The Month That Was - December 2018

Sydney M. Williams

swtotd.blogspot.com

The Month That Was – December 2018

January 1, 2019

“The rapid nightfall of mid-December had quite beset the little village,

as they approached it on soft feet over a first thin fall of powdery snow.”

                                                                                                            Kenneth Grahame (1859-1932)

                                                                                                            Wind in the Willows, 1908

January is not only a time we look back, but, like Janus, it is a time we try to penetrate an impenetrable future. In doing so, we must remember that predictions, no matter how analytical and allegedly impartial, are influenced by ideologies and biases. However, I suspect we all agree that the 2020 Presidential race began as soon as the ball dropped in Times Square. The Democrat field will be crowded. Youth and idealism will challenge age and experience. Far-Left socialists will combat centrists. On the Right, the big questions:Will Republicans try to unseat President Trump?Or will Mr. Trump decide one term was enough, declare victory and retire?After all, he will turn 74 in 2020, and the Presidency is not where most people would choose to spend their “golden” years. Of course, he is not “most people.”

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Back to December. It was a month of contrasts, like the opening sentence in A Tale of Two Cities, “It was the best of times, it was the worst of times…it was the spring of hope, it was the winter of despair…” The economy was the strongest in a dozen years, yet stocks fell. Equities saw their biggest Christmas Eve sell-off in history. On the next trading day, they had their largest point gain ever. Questions arose: Should President Trump be true to his campaign promises, or should he compromise? He is condemned for not doing so; he is condemned when he does so. Is nationalism a force for evil, as Angela Merkel and Emmanuel Macron claim? Or is nationhood necessary for liberty, as most conservatives believe? Are those who voted for Brexit and Donald Trump, and who have rallied against the state and the corrupt policies of elites in business, finance and government ignorant, or are they battling elitism, statism and the status quo? Are people better off when the focus is on identity – intersectionality – rather than the individual? Will millennials bend toward capitalism, or will they lean toward socialism? Did Michael Flynn lie, or was he entrapped? Has an increase in carbon dioxide allowed the earth to become greener and more productive, as a NASA survey last month alleged, or will it be the death of the planet, as Kyoto and Paris assert? Has there ever been a U.S. President more critically scrutinized and more vilified by MSM than Donald J. Trump?  

Hypocrisy among politicians is an unfortunate fact, as is affectation in the media. We saw it in the multi-day George H.W. Bush memorial and burial, which was an over-the-top extravaganza, even for a decent and accomplished man – Air Force One from and to Houston, a memorial service at the National Cathedral and another the next day at St. Martin’s Episcopal Church and then a slow train ride to the burial site in College Station. It was a send-off usually reserved for kings and potentates. But it felt like those who had long condemned the man and his politics were trying to atone for what they had done, or were they using his death to contrast the polished, gracious Mr. Bush with the brash, artless Mr. Trump?

There was always a sense that Mr. Bush’s WASPish background was decent and ethical. His love for his family was appreciated, especially by those who believe in strong family values. But there was something surreal, in fact disquieting, in the adulation by the media for a dead white man they had ridiculed while alive. We expect dissimulation in our politicians but, in vain, look for objectivity from the press. Mr. Bush came to the oval office at a pivotal time, but the great events then occurring were a result of two previous politicians – Ronald Reagan and Margaret Thatcher – who oversaw the blood-less overthrow of the Soviet Union, which ended the Cold War and allowed Eastern Europe to ally with the West. Operation Desert Storm chased Saddam Hussein and the Iraqi army out of Kuwait but didn’t stop him from killing 50,000 to 100,000 Iraqi Kurds in the north and Shiites in the south. The failure to destroy him, along with 9/11, were prologue to the invasion of Iraq in 2003 and the never-ending Second Gulf War.

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While disagreements over control of illegal immigrants led to a partial government shutdown at the end of the month, the impact is felt more in the media than in most people’s lives. Immigration is solvable, but both sides prefer to keep the issue alive. Semantics is part of the problem. A “wall” denotes keeping people in as well as out. Even President Trump has suggested using another word, if that helps effect a more secure border. He asked the Senate to end cloture, so that a simple majority vote could be taken – a decision that, in my opinion, would be a mistake, as filibusters help protect the rights of minority parties. Such a change would haunt Republicans, as Democrats discovered in 2018 after Harry Reid’s decision to use the nuclear option for judicial appointments in 2013. A government shut-down became inevitable when Mr. Trump, on TV and in front of Chuck Schumer and Nancy Pelosi, said he would take responsibility, an offer so good negotiations never began. Mr. Trump stayed in Washington, while Ms. Pelosi vacationed in Hawaii.

Changes in Administrative personnel amounted to “chaos,” according to a mainstream media. Whether true or not, change can be disruptive. Heather Nauert, State Department spokeswoman and former Fox News correspondent, will replace Nikki Haley as Ambassador to the U.N. William Barr, Attorney General under George H.W. Bush, will replace Jeff Sessions. Chief of Staff John Kelly will be replaced by Michael Mulvaney, currently Director of the Office of Management and Budget. Defense Secretary James Mattis will leave on January 1, to be replaced, temporarily, by Deputy Defense Secretary Patrick Shanahan. In a controversial decision, Mr. Trump chose to withdraw 2000 U.S. troops based in Syria and to begin bringing home half the troops stationed in Afghanistan. He explained: “We have defeated ISIS in Syria, my only reason for being there…” On a surprise Christmas visit to troops in Iraq, President Trump reiterated, to a standing ovation, his position on Syria.

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Overseas, the month began with a meeting of the Group of 20 in Buenos Aires.  The choreography was fascinating, as presidents and prime ministers pirouetted away from being photographed with the despised Saudi Prince Mohammad bin Salman. The exception was Vladimir Putin who high-fived the man as he sat down, sending a message that he approves of killing and dismembering dissidents. The Intergovernmental Conference on the Global Compact for Migration met in Marrakech to approve a previously adopted UN resolution for safe, orderly and regular migration. Its purpose, “to cover all dimensions of international migration in a holistic and comprehensive manner.” That sounds good, but, when one sees what those policies have done to our southern border and what has happened (and is happening) in Europe, should we be surprised when so many question the wisdom of the “established liberal order”? Another boondoggle, for which we in the U.S. pay the largest share, was the climate meeting in Katowice, Poland, where signatories to the 2015 Paris Accord agreed to implement rules laid out three years earlier. One consequence was a protest in France. Too often, bureaucrats fail to include economic costs of feel-good policies. Russia successfully flight-tested their Avangard Hypersonic Glide Vehicle, an ICBM that travels at twenty times the speed of sound. The system, as Putin explained “is impervious to current and future air defense and missile defense systems of a potential enemy.” The missile, first announced last spring and its launch last month, is a violation of the INF Treaty, and explains why President Trump withdrew from that treaty in October. In another blow to globalism, Japan exited the International Whaling Commission.

Theresa May survived a no-confidence vote, 200 to 117. Those voting against her were hoping for a strong Leave-supporting leader to emerge. The risk, as they saw it, is that the U.K. becomes a vassal state, locked into the EU without a voice. Elitist European leaders in Brussels, already distanced from the people they represent, are shortsighted in making themselves unpopular with middleclass Europeans who have a sense of patriotism toward their heritage and native countries. If Parliament does not approve the deal Mrs. May negotiated a “hard” Brexit may ensue, or possibly an abandonment of Brexit, meaning the will of the people has been abrogated. Those who voted for Brexit in 2016 wanted to take back their sovereignty and their courts, not have them tied to unelected Continental bureaucrats in Brussels and Strasbourg. This battle for Britain – a restoration of middleclass values and incomes – is one being played out in other nations, including the United States. It is a fight between those who believe in the rights of the individual versus the might of tribalism. It raises the possibility of an all-powerful state and the bureaucracy it supports. Unlike past democratic disagreements, this is a fight over ends, not means. Emmanuel Macron, the sanctimonious President of France, finally bowed to the gilets jaunes: He granted an increase in the monthly wage of a 100 Euros per month, with a promise that overtime pay would be exempt from tax and social charges, and that the planned tax on pensions under 2,000 Euros a month would be cancelled. He also said that the fuel tax surcharge would be suspended. But he refused to reinstate a higher tax on the wealthy.

Churchill’s definition of Russia, as “a riddle wrapped in a mystery inside an enigma,” applies to the Middle East. Two Muslim countries, Iran and Saudi Arabia, are locked in a battle for supremacy – Shia versus Sunni, with Yemen and Syria as battlefields. A temporary ceasefire was negotiated in Yemen. Turkey and Iran are aligned against the Kurds and, thereby, against the U.S. Both see Syria as opportunity. The murder of Jamal Khashoggi disrupted our alliance with Saudi Arabia and may have allied us more closely with Erdogan’s Turkey, a country deemed “not free” by Freedom House. No matter, the U.S. remains committed to the region. Withdrawing troops from Syria and some from Afghanistan does not mean the U.S. is abandoning the Middle East militarily. The United States has over 50,000 troops stationed in a dozen Middle East countries. World-wide, the U.S. has 165,000 soldiers deployed in 150 countries. 

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As for markets and the economy, “the future,” as the song goes, “is not ours to see.” I have long taken a perverse view of markets. When they rise, I know that at some point they will fall; and when they decline, I know that they will, at some future time, go higher. But I also know the long-term trend is upward. So, I don’t worry as much as others. It is dividend growth that concerns this aged ex-stock broker, not the timing of markets, something impossible to predict. Will a recession occur in the next couple of years? I don’t know. I do know Democrats are hoping so, and I also know we are not immune from one. We have lived through nine and a half years of economic growth, in which manufactured low rates played a role, and now, finally, they are beginning to normalize. On the positive side, the middle class is catching up. Wages and salaries were up 3.1%, the fastest growth in a decade, and Christmas sales were the strongest ever. Low interest rates have helped equities, which have risen three-fold in ten years, but low rates have done little for oil, gold, Bitcoins and home prices. Nevertheless, I am not overly concerned. In my opinion, we have seen nothing, thus far, that would compare to the high inflation rates and despondency of the 1970s, to the late 1990s tech bubble or to the credit crisis of 2008.  But equity and oil markets swooned in December. Both were lower by 10% for the month, with crude down 25% for the year and the DJIA down 7%. In terms of daily volatility, the month of December was the most volatile since November 2011. The VIX rose for the year and the month, peaking on Christmas Eve. Bond yields rose for the year, though they fell in December. The reverse was true for gold. The Dollar rose for the year but fell in December.

What should concern people over the long term is not a possible trade war with China, higher interest rates, climate change or stock market performance. The existential threat we face is demographics – a dearth of births and an aging population. In 1957, 4.3 million babies were born in the U.S., then with a population of 172 million. According to a report issued last month by Lyman Stone of the American Enterprise Institute for Family Studies, there were 3.9 million births in 2017. In 1957, the median age in the U.S. was 29; today it is 38. Life expectancy in 1957 was 69.5; today it is 78.8. In 1957, the population of the U.S. grew 1.7%. Last year it grew at 0.6 percent. Between 1957 and 2017 real GDP growth compounded at an annual growth rate of 3.05%. Over the past ten years, it has compounded at less than two percent. Even with immigration numbers included, nine states saw population declines in 2017, including New York, Illinois and my state of Connecticut. Those numbers are concerning. Who will pay for our aging population? Longevity is increasing and the workforce is shrinking. Can a country continue to grow once its population begins to decline? Is immigration the answer or should government encourage more births This is a world-wide problem. The situation in Europe, Russia, Japan and even China is direr than in the U.S.

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In other news domestically, a Marriott data breach left 500 million people exposed. Mr. Trump’s former attorney, Michael Cohen was sentenced to three years in jail for financial crimes and lying to Congress. In a single session before the House Judiciary Committee, former FBI Director and current Trump critic James Comey, replied 245 times: “I do not know,” or “I do not recall.” Scott Walker of Wisconsin signed three bills before leaving office: To give the legislature power to block administrative rules, including the banning of guns; to codify voter ID and Medicare work requirements, and to restrict early voting to two weeks. In Arizona, Martha McSally, who lost a close race for the Senate to Krysten Sinema, was appointed to the Senate to fill out the remainder of John McCain’s term. Elizabeth Warren announced the formation of an exploratory committee, making her a likely candidate for President in 2020. After a twenty-three-year run, the Weekly Standardclosed. Its circulation had shrunk by double digits in every year except one, since 2013. Fred Barnes, executive editor and co-founder, noted that the magazine’s “criticism of Trump affects circulation negatively.” But its problems predated the 2016 election. Two Guatemalan children – ages seven and eight – died of illness while in U.S. custody, after crossing the border illegally. Following a two-year trip, the robotic explorer Osiris-Rex came within twelve miles of the asteroid Bennu, where it will remain in orbit for a year. And Congress can’t solve immigration? Colin O’Brady became the first person to complete a solo crossing of the Antarctic. 16-year-old Kansan Braxton Moral will receive two degrees in May – his high school diploma and a bachelor’s degree from Harvard. 

Political correctness made its way across the country. The Harvard Medical School released a statement in which they condemned the decision by the Health and Human Services Department to explicitly define sex “on a biological basis that is clear, grounded in science, objective and administrable.” They responded: “Harvard Medical School is staunchly opposed to any efforts by federal agencies to limit the definition of sex as an immutable condition determined at birth.” That was an odd retort from a science-based institution. For decades, the Frank Loesser-penned song, “Baby, it’s Cold Outside,” which won an Academy Award for best original song in 1949, was a staple of the Christmas season. No longer. Several radio stations banned it, claiming it is a “prelude to rape.” Speaking of Christmas, Alexandria Ocasio-Cortez, the 29-year-old newly-elected Representative from New York’s 14^thDistrict, told us that Joseph and Mary, with Mary pregnant with the baby Jesus, did not travel from Nazareth to Bethlehem to comply with orders from Roman census-takers. No, they were refugees, like Guatemalans scrambling to reach the U.S. border.

Falling into the political correctness trap is easy. In an interview with the New York Times, James Dyson, British inventor and industrial designer, referred to Asia as the “Far East,” an error for which the Times felt obligated to issue an apology. A black teenage wrestler, Andrew Johnson, was forced to cut his dreadlocks by a white referee, or risk forfeiting his match. The incident became a media sensation, and the referee became persona non grata. But in August 1962, at Fort Dix, a young white male Army recruit (me) was forced by a black first sergeant to have his hair cut. That event went unrecorded and unremarked. There are differences, certainly, but one wonders: Is there a bigger message regarding attitudes of respect toward authority figures? The politically correct Jeff Bezos said Amazon wants to cut the CRaP (Can’t Realize any Profit). As a member of the Leftist establishment, mainstream media left him alone, despite the impact on manufacturers of low-priced consumer goods. Clemson Professor Todd May wrote a piece for NYTimes.com: “Would Human Extinction Be a Tragedy?” In his answer, he was ambivalent – there would be suffering “among those who have much to lose by dying…but the prevention of future humans from existing would cause no suffering.” And for this analysis one pays $48,500 a year!

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In other news internationally, a Christmas market in Strasbourg was the scene of a gunman yelling “Allahu Akbar.” Cherif Chekatt killed five and wounded eleven. Chekatt, a self-styled Jihadist, was known to the police who obviously weren’t paying attention. During the month, the Democratic Republic of Congo twice put off the presidential election, an election already delayed by two years. However, the vote did get underway on Sunday, December 30. The most recent excuses were an Ebola outbreak and a fire on Christmas day that destroyed voting materials for nineteen of Kinshasa’s (the capital) twenty-four constituencies. President Joseph Kabila has been in office almost eighteen years. He doesn’t appear anxious to leave. (But the West forgets how slowly democracy evolved in Western Europe and even in the United States. While the U.S. achieved independence through revolution, democracy has been an evolutionary process). Europe’s liberal order, which emerged from the ashes of World War II, is at risk of self-immolation: For example, the EU’s General Data Protection Regulation, a regulation that claims to protect the privacy of consumers within the EU, deemed the sending of corporate Christmas cards a violation. 

Iran, a preferred trading partner of Germany and France, launched a ballistic missile capable of delivering nuclear weapons to southern Europe. Denmark announced that anyone who takes Danish citizenship be required to shake hands at the naturalization ceremony. The policy is aimed at Muslims who refuse on religious grounds to touch members of the opposite sex. For the Miss Universe contest, Spain nominated a transgender, providing viewers a full-frontal view of political correctness. Australia announced that it recognizes West Jerusalem as the capital of Israel and will move their Tel Aviv embassy once a peace settlement is announced. The eruption of volcanic island Anak Krakatau in Indonesia caused a tsunami that killed 430 and injured 1500. A roadside bomb, hit by a tourist bus near the pyramids of Giza, killed four and wounded ten. In retaliation, Egyptian police killed forty alleged terrorists who, police said, were planning a series of attacks. Dutch TV personality, Emile Ratelbard, who last month filed suit to get his age lowered from 69 to 49, lost his case in court.

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Death claimed Penny Alexander at 75, the Laverne of “Laverne and Shirley” and director of “Big,” the first film directed by a woman to gross over $100 million. Bob Bryan, one half of the comedy duo “Bert and I,” died at 87. Richard Overton, America’s oldest World War II veteran, died at 112 in Austin, Texas. Scott Coby, with whom I worked forty-five years ago, died at 75. And my brother George’s Westphalian mare Rocher, the U.S. Equestrian Federation’s horse of the year in 2003, died at 27.

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With the next election less than two years out, political rhetoric will ratchet higher. While there were periods when politics were less contentious, roots of polarization run deep. In 1869, Anthony Trollope published Phineas Finn, the second in his Palliser series. He wrote about the fraternity of Parliamentarians when off the floor:“It is not so in the United States. There the same political enmity exists, but there, political enmity produces private hatred. The leaders of parties there really mean what they say when they abuse each other.” His words, written in the aftermath of the Civil War, suggest what we experience today is something our Country has seen before. The French have an expression:“Plus ca change, plus c’est la même chose.” We live, as the Chinese saying goes, in interesting times. 2019 will be filled with surprises. What will they be?I have no idea, but the spectacle should be fun, as long as our Republic does not suffer irreparable damage.

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With those as final words for 2018, I wish you a happy, healthy and more civilized 2019!