Uncle Joe is finally best at something!
With a net negative approval rating of -13 percent in the 538 polling average, he is the MOST unpopular President ever recorded at this point in his term. Worse than Trump, Carter, Ford, or anyone else since modern polling began.
SOURCE
This feat is particularly impressive because when Biden took office 16 short months ago he was at +20 net, far better than Trump. He is losing two points a month, every month. By 2024 imagine where he’ll be.
Meanwhile, actual photo of the 2022 Congressional election:
The worst part is that the only Democrats left will be from ultra-safe seats and thus are likely to skew even harder left, which makes me fear the Dems will learn entirely the wrong lessons (and the Republicans may too, if they see this as anything other than a referendum on Uncle Joe).
Let’s just hope the GOP focuses less on score-settling and more on making sure the Bill of Rights hasn’t been entirely trashed by the end of Uncle Joe’s one and only term.

Uncle Joe is finally best at something! With a net negative approval rating of -13 percent in the 538 polling average, he is the MOST unpopular &#8230;

Yay Joe Biden!

"The Typhoid Mary of Disinformation": Nicolle Wallace. Nobody Spreads it More Relentlessly.
From her days as Bush/Cheney propagandist, to her stint on The View, to her role as beloved-by-Democrats MSNBC host, Wallace has perfected the art of sociopathic lying. Watch our original video.
The most blatant and shameless liars from the first term of the Bush/Cheney administration have, revealingly, enjoyed great success in media and journalism. That is because serial deceit is not a liability for a thriving career in corporate journalism but rather a vital asset — provided that the lies are in service of ruling class policies. Tawdry propagandists who helped drive post-9/11 America into a bottomless pit of lies and self-destruction have become the most highly-paid and beloved stars of liberal media. They include:
Former Bush White House speechwriter David Frum of The Atlantic and CNN;
Bush/Cheney CIA and NSA Director Gen. Michael Hayden of CNN;
Ubiquitous amoral neocon warmonger Bill Kristol of MSNBC and various #NeverTrump groups;
Al-Qaeda/Saddam conspiracy theorist Jeffrey Goldberg, now editor-in-chief of The Atlantic;
The various scumbags, con artists, predator-protectors and fraudsters of the Lincoln Project, drowning in #Resistance cash and frequent MSNBC appearances;
Pro-war Florida GOP Congressman Joe Scarborough, now a multi-million host of MSNBC's flagship morning show and anchor of its corporate brand; and,
Rep. Liz Cheney, long-time vocal supporter of her father and now a literal "hero” to American media liberals.
But few Bush-era propagandists have thrived more, made more money, and developed a more devoted and swooning liberal fan base than the official Communications Director of the Bush/Cheney White House and 2004 Bush/Cheney-reelection campaign, Nicolle Wallace. Having catapulted from her work as Jeb Bush's Press Secretary to the White House to senior adviser to John McCain's presidential campaign (working for her close friend, Lincoln Project co-founder Steve Schmidt, who recently performed one of the most public and sustained nervous breakdowns in the history of the internet), Wallace was always beloved by the DC press corps.
In 2005, when she was named Bush White House Communications Director, The New York Times lavished her with praise, claiming that she “comes from a different mold than the small band of Texans who carry out the White House press policy” and admiringly noted that “she was once fired for being too nice to reporters.” She endeared herself further to corporate journalists by repeatedly sabotaging the McCain campaign from which she was collecting a paycheck, leaking negative stories about McCain and his running mate, Alaska Gov. Sarah Palin (whose selection as Vice Presidential candidate was driven primarily by liberal icons Bill Kristol and Steve Schmidt).
As Wallace — seeing the media's love affair with Obama — began shrewdly repositioning herself as a liberal, she claimed in 2010 that she did not even vote for McCain due to her misgivings about Palin (a claim which Schmidt repeated about himself for the first time last week during his multi-day psychological erosion). When Wallace published a self-glorifying novel about the first female chief of staff (modeled after herself) to the first female president in 2011, liberal corporate journalists including MSNBC's Rachel Maddow gushed over it, while The New York Times’ reporter Ashley Parker, now of The Washington Post, heralded her as “the tough, savvy and hard-charging conservative political operator” who enjoys a close friendship with CNN's Dana Bash.
So beloved was Wallace by the corporate press that she was rewarded in 2014 with a highly lucrative contract to be a co-host on ABC's The View. She then joined NBC News. Quickly adapting to her new role as a Republican who vehemently despised Donald Trump — easily the most lucrative Trump-era archetype —- MSNBC bestowed her with her own afternoon cable show in 2017. She quickly became one of Democratic viewers' most popular hosts — constantly giving a platform to Schmidt and other Lincoln Project sleaze merchants as part of the #NeverTrump gang, a faction so beloved by corporate media employees that they filled cable green rooms and newspaper op-ed pages while having little to no representation among the actual voting populace. Liberals love Wallace so much that she was given a second hour to host in 2020.
But lurking beneath her perky smile, multi-million-dollar media contracts, gushing liberal fan base and a long list of media admirers is something extremely dark and pernicious. In a swamp of professional liars and sleaze merchants, Nicolle Wallace has distinguished herself easily as one of the most seamless and casual liars in the world of Washington politics and media. She thrived in the Bush/Cheney administration precisely because she was so adept at selling the White House's deadly lies to liberal corporate media employees, dressing up those lies in a pleasing-to-liberals packaging that she learned from growing up in a affluent town near San Francisco, and then at Berkeley and Northwestern's School of Journalism. She was the vintage conservative who liberals could love — a smiling sophisticate, someone willing to betray her GOP employers to impress liberal journalists, an amicable young woman touting degrees from the types of schools that impress coastal media elites — and it was virtually inevitable that she would thrive within media corporations that need women who can credibly claim to be conservatives yet appeal to liberal sensibilities and flatter liberal audiences.
Wallace has employed those personality traits in service of the most toxic and insidious of all tasks: a happy, relentless purveyor of official disinformation. When the CIA wants the American public contaminated with its lies and disinformation, Nicolle Wallace's lips begin moving. She delivers the anonymous disinformation campaigns of the U.S. security state with a tone of empathy, compassion, and liberal elegance, all in the language and with the affectations which affluent liberals most admire.
She has an unsurpassed ability to broadcast to audiences outright lies whispered to her by Deep State operatives — one after the next — without flinching or betraying the slightest sense of a conscience or moral compass. She lies like only a sociopath can: exuding charm and warmth yet utterly vacant on the inside, except for a soul festering in rot. Over the last twenty years — from her perches at the White House, on The View, and now at MSNBC — nobody has made liberals eat up Pentagon and neocon war propaganda more eagerly and uncritically than Nicolle Wallace.
There is literally not a single liberal/CIA disinformation campaign over the last six years that she did not fully and uncritically embrace. Each time the U.S. Security State and Democratic Party fabricated blatant lies and embarked on injecting their poisonous brew into the American bloodstream, Nicolle Wallace was at the forefront. Using the skills she harnessed to help lead Americans into one of its most destructive and immoral wars in U.S. history — the invasion and 15-year destruction of Iraq — the former Bush/Cheney shill, now a DNC and CIA shill, has played a starring role in virtually every lie American liberals have been led to believe.
Because Wallace is primarily a video performer — she rarely writes or speaks extemporaneously, instead clinging loyally to talking points and teleprompter scripts — video is the only medium that can really convey the full extent of her brazen contempt for the truth. After we began compiling many of the examples of Wallace's leading role in spreading official disinformation, we asked Matt Orfalea — who came to prominence as a young videographer for the 2016 Sanders campaign and who has since become a much more heterodox voice on his Rumble page, which he began after repeatedly being censored by YouTube — to produce a video with the goal of viscerally conveying who Nicolle Wallace really is and the dark arts on which she relies for her careerist and ideological project.
Orfalea is an artist: a highly creative and unorthodox videographer. The videos he produced for journalist Matt Taibbi regarding the media's disinformation orgy about the Kyle Rittenhouse trial and its even more deceitful effort to lie to the public about the materials on Hunter Biden's laptop are two of the best political videos I have seen in years. The video he produced for us on Nicolle Wallace — the Typhoid Mary of Disinformation — is, in my view, at least of the same quality. The tone and tenor of this video are obviously quite different from those we typically employ to do our reporting here, but the video so perfectly conveys who Wallace is, and how she spews and disseminates disinformation, that I am very proud to present it and eager for you to watch it.
The free trailer, available to all, is below. The full mini-documentary, for subscribers only, follows after that. Above all else, it demonstrates the key point about this new discourse about “disinformation.” Those who most flamboyantly warn of the dangers of disinformation and seek to censor the internet in the name of fighting it are, (through such tactics as the defunct-for-now Homeland Security Disinformation Board) in fact, the most aggressive and destructive purveyors of disinformation in the world.
The trailer for "The Typhoid Mary of Disinformation”:
Correction, May 19, 2022, 7:57 pm ET: This article was edited shortly after publication to reflect that Wallace grew up in an affluent town near San Francisco, not, as originally indicated, in Orange County where she was born.

From her days as Bush/Cheney propagandist, to her stint on The View, to her role as beloved-by-Democrats MSNBC host, Wallace has perfected the art of sociopathic lying. Watch our original video.

"The Typhoid Mary of Disinformation": Nicolle Wallace. Nobody Spreads it More Relentlessly.

Unvaccinated people are much more likely to develop broad antibody immunity after Covid infections than people who have received mRNA shots, a new study shows.
The gap remains large whether people had mild, moderate, or severe Covid infections, the study showed - undercutting a crucial argument that vaccine advocates have made to defend the shots.
The research draws on data from Moderna’s 30,000-person clinical trial for its mRNA shots. It may help explain why so many Americans now suffer multiple Covid infections, sometimes within months.
Researchers already knew that many vaccinated people do not gain antibodies to the entire coronavirus after they are infected with Covid.
Unvaccinated people nearly always gain antibodies to the nucleocapsid protein, which covers the virus’s core of RNA, as well as its spike protein, which allows the virus to attack our cells. Vaccinated people often lack those anti-nucleocapsid antibodies and only have spike protein antibodies.
—
Vaccine advocates claim the lack of nucleocapsid antibodies may occur because the mRNA shots prime people to fight off the Covid infections more quickly and have lower viral loads. In this view, the narrow immune response is a feature, not a bug - vaccinated people are less seriously infected and so do not need to generate anti-nucleocapsid antibodies.
This study essentially demolishes that theory.
Scientists from the National Institutes of Health and Moderna quietly posted the paper a month ago as a pre-print, but it has received little attention despite its import.
The researchers examined the development of anti-nucleocapsid antibodies in people who had been part of Moderna’s clinical trial and were infected with Covid. As they expected, the scientists found that the vaccinated people were far less likely to develop the anti-nucleocapsid antibodies. Only 40 percent of people who received the shots had antibodies, compared to 93 percent of those who did not.
But they then went a step further. Because the infected people had been in the trial, their viral loads had been precisely measured when they were found to have Covid. So the researchers were able to compare vaccinated and unvaccinated people who had the same amounts of virus in their blood.
Once again, they found that unvaccinated people were far more likely to develop anti-nucleocapsid antibodies than the jabbed. An unvaccinated person with a mild infection had a 71 percent chance of mounting an immune response that included those antibodies. A vaccinated person had about a 15 percent chance.
Only in cases of severe infection and very high viral loads did the difference narrow significantly; in those cases all unvaccinated people and most of the vaccinated had anti-nucleocapsid antibodies.
The chart that should worry the vaccinated: the yellow line shows the odds that an unvaccinated person will develop anti-nucleocapsid antibodies to Sars-Cov-2, stratified by viral load. The blue line shows the same odds for a person who received an mRNA shot.
An unvaccinated person has an almost 60 percent chance of developing antibodies even with an extremely mild infection; a vaccinated person needs almost 100,000 times as much virus in his blood to have the same chance.
SOURCE
The researchers also tried to correlate the development of anti-nucleocapsid antibodies with viral load over time. Theoretically, if vaccinated people cleared the virus more quickly, they might have fewer antibodies - another version of the “it’s-a-feature-not-a-bug” defense. But they found the opposite - again, vaccination status and not the duration of infection was what mattered.
The “likely explanation is a vaccine-induced reduction in seroconversion [the production of antibodies],” the researchers wrote.
—
The study all-but-proves the mRNA shots themselves — and not whatever reduction in viral loads they may cause — are impeding the development of the anti-nucleocapsid antibodies.
Still, the long-term immunological and medical significance of the lack of those antibodies is less clear. The reason that drugmakers targeted the spike protein rather than the nucleocapsid in the first place is that Sars-Cov-2 depends on its spike for its crucial initial attack on the exterior of human cells. It exposes the nucleocapsid protein only after it has dumped its mRNA inside the cell itself.
Yet there is some evidence that antibodies to the nucleocapsid play an important role later in our immune response.
And the coronavirus’s spike protein mutates rapidly, potentially rendering antibodies it against useless. For example, Omicron’s spike is markedly different than that of earlier variants. The nucleocapsid protein mutates far more slowly, offering a potential second line of defense.
Answering these questions and figuring out what if any harm the lack of anti-nucleocapsid antibodies may cause will require a concerted research effort. But it is precisely this kind of work - work that might reveal long-term damage from the vaccines - that government and academic scientists are studiously avoiding.
In the meantime, expect lots more stories like this:
And expect those articles to avoid the most important question of all - whether unvaccinated people are being reinfected, or only the vaccinated.

A bombshell study - from the National Institutes of Health and Moderna, no less - should end debate

URGENT: The most powerful evidence yet that mRNA vaccines hurt long-term immunity to Covid after infection

From crime and homelessness to energy and water shortages, everyone can see that California is in a crisis of chaos. Governor Gavin Newsom says it’s not his fault. In December, after a talk show host complained about rising crime, Newsom pointed to the fact that there are 470 cities in California. Last Tuesday, Newsom called the Coastal Commission’s vote against a desalination plant a “mistake.” And on Thursday, Newsom blamed “NIMBYism” for the worsening homelessness crisis.
In other words, Newsom has effectively admitted that he can’t govern California. And he has done so not once but repeatedly throughout his time in office.
In January, after videos of widespread looting and garbage at the Union Pacific train depot in Los Angeles went viral, Newsom staged a photo op at the site, where he helped clean up the mess. “I see what everybody’s seeing,” he said, “and I’m asking myself, ‘What the hell is going on?’”
The event was widely ridiculed. A satirical news site spoofed the event with an article headlined, “Gavin Newsom Demands Answers from Whoever’s in Charge of California.”
Newsom’s not wrong that he faces obstacles to governing. It’s a problem that voters in San Francisco and Los Angeles elected District Attorneys who don’t prosecute drug dealers, and city council members who demand the police stop enforcing anti-camping laws. It’s a problem that the California Coastal Commission is dominated by anti-growth, pro-scarcity activists. And it’s a problem that NIMBYs block new building of all kind, from homes to apartments to shelters.
But nobody has had more influence over California’s policies, from crime and homelessness to energy and water, than Newsom, and nobody has more power in California than the governor.
As mayor of San Francisco in the early 2000s, Newsom diverted funding from homeless shelters to homeless housing, resulting in a shortage of shelters first in San Francisco and then, over time, statewide. As a result, homelessness increased 31% in California even as it declined 18% in the rest of the US, over the last decade.
As mayor, lieutenant governor, and governor, Newsom championed the policies that resulted in rising crime, including radical decriminalization of drugs and shoplifting and the release of prisoners before they have been adequately rehabilitated. And in his latest budget proposal, Newsom proposed closing three prisons, not just two, and releasing 76,000 prisoners early, including 63,000 who were convicted of violent crimes, without any plan to properly rehabilitate them, first.
And not only did Newsom’s own appointees to the Coastal Commission vote against the proposed desalination plant, the governor has extraordinary influence over the other Commissioners who were appointed by the Senate Rules Committee, which is controlled by Democrats, and the Speaker of the Assembly, an ally of Newsom’s.
Newsom has extraordinary powers and hasn’t hesitated to use them in the past. During covid, when the teachers union demanded that he keep our children out of school for the entire 2020-2021 school year, he did so, even though European nations sent children back into classrooms in the fall of 2020, and even though Newsom’s own children received in-classroom instruction in private school.
And when Newsom wanted the California Public Utilities Commission to give Pacific Gas & Electric, which had donated hundreds of thousands of dollars to his campaign, and to his wife’s nonprofit, a “safety certificate,” he made sure it did, over-riding the objections of its staff. “I did not want to sign this,” said former Commission director Alice Stebbins. “The bottom line is I was told to sign it. You will sign this. Period. “I trusted my Governor.”
Newsom could declare a state of emergency on the homelessness crisis, create a statewide psychiatric and addiction care system, and build the shelters, drug detox centers, and other facilities California desperately needs. And Newsom could declare a state of emergency on energy and water to build the plants required to prevent deaths from blackouts and water shortages that could cripple the state.
But he won’t, and so now California is facing multiple crises simultaneously on crime, homelessness, blackouts, and water shortages. Why won’t he? Because action would require that Newsom cross the special interests that he feels he needs to run for president in 2024 or 2028; because action would require Newsom taking responsibility for what’s happening, rather than blaming others; and because, at the end of the day, Newsom is a product of good times, and good times make weak leaders.

But the problem isn't the bureaucrats and the NIMBYs. It's Gavin Newsom.

Finally, Gavin Newsom Admits He Can't Govern California

I have always wanted a native CSS way to crop an image and position it in any direction I need. This has been possible by using an additional HTML element combined with different CSS properties that I will explain later.
In this article, I will walk you through the new CSS property
object-view-box that was suggested by Jake Archibald early this year. It allows us to crop or resize replaced HTML elements like an
</img> or a
<video>.
The problem
In the following example, we have an image that needs to be cropped. Notice how we only want a specific portion of that image.
Currently, we can solve that by one of the following:
- Using an
<img>and wrapping it in an additional element
- Using the image as a
background-imageand modifying the position and size
Wrapping in an additional element
This is a common solution to this problem, here is whatâ€™s happening:
- Wrapped the image in another element (The
<figure>in our case)
- Added
position: relativeand
overflow: hidden
- Added
position: absoluteto the image, and played with the positioning and sizing values to achieve the result
<figure> <img src="img/brownies.jpg" alt=""> </figure>
figure { position: relative; width: 300px; aspect-ratio: 1; overflow: hidden; border-radius: 15px; } img { position: absolute; left: -23%; top: 0; right: 0; bottom: 0; width: 180%; height: 100%; object-fit: cover; }
Applying the image as a background
In this solution, we use a
<div> and apply the image as a background, then we alter the position and size values.
<div class="brownies"></div>
.brownies { width: 300px; aspect-ratio: 3 / 2; background-image: url("brownies.jpg"); background-size: 700px auto; background-position: 77% 68%; background-repeat: no-repeat; }
It works great, but what if we want to apply the above to an
<img>? Well, thatâ€™s what
object-view-box is about.
Introducing object-view-box
I got excited when I saw that the property
object-view-box might be shipped in Chrome 104. Available now in Chrome canary.
According to the CSS spec:
The object-view-box property specifies a â€śview boxâ€ť over an element, similar to the
<svg viewBox>attribute, zooming or panning over the elementâ€™s contents.
The property takes the value
<basic-shape-rect> = <inset()> | <rect()> | <xywh()>. For the demo in this article, I will focus on the
inset() usage.
Letâ€™s get back to the problem.
With
object-view-box, we will be able to use
inset to draw a rectangle from the four sides (top, right, bottom, left), and then apply
object-fit: cover to avoid distortion.
<img src="img/brownies.jpg" alt="">
img { aspect-ratio: 1; width: 300px; object-view-box: inset(25% 20% 15% 0%); }
How is that even working? Donâ€™t worry, I will explain everything below. Letâ€™s go!
The image intrinsic size
The intrinsic size is the default image width and height. The image Iâ€™m dealing with has a size of
1194 Ă— 1194 px.
img { aspect-ratio: 1; width: 300px; }
With the above CSS, the rendered size of the image will be
300 Ă— 300 px.
Our goal is to draw a rectangle on the intrinsic image. To do that, we will use the
inset() value.
Applying the inset value
The
inset() value will be based on the original image width & height, resulting in a cropped image. It will help us in drawing an inset rectangle and control the four edges, similar to dealing with margin or padding.
The inset value defines an inset rectangle. We can control the four edges, just like we deal with margin or padding. In the following example, the card has an inset of 20px from all the edges.
Letâ€™s get back to the CSS for the object-view-box.
img { aspect-ratio: 1; width: 300px; object-view-box: inset(25% 20% 15% 0%); }
Here is how the above looks behind the scenes. The values
25%,
20%,
15%, and
0% represent the top, right, bottom, and left respectively.
Fix image distorsion
If the size of the image is square, the cropped result will be distorted.
This can be easy with the well-supported
object-fit property.
img { aspect-ratio: 1; width: 300px; object-view-box: inset(25% 20% 15% 0%); object-fit: cover; }
Thatâ€™s it. Isnâ€™t that just amazing? Being able to do art direction on an
<img> can be very useful for responsive design, or even showing different parts of an image.
Zooming in or out
We can use the
inset to zoom in or out an image. As per my testing, transition or animation wonâ€™t work with
object-view-box.
We can also zoom out with a negative inset value.
Image how this will be useful for being able to zoom an image, without wrapping it in an additional element.
Demo
Here is a demo that you can test in Chrome Canary today. Please make sure to enable the â€śExperimental Web Platform featuresâ€ť flag.
See the Pen CSS :has - Color theme by Ahmad Shadeed (@shadeed) on CodePen.
Conclusion
Iâ€™m so excited about other potential use-cases for this new feature. That was a quick first look, and I will come back later with more explorations.

First Look At The CSS object-view-box Property

From the Department of Are You Fucking Kidding Me*
CNN just ran a piece explaining that “scientists are urgently trying to solve” the question of whether the endless waves of Covid we now have “may be a result of the mRNA technology used to build some Covid-19 vaccines.”
Not making this up:
SOURCE
Oh? You don’t say? Now “scientists” are “urgently trying” to figure out if the “mRNA technology” is the problem and not the solution?
Now?
NOW?
Maybe they can urgently try to build a time machine too, or an unvaccine machine.
—
The article also includes this gem, from Dr. Anthony Fauci:
Oh, Tony! T-Dog! Allow me to translate:
I’m not saying it doesn’t work it at all, okay? Not out loud. I’d be absolutely insane to say that out loud after telling A BILLION PEOPLE TO TAKE IT. I’m just saying it could be better. And by better I mean actually work. But I didn’t say that.
(A subscribe now button, please excuse)
—
And finally this:
Yes, apparently we’ll “need to administer booster shots… [or] rollout an entirely new vaccine altogether”?
What you’re seeing here is the first steps toward an official acknowledgement that the mRNA vaccines have failed and new vaccines are coming sooner or later.
Booster shots? Remember, booster shots are available everywhere now. SECOND booster shots are available everywhere. And despite endless badgering from media and public health authorities, uptake has been close to zero for months.
The side effects are at least as bad with the third and fourth doses as the original two - that is, worse than Covid for many if not most people - and everyone knows the shots will not stop anyone from getting Covid in any case.
Thus the booster campaigns will be allowed to molder, probably within months. The White House will excuse the failure of the vaccines as a failure of public opinion, claiming that “mRNA vaccine hesitancy has risen to unsustainable levels,” or some such, and that we need new vaccine technology. (By new I mean old, most likely.) They may even be cynical enough to blame those of us who were right all along for said hesitancy.
The great mRNA experiment will come to an end, not with a bang but with 200 million expired doses in freezers. The most likely but by no means certain outcome is: zero long-term benefit, zero to some long-term harm, and $100 billion-plus for Pfizer and the gang.
Heads science wins, tails you lose:
This has been The Pandemic’s Wrongest Man, an occasional series!

From the Department of Are You Fucking Kidding Me* CNN just ran a piece explaining that &#8220;scientists are urgently trying to solve&#8221; the question o&#8230;

URGENT: The Pandemic's Wrongest Man, an occasional series

Millions of U.S. government employees and contractors have been issued a secure smart ID card that enables physical access to buildings and controlled spaces, and provides access to government computer networks and systems at the cardholder’s appropriate security level. But many government employees aren’t issued an approved card reader device that lets them use these cards at home or remotely, and so turn to low-cost readers they find online. What could go wrong? Here’s one example.
KrebsOnSecurity recently heard from a reader — we’ll call him “Mark” because he wasn’t authorized to speak to the press — who works in IT for a major government defense contractor and was issued a Personal Identity Verification (PIV) government smart card designed for civilian employees. Not having a smart card reader at home and lacking any obvious guidance from his co-workers on how to get one, Mark opted to purchase a $15 reader from Amazon that said it was made to handle U.S. government smart cards.
The USB-based device Mark settled on is the first result that currently comes up one when searches on Amazon.com for “PIV card reader.” The card reader Mark bought was sold by a company called Saicoo, whose sponsored Amazon listing advertises a “DOD Military USB Common Access Card (CAC) Reader” and has more than 11,700 mostly positive ratings.
The Common Access Card (CAC) is the standard identification for active duty uniformed service personnel, selected reserve, DoD civilian employees, and eligible contractor personnel. It is the principal card used to enable physical access to buildings and controlled spaces, and provides access to DoD computer networks and systems.
Mark said when he received the reader and plugged it into his Windows 10 PC, the operating system complained that the device’s hardware drivers weren’t functioning properly. Windows suggested consulting the vendor’s website for newer drivers.
So Mark went to the website mentioned on Saicoo’s packaging and found a ZIP file containing drivers for Linux, Mac OS and Windows:
Out of an abundance of caution, Mark submitted Saicoo’s drivers file to Virustotal.com, which simultaneously scans any shared files with more than five dozen antivirus and security products. Virustotal reported that some 43 different security tools detected the Saicoo drivers as malicious. The consensus seems to be that the ZIP file currently harbors a malware threat known as Ramnit, a fairly common but dangerous trojan horse that spreads by appending itself to other files.
Ramnit is a well-known and older threat — first surfacing more than a decade ago — but it has evolved over the years and is still employed in more sophisticated data exfiltration attacks. Amazon said in a written statement that it was investigating the reports.
“Seems like a potentially significant national security risk, considering that many end users might have elevated clearance levels who are using PIV cards for secure access,” Mark said.
Mark said he contacted Saicoo about their website serving up malware, and received a response saying the company’s newest hardware did not require any additional drivers. He said Saicoo did not address his concern that the driver package on its website was bundled with malware.
In response to KrebsOnSecurity’s request for comment, Saicoo sent a somewhat less reassuring reply.
“From the details you offered, issue may probably caused by your computer security defense system as it seems not recognized our rarely used driver & detected it as malicious or a virus,” Saicoo’s support team wrote in an email.
“Actually, it’s not carrying any virus as you can trust us, if you have our reader on hand, please just ignore it and continue the installation steps,” the message continued. “When driver installed, this message will vanish out of sight. Don’t worry.”
The trouble with Saicoo’s apparently infected drivers may be little more than a case of a technology company having their site hacked and responding poorly. Will Dormann, a vulnerability analyst at CERT/CC, wrote on Twitter that the executable files (.exe) in the Saicoo drivers ZIP file were not altered by the Ramnit malware — only the included HTML files.
Dormann said it’s bad enough that searching for device drivers online is one of the riskiest activities one can undertake online.
“Doing a web search for drivers is a VERY dangerous (in terms of legit/malicious hit ratio) search to perform, based on results of any time I’ve tried to do it,” Dormann added. “Combine that with the apparent due diligence of the vendor outlined here, and well, it ain’t a pretty picture.”
But by all accounts, the potential attack surface here is enormous, as many federal employees clearly will purchase these readers from a myriad of online vendors when the need arises. Saicoo’s product listings, for example, are replete with comments from customers who self-state that they work at a federal agency (and several who reported problems installing drivers).
A thread about Mark’s experience on Twitter generated a strong response from some of my followers, many of whom apparently work for the U.S. government in some capacity and have government-issued CAC or PIV cards.
Two things emerged clearly from that conversation. The first was general confusion about whether the U.S. government has any sort of list of approved vendors. It does. The General Services Administration (GSA), the agency which handles procurement for federal civilian agencies, maintains a list of approved card reader vendors at idmanagement.gov (Saicoo is not on that list). [Thanks to @MetaBiometrics and @shugenja for the link!]
The other theme that ran through the Twitter discussion was the reality that many people find buying off-the-shelf readers more expedient than going through the GSA’s official procurement process, whether it’s because they were never issued one or the reader they were using simply no longer worked or was lost and they needed another one quickly.
“Almost every officer and NCO [non-commissioned officer] I know in the Reserve Component has a CAC reader they bought because they had to get to their DOD email at home and they’ve never been issued a laptop or a CAC reader,” said David Dixon, an Army veteran and author who lives in Northern Virginia. “When your boss tells you to check your email at home and you’re in the National Guard and you live 2 hours from the nearest [non-classified military network installation], what do you think is going to happen?”
Interestingly, anyone asking on Twitter about how to navigate purchasing the right smart card reader and getting it all to work properly is invariably steered toward militarycac.com. The website is maintained by Michael Danberry, a decorated and retired Army veteran who launched the site in 2008 (its text and link-heavy design very much takes one back to that era of the Internet and webpages in general). His site has even been officially recommended by the Army (PDF). Mark shared emails showing Saicoo itself recommends militarycac.com.
“The Army Reserve started using CAC logon in May 2006,” Danberry wrote on his “About” page. “I [once again] became the ‘Go to guy’ for my Army Reserve Center and Minnesota. I thought Why stop there? I could use my website and knowledge of CAC and share it with you.”
Danberry did not respond to requests for an interview — no doubt because he’s busy doing tech support for the federal government. The friendly message on Danberry’s voicemail instructs support-needing callers to leave detailed information about the issue they’re having with CAC/PIV card readers.
Dixon said Danberry has “done more to keep the Army running and connected than all the G6s [Army Chief Information Officers] put together.”
In many ways, Mr. Danberry is the equivalent of that little known software developer whose tiny open-sourced code project ends up becoming widely adopted and eventually folded into the fabric of the Internet. I wonder if he ever imagined 15 years ago that his website would one day become “critical infrastructure” for Uncle Sam?

Millions of U.S. government employees and contractors have been issued a secure smart ID card that enables physical access to buildings and controlled spaces, and provides access to government computer networks and systems at the cardholder's appropriate security level. But many government employees aren't issued an approved card reader device that lets them use these cards at home or remotely, and so turn to low-cost readers they find online. What could go wrong? Here's one example.

When Your Smart ID Card Reader Comes With Malware

Emmanuel Vincent is a hunted man.
On June 24, an officer of the French Ministry of the Interior, acting under the terms of the Hague Convention, summoned him to a police station and served him papers to appear in court for posting false and misleading statements in his role as president of Science Feedback, a Facebook fact checking service. On top of this, the beleaguered nonprofit has weathered multiple critiques for posting politicized, biased opinions that call themselves “fact checks”—including a Wall Street Journal editorial that called out Science Feedback for attacking Johns Hopkins physician-researcher Marty Makary, after he wrote an essay predicting the arrival of COVID-19 herd immunity.
“This is counter-opinion masquerading as fact checking,” the Wall Street Journal wrote, noting that Dr. Makary never made a factual claim; he had made a prediction based on his analysis of available evidence.
If you’re interested in falling down a science rabbit hole, feel free to read what Dr. Makary wrote and how Science Feedback responded. But here’s the thing, you don’t need a PhD in epidemiology to understand that when experts analyze studies and make predictions they might be wrong.
Duh. Predictions are opinions, not facts.
And while there’s nothing wrong with Science Feedback posting a contrary prediction, labeling their own opinion a “fact” just proves they fail at logic.
This inability to grasp the difference between opinion and fact has made Science Feedback the butt of online scorn, but what landed Vincent in a police station and sent him fleeing from justice like a man who stole something is colluding with Facebook and the federal government to deny people their First Amendment rights.
All while pretending to be an “independent fact check.”
We’ll get to the specifics of that in a second. Nonetheless, the charge alone has sent Vincent running from address to address, all over Paris.
Back in August of 2020, Vincent was first served a legal complaint at the address for Science Feedback, at 40 Rue Alexandre Dumas, 75011, Paris, France. He was then served at a second address in Paris, 16, rue Cecile Furtado Heine.
By September 2020, a French legal agent learned that Vincent had registered Science Feedback at a different address in Paris. He then called Mr. Vincent on his cell phone and delivered him the documents at a completely new address. (I think we’re now at four addresses) Vincent confirmed to the legal agent that he had already received the documents at one of the addresses, and then refused to sign a receipt.
The court documents were then translated into French, and sent to various addresses for Vincent and Science Feedback. Vincent was then sent certified translations of other legal proceedings against him, and by July of last year, the French Ministry of Justice attested that Vincent was served the documents under the Hague Convention.
According to a certified translation of the French Ministry documents, Ms. Marie Fonquerne, a judicial police officer, requested that Mr. Vincent appear at a police prefecture where he confirmed that he is president of Science Feedback. Vincent then agreed to accept correspondence at an email for Science Feedback, but then gave this weird explanation for why he could not accept the documents:
[I]t is the company SCIIVERIFY that works in partnership with FACEBOOK and not the association SCIENCE FEEDBACK. SCIVERIFY is a subsidiary of SCIENCE FEEDBACK and is located at 40 Rue Alexandre Dumas 75011 PARIS and it is who must be assigned, -- I refuse to accept the act which is not addressed to the right entity.
Vincent’s absurdist game of hide and seek has thus far cost over $17,000—as it required the hiring of French legal agents to personally hand-deliver him documents which he refused to sign, and the pursuit of service under the Hague Convention, in which he was summoned to a police station and once again refused to sign for documents.
Emmanuel Vincent did not respond to multiple requests for comment. What is this man afraid of?
In their legal complaint against Facebook, Children’s Health Defense cites an article in Fast Company that reports how Facebook sometimes changes the fact check labels of groups like Science Feedback in response to business pressure. In an awkward statement, climate scientist Andrew Dessler of Climate Feedback backed into Children Health Defense’s argument that the government is restricting free speech that is protected under the First Amendment by forcing companies to censor speech instead.
We need to have a society-wide discussion about how corporations should deal with disinformation, and then the government should require corporations to adopt that policy.
The most important thing about the story, and something that doesn’t seem to bother a lot of people, is that we have outsourced decisions like this to corporations. This is a truly terrible situation to be in.
Dessler didn’t realize he was pulling the curtain back on the government’s game to violate the First Amendment by outsourcing free speech restrictions to Facebook. But that’s exactly what Dessler did, and his argument is the same claim made by Children’s Health Defense.
If the federal government censored people for disagreeing with the National institutes of Health (NIH) or the Centers for Disease Control and Prevention (CDC), that would obviously violate the First Amendment. Instead, the government outsources this censorship to Facebook. Facebook provides censorship through a network of contract “fact checkers” like Science Feedback which receive some funding and training through Facebook and follow guidelines set up by Facebook for how to identify “false” information.
If you’re wondering what Facebook consider the baseline of scientific truth against which the measure other information as false, just check the websites of federal agencies such as the NIH or the CDC. Deviations from the government is likely to get a Science Feedback “fact check.”
Yes, as laid out in the lawsuit and essentially confirmed by Climate Feedback’s Andrew Dessler, the shell game is that transparent. Thus the need for Science Feedback’s Emmanuel Vincent to hide out in Paris so that he can avoid public accountability before a judicial system that is not (yet) rigged by Facebook.
If you’re still confused if Science Feeback’s work is actually biased, consider who they choose to focus their fact checks on, and who they very carefully avoid. Yes, they play favorites.
Science Feedback has never once called out a media report or Twitter account for using the “conspiracy theory” label to attack the credibility of people questioning if the pandemic started from a lab accident in Wuhan, China. A POLITICO-Harvard poll last summer found that the majority of Americans believe that COVID leaked from a Wuhan lab, but science writers at multiple outlets—Scientific American, New York Times, Science Magazine, Washington Post, and Nature Magazine—have dismissed anyone stating this as a “conspiracy theorist.”
Only the Washington Post has gone back to correct prior stories for misusing the term “conspiracy theory.” Yet, Science Feedback has never “fact checked” a single science outlet for throwing around the “conspiracy theory” label like confetti at a New Year’s Day parade.
Nor has Science Feedback “fact checked” the NIH’s Anthony Fauci for misleading Congress and the American public about money his institute provided for dangerous virus research at the Wuhan Institute of Virology. That fact checking was done here at the DisInformation Chronicle, and by Vanity Fair (“In Major Shift, NIH Admits Funding Risky Virus Research in Wuhan”) and by The Hill (“Fauci LIES On Gain Of Function Research CONFIRMED By NIH, EcoHealth Failed To Report Findings”).
And when it comes to vaccines, Science Feedback provides little scientific feedback when the person spitting out disinformation on Twitter is Fauci favorite Peter Hotez, from the Baylor College of Medicine.
Hotez is NEVER fact checked, despite tweeting obvious examples of blatant falsehoods.

Do fact checkers provide Facebook&#8217;s muscle to rob us of free speech?

The President of Facebook’s Science Feedback Is Hiding in Paris, Terrified of Appearing in Court

A lot of people asked for a summit between Ted Gioia and Rick Beato—and it finally happened.
Frankly, I was intrigued by the idea too.
Rick has an influential YouTube channel with millions of subscribers—where he has interviewed Sting, Pat Metheny, and other master musicians. I’d never met him until we got together a few days ago, when we hung out, had dinner, and sat down for this in-depth dialogue. But I already knew from his videos that Rick is a trustworthy and knowledgeable guide who cares deeply about the music and our culture.
He, too, is an honest broker.
So I anticipated that this would be a fun, frank, and freewheeling conversation, and I wasn’t disappointed. In fact, this video is already starting to shake things up—at least judging by the early response.
This is probably the best place to start if you want to know what I see happening in our music and culture right now, and where it’s heading. It’s also a good guide to my core values and worldview.
Happy listening!

The popular YouTube host engages me in a freewheeling dialogue

I Have a Frank and Unfiltered Conversation with Rick Beato

Well, that was kinda sudden!
In the three months or so since we last spoke, the world has become an entirely different place – at least for those of us who keep up with any sort of international, financial or stock market news.
The headlines are new, and the problems are of course very real. Russia has started one of the biggest, shittiest wars in a generation – killing untold thousands of people, displacing millions, and halting trillions of dollars of production and trade. This has compounded the “everything shortage” of broken supply chains that we have all been feeling for the past two years, creating even more inflation especially in oil prices. And just to amplify everything even further, China has launched a batshit crazy (and medically impossible) “zero covid” policy, locking down hundreds of millions of its own people who can no longer produce or export the things that the rest of the world’s economy had grown to rely upon.
The resulting shortage of goods and workers has created rising prices (inflation), which has triggered our central bankers to finally rise from their slumber and start jacking up interest rates.
Which has in turn triggered the more skittish stock investors to run for the exits and completely change their view of our economic future, flooding the financial news with red ink and scary headlines.
The bottom line is that the overall US stock market is down about 20% over the past three months. Which means that if you add up your net worth as I do occasionally, you may find that almost a fifth of it has suddenly gone up in smoke.
Fortunately, this is just an illusion. While the human side of every war is awful and you should help out if you can, the financial side of this panic is very normal and we were overdue for something like this to happen.
A 20% drop in stock prices is called a “bear market” and they traditionally happen every few years, lasting just 9 months or so from top to bottom. But in the Mustachian Era (the years since 2011 when I started writing this blog), there has only been one: the 2020 Covid Crash which only lasted about a month. Heck, even in my 25 year investing lifetime (roughly 1997 to present), there have only been a handful:
.
So if you’re under 40, some of this may feel unfamiliar.
Now that we’ve covered the background, we can get into some better news:
If you really understand the points above and really feel excited about them, you can drop the fear and stress out of your investing life, which means you will live a life that is both wealthier, and more fun. So let’s cover each point properly, so you can be excited about all this as I am.
1) Why is this healthy again?
First, the part about the Federal Reserve and why a central banking system is so useful (despite the claims of financial anarchists like Bitcoin lovers):
When something bad happens (like the sudden deliberate recession we caused due to our own 2020 Covid shutdowns), the Fed can drop interest rates and “print money” in other ways to boost investment and demand in the economy. And it works – this is why our economy bounced back so quickly from the largest slowdown in history.
Some might say it worked too well – while we have benefited from record low unemployment, we have also seen prices of houses, stocks, and everything else rise with alarming speed. So eventually, they had to turn off the booster.
By raising interest rates, the central bankers put a slight drag on business spending, consumer borrowing and stock market exuberance. This lowers demand for everything, which pours some cold water on inflation. The deflating of the most overpriced stocks shows that the policy is working. And over the next year, higher mortgage rates should also end the crazy bidding war of a housing market we’ve been seeing in most cities.
But stock market crashes and even brief recessions are good for more than just fighting inflation. They’re good for fighting a persistent flaw in human nature itself.
Humans are lazy creatures at heart. When things get too easy, we lose our edge and our motivation to learn, innovate and make changes. It happens at the individual level, as I notice when I waste certain evenings on the couch accomplishing nothing. And it happens even more in the collective sense, if a group of people secures a nice stream of power and profit that remains unchallenged.
Imagine that you’re running a company. Your customers keep buying your stuff no matter what you do, investors bid your stock price up to the moon regardless of your financial performance, and there is no competition on the horizon. What do you think will happen to your monopoly?
There’s no need to speculate on this, because it has happened to varying degrees since the beginning of economic time. The answer is that you start to suck. Your product innovation stagnates, your customers grow less and less happy, and your investors grow nervous. Eventually, something comes along to poke at this bubble of complacency – in this case war and covid and inflation – and then POP! – your sales dry up, your stock price crashes, and your cozy corporate desk has turned into a tattered lawn chair in the parking lot and your business is done.
But wait! While you were adding that final layer of lipstick to your obsolete film camera or manual typewriter or gasoline-powered line of cars and trucks, there actually were competitors out there, inventing better products and offering better customer service and keeping their balance sheets lean, because they had to, because things for them were hard.
Your inefficient company goes out of business, and your more nimble competitors welcome your former customers. They may even suck up the best of your former employees and buy your old factory to start making new, better products.
This happens all the time, and while it can be painful for those who weren’t prepared, it’s a healthy thing for business overall. And a healthy thing for overpriced housing markets, and the speculatively inflated prices of oil, lumber, copper and everything else.
To a certain extent, the high prices were useful in sending a signal that we need to produce more of these things. But beyond that limit, people started buying overpriced stocks, houses, cryptocoins and commodities simply because they hoped to make a quick buck by flipping them to someone else at a higher price. Instead of investing in a productive asset, these speculators were just assuming the recent momentum would continue. This type of gambling is a waste of everyone’s time, and a good price crash is the way we flush the financial toilet.
2) My net worth has just cratered by 20%. How exactly does this mean I am getting richer?
The first thing to ask yourself is, “20% of what?”
Sure, stock prices are down from a recent peak, but that peak itself was just an arbitrary fleeting moment of investor enthusiasm. Was that previous price really the “right” value for stocks, or did you just grow attached to it because of our known human weakness of Loss Aversion?
To put it another way, what if instead of looking at our investments as the financial media likes to portray them, which is like this:
What if we decided to be more sensible, start the damned Y axis at zero as every graph should do, and zoom out to a reasonable time horizon,such as the Age of Mustachianism which happened to begin in 2011. And ignore the wiggly blue line and follow the more meaningful red line.
Well, how interesting. Not only has this crash returned us to a roughly straight line of longer term stock market growth, but that line itself is very generous, representing a 12.8% annual compound gain if you factor in a quarterly reinvestment of dividends (which typically add about 2% to your annual returns but aren’t shown in these charts). Over longer periods like 50 years, stock returns have been closer to 10% after dividends, which means we’ve still had more than our share of good times.
In the long return, stock prices are determined by this formula:
Stock price = company earnings x BRM*
*(Bullshit Random Multiplier)
The BRM, more formally known as the Price-to-Earnings ratio or P/E, is supposed to be based on a mathematical estimate of the present value of all future dividends you will receive if you hold a stock for the entire life of the company.
When we expect higher interest rates or inflation over the next 20 years, the P/E should fall because those distant future earnings become worth less in today’s dollars. Meanwhile, if we somehow realize that the long-term future of the business world is even more rosy than we thought, the P/E should rise because investors can accurately predict a larger stream of future earnings.
But the “bullshit” factor comes in due to things like the “He Said She Said” nature of whatever Elon posted on Twitter today, momentum trading algorithms, meme stock traders banding together to drive up random stocks regardless of underlying value, and more. In short, the short term BRM is just a measure of the present moment’s balance of greed and fear.
As an investor, however, you don’t care about the BRM. In fact, you don’t even really care about the share prices of your investments, because the price of an individual share only matters twice in your lifetime:
Everything else is just silly noise.
Right now, most of us are still earning money and accumulating more shares. Even Mr. Money Mustache, as a person who retired 17 years ago, is still in this boat for the simple reason that my retirement income from dividends and hobby businesses is still greater than my annual living expenses (which still hover around $20,000 per year).
On top of this, if you are holding mostly index funds as you should be, your stocks deliver a nice helping of dividends every three months, which you have set to automatically reinvest into still more shares of those same index funds. In today’s market, you are getting about 20% more shares for each dollar that you invest. Which translates to a full 20% more wealth from those shares in your future.
3) Okay, but I really am retired and trying to live off my investments now. How is this not a disaster for me?
First of all, you’re still getting the dividends that we celebrated in point 2) above. When the stock market crashes, dividend payments usually remain far more stable because the big, established companies in your index funds continue to make money.
It’s quite similar to owning a portfolio of rental houses spread throughout the world: while house prices fluctuate all the time in different cities, the total rent paid by a group of thousands of tenants will tend to remain pretty stable and just rise at the rate of inflation.
So this stream of money will keep coming in and covering a substantial portion of your living expenses (between 30% and 50% for most retirees in today’s market conditions if you retired using the 4% rule).
Even if you don’t adjust your spending or income during this bear market, the end result is that you simply need to sell a tiny percentage of your shares at a discount during the bear market – which means your portfolio shrinks a bit faster.
But the 4% rule already takes this into account: if there were no such thing as bear markets, the safe withdrawal rate would actually be equal to the long-term average of stock market growth, which is closer to 7% after inflation. By sticking to 4% or slightly less, you are giving yourself a high chance of weathering the storm.
cFireSim: Economic History to the Rescue!
To really understand what this means I reached out to Lauren Boland, the financial calculations wizard behind the amazing cFireSim retirement simulator. Her long-running site gives you the best shot at answering the question: “If I retire with a fixed chunk of money, what are my chances of success?”
I asked her what it really means when the stock market drops: does a 20% drop really make you 20% less “retired” or is actual outcome more subtle? True to form, she got back to me within just a few minutes with these thoughts:
MMM: How should potential retirees think of the recent crash in valuation – has it really pushed out their retirement date, or not?
Lauren:
It depends on how flexible you are willing to be with your spending. As stocks get more expensive (a higher price-to-earnings ratio), it can be a perfect time to spend more (take those gains), and when they drop in value (like right now), you may want to spend less to preserve your capital.
We have a name for the this idea of stock crashes that come at just the wrong time: the Sequence of Returns Risk. If you retire just BEFORE a big stock market crash, your first few months or years will drain your portfolio a bit more than you expected, until stock prices recover. So, recent retirees are living this right now if they retired without much safety margin.
On the other hand, If you HAVEN’T retired yet, and your numbers still look good even now, I think it may actually be a better time to retire, since you can hope that history repeats itself and there is a recovery. It’d be like retiring at the bottom of 2009 with still-decent numbers.
— (thanks Lauren!) —
Okay, so we’re probably not screwed either way. But still, as a Mustachian this seems like a great excuse to refer to point #1 above: use the chaos and disruption as an excuse to make yourself stronger. Become more efficient with your spending, find enjoyable ways to create value for others that happen to produce money for you as well, and improve your exercise, eating and personal growth programs as well. Because hey, why not?
Epilogue: How does all this Misery end?
Although you now understand that even the current situation is normal and healthy, there is even better news at the core of it: It’s a self-correcting problem, and the solution is already in the works.
A shortage of goods, a sloshing overflow of the money supply and inappropriately low interest rates led to everything getting more expensive. But meanwhile, companies have built more factories and hired more workers to increase production and now the central banks have cranked up interest rates and reversed their other support programs as well.
The result: mortgages cost more so housing sales have slowed. Consumers and businesses are both pissed off by recent price increases and more cautious about the future so they are buying less stuff, which reduces the Everything-Shortage that we mentioned earlier. Suddenly, supply catches up to demand and prices stop rising.
Or to summarize all of this in a much pithier way: the solution to high prices, is high prices.
The world is scary and the stock market has plunged, but the fundamental picture hasn’t changed at all: billions of humans are working hard and applying their ingenuity every day to get ahead. It’s a messy process, but on average we continue to succeed at this task over time. People who understand this unchanging mechanism will look at this year’s sale on productive asset and say, “Cool – sign me up for another helping of future wealth, and thanks for the deal!”
In the comments – what are YOU doing in response to this bear market? Are you scared, or doubling down on investing?

Well, that was kinda sudden! In the three months or so since we last spoke, the world has become an entirely different place &#8211; at least for those of us who keep up with any sort of international, financial or stock market news.&#160; The headlines are new, and the problems are of course very real. [&#8230;]

Finally, a Stock Market Crash!

May 18, 2022
Finland and Sweden have applied for membership in the North Atlantic Treaty Organization (NATO), a defensive alliance originally formed in 1949 to resist the expansion of the Soviet Union and now standing against Russian expansion under president Vladimir Putin. Now the 30 member nations will consider the applications. They are expected to go through, although Turkish president Recep Tayyip Erdogan has said he does not view their applications positively, likely to gain concessions from the United States in ongoing negotiations. The timeline to membership will be shortened since the countries are at risk from Putin’s current policies.
National Security Advisor Jake Sullivan warned Russia that U.S. and European allies “will not tolerate any aggression against Finland or Sweden” while NATO applications are under consideration.
As the Russian invasion of Ukraine nears its twelfth week, the United States today reopened our embassy in Kyiv, and tonight, the Senate unanimously confirmed Bridget A. Brink as U.S. ambassador to Ukraine. We have not had an official ambassador in Ukraine since Trump abruptly recalled Marie Yovanovich in 2019. Yovanovich was standing in the way of Trump’s attempt to pressure President Volodymyr Zelensky to announce an investigation into Joe Biden’s son Hunter before he would release the congressionally appropriated funds Ukraine badly needed to fight off Russia.
To address the baby formula shortage caused by the closing of Abbott Nutrition’s plant in Sturgis, MIchigan, and exacerbated by tariffs that keep foreign baby formula out of the U.S., President Joe Biden today invoked the Defense Production Act to prioritize the manufacture of formula, and is flying formula in from other countries.
This evening, the House of Representatives voted on a proposal to appropriate $28 million in emergency funds to address the baby formula shortage. Two Democrats did not vote, 219 Democrats voted yes. Twelve Republicans voted yes and 6 did not vote. The rest, 192 Republicans, opposed the bill. It now goes on to the Senate.
The House also voted today on the Domestic Terrorism Prevention Act of 2022, which steps up the sharing of information about domestic terrorism among government departments and creates an interagency task force to analyze and combat white supremacist and neo-Nazi infiltration of the uniformed services and federal law enforcement agencies. The House passed the bill by a vote of 222 to 203. All the no votes came from Republicans; all the Democrats voted in favor. It now goes on to the Senate.
There was big news today from a quarter that made it easily overlooked. In a decision about the power of the Securities and Exchange Commission to judge those accused of engaging in securities fraud, the United States Court of Appeals for the Fifth Circuit ruled that “Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle by which the SEC would exercise the delegated power, in violation of Article I’s vesting of ‘all’ legislative power in Congress….”
Congress created the Securities and Exchange Commission in 1934, after the Great Crash of 1929 revealed illegal shenanigans on Wall Street. The SEC is supposed to enforce the law against manipulating financial markets. The Fifth Circuit covers Louisiana, Texas, and Mississippi, and its judges lean to the right. Today’s decision suggests that the leaked draft of the decision that would overturn Roe v. Wade has empowered other judges to challenge other established precedents.
What is at stake with this decision is something called the “nondelegation doctrine,” which says that Congress, which constitutes the legislative branch of the government, cannot delegate legislative authority to the executive branch. Most of the regulatory bodies in our government since the New Deal have been housed in the executive branch. So the nondelegation doctrine would hamstring the modern regulatory state.
According to an article in the Columbia Law Review by Julian Davis Mortenson and Nicholas Bagley, the idea of nondelegation was invented in 1935 to undercut the business regulation of the New Deal. In the first 100 days of his term, President Franklin Delano Roosevelt set out to regulate the economy to combat the Great Depression. Under his leadership, Congress established a number of new agencies to regulate everything from banking to agricultural production.
While the new rules were hugely popular among ordinary Americans, they infuriated business leaders. The Supreme Court stepped in and, in two decisions, said that Congress could not delegate its authority to administrative agencies. But FDR’s threat of increasing the size of the court and the justices’ recognition that they were on the wrong side of public opinion undercut their opposition to the New Deal. The nondelegation theory was ignored until the 1980s, when conservative lawyers began to look for ways to rein in the federal government.
In 2001, the Supreme Court unanimously rejected the argument in a decision written by Justice Antonin Scalia, who said the court must trust Congress to take care of its own power. But after Justice Clarence Thomas suggested that he might be open to the argument, conservative scholars began to say that the framers of the Constitution did not want Congress to delegate authority. Mortenson and Bagley say that argument “can’t stand…. It’s just making stuff up and calling it constitutional law.” Nonetheless, Republican appointees on the court have come to embrace the doctrine.
In November 2019, Justice Brett Kavanaugh sided with Justice Neil Gorsuch-—Trump appointees both—to say the Court should reexamine whether or not Congress can delegate authority to administrative agencies. Along with Chief Justice John Roberts and Justice Thomas, they appear to believe that the Constitution forbids such delegation. If Justice Amy Coney Barrett sides with them, the resurrection of that doctrine will curtail the modern administrative state that since the 1930s has regulated business, provided a basic social safety net, and promoted infrastructure.
As Justice Elena Kagan pointed out, the nondelegation doctrine would mean that “most of Government is unconstitutional.”
In today’s decision, it is no accident that Judge Jennifer Walker Elrod's majority opinion recalls what President Ronald Reagan, at a press conference in 1986, called the “nine most terrifying words in the English language”: “I'm from the government, and I'm here to help.” Reagan began the process of dismantling the New Deal government, and its achievement seems now to be at hand.
The decision will almost certainly be appealed.
—
Notes:
https://www.congress.gov/bill/117th-congress/house-bill/7790/text
https://columbialawreview.org/content/delegation-at-the-founding/
https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/18/fact-sheet-president-biden-announces-new-actions-to-address-infant-formula-shortage/
https://www.congress.gov/bill/117th-congress/house-bill/350
https://www.cnn.com/2022/05/18/politics/house-vote-domestic-terrorism-bill-buffalo-shooting/index.html
https://www.npr.org/2022/05/18/1099679338/finland-and-sweden-formally-submit-nato-membership-applications
https://www.cnn.com/2022/05/18/politics/us-embassy-kyiv-reopens/index.html
https://www.washingtonpost.com/world/2022/05/18/russia-ukraine-war-putin-news-live-updates/
https://www.nytimes.com/live/2022/05/18/world/russia-ukraine-war#the-top-diplomats-from-the-us-and-turkey-will-meet-in-new-york
https://www.cnn.com/2022/05/18/europe/turkey-nato-finland-sweden-cmd-intl/index.html
John P. Collins @prof_jpcThis seems like a pretty consequential decision https://t.co/DiyNjlygtt https://t.co/ghlsYyvdl8

Finland and Sweden have applied for membership in the North Atlantic Treaty Organization (NATO), a defensive alliance originally formed in 1949 to resist the expansion of the Soviet Union and now standing against Russian expansion under president Vladimir Putin. Now the 30 member nations will consider the applications. They are expected to go through, although Turkish president Recep Tayyip Erdogan has said he does not view their applications positively, likely to gain concessions from the United States in ongoing negotiations. The timeline to membership will be shortened since the countries are at risk from Putin&#8217;s current policies.

May 18, 2022

Dis information is true!
The Biden Administration appears to be giving up on its newest pathetic yet Orwellian effort to suppress free speech.
Taylor Lorenz, the world’s least self-aware journalist (heavy competition for that title), has dried her eyes long enough to report that the White House has “paused” the Disinformation Governance Board, sparing us all from having to sue it as a per se First Amendment violation (assuming we could ever figure out what it did).
You can expect the “pause” to end on the 12th of never, since Lorenz also reported that Nina Jankowicz, the board’s head, resigned Wednesday morning.
Lorenz loves censorship and censoriousness almost as much as she hates telling people how old she really is, so it’s pretty clear that the feds gave her the scoop in an effort to get in front of the Biden Adminstration’s embarrassment du jour (I know, the day isn’t over yet).
Not the irony in the headline. The Post sure won’t!

Dis information is true! The Biden Administration appears to be giving up on its newest pathetic yet Orwellian effort to suppress free speech. T&#8230;

Bye bye Disinformation Governance Board

Americans are struggling with two related problems: one, there’s general inflation, which means pretty much everything is expensive; two, there’s energy price inflation, which means that energy in particular (specifically, oil and gas) is expensive.
This has led some politicians, mainly Republicans-and-Joe-Manchin, to propose a dual solution: cut back on government spending (to tame inflation) and increase domestic oil and gas production (to tame energy prices).
This approach is wrong-headed and counter-productive on both counts. The reasons why are laid out in a new issue brief from the Roosevelt Institute, the first in a series called “All Economic Policy Is Climate Policy” (which, hell yes).
Lauren Melodia, deputy director of macroeconomic analysis at the Roosevelt Institute, and Kristina Karlsson, the institute’s program manager for climate and economic transformation, argue that fossil fuel prices are inherently volatile, and that volatility has serious macroeconomic effects; on the flip side, electricity prices — specifically renewable electricity prices — tend to be far more stable and manageable.
It follows that government spending to build out clean-energy infrastructure is itself anti-inflationary; it removes a source of price instability and replaces it with stability.
This argument is my favorite kind — it put words to something that’s been rattling around in my head for years — so I was excited to talk to Melodia and Karlsson about the volatility of fossil fuels, why we’ve come to accept it as an inevitable fact of life, and why it is, in fact, a choice that we could make differently.

Energy prices are a big part of inflation, but none of the traditional inflation remedies help solve it. In fact, only one thing can: a transition from (inherently volatile) fossil fuels to (inherently stable) clean energy. I talk with two scholars about why.

Volts podcast: Lauren Melodia and Kristina Karlsson on energy inflation and how to tame it

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Quote: Mastery of fears.
Framework: Disruptive innovation.
Tweet: The cold email playbook.
Article: Default alive or default dead.
Podcast: Buy now, pay dearly?
“Courage is resistance to fear, mastery of fear—not absence of fear.” - Mark Twain
What we fear the most is often what we most need to do.
Get closer to your fears. Master them.
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Disruptive Innovation
The late Clayton Christensen was one of the most influential management thinkers of our time. His theory of disruptive innovation is widely considered one of the most important business ideas of the 2000s (though it was originally developed in the mid-1990s).
The process of disruptive innovation—according to Christensen—involves a smaller company challenging an established incumbent by entering at the bottom of the market and methodically moving up-market.
The generalized process plays out over a few steps:
Incumbents develop a product or service for the most profitable customers, ignoring all other customers.
Upstarts target the ignored market segments—customers who are typically being over or under-served by the incumbent’s offering. These upstarts win by delivering exactly what is needed at a lower cost compared to the incumbent.
Incumbents don’t respond—choosing to continue their focus on the most profitable customers.
Upstarts methodically move upmarket from the initial entry.
Upstarts eventually attract the incumbent’s profitable customers, completing the cycle of disruptive innovation.
There are plenty of real examples of this playing out right now. Banking is a big one that I’ve seen—traditional banks are being disrupted by upstarts targeting a specific customer segment that has been under-served by the incumbents. Mercury is targeting startups—providing the best banking experience for that specific customer archetype.
This framework is powerful. It can be used:
To ideate on new business ideas—identify the incumbent, identify the customers that are being over or under-served by the incumbent, create the best product for that specific customer segment.
To evaluate the shifting landscape as technology disrupts traditional industries. This is useful as an investor for predicting large, long-term changes.
Disruptive innovation is definitely one of my most frequently used frameworks for business and startup problem-solving.
This was the most tactical thread on cold emails that I’ve ever read.
It lays out a play-by-play for how to raise money via cold emails, which the author has done successfully on many occasions.
I’ve seen a lot of threads on cold emails, but the illustrative example this walks through was what brought it to life for me. You can basically duplicate this format and structure for your own cold email endeavors—just adjust to your situation and context.
Definitely worth your time.
Default Alive or Default Dead
This is a great Paul Graham memo from 2015 that is hyper-relevant for founders, investors, and operators as we enter a period of uncertainty and market choppiness.
The basic idea is that there are two states of a company:
Default Alive: At the current level of expenses and revenue growth, the company will be able to achieve profitability before it runs out of cash.
Default Dead: At the current level of expenses and revenue growth, the company will not be able to achieve profitability before it runs out of cash.
The takeaway: Companies who are Default Alive will always operate from a position of strength—able to make thoughtful, creative decisions about how to execute and grow. Companies that are Default Dead need to focus on getting to Default Alive status before thinking about anything else. Ruthless honesty about where you sit is the important part.
I apply this concept more broadly than just for startups and investing—I think this applies to our own personal finances. Make sure that you are always Default Alive. The peace of mind will allow you to take thoughtful risks and expose yourself to asymmetric opportunities.
Planet Money—Buy Now, Pay Dearly?
Buy Now, Pay Later (or “BNPL”) has taken the commerce world by storm over the last five years. There are very few large purchases that don’t have the option of doing an installment payment through one of the major BNPL providers (like Affirm). Heck, my protein powder even offers the option to split the $75 payment for a 2 pound jug into 4 payments!
I’ve often wondered whether this was a relic of the bull market and likely to end.
This Planet Money was an awesome, short investigation of this question and dives into the industry and whether it poses any major risks to consumers and the economy.
Listen to it on Apple Podcasts or Spotify.
Why You Need a Digital Detox with Andrew Wilkinson
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How to Cold Email, Disruptive Innovation, & More

‘‘What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that: we clearly have still a job to do when it comes to cooling down demand’’
Jerome Powell, May 17th 2022
Powell’s remarks in the Wall Street Journal interview this week were quite interesting, and markets seem to have noticed: we have seen quite some wild moves, but again the most relevant price action is happening under the surface.
In such a choppy market environment, systematic risk management techniques and a data-driven investment approach are key to tell the forest from the trees and reduce drawdowns in your portfolio.
In this article, we will:
Reflect on some interesting market moves happening under the surface;
Discuss two of my macro ‘‘polar stars’’ indicators that can help us navigate and explain current market circumstances;
Introduce for the first time my Volatility Adjusted Market Dashboard (VAMD), a tool I’ve been working on to further deliver value to The Macro Compass community.
Actually, before we jump right in.
Andreas Steno and I have been putting quite some effort to deliver the most fun and actionable macro investment podcast out there, and so far the response has been huge: almost 50.000 unique listeners per episode across platforms!
If you haven’t yet listened to The Macro Trading Floor podcast, this week is your chance: Andreas and I interviewed a very special guest and trust me, you don’t want to miss this! :)
Links here: Apple, Spotify, Google, YouTube.
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Back to it: Powell played the hawkish horn again, and markets are reacting in quite some interesting ways.
The three main lines from his interview were:
‘‘Financial conditions overall have tightened significantly.
That’s what we need to see’’;
‘‘We need to see growth moving down from very high levels, and we clearly have still a job to do on cooling down demand’’;
‘‘If that involves moving past broadly understood measures of neutral rates (i.e. 2.00-2.50% on Fed Funds), we won't hesitate to do that’’.
You gotta admit he can’t be more straightforward than this.
The FOMC is totally comfortable (!) with financial conditions tightening, as we clearly still (!) have a job to do on cooling down demand and if that involves raising Fed Fund rates >2.50% we won’t hesitate (!) to do that as we need to see is inflation coming down in a clear and convincing way (!).
But now, why would I define market reactions as ‘‘interesting’’?
We all see the consequent bloodbath in equity markets and it doesn’t strike as particularly surprising, right?
Well, here are a couple of interesting moves going on beneath the surface.
After a relentless move up, for the first time this year US implied real yields between 2027 and 2032 (5y5y forward) have experienced a remarkable drop.
But wait a second, I thought a tighter monetary policy stance would push real yields up via a combination of higher nominal rates (reflecting the new, hawkish stance) and lower inflation expectations (as markets expect Central Banks to be successful in this exercise)? Also if real yields are lower, shouldn’t that support risk assets?
Let me help you understand what’s going on.
Real yields are now responding to markets repricing demand down in a significant way: let’s have a look at commodities and GDP/earnings revisions for example.
Since the pandemic-related trough in 2020, Agricultural Commodities (Invesco DBA ETF, blue) and Industrial Commodities (copper, in orange) have basically moved up in sync: as the gargantuan amount of fiscal spending fed through the economy and supply bottlenecks were popping up, the demand/supply imbalance kept growing and supported price increases across the entire commodity space.
But now look at the divergence in that red box.
Over the last month copper - a bellwether metal for the global economy - has been hit with a 12% drawdown while Agricultural Commodities are trying to test new highs.
The rather global-industrial-demand-driven commodities (orange) have started to show signs of weakness against the more supply-bottleneck-driven commodities (blue).
Additionally, credit spreads are kinda blowing up with US high-yield spreads having now exceeded the 2018 peak of 500-ish bps and they seem to be heading towards the 600 bps 2016-global-growth-scare level.
Alright, so this must be reflected in GDP and earnings forecasts too, right?
I mean, Wall Street analysts and us on The Macro Compass must be looking at similar screens and charts after all :)
Analyst consensus for the 2022 US real GDP growth has been consistently revised down this year and now sits at 2.7% - but still nicely above trend, though.
And while even big consumer staples companies (e.g. Walmart, Target) have missed their earnings per share target and have warned investors they could actually deliver negative (!) YoY EPS in 2022, analyst consensus for 2022 EPS growth for the companies listed in the S&P500 index still sits at +10%.
Yes, plus 10%.
So, while forward-looking markets are pricing in a slowdown in demand it seems analysts are still relatively relaxed about the end point - shall we be, too?
Some of my ‘‘polar stars’’ macro indicators disagree.
Real yields are moving up for the wrong reasons, and they sit above long-term equilibrium levels = not good.
Despite the sell-off, my equity risk premium metric says stocks are neither cheap nor expensive on a long-term basis and there seems to be more room to reprice further down.
Real yields can move up and down for good and bad reasons.
Up for good reasons: cyclical economic growth is picking up, and there are some expectations that long-term structural growth might be increasing too (e.g. 2017-early 2018);
Up for bad reasons: monetary policy is been tightened aggressively in an effort to cool things down, and cyclical economic growth isn’t that strong anymore (e.g. late 2018, early 2022);
Down for good reasons: monetary policy is been eased strongly and economic growth has bottomed and now picking up (e.g. second half of 2020);
Down for bad reasons: a major growth scare is coming and earnings/growth needs to be repriced down (e.g. 2016, perhaps now).
As we move back and forth between ‘‘up for bad reasons’’ and ‘‘down for bad reasons’’, my polar macro star indicator instead focuses on the observed real yields relative to long-term equilibrium real rates the economy can handle.
In the chart above I used 10y real rates to get a longer data history, but the main conclusion remains the same: when observed risk-free real yields (blue) either trade above equilibrium level (orange) for a prolonged period of time (red box) or they sharply reprice up in a short time frame (red arrow), s**t happens in markets.
Today, a blend of metrics I use to grasp US observed real yields is trading above equilibrium r* and - most importantly - the repricing from negative real rates to today’s positive and above-equilibrium levels has been extremely quick: not good.
But now, equity market valuations must be attractive after this repricing, right?
Not really.
Let me quickly introduce my simple gauge of Equity Risk Premium.
Investors always have a choice between allocating capital in a risk-free instrument or in risk assets - for which they expect to be compensated: hence, looking at S&P500 valuations in a silo makes little sense.
Instead, the focus should be on what's the additional expected return one can generate on top of the risk-free real yield she can get from investing in US Treasuries.
The 12-month forward earnings yield allows me to discount expectations for future earnings growth and zoom in on the valuation side, which I compare to 5y5y real yields: why?
Large-cap companies generally have a decent pricing power. That allows them to incorporate most of the inflationary pressures into earnings without hugely affecting margins, which is why one might consider their future cash flows as ''real'' cash flows to a certain extent.
Looking beyond just the next 5 years and hence focusing on 5y forward, 5-years real rates allows me to avoid focusing too much on the short-term monetary policy cycle: after all, we are trying to judge whether valuations are cheap/expensive from a medium to long-term standpoint.
At a 5.3% ERP, we are just sitting in the middle of a 15-year band.
Not cheap.
The main message hasn’t changed a tiny bit.
Stay.
Defensive.
I wrote too much about markets and macro indicators, but I still want to quickly introduce you to one of the many new tools you are going to be seeing on The Macro Compass in the near future: the VAMD.
This dashboard standardizes daily, weekly and monthly market moves in global macro (literally every-single-asset-class-and-geography) for the underlying volatility: the idea is that if Bitcoin moves 3% in a day I shouldn’t jump off my chair, but if EUR/USD moves 3% in a day I should really pay attention.
So, here you go with a preliminary release of the ‘‘summary dashboard’’ with a monthly time frame.
Developed and emerging market rates, equities and credit spreads plus commodities, FX and crypto all in one sheet and color-coded according to how ‘‘big’’ was the move.
For instance, over the last month we had a huge move in the ECB deposit rate priced by December 2022 (dark red = 3+ standard deviations) and big moves down in US equities, wider credit spreads, silver, copper, USD/RUB…
Did you think the BTC and ETH moves were huge?
Think twice: in standard deviation terms, nothing to be uber-impressed about…
Enough for today, guys.
Next Monday I’ll be explaining how I use the VAMD, what risk management techniques I use to size positions and limit drawdowns in my portfolio and the other tools we are working on to deliver even more value to The Macro Compass community.
If you have any suggestions or comments, please let me know!
Last but not least: if you are interested in any kind of partnership, sponsorship, or in bespoke consulting services feel free to reach out at TheMacroCompass@gmail.com.
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See you soon here for another article of The Macro Compass, a community of more than 47.000+ worldwide investors and macro enthusiasts!

Listen now | And don't miss the new tool I introduce this week!

Let The Macro Polar Stars Guide You

A couple of weeks ago, I wrote a post envisioning a future where interest rates go to 8%. I made it clear that this was only a possible bad scenario that people should have contingency plans for, not a forecast that people should expect to come true. In fact, I think the most likely outcome is a “soft landing” for the U.S. economy.
A “soft landing” sounds nice, and it is a hell of a lot nicer than the truly awful scenarios like runaway inflation or a deep and crushing recession. But that doesn’t mean it’s a painless outcome where inflation simply vanishes and economic growth continues apace. More likely, we’ll get a short and mild recession like the one in 2001:
Remember that the Fed and the markets are also expecting this. As I explained in that earlier post, if the Fed expected inflation to remain at its recent ~8% level indefinitely, it would raise rates to 8% or higher. The fact that it’s raising rates by much less than that (so far) means that it still expects inflation to come down without the need for a Paul Volcker-like crushing of the economy. And markets also expect inflation to be significantly lower over the next 5 years:
Of course predictions are hard, especially about the future, and especially about the future of the macroeconomy. So let me explain why a short and mild recession, and subsiding inflation, now looks like the most likely scenario.
Read more

Falling demand will hit inflation. But there will be a price.

It looks like we're headed for a soft landing

On May 22, 1964, in a graduation speech at the University of Michigan, President Lyndon Johnson put a name to a new vision for the United States. He called it “the Great Society” and laid out the vision of a country that did not confine itself to making money, but rather used its post–World War II prosperity to “enrich and elevate our national life.” That Great Society would demand an end to poverty and racial injustice.
But it would do more than that, he promised: it would enable every child to learn and grow, and it would create a society where people would use their leisure time to build and reflect, where cities would not just answer physical needs and the demands of commerce, but would also serve “the desire for beauty and the hunger for community.” It would protect the natural world and would be “a place where men are more concerned with the quality of their goals than the quantity of their goods.”
“But most of all,” he said, it would look forward. “[T]the Great Society is not a safe harbor, a resting place, a final objective, a finished work. It is a challenge constantly renewed, beckoning us toward a destiny where the meaning of our lives matches the marvelous products of our labor.”
Johnson proposed rebuilding the cities, protecting the countryside, and investing in education to set “every young mind…free to scan the farthest reaches of thought and imagination.” He admitted that the government did not have the answers to addressing the problems in the country, “[b]ut I do promise this,” he said. “We are going to assemble the best thought and the broadest knowledge from all over the world to find those answers for America. I intend to establish working groups to prepare a series of White House conferences and meetings—on the cities, on natural beauty, on the quality of education, and on other emerging challenges. And from these meetings and from this inspiration and from these studies we will begin to set our course toward the Great Society.”
Johnson’s vision of a Great Society came from a very different place than the reworking of society launched by his predecessor, Franklin D. Roosevelt, in the 1930s. Roosevelt’s New Deal had used the federal government to address the greatest economic crisis in U.S. history, leveling the playing field between workers and employers to enable workingmen to support their families. Johnson, in contrast, was operating in a country that was enjoying record growth. Far from simply saving the country, he could afford to direct it toward greater things.
Immediately, the administration turned to addressing issues of civil rights and poverty. Under Johnson’s pressure, Congress passed the Civil Rights Act of 1964 prohibiting voting, employment, or educational discrimination based on race, religion, sex, or national origin. Johnson also won passage of the Economic Opportunity Act of 1964, which created an Office of Economic Opportunity which would oversee a whole series of antipoverty programs, and of the Food Stamp Act, which helped people who didn’t make a lot of money buy food.
When Republicans ran Arizona senator Barry Goldwater for president in 1964, calling for rolling back business regulation and civil rights to the years before the New Deal, voters who quite liked the new system gave Democrats such a strong majority in Congress that Johnson and the Democrats were able to pass 84 new laws to put the Great Society into place.
They cemented civil rights with the 1965 Voting Rights Act protecting minority voting, created jobs in Appalachia, and established job-training and community development programs. The Elementary and Secondary Education Act of 1965 gave federal aid to public schools and established the Head Start program to provide comprehensive early education for low-income children. The Higher Education Act of 1965 increased federal investment in universities and provided scholarships and low-interest loans to students.
The Social Security Act of 1965 created Medicare, which provided health insurance for Americans over 65, and Medicaid, which helped cover healthcare costs for folks with limited incomes. Congress advanced the war on poverty by increasing welfare payments and subsidizing rent for low-income families.
Congress took on the rights of consumers with new protective legislation that required cigarettes and other dangerous products to carry warning labels, required products to carry labels identifying the manufacturer, and required lenders to disclose the full cost of finance charges in loans. Congress also passed legislation protecting the environment, including the Water Quality Act of 1965 that established federal standards for water quality.
But the government did not simply address poverty. Congress also spoke to Johnson’s aspirations for beauty and purpose when it created the National Foundation on the Arts and Humanities. This law created both the National Endowment for the Arts and the National Endowment for the Humanities to make sure the era’s emphasis on science didn’t endanger the humanities. In 1967 it would also establish the Corporation for Public Broadcasting, followed in 1969 by National Public Radio.
Opponents of this sweeping program picked up 47 seats in the House and three seats in the Senate in the 1966 midterm elections, and U.S. News and World Report wrote that “the big bash” was over.
And yet, much of the Great Society still lives on, although it is now under more significant challenges every day from those who reject the idea that the federal government has a role to play in the shaping of our society.
“For better or worse,” Johnson told the University of Michigan graduates in 1964, “your generation has been appointed by history to deal with those problems and to lead America toward a new age. You have the chance never before afforded to any people in any age. You can help build a society where the demands of morality, and the needs of the spirit, can be realized in the life of the Nation.
“So, will you join in the battle to give every citizen the full equality which God enjoins and the law requires, whatever his belief, or race, or the color of his skin?” he asked.
“Will you join in the battle to give every citizen an escape from the crushing weight of poverty?...”
“There are those timid souls who say this battle cannot be won; that we are condemned to a soulless wealth. I do not agree. We have the power to shape the civilization that we want. But we need your will, your labor, your hearts, if we are to build that kind of society.”
—
Notes:
https://www.presidency.ucsb.edu/documents/remarks-the-university-michigan
U.S. News and World Report quotation is in Mary C. Brennan, Turning Right in the Sixties: The Conservative Capture of the GOP, p. 119.

On May 22, 1964, in a graduation speech at the University of Michigan, President Lyndon Johnson put a name to a new vision for the United States. He called it &#8220;the Great Society&#8221; and laid out the vision of a country that did not confine itself to making money, but rather used its post&#8211;World War II prosperity to &#8220;enrich and elevate our national life.&#8221; That Great Society would demand an end to poverty and racial injustice.

May 21, 2022

The Business Case Behind Lionel Messi Going To Major League Soccer
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Hey Friends,
Lionel Messi is one of the world’s most popular athletes. We know this. He has more than 325 million followers on Instagram alone—that’s roughly equivalent to every person currently living in the United States following him on the platform.
And Forbes estimates that the soccer star made $130 million last year, meaning he is not only one of the world’s most popular athletes but also the world’s highest-paid.
Lionel Messi 2022 Income Breakdown
On-Field: $75 million
Off-Field: $55 million
Total: $130 million
So when news broke yesterday that Lionel Messi was set to leave Paris Saint-Germain in 2023 to join Major League Soccer (MLS) club Inter Miami, many Americans were understandably excited. And when you add in the fact that the report claimed Lionel Messi would be acquiring a 35% equity stake in the MLS franchise—valued at more than $200 million today—it almost seemed like it was too good to be true.
Well, maybe that’s because it was. Lionel Messi’s camp quickly denied the rumors, saying they are “completely false” and that Messi “has not yet decided on his future.”
I’m not sure what to think about this, quite frankly. Lionel Messi has purchased more than $10 million worth of luxury Miami real estate over the last few years. Inter Miami co-owner David Beckham was pictured with him this past weekend in Qatar. He has publically joked about joining the club several times, and let’s be honest, even if Messi had agreed to the deal, it’s not like he would come out and confirm the report anyways.
So we’ll see what happens. But rather than waste your time speculating on what might eventually happen, I want to spend our time today breaking down the business case as to why I think this is actually a good idea. So without further ado, let’s get right into it.
I think David Beckham is probably the most obvious example to start with. He left Real Madrid in 2007 to play for Major League Soccer’s Los Angeles Galaxy, and he signed a five-year, $32.5 million deal with the club — or $6.5 million per year.
That represented a 70% pay cut to his current deal at Real Madrid. But that was just the public number. David Beckham reportedly made more than $250 million during his time with the LA Galaxy through a unique revenue-sharing agreement with the team and a laundry list of multi-million-dollar sponsorship deals.
Still, that was just the tip of the iceberg for David Beckham. The real win came years later when he exercised an option in his LA Galaxy contract that gave him the right to purchase a Major League Soccer expansion franchise for just $25 million.
Why was that the big win? Because expansion fees had increased drastically, going from $10 million when David Beckham originally signed the contract to the $150 million that Nashville SC paid just one month prior to Beckham exercising his option.
MLS Expansion Franchise Fee
2007: Toronto FC pay $10 million to join the league
2017: Nashville SC pay $150 million to join the league
The reality is that Lionel Messi probably won’t get nearly as good of a deal as David Beckham. Major League Soccer was a much smaller league in 2007, and Beckham was taking a much larger gamble. But that doesn’t mean Lionel Messi’s potential 35% equity stake in Inter Miami won’t eventually be worth much more than it is today.
It’s become fairly apparent to me that Major League Soccer is set to become the next major professional sports league in the United States. And with several MLS clubs already worth nearly $1 billion on paper, you could probably argue that it already has.
For example, the Seattle Kraken recently paid a $650 million expansion fee to become the NHL’s 32nd franchise. But according to Sportico’s 2021 MLS valuations, there are already five clubs worth more than that in Major League Soccer — Los Angeles FC, Atlanta United, LA Galaxy, Seattle Sounders FC, and New York City FC.
Los Angeles FC: $860 million
Atlanta United: $845 million
LA Galaxy: $835 million
Seattle Sounders FC: $705 million
New York City FC: $655 million
And just look at how average team valuations have trended over the last few years, increasing from $240 million in 2018 to $550 million in 2021. That’s a 32 percent compounded annual growth rate and a massive increase from the $10 million expansion fee Toronto FC paid in 2007.
Of course, we all know that past success does not guarantee future results. But all signs indicate that MLS franchise valuations probably have much more room to run.
Soccer is the world’s most popular sport. Estimates suggest there are about 4 billion soccer fans globally, meaning that more than 50% of the world’s entire population enjoys the sport. But even in the United States specifically, more children (ages 13 to 17) now play soccer than ice hockey, lacrosse, wrestling, and gymnastics combined.
And the number of children playing soccer is now within striking distance of baseball.
Baseball: 1.8 million
Soccer: 1.2 million
Lacrosse: 421,000
Gymnastics: 247,000
Ice Hockey: 243,000
Wrestling: 219,000
But the underlying fundamentals of MLS franchise ownership also appear to be improving. For example, the 23 teams that competed in MLS during 2018 combined for $100 million in losses. Even worse, only seven of those teams turned a profit, and of those seven teams, just three made $1 million or more in profit.
Sure, expansion fees have certainly helped limit the financial damage as the league grows. Cincinnati and Nashville each paid $150 million. St. Louis and Sacramento paid $200 million each, and Charlotte paid an MLS record $325 million in expansion fees — those fees are then split across the league.
But the real growth driver will be media rights. For example, Major League Soccer has seen the average annual value (AAV) of its broadcasting rights increase from $8 million to $75 million over the last decade. That’s solid growth, of course, but it still pales in comparison to major sports leagues like the NFL and NBA, which bring in $10 billion and $2.6 billion each year in media rights, respectively.
Major League Soccer is currently negotiating its next rights package, and the rumor is that they might be having a hard time finding someone at their preferred $300 million per year price tag. But regardless, MLS media rights are set to increase 3-4x, and if that enables them to sign better players like Lionel Messi, they will only go higher.
And that’s without even talking about the specific opportunity at Inter Miami.
The Miami MLS club is currently valued at $525 million, according to Sportico, and is estimated to do ~$35 million in annual revenue in a non-pandemic year. That’s a 15x revenue multiple and resembles a valuation that is more closely aligned with software companies (~15x revenue) than traditional sports franchises (~6x revenue).
But there are also a lot of exciting things happening in Miami. The club played its inaugural season in 2020 during the middle of a global pandemic. They are building out a youth academy and development system under David Beckham, and ownership was recently granted a 99-year lease for a massive redevelopment project in Miami.
This will allow them to build a new 25,000-seat stadium, at least 750 hotel rooms, 30+ acres of retail space, hundreds of thousands of square feet of office space, and a 58-acre public park. That should bring in more revenue and increase the valuation.
Still, the reality is that no one really knows what is going to happen next.
Lionel Messi would have an incredible economic impact on the Miami franchise if he were to get involved. And it would most likely be a no-brainer for the ownership group to include him, regardless of the price.
But the Argentinian has earned more than $1 billion throughout his illustrious career, and at that point, maybe you start to think about retirement a little bit differently.
I hope everyone has a great day. I’ll talk to you tomorrow.
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The Cantillon Effect and Stock Market Crashes
There's a mismatch between financial returns and underlying economic activity. This mismatch deforms our society, and there's only one way out.
Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…
Today I’m going to write about the decline in stocks, and what it means.
The Big Ouch
Anyone who has paid attention to stocks has noticed a pretty vicious downturn over the last six months. Since its high late last year, the NASDAQ is off by over a quarter, with big tech leading the way down. It’s not just stocks, we’re experiencing a broad-based decline across different sectors, from tech to NFT’s to streaming giants like Netflix, with commodities like oil or diesel that are in short supply holding up or going higher. The bond market is having its worst performance since 1842. Along with the downturn comes pain, from layoffs in Silicon Valley to crypto message boards on Reddit with suicide hotlines affixed to Walmart indicating that broader job cuts are going to come soon. It’s an ugly situation.
And yet, while it’s painful and sad, this collapse, in many ways, can’t come soon enough. The drop in the markets is necessary.
To understand why, it helps to start with the purpose of finance. Financial markets are critical in any free society, because they enable flexibility in production and distribution. Without the ability to borrow money, speculate, and go bankrupt, it is very difficult if not impossible to systemize innovation, kill off old and inefficient firms, or cater to consumer tastes. Yet, finance should be a small part of the economy, because speculation isn’t intrinsically valuable. Banks should serve production, providing capital to ventures that will eventually generate income.
Sometimes, however, financiers are able to take control of production, and that leads to wild inefficiencies, speculation purely on asset price inflation, and eventually authoritarian politics. As economist John Maynard Keynes wryly put it, “When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.” That’s where we are now. Compensation for financial intermediaries has historically cost about 2% of GDP; today it’s at 9%. To put it differently, a small number of people are collecting hundreds of billions of dollars in fees running private equity funds, but private equity is no better (and probably worse) in terms of returns than public equity indexes.
This is no way to run a country. In a society with a coherent social vision, people would get rich investing in baby formula production, or medical dye, or generic pharmaceuticals, all of which are in shortage. But instead, money has been flooding into cryptocurrencies, weird obvious scams like SPACs, and a manic art market. Christie’s, for instance, just sold a famous Andy Warhol painting, a 1964 silk-screen of Marylin Monroe. The work went for $195 million to an anonymous bidder, which is the size of the annual budget for a small city, like Norman, Oklahoma. When baby formula is in shortage and art markets are insane, the economy has clearly become the byproduct of a casino. (I suspect there’s probably some form of collusion here, of auction houses, high-end museums, and billionaires, to keep prices high, but the point stands.)
The effects of such a mania aren’t constrained to the financial class; this chart from the New York Times shows that the huge increase in asset values since the Federal Reserve started pumping money into the financial system during Covid has showered $6 trillion on homeowners, while denying homeownership to an entire generation.
Essentially, if you own assets or intangible capital assets, you’re doing great. If you rely on your income making or moving something, you’re not. Hence the shortage in stuff that needs to be made or moved like baby formula, and the surplus in bullshit like cryptocurrency.
The Kill Zone Economy
There are a few important reasons why we are living in a giant casino. The first is monopolization. An economy full of corporate monopolies simply does not allow for enough new investment in productive ventures that can fulfill consumer needs. Monopolies either choke off new entrants to the market, or they buy them out.
Venture capitalists call the industry segments dominated by big tech firms like Google or Amazon ‘kill zones,’ indicating that’s where they won’t invest. But kill zones apply more broadly. Google blocks new entrants into search, just as Abbott Labs, Nestle, and Mead Johnson control baby formula, and group purchasing monopolies stop firms from making generic pharmaceuticals in shortage.
Indeed, in 2017, economist Simcha Barkai found that consolidation across the economy was costing significant amounts of investment. He wasn’t initially looking at investment, but at why workers weren’t benefitting from productivity gains. What he found is that the problem wasn’t just with workers, capital investment itself was going down faster than labor share. Firms were spending less on workers, while also spending less on robots. What was up, was profits. The reason, Barkai found, was consolidation across the U.S. economy since 1985, with the trend more pronounced in more concentrated sectors and less pronounced in ones that were less consolidated.
What he was implying is that large profits weren’t going into productive investment or to wages, but instead to government bonds. There was just nothing to invest in, because monopolies had hindered entrants into markets. The kill zone, Barkai found, was everywhere.
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Julius Krein, in a brilliant essay last fall, wrote about this same dynamic, noting that there has been a stark disconnect between productivity and profits.
The U.S. economy is, to a unique extent, organized around maximizing asset values and returns on capital independently of growth—in terms of corporate behavior, financial market incentives, and government and central bank policy. This may seem obvious or even tautological: what is capitalism if not a system aimed at maximizing returns on capital?
But the disconnect that has emerged between returns on U.S. financial assets and underlying economic performance—and even corporate profits—over the last few decades should raise deeper questions about basic economic policy assumptions and their theoretical foundations. Insofar as rising asset values are not linked with growth or productivity—and at the very least it is clear that they can diverge for meaningful lengths of time—then not only are different policy approaches required to achieve these distinct objectives, but the larger relationship between capitalism and development will need to be rethought.
Economist Jan Eeckhout, who wrote The Profit Paradox: How Thriving Firms Threaten the Future of Work in 2021, had a similar observation. At a recent conference, Eeckhout presented his work, and noted that from 1948 until 1980, the Dow Jones Industrial Average - which is basically the top thirty companies - stayed at roughly the same inflation-adjusted value. It did not move at all. In 1980, we hit an inflection point, and it started rising dramatically. Large firm profits started increasing, which is something you can see in lots of other areas, like mark-ups or profit rates. Because of the dominance of these firms, overall production, Eeckhout argues, is lower than where it should be, by a substantial amount.
So when demand spikes for real stuff, inflation is one result.
The Cantillon Effect
Policymakers have, for decades, avoided dealing with the drag on growth that monopolies are, and they have done so by turning to the tool of pushing up asset values by making it easy for financiers to borrow money and speculate with it. During the pandemic, this policy framework turned comical. In March of 2020, Congress passed the CARES Act, the second finance-heavy bailout in the last twenty years. Chris Leonard’s Lords of Easy Money covered this framework well, tracing the choices of the Fed to boost asset valuations and the consequences of those choices.
The place where most people experience this deformation is in the housing market, which is basically nonviable at this point for most people trying to buy their first home. But its impact in other sectors was just as profound in terms of rearranging political power. The bailouts saved private equity shops from their Minsky Moment, consolidated corporate assets, amped up tech valuations, boosted speculative fervor in GameStop and helped Wall Street-adjacent crypto barons.
At the time I called this bailout a ‘corporate coup,’ and it was. Shortly after that, as the stock market boomed, I started harping on something called the Cantillon Effect, or why Wall Street got a bailout and ordinary people didn’t. The Cantillon Effect, which is named after French 18th century economist and philosopher Richard Cantillon, is a theory of monetary policy and political power.
Cantillon described what happens to class of people in the economy when a gold mine opened. Those near the mine, or with connections to the king, were the first to get access to the increased money supply. They bid up assets, and gain political power. Then as the gold moved into the rest of society, inflation in normal goods is the result. (Cantillon also noted that imports increase dramatically after a gold discovery, articulating a version of what is today known as ‘Dutch disease’ in economics.)
Money, in other words, does not flow in a neutral manner when it is coined or printed. Today, we don’t use gold, but the institutional closeness of the Federal Reserve to Wall Street mimics this situation. Small businesses and ordinary people did get some money from the CARES Act, but it flowed months after private equity firms and monopolies got their cash with which to bid up financial assets. Imports also skyrocketed, consistent with Cantillon’s theory. Money printing at the Fed and monopolization interacted in a toxic way, with cheap capital causing a massive merger boom that is further consolidating the economy.
During the height of the GameStop craze, the Cantillon Effect was again relevant. The gist was, there are so few places to invest in real production because of consolidated markets, that the only things to put money into are private equity-style takeovers, or speculation in financial markets. Here’s what I wrote last January.
On Friday, a Wall Street contact told me, “Matt, this speculation isn’t just about GameStock, it’s everywhere. I collect basketball cards, and there’s a bubble in these collectibles.” And sure enough, I poked around, and there is. There are endless sites and message boards talking about ‘investing' in cards, with titles like “7 Rookie Cards That Could Double Your Money In 2021”. And the price hikes aren’t happening in old rare vintage cards, but new ones printed relatively recently, like $1.8 million going for a Lebron James or Giannis Antetokounmpo rookie card.
And the pricing pattern tracks the overall speculative fervor we’ve been seeing in the post-financial crisis era. Prices of these cards started going up in 2016, but really started spiking when the pandemic hit and the CARES Act passed. And where there’s speculation, there’s corruption, with ‘grading companies’ playing the same role as the rating agencies during the financial crisis.
It’s been a frenzy, and an obvious one.
After the Crash
Because of wage demands from labor, the Federal Reserve is now pulling support from financial markets, both increasing the cost of borrowing money, and withdrawing cash directly by reducing its large balance sheet. An extremely fragile market, with all asset classes except certain commodities, is the result. The Cantillon effect is going into reverse, and the first people to get hit are those closest to the gold mine. Aka, the billionaires.
So far, the decline is not that bad, the stock market is still substantially up above its pre-pandemic level. But if the Fed continues on its path, and a big crash really does happen, then the most important consequence is that minds open up to what had previously seemed impossible, because solidity melts away, at least temporarily.
Financial crashes remind me of the American philosopher John Rawls, and his theory of fairness known as the veil of ignorance. Rawls thought that we should try and choose our principles of governance using a thought experiment. What laws would we choose if we did not know our place in the social order? His view was that those under such a veil of ignorance would try and build a society that is not as predatory towards those without power, because of the risk being they might end up as one.
When the asset values that underpin the American social order go wobbly, then even the powerful start to imagine that the greater good has some merit. And frankly, it is about time. While the bailout in 2020 was toxic, it is only the most recent example of prioritizing finance. For decades, union and public pension funds have been overestimating returns to avoid raising taxes or contributions, which means that we have a large shortfall that has been stop gapped with financial games. And underpinning this mismatch between finance and real production is imports from China.
In other words, the very essence of how we run our society is deformed by a policy framework that prioritizes monopolization, speculation and cheating over the ability to, well, do anything else. Here’s the most basic question of statecraft, lifespan. Are we keeping our people alive? Increasingly, the answer is no.
The 2020 financial crunch during Covid was the second big crisis of this century, and Donald Trump wasted it. In 2009, Barack Obama thew away the opportunity he got during the great financial crisis to restructure America into a fair society. Americans were willing to endure pain in return for justice. Instead, Obama and Trump rewarded them with Oxycontin.
We do not have to go down this road again. We can restore our communities, our markets, and our businesses. There are many policy choices to get us there, but the basic idea is that we have to return to a world where the person who does the work gets the reward for that work. That’s starting to happen. Here’s a headline yesterday on Jonathan Kanter, the new chief of the Antitrust Division.
Obviously, we’ll have to help people injured in this downturn. But after that, we should restore the basic primacy of commerce over speculation and monopolization. That means taking apart conglomerates like Abbott Labs and Google, restoring bright line antitrust rules, raising tariffs, re-regulating airlines, shipping, trucking, and railroads, and shrinking the financial sector, as well as reforming the Federal Reserve so that Congress and elected leaders get a say in when recessions happen. Doing basic things like stockpiling agricultural commodities, like we used to do, and prioritizing small farms, as well as domestic manufacturing, can help insulate us from supply shocks. These ideas are a start, the point is return to seeing wealth as making things we need, not numbers on a spreadsheet.
In the end, we have to decide whether we want to even have a society. We can do that. Of course, we can choose the other much darker road. But as long as the Federal Reserve keeps the bubble going, we can’t make that choice, and the damage gets worse. So even though it will painful, that bubble can’t pop soon enough.
Thanks for reading!
And please send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation and democracy. And consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.
cheers,
Matt Stoller

There's a mismatch between financial returns and underlying economic activity. This mismatch deforms our society, and there's only one way out.

The Cantillon Effect and Stock Market Crashes

Welcome to the 876 newly Not Boring people who have joined us since Monday! If you haven’t subscribed, join 124,021 smart, curious folks by subscribing here:
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Hi friends 👋 ,
Happy Thursday! I’m excited to introduce a new monthly Not Boring series: The Founder’s Letter.
Helping founders tell their stories is core to Not Boring. Often, that means me spending a bunch of time with a founder and doing my best to tell it as I see it, with the benefit of a whole lot of time to think and craft and edit. Sometimes, it takes the form of a conversation on Not Boring Founders, during which founders give their raw unedited thoughts. This is a third way.
In early February, my friend Kevin Song, the founder and CEO of Not Boring Capital portfolio company withco, introduced the world to his company with a heartfelt letter: Why be with company? Recapturing the American Dream. Unlike a traditional funding or launch announcement, Kevin’s letter focused on why he started withco—why its mission is so important to him and what the world will look like if withco succeeds.
A few weeks after Kevin published his letter, I caught up with Mackenzie Burnett, the co-founder and CEO of Ambrook, another Not Boring Capital portfolio company. After silently building, Mackenzie was ready to tell the world about Ambrook, and we discussed how she might do it.
Should she go to TechCrunch?
An agriculture-specific trade publication?
Do the podcast circuit?
Maybe. Never hurts. But I thought back to the first time Mackenzie and I spoke. She talked about why she started Ambrook — why its mission is so important to her, and what the world looks like if Ambrook succeeds. Mackenzie could let other people tell her story, but I thought it would be more powerful coming directly from her. So I asked her if she’d be game to do it in Not Boring, and lucky for us, she was.
Mackenzie is a force of nature.
A couple of months after I invested in Ambrook, I ran into Mackenzie again, in a strange place: the ConstitutionDAO core team’s Discord channels. She joined a couple days into the process, when things were just getting chaotic, and whipped the whole thing into shape like the Tasmanian Devil’s organized twin. I remember seeing her work and being so, so happy that I’d backed her. She’s the kind of founder you back no matter what she’s building.
Luckily, she’s building something important, at just the right time. A couple of years ago, it would have taken a huge team rebuilding all of the basics to build financial products for farmers. Today, thanks to a smorgasbord of fintech primitives, Ambrook is doing it with a team of just eight people. What wasn’t a venture-scale opportunity before suddenly is. I’ve written a lot about primitives and composability in Not Boring. The promise of those concepts, of course, is that future entrepreneurs will take the building blocks and organize them in a way that helps real people and makes the world a little bit better.
That’s what Ambrook is doing.
This is Mackenzie’s story about why and how.
Over to Mack.
I.
Let me tell you a story.
Imagine you’re a cattle rancher in the high plains of Colorado.
You rent a small plot of land from a neighbor. You have twenty head of cattle.
You tell folks about how you came to Colorado from out East when you were fourteen, working a construction gig with your dad. You fell in love with horses and cattle and the lifestyle of ranching here. You decided to stay.
You’re hoping to buy your own land one day, and expand the small herd you have. Maybe you’ll explore regenerative grazing.
But to do that, you need to get your books in order. You get by, but your margins are thin. You need a business plan to give to your bank. Not to mention a balance sheet.
You’re working on it. But it’s hard to find time at the very end of your days, when you’ve been outside and one of your pups went missing and so you had to drive over to the neighbors’ to find him and then one of the cows gave birth when you got back.
You know the government has programs that will help you grow your ranch, but the applications are lengthy and hard to keep track of.
Not to mention that just to stay compliant as a rancher, you’re probably filing paperwork for six – or is it seven? – different government agencies.
You love your job, and you need to do all this to do your job. But all this means wiping the cow crap off your hands, going on the computer, and hunting through slow-loading government websites. One of them took 25 minutes to download a PDF last week. You made lunch in the meantime.
Farm accounting, farm funding, farm compliance. There’s paperwork for everything it seems. Hours and hours a week of paperwork.
And you’re worried about things happening around the world, outside your control. Drought and wildfires from climate change have wracked Colorado of late. Supply chains still backed up from the pandemic. Rising fertilizer and fuel costs from the war with Russia. Inflation making everything worse.
This rancher is real – and his name is Teo.
Teo is one of Ambrook’s early customers. We helped him get a farm grant during the pandemic, when the rodeos were shut down and the meat processing facilities were backed up. Now he’s using Ambrook to get his books in order and business plan in place.
This is Teo’s story, and the story of countless producers across the country. Some folks move into farming, like Teo. Many have been farming for their whole lives. The paperwork sucks all the same.
II.
Now, let me tell you my story.
I grew up with conversations about agriculture at the dinner table.
Tales of citrus production, the threat of longhorned beetles to American hardwood forests, the dynamics of illegal agricultural imports through the U.S.-Mexican border.
My parents were lifelong civil servants with the U.S. Department of Agriculture, so the conversations got pretty wonky.
For both of my parents, the job was personal.
My mom was born into a local dairy empire in India, built from a rural village in Gujarat and passed down generation after generation until my grandfather immigrated with his family to the United States. My dad grew up going to his family’s dairy, poultry, and produce farms in New England.
I turned out pretty wonky too.
My path looks eclectic from the outside – my first startup built open source software infrastructure, then I went back to grad school to work with U.S. military officials on climate risk, and then I worked on water trading in the Central Valley.
The common theme connecting all these dots is that I’m driven to solve esoteric societal problems – preferably with technology.
There are jobs out there where you can really make a difference in people’s lives.
III.
Most agriculture today is neither sustainable nor resilient.
On sustainability: more than 40% of U.S. land and freshwater is devoted to farming.1 U.S. agriculture contributes to upwards of 25% of the nation’s greenhouse gas emissions.
On resilience: climate change is already devastating agriculture and rural communities. (“Adapt or die,” was what one producer told us for Ambrook Research.)
If we’re going to meet the UN’s projected 70% increase in food demand by 2050, something needs to change.
Fortunately, many sustainable farming practices both reduce agriculture’s climate impact and make farms more resilient. However, many farms are not investing in sustainability for three main reasons:
Farm margins are thin and increasingly volatile.2
Antiquated systems make it hard to know where farms are making and losing money.
There isn’t enough financing out there to fund sustainable practices.3
Here’s a real-life example: planting a cover crop benefits the soil, captures carbon, and usually makes the farmer a bit of money. But it’s an additional investment and risk – a few years of upfront cost, labor, and equipment before you start to see any return on investment. That means a lot of farmers today are reluctant to start cover cropping, despite the value-add to their soil, the environment, and their bottom line.
If you’re worried about or don’t fully understand your bottom line, it’s hard to invest in the sustainable practices that would secure the long-term financial and environmental health of your farm. Farms are complex operations, yet farm financial management still exists as a loosely-connected constellation of pen and paper, Excel, Quickbooks, and decades-old industry software. It’s hard for a lot of farmers – and their finance managers, bankers, and local USDA officials – to know what’s going on in real-time.
Ambrook builds simple, collaborative financial management software for farms. Grant discovery, bookkeeping, spend management with cards, bill pay – the whole fintech gamut. With Ambrook, farmers have a clear view into their financial present and future, can improve their margins, and get easier access to credit.
And of course, farmers have to do less paperwork, because Ambrook makes it easy to automatically fill and file government forms.
When we started Ambrook, we were surprised no one had built this yet. As we dug in, it became clear the reason was because it was hard to build a venture-scale business before the rise of fintech primitives.
Fintech has opened up new business models, where users get software for free and networks, banks, or vendors pay the fees. For thin-margin businesses like farms, this makes software far more accessible to the long-tail of the market – to the everyday farmer. And it makes it easier to scale into enterprise applications and compete against expensive ERP platforms.
Agriculture is characterized as one of the least digitized industries – not because farmers are anti-technology, but because few companies have built for their use case. Many farmers, regardless of their size, run sophisticated operations. They deserve the tools to match.
Over time, we plan to layer in sustainable financing and resource management. Once we’ve solved this problem for agriculture, we’ll expand to other natural resource industries – fisheries, forestry, mining – faced with the same problem of making sustainability profitable.
IV.
Ambrook is built on a philosophy of pragmatic environmentalism: if you care about the earth, then you should care about the people whose jobs are to be stewards of the earth.
If our team succeeds, we’ll have built a far more resilient natural resource supply for society – starting with food and water.
Farmers using our software will be able to invest in more sustainable practices while lowering their costs and improving their margins.
More carbon will be stored in the soil. Less freshwater will be sucked from aquifers. Less nitrogen will pollute our waterways.
And our customers will be able to keep the family farm in the family for longer, weathering increasingly volatile market and climate shocks, in a way that actually starts building wealth again for rural America.
We’ve stayed lean so far, prioritizing a small, fast, senior team as we figured out the best place from which to tackle this problem. We think the product speaks for itself – but you can read about how thoughtful Brian has been about designing our cross-platform experience, or Atticus has been about diving deep into research and customer case studies.
Now that we know we’re onto something, we’re hiring aggressively to go after the opportunity.
If you want to build a new financial stack from the ground up and become an expert in everything from banking and cards to lending and accounting, you should join us. If you want to solve problems in climate or agriculture, you should join us.
Basically, if you come to Ambrook, you’re going to learn how to build this weird, huge business tackling real, deep problems. Most people don’t spend enough time thinking about or being exposed to hard, interesting spaces. At Ambrook, you get the full fintech + SaaS training, but also the muscles to connect those things to challenging problems.
Then, when you’re ready, Jeff, Dan and I will back you to start your own company and introduce you to all our investors. Because, at the end of the day, we need more founders and experts solving problems for these industries and for climate change – that’s my priority.
See you soon,
Mackenzie
P.S. We visited Teo at his ranch last month – you can hear his story in his own words in this beautiful little video that Stripe just released about Ambrook.
And of course, you can check out Ambrook’s website and careers page to get involved.
Thanks to Mackenzie for sharing her story, and to Tom White for editing!
Thanks for reading, and see you on Monday,
Packy
Land usage is unsustainable because you can no longer just linearly scale land use to meet increased demand from population growth. Freshwater usage is unsustainable because more water is being used each year than can be replenished in aquifers.
Margins are thin because farms today are squeezed on both sides by monopolies of scale – input suppliers and equipment manufacturers on one end, and wholesale buyers on the other end – and underneath by rising cost of land. Government subsidies can help, but aren’t a panacea. Margins are volatile because farming is subject to increasingly unpredictable global conditions, like weather (and climate change), trade wars, and supply chain shortages.
Case in point.

Building sustainable and resilient agriculture through better financial products and pragmatic environmentalism

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