What we’re reading (9/10)
“U.S. Airlines Warn Of Dimming Outlook Amid Delta Variant” (Wall Street Journal). “Airlines warned Thursday of another pandemic-driven hit to profits in the months ahead, as the Delta variant interrupts a rebound in air travel. Major carriers said new travel bookings have slowed in recent weeks and cancellations have increased, tempering airlines’ outlook after less than two months earlier some had projected the recovery would continue to strengthen.”
“The Elizabeth Holmes Courtroom Drama” (DealBook). “The trial of Elizabeth Holmes began yesterday with opening arguments. Holmes, the founder and former C.E.O. of Theranos, a blood testing start-up, has been charged with 12 counts of wire fraud and conspiracy to commit wire fraud; if convicted, she faces up to 20 years in prison. Lawyers on both sides framed the debate set to dominate the trial: whether Holmes was knowingly cheating investors or blindly taken in by Silicon Valley’s ‘fake it ’til you make it culture’ as well as by her former business and romantic partner Ramesh Balwani.”
“Investor Overconfidence Linked To Selective Memory” (Ars Technica). “There's extensive academic literature on the risks faced by investors who are overly confident of their ability to beat the market. They tend to trade more often, even if they're losing money doing so. They take on too much debt and don't diversify their holdings. When the market makes a sudden lurch, they tend to overreact to it…[w]ith the cost of going wrong, you'd think that people who risk money in stocks would learn from their past mistakes. But a new study suggests that our memory's tendency to take an optimistic past gets in the way, with people inflating their gains and forgetting their losses.”
“The Bill Ackman SPAC Debacle Is The Perfect Example Of What Happens When A Market Bubble Meets A Star Investor's Hubris” (Insider). “Ackman seems desperate to not do his SPAC in expected way. Perhaps he is waking up to a fact many other investors are realizing: that SPACs aren't all they're cracked up to be. The rate of formation of new SPACs has drastically declined in recent months, many investors in existing SPACs have asked for their money back, and the performance of now-public SPAC companies has been dismal.”
“Climate Policy Should Pay More Attention To Climate Economics” (John Cochrane, National Review). “Climate policy is ultimately an economic question. How much does climate change hurt? How much do various policy ideas actually help, and what do they cost? You don’t have to argue with one line of the IPCC scientific reports to disagree with climate policy that doesn’t make economic sense…the best guesses of the economic impact of climate change are surprisingly small…[e]ven extreme assumptions about climate and lack of mitigation or adaptation strain to find a cost greater than 5 percent of GDP by the year 2100. Now, 5 percent of GDP is a lot of money — $1 trillion of our $20 trillion GDP today. But 5 percent of GDP in 80 years is couch change in the annals of economics. Even our sclerotic post-2000 real GDP grows at a 2 percent annual rate. At that rate, in 2100, the U.S. will have real GDP 400 percent greater than now, as even the IPCC readily admits. At 3 percent compound growth, the U.S. will produce, and people will earn, 1,000 percent more GDP than now.”
