Gus Steeves joins Richard Morchoe on the September, 2023 Long Hill Report.

Met with Gus Steve to discuss issues of the day.

Not the debt ceiling again?

 Yup, it's back. It does have a value, to illustrate how ridiculous our system is.

Read Once again, it is time to panic over the debt ceiling at the substack.

State Department betrays people in the Northeast to sell energy in Europe

So Nordstream is bombed Europe does not want to freeze. Blinken says we can help. He does not mention what that will cost New Englanders.

What a country.

Blinken announces policy of selling US energy in Europe after coming of Nordstream

The War Democrats

 There is still an antiwar left, It just isn't in the halls of Congress.

War Democrats

Or the anti-war hawks.

The First Long Hill Column on Testing was in August, 2020

Originally posted in the Greater Sturbridge Town & Country Living Magazine. 

The Test We Need To Pass

 

By Richard Morchoe 

 

What is to be done?  These words were part of the title to a pamphlet written by Lenin in 1902.  The question was, for him, about political struggle.  The same question, for us, is about life itself.  

 

For a good part of this year, the nations of the world have been dealing with a pandemic due to the Covid-19 virus.  No one I know has not been affected and your columnist will go out on a limb and guess that anyone who reads this has seen their lives changed as well.

 

Life seems to be opening up.  First, in a manner unplanned, as happened in the wake of the death of George Floyd and second, in the phased re-openings such as ours here in Massachusetts.  As we follow the steps outlined in the protocols we might get back to something approximating normal life, or what the governor has called the "new normal."  Maybe the new abnormal would be a better term.

 

Your columnist has been keeping an excel spreadsheet of the daily increase in cases and deaths recorded in localities where he has friends and relatives.  Excel, being flexible enough, more states and countries were added if there seemed to be something interesting happening.

 

Massachusetts is doing much better than it had been early on with the soldier’s home and nursing home deaths.  In this, we are similar to our sister state bordering to the west.  Indeed, if the states were for profit organizations with independent boards of directors, the chief executives would have been removed as the deaths of the elderly were reported.

 

Still, give Charlie his due, we have improved, but we are still registering new cases in the hundreds most days and deaths in double digits.  Clearly, the war is not over.

 

New York state and city started out on the same poor trajectory we did, but, like us have improved.  The city, even with the riots and continuous protests, is doing well.

 

Seattle, Washington, which had been doing okay, has lost it.  This seems to have occurred along with the rise and fall of CHAZ or was it CHOP.  You can't tell the players without a scorecard.

 

One southern state was kept tabs on.  Georgia opened up full of hope, and crashed.  The headlines from most of the other states from below the Mason-Dixon are similar.  With summer, we were supposed to see a lessening of the severity of the plague.

 

Asking around, it was explained to me that summer in the south is no longer summer, but air conditioning season.  Whereas when the weather warms up here, we go outside, down south, when it gets really, really hot, they go from air-conditioned house to climate-controlled car to air-conditioned work place.  They are not soaking up as much vitamin D as we are.

 

Foreign countries were doing great until they weren't.  Czechia masked up early on via citizen initiative and it worked well.  They seem to have loosened up and it shows.  

 

Uruguay, known for being the most un-corrupt South American country, almost completely ended Covid-19, but the virus is making a comeback in the lower hemispheric winter as it is in the formerly triumphant Australia.

 

New Zealand declared the plague over, yet sees a case a day diagnosed, but no deaths.  Singapore, a nation almost predicated on air conditioning, has new cases in the hundreds daily, but also no deaths, usually.

 

Is there any country that can be considered an unmitigated success?  Coming closest might be Taiwan.  Across a strait from China, it could have been a disaster, but they learned from the SARS scare of 2003 and a plan was in place.

 

They masked early, restricted entry to the country and enforced the rules.  Also, there has been an emphasis on testing.

 

Taiwan has done this without the World Health Organization.  It is not a member of the WHO because of China.  They have had a grand total of 451 cases and seven deaths in a country of just under 24 million.  Not a behemoth but neither is it a postage stamp.  It is an effort we should be jealous of.

 

Certainly, there is much to learn from other countries that have confronted Covid-19, even if there is only so much that can happen in our somewhat ungainly federal system.

 

By nature, we are optimistic on Long Hill, but looking at the daily case figures for our state, there is reason to fear a surge later in the year.

 

So, there is the question we asked at the beginning, what is to be done?

 

Testing!

 

The government and much of the media are putting an emphasis on a vaccine, but that is not at all certain.  

 

So, why should one be enthusiastic about testing.

 

Some prestigious institutions have lined up behind it for good reasons.  Harvard will allow students back on campus, but will test for the virus every three days.  A test you don't have to study for, what's not to like?  Princeton will limit the number on campus but test them regularly.  Other top-flight schools will be practicing similar regimens.

 

These choice colleges know that if you are going to train up the next elite, it's important to keep them alive to protect the brand.

 

Testing is not widespread enough yet, nor is the turnaround fast enough.  Right now, the capacity is sorely lagging.  Still, it is easier to improve testing than come up with a vaccine.  So more and faster testing units need to be made and an infrastructure to test often and evaluate quickly must be put in place.

 

When someone wants to highlight the seriousness of a condition they might compare it to another condition.  Jimmy Carter referred to the energy crisis of the 70s as the moral equivalent of war.  Others might say a crisis calls for a Manhattan Project on the scale of the crash program that led to the atomic bomb.  If ever there was a time that called for such a program this is it.  It should not be near the degree of difficulty as the development of nuclear weapons.

 

One method of getting there has been suggested by Nobel economist Paul Romer and two congressmen, one from each party (From The Hill, June 15, 2020).  Their solution is to offer a federal prize.  There are precedents as federal prizes have been used before to solve problems.  This is so crucial because as the authors write:

 

 "Testing allows us to pinpoint those who are infected and must isolate, while lifting lockdown for those who are uncompromised. Another prize competition focused on scaling up capacity to millions of tests per day will accelerate our return and establish a critical advantage when, inevitably, we face a pandemic like this again."

 

Enormous sums have been spent in this emergency, most of it not on the average citizen.  Attaining testing capacity is crucial.  We should be happy to reward those who succeed rather than those who fail as we have been.

 

Romer and his two colleagues are not alone.  The Rockefeller Foundation has released the National Covid-19 Testing & Tracing Action Plan which has the same goal as Romer and associates.  The Foundation will invest $50 Billion.  Its president was blunt, "The only alternative is more large-scale lockdowns."

 

Up on Long Hill, we cannot be sure we are correct, but following what appears the most logical course when we look at the numbers, testing seems the best choice.

 

What seems also to follow is that going down a path of fits and starts with partial re-openings and re-closings for the next decade will not work unless we get lucky with the vaxx.  

The Long Hill Report celebrated St. Patrick's day with the team from Bucket List Maple Syrup-Sweet!

Class Warfare Goes to the Stock Market

My column from the March 2021 issue of the Greater Sturbridge Town & Country Living Magazine

 

By Richard Morchoe

 

Occasionally, the Matrix opens up and there is a glimpse of the reality that has been hidden from sight and we see our place in the world.

 

Okay, it has been years since I've seen the movies and they are only imperfectly remembered, so I don't know if an analogy of the Matrix opening makes sense.  A better example might be the Wizard of Oz when Toto pulls aside the curtain to reveal who the wizard really is.

 

We had a similar incident last month when something that was not supposed to happen did.  In the financial world, some connected people had their slam dunk of a deal upended and the business news channels were caught wondering how to view the event.

 

It looked like the usual short play.  A company whose raison d'être was not a money maker had caught the attention of some people who saw that the price of the company's stock should go down. They would be more than happy to assist in the decline and make a few bucks doing it.

 

Now in buying stocks, one hopes the price will increase to sell at a profit.  How can one make money doing that with a stock that is a dog?

 

To do it with a loser issue, it is sold short.  That is the stock is borrowed and the borrowed stock is sold.  The short seller waits for the price to go down and then buys back the stock and returns it to the owner.

 

The difference between what it was sold for and what it is bought back for is the profit.

 

The hedge fund cool kids had every reason to believe this would work well, except it didn't.

 

The company that was to be the victim, GameStop (symbol GME), sold physical copies of computer games when gaming had gone mostly digital.  

 

Some hedge funds saw the opportunity and piled on, selling short more shares than actually existed.  Selling short shares of stock that do not exist is called "naked" short selling.  One may ask how is this legal?  Well, it isn't, and was outlawed during the Great Recession when the financial industry learned its lessons and bad things were never to happen again.  

 

Naked shorting continues to happen, but the jails are not full of the connected practitioners.  As George Orwell had it, some animals are more equal than others.

 

The GameStop play looked good for the raiders, but as Scots poet, Bobby Burns noted, “The best laid schemes o' mice an' men / Gang aft a-gley.”

 

The internet has changed the world.  Whether it has been for the better is a matter for debate,

 

Back in the Dark Ages, brokerages, charged hefty fees to execute stock trades.  For the average person to become knowledgeable about a company's shares demanded, at the least, a trip to the library and the information there was probably incomplete.  Thus, the number of people who invested who were not employees of financial businesses, was limited to those with resources and sufficient time to gain some expertise.  

 

Now, in these latter days, all knowledge is online.  Couple that with enterprises such as Robinhood that will execute customers' stock trades sans commission and the democratization of the market seems complete.

 

A multitude of people who follow WallStreetBets on the discussion site, Reddit noticed the shorting of the stock and like a hive swarm started buying GameStop.  When that happened, the short sellers faced having to buy back the stock.

 

A huge fly in the ointment is, if there are enough buyers, theoretically the stock could keep going up forever.  The hedge funds would go bust long before that.  As the financial lumpen proletariat grabbed their digital pitchforks to storm the castle, it looked like it was going to happen.

 

The peasant army bought enough shares such that Melvin Capital, one of the biggest short sellers had to be bailed out to the tune of three billion dollars.  The Bastille had fallen, Vive la révolution.

 

It was at this point that the curtain was pulled aside and not by Toto, or if you must, Agent Smith of the Matrix.

 

The establishment was not amused.  On business news channel, CNBC, host of the midday show Halftime Report, Scott Wapner, had as a guest Chamath Palihapitiya, CEO of the venture capital firm Social Capital.

 

Wapner had a problem with the young billionaire.  Palihapitiya was standing up for the insurgents and Scott came off as a valiant defender of elite capital, but Scott kind of tried to do it in a roundabout way of seeming to sympathize with the poor little guys.  

 

Wapner suggested that GameStop was primed to fall and the little guy would need to be protected by regulation.  Chamath did not say Scott was crying crocodile tears but responded, “Don’t all of a sudden look at a short squeeze, where money is being made by retail, and say, ‘Hey. they could be and may be the bag holder in the future, so let’s make sure they can never participate in the future,” Palihapitiya said. “That’s crazy.”

 

Scott denied that was what he was saying and Chamath replied: “You are saying that!” ... “That’s the implication of what you’re saying.”

 

“I’m not saying they shouldn’t be able to participate,” Wapner countered.

 

“You’re saying they should participate on your terms—” Palihapitiya said.

 

“No!” Wapner shot back.

 

Palihapitiya countered, “On Wall Street’s terms, in a way where — when Wall Street can have the best of it, they can maybe participate on the side.” 

 

Scott claimed all he was looking for was a "hazard sign."  It was weak and not at all convincing.  

 

Wapner was clearly annoyed as if his young billionaire guest didn't know the team he was supposed to be on.

 

CNBC was not done.  They would have as an interview, Leon Cooperman, another member of the aggrieved rich.  "People are sitting at home getting their checks from the government, okay, and this fair share is a ######## (see note at the end*) concept.  It's just a way of attacking wealthy people.  I think it's inappropriate.  We all got to work together and pull together."  Of course, the previous sentence is certainly a  ######## concept as no one expects Leon to be down in the trenches with the plebs.

 

It was not just business TV; other respectable figures spoke out.  Former SEC Commissioner Laura Unger was concerned.  She compared the GameStop uprising to January 6th at the Capitol, "If you don’t have the police in there at the right time, things go a little crazy.”  She did admit it was to a "lesser degree,” but was the same “platform-created frenzy that people are operating under,” and added Wall Street was living through “trying times.” 

 

Of course, the "trying times" are hardly caused by the GameStop events.  They are, at most, a symptom.

 

CNN's Chris Cillizza penned "How Trumpism explains the GameStop stock surge."  At least he didn't blame Putin.  His idea was that it was anti-elitism as the driver.  Maybe so, but Chris' words could only be considered a defense of team elite.

 

Your columnist admits to cheering for the insurgency.  He tends to be a Carlinist as he agrees with the late George Carlin's famous quote about the distribution of power in this country, "It's a big club, and you ain’t in it."

 

I am not proud of the feeling, it is a bit of a churlish sentiment, but there it is.  Carlin's dictum may not be completely justified, but a heck of a lot of it is.

 

In the end, the revolt failed.  Robinhood, the firm that executes most of the trades for the GameStop buys stopped any further trading in the stock.  

 

Not unreasonably, there were thoughts that someone big had had a mafia style sitdown with Vlad Tenev (not to be confused with Vlad Tepes) head of Robinhood, who was told that something bad could happen.

 

Citadel Capital executes Robinhood's trades and thus receives information from the order flow.  It also ended up bailing out Melvin Capital's short position.  That could not have made them happy.

 

It turned out that was probably not the case and Robinhood had severe cash problems due to the huge volume of trades they had been called on to execute.  Tenev testified to that before Congress.

 

So, the glorious putsch was over.  Robinhood as a get rich quick avenue is as valuable as three card monte.  Still, for the occasional investor, there are worse things than commission free trades.  Just remember that the Citadel Capitals are harvesting your information and as they say, for social media, you are not the customer, you are the product.

 

Also, remember the sage investing advice of Mark Twain, who was probably the nation's greatest humorist: "OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks.  The others are July, January, September, April, November, May, March, June, December, August, and February."

 

*As this is a family magazine, we on Long Hill wish to spare our readers any vulgarity. Thus ######## represents the end product of bovine digestion.

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