Letter #5: Separation Anxiety
Gaddafi's Legacy | Austin's Surreal Estate
Giant conglomerates have been splitting up. Breaking up is never easy. A relationship takes time and energy to build — it’s an investment in both the present moment and in future potential; a chance to realize lofty dreams. There’s an old Yiddish proverb that goes “We plan, God laughs”. It clearly applies to both love and business. GE’s split into three separate, publicly-traded companies has led to concern in South Carolina in particular, where it employs over three thousand people. So far, no impact to employment is anticipated, for now.
Other companies spinning off (or who have recently spun off) businesses are Johnson & Johnson, Pfizer, and Merck. And it’s not just limited to Big Pharma: Honeywell, ITT, Dupont, and Dell (which split off VMWare), have also shaken off parts of their business portfolio. There’s a trend happening. What’s behind it?
One theory is based around equities analysis. Analysts (and the investors they work for) typically specialize in specific industries. It’s a lot easier to forecast potential ROI when a company does one thing and does it well. The conglomerate structure still has its advantages, especially for equities firms that intend to remain private - but for publicly-traded companies, funding may be easier to access when individual businesses and sectors overlap neatly. Wall Street likes easy-to-comprehend fundamentals.
Getting back to fundamentals has been an important theme of the past week. Take it to heart.
Moammar Gaddafi’s son has announced his candidacy for President of Libya. This is significant for a few reasons, but those can’t be properly understood without context on Libya’s history and relevance to the African Diaspora.
Remember the “Arab Spring”? It initially began as a series of opposition movements in North Africa, demonstrating against NATO-backed authoritarian regimes like Egypt and Tunisia back in 2011. However, it soon became clear that the United States could also use the unrest to topple the regimes it doesn’t like very much. There were two governments the US and NATO were particularly desperate to overthrow: Syria and Libya. We’ll get to why in a moment.
So the US begins arming “moderate rebels” (the terrorists Uncle Sam likes) in both countries. Yeah, just like the Mujahideen of the 80’s - it’s a one-trick foreign policy pony. Nobody said you had to be creative to work at the State Department.
Anyway, they had grisly, blood-soaked success in Libya. Not only was the Libyan government overthrown, Moammar Gaddafi himself was captured and filmed being beaten and sexually assaulted with a bayonet, before being murdered by the “moderate” NATO-backed opposition. Your uh, tax dollars hard at work.
So, why Gaddafi? What made him so bad? He was a prominent Libyan military man who became a pan-Arab and pan-African nationalist and anti-colonial leader during the pivotal 1960s. He is criticized for his forty-year reign and his cult of personality primarily. It should be stressed, however, that the US is totally fine supporting even worse dictators and war criminals; hell, we’ve elected more than one ourselves. Gaddafi’s true “crime” was probably calling for African states to reject conditional aid from the West, correctly recognizing it as a tool of neocolonialism. He also believed in a united African continent, a dangerous idea to former colonial powers, no doubt.
The murder of Gaddafi is perhaps the worst (but not only) war crime of President Barack Obama’s illustrious career, in terms of its negative impact on Black international power and security. Almost immediately after, general order broke down. Slavery was re-introduced to Libya by NATO-backed forces. Even ISIS started moving in. Africa has few heads of state with the kind of consciousness Gaddafi had. They have a nasty habit of getting assassinated, actually. Saif al-Islam Gaddafi might be able to heal some of the bitterness and restore some dignity to Libyan and African politics, if he lives long enough.
Real-estate prices are skyrocketing in cities like Austin, Texas. There, the demand is at least partially fueled by Mexican and Chinese buyers, and relocating Silicon Valley workers. Conflicting reports indicate a slight reduction in the frenzy; but that may still just be an after-effect of the boom itself, as inventory has dried up - the median listing time in Austin decreased to 9 days now, from 14 days in December 2020. In Austin, boom feels more like bubble.
We see markets like Austin as overpriced. It’s plain as day. It’s clear that drab-looking 2-bedroom single-family homes probably shouldn’t be going for nearly a million dollars.
This newsletter is written by a real-estate investor who has an interest in closing the racial homeownership gap in particular. Speculative environments like Austin aren’t good for anybody, whether you’re a priced-out renter or a priced-out buyer. Our recommendation is to stay away from markets like this, because you do not want to be left holding the bag when the Federal Reserve raises interest rates and mortgage rate increases plunge assets/debts bought/incurred at the peak into underwater status.
Raising interest rates is an effective but controversial way of dealing with inflation. It may end up being the Biden administration’s method of last resort. We prefer to invest in communities that have been historically underserved but may soon be on the upswing, due to new factors like federal infrastructure funds and the movement of employers. Stable long-term rental markets are generally preferable to the boom-and-bust Airbnb market. Chasing bubbles is how you get burned.
If only there were some kind of subscription, say, for $20 a month, that would give you access to this kind of fundamental market data (including tracking hate incidents and police use of force), and access to a Slack community of real-estate professionals (agents, attorneys, and loan officers) from under-represented backgrounds (and possibly your next group real estate investment partner) and answer these big, complex questions for you continuously.
Ah yes, there is. Wonderful.
Also Worth Reading
Chinese Voters Came Out in Force for the GOP in NYC, Shaking Up Politics | Brooklyn Daily Eagle
Beto O’Rourke says he’s running for Texas governor | Texas Tribune
“Narcos: Mexico” Season 3 dropped last week on Netflix, and it’s a certified hit. It tells the story of Amado Carrillo Fuentes, the largest Mexican drug trafficker in history, and certainly the most influential of the Mexican cartel leaders of the 80s and 90s. Intertwined is the story of Joaquin “El Chapo” Guzman’s rise to eventually lead the Sinaloa Cartel. American rappers love Chapo because he was the most creative of the traffickers from that era, and comes from the poorest origins. He also loves his mother very much. (Netflix)
Moris’ “Treinta Minutos De Vida” (1970) is a folksy solo act by Argentinian singer/guitarist Mauricio Birabent, originally of Los Beatniks. His voice sort of occupies that perfect valley between not-trying-hard-enough-to-sing and trying-too-hard-to-sing. It’s hard to describe. Check out “De Nada Sirve” - originally found on the Narcos soundtrack, of course. The rest of the tracks range from nearly-acapella ballads to jazz piano instrumentals. He’s kind of all over the place, which is endearing. (Vinyl / Spotify)
Hasta la próxima vez, pues.