Tuesday, August 23, 2016

This placid market

If this equity market of late was a lake, there would hardly be a ripple in it.  There is almost no activity of any consequence in recent weeks.  It is almost unnerving.  For many years, various pundits and some legitimate analysts would talk about the summer swoon, especially in August, but more often than not, that truism did not turn out to be true.  With ubiquitous communication capabilities, the market did not stop for the beach.  If there were events of consequence, investors could jump in from anywhere.  That's an old story.  Now, this month seems to be reviving the old adage.

July was a particularly good month for equities, one that was unexpected.  That may be a reason for the mostly flat line in August.  Under the surface there appears to more going on than in the major averages as extended market indexes have shown some new strength for small cap and mid cap stocks relative to earlier in the year. Still, it is a bit of a concern to sit around waiting to see where the market is going, what sectors will break out or breakdown.  Any indications of what lies ahead are not clear at the moment, at a time when the political world in the U.S. feels as if it is edging into chaos.

Investors are staying calm at the moment.  That's good news.  There is no consensus as to what lies ahead.  There is a concern that the need for yield is stretching the price of stocks with decent dividends beyond what expected valuations would suggest.  There is a concern that the Fed is behind the curve on whatever may lie ahead, in other words that it has by default become complacent.  We are cautious but still behaving like normal investors, trade here and there, and staying the course.



Monday, August 22, 2016

"Chaos Monkeys", a mixed opinion

This informative yet strange book is subtitled "Obscene Fortune And Random Failure In Silicon Valley" and the writer is Antonio Garcia Martinez, a former product manager at Facebook and the co-founder of a venture capital start-up that was sold to Twitter.

The book is an at times insightful look at various aspects of Silicon Valley business.  It looks at the challenge of creating and managing a start-up.  It details the demands of a growing internet business that is basically constant seat of the pants change, lots of new competing ideas, and plenty of driven personalities, some attractive and some not.  It focuses on the huge challenge of monetizing businesses that have been designed with the primary purpose, sometimes sole purpose, of attracting users.  All of this is detailed well, and was educational from a technology point of view.  From a finance point of view it at times seems at bit plodding but that may depend on one's background.

So what is wrong with this book?  It is absolutely filled with sophomoric attempts at humor.  Michael Lewis is someone Martinez is not, ditto not Robin Williams or Jay Mcinerney.  Much of the humor attempted belongs in the bathroom, the bedroom, or the back seat of a car, and it almost uniformly feels forced.  Once the writer gets in this mode he must feel required to get on an obscenity laced rant.  It's all too glib and cute.  It is beyond annoying and it is almost constant.

On top of that, this is one of the most self adulatory books that has ever been read here.  Martinez creates himself as a Silicon Valley free spirit, living on a boat in the bay, riding his bike, drinking til dawn, fathering children that he rarely sees, and having sex in a closet at a company party.  Why do we need to know all of this.  Why do we care about this man?

All of that said, the book was finished here, because the morsels of interesting information were worth wading through the muck.  It was a relief to finish with the book and the writer.

Wall Street Journal delivery

We have forever had home delivery of the New York Times here, but as of today the Wall Street Journal will come as well.  It is clearly an attempt to create as big a mess as possible around my reading chairs.

Rather than just pick up the Journal at the drug store or the grocery store when seeing that the articles look interesting, this will be a reliable way to see it every day.  This is a result of an offer received in the mail, for new subscribers, to get 6 months of WSJ delivery at a cost of $99.  As Donald Trump might say, "What have I got to lose?"  Of course there will be an automatic renewal at a higher rate, but that's six months from now, which is forever based on what's happening here, and it can be canceled.

The Journal is good complement to the Times.  For example, today had an article about the company Kimberly Clark, which over the past four years has been a significant and highly productive investment here.  I now know much more about why this has been the case and it's not been solely because Huggies, Depends, and Kleenex are necessities for many and are category leaders.  The article "Stimulus Efforts Get Weirder" is a look at how central banks of many countries are doing more creative or misguided initiatives to get any type growth out of their economies.  Another piece, "Silicon Valley Gives Trump Cold Shoulder", is just what it says.

Of course, with the Journal one must be willing to put up with or ignore some of what they print, like an op-ed today by John Bolton lauding Donald Trump's foreign policy.  That's based solely on one teleprompter speech read last week, and ignores everything that Trump has said, and seems to believe, over at least the last nine months.  Those articles can be ignored here, or read for entertainment.

While the WSJ can now be seen fully online as well, reading a newspaper in a chair is much preferred here to sitting and looking at a screen.  Old habits die hard.  The recycling bag will get bigger.


Sunday, August 21, 2016

Late to the theater...

This weekend two very different films set in the Islamic middle east were watched here.  For the most part they have been in and done at the theaters, so they were available on Netflix.  The first was "Whiskey Tango Foxtrot", which was loosely based on the memoirs of a woman journalist covering the war in Afghanistan.  Starring Tina Fey and with Margot Robbie, it is meant to be both a somewhat humorous but informative look at an obviously a serious situation.

For those hoping that they would see film footage of Afghanistan, and one could at first assume that they were, but it was filmed in New Mexico.  At least that was well done.  While not quite ever getting accustomed to seeing Tina Fey playing anything serious, the film was mostly entertaining and did show the travails of and dangers faced by journalists covering the war, especially female journalists.  It also showed the close knit community of journalists in "Kabubble" as they sought relief from the stress through aggressive partying.

"A Hologram for the King", a film based on the book of the same name by Dave Eggers, is the story of a troubled and aging salesman sent by a large U.S. construction and technology company to bid on a major project in Saudi Arabia.  Tom Hanks plays the main character.  The film has its slow parts and its engaging parts, but rarely has any edge of the seat action.  The salesman needs to wade through a range of cultural barriers and understand how the society works, especially as expected norms for the majority of the country's citizens do not apply to the wealthy who live there or to the expats and diplomats who are there as well.

Regardless of where this film is located, the crux of the film is the life of the salesman, divorced, past his prime in his career, absolutely needing some success, missing his early '20's daughter, and anxious about midlife health scares.  In this unusual country he finally becomes grounded and unexpectedly finds his place.

Of the two films, "Whiskey Tango Foxtrot" did more to entertain but "A Hologram for the King" gave more insight into the country that it was situated in.  Reflecting further on the films, it seems clear that the Tom Hanks character will have much more of a lasting impact on most viewers than the Tina Fey character.  For those who might wonder, Margot Robbie kept her clothes on and Sarita Choudhury did not.

With the inclusion of that last sentence, it is acknowledged that neither of these films is worth a trip to the theater for most people, but they helped pass part of two evening's decompression.




Friday, August 19, 2016

The U.S. housing market and credit risk

The August 20th issue of "The Economist"has a cover with the title "Nightmare on Main Street". That lead editorial and the following first article in the issue, "Comradely capitalism", discuss the risks that remain in the U.S. housing market.  While noting that the capital of the banks is much stronger, that risky and funky derivative risk has been reined in compared to 2008 and 2009, and multiple new regulations exist to avoid a repeat of that period's crisis, there is still an issue with this massive market.  A chart titled "A state business" shows that the government is now the explicit funding source for anywhere from 75% to over 80% of all mortgages since 2008, as compared to less than 10% be before 2008.

What was meant as a way to staunch a crisis has become permanent.  While this insulates private investors and corporations from much of the direct risk, the risk does not go away.  It now belongs to the U.S. taxpayer.  With both campaigns now pointing to the decline in the U.S. home ownership rates since 2008 as a big problem, their suggestion of a solution implies that the U.S. taxpayer in general will be a participant in rebuilding greater risk, even if intended to be well managed.  "With a fifth of all mortgage loans granted since 2012 having loan to value ratios of 95%", less than reassuring lending still goes on.

While there does not appear to be any crisis on the horizon, the candidates' lofty thoughts  about infrastructure spending will come to naught if by chance there is a financial or political or global risk event that triggers a decline in the home mortgage market.  The supposed value of houses in this area, based on selling prices in the first half of 2016, is approaching record levels.  After what we have just been through, it makes one think...

That means thinking about maintaining the liquidity necessary for any unexpected downturn, selling one's house now, or maybe even buying a house now before interest rates rise as well as prices. Personal situations vary.



Wednesday, August 17, 2016

Trump adds to his campaign staff

It had seemed like Paul Manafort was the perfect choice for a Donald Trump campaign manager.  He lives in Trump Tower, albeit quite a few floors below Trump, he played some role in the Republican campaigns of Ford, Reagan, and the senior Bush, and more recently had spent more than five years as political adviser to the oligarch, Putin ally, and looter of Ukraine Victor Yanukovych until his ouster. Manafort was well known and without scruples.  To add to that, his career included periods advising the rapacious dictators Ferdinand Marcos of the Phillipines and Mobutu Sese Seko of the Congo.  He also looked and sounded like a respectable man.  What more could Trump ask for?

He wanted more firepower for his strange campaign.  Roger Ailes, fresh off his firing at Fox, is now advising him on the coming debates, Stephen Bannon, executive chairman, or some such title, of Breitbart News joins the team with a reputation as a pit bull of anti-establishment political opinions and conspiracy theories, and Kellyanne Conway, a pollster and publicist who has a close working relationship with Robert Mercer, the hedge fund billionare who was primary financier of the Ted Cruz campaign and whose political beliefs move into the bizarre side of the extreme right wing.  How will this work?

It seems that Trump has decided to double down on his erratic behavior and his attacks on anyone who is not on board his runaway train.  Is this campaign going to just get more ugly, and become more of an attack on the U.S. political system, that is democracy?  In this unusual and unpredictable political year, nothing seems certain.

"The whole world is watching?"

Tuesday, August 16, 2016

Stocks drop today, as would be expected

After a Fed member's comments about the possibility of an interest rate rise in September, the U.S. stock market declined in a predictable and controlled manner.  Interesting bright spots in the market even after the recent rise to new highs, not inflation adjusted, still remain.  They are emerging markets stocks which after three recent dull years, at best, have begun to move up in the last month and a half.  Also small cap and medium cap stocks, aka extended market stocks, have been moving up modestly, now noticeably, since February after lagging the large caps in recent years.  Looking at these two areas may present opportunities, although here skepticism will always remain about the ability to choose emerging market stocks or indexes, while a mild resurgence in the extended market is seen as an opportunity.

Now is not too early for large institutional firms to begin looking at harvesting gains for the year to establish a base for strong performance.  For example, Johnson and Johnson has had a substantial run-up over the past two years and remains attractive.  But the run-up may mean that the stock is out of line with its intended allocation.  A fund manager may sell some part of that position to lock in gains, and simultaneously buy another strongly capitalized stock with decent earnings growth and dividends, like 3M or Merck or many other names.  Waiting for the fourth quarter to make changes is not the easiest time to do so in some years.  Declines in strong stocks may happen for portfolio management reasons.

One of the hardest things for some investors to do, raising my hand, is to sell parts of positions in stocks that are performing well and have large gains for the tax man to pursue.  It is a chore that is unfortunately necessary at times.

Monday, August 15, 2016

"The Sympathizer", a novel about the detritus of the war in Vietnam

This book by Viet Thanh Nguyen won the Pulitzer prize for fiction this year.  It also received other awards and was on many top 10 lists in the print media.  It seemed as if it needed to be read, but it was not immediately easy for this reader.  Twice it was started and after a few chapters in it was put down due to other interests.  Recently it was once again picked up again and with some effort it was completed.

What was difficult about the book was that it described situations that ranged from humorous to dreadful.  The main character is a half Vietnamese/half Caucasian man who came of age during the war.  Born and raised in Vietnam, he went to college in the Los Angeles area but went back and forth to Vietnam.  His loyalties were mixed both in Vietnam and the United States, as his ethnic background and his geographic locations led to a constant cognitive dissonance in his life.

The observations of this character about life in the U.S. as a perceived Asian are insightful and at times entertaining.  His situation related to the war is more complicated, gripping at times and at other times harrowing.

The unique nature of this book makes it a novel that stands out and is compelling in the way that it is written.  It is not surprising that the book was considered as a major book of the year.  Much of the story is loosely based on actual events.  What could be disconcerting to this reader was the less than cohesive way the narrative developed.  At times there is humor that seems forced, or not so much humor as evidence of despair.  The serious nature of the book is encompassed by this passage near its end, "Our commandant was a man who didn't get the joke, and people who do not get the joke are dangerous people indeed.  They are the ones who say nothing with great piousness, who ask everyone else to die for nothing, who revere nothing.  Such a man could not tolerate someone who laughed at nothing."

 

Sunday, August 14, 2016

Celebrities for Trump

The Yahoo home page, and its list of stories that are routinely odd, today had one article with the title, "35 Celebrities Who Support Donald Trump".  I had to take a look.  The article was unwieldy as each celebrity needed to be brought up one at a time, surrounded by advertisements.   After viewing just 11 of the supposed 35, the website sent me to another website about female celebrities unrelated to politics.  That was odd, but not at all unexpected for this type of Yahoo suggested news.  I had had enough anyway.  Among the 11 that were seen were Hulk Hogan, Mike Tyson, Tom Brady, Owen Wilson, Ann Coulter, Charlie Sheen, Hershel Walker, and Mark Cuban.  Fyi article writer, Cuban is now fully behind Hillary Clinton.

Quote from a book not yet finished

There is a book being read here that will not be mentioned today.  It needs to be completed and then some sort of overall comment will be written.  Here are two sentences from the book that appealed to me, one as completely timely and one as completely timeless.

"Americans on the average do not trust intellectuals, but they are cowed by power and stunned by celebrity.  Not only did Dr. Hedd have a measure of both, he also possessed an English accent, which affected Americans the way a dog whistle stimulated canines."

Tuesday, August 09, 2016

U.S. equity market absolutely flat

If there were ever a flat day in the U.S. equity market, this was it.  Some individual stocks moved a bit, but it is hard to find any that did so meaningfully, at least in portfolios here.  Volume was only slightly above half of the 90 day average and more than 20% below the ten day average.

The market averages are mostly at highs, but it does not feel like that.  Looking at the huge ETF SPY, the short interest is 28%, not reassuring at the moment, and the dividend yield is 2%, not bad relative to other market yields.  We are standing at the crossroads.  If the market has a reason to rise, that short interest will need to cover and it could mean a big move up.  If the market gets bad news, there is little to prevent a precipitous decline.

Equity p/e's trade on the cost of money and the outlook for the future.  If something clouds the outlook, even in a relatively stable financial market, that could unnerve investors.  There is no collapse on the horizon but a burst up of consequence and a 10% pullback are both possible.

Monday, August 08, 2016

"One Summer, America 1927"

This historical account by Bill Bryson is entertaining and informative.  It's a view of America in and around 1927 that is full of interesting facts and well told stories, and gives the perspective of the American people at that time.  What really was of interest to them and what news did they obsessively follow?

This was the year of Charles Lindberg's crossing of the Atlantic and the year of Babe Ruth's 60 home runs.  Jack Dempsey and Gene Tunney fought before 150,000 fans at Soldier Field as America listened on the newly ubiquitous radio.  President Calvin Coolidge did little and said less as the economy prospered.  Al Capone was at the height of his criminal powers that year, so much so that he was more or less a part of the Chicago establishment.  Prohibition was in force but in big cities but it was only tacitly enforced.  Saloons grew exponentially as untaxed and unregulated beer and booze was highly profitable.  Films were never more popular and were shown in extravagant movie palaces in New York, Chicago, and Los Angeles among other big cities.  The theory of eugenics was developing a mainstream following that tied into the racism that was a reaction to immigration and what was happening in Germany.  Ownership of automobiles was growing rapidly as these future huge businesses developed.  Newspapers had readership like never before, or after.

"One Summer" captures all of this and more as it follows popular culture at that time.  What it only touches on but does not delve into deeply are the forces that were setting the stage for the Great Depression.  That no doubt reflects what was of interest, or not of interest, to people at that time.

The book did not end with any grand conclusions or major insights.  It was simply an in depth look at a period in time.  The reader was left on his own at the end, having been treated to a deluge of commentary on that year in America, 1927.  It's a fine bit of story telling.



Postscript:  Reading this book,  I could not help but think about how this was absorbed by my parents.  My father would have been nine years old at that time and my mother seven.  I know that my mother loved movies, and she even played the piano(she was gifted) in the flat floored theater with folding chairs in her small town before the age of ten, but I don't know how much before.  My father was never much of a sports fan(until golf that he began to play in his forties), but he did choose to become trained as an Army Air Force pilot even before the U.S. entered WWII(Lindbergh related?) for some reason.  He was eventually shot down over China as part of the Flying Tigers, the successor of the OSS.  He survived and would never talk about it, and here I am.



Sunday, August 07, 2016

This week's Bloomberg Businessweek

This magazine has a "special double issue" at the moment, one called "The Interview Issue".  It is an interesting and diverting edition of the magazine.

The relatively brief interviews are with forty different people, most well known in business, some in politics, and a few in creative pursuits.  While there is nothing earthshaking here, the interviews seem to give a fair representation of the main strengths and interests of the person being interviewed and, depending on one's previous knowledge, can be enlightening.

The best article in the issue, viewed from this perspective of course, is titled "Is Banking Better in Bed" and concerns the move to negative interest rates in certain regions and the almost lack of interest return broadly, unless one is inclined to try out bonds from Greece, Russia, Pakistan, or Venezuela among other distressed issues.  The safest way to seek yield is from dividend stocks, but many view that as a very crowded trade at the moment.  The U.S. high yield bond market does offer opportunities but buying them in a mutual fund is a bet that is highly dependent on the often opaque skill of the fund manager, more so than in most stock funds by far.

Preservation of capital is more important now than growth for most investors, at least that is a crucial starting point.  It does not make for an especially scintillating or entertaining investing experience at the moment.  Is boring the right word?



Saturday, August 06, 2016

U.S. equities jump on positive jobs report

U.S. equities rose almost 1% broadly on Friday after a jobs report that was more positive than most analysts had predicted.  Financials in general and banks in particular rose sharply, as the prospect of even a minor increase in interest rates would make trading and lending more profitable, or once again profitable after simply being a weight on earnings for the past year.  The stock price rise yesterday, though, was also widespread, covering major tech firms and well capitalized consumer product companies.

The unemployment rate stayed at 4.9%, but more importantly some cumulative wage growth was thought by the market to be evident.  That and continued low oil prices could lead to a gain in consumer spending in the back to school months and then, think the optimists, continue in to the holiday season.  In fact, it is too early to make any such projections but investors are grasping at straws.

Included in job totals are many people who are underemployed or working more than one job. Earnings growth in the aggregate is still modest, and what there is often depends on the financial engineering of stock buybacks.  Capital spending is not growing in any pronounced way, as a conservatism by both businesses and consumers is a lingering effect of the slow recovery.

Retail investors can take solace in the fact that this rise in the market is being led by institutional investors, the presumed professional investors and traders.  They must believe that there is an potential upside from these market highs.  Corporate and insurance company pension funds are particularly hard pressed to bet on this, as their generally actuary projected 7% return is questionable for the year.

For the most part we will simply sit back and watch, looking for ways to improve portfolios but not grow them.  The market may not recognize that it is August, but we do.  Still it seems that nap time has been missed today and the challenge to come up with dinner will be upon us.  It's time then for Tazo zen tea, the zen not to be achieved but some relaxation is possible.

Thursday, August 04, 2016

Books and books of photographs

During our early time together and during the years of our children growing up, we compiled many books of photographs.  There are at least 20 of them, probably more.  Many of them document a period of the children's lives, birthdays, holiday events, visits to and from friends and relatives, block parties, and the like, and for the most part those photos were of great interest at the time that they were developed, but, with notable exceptions, seem somewhat repetitive now.  The books that are of really great interest still are those from major trips.

Those before children to France, Istanbul, Greece, Portugal, and Italy are fascinating now.  We were so young and we were so pleased to be traveling, away from what at the time were rather monotonous mid level jobs in New York.  That would change, but we were both in the patiently or not so patiently "paying the dues" portion of our careers.  Still the jobs paid enough for exceptional if not luxurious travel.  That statement should be corrected.  In the early 1980's, the dollar in Greece, Turkey, and Portugal was strong.  I fully remember, after the first day in Crete, saying to K that we can go to any restaurant or hotel we want and order anything we want, even any bottle of wine.  That was a new feeling.

The travel trips with the children also have photos of events that otherwise almost had been forgotten, multiple trips to Europe, and three trips to Maui.  At one point, the older daughter complained that she had been to Paris more times than she had been to Disneyland.  Some of the best more recent, not so recent for sure, pictures come from a trip to Forte dei Marmi on the Tuscany coast in 2001.  Venice and Siena were also part of that journey.  After that trip and one to Paris and Cannes in 2002, the full family trips ended.  The teenage children were pulled in other directions and sometimes opportunities were missed or other responsibilities needed to be tended to.  A 2009 trip was taken to Paris with the younger one as she wanted to see the city with the eyes of one who would remember it. She had also turned into a photographer, and still is on her many travels as a young adult.

Will I look at one today, if I get the time?








Monday, August 01, 2016

The surprising strength of equities

In July, stocks advanced slowly but meaningfully during the month.  From the mid-February lows, they are up almost 20%.  Today was a mixed day, not unusual.  The S&P and Dow were down modestly but the Nasdaq rose by a higher percentage rate.  All in all, one could say it was a flat day to start August.

Other than the lack of investment alternatives, there is no significant reason for this performance. From the beginning of 2016, across the indexes, aggregate stocks are up somewhat more than 6%, not including dividends. Here in stock picker's land, the returns in four somewhat equity weighted portfolios have been fine, and modestly stronger.  Given the risk involved in some of the choices, the portfolio is vulnerable to a negative change in sentiment, but what's new.  It has evolved into a more large cap, strong balance sheet, dividend paying portfolio in the last two years.  The number of stocks held now that are small and mid cap stocks that could be characterized as swing for the fences bets are fewer than in year's past.  The ideas have not been forthcoming.

Right now, just standing still, although it feels like a time to think about taking some gains selectively.


Sunday, July 31, 2016

Hillary Clinton's speaking style

Given that Hillary Clinton is running for President against a chronic and transparent liar, it can boggle the mind that polls show the race as being increasingly tight.  Whether Trump just makes things up like a pompous school boy, or simply does not know the facts is not important.  He feels free to say anything.   In addition, Trump does not explain policy choices, and seems to think that saying everything "will be great" should satisfy many of the American people.  That he seems to be right is troubling.

Could much of this be simply a matter of style.  During the convention one network had an interview with Cecile Richards, daughter of the late Ann Richards, who is a Democrat and a political activist of some renown.  The interview related to her strong support of Hillary Clinton, but of course reverted to a discussion about her famous mother, Ann's strong public speaking skills, and her sense of humor. In passing, Cecile said "and she never yelled".

That could be taken as message to Hillary, who continues to act as if she is a terrific public speaker. She is not and she should calm down.  She knows her facts and she knows her policy.  The public does not seem to want to see her more or less applaud herself.  She should make an effort to let the applause and the enthusiasm come to her, not from her.  That has been said here before, but when she finishes a speech after a "rousing" close, and then puts her hands up in the air like she has just kicked a field goal to win the Super Bowl, she is doing herself no favors.

Unfortunately, a sense of humor does not seem to be part of her DNA as a speaker.  Lightening up in other ways could be helpful if it is not forced.  Sometimes humor can show up when least expected if there is a more relaxed style.  

Saturday, July 30, 2016

"Heroes of the Frontier", the new novel by Dave Eggers

Almost everything Eggers' writes is read here.  It seems that each book that he chooses to write is unique.  There is a different pulse and intent to each one.  The stories and characters tend to be a different challenge to understand.

"Heroes of the Frontier" is the tale of a youngish middle aged woman, a dentist with two young children from Ohio, who abandons the tedium, or some might say regularity, of her middle class life as too many issues overwhelm her.  She tells no one and flies to Alaska with her children, rents an antiquated RV, and after a quick visit to see an unrelated "sister" in Homer, drives on with no direction known.  The novel tracks her adventures, missteps, and neurotic planning, all following little purpose other than getting away, disappearing.

Her relationship with her 8 year old son and 5 year old daughter are central to the story, and to her life.  This relationship is well handled, the dialogue is stellar, but as the story builds it becomes an increasingly tense plot for this little and carelessly adventurous family.  In fact, here the book became almost exhausting to read as it developed to a close.

If this is meant by Eggers to be analogous to life in general, it is to some extent a grim view.  Yet, the book does not end with defeat, and there is humor throughout, wry though it may be.  Instead it suggests a continuation similar to the saying "life goes on".

Having been in a slump of not finishing books lately, for some reason one excellent one and two where the verdict is still out, it was a relief to pick up a book that was compelling enough for a straight through read over several days.

Wednesday, July 20, 2016

Big news at Republican convention...

Melania admits that she liked Michelle's speech and echoed it.  One could think that is was the incompetence of her associates but as set up for women, beauty versus thought.  Could it be that they are not independent except in the minds of perverts like Donald.  Trump can count as a racist on more fingers than on my right hand, including women as a fairly large group.

Tuesday, July 19, 2016

The Republican convention avoids content

Having watched, off and on, maybe two thirds of last night's Republican convention on PBS , it can safely be said that any detail of policy was completely ignored.  From stars of shows about dimwits to half known celebrities to the always rabidly attention seeking Rudy Giuliani, the only message was "trust Trump" or "Trump is a leader" or "Trump has your back" and on and on. There was no discussion of issues with any policy content whatsoever.

This may be the tone of the entire convention, and looking at the audience it seems as if they are fine with that.  Attacking Hillary Clinton in an ugly way was a highly popular approach by a few speakers and blaming all of the perceived ills of the country on the Clinton and Obama administrations must have been required of every speaker.  Wasn't there this person named George W. Bush in the middle there somewhere.

This week's The New Yorker magazine(July 25th issue) has an interesting article about the ghost writer of "Trump's" best selling book "The Art of the Deal", Tony Schwartz.  Schwartz, who wrote virtually every word of the book that Trump now claims to have written by himself, regretfully says that "I'll have to carry this until the end of my life".  He notes that "if Trump is elected President, the millions of people who voted for him and believe that he represents their interests will learn what anyone who deals closely with him already knows --- that he couldn't care less about them."

Essentially, he views Trump as an obsessive attention seeker, an almost psychopathic narcissist, who would be a disaster as political leader, a world leader for God's sake.  This is interesting reading, even if highly opinionated.

Sunday, July 17, 2016

The Republican conventioneers

What will bind together the folks attending the Republican convention?  This may be interesting to watch.  Will unanticipated speeches and crowd reactions be part of the event, or will they pull off a calm and somewhat routine series of evenings.

Thinking about who the Republicans are now, and what holds them together, these are some thoughts. The first two are easy.  First, there are those Republicans, maybe new Republicans but in the party, who are simply pro-Trump.  He says things that they have always wanted to say and he says them in unvarnished fashion.  They do not seem to need an overall vision from him or a cohesive thought process.  They like immediate thoughts, clear in their singularity.

Second, there are the anti-Clinton Republicans, many who have an intense dislike for her that has built up over the years.  They would vote for just about anyone nominated to oppose her, without qualification.

These two groups are solid although not necessarily in line with each other on many issues.

A third large group could be called the "aberrationists".  They are long time staunch Republicans that will always vote as a Republican, even if they view the Trump phenomenon as unseemly, out of the ordinary, maybe as transient, or maybe just as election politics.  They believe in the pro-business, smaller government, low tax, and social conservatism that has long characterized the Republican party, even if that "ideal" has not been completely accurate for many years.

The last group will be called the "cognitive dissonance crowd".  They both like and resent parts of government.  They want all of the benefits that they "deserve", but they want low taxes and minimal regulation as well.  This is not unusual, as coming up with the right formula for government to please all is not easy, in fact it is impossible. What makes them a group within the party is that Donald Trump exhibits no "cognitive dissonance" of any sort despite making comments that are contradictory or at times nonsense.  They want to be like him. They, for the most part, come from of the once dominant white middle class that is in disarray as it shrinks.

These observations about the Republican party are of course simplistic and not at all comprehensive. What they don't mention is anything about foreign policy opinions.  In the past some Republican candidates led their campaigns with foreign policy opinions.  Reagan did in his own unique way, and George H. W. and Nixon were passionate about their positions and opinions.  This year's Republican primary has been U.S. centric.  With terrorist attacks in this country and fraying race relations on the fringes as well, this may become even more of the case in the general election.  That may be good for Trump, as he is close to clueless about international affairs, while Clinton, like her or not, is well informed on that front.

On to the conventions...

"Lucky Bastard"

This was the ordered book that was referenced in the June 23 post here about the newest book by Charles McCarry.  This one was written in 1998 and, having just been read, it is understandable why it had not been highlighted  widely.  It is clearly unlike the many "Paul Christopher books" espionage books written by McCarry that were often excellent historical fiction as well as engaging reads.

"Lucky Bastard" is pure fiction, hopefully.  The basic story is about a man born in the mid-1940's who may or may not have been an illegitimate child of JFK.  He believes that he is, and he has an engaging personality that works with almost everyone, and opinions that shift constantly to maintain his good relationships with all.  He is chosen by the KGB while in his early college years to be someone that they could manipulate into becoming a powerful politician.  Without him being aware of that, they succeed in their efforts.

This character, Jack Adams, is himself a skillful manipulator of others, reasonably smart and is more than a bit of a perverse sex maniac.  This aspect of the novel seems overdone, weirdly so relative to McCarry's previous work.  Overlooking that strange excess, the book is entertaining, at times humorous, and at other times, unfortunately, seems to be somewhat relevant to the current election season.  While not historical fiction, could it possibly be prescient fiction?




Thursday, July 07, 2016

Too much to write about... a fallback on financial markets

When it comes to both the financial markets and election season politics, there is so much that could be written about that it has led to a mind block here.  The latest black on police and vice versa does not help at all either, it's just something heartbreaking beyond comment. Where does one start when there is so much going on.  Maybe it's the summer heat that has led to this way of thinking.  My Texas friends would suggest that a glass of hibiscus iced tea might help, and this afternoon a pitcher will be made.  For now, here is an effort to make a few comments on financial markets, which is a usual safe starting place.

To say that things are unsettled in the global financial markets is an understatement.  While in fact bond and stock markets have been relatively stable if one overlooks week to week volatility, in fact our little eight portfolios are each having a positive year, it is unclear if anyone has a clear insight into where events will take us.

There were three events this week that were notable here, so far.

First was the suspension of trading, meaning no redemptions allowed, in a $3 billion Standard Life run U.K. real estate fund. That is only one of their many overall funds(good new, bad news?) Standard Life is a long time pillar of Scottish pension and trust investing, and one of the largest, maybe still the market leader.  This action suggests a lack of liquidity in the market, which hopefully will not lead to any forced redemptions by that firm.  It is almost certain that some smaller funds of this type are taking the opportunity to bail out now.

When the formerly highly respected, these days less, Third Avenue Funds Management, stopped redemptions and decided to liquidate their $800 million high yield fund several months ago, it disrupted the markets here for a few days.  It certainly further damaged the already languishing reputation of that firm.  Any repercussions for Standard Life or U.K. property market seem muted from here, but actions like this can take months to play out.  It is not a positive sign.

Second has been the "in process" crisis for Italian banks.  Their credit profiles are poor and with an aggregate 17% of all loans in the banking system rated as non-performing.  This is the worst level among European banks, and will almost certainly get much worse as collateral turns out to be, practically speaking, illiquid, as the Italian legal system bureaucracy is so bloated and antiquated that it barely functions if at all.  Further aggravating the problem is the fact that the Italian banking system is among the least innovative in the world among larger countries, and basically is just a deposit and lending system, almost completely lacking in investment management or other financial products. What that means is that in this interest rate environment, Italian banks are unprofitable even before any credit losses are factored in.  A bailout by other banks is difficult to imagine, as it could lead Portugal, Spain, and any other stressed system to expect that similar relief would be available.

Third is the shrinking of the commercial loan market in the U.S., mainly due to real estate.  The great recession's real estate illiquidity was based in home mortgages as all know. Commercial real estate behaved like most commerical businesses at that time, meaning some fine, some ok, some under pressure.  Today the securization market for commercial mortgages is broadly weak and more expensive if it can be accessed at a time when maturities are coming due from the late 2000's.  That is not a good omen for continued economic growth.

There are many other things one could worry about, but also many that are positives such as employment growth and some increase in consumer spending.  There are also two powerful overhangs on the market...  the election and ISIS based terrorism.  These are not possible to quantify.

despite all of this, the minimal other attractive investment opportunities with any yield of consequence make the stock market, at the moment, continue to be almost a safe haven, done conservatively.  Investors need to be there.  If it does go down, it will be in lockstep, stock picking almost irrelevant, as overall valuation would be the major question.  That's not a pretty picture to think about, but we all have mattresses.

Monday, June 27, 2016

EU exit vote by Britain could be a big deal

At the moment, the thought here is that the financial market's negative reaction to the British vote will mitigate soon, and we will settle down into value trading.  Growth trading will not be prevalent soon.  There has been much investor chatter about the monetary and fiscal implications of this vote, but briefly here are three that are most interesting here.

--- The most frightening aspect is what it does to the alliance that pretends to keep Vladmir Putin in check.  Most don't read about it, but the Russian backed push into Ukraine continues even today. Given the disarray in the European Union and Obama's aloof attitude, some would say lame attitude, toward any foreign policy action(note what is said is "action", is not words).  Is this the time for Putin to push further into Ukraine and make some inroads into the Baltic states that the EU will make excuses for(retaking real Russian citizens for example).

---What will Scotland do?  Their vote suggested that they want no part of separation from the EU. Will this lead to a break up of the U.K.(not to mention Northern Ireland's same thoughts and votes).
While dated now, I traveled to Edinburgh at least twice a year from the mid-1980's to the early 2000's, and know that it is a completely different culture from England, especially London where business often required my body four or five times each year.  From a financial point of view London was and now continues to be a financial hub of global trading.  Edinburgh and Glasgow were always viewed as havens for long term investment, pensions funds, and private trusts.  They were always a pleasure to visit although the long term historians there at dinners could overwhelm this less historically experienced calling investment analyst easily.  The conclusions of those types almost always were wrong, but everyone was so polite there despite that. Golf and sitting by a hotel fireplace talking with others with a glass of precious single malt in hand was also an attraction.

London was a place that required work to get into an accepted space.  For me, that was at least five years, with some firms as long as ten.  There was an arrogance that was not hidden in the least by those London Brits.  Some were so smart that they could pull it off and deserved to do so, but many were just phony, barely financially literate snobs of their realm.

If the financial relationship between London and Scotland breaks, this will be a huge financial event, an opinion here.  They complemented each other in a complex way, but they were part of one calling universe and it was a real trip to do both places one after the other.  Truthfully, the Brits and the Scots knew their roles and what was going on, even as they competed royally.  Rarely did a Scot ever move to a Brit firm, and vice versa. At this moment there is not one instance of that can be remembered here.

---So now what about London?  After the next two years of dealing with this vote, could it simply, of course not so simply, divorce itself from the U.K., and become a Monaco, Zurich, or Geneva.  Many of their banks most innovative trading types come from the best university in France.  Everyone likes living in London, but could that change for financial reasons.  If government mandates reflecting Brexit voters become dominant, will London's leading global financial liquidity be questioned, or damaged?


There is much more to come.   These are thoughts here that have not necessarily been given enough attention yet, as the dwindling white middle class of England, much like that of this country, sits on their couches in the evenings watching television, while knowing that they will somehow be taken care of, minimal literate study required.

Saturday, June 25, 2016

The other 1%

Much is written about the probable 1% of the U.S. population, probably world population, that controls such a disproportionate amount of the world's wealth.  The divide is so wide that the middle class is being hollowed out, by all accounts, here in the U.S.  There are many who still have middle class values and images of themselves as middle class, but from a wealth point of view are on week to week budgets with little or no excess.

In fact, a significant number of Americans pay little or no taxes other than the regressive social security tax, local regulatory taxes, and whatever sales taxes exist wherever they live.  Some statistics suggest that this may be as many as 40% of all Americans, some even say more, some of course less. When the top 1% are deemed to have so much(and the top .01% have such massive wealth), and so much of the population lives from paycheck to paycheck, or worse, the suggestion that things are out of kilter is legitimate.  What to do about this is less clear, as what is needed cannot be solved by just taxing the wealthy more.  That might feel right, but it would not come close to solving the problem.  What that requires is real growth in our economy and a more principled approach to worker compensation.

The "other 1%" mentioned in the title applies to corporations.  They are the small percentage of corporations with massive amounts of cash, both in this country and money made legitimately overseas.  Most of these companies are related to the tech industry and some are simply long term conservative cash cows.  With borrowing costs historically low, however, many more corporations are on the surface cash rich, and they use that cash to buy back stock, offer senior employees large stock option plans, and pay attractive dividends.  This all serves to help raise their stock price over time, even often in the near term, but one could make the argument that is not a productive use of capital.  One could also say with certainty that this could be dangerous if there were any significant economic downturn.

Making large stock buybacks, paying such attractive dividends, and rewarding executive employees so generously, often with borrowed money, can suggest that these companies have no ideas or opportunities for new capital investments, the type of investments that lead to hiring more employees, paying rank and file employees better wages, providing more training for research and development, and generally all things that a company that aspires to future growth would do.  Instead, much of what could be used for capital investment for future growth is spent to reward existing shareholders and senior executives as soon as possible.

That certainly does not seem like what is best for our economy long term, but it is not really as simple as that.  What is said next here is nothing new.  Globalization of business activities has changed the economic landscape in a way that is not changing anytime soon.  Technology, with all of its benefits, has reduced the need for hands on workers relative to the past.  Product cycles move much more quickly due to massive advertising, omnipresent social media, and ever changing consumer preferences, and that makes it difficult for businesses, especially small businesses, to take risks on innovation.

There are no answers in this comment.  What can be highlighted is that the U.S. economy is still among the most resilient and creative in the world.  Old paradigms are in the process of changing and that does not happen quickly.  The angst that is felt today could very well eventually lead to a period of greater prosperity, or more importantly greater optimism and opportunity.  During this election season, the negative seems to be front and center of almost all debates and pundit commentary.  Much of that should be ignored, and taken for what it is.  That is that they are simply scare tactics to attract votes. The economy has at times in the past been much better, at times much worse.  Relatively speaking the U.S. should do well, but that may not be in a satisfying enough way to many in the next few years.  In fact, it is unlikely to be the case, even if all is headed in the right direction.




Thursday, June 23, 2016

"The Mulberry Bush", the latest novel by Charles McCarry

This book was a welcome find.  Written last year when McCarry was 86, it was a  surprise to find.  His finest novels were written in the 1980's and were totally focused on the period from the early beginnings of World War II up until the time of President Kennedy.  A former CIA officer, his knowledge of the ins  and outs of espionage was stellar, and the historical fiction that he wrote in this genre was better than any other writer.

"The Mulberry Bush" is about the activities of the CIA, the Russians, and others in Argentina during the significant turmoil and carnage there in the late 20th century.  Once again, historical fiction is at work, and the story is convincing, and easily kept the attention of this reader.  One could say that the ending of the book was somewhat flat, allowing no conclusions and really losing any of the historical meaning that was evident in his earlier books. Maybe that was all there was to that conflict, just personal and family vendettas and of little real political meaning.  While ideological disputes and age old tribal loyalties resonate in disputes in much of the world, in Central and South America family fiefdoms are center stage.

It was nice to find that McCarry is still writing, and writing well.   Another recent book from McCarry is on the way from Amazon Prime, an amazing service.

Tuesday, June 07, 2016

Student loans and Bernie Sanders

Last night a major factor in the youth movement for Sanders became clear.  In an interview, an early twenties type explained how Sanders would relieve his college debt.  In another a current college student said he would allow her to go to college for free.

So, youth vote for yourselves of course.  That is not the only issue.  Whether Sanders, Clinton, or Trump, there are a huge range of issues being voted on.

A young person who is a friend on mine is an Americorps  volunteer in Texas.  There were 78 of the volunteers in a class called "College Forward".  When in training they were asked how many had student loans to repay, and all but my friend raised their hands.  She was shocked.

One could say that there is no, absolutely no, resolute idealogical choice by many young people around Bernie's ideas, half hatched as they are.  It is a pure economic choice, one that was made as an agreement and they want to completely give up on.

Monday, June 06, 2016

"Before The Fall"... a book by the creator of "Fargo"

This was an entertaining book with a bit of a muted ending, as is common in many books that are read but not written about here.  Stuck now with being on the cusp of having something to write about Trump, soon I hope, that is even a little different from the volumes of interpretation that have already been written, it occurred to me that something should put into print to keep the non-U.S. readership alive, close to half of the followers here for whatever reason.

"Before The Fall" is written by Noah Hawley, who in his mid-thirties, unknown here until three days ago, and has built a large writing business in books, screenplays, and television, including Fargo.  The story in this book starts with a small private airplane crash with mostly wealthy people on board, and then proceeds to detail the lives of each of the passengers.  That seems like a good way to outline and segment the writing of a book.

Hawley is a talented writer.  He manages to say in new ways many things that should be shared wisdom, and he occasionally might even come up with some himself.  The important thing about the book is that it is entertaining and will be perfect for many a beach read, airplane ride, or train trip where a book should be semi-intelligent and absorbing, if not ever lasting.  If what has been written here is understood, read this book.  It has great recent reviews.  It was read here in two days.  It was engaging, but the ending seemed a little flat.  Try it from a library, not meant for the shelves.

Saturday, June 04, 2016

Buying new stuff

It often does not seem to be the time to buy new things here.  Why not just use the old stuff.  There are, however, at times good reasons to make some purchases and there have been some here recently. The biggest was a new washer and dryer about two years ago.  It seemed like that kind of purchase was made at some sort of life changing event, like buying a new house, or moving.  In actuality, ours just were not working well after 16 years of constant use of  Mayfair items.  The new LG ones have many more features, like a water amount gauge that somehow measures just what one needs.  Want to wash just one pair of muddy jeans after an afternoon of planting flowers.  No problem, water will not be wasted.  Still, it seemed odd to be buying new ones while just staying in place.

Recently, three new Teflon skillets were bought online from Williams Sonoma.  The older ones worked fine but in recent years have been scratched by multiple users, some seemingly unaware that scrambling eggs in a Teflon skillet with a fork pressed down was not a good idea.  Two were needed replacements and one was a larger one that may not have been needed --- but I was shopping.  If time to do real cooking presents itself, this large skillet with a glass cover will be a good addition, if.

A new small toaster oven is on the way.  For the last two years, the one that we have had for a long time had a dial that is difficult to place in any definite position and one that is lost and requires a pair of pliers to set.  We use it for toast every morning and often at lunch to warm up sandwiches.  Just ignoring the problems was not necessary, and we look forward to the new one tomorrow.

Then there are jeans, which are almost exclusively the pants worn here.  Frayed cuffs, too much fade, and at times stains have been ignored.  They are just jeans.  But worn constantly it was becoming obvious that new ones would look much nicer and even feel better.  Four new pairs have been purchased online from Levis in recent months.  The same size has been worn for the last 20 years so the fit is fine.  They look good.  Did looking poor seem like a good idea?

Those are some examples of recent purchases that I have have finally had the minimal foresight to make.  Of course, some blunders have been made.  Just a few, but did we really need an iced coffee maker?  It was not expensive but was one more thing to put in the kitchen necessary, and is it worth the trouble.  I think not, and this will go down as a mistake and as summer begins we will know soon. Buying polo shirts from different brands online is next to impossible.  Despite measurements,  a large in one brand can be far to tight and in another far too long.  Mistakes have been made and at times ignored as sending the stuff back is more trouble than it is worth sometimes.

As we age our stuff ages, but it always seems like a surprise that we need more when we have so much.  Deliveries to the non-profit thrift store in a neighboring town need to be stepped up again.


Postscript:   Tonight the new 12 inch Teflon skillet with glass cover was used to cook two big pork chops.   Perfect.  The new iced coffee maker was put in a low cabinet to hide my mistake.

Friday, June 03, 2016

"The Fractured Republic"

This book by Yuval Levin is subtitled "Renewing America's Social Contract in the Age of Individualism".  Levin was not familiar here until a column by David Brooks was read that praised this book.  Brooks, in his op-ed columns in the New York Times and in his appearances on PBS News Hour, is viewed by some as a resident conservative for those media outlets.  That said, he comes across as a intellectual moderate with views that many could agree with, especially when compared to the radical race to the right of the just completed Republican presidential primary campaign.

Levin is editor of "National Affairs" and a contributing editor to "National Review" and the "Weekly Standard".  Jacket cover praise for this book comes, as is not unexpected, from Paul Ryan and Peggy Noonan, but also from George Packer.  "The Fractured Republic" details the divided U.S. society that exists today, economically, socially, culturally, and politically.  That supposed bedrock of U.S. society, the middle class, has been significantly diminished in the last 20 years and in some ways only exists, according to Levin, in the minds of the right and left with a sense of nostalgia, a type of nostalgia that leads nowhere but to frustration. This book could have been written by a combination of the minds of a seriously right wing conservative intellectual and Robert Putnam.

It suggests that we are now faced with a schism in society of either an individualistic approach to our lives or a statist approach.  The already hollowed out middle class and the middle mediating layers of society have lost influence, whether that be families, communities, churches, charities, civic associations, really any organization that drives change through local or personal contact.  Solutions to many of society's problem could come from the ground up if these aspects of society could be rebuilt, into many solutions for many problems as opposed to individual solutions or central government approved or directed ones which are unlikely to be satisfying to many in our increasingly diverse culture.  The drift of the book is clear.

This is a thoughtful book, and it seems at times that there is not much to disagree with.  Levin acknowledges that he is a Republican conservative and the only politician that he regularly singles out for criticism is President Obama.  He comes off as striving to be even handed and almost apolitical in his analysis, but the elephant in the room is the outright intransigence of the Republican Congress to seriously consider anything the President proposes, even something as widely approved of by huge margins of the public such as infrastructure spending, which is becoming absolutely necessary(anyone who travels to other parts of the world know this for certain) and which would be sound fiscal policy to produce better paying jobs.  Levin somehow sees a dysfunctional Congress as a completely shared event and cites the many executive orders by Obama as an example of his unwillingness to compromise.

One other aspect of this book is Levin's constant pounding home his main themes, in many articulate ways but to the point of beating a dead horse.  This book can be almost mind numbingly repetitive at times.

With those caveats, and with a willingness to read fast at times, this is a constructive and thoughtful book.  Most of it is not new thought, but it is so much better and more studied than much of what comes out in book form from the right wing.  It makes an effort in its own way to be balanced.  There are important facts in the book that were important and not familiar here.  It was worth reading for those interested in our current deadlocked and "fractured" society.


Postscript---6/5---aspects of this book are pertinent to interpreting the strange election season of 2016.