Dana Blankenhorn

The U.S.-China Alliance

2012-01-27T05:54:00-05:00

Think of this as Volume 16, Number 4 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

Steve Jobs did something generations of political leaders have been unable to do.

He cemented the alliance between China and the United States.

He did this by making money for both, through cooperative development of his iOS line. As he told the President, you can't make this in the U.S. We don't have the human infrastructure and logistics to produce, say, 37 million iPhones and 15.4 million iPads in one 90-day period, box them and and ship them, the way China can.

On the other hand, China lacks the software and marketing imagination needed to move that merchandise in countries around the world. It lacks the branding. Even the Chinese people know the difference between a real Apple Store and a Chinese knock-off. They will pay a premium for the real thing. And Apple, today, sits on $96.7 billion in cash.

Thus we have a symbiotic relationship, one that other companies can exploit, one that benefits the people and governments on both sides of the trade. Historically it's an important moment.

China and the United States are the great powers of the world today. No one denies this. Yet their economies are based on partnership, not competition. Peace, not war.

This has benefited China immensely. They have been able to keep what their armies took, Tibet, but they have taken the rest of what they wanted territorially without firing a shot. Taiwan just elected a leader dedicated to the slow absorption of his nation, Macau is going through an unprecedented boom, and Hong Kong is now the tip of a greater co-prosperity sphere that stretches right up the Pearl River Delta. And speaks English.

What folks don't yet credit is that this benefits the U.S. too. We're not getting the kind of Great Power pushback on our oil imperialism we got a generation ago, because opening those markets to oil exploration is in China's interest as much as it is ours. And companies like Apple, which design and market here but manufacture there, are going through an economic boom that makes the dot-com bubble look like something you'd find in a Coca-Cola.

Coca-Cola is a big part of this story, by the way. Coca-Cola, McDonald's, WalMart, and brands like them have created a global American culture, one that speaks English and has similar desires for a better, peaceful life. I saw this when I visited China in 2009.

The closest analog to what we have now is the U.S.-English detente that began after the War of 1812. But it's not similar at all. Because the world was different then, it wasn't a single global market.

No, it's not all going to be kumbaya. But both sides have a peace dividend right now, if they choose to seize it. And people on both sides now have opportunities to grow closer together, as individuals, in ways that can truly cement an enduring global peace.

Pax Steve.

A Stand Up Guy

2012-01-26T13:54:28-05:00

Republicans are having a primary fight right now that should rewrite some history books.

The assumption is that Republicans follow orders, while Democrats all want to lead the parade. Republicans vote with their heads, Democrats with their hearts.

So, Mitt Romney. It's his turn. He finished second last time, McCain lost, so it's his turn. He's got the money, he's got the looks, he's got the money, he's got the endorsements. And if his personality has a Nixon problem -- he's uncomfortable around people -- well so did Nixon. And if those Kennedys hadn't stolen 1960 Nixon never would have lost (and may have never gone paranoid).

But if Mitt Romney is the GOP ego, Newt Gingrich is its id.

Newt is still in this race because of one man, a guy I once worked for. Sheldon Adelson. Adelson cares about one issue and one issue only -- fealty to Israel and whatever Israel wants. The big story no one is writing is that Newt Gingrich has pledged such fealty, and he has $10 million (so far) to show for it.

But leave that aside. Other than Shelly's money, what is Newt Gingrich? You've got a man who was a politician for a quarter-century but who has actually spent the last 14 years in entertainment. He writes books, he talks in front of crowds or TV cameras.

He's a stand-up. As in stand-up comic. He's been doing it most of his life -- it was what propelled him into the House Speaker's chair, the idea that he could vamp on camera, keep the attention of the nation focused on him, defy Presidents (starting with Bush the greater) and leave 'em laughing. Not all of 'em, but his people, his audience.

It's just what every stand-up comic does. The secret to a stand-up's success is finding his people and cultivating that audience. Jeff Foxworthy never appeared on Def Comedy Jam. Dave Chappelle was not part of the Blue Collar Comedy Tour.

Your audience can be very narrow, or it can be very broad, like that of Russell Peters. Its devotion could be an inch thick or a mile deep. You can fly across the sky like a meteor, a la Bill Hicks (left, above), or you can hang in there and become a legend, like Bill Cosby.

Of course there's a less charitable way to put this.

In Mark Knopfler's song "A Stand Up Guy" he's talking about a patent medicine salesman. "They want to trust somebody, yeah they want a standup guy." That's Gingrich.

Instead of selling his personality or the laughter of the moment, he's got a product to sell you, literally political snake oil:

I drank it once, it tasted
Like grease and paraffin
It's mostly alcohol, okay
You can't deny it's strong

Whether you see Gingrich as a threat depends entirely on whether you see what he's selling as snake oil or not. The conservative base does not. The party establishment does.

But aren't both sides pushing the same simple set of solutions -- is there really much difference between what Romney or Gingrich would do in office (even regarding Israel) and what Bush the Lesser did? So what is the business wing of the GOP really all about -- do they really believe in what they're selling or are they selling snake oil?

This is the real division within the party right now. It's between those who view "principles" as rhetorical tricks to gain power, as snake oil, and those who really believe in what's being peddled, who think the snake oil works. And what's happening within the party right now, as the establishment pushes harder-and-harder to marginalize the Stand Up Guy and the Stand Up Guy pushes harder-and-harder to stay on stage, is that the audience is starting to figure out that the guy who made the snake oil knows it's a nonsense.

It's a different kind of "blow-up" than what happened to Democrats in 1972, when everyone was reduced to tribes -- by race, by sex, by passion -- and voters chose Nixon 3-2, Watergate notwithstanding. "We're all Nixon's niggers now, joked George Carlin (another great stand-up) and the audience cheered because it was the truth.

But it's a blow-up nonetheless.

The question is whether this President can do more with that blow-up other than ride to his own re-election, whether he can use that blow-up to turn whoever wins, not into George McGovern, whose party lost little ground in 1972 other than at the top of the ticket, but into Barry Goldwater, who gave Democrats the veto-proof majorities they needed to create real, lasting change.

I'm sure if you asked Newt's fans that question they'd prefer he be Goldwater.

So would I.

Oil From Tires, Gold From Straw

2012-01-25T16:53:01-05:00

I don't care much for penny stocks. But I have a problem, and if someone can solve it I won't begrudge where they come from.

These guys , who call themselves Green Envirotech Holdings, claim they can solve a big problem in my neighborhood.

Tires.

Every spring my neighbors and I go out hunting for old tires, and every year we find tons of them. Along the road, under viaducts, down in creek bottoms. Tires thrown around by guys who are selling tires to poor people and don't care for the expense of recycling them because they're poor themselves.

If you could turn tires into money, if the tires had value, then people wouldn't be going around stealing copper, they'd be grabbing these tires and making a semi-honest living.

Green Envirotech has a process it calls PlastExtract – it supposedly turns the shredder residue created by auto recyclers (who are mainly interested in metals) or what's found in old tires into plastic resins and a form of crude oil. For raw material it can also use low-grade plastic like the liners used in agriculture.

Right now the shredder residue is dumped in landfills. Green Envirotech – GETH for those who want to Google the stock – says it can reduce this waste by 40%. Plastic is another big landfill material, and the tires – the ones we collected went to a central facility from which they, too, were trucked to landfills.

Not to say there aren't people making use of old tires. My father-in-law dumped a bunch into the holding ponds on his ranch to build artificial reefs for algae eaten by whatever fish he could grow there. And they can be turned into padding for playgrounds – today's kids bounce where my kids got boo-boos and my generation got broken bones.

Still, in March GETH got $5 million in equity financing from a specialist in such dealings, which seems to have gone into buying a Hong Kong plastics broker called Magic Bright Ltd., for a reported price of $6 million. (An executive claimed Magic Bright has revenues of $40 million per year.) Over the first 8 months of last year the company filed 17 separate sets of documents with the SEC.

Last May GETH retained a boutique investment banker called Mosaic Capital LLC based in a small Sherman Oaks office building. At the end of the year it signed a joint venture deal with a unit of ACG Companies in Irvine, which seems to specialize in extracting capital from foreign nationals under the EB-5 program, which helps foreign investors establish residency in the U.S. The release claims the relationship will build plants costing $30 million each, using the PlastExtract process.

Right now the company remains a shell with big plans. There is a plant planned for Sheboygan, Wisconsin, in a former auto parts warehouse abandoned at year-end by International Automotive Components of Michigan. This plant would turn shredder residue from auto recycling into oil and usable plastic resin, and be financed by the city through tax-free industrial revenue bonds based on the employment of two shifts, 140 people, creating 120,000 barrels of oil and 50 million pounds of plastic resin annually from about 70 million pounds of material.

The Sheboygan Press has been following the story and wrote in October that GETH had not yet raised the start-up capital required to go into operation.

All is supposedly explained by a document filed at the end of the year, which I found at a site called Docstoc.com. This document claims that Mosaic is raising $22 million, which will go into expanding Magic Bright, which it calls a “plastic broker,” and into working capital for the Sheboygan plant. GETH claims to have a letter of intent with Stone Green Capital LLC, a New York fund manager headed by a former J. P. Morgan real estate man, Lewis Jones , which would go into both debt and equity once the bonds are put in place by an unnamed third party. That's due to be ready in March.

There's also mention of a Kansas City outfit called Ebbros I Investment Group, which would build the plant. But this company does not seem to exist online except as a name on a GETH press release. That release also states that Ebbros will re-sell the oil.

Now, about penny stocks.

Usually penny stock outfits are headed by a sharpie who has been this way before. The sharpie in this case is Gary De Laurentiis. He was previously in another penny stock recycler, called Eco2Plastics. Eco2 has been flogging a “new” way to recycle plastic bottles for over a decade. After De Laurentiis left that company, they went through bankruptcy and emerged as a private company – that was its last press release, and it's dated June, 2010.

Here's De Laurentiis getting interviewed on Youtube (in a GETH press release).

For me, Eco2 is the “tell” in this case. It was a similar deal – new recycling technology, solution for a popular problem, patents and deals and Gary De Laurentiis, hurry, hurry, hurry, step right up...and get burned.

So when I saw a press release touting GETH's presence in the tire recycling market, and I got a tweet from someone I never heard of before touting the stock, my spidey sense started tingling.

GETH has been as high as four cents, it's been at less than one cent, and it's at about three cents now, following the tweet campaign. It's showing $30,000 in revenue for the last quarter on which it had gross profits of $20,000 and “general administrative expenses” of $360,000.

So what is going on? Who is Ebbros, and why does GETH need them? Where is Magic Bright's revenue, because it's certainly not on GETH's books. When is someone going to be turning earth in Sheboygan? What about these foreign investors – are they just buying entry into the U.S. or are they going to multiply the Sheboygan “success” (when it comes) into something investors can profit from?

No retail investor should touch a deal like this until there's a plant built, operating, and working according to claims. Should that happen all this rigamarole is the market doing its job.

If it doesn't?

Investors Candy: Dana on NRG and BBG

2012-01-25T09:07:01-05:00

The Ugly Truth About Apple, China and Jobs

2012-01-23T08:10:01-05:00

Those are really crummy jobs.

Politicians are all a-dither about the recent New York Times story concerning Apple's production in China, and how Steve Jobs told the Administration those jobs weren't coming back. And about how great Chinese logistics are.

But the jobs we are talking about are really crummy jobs.

Mass production, making stuff over-and-over by hand, is sucky work. Maybe it was good for your great-grandfather, who contrasted it with slaving on a farm trying to bring in a crop. And it was. But compared with any modern job, any job you'd do or want to have your kids doing, it's a crummy, crummy jobs.

Fact is, America's future does not lie with mass production, but with mass customization. It lies with makers who can produce single parts on computers and have them created on 3D printers. It lies in design, in prototyping, in the creation of high-value rather than low-value products.

Do you want your kids doing grunt work in a factory? Want them living in dorms, on-call 24-7, working 12-hour shifts 7 days a week for a few dollars per day? You want them doing rote work that is so soul-destroying that suicide looks like a great solution?

I didn't think so.

What you want is for your kids to create the robotic factories that eliminate the need for all that hand-work. What you want is for your kids to be designing the software that leads to creation of a Moon base. What you want is for your kids to be in jobs where they can think different, not in jobs where they don't think.

And you know what. Every worker at Foxconn wants that for their kids, too.

Political Tectonics

2012-01-20T02:49:00-05:00

Think of this as Volume 16, Number 3 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

Want to know the historical importance of the SOPA-PIPA fight? To learn that you must travel deep underground, to the world of political tectonics and what drives us.

Economically, what happened in the early years of the Nixon Era was that two key economic interests divided.

Manufacturing, mainly based in the Midwest, took political power throughout the Kennedy and Johnson years. Technology, companies like Intel and Hewlett-Packard, both based in California, gravitated toward the Republicans. And it was this divide within the business community that ultimately proved crucial, as the New Deal moat was destroyed in the 1972 Nixon landslide, validating the creation of “fiat currency” to solve tech's natural tendency toward deflation.

This sort of thing had happened before. Each one of our political crises began when one industry seized power and, in time, other industries objected. It was the final triumph of the new economic order, the validation of a new set of myths and values in succeeding elections, that eventually resulted in each New Thesis, each new Age of American politics.

From the Age of Jackson to that of Lincoln. From the Age of Lincoln to that of Teddy Roosevelt. From the Progressive Era to the New Deal. From the New Deal to the Nixon Era.

From the Nixon Era to the Obama Era. It's not the leaders who create their times. They just ride the waves and take the credit. It's economic change that drives the train, under the surface.

Think about it. Consumer manufacturers who needed demand moved toward the Democrats after 1932, when demand-based policies were introduced over the objection of industrial manufacturers. Big business was split in the late 1890s, as financiers of industrial inputs like electricity and communication, accepted regulation on behalf of manufacturers. Manufacturers, in turn, rose to power after the Civil War, having destroyed free (to the producer) labor known as slavery.

What has been happening in the SOPA-PIPA battle is similar. The two pillars of the Nixon economy, content and technology, have divided. Content, which rose to power under FDR, and moved toward the GOP with Nixon, is being overrun by the forces of technology, who are in turn molding the Democratic Party in their own image.

It's not a uniform move. It never is. There were Republican car manufacturers in the 1960s like George Romney, and there were Democratic utility magnates in the 1920s. (Al Smith called them his base.) But industry – economic interests – have always been the tectonic plates whose shifts create our political earthquakes. There are many Republicans in Silicon Valley. But it's this balance of forces that drives both our economy and, in the end, our politics.

This is true regardless of the laws governing campaigns. Whether money and speech are deemed separate by government, money wins. But it wins because it's the mantle, the liquid heart of the American economic planet. When an industry tries to get in front of the political train, when it becomes the political crust, it becomes brittle, subject to rejection by other industries, other economic interests, and ultimately by the people.

What I've found in my study of American history over the last decade is that there are multiple cycles, mostly moving in concert, deep underground within the economy. Think of them as currents, like the Gulf Stream, moving deep underneath us.

The technology cycle is one generation old, and thus is at the height of its power, able to act almost wholly below the political surface. The content cycle is two generations old, and thus finding for the first time that it's not getting its way, as technology separates from it. The oil cycle is three generations old, and having seized political power over the last decade it is just now being pushed back by new economic forces formed in reaction to that power seizure.

Here it is more simply. Energy harvesting is rising to replace fossil fuels. That's an economic change 100 years in the making. Content is getting political push-back for the first time in two generations, and technology is now entering its political golden age.

All this is going on underneath the surface. It's only seen when volcanic events, when economic crises, occur. And that's where we get political earthquakes from, political volcanic eruptions, and political change that matters, that lasts.

Andrew Sullivan wrote recently that President Obama is playing “a long game.” This is the game he's playing. Re-alignment isn't just a new balance between government and the people, but a new balance among industrial sectors and economic models.

This is a good thing. The aim of our politics is greater prosperity, greater freedom, for all. It's political tectonics that makes it possible, and economic interests are its currents.

Internet Made Me a Video Star

2012-01-17T09:17:06-05:00

A few weeks ago I was contacted by Curtis Hollister of Investor Candy (the fellow on the left above.)

Curtis had seen my work at Seeking Alpha and was launching a video service for investors. Would I be interested in helping out?

Before I knew it, I'd turned the back bedroom into a rudimentary studio, complete with a green screen I hung over a bed and a fancy video camera Curtis sent me. He asked me to look into First Solar, which I did, then scheduled a GotoMeeting call.

The result is what you see above. He sat in his office and asked questions. I sat in my office and answered them. Same thing I've done for decades, only in reverse. He used a little technical magic to transform my bedroom into the Atlanta skyline and voila.

Let me know what y'all think. Has the Internet made me a video star or should I stick to my typing?