Chief Investment Strategist, The Freeport Society
When I drive that slow, you know it’s hard to steer
And I can’t get my car out of second gear
What used to take two hours now takes all day
Huh, it took me 16 hours to get to L.A.
Go on and write me up for 125
Post my face, wanted dead or alive
Take my license, all that jive
I can’t drive 55
From Sammy Hagar’s “I Can’t Drive 55.”
It seems like a lifetime ago, but in 1974 the federal government mandated that 55 miles per hour was the maximum speed on all interstate highways. It was – as our wise leaders thought – the best way to thumb our noses at OPEC and conserve energy following the 1973 oil embargo and energy crisis.
Never mind that the free market was more than capable of fixing the problem. The right response to higher oil prices is to make more fuel-efficient cars, which is exactly what happened in the decades that followed.
Between 1973 and 1990, a car’s average fuel economy improved from about 13 miles per gallon to just shy of 20, an improvement of 54%. It’s only continued to improve since then.
And naturally, with or without government interference, cost-sensitive drivers always had the option of buying more efficient cars… to drive as slowly as they’d like. They also reserved the right to not drive at all or to take the bus.
But no…
The government, in all its wisdom, chose to wag its collective finger at us and lay down the law: Drive under 55 mph or risk a ticket from the highway patrol. This added untold numbers of hours to an incalculable number of road trips over two decades.
I guess we really showed OPEC a thing or two by adding a few extra hours of travel time to our family vacations at Disney World and the Grand Canyon!
While never popular, that little gem of nanny-statism managed to stay on the books until 1995, with a few revisions over the years, until Congress finally repealed it and returned the regulation of speed limits to state and local governments.
Well, here we go again…
The 9 Most Terrifying Words
A new bill being debated in the California State Senate would require vehicles sold in the Golden State to come with speed regulators that prevent the car from driving over the speed limit. Hand-wringing over the uptick in auto-related deaths prompted the state to “do something.”
President Ronald Reagan was right when he said, “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”
At least you won’t have to worry about a speeding ticket because it would be physically impossible, without (presumably illegal) aftermarket customizations, to drive your car any faster than the new limit.
For the uninitiated, there are two types of speed regulators. Active regulators will physically not permit your car to go faster than the speed limit (or a tolerance band just above it). Passive speed regulators would allow your car to go faster, but they would buzz or beep at speeders to slow down.
The European Union has already required that all vehicles sold in member countries have passive speed regulators starting in July.
Given California’s size and economic clout, its regulations end up becoming the default for the rest of the country. Put yourself in Ford or GM’s shoes. It makes no sense to produce two lines of cars, one for California and another for the rest of the country. So, whatever the Golden State decries generally ends up being the norm for the rest of us.
I shudder to imagine my next road trip to Colorado… stuck with my three screaming kids in a confined space, crawling behind a line of trucks I can’t pass because the wise mandarins in California neutered my car.
Sigh…
My assumption is that the business of de-regulating speed-regulated cars, legally or not, will be a profitable one. We’ll find out soon enough.
Incidentally, my friend Louis Navellier recently shared his thoughts on “Californication” – the process by which anything that comes to pass in that state infiltrates the rest of the country – and how best to protect your assets from it. You can watch his presentation here.
In other news…
News Flash: Investors Put Profits Over Politics
The Financial Times reported this week that sales of climate-focused mutual funds have fallen 75% over the past two years, citing “high-interest rates, poor performance and a campaign against ‘woke’ investment” as reasons for the investor exodus.
Where do I even start here?
When university endowments dumped tobacco stocks years ago, they didn’t cause anyone to quit smoking and they didn’t prevent a single lung cancer death.
Yes, the public health campaigns made a difference, and consumers themselves became more health conscious. But I cannot argue with a straight face that institutional investor blacklisting made a bit of difference. All it did was shift ownership from institutional investors to income-oriented retail investors.
Likewise, climate mutual funds don’t do anything for the climate. All they do is pull investor capital out of other potentially profitable investments.
Naturally, the Federal Reserve played a big role in financing all of it.
When the Fed injected $5 trillion of new liquidity into capital markets between 2000 and the beginning of 2022, dollar amounts stopped having any real meaning.
What’s a trillion among friends?
Cash sloshed into the most dubious of projects with no real chance of profitability.
But the moment interest rates rose to something resembling normal in 2022 and 2023, the game was over. Money was no longer free, and profitless investments were suddenly competing with a 5% risk-free rate in Treasuries.
I’m not going to say that all “climate investments” were or are bad trades. While Tesla Inc. (TSLA) has had its problems of late and was an early beneficiary of massive government subsidies, the company is now quite profitable in its own right.
I’m not a fan of the stock because I simply can’t justify its valuation. But it makes a good – and popular – product. Kudos to any investors who invested early and made a killing.
But the “climate investing” bubble also saw hundreds of billions of investor dollars allocated to poor investments with no realistic chance of long-term success. A recent report shows that 75% of California rooftop solar companies are now at high risk of bankruptcy. We can assume the numbers look similar in other states.
That’s why, at The Freeport Society, we don’t put politics in front of profits. We stick with quality companies that have survived the test of time… and those embracing technology and exponential progress, among others. You can find details here.
To life, liberty, and the pursuit of wealth.