Monday, August 4, 2014

"The Month That Was - July 2014"

                         Sydney M. Williams
                                                                                                                                     August 4, 2014
                                                                                                             
The Month That Was
July 2014

“Here men from the planet Earth first set foot upon the moon, July 1969.
We came in peace for all mankind.”
                                                                                                                                     Neil Armstrong (1930-2012)
                                                                                                                                     July 20, 1969

Aided by science, civilized society is supposed to move forward over time. In many respects it has. In communication, information processing, our ability to combat disease, creating better alternatives for consumers in retailing, we are light years from where we had been a few years ago. Two examples of the thousands out there: The Apple iPhone 5S has more computing power than Voyager 1 that recently left the solar system. Amazon is considering “Prime Air,” a drone-based system that will be able to deliver an order thirty minutes after purchase.

But, in other ways we have retreated. On July 20th, 1969 – two years before my youngest son was born – Apollo 11 landed on the moon, a development that was beyond the wildest dreams of one my age at the time. Three and a half years later, Apollo 17 saw the sixth and final landing of humans on the moon. Since, that lunar orbit we see on clear nights has not experienced any steps of man, small or otherwise. Government is now focused on the more mundane, providing free condoms and ensuring its citizens are happy and comfortable. In the meantime, our infrastructure is crumbling, our rights are being eroded and exploration has been left to others. We blithely live in the present with little concern or planning for the future.

Forty-five years ago, the nation was focused on what men could accomplish with technology and human will – gifts for all mankind. A robust economy was seen as necessary. Today we develop technologies that allow men and women sitting in consoles to cleanly kill enemies with no risk of self injury. Social media has become common for children over the age of six. Teen-agers spend hours on their cell phones instant-messaging and sending photos and videos. We have developed at least 26 methods of birth control, allowing pleasure without consequences. (Don’t get me wrong. I am in favor of birth control and I, too, like my pleasures unhindered. But I suspect our world has become more self-absorbed. There is less of John Kennedy’s ‘…what I can do for the country’ and more of the Barack Obama’s ‘…what the country can do for me.’)

July, like all months, was filled with the serious and the trivial, the joyful and the sorrowful. Two plane disasters occurred during the month, killing 416 people. Combined with the 227 who died on Malaysian Air 370 in March, those three crashes killed 645 people. Last year, of 3.1 billion air passengers, 173 died in crashes, suggesting the odds of being killed in a plane accident were about 18,000,000 to one.  (In contrast, an estimated 35,000 Americans were killed in auto accidents last year. The National Transportation Statistics Bureau estimates that the odds of being killed are roughly ten times greater in a car than in a plane.) Malaysian Air 17 was shot down over eastern Ukraine, either by Ukrainian separatists, or possibly by Russians. Either way, the missile and its launch pad were most assuredly Russian; though it is my guess the militants thought they were firing at an enemy plane, but have been unable to admit to such a stupid and tragic mistake. Air Algérie 5107, on a flight from Burkina Faso to Algiers, crashed in a remote region of northern Mali, killing all 118 aboard.

The biggest news story has been Israel’s defense against the terrorist group Hamas, which now controls the Gaza strip. Israel is not only faced with an enemy that has sworn to “wipe them off the map,” they are also fighting a PR battle, as Hamas is expert at putting children and civilians in harm’s way. (For example, the other morning, listening to CBS radio, the newscaster announced that Israel had targeted a school and some 19 children were killed. The nonchalant ignorance of the announcer almost made me physically ill.) “War is Hell,” William Tecumseh Sherman allegedly once said, and he would have known. It is easy for us sitting in the comfort of our homes to become influenced by the photos and news stories emanating from Gaza City and feel sympathy for hapless Palestinians living there. Israel is fighting for its survival against a small group of Islamic extremists who are committed, not only to that country’s destruction, but to that of the West with its Christian-Judeo heritage. With 24-hour news coverage, we must take care and not let the distraction of ignorant commentators cause us to lose sight of the forest for the trees.

The situation in eastern Ukraine worsened during the month following the shooting down of MH17. Heavier sanctions have been pressed on Russia, led by the United States and reluctantly followed by Europe, which is far more dependent on Russia for trade and especially energy. Ukrainian Prime Minister Arseniy Yatsenyuk survived a confidence vote after his resignation (due to a failure to create a unified government) was denied. But Putin is hanging tough.

One would have thought, after all mankind has been through especially in the last one hundred years that people could live peacefully, intermingling, while respecting the rights of others. It is only through history that we begin to understand the futility of war – not that one can give in to terrorists – but the waste that it brings. A gift of the Founding Fathers was that they understood Machiavelli when he warned that in establishing a government one should “presuppose that all men are bad and that they will use their malignity of mind every time they have the opportunity.” The founders were wary of centralized power; so designed a government that would be balanced, with each branch providing checks on the other two. Power was diffused further by giving authority to state and local governments. What we have been witnessing in Washington, in this epic clash between the House and the President, is a testing of that construct. The stakes are high.

Those who live in other countries are not so fortunate, as we have seen in the Middle East, Ukraine, China, and throughout most of Africa, South America and a large part of Asia. Newscasts carrying images of the dead in Gaza ignore the 2500 Syrians who were killed during the month of Ramadan, which ended on July 28th.     

The outbreak of Ebola in three West African nations (Sierra Leone, Guinea, and Liberia), which has already infected more than 1,300 people and killed more than 700 of them, is expected to spread around the world; though the head of the CDC in Atlanta has said it is unlikely it will spread to the United States. Nevertheless, the first inflicted patient, an American case worker – a doctor – working in Africa, was airlifted to Emory University Hospital in Atlanta. The disease is extremely contagious and usually fatal. The death total rose to 729, when it was reported by the W.H.O. that 56 had died and 122 new cases were reported the previous week. Ernest Bai Koroma, President of Sierra Leone, was quoted in Friday’s New York Times: “The disease is beyond the scope of any one country or community to defeat.”

The crisis along the Mexican border sees no sign of abatement or political resolution. Humanitarian concerns are facing the reality of absorption and the question of how to deal with the tens of millions of immigrants who are here illegally, along with the millions of immigrants who are proceeding along the legal path toward citizenship. Differences between and among the political parties have raised temperatures in an already over-heated Congress and White House. Stories of impeachment, no matter their source (but which assuredly – and cynically – stem from the White House), serve only to detract from more serious matters.

In sports, LeBron James decided to return to Cleveland. Germany defeated Argentina for the World Cup in Brazil. According to FIFA (Fédération Internationale de Football Association), more than 260 million people worldwide watched one or more of the games. Rory McIlroy, only the third Irishman in my lifetime to do so, won the British Open. He was also the third youngest to do so, after Steve Ballesteros in 1979 and Tiger Woods in 2000. Novak Djokovic beat Roger Federer for the men’s title at Wimbledon. Petra Kvitová of the Czech Republic won the women’s.

Death claimed Olympian Louis Zamperini, subject of Laura Hillenbrand’s story, Unbroken, a book that has spent more than three years on the New York Times’ best seller list. His death had been first announced 71 years ago, after his plane crashed in the Pacific. He was 97. Actor James Garner died at age 86. Alan C. (Ace) Greenberg, former chairman of Bear Stearns died at age 86 on July 25th. He had inherited the job of chief executive in 1978 from Salim L. (Cy) Lewis who had been CEO since 1949. Over 52 years two men grew the firm into a powerhouse. In less than a decade, Greenberg’s successor, James Cayne, brought the company to its knees. Former Republican Senate majority leader Howard Baker, Jr. died at age 89. He became well known for his intense questioning of the committee investigating the Watergate break-in. He later served as President Reagan’s Chief of Staff. Senator Baker was the son of a Congressman and the son-in-law of Senate minority leader Everett Dirksen of Illinois. Also died during the month, Ernie Ball who played in the very first Master’s with Bobby Jones in 1934. He was aged 103.

In the world of finance: The economy popped back smartly in the second quarter, with GDP up 4%. But labor markets continue strained and the housing market sluggish. Detroit expected to emerge from bankruptcy, but it now appears it may be late summer or fall before that happens. Argentina is now in “selective default” according to Standard & Poor’s, but also, if the New York Times is to be believed, “in denial.” Default or a restructuring of her debt would have the consequence of limiting trade and raising future borrowing costs. Argentina’s President, Christina Kirchner, a populist who claims to speak for the poor, has enriched herself and her family during the eleven years she and her husband served, as their country’s economy collapsed. The Dow Jones declined more than 2% on the last day of the month, marking the first time since April 10th that that index has traded up or down more than 1.5%. The DJIA closed the month 1.6% lower than it began. However, it was the high-yield end of the bond market that got smacked the hardest. The yield on the FINRA-Bloomberg high yield index rose 64 basis points, or 12%, suggesting a concomitant decline in prices. Gold and oil prices fell during the month.

Elsewhere during the month: ISIS declared a caliphate in Iraq, encompassing much of the land west of Baghdad and most of Nineveh. On July 11th, 31-year old Amelia Rose Earhart landed in her single-engine Pilatus PC-12 at Oakland International after a solo trip around the world in 15 days, with 17 stops. She made a point of flying over Howland Island in the Pacific where her famous namesake, Amelia Mary Earhart disappeared in 1937. “Dawn of the Planet of the Apes” was released on July 11th and by the end of the month it had gross receipts of over $350 million. It is the 8th in the series, the first of which, starring Charlton Heston, was released in 1968.


The VIX, a measure of implied volatility – a measure of expected market volatility over the next 30 days – rose 46% during July, suggesting August may not reflect the “dog days” of summer. We will know in a month.

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