Inside today’s Daily Journal…

Editor’s note: Porter & Co. will be closed tomorrow, Friday, June 19, because the markets shut down for the Juneteenth national holiday. Both the Daily Journal and the Customer Care team will return on Monday, June 22.

Today, though, Porter has turned the Journal over to Marty Fridson – distressed-debt analyst for Porter & Co.’s Distressed Investing advisory and perhaps the most well-known figure in the high-yield world. Working at firms like Salomon Brothers, Morgan Stanley, and Merrill Lynch, Marty became known for his innovative work in credit analysis and investment strategy and for nine consecutive years was ranked #1 in high-yield strategy in the Institutional Investor All America Survey.

Here’s Marty…

Certain ideas transcend party lines. They include some very bad ideas.

In August 2025, Republican Commerce Secretary Howard Lutnick argued that the federal government should receive stock in companies that receive funding through the CHIPS and Science Act, which supports research and promotes location of semiconductor production in the U.S. (The CHIPS Act was signed by Democrat Joe Biden after being passed with considerable Republican support in both the House and the Senate.) Lutnick said:

In short matter, Uncle Sam owned 9.9% of chipmaker Intel (INTC). Secretary Lutnick has subsequently advocated applying the same concept to defense contractors.

Very far over on the other side of the ideological spectrum, socialist Senator Bernie Sanders of Vermont announced in a June 1, 2026, New York Times opinion piece that he’d soon introduce the American Artificial Intelligence (“AI”) Sovereign Wealth Fund Act. It would require OpenAI, Anthropic, xAI, and other companies to fork over 50% of their stock to the government. His rationale: The public should share in the wealth created by a public resource, in this case “the accumulated knowledge, creativity, and labor of mankind” that AI taps.

This right-left convergence on the desirability of state ownership of business isn’t actually as surprising as it might seem, taking history into account. True, the idea of nationalization is most often associated with socialism. For example, the UK steel industry was nationalized by a Labour government in 1949 – and again in 1967 after the Tories mostly denationalized it during the intervening years.

But at the opposite ideological extreme, Italy’s 1922-1943 fascist government, which initially suppressed socialism and defended private property, responded to the Great Depression by taking over failing banks and acquiring stakes in industrial firms. Italian dictator Benito Mussolini’s regime ultimately became one the world’s largest state-owned holding companies, controlling significant portions of banking, shipbuilding, steel, telecommunications, and transportation.

It’s probably not wise for the U.S. to take its economic policy cues from those governments. To cite one especially disturbing statistic, the annual UK inflation rate averaged 16.15% during Labour’s second term in power during the period (1974-1979) of state ownership.

Secretary Lutnick specifies that the equity grabs he champions would consist of non-voting shares, merely providing taxpayers a chance to participate in companies’ future price appreciation. But can we be sure that a future administration will passively stand by as the management of a corporation takes actions that, in the bureaucrats’ judgment, will destroy taxpayers’ wealth over the long run?

And suppose a partially government-owned company displays insufficient enthusiasm for a future progressive administration’s environmental or diversity policies. Will the ruling party’s president and members of Congress withstand loyalists’ calls to take a page from the activist-investor playbook, seeking board representation and demanding specific strategic changes? Especially if, as Senator Sanders proposes, the feds own half of all the company’s shares.

Readers may be understandably skeptical about this sort of “camel’s-nose-under-the-tent” argument. But real-life examples unquestionably exist of initially limited government interventions that vastly expanded their scope over time. Consider Social Security, which began in 1935 by doing nothing more than providing retirement pensions for certain workers, mainly industrial and commercial. Four years later, the program added spousal and survivor benefits. Then came disability insurance. Coverage was eventually extended to farm workers, domestic employees, and self-employed individuals, as well as state and local government employees.

Lutnick laments that when government-funded research by companies or universities leads to patents, we taxpayers who put up all the cash “get nothing.”

Really?