Monday, January 4, 2016

The Month That Was - December 2015

Sydney M. Williams

The Month That Was
December 2015

                                                                                                                                 January 4, 2016

“I heard the bells on Christmas day
Their old, familiar carols play
And wild and sweet the words repeat
Of peace on earth, good will to men!”
                                                                                                        “Christmas Day” 1863
                                                                                                        Henry Wadsworth Longfellow

We ended the year with the good ship ‘United States’ rudder-less, in a threatening sea and captained by an imperious and aloof President – an Ahab fixated on his dislike for America’s imperious past and determined to amend it in his own image. Prospects for the upcoming Presidential election, at least given the two individuals who lead their respective Party’s polls, are dispiriting. On the one hand we have a megalomaniac, a man who approaches politics as though he were hosting a fantasized-reality TV show. His narcissism exceeds his respect for his fellow man. On the other, we have an arrogant and supercilious woman who feels the crown is her due – a consummate liar who measured her success as Secretary of State, not in terms of bringing peace to the world’s hot-spots or in treaties enacted but by miles flown and countries visited. While the present is daunting, the future – unless our choices are different – scares the bejezus out of anyone who loves their Country, has knowledge of its history and is endowed with common sense.

Sadly, we have reached a point where Lincoln’s depiction of the United States seems no longer to apply. We have become a “government of the elite, by the elite, for the elite.” The “people,” apart from their votes and their money, are no longer relevant. Washington politicians are a class unto themselves, with mainstream media as their PR department. We listen to President Obama talk of fairness, of wealth and income inequality; yet the divergence has grown sharper during the past seven years. We listen to Mrs. Clinton claim she speaks for the “little” people, while subverting the system to her own financial benefit. Donald Trump is adored by what was once termed the “silent” majority – those who believe that the Country they see is not the one they knew. Yet they ignore his past crony-like ties to politicians of all persuasions.

Mr. Obama sees his mandate as clear: rule by executive order, avoid coopting the opposing party, dismiss laws that do not accord to his ends. The consequence has been a less stable world; a people divided by race, religion, wealth and income; a population grown fearful of an enemy that will not be named; an anemic economic recovery that has seen work-force participation numbers at forty-year lows; the shuttering of more businesses than those that start-up, and an increase in the numbers of people in poverty.

But enough of my emotive and partisan blabbering. On to the month of December – what did it bring, besides Christmas and Hanukah? Domestically, the defining moment came in San Bernardino when two radicalized Islamists, Syed Rizwan Farooq and his wife Tashfeen Malik snuffed out the lives of fourteen of Farooq’s co-workers at the San Bernardino County Health Center’s Christmas party. The killings highlighted weakness in our immigration system and made clear that Islamic terrorists are neither contained nor on the run. While the Northeast is enjoying the warmest weather on record, forty-three people died in storms that hit seven western and mid-western states over the Christmas weekend. One effect of those tornedos, heavy rains and early snow has been a rising Mississippi. Republicans held their fifth debate on December 15, attracting 18 million viewers. The focus was national security and jobs. Four days later, on the Saturday before Christmas, the Democrat National Committee was successful in keeping viewership to fewer than 8 million during that Party’s third debate. The point for the DNC: do nothing to derail the nomination of Mrs. Clinton. Paul Ryan, newly elected Speaker of the House, has grown a beard. Whether to disguise his intentions or to audition for Santa Claus is unknown. ‘Star Wars: The Force Awakens’ opened with record audiences, taking in over $1 billion by the end of its second weekend.

Elsewhere, NASA announced it is accepting applicants for the Class of 2017 to train for a manned mission to Mars in the 2030s. Elon Musk’s SpaceX’s Falcon 9’s booster rocket landed back on its launch pad – a first, and a step forward in the use of re-useable rocket boosters. Taking demands for equality to unchivalrous levels, Secretary of Defense Ashton Carter announced that women would be eligible for all combat roles. Another 5300 e-mails from Hillary Clinton’s private server were released on the last day of the year. This time, several had portions redacted, as the State Department claimed they contained classified information. This was despite Ms. Clinton’s prior allegation that none did. Proving P.T. Barnum correct, video maker Ami Horowitz got fifty students at Yale to sign a petition calling for the abolishment of the First Amendment. Beagles became the first dogs to be born by in vitro fertilization. Will sexless procreation cause recreational sex to evolve out of existence? Not in my life time, I hope!

The December climate talks in Paris – the boondoggle of all boondoggles, with forty thousand people from 195 countries descending on the City of Light, all at taxpayer’s expense – dominated the international agenda. Merrily, attendees returned to their respective countries, filled with self-praise for an agreement that was not binding. As the month came to an end, Iraqi forces re-took the city of Ramadi, the largest city in Al Anbar Province, about 70 miles west of Baghdad. We can only hope it is indicative of a weakening ISIS and a strengthening of coalition forces. However, like the Hydra, Al Qaeda and the Taliban are resurgent in Afghanistan. Good news came from Venezuela where Nicolas Maduro’s Chavista Party was soundly defeated in National Assembly elections, with the opposition coalition (Democratic Unity Roundtable) winning a solid two-thirds majority. However, eight of those seats are being challenged by Mr. Maduro’s hand-picked judges. In another positive piece of news, two leaders of neighboring nuclear nations met for the first time in years when India’s Prime Minister Narendra Modi made a surprise visit to Pakistan where he met with Nawaz Sharif, Pakistan’s Prime Minister.

Political correctness, an American concoction, was exported to England where students at Oxford’s Oriel College are lobbying for the removal of a statue of Cecil Rhodes for being “imperialist and colonialist.” Each year eighty-nine students are chosen from a dozen or more countries to study for two years at Oxford. Americans like Bill Clinton, Cory Booker and Bobby Jindal were able to do so because of funds Mr. Rhodes provided. As the Financial Times wrote in a recent editorial, “Airbrushing out figures because they offend our contemporary values is no way to approach the study of history.” Without knowledge of our past, we have little hope of coping with the future. In other news, Vladimir Putin’s lapdog, John Kerry, has come around to the idea that Assad should remain in power in Syria.

True to its word, the Federal Reserve raised the Fed Funds and Discount rates by twenty-five basis points to a quarter of one percent and half of one percent respectively. For most of the post-War era, Fed Funds have been between four and five percent, with the Discount rate usually 100 basis points higher. It is not the increase that is of import, it has been the seven years of abnormally low rates that is of significance. “Free” money has done little to lift the economy. Broadly speaking, interest rates rose during the first thirty-five years following the end of World War II. They have fallen during the last thirty-five years. During both periods, the economy rose and so did equities.

While stock prices during the month declined modestly, oil prices continued sharply lower, losing about 13% during the month and about 35% for the year. December showed the lowest close for oil since February 2009. The yield on High-yield (junk) bonds rose, with the yield on the FINRA-Bloomberg High-Yield Index ending the year at 9.06%, the first year-end close above 9% since 2009. (Keep in mind, the yield on junk bonds has been rising since mid-2014.) The year was a tough one, especially for value investors like Warren Buffett, with Berkshire Hathaway’s stock price down about 12 percent. The DJIA and the S&P 500 were both down for the year, the first decline since 2008. On the other hand, technology stocks had a good year, with the NASDAQ 100 posting an 8.4% increase. Financial markets never remain static. On the day in March 2000, when the NASDAQ 100 first climbed above 4700 – it closed at 4593.27 this year – Berkshire Hathaway made its low. While I do not believe that speculation is anywhere close to what it was sixteen years ago, I also do not believe that we can assume that last year’s winners will finish first this year.

Sobering, in terms of what it means for future employment and economic growth, was a study from the National Bureau of Economic Research released this month. It noted that the number of startups declined over the past several years: “There is now robust evidence, from multiple data sources,” wrote authors Ryan Decker of the Federal Reserve, John Haltiwanger of the University of Maryland, and Ron Jarmin and Javier Miranda of the Census Bureau, “of a pervasive decline in U.S. business dynamism over the last several decades.” We are seeing a lack of willingness to invest in the future, an indication of declining confidence. That lack of confidence, in my opinion, is the fault of a complex tax code that favors the wealthy and large businesses, along with burdensome regulations that especially affect smaller businesses.

December, like all months, carries with it anniversaries. One hundred and fifty years ago, on December 6, 1865, the United States ratified the 13th Amendment, abolishing slavery throughout the nation. December 7, 1941 is a day that will “live in infamy,” as it marked the date when Japan attacked the U.S.’s Pacific Fleet at Pearl Harbor. The 12th of December would have been Frank Sinatra’s 100th birthday. And, from a personal perspective, the month will always carry a level of poignancy for me, as it was the month, many years ago, that my parents and oldest sister died.

Samuel Berger, President Bill Clinton’s former national security advisor, died at age 70. Natalie Cole, daughter of jazz legend Nat King Cole, died at age 65. Stein Ericsen, 1952 Olympic gold medalist, died at age 88 at his home in Park City, Utah. Ericsen always had a special place in my heart, as my first competition skis were Stein Ericsen’s. I got them in 1955, kept them all these years, and now my son Sydney has them.   Death also claimed a friend, Charlie Flood. Charlie and I usually disagreed when it came to politics, but his intelligence and acerbic humor always made him a delightful companion.

Among the odder news items during the month, the National Safety Council cited “distracted walking” as a leading cause of death and serious injury. And Maryland Governor Martin O’Malley, campaigning in Iowa, had only one person show up for an event in the town of Tama. After the one-on-one meeting, according to a CBS reporter, “Kenneth” remains “undecided.”

The new year began crisp and clear, with seasonal temperatures, at least in this part of Connecticut. We can only hope that the New Year’s Day temperateness and clarity bode well for the year ahead.

Happy New Year!

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