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Ruffling the kleptocracy

In other news – just started a subscription to the FT and wow, there ARE other stories out there. Boring, significant. Anyway, the U.S. is about to ban anonymous shell companies:

The Biden administration’s focus on corruption and money laundering may so far have attracted less notice than its other big policy decisions. But it is the most meaningful manifestation of the US president’s argument that making the economy work for ordinary Americans is intimately connected to US national security and foreign policy interests.

There are many reasons to cheer this turn in policy. First, it is an all-too-rare example of relative bipartisanship in a deeply polarised country. Days before the January 6 attack on the Capitol, the Corporate Transparency Act was passed by overwhelming majorities of the US Congress as part of the annual defence spending authorisation bill. This law will, when implemented, in effect ban anonymous shell companies in the US — a favoured conduit for the world’s corrupt to launder dirty money, as Yellen referred to in her remarks.

Second, the administration means it seriously. The Treasury has issued an implementation rule for the shell company ban. Too often, in the US or elsewhere, good laws on paper have been dead letters in practice, because of loopholes or a failure to put enough resources and political support behind enforcement. This time looks different.

So weird, and not to get/stay meta all the time, but this story even hits the mythical ‘bipartisan’ note somehow, and yet still never rises to the level of the local news. Sure, it was drowned out by a coup attempt, but as the article points out, corrupted government institutions are the very things that abet anti-democratic movements. So, striking back at corruption also strikes a blow in support of liberal democracy. Sounds so quaint, but that’s where we are.

Image: Nicobar spindle shell, typically not itself a threat to democracy.

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Abundance of scarcity

That’s where we are now, or one of the places, so sayeth Matt Levine:

Basically it is easy, using blockchain technology, to create scarce claims. You could I suppose use this technology to create scarce claims to scarce resources: You could put, like, housing deeds or shares of corporate ownership or cargo-container manifests on the blockchain. This would — people have argued for years — have benefits in terms of efficiency and legibility and tradability. It would create value by improving the processes by which real-world assets are transferred and allocated. Classic financial-services stuff. Nobody talks that much about this anymore.

Instead, people like to use blockchain technology to create scarce claims to abundant, or infinite, resources. There is absolutely no shortage of JPEGs, they are infinitely reproducible more or less for free, but that means — or meant — that you couldn’t become a millionaire by having good taste in JPEGs. But now people can create a unique non-fungible token representing ownership of a JPEG and use it as a status symbol or a speculative asset. Nobody will pay you for a number in your computer’s memory, but people will pay you for a scarce number in your computer’s memory.

Stop shaking your head – it’ll hurt your neck. Or just wait.

Theoretical normal person: If you could do a thing that wasn’t just bad for but ruinous to your country’s political system – but it was very good for your profits, would you do it?
Our actual media: Do what?

Such is our national media paralyzed on the question of how to cover Biden, how to normalize authoritarian white nationalism and get Trump back. Ratings are down and they’re in a bad way, which means they’ll gladly put us [all] in a worse one to keep the eyeballs rolling in and the clicks coming.

It’s really something.

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Theories about ESG investing

This is some serious inside baseball. But it IS October:

If your basic theory of ESG investing is “we will avoid bad-ESG stocks in order to drive up the cost of capital of bad-ESG things,” it seems to be working:

Years of awful returns and pressure from clients to exit from the oil-and-gas business have left fewer and smaller firms able to take advantage of rising prices and help boost production. The unwillingness of some banks to make energy loans has compounded the challenges to boosting energy supplies.

Those left are moving to increase production, but they are relatively small players who won’t be able to make a significant impact on output. Investors are steering capital away from fossil fuels and toward companies that rank high in environmental, social and governance, or ESG, measures.

“Oil-and-gas has seen the worst returns of any sector over the past five years; the returns are volatile and investors feel ESG pressures,” says Wil VanLoh, who runs Quantum Energy Partners, which manages $18 billion, making it one of the few remaining big energy private-equity funds. “There’s been a huge retreat in available capital.”

That’s from Matt Levine’s Bloomberg daily newsletter, talking game about the game. But the idea that ESG investing is maturing, as he says, is an interesting one. If companies and the courts are no longer going to just line up on the side of fiduciary responsibilities as a way to protect shareholders – and hence, the companies that may continue to pollute and spew for profit – that’s at least a change.

Image: Abraham Lincoln: Baseball Theme Currier & Ives Cartoon, 1860.

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Swarms at the trough

The once-in-a-generation opportunity to repair and rebuild infrastructure across the country is also a once-in-a-not-soon-enough siren call to private equity to interrupt, disrupt and corrupt:

Legislation with the size and scope of the $4 trillion “Build Back Better” agenda is like a Bat-Signal for lobbyists, urging them to swarm Capitol Hill without delay. Literally thousands of companies, organizations, and trade groups have lobbied on one or more of the bills in this package. But one industry’s representatives keep showing up over and over again, whether in formal lobbying sessions in Congress or more informal meetings: private equity.

“At every point, private equity lines up at the trough,” said one observer close to the discussions. “There’s just somebody in every fucking meeting.”

Private equity lobbyists have multiple interests in the bills being discussed. They obviously want to keep any tax increases away from their industries, and successfully fought to keep tax hikes out of the $550 billion bipartisan infrastructure bill, which is slated for a House vote on September 27. Those tax hikes got shifted to the reconciliation package known in Washington as the Build Back Better Act, and private equity has kept up the pressure there.

But the industry has another reason to be involved in the reconciliation bill. The blueprint includes hundreds of billions of dollars in investments to expand home and community-based services for elderly and disabled people under Medicaid (initially set at $400 billion over ten years), and to provide subsidies for high-quality child care programs (set at $225 billion). Private equity happens to be deeply invested in both of these industries, with dozens of home care and child care companies in their portfolios.

So, people should just be aware. Like accounting gimmicks from the political opposition and in the media that will make $3.5T over ten years sound like too much in an +$20T per year country (narrator: it’s Not), also be advised about all the beaks dipping toward the puddle as it gets sliced and diced. Let’s not get distracted about who is doing what – or why they might be whining about it.

Like we say, a country that can drop a small SUV on Mars from a helicopter and watch it drive around in real time can afford to fix any problem – except where stupidity and corruption won’t allow it.

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Boring work of staggering effectiveness

Right along the lines of super unexciting infrastructure fixes to crucial bridges, railways, pipes and water mains is the capping of methane-spewing oil wells, of which we have a leaky and abundant surplus:

Curtis Shuck calls the well a “super emitter,” one of many in a wheat field not far from the Canadian border, a part of Montana known as the “golden triangle” for its bountiful crops. Aside from the scattered rusty pipes and junked oil tanks, the field is splendid and vast, its horizon interrupted intermittently by power lines and grain bins. On these plains, Shuck says, you can watch your dog run away for a week.

He is a former oil and gas executive who nowadays leads a small nonprofit — the result of a personal epiphany — and is tackling global warming one well at a time. That is the approach of his Well Done Foundation, plugging this and then other orphaned sites and trapping the methane underground. The effort started in Montana in 2019 but will expand to other states before the fall.

“When we’re done, it will be like this well was never here,” Shuck said, standing upwind as cement was pumped hundreds of feet down, through a series of pipes stuck in the 7½-inch-wide hole like a straw in a juice box.

30K to cap a well. Well done, Well Done. Plant trees, install solar farms, wind farms, stop dumping sewage, limit runoff, cut back on steaks (sorry! but do), refurbish the train lines, live close to work. Listen to ‘Trane while you walk. Live a little.

What’s it going to take? All of it, every last all of it. Everything.

Image: Abandoned oil storage tanks left behind in Montana. (Adrián Sanchez-Gonzalez for The Washington Post)

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Fixing it

Notwithstanding the [late] reckoning with our very own special coup, the one we think we dodged and the very one over which Our Media is fascinated by exactly all the wrong details; the battle between Chicago and lake Michigan; and the new Gilded Age space flights for plutocrat tourists, the economy seems to have magically withstood a pandemic (Narrator: It’s not magic):

Initial unemployment claims came in at 360,000 for the week ending July 10, below the previous week’s revised read of 386,000. That reading matched the consensus forecast among economists, according to Bloomberg.

The decline in the seasonally adjusted number resumes the overall downward trend of the volatile data series after an unexpected rise in initial claims last week. The Labor Department noted that this marks a new pandemic-era low.

While the number of Americans newly filing for unemployment benefits tends to bounce around from week to week, it’s been on a general downward trend after spiking to record-shattering numbers amid the early days of the pandemic last spring. The return to that downward trend matches other data suggesting a steadily recovering labor market.

360K is still a very many lot of people, and yet you ask: after years of making sure our billionaires had enough nest eggs to color-coordinate their space suits, how was it possible to get through a year of very limited economic activity and still be able browse and sniff at the want ads and generally avoid most of the fascist tendencies on offer? Give. People. Money.

CARES and PPP run themselves out by design, which is helping people stay afloat. This is why we’re longing for vacations instead of standing in breadlines. And the infrastructure bill will bring more of this – not gifts and not luxuries – but investments in people and how we live, with recommendations for new arrangements for different needs that WE have made absolutely necessary (see Chicago example above and read the history). Move the monuments. Buy the trains. Pay the carpenters, or become one. As legend has it, the profession has a storied past.

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Self-driving boats

Since he began scamming promising people – buyers and not just buyers, but BUYERS – that full self-driving would be available in six months (2016), Elon Musk has played a vital role in one of our great national pursuits. Yes, separating people from their money. But normalizing electric cars, even with the side auto-taxi fraud, is to be lauded. Tesla definitely got the other car makers to get some skin in the game.

There are and long have been many obvious reasons behind the difficulty of self-driving cars that Musk is now copping to, but again the Overton window has been effectively shifted. Quiet electric vehicles are turning up all over the place – on land, on sea, even in the fjords:

But they’ve already made Norway the most electrified shipping nation in the world, thanks to an aggressive government push to cut maritime emissions. The country is home to almost three-quarters of the 274 vessels globally that run at least partly on batteries, according to a state advisory body. Its fleet of 31 fully-electric car ferries is expected to nearly double by the end of the year, says the Green Shipping Programme, a public-private partnership that supports the transition. Even the sightseeing ferries that cruise Norway’s famous fjords are transitioning to battery power.

On a Saturday morning in Stavanger, along Norway’s west coast, a new ferry, the Rygerelektra, is in the harbor preparing for a tour of some nearby fjords. Measuring 42 meters long with seating capacity of nearly 300, the ferry, is owned and operated by Rødne Fjord Cruises. It is among a group of vessels from several of Norway’s leading maritime companies that are driving a shift towards zero-emissions fleet and supporting Norway’s ambitious economic reinvention away from oil and gas to alternative energy source.

They acknowledge the challenges of large-scale fleet charging, though promising technology already exists. And then, they can’t resist the temptation:

“In Norway, we need to transition from oil exports to sustainable products and services, while still utilizing the competence we have gained from the oil industry, says Pia Meling, vice president of sales and marketing at Massterly, the autonomous shipping company. “We would like to compete on the renewables and in clean shipping in particular.” Massterly’s vision is one of zero-emission, autonomous vessels moving everything from passengers around Norway to containers across oceans.

Emphasis added because I guess they can’t help it. But really, who knows where the over-promise of auto-taxis might lead? Self-driving boats are certainly more possible, if not theoretically easier – at least until you get to a crowded harbor. But hey, in the open water? Sure. In six months, we’ll be…

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On Divestment

When that thing that people may be afraid might happen is already happening, only change the ‘thing’ to ‘investing in dirty energy’ and the fear to ‘you can still make money on your money if you stop.’ The world’s largest investment house reports on tomorrow, today – pulling your money out of fossil fuels already turns a profit:

In places, BlackRock’s findings are redacted, so as not to show the size of particular holdings, but the conclusions are clear: after examining “divestment actions by hundreds of funds worldwide,” the BlackRock analysts concluded that the portfolios “experienced no negative financial impacts from divesting from fossil fuels. In fact, they found evidence of modest improvement in fund return.” The report’s executive summary states that “no investors found negative performance from divestment; rather, neutral to positive results.” In the conclusion to the report, the BlackRock team used a phrase beloved by investors: divested portfolios “outperformed their benchmarks.”

In a statement, the investment firm downplayed that language, saying, “BlackRock did not make a recommendation for TRS to divest from fossil fuel reserves. The research was meant to help TRS determine a path forward to meet their stated divestment goals.” But Tom Sanzillo—I.E.E.F.A.’s director of financial analysis, and a former New York State first deputy comptroller who oversaw a hundred-and-fifty-billion-dollar pension fund—said in an interview that BlackRock’s findings were clear. “Any investment fund looking to protect itself against losses from coal, oil, and gas companies now has the largest investment house in the world showing them why, how, and when to protect themselves, the economy, and the planet.” In short, the financial debate about divestment is as settled as the ethical one—you shouldn’t try to profit off the end of the world and, in any event, you won’t.

If the ‘masters of the Universe’ are already running for cover, the debate basically devolves to ‘you’re not the boss of me.’ Rising tides and disappearing oysters beg to differ.

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Front Foot

Stay on it.

White House officials are preparing to present President Biden with a roughly $3 trillion infrastructure and jobs package that includes high-profile domestic policy priorities such as free community college and universal prekindergarten, according to three people familiar with internal discussions.
After completing the $1.9 trillion coronavirus relief package this month, Biden administration officials are piecing together the next major legislative priority. Although no final announcement has been made, the White House is expected to push a multitrillion-dollar jobs and infrastructure plan as the centerpiece of the president’s “Build Back Better” agenda.

This will do multiple things, with hundreds of billions of dollars to repair roads, bridges, sewers, waterways and railways, as well retrofitting thousands of schools and other buildings, the bill also includes $400 billion to combat climate change, with $$$ for transit, and importantly, R & D. And this isn’t pouring money into nowhere – people will have to do that building, digging, measuring, research. So… jobs. Yes, boring and crucial.

And Republicans will fight it because of reasons. Let them. Make them. Remember: no tax cuts, especially the most recent ones, have ever been paid for. And the bugaboo of inflation will be what they betting on to argue against infrastructure investment. Let them explain. From the back foot.

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The President Show

Look what you can do instead of hosting The President Show:

Second, the rescue bill has quietly become an infrastructure bill. It devotes $350 billion to supporting state and local governments. These funds, initially proposed to plug COVID-19-created holes in public budgets, in many cases now exceed those holes. So the Senate has allowed states, cities, and counties to spend that money on improving services such as water, sewage, and broadband. Because many water systems are vulnerable to climate change and must be adapted, this is de facto climate funding. The bill also contains $31 billion for tribal governments and Indigenous communities, including line items for new infrastructure, housing, and language preservation.

Downtown in our quaint little burg, one of the main streets in the central business district has been a mess for about three months, with sidewalks and the street alternately under massive excavation as sewers, power and water lines are replaced and updated. It’s a huge mess on a one way street in a tiny downtown and it’s not apparent when it will be completed. But that’s how badly needed it was, likely long overdue precisely because it’s such a hassle. Some of what is being replaced was likely original – whatever that might mean in this context. There’s a reason people/governments don’t want to do this. It’s hugely disruptive and expensive. But also absolutely necessary. There are likely 10,000 places this needs doing. So fix them, get started. And robots can’t do this work, btw. More boring accomplishments, please.

And then let’s dance to this music.