Friday, September 30, 2016

Endorsements of Gary Johnson?

Newspapers or media outlets that endorse Gary Johnson are bailing out in a way that does not work at all.  Gary Johnson, at times, can hardly remember his own name.  That's a bad exaggeration from here, but not inappropriate.  This man is widely unread, the Sarah Palin of this election season.  Why would some major newspapers endorse him.  Because he is a him and wears jeans?

Obviously, it is because the two major candidates are unappealing to them.  How could Johnson possibly appeal to them?  Is it simply his Libertarian party connection.  One could guess not, as some of the newspaper endorsements come from constituencies that are not so strong on the values of that group.  The answer is that it is simply a protest vote that defaulted into Johnson.  If Weld were the presidential candidate, there might be a reason.  With Johnson, it is simple cynicism, or baby stomping feet.

If no candidate satisfies, these newspapers should simply state their opinions on the facts and say that they leave it up to the voters.  Is that unreasonable?

Thursday, September 29, 2016

Comments on "Still Alice" and "This Boy's Life", films

A few nights ago, "Still Alice" was watched here on HBO.  It had been seen almost two years ago when it opened and at the time was seen as special.  A new viewing last night saw not only some new provocative aspects of Alzheimer's that had not been noticed in the film before, but also some new thoughts about how shallow the film is in some ways.

What was newly noticed, on the insightful side, was the comment on the effect of medications, none stopping the progress of the disease but possibly effective in the amelioration of the symptoms short term.  That was known but not fully appreciated at the time.  Also, and completely overlooked before, was the impact on speech which is apparently ubiquitous with this disability.  To still be able to understand others, but to not be able to get the words out, reminded me of ALS.  A doctor here says that there is no relationship, although for the patient it is surely the same dilemma.  That we know. While the perceived wisdom of the medical community is that dementia diseases do not cause death, the film does depict the radical increase of fatigue and withdrawal from life that occurs, certainly a form of death to a family if not to physicians.

What is now seen as somewhat superficial in the film was the family impact and dynamic.  Everyone stays basically the same.  The husband of Alice continues his life work unabated, with only a few nuisance events.  The children stay on the tracks of their lives, excluding one scare that is unexplored. What is missing is the actual physical pain of the sufferer and the complete exhaustion and frustration of the caretakers.  Other than a feeling of loss, where is the sense of regret and resentment of the afflicted person.  Where is the pain of trying so hard, so hard, to act normal to provide a facade for friends and family that ultimately does not work.  Where is the anger at this outcome by family and caretakers that must be restrained.  Where is their complete exhaustion?

It's a good film, a timely film, but there must be better ones out there in the past, or someday soon.

"This Boy's Life" debuted in 1993.  That was in year two of a period of at least 12 years when only a few choice films were seen here, or even noticed.  It was the period of all corporate work leading to periods of a few weeks of all out vacation intensity.  No rest in either mode.

So this film on a Starz network was completely new late last night.  It is the autobiographical story of the childhood of Tobias Wolff, a once popular writer whose work was a little less than brilliant.  This life story led to his fame, and it is certainly a testament to his will to succeed in life.  The players in the film are exceptional.  Leonardo DiCaprio at a young age plays Tobias.  There was no knowledge of him as an actor in 1993 but there he is.  Ellen Barkin is his mother in an attractive role as a down on her luck beauty who enters into a marriage of compromise, then complete deference.  Robert DeNiro as the step father plays the most despicable role in his career it seems.  His depiction of Tobias's father is truly that of an awful self centered person.  One cringes at his every scene in the latter parts of the film.

The only reason to keep watching this multi-faceted melodrama was the fact that it was based on a true life.  It was watched and was not exactly a film that led to a restful snooze.

Wednesday, September 28, 2016

"Jackson,1964", reporting by Calvin Trillin

This book, subtitled "And Other Dispatches from Fifty Years of Reporting on Race in America", is a sample of Trillin's journalism that in a composite view shows how the subject of racism has evolved, and not evolved, during a reporter's lifetime.  It is especially interesting due to Trillin's clear, sparse, and insightful reporting style, and from the perspective of events over the last year that have laid bare the country's remaining challenges.

Each chapter in this book could be interesting to many, but making choices leads to highlighting a few.  "Jackson, 1964" covers the "Mississippi Summer Project", a voter registration drive up against tremendous odds, one that only scratched the surface of success but laid the groundwork for significant gains in years ahead, in that state and others.  "The Zulus" looks at one aspect of the Mardi Gras celebration in New Orleans, one that focuses on a "tribe" of black faux Indians, parading in blackface to exaggerate their point, and the attention and frustration it caused many as the civil rights movement became widespread.  The Zulu parade, having been started in 1916, was a part of the chaos of Mardi Gras that was expected, and the unique nature of New Orleans is on view in this article.

"Cause and Circumstances" looks at the killing of a black man by a white policeman in Seattle in 1975.  That such an incident causes instant conclusions by different groups has not changed to this day, as we see.  "Remembrance of Moderates Past", written in 1977, begins with this comment by a black lawyer in New Orleans in 1960 as the public school system was being desegregated --- "I keep hearing about white people who say they're working behind the scenes" --- during a time when the business and professional leadership of the city stood silent while the city seemed to be taken over by a bunch of women in hair curlers screaming obscenities at six-year-olds.  "Yes sir", he said, "It must be getting really crowded back there, behind the scenes".  This thought can ring true to many in many places during the height of the civil rights years.

This carefully written book is enjoyable, if that can be said when discussing this subject that is fraught with contradictions and questionable behavior.

Friday, September 23, 2016

Can an equity investor hold their nose and buy Wells Fargo now

Wells Fargo closed today flat at $45.74 after closing yesterday at $45.72.  On September 1st the stock was at $51 and had been as high as $55 in the last year.  It now has a dividend yield of 3.3% and a trailing twelve months p/e of 11.3x, well below the S&P median.  The penalty that it just received from the regulators was limited by what they were allowed to charge, and it is peanuts compared to WFC's earnings.  There is no comparison to the many giant charges related to mortgage securities that have impacted the large financial services companies in general.

With all of the attention on their fiasco and fraud related to opening phony accounts without customer knowledge, it can safely be assumed that their incentive systems will be overhauled as soon as possible.  It is also clear that they have no choice in the near term other than to make management changes.  They do have a succession plan in place and the likely person rising has had no role in the retail banking imbroglio.  It can also be assumed that a major customer outreach program is underway.

With the fines for their fraud not substantial, it now can be recognized that a huge amount of Well Fargo's business is annuity-like.  Their gargantuan mortgage business will keep seeing a flow of servicing fees and interest.  It is unlikely that a significant amount of customers will go out and refinance their mortgages with another firm.  There are costs to doing that, and the risk that Wells will scam them is reduced with government scrutiny.  The same can be said for the average banking customer.  Making changes to banking arrangements is something that most retail customers would like to avoid as it is a time consuming process that can always lead to errors in transfers to a new financial institution and requires establishing new relationships.  WFC's risk profile in the corporate and institutional market has always been low relative to investment banks, of course, and to JPM, in particular, and BAC as well.

The bad news will keep coming as Congressional hearings and Labor department investigations go on.  This is prime time for attention seeking politicians to get their mugs on the screen, indignant and probing , as if they had been seriously examining the industry in the past, or in the previous month. The bad news is presumably reflected in the new lower stock price.  It could decline somewhat more, but one could guess that the worst has mostly happened from a stock price point of view.

It's an investment to think about.  It is not an endorsement of the firm's behavior, but a chance to buy a substantial firm that has many positive attributes and leading market positions at what could be a reasonable price, with a good yield, and meaningful upside if the Fed ever has the guts to raise rates.

Postscript:   Wells Fargo has been well known as a bank with a history of good management.  There had,in my heyday, never been a hint of arrogance from this firm, from its senior to middle management seen from day to day into the 80's and beyond.  Culture sustains itself, and this aberration will be overcome.  As more comes out, any challenge will become more clear.

Clinton estate tax proposal

Sometimes it's not that hard to wonder if Hillary Clinton is trying to lose this election.  She announced her proposed estate tax policy as detailed in the WSJ article today, "Clinton Seeks Big Jump in Estate Taxes".  Her plan would dramatically impact a relatively small number of extremely wealthy families, but it would also hit families with small businesses and any family inheriting stocks and other assets with capital gains.  Also, the complexity of her suggested capital gains reporting, for all taxpayers inheriting such assets no matter how small, will be a boon to tax accountants and an affront to individual taxpayers who think that they should be able to do their taxes without paying for help.

From an election point of view, why would she go into such detail on a proposal that would need to be negotiated with Congress, the outcome of which is completely unclear.  The estate tax issue is up in the stratosphere for most voters and is not a key to how they would cast their ballot.  To those voters who see her proposal as a significant confiscation of wealth, it will antagonize them and no doubt increase their election activity and contributions in the coming weeks, despite the cloud of Trump.

Relative to the actual budget deficit and tax receipts, her overall tax plan is more cosmetic than it is a major additive to funding her proposals.  It helps, but it is done for the purpose of fairness and wealth redistribution.  That's fine.  There is one proposal, however, that cuts right into the upper middle class, those not rich but doing well.  That's eliminating the step-up in capital gains taxes upon the death of someone leaving an estate.  As it has been, when a person dies their assets are repriced as of the date of their death.  If they have gains, they are eliminated as being taxable.  If they have losses, they can no longer be used to offset tax.  For those who save, those who buy and hold stocks and other assets with the goal of building wealth over time, this would be a significant change for many families and small businesses.  It's a potentially huge hit on the upper middle class, those whose children would benefit from their thrift and work.

While the overall number of families and businesses significantly affected by these proposals still may seem limited, Americans are almost naturally aspirational.  For example, a small business run by a thirty year old may be very small now, but if successful could grow into something that Clinton's proposals could impact years ahead.  Her net may be catching a population segment much broader than she realizes.

There was no good reason to promote this now.  Clinton seems to go out of her way to show how smart she is, how fair she is, and what a swell candidate she is.  With Trump as the alternative, she should win the election.  What she does after that and can get through Congress is after the election of course.  Why provoke voters that absolutely should be in her camp, not in Trump's or with Gary Johnson or Jill Stein.  Her potential victory is not a done deal.

Postscript:  Today's early statement that she would go to Charlotte tomorrow was really not smart. Trump soon followed saying he would go there as well.  Thankfully the Charlotte mayor said to both "stay away"'.  They have their hands full.  What was Hillary thinking in saying that she would go there, as if she is some sort of savior.  She must win, but she is not helping us.

Thursday, September 22, 2016

Opportunists for Trump

There is a category of Trump supporter that goes beyond the routine.  They stand out in a way that is completely transparent.  They clearly don't mind the attention that they receive or the incredulity with which their statements are met.  They see a chance for something much bigger.

This comment is not focused on the campaign manager from nowhere, Corey Lewandowski, who has now been replaced.  With no experience, he did well by doing nothing.  It could be focused on Paul Manafort, but his aspiration may have been to do what he was doing, and he had achieved it just as he did in Ukraine.  He, too, is gone.  It is also not focused on Boris Epshteyn or Kellyanne Conway, two Trump publicists in the spotlight now who make little sense at all as blindly steadfast Trump supporters and apologists. They are making good money and getting tremendous exposure, but that is their accomplishment.

The "Opportunists for Trump" group has much bigger things in mind.  They are beginning to come out of the woodwork.  The prime one seen here is Steven Mnuchin, Trump's chief fundraiser.  With Yale, Skull and Bones, Goldman Sachs, and success as a Hollywood producer in his background, he startled most who knew him or even knew of him by signing on with Trump.  There is only one answer to this puzzle.  He sees an opportunity to be Secretary of the Treasury and he does not see Trump's quest for the Presidency as a lost cause.

A second example of this showed up today as Andrew Stein wrote an opinion piece in the Wall Street Journal today endorsing Trump.  Remember Andrew Stein?  He from a wealthy and connected family in New York that played a leading role in state and city Democratic politics for many years.  He was a constant attention seeker.  He went from job to job, serving in various New York elective offices from 1969 to 1994.  He once was Manhattan borough President, but he never made it to the top rungs of the ladder that were his obvious aspiration, or obsession.

With his career in politics seemingly over, and his Democratic network diminished, he now sees an opportunity.  Supporting Trump could lead to something, could lead to attention from the media again, and might put him in the second tier of the cabinet, assistant secretary of whatever, of anything, please.

Then we have Rudy Giuliani.  How he would like to be back in the news.  His supportive comments about Trump have been beyond the fringe.  He is embarrassing himself with his obsequiousness.  He is an obvious shill, and an outright liar.  Too bad for someone who years ago had some credibility despite his pompous self image, seen here on the 8th floor of the building worked in, back in his years as Mayor.  We must not forget the ultimate champion of this style, Chris Christie.  Christie, who had some mettle just a few years ago, does not seem to realize that he will get nothing for his fawning, while unfortunately Giuliani possibly could in the event of the unexpected.

Waiting for the next blatant opportunist could be a parlor game.  Who could make the best guess for the next one in line.

Tuesday, September 20, 2016

"The Pigeon Tunnel", life stories from John Le Carré

As a reader, from time to time of espionage fiction based on real historical settings, I had at one time read a few novels by Le Carré.  From this perspective they were interesting but a bit too involved in the inner workings of the spy services, meaning a bit tedious.  That statement must seem like heresy to some Anglophiles who view Le Carré's work with adoration, but so be it.

Most new books of this genre of fiction inevitably have reviews that state something like, "belongs in the realm of John LeCarré and Alan Furst."  The assessment of the former has just been stated and Furst is a second class spy writer, well grounded in history and the locales of Paris, and with a claim to fame of being in the literary community of Manhattan's upper west side.  If two favorites were chosen here they would be, first, Charles McCarry and second John Lawton.  Their work is, more broadly, historical fiction at its best.

Regardless of this opinion, "The Pigeon Tunnel" is an interesting collection of memories from LeCarré.  Some of the stories are fascinating as he gives accounts of his travels around the world. Some that focus on the rationale or background for particular books of his are less so, as I have not read the books in question.  His two chapters on visits to Russia in 1987 and 1993 were particularly interesting.  Overall, these stories are a mixed bag, but finding the ones that sparkle are worth the slog through some that are factually of note but not as entertaining.  The longest chapter, "Son of the Author's Father", is one of the gems.

David Cornwell, the real name of the LeCarré writer, had a fine career and it continues.  To those who love his work this book is no doubt cherished.  Here it was enjoyed.

Monday, September 19, 2016

Slipping into darkness

This time of year can be somewhat less than upbeat.  The length of the day becomes shorter in a way that is not always fully anticipated.  The weather is beginning to get a little cooler and more cloudy on some days.  The wind picks up and is beginning to shake a few leaves off of the trees.

In fact, the weather is still pleasant but, directionally speaking, a sense of foreboding can come to those who like summer, lots of light, and warm weather.  We know what's coming.  Soon there will be less people out in the evening.  Those early fall storms could be on the horizon.  Summer in fact and on the calendar is almost over.

An attitude adjustment needs to be made to shake off any anticipatory fatigue.  It's been done before many times and must be done again.


Saturday, September 17, 2016

Apple's revived stock price, Deutsche's pending disaster

After media skeptics continually raised doubts about the iphone 7 and had begun comparing Apple's stock to that of a sluggish Microsoft in the mid-2000's, the stock was up 11% in the past week more than 25% above the recent June 27th low of $91.50.  The new iphone is now almost sold out and a new Apple watch seems to be attracting more interest than the first edition.  At the new price as of Friday's close, Apple is still trading at a trailing twelve months p/e of 13.5, below the S&P 500 average, and it has a dividend yield of 2% that will certainly grow over time.  When the numbers work and the embedded core Apple users act, listening to most securities analysts and pundits is not worthwhile.

Meanwhile, back at the bank ranch, Deutsche Bank is the latest victim of U.S. regulators wrath about mortgage securities business seven years ago.  Will this ever end?  The fine proposed by these regulators is a preposterous $14 billion.  The only fine larger was the $16 billion paid by Bank of America, including its untimely acquisition of the massively flawed Countrywide, indigenous operations that were significantly larger than Deutsche.  Securities analysts had been projecting that the fine would be $4 billion to $5 billion, because that was what the company was telling them and what the company expected, or hoped for.

Is this payback for the EU's $14 billion tax bill for Apple, which the Irish government itself is not seeking? There is often no way to figure out the rationale for such charges, and many large U.S. banks like Goldman Sachs and J.P. Morgan have often paid up whatever very large fines as soon as possible to get bad publicity behind them, even if executives viewed them as extortion.  Most of these fines do not go to holders of such tainted securities, but simply to government coffers as punitive assessments. Deutsche insists that this is still a negotiation, but the stock market wonders and the more that 8% decline in the stock yesterday suggests that any fine, even if reduced, will be much larger than had been expected.  To many, it looks as if Deutsche will need to raise capital to meet its capital standards and this will temporarily put a further damper on its stock.  To repeat, will this ever end?  The fines do relate to some level of misconduct, but why could this not have been concluded earlier?

Friday, September 16, 2016

II Delivering Alpha Conference big shots go market negative

Some of the most active, successful, and influential investors at this week's conference were prone making exceptionally negative comments.  It was surprising and, as it is impossible to know if they somehow were talking their own books, a bit confusing.

Carl Icahn is definitely an aggressive equity investor at all times.  He intimidates companies that he invests in, and with his reputation can often incent management behavior in a way that he almost dictates.  While it is clear that he is still investing, he called these times "exceptionally dangerous".  His words were that whether it's one week or months away, there will be a noticeable correction.  Paul Singer sees a "huge bubble" in the bond market.  He thinks a significant repricing is inevitable and suggests that it could be calamitous for some.  He sees gold as a good investment.  Ray Dalio was highly cautious as well, seeing issues in the bond market, equity market, and commodity markets.  Dalio's view is understandable as when one part of the securities markets to some extent collapses, liquidity is affected broadly and impacts all markets.

The equity market is still performing reasonably well, but with much more volatility than in August. Things are heating up even as summer ends.  It's easy to suggest that the bond market is vulnerable. Staying the course is the main option, being wary of anything but short to medium term bonds and strongly capitalized stocks.  The coming months will be a time to look at any over allocations.

A few campaign comments

The opinion here is that Hillary Clinton should not have rushed back to campaigning so soon.  She would have collapsed on Sunday had Secret Service agents not been around her.  For gosh sake, she was diagnosed with pneumonia.  That is not trivial.  It is assumed that much more rest is generally required for people so afflicted, even often a few days in the hospital.  She must think that getting back on the campaign trail as quickly as possible was a necessity.  Once again that is an exaggeration of how influential her campaigning style has been.  Now she has set herself up for a big problem.  If there is one more health scare, one more instance of dehydration, or a big stumble caught on camera, her campaign will be damaged.  Significant plane travel is taxing on the body. Trump and his media minions will make sure that any problematic physical event will now receive plenty of attention.

The good news is that the few days off seemed to give her a chance to reset her campaign.  She now says that she will focus on her major planned initiatives and not as much as on Trump's obvious falsehoods. They are so transparently not true and the majority of voters should see that.  Committed Trump supporters will not be budged by any logic or any facts.

There is an editorial in the September 10th "Economist" magazine with the title "The Art of the Lie".
It is worth reading, and it points out two important thoughts related to this.  Quoting, "Feelings, not facts, are what matter in this sort of campaigning.  Their opponents' disbelief validates the us-versus-them mindset that outsider candidates thrive on.  And if your opponents focus on trying to show your facts are wrong, they have to fight on the ground you have chosen."

Quoting again, "Well-intentioned journalistic practices bear blame too.  The pursuit of "fairness" in reporting often creates a phoney balance at the expense of the truth."  This is why Trump seems to get a pass on many of his outrageous statements while Clinton has to fight tooth and nail about her e-mails, not about her more important policy initiatives. By the way, Matt Lauer was a joke.

"The Economist" refers to a "post-truth" era of politics.  How to hold a candidate with the bombast of Trump to some degree of accountability is difficult.

As a related aside, it would be nice to think that Clinton's "deplorables" comment at Streisand's LGBT event was due to growing fatigue and not just playing to an audience for applause.  That comment was almost as bad as Mitt Romney's 47% comment in 2012.  At least Romney did not know that he was being recorded.

Sunday, September 11, 2016

15 years ago

This 9/11 seems to have a little more resonance.  The loss of friends is no less meaningful, but for some reason that long ago walk up the hill to our house after a day of hiding was full of memories. The vulnerable structures remain, and building a tower on that site was a defiance by private enterprise that shows the best of this country.  If we could live with that intensity as we face the bigger problems in our society of tech and finance dominating our work lives and compensation, we could just maybe create solutions.  Whether there are any potential leaders can bring that to the table is not clear

In memory of many, but more specifically to my close friend David Berry, KBW head of research.

Friday, September 09, 2016

Wells Fargo's account opening debacle

The fiasco around Wells Fargo's disclosure that it has been fined for setting up bank accounts and credit card accounts without the knowledge of customers will not be a significant financial event for the firm.  Wells can easily digest the fines, as they pall in comparison to all of the fines over recent years related to mortgage securities and mortgage originations in the industry.  In addition, the cost to the bank of reimbursing customers for actual overcharges or late payments is modest.  That said, the reputation risk for Wells is huge.

Investors closely follow account growth, and the success of the overly vaunted concept of "cross selling".  In forecasting future earnings growth, they consider the potential benefit from new accounts.  Their forecasts are now tainted.  Customers, too, will certainly be aghast now that they know that this has been surreptitious practice of some Wells' bankers.  Most importantly, however, is the complete waste of time and the aggravation that this fraud has caused existing customers that have been affected.  Can a reader fully appreciate how much time it takes and aggravation it causes to deal with a problem that one has with a bank account.  People in general are understandably highly sensitive about irregularities in their financial life, and losing sleep over it is normal.

Wells says that it has fired 5,300 employees that have been involved in the scam.  Bizarrely that has been over a five year period.  They have long known that they had a problem.  The incentive system at the bank, closely linked to "cross selling", has somehow incented this behavior and yet has apparently not been modified during this time frame.  Selling commodity products is possible only with strong relationships.  Broad online banking opportunities from multiple sources have dented those relationships.  That's the dilemma for retail bankers, especially those who are just beginning at a firm and need to build a portfolio of clients.

There are questions that arise from this.  First and foremost is whether this is an industry problem and not solely related to Wells?  Second is whether, with all of the mergers that have created our major banks, is this behavior primarily related to one or two regional areas tied to acquisitions by Wells or is it widespread?  Third, what changes will Wells make to avoid a repetition of this, as firing of those involved over the years does not seem to have been effective?

The banking industry certainly did not need another reason for the politicians to pounce on it, but this will surely be campaign fodder.

Wednesday, September 07, 2016

The global rise of Trumpism

Whether it is just a sign of the times everywhere, or a reflection of what is going on in this country, an anti-immigrant, nationalistic, style of right wing politics with unusually harsh rhetoric has become widespread.  Donald Trump's uninhibited crowd crazing politics of the negative is not just happening in this country.

In England, Nigel Farage led a party that favored Brexit and won, surprising an establishment that found it difficult to take him seriously. With success, Farage bowed out of politics, at least for the moment, when the task of aiding the transition would have required work, rather than excess, vitriol, and bombast.  In France, Nicolas Sarkozy has risen from the ashes to become a faux centrist right wing agitator full of absurd comments to try to take the mantle of the right from the even more extreme Marine Le Pen.  In Austria, election disputes will be decided in October and it is possible that the anti-immigrant almost Hitleresque Freedom Party could win.  In Germany, Chancellor Angela Merkel's party was defeated in her home district as a far right party won 21% of the vote and allowed the Socialists to win.  In Italy, polls suggest that 65% of the voting population has moved to the right due to immigration fears.

The unprecedented language and hostility of the Philippines new President Rodrigo Duterte as he spoke about President Obama is further evidence of a deterioration in any sort of decorum in some areas of world politics.  They are a long term ally that depends mightily upon U.S. aid and defense still now, long after they became independent after WWII.

The willingness of Trump to lavish praise on the dictatorship/kleptocracy of Russia and Putin while saying that if he doesn't become President it will only be because the election is rigged is perhaps more blasphemous than all of the above.  And yet here we are.  The media is playing the "try to be fair" game and bending over backwards to accept Trump as a normal candidate.  Clinton has her problems, but she also has her principles.  They are being tested as Trump is given a pass.

Where is the good news here?

Sunday, September 04, 2016

"Hillbilly Elegy"

This first book by J.D. Vance was read here a few weeks ago, immediately after it was published. Usually that means something will be posted soon after.  This book was different.  There were many aspects to it that did not fit into an easy description, at least that was the case here.  By now it has been widely reviewed and has attracted significant attention.

In what ways was this book attractive and identified with here?  First, while never seeing myself as growing up in a hillbilly culture, growing up at 500 feet above sea level on the fall line in Virginia and far from the mountains where "hillbillies" lived, based on what was read here I certainly must been growing up in a "hillbilly" town.  At one point it is mentioned that in Middletown, Ohio, where much of the book takes place, more than 20% of those entering high school as a freshman would never graduate. That number was over 40% in our hometown when I was growing up.  It was a highly divided mill town.

Second is Middletown itself, which is in a part of Ohio that I covered as a corporate banker in the mid-80's, where a major client was Armco Steel.  The deprivation described about Middletown now is not something that was obvious then.  Armco, where some of the Appalachian transplants described in the book worked, seemed to be the ultimate patriarchal company.  They maintained an expansive recreation area with two immaculately maintained first class golf courses for all employees and much more. During my coverage time, Armco was working, we bankers were working, to help it avoid bankruptcy.  Almost three months of meetings with all banks and lawyers in downtown New York*, plus multiple trips to Middletown, made what was read here in this book of great interest.

Third, the book led to reflections about my great grandfather in Lebanon, Virginia, someone I never knew, who was the son of an Irish immigrant and by the early 1900's was a lawyer for some of the largest coal companies in Virginia and Kentucky.  My grandmother told me about him taking her to stay at the Waldorf Astoria when she was 12, as he needed to be there on a business trip.

Fourth, the many drives through Appalachia that were made during the time that I lived in Louisville and going to the hometown in Virginia, were always opportunities to see Appalachia, stop to get gas or a barely edible sandwich, and talk with whomever.  Few people took the opportunity.

Fifth is the fact that this book is all about a mostly dysfunctional culture, and a very resilient one, rather than governance or politics, although that is not avoided.

This has obviously not been a review of this book in any form.  It is random reactions to an interesting book.  It caused some personal reflection on my part,  related to some things that I know and like to ignore.  With what little a reader can gain from what has been written here, it is suggested that this book be read now, not because it tells any type of full story but because it does a great job of telling a piece of one, that is if one reads it as a reflection on what is happening in this unusual election season.  I did.  J.D. Vance tells his family story in what seems to an honest and straightforward way, and it has much broader implications.  At 31, he is already an accomplished and experienced individual, war veteran, writer, and practicing attorney.  What's next?

*I remember many things about those intense all day and late night meetings as seven banks and Armco struggled to agree on anything that would lead to a solution.  One winter night a major blizzard arrived, and I was wondering how could make it back to my midtown studio.  Would there be any cabs, would I need to walk, or would the subways be working if the effort was made to walk to one and from one.  With that on my mind, three J.P. Morgan bankers, with a short walk to their bank and car services ahead, were talking about whether their lanes in Connecticut would be blocked. They were my age or younger.

U.S. Open tennis on television

Yesterday, we watched a few hours of the U.S. Open on television.  It was entertaining for the most part, completely engaging at times.

For many years I had disdained television in favor of seeing the event in person, or not at all.  Sure, on occasion for special semi-final or final matches we had tuned in, but for middle of the tournament matches almost never.  Since we live 20 minutes on the Long Island Railroad from the Tennis Center, we, meaning K, me, or at least one of the daughters, would go to some of the early rounds every year. When I lived in Manhattan, the 7 train was an easy ride there from mid-town.  At other times I was able to entertain clients there at corporate expense in some of the best seats in the stadium, and with available hospitality tents.

The entire scene each year was worthwhile.  The crowd, with so many from around the world in a good mood, the food venues, and even the shops were a diversion whenever one was needed   Even though I played tennis for many years, actively and somewhat competitively until my mid-fifties, just sitting and watching for hours, in person and certainly on television, was not my deal.

It was a pleasure to watch yesterday.  What was remembered as commercials at every changeover or any break in the action seems to no longer be the case.  ESPN stayed with the action most of the time, moving from one match to another.  When there was an infrequent commercial break, relative to the past, it was a bit longer but allowed time for any break needed, or a resupply of chips.

We will watch more as the tournament progresses.  It would still be better to be there, but that will not happen this year.

Saturday, September 03, 2016

A break to reconsider the market

This three day weekend will be a time for many to relax and maybe, while doing so, have a few unfettered thoughts about the stock market.  Will there be a post Labor Day ramp up of activity?  It surely could not slow down more.  Will major institutional investors and pension fund managers begin to take more risk and do more trading to assure, or try to assure, that their year will be better than it looks now.

Very recent results have seen a resurgence in long dormant small caps, mid-caps outperforming large caps, and emerging markets showing some life.  There is no reason to bet that these trends will continue, but if the large cap dividend trade becomes even more crowded the near term, opportunity may still be in be those areas.

There is a thought here that the ongoing election pyrotechnics have investors standing back aghast, simply not able to fathom what will happen as the next two months unfold.  There appears to be no way to trade this, and uncertainty is part of the market activity stall.  It would not be surprising if this uncertainty leads to a near term drop in equity prices, a drop based not only on any flight from equities but also a repricing of equities based on boredom, ambivalence, and the inability of investors to analyze the impact of political events.

Given the lack of alternatives, most investors will stay the course but it is not especially satisfying.