Will Smith, the movie actor, is a man of solid values, profound thoughts, and high principles. If you don’t believe that, just ask him. He’ll tell you himself, over and over again, just how deeply he’s thought about the meaning of human existence, about how to formulate his personal ethics and put them into practice, and about how to instill those values in his son Jaden and daughter Willow, both of whom he pushed into showbiz at age six.
Along with his actress wife, Jada Pinkett Smith, Will has cooked up a whole special language in which to talk about life, goals, and the universe. It’s not just enough, they explained to Oprah Winfrey in a 2010 interview, to marry, have kids, earn a living, and try to make a happy home. No, when “two spirits join together” in wedlock you need a shared “vision” because there is “so much more you have to be dedicated to.”
As Jada put it, she and Will are “two big beings that came together,” and once they saw their kids growing up and becoming “their own beings,” they realized they needed to form a “family business” aimed at scoring cosmic achievements. They needed to encourage their progeny to devote their inborn “excellence” to the high purpose of doing “service to greatness” and of “advanc[ing] and elevat[ing]” humanity.
Just as Will has done in movies like The Pursuit of Happyness [sic] and After Earth – and Willow, in turn, has done in her megahit music video “Whip My Hair.”
But Will and Jada aren’t content with just instilling values in their kids. As Will told Oprah, “I don’t want to be an icon. I want to be an idea….I want to represent possibilities. I want to represent magic, right? That you’re in a universe and two plus two equals four. Two plus two equals four only if you accept that two plus two equals four. Two plus two is going to be whatever I want it to be.” He went on to assert the importance of making choices: “There’s a redemptive power that making a choice has. Rather than feeling like you’re an effect to all things that are happening.” And he asserted his belief “that I can create whatever I want to create….I feel very strongly that we are who we choose to be.”
Okay, some of it doesn’t entirely make sense, some is neither original nor profound, and some is just plain hooey. But what more can you expect from a guy who for years was ranked by Forbes as Hollywood’s most bankable star, and was repeatedly included on its list of the richest Americans under age 40 – and who therefore, one imagines, is surrounded constantly by handlers who won’t stop telling him how brilliant he is?
Anyway, the point is that Smith isn’t content to give the world cinematic masterpieces like I, Robot and Hitch. He wants to enlighten us. He thinks he knows stuff. And he especially thinks he knows a lot about religious and spiritual stuff.
The fact that he’s donated a lot of money to Scientology – and that he sounds an awful lot like a Scientologist, and starred in the horrible movie After Earth, which is packed with themes that, according to many critics, seem to have been drawn from Scientology – has sparked rumors that he’s a secret member of that sect. He’s denied it, maintaining instead that he finds ideas worth using in a variety of faiths.
“I’m a student of world religion,” he said in a 2007 interview, “so to me it’s hugely important to have knowledge and to understand what people are doing.”
Which brings us to his recent visit to – of all places – Dubai.
Last week we explored the presidency of Brazil’s Dilma Rousseff, who in recent months has seen her throne shaken by the Petrobras scandal – described by the Wall Street Journal as “the biggest corruption case ever in a country with a long history of scandals.” Even Rousseff’s predecessor as head of state, Luiz Inácio Lula da Silva (whose own administration was almost brought down by the 2005 Mensalão scandal), has been under scrutiny in this season of scandal, with authorities looking into shady financial activities involving both Lula and his son as well as into accusations that the former president had lobbied illegally (and profitably) for Odebrecht, a huge Brazilian conglomerate.
Even as the Petrobras probes were widening and arrests adding up, Brazil’s economy was in free fall. Brazil’s GDP, which had experienced annual growth of over 5% during the century’s first decade, sunk below 3% in 2012 and 2013 and to 0.1% in 2014. On September 9, 2015, Standard and Poor downgraded Brazil’s credit rating to junk status. Over the course of 2015, Brazil’s economy actually shrunk by 2.7%. Meanwhile, Rousseff’s numbers also dived. In December 2014, her approval rating was at 80%; by March 2015, it was at 34%; by August, 8%. In that month, protesters around the country called for her impeachment. By September, she’d become “Brazil’s most unpopular president in recent democratic history.”
In that same month, party treasurer João Vaccari Neto was sentenced to over 15 years in prison for corruption and money-laundering, the latter of which involved over $4 million. Sentenced to prison alongside Vaccari was Renato Duque, who received a more than 20-year term for “inflating contracts at Petrobras” and funneling the excess profits into the coffers of Rousseff’s Workers’ Party.
Not long ago, in response to state employees and business executives who’ve blown the whistle on the massive government corruption on her watch, Rousseff famously said: “I do not respect informants.” She cited with pride her refusal, back in her Marxist guerrilla days, to rat on her comrades under torture. Her remarks, of course, reflect a curious attitude (to put it mildly) toward corruption – and, indeed, toward the very concept of public service and stewardship of the people’s resources. In October 2015, maintaining that the mounting accusations against her in connection with the Petrobras scandal were utterly false, she declared: “I do not intend to leave power.”
To be sure, on October 19, a parliamentary commission (consisting mostly of pro-government legislators) issued a report purportedly clearing Rousseff and Lula of personal involvement in Petrobras-related crimes. But that report didn’t end the controversy, and nobody expected it to. Rousseff remains under a cloud, and continues to hold on to power by a thread; in late December, Reuters reported that the lower house of Brazil’s Congress would probably decide by March whether to recommend Rousseff’s impeachment.
Meanwhile her administration’s corruption has dramatically altered Brazil’s image on the world stage. Writing in Forbes on October 22, Kenneth Rapoza summed up the whole messy situation by noting that while Brazil, according to Transparency International, had been the “least corrupt” of “the big four emerging markets” (not really much of an accomplishment, given that the other three are Russia, China, and India), “2015 has shaped up to be the year that threw all that off a cliff.” The Petrobras scandal, wrote Rapoza, had “made Brazilian politics into Latin America’s Greece.”
Christmas came early for fans of freedom in South America.
It almost seems too good to be true. On November 22, in an upset election, opposition candidate Mauricio Macri beat out Daniel Scioli, whom the current head of state, the dictatorial Cristina Kirchner, had supported fully to replace her as president of Argentina. He took office on December 10.
His election, wrote Agustino Fonteveccia at Forbes, “blew new wind into the sails of South America’s second-largest economy” and “led to a flurry of optimism across the country, and particularly on Wall Street.”
Twelve years of Kirchnerism (Cristina’s eight years in power followed four years of rule by her late husband, Nestor) brought the Argentinian economy to its knees with excessive social-welfare spending, shameless government bloat, sky-high tariffs, massive corruption, and the imposition of a whole raft of destructive socialist economic ideas – all of which led, inevitably, in 2014, to the country’s second sovereign-debt default in fourteen years. Kirchner, as we’ve seen several times on this site, surrounded herself with stooges who propped up her power while enriching themselves at the expense of the Argentinian people. Macri, who has been mayor of Buenos Aires for eight years, promised to turn the country back in the direction of the free market and to fight institutional corruption.
Kirchner has called Macri a tool of corporate interests. “A country is not the same as a business,” she chided in one speech. Macri, for his part, when asked what he would change about Kirchner’s foreign policy – which has emphasized close relations with Cuba and Venezuela, said: “Everything!”
After his victory was secured, he “immediately made a call for Venezuela to be booted from South America’s continental trade union Mercosur,” citing the chavistaregime’s habit of imprisoning its critics, most famously opposition leader Leopoldo López. He’s also expressed an eagerness to strengthen ties to Mexico, Colombia, Peru, and Chile. And he’s vowed to enact “a rapid and wide-ranging burst of reforms designed to dismantle the thicket of socialist controls” put in place by the Kirchners. “We will experience the start of a new era,” promised Alfonso Prat-Gay, Macri’s choice for Minister of the Economy (and a former top official at J.P. Morgan in the U.S.). “The tyranny of authoritarian populism is over.”
During her final days in power, La Kirchner did not, shall we say, develop anything remotely resembling class. Instead of working with her successor to ensure a smooth transition for the country’s own good, she threw upso many obstacles for Macri’s incoming administration – making last-minute appointments and appropriations that will cause lasting damage not only to him but to the citizens of Argentina – that even some of her ardent supporters cried foul.
Fonteveccia, to be sure, offered cautionary words. “Not only is Macri not the freewheeling markets capitalist he suggests he is,” maintained the Forbes writer, “but the challenges his administration faces—rampant inflation, a bankrupt central bank, a fractured political system, and a stagnant economy, to name a few—suggest more pain is in the cards before Argentina can spread its wings and become a fully functioning member of the world economy and the global financial system.”
Nor, admittedly, does it help that the Kirchnerites retain a majority in both chambers of the National Congress. Then again, many observers are a good deal more optimistic than Fonteveccia. There is particular enthusiasm, not only in Buenos Aires but in Washington and on Wall Street, over the people he’s selected for his cabinet. It certainly looks more promising than the gang of useful stooges with which the Kirchners surrounded themselves.
In any event, the Argentinian vote was only the first part of a terrific one-two punch. We’ll get to that tomorrow.
During the last couple of days, we’ve been pondering the career and views of big-government economist Joseph Stiglitz, who, among much else, is a fierce critic of American-style capitalism, an ardent fan of the U.N., a proponent of an international tax system (!), and a “point man” for George Soros, the gazillionaire bag man for the American far left.
One of Stiglitz’s fixations, as we’ve mentioned, is income inequality. He sees it as the root of virtually all economic problems. Last April, Mark Hendrickson did a good job of putting Stiglitz in his place when it comes to this topic. Writing in Forbes, Hendrickson pointed out that Stiglitz is so down on income equality that “he looks more favorably upon the Great Depression, with its greater poverty but lower measures of inequality, than the 1980s, with its significant improvements in standards of living for the non-rich accompanied by higher measures of inequality.”
We’re reminded of Margaret Thatcher’s famous November 1990 retort in the House of Commons to a Liberal Democrat MP who complained about the rise in income inequality during her years as prime minister: “What the honorable member is saying is that he would rather that the poor were poorer, provided that the rich were less rich….So long as the gap is smaller, they would rather have the poor poorer. You do not create wealth and opportunity that way. You do not create a property-owning democracy that way.”
Stiglitz’s preoccupation with income inequality leads to some bizarre pronouncements. For instance, he attributes post-World War II prosperity to that era’s highly progressive tax code; Hendrickson replies, quite sensibly, that “I know of no accepted economic theory that high taxes create prosperity,” and ascribes postwar prosperity, more logically, to the “huge decline in federal spending after the war” that sparked “a flood of pent-up demand.” Similarly, while Stiglitz blames today’s greater economic inequality on the less progressive tax codes that were introduced during the Reagan era, Hendrickson retorts that “there is a much more obvious cause” for this inequality, namely government growth. Hendrickson sums up his differences with Stiglitz as follows:
Joseph Stiglitz’s diagnosis is flat-out wrong when he argues that the middle class is declining because the rich are getting richer. That zero-sum view is atavistic mercantilist nonsense….for him to blame the rich instead of government for today’s problems reflects a partisan and ideological bias rather than objective economic analysis.
Indeed. In the next couple of days, we’ll take a closer look at Stiglitz’s partisan and ideological biases. Hold on to your hats.
Michael Lewis, the financial writer, has said that when he first met Kyle Bass, “I had an experience I’ve often had while listening to people who seem perfectly certain about uncertain events….One part of me was swept away by his argument….The other part suspected he might be nuts.”
Lewis isn’t the only financial insider who’s had a mixed reaction to Kyle Bass. The Dallas hedge-fund manager has, it must be acknowledged, won his share of praise. Once upon a time, indeed, he was considered something of an instant legend. Only two years after launching his own hedge fund in 2006, he struck it rich as a result of having predicted the subprime mortgage crisis.
For fifteen minutes, he was the hottest guy in the game.
Since then, however, things haven’t gone very smoothly for Kyle Bass. Far from it. In recent years – not to put too fine a point on it – his fund, Hayman Capital Management, has often performed disastrously. It’s had its ups, but some of its downs have been headline-making. In April 2012 alone, it lost 29% of its value. During the first quarter of 2014, it dropped by over 6%.
Time and again, Kyle Bass’s confident forecasts have proven wrong – often catastrophically so. Most famously, he’s been saying for years that the Japanese economy is an immense Ponzi scheme and that any minute now the market will catch on – leading inevitably to a debt crisis that sends bond yields sky-high and makes the yen all but worthless. In July 2013, he warned that this implosion would come within about two years – and would rock international markets so dramatically as to force the Western world to reconstruct its economic order from the ground up.
His doom-and-gloom prophecies for Japan, however, have yet to be fulfilled. And as time has gone by, more and more observers have clobbered his analysis. In May 2012, Joe Weisenthal of Business Insider called Bass’s take on Japan “totally simplistic and incorrect.” Noting that Bass bases his forecast largely on Japan’s debt-to-GDP ratio, Weisenthal pointed out that debt-to-GDP “is a lousy measure of anything” because it “just doesn’t tell you anything about interest rate risk or credit risk.”
After all, argued Weisenthal, foreigners hold plenty of U.S. debt, but this hasn’t sent the American economy into a tailspin; by contrast, Italy’s public debt is mostly held domestically, yet that country is headed down the tubes. Yes, Weisenthal acknowledges, “there are a lot of yen floating around the world,” but ultimately “that currency will find its way home.” This, in Weisenthal’s view, is what Kyle Bass doesn’t get:
For a country that borrows in its own currency, government spending finances borrowing! If Japan spends 100 billion yen on something, that’s 100 billion yen out there in the world that will eventually wind up in a financial institution, where ultimately 100 billion yen worth of JGB will be purchased.
Weisenthal also made this observation:
True sovereign bustups are not the result of accounting or numbers, but the result of some kind of social/political dysfunction. Japan is arguably the most stable society in the world, with low unemployment and a functioning economic and political culture. Thanks to the country’s population dynamics, Japan isn’t a growth dynamo, but there aren’t even the vaguest hints of instability. It’s not the kind of place where you’d see a meltdown.
Another expert who’s disputed Kyle Bass’s Japan scenario is Jesper Koll, head of Japanese equity research at J.P. Morgan Securities Japan. In Koll’s view, as paraphrased by Stephen Harner of Forbes, “Kyle Bass has not fully thought through some of his points, or has ignored contrary indications.” Yes, wrote Harner, the economic policies of Prime Minister Shinzō – who set a 2% inflation target and decreed a “Keynesian deficit spending stimulus” – might raise interest rates, but “there will be no crisis, and there may not be higher rates.”
Koll’s view, in short, is that Japanese government bonds “remain an attractive asset.” Koll made a number of cogent points – among them, that deregulation in several sectors of the Japanese economy could send productivity soaring and significantly boost the country’s economic health.
Curiously, while sounding a death knell for Japan, Kyle Bass has been bullish on – of all countries – Argentina. In September 2014, the BBC reported that unlike Moody’s and other ratings agencies, which were “very critical” of the regime of Cristina Fernández de Kirchner, “Kyle Bass believes that the current economic policy of the Argentinian government is the correct one.”
So gung-ho, in fact, has he been on investment in Argentina – which, it will be recalled, defaulted on its debt last year for the second time in thirteen years – that The New York Post commented on August 28, 2014, that Kyle Bass, addressing this subject on the previous day, had “sounded more like Argentina’s leftist economy minister Axel Kicillof than a U.S. hedge-fund manager.”
Was the Post on to something? Throughout Argentina’s debt crisis, Kyle Bass did come off not like a responsible financial manager but like a paid spokesman for the Casa Rosada (Argentina’s White House). As the BBC noted, Hayman Capital has a “good relationship” with Fernández – a leader who, like her late husband and predecessor, Néstor Kirchner, is notorious for her destructively socialist economic policies and her government’s staggering levels of corruption. The ruling by a New York judge that Argentina couldn’t dodge its debt to holdout creditor Paul Singer of Elliott Management was legally solid, but Kyle Bass wasn’t having any of it: Singer, he charged inappropriately, was “holding poor countries as hostages.”
Then there is his perplexing enthusiasm for General Motors. It’s been his biggest position for some time, although he admitted himself that a massive GM recall made 2014 “a tough year” for his firm. Still, he insisted that GM’s management was “doing a great job” and that the company was “much leaner” than in the 1990s. “By every metric” except the recall issue, Kyle Bass claimed, GM is “doing great.”
In February 2015, all his major moves having failed him, Kyle Basstried a new tack: selling pharmaceutical companies short and then exploiting a relatively new process, “inter partes review,” to challenge their patents. First he went after Acorda Therapeutics, whose major product is Ampyra, a treatment for multiple sclerosis, and whose stock fell nearly ten percent as a result of his challenge. It remains to be seen how this new move will pan out.
Meanwhile, Kyle Bass finds himself entangled in what may be America’s least enviable legal battle. A few years back, he went into business with the late Chris Kyle, subject of the recent film American Sniper and now a posthumous national hero; the enterprise has since gone bankrupt, and Chris Kyle’s widow, Taya, has sued a Hayman Capital attorney, making a host of serious charges, among them that he pressured her husband to surrender the rights to his firm’s now-iconic logo and that (in violation of Texas law) the lawyer never made clear that his ultimate loyalty was to Hayman and not Kyle. Also at issue are a loan on the Kyle family home and the profits from his bestselling memoir. However you cut it, it’s a shabby situation for a hedge-fund superstar to find himself in.
Briefly put, Kyle Bass’s star has slipped considerably since he made his name – and his fortune – on the subprime mortgage crisis. It seems fair to say that what looked for a while there like a Midas touch has turned out to be something more like a case of first-time gambler’s luck giving way to the usual Vegas pattern of loss after loss after loss.
Sure, he could still turn things around. Who knows? Stranger things have happened. But given his recent record, we wouldn’t bet on it.