Andy Kessler: Wall Street Meat : My Narrow Escape from the Stock Market Grinder
My first book. Stories of working as a Wall Street analyst with Jack Grubman, Frank Quattrone, Mary Meeker, and Henry Blodget
Andy Kessler: Running Money : Hedge Fund Honchos, Monster Markets and My Hunt for the Big Score
New York Times Bestseller Barron's Best Business Books 2004
Andy Kessler: How We Got Here : A Slightly Irreverent History of Technology and Markets
Connect the dots from the Industrial Revolution to the Computer and Communications business of today.
Andy Kessler: The End of Medicine: How Silicon Valley (and Naked Mice) Will Reboot Your Doctor
Can we get medicine on the same ever-lowering price curves as technology. Funny stories of my quest to figure out where silicon will change medicine.
Posted on September 20, 2013 | Permalink
Hedge funders are in the news. Carl Icahn tweets about his dinner with Apple's Tim Cook. Dan Loeb tussles with George Clooney. Bill Ackman says Herbalife is a pyramid and shorts the stock; George Soros goes long. If you want to understand the guys who run hedge funds, you first have to realize that they—we—are a little nuts.
The trick to running a hedge fund is to drink from the fire hose of information, take it all in, figure out what everyone else knows and then position your portfolio to benefit when everyone else is inevitably wrong. This is no simple feat. Sleepless nights, second guessing, minds racing, almost a split personality working out both sides of all arguments.
You force yourself to think like a contrarian. Actually, you become like George Costanza in the "Opposite" episode, listening when Jerry Seinfeld suggests "if every instinct you have is wrong, then the opposite would have to be right."
Famed investor Julian Robertson climbed mountains because, I'm convinced, at the summit, when the air is thinnest, you become euphoric. Great hedge funders bottle that feeling—because once you invest, you're at the whim of markets that no one can forecast day to day. You are floating, drifting—your gut knows you're right but you tumble violently until the market catches up with your way of thinking. Stay sane? No gain.
Is technology to blame for our stubborn unemployment? President Obama scored ATMs and airport kiosks in a 2011 "Today Show" interview, blaming them for "structural issues with our economy." Other technophobes have piled on. Former Labor Secretary Robert Reich wondered late last year: "What if we're stuck at a new normal of high unemployment and low job growth? It's possible because technology might just have gotten the best of us." In March, Salon.com declared "Your iPhone kills jobs." And in May, the Economist suggested "technology may destroy more jobs than it creates."
The road to wealth does indeed pass through the graveyard of today's jobs. But history shows that better, higher paying jobs are always created by technology—even if no one seems to remember this during periods of creative destruction.
The trick is to lower the cost of new machines and inventions that can do things never before possible, making them available for wide use. Here are a few recent examples that could be economic game-changers and job-creators:
• Three-dimensional printing. By now, you've probably heard of 3-D printers, the gadget du jour for geeks that creates objects from computer models, building them layer by layer. Right now, they are priced between $1,000 and $10,000, with the most expensive version able to print multiple materials.
Ah, the state of discourse today. Over the course of a few hours, after Gen-G piece ran in the WSJ, http://t.co/nUFlREvRAz, I’ve been called:
sociopathic scum (http://bit.ly/16nNudA),
a cold-hearted inhumane sadistic fiend,
pure evil and greed,
one man Spanish Inquisition,
sad human being,
belongs in a cage,
low life simpleton,
tax this idiot,
a curmudgeon...you sad, sad little man,
well-supplied with arrogance, privilege, and douchebaggery,
self important self aggrandizing self promoting selfishness,
a greedy selfish piece of filth,
a few threats of physical harm (Someone needs to pop that guy in the mouth. Hard. Repeatedly. At least he raised a conscientious son,)
but finally (whew) not a total dungheap.
So at least I’ve got that going for me.
Passing through the San Francisco airport recently, I ran into a couple I know who were waiting to pick up their teenage children. "Coming back from camp?" I asked.
They responded with a gaze that could curdle milk into yogurt. Their kids were coming back "from their service trip to Guatemala," their mother informed me. "It was a wonderful volunteer experience, they really are improving lives." Gee, and I thought my kid was doing well by working at Jamba Juice this summer.
A little digging turned up some information about these service trips. One is called the Global Leadership Adventure: Children of the Maya. "Volunteer at a Maya school, attend a ceremony with a Maya shaman," the website reads. You'll receive 30 hours of community-service credit—also known as college-application fodder—for only $2,999. For $200 more, head to Ghana for two weeks to "improve local health and living conditions, live just steps away from the beach." What about investing the same $2,999 in Guatemalan entrepreneurs? Fat chance. Volun-tourism is charity for the giver.
I understand that overbearing parents encourage their children toward such do-good interludes, hoping that it will get them into Brown, but why does this generation go along with it? My take: Because they have it all. The baby-boom generation gave way to the slacker Gen-Xers, followed by Gen-Y and now we've moved up the alphabet to Gen-G—for Guilty.
So many young adults today really do have everything: GPS smart phones so they're never lost and Facebook so they're never bored. Macrobiotic yogurt, photorealistic computer-generated movies and shelves filled with participation trophies. Gen-G has not yet contributed anything but still feasts from the cornucopia of technology plenty.
Instead, these young people "serve."
Posted on July 09, 2013 | Permalink
Anyone who cares about America's shortage of computer-science experts should cheer the recent news out of Georgia Tech. The Atlanta university is making major waves in business and higher education with its May 14 announcement that the college will offer the first online master's degree in computer science—and that the degree can be had for a quarter of the cost of a typical on-campus degree. Many other universities are experimenting with open online courses, or MOOCs, but Georgia Tech's move raises the bar significantly by offering full credit in a graduate program.
It comes just in time. A shortfall of computer-science graduates is a constant refrain in Silicon Valley, and by 2020 some one million high-tech job openings will remain unfilled, according to the Commerce Department.
That's why Georgia Tech's online degree, powered by Udacity, is such a game-changer. For the same $7,000 a year that New York City spends per student on school buses, you can now get a master's from one of the most well-respected programs in the country. Moore's Law says these fees should drop to $1,000 by 2020—a boon for students and for the economy.
Sadly, MOOCs are not without controversy. Consider what happened at San Jose State after the university last fall ran a test course in electrical engineering paid for by the Bill and Melinda Gates Foundation. Students who worked with online content passed at a higher rate than classroom-only students, 91% to 60%. The course was so successful that the school's president decided to expand online courses, including humanities, which will also be rolled out to other California State universities.
You'd think professors would welcome these positive changes for students. Some teachers across the country are, however cautiously, embracing the MOOC model. But plenty of professors smell a threat to their livelihood. In an April 29 open letter to the university, San Jose State philosophy professors wrote: "Let's not kid ourselves; administrators at the CSU are beginning a process of replacing faculty with cheap online education."
In April, an Amherst faculty committee decided against online courses, since they apparently run afoul of the school's mission of "learning through close colloquy." As it happens, Amherst professors rank seventh in salary of top liberal arts colleges, pulling in $137,700.
A terrific comment on repos from this Zero Hedge piece:
Fred lends Bill his car to go to the grocery store. On the way Bill stops off at Pay-Day Loans and borrows $1,000 using Fred's car as collateral. Pay-Day sells the loan to GS who uses the money in Fred's account to buy the loan.
A week later Bill gets killed by a crack dealer, the loan never gets repaid, Fred's car is seized and his account at GS is Corzined. Pay-Day and GS get a .gov bailout, Fred's car is sold at auction, and Fred's account at GS is vaporized as an unintended consequence without malice which makes it OK. Pay-Day and GS make generous donations to political parties. The Fed prints some extra money to cover the costs of the transactions and makes it part of the public debt. The tax payers are screwed, the lenders are made whole and Fred has no wheels, is broke, goes on food stamps and disability.
Or did I miss something?
Here is the great economic paradox of our time: Despite the Federal Reserve's vast, 4½-year program of quantitative easing, the economy is still weak, with unemployment still high and labor-force participation down. And with all the money pumped into the economy, why is there no runaway inflation?
Federal Reserve Chairman Ben Bernanke told
Congress on Wednesday, that "We are pushing real hard at this point but
there are a lot of headwinds." But the usual excuses—commercial banks not
lending, not enough government spending, weak retail sales, Europe in
disarray—are straw men. The Fed has even discussed an exit strategy from its
asset purchases, but without ever explaining why its buying spree led to so
little economic growth.
The explanation lies in the distortion that Federal Reserve policy has inflicted on something most Americans have never heard of: "repos," or repurchase agreements, which are part of the equally mysterious but vital "shadow banking system."
The way money and credit are created in the economy has changed over the past 30 years. Throw away your textbook.
It has been said that an actuary is someone who really wanted to be an accountant but didn't have the personality for it. See who's laughing now. Things are starting to get very interesting, actuarially-speaking.
Federal bankruptcy judge Christopher Klein ruled on April 1 that Stockton, Calif., can file for bankruptcy via Chapter 9 (Chapter 11's ugly cousin). The ruling may start the actuarial dominoes falling across the country, because Stockton's predicament stems from financial assumptions that are hardly restricted to one improvident California municipality.
Stockton may expose the little-known but biggest lie in global finance: pension funds' expected rate of return. It turns out that the California Public Employees' Retirement System, or Calpers, is Stockton's largest creditor and is owed some $900 million. But in the likelihood that U.S. bankruptcy law trumps California pension law, Calpers might not ever be fully repaid.
So what? Calpers has $255 billion in assets to cover present and future pension obligations for its 1.6 million members. Yes, but . . . in March, Calpers Chief Actuary Alan Milligan published a report suggesting that various state employee and school pension funds are only 62%-68% funded 10 years out and only 79%-86% funded 30 years out. Mr. Milligan then proposed—and Calpers approved—raising state employer contributions to the pension fund by 50% over the next six years to return to full funding. That is money these towns and school systems don't really have. Even with the fee raise, the goal of being fully funded is wishful thinking.
Posted on April 10, 2013 | Permalink
Last month 11 scientists were awarded $3 million each as winners of the first annual Breakthrough Prize in Life Sciences. The awards—funded by Google's Sergey Brin and his wife, Anne Wojcicki, Facebook’s Mark Zuckerberg and his wife Priscilla Chan, and Russian investor Yuri Milner—are intended to recognize "excellence in research aimed at curing intractable diseases and extending human life" and to "enhance medical innovation."
This type of prize is commendable, its generosity admirable. But it prompts a question: Will such a prize actually spur innovation or do anything to help society? Or will it be like those given to MacArthur Fellows, who receive $500,000 over five years? Last year the MacArthur winners included a marine ecologist and a stringed-instrument bow maker – in other words, those that are good at giving TED talks. Good for the winners, good for those giving out the money. For the rest of us? Not so much.