Krushner and Kodak

You’ve probably heard about how Kodak came to be loaned an extraordinary amount of money to make a drug to tread Covid-19 that nobody thinks works with the result that insiders may become obscenely rich. So far, so well-known. What I had not realized previously was that Jared Krushner had shared a dorm as a student with the head of the agency that decided to select Kodak, a company with no previous experience of manufacturing phamaceuticals, for the loan. The fact that Kodak had recently decided to spend $870K on lobbying is, of course, entirely coincidental.

Kodak HCQ story.

I am not an investigative reporter, and I have no idea if anything underhand is going on here, but it doesn’t pass the smell test.

I am strongly in favour of real capitalism, in which companies compete for capital in a free market and succeed as a result of creating more benefits for consumers (‘consumer surplus’ in the economists’ jargon). Left wing commentators will draw the completely wrong conclusion from this story, which is that more government, and more government is needed, to prevent these ‘abuses’. If the government left more money in the hands of consumers, business would have an incentive to pander to them, rather than faceless bureaucrats with political connections.

The Nixon Shock Anniversary

Wikipedia has a page about the Nixon Shock: the announcement that the US would come off the gold standard, in 1971. People predicted that it would lead to inflation, and you have to admit, they had a point:

And inflation is a stealth tax which can be used to pay down borrowing. Normally, creditors demand compensation, in the form of increased rates. This seems to have stopped happening lately. There has been some sogginess in yields lately, but nothing to spook the horses. Yet.

Sleepwalking into a disaster

This podcast, in which Mike Green of Logica Advisors talks to Grant Williams and Bill Fleckenstein is mind-expanding. It contains far too many ideas for me to adequately summarize here, but a few that stuck with me are:

• passive funds now dominate the market and are always the marginal buyers (and, in theory, sellers),
• passive funds have never really gone for any significant time as sellers, and it’s very unclear who they would sell to (buying from active funds is easy, because investors constantly move money from active to passive, including to closet-trackers),
• as bond yields constantly edge down to become negative, structured products that offer capital certainty with equity upside will stop,
• fixed interest investments have the characteristic of puts (I’m not entirely clear about this and will probably have to re-listen),
• Blackrock has to much power,
• stocks really do always go up (until the end game), because there is always more money flowing from active to passive funds,
• the strong welfare state in places like Sweden is the result of capital losing access to labour as a result of emigration to the USA in the 1870s. The problem today is that labour does not have anywhere equivalent to go to which would cause the 0.01% to capitulate. (Yes, a guy who runs a hedge fund actually said that.)