Tag Archives: Politics

The Last Fast Food Worker in California

September 7, 2022 tremendousblog 3 Comments

Who will be the last fast food worker in California?

Yesterday, California passed a new law dramatically raising fast food wages.

It sounds like a victory for the working class. But it’s likely to put them out of a job.

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California Governor Gavin Newsom signed the fast food recovery act into law, giving restaurant-chain employees more input over wages and working conditions even after strong protests from the industry.

A study by Harvard Kennedy School and UC San Francisco showed that wages for California’s fast-food workers hover around $16.21 an hour, or 85 cents on the dollar compared with other service sector workers in the state. AB 257 could raise wages as high as $22 an hour next year for chains with 100 or more locations across the US. It’s the first US law of its kind, leading the way for other states.

Let’s see how this will play out at a restaurant. And where better than the oldest McDonald’s in America, in Downey, California?

In business since 1953, the Downey McDonald’s is one of the area’s biggest tourist attractions. And it still serves Big Macs and fries, 7 days a week.

The Downey McDonald’s is open from 6am to 10pm every day. That’s 112 hours a week.

McDonald’s employees in Downey actually do a little better than that $15 minimum wage. They average $16.41 per hour.

Increasing that to $22 means every employee-hour costs $5.59 more. Staffing the restaurant for those 112 hours now costs $128,000 per person per year, instead of $96,000.

Instead of paying that, restaurant owners may hire Flippy.

Flippy is a robot from Miso Robotics that runs an entire fry station. It can make french fries, onion rings, and even chicken tenders.

It costs about $36,000 a year. And unlike humans, it never comes in late, gets sick, or tries to unionize.

Flippy can’t do all the jobs in a McDonald’s — yet. But in combination with order kiosks and automated drive through lanes, there may soon be few fast food jobs left.

Is all this fair? I don’t know.

But it’s going to happen. And blunt instruments like this law only bring our robot future closer.

Instead, politicians like Gavin Newsom should focus on helping working class people get more skills. This is a durable path to better wages and a better life.

I hope for a future where humans do stimulating, meaningful work. Let Flippy handle the rest.

What do you think of the California law? Leave a comment at the bottom and let me know!

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Business

New Law Could Put Big Short Sellers on the Endangered Species List

July 5, 2022 tremendousblog 6 Comments

A new law introduced in Congress could mean the end of some major short sellers. According to a report that broke this morning on TheStreet, the law would require disclosure of short positions by large investors.

Today, big investors like hedge funds have to disclose the stocks they own quarterly. But they can keep secret any short position they have, no matter how large.

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If the bill passes, those days are over. From TheStreet:

The Short Sale Transparency and Market Fairness Act will modify the reporting requirements applicable to certain institutional investment managers who have more than $100 million in assets under custody and who are required to file ownership reports with the SEC. Key modifications include:

1 Reducing the reporting window from 45 days to 10 days after the end of each month for such asset managers.
2 Expanding such reports to require reporting of direct or indirect derivative positions or interests (including short positions).

This could make it dangerous for hedge funds to heavily short a stock. Soon, everyone would know about their position.

That means other hedge funds could buy the same stock to engineer a short squeeze. They may be joined by retail investors, as was the case in shares of GameStop Corp. and AMC Entertainment Holdings Inc. last year.

A short squeeze can cause catastrophic losses for a hedge fund, as in the case of Melvin Capital.

The new law could also make naked short selling more difficult. This generally illegal practice involves selling short shares without borrowing them first.

I’ve long suspected naked shorting in shares of meme stocks like AMC and GameStop, along with many other investors.

But what if regulators or the public could count up the amount of short positions out there? If big investors have far more shares short than exist, it would be strong evidence of naked short selling.

In all, I think this bill would be a very positive change for markets. If investors have a right to know about long positions held by big institutions, why not short positions?

What’s more, in a future financial crisis, knowing who shorted what could be critical. A huge short position that blows up could push an institution to insolvency, perhaps dragging others with it.

We don’t know yet whether the bill will pass or what final form it might take. But here’s hoping Congress acts to make markets safer, fairer, and more transparent.

What do you think about the new bill? Leave a comment at the bottom and let me know!

More on markets:

AMC Fails to Deliver Pass 2.6 Million in New Report

Hedge Fund Tiger Global Losing $136 Million a Day, Down 52%

$6B Hedge Fund Cut Off from Trading As Investigation Looms

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Business

Shadowy Hedge Fund Cash Bankrolls Fight Against Regulation

June 22, 2022 tremendousblog 1 Comment

Hedge funds are going all out to stop the SEC from implementing new disclosure rules. Now they have some help from an academic group whose finances are shrouded in secrecy.

From a report that broke yesterday in Institutional Investor:

…hedge funds aren’t fighting the SEC alone: A new organization, which Institutional Investor has learned has at least one hedge fund backer, has enlisted dozens of academics to argue against the proposals, creating something of a firestorm of criticism.
Wonky academic comments on proposed SEC rule changes typically fly under the radar. But [UC Berkeley law and finance professor Frank] Partnoy made them his mission. Now his work — in comment letters signed by himself, [Robert] Bishop, and other academics — is taking some heat. In part, that’s because the financing of his institute, which pays Partnoy and Bishop for their letter writing, has been shrouded in secrecy.

The International Institute of Law and Finance refuses to disclose its backers. But at least one major hedge fund manager, Bill Ackman of Pershing Square Capital Management, is bankrolling the effort per Institutional Investor.

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Even the group’s chairman is a hedge fund employee:

The chairman of the institute’s board is Stephen Fraidin, a corporate attorney and partner at Cadwalader who has also long worked for Pershing Square.

Given the institute’s lack of financial disclosures, we can only guess who else may be backing its efforts. But we do know that numerous hedge funds, including Citadel, have met with the SEC to oppose new regulations.

So what exactly are these regulations that hedge funds and their friends in academia so passionately oppose?

One requires investors who buy over 5% of a company’s stock to disclose the position sooner. Another requires similar disclosure if the 5% position is in swaps.

Swaps can be used to hide both long and short positions in a stock. They can also lead to sudden, massive losses, as was the case with Archegos Capital Management last year.

Other shareholders should know when the stock they hold is being accumulated by a major investor. Employees too need to know about ownership changes that can affect their livelihood.

Better disclosures could even prevent another financial crisis. If banks know about a fund’s huge swaps positions, they may be unwilling to extend it more credit, which could prevent a huge hedge fund or bank failure.

But just because regulations are good for society as a whole doesn’t mean hedge funds won’t fight them with everything they’ve got. And since the message isn’t that persuasive coming from them, why not pay a few academics to deliver it for them?

Hedge funds are also finding some unlikely allies in Washington, including a Congressman with ties to hedge fund Elliott Management:

Rep. Ritchie Torres, a Democrat from New York’s South Bronx — one of the poorest districts in the nation — whose top donors include Elliott, has been circulating the letter [opposing regulation], according to an individual familiar with the effort. (Torres, whom OpenSecrets says is a top recipient of hedge fund cash in the current election cycle, did not return multiple requests for comment, nor did Elliott.)

Is hedge fund regulation really a top priority of Torres’ constituents in the South Bronx?

Big money has long since poisoned politics and now is doing the same with academia. We, as citizens and investors, need to stop fooling ourselves about who these institutions really represent.

Who else do you think is behind the fight against hedge fund regulations? Leave a comment at the bottom and let me know!

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Business

Why High Oil Prices May Not Matter for Stocks

March 10, 2022 tremendousblog Leave a comment

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You don’t need me to tell you that oil and gas prices are through the roof these days.

Gas stations are changing numbers faster than slot machines. And the explosion in prices is sowing fear in the stock market.

But I think this huge spike in oil prices won’t matter much for stocks in the long term.

Looking at some historical data today, I noticed that big advances in oil prices are actually associated with above average returns for stocks.

Let’s look back at some major oil price spikes and see what happened to stocks.

A Trip Down Memory Lane

Our first stop takes us back to the late nineties. That was the last time I saw gas under a dollar!

Indeed, oil was a mere $12.36 a barrel in February of 1999. Just one year later, it had shot up to $28.28, a 128% increase.

Surely a stock market crash was next, right?

Wrong. Stocks increased 11% that year, an above average return.

Our next stop takes us to the depths of the financial crisis. At the beginning of 2009, oil traded for $46.17.

By April of 2011, the price had jumped to $107.55, an advance of 133%.

Market meltdown? Hardly.

Stocks surged 48% as the economy rose again from the ashes.

Why would stocks go up even as oil, a major cost center, rises?

Both are responding to an improving economy. Stronger economic growth means better prospects for companies, raising stock prices.

A stronger economy also means more demand for oil as families go on vacations again and buy bigger and shinier SUV’s. That increases oil prices.

Indeed, you’ll notice that during periods of increasing oil prices, economic growth also increased rapidly:

What About Today?

In April 2020, oil prices stood at just $20.28 a barrel, the lowest in over 20 years. Today, West Texas Intermediate oil has increased to $119.26 a barrel, a staggering 488%.

Sure enough, a similarly massive upshift in economic growth happened during that time. US GDP went from falling 31% year over year to growing 34% year over year, as lockdowns were implemented and then lifted.

Since lockdowns began to ease in later 2020, economic growth has remained strong, routinely clocking around 7%.

That roller coaster for growth resulted in a roller coaster for oil prices as well. We shouldn’t be unduly alarmed that oil is recovering along with the economy as a whole.

While geopolitical events have contributed to higher prices this year, you’ll note that most of the increase in oil prices happened well before Russia’s invasion of Ukraine.

High prices or no, I’ll be holding my stocks.

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COVID

The UK Has Killed COVID, and the US Is Close Behind

March 8, 2021 tremendousblog Leave a comment

The UK has vaccinated faster than almost anywhere on earth:

And it’s working! Cases have fallen off a cliff, dropping by almost 90% in just two months:

The US is actually not far behind the UK in vaccinations per person anymore, although we were significantly behind until recently. And we are actually putting out more doses per capita than the UK at the moment. So, this gives us an idea of what we have to look forward to. If anything, our results should be even better because a more contagious variant is more widespread in the UK than here.

Indeed, we’ve seen cases fall by 2/3rds over the same period:

To me, this seems like an incredibly powerful endorsement of Brexit and the Johnson government, neither of which I ever thought I’d favor! But the rollout in the EU has been pathetic. Meanwhile, as an American, I’ve been looking upon the UK with envy.

Bottom line: the vaccines really are working, and we have an amazing summer to look forward to!

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Business, COVID

Europe Is Falling Behind the US, and It’s Going to Get Worse

March 4, 2021 tremendousblog Leave a comment

A huge untold story of the world today is how far Europe has fallen behind the US economically in recent decades:

Here are the 2019 numbers (in 2019 dollars, again World Bank) US: $65,297. UK $42,330. That’s 35% less than the US. Or, the US is 54% better off than the UK.. France: $40,494. Italy: $33,228 That’s 50% less than US. Or the US is 96% better off than Italy. China: $20,261.
And it’s been getting steadily worse. France got almost to the US level in 1980. And then slowly slipped behind. The UK seems to be doing ok, but in fact has lost 5 percentage points since the early 2000s peak. And Italy… Once noticeably better off than the UK, and contending with France, Italy’s GDP per capita is now lower than it was in 2000.

More here.

So why is this happening? Regulation and lack of investment in IT in the services sector are chief suspects.

I definitely noticed this difference when I went to Paris for the first time in the fall of 2019. I was expecting a gleaming city, but I was surprised at the poverty I saw. There were panhandlers at the airport, which I’ve never seen in the US, and a lot of crumbling buildings and down-and-out people. It was rather sad. However, I enjoyed my time there a great deal, and would recommend their delicious food and superb art highly.

With the vaccine rollout in Europe going far more slowly than in the US, I think they will fall much further behind, and quickly. Other parts of the world will be wide open while they’re still locked down.

On the bright side, this could provide a great opportunity for the UK to catch up, since it has outpaced the US, China and almost every other country worldwide on vaccines. Their speed and innovative policies, like delaying second doses of vaccines, have impressed me a great deal.

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Tremendous

Tag Archives: Politics

The Last Fast Food Worker in California

New Law Could Put Big Short Sellers on the Endangered Species List

Shadowy Hedge Fund Cash Bankrolls Fight Against Regulation

Why High Oil Prices May Not Matter for Stocks

The UK Has Killed COVID, and the US Is Close Behind

Europe Is Falling Behind the US, and It’s Going to Get Worse

An angel investor's take on life and business