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Much of Mr. Klarman’s anxiety seems to emanate from Mr. Trump’s leadership style. He described it this way: “The erratic tendencies and overconfidence in his own wisdom and judgment that Donald Trump has demonstrated to date are inconsistent with strong leadership and sound decision-making.”

“While they might be popular, the reason the U.S. long ago abandoned protectionist trade policies is because they not only don’t work, they actually leave society worse off.”

He worries, for example, that Mr. Trump’s stimulus efforts “could prove quite inflationary, which would likely shock investors.”

“Exuberant investors have focused on the potential benefits of stimulative tax cuts, while mostly ignoring the risks from America-first protectionism and the erection of new trade barriers,”

“The big picture for investors is this: Trump is high volatility, and investors generally abhor volatility and shun uncertainty,” he wrote. “Not only is Trump shockingly unpredictable, he’s apparently deliberately so; he says it’s part of his plan.”

he warned, “If things go wrong, we could find ourselves at the beginning of a lengthy decline in dollar hegemony, a rapid rise in interest rates and inflation, and global angst.”

he issued a statement after Mr. Trump criticized a judge over his Mexican heritage, saying he planned to support Mrs. Clinton: “His words and actions over the last several days are so shockingly unacceptable in our diverse and democratic society that it is simply unthinkable that Donald Trump could become our president.”

“Despite my preference to stay out of the media,” he wrote, “I’ve taken the view that each of us can be bystanders, or we can be upstanders. I choose upstander.”

“This should give long-term value investors a distinct advantage,” he wrote. “The inherent irony of the efficient market theory is that the more people believe in it and correspondingly shun active management, the more inefficient the market is likely to become.

“In matters of style, swim with the current; in matters of principle, stand like a rock.”

Investment firm Schroders said there could be $23tn of global economic losses a year in the long term without rapid action. This permanent economic damage would be almost four times the scale of the impact of the 2008 global financial crisis

Lord Nicholas Stern, of the London School of Economics said: “The low-carbon economy is the growth story of the 21st century and it is inclusive growth. Without that story, we would not have got the 2015 Paris agreement, but the story has grown stronger and stronger and is really compelling now.”

A key demand of the Global Investor Statement is to phase out coal-fired power stations across the world

Dozens of nations will affirm their commitment to end their coal burning on Thursday

the UN summit has seen US, Chinese and Japanese financial institutions cited as leaders in providing nearly $500bn in backing for new coal plants since the Paris agreement was signed.

The French president Emmanuel Macron’s botched attempt to increase fuel taxes and the gilets jaunes protests that followed were a model of how not to do it, said observers in Poland.

“It failed to take people along with them, accompanying the policy with social measures to allow citizens to embrace the opportunities of the transition and ride out the challenges,

They also want an end to subsidies for coal, oil and gas, which the IMF rates at $5tn a year and which the G20 has been promising to tackle for a decade. This measure alone could cut global CO2 emissions by 10% by 2030, according a UN report released in time for the Poland summit.

The investors said current national pledges to cut carbon would lead to a catastrophic 3C of global warming and that plans must be dramatically increased by 2020

The rise of China’s venture market “signifies a shift from a single-epicenter view of the world to a duopoly,” he says.

The surge also positions Asia’s investors to win stakes in markets that Western companies covet, or that have national security implications.

. “If you think that being the locus of invention gives you a boost to your GDP and so forth, that’s a deterioration of the U.S. competitive advantage.”

Although one of the biggest Asian investors is Japan’s SoftBank Group Corp. , which has tapped Middle Eastern money to create the world’s largest tech-investment fund, it is Chinese activity that is having the greatest impact.

China is creating unicorns—startups valued at a billion dollars or more—at much the same pace as the U.S., drawing on funding from internet giants like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. as well as more than a thousand domestic venture-capital firms that have raised billions of dollars a year for the past few year

Chinese-led venture funding is about 15 times its size in 2013, outpacing growth in U.S.-led financing, which roughly doubled in that time period

Most Chinese-led investment so far has gone to the country’s own firms, the Journal analysis found. Many of them, like the Yelp equivalent Meituan-Dianping, are household names with millions of customers in China, yet virtually unknown elsewhere.

Many Chinese tech companies are “at this critical size that the China market alone is not enough to support their business and valuation,

Madhur Deora, chief financial officer for Paytm, one of India’s biggest e-payments firms, says the company approached Alibaba affiliate Ant Financial instead of U.S. backers for funding in 2015 because Chinese mobile-internet innovations are “way far ahead of anything that’s happened in the U.S.

One reason China’s push into new technologies worries many in the U.S. is that, unlike the hunt for good returns that underpins most Western venture finance, a lot of Chinese investment is driven by strategic interests, some carrying the specter of state influence.

China is pushing hard into semiconductors, for which the government has provided billions of dollars in public funding, and artificial intelligence, where Beijing in July set a goal of global leadership by 2030

Mr. Lee, the venture investor, predicts that in the next five to 10 years Chinese tech companies will become pacesetters for tech-related development, vying with the likes of Alphabet Inc.’s Google and Facebook for dominance in markets outside the English-speaking world and Western Europe.

“All the rest of the world will basically be a land grab between the U.S. and China,

“The U.S. approach is: We’ll build a better product and just win over all the countries,” says Mr. Lee. The Chinese approach is “we’ll fund the local partner to beat off the American companies.”

Asia’s rise as a startup financier is even starker in the biggest venture investments—those of $100 million or more. These megadeals have become an increasingly important part of venture finance as valuations have ballooned, with their proportion of deal volume growing from around 8% in 2007 to around half of the total last year.

In Southeast Asia, a flood of Chinese money into local startups—such as the $1.1 billion Alibaba-led investment into Indonesian online marketplace PT Tokopedia last year—is drawing the region closer to China

Chinese money is also playing a big role in India, which, with a population of 1.2 billion, has been described as the next big internet market. Chinese and Japanese investors each led nearly $3 billion in venture finance in India last year, ahead of the nearly $2 billion in deals led by U.S. investors

“Think of strategic investments and M&A as playing a game of go,” said Mr. Tsai, the Alibaba executive vice chairman, at the investor conference last year. “In a game of go the strategic objective is to put your pieces on the chessboard and surround your opponent.”

Their firms do more business in some corners of the financial world than many banks, including lending to low-income homeowners and small businesses. They lobby members of Congress. And they have put large sums of money behind presidential candidates, at times pumping tens of millions of dollars into super PACs.

The hedge fund industry has now ballooned in size, to $2.9 trillion, from $539 billion in 2001. So, too, has the pay of the industry’s leaders.

When Institutional Investor first started ranking hedge fund pay 15 years ago, George Soros topped the Alpha list, earning $700 million. In 2015, Mr. Griffin, who started trading as a Harvard sophomore out of his dorm room, and James H. Simons, a former math professor, each took home $1.7 billion

his own personal wealth has grown exponentially, and is estimated by Forbes at $7.5 billion.

Mr. Griffin’s firm, Citadel, has grown from a hedge fund that managed family and pension fund money into a $25 billion firm

He recently made headlines when he paid $500 million for two pieces of art. In September, Mr. Griffin, 47, reportedly paid $200 million to buy several floors in a new luxury condo tower that is being built at 220 Central Park South, in Manhattan.

He was the biggest donor to the successful re-election campaign of Mayor Rahm Emanuel of Chicago. More recently he has poured more than $3.1 million into the failed presidential campaigns of Marco Rubio, Jeb Bush and Scott Walker, as well as the Republican National Committee

Citadel’s flagship Kensington and Wellington hedge funds returned 14.3 percent over 2015

Mr. Simons, 78, has been a major political donor of the Democrats, donating $9.2 million in 2016, including $7 million to Priorities USA Action, a super PAC supporting Hillary Clinton.

Among 2015’s top hedge fund earners are five men who actually lost money for some investors last year but still made handsome profits because their firms are so big

For many managers, collecting large pay, even when performance was not tops, has become a side effect of growing bigger. Advertisement Continue reading the main story “Once a hedge fund gets to be large enough to produce incredibly outsized remuneration, the hardest part of due diligence is determining whether the investment process is affected,

“Is the goal to continue to make money in a risky environment or is the goal to preserve assets on which you collect fees?”

Michael Platt, the founder of BlueCrest Capital Management, took home $260 million, according to Alpha. It was a difficult year for his firm, once one of the biggest hedge funds in Europe with $37 billion in investor money. He lost investors in his flagship fund 0.63 percent over the year and then told them he was throwing in the towel.

Conard said Baker was undercounting the social benefits of investment. He looks, in particular, at agriculture, where, since the 1940s, the cost of food has steadily fallen because of a constant stream of innovations. While the businesses that profit from that innovation — like seed companies and fast-food restaurants — have made their owners rich, the average U.S. consumer has benefited far more. Conard concludes that for every dollar an investor gets, the public reaps up to $20 in value. This is crucial to his argument: he thinks it proves that we should all appreciate the vast wealth of others more, because we’re benefiting, proportionally, from it.

What about investment banks, with their complicated financial derivatives and overleveraged balance sheets? Conard argues that they make the economy more efficient, too. The financial crisis, he writes, was not the result of corrupt bankers selling dodgy financial products. It was a simple, old-fashioned run on the banks, which, he says, were just doing their job

He argues that collateralized-debt obligations, credit-default swaps, mortgage-backed securities and other (now deemed toxic) financial products were fundamentally sound. They were new tools that served a market need for the world’s most sophisticated investors,

“A lot of people don’t realize that what happened in 2008 was nearly identical to what happened in 1929,” he says. “Depositors ran to the bank to withdraw their money only to discover, like the citizens of Bedford Falls” — referring to the movie “It’s a Wonderful Life” — “that there was no money in the vault. All that money had been lent.”

In 2008 it was large pension funds, insurance companies and other huge institutional investors that withdrew in panic. Conard argues in retrospect that it was these withdrawals that led to the crisis — not, as so many others have argued, an orgy of irresponsible lending

Conard concedes that the banks made some mistakes, but the important thing now, he says, is to provide them even stronger government support. He advocates creating a new government program that guarantees to bail out the banks if they ever face another run.

the central role of banks, Conard says, is to turn the short-term assets of nervous savers into risky long-term loans that help the economy grow.

A central problem with the U.S. economy, he told me, is finding a way to get more people to look for solutions despite these terrible odds of success. Conard’s solution is simple. Society benefits if the successful risk takers get a lot of money

As Conard told me, one of the crucial lessons he learned at Bain is that it makes no sense to look for easy solutions. In a competitive market, all that’s left are the truly hard puzzles. And they require extraordinary resources. While we often hear about the greatest successes — penicillin, the iPhone — we rarely hear about the countless failures and the people and companies who financed them.

we live longer, healthier and richer lives because of countless microimprovements like that one. The people looking for them, Conard likes to point out, are not only computer programmers, engineers and scientists. They are also wealthy investors like him

He said the only way to persuade these “art-history majors” to join the fiercely competitive economic mechanism is to tempt them with extraordinary payoffs.

When I look around, I see a world of unrealized opportunities for improvements, an abundance of talented people able to take the risks necessary to make improvements but a shortage of people and investors willing to take those risks. That doesn’t indicate to me that risk takers, as a whole, are overpaid. Quite the opposite.” The wealth concentrated at the top should be twice as large, he said. That way, the art-history majors would feel compelled to try to join them.

Rather than simply serving as an invitation for everybody to engage in potentially beneficial risk-taking, inequality can allow those with wealth to crush new ideas.

Unlike Romney, Conard rejects the notion that America has “some monopoly on hard work or entrepreneurship.” “I think it’s simple economics,” he said. “If the payoff for risk-taking is better, people will take more risks

Conard sees the success of the U.S. economy as, in part, the result of a series of historic accidents. Most recently, the coincidence of Roe v. Wade and the late 1970s economic malaise allowed Ronald Reagan to unify social conservatives and free-market advocates and set the country on a pro-investment path for decades. Europeans, he says, made all the wrong decisions. Concern about promoting equality and protecting favored industries have led to onerous work rules, higher taxes and all sorts of social programs that keep them poorer than Americans.

Now we’re at a particularly crucial moment, he writes. Technology and global competition have made it more important than ever that the United States remain the world’s most productive, risk-taking, success-rewarding society. Obama, Conard says, is “going to dampen the incentives.” Even worse, Conard says, “he’s slowing the accumulation of equity” by fighting income inequality.

Conard’s book addresses what is perhaps the most important question in economics, the one Adam Smith set out to answer in “The Wealth of Nations”: Why do some countries grow so rich and others stay poor? Where you come down on the answer has as much to do with your politics as your economic worldview (two things that can often be the same)

Nearly every economist I spoke with said that Conard has too much faith in the market’s ability to reward only those who create real value. Conard, for instance, insists that even the dodgiest financial products must have been beneficial or else nobody would have bought them in the first place. If a Wall Street trader or a corporate chief executive is filthy rich, Conard says that the merciless process of economic selection has assured that they have somehow benefited society. Even pro-market Romney supporters take issue with this. “Ed ought to be more concerned about crony capitalism,” Hubbard told me.

“Unintended Consequences” ignores some of the most important economic work of the past few decades, about how power and politics influence economic growth. In technical language, this field is the study of “rent seeking,” in which people or companies get rich because of their power, not because of their ideas.

wealthy individuals and corporations are able to influence politicians and regulators to make seemingly insignificant changes to regulations that benefit themselves. In other words, to rig the game

Conard’s version of the financial crisis ignores much reporting and analysis — including work I’ve done with NPR’s “Planet Money” team — that shows that some of the nation’s largest banks actively manipulated customers and regulators and, sometimes, their own stockholders to profit from dangerous risk

he expressed anger over the praise that Warren Buffett has received for pledging billions of his fortune to charity. It was no sacrifice, Conard argued; Buffett still has plenty left over to lead his normal quality of life. By taking billions out of productive investment, he was depriving the middle class of the potential of its 20-to-1 benefits. If anyone was sacrificing, it was those people. “Quit taking a victory lap,” he said, referring to Buffett. “That money was for the middle class.”

Perhaps concentrated wealth will inspire a nation of innovative problem-solvers. But if the view of many economists is right — that it sometimes discourages innovation — then we should worry

on this one he resorted to anecdotes and gut feelings. During his work at Bain, he said, he saw that successful companies had to battle against one another. Nobody was just given a free ride because of their power. “Was a person, like me, excluded from opportunity?” he asked rhetorically. “If so, I wasn’t aware!”

both could be true. The rich could earn a great deal of wealth through their own hard work, skill and luck. They could also use their subsequent influence to make themselves even richer

One of the great political and economic challenges of our time is figuring out the balance between wealth that benefits society and wealth that distorts.

Glenn Hubbard said only that at a broad level, Romney and Conard share “beliefs about innovation and growth and responsible risk-taking.”

Conard and Romney certainly share views on numerous policy matters. Like many Republicans, they promote lower taxes and less regulation for those who achieve financial succes

On Monday, the platform went dark after a hacker took over the accounts of 178 users, including Torba and the Republican congresswoman Marjorie Taylor Greene.

Gab, a Twitter-like website promoted by Torba as a bastion of free speech, has long been a forum of last resort for extremists and conspiracy theorists who have been banned on other online platforms. It attained worldwide notoriety in 2018 when a user, Robert Bowers, wrote on the site that he was “going in”, shortly before allegedly entering the Tree of Life synagogue in Pittsburgh, Pennsylvania, and killing eleven people.

The leaked files contained what appears to be a database of over 4.1 million registered users on the site and tags identifying subscribers as “investors”, “verified” users and “pro” users.

The 2017 share offering, for example, required a minimum investment of $199.10, and rewarded investors who contributed a greater amount with “perks”. Users who invested $200 could display a “Gab investor badge” on the site. The badges corresponded with a tag in the database, which allowed investors to be looked at in detail.

Some of the people associated with investors’ accounts had high-profile jobs and public roles, while spewing hate and extremist beliefs online.

The data breach also appears to offer some insight into users tagged as “verified” by Gab, which according to the platform’s own explanation means that they have completed a verification process that includes matching their display name to a government ID.

And it appears to include a list of users registered as “pros”, which allows users to access additional features and a badge at a price starting at $99 year. The database indicates over 18,000 users had paid to be pro users at the time of the breach. Nearly 4,000 users were flagged as donors to Gab’s repeated attempts to attract voluntary gifts from users.

Direct messages included in the leak appear to show close communication between Torba and a major QAnon influencer who is labeled a Gab investor, seemingly reinforcing the CEO’s public efforts to make Gab a home for adherents to the QAnon conspiracy theory, which helped fuel the 6 January attack on the nation’s Capitol.

According to Wired, the data exposed in the apparent hack was sourced by a hacker who had found a security vulnerability in the site.

“Gab was negligent at best and malicious at worst” in its approach to security, she added. “It is hard to envision a scenario where a company cared less about user data than this one.”

"Many of our investors have demonstrated support and confidence in AMC. We intend to communicate often with these investors, and from time to time provide them with special benefits at our theatres," Adam Aron, AMC's CEO, said in a statement.

Paramount's "A Quiet Place Part II," a new horror film starring Emily Blunt, opened to the biggest weekend of the pandemic so far, notching $48.3 million for its three-day debut in North America over Memorial Day weekend.

The good news on Wall Street also came a day after AMC announced that it raised $230.5 million by selling 8.5 million shares to Mudrick Capital Management.

the turnaround is also getting a boost from movies — as well as audiences — returning to theaters over the last few months, punctuated by last weekend's big box office numbers.

Other promotions include special discounts and screening invites for retail backers.

Goldman Sachs downgraded shares of theater chain Cinemark (CNK) and big screen operator IMAX (IMAX) to a rare "sell" rating on Wednesday.

after Mr. Trump won the election that year, the world seemed to blame tech companies for his victory. The resulting “techlash” against Facebook and others caused some industry leaders to reassess their political views, a trend that continued through the social and political turmoil of the pandemic.

The start-up industry has also been in a downturn since 2022, with higher interest rates sending capital fleeing from risky bets and a dismal market for initial public offerings crimping opportunities for investors to cash in on their valuable investments.

Some investors said they were frustrated that his pick for chair of the Federal Trade Commission, Lina Khan, has aggressively moved to block acquisitions, one of the main ways venture capitalists make money. They said they were also unhappy that Mr. Biden’s pick for head of the Securities and Exchange Commission, Gary Gensler, had been hostile to cryptocurrency companies.

Last month, Mr. Sacks, Mr. Thiel, Elon Musk and other prominent investors attended an “anti-Biden” dinner in Hollywood, where attendees discussed fund-raising and ways to oppose Democrats,

Some also said they disliked Mr. Biden’s proposal in March to raise taxes, including a 25 percent “billionaire tax” on certain holdings that could include start-up stock, as well as a higher tax rate on profits from successful investments.

“If you keep telling someone over and over that they’re evil, they’re eventually not going to like that,” he said. “I see that in venture capital.”

Some tech investors are also fuming over how Mr. Biden has handled foreign affairs and other issues.

Mr. Andreessen, a founder of Andreessen Horowitz, a prominent Silicon Valley venture firm, said in a recent podcast that “there are real issues with the Biden administration.” Under Mr. Trump, he said, the S.E.C. and F.T.C. would be headed by “very different kinds of people.” But a Trump presidency would not necessarily be a “clean win” either, he added.

Mr. Sacks said at the tech conference last week that he thought such taxes could kill the start-up industry’s system of offering stock options to founders and employees. “It’s a good reason for Silicon Valley to think really hard about who it wants to vote for,” he said.

“Tech, venture capital and Silicon Valley are looking at the current state of affairs and saying, ‘I’m not happy with either of those options,’” he said. “‘I can no longer count on Democrats to support tech issues, and I can no longer count on Republicans to support business issues.’”

Ben Horowitz, a founder of Andreessen Horowitz, wrote in a blog post last year that the firm would back any politician who supported “an optimistic technology-enabled future” and oppose any who did not. Andreessen Horowitz has donated $22 million to Fairshake, a political action group focused on supporting crypto-friendly lawmakers.

Venture investors are also networking with lawmakers in Washington at events like the Hill & Valley conference in March, organized by Jacob Helberg, an adviser to Palantir, a tech company co-founded by Mr. Thiel. At that event, tech executives and investors lobbied lawmakers against A.I. regulations and asked for more government spending to support the technology’s development in the United States.

This month, Mr. Helberg, who is married to Mr. Rabois, donated $1 million to the Trump campaign

As it turns out, technology demand only increased and the Nasdaq had its best year since 2009, spurred on by low interest rates and a surge in spending on products for remote work.

“Companies that recently raised at very high prices at the height of valuation inflation may be grappling with high burn rates and near-term challenges growing into those valuations,” Shakir told CNBC in an email. “Others that were more dilution-sensitive and chose to raise less may now need to consider avenues for extending runway that would have seemed unpalatable to them just months ago.”

“Our companies heeded that advice and most companies are now prepared for winter,” Lux wrote.

“This time, many of those tools have been exhausted,” Sequoia wrote. “We do not believe that this is going to be another steep correction followed by an equally swift V-shaped recovery like we saw at the outset of the pandemic.”Sequoia told its companies to look at projects, research and development, marketing and elsewhere for opportunities to cut costs. Companies don’t have to immediately pull the trigger, the firm added, but they should be ready to do it in the next 30 days if needed.

And among companies that are still private, staff reductions are underway at Klarna and Cameo, while Instacart is reportedly slowing hiring ahead of an expected initial public offering. Cloud software vendor Lacework announced staffing cuts on Friday, six months after the company was valued at $8.3 billion by venture investors.“We have adjusted our plan to increase our cash runway through to profitability and significantly strengthened our balance sheet so we can be more opportunistic around investment opportunities and weather uncertainty in the macro environment,” Lacework said in a blog post.

Shakir agreed with that assessment. “Like many, we at Lux have been advising our companies to think long term, extend runway to 2+ years if possible, take a very close look at reducing burn and improving gross margins, and start to set expectations that near-term future financings are unlikely to look like what they may have expected six or 12 months ago,” she wrote.

Lux highlighted one of the painful decisions it expects to see. For several companies, the firm said, “sacrificing people will come before sacrificing valuation.”But venture firms are keen to remind founders that great companies emerge from the darkest of times. Those that prove they can survive and even thrive when capital is in short supply, the thinking goes, are positioned to flourish when the economy bounces back.

conditions.”CORRECTION: This story was updated to reflect that cloud software vendor Lacework raised $1.3 billion in growth funding at a valuation of $8.3 billion.

Mr. Bogle has some hard news for investors. The basic appeal of index funds—their ability to deliver the market return without shifting an arm and leg to Wall Street’s army of helpers—will only become more important given the decade of depressed returns he sees ahead.

Don’t imagine a revisitation of the ’80s or ’90s, when stocks returned 18% a year and investors, after the industry’s rake-off, imagined they “had the greatest manager in the world” because they got 14%. Those planning on a comfy retirement or putting a kid through college will have to save more, work to keep costs low, and—above all—stick to the plan.

The mutual-fund industry is slowly liquidating itself—except for Vanguard. Mr. Bogle happily supplies the numbers: During the 12 months that ended May 31, “the fund industry took in $87 billion . . . of which $224 billion came into Vanguard.” In other words, “in the aggregate, our competitors experienced capital outflows of $137 billion.”

That said, Mr. Bogle finds today’s stock scene puzzling. Shares are highly priced in historical terms; earnings and economic growth he expects to disappoint for at least the next decade (he sees no point in trying to forecast further). And yet he advises investors to stay invested and weather the storm: “If we’re going to have lower returns, well, the worst thing you can do is reach for more yield. You just have to save more.”

He also knows the heartache of having just about everything he has saved tied up in volatile, sometimes irrational markets, especially now. “We’re in a difficult place,” he says. “We live in an extremely risky world—probably more risky than I can recall.”

Then why invest at all? Maybe it would be better to sell and stick the cash in a bank or a mattress. “I know of no better way to guarantee you’ll have nothing at the end of the trail,” he responds. “So we know we have to invest. And there’s no better way to invest than a diversified list of stocks and bonds at very low cost.”

Mr. Bogle’s own portfolio consists of 50% stocks and 50% bonds, the latter tilted toward short- and medium-term. Keep an eagle eye on costs, he says, in a world where pre-cost returns may be as low as 3% or 4%. Inattentive investors can expect to lose as much as 70% of their profits to “hidden” fund management costs in addition to the “expense ratios” touted in mutual-fund prospectuses. (These hidden costs include things like sales load, transaction costs, idle cash and inefficient taxes.)

Mr. Bogle relies on a forecasting model he published 25 years ago, which tells him that investors over the next decade, thanks largely to a reversion to the mean in valuations, will be lucky to clear 2% annually after costs. Yuck.

Investing, he says, always is “an act of trust—in the ability of civilization and the U.S. to continue to flourish; in the ability of corporations to continue, through efficiency and entrepreneurship and innovation, to provide substantial returns.” But nothing, not even American greatness, is guaranteed, he adds

what he calls the financial buccaneer type, an entrepreneur more interested in milking what’s left of the active-management-fee gravy train than in providing low-cost competition for Vanguard—which means Vanguard’s best days as guardian of America’s nest egg may still lie ahead.

the growth of indexing is obviously unwelcome writing on the wall for Wall Street professionals and Vanguard’s profit-making competitors like Fidelity, which have never been able to give heart and soul to low-churn indexing because indexing doesn’t generate large fees for executives and shareholders of management companies.

Security concerns, moreover, keep most information about stockpile purchases under wraps. Details about the contracts and inventory are rarely made public, and even the storage locations are secret.

Former Emergent employees, government contractors, members of Congress, biodefense experts and current and former officials from agencies that oversee the stockpile described a deeply dysfunctional system that contributed to the shocking shortages last year.

Purchases are supposed to be based on careful assessments by government officials of how best to save lives, but many have also been influenced by Emergent’s bottom line

The stockpile has long been the company’s biggest and most reliable customer for its anthrax vaccines, which expire and need to be replaced every few years.

In the two decades since the repository was created, Emergent’s aggressive tactics, broad political connections and penchant for undercutting competitors have given it remarkable sway over the government’s purchasing decisions related to the vaccines

While national security officials still consider anthrax a threat, it has not received specific mention since 2012 in the intelligence community’s annual public assessment of dangers facing the country, a report that has repeatedly warned of pandemics.

Emergent bought the license for the country’s only approved anthrax vaccine in 1998 from the State of Michigan. Over time, the price per dose the government agreed to pay Emergent increased nearly sixfold, accounting for inflation, contributing to record revenues last year that topped $1.5 billion

The company, whose board is stocked with former federal officials, has deployed a lobbying budget more typical of some big pharmaceutical companies

Competing efforts to develop a better and cheaper anthrax vaccine, for example, collapsed after Emergent outmaneuvered its rivals, the documents and interviews show.

preparations for an outbreak like Covid-19 almost always took a back seat to Emergent’s anthrax vaccines

the government approved a plan in 2015 to buy tens of millions of N95 respirators — lifesaving equipment for medical workers that has been in short supply because of Covid-19 — but the masks repeatedly lost out in the competition for funding over the years leading up to the pandemic

After Dr. Frieden and others in the Obama administration tried but failed to lessen Emergent’s dominance over stockpile purchases, the company’s fortunes rose under Mr. Trump, who appointed a former Emergent consultant with a background in bioterrorism to run the office that now oversees the stockpile

“If I could spend less on anthrax replenishment, I could buy more N95s,” Dr. Kadlec said in an interview shortly after leaving office. “I could buy more ventilators. I could buy more of other things that quite frankly I didn’t have the money to buy.”

And now, as some members of Congress push for larger reserves of ventilators, masks and other equipment needed in a pandemic, a trade group led in part by a top Emergent lobbyist has warned that the purchases could endanger companies focused on threats like anthrax and smallpox by drawing down limited funds.

Last year, as the pandemic raced across the country, the government paid Emergent $626 million for products that included vaccines to fight an entirely different threat: a terrorist attack using anthrax.

“I think it’s pretty clear that the benefit of the vaccine is marginal,” he said in an interview

“They’re very vicious in their behavior toward anybody they perceive as having a different point of view,” said Dr. Tara O’Toole, a former Homeland Security official who says she ran afoul of Emergent in 2010 after telling Congress that the nation needed a newer and better anthrax vaccine.

That year, the company that would become Emergent — then known as BioPort — paid Michigan $25 million to buy the license for a government-developed anthrax vaccine and an aging manufacturing plant.

The company opened its doors with one product, called BioThrax, and one customer, the Defense Department, which required the vaccine for service members.

Emergent’s anthrax vaccine was not the government’s first choice. It was more than 30 years old and plagued by manufacturing challenges and complaints about side effects. Officials instead backed a company named VaxGen, which was developing a vaccine using newer technology licensed from the military.

Emergent’s successful campaign against VaxGen — deploying a battalion of lobbyists, publicly attacking its rival and warning that it might cease production of its own vaccine if the government didn’t buy it — established its formidable reputation. By 2006, VaxGen had lost its contract and the government had turned to Emergent to supply BioThrax.

“They were totally feared by everybody,” Dr. Philip Russell, a top health official in the administration of President George W. Bush, said in an interview. He said that he clashed with Emergent when he backed VaxGen, and that his reputation came under attack, which was documented by The Times in 2006. (Dr. Russell died this January.)

the group of federal officials who make decisions about the stockpile and other emergency preparations — known as the Phemce, for the Public Health Emergency Medical Countermeasures Enterprise — ordered up a study. It found in 2010 that the government could not afford to devote so much of its budget to a single threat.

Instead, the review concluded, the government should invest more in products with multiple applications, like diagnostic tests, ventilators, reusable respirator masks and “plug and play” platforms that can rapidly develop vaccines for a range of outbreaks.

from 2010 through 2018, the anthrax vaccine consumed more than 40 percent of the stockpile’s budget, which averaged $560 million during those years.

Emergent and the government have withheld details of the stockpile contracts, including how much the company has charged for each dose of BioThrax, but executives have shared some of the missing information with investors.

The company in 1998 agreed to charge the government an average of about $3.35 per dose, documents show. By 2010, the price had risen to about $28, according to financial disclosures and statements by Emergent executives, and now it is about $30

Over the past 15 years, the company recorded a gross profit margin of about 75 percent for the vaccine, in an arrangement that one Emergent vice president called a “monopoly.”

Emergent’s rise is the stuff of lore in biodefense circles — a tale of savvy dealings, fortuitous timing and tough, competitive tactics.

One afternoon in October 2010, Wall Street investors gathered at the Millennium Broadway Hotel in Manhattan for a presentation by Mr. Burrows. He shared with them a secret number: 75 million.That was how many BioThrax doses the government had committed to stockpiling, and it was the backbone of Emergent’s thriving business. In pursuit of that goal, the government had already spent more than $900 million, and it continued to buy virtually every dose Emergent could produce. It had even awarded the company more than $100 million to expand its Michigan factory.

“The best approach toward anthrax is antimicrobial therapy,” Dr. Anthony S. Fauci, the government’s top infectious-disease expert, told Congress as early as 2007.

In an analysis published in 2007, the firm determined that giving antibiotics immediately after a large outdoor anthrax attack was likely to reduce serious illnesses by more than 80 percent. Administering the vaccine would then cut serious illnesses only by an additional 4 percent.

Dr. Ali S. Khan, who ran the C.D.C. office managing the stockpile until 2014, said bluntly: “We overpaid.”

“A bunch of people, including myself, were sitting in a room and asking what kind of attack might happen,” said Dr. Kenneth Bernard, a top biodefense adviser to Mr. Bush, recalling a meeting in the months after the 2001 attacks.

“And somebody said, ‘Well, I can’t imagine anyone attacking more than three cities at once,’” he said. “So we took the population of a major U.S. city and multiplied by three.”

A team of Homeland Security and health officials began doing just that in 2013. The group determined, in a previously undisclosed analysis, that the government could stockpile less BioThrax and still be prepared for a range of plausible attacks, according to two people involved in the assessment. Separately, government researchers concluded that two doses of BioThrax provided virtually the same protection as three.

the National Intelligence Council, which helped draft the assessments during Mr. Obama’s second term, said in an interview that the idea of a three-city attack affecting 25 million people was “straining credulity.”

“If you talk to the head of the House Intelligence Committee,” Don Elsey, Emergent’s chief financial officer, told investors in 2011, “and you say, ‘What are you most worried about?’ he’ll say, ‘Let me see: Number one, anthrax; number two, anthrax; number three, anthrax.’”

Emergent’s sales strategy was to address that fear by promising the federal government peace of mind with its vaccine.

“There’s a political element involved,” Mr. Burrows, the company’s vice president of investor relations, said at an industry conference in 2016. “I don’t have a marketing expense. I have lobbying expense.”

Since 2010, the company has spent an average of $3 million a year on lobbying — far outspending similarly sized biotech firms, and roughly matching the outlays of two pharmaceutical companies with annual revenues at least 17 times greater, AstraZeneca and Bristol Myers Squibb

In 2015, as stockpile managers questioned the large purchases of BioThrax, the spending topped $4 million

“They were pouring it on — how poor they were and how this was going to ruin the company, and they’d have to close down factories, and America was going to be left without anthrax vaccine,”

“Their revolving door is moving at 60 miles per hour,” said former Senator Claire McCaskill, a Democrat from Missouri who had questioned spending on the vaccine while in the Senate. “There is really a lot of incestuousness because it’s such a specialized field.”

Ms. DeLorenzo, the Emergent spokeswoman, said the lobbying was necessary because government investment “in biodefense and other public health threats has not been as strongly prioritized as it should be.”

Over the past 10 years, Emergent’s political action committee has spread almost $1.4 million in campaign contributions among members of both partie

The move followed a yearslong pattern of retaining a bipartisan lobbying corps of former agency officials, staff members and congressmen, including Pete Hoekstra of Michigan, Tom Latham of Iowa and Jim Saxton of New Jersey.

“You have people coming and saying, ‘There’s no market for this — nobody’s going to produce this unless you buy enough of it to keep the production line open,’” he said. “It’s an absolutely appropriate argument to make.”

Emergent’s campaign proved effective. Despite the 2015 recommendation by the stockpile managers, Senate overseers made clear they opposed the reduction, and the government went ahead and bought $300 million worth of BioThrax.

Emergent executives, meanwhile, warned that there could be job losses at the factory in Lansing, Mich. — the capital of a swing state at the center of a contentious presidential campaign between Mr. Trump and Hillary Clinton.

Because Emergent was the sole manufacturer of a product deemed critical to national security, the company has played what one former executive described to The Times as “the we’re-going-to-go-bankrupt card.”

Dr. Hatchett said the idea gave him pause. But, he explained in an interview, “if there’s only one partner that can provide a product and only one customer for that product, the customer needs the partner to survive.”

Just a year later, Emergent spent about $200 million in cash, and made other financial commitments, to acquire Sanofi’s smallpox vaccine and GlaxoSmithKline’s anthrax treatment, two products with established pipelines to the stockpile. The purchases expanded Emergent’s hold over the reserve.

Ms. DeLorenzo said the acquisitions did not suggest the company was better off than it had claimed, but Dr. Bright said he and others involved in the bailout felt used.

a plan five years earlier to create an emergency supply of N95 respirators was simply not funded. A team of experts had proposed buying tens of millions of the masks to fill the gap during an outbreak until domestic manufacturing could ramp up, according to five officials involved in the assessment, which has not been previously disclosed.

By the time the novel coronavirus emerged, the stockpile had only 12 million of the respirators. The stockpile has since set a goal of amassing 300 million.

Dr. Kadlec, the Trump administration official overseeing the stockpile, said he used the previous administration’s mask recommendation to raise alarms as early as 2018.

Dr. Annie De Groot, chief executive of the small vaccine company EpiVax, spoke about the need to break Emergent’s lock on research dollars at a biodefense forum in 2015.

“Politicians want to look like they’ve addressed the problem,” she said. “But we need to actually listen to the scientists.”

Over the last five years, Emergent has received nearly a half-billion dollars in federal research and development funding, the company said in its financial disclosures.

“We know ahead of time when funding opportunities are going to come out,” Barbara Solow, a senior vice president, told investors in 2017. “When we talk to the government, we know how to speak the government’s language around contracting.”

The company used federal money to make improvements to BioThrax, and also found a way to earn government money from a competing anthrax vaccine it had excoriated. After the demise of VaxGen in 2006, Emergent bought the company’s unfinished vaccine and in 2010 persuaded the federal government to continue paying for research on it

By the time the research contract was canceled in 2016, Emergent had collected about $85 million, records show. The company then shelved the vaccine. “If the U.S. government withdraws funding, we re-evaluate whether there is any business case for continuing,” Ms. DeLorenzo said.

For more than 30 years, the government had been encouraging the development of a BioThrax replacement. In 2002, the Institute of Medicine had concluded that an alternative based on more modern technology was “urgently needed.” By 2019, there were three leading candidates, including one made by Emergent, known as AV7909.

Emergent’s candidate was hardly the breakthrough the government was seeking, former health officials said. AV7909 was essentially an enhanced version of BioThrax. The competitors were using more modern technology that could produce doses more rapidly and consistently, and were promising significant cost savings for the stockpile.

To qualify for emergency authorization, a vaccine must be at an advanced stage of development with no approved alternatives. Emergent acknowledged in its financial disclosures that there was “considerable uncertainty” whether the new vaccine met those requirements.

The election of Mr. Trump as president was good news for Emergent.

Dr. Lurie, the senior health official in the Obama administration who had tried to scale back BioThrax purchases, was out. Mr. Trump’s pick to replace her was Dr. Kadlec, a career Air Force physician and top biodefense official in the Bush administration who was fixated on bioterrorism threats, especially anthrax, current and former officials said

Soon after entering the Trump administration in 2017, Dr. Kadlec took a series of actions that he characterized as streamlining a cumbersome bureaucracy but that had the effect of benefiting Emergent.

He assumed greater control of purchasing decisions, diminishing the authority of the Phemce, the oversight group that had proposed buying less BioThrax. And in 2018, he backed a decision to move control of the stockpile to his office in the Department of Health and Human Services and away from the C.D.C., which is based in Atlanta and prides itself on being insulated from the influence of lobbyists.

Dr. Frieden, the former C.D.C. director, was strongly opposed. The move, he said, “had almost as an explicit goal to give the lobbyists more say in what got purchased.”

That July, the government made the announcement Emergent had been banking on, committing to buying millions of doses. Separately, it said it would stop funding Emergent’s competitors.

The decision to side with Emergent did not surprise Dr. Khan, the former C.D.C. official overseeing the stockpile.“Again and again, we seem unable to move past an old technology that’s bankrupting the stockpile,” he said.

Last month, as the death toll from Covid-19 neared a half-million, Mr. Kramer, the company’s chief executive, told analysts there had been no “evidence of a slowdown or a delay or a deprioritization,” and echoed a statement he had made in April when asked whether the pandemic might interrupt Emergent’s sales to the stockpile.“It’s pretty much business as usual,” he said then.

A 3% mortgage might end up in a 2% pool. That’s because to further standardize the loan, parts of the interest go to pay for other transformation services.

In an economy where lots of people are missing payments, that can bite. The surge in payment deferrals during the pandemic, for example, fell hard on servicers.

A big way rate risk manifests is that speed at which people prepay. This in turn can affect what investors are willing to pay, because securities derived from those mortgages essentially become shorter-lived. So even as originators enjoy the benefits of volume when lots of people are refinancing, they might earn less when selling mortgages. Of course, when the Federal Reserve is buying mortgage securities, and when rates on other fixed-income assets are so low, originators’ profits selling mortgages can remain quite large.

He denied he could have told his associates he had bought Forbes, but he did not respond to subsequent requests for comment about the tapes. In a later emailed statement, he said: “I have no investment in this transaction and no plans to invest in any way in the future, whether directly or indirectly.”

Russell courted potential investors in Silicon Valley and Hollywood over the summer — an attempt to bring in American ownership even as he maintained ties to foreign funders, according to four people who have worked with Russell on the deal, who, like others, spoke on the condition of anonymity to describe private business matters.

Musaev holds the license to publish Forbes Russia, one of the dozens of local language editions of Forbes magazine that are part of the overall media group, and has close connections to some of the individuals reported to be investors backing Russell, according to a former Musaev business partner, Pavel Cherkashin, as well as three additional people familiar with the deal.

In a memo circulated to policymakers on Capitol Hill in July and seen by The Post, Treverton cited information showing the deal’s foreign investors, including, he claimed, Khemka’s daughters, would contribute nearly 50 percent of the total $800 million purchase price, while Russell would be investing only a small fraction of that amount. “It appears there is a strong national security argument for the US Government to block the ... buyout,” Treverton wrote. Treverton declined to comment further when reached by The Post.

Russell’s announcement in May that he planned to buy Forbes was widely viewed as a surprise. So was the offer valuing Forbes at $800 million, which was $200 million more than the failed SPAC deal’s expected price. Some media analysts also balked at the price tag, noting it was more than the combined sale price of The Washington Post, Fortune and Time.

Except Mitt Romney was not a businessman; he was a master financial speculator who bought, sold, flipped, and stripped businesses. He did not build enterprises the old-fashioned way—out of inspiration, perspiration, and a long slog in the free market fostering a new product, service, or process of production. Instead, he spent his 15 years raising debt in prodigious amounts on Wall Street so that Bain could purchase the pots and pans and castoffs of corporate America, leverage them to the hilt, gussy them up as reborn “roll-ups,” and then deliver them back to Wall Street for resale—the faster the better.

That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.

So the vast outpouring of LBOs in recent decades has been the consequence of bad policy, not the product of capitalist enterprise. I know this from 17 years of experience doing leveraged buyouts at one of the pioneering private-equity houses, Blackstone, and then my own firm. I know the pitfalls of private equity. The whole business was about maximizing debt, extracting cash, cutting head counts, skimping on capital spending, outsourcing production, and dressing up the deal for the earliest, highest-profit exit possible. Occasionally, we did invest in genuine growth companies, but without cheap debt and deep tax subsidies, most deals would not make economic sense.

In truth, LBOs are capitalism’s natural undertakers—vulture investors who feed on failing businesses. Due to bad policy, however, they have now become monsters of the financial midway that strip-mine cash from healthy businesses and recycle it mostly to the top 1 percent.

Accordingly, Bain’s returns on the overwhelming bulk of the deals—67 out of 77—were actually lower than what a passive S&P 500 indexer would have earned even without the risk of leverage or paying all the private-equity fees. Investor profits amounted to a prosaic 0.7X the original investment on these deals and, based on its average five-year holding period, the annual return would have computed to about 12 percent—well below the 17 percent average return on the S&P in this period.

having a trader’s facility for knowing when to hold ’em and when to fold ’em has virtually nothing to do with rectifying the massive fiscal hemorrhage and debt-burdened private economy that are the real issues before the American electorate

Indeed, the next president’s overriding task is restoring national solvency—an undertaking that will involve immense societywide pain, sacrifice, and denial and that will therefore require “fairness” as a defining principle. And that’s why heralding Romney’s record at Bain is so completely perverse. The record is actually all about the utter unfairness of windfall riches obtained under our anti-free market regime of bubble finance.

When Romney opened the doors to Bain Capital in 1984, the S&P 500 stood at 160. By the time he answered the call to duty in Salt Lake City in early 1999, it had gone parabolic and reached 1270. This meant that had a modern Rip Van Winkle bought the S&P 500 index and held it through the 15 years in question, the annual return (with dividends) would have been a spectacular 17 percent. Bain did considerably better, of course, but the reason wasn’t business acumen.

The secret was leverage, luck, inside baseball, and the peculiar asymmetrical dynamics of the leveraged gambling carried on by private-equity shops. LBO funds are invested as equity at the bottom of a company’s capital structure, which means that the lenders who provide 80 to 90 percent of the capital have no recourse to the private-equity sponsor if deals go bust. Accordingly, LBO funds can lose 1X (one times) their money on failed deals, but make 10X or even 50X on the occasional “home run.” During a period of rising markets, expanding valuation multiples, and abundant credit, the opportunity to “average up” the home runs with the 1X losses is considerable; it can generate a spectacular portfolio outcome.

The Wall Street Journal examined 77 significant deals completed during that period based on fundraising documents from Bain, and the results are a perfect illustration of bull-market asymmetry. Overall, Bain generated an impressive $2.5 billion in investor gains on $1.1 billion in investments. But 10 of Bain’s deals accounted for 75 percent of the investor profits.

The credentials that Romney proffers as evidence of his business acumen, in fact, mainly show that he hung around the basket during the greatest bull market in recorded history.

By contrast, the 10 home runs generated profits of $1.8 billion on investments of only $250 million, yielding a spectacular return of 7X investment. Yet it is this handful of home runs that both make the Romney investment legend and also seal the indictment: they show that Bain Capital was a vehicle for leveraged speculation that was gifted immeasurably by the Greenspan bubble. It was a fortunate place where leverage got lucky, not a higher form of capitalist endeavor or training school for presidential aspirants.

The startling fact is that four of the 10 Bain Capital home runs ended up in bankruptcy, and for an obvious reason: Bain got its money out at the top of the Greenspan boom in the late 1990s and then these companies hit the wall during the 2000-02 downturn, weighed down by the massive load of debt Bain had bequeathed them. In fact, nearly $600 million, or one third of the profits earned by the home-run companies, had been extracted from the hide of these four eventual debt zombies.

The bankruptcy forced the closure of about 250—or 40 percent—of the company’s stores and the loss of about 5,000 jobs. Yet the moral of the Stage Stores saga is not simply that in this instance Bain Capital was a jobs destroyer, not a jobs creator. The larger point is that it is actually a tale of Wall Street speculators toying with Main Street properties in defiance of sound finance—an anti-Schumpeterian project that used state-subsidized debt to milk cash from stores that would not have otherwise survived on the free market.

Ironically, the businesses and jobs that Staples eliminated were the office-supply counterparts of the cracker-box stores selling shoes, shirts, and dresses that Bain kept on artificial life-support at Stage Stores Inc. At length, Wal-Mart eliminated these jobs and replaced them with back-of–the-store automation and front-end part-timers, as did Staples, which now has 40,000 part-time employees out of its approximate 90,000 total head count. The pointless exercise of counting jobs won and lost owing to these epochal shifts on the free market is obviously irrelevant to the job of being president, but the fact that Bain made $15 million from the winner and $175 million from the loser is evidence that it did not make a fortune all on its own. It had considerable help from the Easy Button at the Fed.

The lesson is that LBOs are just another legal (and risky) way for speculators to make money, but they are dangerous because when they fail, they leave needless economic disruption and job losses in their wake. That’s why LBOs would be rare in an honest free market—it’s only cheap debt, interest deductions, and ludicrously low capital-gains taxes that artifically fuel them.

The larger point is that Romney’s personal experience in the nation’s financial casinos is no mark against his character or competence. I’ve made money and lost it and know what it is like to be judged. But that experience doesn’t translate into answers on the great public issues before the nation, either. The Romney campaign’s feckless narrative that private equity generates real economic efficiency and societal wealth is dead wrong.

The Bain Capital investments here reviewed accounted for $1.4 billion or 60 percent of the fund’s profits over 15 years, by my calculations. Four of them ended in bankruptcy; one was an inside job and fast flip; one was essentially a massive M&A brokerage fee; and the seventh and largest gain—the Italian Job—amounted to a veritable freak of financial nature.

In short, this is a record about a dangerous form of leveraged gambling that has been enabled by the failed central banking and taxing policies of the state. That it should be offered as evidence that Mitt Romney is a deeply experienced capitalist entrepreneur and job creator is surely a testament to the financial deformations of our times.

Such big drops are a reminder of how investors don't have any tolerance when stocks at large are hovering around their long-term average valuations. "Any company that misses in this environment is getting hurt big time," says Peter Cardillo of Rockwell Global Capital. "It's a question of investors not being forgiving."

I get Mr. Fama’s theory, but the evidence points decidedly in the opposite direction. I have met many investors who have consistently outperformed the market.

Sophisticated investors have learned that even when they are convinced that an overall market is expensive or cheap, markets can indeed be irrational and predicting the timing of the inevitable correction can be challenging.

markets can remain irrational longer than an investor can remain solvent.

Total funding for clean-tech start-ups fell during most of the past decade

But there are dozens, if not hundreds, of start-ups developing new technologies that address the issue.

Two major scientific organizations said last fall that even if greenhouse-gas emissions were reduced significantly, stopping drastic global warming would require technological breakthroughs that allowed for the removal of billions of tons of carbon dioxide already in the atmosphere.

Some promising methods for accomplishing that involve old-fashioned technologies, like planting trees and changing the ways farmers till their fields

In 2018, $6.6 billion was invested in clean tech, about 15 percent of what went to software start-ups. Carbon-removal start-ups got a tiny sliver of that.

So far, no one has found an obvious way to turn capturing carbon dioxide into a profitable business.

Noah Deich, the founder of Carbon180, a nonprofit that sponsored the event, said it was encouraging to see investors there. But he said he had not seen the commitment to investing that he believed was necessary to get the technologies working.

“For an internet company, even if you don’t have a real product, you can get money to develop one,” he said. “Here, it’s the opposite.

“It is tackling big markets and big challenges, but that doesn’t necessarily mean that those are going to be big businesses,”

a broad array of investors, including venture capitalists, will need to get involved. And they will need to wait more than three or four years to cash out

Mr. Oros said that his fund had not made an investment in the sector and that he did not see a way for the industry to take off without government policy encouraging it

for these businesses to succeed it would probably be necessary for governments to create a carbon tax or other subsidies as incentives for new businesses.

Mr. Lackner said investors should assume that governments would be willing at some point to pay for what these companies were doing.

“In the end, there is no way for the market to not exist,” he said. “This will be a brand-new industry at a huge scale.”

In the time it took Carbon Engineering to raise one round of $68 million, Slack, a messaging company founded the same year, has raised more than 10 times as much and is now preparing for an initial public offering that could value it at nearly $20 billion.

Everyone who discusses the difficulties these start-ups face points back to the clean-tech boom, when several venture capital firms put billions of dollars into solar energy and other technologies. While solar power has gained traction, most of the clean-tech funds were viewed as failures.

venture capitalists needed their investments to show returns within a few years

“There is a fundamental mismatch in time lines,”

One of the biggest investors in climate-focused start-ups is Breakthrough Energy Ventures, a $1 billion fund that seeks to support the development of world-saving technology that might not have a quick turnaround. The fund has received money from Bill Gates and several other billionaires.

money from major philanthropists would not be enough to get even one start-up up to speed, much less the dozens needed to meet the carbon-reduction goals set by international bodies like the Intergovernmental Panel on Climate Change

Ocean-Based Climate Solutions, has created a device that stirs up water in the ocean to promote the growth of phytoplankton, which are algae that can take carbon dioxide out of the air and deliver it to the bottom of the sea in solid form.

“We don’t need another photo-sharing app or another blockchain start-up,” said Mr. Rogers, who is investing his money through Incite Ventures, a fund he created with his wife, Swati Mylavarapu. “We need to solve the carbon crisis. But a lot of folks are chasing the easy money rather than taking responsibility for what needs to be done.”

what matters for equity valuations is which energy sources dominate the growth in demand, not which sources dominate the overall level of demand.

It is the marginal change in the composition of the German power market every year over the last decade rather than the annual system change in the composition of demand that explains why the German utilities E.ON and RWE have lost ~80% of their market capitalization since 2008.

In a mature market with a fast-growing, low-cost new entrant (renewables) the equity market will price in the decline of fossil-fuels far quicker than their market share will actually fall

the oil & gas (O&G) and Automotive sectors are increasingly exposed to the same kind of disruptive change that the German utilities have faced over the last decade.

Equities are priced on expected discounted cash-flows, and for energy companies expected future cash-flows depend on market expectations of future volumes sold and prices achieved. In the German power market up until 2008, the largest incumbent power generators, E.ON and RWE, had a diversified mix of conventional power plants consisting mainly of fossil-fuel (i.e. coal and gas) and nuclear capacity, but these incumbents were not investing in renewable energy at all over 2002-2008.

nearly all of the demand growth over 2002-08 has been captured by renewable energy sources. Indeed, and as can be seen in Figure 1, of the total 50TWh increase in demand over these six years, 47TWh was captured by renewables, and only 3TWh by conventional power sources. It also means that since 2008, as renewables have continued to grow relentlessly, the market share of conventional generation, including fossil fuels, has inexorably declined.

even after the last 15 years of spectacular growth in renewables, conventional generation – nuclear and fossil-fuel based capacity combined – still accounts for the lion’s share of generation, with 325TWh of total output in 2018 (60% of the market) versus 219TWh for renewables (40%). This is precisely why the German government is having to accelerate the phase-out of coal to help it achieve its longer-term emissions targets – the current rate of system change is simply not fast enough to meet those targets.

the equity market started to price in the end of conventional power generation in Germany as soon as it peaked 10 years ago, even though at that time it still accounted for over 80% of the market.

it would be of little consolation to shareholders in the oil majors if the share of oil and gas in the global energy mix in 2030 were still above 50% but demand had peaked before that and prices had started falling owing to the continuing rapid growth of low-cost renewables.

it is worth contemplating that in 2017, while fossil fuels still accounted for 85% of total system demand and renewables for only 3.6%, renewables already accounted for 30% of the growth in energy demand

The process was repeated over and over, as word of cum-ex spread like a quiet contagion. Germany was hardest hit, with an estimated $30 billion in losses, followed by France, taken for about $17 billion. Smaller sums were drained away from Spain, Italy, Belgium, Austria, Norway, Finland, Poland and others

Outrage in these countries has focused on the City of London, Britain’s answer to Wall Street. Less scrutinized has been the role played by Americans, both individual investors and branches of United States investment banks in London, including Morgan Stanley, JPMorgan Chase and Merrill Lynch Bank of America.

American bankers didn’t try cum-ex at home because they feared domestic regulators. So they moved operations to London and treated the rest of Europe as an anything-goes frontier

”There was this culture in London, and it really came from New York,” he said. “These guys were either from New York or trained in London at New York banks, and they looked at Europe as their playground. People at the highest levels were collaborating to rip off countries.”

uffice it to say, the goal was to fool the financial system so that two investors could claim refunds for dividend taxes that were paid just once.

the presiding judge issued a preliminary ruling that, for the first time, declared cum-ex a felony, calling it a “collective grab in the treasury.”

German prosecutors say they will now pursue 400 other suspects, unearthed in 56 investigations. Banks large and small will be ordered to hand over cum-ex profits, which could have serious consequences for some. Two have already gone bust.

officials in Germany say the trade was a form of theft, one so obviously illicit that forbidding it — which was tried twice, with ineffectively worded laws — was hardly necessary.

Precisely who invented cum-ex trading, and when, are mysteries, but ground zero for this scandal may have been the London branch of Merrill Lynch.

At Merrill, Mr. Shields’s job was to identify “tax-attractive trades,” as he put it in his testimony. He had joined one of the least visible sectors of the financial world, which pokes at the seams of international finance law, looking for ways to reduce clients’ tax bills.

When he pointed this out to management, the policy was tweaked.“They said, ‘You can answer a call on your mobile, but you need to immediately move off the floor,’” he recalled. “So these guys would get up from their desks, start walking toward the edge of the floor, send a text message and then walk back. It was a joke.”

The trade was pure theater and required a huge cast: stock lenders, prime brokers, custodians, accounting firms, asset managers and inter-dealer brokers. It also required vast quantities of stock, most of which was sourced from American shareholders.

A lawyer who worked at the firm Dr. Berger founded in 2010, and who under German law can’t be identified by the media, described for the Bonn court a memorable meeting at the office.

Sensitive types, Dr. Berger told his underlings that day, should find other jobs.“Whoever has a problem with the fact that because of our work there are fewer kindergartens being built,” Dr. Berger reportedly said, “here’s the door.”

Seemingly risk-free profits poured in, and over the years a mini-industry thrived, one that a former participant labeled “the devil’s machine.”

When Mr. Tibo tried to signal his concern to executives at UniCredit, the bank’s Italian owner, they didn’t seem to care, he said

“There were big profits coming out of HypoVereinsbank, and most of it was from the investment banking section,” Mr. Tibo said. “The Italians quickly made up their minds: ‘We want to make money.’ No one gave us any internal support, because they didn’t want us to learn anything.”

By then, Mr. Mora and Mr. Shields were long gone from the London branch. Tired of niggling questions and feeling underpaid, they had left in 2008 to open Ballance Capital, one of the first full-service, one-stop cum-ex trading shops.

Dozens of German banks participated in cum-ex deals, too, gobbling up German taxpayer money at the same time they received a rescue package worth more than $500 billion.

Last year, the lawyer who testified anonymously at the Bonn trial described the culture of the cum-ex world to Oliver Schröm and Christian Salewski, two reporters on the German television show “Panorama,” under disguising makeup. It was a realm beyond morality, he said: all male, supremely arrogant, and guided by the conviction that the German state is an enemy and German taxpayers are suckers.

“That was the normal world to which we no longer belonged,” he told the reporters. “We looked out the window from up there, and we thought, ‘We’re the cleverest of all, geniuses, and you’re all stupid.’”

a former Merrill Lynch investment banker sat in a London restaurant near the Thames and described what had turned him into a whistle-blower. In the years after the financial crisis, he said, he noticed that a handful of colleagues on the company’s trading floor were using their personal mobile phones, a breach of company policy. All communication was supposed to be tracked and recorded. These guys were sending self-deleting texts on Snapchat.“Obviously, they were circumventing controls,”

Worried about the growing pileup of tax-withholding credits on the books, Frank Tibo, the bank’s chief tax officer, flew to London in May 2007. He spent the day grilling Mr. Mora

The complaint lays out, in painstaking detail, how the trades were confected, who executed them and which questions should be asked by investigators to uncover the “sham.” It states that Merrill Lynch earned hundreds of millions of dollars over the previous seven years from cum-ex trades.

“Anyone who stood in the way of this trade was swept aside, and those who enabled it were promoted,” the whistle-blower said in a follow-up phone call. “But it was widely regarded as insanity inside the bank for it to be extracting money from sovereign treasuries, particularly after the entire sector had been supported by the public purse.

American banks conducted their cum-ex trades overseas, rather than at home, out of fear, the whistle-blower said. Specifically, he mentioned a 2008 Senate investigation into “dividend tax abuse” that found it was depriving the Treasury of $100 billion every year. The report led to a ban on dividend arbitrage tied to stock in United States corporations.

But nothing prevented American bankers from conducting such trades with foreign companies on foreign soil.

German efforts to stamp out cum-ex with legislation, in 2007 and 2009, left holes through which certain types of financial players could still crawl. This included private pension plans in the United States, a niche financial product for wealthy people who want the kind of privacy, and exotic investment options, that Fidelity doesn’t offer.

Investors will have problems of their own. Many have said they had no idea how cum-ex traders returned such dazzling profits. That defense became less plausible in 2012, after the German government spent millions of dollars to buy 11 hard drives from industry insiders. The hard drives were filled with marketing fliers, written by bankers, who sold cum-ex with an antigovernment pitch.

“We learned that it was very common for these bankers to have conversations over coffee with clients about cum-ex,” said Norbert Walter-Borjans, a former minister of finance for North Rhine-Westphalia. “They would say, ‘If you have a problem with how your hard-earned money is being spent in taxes, we’ve got an idea for you.’”

Authorities across Europe are said to be waiting for a resolution of the Bonn trial to move ahead with their own. Many are livid that Germany didn’t alert them sooner about the perils of cum-ex. The failure, say lawyers, stems from a Europe-wide hypersensitivity about privacy, which is especially acute when it comes to taxes.

In 2012, soon after Germany shut down its cum-ex problem, a London trader began a cum-ex scheme that fleeced the Danish tax authority of $2 billion, officials there say. The trader, Sanjay Shah, who now lives in Dubai, denies wrongdoing but has never been shy about the source of his wealth.When he bought a $1.3 million yacht a few years ago, he found the perfect name: Cum-Ex.