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Stocks to Short for Your Grandkids

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As I mentioned in an earlier post, working in a pension fund makes me think toward the long term. In that post I spoke about broader long-term risks; here I will give my view about long-term risks at the more specific level -- namely, industries to short if you are looking out a generation or more. That is, how various industries will decline over the next thirty or forty years. That is a long time, like the time since Whip Inflation Now of the mid-1970's, or the LBO craze of the late 1980s, but if you are under fifty there is a good chance you will live to see it, and your grandchildren will be in the thick of it.

General propositions
The key drivers of what to short are developments in the following areas:

  • ·       Increased reliability of products. Already, many of the things we consume are more reliable and last longer than any time in the past. Take computers and LED screens. And soon, it will be electric cars.
  • ·       Less consumption of goods. In the sense that most of our time is spent on fewer things – like those highly reliable computer items.
  • ·       More commodity items. Which means less demand for advertising. Compare advertisements today with those of a generation or two ago. Almost everything was driven by brands. Now we are not as focused on brands, and as far as brands go, there are so many brands that are hard to differentiate that they may as well be commodities. Meanwhile luxury goods are moving toward items that are inherently scarce, like art and real estate -- items that do not require production.
  • ·       More efficient production. And part of that efficiency is that what we produce requires less labor.
  • ·       Increased demand for personal space and privacy. We will circle the wagons around our personal space and privacy. We are going to draw the line when we find that companies know more about us than we know about ourselves.

Let's start with the easy ones, where there is a clear consensus, and work our way down from there:

Oil. We all know that fossil fuel is a goner. And the more obvious it becomes that oil remaining in the ground will be a stranded asset, the more oil will be pumped out in the shorter term. So between growing renewables, flowing oil, and more efficient technologies, energy will be abundant.

Will the oil jobs be replaced by renewables. Is it only a matter of retraining of those working in this sector to work with renewables? No, because even ignoring the higher economies in production, the capital plant of renewables lasts a lot longer and requires less maintenance per kilowatt-hour produced.

Saudi Arabia and the rest of the Middle East. There is a clear regional implication to this, of course. This is not good for the Middle East. And what is also bad for the Middle East is climate change.  Some predictions are that the Arabian Peninsula will become so hot as to be uninhabitable. So much for the Saudi's Vision 2030. And, I really can’t understand what the thinking is with Aramco. It is a long-term bet under the clouds of oil demand dropping with increasing speed and the political vulnerability of Saudi Arabia.

Trucking.  Trucking will also clearly altered from an employment standpoint by self-driving vehicles. We got a taste of this a few weeks ago when Tesla unveiled its semi truck. Whether you like Tesla's odds or not, self-driving trucks are coming, especially for runs along the interstate.

Things will also change at the local level, for example for package delivery. A new household appliance, already in the works, will be a lockbox that can be opened for securely delivering packages, as ubiquitous as mailboxes. In the limit there will be one run per day of an autonomous vehicle to each residence and business. (How the packages get from the vehicle to the lockbox is the weak link in taking humans out of the loop in this scenario.)

Autos. Another no-brainer is that the automobile-related industries will be far smaller. Gas stations will disappear. And most mechanics. Cars will last far longer and require less maintenance, garages, which are already on the downswing, will largely disappear as well. (New tires from Costco.) Once production is scaled up with a few rounds of efficiency gains, electric cars are not complex, and are cheap to build. The cost of cars will be a fraction of what they are today. With low maintenance, low fuels costs, low purchase price, and autonomous driving, transportation will be far safer and less expensive.

People will be traveling less; fewer trips to the mall. People will have less need for a dedicated car because they will summon an autonomous car that can be running people one place or another nearly 24/7.  And most people won't care as much about style because they will be treating them as what they are, transportation services -- which gets to my point about more commodity-like products.

There will still be the vestigial car, just like there are still mechanical watches. Gas-powered cars will be admired and collected for their workmanship and intricacy, and not for their performance or function. Driving a car will be a hobby, like horseback riding. And maybe not in forty years, but at some point, people-driven cars will be seen on the street about as often as horses are. They will be enjoyed on closed tracks, just as horses are today.

Casualty Insurance
It is a mixed bag; some lines will dwindle, others will grow.
Auto. Autonomous vehicles are safer than people-driven vehicles, especially when all cars are autonomous. Fewer accidents means less need for casualty insurance.
Liability. Less high-risk labor.
Property. Things will be looking up here, due to the effects of climate change.

Real Estate
Commercial. Stores will become less prominent as the efficiencies of delivery improve. And as many items last longer. This leads to issues for commercial real estate. There will be construction for warehouses and "fulfillment centers." These are cheaper to build and maintain than commercial retail space. So less construction and maintenance. With the move toward renewables, there is a drop in construction of large-scale fossil fuel plants, and the plant for renewables will not require as much construction and maintenance demand.

Residential. Demographics and lifestyle will change the demand for housing. There will be less demand for large houses with living rooms and dining rooms that are not used, and for four and five bedrooms. This means a glut for some zip codes. And it also means fewer construction jobs. Houses will have solar cells and batteries to be increasingly self-sufficient, so less energy use.

So chalk up the construction industry -- one that is more immune to technology -- as another casualty.

Basic Materials and Mining
With less demand for new cars, less construction, and key goods that are replaced less often, there will be a drop in demand for many raw materials. Though others, like those that are needed for batteries and computers, will increase in demand. Or maybe not. Who knows what raw materials will be in demand, and how great that demand will be with the changes in technology that we might see over the course of the next generations. And because these products last longer, and finally meet the needs for various functions, they will not be the same engine of production.

Advertising (and Facebook and Google)
There is a feedback loop between advertising and the information and social network companies that depend on advertising. This feedback leads to a self-destructing business model, with the information companies and advertising going down together. The information companies depend on advertising, and yet they are information engines that reduce the need for advertising.

And advertising for non-luxury and non-status goods (luxury and status goods are not the fodder of Google or Facebook) will drop for the reasons I mentioned above: less advertising because we will demand fewer goods, and many of the goods will be commodity-like. Few of us care about which chargers we buy for our phones.

There are other pressures that might build for social networks such as Facebook. We will still need search engines, but Facebook is already tiresome to some of us, and we are getting the first whiffs of the toxicity at its root. With the world veering toward an impersonal dystopia, we will guard our privacy, we will circle around our real relationships. Here are recent articles from Wired that give a flavor of where things might be going, one a truly harrowing saga of overcoming malicious cyber attack, and another one of any number you can find, appearing with increasing frequency, on privatizing Facebook. From the perspective of forty years out, Facebook and social networking in general will have been a flash in the pan.
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Been There


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Everybody Lies: FBI Edition


You, dear readers, know my advice about talking to the FBI: don't. If the FBI — or any law enforcement agency — asks to talk to you, say "No, I want to talk to my lawyer, I don't want to talk to you," and repeat as necessary. Do not talk to them "just to see what they want." Do not try to "set the facts straight." Do not try to outwit them. Do not explain that you have "nothing to hide."

Shut up, shut up, shut up, shut up, shut up, shut up.

This advice is on my mind of late what with two former Trump folks — George Popadopouluos and Michael Flynn — pleading guilty to the federal crime of lying to the FBI.

Plenty of people agree with me. Sometimes, though, I hear different advice. Sometimes I hear this:

No. Or more accurately: no, unless you have first prepared exhaustively with an attorney.

This is not a casual conversation about who took a bite out of the roll of cookie dough in the fridge. This is serious complicated stuff, and your whole life hangs in the balance. Platitudes aside, going into a law enforcement interview armed only with the attitude "I'll just tell the truth" is poor strategy.

Here's why.

No offense, but you may be a sociopath. If the FBI wants to interview you, it's possible you're some kind of Big Deal — a politician or a general or a mover and shaker of some description. If you're kind of a big deal, there's a significant possibility you're a sociopath. You really don't know how to tell the truth, except by coincidence. You understand what people mean when they say "tell the truth" but to you it's like someone saying you should smile during the interview. Really? Well, I'll try, I guess, if I remember. You've gotten to be a big deal by doing whatever is necessary and rather routinely lying. It may be difficult for you to focus and remember when you are lying because lying feels the same as telling the truth. If someone shoved me onto a stage and said to me, "look, just hit the high C cleanly during the solo," I could take a real sincere shot at it, but I wouldn't really know what I was doing. If you think you can go into an FBI interview and "just tell the truth," when it's not something you're used to doing, you're deluding yourself. You're not going to learn how in the next five minutes.

You're almost certainly human. There's a commandment about not bearing false witness. But rules don't become commandments because they're really easy to follow. They become commandments because we — we bunch of broken hooting apes — are prone to break them. Everybody lies. Humans lie more under pressure. FBI agents are trained in two dozen ways to ratchet up the pressure on you without getting out of their chair — verbal, nonverbal, tone, expression, pacing, subject changing, every trick that any cop ever used in the box. You're only human. Unprepared, you will likely lie. Smart people, dumb people, ditchdiggers and neurosurgeons, lawyers and accountants, the good and the bad, they all lie. Usually they lie about really stupid things that are easily disproved. I'm not making a normative judgment here; surely it would be nice if we didn't lie. I'm making a descriptive statement: humans lie. Saying "I'll just go in and tell the truth" is like saying "I'll just start being a good person." Well, good luck. Look, you admit to being fallible in other respects, right? You admit sometimes you're unkind when you're tired, or sometimes you drink or eat more than you know you should, or sometimes you procrastinate, or sometimes you have lust in your heart? What makes you think you're infallible about telling the truth?

Dumbass, you don't even know if you're lying or not. When an FBI agent is interviewing you, assume that that agent is exquisitely prepared. They probably already have proof about the answer of half the questions they're going to ask you. They have the receipts. They've listened to the tapes. They've read the emails. Recently. You, on the other hand, haven't thought about Oh Yeah That Thing for months or years, and you routinely forget birthdays and names and whether you had a doctor's appointment today and so forth. So, if you go in with "I'll just tell the truth," you're going to start answering questions based on your cold-memory unrefreshed holistic general concept of the subject, like an impressionistic painting by a dim third-grader. Will you say "I really don't remember" or "I would have to look at the emails" or "I'm not sure"? That would be smart. But we've established you're not smart, because you've set out to tell the truth to the FBI. You're dumb. So you're going to answer questions incorrectly, through bad memory. Sometimes you're going to go off on long detours and frolics based on entirely incorrect memories. You're going to be incorrect about things you wouldn't lie about if you remembered them. If you realize you got something wrong or that you may not be remembering right, you're going to get flustered, because it's the FBI, and remember even worse. But the FBI would never prosecute you for a false statement that was the result of a failed memory, right? Oh, my sweet country mouse. If you had talked to a lawyer first, that lawyer would have grilled you mercilessly for hours, helped you search for every potentially relevant document, reviewed every communication, inquired into every scenario, and dragged reliable memory kicking and screaming out the quicksand of your psyche.

You have no idea what you're telling the truth about. Look, you think that you can prepare to tell the truth. But at best you can prepare to tell the truth about something you know about and expect and understand. So let's say I know I'm going to be asked about whether I'm an ass on Twitter. I'm ready to come clean. I am definitely an ass on Twitter. But I get in there and the agent is all, "Mr. White, isn't it true that in October 1989 you accidentally hit on a major news anchor when you saw her from behind at the copy machine and thought she was another intern at CBS and so you sidled up for a full-on 'how YOU doin" and then she turned around and you saw who it was and you stammered something and spent several hours in the stairwell?" See, I was not mentally and emotionally prepared to tell the truth1 about that. So we're off to the races. I went in with the best of intentions, I got sandbagged with something completely unexpected, I panicked like the grubby little human that I am, and I lied.

You can't even talk properly. If you're an attorney and you need to prepare someone for testimony, you know: we're a bunch of vague, meandering, imprecise assholes. We talk like a water balloon fight, sort of splashing the general vicinity of the answer. We don't correct questions with inaccurate premises that don't matter, we generalize and oversimplify and summarize and excerpt and use shorthand that only exists in our heads, and we do this all day every day in casual conversation. A huge amount of conversation goes on between the words and by implication. If I'm walking past your office and ask "did you eat?" I don't need to vocalize that I mean did you eat lunch and if not would you like to go to lunch. You can respond "I have a meeting" and I will understand that you mean you understand and acknowledge that I'm asking you to lunch but you are unable to go. Huge parts of our conversations are like that. Usually it doesn't matter. But if you can get charged with a federal crime if something you say is, taken literally, not true, it matters like crazy. It takes training and an act of will to testify — to listen to the question, to ask ourselves if we know what the question means, to ask ourselves if we know the answer to that question and not some other question it makes us think of, and to give a precise answer that directly answers the question. So not only do you have to go into that FBI interview and tell the truth — you have to be prepared for a level of precision and focus that you almost never use in your day-to-day communications.

You don't know if you're in trouble. You say "I'll just go and tell the truth." Well, if you mean "I'll just go confess to anything I've done wrong and take the consequences," that's one thing. But if you mean "I'll just tell the truth because I've done nothing wrong and I have nothing to hide," you're full of shit. You don't know if you've done something wrong yet. Do you know every federal criminal law? Have you applied every federal criminal law to every communication and meeting and enterprise you've engaged in for the last five years? "But . . . but . . . the FBI said they just wanted to talk about that meeting and there was nothing wrong with that meeting." Dumbass, you've got incomplete information. Not only do you not know if there was anything wrong about that meeting, you don't know if that's what they'll ask about. If you're saying "I'll talk to them because I have nothing to hide," you are not making an informed choice.

Everybody lies. Especially the FBI. Look, mate: the FBI gets to lie to you in interviews. They can lie to you about what other people said about you. The can lie to you about what they've seen in your emails. They can lie to you about what they can prove. They can lie to you about what they know. Authority figures barking lies at you can be confusing and upsetting and stressful. Our brain says "I didn't do that thing but they say they have emails so maybe did I do that thing or sort of that thing?" Many people react by blurting out more or less random shit or by panicking and lying. Do you have what it takes not to do that? Better be sure.

Remember: the FBI wins nearly any way. Confess to a crime? They got your confession. Lie? They almost certainly know you lied, and already have proof that your statement is a lie, and now they've used the investigation to create the crime.

The answer is to shut up and lawyer up. A qualified lawyer will grill you mercilessly and help you make an informed rational choice about whether to talk. Then, if you decide to talk, the lawyer will prepare you exhaustively for the interview so you can spot the pressure tactics and interrogation-room tricks, and so you will have refreshed your memory about what the truth is.

Your best intentions to tell the truth are a thin shield.

Copyright 2017 by the named Popehat author.
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That SALT tax deduction change only screws over blue states, right? Uh oh…

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Strap in; it’s time to talk about that most awesome of topics, tax policy! Woohoo!

Nobody knows exactly what’s in the Republicans’ tax bills or what its total effects will be, least of all the Republicans. But one thing we do know is that it will get rid of something called the “SALT” (state and local tax) deduction. You see, taxpayers can currently deduct the cost of their state and city taxes from their federal taxes — and so by getting rid of this, most people will see their federal tax bills go up. Some more than others.

The conventional wisdom holds is that this is a change specifically designed to steal from blue-state voters with their high state rates as punishment for voting Democrat. Hell, conservatives even brag about this as a selling point. It’s not designed to convert voters or sway them to vote Republican. It’s there just to hurt people, thus representing the brutal ugliness of the New GOP of Donald Trump and Roy Moore.

Unfortunately, Republicans didn’t entirely think this one through.

Yes, it’s true that bad ol’ New York and California look like they’ll get it in the neck. But who else? The results certainly surprised me (courtesy of the not-exactly-liberal Tax Foundation):


So, taxpayers in Minnesota, Wisconsin, and Iowa are also going to see their tax bills go through the roof, once they can no longer deduct those confiscatory state taxes from their federal. These are critical battleground states – WI only went for Trump by a razor-sharp margin. Do you think voters there remember who to blame about their tax hikes?

Also, did you check out South Carolina’s rate? 7.0% in the reddest of red states! It’s almost as high as the People’s Republic of New York! Oh, but it gets better:



Look closely. Unless you’re pulling down seven figures — as a single filer, natch — NY’s top rate won’t even affect you, while SC’s top rate kicks in at a mere $14,650 a year. This means almost all SC residents are literally paying more in state taxes than us hippie gun-hating baby-killing godless heathens up here in Babylon. Why aren’t South Carolinians asking Lindsey Graham why he’s hiking up their taxes to pay for his deep-state big-government programs?

And compared to the 6.45-6.85% that most New Yorkers pay, the top rates for Arkansas (6.90% at just $35k of income), Georgia (6.0% at — I’m not making this up — $7k) and Idaho (7.4%, $10.9k) are certainly comparable, if not higher. Wonder what the #MAGA voters there will think of how things are going when they file in 2018? I’m sure they’ll be comforted by all the tax breaks personalized for the Trump family.

Texas is usually held up as the shimmering city on the hill by Republicans, with its lack of income tax. But this ignores local and property taxes that also fall under the purview of SALT. But, hey. It’s not like Texans like big houses on big estates, right?

If Republicans had actually tried to pass legislation through the “regular order” that John McCain used to care about — hearings, studies, all that boring stuff on CSPAN that people try to ignore — instead of literally passing handwritten notes as legislation, this might have all come out. But their manic rush to get something done before 2017 is up, at the behest of their ochre overload in the White House, and with as little oversight as possible, will predictably blow up in the faces of themselves and their voters.


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5 days ago
Frightening map. I can't believe I'm in a LOW TAX state (at least in regards to state income taxes).

Digital Pets That Don’t Die

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In case you were wondering what tech billionaires are up to these days, here’s a hint:

That’s right, they’re breeding digital cats on the blockchain! CryptoKitties are here, and they’re priming Ethereum enthusiasts for an assured future as cat ladies. After just five days, CryptoKitties is the most popular application on Ethereum, accounting for over 15% of all transactions on the network. What better use case for an unstoppable world computer?

Remember when digital kitties didn’t need to live on a blockchain? Back in the 90s we had Catz, and they roamed the background of a user’s desktop. Catz featured a primitive AI where the animals developed personalities depending on user interactions. If the cat was neglected or abused, it would run away. And yes, users could breed, adopt, and sell their Catz.

Catz for Windows 3.1

The Catz craze lasted maybe six months. Much like real-world pets, desktop animals get tiresome after the novelty wears off. The parent company followed up with digital Dogz, Hamsterz, Horsez, Pigz, Bunnyz, and Guppiez, but nothing really stuck; users invariably got bored and left their Petz to starve or run away.

Virtual goldfish not boring enough for you? Here are some digital Bunnyz!

To improve user retainment, the Petz brand came out with a new product: Babyz. It was the same basic game engine wrapped in the skin of a Cabbage Patch Kid. While Catz was mainly used as a desktop distraction, Babyz was designed for long-term emotional bonds. Users could talk to their digital baby through a microphone, and eventually the baby would learn to speak back.

Babyz couldn’t breed like the other animals, but they also couldn’t die. While most people have no qualms deleting a tired pet, the situation is different with a digital baby, especially one that has learned to talk. Compassionate users set up virtual orphanages where people could put their unwanted offspring up for adoption. Thousands of Babyz languished in online homeless shelters until the game was discontinued in 2000, at which point the children were digitally euthanized.

Send Baby to the digital Baby Farm.

CryptoKitties boasts that their cats can’t be destroyed, but the whole point of a digital creature is that it can be destroyed. Dogz and Catz run away, and digital Guppiez go belly-up — These are features, not flaws. They remind us that commitment is futile and that life is just a long process of being abandoned by everyone we ever cared about until we die alone. The advantage of a virtual pet is that we can delete the evidence and move on.

Just like its predecessors, CryptoKitties were made to be abandoned. This time it happens on the blockchain, where CryptoKitty remains are replicated across thousands of computers all around the world, persistently occupying real estate long after we’ve given up on them. This is probably what it’s like to have kids.

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Hank on Potheads

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From a clip of Barbet Schroeder's The Charles Bukowski Tapes :
Interviewer: What do you think of drugs versus alcohol?

Charles Bukowski: Ah, my favourite subject. I think a man can keep on drinking for centuries and he'll never die, especially wine and beer. But I've met too many young people, especially when I was working for Open City, just smoking marijuana, within a two year period, who were intelligent at first and after two years of marijuana they just came around going [airhead voice]: "Haaaaaaay! Haaaaaaay! How you doooing?"

I'm going to be one of the first to say that marijuana is very, ultimately, destructive. And then, finally, there'll be government studies to prove that it's totally harmful, much more harmful than it's ever been exposed to have been. Because I've seen it through people, they just end up [airhead voice]: "Haaaaaay...haaaaaaay..." And I don't like that. I like drunkards, man, because drunkards, they come out of it, they're sick and they spring back, they spring back and forth. But even the light drug freaks, they're just [airhead voice]: "Okaaaay. Okaaaay." It's like all mind circulation and all spirit has been cut off....

Alcohol gives you the release of the dream without the deadness of the drugs. You know, you can come back down. You have your hangover to face, that's the tough part. You get over it, you do your job, you come back, you drink again. I'm all for alcohol, I'll tell ya. It's the thing.
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