“Time after time, history ran over the Luddites and romanticists, those who sought to restore the old and delay the new. And every time, history did it with faster, more reliable and more advanced vehicles.”
–Winston Churchill
New technologies have always threatened some jobs, but have created vastly better ones in the process.
October 3, 2024 – In the 19th century, English textile workers saw rapid innovations. Factories replaced the “cottage system,” allowing local artisans to hand-craft various items of clothing.
Within those factories, new tools and technologies could allow one relatively unskilled worker to produce hundreds of items in the time it would take one skilled craftsperson to create a single item.
That was a huge boon to society. It lowered the costs of clothing, created less waste, and improved society as a whole.
But the craftsman were worse off. And as factories improved their machinery even more, soon even those who benefitted started to perceive a danger to their jobs.
This led to the rise of an anti-technology group known as the Luddites.
To some extent, they exist in every time and age. Sometimes, they go as far as to sabotage machines. Other times, they look to protect their livelihood from the rapid change of technology.
We’re seeing a new Luddite movement play out in real-time…
Today, more than three dozen cargo ships stand idle off the coastal ports of the Eastern United States.
The culprit? A longshoreman strike that started on Tuesday.
And while the union is demanding a higher wage, their key demand has nothing to do with money. It has to do with technology.
That’s because there have been tremendous strides in automation in recent years. It takes fewer longshoremen to offload cargo than it has in the past. And given how much cargo moves through the global economy, that’s a good thing.
Today’s strike is costing the U.S. economy roughly $3 billion per day. We can afford it. We may see some shortgages of some goods over the coming weeks. We’ll be fine.
This strike will likely take weeks to play out. That’s because President Biden won’t get union leaders and port authorities to sit down and hammer out an agreement, even though he’s legally capable of doing so.
For the union, the outcome of this negotiation sounds like a life-or-death matter. For many of those workers, it likely is. These dockworkers are paid an average of $150,000 per year, a great salary in most port cities. But those jobs could be under fire from automation technologies.
It’s most likely some deal will be reached. Workers will go back with a higher paycheck.
And automation technologies will be slow to roll out, but over time they likely will. Still, standing against technological progress is a losing game over time. And the U.S. will lose out on productivity gains thanks to this latest labor agitation.
Today, our friend Tom Dyson, investment analyst at our friend Bonner Private Research, looks at the impact of the strike in more detail, and what it means for the death of American innovation. Enjoy ~~ Addison
The Money Spigots
Tom Dyson, Bonner Private Research
QUESTION: What do you think of the closure of the ports due to the strike?
MY RESPONSE: I’ve been following it closely. In case you missed the news, the giant union that controls port workers on the East Coast, the Gulf Coast, Canada, Puerto Rico, Bahamas, major rivers and the Great Lakes — with over 85,000 members — has gone on strike. They are demanding an increase to their wages of $5/hr every year for the next six years, and an air-tight guarantee that shipping lines will stop all efforts to automate the ports.
This concerns us for two reasons. First, because we added container shipping line, Zim Integrated Shipping [ZIM] to the Official List a month ago. Zim is in the business of transporting containers, and many of its containers move through ports affected by the strike.
Whenever something disrupts the flow of containers around the world, shipping rates soar. We saw this with Covid and then with the Red Sea closure. This strike is just another potential bonanza for shipping lines like Zim.
This likely explains why Zim was the best performing shipping stock in September, rising 40.4%.
Our thesis for buying Zim had nothing to do with strikes or other disruptions. Zim’s stock looked mispriced relative to the profits it is making, and the giant pile of cash it holds on the balance sheet. If rates could stay high for another two months, we said, Zim would likely pay out a 30%-plus dividend early next year, based on our cost basis for the stock.
So a strike significantly improves the odds of us receiving a large dividend from Zim early next year…
Our strategy remains the same. We’re holding out for a 50% gain here, which based on our official entry price equates to a sell price of $27.89. If Zim’s stock touches $27.89, I’ll issue a sell alert and take the 50% gain. In the meantime, I’m moving ZIM to ‘HOLD’ and keeping ZIM marked “Sell at a 50% gain.”
The second reason the strike concerns us is because of our Big Picture view. In short, the longshoremen are at risk of becoming the next victims of globalization. If the shipping lines get their way, the ports will be automated, as they are in other countries, and the longshoremen will eventually lose their jobs.
But if the longshoremen get their way, US ports will become even more inefficient and expensive to operate, and ultimately US consumers will pay higher prices for the imported goods they buy.
In other words, this is a fight between globalization and onshoring. Cheaper consumer goods or protected US jobs. Political unrest or a weak dollar.
Our position is simple. They’re going to let the dollar go against gold. It’s already started. We call this the “synchronized global currency devaluation.” They’ll water down the real value of the debt. They’ll choose onshoring… and inflation… and protectionism.
The other aspect of the ports issue — which catches my attention — is whether supply chain bottlenecks ever did, or ever will again, cause inflation. Our argument is that the 20% expansion in the money supply from 2020 to 2022 resulted in the 25% shift higher in the entire price level. It wasn’t the lockdown policies that produced inflation. And it wasn’t corporate greed. It was the huge gusher of money spewing out of Washington.
However, if there WAS any truth that it was the supply chain that caused inflation — constrained supply meeting pent up demand — well then we ought to see that again in a prolonged port strike. In fact, that wouldn’t surprise us at all.
Any higher inflation numbers between now and the election, which is just now just 34 days away, will be blamed on the union’s strike. In the big picture, we know that inflation is now the deliberate policy in DC. The soaring national debt requires it. ~~ Tom Dyson, Bonner Private Research
So it goes,
Addison Wiggin,
Grey Swan
P.S. Reader Damon C. writes in:
Your column on the Pact For The Future was long on warnings about what “they” will do to “us”, but so far it appears to be the usual pie-in-the-sky wish list that academics and bureaucrats regularly publish, asking for commitments to “policies and mechanisms” to provide free unicorns for everyone.
I have no quarrel with their ideals, but we should openly admit to ourselves for once that humans are still flawed, as individuals and societies. Until we breed or indoctrinate (no luck so far!) Human 2.0 we will continue to lurch from crisis to crisis, and no UN mandate, messianic politician or ‘strong man’ is going to save us from ourselves; I’ll settle for weeding out every Hitler, Jim Jones, Pol Pot, and other extremists as best we can.
Fair points all around. The path to a one-world government is a long and lumbering one, and the next steps forward may not be along the obvious paths. What’s annoying to us is… that folks are out their actively laying the groundwork for it at all.
Thoughts on a one-world government? Or AI’s disruption of the 21st Century labor force? Or any of our other recent topics, for that matter, send ‘em here: addison@greyswanfraternity.com
