Saturday, December 31, 2022

A Boy of Mars (A Sci-Fi Short Story)

Living on Mars is not a technical problem, but a people problem.

The first Mars colony was a failure, and in part, it was thought because we provided enough return rockets so that every colonist could leave if they wanted to.  And after a year or so, they wanted to.  That, and the costs were staggering and people on Earth raised the usual objections, "Why are we spending so much money so a few people can live on Mars when we have people starving on Earth?"

So the second colony was designed differently.  No half-measures this time, and in part, that meant no return flights.  Each of the dozens of rockets sent to Mars every other year would be a one-way trip, bringing people and supplies.  The rockets would then be taken apart and their plumbing, wiring, and electronics used for building the colony - underground.

Yes, living on Mars wasn't a fantasy of life under clear plexiglass domes.  The bitter cold temperatures and cosmic radiation meant that was simply not possible. The lack of a significant magnetosphere probably lead to the dissipation of Mars's atmosphere and water in the first place, and today it means no shield from solar or cosmic radiation.  Truly, Earth has a host of unique aspects which allow it to support life - from its size and distance from the sun, the makeup of its crust, its liquid core, its magnetosphere, the ozone layer, and even its unusually large moon, which created tidal estuaries that were incubators for early life - the lack of any one of these things could have meant Earth would be a lifeless rock like the Moon - or Mars.

The new Martian colony had slightly less than 100 colonists - all volunteers, of course, and all experts in multiple fields. We wanted a large enough colony to be sustainable, but not so large that Dunbar's number comes into play.  Every colonist had to cross-train in a number of fields, must have a number of different skills, and be willing to work in a number of fields.  It wouldn't be possible, for example, to have only one doctor, as if they died, well, the colony would be helpless.  Not only that, everyone had to have some familiarity with various systems that sustain our underground colony, from the hydroponics farms, to our power plant, the air recirculation system and yes, even the sewage treatment and water recycling plant. Yes, everyone has to do a shift there, if only just once a month.  Failure of any one of these systems means death for the entire colony.

And of course, everyone would have to dig - to expand the colony space to accommodate the growing hydroponic farms needed to sustain us in food and oxygen - as well as provide space to grow. Dig - or die.  Those were our two choices.

A big part of why the earlier colony failed was psychology.  The first colonists were chosen mostly for their scientific skills, and there developed a resentment by some, having to do "dirty work" like cleaning the waste filters in the water recycling plant, or the tedious process of getting hydroponic plants to grow.  This time around, however, every colonist was carefully screened, not only for their technical skills, but for their emotional makeup.  It goes without saying that there would be no room in any extraterrestrial colony for conspiracy theorists or flat-earthers - and yes, they still exist on Earth.  In fact, a whole new conspiracy theory arose that the first Mars colony was a hoax - with some believing that Mars itself did not exist at all.  It seems the crazy times had come back.

Oddly enough, when asked why they wanted to join the new Mars colony, one of the most common answers was "to get away from humanity."  It seems many technical and logical people were just fed up with the state of mankind and wanted a fresh start.  But psychology isn't an exact science and some people slipped through that should have been caught in the screening process - and Sarah and Tom were two of them.

People don't think about the little details involved in setting up a colony - and inter-personal relationships are part and parcel of humanity.  A system of governance had to be figured out and we came up with a military-style system of rank - such as used on the Moon colony - but tempered by an elected council of advisors. Clearly, pure Democracy would never work in an extra-terrestrial colony - you can't let people vote themselves more air or food, or let things get so bad before people come to their senses, as you can do on Earth - or could do, before things got out of hand.

Then there is sex.  Yes, people have sexual as well as emotional relationships, and often, on Earth, they cause people to do irrational things - stalk, rape, murder, or just create basic emotional imbalance and havoc.  This was a tricky part, as the current US government, being rather religious in nature, didn't want to hear about it - or have the public know about it.  As far as NASA was concerned, all the colonists were married, monogamous couples.  There would be no "free love" on Mars - but of course, there was, to some extent, we just didn't tell anyone about it.  We tried to screen our candidates so that things like jealousy and envy would not arise.  And for the most part, we were successful.

It was decided, however, that the colony couldn't afford to raise children until it was firmly established, and even then, having a child would have to be approved by the council, and then only if your genetic and psychological makeup passed muster.  We couldn't afford to have any children with congenital defects, who would need lifetime care - which means any deformed or handicapped child would have to be aborted.  Again, the fundamentalist administration didn't want to hear this, so we didn't tell them about it.  Speaking of which, another topic the fundamentalist administration and the general public didn't want to know about was euthanasia.  If a colonist was severely injured to the point they needed constant care, euthanasia was the only option.  Similarly, if a colonist aged out and became unable to care for themselves or suffered from dementia, then it was a quick breath of nitrogen and you get buried in the Martian soil (actually, your body would be recycled, but the Earthies didn't want to hear about that, either!).

No, living on Mars wasn't going to be fun.  There could be no slackers, no ne'er-do-wells, no alcoholics (no alcohol!) or drug addicts or vandals, thieves, or criminals of any sort.  The entire colony would have to work toward one goal - survival of the colony - and survival of the individual would be secondary to that.

This is not to say life on Mars was a grim existence.  It was invigorating to see the colony grow, with each new underground section opened up.  It was a big day when we were able to finally achieve self-sufficiency in food production - after achieving self-sufficiency in water and oxygen first.  And each new discovery of the geology of Mars excited the whole colony.  It was starting to look like the colony would survive - that we would survive, if we kept working at it.

But of course, we were still dependent on Earth and the plethora of rockets launched about once every two years when Mars and Earth were in opposition.  We were unable to produce any but the most rudimentary of manufactured goods.  Things like semiconductors, wiring, tubing, glass, and plastics all had to be imported from Earth and it would be years before we could produce any on Mars.  Our first order of business was to acquire an additional power plant which would allow us enough energy for most basic manufacturing processes, such as producing metal alloys.

It seemed like things were going well, until Sarah announced she was pregnant.  Like I  said, it wasn't anticipated we would have children in the colony for many years - the average age of the colonists was 27. All the men had agreed to a vasectomy before shipping out from Earth, with sperm samples carefully frozen and kept in cold storage at the colony for later use, if necessary.  It wasn't clear at first whether the vasectomy didn't take with Tom (who we presumed was the father) or whether Sarah had somehow sneaked into the cold storage vault and obtained a sperm sample.

Abortion seemed like the logical choice at first - the colony could not afford to have a day care center set up, as we had little room for one, and the entire staff of colonists was already working at least 12-hour days, without stop, as it was.  That option, however, was lost when Sarah announced on social media that she was pregnant - and thus that information got back to Earth.  With the fundamentalist administration in power on Earth, having an abortion was out of the question.  They would have cut off future funding just as we needed it most.

So in a way, it turned out to be a good thing, at first, as interest in the Mars colony was waning as Earth became more and more mired in its problems, and started looking inward.  A baby on Mars!  It made the headlines of all the tabloids and support for the Mars colony surged.  Legislation funding the new power plant sailed through Congress and it was promised to be shipped next year.

Of course, a baby on the way meant we had to make quite a few adjustments on Mars.  A nursery had to be constructed - baby-proof of course.  Not much in the colony was designed to be child-proof, as everyone there was an adult and had some sort of scientific background.   Power leads and connection panels were often unguarded, as the materials to make safety enclosures and electrical insulation were in short supply.  You just had to be careful and not do stupid things.  What's more, so many of the critical components, including the plumbing for our water supply and recycling, were accessible to anyone.  The air recirculation system was similarly exposed.  It wasn't a problem for a cadre of scientists and engineers, but a small child?  This could get sticky.

What's more, work schedules all had to be reworked to accommodate not only Sarah's pregnancy (and she did work a full shift, right up almost to the end) but also to provide supervision and care for the baby once it was born.  Yes, this was difficult, but we all felt we had to pull together.  It was the next step in the colonization process, of course  - but a step we had hoped not to deal with for a decade or more.

The birth was anticlimactic - it went smoothly despite, as our primary doctor put it, "my best efforts" and everyone was excited to see the new baby - the first human born on Mars - the first Martian, if you will.  He was a healthy baby boy and Tom and Sarah named him Jake.  Sarah was out of action for the first two weeks, but returned to work, with her schedule adjusted to allow for breast-feeding.   The entire diaper thing was a bit of a challenge, as the colony was set up such that everyone used a recycling toilet.  We had to sew diapers from fabrics scavenged from surplus clothing stores (spacesuit underwear worked very well) with the hope that it would be replaced by a shipment in the next rocket.  Disposable diapers were out of the question - as indeed, disposable anything was impossible in the closed-loop system we lived in.

There were signs of trouble early on. Jake would cry incessantly and even scream for hours on end.  We were concerned that maybe he suffered from some form of Autism, but it was too early to make such a diagnosis.  The screaming sort of put everyone on edge - it is hard to get away from loud sounds in the cramped environment of our underground colony.  On the plus side, more colonists volunteered to work at the remote waste recycling plant, where the hum of pumps and machinery drowned out the noise - if you didn't so much mind the smell.

The first real hint of trouble was a communication we received from Earth.  As a member of the council, I was privy to communications between the psychological staff on Earth and our two resident psychologists (one also an Engineer, the other a biologist) in the colony.  It seems that the background checks on Sarah has somehow failed.  Her family had a history of mental health problems and worse yet, Sarah knew about this and lied about it on the application forms.   Further research indicated that she had, in fact, impregnated herself from our frozen store of sperm, which would imply she herself had some mental health issues.

But what to do?  We didn't have a return rocket to send her and the baby back - and it wasn't even clear a baby could survive the acceleration g's associated with launch and re-entry, not to mention the months in space such a journey would take.  We were stuck with Sarah and Jake - and Tom - and had to figure out how to make things work.

Despite these concerns, things seemed to get better.  Jake stopped his crying and screaming and turned into a charming little baby.  He seemed quite curious about his environment, though, and had to be watched constantly.  As soon as he learned to crawl, he tried to crawl away from one of his minders, and as I explained before, our colony is hardly baby-proof.  We ended up walling off one section of the sleeping quarters as a "nursery" for Jake as well as a sleeping area for Tom and Sarah.  There was some grousing by other colonists as to the fairness of this, as Sarah and Tom had (by Mars standards) a luxurious private "room" while the rest of us had to sleep in not-so-private bunks.  And they achieved this luxury by breaking the rules.  It didn't help matters any that Sarah bragged about having these private digs.

A few years went by and a few more oppositions came and went, and while the supply rockets arrived, the power plant we were hoping for never materialized.  We were dependent on Earth to survive and maybe Earth wanted it that way.  Little Jake grew up and was a real terror.  Hyperactivity was one diagnosis, another was somewhere on the Autism spectrum.  Perhaps it was ADHD.  Whatever the cause, he was starting to become an annoying little pain in the ass, to put it bluntly.  He ran around the colony, screaming at the top of his lungs and often broke things by accident.  He would pout and sulk when verbally disciplined.  We never dreamed of spanking him - that was considered abuse. The best we could do was withhold access to video games, which seemed to be his greatest joy.  But even then, he figured out how to access them by using his Mother's account.

We had started formally schooling him by age five - again a task we were not yet prepared for, and one which used up a lot of manpower.  We had tried getting Jake to self-educate using programs beamed from Earth, but he refused to participate in these - loading games into his tablet as soon as adults turned their backs. It was becoming apparent that his mental capacity was somewhat deficient and we pondered what role he would play in the ongoing colony.  It could be he would be suited for little else than manual labor.

He wanted to go outside and see the surface of the planet, but we had no spacesuits in his size and it would be another year before one could be sent from Earth.  There was some discussion as to whether it was worthwhile to have a suit made in a child size as he would quickly outgrow it - and the colony had no plans for more children for years, at least.  We finally were able to get him into one of the pressurized rovers by having him curl up in a pressurized sample container and then carrying that out the airlock to the rover.  It was a dicey proposition as we usually required one space suit for every passenger in a rover.  If there was a decompression issue, he would have to curl back up into the sample container, which had a limited attached oxygen supply.  If they had to walk anywhere to be rescued, he would have to be carried.

Once in the pressurized rover, he seemed to enjoy seeing "his" planet for the first time, but when it came time to go back to the underground colony, he threw down a fit and started kicking and screaming - cracking one of the flat panel displays in the rover cabin.  This was a piece of electronics that we could ill-afford to lose, as getting a replacement from Earth would take a year or more and cost tens of thousands of dollars - and mean displacing some other piece of hardware on the cargo rocket, that we dearly needed.

But it got worse.  Once back in the colony, he started sulking and doing small acts of vandalism and sabotage.  At first it wasn't noticed or was chalked up to accident, but then he was caught turning valves in the air recirculation system and dumped several hundred kilos of precious breathable air into the Martian atmosphere.  The director of the air recirculation system was livid and hauled off and smacked him in the butt so hard that little Jake flew three feet in the air, which isn't too hard to do in the reduced gravity of Mars.  Some present were horrified and a meeting of the council was called.

We asked for some professional opinions from Earth as well as that of the two qualified psychologists in the colony.   Some claimed it was a phase he was going through, while others thought this was a sign of mental imbalance that could get worse with time.  What was clear to everyone was that we were not yet prepared for child-rearing.  The colony would have to build a child-proof creche to raise children in, and allow them into the general colony only with strict supervision.  One curious hand could kill off the entire colony by pressing the wrong button or turning the wrong valve.   It was clear too, that long-term, the colony would have to increase the safety factor of all of our systems, many of which were jury-rigged, to prevent such accidents in the future.

Unfortunately, not much was accomplished at this meeting.  Like most parents everywhere, we kicked the can down the road, when it comes to problem children.  We hoped that Jake would "grow out of it" as he matured and realized that life in the colony was a lot of hard work.  But in his defense, he never asked for any of this, and had he been born on Earth, perhaps his life would have been different.  Maybe he would have been a troubled child there, but the consequences would be less dire.

The next problem we had with Jake involved stealing food. Like I said, we had just become self-sufficient (barely) with hydroponics.  Food was still in short supply and our staff nutritionists carefully monitored what was served in our meals as well as the portion sizes.  Life on Mars wasn't like our lives on Earth.  You could not just "raid the refrigerator" if you were feeling a bit peckish.  Food was rationed, and no one in the colony had much in the way of excess body fat.

We were quite proud, therefor, when our head of hydroponics announced a special treat for us - he was able to grow a patch of strawberries that would be ripe next week - and provide us with a treat for dessert at Sunday dinner.   But alas, such was not to be - we found Jake groaning with a belly-ache and the entire row of strawberry plants picked clean.  Not only was it a selfish thing to do, but it was a breach of etiquette.  We didn't have the draconian laws in effect on the moon colony (which was run as a military base).  Theft of food there was a capital offense - although such punishment had never actually been meted out.  The threat alone was enough to curtail such thievery - that and the military discipline that they enjoyed.

At this point, there started to become an anti-Jake faction in the colony.  A number of colonists were grousing that Jake had caused nothing but problems for the colony and that Sarah had been selfish in impregnating herself.  Many started to give Sarah the cold shoulder and they resented their shifts monitoring Jake and his behavior.  It got so bad that we had to cull the Jake-haters from babysitting him - the outright hostility from some colony members were making his emotional problems much worse.

I wish I could say it got better, but it got even worse - petty acts of vandalism continued as well as graffiti.  We knew it was Jake, of course - his childish scrawls were easy to spot.  Everything came to a head, however, a year later when Jake intentionally broke through several safety measures we had installed and dumped several thousand gallons of hydroponic fluids outside of the habitat.  By the time the sabotage was discovered, half the plants in our hydroponic farm had died.  These plants not only represented our food source, but also helped recycle carbon dioxide into oxygen.  When confronted with the damage, Jake yelled that he was "getting even" for being denied access to his video games.  He threw down a full-fledged tantrum.

An emergency meeting of the council was held. The prognosis was grim.  Opposition - and supply rockets - were over a year away.  We would have to go to a crash diet, limiting rations by nearly half.  Worse yet, the oxygen supply would be critical the entire time.  It was entirely possible that some or all of the colony would die from malnutrition and/or oxygen starvation.   One member of the council raised the ugly question: If there was only enough air for half the colony population, should half then be euthanized to insure the survival of the other half?

You could have heard a pin drop.

"I think I know who we should start with," another council member added.  The Chairman had to bang his gavel for order as pandemonium broke out.  The harsh realities of living on Mars were starting to become apparent.  We were living a very precarious life here, and so far we had been lucky that no major mishap had occurred on our own accord.  The birth of Jake had thrown a wrench into the works by accelerating our plans.  Compounding the problem was the Earth was cutting back on our supplies, using the logic that we were becoming more self-sufficient and needed less Earth goods - and that things like electronics and machinery (including the promised power plant) were "luxuries" that colonists didn't need - as people on Earth were suffering enough.

Once again, we kicked the can down the road.  We would ration food and hope for the best and "see what happens."  People were starting to feel lethargic on a low-calorie diet and within a few months, the air got kind of foul and hard to breathe.  If we could only hold out until the next supply rocket arrived, we'd be OK. In the meantime, we scrambled to re-establish our hydroponics systems, but plants don't grow overnight.

As for Jake, that problem sort of resolved itself.   We found Sarah, Tom, and Jake in their private room, apparently victims of a murder-suicide.  They had fed Jake a fatal dose of tranquilizers before taking them themselves.  The prospect of having killed off their fellow colonists was apparently too much for them.  We reported their deaths as accidental and recycled their bodies after a brief ceremony.

And that, in short is how the second Mars colony failed.   We made it to the next opposition, albeit a bit thinner than the previous.  But Earth didn't send a supply rocket, but rather two passenger rockets and a refueling drone in orbit.  We were given an ultimatum - return to Earth or else.   Earth wasn't going to spend trillions more to establish the Mars colony.  And the near disaster caused by one person illustrated how frail the Mars colony was.  How could we expect to establish a self-sufficient colony without extensive facilities for manufacturing, child-rearing, education, as well as retirement for the elderly and infirm?

Reluctantly, we held a vote and a majority voted to return.  A few hardy souls with military experience applied to join the Moon colony - under the strict military discipline there, they would be required to be rendered chemically sterile.  The military wasn't messing around as we had been.

Could another Mars colony succeed where we left off?  Only if trillions more in equipment were sent there first.  In order to succeed, the colony would have to be able to make everything they needed to survive - and to survive in such a hostile environment mankind would need a lot of technology. You can't just drive to the hardware store on Mars to buy a length of pipe, a piece of wire, or a new rubber seal for your spacesuit - it all has to be shipped from Earth, at considerable expense. Shipping the manufacturing capabilities to make these things is even more daunting.

Maybe someday, we will go back to Mars. Maybe not. There has been a lot of hand-wringing and discussion - mostly in private - as to what went wrong with both attempts at settlement.   All I can say is, a trained cadre of Engineers and Scientists can survive underground for a long while, if they are dedicated to a technical task as we were.  But for ordinary people, like poor Jake, who may not have that dedication to such a lofty goal, life in an underground warren might seem a bit confining and unsatisfactory.

Maybe Jake was trying to tell us something - mankind wasn't meant to live in a cave, a spacesuit, or in some tin can floating in space.  Yes, mankind can survive in such places, for a limited time and at staggering expense.  But as a place to live - for all mankind for all time?  It simply makes no sense, when we live on a world designed for our beings, or more precisely, we have been designed for such a world.

Friday, December 30, 2022

Free Speech for Me, Not For Thee!

The Constitution is not a religious relic!

There has been a lot of talk about our Constitution lately.  Republicans, winning a thin majority in the house - often by lying about their credentials - have promised as their first act, to read the entire Constitution out loud!  Boy!  That will take weeks, right?  Actually, it is not a very long document and this sort of grandstanding nonsense is exactly why many are no longer enamored of the GOP.

Our "Founding Fathers" - who are now anointed as religious prophets - envisioned that the document they created was imperfect and installed, as a result, a mechanism allowing it to be amended over time.  They foresaw, for example, that the issue of slavery would eventually come to a head.  But before the ink was even dry on the Constitution, it was amended - ten times - to add what has become known as the "Bill of Rights".

Sort of an embarrassing omission, really - they wrote down what the Government could do in the Constitution, including such obscure things as establishing Patent and Copyright laws, but failed to set forth what the government couldn't do.  And coming from a revolution where the British (boo! hiss!) abused the rights of the colonists, they added ten amendments (which some on the right treat as Ten Commandments) concerning such obscure things as quartering of soldiers.

Of course, in recent times, the first and second Amendments have been talked about a lot.  The British tried to suppress talk and protest, and hence the first amendment's proscription that the government could not suppress speech.  Of course, this doesn't mean you are required to host a meeting of the proud boys in your living room or your place of business, only that the government cannot suppress, entirely, their views. This doesn't mean the government can't control the time and place of such speech. For example, in recent months, some idiots have decided to chain themselves across busy highways as a form of "carbon protest".  While they have a right to protest, they don't have a right to block city streets or highways.  It is pretty basic and understandable.

Similarly, the second amendment is not absolute and never, historically, was considered so.  For over a hundred years, New York had a concealed-carry law, for example, that required a permit to carry a concealed weapon - and have a damn good reason for doing so.  For some reason, during those hundred years, the Supreme Court never had an issue with this.  But in recent times, we are finding out why these laws were put in place - it is intimidating, threatening, and dangerous when people walk around carrying loaded firearms while wearing body armor.  We have turned our country into a war zone, and if someone doesn't like your opinion on some matter, they will show up with a loaded gun and parade in front of your house.

So much for free speech - it only exists if you own and carry a firearm.

But getting back to the first amendment, the people who are squawking the loudest about "cancel culture" and their "free speech" rights being trampled are usually the first to sue others for slander and libel.  Donald Trump, for example - he of perpetual grievance - claims his "free speech" rights are being violated because he was thrown off Twitter - a privately owned company that is in no way connected to the Federal Government.  Trump was free to start his own platform - and did - and it isn't our fault that only his nutball followers went on it.   To him, free speech means we all have to listen to what he says, like it, and agree with it.  Anything less is an outrage.

Trump is also famous for saying that our libel laws are too weak and need to be made more like those in the UK.   Of course, this allows people with money and influence to silence the voices of the powerless and poor.  If you speak out against a wealthy person, they can hit you with a SLAPP suit (a nuisance lawsuit designed to swamp you with legal costs until you beg for a settlement).   The rich can afford to silence the poor - and particularly the middle-class - with such antics.  The poor, meanwhile, are pretty powerless to stop the wealthy and connected from ruining their lives.

Free speech for me, not for thee!

The latest gambit of the "free speech warriors!" is they are claiming that Twitter (pre-Musk) "suppressed" a story published in the New York Post about Hunter Biden's laptop.  Hunter Biden's laptop apparently contained what are known on Tinder as "dick pix" and apparently his Dad asked Twitter not to publish those.  Of course, the entire story was published elsewhere in national newspapers and on other sites, so I am not sure how this amounts to "suppression" of speech.  But then again, the grievance-meisters (who are not victims!) never have much use for logic.

Elon Musk is another example of a "Free Speech Absolutist" who is all-too-happy to suppress the speech of anyone who disagrees with him or criticizes him in any way.  Irony is lost on this man.  Once again, we are given this bastardized definition of "free speech" to mean not just the government cannot entirely suppress speech under the first amendment, but that even private individuals and companies must be forced to host such speech - unless of course, it conflicts with the views of the free speech warriors.

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

Oddly enough, these first amendment proponents often fail to read the entire thing - and a major part of is that the government is prohibited from establishing a national religion.  The same folks who claim to be victims of "Cancel Culture" because they can't say "Merry Christmas!" anymore (they can, and do - anyone who says otherwise is lying) also claim that we are a Christian Nation and want to establish a form of Christian Sharia Law - where the Bible (in all its inconsistencies and contradictions) is the basis of the law of the land.  I wonder how "Thou Shall Not Kill" will work with their position on the death penalty - I'm sure they'll find an exception to the rule!

So what is ironic about all this talk about "First Amendment Rights!" and "Free Speech!" is that the people shouting this the loudest want quite the opposite of what the "Founding Fathers" intended.  They'd rather have free speech for those with power and money, and squelching speech for the powerless and weak.  That is not what the first amendment is all about.

One laughable example is Musk's obsession with suppressing the young man who put up a Twitter page which includes tracking data of Musk's airplane.  This data is freely available online from the US Government.  I use sites like Flightaware all the time when I see an interesting plane parked at our tiny crosswind-landing airstrip.  I can see who owns the plane, where they came from and even see their flight path.  Maybe this is an "invasion of privacy" but there are ways to disguise your ownership - many planes are listed in the name of an LLC or leasing company, for example.

If Musk has a problem with this, he should petition the FAA (or Congress) to make such information private.  Going after a young man who is just republishing government data comes across as petty and petulant.  Besides, mirror sites on other social media are publishing the same data, just to piss him off.  Apparently he's never heard of the Streisand Effect.  It sort of is like this Harry-and-Meghan Netflix debacle (which has had horrible reviews).  Kind of hard to do a six-part miniseries about how your privacy has been invaded.  You can't have it both ways - you can't crave celebrity and attention and at the same time, cry about your loss of privacy.

This is not to say that the Paparazzi are innocent parties - they often harass people and invade the privacy of celebrities and political figures.  On the other hand, I wonder why more celebrities don't just invite them into their home and say "take all the pictures you want!"  After a two-hour photo shoot, I suspect most of them would drift off - there is no value in celebrity pictures when they are being given away for free. You could just see the editor of The Enquirer saying, "Another photo of Meghan Markle?  I'm not paying for that!  I already have 10,000 of them!"  It is only when you make something rare that it becomes valuable.  Right there is why the Meghan-and-Harry series bombed.  There was simply too much of it.  If they made it a half-hour special, they would have been better off.

Just a thought.  I mean, the paparazzi are going to get their pictures anyway - you can spoil all their fun and ruin their business model by flooding the market with product.  Pretty soon, they won't bother taking pictures of you as there is no profit in it.  It is an interesting idea - use the free-market economy to your advantage!  Of course, maybe celebrities like to keep the "price" of their photos high, as people crave even more what they cannot have. There is a sick little dance between celebrities and the paparazzi - they claim to hate each other, but they are in a symbiotic relationship.

Or maybe this - take your own pictures of yourself in "compromising positions" and then sell them directly to The National Inquirer - and profit!  Why should some jerk-off with a telephoto lens make money off of you when you can sell these pictures directly (and no doubt have better quality photos as well!).   But then I guess, you can't be a whining celebrity if you do that.  I suspect some of the B-list celebrities are already on this, however - through their publicists.

But I digress. Or did I? Because much of this "First Amendment Warrior" and "Cancel Culture" nonsense is just some narcissistic celebrity, billionaire, or politician trying to keep their name in the papers - and online.

And maybe, 2023 is the year we finally get sick of paying attention to these idiots - and expose them for the two-faced liars they have always been.

Thursday, December 29, 2022

A Tax Deferred is a Tax Denied

Why would it make sense to delay paying taxes?

In tax law class in law school, our professor did a big calculation on the chalk board (yes, chalk, not a white erase board) on how a tax deferred is essentially a tax denied.  What does this mean and how does it work?  I noted in a recent posting that Elon Musk (among others) avoided taxes by taking out loans using his stocks as collateral.  At first this makes no sense, until you do the numbers.

There are a number of scenarios where you can delay taxes and thus reduce their effect, over time.  Life insurance loans, capital gains rollovers, the IRA and 401(k), or just borrowing against assets. These tricks usually make sense only for high earners, but then again, the IRA or 401(k) works for us "little people" in the middle class.

Let's crunch some numbers on these techniques and see how they work.

1. Borrowing against assets:  Say you are a Billionaire and want to cash in some equity in your big company and spend it on cocaine and hookers and a new Ferrari.  Problem is, you cash out a billion dollars worth of stock and three bad things happen.  First, you have to pay capital gains tax on that stock sale - both Federal and State - and that could be 20% or more!  Second, you lose control of your company each time you sell off stock - eventually you could become a minority shareholder.  Third, people get nervous when the founder sells shares - and your sale of large chunks depresses the share price as there are not enough suckers buyers for the stock - even if you sell it off in little dribbles at a time.

So you talk to your accountant and banker and they propose a solution - a loan!  You borrow a billion dollars at, say 5% interest, using your stock shares as collateral for the loan.  Since loans are not "income" (they have to be paid back!) you avoid paying, say, $200M in taxes to the State and Feds in capital gains tax (let's use that as a round number in these calculations).  That's a big savings right there.

Say the term of the loan is ten years, with a balloon payment due at that time.  In ten years, if your stock appreciates at 5% a year, your $1B in stock that you didn't sell is now worth $1.63 Billion dollars.  Of course, the loan balance is now about the same, so you break even - right?  But breaking even is still coming out ahead, as you had control over that $1B for a decade, without having to pay taxes on it, and also maintained ownership control of your company, since you didn't sell shares.   The "Future Value" (FV) of money is always worth less today, so paying $200M in taxes ten years from now is always a better deal than paying it today - and maybe you'll never have to pay it at all!

If your loan rate was, say, 3% and the stock appreciated by 7% a year (which isn't hard to do) then you come out ahead.  The loan balance would be about $1.34B and your stock worth $1.97B which means you could easily pay back the loan and the taxes and still have stock left over. It does entail risk, though - particularly if your stock is over-valued or volatile.

Worse yet, most banks have a "trigger" price that will force the sale of stock shares once the amount pledged is worth less than or equal to the loan balance.  This means you may be forced to sell your shares and give the balance to the bank if they "call the note" and you may end up with a hefty tax bill as well.

On the other hand, the bank may "rollover" the note into a new 10-year balloon note, and you can keep doing this until you die and then really cash in - death and taxes.  You see, once you die, those shares are transferred to your heirs at stepped-up basis and thus they owe no taxes on the capital gains.  As we shall see, this works also for Real Estate rollovers.  But even if your estate ends up paying taxes, who cares? You're dead and you cheated the tax man to the very end.

Like I said, most of these games are things only super-rich people can get away with (and that's fair - right?) because they have an "in" with banks, who are willing to loan them money at low rates as the loans are "secured" by the pledged stock.  Banks consider this a low-risk loan, as the worst that can happen is they force sale of the stock and get all their money back.  It isn't as risky as some unsecured credit card debt to some middle-class plebe and a helluva lot less costly to administer as well.

The next time you hear about some rich guy paying little or no taxes, chances are, they may have used this loan dodge to avoid paying taxes.  But even if they do pay taxes, often it is capital gains taxes, which have a far lower rate (particularly today) that ordinary income taxes.  As Warren Buffet noted, his tax rate is less than that of salaried secretary - and that just isn't right.  It isn't about to change, either, as rich people write the tax code.  Sad, ain't it?

2.  The IRA/401(k):  Congress threw us little people a bone back in 1978 by creating these tax programs that allow us to put aside money, tax-free, for retirement.  The net result was that it created a whole new class of investors - and investment houses and advisers - which has in turn, made markets more volatile.  In addition, most companies, when enacting 401(k) plans, phased-out their defined pension plans, which was a net loss for many working-class people who were unable or undisciplined enough to set aside money in a 401(k) plan.  Of course, the remaining few with pensions often found those gutted when the company they worked for went bankrupt.  It was a huge robbery of the working class, but it took so long to happen that it largely went unnoticed.  And of course, we were told that economic conditions were to blame, what with the price of oil, inflation, and layoffs.  We were told we were lucky to have jobs at all - and that politicians "created jobs" for us and we should be grateful for whatever crumbs were left on the table for us!

But I digress.  Enough soapbox for one day!

The 401(k)/IRA concept is simple - a tax deferred is a tax denied.  In addition, a working-class person can take advantage of lower marginal rates when they retire - provided they make less money in retirement, which is possible if you are debt-free.  I have no debts, so that knocks tens of thousands of dollars off my required income.  No mortgage, no car payments, no credit card debt, no student loans - all paid off, over 30 years.  And since I am retired, I spend a lot less money.  I own a seven-year-old car with 32,000 miles on it - it will last a long time compared to when I was working and commuting.

Say you are paying 20% taxes as a working person and only 10% in retirement (I am actually paying less than that - my Federal Taxes last year were $300!).  You put $2000 a year into an IRA earning 5% rate of return.  After 30 years, it is worth $139,521.58.   Now, if you put away $2000 in after-tax money, you would pay 20% of that in taxes, so you would only be investing $1600 each year - for a total of $111,617.26.   In effect, the IRA allows you to make money from the money you would have paid in taxes and as a result, build a larger nest egg.

The icing on the cake is that when you take money out in retirement, you only pay 10% in taxes on it, as opposed to the 20% you would have paid while working.  The Roth IRA is sort of the reverse of the regular IRA and for the life of me, I fail to see the real purpose of it, other than you avoid paying taxes on the gain which admittedly does save you something.  But there are bigger savings in the traditional IRA or 401(k) so I would go after that low-hanging fruit first.

So in retirement you pay 10% in taxes on that $139,521,58 or about  $14,000 over time.  Note that if you subtract the $111,617.26 from the $139,521.58, you net nearly $28,000 - nearly double the tax bill at 10% and about equal to the bill even if you stayed at the 20% rate.  A tax deferred is a tax denied, indeed!

3. Life Insurance Loans:  I have written about whole life insurance and its kin - Variable and Adjustable Whole Life.  I don't really recommend them to folks, but some people in higher brackets use them as a means of tax avoidance.   They can be handy for folks who retire in the upper brackets, for example - but not really useful for ordinary folks like myself.

Say you have a whole life policy that has a $1M death benefit and has a cash value of about $500,000.  You reach retirement age and you could cash out that $500,000 but would have to pay capital gains tax on the gain (what the policy is worth, cash value, versus what you paid into it over the years).  I am sort of facing this right now, as two of my policies are "paid up" and issue a grand or so in dividend checks every year.  I have to pay taxes on a portion of these dividends, but it is not a huge amount as my overall income is low and the standard deduction wipes out most of even that.

But for a wealthier person, a half-mill in capital gains means a hefty tax bill - say a hundred grand at the 20% we posited above.  Most whole life policies have a loan provision however.  So instead of cashing out $500,000 you "borrow" $500,00 - tax free - for a loan of ten years at 5%.  The analysis runs along the same lines as above.  The policy's "cash value" continues to grow during that ten years and if you keep rolling over that loan until you die, the "death benefit" (which is not taxable) could be used to pay back the loan, and any surplus paid out to your heirs - again, tax-free.

The only catch, of course, is that you have to pay interest in the loan, and that could be more than your tax bill.  So you are avoiding paying taxes, but paying interest to your insurance company.  In effect, though, what you are doing is borrowing against your death benefit - which is ordinarily something you don't have access to, unless you fake your own death (NOT recommended!).  Maybe you are screwing your heirs, but you end up with access to that half-mil, tax-free in the interim.

My loan rate is at 8% which is very high, even today, as I took out these policies at a time when interest rates were high.  So even if I wanted to try such a gag, I doubt it would be worthwhile, as the loan interest would be staggering.  But the good news is, since I have these spread out over three policies, I could "cash out" one policy during one tax year, if I needed the money, and thus not face a staggering tax bill.   The other tactic is to assume that since I am older than Mr. See, that the death benefit would pass to him, which he would need since he would presumably live longer than I would. Cheerful thoughts!

But, as in my example, the death benefit is about double the cash value (but nearly as large as in my example above!), so it makes sense to hang on to the policies rather than cash them out.  Borrowing against them?  It wouldn't work for me.  But then again, I'm not mega-rich.

4. Capital Gains Rollovers (Real Estate):  I wrote about the Starker Deferred Exchange or 1031 exchange, which is an example of how rich people write our tax code.  In this case, it was some rich dude named Starker, I guess, who challenged the meaning of "realization event" and got the code changed to allow you to "roll over" your interest in one investment property in a "like exchange" with another property.  If you play this right, you can avoid paying taxes entirely.

Say you buy a condo and live in it.  You and the wife get tired of condo living and buy a townhouse.  You keep the condo and rent it out and make a small profit on it, and it appreciates in value as well.  You move out of the townhouse and buy a free-standing home - and rent out the townhouse as well.  You now have a nice little real estate empire, and if you have good tenants (not hard to do in the Washington DC area, where everyone has a government paycheck) you make a nice extra income and the properties appreciate over time.

Eventually you want to retire, so you sell your house and buy a retirement home on the Outer Banks.  You sell the condo and townhouse and buy other properties there which you rent out to vacationers on VRBO.  This, by the way, is not speculation but what I have seen many friends and employers do over the years. Since you are converting the rental properties to like properties in your new location, you don't have to pay capital gains tax on the sale  - your basis in the properties is transferred to the new property in a 1031 exchange.  And you can do this an unlimited number of times.

Now, when you die, your heirs get these properties with a stepped-up basis.  They are assumed to be worth "market value" at the time of death and they get these, tax free.  So it is a keen way of creating dynastic wealth.   The poor person who rents?  Yea, fuck him, the dirty plebe!  He doesn't write the tax code - we do!

But suppose you have no heirs and want to cash out of these rental properties?  Well, a tax deferred is a tax denied, and you have deferred paying taxes on these rental properties for decades now.  But you can avoid paying even that!   You could sell your personal residence, and the first $500,000 in gain is tax-free (no doubt, that number will be raised in the coming years).  So you could live off that money, tax-free for many years.

In the meantime, you move into one of your former rental properties and declare it as your personal residence.  So long as you lived there for three years out of five, it now falls under the same tax provisions as your personal residence because it is.  So you could do this and "cash out" of your personal home and your rental properties, and not pay a dime in taxes.  Not only is the tax deferred, it evaporates entirely!

Oh, and you can depreciate a rental property and save even more by converting (effectively) your ordinary income into capital gains - and pay taxes at a lower rate (and defer those taxes as well!). 

Note that tax codes change yearly, so consult a tax advisor for details on the current year's code. Things do change over time and Congress is constantly tinkering with the code and some of these "loopholes" may end up being closed over time - but not if the rich can help it!

Personally, we presently are facing a capital gains "problem" with our condo.  In August of 2023, they will buy the place and tear it down and hand us a check for $160,000, all of which is taxable.  Not only will this create a Federal and State tax bill of $34,800 plus we would lose our "Obamacare" subsidy for that year, or another $18,000(!!).  Obviously, rolling this over into something would be ideal.  If not, well, Uncle Sugar gets quite a taste!

If we could roll that over into a condo in a retirement community, we could then "downsize" at a later date and declare that condo as our personal residence and sell our existing home, tax-free and live on that money for a decade or more.  Nice work if you can get it.  We'll see how that plays out. 

As you can see, the tax code is biased toward property owners.  And you wonder why so many people are going nuts over real estate!

There are a number of ways for people - usually the wealthy, but also the upper-middle-class - to avoid paying taxes simply by deferring the due date.  The longer you can delay paying a tax, the lower the effective tax is, due to inflation over time and the Future Value of money.  But in addition, if you delay paying a tax, that money, in your investment account, can continue to grow. And if you can delay paying taxes until the day you die, well, you've cheated the tax man, but perhaps not the undertaker.

"Cheated" is, of course, a loaded word, as the schemes I have detailed above are all perfectly legal, at least at the time of this writing, to the best of my knowledge.  Even the IRS admits that tax avoidance (using legal means to limit your tax bill) is perfectly legal - and some call it a patriotic duty!  Tax evasion - using illegal schemes to underpay or not pay taxes - is breaking the law. But what is avoidance one day, could be evasion the next.  However, avoidance schemes which are elucidated in the tax code (e.g., the 1031 exchange) are, by their very nature, legal, as they are the law.

You could argue that some of these provisions are unfair - and many do.  Some propose ways of fixing these "loopholes" (i.e., Laws) by enacting new laws to limit their effect. For example, when Musk famously didn't pay taxes because he borrowed against his shares, some politicians made big grandstanding noises that Billionaires should be taxed on capital gains even if a realization event didn't occur.  So for example, you make a million dollars because some stock you invest in goes up in value, then you have to pay taxes on that stock even if you never sold any of it.  This would, in turn, force you to sell some of that stock just to pay the taxes.

But if the next year, the stock tanked and you lost a million bucks, could you deduct that from your taxes as a capital loss? You see how it gets sticky and the accounting becomes a nightmare.  Taxing phantom gains gets messy in a real hurry.  Sadly, this sort of heads-I-win-tails-you-lose occurs with second homes.  You make a profit on the sale of your vacation home and that is taxable.  You make a loss on it, and it is not deductible!  Oh, the sad plight of vacation home owners!

I doubt these "loopholes" will be closed anytime soon, and not just because they would create accounting nightmares.  Besides, borrowing against assets might delay paying taxes, but in the case of someone like Elon Musk - where the share price of the shares he pledged is in free-fall - the whole thing can blow up in his face, if he is not careful.   He might end up paying even more taxes as a result.

Really too bad that Tesla doesn't pay dividends - he could live comfortably off of that.  Sadly, though, dividends are ordinarily taxed as ordinary income, which is why they are not so popular with the mega-rich anymore.  They want capital gains!

And so, we play these games, to avoid paying even that.

Wednesday, December 28, 2022

How's that Gold Working Out? (Time Machine Investments)

If you paid $1700 an ounce for gold several years ago, congratulations!  You just about broke even - if you don't account for inflation, or how much you could have earned with a savings bond instead - and that's just pathetic.

Gold Buggery has sort of faded from the scene, after making a big splash a few years ago.  The plebes and apes have moved on to "crypto" and hyped "stonks" to dissipate their wealth.  It wasn't long ago, though, that a lot of the same hype attached to "crypto" was being used to hype gold.  "It's a hedge against inflation!" they argue, and "it's gone up in value, so it must be a good investment!"  Sadly, these folks who lost money on gold, lost money on crypto and stonks.  So now, like the annoying man, they blame "the system" and claim the Federal Reserve somehow stole their money.  Better march on the capitol and overthrow the government!  Uncle Donald will get all their money back in the form of TrumpCard NFTs!   Free ponies - the dream to beautiful to let die!

What got me started on this was wondering whatever happened to the price of gold, anyway.  And the reality is, as the chart above shows, the price has gone nowhere in the last few years.  It kind of peaked at $1700 or so, almost exactly a decade ago (October 2012).  Ten years later, it is trading for... $1800.  Taking into account inflation (particularly over the last year) and anyone who bought gold during the 2012 bubble is way behind the game.  Even lowly savings bonds have done better than that - increasing in value by 50% over that time period (I know, as I recently cashed some out and re-invested the money in Series I bonds which are paying 6-9%).   If you just invested in a tame mutual fund (you know, one that invests in real companies that make real things, earn profits, and pay dividends) you would likely have doubled your money over the last decade.

Note, however, that by choosing starting and end points on a graph like this, you can show wild gains, losses,or breaking even.  So perhaps I am being a bit disingenuous here, as the graph I chose was the first one I saw when Googling "price of gold."   If the start point was 2018, you could show a 50% gain in a short period of time.  But this just illustrates how risky it is to invest in volatile commodities (or commodities in general) as you can't really pick your start and end points with accuracy unless you have a working time machine.  That right there is a key indicator whether something is a shitty investment - does it require a working time machine to make money?  If so, it is probably a bad bet, whether it is lottery tickets, gold, crypto, or hyped stocks.   Just walk away from time-machine investments.

I digress, but right there is probably another quotable quote.

So why do people invest in get-rich-quick schemes? Well the answer is in the question. Buying "boring" things and then forgetting about them for a decade doesn't seem very interesting or profitable. You check your account every day and it grows - if at all - at a snail's pace.  Then there is some minor snafu and you lose 10% of your account.  Surely gold has to be a better deal than that!  People are becoming millionaires overnight with this stuff!  And they are - by selling gold to you.

Insert whatever other scam-du-jour is on the menu - crypto, hyped stonks, whatever. People are convinced there is an "inside secret" to making money and that helpful con-men are willing to share it with you as they are decent people who want to see you succeed!   Yes, people are that gullible.

The other part of the equation is that many folks don't think about what they are investing in.  I saw a posting online from a Musk fanboy asking whether Tesla was a good buy these days as the price was so low. "Buy on the dip!" the stonk-meisters argue - usually when the "stonk" they are hyping has plummeted in value.  Hey, you wasted $1000 on some hyped stock, why not double-down your bet, now that is has halved in value?

But you have to look at more than share price.  And yes, I know, that's all the shouting guy talks about, or CNBC or even "Marketplace" on NPR.  Stock price! Stock price! Stock price!  That's all that matters, they say.  That, and whether it is trending up or down and by how much.

Things like dividends, which for some stocks can be 5% or more (a lot more, particularly if you paid little for the stock years ago) can make a big difference in your rate of return.  Maybe the share price is increasing very slowly, but if you factor in dividends, the rate of return might be much higher than you think.

Then there is the company's financials and products.  Are they making profits, and if so, how? And for how long?  And if not, do they have a realistic plan on how to make money?  So many "tech" stocks are just vehicles to enrich the founders of the companies, who take out huge salaries and stock options, leaving little for the IPO share buyers (who bought 5% of the company at IPO).   Meanwhile, some international company with factories on five continents, selling trillions of dollars of products a year, with a track record of a century or more, is dismissed out-of-hand as "old school" investing. You'll never make money at that!

So, what is the answer?  Well, since we don't have a working time machine (well, I don't, anyway - maybe the lizard people do) you will likely go broke buying into time machine investments.  The people hyping and promoting these get-rich-quick schemes make tons of money (even as they go to jail) but you and I are the ones putting money into these schemes and rarely taking out, other than the pennies-on-the-dollar we receive when it all goes horribly wrong.

As "boring" as it sounds, investing in a panoply of things, over time, tends to be the best outcome for the average middle-class investor.  And often, being less active in investing is a better mode than active investing.  The temptation is all-too-great to invest based on the news of the day, rather than long-term objectives.

For example, I recently wrote about how Tesla stock is overpriced.  It has a P/E ratio of 50 or so.  Meanwhile, "old line" companies like Ford and GM have startlingly low P/E ratios - Ford as low as 9! (UPDATE: Now 7!).   That means Ford is earning 12% or more whereas Tesla is earning 2% or less.  But there are other factors to consider.  Many are predicting a major recession next year, and if so, we will go from "car shortage" to "car surplus" in a real hurry.  Maybe Ford has over-extended itself (much as Tesla has) building EV factories to satisfy a demand that may not materialized (or may materialize but not be as high as anticipated).   I have noted before that Hybrids and EVs are neat and all, but when it comes time to getting out my own checkbook, I find that I can buy a lifetime's supply of gasoline for the delta in market price of an EV or Hybrid over a conventional IC engine.

In other words, there are no guarantees in investing, even in an "old line" company like Ford (or indeed, GM, which went bankrupt last time around).   So investing in one stock or one thing is very risky.  If one is to buy gold, well, it would be safest to not make it more than a minor part of your portfolio.  Even then, if you buy at the wrong time, it could be decades before you recoup your investment, as people who bought during the 1982 bubble discovered.  On the other hand, if you wanted to make a "pile" on gold, you have to go all-in with a huge investment, as even a 50% gain means nothing if all you invested was $500.   The risks of "losing it all" are just too great.

So just steer away from time-machine investments.  What kills the small investor is trying to time the market.  And I say this from experience!  Nearly every investment I made based on the news of the day has gone South.  Mutual funds and other long term "invest and ignore" things have done far better.

There is a lesson in there, somewhere.

Tuesday, December 27, 2022

How Elon Musk Could Go Bankrupt - Part II

2023 could be an interesting year.

From richest man in the world to homeless?  Could it happen?  Well, maybe not that far, but one thing is clear, Musk is no longer the richest man in the world - if he ever was - and never will be again.

Getting one thing out of the way - Market Cap.  I have written about this before and how it is bullshit and only plebes bite on this nonsense.  Market cap is a simple equation - the number of shares of a company multiplied by the last share price paid by some sucker.   It really doesn't represent the "value" of a company, only a theoretical value if somehow you could sell every single share for that price.

This does happen, on occasion, when someone buys an entire company - for example, when someone pays a $10B premium over "market cap" to buy Twitter (Genius!).  But for the most part, Market Cap is never realized.  Once the large shareholders of a company start cashing out, everyone else gets nervous (and there are not enough suckers to buy the shares) and the share price - and market cap - plummets.  Oddly enough, we see this side of Market Cap also with Musk - as he sells blocks of shares of Tesla to try to bail out his shitty Twitter deal.  There aren't enough people to buy the shares, so the price plummets - by 70%!   Clearly Tesla was never worth more than all the other car companies combined - and clearly the share price is still well above where it should be, particularly since it pays no dividends.

It gets worse.  Musk famously didn't pay income taxes for a few years (he's paying now, though!) as instead of selling shares in Tesla to make payments on his lifestyle, he borrowed against his shares.  Loans are not taxable income, and the theory is, you can pay back the loans with the shares later on, and a tax deferred is a tax denied.  Say you borrow $1B and pay it back ten years later, pledging your shares in as collateral in the interim.  Ten years later, your shares are worth $2B and you pay back the loan by selling half the shares (plus some more to pay the interest).  Sure, you have to pay capital gains tax on the shares you sold, but in the meantime, you made a pile of money on the share price increase!

That's the theory, anyway.  The reality is, of course, Tesla shares were dramatically over-valued and if pledged as collateral on a loan, the Bank may "call" the loan and force sale of the shares, if they feel the loan is in risk of default.  Elon Musk could lose most of his stake in Tesla this way - perhaps all of it.  Because when those shares are sold by the bank, that's another realization event, and it comes with a hefty capital gains tax bill, which in turn requires selling more shares to pay that (and then selling more shares to pay the tax on that sale).  The whole thing can collapse like a house of cards.  According to some sources, Musk has pledged half his shares in Tesla for such loans.  This was before the Twitter takeover.

What's worse is that Tesla is facing its own share of troubles.  The "autopilot" and "full self driving" modes are being faulted for causing accidents. These driving aids were marketed as self-driving features (hence the names) when in fact, they were merely driver's aids.  Worse yet, there are reports that Teslas are slamming on the brakes while on the Interstate, causing a 9-car pileup in one incident, recently.  "Move fast and break things" might work in Silicon Valley, but in the car business, the "things" you break are real people.   Expect class-actions suits to dog Tesla in 2023.

But wait, it gets worse.  Teslas have acquired a poor reputation for quality and service.  Cars fresh from the factory have poor door panel fit and trim pieces that fall off.  Maybe you could get away with this for a $35,000 car, but not a $100,000 one.  As more and more mainstream automakers offer electric vehicles, the impetus for owning a Tesla will diminish, and according to some sources, orders are already being cancelled.

But wait it gets even worse.  Musk embracing ultra-right-wing "free speech" and GOP values has alienated the very people who buy EVs.  So expect to see that "backlog" of orders diminish down to nothing.  Already, Tesla is offering discounts on some models - this is not a good sign.  As I noted recently, I met a fellow who ordered a Tesla and a Mach-E and Ford delivered first, so he canceled his Tesla order. "I'm glad it worked out that way," he said, "as when I ordered the Tesla, Musk hadn't come out as a right-wing Republican!"  Driving a Tesla, as a liberal is seen as hypocritical.   I wonder how many will hit the used-car market in California in the coming months.

But wait, it gets worse than that.  The Texas and German "giga-factories" (really?  Did a child come up with that name, like "cybertruck?" Oh, right, nevermind), which Musk called "money furnaces" are struggling to go online.  Germany in particular will be problematic for Tesla, as the powerful unions and local governmental regulatory agencies have as much a say in running a factory as management does.  GM bailed on Europe in part because even closing a factory required approval from the union, local governments, and even the customer base.  The Tesla/Musk model of trying to get people to work 60-hour weeks with no overtime simply won't fly in Europe - and maybe not in America for much longer.  Eventually, the people working themselves to death have to ask, "What's in this for me?  Why am I sacrificing my life for a Billionaire?"

Speaking of unions, though, Tesla will eventually have to deal with the UAW, who, over time, will get their foot in the door at Tesla, particularly as stories of worker abuse continue.  It may be a matter not of "if" but "when."

Speaking of factories, some analysts have noted that while Musk called these empty factories "money furnaces" at the time, Tesla's profits seemed strangely level.  Some are claiming that there may be some accounting irregularities - for example, claiming warranty claims as "goodwill repairs" instead of expensing them.  Building three new factories simultaneously would seem to take up a good portion of the company's cash-flow, but it isn't showing up on the books.  Maybe it is just an accounting record-keeping method.  But given Musk's irrational and bizarre behavior, anything is possible.

But the worst is yet to comeCarbon credits is one way Tesla makes more money per car than Mercedes or BMW.  Or made, anyway.  Other automakers buy these carbon credits to offset their sales of gas-hungry SUVs and pickup trucks. Automakers are getting tired of putting cash in Tesla's pockets, though, and bidding against each other for a tiny pool of carbon credits.  So they are making EVs of their own - which are more attractively priced (particularly since they still qualify for tax credits) and better built.

So you can see a death spiral here with Tesla. The share price will continue to drop as Musk (and others) sell their shares.  The reputation of Tesla, now besmirched by quality issues and political ones, will result in slower sales, aggravated by the plethora of newer EV models from competing manufacturers.  Carbon sales will slow as they become more plentiful from other makers.  Profit per car will diminish, and the rush to build and expand with new factories in Europe, China, and Texas, will start to look like a bad move.  China could be particularly problematic as nationalism there takes hold and Chinese buyers look to domestic brands over foreign ones - that could be a problem for all Western car companies (and companies in general) particularly General Motors, who made 50% of its profits in China.

The good news?  Well, Tesla might finally have a rational P/E ratio as its share price falls (but not if earnings fall just as fast).  If Musk's interest in Tesla shrinks to nearly nothing, perhaps his political legacy will no longer dog the brand (the dirty halo effect) and he will be forced out of leadership positions and more rational and experienced people can take over.  And in fact, the share price might drop to the point where some other manufacturer decides to bid to buy the place.  That could be a good move for a company that is late to the EV game and wants to buy their way in - and buy the carbon credits as well.

Or, Tesla could go the way of Studebaker and Packard.   The carmaking business historically is littered with the carcasses of old-time and wanna-be makers.  It is a cutthroat business of tiny margins, and as soon as one maker discovers a new vein of ore, the other makers dig in and mine it as well.  Studebaker and Rambler made a go of the small car market during the recession of 1960.  But within a few years, both were history as the "Big 3" introduced small cars of their own.   You can't expect other automakers to sit on their hands.

OK, well, that's Tesla.  What about SpaceX and other ventures?  SpaceX is having success with its Falcon rockets, but since it is privately held, we have no idea whether it is making money or not, and if so, how much.   The other half of the endeavor is the "Starship" rocket which many have noted makes no sense whatsoever.   While it is an interesting technical feat to launch a rocket straight up and then have it land vertically on its launch pad, it is a horrendous waste of fuel and payload capacity.  This might work for a Falcon-9 booster (which is not in orbital flight).

The "Starship" looks like the "spaceship" from the 1930's to 1950's pulp-fiction sci-fi magazines, which posited that such craft could be used for suborbital flights - Los Angeles to Tokyo in two hours!  But landing a huge craft on its tail is kind of risky, particularly with people inside.  There is a reason Falcon-9 boosters land on a barge in the Atlantic.  And more than one has flubbed the landing.

And for orbital flight, the "Starship" will require a booster larger than the Saturn V rocket.  It is the stuff of science fiction and we'd all like to see it as science fact.   But is it a realistic space transportation system or just a one-off technical gimmick like the Virgin Galactic?  I think the point is, space is a risky investment, and it might pay off, or might go broke.  We'll have to wait and see.

The more traditional approach of using aerobraking to slow a space vehicle to suborbital speeds makes far more sense. Whether the "Starship" can do this with a thin body made of stainless steel, remains to be seen.  For every dollar SpaceX is making with a Falcon-9 launch, they are throwing away on the "Starship" wet dream, or so it would seem.  If they can pull it off, it would be a miracle.

The big "if" for SpaceX is that one accident could cripple the company for years.  Space exploration is a highly dangerous endeavor. The Soviets only crowed of their accomplishments when Cosmonauts returned to earth.  The rumor is, there were many others who died in space when their vehicles could not re-enter, or they burned up on re-entry or blew up on the pad.  In America, we blew up quite a few rockets in the 1950s to the point where we felt we would never win the "space race." 

But even then, three men died in Apollo 1 on the pad during testing.  Apollo 11 landed on the moon, but came within seconds of running out of fuel and crashing to the surface - it was a close call and not talked about much at the time.  Apollo 13 illustrated how one tiny undetected flaw in manufacturing could blow up a spacecraft and nearly kill its compliment.  And the Space Shuttles reinforced this lesson - tiny defects or unanticipated events could cause an entire spacecraft to explode - killing all aboard.   Space travel is and always will be, risky.

SpaceX has had its share of blowups, mostly on the ground or with unmanned missions.  The "Starship" in particular has made some impressive balls of fire when it failed to stick the landing.

The point is, SpaceX is one blow-up from financial ruin.  When Apollo 1 burned on the pad, it took a crash course of months - years even - to figure out what went wrong, not only with the technology, but the manufacturing process and the corporate culture.  Again, "move fast and break things" is a bad idea when human lives are involved.  After Apollo 13, NASA realized they were living on borrowed time and curtailed the whole moon landing program early. When the shuttles blew up, they were grounded again, for years, until safety measures could be improved.  After Columbia, the end of the shuttle program was announced.

So if SpaceX does have an accident, it could shut down that program for years, which would mean spending millions - if not billions - fixing problems, while at the same time, having no income. In the meantime, competing space vehicles are coming online and may steal some of SpaceX's thunder.  That in turn points out another problem - with so many getting into the space launch business, can SpaceX compete?  So far they have been the low-cost provider, but are they doing so at a profit or loss?  Again, we have no idea as the company is privately held.

Granted, this is a "what if" scenario, but a very real one.  Given how Musk pushes his employees to work long hours and rush things through, I think there is at least a 50/50 chance of some sort of SpaceX disaster in the next 1-5 years.  That could create a huge financial blowout as a result.

So what does that leave? Twitter? Twitter was losing $1B a year before Musk over-paid for it on a whim, using a price based on a marijuana pun.  He saddled the company with $1B more per year in interest payments on its debt, and then lost another $1B a year in advertising revenue.  That's $3B a year in the hole - and he's asking other shareholders to throw good money after bad in this deal.

Meanwhile, he's stopped paying the rent on office space and refusing to pay severance to the numerous employees he's fired.  Why anyone would want to keep working there is anyone's guess - their stock options are probably worthless at this point.  When you stop paying rent and stop paying your suppliers, it is a tacit admission that bankruptcy is around the corner.

When that happens, shareholders are generally wiped out and debtors take possession of the company as the new shareholders.  So Saudi Arabia and Bank of America will become the new owners of Twitter?  Stay tuned.

The point is, using "Market Cap" to say that such-and-such a person or company is the biggest or richest in the world is pointless.  And sadly, sometimes even the people and companies involved start to believe this.  Tesla is worth more than Toyota?  When Toyota makes more cars in a month that Tesla does in a year?  That simply makes no sense whatsoever.

And like clockwork, some clueless "stonk" buyer will go on Reddit and "ELI5" as to "where did all the money go?" never realizing that it never existed in the first place.  Market cap is bullshit - and dangerous bullshit at that.  It's only real use is in generating click-bait headlines for "Finance Journalists" to sell ad space.

Sadly, it seems that even Musk got caught up in this hoopla and that is what is leading to his downfall with Twitter.  It is one thing to make a strategic purchase of a distressed company and then turn it around, shed unprofitable divisions, and return it to profitability.  That is the Warren Buffet way.  It is another to pay a hefty premium over market value for a company that has never made a profit in its short history and has no path to profitability and then instead of cutting costs and making it profitable, increase annual losses by a factor of three.  This is not financial genius at work.

What is it, then?  Drug use?  Mental illness?  Narcissism?   All of the above?   Would you invest with a guy who names his kid Mercur Scorpio XR4Ti?   I certainly wouldn't.  Yet there are still today, legions of fanboys who worship at the altar of Space Jesus.

They all want to get in on "The Next Big Thing!"  I think 2023 will be the year we realize that "The Next Big Thing!" wasn't even a thing.  "Technology" such as delivering food or driving taxicabs or renting out your house, simply isn't that profitable.  In fact, it isn't profitable at all, when Silicon Valley takes a huge cut of the cake.

Maybe 2023 will be the year we wake up from this dream - with one heck of a hangover!

Monday, December 26, 2022


It isn't all that hard to convince people that a minority group is less-than-human. This propaganda piece from the 1800's tried to fuel anti-Irish sentiment.

Demonizing is all the rage these days, but then again it never went out of style.  If you want to oppress a minority group, all you have to do is spread stories that "those people" are less-than-human and you can then do whatever you want.

For example, when Europeans colonized the Americas, they spread stories that the natives ("Indians") were savages and little more than wild animals.  They ran around naked half the time, smoked "tobacco" and were ruthless killers.  We were doing them a favor by converting them to Christianity and taking away their lands.  And if they didn't see the light, well, "The only good Indian is a dead Indian" ...and you take their lands.

Note that taking things from the minority in question is usually the common denominator.  If they don't have anything, then preventing them from getting anything is on the agenda.

Africans suffered a similar fate - in the US and worldwide.  Once again, we are told that these are "savages" and need to be liberated by the white man and taught the Christian faith.  "The White Man's Burden" they called it.  Of course, this "burden" included taking away their countries and their wealth.  In the Americas, of course, this same demonization was used to justify slavery.  Blacks, we were told, were like animals - they needed discipline.  If left to their own devices, they would rape, rob, and murder, and of course, it goes without saying, they were lazy and indolent (again, these are common traits assigned to a number of races, including Hispanics).  They don't feel pain like we do, it was said - which justified beating them like a mule.  Once again, taking-away is the goal, in this case, their own freedom.

It never ends, of course.  There is always some new minority group to marginalize and demonize.  The Irish, as I noted before, were discriminated against in their own country as wealthy Englishmen bought up all the land and reduced the native population to tenant farmers.  In America, the same old tropes about any minority group were bandied about - they're lazy, they drink to excess, they are indolent, they are criminally inclined, they are ugly and undesirable.  Oh, that and they're Catholic.   Can't have any of that!  Not in white-bread Protestant America!

Of course, as a marginalized group achieves power, these tactics of marginalization start to fail - but not without a fight.   They killed our first Irish-Catholic President, and they don't think much of our second one. But the Irish - like many other immigrant groups - are here to stay and they have succeeded, largely, in assimilating into American society (and vice-versa) - which is a lot easier to do when you are white, of course.

Jews bear special mention because they have been demonized - quite literally - over the centuries.  They have been accused of all sorts of nonsense, from cannibalism to devil worship.  And the caricature of the "dirty Jew" served to reinforce the notion that somehow they weren't even human.  Before there was a holocaust, there was a steady drumbeat of antisemitism in Europe - going back centuries, of course, but amplified by the Nazis in their day.  They succeeded in convincing ordinary citizens that Jews were a threat to their culture and country and what's more, were into all sorts of deviltry. That laid the groundwork for the increasing oppression and eventual murder of millions.

And sadly, we are seeing the same thing happening today.  What is odd is that many Jews are very conservative and Republican, but the very same party is harboring and inflaming this modern antisemitism.  It makes no sense to me that Jews would support this, but I guess since these same antisemites have unconditional love for Israel (because this fulfills an imaginary "end times" prophesy) they go along with the deal.   It is a dangerous Faustian bargain!

Of course, anti-Muslim sentiment has been strong in this country, since before the hostage standoff in Iran in 1979 and amplified after 9/11.  Again, we are told that a minority is "taking over" and that their habits and customs are an anathema to American values and ideals.  Sharia law is being enacted in Dearborn! (No, it is not).  Before long, your kids will be memorizing the Koran in school, while saying "Merry Christmas!" will get them expelled.  Again, not true. Sad that I have to say that.

Asians are once again in the cross-hairs, although the incidents of anti-Asian violence appear to be perpetrated by blacks - and often homeless people.   It is not atypical that one minority sets out against another (Hispanics versus Blacks, for example).   But I think these incidents, particularly where the perpetrators are mentally ill homeless people, are the result of the constant anti-Asian drumbeat that the right-wing has promulgated.   Wind-up soldiers will do your bidding, if you just create the atmosphere of paranoia and demonization.

Of course, this is nothing new. The Chinese Exclusion Act specifically targeted Asians, even as America was welcoming immigrants of all other stripes.  The stereotype of "Asian hoards" overrunning America had currency then, and through the cold war.  Once again, a minority is seen as cunning and ruthless - when, of course, they are not lazy and indolent.  You know, smoking opium in those opium dens that the British established to enslave them.   Drug wars are nothing new, it seems.

Of course, today, Asian stereotypes have been updated.  Asians are smart and "good at math" and thus "taking all our jobs" when they are not eating dogs or live fish or something else gross.  Again, the idea is to make "the other" seem alien and inhuman - demonizing.

Which brings us to these drag show incidents.  Why suddenly these are deemed a "threat" is interesting. It was created, not by accident, by the Murdoch news group.  Commentators like Tucker Carlson have been beating the drum of trans-hate and drag-hate (conflating the two, of course) and claiming that - like every minority before them - that "LGBTQ" people are all Satan-worshiping pedophiles, who are out to "convert" children with "Drag Queen Story Hour".   Worse yet, they are promoting that children change their gender in Elementary school - although there is scant evidence that this is actually happening.

Every accusation is a confession, it is said.  And the loudest voices accusing trans people or drag queens of "grooming" children are the same people who have had their picture taken with underage girls on Jeffry Epstein's private island

And of course, this is expanding to include every stripe in the "LGBTQ" rainbow - all gays are now deemed to be groomers - by the likes of Matt Gaetz, un-ironically.  Every accusation is a confession - again.  Part of this, is, of course, push-back against advances by minority groups, which appears to be threatening if you are in the majority and may someday be a minority yourself (but not any time soon).  Oddly enough, this sort of nonsense resonates mostly with the underclass of poor whites - who see advances by minorities as coming at their expense.  And yes, the stereotype of "white trash" fits right into the narrative of indolence, laziness, violence, criminality, and other boorish behaviors usually attributed to minorities.

Of course, these same sort of crazy accusations have been leveled at all Democrats by the "Qanon" conspiracy, which posits that pizza parlors are being used by Democrats to cannibalize children for their hormones or some such nonsense, in order to feed the insatiable appetites of "the lizard people."

Sounds pretty ridiculous, but it is no more ridiculous than The Protocols of the Elders of Zion - a famous forgery that purported that Jews murdered Christian children and drank their blood.   You see the pattern here, don't you?

The end goal - and there is a goal - is to get followers to believe this nonsense, at least subliminally, so that they will view [fill in the blank] minority as not only less than human, but a demon.  In fundamentalist Christian circles, this is often literally the case.  And you know what you do with demons, right?  Cast them out!

This should be worrying to most Americans, because today it seems every minority group is on the chopping block - Blacks, Hispanics, Asians, Jews, Gays - whoever.  Even majorities are in peril, such as Democrats and Women.  We take our freedom for granted, but few in American realize that, worldwide, women are basically property, and minority groups are largely slaves.

We should also be worried because already this has progressed from mere hateful rhetoric to action, in terms of windup soldiers attacking various minority groups.  Attacks have been made on synagogues and mosques, as well as on gay bars and drag show performances.  Individuals have been attacked by cowards who approach them from behind and punch them without warning.  This will escalate over time, if not checked.  Young Asian women have been pushed in front of Subway trains.

And just as in the 1930's, people say, "Well, I'm not Jewish, fortunately!  It is sad, but at least they haven't targeted me!"  Yet.  And yet in an eerie parallel to the fascist era, Socialists and Communists (distinct minorities in America) are also being targeted, just as happened in Reverend Martin Niemöller's poem.  I'm no Socialist, but that doesn't mean others don't have a right to that opinion.

And no, I don't understand the whole "trans" thing, but at the same time, I don't understand all the hate over it - and the mostly false stories being spread about it.  And no, I don't understand "Drag Queen Story Hour" but if a parent wants to take their kids to that, I am not sure it will scar them for life.  And a drag show isn't the same thing as some drag queen reading stories to kids. But even drag shows are, at worst, PG-rated with maybe a few R-rated jokes.  Hardly a "sex show" as the far-right alleges.

But again, you see the pattern - spreading lies and stories that simply are not true, to get people riled up, angry, and even violent.  All it takes is one unhinged guy with a gun, and 40 hours a week of Fox TV watching to set them off.

Of course, when that happens, they will be called a "lone wolf" and an aberration and proof that gun control laws simply don't work.

And lest you think this is limited to the United States, think again.  The same sort of prejudices are occurring in the UK and Australia - places where Murdoch publications extend their sticky fingers.  And even in mainland Europe, right-wing thinking is taking hold and prejudices are being fanned, helped in part by a migrant crises.  Right - that.  Migrants are caricatured as animals, swimming across the Mediterranean and climbing onto train cars and trucks to sneak into Western countries.  They are like animals we are told - and reproduce like rabbits.

Maybe there is a migration problem (that can't be solved by deportation?) but demonizing migrants isn't the answer.  And yes, there has been anti-migrant violence in several European countries.  Same shit, different country.

So it ain't just us.  Perhaps this trend is a result of increased population and scarcer resources.  Or it could just be that human beings, every 40 years or so, have to go nuts and kill each other.  Or maybe it is an orchestrated plan by one group to achieve power and/or maintain it. Scapegoating minorities is the oldest game in the book - and keeps your followers distracted so they don't look at the man behind the curtain.

One thing is for sure - if this trend continues, we can expect to see more violence, murder, and mayhem.

That is, unless people say, "Stop!"