though honestly, as weird as this year is already going, I’m tempted to put a few hundred dollars in Dogecoin…

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    Posted in Economics, Media Watch | 7 Comments »

    Gun News Roundup for December 20, 2020

    Sunday, December 20th, 2020

    Been a while since I did a gun news roundup, but a few items of interest caught my attention:

  • About that ammo shortage:

    Demand actually was on the upswing before the year 2020 even began. Then the dumpster fire that is 2020 wrought havoc on both gun and ammunition availability. This is a pure demand-driven issue. The government guys who may or may not be in black helicopters are not interested in small rifle primers or .22 Long Rifle. Good luck finding either on the shelf.

    How bad is it? Let me give you some anecdotes.

    Just two weeks ago, I received a call that probably should not have surprised me.

    “Do you have any .30-30?” This was not a question I was expecting. I mean, after all, there might be some parachute-cord-wrapped lever-actions somewhere if they haven’t been snarfed up, but .30-30 ammo? Really?

    It seems the friend of a friend was heading out on a hog hunt and left it too late to buy ammunition. Nowhere in northern Virginia could you find a box of .30-30 on the shelf. He was headed for a wild boar trip and had exactly four rounds. I dug into my personal stash to make sure his hunt wasn’t ruined, but this is a symptom of a much larger issue today.

    Back in April, one of our field editors received a call from a pretty prominent gun shop asking, “How much 9 mm do you have?” He answered and was told that he would be paid twice what he paid for it, and a truck would be there tomorrow.

    A friend at Hornady recently reached out to me to ask that I spread the word. What’s going on with ammunition is nothing sinister, nor a conspiracy. It is simple supply-and-demand. In fact, it’s hyper-inflated demand like no one has ever seen. I certainly haven’t in the 30 years that I’ve been paying attention to such things.

    Much has been made of the fact that guns, especially guns suitable for personal defense, have been hard to find. It would stand to reason that, with gun sales at an all-time high, ammunition will not take long to follow. At first, it was 9 mm Luger and .223 Rem., with local outages of things like .300 Blackout and 7.62×39 mm. It is not because the ammunition makers are not working all-out. American ammunition makers have all increased output and productivity as much as they can. They are making more ammunition than they ever have before. As soon as it goes into distribution, it is gone.

    Despite this, they are being hammered by their customers who ask, “Where is the ammo?“ It’s not being diverted to top-secret government contracts. It’s being bought by your friends and neighbors before you.

    Snip.

    With the COVID-19 pandemic, protests, riots and then the most rabid anti-gun platform ever introduced being pushed by the Democratic party, it’s no wonder that people have increased their demand for guns and ammunition. When a candidate for national office—even a poorly performing one—utters, “Hell yes, we’re going to take your AR-15,” what did you think was going to happen?

    This is not even attributable to supply-chain problems, with the exception of the Remington ammunition plant in Arkansas. That plant was sidelined by the sale of the company by an Alabama bankruptcy court. Talk about a series of unfortunate events. One of the largest plants in the country couldn’t make ammo at full capacity because of the financial problems of its parent company. The good news is that Vista Outdoor picked up that facility, and the Vista team is very good indeed at making ammunition. I am told after the first of the year, ammunition will be flowing out of that plant, and many of its workers will be rehired.

    We have been through conditions similar to this before, but nothing like this. It’s to the point that waterfowlers looking for ammo are having a hard time because people looking for defensive loads have decided that steel BBs are better than nothing.

    A friend at a major retailer told me one of his managers was approached by a customer who found a box of .38-55 sitting alone on the shelf. He asked if there was anything in the store that would shoot it, as it was the only box of ammo there.

    This is a great year to be in the replica-cowboy-gun business, but for entirely different reasons than usual. I personally watched a fellow who entered the gun shop wanting a Glock and left with a Uberti single-action revolver in .45 Colt simply because it was the only handgun in the store. Once that was gone, the shelves were bare.

    I have spoken with representatives of every major ammunition company in the United States, as well as quite a few importers. It’s not that they aren’t trying to meet the demand. It’s just the demand is so high that as soon as product enters commerce, it’s gone. There’s an insatiable appetite out there now, and once rumors about ammo being in short supply start leaking out, much like the many primer scarcities we’ve had over the years, the demand increases. Panic begets more panic.

  • Speaking of the ammo shortage, Borepatch sees signs of it at the Palmetto Gun Show in Florida:
    • Ammo was at a premium. Pricing was high and it looks like dealers were buying out other dealers before the show started (and then marked each box up). While I’m not enormously well stocked, I’m well stocked enough not to have to spend $20 for 50 .22LR (!). I mean, seriously?
    • There was a LOT of Donald Trump stuff there, and not in a let’s clear out the old inventory sense. People were walking around in MAGA hats and there was what looked like a lot of fresh inventory being scooped up by the crowd. However this plays out, The Donald is not fading away. Oh, yeah – several vendors had “Biden Is Not My President” T-Shirts for sale and I saw more than one dude walking around in them.
    • Didn’t see any tables of Nazi memorabilia. Might be the first gun show I’ve been to that didn’t sport that.

    The last point accords with my own experience at the San Antonio gun show in October.

  • I’ve supported many of Texas Attorney General Ken Paxton’s recent lawsuits, but not this one: “Texas attorney general accuses firearms website of price gouging at start of pandemic.”

    Texas Attorney General Ken Paxton has accused the Fort Worth-based website Cheaper Than Dirt, which primarily sells firearms, ammunition and hunting gear, of price gouging at the start of the pandemic.

    The AG’s office identified over 4,000 sales that involved price gouging and has directed Cheaper Than Dirt to pay $402,786 in refunds to consumers, according to court documents filed this month.

    Over 100 people have complained to the AG’s office about Cheaper Than Dirt, the Houston Chronicle reported earlier this year.

    The same week that Gov. Greg Abbott made a pandemic-related disaster declaration in Texas, ammunition orders to Cheaper Than Dirt substantially increased. In response to the increased demand for its products, the website raised the prices on hundreds of its products, according to the AG’s office.

    The Texas AG’s office has identified ammunition as a necessity and, as a result, is arguing that those price hikes were against the Texas Business and Commerce Code. The code forbids businesses from “taking advantage of a disaster” by selling “fuel, food, medicine, lodging, building materials, construction tools or another necessity at an exorbitant or excessive price.”

    This is sheer folly dressed up as righteousness. The market pays what the market will bear, and prices adjust to meet demand. As the first of today’s roundup links note, this year’s ammo shortages are overwhelmingly driven by consumer demand. High prices are the market’s signal to bring more capacity online to meet demand. Short-circuiting that signal helps no one. Paxton’s lawsuit displays an amazing ignorance of basic economics.

    To drive home the scale of the current panic buying, I checked on both Cheaper Than Dirt and ammo.com for .45 ACP ammo prices and both were completely out, which I don’t think I’ve ever seen before. The cheapest price over at AmmoSeek is 68 cents a round, up considerably from from the 50 cents I paid at the San Antonio gun show two months ago.

  • The Texas chapter of Gun Owners of America has put videos for gun owners to navigate the 87th Texas legislative session:
    1. Bill Survival 101 (Slide deck)
    2. The TLO Website
    3. Talking to Legislators (Slide deck)

    Useful information if you want to help influence the legislative process.

  • Smith & Wesson sues New Jersey Attorney General Gurbir Grewal for violating their First and Second Amendment rights. In New Jersey Attorney General is an appointed position, and Grewal was appointed by Democratic Governor Pat Murphy in 2018.
  • KR Training’s December newsletter, including the class schedule through March 2021. Plus the KR Training blog has lots of historical firearms training tidbits.

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    Posted in Economics, Guns, Texas | 5 Comments »

    Walter E. Williams, RIP

    Thursday, December 3rd, 2020

    Famed free market economist Walter E. Williams has died at age 84.

    Williams is probably most famous for being a regular guest of Rush Limbaugh, but I probably first became aware of him from his work in Reason magazine, which published excerpts from his book The State Against Blacks. (No Amazon link, because the book is out of print and hideously expensive on the user market; a canny publisher should get it back into print.) Like Thomas Sowell (to whom he was often compared), Williams used his inside understanding of the American black experience to argue persuasively that free markets were the best mechanism to lift black people out of poverty, and that government intervention (be it a minimum wage, Affirmative Action, heavy business regulation, the welfare state, or closed shop labor rules) constantly undermined black economic progress.

    Williams also wrote an autobiography, Up from the Projects: An Autobiography, that’s more readily available. Here’s an interview where he discusses it:

    Here’s a documentary on The State Against Blacks:

    As you might expect, Williams was not a fan of #BlackLivesMatter or ascribing the lack of black economic progress to “systemic racism”:

    While it might not be popular to say in the wake of the recent social disorder, the true plight of black people has little or nothing to do with the police or what has been called “systemic racism.” Instead, we need to look at the responsibilities of those running our big cities.

    Some of the most dangerous big cities are: St. Louis, Detroit, Baltimore, Oakland, Chicago, Memphis, Atlanta, Birmingham, Newark, Buffalo and Philadelphia. The most common characteristic of these cities is that for decades, all of them have been run by liberal Democrats. Some cities — such as Detroit, Buffalo, Newark and Philadelphia — haven’t elected a Republican mayor for more than a half-century. On top of this, in many of these cities, blacks are mayors, often they dominate city councils, and they are chiefs of police and superintendents of schools.

    In 1965, there were no blacks in the U.S. Senate, nor were there any black governors. And only six members of the House of Representatives were black. As of 2019, there is far greater representation in some areas — 52 House members are black. Nine black Americans have served in the Senate, including Edward W. Brooke of Massachusetts, Carol Moseley Braun and Barack Obama of Illinois, Tim Scott of South Carolina, Cory Booker of New Jersey, and Kamala Harris of California. In recent times, there have been three black state governors. The bottom line is that today’s black Americans have significant political power at all levels of government. Yet, what has that meant for a large segment of the black population?

    Democratic-controlled cities have the poorest-quality public education despite their large, and growing, school budgets. Consider Baltimore. In 2016, in 13 of Baltimore’s 39 high schools, not a single student scored proficient on the state’s math exam. In six other high schools, only 1% tested proficient in math. Only 15% of Baltimore students passed the state’s English test. That same year in Philadelphia only 19% of eighth-graders scored proficient in math, and 16% were proficient in reading. In Detroit, only 4% of its eighth-graders scored proficient in math, and 7% were proficient in reading. It’s the same story of academic disaster in other cities run by Democrats.

    Violent crime and poor education is not the only problem for Democratic-controlled cities. Because of high crime, poor schools and a less pleasant environment, cities are losing their economic base and their most productive people in droves. When World War II ended, the population of Washington, D.C., was about 800,000; today, it’s about 700,000. In 1950, Baltimore’s population was almost 950,000; today, it’s around 590,000. Detroit’s 1950 population was close to 1.85 million; today, it’s down to 673,000. The population of Camden, N.J., in 1950 was nearly 125,000; today it has fallen to 74,000. St. Louis’ 1950 population was more than 856,000; today, it’s less than 294,000. A similar story of population decline can be found in most of our formerly large and prosperous cities. In some cities, the population decline since 1950 is well over 50%, and that includes Detroit, St. Louis, Cleveland and Pittsburgh.

    Academic liberals, civil rights advocates and others blamed the exodus on racism — “white flight” to the suburbs to avoid blacks. But blacks have been fleeing some cities at higher rates than whites. The five cities whose suburbs have the fastest-growing black populations are Miami, Dallas, Washington, Houston and Atlanta. It turns out that blacks, like whites, want better and safer schools for their kids and don’t like to be mugged or have their property vandalized. And like white people, if they have the means, black people cannot wait to leave troubled cities.

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    Posted in Economics, unions, video, Welfare State | 9 Comments »

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