It's not rich vs poor, it's makers vs takers | David Friedberg

David Friedberg: It's not rich vs poor, it's makers vs takers.

@friedberg:

The great lie is that there are two sides to society, that is the rich and the poor.

And the great truth is that there are two sides that are the makers and the takers.

The lie is that the rich are unfairly rich and the poor are unfairly poor, and therefore, the poor must take from the rich.

But the truth is that it's the takers that tell you that lie, that the real truth is that artists, plumbers, electricians, woodworkers, computer scientists, people that build, people that make from all walks of life, all income levels, all wealth brackets, are the makers.

And the takers are what Sacks calls this intelligentsia, the analysts, the espousers, the armchair mechanics, the critics, the commentators, the politicians. They are the takers.

They are the people that watch the rest of society make stuff, build stuff, specifically doing things that create value for other people in society. That's what a maker is.

Who allocates capital better? Makers or Takers? Success-motivated individuals or power-obsessed governments? Case in point:

A socialist may object: “private companies also fail”. Indeed they do. And when they do, they forfeit their money. Theirs and their backers’ money. When governments fail, they waste your money. Our money. 

Stock market CAGR performance: U.S. beats them all, over all time periods

"CAGR" = Compound Annual Growth Rate

We've been in all markets, since 2007 when we sold our business and had money to put into stocks. Into the U.S., China, Hong Kong, Europe and Australia markets. All those above. 

Over time, we've concentrated in the U.S. market. 

Which has performed markedly better than all others in the world. In particular much better than our one here in Hong Kong and the main Chinese one. Not to mention that in China, both individual stocks and the overall market are much less transparent than in the U.S. 

The U.S. market and its stocks are far and away the most transparent in the world. I discovered this during my time as a Day Trader in 1999-2000.

Above, FWIW.

ADDENDUM: My wife reminded me that I'd once early on made a "crazy" suggestion to put all our money in Apple stock. Well, it may have been crazy. Putting all your money in one basket is not normally recommended. But... if we had put all our money into Apple in 2008, we would today have $US 400 million in our account. Quite a lot more, rather, than what we in fact have.... 

Not so crazy. 

It was the famous Warren Buffet who one said: "I do like to put all my eggs in the one basket. And then to watch the basket very carefully". That's the Sage of Omaha. The most successful investor ever. The idea of "diversity" is really a lazy one. What everyone says to do and so we do it. 

The “Theory of Public Pressure" | Ze’ev Jabotinsky

 From “Bibi: My Story” by Benjamin Netanyahu 

Jabotinsky had developed the “Theory of Public Pressure” in an article he wrote in the spring of 1929.

He posited that the most potent influence on democratic governments is the pressure of public opinion. It matters not, he argued, if a government is headed by the friendliest of leaders. 

If your opponents apply sufficient pressure on that government, it will eventually tilt against you. To balance this, you must sway public opinion to your side by an unceasing public campaign “like the constant drizzle on a green English lawn,” he said. 

-- “Bibi: My Story”, p.112 Kindle edition, 15%  

I'd thought Ze’ev Jaobtinsky was perhaps the earliest proponent of the “Theory of Public Pressure”, but it turns out that it was much earlier, going back to Hellenic times. 

But still.... He was the one that made it a central pillar of Israeli influence in the United States. 

Which led to the Israeli public relations machine centred on “J Street” in Washington. Which has been so successful that people make a big issue out of it: “The Jewish lobby”, the “perfidious influence of Jewish public lobbying on American politics”, and all the rest of it. 

Once again, Israel, Jews, are so successful that they cop a malign backlash. 

Even from other Jews. I don’t forget John Mearsheimer's book “The Israel Lobby and U.S. Foreign Policy”, which I read when it came out -- and agreed with the “1-star” reviewers, that it was a vicious anti-Jewish tract, not mitigated by Mearsheimer's own Jewishness. 

(At other times, I’ve rather liked Mearsheimer’s views on geo-politics. Just that when it comes to Israel, as with so many Jews and goyim alike, he’s blinded. Yes, “blinded” I say. Like the horrid Jew-hating Jew, “professor” Norman Finklestein, he who said of the October 7th Palestinian massacre of Jews, the worst since the Holocaust: “It warms my heart”, he exulted, while hiding under the mantle of “my family were Holocaust victims”. Yes, Norman, and they’d be turning in their ovens at your treachery).

To this day, we have dark warnings of the influence of the “Jewish Lobby” in America. Forgetting always that every other country in the world, every other ethnicity in the world, every other entity in the world, has some form of lobbying in the United States, for it is the biggest country, economy-wise, and the biggest country, military-wise and the biggest country, foreign aid-wise. 

And so of course you want to be there, in the fray, trying to get your own interests heard. 

But again, it’s only Israel, that horrid Jewish "ethno-state", which is singled out for opprobrium, for having the temerity to develop the best of the lobbying groups. 

How dare they? Those perfidious Jews. 

“For sake of economy, China must stop using capital as a dirty word” | Zhou Xin

Going down the bits I’ve highlighted above: 

Karl Marx defines “Capital” as “dripping from head to foot, from every pore, with blood and dirt”. Elsewhere, he and Engles, in The Communist Manifesto, call for 

• The end of private property
• State confiscation of all property
• Extinguishing (ie murdering) the bourgeoisie
• Abolishing the nuclear family
• Nationalising all industry and “means of production”
• Nationalising all credit, transport and communications

It’s all there, plain and in the open. What a horrid ideology! Which has ended in disaster and pyres of bodies everywhere it’s been tried. But Gen Z, young people? Fully 60%, want Socialism (aka Communism, or commie lite, if you must) in the US!  Because they haven’t been taught communism’s murderous history. Which I saw first hand when I went to China in 1976.

"The old Chinese joke": you tell your god-son over and over, he’s your son; you don’t have to keep telling your actual son that he’s your son. “The lady doth protest too much, methinks” => “The Party doth reassure too much, methinks!” The Communist Party constantly telling private entrepreneurs that they needn’t worry... makes them worry!

"China’s growth in the last 40 years". I’ve said a million times, China has grown its economy in exact proportion to the extent to which Beijing allowed the spread of private enterprise. Zhou Xin: “China’s economic miracle over the last forty years is a historic process of liberating growth potential …”.

The “debt-fuelled model” based on State Owned Enterprises is inefficient and wasteful. Amen.

"Time for China to stop treating capital as a dirty word". Yeah, but nah. Not going to happen. Not under Xi Jinping.

Rereading the “Communist Manifesto” | it’s “hate speech”!

Heh. 

I’ll be jotting down some thoughts after listening to a podcast interviewing a new book on the Communist Manifesto (CM), “A Spectre, Haunting Europe: on the Communist Manifesto”, by China Miéville. 

I say “re-read” as I’d had to study it, the CM, seriously, in 1976, at the Peking Language Institute, with the double horror of studying it in Chinese.

Meantime, the above meme is place-marker-cum-troll. Kind of spot on, isn’t it, though? One of the best learning in life is “there’s no such thing as a free lunch” (Milton Friedman).

LATER: My process leading me back to a re-reading of the Communist Manifesto: 

Yesterday’s screenshot of looking up “Twitter” on NYT site ⇨ To Chris Hayes article  ⇨ Chris Hayes podcast with China Miéville ⇨ New book on the CM, called “Spectre, Haunting”, which is the first line in the Introduction to the CM ⇨ And so back to the CM....

The CM is a shocking read even today. One could make the case that it’s “hate speech”. Hatred towards groups of people (the bourgeoisie and capitalists) and calling for their elimination (“genocide”?). 

One sometime hears an apologia for Communism (aka socialism) along the lines of “the original idea is great; just that it’s not been implemented well”. I’m not so sure the original idea was all that great, tbf. Read it. Read the CM. To me it’s pretty grim, and I’m sure it seemed pretty grim to many even when it was published in 1848. But even if one grants that it was a grand idea then, in 1848, (which, to repeat, I don’t), even if you grant that the idea was a wonderful, utopian one, we’ve had nearly two hundred years of trying it out in practice since then. And not a single country out of the dozens that have tried, not a single one has succeeded.[*] They have all fallen into dictatorship and despair. That’s on record, so why on earth do we still have people the likes of Chris Hayes (senior at MSNBC) and China Miéville (award winning author) still admiring the Manifesto with so much admire? Why? I don’t get it. 

[*] China has been successful in recent decades to the exact extent that it has given up on the principles of the CM. When I arrived in 1976, they were following the CM. They were dirt poor. They gave them up when I was there. The economy boomed. QED. 

Snippets below. They are cherry-picked, of course. But everything in life cherry-picked. Including this sentence, cherry-picked from my mind. In any case, they are representative and the full text is right there for the reading (only 12,000 words). Here are my snippets:

In this sense the theory of the Communists may be summed up in the single sentence: Abolition of private property.

I, Pencil. I, love it

Click pencil and scroll down for I, Pencil

I’d heard of this famous essay from 1946, a parable really, about how many people it takes to make a pencil. Forget “it takes a village”, as Hillary said. It takes a world to make a pencil. And it’s made without a single person in that world chain thinking that they’re making a pencil or having any aim to make a pencil.

I arrived in China in 1976 when the communist party still believed that they could plan how to make a pencil. Result: no pencils. In winter, courtesy of central planning, there was only one vegetable available: Pak Choi (白菜). Now, since they decided to let the market decide from 1980, they have every food imaginable. And every consumer good imaginable. That’s the magic of the market. That’s the mire of central planning.

A conservative site criticised the essay “I, Pencil” recently. Too libertarian for them. And Dominic Pino defends it. As I would, a left-libertarian as I’ve found myself to be.

BLM should be Cancelled

I’m talking of the organisation, BlackLivesMatter.com, of BLM in Caps. I’m not talking of the lower-case blm, the understanding, the acceptance, the strong belief that — of course! —  black lives matter.
The reason to cancel upper case BLM? Because it’s a Revolutionary Marxist organisation bent on overturning the state.
The three co-founders of BLM — Patrisse Khan-Cullors, Alicia Garza and Opal Tometi — are self-described revolutionary Marxists who have a “deep understanding of Marxist theory”. Which theory includes choosing a target, freezing it and demonising it. Hence their target of police killing of black people. For who could not be against that?  And so people are enjoined, they proclaim “black lives matter” (lower-case) and are escorted into the agenda of the BLM, the upper-case Marxist outfit.
Alicia Garza says she is influenced by Assata Shakur, a Cuban-exiled Black Liberation revolutionary wanted on multiple murder charges in the US. /Snip:

When I use Assata’s powerful demand in my organizing work, I always begin by sharing where it comes from, sharing about Assata’s significance to the Black Liberation Movement, what it’s political purpose and message is, and why it’s important in our context.

The aims of BLM, from their website and writings of the co-founders:

• Overthrow the market economy
• Abolish the nuclear family
• Abolish the police

Enough there for cancelling? If not cancelling — too far a bridge? — then surely, at least, enough to give up our current fawning, our “taking a knee” for the upper-case organisation? Or is it too hard to make the distinction between the upper-case BLM and the lower-case black lives mattering? Because people might mistake your scruples for failure to acknowledge that, lower-case, black lives matter? That you might be labelled racist?

While America and others are busily shutting down China’s Confucius Institutes, teaching mainly Chinese language and culture*,  because they “challenge western values”, isn’t BLM, the upper-case, home-grown Revolutionary Marxist outfit, a much more dangerous organisation?  Isn’t BLM a much greater and more present danger to western values?
Given the aims above, of course it is.

********

* China’s Confucius Institutes sounded like a pretty good idea to me. Teaching Chinese language and culture. Great. And I’m a bit of a fan of Confucius. I’ve read his Analects in the original (论语). Many of his teachings are relevant through the ages. But I wasn’t surprised, especially after the ascent of Xi Jinping in 2012, to read credible reports that the Institutes were (sometimes) funnelling money and influence to try to ban western university studies of issues Beijing didn’t approve of.

European chamber warns China may lose appeal for investors if it doesn’t act | South China Morning Post

Back in the 80s I was a China consultant working for Australian companies wanting to do business in China. Many were trying to establish joint ventures in the People's Republic. One case I was in charge of was trying to do the opposite. It was IXL Ltd from Melbourne and it was trying to get out of an agricultural joint venture it had got into in Yunnan province and which it had decided was a mistake.

The joint venture agreement had a clause dealing with what happens when one partner wants to leave. But the Chinese sides first impulse was to tell us to take a hike. We made the point that they should not do this as it would impact badly on China's reputation. End of the day that worked and we got some money to get out. 

Just a few years later, let alone thirty plus years later, that approach would not work. The desperation of international companies not to miss out on the "world's largest market"that they didn't give two hoots about an argument about China's reputation. 

An old Aussie mate of mine has been working in China for over thirty years. Also dealing mainly with Australian companies wanting to do business in China. Every now and then I ask him how business is. And every time the answer is "worse". Chinese partners more arrogant, more self-interested, more screw you jack, if you want to do business with us you do it our way or it's the highway for you. 

For that reason, I agree with the get-tough-on-China policy. I don't agree with the way Trump is going about it, but going about it is the correct and necessary move. And as Mao Tse-Tung said, you have to break some eggs to make an omelette. 

All those talking about who will hurt most or benefit most miss the main point. China is in the wrong. It's a serial offender, a serial cheat. Complaining to the WTO has failed. It's time to get tough, even if that involves hurt all around. And phooey to those who suggest that China is somehow right in retaliating (though of course it must be expected in the context of a negotiation). 

Here the European Chamber of Commerce in China makes the case..

Another long-standing concern of many foreign companies operating in China is forced technology transfers. The chamber said 19 per cent of the companies surveyed – in sectors such as aviation, cars, chemicals and engineering – felt compelled to transfer technology.

Meanwhile, 43 per cent said they had found it more difficult getting access to the sectors listed under the Made in China 2025 policy, although access had improved for larger European firms, particularly in cars and machinery.

Companies surveyed identified the top regulatory obstacles as unfavourable treatment in dealing with administrative issues, discrimination in enforcement of rules, market access barriers and licensing requirements. Legal services, pharmaceutical and medical devices were among the sectors that reported the most cases of unfair treatment.

Keep Walkin'...

And now for a change of mood....

Brilliant ad for Johnny Walker, one that's "gone viral", so you may have seen it already.  Robert Carlyle doing one long 6-minute tracking take, and hitting his marks spot on!  

It's fun.

Let the '12 Campaign Begin!

In the discussion last night between our pessimist and our optimist (see below on stocks and multiples), our interlocutors agreed on one thing: Obama is not doing well; he is too professorial, not power-wielding enough.  Not a Roosevelt or Johnson.   Both thought he would be "toast" in 2012.  Who are the candidates?  For the GOP, the front runners are, amazingly enough, Romney and Palin, a Mormon and an almost-born-again.  Let the campaign begin!  Actually, it won't be long until it starts--for some, maybe, like "slutty stewardess" Sarah-- it's started already.

I then came across this link to the All Seeing Eye, comparing the last twelve presidents' approval ratings at this point of their presidencies.  Obama's is tenth.  Harry Trumans was the lowest.  The two highest were Bill Clinton and Dubya.  Their approvals both had risen immediately after an impeachment and starting a war, leading a journalist to joke that if Obama can start a war and get impeached, his approval will go over 100%.  Links at the Eye, including a fun interactive chart of presidential approval ratings....

S&P Multiples

 A comment last night (post below): that average multiples are now at or over pre-crisis levels, hence correction due.

This morning's Bloomberg happened to have a story on S&P Multiples:

• Current level: 13 times earnings (I forget if this was trailing or forward, though if I recall, they're most often on forward earnings)
  
• Average of last five decades: 16.5 times
  
• If stocks were to increase in price to 16.5 times earnings, the market would need to go up 26%.....

Consensus estimates of the S&P, for what they're worth (and that may not be much...), is 1020 by year end, vs 979 now.