Coinbase: Act of Defiance

  • How the American oligarchy consolidated power…
  • … by embracing “woke” ideology
  • Why the Coinbase IPO is remarkable
  • Gratuitous corporate “John Hancocks”
  • Unemployment benefits backfire (McDonald’s)
  • A reader on *insecure* two-factor authentication… A counternarrative to “doomsday… Chinese labor shortages”… And more!

Heh…

Brooklyn Center

Lotta wisdom in that tweet. As we mentioned after the death of George Floyd last year, there’s likely an undercurrent of economic distress beneath every outbreak of civil disorder — going back at least as far as the trouble in Ferguson, Missouri, during 2014.

Doesn’t matter what the surface grievance is, either. By one account, nearly 60% of people facing charges for the Capitol riot in January have some history of money trouble — foreclosure, bad debts, back taxes.

And as we pointed out most recently on Election Day, ultimate blame for this privation lies with the Federal Reserve — whose policies have enriched “the 1%” (really the top one-tenth of 1%) while the bottom 90% of income earners have been losing ground throughout the 21st century.

But the Fed and the rest of the power elite know which way the wind’s blowing — which is why they’re embracing “woke” ideology with great ardor.

We’ve described the phenomenon before: By co-opting the social justice warriors, the American oligarchy — Wall Street, Silicon Valley, the health care cartel, the military-industrial complex — cements its grip on power. “Social justice” is a brilliant distraction from how the crony-capitalist power structure really works.

Here, for example, is an Instagram post from Visa days after George Floyd’s death — with a twist on its “It’s everywhere you want to be” slogan.

BLM

And of course, we can’t forget the absurd image of JPMorgan Chase’s CEO “taking a knee” the same day as Visa’s meme…

We Stand for Democracy

And the beat goes on: JPM kicked off earnings season this morning by crushing the Street’s expectations, thanks in large part to its trading desk’s prowess. The numbers are so good, the bank is releasing $5.2 billion it had set aside for loan losses — in other words, another $5.2 billion to gamble with.

If those gambles blow up? That’s what bailouts are for.

You say people wouldn’t stand for it again after what happened in 2008?

Ah, but by internalizing woke doctrine, the banks have every reason to believe they’ll forestall the torches and pitchforks they so richly deserve. After all, how could anybody oppose bailing out such noble advocates of diversity, equity and inclusion? Only racists would oppose the next round of bailouts. (See how that works?)

Goldman Sachs, aka the vampire squid, also delivered boffo numbers this morning.

Set in this context, the Coinbase IPO today is a remarkable event.

Going into this morning, the cryptocurrency trading platform had an estimated valuation of $65 billion — on par with the New York Stock Exchange’s parent firm, go figure. As we go to virtual press, trading has opened at $381 a share — boosting the market cap to $99 billion.

But you can read about the IPO anywhere. Of way more interest to us this morning is how Coinbase eschewed woke doctrine — indeed, any sort of political doctrine — and somehow got away with it.

On a company blogpost last year, CEO Brian Armstrong declared Coinbase would not follow the Silicon Valley herd. Instead it would adopt a politically neutral stance, staying “mission-focused” and sticking to its crypto knitting.

“The reason,” he wrote, “is that while I think these efforts are well intentioned, they have the potential to destroy a lot of value at most companies, both by being a distraction, and by creating internal division.”

Simple, sensible, reasonable. Not surprisingly, Armstrong and Coinbase got roasted by the mainstream for taking this position.

As Glenn Greenwald writes on his Substack site, “the notoriously censorious and politicized ‘tech reporters’ of The New York Times punished the company for its heresy of neutrality with a lengthy article depicting Coinbase as a bastion of racism and toxic bigotry.”

Amazingly, Armstrong stood his ground. He offered severance packages of up to six months’ pay for employees who objected to the policy.

“Life is too short to work at a company that you aren’t excited about,” he wrote in an internal email. “Hopefully this package helps create a win-win outcome for those who choose to opt out.” Roughly 60 people, or 5% of the workforce, took him up on the deal.

That was about six months ago. As far as we can tell, that was the end of it. A web search for “Coinbase social justice” turns up nothing since then.

Clearly, Coinbase’s strict neutrality was no obstacle to going public. But Coinbase is an outlier.

A month after George Floyd’s death, we chronicled how large swathes of corporate America were temporarily backing away from advertising on social media — on the theory they didn’t want to be hawking their wares in proximity to “hate speech.”

In one sense, that was nothing new. Brand advertisers don’t like to be associated with anything controversial. In 2009, Glenn Beck went too far on his TV show and Procter & Gamble ditched its ad buys. In 1989, Coca-Cola apologized for airing a Coke spot during an extra-raunchy episode of Married… With Children.

But those were easy calls back in the day: No one was going to stop buying Coke or Crest as a result of those decisions.

Now? It’s much harder for world-class brands to be all things to all people.

To the extent that those brands are taking sides in the culture wars, they’re leaning woke — even more than they were last summer.

This morning, a two-page ad appeared in the print editions of The New York Times and The Washington Post.

We The People

On the heels of a new voting law in Georgia — with similar efforts underway in Texas and elsewhere — the ad declares its opposition to “any discriminatory legislation or measures that restrict or prevent any eligible voter from having an equal and fair opportunity to cast a ballot.”

Hundreds of companies and executives are among the signatories — Amazon, BlackRock, Google, Warren Buffett, General Motors, Merck, Netflix, Starbucks.

Not everyone’s on board. For some, it’s still too hot to handle.

Atlanta-based Coca-Cola and Delta Air Lines came out against the Georgia law (though not forcefully enough for some of the law’s critics)… but begged off signing the letter, “perhaps fearing more blowback for earlier statements and also not feeling the need to speak again,” says The New York Times.

But the ad nonetheless “represented the broadest coalition yet to weigh in on the issue.”

Where does it end?

“Big Business is already quite powerful in our society,” writes Rod Dreher in The American Conservative. “Do we really want a society in which Big Business reserves to itself the right to tell polities what their laws and policies are going to be, at the risk of punishing that polity economically if it resists?

“Does this sound like the kind of country you want to live in? If you are pro-choice, imagine that Big Business decided to threaten your state’s legislature with economic consequences if it doesn’t pass pro-life legislation.”

Which brings us around to the core subject matter of this e-letter — investing.

What to do if a company looks like a sound investment but its management takes a stand on an issue that you just can’t countenance?

For a long time we’ve cited the guidance of the late Harry Browne, one of the pioneering “hard money” newsletter editors of the pre-internet era.

“The stock exchange isn’t a pulpit,” he wrote in 1995. “If you want to promote a particular environmental policy, political philosophy or other personal enthusiasm, do it with the profits you make from hardheaded investing.”

The market action today is a mirror image of the last couple days — now it’s the Dow charging ahead, with the Nasdaq lagging.

At last check the Big Board is up nearly two-thirds of a percent — into record territory at 33,878. The S&P 500 is up microscopically from yesterday’s record close, now 4,144. And the Nasdaq is down a quarter-percent at 13,964.

But the Nasdaq’s rally in recent days has caught the eye of our chart hound Greg Guenthner: “Many of the red-hot tech names that led the market higher in late 2020 started to break out again. Even a couple of the forgotten work-from-home names like ZM caught a bid. It looks like some of these former leaders are getting their mojo back.”

Bitcoin made a run at $65,000 this morning but as we write, it’s back to $63,215. And as for Coinbase, “attempting to trade an IPO the day it debuts is a great way to get stuck with some quick losses,” Greg reminds us.

Gold is losing a bit of its luster, down nine bucks to $1,736. But silver’s hanging tough, up a nickel to $25.39. Crude is zooming higher after the Energy Department’s weekly inventory numbers — up $2.85 and back above $63.

Sign of the times, literally…

Short Staffed

According to a video posted on TikTok last weekend, this sign was displayed outside a McDonald’s somewhere in the United States..

Not surprisingly the video has topped 1.1 million views. And it’s generated nearly 1,000 comments — some of which echo what small-business surveys and our own readers are telling us: Good help is hard to find, and extended unemployment benefits are a disincentive to return to the workforce.

“This is every restaurant in America right now,” says one. “Be kind and don’t take it out on the staff.” Amen…

“If you think two-factor authentication will provide security, think again,” a reader writes in response to yesterday’s mailbag.

“Over a year ago I saw a demonstration of a hacker break two-factor authentication. It may make it more difficult, but it can still be done.

“You need real security, Deep Instincts’ security brain. It disables attacks before the file has completed download. It is near 100% effective in identifying and disabling attacks.

“Love The 5.”

“I would believe Jim Rickards’ doomsday view of Chinese labor shortages,” writes a reader who’s spent many years in Asia, “if it were not for the fact that a significant portion of the low-skill labor has been filled in offshore factories from China to Indonesia, Vietnam, Malaysia, Philippines and other nations (Africa at some point in the future??).

“The labor skill in China is moving up in its skillset and into the high-technology sector, so a smaller pool of unskilled labor is required.

“Basically this has been happening over the last 20 years but has not slowed the march of Chinese industry and I doubt very much that it will slow industries over the next 20 years.

“But Jim is right to see that there may be a decline in the population growth and that is not a bad thing…”

The 5: Interesting. If you’re right, China might well escape the so-called “middle-income trap” — in which developing nations that climb out of abject poverty find themselves unable to attain true first-world standards of living for the masses.

Few countries have been able to escape the middle-income trap — South Korea and Taiwan are notable exceptions, unless you want to include a handful of Middle East oil sheikhdoms.

But if China can pull it off…

Best regards,

David Gonigam

Dave Gonigam
The 5 Min. Forecast

P.S. As we were writing this morning, news crossed the wires that Bernie Madoff has died in prison at age 82.

No point to us doing a full obit… but we do want to fill in a few gaps the mainstream will likely leave.

In the first place… never forget how the regulators dropped the ball on Madoff’s epic Ponzi scheme.

Whistleblower Harry Markopolos tried to get the attention of the Securities and Exchange Commission, but the SEC kept sending his calls to voicemail. (Maybe they were too busy watching porn on the clock; the agency’s inspector general found senior staffers routinely porn-surfing even as the Panic of 2008 was unfolding.)

And as long as we brought up JPMorgan Chase and the elites’ culture of impunity today… never forget how JPM paid a $2.6 billion cost-of-doing-business fine to the U.S. government and Madoff’s victims for its failure to alert the feds to its suspicions that something funky was going on. The fees were just too good to pass up.

Is Madoff’s conviction and prison time evidence that the system works as it should? Not really…

Jon Schwarz

Right on…

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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