The Donald – II September 15, 2015September 15, 2015 [Third Estimated Tax Payment Due Today (for taxable income not subject to withholding). Click here for instructions and the form.] Yesterday I provided the Trump paintbrush tool and the amazing Who Said It quiz. (How’d you do?) Today, from the Atlantic, Jon Lovett’s take on Trump’s 2017 Inaugural address and what follows. (I expected hilarity. The tone comes off more as: “hey, folks; this isn’t funny!”) One of you who shares Lovett’s alarm sent me Andrew Reinbach’s post from 2011 — the last time Trump was flirting with ruling the world — writing: “It’s hard to believe all those details about Trump’s mob ties have eluded the DNC oppo research team. Yet I’ve never seen anything about them. Just for my own understanding, why is that?” I have no idea. I’m not sure we even want him to lose the primary. I personally want them all to lose the primary . . . or maybe somehow coax Rick Perry back into the race and on to the nomination. Bush and the Koch Brothers do for sure want Trump to lose the primary — and have vast opposition-research resources at their disposal — so if this story could hurt Trump, it will probably come out. But why would it hurt him? The piece acknowledges that everybody who wanted to build anything in New York worked with certain facilitators they probably knew were connected to the mob. Confronted with this charge, Trump would likely just brush it off. “Hey, I was 35, I wanted to build great buildings, my lawyer told me – and by the way, he was Jackie Onassis’s lawyer too, and wasn’t SHE a hottie, nice woman, really, loved to be with her — I used to be a Democrat back then but now I have a YUUUGE fortune and I’ve evolved, the way Ronald Reagan evolved — so when my lawyer, Roy Cohn, told me I needed to write some checks to avoid labor problems, and that everybody did it or went bankrupt, I chose not to go bankrupt. Good choice, don’t you think? And I built some great buildings! Now when I’m president I’ll be able to crush the mob – I will CRUSH them! — because our stupid leaders are never tough enough to do it. I’ll do it. I will CRUSH them. I’m tougher and smarter than anybody — have you read my book? — and I’ll have the launch codes in a football somebody carries aroundwherever I go, so I’ll just fix this — not just for New York but for all America’s cities — and you will thank me four years from now and say, ‘Great job, President Trump.'” Right? So I think we probably just need to stick to policy, experience, intelligence, and temperament, only one of which he suitably has (intelligence). And to the facts. It’s so easy to mislead people — “a lie can travel halfway around the world before the truth can get its boots on,” as someone said — and if you repeat it often enough, especially to willing ears, it becomes dogma. The Republican Senate majority leader, Mitch McConnell, has said that “By any standard, Barack Obama has been a disaster for our country.” It is just a completely ludicrous, “up-is-down” statement . . . how about “standards” like the economy or the housing market or corporate profits or unemployment or or gasoline prices or the reduction in the deficit* or the number of American soldiers dying each week . . . yet McConnell suffers no loss of status for having made it. And climate-deniers chair the House and Senate science committees on climate change. So now comes Donald Trump saying our leaders are so stupid! Yes, okay, maybe the President was editor of the Harvard Law Review. And maybe his Energy Secretary Moniz headed MIT’s Physics Department. But they are just so stooopid! The deal THEY brought the world together to secure gets rid of only 98% of Iran’s fissile material, so Iran can’t make even one bomb — Trump would have gotten rid of 198% of it! The deal THEY brought the world together to secure gets rid of only the most modern two-thirds of their centrifuges. Trump would have gotten rid of all but one of them — and forced that one to spin backwards. The deal THEY brought the world together to secure imposes 24/7 inspection on Iran’s entire nuclear supply chain and allows for inspection of any other site . . . so that if, against all reason, their leaders do cheat (and religious fundamentalists do sometimes defy all reason), we will have far better intelligence than we have now on what needs to be done and how to do it. Trump would have forced them to accept 25/8 inspection — and to pay us $50 billion a year for not attacking them. He states flatly that not only isn’t this a good deal, it is the worst, worst, WORST deal he has ever seen in all his years of YUUUUGELY successful negotiations. Like the time he brought China, Russia, Germany, France, and the UK together to . . . well, never mind. It’s just ludicrous; and for now, at least, he’s both winning and helping to misinform the public and tear down our leaders. (He’s joined in his assessment by Sarah Palin, Ted Cruz, and the Dick Dynasty guy — Trump was happy to share the podium with them.) Oh! And Dick Cheney says it’s a terrible deal, too, and you know how good his judgment is. * Such that the National Debt is now once again growing more slowly than the economy as a whole.
The Donald September 14, 2015September 13, 2015 Did you know you can now paint with Donald Trump? I tossed off a quick abstract. You can probably do a lot better — feel free to share. But the real time you need to take this morning is with this jaw-dropping little quiz — Who Said It? Donald Trump Or Lucille Bluth? (Lucille, if you don’t recognize the name, was the hysterically funny alcoholic matriarch on “Arrested Development.”) Let me know how you score.
Infrastructure, Dammit! September 11, 2015September 11, 2015 As a nation, ours scored a D+ on the latest report card. Blocked by Republican intransigence, we’ve been spectacularly “penny wise and pound foolish.” (It costs a lot more to replace a bridge after it collapses than to maintain it so it doesn’t collapse — 10 times more so when you account for all the detours and traffic jams for the months required to rebuild.) About the least “conservative” thing I can think of is cutting taxes as our infrastructure crumbles but that’s exactly what our Republican friends have for decades done. So now comes a report from attorney Philip K. Howard, founder of Common Good (and author of The Death of Common Sense: How Law Is Suffocating America*) — no knee-jerk liberal he — that maintains: Delays in approving infrastructure projects cost the nation more than twice what it would cost to fix the infrastructure, according to a new report released by Common Good, the nonpartisan government reform coalition. Those approvals can take a decade or longer, and the report shows that a six-year delay in starting construction on public projects costs the nation over $3.7 trillion, including the costs of prolonged inefficiencies. That’s more than double the $1.7 trillion needed through the end of this decade to modernize America’s decrepit infrastructure. The report, Two Years, Not Ten Years: Redesigning Infrastructure Approvals, proposes a dramatic reduction of red tape so that infrastructure can be approved in two years or less. I’m for it! But it’s not just red tape that’s caused delays; it’s the G.O.P. that blocks spending. There was the American Jobs Act the President exhorted a nationally televised prime-time joint session of Congress to enact five years ago . . . Spending $50 billion on both new and pre-existing infrastructure projects. Spending $35 billion in additional funding to protect the jobs of teachers, police officers, and firefighters Spending $30 billion to modernize at least 35,000 public schools and community colleges. Spending $15 billion on a program that would hire construction workers to help rehabilitate and refurbishing hundreds of thousands of foreclosed homes and businesses. Creating the National Infrastructure Bank (capitalized with $10 billion), originally proposed in 2007, to help fund infrastructure via private and public capital. Creating a nationwide, interoperable wireless network for public safety, while expanding accessibility to high-speed wireless services. . . . killed by the Republicans even though there were so many people desperate for work and the interest rate on borrowing to finance such projects was so phenomenally low (see: “GOP kills Jobs Bill Despite Majority Support”). And there were numerous local examples — prime among them: Florida’s Republican governor killing . . . . . . the Obama administration’s marquee high-speed rail project, giving up a whopping $2.4 billion in federal funds for a Tampa-Orlando bullet train. This was the nation’s most shovel-ready high-speed project, and the state wasn’t required to spend a dime to build it; running through the heart of the politically sensitive I-4 corridor, it had bipartisan support in South Florida, where it was seen as a precursor to a long-awaited Orlando-Miami line . . . And New Jersey’s Republican governor killing . . . . . . a $12.4 billion tunnel that would have doubled commuter capacity to Manhattan. If Christie hadn’t stopped the Access to the Region’s Core project that began in 2009, mass-transit relief would have come as soon as 2018. Now he supports an approach, with new oversight by the Port Authority of New York & New Jersey, that has no dedicated funding and would take at least 10 years. . . . Only now that interest rates look set to start creeping back up, and unemployment has fallen from 10% to 5.1%, might we — possibly — begin to ramp up our infrastructure programs. The famous Republican “government shutdown” stunt that needlessly cost us $24 billion was dramatic and well publicised. But the delay of infrastructure revitalization, while less visible, is costing us trillions. Have a great weekend — and vote Democrat if you think we should strive for better than a D+ on the infrastructure report card. *”Every doctor and teacher frustrated by paperwork, every judge frustrated by mandatory sentencing guidelines, every banker and businessman tied in regulatory knots, every manager terrified to fire someone for doing a poor job – every taxpayer – will findThe Death of Common Sense a blood-boiler. What makes it important, though, is not its (amazing) anecdotes, but that it so elegantly synthesizes them…and points to solutions.” – Andrew Tobias
Small Ways To Help The Syrians September 10, 2015September 9, 2015 My remarkable friend Dick Simon writes: . . . We must take action to address the refugee crisis, both because it is humane and moral, and because we either pay now or pay much more later. Abandoned, unemployed, and increasingly desperate youth, seeking any sense of community, are easy targets for ISIS and other terrorist organizations. In 2010, I traveled in Syria with my family and was there again when the conflict began in 2011, when “only” 26 people had been killed in Daraa. I spent time in markets in Damascus and Aleppo that now no longer exist, as well as the now destroyed archeological ruins in Palmyra. Many of the people I met and visited with have either been killed or are now refugees. The numbers are staggering. More than 250,000 Syrians have been killed since the conflict began. Syrians now represent the largest refugee population in the world. 4 million have left the country and 8 million are internally displaced, a total of over half the pre-war population of the country. Neighboring countries are overwhelmed. Syrian refugees now represent almost a third of Lebanon’s and a quarter of Jordan’s populations. In contrast, the US has admitted fewer than 1,000 Syrian refugees. This year, spending time in the Syrian refugee communities of Turkey and Jordan, the most common question I hear from refugees is “Why do they hate us?”, referring to a feeling of being completely abandoned and forgotten by the world. I provide the very unsatisfactory answer that the situation is complex and people don’t know exactly what to do, so feel paralyzed and do nothing, but that there are people who care and are trying to help. I’ve been involved with the Karam Foundation creating a computer lab at Al Salam School in Reyhanli, Turkey and talking with a range of students about kNOw THEM. Karam provides health and emotional support as well as enrichment programs for Syrian refugee children. In order to share our experiences, Patty and I have written articles, Challenging Stereotypes with Syrian Refugee Children in Turkey (Dick Simon) and What I Learned Making Instant Hug Machines for Syrian Kids (Patty Simon). I’ve also been involved with a fantastic documentary, Salam Neighbor, which humanizes the crisis through the stories of several individuals living in the Za’atari Refugee Camp in Jordan. Although the problem is in many ways overwhelming, small actions can make a huge difference in the lives of real people. If you’re interested in finding out more, some of the great organizations we’ve been involved with include: International Medical Corps, Karam Foundation, Mercy Corps, Salam Neighbor, and UNHCR. If you’re interested in helping to create a documentary about Syria’s national wrestling champion now living in Jordan’s Za’atari refugee camp, visit the Hope Amid Despair in Jordan Kickstarter page. There but for the grace of God — and how ironic that so much of this misery and mayhem comes in the name of God* — go we. *”I have caused great calamities,” Queen Isabella declared five centuries before ISIS began its atrocities. “I have depopulated provinces and kingdoms. But I did it for the love of Christ and his Holy Mother.”
“Palin Eyeing Energy Secretary In Potential Trump Administration” — CNN September 9, 2015September 8, 2015 The short clip is here. The Donald has invited the speculation that she might find some role in his administration, “Because she really is somebody who knows what’s happening and she’s a special person.” The full 15-minute Palin interview here. (Meanwhile, I have not yet seen Trump Kills Kitten on Live Television, Expands Lead, from the satirists at the Daily Courrant — presumably because demand to see it has crashed the server.)
The Republican Reasoning On Iran September 8, 2015September 8, 2015 One politician with a deep commtment to Israel and a heavily Jewish constituency is Congresswoman and DNC Chair Debbie Wasserman-Schultz. Over the weekend, she endorsed the Iran deal. If you don’t support it, or remain a bit unsure, I’d urge you to read her Miami Herald op-ed. Enlightening, too — if dismaying — are the comments it elicited. The first that comes up is from a retired Ashland, Kentucky man who reasons (in full): What a moron! He is followed by someone named Bruce Welt, a professor of agriculture and biological engineering at the University of Florida, who counters the Congresswoman’s arguments with: The Democrat Party is vile, evil and immoral. Anyone supporting this idiotic and irresponsible concesssion to Iran must be shamed, punished and then ignored. The entire Democrat Party must be shamed, punished and ignored. DWS disgusts humanity. As do, it presumably follows, the 340 rabbis, 60 national security leaders, 100+ former ambassadors, George H.W. Bush’s former National Security Advisor, and all the others I’ve linked to — Republicans and Democrats — who also support the deal. They all apparently “disgust humanity,” according to professor Welt. And someone named John Nelson reasons: Congratulations. The Democratic Party goes down in history alongside incompetent fools such as Neville Chamberlain. Thanks to your wilfull ignorance, our servicemen and women will face fully re-armed and nuclear equipped Islamo-Nazis. His Neville Chamberlain reference is interesting. Imagine if the world had brought Hitler to the table before he invaded anyone and worked out a deal under which he had to get rid of two-thirds of his heavy weaponry – the most advanced two-thirds at that – and 98% of his ammunition. And agree to 24/7 surveillance of all his known arms factories and arsenals — his entire military supply chain. Would John Nelson have rejected that deal as not worthwhile? As pro-Nazi in some way? Or might that deal have prevented World War II and saved tens of millions of lives? Not to say this deal will necessarily be honored by Iran; but if it’s not, we’ll be in a better position than now to take the necessary steps: we’ll have much more intelligence on what needs to be done. Oh! And this just in: an extensive list of top-ranking Israeli military brass who urge Prime Minister Netanyahu to accept the deal. That not a single Republican in the House or Senate agrees with Colin Powell, who has strongly endorsed the deal, or with Republicans like former Senate Armed Services Chair John Warner, is dismaying on so many levels. What has happened to the Republican Party?
Labor Day Special: “A World Without Work” September 5, 2015September 5, 2015 In case you tore a tendon lunging for a shuttlecock and can’t go out and play this weekend (does anyone still play badminton?), here’s a really interesting, important article from The Atlantic, “A World Without Work,” by Derek Thompson, that I commend to your attention. It addresses one of the very most fundamental issues of our time, as our species attempts to adapt to the accelerating pace of technological change that could: (a) provide extarordinary levels of health and prosperity for virtually everyone, if we can find ways to share the good fortune; (b) lead to even greater inequality, where the relatively few who own and operate the capital equipment that does all the work live like kings, while everyone else stands in bread lines; or (c) send us hurtling off the rails into eventual extinction. (The article doesn’t address this, but it would give new, species-wide meaning to the phrase, “too smart for their own good.” Not that anyone would be left to appreciate the irony.) I favor (a), and am thrilled by the possibility. Have agreat Labor Day . . . and enormous thanks to all who actually work for a living. Not that writers and Democratic fundraisers don’t work, we do; but real work in the sense of work that is exhausting, feet-aching, back-breaking, sun-scorched, mind-numbing, smell-gagging — or dangerous. We profit from your labor each time we eat a tomato or enter a hotel room or walk the streets in safety. You are too often under-paid and under-appreciated.
One Citizen’s Crusade September 4, 2015September 4, 2015 Ed & Art: “You have to listen to this woman. Even just the first minute. Remember, this person has a driver’s license and is out there on the road somewhere. This is why Trump could win.” ☞ Oh, deer. And if you have another minute, read Tom Friedman’s column on why it is our great ally Saudi Arabia, not our great enemy Iran, that is the leading sponsor of terrorism and radical Islam that so threaten the world. (And given how awful Iran is, that’s saying something.) Speaking of which, you can see my friend Parvez Sharma’s A Sinner In Mecca, discussed here — “most striking is his footage, filmed on a mobile phone and two tiny cameras without permission from Saudi authorities, then smuggled out of the country” — at New York’s Cinema Village from September 4-11 . . . LA’s Laemmle Village from September 11-18 . . . Cinema Detroit September 18-25 . . . and San Diego’s Digital Gym Cinema October 9-15. It is a New York Times “critic’s pick,” with 10 out of 10 favorable reviews here on Rotten Tomatoes. “Islam is imploding upon itself right now and there’s a huge crisis,” Parvez told a French journalist. “It (a reformation) is happening, but it is happening too slowly and we’re running out of time. The change needs to happen with Wahhabi Islam [the Saudi brand] — that is the root of all the problems.” “Mr. Sharma has created a swirling, fascinating travelogue and a stirring celebration of devotion.” – NEW YORK TIMES “Next time you hear politicians or right-wing broadcasters asking why “moderate” Muslims don’t denounce terrorism, show them this movie.” – THE VILLAGE VOICE “A Sinner in Mecca” takes its audience where no movie has gone before . . . an absolute must-see for any student of sociology or religion.” – THE DAILY NEWS And one other note on religion: the Kentucky clerk jailed for defying the Supreme Court on religious grounds. Jim Burt: “She has been jailed for ‘contempt of court’ – that is, repeatedly defying a lawful order of the court having jurisdiction over the present dispute — not for ‘practicing her religion.’ If she had been of a different religious persuasion, and felt prior to the Supreme Court’s decision that she should, as a matter of conscience and religious belief, issue marriage licenses to same-sex couples despite this then being against Kentucky law, should she have been permitted to do so because to stop her would have impaired her freedom of religion?” ☞ We all favor religious freedom; but I’m not sure the religious-freedom folks would have taken her side.
Getting The Lead Out: Why Crime Falls September 3, 2015September 2, 2015 [CORRECTION! Yesterday’s link to the men who herd cats was broken. So sorry!] I concluded Tuesday’s post with a link, Get The Lead Out, that I assume none of you clicked. (It was a long post, and you guys are busy! Or perhaps, as Ronald Reagan explained when asked why he hadn’t read his briefing book for that day’s important Summit meeting: “Well, Jim, ‘The Sound of Music’ was on last night.”) So I’m clicking it for you. In very small part: . . . During the ’70s and ’80s, the introduction of the catalytic converter, combined with increasingly stringent Environmental Protection Agency rules, steadily reduced the amount of leaded gasoline used in America, but Reyes discovered that this reduction wasn’t uniform. In fact, use of leaded gasoline varied widely among states, and this gave Reyes the opening she needed. If childhood lead exposure really did produce criminal behavior in adults, you’d expect that in states where consumption of leaded gasoline declined slowly, crime would decline slowly too. Conversely, in states where it declined quickly, crime would decline quickly. And that’s exactly what she found. Meanwhile, Nevin had kept busy as well, and in 2007 he published a new paper looking at crime trends around the world (PDF). This way, he could make sure the close match he’d found between the lead curve and the crime curve wasn’t just a coincidence. Sure, maybe the real culprit in the United States was something else happening at the exact same time, but what are the odds of that same something happening at several different times in several different countries? Nevin collected lead data and crime data for Australia and found a close match. Ditto for Canada. And Great Britain and Finland and France and Italy and New Zealand and West Germany. Every time, the two curves fit each other astonishingly well. When I spoke to Nevin about this, I asked him if he had ever found a country that didn’t fit the theory. “No,” he replied. “Not one.” . . . The whole article is fascinating. And, as argued Tuesday, we should de-lead America’s inner-city homes and apartments, because lead paint, too, has a terrible effect on our kids and the adults they grow up to be. We’ve gotten the lead out of gasoline. Now let’s get it out of housing. The return on investment, as reported here, would be phenomenal.
Herding Cats September 2, 2015September 2, 2015 Everybody talks about it — “it’s like herding cats” — but here are the men who do it. You won’t want to miss that. But once you’ve seen the cat herders in action, you may want to turn your attention to the unsettled nature of the markets. For that, I’ve gotten permission from Aristides’ Chris Brown to share with you his monthly letter, emailed yesterday from Toledo. Chris is scary smart, so I pay attention. 1 September 2015 Dear Partners, Aristides Fund LP celebrated its seventh anniversary by posting its best August since 2009, gaining 1.47%. . . . One hundred thousand dollars invested at the inception of Aristides Fund LP, August 15, 2008, is now worth $344,150, representing growth of 19.1% annualized. . . . Several of you have asked for our thoughts on the recent market sell-off, so, although we have no special powers of market timing and no economic crystal ball, here goes. In the very short term, market sentiment was excessively fearful last week, meaning that it is unlikely that the market goes meaningfully (more than 2-3% below) the lows from August 24 over the next 3-5 weeks. Historically, it would also be more likely than not that we do have some sort of retest of those lows in the very near term. Longer-term, we remain very guarded in our outlook for equities. Mebane Faber recently (May 31) published a great article called “10 Bearish Charts, 1 Bullish Chart” in which he points out that April 2015 had the highest level of U.S. corporate stock buybacks ever, that May 2015 had the highest ever value of mergers and acquisitions, that the average price of these M&A deals was 12.4x EV/EBITDA year-to-date (highest on record), that the percent of initial public offerings that are unprofitable companies is the highest ever, that the Shiller cyclically-adjusted price/earnings ratio is the 4th highest it has ever been (next to 2000, 1929, and 2007), that the price-to-sales, price-to-book, and price-to-cash flow ratio of the median S&P 500 stock are at all-time highs, that % of portfolio allocation to equities has only been higher in the late 1990s and the late 1960s, that margin debt is at all-time highs, and that average Investor’s Intelligence bullish sentiment in 2014 was the second-highest on record. Equity bulls counter that the “equity risk premium,” the gap between the earnings yield on stocks and the yield on bonds, is very large currently (i.e. stocks are cheap relative to bonds), and likewise that there are factors that have permanently raised after-tax corporate profit margins (e.g. better corporate management, more oligopolies, less power of labor to demand higher wages, and creative tax management strategies). If we’ve learned one thing from the great economic prosperity/bull market from 1982-2000, and the subsequent unwind, it is that economies look a lot better when the level of debt-to-GDP is on the rise, and that it’s a pretty hard slog when debt-to-GDP is contracting (or, for that matter, it has been quite a headwind, compared to what we had grown accustomed to, just to have debt-to-GDP stay the same). This is probably the most important and most underappreciated aspect of long-term economic cycles. Debt-to-GDP in the United States has declined very modestly since 2008, from a very high peak, but is still much closer to a top than a bottom. Therefore, it’s probably safe to argue that downside risks to the economy outweigh the prospects for a new economic boom. Combine this with high valuations, and stocks are vulnerable. Another immensely important yet underappreciated principal of the markets is that things don’t matter until they do. Just as the massive credit buildup in the U.S. was obvious to some smart folks for years, it didn’t matter to markets in 1994; it didn’t matter until it started to reverse itself, very quickly, in 2007. The world’s second largest economy, China, has been on the biggest fixed capital investment binge in the history of earth for about the last fifteen years (or roughly double the length of time of the second-longest such binge). You might think of China as a very export-driven economy, but that is only part of the story. Net exports (exports less imports) account for only about 4 percent of Chinese GDP. The amount of China’s economy dependent upon fixed capital investment is astronomical. For example, from 2011 to 2013, in three years, China produced more concrete than the United States did in the entire 20th century. Certainly the Chinese people are well-educated, hardworking, and industrious, but the Chinese “economic miracle” had another tailwind as well. Any guesses what it might be? Surprise! It’s debt. While China’s economy has grown, China’s debt, especially corporate debt and local government debt, has grown much more dramatically. People who say “The fall of the Chinese stock market is inconsequential to the wealth of most Chinese people” are correct in the same way that people who said “Subprime loans are a very small part of the loan market and an inconsequential part of U.S. GDP” were correct in 2006-2007. The dramatic rise and fall of the Shanghai index in the last 12 months is a symptom of debt becoming too widely available, and abused for speculative purposes (margin lending on stocks, in this particular instance), followed by the beginning of a contraction of debt. Although even margin debt is a relatively small part of China’s economy, the willingness of Chinese individuals to extend credit to Chinese corporations is a key part of the Chinese economy. Chinese GDP has been growing more slowly than Chinese debt for several years now, and if credit conditions tighten in China, the world’s second largest economy is likely to slow considerably. Already, key commodity inputs that had previously been buoyed by Chinese demand, including iron ore, copper, and oil, have fallen dramatically. The same is true for the currencies of countries whose economies heavily depend on exporting commodities, such as Brazil, Australia, Russia, and Canada. Many countries are heavily dependent upon exports to China. Nearly 30% of Australia’s exports are delivered to China. Chile, Peru, and Brazil together send roughly 20% of their exports to China, so any slowdown in China could hurt an already fragile South American economy. Likewise, South Korea and Japan send China 24% and 18% of their exports, respectively. Even 10% of European Union exports (roughly 1.1% of the entire EU economy) go directly to China. China has already devalued the yuan slightly, and has spent a small fraction of its considerable foreign currency reserves defending the currency and its stock market. If the yuan needs to depreciate much further, as some observers are speculating, the effects on China’s economic Asian competitors, such as Japan, could be profound. To make a long story short, China has accounted for a very substantial portion of global GDP growth in the post-2008 period, so in a world that is heavily indebted and barely growing, a significant economic slowdown and currency devaluation in China would be bad news for many industries in many nations. We aren’t scrambling to put on China-related shorts. Some other investors, like Jim Chanos, who are better at discerning macroeconomic trends than we are, have already had such positions on for more than a year, and have made a lot of money in the process. We don’t know how far along things are, or how bad they will actually get, and we know that by the time that even guys sitting in Toledo, Ohio, have access to the narrative, maybe the bottom is in or at the very least it’s probably about time for a counter-trend rally. But, nevertheless, it’s important to respect the fact that not all is rosy in the global economy. Most of our thoughts these days, as usual, are on finding good opportunities one company at a time, both on the long side, and to a lesser extent on the short side. Our broad market hedges obviously did well in August, but we also made considerable money elsewhere. Unwired Planet performed well for us thus far, and the story is still very underappreciated, in spite of us writing about it on SeekingAlpha. MAST Capital privately bought a large chunk of UPIP stock for $1.00 last month. Yet the stock is still below 80 cents in the open market! Southern Missouri Bancorp finally got the rally it should have had three months earlier (when it said on a conference call that they would pay their SBLF funds back without a capital raise, unless an attractive acquisition came along). EMCORE, which is still mostly a pile of cash, rallied off of strong earnings. Our SAExploration bonds traded up even as oil (which we are short as a hedge) traded down; the price isn’t a fluke as (1) we sold $1 million face (we could have sold more but didn’t want to), and (2) Fidelity exchanged $10 million face worth of bonds for stock essentially priced at about $4.25 per share, well above the current market price. The bonds still yield about 25% to maturity. Our small shorts in Mobileye (a great company that is massively, massively overpriced) and 6D Global Technologies (a bad company that is massively, massively overpriced) contributed meaningfully. Kroger did not perform well, but was noteworthy in that we were able to buy 20,000 shares on the day of the market panic at an incredible price, and sell it 5 points higher about an hour later. Of course, several positions lost money, as you’d expect with the market down six percent, but nothing got hit too badly, and all-in-all, we held up pretty well. Thank you for your partnership. It’s anyone’s guess what the rest of the year will bring to the markets, but we will certainly try our best to continue to keep our assets buffered and to find some good opportunities along the way. None of this is to say what will happen next — or that you should do anything about this (I bought a few shares of UPIP at 77 cents). If you’re in the stock market with money you won’t need to touch for many years, which is the only sensible way to be in the market, the last thing you want to do is jump in and out. But won’t you feel more knowledgeable around the barbecue this weekend? “Do you know, guys: China produced more concrete in three years than we did in the entire 20th Century? Pass me the relish?”