Sunday, September 27, 2026

Books: American Rascal: How Jay Gould Built Wall Street's Biggest Fortune

 


 (Drivebycuriosity) - America`s rise as a super power  was made possible by the construction of the railways, that tie the continent spanning country together. Jay Gould, an investor & speculator, played a defining role in the evolution of America`s railway networks.

Georg Steinmetz`s biography "American Rascal: How Jay Gould Built Wall Street's Biggest Fortune" displays not only the life of Gould, he also delivers a fascinating story of the "Wild West" of Wall Street and the role of "unfettered capitalists" in America`s economic rise  ( amazon)

Steinmetz portraits Gould as a kind of Dr Jekyll and Mr Hyde and describes him as a ruthless manipulator but also as an extraordinary problem solver, an unparalleled negotiator, an expert communicator, a lightning-fast thinker, and a masterful tactician with a staggering memory. 

Gould amassed a huge fortune on Wall Street by manipulating stock prices, but through his work with railroads he helped to build the country. Railroads changed America in the nineteenth century much as automobiles changed the country in the twentieth century and the internet has changed the twenty-first century. 

Gould became immensely rich by manipulating the market, but he reinvested his profits in a way that created more jobs and economic growth. America would have developed without Gould, only not as fast or efficiently.

Gould’s aggressive railway investments lowered freight rates. His success as a railroad investor attracted speculative capital into a vital industry when other sources fled the field. 

Gould took advantage that there way too many railways. They were too small and too inefficient, their meager revenues did not cover their costs, they had too high debs. By buying some and closing others, Gould inaugurated the inevitable process of industry consolidation.

Steinmetz`s Gould biography is also an introduction how markets are getting played. He was one of the ubiquitous short sellers who borrow stocks or other assets and sell them immediately. They expect that they are able to buy these assets back for a much lower price, what would create a huge profit. But short selling is very risky. If the price of the shorted asset goes up, the short seller may be forced to buy it back for a much higher price, causing high losses and even bankruptcy.

Often short sellers manipulate stock prices. For instance Gould shorted stocks of a railway, named Central, that belonged to his competitor Vanderbilt. Then, through his brokers, he spread the rumor that Vanderbilt was dead and claimed that a train that a train with Vanderbilt on board had derailed and the Commodore was a casualty. The rumor sent Central stocks south and Gould could buy them back for a fraction of what had he paid.

Sometimes Gould took also the opposite side and used his huge wealth to create a corner. When he knew that  rivals had shorted a stock and were in urgent need to buy this stock back, Gould purchased all available stocks, driving their price up. The short sellers were forced to buy from him very expensively to avoid bankruptcy.

But there were other ruthless manipulators. One of them was Daniel Drew, who`s specialty was the bear raid. "He’d sell a company’s stock short, spread lies about the company’s supposedly wretched condition, and close the position at a profit after the stock crashed on rumors of collapse. His talent was stirring up fright. He commemorated this by naming his favorite horse Panic".

  

Steinmetz`s biography is entertaining and a good introduction into America`s economic rise and the secreds of stock market manipulation

 

P.S.  Jay Gould is long dead. Unfortunately short sellers are still in fashion and are spreading their poison (The Case Against Short Sellers  drivebycuriosity ). In 2008 short sellers amplified the crisis. After the bankruptcy of Lehman Brothers, which brought huge gains for short sellers, groups of short sellers tried to repeat their success. They attacked everyone who seemed vulnerable, especially the banks, by massive selling and spreading gloomy rumors.  Dallas Fed President Richard Fisher, member of Federal Reserve, described these groups as " big money" that "does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they go after it" ( marketwatch).

Late 2008 the massive bets against banks and many other companies - supported by spreading gloomy rumors all over the media - destroyed not only the trust into the attacked firms, the negative bets destroyed the trust into the whole economy. At least one of the short sellers is still celebrated by Hollywood & the media: The Big Short. The evil never dies.

 

 

Thursday, September 24, 2026

Economics: Making Sense Of The Interest Rate Surge


 (Drivebycuriosity) -  The American interest rates are on a tear. Yesterday the yield of 10-year US treasuries jumped to 5.1% - a 19 years high ( cnbc). The media refers to inflation and the politics of the Federal Reserve. That does not make sense. Inflation & Federal Reserve decisions may influence the interest rates of the coming months, but over 10 years?

I believe that the market anticipates an economic boom created by the high corporation investments into AI. “The buildout of AI factories — the largest infrastructure expansion in human history — is accelerating at extraordinary speed" observes Nvidia CEO Jensen Huang (nvidianews ).

AI is rapidly expanding into robotics, self-driving cars and myriads other applications and will hike the productivity of the economy in the coming 10 years significantly. The rising productivity will hike company profits and accelerate economic growth substantially. Rising profits and faster economic growth will make consumers & CEOs more optimistic and inspire them to take more loans and the growing profits will justify higher interest rates. 

Fasten seatbelts! 

Thursday, September 17, 2026

Economics: See How Stupid The Federal Reserve Is


(Drivebycuriosity) - It turns out that Federal Reserve Chairman Kevin Warsh and his comrades from the Fed Board are quite stupid. Yesterday they hiked their interest rate in order to fight the sticky inflation. Warsh complained: "This summer’s inflation readings do not tell me that underlying trends have meaningfully improved” (cnbc )

The sticky inflation is the result of the oil price rise in the recent 12 months caused by the Iran war. Will the rate hike create more oil? Nope. Will it stop the war? Nope. The Fed cannot turn the time back, neither do they have an influence on geopolitics and the market price of oil. These are force majeure.

The so-called “core” inflation (excluding food & energy)  dropped already to 2.4% y/y, a five-year low ( fisherinvestments). The difference to the measured inflation rate is caused by the past - the oil price gain of about 60% y-o-y.   

If the oil price stays on today´s level, then in the coming months the y-o-y price gain will go to zero - that is pure mathematics (calculus). In this case the measured inflation rate will move lower, approaching the core inflation. Only when the oil price keeps climbing - fueled by an ongoing Iran war - then the inflation will stay elevated - or even goes higher.

Apparently Warsh & Co. don`t understand simple mathematics. Yesterday`s interest rate hike gave a wrong signal, showing that the Fed is hawkish. They created another headwind for the economy, in addition to Iran war, expensive oil, trade war, AI anxiety, anti-data-center mood and a general pessimism.  

 

Sunday, September 13, 2026

Science Fiction: Bios By Robert Charles Wilson


  (Drivebycuriosity) - Maybe in a far future humans will explore planets that are light years away. The science fiction novel "Bios" by Robert Charles Wilson narrates such an exploration ( amazon). Humans try to exploid an extra-planet and are confronted with a very different fauna & flora. Soon the plot turns into a nail-biting action thriller and then into horror (this is a spoiler free blog). 

The name tells it already, the plot is based on biochemistry, but also on evolution & quantum physics. Wilson has the gift to turn science into exciting stories. He describes and explains how intelligent life developed under conditions that are different from earth. Because of the far harsher environments cells, the bricks of organic life, are much better defended, more efficient, far more complex. They synthesize a staggering array of organic chemicals and are highly dangerous for humans, who´s immunity systems are not prepared for the alien environment. 

"Bios" is also spiced with some romantics and has even some explicit sex, very different from the usually  timid scifi genre that often caters young adults.  Reading "Bios" was not only a pleasure, it refreshed my knowledge and I learned a lot new things. 

"Bios" is on the same level like Tchaikovsky`s "Shroud" or Stanislaw Lem´s classic "Solaris".  A must read for any scifi connoisseur.

Books: The Unforsaken Hiero


 (Drivebycuriosity) - 
The 1970s were the time of the cold war and everyone was afraid of a possible devastating nuclear conflict between the West and the Soviet Union. A good climate for books about post-apocalyptic worlds.

Sterling E. Lanier`s fantasy novel "Hiero`s Journey", published in 1973, belongs to best post-apocalytic scenarios (my. review). The plot is set about 5,000 years after the disaster. The nuclear strikes had changed the genes of everything living - and created new and bizarre life forms. The plot follows a military priest who is fighting against powerful evil forces, with the help of exotic mutants and his own enhanced psychic capabilities (this is a spoiler-free blog). Much fun to read.  

Unfortunately the follow-up "The Unforsaken Hiero" disappoints ( amazon). Some of the fascinating companions of the first book are missing in the begin of the novel and the new challenges and life forms the protagonists meets instead are less interesting. Parts of "The Unforsaken Hiero" remind of Brother Grimm`s fairy tales, but not in a good way.

I still recommend Vol. 1 for fans of well written post-apocalyptic fantasies. 

Tuesday, September 8, 2026

Books: The Story Of China By Michael Wood

 


 (Drivebycuriosity) - Telling the history of China is a huge challenge. Michael Wood tries to narrate the "story" of the giantic country from the bronze age  through the present by going his own way ( amazon). He writes: "Our view of China opens from below, and from the fringes and the provinces; seen through the live of individuals,men and women, the dynasty founders and emperors,but also from writers and travelers, for instance a Mrs Wang and her children on a southern river Odyssey".

Wood`s anecdotes are interesting but tales about "Mrs. Wang and her children" and other anecdotes obstruct the view on the whole picture and the reader gets lost in countless sub-stories, that were not really important for the evolution of China.   


I prefer "China: A History" by John Keay (my review). His history is much more focused, more sober and much better to read and to understand. While I got lost in Wood´s "stories", I learned from Keay why China´s recent rise, the awakening "of the dragon", is just a comeback, a reawakening. 

 

Wednesday, September 2, 2026

Economics; Should The Fed Fight The Iran War?

 


 (Drivebycuriosity) - Should the Fed fight the Iran war? Ok, the question is ridiculous and absurd. But many pundits - and even some members of the FOC - demand that the Fed hikes her interest rate to fight the stubborn inflation. Their pleads are synonymous.

                       Force Majeure 

Let me explain that to you. The sticky inflation is the result of the oil price rise in the recent 12 months - almost up 40%. What can the Fed do against rising oil prices? Nothing. The high oil price is caused by the Iran war. And the war is the result of geopolitical stupidity and is force majeure for the Fed. 

Inflation means CONTINUOUS PRICE RISES. If the oil price stays on today´s level the inflation effect goes away. Only when the oil price keeps climbing - fueled by worsening of the war - then inflation will stay - or even goes higher.

Would the Fed try to fight the oil-price induced price hikes the authority would cause additional headwinds for economy - and may even cause a recession.