don't try this at home

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

To investors,

One of the recurring themes in this letter over the last few weeks has been a “K-shaped" recovery. The idea is that coming out of the economic shock earlier this year, the wealthiest Americans were recovering quickly, while those without significant assets or income were continuing to struggle.

Putting the debate over a specific letter in the alphabet aside, this idea of two Americas and their polar opposite responses to the economic shock made sense. We just didn’t have material data to unpack around the thesis.

Thankfully, Harvard economist Raj Chetty has been working diligently to solve that problem. He and his team released a new tool in the last few months that highlights the economic situation on a county, city, and neighborhood level across the United States. Bloomberg wrote a great article about Chetty and the work he has been doing, which you can read here.

I played around with the tool for awhile this morning and was impressed with the insights that it provided. First, it is obvious that high-wage worker employment has basically recovered to pre-COVID levels, but low-wage workers are still suffering significantly.

As of September 2020, total consumer spending in the United States is only down 3.8% compared to January of this year.

But when you break consumer spending down by socioeconomic class, you realize that low income citizens are spending more today than they were in January and high income citizens are spending almost 10% less.

So what industries are winning and losing during this volatility of consumer spending? Across all socioeconomic classes, grocery spending is up 10% year-to-date, and restaurant/hotels (-24%) and transportation (-46%) are down significantly.

Chetty’s team also tracks small business revenue. As you would imagine, the national small business revenue across industries is down more than 20% since January.

Leisure and hospitality are down almost 50% nationally, while other industries are hovering around 10% decreases year-to-date.

Some of the drop in revenue may be attributed to the percentage of small businesses that are open. Unsurprisingly, more than 20% of small businesses remain closed compared to January of this year.

And Leisure and Hospitality businesses are more than twice as likely to be closed at the moment compared to other industries.

If so many businesses are still closed, you would expect open job roles to be down as well. While this is true, the 6% decrease in job postings compared to January 2020 was a much lower drawdown than I would have anticipated.

What is interesting is that the job postings that require the highest amount of education are down more than job postings that require minimal education.

Lastly, the student progress in math is actually up nationally since January 2020.

But when broken out by socioeconomic class, we see a very different story.

Raj Chetty and his team are finally presenting data that supports the idea of a “K-shaped” recovery. If you’re wealthy or have high income, the recession is essentially over for you. If you are less fortunate, you are still struggling to navigate the economic carnage.

Hope each of you has a great day.

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

THE RUNDOWN:

Coinbase Hires Executives From Venmo, Adobe and Google: Cryptocurrency exchange and wallet platform Coinbase announced it has hired Shilpa Dhar, Ravi Byakod and Frank Yoo for VP roles on its product, engineering, and design & research teams. In an announcement published on its website, Coinbase said it was also creating a new “Platforms” team across its product and engineering organisations and that Dhar and Byakod would head the new team. Read more.

Startup Behind Siacoin Storage Platform Raises $3M, Rebrands as Skynet Labs: The startup formerly known as Nebulous has raised a $3 million funding round led by Paradigm with participation from Bain Capital Ventures, Bessemer Venture Partners, A.Capital, Collaborative Fund, Dragonfly Capital Partners, Hack VC, INBlockchain, First Star Ventures and others. Read more.

Economist Stephen Roach Issues New Dollar Crash Warning: Economist Stephen Roach warns next year will be brutal for the dollar. Not only does he see growing odds of a double-dip recession, the Yale University senior fellow believes his “seemingly crazed idea” that the dollar would crash shouldn’t be so crazy anymore. “We’ve got data that’s confirmed both the saving and current account dynamic in a much more dramatic fashion than even I was looking for,” Roach said. Read more.

JPMorgan to Pay Almost $1 Billion Fine to Resolve US Investigation Into Trading Practices: JPMorgan Chase is close to paying almost $1 billion to resolve government investigations into the alleged manipulation of metal and Treasurys markets, according to a person with knowledge of the matter. A settlement between New York-based JPMorgan and several U.S. agencies could come as soon as this week, according to Bloomberg, which first reported news of the fine. The deal would resolve probes from the Justice Department, the Commodity Futures Trading Commission and the Securities and Exchange Commission. Read more.

Peterson Ventures Just Closed a $65 Million Fund: Peterson Ventures, a 12-year-old, Salt Lake City, Utah-based seed-stage fund, has long operated fairly quietly, but many of its bets have become known brands in the respective worlds of consumer and enterprise software investing. Among these is the shoe company Allbirds; the men’s clothing company Bonobos (acquired a few years ago by Walmart); and Lucid Software, which closed its newest, $52 million round back in April. Read more.

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

1. Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

2. Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

3. Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

4. BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

5. Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today.

6. Coinlist — Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100.

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

“I want us to go for the gold here, and take this model and make it a part of the life of New York City for years and generations to come." [ more › ]

One of my followers on Twitter suggested that Trump supporters don’t understand that he poses a danger to democracy.

I disagree.

There may be a few Trump supporters who don’t understand the danger posed by a president who openly says that the way for him to stay in power is to “get rid of the ballots.” There may be single-issue voters who support Trump because he promises to enact their issue, so they overlook his obvious authoritarianism.

But I believe a good portion of the gung-ho diehard MAGA people get it. They want an authoritarian president. They find a strongman appealing.

Richard Hofstadter talked about such people in his classic work:

Because on the whole, Trump voters tend to be less educated than those who support moderate or liberal candidates, people have the idea that the way to prevent another authoritarian president is to re-educate Trump voters.

I have a different idea: Re-educate those who favor liberal democracy so that they understand what it takes to keep democracy working.

(For regular readers, some of what follows will be repetitive, but to make my argument that the people who need to be re-educated are liberals and Democrats, I have to cover some familiar ground.)

Many liberals and Trump critics have the idea that the United States has always been a liberal democracy—and then along came Trump, pulling the wool over his followers’ eyes and battering our democratic institutions.

In fact, America didn’t start to move toward a true liberal democracy until Brown v. Board, the 1954 Supreme Court case that declared racial segregation unconstitutional. Brown sparked the modern Civil Rights Movement, which in turn gave rise to the women’s rights movement. Liberals cheered these changes. Many did not.

Trump is riding the backlash from those changes.

For most of U.S. history, Americans lived in a hierarchy. Think of slavery, Jim Crow, and women’s place in the home. Until the modern Civil Rights movement, what we now call voter suppression was legal. For most of our history, only white men voted.

A person on Twitter told me, “Things have never been this bad.” People who think, “Things have never been this bad,” have probably never imagined what life was like for an African American woman in 1850. She didn’t even own her own body. Literally. So yeah, for a lot of Americans, things have been much, much worse.

If you’re like me, before Trump, you had an idea of American history that went something like this: The founders had some good ideas, but they left too many people out of “we the people.” We started out with ‘we the people’ limited to white, mostly land-owning men. As more people came to be included in we the people, we came closer to realizing the ideals of the founders. I imagined the arc of history looks like this:

There are other people who have the opposite view of American history. They look back nostalgically to a bygone era when America was more orderly. The pine for the good old days. Hoftstader, writing after the McCarthy era, says that those embracing the paranoid style of politics believe that unseen satanic forces are trying to destroy something larger in which they belong. The “something larger” to which they belong is  generally phrased as “the American way of life.” They “feel dispossessed” and that “America has been largely taken away from them and their kind.” They are “determined to repossess it and prevent the final act of subversion.”  They, therefore, adopt extreme measures. They will stop at nothing to prevent what they see as an impending calamity. Hofstader describes them as having a “paranoid style” in politics, but the usual political label is reactionary or regressive.

The “again” in “Make America Great Again” signifies reactionist politics. For them, the arc of history looks like this:

They think America is losing what is great. They feel a nostalgic longing to return to the past.

The fact is that not everyone wants democracy. Some people prefer a hierarchy. They think nature naturally forms a hierarchy. They don’t think democracy is possible or desirable because they think it robs the people who are naturally at the top of the hierarchy and gives to the unworthy.

Moreover, democracy is grinding work requiring compromise. Purists who cannot compromise will never be comfortable in a democracy. Checks and balances naturally slow things down. Change doesn’t happen quickly. People who want Change Right Now will also not feel comfortable in a democracy. They prefer a strongman who promises to break rules and break through the red tape to get things done.

There are also single issue voter who feel so passionately about their issue that they will vote for the strongman who promises to enact their agenda.

“My way or the highway,” isn’t democratic. It’s authoritarian.

When my son was three he came home from preschool and told me, “Today we learned about taking turns.” He added, “I don’t like taking turns. I want all the turns.” (Don’t worry; he grew up to be a nice young man.) Some people still want all the turns. Wanting all the turns may come more naturally than a willingness to compromise.

Now, back to liberals. We learned in school that the heroes—Martin Luther King, Jr., Thurgood Marshall, Susan B. Anthony, the early abolitionists, and others—did the hard work. These heroes battled racism and sexism and made democracy safe for all people.

Liberals and progressives born after the modern Civil Rights movement inherited an expanding liberal democracy. Sometimes people who inherit something feel entitled to their inheritance. They don’t think they have to work for it. They believe the future is set. They imagine themselves in a boat drifting naturally toward a more diverse and inclusive future.

Then, to use Timothy Snyder’s phrase, “Trump broke the story.”

People were shocked. Snyder also explains that “shock is pre-helpless.” If you think “this wasn’t supposed to ever happen!” you are taken by surprise. You don’t know what to do. You think nothing can be done. When Trump acts like a strongman, breaks rules, and threatens democracy, you become paralyzed with panic.

People on Twitter tell me that the very fact that Trump breaks laws and isn’t in jail means that rule of law has failed. For them, it’s all or nothing: We are either a democracy or an autocracy. Trump is acting like an autocrat, therefore, democracy has failed. In fact, there is a thing called “competitive authoritarianism,” which is like what happens when a democracy leans toward authoritarianism: The government has both democratic and authoritarian elements. In other words, there exist shades of gray.

Wouldn’t it have been helpful in your high school civics class if you had been taught that democracies are never completely stable and are always in danger of slipping toward authoritarianism?

People who argue that “Trump breaks laws, therefore rule of law is dead” have never been taught that democratic institutions are imperfect. Fairness and justice are goals we work toward, but like a mathematical limit, we can never arrive. Because institutions are made up of mortals, perfection is impossible.

Too many liberals don’t know know how to build democratic institutions, so when someone like Trump batters them, they don’t know how to rebuild them. They think battered is destroyed forever. We need to teach liberals how to build democratic institutions so that when democratic institutions become battered and bruised and maybe even torn down, they’ll know how to build them back up.

People who prefer democracy must understand that there will always be people and forces working against democracy. I now understand that the graph of history looks like this:

Liberals and progressives push forward. Reactionaries and regressive push backward. It’s a constant struggle and never ends unless the liberals give up (because the reactionaries never will).

People who prefer democracy must understand that if they want a democracy, they can’t drift along in the boat. They have to take responsibility and paddle. (If you’re wondering “How do I do that?” click here for ideas.) Autocracy is for the lazy. You get up, go to work, don’t think about politics, wear blinders, and do what you’re told to do.

People who want democracy need to learn the most effective ways to reach people who think they’re better off in a hierarchy. Shaming people who find the strongman appealing is not the way to show them that democracy would better serve their interests.

People who want democracy need to stop falling for the Strongman Con.

Here’s the thing about democracy: At any time, if a majority of voters decide they no longer want it and get behind a strongman, democracy will cease to exist. It can be built back, of course, but building something back is much harder than preserving it.

After we get through this, we need to re-educate liberals so they understand better how to prevent (and how to respond to) a would-be autocrat.

The post Reeducate the Liberals appeared first on Musing about law, books, and politics.

And just for reference pic.twitter.com/DwElKukB2p

— Jamison Foser (@jamisonfoser) September 24, 2020

The New York Times ran its story on Trump refusing to commit to a peaceful transfer of power on page A15, Washington Post on A4. Can't tell if or where they ran stories but it isn't on the Newseum's front pages for Wall Street Journal, LA Times, USA Today, or Chicago Tribune. pic.twitter.com/NVPMFcb6cd

— Matthew Gertz (@MattGertz) September 24, 2020