Sydney M. Williams
The Month That Was
February 1, 2016
“January is here, with eyes that keenly glow
A frost-mailed warrior
Striding a shadowy steed of snow.”
Edgar Fawcett (1847-1904)
American novelist and poet
Despite rallying the last couple days of the month, world stock markets lost about $7.5 trillion in January, amid fears of global recession. According to analysts, China’s economic growth has slowed to the range of six percent. Keep in mind, however, statistics from authoritarian regimes are suspect. What we do know is that the Shanghai Index is down 22.6% year-to-date. Emerging markets have been battered by falling commodity prices. The MSCI Index is, so far, down 14.9 percent. Brazil and Russia are in recession, if not depression. Europe’s economy is flat-lining, which comes as no surprise given the role of the state in the economy. Economic growth in the U.S. has been anemic - growing at two percent - since the end the “Great Recession” in early 2009. In fact, U.S. GDP growth has not exceeded 2.7% for ten years. Last Friday’s preliminary report on fourth quarter GDP showed growth at 0.7 percent. Free markets have been hamstrung by state intervention (i.e., healthcare, higher taxes, extraordinary low interest rates and increased EPA regulations). It has led to a loss of confidence, and a reduction in forward visibility.
Not even the 2800 delegates to the World Economic Forum in Davos (who, incidentally, flew in on 850 private jets) could lift expectations. Curiously, the theme of this year’s conference, which went from January 19th to the 23rd, was that the world is on the cusp of a fourth industrial revolution. It is generally acknowledged that the first industrial revolution began in England in the late 18th Century and extended into the second half of the 19th. The second, most would agree, began with Henry Ford’s development of the assembly line in early 1920s America. The third, according to The Economist in an April 2012 cover story, is the one we are currently in - artificial intelligence, genetics, 3-D printing, nanotechnology, robotics, etc., the same drivers mentioned two weeks ago in Davos as the fourth. It was not made clear if the business, banking, government and media elites who descended on Davos pulled a Rip Van Winkle, but world economic conditions suggest they haven’t been paying attention. Something is wrong.
Robert Solow’s paradox comes to mind: Changes in technology do not necessarily lead to improved productivity. “You can see the computer age everywhere,” he quipped in 1987, “but in the productivity numbers.” I am not sure of the truth of that statement, but history does tell us is that economic malaise generates extremism, isolationism and volatility. The stock market, for example, had its most volatile month - as measured by daily moves in the DJIA up or down more than 1.5% - since November 2011. But it is the political risk, caused by poorly performing economies, that should make us vigilant. A consequence of that risk can be seen in the U.S., with leading candidates in both parties hugging the fringes. It explains Marine Le Pen in France and Nigel Farage in England, and it points to the success of Syria in Greece, Podemos in Spain and the Socialist Party in Portugal. Donald Trump has called for usurious tariffs against Chinese imports. It explains the desire of government officials everywhere to pin blame for all our troubles on bankers, which, in my opinion, is one reason for the rise of anti-Semitism that is beginning to infest Europe, the United Nations and some of the “politically correct” in the U.S. This past week, the Freedom House’s “Freedom in the World - 2016” noted that freedom around the world declined in 2015 for the 10th year in a row, with 72 of 195 countries assessed showing a decline in freedom. Aggressive tactics by authoritarian regimes like Russia, China, North Korea and Iran, an upsurge in terrorist attacks and a decline in global economic activity were cited as reasons.
Elsewhere in financial news, Connecticut lost one of its most prestigious employers with General Electric’s decision to move to Boston. It has still not sunk into the thick skulls of those running this state that businesses, like Pavlov’s dog, respond to stimuli - negatively when high taxes are deployed. Corporate inversions in the U.S. - last week we saw Johnson Controls announce their intention to merge with Ireland-based Tyco - are not a consequence of a lack of corporate patriotism; they are product of a globally uncompetitive tax code and onerous regulations. Despite facing possible trial in France involving alleged favors for a business ally of then President Nicolas Sarkozy, Christine Lagarde was nominated for a second term as head of the IMF.
Domestically, the interminable races for Presidential nomination dominated the news. At this point, Republicans seem intent on nominating one of two men, neither of whom would likely win the election. Democrats are chasing after a Socialist and a second ethically challenged Clinton. Speaking of Hillary, last Friday the Obama Administration confirmed for the first time that Mrs. Clinton’s home server did contain closely guarded government secrets. She may claim that nothing was marked ‘classified’ when received, but, for God’s sake, she was the Secretary of State! President Obama could hardly let a month go by without issuing an executive order, thus he did so on guns. It has been the use of Executive Orders, not just to make clear Congress’ intentions but to change laws to advance his agenda, that has made Mr. Obama the most dangerously radical President since Nixon. Power, Mr. Obama fully believes, should be vested in the Executive, not evenly distributed across the three branches of government. The standoff at the Malheur National Wildlife Preserve in eastern Oregon appeared to come to an end when the FBI shot and killed one member of the Citizens for Constitutional Freedom and arrested its leader, Ammon Bundy. Donald Trump (intimidated by Megan Kelly or convinced he has the nomination sewed up?) cancelled his appearance at the last Republican debate before the Iowa Caucuses.
The world did not become calmer during the month. Islamic terrorists continued their rampage. At least 29 people were killed in an al-Qaeda attack in Burkina Faso’s capital city. An ISIS suicide bomber killed ten tourists in Turkey. The Islamic militant group al-Shabab attacked and killed 60 Kenyan soldiers at a base in Somalia. A Taliban group killed 30 students on a military base in Pakistan. Groups connected to ISIS attacked six separate sites in Jakarta, Indonesia, killing one and wounding several. In Nigeria, Boko Haram burned alive dozens, including young children. In Cologne and other German cities, on New Year’s eve, hundreds of German women were robbed, beaten and raped by young Muslim men. One consequence: Sweden is considering deporting 80,000 migrants. Germany and Finland are tightening refugee policies. Saudi Arabia executed 47 convicted terrorists, including a Shiite cleric, Sheikh Nimr al Nimr, which created an outrage in the Shia community, especially Iran. Less attention was paid to the fact that 43 of those executed were Sunni members of al-Qaeda. Days before concluding the Iranian nuclear deal, the Iranian Revolutionary Guard captured and detained ten US Naval personnel whose boat allegedly strayed from international waters. The nine men and one woman (who was forced to cover her head) were photographed in a humiliating pose, kneeling before their captors, hands behind their backs.
The IAEA (International Atomic Energy Agency), which is not allowed full inspection privileges in Iran, nevertheless felt comfortable asserting that the country is in compliance with the terms set forth in its nuclear deal with the U.S. and the West. So the deal was signed. Some sanctions were lifted and somewhere between $100 billion and $150 billion in frozen Iranian assets were released, or soon will be. The Administration hailed the agreement as diplomacy bringing peace to the region. Others in the region remain skeptical. Does Israel feel safer? Are the Saudis still convinced of our friendship? What about the Jordanians who have received the bulk of Syrian refugees? Will ISIS put down their weapons? With his new-found wealth, Iranian President Hassan Rouhani went shopping. Before concluding $18 billion in purchases in Rome, he met with Pope Francis. The Vatican, claiming respect for Iranian culture, felt the need to cover up any statues or paintings depicting nude figures. In France, wine was not served at dinner. Political correctness is not limited to the United States. And everyone loves a man with a $100 billion to spend. Who cares if his country is the world’s principal supporter and exporter of terrorism.
Elsewhere, Alex became the first Atlantic hurricane to form in January since 1938 - not necessarily a good omen for this coming September on America’s east coast! Fifty people died across eastern United States when Snowstorm Jonas dumped up to two feet on Washington, D.C., but considerably less where I live. Proving truth to the maxim well known to fathers - that women are tougher than men - only distaff members of Congress showed up the next day. Lead in the water created problems for Michigan’s Republican governor. “Mein Kampf” was published in Germany for the first time since World War II, as a 70-year-old copyright held by the State of Bavaria expired. The W.H.O. expressed concern regarding the outbreak of the Zica Virus in the Americas. “El Chapo,” also known as Joaquin Guzman, Mexico’s notorious drug lord (and the Country’s second richest man), was recaptured on January 8th. Interestingly, at least one weapon from the “fast and furious” scandal was found on his premises. The movie “13 Hours: The Secret Soldiers of Benghazi” was released. To Mrs. Clinton’s relief it has not been a blow-out at the box office. But my guess: it will take its toll. Libyan film makers, not surprisingly, panned the film.
In one of the more hubristic and hypocritical remarks from any recent politician, President Obama said that the Republican “vision has moved, not just to the right, but has moved to a place that is unrecognizable.” While I disagree with the tone of some on the extreme right, to hear the most radical, left-wing President our country has ever elected talk as though his Presidency is mainstream beggars belief! Speaking of fantasies, Power Ball winnings reached $1.5 billion a couple of weeks ago. While three lucky people split the pot, remember that almost two-thirds of that money is the government’s. Lotteries are unhealthy. They raise unrealistic expectations; they promote the concept that one can become rich without working. And, most insidious, they are a severely regressive tax.
In college football, Alabama beat Clemson 45-40 for the national collegiate football title. The Denver Broncos will meet the Carolina Panthers for the Super Bowl title on February 7th in Santa Clara, California, which will pit 39-year-old Peyton Manning against 26-year-old Cam Newton.
Death snatched the English singer, songwriter and instrumentalist David Bowie at age 69. It took Henry Worsley, the British explorer who was thirty miles from completing a more-than 900-mile ski-trek across Antarctica, at age 55. Also at age 55, Bill Johnson, the first American to capture Olympic gold in men’s downhill skiing, died in an Oregon assisted-living facility. Sadly, the world lost Cu Rua, or Great-Grandfather Turtle, in Hanoi. He weighed 360 pounds and his precise age was unknown, but it is suspected he was well into his second century.
It was seventy-one years ago, on January 27, 1945, that the Soviet Union’s army entered Auschwitz and liberated what prisoners were still alive. Remembrance of the 1.1 million Jews who perished in that prison should serve as a reminder that anti-Semitism is still very much alive, especially among “progressive” elites in Europe and, increasingly, in the U.S. The Space Shuttle Challenger exploded 73 seconds after take-off, thirty years ago on January 28th, 1986. Twenty-five years ago on January 17th, the United States, with its coalition partners, began bombing Iraq’s air defenses, communication networks and oil refineries. It was a relentless attack, with as many as 1100 sorties a day. That compares to the 15 or 20 daily attacks on ISIS forces in Syria and Iraq. And on January 7 of last year, two Islamic terrorist brothers, Said and Cherif Kouachi killed eleven employees of the satirical magazine, Charlie Hebdo in Paris.
…And, on the last day of the month, I roared past the age of seventy-five, feeling like the guy in “the little Nash Rambler,” calling out: “Beep! Beep! How do I get out of second gear?!” I feel great and hope you do as well. Welcome to February!