Up A Tree

We don’t want any New Deal We don’t want any Old Deal The old false shuffle was good enough for my father And it’s good enough for me. W.C. Fields

May Day celebrations this year turned organic. Gone were the Red Workers League. Everywhere were the redwoods.

All of the world’s political problems, proclaims the monumentally pompous “Time” magazine article in its special Earth Day issue, “are dwarfed by the need to protect and enhance our habitat.”

The magazine is ablaze with stars. Environmentalist Bill Clinton was called in to add a certain mock-profundity: “The key, I believe, is to help…nations leapfrog into the 21st century by eschewing the outdated Industrial Era logic that more pollution means more progress.”

Leonardo DiCaprio hectors readers to change their ways…by driving more fuel efficient cars…and by joining the demonstrations on Earth Day…”to send a message that politicians and corporations can’t ignore.”

What message?

Mark Hertsgaard calls it a Global Green Deal. But like the New Deal itself…or Stalin’s plan to remake the Soviet Union into the Eden of his imagination…it is a deal that is to be pressed onto people like a pair of leg shackles…not a deal that two parties enter into willingly.

Fashions come and go in environmentalism. Not too many years ago, we were required to drive no faster than 55 mph. That was the deal. Or rather, the law.

The idea was to save gasoline. Did it save gas? Maybe. But at what cost? Millions or maybe billions of hours were spent sitting in cars, rather than doing other things. What was the cost of that time?

When the children were younger, Elizabeth insisted on using real diapers rather than the disposable kind. The disposables were better. They were easier to use…faster, cleaner and cheaper. But Elizabeth was convinced that the disposables were an environmental hazard. They were clogging the landfills and who knows what.

In fact, the lower price of the disposables suggested — to me at least — that they were actually using fewer resources than the cloth diapers. The real diapers sat around in smelly pails and had to be picked up and delivered twice a week. They had to be laundered in very hot water. It was an expensive, resource-consuming operation.

Ordinarily, people figure these things out for themselves. They use prices to guide them…and choose the solutions that suit them best. For example, they weigh the price of extra fuel (assuming it takes more the faster you drive) against the extra time that would be required by driving slowly — and toss other factors on the scale too…such as incremental danger — and decide for themselves what they want to do.

This sort of calculation takes place all over the world, all the time. A person who owns a game farm in Botswana might decide whether he’d rather have a living elephant or the money that would be paid to him for allowing a big game hunter to shoot it. Likewise, a company that owns forests routinely decides whether to log the trees or not.

People acting rationally and by their own will are usually concerned enough to protect their own capital — whether it is elephants, gasoline or redwoods, so rarely are privately-owned assets completely depleted or ruined. It would not be in a paper company’s best interest to waste the forest completely.

It is only when natural resources are NOT under private control that capital is wasted. It was the absence of property rights that turned the Soviet Union into such a mess. It is why animals get hunted to extinction on communal lands. It is why certain species of fish are over-harvested and why government land is often overgrazed, strip-mined or deforested.

But there’s not much power or glory in the application of civil, neighborly, practical and cooperative remedies. What too many environmentalists really long for is force.

“Everyone knows the planet is in bad shape,” says Mark Hertsgaard. “We have to change our ways profoundly — and very soon…Climate change, water scarcity and species extinction are getting worse,” he tells us.

In fact, the climate change issue is on every pair of lips “Time” mentions. Is it true that the climate is changing because of something mankind is doing? I don’t know. But I’m certain it is a matter of great dispute. And even if the climate were changing…is it for the better or the worse?

Even the extinction of species is the normal course of nature. In the end, as Keynes tells us, we will all be extinct. Every one of us. It might be worth saving an animal, at the margin…but no animal — not even man — is infinitely valuable.

Still “Time” lauds the “heroes of the planet.” Among them are a man who was hanged for murder and a pair of environmental desperadoes who, among other things, rammed whaling ships.

But one of the “kid heroes” deserves special mention. Julia Hill spent more than two years literally up a tree. She lived in a redwood — so it would be “saved from being turned into someone’s deck.”

There are, however, many thousands of people who would prefer to have the deck. Julia, who might have saved her money and simply bought the tree honorably, instead used a kind of loony stunt to bully the lumber company. She spent her time in the tree, on a solar-powered cell phone — talking to the media to “get the message out.”

What message? Mike Hertsgaard’s plan calls for a major overhaul of the way the world does business. Carmakers need to be driven away from their SUVs.

Forget civil society and property rights: “Washington would tell Detroit,” suggests Hertsgaard, “that from now on the cars have to be hybrid-electric or hydrogen-fuel cell cars.”

Consumers need to be knocked off their redwood decks. “The power of Big Money,” would be neutralized (at least, any big money that didn’t fall into line). Workers in anti-environmental industries (such as coal mining) would get a “just transition.”

It would be a big deal. But why not? If it would really “Save the Earth.”

Bill Bonner

Paris, France May 3, 2000

*** Tuesday was not as good a day for the nation’s stockholders as Monday. The Dow fell 80 points. The Nasdaq dropped 172 points — a loss of 4.36%.

*** But you never take a loss unless you sell, right? That’s the mantra of today’s TNT investors — who believe they can wait out any downturn.

*** Berkshire Hathaway fell $3,800 to close at 55,000. Buffett sidekick Charlie Munger described the current state of investing at last weekend’s shareholder meeting: “I think the reason we use the term `wretched excess,'” said Charlie, referring to the way stocks other than Berkshire Hathaway have been bid up to preposterous levels, “is that there are wretched consequences.”

*** Another stock that is beginning to suffer wretched consequences of the free money era is AT&T — which fell 15% yesterday.

*** The Dow closed yesterday below its level of a year ago.

*** But gold stocks, finally, are beginning to stir. They were up about 10% yesterday, as gold rose $2.20. Could this be the start of something big? I don’t know, but investors have been disappointed too often by the gold stocks. They view any rise in the gold stocks skeptically. They will wait for evidence…proof. They’ll wait until the stocks move up strongly before they buy.

*** Finally, when the stocks are once-again overpriced…the gold bugs will come out of the cracks and crevices where they’ve been hiding for the last three years. They’ll become gold bulls — and will bid up favored stocks to outrageous levels. A few dot-com executives, sifting through the ashes of their burnout enterprises, will find bits of gold, silver and copper…and with the help of psychologists provided by the receivers, will have a flash of recovered memory syndrome. They’ll recall that they were once mining companies. With the help of venture capitalists in Vancouver, rather than those in the Bay Area, they’ll become mining companies once again.

*** Gold must be getting hot. At least hot enough so that it is worth stealing again. Albania reports that $2.8 million worth of its national treasure — in gold coins – – is missing from the Tirana vaults.

*** Oil rose, too — up about $1.

*** Lynn Carpenter reports that debt quality is declining. No doubt the quality of both debt and equity in the TNT sector is falling. But so is the quality of “Old Economy” corporate paper — according to a chart from Moodys. “Both Old and New Economies are in for a cash squeeze,” says Lynn. Buy bonds. http://www.fleetstreetletter.com

*** Meanwhile, the cost of labor is rising at its fastest rate in 10 years. No wonder. A survey of 50 cities by First Union’s Economics Group shows half have unemployment rates below 3%. The Raleigh/Durham area seems to have the tightest labor market — with an unemployment level of 1.7%. “The pool of available workers,” says the study, “is about as shallow as it can get.” You don’t need a high school education to get a good job in North Carolina…just a pulse.

*** Little noticed when the Nasdaq was coming down earlier this year was another crash south of the Rio Grande. The Mexico stock market fell 24%.

*** This could be a buying opportunity for a company that lacks everything the dot-coms have in such abundance. Where the Internet stocks have high tech, this company produces something that has been made for thousands of years…and even today, no one knows exactly what makes it work. While the Internets produce little or no cash, this company has $1 billion in free cash flow. Where the Internets specialize in the intangible…this business makes its living on something decidedly concrete. And while the TNT shares trade at as much as 1,000 times earnings…this stock can be bought for just a little more than five times earnings. The company is Cemex. Dan Ferris, at “Real Asset Investor,” thinks it is a buy. https://www.agora-inc.com/secure/form1.cfm?pubcode=RASS&pcode=W13797&alias=w-dr2 *** William Fleckenstein of SiliconInvestor.com provides another example of capitalists’ money ending up in the hands of undeserving employees. Conseco’s ex-CEO walked away with a $70 million severance package after running the company into the ground.

*** In other curious news, Reuters reports that 511 women were discovered in what was supposed to be an all-male prison in Columbia. In evocative prose, the reporter called the prison “a hotbed…of prostitution.”

*** This week marks the anniversary of the Madrid uprising against French troops in 1808. The Peninsula Wars kept the British, French and Spanish engaged for several years — until the French were driven out in 1813. They are remembered today only by Goya’s famous paintings — the “2nd of May” and the “3rd of May”

*** This month’s “Geology” magazine worries about the discovery of a crack in the floor of the Atlantic Ocean off the coast of Virginia. It could produce a tidal wave — like the one that smacked Newfoundland in 1929, killing 51 people. Then again, it could be nothing.