How to Hand Out Free Money

On a gray afternoon in Juneau, 36-year-old Kristen Hemlock sat on her bed picking at a cold McDonald’s chicken sandwich, waiting for the checks to arrive. Her four-year-old son, Eli, chubby and dimpled, lay on his stomach on a bottom bunk two feet away, distracting himself with YouTube cartoons. Six-year-old Mason wasn’t home from school yet, permitting a fleeting truce in the brothers’ perennial war over her phone. In a home the size of a dorm room, it was a more reliable source of entertainment than their toy trucks and guns. Broken drawers spilled out of a chipped wicker dresser, and fleece blankets, one patterned with the phrase “I love you to the moon and back,” blocked light from the lone window.

The boys’ father, 35-year-old Daniel Varner, sat at a tiny table in khaki overalls and work boots, jiggling his leg.

“It’s delivery mail, isn’t it?” he asked Hemlock.

“Yeah, so it might be tomorrow.”

“Oh yeah, it’s not coming. I was thinking post office box.”

“It could.” Hemlock emitted the nervous laugh she reserves for her saddest stories. “I’m hopeful.”

Most of the family’s 52 neighbors at St. Vincent de Paul Society’s transitional housing shelter, a faded blue building on the outskirts of town, were also waiting for money.

It was October 4, and pretty much everyone in Alaska was expecting it, with varying degrees of impatience—$1,600 for every man, woman, and child. For nearly four decades, the Permanent Fund Dividend (PFD) program, designed to share revenue from the state’s oil wealth, has made flat annual payouts to anyone who has lived there for at least one calendar year, barring those with certain criminal convictions. While the program’s architects didn’t use the term, it’s the closest thing today to a universal basic income program that has durably existed anywhere in the world. (...)

Inadvertently, red-leaning and fiercely independent Alaska has become a global model for advocates of doling out “free money.” After visiting the state in July 2017, Mark Zuckerberg, a vocal basic-income booster, wrote in a Facebook post that the dividend provides “good lessons for the rest of our country.” The dividend has been a third rail in Alaskan politics for nearly four decades. But just as the hype around basic income is growing, the program is facing an existential threat. Plummeting oil revenue has left the resource-­dependent state—the only one with no sales or personal income tax—with multibillion-­dollar deficits. Even after dramatic spending cuts, savings reserves are dwindling. The local GOP establishment, with backing from wealthy corporate interests, has blocked virtually all attempts to generate new revenue through taxes. With money running out, elected officials have slashed annual checks in half, despite their popularity. In May, lawmakers voted for the first time to divert $1.7 billion away from dividends to pay directly for govern­ment spending. While imposing income taxes would affect the richest Alaskans most, smaller dividend checks, and the program’s uncertain future, are hitting low-income families hardest. (...)

The dividend’s origins are rooted less in ideal­ism than in greed. In 1968, nearly a decade after Alaska joined the Union, the largest oil field in North America was discovered on its northern coast at Prudhoe Bay. Lease sales filled the young state’s coffers with $900 million, more than five times its annual budget. Within five years, the entire windfall was gone. Much of it paid for education and transportation projects, but some politicians and members of the public felt that spending had overinflated the bureaucracy. Jay Hammond, a trapper and fisherman elected governor in 1974, declared that the “nest egg” had been “scrambled.” He and other leaders decided the state ought to safeguard some oil revenue for future generations. In 1976, voters approved a constitutional amendment creating the Permanent Fund, a savings account that would be managed by a semi-independent, state-owned corporation and would take in at least a quarter of oil royalties and related income and invest it.

The fund’s principal could never be touched, barring a constitutional amendment, but Hammond strongly believed the earnings should go directly to residents. The self-styled “bush rat governor” had no interest in charity or wealth redistribution. Rather, influenced by consultants like Milton Friedman who advocated a federal basic income, he viewed recipients as shareholders that should benefit equally from ownership in “Alaska, Inc.” and could spend money more efficiently than the government. Hammond reasoned individual distributions would give the public a personal stake in keeping the fund safe—were politicians to fritter away or mismanage the savings, it would hit every resident right in the pocketbook. If oil was, in the words of OPEC’s founder, “the devil’s excrement,” breeding waste and corruption, Hammond argued a dividend would “at least halfway pin a “diaper'” on it.

As the young fund slowly built up principal, lawmakers debated how to spend the earnings. Most of them strongly opposed dividends, preferring to fund infrastructure or loans to small businesses. Many feared handouts would attract “freeloaders” to the state, or that people would stop working or waste money on frills and vices. But when oil prices soared after the Iranian revolution, there seemed to be enough revenue to go around. In 1980, legislators repealed individual income taxes and put the fund to use, enacting a dividend that would give every adult Alaskan $50 for each year they’d been a resident since statehood. The US Supreme Court ruled the seniority provision unconstitutional, so legislators replaced it with flat annual payouts, extending them to children and adding provisions that prevented recipients from losing federal public assistance because of any windfall. In 1982, Alaskans received their first checks of $1,000. It was the first time in contemporary history that a government had sent money to people just for living in its jurisdiction. (...)

Less than 150 miles from mainland Russia, the Iñupiaq village of Teller, population 228, sits at the base of a tiny sandspit on the edge of a bay bordering the Bering Sea. Unlike many Alaska Native villages, which are only accessible by plane or boat, Teller can be reached by a gravel road that winds through rust and ocher tundra meadows, interrupted by creeks and trampled by herds of reindeer and musk oxen. Beyond the beached skiffs and the sliced salmon draped over wooden racks, on Whale Street (if you hit Walrus Street or Sled Way, you’ve gone too far), a hand-painted sign marks the Teller Native Store, the only place in town selling groceries.

Inside on a Sunday afternoon, Albert Oquilluk lifted a freezer lid. Nothing but reindeer meat, at $14.49 a pound. “Usually, we just go out and get our own,” he said. Trailed by his six-year-old son, Urijah, he moved to a pair of refrigerators and peered at the racks. “No sausage, no bacon.” He threw a can of Spam in his shopping basket.

Most autumns, Oquilluk would have had stores of dried salmon at home, or he’d be out shooting ducks and geese. This year, he’d been lucky enough to land a temporary job as a heavy-equipment operator helping build a new dumping ground for the sewage that villagers collect in “honey buckets.” (Most homes don’t have plumbing or running water.) Normally, his only steady pay was a $125 monthly stipend for sitting on the tribal council, with some money on the side from plowing snow or driving people to clinic appointments. Oquilluk’s wife, Carolyn, works for the local government, but some years the family ends up on food stamps. The construction wages were a welcome boon, but he’d been working 10 hours a day, six days a week, since June. That left no time for fishing and hunting, which most villagers still do to supplement their diets.

Oquilluk is 48 with a round face and salt-and-pepper hair. He tossed a quart of ultra-­pasteurized milk into the basket, then Krusteaz pancake mix, Sailor Boy Pilot Bread Crackers, Sun-Maid FruitBits, grape Kool-Aid, and 27 Otter Pops. Canned sweet potatoes, pickles, and pickled beets went in, too. There were no fresh fruits and vege­tables—those had to be hauled or shipped from Nome, a small city about two hours away, or foraged in the form of wild berries or “beach greens.” Urijah sneaked some Goldfish crackers into the basket, and his father threw in a tin of beef jerky. The total for 11 items and the mess of Otter Pops came to $81.22.

The family’s dividends had arrived two days earlier and were paying for the groceries. All together, Oquilluk, his wife, and their four kids had gotten $9,600 after the cuts. Even given their flush year, that sum made up about 15 percent of their income. In leaner times, they needed the dividend to survive. Rural Alaska is expensive, with gas for their truck and boat costing more than $700 a month. Groceries top $1,000. This year, the money helped them buy things beyond the basics. Oquilluk and his wife had already spent about $2,000 on Amazon. They bought raw honey, kids’ clothing, boots, a boot dryer, a burger press, tongs, bowls, a come-along for hauling boats or marooned four-wheelers, a jigsaw for carving a traditional crescent-shaped knife called an ulu, a bucket seat cushion, a smartphone attachment for their spotting scope, and eight pounds of lard. They were thinking of splurging to send one of their daughters to attend tribal conferences in Anchorage.

Most importantly, they paid off some of the $5,000 plus late fees remaining on their loan for an 18-foot skiff and motor, which Oquilluk had bought so he could fish. “We’re almost three years overdue on payments. When they started cutting our PFDs, that’s when we couldn’t make a payment.”

The Oquilluks are better off than many of their neighbors in Teller, where almost 40 percent of residents live below the poverty line and income per capita is less than half the national median income. For some, the dividend is the only cash they get all year besides public assistance. Dividend checks play an amplified role in rural Alaska, with its isolation, lack of jobs, high living costs, and less reliable public services. Researchers at the University of Alaska-Anchorage estimate that eliminating dividends would increase the number of Alaska Natives living below the poverty line by about a third and boost poverty among elderly Native people in rural areas by 72 percent. Thanks to his job and the dividend, Oquilluk said, “we’re making ends meet.”

In some ways, the role the dividend plays in rural Alaska is similar to what advocates say a universal basic income could do: fill the gaps when there aren’t enough jobs to go around. Alaska’s dividend is not high enough to represent what advocates call a full basic income, defined as being enough to survive on and escape poverty, either on its own or combined with social services. But given that its payments are regular, unconditional, and doled out to virtually every­one, the Permanent Fund Dividend is the closest thing to an institutionalized universal basic income in the world today. For proponents of expanding the idea, the lessons are clear: Universal direct cash distributions work. And they become wildly popular once enacted, with beneficiaries even in an individualistic, conservative state finding ways to justify a government entitlement elsewhere embraced by radicals and leftists.

by Katia Savchuk, Mother Jones |  Read more:

Image: Ash Adams
[ed. I was initially against the PFD and thought about framing my first check instead of cashing it back in 1982. That idea didn't last long (like, before I could even buy a picture frame). I do think the PFD has had a big effect on the state's diversity bringing in lots of Samoans, Filipinos and other cultures with extended close-knit families. What was really crazy though was the near simultaneous abolishment of a state income tax.]

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Jerry Brown’s Midnight in America

Nearly a half-century on the national stage surely entitles a leader to some valedictory words, and if Jerry Brown were a conventional politician one could easily imagine what those words might be:

Though the sun is setting on my time of public service, it will always be rising for this great state et cetera, et cetera, and though we face daunting challenges let me assure you that I have never been more optimistic about the endless promise of blah, blah, blah.

But if Jerry Brown were a conventional politician he would never have been on the national stage for a half-century. He would have been shooed off it several decades ago, to a chorus of mockery about his supposedly eccentric style and mournful commentary about faded promise and what might have been.

Instead, at age 80, Brown is leaving the governorship of the nation’s largest state in a few hours, at noon on Monday. If this departure seems a bit reluctant—he pauses slightly, before demurring when I ask him if he wishes he could keep his job—it is emphatically on his own terms. A leader who at times has been treated as a figure of ridicule has vindicated his place as one of the most serious people in American life across two generations.

During an interview with POLITICO at the governor’s mansion here in late December, Brown was indeed serious. He is not full of warm words about the native wisdom of the people: They strike him as scared, easily prone to distraction and cynical manipulation. He is not more optimistic than ever: He is worried the planet is hurtling toward catastrophe.

How does he see the world in 2019? “Dangerous—and we’re lucky to be alive,” Brown said, his voice rising. “Humankind has created—certainly since the invention of the atomic bomb, but also biological breakthroughs, cyber capacities—humankind has the capacity of vast, vast destruction, even the elimination of human beings themselves, all over the planet. That could be in a matter of days, certainly with the nuclear.”

And yet, as he sees it, America’s entire political culture—elected officials, the news media, intellectuals—seems blithely disengaged from the magnitude of the peril, endlessly distracted by trivia. On climate change, nuclear proliferation and the new awareness that technology can be an instrument of oppression as well as individual empowerment, he continued: “The threat is huge; the response is puny; and the consciousness, the awareness is pathetically small.”

Brown has been reading lately about World War I and sees contemporary parallels between the inability of that generation’s elites to comprehend or control the forces thrusting civilization toward disaster: “I find the metaphor most congenial to describing this problem is sleepwalking.”

Brown may be the most brooding of any major figure in American life, as arresting in its own way as President Donald Trump and his jeremiads about “American carnage.” He regards Trump as a dangerous fraud but also “a symptom” of “widespread estrangement” of people from institutions and leaders they no longer trust—a phenomenon he has observed and often agreed with for decades. He wasn’t surprised that Trump stood out from the “pabulum and predictability” that conventional candidates were offering in 2016.

The message is not “Morning in America,” to borrow the phrase of Brown’s immediate predecessor. Ronald Reagan, of course, after winning the governorship in 1974, went on to a job that Brown very much wanted.

Early in his career Brown was widely seen as an interesting figure but too young to be president. Then for a time he was seen as interesting but too weird. Now he is undeniably still an interesting figure—and, in key respects, at last powerfully in synch with the politics of the moment—but too old.

After years as a second-tier issue, climate change is finally moving to a central place in the Democratic debate; Brown has been a prominent voice on energy and environmental matters since the 1970s. Mistrust of big money and corrupt elites is now shaping the politics of both major parties; Brown has been offering a similar critique and promoting citizen empowerment for decades. At the same time, his emphasis on fiscal discipline has sometimes put him at odds with California liberals.

A couple hours before our interview, at an appearance at the Sacramento Press Club, Brown said it was a mistake to run for president three times—“one too many times,” he lamented, of his bids in 1976, 1980 and 1992—and acknowledged a nugget of political wisdom he first learned from another governor, his father Pat Brown: “Everything is timing.” (...)

Brown belongs with the late Sen. Ted Kennedy as figures who shaped American politics in recent decades more than anyone who did not actually achieve the Oval Office.

It is a rare politician who could generate enthusiasm for offices so much lower than ones he has already held. Why was Brown not too proud for that? “Well, because I’m practical,” he told me. “My skills lie in the political domain. So, outside of office I have less to accomplish and less to do. … I never saw my father work on a car. I never saw him pick up a hammer. I never saw him pick up a broom. But I did hear him talk. I did see him go to meetings. And so I learned the skills of the political and that’s why I pursued it.”

When he returned as governor eight years ago, Brown resolved that he would not be confined narrowly to state issues, and instead would use the office as a platform for existential issues affecting the planet, like climate change and the nuclear peril. He speaks often with former Defense Secretary William J. Perry, for instance, and once burrowed away reviewing a book by Perry arguing that the nuclear catastrophe remains much more probable than people realize.

But Brown says he is not expecting these efforts to loom large in history. My colleagues have noted that Brown is allergic to the word “legacy,” a point he proved in the interview. “Who can remember the legacy?” he said, bristling at my question. “Presidents have legacies in ways that governors don’t. They don’t write the history of governors.”

What follows are excerpts of POLITICO’s conversation with outgoing California Gov. Jerry Brown. The questions and answers have been edited for length and clarity.

by John F. Harris, Politico |  Read more:

Image: Stephen Lam/Getty

Must Writers Be Moral? Their Contracts May Require It

When you see publishers and authors chatting chummily at book parties, you’re likely to think that they’re on the same side — the side of great literature and the free flow of ideas.

In reality, their interests are at odds. Publishers are marketers. They don’t like scandals that might threaten their bottom line — or the bottom lines of the multinational media conglomerates of which most form a small part. Authors are people, often flawed. Sometimes they behave badly. How, for instance, should publishers deal with the #MeToo era, when accusations of sexual impropriety can lead to books being pulled from shelves and syllabuses, as happened last year with the novelists Junot Díaz and Sherman Alexie?

One answer is the increasingly widespread “morality clause.” Over the past few years, Simon & Schuster, HarperCollins and Penguin Random House have added such clauses to their standard book contracts. I’ve heard that Hachette Book Group is debating putting one in its trade book contracts, though the publisher wouldn’t confirm it. These clauses release a company from the obligation to publish a book if, in the words of Penguin Random House, “past or future conduct of the author inconsistent with the author’s reputation at the time this agreement is executed comes to light and results in sustained, widespread public condemnation of the author that materially diminishes the sales potential of the work.”

That’s reasonable, I guess. Penguin, to its credit, doesn’t ask authors to return their advances. But other publishers do, and some are even more hard-nosed.

This past year, regular contributors to Condé Nast magazines started spotting a new paragraph in their yearly contracts. It’s a doozy. If, in the company’s “sole judgment,” the clause states, the writer “becomes the subject of public disrepute, contempt, complaints or scandals,” Condé Nast can terminate the agreement. In other words, a writer need not have done anything wrong; she need only become scandalous. In the age of the Twitter mob, that could mean simply writing or saying something that offends some group of strident tweeters.

Agents hate morality clauses because terms like “public condemnation” are vague and open to abuse, especially if a publisher is looking for an excuse to back out of its contractual obligations. When I asked writers about morality clauses, on the other hand, most of them had no idea what I was talking about. You’d be surprised at how many don’t read the small print. (...)

Jeannie Suk Gersen, a Harvard Law School professor who writes regularly for The New Yorker, a Condé Nast magazine, read the small print, too, and thought: “No way. I’m not signing that.” Ms. Gersen, an expert in the laws regulating sexuality, often takes stands that may offend the magazine’s liberal readers, as when she defended Education Secretary Betsy DeVos’s rollback of Obama-era rules on campus sexual-assault accusations. When I called Ms. Gersen in November, she said, “No person who is engaged in creative expressive activity should be signing one of these.”

It’s not that a company should have to keep on staff a murderer or rapist, she added. But when the trigger for termination could be a Twitter storm or a letter-writing campaign, she said, “I think it would have a very significant chilling effect.”

Masha Gessen, another New Yorker writer, also said she wouldn’t sign her new contract, at least not as it was originally worded. Ms. Gessen, a Russian-American journalist who won the 2017 National Book Award for “The Future Is History,” about the return of totalitarianism in post-Communist Russia, has spent her career challenging prevailing nostrums.

Last year, as prominent men fell like bowling pins after being accused of sexual misconduct, Ms. Gessen published columns on the New Yorker website describing the #MeToo movement as an out-of-control “moral panic” bent on policing sexual behavior by mob justice. Needless to say, many readers did not agree.

“I’m extremely uncomfortable with it,” Ms. Gessen said about the contract, “because I have in the past been vilified on social media.” Having once been fired from a job as the director of Radio Liberty in Russia after what she called a disinformation campaign, she added, “I know what it’s like to lose institutional support when you most need it.” (...)

Morality clauses may be relatively new to mainstream publishing, but they have a long history. The entertainment industry started drafting them in 1921, when the silent-movie star Fatty Arbuckle, who had just signed a then-astonishing $1 million contract with Paramount Pictures, was accused of the rape and manslaughter of a girl at a party. Mr. Arbuckle was acquitted after two mistrials, but by then the public had soured on him, and the studios wanted out.

Today the clauses are widespread in sports, television and advertising. Religious publishers have used them for at least 15 years, which seems fair enough. You can’t condemn a Christian publisher that cancels publication of a book called “The Ridiculously Good Marriage” after the author is accused of having sexually assaulted an underage girl when he was a youth pastor. (He apologized for a “sexual incident.”) Children’s publishers have been including the clauses for a decade or more, and they, too, have a case. It would be challenging to sell a children’s book written by a pedophile. (...)

The problem with letting publishers back out of contracts with noncelebrity, nonreligious, non-children’s book authors on the grounds of immorality is that immorality is a slippery concept. Publishers have little incentive to clarify what they mean by it, and the public is fickle in what it takes umbrage at.

by Judith Shulevitz, NY Times | Read more:
Image: Kiersten Essenpreis

Northwest Angle

Petition calls for U.S. to give Northwest Angle to Canada (CBC)

[ed. See also: Northwest Angle (Atlas Obscura)]

What’s the Purpose of a Moose’s Long Nose?

A scientist from Ohio once pondered why moose have such long noses.

Why, one might ask, does a scientist from Ohio care? It can tell them about evolution, says Lawrence Witmer, a biologist and professor of anatomy at Ohio University. As part of a study of unusual noses on dinosaurs and modern animals, Witmer and his colleagues examined the enigmatic nose of the moose.

Because moose disappeared from Ohio long ago, Witmer looked farther north for help, and he found it in Newfoundland, Canada's easternmost province. There, workers for the Department of Natural Resources shipped him four frozen heads of road-killed moose.

With moose heads intact in his Athens, Ohio, lab, Witmer dissected the noses for a closer look, finding enough compelling information to write a paper published in the Journal of Zoology.

Before Witmer's study, scientists had speculated on why the moose might have evolved such a long nose while other members of the deer family have relatively short noses.

One argument was that a long nose could help a moose shed heat from its huge body after running long distances to avoid predators. Witmer and his co-workers found this adaptation unlikely because few blood vessels exist near the outside surface of a moose's nose.

Another reason a moose might have a big nose is to better sniff out predators or potential mates. Witmer found that idea had merit, and his attention soon turned to a moose's nostrils.

Just like a person's ears, a moose's large nostrils point in opposite directions. The wide spacing of moose nostrils might permit a moose to better locate smells, as our ears help us locate the direction of a sound and its distance.

Witmer couldn't rule out that moose use their unique nostrils for directional smelling, but all the complicated tissues that make up a moose's nostrils suggested moose use them for something more — a set of valves that close automatically underwater.

"Animals like horses, dogs and cats can't close their nostrils," Witmer said. "Closing your nostrils is a common aquatic adaptation, but you don't see it in other members of the deer family.”

When a moose dips its head under water, the difference between the water pressure and the air pressure causes the nostrils to close, Witmer said.

This adaptation, perhaps the main reason a moose's nose is so long, allows a moose to feed underwater without flooding its nose, an unpleasant sensation even for two-legged, short-nosed mammals like us.

by Ned Rozell, ADN |  Read more:

Image: Ned Rozell
[ed. I thought it might be so they could nose around in deep snow.]

Matti Merilaid, Solar System
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Willi Dorner, Bodies In Urban Space, 2007
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Wagyu: Online Beef Sales Take Off

Plant-based cuisine was one of the biggest food trends of 2018. At the same time, beef sales were massive. Nielsen has reported that beef saw the biggest change in U.S. sales in the past few years, with almost 11 percent more pounds sold in 2018 than in 2015. Beef consumption is expected to continue to rise, to 58.8 pounds per person in 2019, 2.8 percent higher than last year, according to forecasts from the Cattle Site.

While 55 percent of Americans still buy their meat at full-service markets, a growing segment is shifting to the internet to find more specialized products. Online meat purchases have jumped from 4 percent in 2015 to 19 percent in 2018. There are three main reasons: Customers are looking for a product that’s higher-quality, sustainable, and traceable.

So while traditional retailers such as Kroger, Albertsons, and even Whole Foods have done little to innovate—course-correcting a brick-and-mortar chain is slow business—consumers are now a click away from the finest-grade beef and the most esoteric cuts, with that pinnacle of fat-marbled decadence, wagyu, leading the charge. Google searches for “wagyu beef” have more than tripled in the past four years.

“It was just a couple years ago that we would constantly get the ‘What is wagyu?’ question from consumers and cattlemen. Those days seem to be behind us,” says George Owen, executive director of the American Wagyu Association.

A quick wagyu primer: Although many people think it’s strictly a Japanese export, American wagyu dates back to the 1970s, when animals brought over from Japan were crossed with domestic breeds such as Angus and Holstein. Today’s American wagyu is predominantly crossbred with some, but not many, full-blood wagyu. Many believe that full-blood, Japanese-heritage wagyu has higher marbling and a richer flavor than its American counterpart. (Kobe beef is also from wagyu cattle but can only come from specific breeds from Japan’s Hyogo prefecture. Beware the words “Kobe-style.”)

The arbiter of our country’s meat quality has long been the U.S. Department of Agriculture. The government agency’s top rating is USDA prime, which comes from young beef cattle (traditionally grain-fed) with abundant marbling. But you won’t find much at your local supermarket. Instead, most markets offer a meat counter stocked with basics (with occasional nods to organic, grass-fed, or antibiotic-free) and a freezer stocked with commodity cuts such as ground beef and rump roast. (...)

Carrying niche products such as wagyu is a difficult stance for markets to take, says Darren Seifer, executive director at market researcher NPD Group. “Space is limited, and everything needs to fly off the shelves,” he says. “Online is more about what your distribution can handle.”

Online meat sales aren’t new. Omaha Steaks has been selling direct for a hundred years, but experts describe the company’s main products as more commodity than craft. Now its butchers are attempting to get with the program. In late 2018 they added four wagyu cuts, including a burger, rib-eye, New York strip, and filet mignon. So far “sales are exceeding expectations,” says Todd Simon, senior vice president and fifth-generation owner of Omaha Steaks.

Other sites have more fully embraced wagyu. “That [top-end] category formerly occupied by prime is now wagyu,” says Kurt Dammeier, chief executive officer of Seattle-based Mishima Reserve (as well as Beecher’s Handmade Cheese). He sells wagyu online from Japanese-heritage, full-blood Kuroge Washu bulls crossed with Angus cows from the western U.S. Costco, the rare exception among mass retailers, sells a 12-pound Japanese-imported wagyu for $1,280 online.

Another standout in direct-to-consumer meat is Crowd Cow, which started in 2015 and has already grown to reach annual sales well north of $10 million. Today it has more than 100 farms; steak arrives with the farmer’s name attached. Online you can learn how the animal was cared for and fed. At the apex of its assortment is “olive wagyu,” which comes from a ranch in Japan where the animals—only 2,200—are fed a special diet of Inawara rice straw, Italian ryegrass, and toasted and sweetened local olive pulp. The A5 olive wagyu tenderloin sells for about $400 per pound. The first time Crowd Cow listed it on its website, it sold out in 22 minutes. It’s one of the reasons Crowd Cow’s wagyu sales have grown fivefold since the company was launched.

“I think Crowd Cow is very clever,” says Andrew Gunther, executive director of A Greener World, a nonprofit focused on bringing more transparency to meat production. “If you’re selling on the internet, it’s about branding and marketing to your demographic,” he says. “They’ve done all the homework for the millennial.”

by Larissa Zimberoff, Bloomberg | Read more:
Image: Crowd Cow

World War II Enigma Cipher Machine Up for Auction

World War II Enigma cipher machine up for auction (Boing Boing)

[ed. For a fascinating (and entertaining) historical fiction account of Enigma's development and use in WWII read Neal Stephenson's Cryptonomicon.]

Childhood's End

All revolutions come to an end, whether they succeed or fail.

The digital revolution began when stored-program computers broke the distinction between numbers that mean things and numbers that do things. Numbers that do things now rule the world. But who rules over the machines?

Once it was simple: programmers wrote the instructions that were supplied to the machines. Since the machines were controlled by these instructions, those who wrote the instructions controlled the machines.

Two things then happened. As computers proliferated, the humans providing instructions could no longer keep up with the insatiable appetite of the machines. Codes became self-replicating, and machines began supplying instructions to other machines. Vast fortunes were made by those who had a hand in this. A small number of people and companies who helped spawn self-replicating codes became some of the richest and most powerful individuals and organizations in the world.

Then something changed. There is now more code than ever, but it is increasingly difficult to find anyone who has their hands on the wheel. Individual agency is on the wane. Most of us, most of the time, are following instructions delivered to us by computers rather than the other way around. The digital revolution has come full circle and the next revolution, an analog revolution, has begun. None dare speak its name.

Childhood’s End was Arthur C. Clarke’s masterpiece, published in 1953, chronicling the arrival of benevolent Overlords who bring many of the same conveniences now delivered by the Keepers of the Internet to Earth. It does not end well.

by George Dyson, Edge |  Read more:

Image: uncredited
[ed. See also: No One is at the Controls (Vanity Fair/Hive)]

Why (Some) Humans Are Born to Have a Beer Belly

It’s that time of the year when a middle-aged person’s fancy turns to treadmills and diets. Scientific literature on excess weight and health is expanding along with global waistlines, and yet, it’s hard to find a solid, coherent scientific explanation for why some people get fat and others don’t, and why some overweight people get Type 2 diabetes and heart disease and others don’t.

Here in the U.S., beliefs about fat follow a science-y sounding quasi-religious narrative: Our prehistoric ancestors had to scramble for food, and therefore evolved voracious appetites that we’ve inherited like original sin. Only self-control can save us, and the association between fat and disease goes without question; it is seen as punishment for the sins of gluttony and sloth.

This narrative acknowledges evolution, but it’s not real evolutionary biology. This week, however, a real evolutionary biologist published a sweeping picture of human fat and health in the Proceedings of the National Academy of Sciences.

While traditional medical research tends to make very narrow hypotheses and test them with specific data, evolutionary biology often works as an observational science, seeking patterns that tie together and explain lots of diverse observations and measurements. Think Charles Darwin, or the big bang theory in cosmology.

The biologist, Mary Jane West-Eberhard of the Smithsonian Tropical Research Institute in Costa Rica, has focused her work on understanding biological variation. Sometimes individuals with the same genes can show dramatic differences; a queen bee and her workers share the same genes but very different fates. A butterfly born at one time of year may live many times longer than those born in other seasons. Some fish can even change sex in response to changes in the environment.

She proposes that the same biological principle can explain why humans come in quite different shapes. Some people put on so-called visceral fat, surrounding vital organs, while others put on so-called subcutaneous fat on the limbs, hips and elsewhere. This makes a big difference in health because recent studies show it’s the visceral fat that’s associated with Type 2 diabetes and heart disease.

Because she’s interested in the functions of things, she looked into visceral fat — also known as the omentum, a part of the immune system. It wraps around the vital organs and protects them from infection. But what’s protective early in life can have a downside later. Our natural immune response often involves inflammation, and that has been associated with Type 2 diabetes and coronary heart disease. The omentum, she said, is the Rosetta stone of pathogenic obesity.

Why then do some people get an expanding omentum and others get "curves" or whatever the latest fashion calls attractively placed subcutaneous fat? She cites other biologists pointing to sexual selection as the driving force in the human tendency to put fat deposits in places where they serve as ornaments.

Her analysis of the data suggests that where your fat goes depends on how well fed you were as a fetus. It’s those who are most undernourished in utero — approximated by low birth weight — who are most likely to accumulate visceral fat in the abdomen. Underweight, badly nourished babies are more vulnerable to infection and benefit from the short-term strategy of laying down protective visceral fat. The pattern is set by epigenetics — chemical changes surrounding the DNA that determine which genes become activated in which tissues.

by Faye Flam, Bloomberg |  Read more:

Image: Sean Gallup/Getty

We Need to Keep Laughing

We the people, our power embodied by members of the new House of Representatives who swore to uphold the Constitution on Thursday, need to dig deep and investigate. We need to expose the crooks, incompetents and traitors selling out their country in a White House of grifters.

We need to call out the moral crimes: the adults financed by taxpayers who let children die in their care. The secretary of state who gives a pass to a kingdom that cuts up a journalist with a bone saw. The press office that covers for a president who can rarely go a single hour without telling a lie.

We need to restrain a toddler in chief who forces 800,000 federal workers to go without paychecks, many of them now missing house payments. We need to remind people that a temper tantrum from President Trump means garbage is overflowing and poop is backing up at our national parks — a fitting image of what this cipher of a man has done to the land.

But also, we need to laugh.

There has never been a more darkly comic person to occupy the White House. Who tells a 7-year-old on Christmas Eve that this whole Santa Claus thing may be bogus? Who rings in the new year with a siren tweet in all CAPITAL LETTERS urging people to calm down? What kind of president puts a poster of himself on a table during a cabinet meeting?

Who else but the Stable Genius, Tariff Man, the A-plus President. Mr. Trump has inspired more laughter in the past year, by one calculation, than any politician in history. At the United Nations, the whole world laughed at him.

People, this is our best weapon! Take it from Mark Twain: “Against the assault of laughter, nothing can stand.” Take it from the Scottish, who greeted Mr. Trump last year with a 20-foot inflatable orange baby in diapers, holding a cellphone. A Scot called Mr. Trump a “tiny-fingered, Cheeto-faced, ferret-wearing … gibbon.”

Or take it from the Finns. When the president suggested that wildfires could be prevented by raking our forests, as he imagined the Finns did, these people showed that their reputation for humorlessness is wrong. Among the best pictures tweeted out by the Finns was that of a woman taking a vacuum to the forest floor.

Mr. Trump hates this stuff. More than anything, he fears ridicule. It’s the necklace of garlic against the vampire. When Bill Maher compared him to an orangutan, Mr. Trump sued. The court threw out the case because jokes about pompous, hypersensitive, orangutan-looking public figures are protected free speech. It was news to no one but Mr. Trump.

The mockery gets to him because deep down, he knows he’s a fraud. “The Art of the Deal” was the invention of its ghostwriter. “The Apprentice” was complete fiction. “He had just gone through I don’t know how many bankruptcies,” Bill Pruitt, a producer on the show, recently told The New Yorker. “But we made him out to be the most important person in the world. It was like making the court jester king.” (...)

Good politicians can tell jokes on themselves. Abraham Lincoln, when accused of being two-faced, replied, “Honestly, if I had two faces, would I be showing you this one?” Barack Obama lamented his diminishment. “I look in the mirror and say, ‘I’m not the strapping young Muslim socialist I used to be.’”

Comedians are truth tellers. The journalistic fact checkers, God bless ’em, can reach only so many people. The antidote to a long day of White House lies is a long late night of comedy.

So it’s encouraging, at the dawn of divided government, to see nonprofessionals get into the act. Take the wall — please, it’s the source of our government shutdown. It’s not big, or beautiful, or made of concrete or steel slats. It’s nothing, at this point. “To be honest, it’s not a wall,” as Mr. Trump’s former chief of staff, John Kelly, said.

Nancy Pelosi, the new — and this time around, well-fortified — speaker of the House, had the best line on the wall. “He’s now down to, I think, a beaded curtain or something.” Not bad. Keep it up.

by Timothy Egan, NY Times |  Read more:

Image: Will Heath/NBC
[ed. See also: Pelosi Says She Will Skip Trump and Negotiate Directly with Putin (New Yorker)]

The AOC Dance

Bid to discredit Alexandria Ocasio-Cortez with college dance video backfires

[ed. She really bugs them (along with Nancy Pelosi and Elizabeth Warren). Do visit the Twitter site: AOC Dances to Every Song, it's great. (I like the Earth, Wind and Fire version myself). See also: That Viral Video of Alexandria Ocasio-Cortez Dancing Is a Meta-Meme (Wired).]

Claude Venard
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Google Shifted $23bn to Tax Haven Bermuda in 2017, Filing Shows

Google moved €19.9bn ($22.7bn) through a Dutch shell company to Bermuda in 2017, as part of an arrangement that allows it to reduce its foreign tax bill, according to documents filed at the Dutch chamber of commerce.

The amount channelled through Google Netherlands Holdings BV was about €4bn more than in 2016, the documents, filed on 21 December, showed.

“We pay all of the taxes due and comply with the tax laws in every country we operate in around the world,” Google said in a statement.

“Google, like other multinational companies, pays the vast majority of its corporate income tax in its home country, and we have paid a global effective tax rate of 26% over the last 10 years.”

For more than a decade the arrangement has allowed Google’s owner, Alphabet, to enjoy an effective tax rate in the single digits on its non-US profits, about a quarter of the average tax rate in its overseas markets.

The subsidiary in the Netherlands is used to shift revenue from royalties earned outside the US to Google Ireland Holdings, an affiliate based in Bermuda, where companies pay no income tax.

The tax strategy, known as the “double Irish, Dutch sandwich”, is legal and allows Google to avoid triggering US income taxes or European withholding taxes on the funds, which represent the bulk of its overseas profits.

by Reuters/The Guardian |  Read more:

Image: Jeenah Moon/Reuters

[ed. Because, of course they did. Even after publication of the Paradise Papers and the massive repatriation tax break they got with the recent Republican tax bill.]

What Happened to 90s Environmentalism?

I grew up in the 90s, which meant watching movies about plucky children fighting Pollution Demons. Sometimes teachers would show them to us in class. None of us found that strange. We knew that when we grew up, this would be our fight: to take on the loggers and whalers and seal-clubbers who were destroying our planet and save the Earth for the next generation.

What happened to that? I don’t mean the Pollution Demons: they’re still around, I think one of them runs Trump’s EPA now. What happened to everything else? To those teachers, those movies, that whole worldview?

Save The Whales. Save The Rainforest. Save Endangered Species. Save The Earth. Stop Slash-And-Burn. Stop Acid Rain. Earth Day Every Day. Reduce, Reuse, Recycle. Twenty-five years ago, each of those would invoke a whole acrimonious debate; to some, a battle-cry; to others, a sign of a dangerous fanaticism that would destroy the economy. Today they sound about as relevant as “Fifty-four forty or fight” and “Remember the Maine”. Old slogans, emptied of their punch and fit only for bloodless historical study.

If you went back in time, turned off our Pollution Demon movie, and asked us to predict what would come of the environment twenty-five years, later, in 2018, I think we would imagine one of two scenarios. In the first, the world had become a renewable ecotopia where every child was taught to live in harmony with nature. In the second, we had failed in our struggle, the skies were grey, the rivers were brown, wild animals were a distant memory – but at least a few plucky children would still be telling us it wasn’t too late, that we could start the tough job of cleaning up after ourselves and changing paths to that other option.

The idea that things wouldn’t really change – that the environment would neither move noticeably forward or noticeably backwards – but that everyone would stop talking about environmentalism – that you could go years without hearing the words “endangered species” – that nobody would even know whether the rainforests were expanding or contracting – wouldn’t even be on the radar. It would sound like some kind of weird bizarro-world. (...)

So what happened?

Every so often you’ll hear someone mutter darkly “You never hear about the ozone hole these days, guess that was a big nothingburger.” This summons a horde of environmentalists competing to point out that you never hear about the ozone hole these days because environmentalists successfully fixed it. There was a big conference in 1989 where all the nations of the world met together and agreed to stop using ozone-destroying chlorofluorocarbons, and the ozone hole is recovering according to schedule. When people use the ozone hole as an argument against alarmism, environmentalism is a victim of its own success.

So what about these other issues that have since fizzled out? Did environmentalists solve them? Did they never exist in the first place? Or are they still as bad as ever, and we’ve just stopped caring?

by Scott Alexander, Slate Star Codex |  Read more:

Image: Amazon

[ed. I can think of a few other reasons (besides those mentioned in this article): a deeper knowledge of the natural world such that environmental solutions are now understood to be more complex/inter-related than initially imagined; economic productivity and financial security becoming more important (over environmental altruism); the looming climate change crisis and our inability to effectively deal with it (which is mentioned), leading to defeatism on any given single issue problem; environmental organizations pumping out alarming proclamations for so long (as a means of fund raising) that they've become mostly background noise; the same groups increasingly fractured in internal debates/fights over scientific theories and action priorities; 24/7 news coverage and the internet ramping up fears and appropriating attention on a broad range of issues (outrage fatigue); and other reasons like fake news, political polarization, corporate propaganda, etc. But too, on a positive note, the effectiveness of environmental laws and regulations over the last 50 years in ameliorating many of the worst problems.] 

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The Psychopharmacology of Everyday Life

Everyone is on drugs. I don’t mean the old-fashioned, illegal kind, but the kind made by pharmaceutical companies that come in the form of pills. As a psychoanalyst, I’ve listened to people through the screen of their daily doses; and I’ve listened to them without it. Their natural rhythms certainly change, sometimes very dramatically—I guess that’s the point, isn’t it? I have a great many questions about what happens when a mind—a mind that uniquely structures emotion, interest, excitement, defense, association, memory, and rest—is undercut by medication. In this Faustian bargain, what are we gaining? And what are we sacrificing?

There is new resistance to the easy solution of medicating away psychological problems, because of revelations about addiction and abuse, a better understanding of placebo effects, or, for example, the startling realization that antidepressants, far from saving some teenagers from committing suicide, can sometimes push them to do it, which means that these pills should not be a first line of defense. Perhaps the time is right to return to the conundrum of mind and medicine.

The story of psychopharmacology stretches from the advent of barbiturates at the turn of the century to the discovery in the early 1950s of the first antipsychotic, based on a powerful sedative used for surgical purposes that was described as a “non-permanent pharmacological lobotomy.” This drug, Chlorpromazine, led to the development of most of the drugs used today for psychiatric management. The proliferation of psychiatric medications, ones with supposedly less overt dangers, began in the late 1980s—at the same time, a watershed lawsuit was filed in the UK against the makers of benzodiazepines, a class of drugs used for treating anxiety and other disorders, for knowingly downplaying knowledge of their potential for causing harm. Today, psychopharmacology is a multibillion-dollar industry and an estimated one in six adults in America is on some form of psychiatric medication (a statistic that doesn’t even include the use of sleeping pills, or pain pills, or the off-label use of other medications for psychological purposes).

Until I started researching the history of psychopharmacology, I didn’t know that it was an antipsychotic that had spurred the developments of most of the medications we know so well today, such as Prozac and Xanax. But it was the issue of antipsychotics that first made me think about what we were trading as individuals, and as a society, in relying so widely on psychiatric meds. When I went to work in a psychiatric hospital during my training, nothing seemed more self-evident than the need to sedate a psychotic person. They were the most clearly “out of their mind” and the medications worked quickly to reduce psychotic symptoms, especially the auditory hallucinations that menaced these patients. How could this be wrong? (...)

I am indeed a Freudian psychoanalyst, that strange anachronism maligned by psychiatry for not being as scientific as medication supposedly is, by virtue of the control studies that can be done with drug treatments. Modern psychopharmacology goes hand in hand with a psychiatric diagnostic system that has, over time, been redefined to rely on medicating symptoms away rather than looking at the structure of the mind and its complex permutations in order to work with a patient in a deeply engaged way over the long haul. Modern psychiatry is hailed as a scientific success story, and drug companies have profited from the fact that talking therapies are often thought to take too long, their results frequently dismissed as unverifiable. I question, though, whether we should demand verified results when it comes to our mental life: Do you believe someone who promises you happiness in a pill?

Psychoanalysis still has the power to intrigue people, it seems—so embedded is it in American popular culture. Psychoanalytic language has entered the vernacular and psychoanalytic concepts permeate the way we all understand human relationships, especially sexuality. I have the sense that we need it more than ever to help us with our discontents because there is enduring value in the Freudian understanding of, on the one hand, the unceasing conflictual relationship between civilization and neurosis, and, on the other, what talking, simply talking, can do.

Freud himself was anything but hostile to psychopharmacology. Indeed, he was a notorious experimenter with drugs, especially cocaine, whose anesthetic properties and psychological effects he was one of the first to discover and champion (until, that is, a host of his friends and family to whom he administered the drug became addicted, contributing even to the death of one friend whose morphine abuse escalated after using cocaine in tandem, until he eventually overdosed). Freud himself underwent a course of experimental hormonal therapy with the first neuro-endocrinologist to see if it would improve his mood. Such research became the foundation for sex-change therapies today, along with a number of other medical discoveries that earned that doctor seven nominations for the Nobel Prize.

Freud’s beliefs about the human psyche thus did not exclude his own quite liberal experiments with medication and medical procedures. Importantly, at the end of his life, Freud chose to forgo any pain medication after almost thirty surgeries for oral cancer, so that he could think clearly with patients and continue to write—though he never ceased smoking the cigars he loved that had almost certainly caused his disease. The lesson I take from Freud is that you can choose your poison, which is the reason I wanted to turn to the topic of drugs, using what I’ve learned as a psychoanalyst over the last two decades.

We do have a choice about whether to medicate and how we do so. I think we have forgotten this because of how easy it is to obtain pills, along with the pervasive idea that our problems are simply chemical or genetic. So I want to begin by recalling what the drug panacea is treating at the most basic psychological level: pain, attention, sadness, libido, anxiety, sleep. Freud was surprisingly insightful about these crucial aspects of the psyche, even from his earliest writings before the turn of the century. By elucidating some basic psychoanalytic notions concerning the most common “troubles” of the mind, and by focusing on the different categories of medications prevalently used, I hope to disrupt our blind passion for prescriptions.

Painkillers

I’d like to begin with painkillers since they have been filling our headlines and because pain is often not thought of as having a psychological component (whereas I believe it does). Given that we have a crisis that has seen opioid-related deaths increase by 600 percent over the last four years, exceeding gun deaths and traffic fatalities in America, with 72,000 dead from overdose in 2017 alone, there is a problem with the way we medicate pain.

Pain is much more enigmatic than is commonly recognized. Why some people have a much higher threshold for tolerating physical pain than others is not fully understood. Nor do we know enough about the relationship between physical and emotional pain.

Freud recognized that pain was an important part of evolution, built into our being as a primary means of apprehending reality and adapting our behavior to avoid the threat of harm. Yet he also called pain a “failure” and a stark limit to the efficiency of the psychic system because it was, on the one hand, too easy always to “fly from pain” (in other words, to obscure it) and, on the other, too difficult to master pain since it creates indelible memory traces that do not lose their intensity even, in some cases, with the passage of time. The memory of pain is often as bad, if not worse, than the pain that was experienced. Consider post-traumatic stress disorder.

“Pain,” writes Freud, is a pure “imperative” that produces a state of “mental helplessness.” And in his view, physical pain and emotional pain are made of the same stuff—what Freud called a breach of the stimulus barrier that protects us from the outside world, where, analogous to our skin, there is a protective layer that is meant to remain intact and unperturbed. When it comes to pain, a shock to the barrier sets off a multitude of nerves that then fire too rapidly to prevent a reaction. This built-in alarm system makes a demand on a person and those around one, forcing everyone to address whatever painful circumstance has arisen.

Even what we call pleasure, or the reward-system of the mind, does not always have a positive outcome, but can involve a lowering of our sensitivity to pain, allaying the alarm system. The opioid receptors of the brain do just this—something Freud called, when speaking about cocaine, the happiness of “the silence of the inner organs.” Lulling can be dulling. Freud also notes that pain and the sounds associated with it, such as screams or groans, coallesce as a first memory trace, bringing together the sensory realms of internal feeling with an acoustic correlative. Our mind creates a solid bond between pain and the sounds we associate with it, which have the power, through empathy, to immediately produce pain in others. This is what makes the cries of an infant so intolerable. So our experience of pain involves not just our own pain, but also our relation to the pain of others.

With the abuse of pain medication, then, we are not only treating our own pain, which is always somewhere between the physical and emotional, but we are also dulling the immense pain around us. Modernity has increasingly allowed a breaking through of the stimulus barrier, from the impossible demands and the chaotic pressures of contemporary life, to a sense of mounting helplessness in the face of environmental disaster, poverty, loneliness, injustice, annihilation. One could say that “all this pain” is nothing new, but the constant forced attention to the theater of it has come with easy access to a powerful antidote: the ability to medicate the pain away, not just our own, but all of it.

Fascinatingly, Freud notes in his later work “On Narcissism” that the pain arising from organic causes often increases our narcissism, making us give up our interest in the outside world—so “concentrated is his soul… in his molar’s narrow hole,” Freud quotes Wilhelm Busch on the poet who is suffering from a toothache. This is a state that, Freud says, resembles sleep, or what he called “the narcissistic withdrawal of… the libido onto the subject’s own self,” a turning-away from the world. So pain and narcissism are bedfellows—and what else is the abuse of pain medication but a synthetic version of this couplet, fulfilling the wish to keep sleeping, to keep dreaming, to turn away from the world. Overdose appears immanent in this schema, as the risk of slipping into permanent sleep, falling down the narrow hole that seems to promise the cessation of all pain.

There is an ethical twist to this understanding of narcissism’s relationship with pain. The opioid crisis enacts the paradox of a society that seeks to annihilate pain as quickly as possible, even as it refuses to care for or attend to it and its underlying causes.

Annihilating pain, or “flying” from it, will never permit us to master pain, but only increases the need for its continued obliteration. This mastery of pain Freud explained as the formation of a mental response network, which strengthens our tools for dealing with pain beyond “toxic agents or the influence of mental distraction.” Freud always advocated “work,” which was how he characterized what happens in psychoanalysis; he also said that drive or libido could be thought of as the demand that a body can make upon the mind for work—like the emotional pain that can come from others’ requiring us to revisit it again and again to try to make more sense of it.

So what are painkillers, finally? They are drive-killers, which is why their effect on sexual function and even digestion is about the ceasing of work. This suggests the acute danger of these pills, insufficiently regulated, with drug companies profiting from this simple desire: no body, no drive, no pain, no helplessness, nothing. Stretched to the logical extreme, they are about permanent sleep. Death. (...)

Antidepressants

Moving from induced mania to depression, it’s been twenty-four years since Prozac Nation was published; I never read it but practically everyone I know has been on a modern antidepressant Selective Serotonin Reuptake Inhibitor (SSRI) like Prozac at one point or another. Do antidepressants help with depression? It’s a touchy subject; they have clearly helped many through periods of depression, saving the lives of some who have struggled with suicidal feelings. One thing I will say is that I prefer my patients not to be on them if possible, or eventually to get off them. True, the lows aren’t as low, but neither are the highs high, and pleasure is limited to some medial zone. To borrow Sylvia Plath’s metaphor of the bell-jar, the whole system feels caught between two glass walls.

Psychoanalytic work depends on following the natural emotional rhythms of the mind, stretched between anxiety, sadness, and excitement, allowing a certain amount of tension to build at the points of blockage. This is what creates breakthroughs. With the SSRIs, it’s as though the machine becomes frictionless and idling, and the complaints—which don’t go away—spin in neutral, never gaining purchase or momentum. That said, who can afford to have lows in today’s world that demands that we always be on and productive? I understand this. I do think the demands that we make use of ourselves are excessive—and nearly a depressant in itself.

by Jamieson Webster, NYRB | Read more:
Image:Wayne Miller/Magnum Photos

Long-Term “Buy & Hold” Crushed Stockholders in Largest Markets Except US & India. But for the US, Luck’s Running Out

Ugly long-term charts that Wall Street doesn’t want us to see. And now US stocks are infected too.

How well does a buy-and-hold strategy work in the stock market over the long term – as measured in years and decades? In the largest markets around the world, it has crushed investors. There are two exceptions: the US and India. And the US is infected too.

The Everything Bubble in the US, a period of nearly 10 years when just about all asset classes have skyrocketed, was perhaps the most magnificent bubble the world as ever seen. But it peaked in 2018 and has since given up some of its gains to the wailing and gnashing of teeth on Wall Street. So it behooves us to see how this has turned out in the other major markets, and how it might turn out in the US.

The results and charts below exclude the effects of dividends, which would have increased returns or rather lessened the losses; and they exclude the impact of inflation which would have decreased “real” returns and increased “real” losses.

Buy & Hold in the USA: So far, so good.

The S&P 500 fell 6.2% in 2018, its first annual decline in a decade. The swoon came in the last three months, with the index falling 14.8% from the peak at the end of September.

Buy-and-hold results: If you bought an index fund at the dot.com peak in March 2000, and held it until today, you would have made 64% in 19 years.

Buy & Hold in Canada, been a drag.

The Canadian stock index TSX fell 11.6% in 2018. It has moved sharply up and down for an entire decade to end up 5% below where it had been in June 2008:

Buy & Hold in China, oh my!

Buy-and-hold did a magic job in China. The Shanghai Composite Index dropped 24.6% in 2018, closing the year at 2,494. That’s quite an accomplishment. The index is down 52% from its last bubble-peak on June 12, 2015, and down 59% from its all-time bubble-peak in October 2007. It’s now back where it had first been in December 2006.

Here’s the magnificent double-bubble and the destruction it has wreaked on buy-and-hold investors. Note that the index would have to skyrocket by 150% just to get back to where it had been at the peak in 2007:

Buy & Hold in Japan, 3 decades of destruction

The Japanese stock market is the modern record-breaker in terms of buy & hold destruction: It’s already measured in decades, and it’s still going on.

The Nikkei 225 dropped 12.1% to 20,015 in 2018 and is down 18% from its 52-week high. But the historical high of the Nikkei was 38,951 in December 1989. The index is still down 49% from that peak nearly three decades ago, and is back where it had first been in February 1987, 31 years ago when many people working in finance today hadn’t even been born.

Over the past 20 years, Japan had relatively little inflation, and so the soothing veil, finely woven out of the methodical destruction of the purchasing power of the currency, has not been thrown over the index. To get back to its peak in 1989, the index would have to soar 95%:

by Wolf Richter, Wolf Street |  Read more:
Images: Wolf Street