Monday, May 13, 2019

Will Russia Blackmail Mark Zuckerberg?


The news media has been running many stories lately about calls for the U.S. government to break up Facebook.  One idea is to separate Facebook, Instagram and WhatsApp, all of which are owned by Facebook and all of which are controlled by Mark Zuckerberg.  These three websites together dominate social media, and advocates of a breakup express concern about monopolization, and also the potential impact on freedom of speech of having so much of the social media business under a single corporate roof.  Indeed, it's not just a concern about a single corporate holding company.  We're talking about one guy--Mark Zuckerberg--who controls all three of these dominant sites.  Zuckerberg arranged to have himself given supervoting shares of Facebook when the company went public.  So he single-handedly controls everything at these three companies even though he has taken a lot of money from public investors.

Special Robert Mueller indicted a bunch of Russians and Russian companies for interfering with the 2016 election, and his redacted report discusses this problem in some detail.  U.S. intelligence agencies are supposedly combating Russian efforts to muck around in the 2020 election.  Only time will tell how effective the countermeasures are.  We may get a preview from the European Parliament election taking place later this month, which Russia is reportedly trying to influence.

But there's a simpler strategy for Vladimir Putin:  blackmail Mark Zuckerberg.  After all, Zuckerberg controls the whole shebang, and if you control him, you're in a sweet spot.  Zuckerberg is human like the rest of us, and all Putin and his henchmen need to do is find out what his weaknesses are.  This surely has already occurred to them, and they no doubt are nosing around in Zuckerberg's past as much as they can.  They'll try to tally every beer he drank before turning 21, and everything he may have smoked or snorted.  They no doubt will be pro-active, which is an integral part of Russian spycraft.  Pro-activity in this regard could mean things like ensuring that Zuckerberg has the opportunity to meet very attractive, friendly and easy-going women wherever he is, and only later might he find out that they had tiny cameras.  If Putin succeeds in getting a pee tape or its equivalent featuring Zuckerberg, Mark will be in a bad place.

U.S. antitrust law doesn't provide that a company can be broken up because its CEO is subject to blackmail by a foreign nation.  But there seem to be good arguments for contending that Facebook satisfies the legal requirements for splitting it up.  And the distinct possibility that a hostile foreign nation would want to blackmail Zuckerberg provides additional reason to be concerned about allowing today's monolithic Facebook to keep lumbering along. 

There may be some who would suggest that Putin already controls the U.S. government, and would through his proxy (you know who) stop the Justice Department and Federal Trade Commission from taking action to break up Facebook.  Whether or not this is true, Putin would want to blackmail Zuckerberg if he can.  The government--at least those parts of the government that still adhere to their oaths to support and defend the Constitution--should do whatever is possible to stop this from happening.  The rest of us may want to consider taking a break from Facebook, Instagram and WhatsApp.


Thursday, March 28, 2019

Does the Mueller Report Contain the Evidence for the Impeachment of Donald Trump?


The report of Special Counsel Robert Mueller has been completed, but not released publicly.  All we have is a letter from Attorney General William Barr stating that Mr. Mueller concluded the evidence he had accumulated of Donald Trump and members of his administration possibly conspiring with Russians to interfere in the 2016 elections was insufficient to justify criminal charges.  Barr's letter also said that Mueller could not decide whether President Trump or others had obstructed justice but that Barr had concluded they had not.

A storm of controversy has arisen over the fact that the report itself is not public and therefore neither Congress nor the public can evaluate Mueller's evidence for themselves.  Whether or not the report will be released in full remains to be seen.  But the delay in releasing the report leaves open the question whether the report contains enough evidence to warrant the impeachment of President Trump.

Criminal charges need to be proved beyond any reasonable doubt.  That is the standard ("burden of proof" is the legal term) that Mr. Mueller would have been working with when he, according to Barr, decided that criminal charges for conspiracy with Russians could not be proven.  That would have also been the standard Mr. Barr worked with when he decided that obstruction of justice charges were not warranted.  But the Constitution does not specify any particular burden of proof for impeachment.

The impeachment process contains two stages.  The first is impeachment--or, the leveling of charges--by the House of Representatives.  The House decides whether there is enough evidence to level charges against the President.  Grand juries in America can level charges (by issuing an indictment) when they believe there is probable cause to believe that the defendant committed a crime.  Probable cause is a much lower standard than beyond a reasonable doubt.  Based on what's already been publicized about possible Trump collusion with Russia, it seems quite possible that the Mueller report contains enough evidence to support a determination of probable cause.  So impeachment by the House could be a distinct possibility if the House chose to use the probable cause standard (and nothing in the Constitution prevents it from doing so).

The second stage of the impeachment process is a trial in the Senate.  The Constitution provides, in Section 4 of Article II that "The President, Vice President and all civil Officers of the United States, shall be removed from office on Impeachment for, and Conviction of, Treason, Bribery or other high Crimes and Misdemeanors."  One might argue that the word "Conviction" implies the reasonable doubt standard.  However, the reasonable doubt standard had only begun to find its way into English law in the 1780's, when the Constitution was written, and was not explicitly recognized by the U.S. Supreme Court until 1881 (see Miles v. U.S., 103 U.S. 304 (1881).  Thus, the Senate is not bound by the reasonable doubt standard, and could impeach President Trump because it believes that grounds for impeachment have been proven by, for example, a preponderance of the evidence or by clear and convincing evidence, both of which are lower burdens of proof used in different types of civil court cases.

It's been reported in the press that the Mueller report is lengthy and detailed.  Thus, it surely must contain a great deal of evidence.  Because of the possibility that the Mueller Report may contain enough evidence to support the impeachment and removal from office of President Trump, it is imperative for America's democracy that the full report be immediately released to Congress and the public.

Friday, March 22, 2019

A Presidential Limerick


There was a President named Trump,
With a heart of coal, just a lump.
He whistled to dogs and loved demagogues.
And feared most of all stocks would slump.

Thursday, March 14, 2019

The Most Chilling Thing Donald Trump Has Said


President Donald Trump reportedly has just threatened violence against his political enemies.  According to a news report, he said that his supporters (whom he identified as the police, military and Bikers for Trump) "could get 'tough' on his political opponents at a 'certain point'"  and "'then it would be very, very bad.'"  (See https://www.thedailybeast.com/trump-warns-it-would-be-very-bad-if-my-police-biker-gang-fans-decided-to-get-tough-on-my-opponents?ref=home.)  This invokes the specter of the criminal violence of Nazis against their political enemies in the 1920s and 1930s.  The conduct to which Trump alludes wouldn't be legal.  But perhaps he thinks he will be protected by the U.S. Department of Justice policy against indicting a sitting President.  Maybe he thinks this will allow him to establish a dictatorship, thus permanently insulating himself from prosecution.  The Justice Department could end up looking like a bunch of ineffectual, complicit patsies while the Constitution is destroyed.  By all indications, the GOP Senators and Representatives won't have the guts to stand up for democracy--never before in American history have so many cowered so much before such a despicable man.  The Democrats in the House and Senate, and the federal courts, could and likely would attempt to stop incipient totalitarianism.  But the means at their disposal are limited if Trump defies the lawful measures they could take (especially if he inflicts political violence on them).  In the end, it will probably be up to the American people to stand up to and overcome Trump's threats of political violence.  But Americans shook off the chains of tyranny once before, in a struggle that began in Lexington and Concord and ended in Yorktown.  If necessary, they can--and will--do it again.

Wednesday, February 27, 2019

The Most Chilling Thing Michael Cohen Said About Donald Trump


Today, President Trump's former personal attorney, Michael Cohen, testified before Congress about his decade or more of dealing with Trump.  Cohen's testimony indicated Trump may have suborned perjury, violated campaign finance laws, conspired with Russians to undermine the Presidential election of 2016 and even possibly violated the draft laws of the 1960s in order to avoid service in the Vietnam War (which would have been a crime).  All of these could be serious offenses, although the draft violation, if there were one, would no longer be prosecuted today. 

But the most chilling thing that Cohen said was, "Given my experience working for President Trump, I fear that if he loses the election in 2020 that there will never be a peaceful transition of power."  See https://www.thedailybeast.com/cohen-if-trump-loses-in-2020-i-fear-there-will-never-be-a-peaceful-transition-of-power?ref=home.  It's one thing to have a criminal in the White House.  That, although very, very bad, has by all accounts happened before and America survived the experience.  But a felonious dictator is far worse.  America established the tradition for modern democracies, with the key element that elected officials step down when their terms are over.  Indeed, this is what most distinguishes America from the monarchies that preceded it.  The first President, George Washington, could easily have been crowned monarch of the United States had he wanted it.  But he did America perhaps his greatest service by stepping down at the end of his second term and retiring quietly to Mount Vernon.  That, more than anything, is the bedrock of democracy that makes America great.

Would Trump attempt a coup d'etat if he lost the 2020 election?  Michael Cohen, as Trump's personal attorney for about a decade, knows Trump better than almost anyone.  Having already pled guilty to perjury before Congress in 2017, he has little reason now to lie, as he knows the cost of perjury.  And Trump's well-publicized affinity for despots (think Vladimir Putin, Kim Jong Un, Xi Jinping, and the rulers of Saudi Arabia) ominously buttresses Cohen's assertion.  There is no procedure written into the Constitution for fending off a tyrant (who by definition would refuse to honor an impeachment proceeding).  Neither Congress nor the federal courts have the means to remove an autocrat who might flaunt the law in order to stay in power.  But Americans have dealt with tyrants before.  These were ordinary Americans, many of whom assembled quietly in the early hours of April 19, 1775 in Lexington and Concord to await the tyrant's redcoated soldiers.  And these farmers, tradesmen and other civilians were victorious.  In America, right makes might.  While we can hope that if Donald Trump tries unlawfully to seize power we don't need to take up musket, powder and shot, we must remember that the greatest defense against oppression and subjugation is the righteousness of a democratic citizenry. 

Monday, February 25, 2019

A Peek Under Facebook's Rug?


There's an old saw about people sweeping dirt under the rug when they do a quick and not necessarily good job of cleaning.   Well, CNBC reports that some Facebook content reviewers are so stressed out by what they see and hear that they are developing symptoms of PTSD, or starting to believe conspiracy theories about 9/11 or the Las Vegas mass shooting.  Reviewers reportedly used drugs or alcohol at work to find relief from their stress, or had sex in bathrooms or a lactating room to escape.  One even said he brought a gun to work in order to protect himself from other employees who made him feel threatened.  See https://www.cnbc.com/2019/02/25/facebook-content-moderators-describe-a-stressful-work-environment.html.  These reviewers, employees of a contractor hired by Facebook, work for wages around $15 an hour to screen violence, threats, hate, and other extreme stuff.  Facebook's contractor says it offers counseling and other assistance to employees.

Is it any wonder Russian government intelligence operatives can use Facebook to undermine American democracy?  Is it any wonder hate groups and other weirdos can use Facebook to promote all manner of sick and extreme views?  Facebook's algorithms can't stop this stuff.  Evidently, Facebook's human reviewers, paid what many consider barely a living wage, can sometimes become so stressed they aren't really able to cope with the job.  So they probably aren't stopping it, either. 

No website is better than its content.  Facebook evidently struggles to control its content.  If its content reviewers can develop PTSD or resort to alcohol, drugs or sex in the lactating room to cope, what reaction might Facebook's users (especially its young users) have to such content?  It may be that so much content is uploaded so fast to Facebook that it cannot truly screen out the bad.  Then again, no website is irreplaceable.  Whatever excuse Facebook may offer for its content problems, no one needs to use it.  The rest of the Internet is a pretty big place, and you're the only person stopping you from exploring it.    

Wednesday, February 20, 2019

The Defining Moment of Donald Trump's Presidency


Special Prosecutor Robert Mueller's report may be finalized as early as next week, according to a news story (see https://www.cnn.com/2019/02/20/politics/special-counsel-conclusion-announcement/index.html).  The report presumably will address crucial questions about President Trump.  Did he collude (conspire would be the legal term) with Russian authorities to undermine American democracy?  Was he a Russian intelligence asset, as one former acting FBI director has speculated (see https://www.cnn.com/2019/02/19/politics/andrew-mccabe-trump-law-enforcement/index.html)?  Did he obstruct justice or suborn perjury?  Did he violate federal campaign finance laws?  Did he engage in money laundering?  Did he violate the tax laws?  These and perhaps many other questions could be encompassed by the Mueller Report.  The answers may go a long way to defining President Trump's legacy.

Will the report be released publicly?  The President has said he'll leave that up to newly installed Attorney General William Barr.  Barr has said he wants to be as transparent as possible and will release at least a summary of the report to Congress.  But there is a view in the Justice Department that "derogatory" information about uncharged individuals should usually not be revealed, and Barr may give weight to the this practice.  If Trump is not charged because he is the current sitting President, which is what traditional Justice Department thinking could dictate, then one might wonder whether Barr would engage in legal convolutions to reason that because the President hasn't yet been charged, derogatory information about him shouldn't be released.  Such a contorted line of reasoning would defy the logic of democracy.  If the President is a crook, the people need to know it whether or not the President is charged.  But only time will tell whether Barr is inclined toward something verging on a lawyer's trickery to protect President Trump.

In addition, Barr will have to think through the issue of executive privilege, a doctrine that often shields the President's conversations with other Executive Branch personnel from disclosure.  However, executive privilege is not unlimited, and a President's general interest in confidentiality does not override the needs of the criminal justice process (see United States v. Nixon, 418 U.S. 683 (1974)(a case in which the Supreme Court enforced a subpoena issued by Watergate special prosecutor Leon Jaworski for President Nixon's tape-recordings of conversations in his office).  Moreover, it is a time-honored tradition in American law that discussions concerning a crime or fraud cannot be protected by a legal privilege.  (See Alexander v. United States, 201 U.S. 117 (1906)).  If Mueller's investigation shows that Donald Trump was engaged in criminal conduct, release of that information cannot be blocked by a privilege.

How William Barr handles the question of releasing the Mueller Report will define his legacy.  Although he has had a highly successful career, nothing he has done thus far will compare in significance to his handling of the Mueller Report.  He will be well-remembered, or not, depending on what he does with the report.

If Barr disappoints the curious members of Congress and the public, remember this.  Many, and perhaps most, of the investigations into President Trump and his doings are outside the scope of Mueller's investigation.  The U.S. Attorney's Office in Manhattan is looking into activities of Trump's former personal attorney, Michael Cohen, in relation to various Trump matters and also activities of the Trump Inaugural Committee.  The U.S. Attorney's Office in Washington, D.C. and the main Justice Department in Washington are involved in some of the cases brought by Mueller's staff, and other cases (like the Maria Butina case).  The Attorney General of New York is looking into the Trump Foundation and some of Trump's activities as a landlord.  Trump's continued ownership in the Trump International Hotel in Washington, D.C. is the subject of litigation brought by the Attorney Generals of the District of Columbia and Maryland.  As these cases progress, we will learn more and more about Donald Trump.  Even if we don't learn everything in the Mueller Report, we will eventually learn a heck of a lot about Donald Trump.  And the totality of this growing tidal wave of investigations and litigation will define Trump's legacy.  Facing, as he does, a Democratically controlled House of Representatives, he won't have any more major legislative achievements.  And his erratic wackiness on the international stage make major diplomatic accomplishments highly unlikely.  It's a sad time when a President's legacy is defined by the legal investigations into his activities.  But Donald Trump has done what he has done, and the chickens are coming home to roost.

Saturday, January 12, 2019

Donald Trump Doesn't Want to Govern


The current federal government shutdown has now become the longest on record. Lots of folks are hurting, from furloughed government employees to furloughed government contractors to the beneficiaries of numerous government programs, such as farmers, small businesses needing SBA loans, prospective homebuyers seeking an FHA or USDA loan, and women seeking protection in one of the many domestic violence shelters that receive federal funds.  Although a lot of government leaders in Washington are creating the appearance of activity, there is no sign of a resolution.  The reason is simple.

President Trump doesn't want to govern.  He wants to win.  Winning, for him, is an imperative.  He looks at life as a competition, where there are winners and losers.  And he is obsessed with winning. 

Governing, however, requires magnanimity, open-mindedness, a concern for others, and an interest in the welfare of the polity as a whole.  In a democracy, governing involves a willingness to accommodate the wishes of those of differing views and compromise.  Leaders, to be successful, must forbear from pressing for the lion's share.  The people are the lion in a democracy.

Trump has shut down the government in a contest over funding for his wall on the border with Mexico, where he wins if the wall is funded and he loses if the wall isn't funded.  By turning what was a political issue that was quite susceptible to compromise into a zero-sum situation, he has pushed the newly empowered Democratic leadership of the current 116th Congress into a joust.  The Democratic leadership in Congress, now wielding majority control in the House and understandably feeling they have a mandate from the electorate not to do things the Trumpian way, see no reason to concede.

President Trump has set a record--for the longest government shutdown ever.  He's not winning.  He's losing.  His legacy, already tenuous, now careens toward abysmal infamy.  The government will re-open, because it must.  Americans, fed up with the dysfunction in Washington, won't accept non-function.  A little graciousness from Donald Trump would be all it takes to get the government up and running again quickly, without an inordinate amount of fallout.  But he's not a gracious man.  So the eventual re-opening of the government is likely to be as ugly as the shutdown.  Whatever the circumstances under which the government re-opens, Trump will have revealed a senseless pettiness that tarnishes his Presidency for the remainder of his time in the White House.

Friday, January 11, 2019

Apple's Dilemma


Apple Corp. is facing mortality--the mortality of the smart phone.  Not that the smart phone is going away any time soon.  It will be around in various iterations for decades.  But it's reached the point in the product cycle where it has become a commodity.  There are lots of different types of smart phones made by many different manufacturers at prices ranging from almost $2,000 to almost zero.  Competition has intensified immensely from the time the iPhone was introduced in 2007, and the iPhone is not always at the cutting edge of technology. 

Last fall, Apple announced that it would no longer report unit sales of iPhones, its most important product.  That was a bad sign, indicating sales were no longer exuberant.  Apple also significantly raised the prices of many products, and said it would endeavor to increase sales of services.  Then, at the beginning of 2019, Apple announced that sales in China were more disappointing than expected.  Not surprisingly, its stock has sagged. 

Apple is swimming against the current.  While it continues to make excellent products, it raised prices at a time when its prices were already at premium levels and the world's economy was slowing.  Even though its products include upgrades, none were astounding, must-have innovations.  Ten years ago, people were willing to pay premium prices for Apple products because they were superior to the competition, in terms of technical capability and quality of manufacture.  Today, other manufacturers turn out very high quality products, sometimes with better features than Apple has, at competitive or lower prices.  Apple seems to be betting that consumers will pay up for a brand name.  That's not ultimately a winning strategy.  Mercedes, which has never been a luxury brand in Germany, tried to do that in America by charging premium prices and creating an aura of exclusivity.  Although it succeeded for a while, its outsized prices attracted a flock of competitors.  Today, Mercedes is no longer a show-stopping dazzler, with some of its lower end models selling for less than many pickup trucks. 

Econ 101 teaches that when Apple raised prices, it shrank the pool of its potential customers because fewer and fewer people can and will pay escalating prices.  And hoping to sell more services is predicated on people buying more Apple hardware.  But if hardware sales are lagging because of price increases and a slowing economy, something has to give--and it has, in Apple's recent disappointing news announcements.

Most consumers don't use more than a few of the myriad features in iPhones and other high-end smart phones.  Indeed, most consumers don't even know what those features are.  When you can buy a smart phone for $100 or $200 that does the few things you care about well, there's no point to paying $1,000+ for a brand name.  Probably most millionaires in America drive ordinary cars.  You don't get to be a millionaire by burning up money on a brand name. 

Apple's dilemma is that it is a giant consumer products company trying to be a high-end luxury company.  That doesn't work.  Highly priced luxury products can only be sold in market niches that serve the wealthy.  Apple cannot afford to become a niche company, lest it lose most of its customer base.  The key to Apple's past success is that it appealed to a lot of middle class but aspirational people.  But those folks can't shell out thousands of dollars a year for computing devices plus wireless service plus other services.  Instead, Apple should take a close look at Toyota, another company known for excellent products made with very high quality of manufacture.  While Toyota vehicles are not always at the cutting edge of technology, they have a strong, loyal customer base because they deliver value--excellent quality at reasonable prices.  While Apple can try to use clever marketing to boost financial performance for the next quarter, or two or three, its long term prospects won't be well-served by hoping that consumers will embrace its cute logo and ever increasing prices.  

Sunday, December 16, 2018

How Donald Trump Could Create a Stock Market Crash


Stock market crashes, such as in 2008, emanate from inflated asset prices.  While economic recessions and other events, such as war, can trigger market downturns, large, sharp market drops (a/k/a crashes) are the result of artificially high asset prices that often have started bubbling.  In 2008, the asset bubbles resulted from overly generous prices being paid for real estate, the resulting mortgages, stocks that seemed like good bets in light of all the real estate activity, and stocks generally because market averages kept rising.  It didn't help that the U.S. government guaranteed almost all mortgages on a de facto or de jure basis.  The easiest way to get people to pay too much for an asset is to make it seem like a sure bet.  Con men know this and profit from it because, despite all the evidence that there is no such thing as a sure bet except taxes and death, people remain suckers for sure bets. 

Donald Trump bet the image of his Presidency on the rising stock market.  Stocks rose briskly right after Election Day in 2016 and maintained their upward momentum for over a year.  Trump noisily celebrated the huzzahs he thought he heard from the financial markets and wore out the fabric of his suit jackets patting himself on the back.

But Trump, despite decades as a New York businessman, hasn't absorbed a simple lesson that he should have learned about stocks a long time ago:   that stocks go up and stocks go down.  There is no such thing in the stock markets as continuing upward momentum.  There is no endless applause.

So, when the stock markets got tummy trouble in 2018, and began to burp, belch and make other inelegant noises, Trump became discombobulated.  He berated the Federal Reserve Board for raising interest rates, manipulated oil prices down by persuading the Saudis to keep pumping large volumes, and condemned American businesses that closed down domestic operations.  Sometimes, on down days in the market, he made statements about trade talks that turned out to be optimistic or premature.  He seemed indifferent to widening federal deficits, instead suggesting a further tax cut for the middle class.  All of these actions seem linked to a desire to support stock prices.  But stocks have remained gloomy.  So we can expect that Trump will keep searching for some way to boost the metric that he thought made him look so good.

Persistent efforts by governments to support and boost asset prices have tended to end badly.  There is no free lunch, and governmental distortion of asset prices inevitably leads to misallocation of capital and other resources.  Pushed far enough, this mispricing eventually becomes too much for investors to stomach, and they back away from the asset. Then, bad things happen to the asset's price. That happened with real estate and mortgages in 2008 and it may be happening with stocks now.  If Trump pushes too hard on maintaining and increasing stock prices, he could foster a bubble in the stock markets, and nothing good for him will result from that.  If you're an investor, don't bet on governmental action to make stocks great again.  Remember:  in the final analysis, stocks go up and stocks go down.