Nancy Pelosi and I Have Something in Common

…both of us will benefit from increases in the price of Nvidia stock.

Paul Pelosi acquired 20,000 shares of NVDA (via a call option exercise) in June of this year.  I’ve been an NVDA shareholder for several years, and sold part of the position at prices considerably more favorable than today’s price of $178/share.

Given that the CHIPS act, which is intended to benefit the US semiconductor industry, is now before Congress, concerns have been raised about whether Paul Pelosi’s purchase might have been influenced by insider information related by his wife.

I note that Nvidia is not thrilled with the bill as currently drafted: it provides benefits for semiconductor manufacturing companies, and Nvidia is not a manufacturer…it is a  ‘fabless semiconductor company’, ie, a design, software, and marketing house.  The actual manufacturing is done by contract manufacturers, especially Taiwan Semiconductor Manufacturing Company.  Some market participants do,  however, have hopes that in the final version of the bill the subsides will be expanded to encompass chip-design companies.

The bill would include ‘guardrails’ to prohibit recipients of the subsidies from making investments to expand chip manufacturing capacity in countries of concern, namely China. There may be an exemption for countries-of-concern whether that chips being made are at >28nm notes, ie, a long way from high-end.  But one industry analyst said:

The guardrail doesn’t change that most of Intel’s or Texas Instruments’ test and packaging is done in China and will continue to be done in China. What use are new fabs for national security if they have to go to China for test and packaging anyways?

I think there are a couple of issues here.  First is the issue of Congresspeople potentially profiting from inside information.  The Pelosi buy does look very bad from this standpoint, especially when there are headlines associating Nancy Pelosi’s support for the CHIPS bill with increases in certain stocks–which include NVDA.  It’s quite possible that this particular transaction is an innocent one, given that the bill as it stands is not one that Nvidia would have preferred, and also that NVDA price is now low enough, in the context of recent history and the general excellence and positioning of the company, that one could develop an entirely reasonable ‘buy’ case without benefit of any inside information.  But the issue of officeholders profiting from inside information is a serious one, and becomes more serious with every further entwinement of government into the details of the economy.

But there is an even more important issue: Do we really want the level of investment in particular industries to be largely controlled by government?  It is true that the semiconductor industry is vital to the US economy and to US national defense…but this is true of a lot of other industries as well.  How about pharmaceuticals and their precursor materials, for example?…I seem to remember threats from Chinese sources to let American burn in the fire of Covid by withholding pharmaceuticals.  What about large transformers, which are vital to the electrical grid and take a long time to manufacture?  What about key minerals, many of which are in fact present in the United States but are mostly sourced from elsewhere because of legal and cultural hostility toward mining?  What about machine tools?

I have low confidence in the ability of Congress, or of government in general, to determine what industries and what specific segments of those industries are truly vital.  There are many complex interconnections which are not easily understood.  I remember that during the pandemic, GE Healthcare was asked to produce a large number of ventilators in an accelerated timeframe. It turned out that they were using a very small contractor…a 3D printing shop, IIRC…which had been shut down as ‘nonessential’.

I’d prefer to see legislative solutions which improve the US business climate for manufacturers in general and for ‘thing’ businesses in general, to the crafting of specific ‘solutions’ for specific industries.  Legislation should deal with the general case as much as possible, rather than functioning as a Reverse Bill of Attainder.  But developing such legislation requires ability to think in abstract terms, and is not a comfortable to politicians who think mainly in terms of interest groups to be used or placated.

Here is the text of the CHIPS bill.

There is also a proposed broader US competitiveness bill, the United States Innovation and Competition Act.

Here’s a WSJ Opinion piece on the CHIPS bill and its proposed galactic expansions.

And here’s Intel CEO Pat Gelsinger and Ford CEO Jim Farley arguing the case for semiconductor subsidization.







Command Failure in the Ardennes, December 1944

This past December 16th 2022 marked the 78th anniversary of the German Unternehmen Wacht am Rhein (“Operation Watch on the Rhine“) offensive in the Ardennes area of Europe, otherwise known popularly as “The Battle of the Bulge.”  The “official narrative” for this battle is that it was an “intelligence surprise” where “Ultra’ code breaking signals intelligence missed because Hitler kept all of the important communications on untappable telephone/telegraph land lines or special couriers. The sole exception being General Patton’s 3rd Army G-2 intelligence officer Colonel (later Brigadier General) Oscar Koch who didn’t rely upon ULTRA and put together the complete picture through a process now known as “All Source Analysis“. Which built an intelligence picture for every intelligence discipline. signals, human, photographic, geographic, combat reports plus dogged order of battle cross filing that sorted every bit of information to plot existence, location and status of enemy ground and air units. A week before the German attack, December 9th 1944, Colonel Koch briefed General Patton’s full 3rd Army staff as to German capabilities and most dangerous probable intentions of those capabilities. Based upon this briefing, Patton ordered his 3rd Army staff to put together a series of counter attack options that were immortalized in a scene from the 1970 movie PATTON.


Figure above from 1997 masters paper “Signal Security In The Ardennes Offensive 1944-1945 Laurie G. Moe Buckhout, Maj. USA

Like a lot of narratives of World War 2, it uses a couple of nuggets of truth with the German ULTRA security black out and Colonel Koch’s brief to Patton to hide and conceal more than inform. It turns out that a lot more people on the allied side than Colonel Koch foresaw the impending German offensive. And that the failure to act on these multiple sources of accurate intelligence was a Command Failure by the “Ultra Cliques” of allied officers at Supreme Headquarters Allied Expeditionary Forces  (SHAEF), United States Strategic Air Force (USSTAF), the American 12th Army Group, and American 1st Army.

This command failure came less from a German security induced blindness of ULTRA than from a months long manipulation of Ultra intelligence data stream by senior officials in the British government — located in the Ministry of Economic Warfare, the “Oil Lobby” through out the Air Ministry and Whitehall ‘Committee Bureaucracy’ as well as the Directorate of Bombing Operations in the Air Ministry — intent on making German oil supplies the top strategic target set over German transportation targets in the Combined Bomber Offensive.  Their motives here were not only to collapse the German economy as a “War Termination Strategy,” but more importantly, make sure Air Power was seen as responsible for the German collapse after the Russian capture of the Romanian Ploesti oil fields in August 1944.  (If you are seeing some post-war institutional motivations here…you are correct.)


These manipulations were discovered in February 1945 by SHAEF when the after action forensic analysis by Royal Air Force Deputy Chief of Air Staff (DCAS) Air Marshall Bottomley found the Combined Strategic Targets Committee (CSTC) was systematically removing messages relating to the distress of the German Railroad, and collapse of the German economy resulting from the railway problems, starting in the fall of 1944.

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Nuclear Power: Has the Time Finally Come?

Commercial nuclear power emerged in the mid-1950s, to great enthusiasm. The Eisenhower administration promoted it as a major part of its Atoms for Peace program.  There was talk about ‘electricity too cheap to meter,’ and about making the world’s deserts bloom via nuclear-powered desalination.

And quite a few commercial nuclear plants were indeed built and put into operation.  In the US, there are presently 93 commercial reactors with aggregate capacity of 95 gigawatts, accounting for about 20% of America’s electricity generation.  But overall, adoption of commercial nuclear power has not met early expectations.  Costs have been much higher than were  expected.  There have been great public concerns about safety, stemming originally from the association of nuclear power and nuclear weapons as well as by practical concerns and then supercharged by the Three Mile Island accident in 1979 and then by Chernobyl (1986) and the Fukushima disaster in 2011.  Permitting and construction times have been long and  unpredictable, driven by the public concerns as well as by the general growth of regulation and litigation in the US and the custom, one-off manner in which these plants have been constructed.

There are reasons to believe that the stalled state of nuclear power may be about to change.  Some factors are:

Concerns about CO2 emissions, combined with increasing realization of the intermittent nature of wind/solar energy, point to nuclear as a solution that could be both practical and politically acceptable.  Europe’s dependency on Russian natural gas, the downside of which has been strongly pointed out by recent events, further builds the case for nuclear on that continent.  Politicians are feeling cornered between their promises of green-ness, the now-obvious dangers of energy dependency, and the need to not do too much economic damage if they want to get reelected.  Some will turn to nuclear.

The Cold War fears of nuclear annihilation are now a long way behind us–surely there are many fewer people who have nightmares about mushroom clouds than there were in, say, 1985.  (Although this point has been partially negated by Russia’s nuclear saber-rattling and by the battles around the Chernobyl area–still, I don’t believe nuclear fears are anywhere near the original-cold-war level)

The French experience with nuclear power, from which it generates about 70% of its electricity, helps build credibility for nuclear as a practical and safe energy source.  Also, the US Navy’s successful operation of nuclear submarines and other ships over several decades.

The downsides of wind and solar in terms of their very considerable land use as well as their fluctuating outputs, are being better understood as a result of experience.  Starry-eyed views of a new technology often become a little less starry-eyed following actual experience with its downsides.

New-generation nuclear plants which can be largely built in factories, substantially reducing the on-site construction time and effort required and potentially reducing the capital costs per kilowatt, are being developed.  The greater standardization, as compared with one-off construction, will hopefully also reduce licensing problems and delays.  Very importantly, most of the reactors are designed to avoid meltdown situations even if left unattended and without backup power.

Most of the new plant designs are of a type called Small Modular Reactors, although the definition of ‘small’ varies from case to case.  Companies in this space include the GE-Hitachi joint venture, a private company called NuScale (soon to go public via a SPAC), Rolls-Royce, the Canadian company ARC Energy, and a consortium of French companies developing a product to be called Nuwber.  I’ll discuss some of those SMR products in more detail later in this post.  There is also interesting work being done at Terra Power (Bill Gates is founder and chairman), which will probably merit a separate post, and on designs using thorium rather than uranium as a fuel.

The products which seem furthest along toward commercial adoption are the modular design from NuScale and the BWRX-300 from GE-Hitachi.

Some deals which are signed or in process:

–In Utah, NuScale plans to deploy their system for an organization called UAMPS (wholesale power services)

–In Romania, NuScale has a deal with SN Nuclearelectrica for a 6-module unit.

–In Canada, Ontario Power has picked the GE-Hitachi system for its first nuclear site–they ultimately plan to install up to 4 reactors there.

–In Poland, GEH has a letter of intent for up to 4 BWRX-300s to be installed by Synthos Green Energy.  Also in Poland, NuScale is working with KGHM, a leader in copper and silver production–sounds like this application is for industrial energy rather than for grid electricity.

–In Estonia,  Fermi Energia OÜ is moving toward deployment of a BWRX-300.

–The US Tennessee Valley Authority has embarked on a program to install several SMRs at its Clinch River site, starting with the BWRX-300.

The CEO of Duke Energy, Lynn Good, says that the company is talking to GE-Hitachi and NuScale as well as TerraPower and Holtec International about SMRs and advanced nuclear with storage capability.

Despite the traction, however, numerous challenges remain for nuclear.

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Heuristics for Ukraine (and other places)

NB: some of the following is from a recent videoconference that included our own Trent Telenko, who is very much the man of the hour, but some of it is more publicly available, not to mention common sense. First, though, as is my wont, a quadrant diagram to organize my presentation …

I. Theater “Hardware” (physical assets/consequences)

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Ukraine Thread Part 3 – Day Eight of the Russian Column Held Hostage (by the usual Russian incompetence) –

Welcome to the third installment of the Russian invasion of Ukraine series.  Since Napoleon stated that the moral is to the physical what ten is to one.  After the situation map (below) we are going to start the post with a look at the moral dimensions of the current fighting. Follow it with my impressions of the current fighting.  Then close with a counterfactual of the Ukraine-Russian fighting based on the works of Trevor Dupuy.


I have posted on twitter about the Russian Army columns North of Kyiv decaying into immobile blobs due to the Rasputitsa, poorly maintained Chinese truck tires and shear “follow the plan” Russian incompetence.

The head and first dozen or so kilometers of the southernmost column north of Kiev have been stuck there for EIGHT DAYS.  The Russians have since rammed more and more vehicles into this monster traffic jam (idiotically “following the plan” Soviet-style) so the whole thing is now 65-70 kilometers long (almost 40 miles).

And, because the trucks can’t go off-road due to the Rasputitsa mud and tire problems, they’re stuck on the roads and the roads’ shoulders three vehicles wide for the whole @40 miles.   That means fuel and resupply trucks can’t move on or off road to deliver anything to anybody.

So all the columns’ heads are now out of fuel and battery power.  They can’t move north, south or sideways, and everything behind them is stuck because of the mud, and rapidly running out of fuel and vehicle battery charge too (assuming they haven’t already).  Nor can any of those columns defend themselves because they’re too densely packed.  They’re just targets waiting for the Ukrainians to destroy them.

Only the Ukrainians had something better to do.  They opened the floodgates of reservoirs around those columns to flood them and turn the surrounding areas into impassable quagmires for months – probably until July or August.  (See photo below) Probably several thousand Russian vehicles in those columns will be irrecoverable losses.  Hundreds of Russian soldiers might have drowned.

Image As correctly pointed out by some of you, Ukrainian troops seems to flooded the area north of Kyiv. That’s the reason why the Russian advance is stagnating there. #Ukraine #UkraineRussiaWar #Kyiv

This was not just a debacle, but an EPIC one. About 1/5th of the Russian force in Ukraine is now flooded or trapped, and are definitely out of the war for good.

Now to the moral dimension.  The 1242 Battle of the Neva, where the Teutonic Knights fought Alexander Nevsky, is one of the founding myths of Russia.


The Battle on the Ice, 1242 – Teutonic Knights vs. Alexander Nevsky 

President Zelensky’s drowning of Putin’s minions in the Battle of the Kyiv reservoir may be as central to modern Ukraine’s founding national identity going forward, for similar reasons, possibly with Zelensky as modern Ukraine’s Alexander Nevsky.

Reddit and other Meme generating sites are going to have a glorious time redoing Stalin’s Alexander Nevsky movie by putting Zelensky’s face on the actor playing Nevsky.

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