I don't give financial advice anymore, but. . .

I still watch the economy and stock markets.

Skip this post. 

I am probably wrong. 

Just because I have the willies doesn't mean there is anything to worry about.

I notice that there is a rush to build giant data centers.

The rush is so intense that the public has gotten spooked. Cities and states are banning them, even though they are theoretically a boon to a community because there are construction jobs building them, and then the fabulously valuable buildings sit there, nearly empty, paying property taxes but putting no demands for public services. 

But it doesn't work that way. Data centers want special low-ball property taxes, they are electricity hogs that sop up cheap legacy power generation, and they need water for cooling. People fear what they represent: a Frankenstein monster technology that steals our jobs and humiliates us by doing everything better than humans do.

But today's blog isn't about the politics of data centers. It is about the financing of them and the systemic risk they bring to our economy. They are being built to suit the most valuable and powerful businesses on Earth. Those companies represent America's economic and technical hegemony. Their capital investment has kept our economy growing. Their leaders have become allies with the president. They are too big to fail. Each of the competitors wants to be the first and biggest artificial intelligence company, the brand-dominant provider of a world-changing technology. You don't get that by waiting for profits from customer business. 

So what's my concern? Most data centers aren't being built by Amazon, Meta, Alphabet, Oracle, or Microsoft. They are the tenant for the facilities. They are the "smart money," the people with the best insight as to the growth of the technology. They have offloaded the risk by establishing Special Purpose Vehicles (SPVs) to create an accounting wall between themselves and the people who built the facilities. The smart money didn't want that risk. No problem. So-called "dumb money" did: private credit.

Maybe there is a good match between the pace of building those centers and the lease income from the hyperscalers using them. Being 76 years old makes me wary. Artificial intelligence users have moved from the experimentation stage to the shop-for-value stage. They realize that much of what they do can be accomplished on something produced by Chinese technology for one twentieth of the cost of AI work done by the frontier chips produced by NVIDIA and the American platforms. Data centers are multi-year facilities for a technology that changes by the month. 

A portfolio can get ugly very quickly. Oracle has lost half its value in the past two months. 

I expect Oracle and every other "hyperscale" company to survive. They are political partners with the American president.  The American taxpayer is a backstop for the very-well-connected. If someone must lose money in a crash-and-burn scenario of mis-allocated capital, the pension funds that funded those SPVs can take the hit. We saw this in the Great Financial Crisis. The well-connected get bonuses. The public absorbed the loss and suffered.

Don't mind me. I am old. Buy and hold. Everything will be OK.

In business and government, we are led by smart, prudent people who make careful, well-planned decisions. Right??

[Note: To get daily delivery of this blog by email go to Https://petersage.substack.com. Subscribe. The blog is free and always will be.]

The SAVE America Act is a bad bill -- but not because it hurts Democrats.

The SAVE America Act hurts Republicans.

It doesn't inconvenience educated, prosperous people (i.e., disproportionally Democrats). 

It discourages the occasional voter, the poor, the less educated, culturally traditional women, and the elderly (i.e., disproportionately Republicans).

For reasons of principle and what is good for public engagement in our democracy, Democrats should continue to oppose the SAVE America Act. But in the event that Trump muscles it into law, Democrats can enjoy one silver lining. It helps Democrats.

The SAVE America Act does not change the law that requires voters to be U.S. citizens. The law would change how to document citizenship. About 12 percent of registered voters do not have ready access to the types of documentation that satisfies the proposed law's conditions. This is about 28.4 million citizens.

A U.S. passport is the gold standard for being able to vote. Prosperous, educated people are more likely to have a current passport than are people with less interest or capacity to travel abroad. For better or worse, Democrats have become the party of prosperous, educated people. Forty-six percent of Americans have a passport; 56% of Democrats do, only 43% of Republicans.

Under the proposed SAVE America Act, there is an alternative to having a passport: a photo ID, plus a certified copy of a birth certificate with the person's full name, the name of at least one parent, the place of birth, signature of the authorizing agent, and the official seal. No photocopies allowed; a certified original only.  About 80 percent of Americans can meet this hurdle, and here Republicans slightly more than Democrats, 84 percent to 79 percent. 

The problem for Republicans is that the name on the birth certificate needs to match the name on the photo ID, and women who take their husband's surname on marriage have a new name. Republican wives are more likely to do that than Democratic wives. Twenty percent of Democratic women keep their birth name; only 10 percent of Republican women do. There is a strong skew toward women with graduate and professional degrees keeping their birth names; those women skew Democratic.

The SAVE America Act requires that the documents presented be current, which skews against the demographic of the elderly who allow their passports or driver's licenses to expire. My father did, about the time he turned 90. The oldest Americans skew Republican (though not my father.)

Theoretically, the various pluses and minuses balance out between the parties. Theory isn't reality. Regular, persistent voters tend to skew Democratic, which is why Democrats over-perform in special elections and mid-term elections. Trump's populist appeal has been underestimated in polls that measure "likely voters" because the MAGA base includes a disproportionate number of people who vote rarely or on impulse. These occasional voters are those least likely to jump through the hoops to have a proper, certified birth certificate or valid name-change documents.

Intuitively we might think that Hispanic voters would be the ones with the most difficulty in having all their paperwork together, since it might require a different document for many of them: naturalization papers. But their recognition that their citizenship might need to be demonstrated, not presumed, is why this group is the one most likely to have citizenship paperwork available. Hispanics partially drifted away from Democrats in 2024 but are once again a solidly Democratic-skewing group.

Bipartisan Policy Center

If the SAVE America Act passed, there would be a busy period of document-chasing and grumbling about the hassles of bureaucracy, and government making easy things hard, and Trump trying to suppress votes. That is a bad message for Republicans at the worst time and circumstance for the least interested people in putting up with the hassle.

Trump is chasing the chimera of millions of "illegals" voting. The irony is that his solution suppresses the legal vote of many of his own supporters. 

[Note: To get daily delivery of this blog by email go to Https://petersage.substack.com. Subscribe. The blog is free and always will be.]

Update and correction

Isabella Lee Tibbets tells me that she did NOT vote to endorse Clay Bearnson.  She said she voted no on endorsing both the Democratic election winner, Denise Krause, and Independent candidate Bearnson.

I was confident that I saw a green check mark on the Bearnson vote, but must have been mistaken. I am sorry for the error. She wrote:

Hi Peter,

Normally I have appreciated your blog but this one I have to correct. You are in fact wrong in saying that I voted to endorse Clay. I voted NO on all 3 candidate endorsements. Please do what’s right and correct that.

Thank you for the correction.  

The exhilarating thing about being a candidate for office is that one can decide for oneself the people and positions one supports and rejects. Isabella is exercising that right.

I have written multiple times in this blog that candidates are defined not by the general nice-nice things they say, e.g., listening to voters, calls for transparency, support for progress, and assertions that one would use common sense. Instead, they are understood by what and whom they oppose. Public opposition to someone or something creates boundaries and edges in an otherwise amorphous brand.

We now know something defined about Isabella Lee Tibbetts: She doesn't think fellow Democrats in the local party should endorse or support Denise Krause or Clay Bearnson. 

She may win votes from that position. She may get raised eyebrows of surprise and disapproval, especially from people who like those two candidates. That is why her position has credibility for defining her political brand. She was willing to pay a price for a position she took, the risk of losing support. 

It is her campaign. A candidate creates a brand by burning bridges, and she has done so. 

As Leslie Gore sang in 1963. "It's my party, and I'll cry if I want to, cry if I want to, cry if I want to." It is Isabella Lee Tibbetts' campaign. Laugh or cry, she laid down her marker.

https://www.leetibbetts.com

 

Messy Democrats: A close up look at a meeting of Jackson County, Oregon, Democrats

No wonder Republicans win elections, even with a flagrantly corrupt, lawless, crude candidate like Trump.

Democrats are a mess. 

Krause at her general election kickoff event

Krause is a very successful grassroots organizer

The good news for Denise Krause: Krause got the endorsement of her local Democratic Party in a Zoom meeting last night.

The bad news for Krause: It was a divided group. She only won 41 to 14, 

Start with her good news. She is at work smoothing the water, reminding fractious Democrats that she respects the four candidates she defeated in the May primary, that endorsements and pledges of support are coming in from unions, advocacy groups, and fellow Democrats from around the county and state, and that polls suggest she is ahead in a matchup against the Republican candidate. 

Her problem is that intra-party politics are a mix of longtime personal relationships, disappointments, policy emphasis, and factions within a group. From the outside, the distinctions seem trivial and petty and not worth risking electing a Republican. Krause narrowly defeated Tonia Moro, who had longer roots with precinct committee people. Krause's grassroots support includes that circle and added to it. Voters needed to make a hard choice between them. People have their friends. 

There was a catalyst for disagreement: whether Krause jettisoned promptly enough, and with sufficient condemnation, an out-of-town campaign consultant who had been accused of a sex crime 20 years ago. 

Personal feelings are involved. Incumbent state senator Jeff Golden had endorsed Moro. Democrats rejected Golden's succession advice. Shortly after the election, Golden emailed and then telephoned me, urging me to attend an event that would feature Oregon state senators in a meeting in Ashland, Krause's home town. The meeting was to raise funds for a staff person for the legislature's environmental caucus. I have been in the situation of the worried host making a last-minute push to fill an event: You call the obvious examples of familiar people. It would have been a perfect event for Krause to attend and be among future colleagues, a place for her to affirm her support for the common cause. Golden did not invite her to the gathering, the person in line to replace him as state senator, the single most obvious and appropriate person to be there. That was a warning sign for me.

Krause's problem is exacerbated by there being a vehicle for dissent: Clay Bearnson, a former Medford City Council member. 

From the Zoom meeting. He attended but, like me, was a non-voting guest.

Bearnson decided to enter the state senate race, filing for office as an Independent, with the support of several members of the Democratic Party who had preferred Moro.

Several Democratic precinct people spoke on Bearnson's behalf at the meeting, one making the point that he was a rebel who would shake up the system. A former Medford City Council colleague, Sarah Spansall, spoke in favor of Bearnson, saying that aside from her, he was the most progressive member of the council. 

The incoming secretary for the local party, Richie Owens, spoke in favor of endorsing Bearnson, but, oddly, when it came time to vote moments later, he marked his ballot with a Red X meaning NO.

Isabella Lee Tibbets, a Democratic candidate for county commissioner, voted NO on endorsing Krause with this red X, and NO on endorsing Bearnson. [Note, that this has been updated. She informed me that I was in error saying she had voted YES on Bearnson.]

Even the party chair, David Sours, did not back Krause with a public word of support, nor a green check mark visible to participants. Most people around him in the Zoom mosaic had green check marks. Not Sours. It is possible that he voted privately, by text message, for or against Krause, but party members looking to the chair to support their elected candidate, did not find it in Sours.

No red X. No green check-mark

Bearnson was not endorsed by the Democratic Party. He got 13 votes; 43 votes opposed endorsing him. Krause dodged that bullet.

I consider this support from the local Democratic party to be underwhelming for Krause. It isn't a good sign. But it is not dispositive, either. Republicans have their own brand problem. 

The tool that Republicans have to win this race -- a growing stockpile of money -- is a poor fit for their task. The Bearnson candidacy is an opportunity to spend a portion of the GOP money supporting Bearnson. (Hey, progressive Democratic Socialists, vote for Bearnson!!! Get who you REALLY want.)  It may work, but there is a problem. This message tends to undermine the argument that Krause is extreme, and the central GOP message is to bring balance to Salem. Bearnson positions Krause in the balanced middle. 

Moreover, regardless of denoted content, a GOP avalanche of ads is a giant statement that Republicans are the big-money party at a moment when billionaire pay-for-play politics and corruption is in the news. Even mere multi-millionaires are intimidated and offended by the raw power of billionaire money in politics. Phil Knight is not content to buy athletic championships for the University of Oregon; he wants to buy a GOP legislature, too. It's a bad look, and a dilemma for Republicans with a million dollars to spend in this tiny media market. If Republican don't spend the money, Krause has an easy lay-up election in a Democratic district. If they do spend the money, their candidates look like the pawn of billionaires elites.

Democrats will do what Democrats do: fracture and fight among themselves. 

Republicans will do what Republicans do: reunify Democrats by bullying them with too much money from the wrong people.

[Note: If people I have written about disagree, or want to put out their own story, I welcome their thoughts and would publish their comments as guest posts over the next few days.]

[Note: To get daily delivery of this blog by email go to Https://petersage.substack.com. Subscribe. The blog is free and always will be.]

Slogans: Campaigns seek a knockout punch.

"Are you better off today than you were four years ago?"

That question was a good slogan in 1980. Inflation was 10 percent, the Fed Chair was raising interest rates every quarter, gasoline was expensive, and Americans were being held hostage in Iran. Candidate Ronald Reagan used the question to focus on voter frustration with President Jimmy Carter.

"Extremism, in the defense of liberty, is no vice," was not successful as a short argument on behalf of candidate Barry Goldwater in 1964. It backfired. It acknowledged his far-right position within the GOP, and described it with the word extreme, which a majority of people did think was a vice.

An exclamation point does not put energy into a low-energy campaign. I watched him speak multiple times in New Hampshire. His campaign slogan should have been, "If you like Bush presidents, hey, I'm yet another."

In 1972, with the Vietnam War still underway, President Nixon used this campaign slogan positing Nixon as the experienced, steady hand at the tiller.

Slogans attempt to make one's strongest case. Oregon Republicans attempting to win state legislative seats are framing their argument as "Bring Balance to Salem." It is a good slogan. Balance seems like a good thing, especially if one thinks that status quo is off-balance. They aren't saying, "We have all the levers of power in Washington, D.C., and we love not having balance there, and if you elect us to office in Oregon, we will obey demands from President Trump because he squashes like a cowering bug any Republican who disobeys him." That is too long to be a slogan that fits on a bumper strip.

Erich Almasy and I have both mused about campaign slogans. Erich is a college classmate. He went on to Harvard Business School, then had a long career on the consultancy-business management track. He and his classmate wife, Cynthia Blanton, live in Mexico.

Guest Post by Erich Almasy

Campaign Slogans

As any marketing executive will tell you, slogans need to be short, emotional, on point, while describing a difference. This is true whether it’s a product, service, or political campaign. In the United States, political sloganeering is almost as old as the country. In 1798, a South Carolina Congressman shouted the phrase, “millions for defense, but not one cent for tribute,” at a dinner party welcoming diplomat John Marshall upon his return from France. Marshall had been negotiating the so-called XYZ Affair, a quasi-war with France where American merchant ships were being attacked. The French wanted a large payment, essentially a bribe, to stop the attacks. In response, the United States began building a national navy to protect its commercial interests. In 1801, President Thomas Jefferson used this navy to fight the Barbary Pirates of North Africa, refusing to pay the demanded tribute. Commodore Stephen Decatur led the U.S. forces and became famous for his toast, “Our country! In her intercourse with foreign nations, may she always be in the right; but our country, right or wrong."

Slogans are utilized by all political parties using both positive and negative messages. The Federalist Party referred to the War of 1812 as “Mr. Madison’s War,” just as Republicans later called World War I, “Mr. Wilson’s War.” This response skewered Wilson’s 1916 slogan, “He kept us out of war.” The 1884 campaign of Democrat Grover Cleveland was blackened by the Republican phrase, “Ma, ma, where’s my pa?” referencing an alleged illegitimate child Cleveland had in Buffalo, NY. After winning, Cleveland, who did not deny the charge, and his supporters added the phrase, “gone to the White House, ha, ha, ha.”

Democratic slogans tend to focus on forward progress, economic opportunity, healthcare, and unity, which often makes them much duller than the pithy Republican themes of blatant patriotism and economic prosperity, especially lower taxes. Often there is hidden subtext (the infamous dog whistles), such as Warren Harding’s “America First,” when the Ku Klux Klan was rising in popularity and Asian and Eastern European exclusion bills were about to thwart immigration for the next forty years. Truman’s “The Buck Stops Here” and attacks on the “Do Nothing Congress” were variations from the norm of passive Democratic phrasing. Only 1964’s condemnation of Republican Barry Goldwater - “in your guts, you know he’s nuts” - raised (or lowered) the bar. 

So how do Democrats get back in the game? Here are examples that I would like to see. Some of them are stolen from successful Republican slogans.

“Make Stuff Cost Less.” Actually used now by former North Carolina Democratic Governor Roy Cooper as he bids for a Senate seat. A simple, blue-collar paraphrase of the successful “It’s the Economy, Stupid,” never formally adopted but widespread during the Clinton campaign.

“Are you better off now than you were two years ago?” Directly stolen from Ronald Reagan’s 1980 debate with Jimmy Carter that emphasized inflation. As Reagan learned, inflation is only cured with economic pain.

“Where’s the beef?” A really old Boomer slogan spoken by actor Clara Peller for Wendy’s. Beef prices have soared nearly 20% and are not going down anytime soon. A federal judge has ruled that using this phrase is not a copyright violation.

“Mr. Trump’s War.” From James Madison to Woodrow Wilson, this directly assigns the blame for the Iran war and all it entails to Trump.

“We Can Do a Lot Better." An upgrade to JFK’s “We can do better” and much preferred to Biden’s “Build Back Better." (huh?). As to the Better theme: “We all Deserve Better.” “Women Deserve Better.” “Children Deserve Better.” 

“Trillions for Billionaires, Not One Penny for Health Care.” The Big Beautiful Bill that steals from and kills children and people with less. “Medicare for All,” is likely ahead of its time.

“ICE ain’t Nice.” “I Like Ike” in reverse. ICE has become America’s Gestapo, and nobody but hardcore MAGA likes them.

Where did Republicans’ "Family Values" go? Throughout the 80s and 90s, Republicans used Family Values as a way to push anti-abortion, Christianity, and tradwives. With adulterous candidates like Ken Paxton and Mark Sanford, as well as Newt Gingrich, Rudy Giuliani, and Donald Trump, a case can be made, especially with the devout Texan James Talarico, that Democrats are now the moral party. 

And finally, in the nasty spirit of “Lock her up,” how about a few zingers:

“Greed kills: Get Rid of Billionaires”

“Impeach President Musk.”

“Epstein: What are they hiding?”

Note: To get daily delivery of this blog by email go to Https://petersage.substack.com. Subscribe. The blog is free and always will be.]

Easy Sunday: Tipping point.

I feel like I have been here before. 

--   This feels like 1999-2000, and the internet bubble is at the top.

--    It feels like 2008, before everything fell apart.

Warning the CEO

"So, what you're telling me is that the music is about to stop."

Artificial intelligence platforms want to charge what it costs them to run their service.  Artificial intelligence users are now treating AI as expensive overhead, not a freebie, and they are starting to shop. 

The era of magical thinking is over.

Friday's Wall Street Journal had this story:

Gifted link to the story

Somebody is going to need to pay for the electricity, the data center construction and operation, all those chips, all the programming and data, and all the investment that has been driving the U.S. economy for this year. Artificial intelligence platforms have initial public offerings ready to launch. Investors buying those IPOs want to see that AI companies make money. 

My $20/month subscription to Claude, an AI platform, is switching to a new payment model, and there is something about "token credits."  Apparently, Claude is going to start charging me what I cost them. I have heard of professional high-volume users of AI who are paying $10,000/month in fees for tokens. Of course, those users are beginning to shop, and China has a much, much cheaper alternative.

I like the price I pay for AI when I use Google, or Apple maps, or when I say, "Hey, Siri." The price is free, or nearly so. That may be the long-term equilibrium price for AI. 

I could see that something was very wrong with the mortgage and housing markets in the several-year buildup to the Great Financial Crisis. TV ads were urging people to buy houses with 110-percent financing. That is, people with no money would be given $50,000 cash to buy a $500,000 home and borrow $550,000 and start making mortgage payments. Once house prices failed to go up, those buyers would not be able to make their payments, nor could they sell their house at a price high enough to pay off the mortgage. The business model for "free money" in mortgages was unrealistic and dangerous. 

The business model for cheap artificial intelligence was unrealistic and dangerous, too. We are entering a period of dislocation where the business needs of providers and users of AI need to come into sync. We are in a mark-to-market moment, that moment when the artificial price ends, and buyers and sellers clear the market by paying the real price for something. 

Today's Easy Sunday post includes a movie clip and transcript from the movie Margin Call. It is the scene where the top executives of the investment bank initiate their own mark-to-market fire-sale of mortgage bonds. The music of magical money built on mispriced mortgages had ended. Click below to see a nine-minute clip. Sit back. Enjoy. This is history. We entered a rough patch in the economy, and people got badly hurt, but most of us survived, and here you are on a mid-summer Sunday.

I have also excerpted a bit of the dialog.

Click here

Sullivan is the quantitative expert who described the precarious situation for the investment bank. 

Tuld is the CEO of the bank.

Sullivan: Well, we have to hold these assets on our books longer than we might ideally like to.

Tuld: Yes.

Sullivan: But the key factor here is, these are essentially just mortgages, so that has allowed us to push the leverage considerably beyond what you might be willing or allowed to do in any other circumstance, thereby pushing the risk profile without raising any red flags. 

Tuld: Now -- thank you, Mr. Sullivan. Sit down. What I'm guessing your report here says -- and give me some rope here -- what I'm guessing it says is that considering the, shall we say, bumpy road we've been on the last week or so, that the figures your brilliant co-workers up the line ahead of you have come up with don't make much sense any more, considering what's taking place today.

Sullivan: Actually, not what's taking place today, but what's already taken place over the last two weeks.

Tuld: So, you're saying this has already happened.

Sullivan: Sort of.

Tuld: Sort of. And, Mr. Sullivan, what does your model say that that means for us here?

Sullivan: Well, that's where it becomes a projection. But, um --

Tuld: You're speaking with me, Mr. Sullivan.

Sullivan: Well, sir, if those assets decrease by just 25%, and remain on our books, that loss would be greater than the current market capitalization of this entire company. 

Tuld: So, what you're telling me is that the music is about to stop, and we're going to be left holding the biggest bag of odorous excrement ever assembled in the history of...capitalism.

Sullivan: Sir, I'm not sure that I would put it that way, but let me clarify. Using your analogy, what this model shows is the music, so to speak -- just slowing. If the music were to stop, as you put it, then this model wouldn't be even close to that scenario. It would be considerably worse. 

Tuld: Let me tell you something, Mr. Sullivan. Do you care to know why I'm in this chair with you all? I mean, why I earn the big bucks?

Sullivan: Yes.

Tuld: I'm here for one reason and one reason alone. I'm here to guess what the music might do a week, a month, a year from now. That's it. Nothing more. And standing here tonight, I'm afraid that I don't hear a thing. Just...silence.

[Note: To get daily delivery of this blog by email go to Https://petersage.substack.com. Subscribe. The blog is free and always will be.]