The blunt edges of guru gilder

July 30, 2016 09:00 AM

Before the 2000 crash, the Gilder Technology Report was arguably the most influential letter on Wall Street and you were regarded as one of the best stock pickers in the world. In 1999, your stock picks were +247% in 10 months, but most of your subscribers signed on during what you called the “hysterical peak”… just in time to incur substantial losses. With the U.S. markets nearly tripled in this bull run and poking at a new high…déjà vu? No, the situation is entirely different. In 1999, there were some 400 tech IPOs that expanded competition and only a relatively few [mergers], which reduced it. In 2000 there had just been a 57%, three-year deflation of the dollar against gold. In 2016, the dollar is relatively stable and weakening against gold. In 2000, there was a real boom of capitalist competition as the Internet was rolled out. Today there is real stagnation as the Internet is nationalized by the Federal Communications Commission [FCC] under Title 2 and the S&P 500 buys up its own shares and its own competition.  

Why do so many investors chase returns and believe in gurus? It depends on the guru. In the 1990s, I was a guru on optics and the Internet with a huge nine-year winning record. I was catastrophically wrong in 2000. It is as bad to buy a guru late as to buy a stock late.

What is the worst investment that investors make today? Buying companies that are growing by buying up their own shares with money borrowed at near zero interest rates. Fake value ultimately disappears.

What is the best investment that you ever made? I was the first outside investor in Gerson-Lehrman, which became a leading knowledge network company. I was among the early investors in Micron, Applied Materials and Qualcomm, which were among the best investments of the era. 

What book has had the greatest influence on you? Nature’s Destiny by Michael Denton. It lead me to believe that silicon will ultimately prove to be a dead end for artificial intelligence. Real AI will be accomplished through carbon technology like the human mind.

You have authored over 15 books, which are your favorites? Microcosm and Silicon Eye. Reagan liked Wealth and Poverty. Steve Jobs chose Life After Television, which in the early 1990s predicted that “The computer of the future would be as portable as your watch and as personal as your wallet. It would recognize speech and navigate streets, collect your mail and your news. It just might not do windows. But it would do doors…” 

Forbes describes your latest book, The Scandal of Money: Why Wall Street Recovers but the Economy Never Does, as “savagely brilliant.” Explain “The Scandal of Money.” $5.3 trillion of currency trading every day without any accurate valuation of money enables finance to dominate real value creation. It’s a scandal.

How so? Doesn’t a liquid global market set legitimate pricing? No, $5.3 trillion of daily churn, with 77% managed by 10 banks, is 26 times the world GDP. It is a huge toll on liquidity compared to free liquidity under a stable currency, with roots in real physical constants, such as time. 

So, Wall Street recovers at the expense of Main Street and the economy? What would have been a better response to the crisis? The crisis was caused by massive and litigious government interference in housing and capital markets. So stop interference rather than double down on it with Dodd Frank and the environmental leviathan. Myriad new regulations have reduced tech IPOs to zero while thousands of tech companies grow or gasp under a glass ceiling, uninvestable by the public on Main Street. Rather than restore growth, the government paralyzed it by “neutralizing” the net as a public utility, by crippling high tech manufacturing, by diverting and distorting hundreds of billions of capital in piddle power distractions, and by effectively nationalizing the banks through the Fed as a Fourth Branch of government.

In TSOM, you maintain that the Fed creates money for the government and the S&P 500 and that Main Street is left out. How? The only thing that is mostly free, is floating money. Money should be fixed through a convergence of bitcoin and gold based on time. Everything else is suffering from a multiple sclerosis of myriad rules based on a luddite cult. The energy market is massively rigged by the [Environmental Protection Agency] in favor of medieval energy sources such as windmills and druidical sunhenges. The Internet is in the process of being rigged and nationalized under Title 2 by Obama’s FCC. The universities are rigged under the student loan scam where the costs of leftist indoctrination are stuck on the students who suffer from it.

So, the system is rigged? Does that place you, the former owner of American Spectator magazine and a former Nixon speechwriter in the Sanders and Warren camp? That is a stupid question. The system isn’t rigged so much as massively over-regulated by socialists who pretend to be democrats. Sanders is a communist (by his foreign favorites you can know him and Obama); Warren is some kind of socialist kook. Both are climate cranks and weather bores who want more regulation.

So, the Fed has failed us? No, we have been failed by the Democratic Party, which has vastly expanded regulation of the economy in the name of a climate cult and socialist doctrine. The Fed has just tried to paper over the failure. It has done a great job in papering over the failure of socialism in America and around the world. But economies can not be fixed with the government power that cripples them.

Your solution? I would abolish the government monopoly on money and enable the creation of new digital currencies based on the bitcoin blockchain and on gold. I would have a jubilee for all administrative regulations, requiring them to be cancelled and re-enacted every seven years. 

You are critical of Barack Obama’s administration. What’s its biggest failure? Destruction of the IPO and startup economy that Jiang Zemin of China called “The crown jewel of all that is great about America.” Under Obama, the United States has actually managed to fall behind Communist China in IPOs and startups. Silicon Valley long ago fell behind Israel in introducing important new technologies. 

Didn’t the credit crisis and overleveraged banks have a role in this? The Banks went where the money was — 62% of new money went to the government to subsidize its cronies and the rest went to the biggest companies to buy back shares, enriching bureaucrats and finance. But credit cannot replace real savings, or finance replace real value creation, which comes through the expansion of knowledge and learning in entrepreneurial capitalism.

What two political reforms would you enact if you could? Mandate zero-based budgeting of all government programs. Require re-enactment of all administrative rules that have been in effect more than seven years. Abolish all campaign finance regulations for individuals, but prohibit corporate contributions. Corporations are not citizens, people are.

You advocate for a formal gold standard? Yes, but I am not particular about how it is accomplished. The gold exchange standard under Bretton Woods ushered in the fastest global GDP growth in history for 27 years. New digital currencies offer many opportunities for a more effective 21st century gold standard.

You were famously anti-feminist in the 1970s; would you like that one back? Absolutely not. Trump is going to win the presidency because of Hillary Clinton’s catatonic feminism at a time when women dominate the colleges and out-earn men with similar credentials. Feminists are now trying to feminize the Marines and Special Forces. As an ex-Marine, I see it as affirmative action sabotage. 

You have been an advocate for immigration. You had said without immigration of the past 50 years America’s living standard would be 40% lower. Why? Just go to Silicon Valley. About half the high tech companies are headed by immigrants or the sons of immigrants, and the back rooms and critical skunk works are full of immigrants, most with crucial skills that Americans lack. Americans prefer to study finance and law, and our so-called “science” students favor luddite environmentalism. Check it out. The decline of high tech immigration is one of the key factors slowing down our economy. Most leading U.S. tech companies now depend on Israel for key innovations, on India for software, and on China for manufacturing.

As a technology visionary and futurist, what do you fear most for our economy? Luddites in office using a climate cult to justify a government takeover of the economy that suppresses all innovation.

What is the main topic of your Telecosm keynote at the upcoming MoneyShow in San Francisco? I will introduce the coming carbon age for the economy and technology.

What does the next correction look like? Japan but with Islamist terror added.

What investment sector (or thesis) will provide the best returns for investors over the next decade? The best long-term investment sector is always new technology. Whether it will be in the United States or in other countries will be determined by this election.

Is there a single favorite investment name (or two)? Among public companies, I like TowerJazz (TSEM), which has become the world’s fastest growing wafer-fab, and Mellanox (MLNX), the heart of the fiber speed cloud. With no IPOs, most of my investments are now private companies, such as Otoy, ASOCS, and Rivetz.

You have experienced every market scenario and cycle, what is the most important lesson that you have learned? Keep your eye on particular companies and technologies. Don’t try to time the market. Invest for the long haul. Ultimately the winners are legal inside traders such as venture capitalists who have intimate knowledge of all their investments. If the United States continues on its luddite socialist path, all sickled over by a pale cast of green goo; all bets are off.

About the Author

Jeff Joseph is the CEO of The Alpha Pages, the parent company of Modern Trader magazine.
E-mail him at jj@alphapages.com or find him on Twitter @alphapagesceo and @venturepopulist.