so why does my apartment smell like smoke?
The economy’s fucked, and I’m not even talking about stagnating wages or anything else I’d normally mention when CNBC tries to convince me that the economy’s doing just fine. Anyone who’s worked a job ever in their life can tell you about most of those. No, I’d like to talk about what the people who don’t work for a living should be able to tell you about, but aren’t.
You know the whole WeWork thing that’s been going on for a while? $50 billion unicorn crashes and burns with millennial style, Japanese megacorp involvement, CEO-pictured-barefoot-hours-before-termination? If you’re out of the loop, go catch up. Hilarious as it is, the protracted comedy-of-error narrative form that this episode’s taken on has distracted from the rather simple reason the ship sank in the first place: “The We Company” never has, and never will, make any money. That’s it. All the fun stuff—namely, (former) Cult-Executive-Officer Adam Neumann’s various extravagances—is simply narrative, an entertaining distraction sure to be picked up and optioned off to Hollywood by Vanity Fair faster than you can spell “Scorsese Biopic.” Neumann’s antics evidently never bothered the starry-eyed VCs that propelled him to billionaire status in the first place, and it’s why we’re all doomed.
Give it a couple of more years until the soon-to-be-embattled CEO of the soon-to-be-merger’d JP-Morgan Stanley describes WeWork as a “warning sign,” a “lesson” in “caution” that he finds “unfortunate.” By then we’ll have forgotten the real warning sign, MoviePass (WeWork being the First Plague—blood in the water, certainly), whose business model was tossing VC dollars into a furnace for as long as they could distract their investors with publicity and coke. WeWork, as far as I see it, is pretty much the same thing. Instead of making the movies fun again for like a month, their elevator pitch was disrupting the market of free real estate. All you really need to know is that they’re the largest tenant of office space in New York City, and lost $1.3B in the first half of 2019. That is, they failed to conceive of “profit” renting office space during the biggest landlording bull run since the last time a few drunk-behind-the-wheel speculators co(o)ked up an unsustainable real estate bubble that’s going to drag you down into your grave.
“Drag me into my grave? Who cares if a couple of stupid VCs subsidize office space for Manhattan’s 453rd influencer marketing company? I heard there’s free beer and coffee?” For emphasis: the largest tenant of office space in New York City is a ticking time bomb that will never make any money. Next time Jerome Powell sneezes or whatever, and CNBC soothsayers start divining “recession,” expect said influencers to skip town for Cabo and leave a whole lot of peach-scented office space up and down Broadway behind. When WeWork goes down, a good chunk of the global real estate market may well go down with it.
“Ok, WeWork is bad, but it hardly seems like the whole economy’s fucked. Have you seen the stock market? I’m no fan of Trump but…” Honest to god, I will defend free markets as far as I can look at myself in the mirror and still come to terms with the power of the pencil, but the biggest lie Friedman ever told remains that anyone has made a “rational choice,” ever.
To paraphrase The War Nerd on, well, war: “Most people are not rational, they are TRIBAL: ‘my gang yay, your gang boo!’” My gang: people who make their livings off the DOW. Your gang: everyone else. Yay: most of the “unicorn” corporations that have fundamentally transformed our culture and socioeconomics over the past decade have been able to see billion-dollar valuations whilst completely unable to turn a profit. Boo: they’ve done this while stealing their employees’ tips (Doordash), jacking up housing costs and looping holes through every single tenant-protection law (AirBnB), paying artists a fraction of their worth (Spotfy et al), and creating an entire new class of serfs. I would look forward to all of their timely demises if it didn’t mean millions of people losing their jobs and a subsequent recession, which it definitely does.
What I’m saying is that the stock market going up is not a reflection of a healthy economy as created by rationally minded entrepreneurs and investors; it’s going up because the people who have the ability to make it go up also happen to be the ones who’ll benefit from it the most. I’ve subsumed enough Marx through Twitter to know this is more or less how the economy works all the time in the first place, but jeeze, were they always so lazy with it? At least Enron had the good nature to commit fraud. Uber, Lyft, Snapchat, Slack, Square, Tesla, Doordash, Postmates, and Wag are just a few that inflated themselves to billions before proving that their business had any merit at all. These geniuses are going to walk away filthy rich and sink your retirement fund for inventing—double checking my notes here—taxis, food delivery, and dog walking. Things that have literally always existed, and without wage-slavery as a side-order. Get your free delivery in while you can, for sure—just don’t forget to check your receipts.
I’m sure a few of them will turn it around and end up more Google (tragedy) than Yahoo (farce), but on the whole it’s increasingly apparent that this 10-year-long bull run is little more than a second dotcom bubble with booze and hookers. It’s a gaggle of ketamine-friendly VC nerds and losers playing high stakes poker with play money, except it’s real money, and the bullshit companies they invest in don’t make any money.
This article on the attempts of bank CEOs to publicly rationalize their insanity gave me a vivid flashback to that feeling I had the day Epstein died—that we’re so powerless against our lizard overlords that they don’t even try to cover up their crimes. We also have to live with the fact that their jobs are all made up! They don’t actually know or do anything, they simply clap when numbers go up and cry when they go down. Just like the rest of us, except they get rich both ways. I mean,
The reason [banks had overvalued Uber by around $64 billion, the CEO of Morgan Stanley said], had to do with each bank’s or analyst’s guess at “penetration”… “Let’s say, what, 100 million people or so [worldwide] have been monthly active users of Uber…What percentage of the population is that? Less than 1% or something. Is that 1% going to be 2%, 3%, 6%, 10%, 20%? Half a percent, because people stop using it and turn instead to some flying [taxi]? So if you take all those variable, possible outcomes, you get huge variability in outcome.
I’d make a bigger point of the fact that the CEO of Morgan Stanley sucks at math if it weren’t for the fact that he also doesn’t believe anyone can reasonably guess at the future performance of a given company—that is, the reason the stock market exists and ostensibly makes sense in the first place.
What I’m saying is that the Capital-E Economy—at least, the CNBC one, the Morgan Stanley one, the Trump Twitter one—is fake. It’s made up, it’s a simulacra of exchange, it doesn’t really matter and it does not exist. It is not based on anything material, any hard numbers or facts, any analyst’s informed decision based on P/E ratios or diluted EPS; it is a runaway train fueled by myopia and adderall whose tracks end squarely at your mortgage.
Am I exaggerating? Yeah, probably. It’s not like I have any real idea what’s going on. I just read the news and sometimes talk about it. So when the news tells me that the repo market went to shit overnight last September, and the Fed’s been bailing it out to the tune of $60B every month, it sounds bad—but, again, I don’t really know what’s happening, or what the fuck a repo market is, or why it matters, or what any of these words actually mean. And that’s ok! I’m not even allowed to buy a beer; someone else can do me a favor and take this one. Besides, the Fed’s got the whole thing under control, right?
Yes, no, maybe; no one has a clue. Finance assholes made math so complicated that they either can’t figure out if they have, or are for some reason too scared to tell us how they did, solve the many problems that they created. “Even if the Fed was able to patch the problem by supplying liquidity, we’re still left wondering what else the central bank either doesn’t know or is not revealing.”
Okay, so scratch that, the government’s inept—we knew that. Someone has to have some idea what’s going on, right? This guy? Emphasis his,
The Fed is providing liquidity to the banks so they can provide it to the hedge funds, so they don’t have to sell leveraged positions and drive stocks down. If one were of a suspicious nature, it is easy to imagine that the Fed not only sees that this is happening, but that it is the reason they’ve stepped in to begin with — to prop up stocks. My own take is that this is not their goal, but is a side effect that they’re not inclined to do anything about.
I am literally nothing if not of a suspicious nature—seriously, nothing—but I’ll defer to his knowledge here and stop short of pointing fingers. Either way, it sounds like the Fed is throwing cheap money at banks and hedge funds so they can avoid coming to terms with their suspicious lack of cash. By which I mean trying (and then failing) to sell the worthless fake investments I spent this whole essay talking about.
As we’ve seen with WeWork, just like Bitcoin a solid three or four times now, the bubble won’t pop until everyone realizes it’s a bubble. In this case, it should have happened probably years ago—September at the latest—so what’s up? LPT: when things are supposed to happen but don’t, the fault is either with a) God or b) the media. Considering how many people will be tuning in to impeachment live-updates while their car is being repossessed, I’m leaning media. This is why we’re doomed.
Via Wall Street on Parade, and I just have to take the whole thing:
Our guys over at the Fed are running around screaming “LALALA CAN’T HEAR YOU” with their eyes closed and their fingers up their ears, and this time I’m pretty sure I’m not exaggerating. It’s just that transparently fucked, and the media knows that the game will be up the moment they start reporting on it.
I don’t mean to make light of the ever-approaching financial crisis that will probably be worse than the last one, considering that we haven’t addressed a single one of the problems that caused it. My point is that things are already bad, even according to the “hard numbers” I said I wouldn’t talk about like wage stagnation, life expectancy, suicide rates, consumer debt, student debt, corporate debt, the number of people taking ski trips, drug prices, birth rates—you know, material things actually rooted in the real lives of real people—so the fact that we’re supposed to believe our fake economy is a good one is even more insulting. Don’t ignore what you can see with your own eyes. Cui bono?
Thanks to @janissaryjones on Twitter for being my source on a lot of the repo-market stuff. He’s one of the few people even pretending to do real reporting on it, plus he has a real way with words: “Louder for those in the back. FINANCIAL MARKETS NEED HALF A TRILLION TO STAY LIQUID.”