Saturday, September 1, 2018

"The Month That Was - August 2018"

Sydney M. Williams

The Month That Was – August 2018
September 1, 2018

August rain: the best of summer gone,
And the new fall not yet born.
The odd uneven time.
                                                                                                      Sylvia Plath (1932-1963)
                                                                                                      The Unabridged Journals of Sylvia Plath, 1952

As we consider the news, it is worth a reminder that bias, arrogance and hypocrisy are natural adjuncts of the media. Too often, in recent times, they have become rent-seekers, compromising integrity for collusion with those they are supposed to cover. Politicians have many of the same attributes, but for them it is primarily about power. Control of the federal bureaucracy wields enormous influence and, as we have seen, can be self-sustaining across succeeding Administrations. In 2016, the Presidential elections was not about finding the angel hidden among heathens, but deciding which candidate was the least Beelzebub-like, in terms of character and values. But also, which espoused policies most like one’s own. No matter whether one is conservative or liberal, we should all be able to agree that freedom, progress and well-being hinge on economic growth. Elections determine which policies allow for the greatest growth that does the most good for the most people, in terms of providing opportunity, encouraging self-reliance and lifting people from poverty, while doing the least harm in terms of safety and the environment. Admittedly, that is a judgement call and people can and will disagree. Nevertheless, Mr. Trump was my choice in November 2016. Nothing I have heard or read since causes me to re-think that decision.

Apart from primaries in a number of states, the conviction of Paul Manafort and the guilty plea by Michael Cohen, real news, as is typical in August, was sparse – a lot of chaff but little wheat. (The midterm elections will begin in earnest after Labor Day.) Europe continues to struggle over Brexit, Greece, Poland, Turkey and illegal immigration, all of which manifest the coercive and undemocratic tendencies of Brussels-quartered bureaucrats. China continues to chase its Belt and Road Initiative, while bullying its neighbors. Terrorism and war in the Middle East are unending. The domestic economy is strong. The bull market in stocks persisted. A trade deal between the U.S. and Mexico was announced. Wildfires in California burned tens of thousands of acres, destroying hundreds of homes. The Angel of Death appeared and bore away some good people, including the heroic John McCain. And Mr. Trump remained a lightning rod – a willing one – for harried Democrats who struggle to find a coherent message, apart from disparaging Mr. Trump with hate-filled messages. It is ironic that the party that bears the name “democrat” refuses to accept the outcome of a democratic election almost two years ago. They claim Mr. Trump is a fascist, yet he has curtailed regulations, reduced taxes and dismantled a federal bureaucracy that had been built stronger by Mr. Obama. Abnegation of power is not the way of tyrants. As well, the Left accuses the President of obstructing free speech, while newspapers, TV, cable news shows, and social media are afire in opposition, and their comrades on college campuses shut out conservative speakers. While real news was light, the air was thick with irony and hypocrisy.


However, the world did not stand still. Both political parties in the U.S. geared up for tough campaigns, ones in which Democrats have a slight, but not conclusive, edge. What Republicans should do is run on domestic and foreign policy accomplishments of the Trump Administration – deregulation, the tax cut, a strong economy, judicial appointments, and a rekindling of a grudging, if unaffectionate, respect from abroad – while Democrats can only run on an anti-Trump and pro-impeachment agenda. Michael Barone recently wrote that Mr. Trump “is getting the kind of economy he promised, with growth targeted at the downscale (including Blacks and Hispanics) rather than the upscale…with growth spreading to regions that have seen little of it for decades. If Democrats do take the House in November, they will most certainly vote to impeach Mr. Trump. But, as The Wall Street Journal editorialized on August 24th: “They simply don’t want to admit this before the election lest they rile up too many deplorables and independents who thought they elected a President for four years.”  A special election was held in Ohio to fill the Congressional seat vacated by Republican Pat Tiberi. The race was won by Republican Troy Balderson, with less than a one percent margin, over Democrat Danny O’Connor. The two will face off again in November. Primaries were held in a dozen or more states. In outspending their opponents by 5-1, right-to-work laws in Missouri were defeated. In Connecticut, the November election will pit self-made, political outsider Republican Bob Stefanowski against Democrat Ned Lamont, the Greenwich-based, political insider and great-grandson of J.P. Morgan’s senior partner Thomas Lamont. (Sixty years ago, Stefanowski would have been a Democrat and Lamont a Republican!) In Kansas, in another close race, Kris Kobach, a Trump supporter, defeated current Governor Jeff Colyer for the Republican nomination. He will take on Democrat Laura Kelly in November. Democrat Andrew Gillum, progressive and underdog, will become the first African-American to run for governor in Florida. Mr. Gillum will face Republican Ron DeSantis.

The Mueller investigation received plaudits when a court convicted Paul Manafort on eight felony charges, when Michael Cohen pleaded guilty to eight violations of banking, tax and campaign laws, and with the granting of immunity to executives at the National Enquirer regarding the Cohen probe. But it is the partisan manner in which the investigation is being conducted and the inequitable way in which the law is being enforced that bothers Americans. Kimberly Strassel put it well in The Wall Street Journal: “Mr. Mueller seems blind to the national need for – the basic expectation of – a thorough look into all parties. That omission is fundamentally undermining any legitimacy in his findings. Lady Justice does not wear a blindfold over only one eye.” In an essay titled “The Double Standards of Postmodern Justice,” Victor Davis Hanson wrote: “What bothers them [the American people] is that our guardians of morality do not offer any principles to explain why some people’s lives are harmed or destroyed and others’ lives are not.” It is this misuse of power and the lack of fair and disinterested methods that concern and divide Americans. That there was collusion in 2016 is clear to all but the willfully blind. But the collusion that took place was not between the Trump campaign and the Russians; it was between the Clinton campaign and agencies of the federal government – the FBI, the NSC and the CIA – something far more damaging to the principle of democracy.


In foreign affairs, it was not the storms encountered – hurricanes hitting Hawaii or earthquakes in Indonesia – but shifts in tectonic plates that should command our attention. Saudi Arabia and Canada are embroiled in a tantrum over human rights. After overthrowing long-time dictator Robert Mugabe in an election last year, Zimbabwe’s new PM Emmerson Mnangagwa has adopted the old dictator’s ways. His security forces killed at least six opposition protesters. The Trump Administration used economic warfare to further America’s interests. Further sanctions against Iran were announced: The barring of Iran purchasing US and European aircraft and the barring of imports of Iranian oil and gas by Western states. In the meantime, the Rial, has fallen 50% against the U.S. Dollar this year. Additional tariffs and sanctions were imposed on Turkey. Their currency, the Lira, has declined 45% since the end of 2017. An article in the Financial Times highlighted the concern over the social welfare state of Sweden. Social Democrats, who have been in power since the fall of 1914, are “almost certain to receive their lowest share of the vote in more than a century,” in an election to be held in September. The reason: immigration policies. They support a “salad bowl” approach, a policy that encourages state-enabled segregation. Sweden’s problems should serve as a warning to those in the U.S. who favor open borders. Immigration policies should serve the interests of the nation. “They should not be viewed,” as Professor Edward Erler of California State University said last April at Hillsdale College, “as acts of charity to the world.” Indicative of the wondrous ways of Socialism, Venezuela, the country with the greatest proven oil reserves in the world, is expected to see their economy shrink by 18% (the third year in a row of double-digit declines) and inflation is expected to reach 1,000,000% according to the IMF. Exodus and starvation are constant companions of the Venezuelans.

But the tectonic shift during the month continued to be China, with their Belt & Road Initiative, which will lead them, they hope, toward global hegemony. Mahathir Mohamad, Prime Minister of Malaysia warned against “a new version of colonialism,” as he expressed Asian unease toward China’s increasing economic and political influence. In August, China vied for a role in the reconstruction of Syria, a country whose civil war has made it the nexus for possible global confrontation. Keep in mind, Syria was the western terminus of the old silk road. From the coastal city of Latakia to the Lebanese deep-water port city of Tripoli is only about 100 miles. Russia is also involved in Syria, as are two other China allies, Turkey and Iran. As Syria recovers, what will be the role of the West? Will Syria become the 21st Century’s Serbia? China, a country of 1.4 billion people and an economy second only to ours, offers emerging nations an alternative to liberty and free-market capitalism. It is not only vigilance that is wanted on the part of the West, but strength. For example, ensuring that the Malacca Straits and the South China Sea remain open for global trade.


In August the current U.S. bull market became the longest on record. Contributing factors include an acceleration in GDP, which reached 4.2% in the second quarter and second quarter S&P 500 earnings that rose 23.5%. (Indicative of the economy’s strength, GDP has risen in 35 of the past 36 quarters.) Consensus estimates (which are almost always wrong) for 2018 and 2019 put the current price/earnings multiple for the S&P 500 at 20X and 18X respectively. Stocks, as measured by the DJIA, closed up 2.2%. Yield spreads narrowed, with the Two-year and the Ten-year closing at yields of 2.63% and 2.85% respectively. (A year ago, 85 basis points separated them.) Relatively high equity valuations and narrowing yield spreads are like cautionary yellow flags at the Jersey beaches. On August 2nd Apple became the first trillion-dollar company, roughly the value of all U.S. publicly traded stocks in 1984. The price of Bitcoin continued to decline, falling 7.8% during the month. Central bankers held their annual conference in Jackson Hole, where Fed Chairman Jay Powell compared the challenges of U.S. monetary policy to “navigating by the stars.” (I trust he did not mean that literally.) The Fed will continue to nudge rates higher but said they would “err on the side of caution. Among the questions they cited: Why have wages and inflation failed to ignite? (Wage growth is good. Inflation is bad.) Regardless, rates remain historically low, providing little or no cushion should the economy again slip into recession, which at some point it will.


In other news, The New York Times reported about the effect of the tax bill on high-income New Yorkers. They wrote of the harm to high earners in limiting deductions for state and local income taxes – a combined rate of 12.74% for the city’s highest earners – against federal income taxes. The article noted that New Yorkers, especially the wealthy, were moving to Florida. Yet the Times article included the ironic phrase: “While the legislation [the tax bill] largely benefits the wealthy and corporations…” Brooks Koepka became the first golfer since Tiger Woods in 2000 to win both the United States Open and the PGA Championship in the same year. The Mueller investigation etched deeper and more partisan when Michael Cohen hired Lanny Davis. Mr. Cohen once said he “would take a bullet for Mr. Trump.” Now he has hired a former consigliere for the Clinton family, a scenario only Mel Brooks could have dreamt up. Archbishop Carlo Maria Vigano, former Vatican official and diplomat, accused Pope Francis of covering up sexual allegations against former Archbishop Theodore McCarrick of Washington, D.C., and said he (the Pope) should resign. Peter Strozk was fired. John Brennan had his security clearance revoked. And Google said they would refuse to help Mr. Trump’s military but are willing to accede to China’s demands. In the theater of the absurd, PETA said they want Maine officials to erect a five-foot memorial to honor lobsters killed in a truck crash on Route1 in Brunswick.

A bridge collapsed in Genoa, killing 39. An earthquake on the Indonesian island of Lombok killed 91. Venezuela President Nicolas Maduro, a man who would lie to his mother, claimed to have been the target of an assassination attempt by Drone. Scott Morrison was named Australia’s Prime Minister, the sixth to hold that position in eleven years! A 90,000-year-old bone fragment, discovered in the Atlai Mountains by researchers from the Max Planck Institute for Evolutionary Anthropology in Leipzig, was that of a daughter to a Neanderthal mother and a Denisovan man. Opioid-related deaths in the U.S. reached 72,000 last year, almost 25% more than the number of Americans who died in ten years of fighting in Vietnam. (In one 24-hour period this past month, 49 people overdosed in New Haven, a city of 130,000! Fortunately, no deaths were reported.) In a demonstration as to which side has the most extremists, a White Nationalist rally in Washington drew about 20 people, according to The New York Times, but thousands of Antifa protesters. It was disclosed this past month, five years after the incident, that Senator Diane Feinstein employed a Chinese spy on her staff. Two weekends of shootings in Chicago, a city with gun laws that are among the toughest in the nation, killed a dozen people and wounded almost a hundred. A disenchanted video game player at a tournament in Jacksonville Florida – unhappy because he lost – killed two and wounded nine before shooting himself. Cristhian Bahena Rivera, an illegal immigrant, was charged with stabbing to death 20-year-old Mollie Tibbets in Iowa. San Francisco, whose Mayor and City Council have never met a regulation they didn’t like, introduced an ordinance that would forbid employee cafeterias in new corporate construction. A leftist production of “The Diary of Anne Frank” trivialized the death of six million Jews and treated law enforcement agents as the Gestapo. It has ICE agents tracking down Latino illegal aliens. And, in what had to have been devastating news for the President, the West Hollywood City Council, in an act of shame, voted unanimously to remove Mr. Trump’s star from the Walk of Fame.


The Angel of Death was busy: Restauranteur Joel Robuchon died at 73. Aretha Franklin, whose rendition of “Amazing Grace” has no parallel, died at 76. Kofi Annan succumbed at age 80. John McCain, who was accorded a state funeral, died at 81. Senator McCain was a patriot whose five and a half years in a North Vietnamese prison camp showed a man of extraordinary courage and character, but whose campaign for President in 2008 showed flawed judgment in at least two regards: his choice of Sarah Palin as a running mate and his temporary suspension of his campaign in September following the Lehman bankruptcy. Senator McCain convened the non-partisan meeting, which was held at the White House, but at which he offered no advice.  (Fortunately, Henry Paulson was then Secretary of Treasury and Ben Bernanke was Chairman of the Federal Reserve. By December of that year, while the economy was still in recession and the stock market continued to fall, credit markets stabilized, and high-yield bond prices began to recover.) Mr. McCain was a maverick, a man with friends across the aisle, but his lack of judgement would have hurt him in the Presidency. V.S. Naipaul, winner of the Nobel Prize for Literature, died at 85. Playwright Neil Simon died at 91. Atal Bihari Vajpayee, former Prime Minister of India, died at 93. And I lost two friends: Dave Birkic, who died far too young at 77, and John Klingenstein, a former colleague, who died at 90.


We move onto September, a month that heralds fall, a time for harvesting what has been sown, but also a month when new school and college years begin, a priceless opportunity for millions of children and young adults. The seeds of learning that will be planted now will germinate over their lifetimes.   



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