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The GameStop Squeeze Will End Badly

The GameStop store in Westminster, Colo., January 14, 2014 (Rick Wilking/Reuters )

So, it was another hilarious day where, after falling from a $150 high, GameStop’s stock touched $250 on Tuesday.

Reddit’s WallStreetBets forum is in the midst of euphoria, on the news and rumors that they have absolutely crushed Melvin Capital, a firm that took a huge short position against GameStop. The Reddit hordes squeezed Melvin Capital and may have squeezed out the firms that tried to bail out Melvin Capital. The originator of this play, who goes by the YouTube name Roaring Kitty, seems to have turned his $50,000 investment into a fortune topping $20 million — so long as he liquidates.

But then that’s the question right now. Will the Reddit kids liquidate?

Right now the forum is roiling not just with David-beats-Goliath strutting, but political manifestos aimed at hedge funders and the Wall Street Establishment. There are vows to take GameStop to $1,000, defeating any incoming short-sellers, or die trying. There are posts trying to get people excited to reload their GameStop positions even if only to make a political point, or simply to wreak havoc on the institutions. There are even some moving posts where users post their screenshots of a major student loan paid off by GameStop stock, which is almost poetic, in its way. Elon Musk tweeted about it, and my guess is that GameStop is going to pop Wednesday to even more absurd heights. This is going to end in misery for a lot of these kids.

Smarter money, I think, is leaking toward buying stocks and options against other vulnerable short positions — Bed Bath & Beyond, or AMC Entertainment — though none was quite as vulnerable to a squeeze as the GameStop short-sellers.

The whole cycle of stories about instant-millionaire day traders reminds me of the dot-com bubble. I was just a teenager, but even at a small family-owned grocery I remember all day hearing the absurd stories about people who risked it all on the Red Hat IPO, and won big.

Even with all this money sloshing around from the Fed, and the way it is propping up Boomer retirement accounts — it really feels like a silly season just before a correction.

But what do I know?

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Victor Davis Hanson Podcast New Episode: Time to Forget

The new episode (No. 52, which marks our first year) of the Victor Davis Hanson Podcast is ready for your lent ears. Discussed by VDH: his thoughts on cultural reprogramming and political forgetting, attacks on the 1776 Commission, Joe Biden’s executive-order attack on girls’ sports, and California governor Gavin Newsom’s lockdown loosening (coincidental to his recall fears?). Catch the wisdom here.

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Trump Impeachment Trial: Five Republicans Look Likely to Convict

The Senate held a test vote on the Senate impeachment trial and 45 Republicans voted to dismiss, suggesting that the vote to convict probably won’t go beyond what seemed the likeliest votes at the outset (Romney, Sasse, Collins, Murkowski, and Toomey). In the scheme of things, that would be a lot of members of a president’s own party voting to convict, given that previously there’s been zero or one (Romney the first time around). But, of course, it’s far short of the 17 Republican necessary to convict. This trial could end up being more of a political afterthought than the first one, when Washington was consumed by it but even Democratic presidential candidates out on the campaign trail weren’t talking about it.

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A Filibuster Calculation | National Review

Senate Majority Leader Mitch McConnell (R-KY) conducts a news conference at the U.S. Capitol, December 1, 2020. (Tom Williams/Pool via Reuters)

Let’s say you’re a middle-of-the-road senator. Maybe you’re from a purple state, maybe you’re moderate in your views, maybe both. Your party has a small majority. Sometimes a piece of legislation that is very important to the most revved-up portion of your party is one that you dislike, or that doesn’t play well in your state. How to handle the political problem?

Enter the filibuster. You can give the bill its 52nd or 53rd vote secure in the knowledge that it’s not going anywhere. Supporters of the bill aren’t mad at you, because you sided with them. Opponents of the bill aren’t too mad at you, either, because they won. It won’t always work out that way, of course — sometimes the opponents will hold your vote against you even though they won — but it’s often a better political outcome for you than having to actually be responsible for passing or killing the bill. If you privately believe the bill is a bad idea, so much the better.

What happens, though, when the filibuster itself becomes an issue? The majority-party senator who values it as a means of seeing bills die without having to kill them himself, or who just thinks it’s a good institution, can perform the same maneuver: Say he’s against the filibuster and will vote to abolish it while secretly hoping that a majority votes to keep it. But this dodge might not work if he is the actual deciding vote.

Then the question he might ask himself is: Do I want to vote against my party’s hard-core activists on one procedural issue that very few voters care about, or do I want to face vote after vote on abortion, the minimum wage, environmental regulation, etc., where I may have to disappoint my party on issues that a lot of voters care about?

He might also think about how the filibuster will affect his status in the event his party narrowly loses the majority. If that happens, the other party will have to court him to get something done if there are filibusters. It will have less need of him if there aren’t any.

The backdrop to this hypothetical discussion is that Senate minority leader Mitch McConnell has been blocking consideration of a resolution to organize the chamber until getting a commitment to preserve the filibuster. After he did that, Senators Sinema and Manchin reiterated that they favor keeping it and aren’t going to change their minds. McConnell has now declared victory and dropped his objection, so the Senate can proceed to organize.

McConnell ate up some of the new majority’s time — even more precious, its early time — and sowed some dissension in its ranks. Some people will say he lost the exchange because he dropped his objection without a formal commitment on the filibuster, but that’s not much of a cost, especially since there’s a credible counterargument that he won. And there are almost certainly more than two Democratic senators who are satisfied with this outcome.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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If You’re Gushing about Non-Answers, You’re Not Really a Journalist

White House Press Secretary Jen Psaki speaks after the inauguration of Joe Biden as the 46th President of the United States, January 20, 2021. (Tom Brenner/Reuters)

Large swaths of the national media are still thrilled that the Biden administration is not the Trump administration, gushing in news chyrons about “how refreshing” it is.

The Biden administration is reinstating and expanding travel bans in response to new variants of SARS-CoV-2, which is likely to be the right policy move. But it does cut against Biden’s campaign trail declaration that “banning all travel from Europe — or any other part of the world — will not stop it” or Biden labeling the previous administration’s restrictions on entries from China “xenophobic fear-mongering” and “hysterical xenophobia,” and White House press secretary Jen Psaki insists these new travel bans do not represent a contradiction of Biden’s rhetoric on the campaign trail.

Yesterday, Psaki gave a non-answer when asked about CDC director Dr. Rochelle Walensky’s bizarre claim, “I can’t tell you how much vaccine we have.”

Q: But just to button this up: [U.S. Army General and chief operating officer of Operation Warp Speed] Gus Perna still works here, right?  And he’s in charge of the logistics.  So could he say how much vaccine there is, since they’re in charge of where it’s going? 

MS. PSAKI:  Well, again, there is a new CDC Director in charge (inaudible) spoke to this.  And I think what we’re trying to do now is fully assess what we have access to, what the status of the vaccine supply looks like, and ensure that we’re communicating that accurately and effectively with the public.

It appears the Biden administration does not know whether it supports a free trade deal with the United Kingdom or not:

Q    And on the UK, we know, over the weekend, President Biden had a phone call with Prime Minister Boris Johnson, and Mr. Johnson said they talked about the free trade deal. However, from the White House readout, we don’t see that.  Does the President support the free trade deal with the UK?

MS. PSAKI:  I haven’t talked to him or Jake Sullivan about that.  I’ll venture to do that and see if I can get more for you on it.

(Also note that yesterday Psaki declared, “We’re starting from an approach of patience as it relates to our relationship with China.” When we examine the Chinese government’s decisions and actions over the past year or more, has Beijing really earned “patience” from the U.S. government? Is the problem really that we’ve been too impatient with China?)

So, yes, it is just swell that Jen Psaki is nicer than Kayleigh McEnany and that reporters find her easier to deal with than Stephanie Grisham or Sarah Huckabee Sanders. But on that widely touted pledge to share more accurate information, Psaki is getting graded on a generous curve.

Far too generous.

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Chief Justice Roberts a Back-Channel ‘No’ on Presiding over Trump Impeachment Reboot

Chief Justice of the United States John Roberts departs the Trump impeachment trial in Washington, January 29, 2020. (Brendan McDermid/Reuters)

Officially, neither Chief Justice John Roberts nor the Supreme Court has commented on the fact that the chief justice will not preside over former president Donald Trump’s second Senate impeachment trial, set to begin in two weeks. Roberts, of course, sat on Trump’s first impeachment trial a year ago, while the latter was president.

Senator Patrick Leahy, the Vermont Democrat whose seniority has landed him in the position of the Senate’s president pro tempore, will preside. The senator made no allusion to the chief justice in a statement he issued about the trial. He observed (among other things) that “the president pro tempore has historically presided over Senate impeachment trials of non-presidents.”

Nevertheless, it appears that there was some outreach from the Senate to the chief justice, who demurred. According to the New York Times, Senate majority leader Chuck Schumer (D., N.Y.) “said Chief Justice Roberts was uninterested in reprising a time-consuming role that would insert him and the Supreme Court into the political fight over Mr. Trump.” How exactly Roberts made his uninterest known to Schumer is not explained.

As I’ve noted (here and here), the Constitution (Article I, Section 3) states: “When the President of the United States is tried [by the Senate for impeachment], the Chief Justice shall preside[.]” Trump is no longer president of the United States; ergo, under a narrow but commonsense construction of this provision, the mandate that the chief justice preside over presidential impeachment trials does not apply. Nothing more needed to be said, even though, as our Dan McLaughlin contended, it would certainly have been preferable for Chief Justice Roberts to explain his reasoning in a formal written opinion — particularly if he was in fact asked and, upon consideration, declined.

For now, we’ll have to content ourselves with a fleeting reference in the Times to some back-channel communication.

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McKinsey: Corporate Social Responsibility, the Putin Way

Russian President Vladimir Putin at his annual end-of-year news conference at the Novo-Ogaryovo state residence outside Moscow, Russia, December 17, 2020. (Sputnik/Mikhail Klimentyev/Kremlin via Reuters)

McKinsey & Company (“our commitment to making a difference in society is embedded in everything we do”) is one of those firms that like to emphasize how much they support “stakeholder capitalism”:

Business leaders should embrace the apparent contradiction—of low trust and high expectations—and make the choice to demonstrate that they see their mission as serving not only shareholders but also customers, suppliers, workers, and communities. The common term for this is “stakeholder capitalism” and we think its time has come.

Many CEOs say they agree—at least theoretically. There are certainly examples of businesses just talking the talk and not following through.

Well, since McKinsey mentions that topic, here’s The Moscow Times:

The Moscow office of leading U.S. consultancy McKinsey & Company banned its staff from attending an unauthorized protest in the capital in support of Kremlin critic Alexei Navalny on Saturday and warned them against voicing online support, according to an email sent to McKinsey personnel seen by The Moscow Times.

Russians nationwide took to the streets on Saturday in support of the opposition activist, who was jailed this week on his return from Germany to Russia.

The message, titled “Stay safe, stay neutral, enjoy weekend,” was sent to all employees in the office and shared with The Moscow Times by two McKinsey consultants on condition of anonymity.

On one side, Russia’s authoritarian leader, credibly associated with murder, helpful “terrorist” attacks, corruption and ballot-rigging.

And on the other, supporters of a jailed opposition leader who has recently survived an assassination attempt by members of the state security services.

McKinsey’s advice: “Stay neutral.”

Wait, there’s more:

“There is a call from some oppositionists for nationwide street demonstrations tomorrow that almost certainly will not be authorized. In line with policy, McKinsey employees must not support any political activity either publicly or privately. This ban does include posts in social media featuring your political views or your attitude to any action with a political flavour. This line of conduct is mandatory. Please make sure you stay away from public areas of gathering around 2pm tomorrow and please refrain entirely from making related posts in any media,” the message said.

The Moscow Times contacted McKinsey. From the same report:

When asked for comment on the message by The Moscow Times, McKinsey replied, “McKinsey supports its employees’ rights to participate legally and in a personal capacity in civic and political activities across the countries we operate.  The recognition of these rights is unqualified.”

Saturday’s protest had not been approved by the Russian authorities.

“Legally” is doing a lot of work there.

The Moscow Times followed up on the story here:

The managing partner of U.S consultancy McKinsey & Company’s Moscow office has messaged his staff “clarifying” an earlier email banning them from attending an unsanctioned protest for jailed Kremlin critic Alexei Navalny.

“Some of you have raised concerns about my email to the office yesterday. I admit that the Firm’s policy was incorrectly reflected in that email,” Vitaly Klintsov wrote on Saturday.

He added a clarifying statement saying, “McKinsey supports its employees’ rights to participate legally and in a personal capacity in civic and political activities across the countries we operate. The recognition of these rights is unqualified.”

The earlier email sent on Friday and seen by The Moscow Times also said the ban included posts on social media “featuring your political views or your attitude to any action with a political flavor.”

Klintsov’s initial email was met with criticism by current and former staff of McKinsey, according to screenshots of conversations shared with the Moscow Times by employees at the firm. The company also received widespread criticism on Twitter from prominent human rights activists and journalists.

Tens of thousands of people took to the streets across Russia on Saturday in a wave of support for the opposition activist, who remains in jail.

The instructions to McKinsey’s Moscow employees caught the attention of U.S. Republican Senator for Florida Marco Rubio, who said in a statement on his website that the email “raises serious questions about McKinsey’s core values and corporate culture.”

“[I]t strains credulity to believe the managing partner of Russia and CIS incorrectly characterized how McKinsey policy sought to interact with the Putin regime in his original email.” Rubio wrote. “It is no secret that McKinsey maintains close business ties to Russian government agencies and Kremlin-linked companies.”

McKinsey has a long-standing relationship with Kremlin-linked companies, some of which are under Western government sanctions. In 2018, McKinsey was hired by VEB Bank, a bank that is fully owned by the Russian state and under U.S. sanctions. It has also consulted for Russian oil company Russneft.

The consultancy has previously been criticized by human rights activists for working for authoritarian states, including Saudi Arabia, Turkey and China.

In a curious way, history is repeating itself. Stakeholder capitalism is, in essence, an expression of corporatism.

As I noted here:

Corporatism takes many, many forms. It can range from the relatively (relatively) benign — it runs through European Christian Democracy, and it can be detected in early-20th-century American Progressivism — to the infinitely more heavy-handed. It has been an important element in the theory, if not the practice, of some variants of fascism, most notably in Mussolini’s Italy, but not only there.

Corporatism takes as its starting point the idea that society is best run through its leading interest groups, either alongside the ballot box, or, under fascism, in place of it. To fascist ideologues, it was a pathway to a harmonious national community, a “third way” that made redundant the class divisions that could tear a nation apart. Conveniently, this national community could be directed by a single party under, more conveniently still, a single leader.

A key part of the pathway to social harmony was, Mussolini claimed, “social justice” (a phrase, it seems, we are doomed to live with for eternity) and something to which the “selfish individual” will always be an obstacle. Mussolini’s claim is a reminder of the conflicting attitudes toward the individual percolating through corporatism.

Corporatism rests on the assumption that most individuals are unable to protect or assert themselves on their own and so need the support that only the group (and/or the state) can bring if they are to flourish. But (to the extent that it is needed), the proof, however camouflaged, that this is a fundamentally collectivist ideology can be seen in the treatment of the individual who does feel able to strike out on his own, yet finds himself criticized (“selfish”) — or worse — for his effrontery.

And so, stakeholder capitalism comes into view…

But the language of social justice that accompanied fascist corporatism was mostly camouflage designed to conceal the way that power and money were divided up between the state, parastatal, and private-sector entities, with no one else getting much of a look-in, let alone a say.

History doesn’t repeat itself, but it often rhymes (as Mark Twain may or may not have said). Stakeholder capitalism is neither a replay of the benign corporatism of, for example, post-war West Germany, and, nor, despite the way it is increasingly being used to bypass democracy, is it a rerun of corporatism’s fascist incarnation. Nevertheless, let’s just say that to compare McKinsey’s talk with its deeds, at least outside the West (and McKinsey is by no means alone in this) triggers some unsettling comparisons.

And those who think that such games will only ever be played outside the perimeter of our safe, Western democracies have not being paying attention.

Speaking of which, on Monday the World Economic Forum (“Davos”; you can find the, uh, McKinsey guide to what’s going on there here) played virtual host to China’s leader, Xi, who was apparently able to take a break from organizing the genocide of the Uyghurs to use the WEF’s platform to give a moral lecture to the rest of us. On Wednesday, incidentally, the WEF is set to be addressed by none other than Vladimir Putin.

Perhaps it’s unfair to mention that Klaus Schwab, WEF’s founder and executive chairman, has been beating the drum for stakeholder capitalism for decades.

Then again, perhaps it’s not.

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Minimum Wages and Jobs: New Paper Crunches the Numbers

One of the most striking features of the academic debate on minimum wages is that the scope of disagreement extends to characterizations of the literature itself.

Normally, in an active literature, one economist would believe the right answer to a question is X, and another would believe it is Y, but the two would agree on what the body of evidence as a whole has to say on the subject.

Not so with the minimum wage. Some economists believe that the totality of the evidence suggests it reduces employment, while others believe the opposite.

To the rescue ride economists David Neumark and Peter Shirley. From the abstract of their new paper, released Monday:

Summaries [of the research literature on the minimum wage’s effect on employment] range from “it is now well-established that higher minimum wages do not reduce employment,” to “the evidence is very mixed with effects centered on zero so there is no basis for a strong conclusion one way or the other,” to “most evidence points to adverse employment effects.” We explore the question of what conclusions can be drawn from the literature, focusing on the evidence using subnational minimum wage variation within the United States that has dominated the research landscape since the early 1990s. To accomplish this, we assembled the entire set of published studies in this literature and identified the core estimates that support the conclusions from each study, in most cases relying on responses from the researchers who wrote these papers.

Our key conclusions are: (i) there is a clear preponderance of negative estimates in the literature; (ii) this evidence is stronger for teens and young adults as well as the less-educated; (iii) the evidence from studies of directly-affected workers points even more strongly to negative employment effects; and (iv) the evidence from studies of low-wage industries is less one-sided.

(Emphasis mine.)

Michael R. Strain — Michael R. Strain is the director of economic-policy studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute.
 


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The Press and Twitter: A Collective-Action Problem

Megan McArdle thinks that media institutions should put restrictions on how their employees can use Twitter. Those institutions “become hostage to the stupidest or most extreme thing any employees have said in their most thoughtless moments. They also suffer when angry employees turn internal fights over policy into ugly public spectacles.” She concludes that “the big media outlets and the major think tanks should tell their employees to read Twitter all they like, but not to post anything more controversial than baby pictures or recipes for cornbread.”

I think she is right, even though it goes against my interests as an individual. Which gets to a point I think she underplays: Twitter boosts the influence of individual journalists at the expense of their institutions. That’s part of the problem it poses for journalism.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.