The Month That Was - June 2019

Sydney M. Williams

swtotd.blogspot.com

The Month That Was – June 2019

July 1, 2019

“How did it get so late so soon?

It’s night before it’s afternoon.

December is here before it’s June.

My goodness, how the time has flewn.

How did it get son late so soon?”

                                                                                    Dr. Seuss, aka Theodor Seuss Geisel (1904-1991)

                                                                                    The Cat in the Hat, 1957

The world is complicated. It has always been so. Resources are limited, but man’s mind is limitless. We live on a planet with just over two acres of inhabitable land per inhabitant. But that fact, and the limits implied, speaks to man’s remarkable ability to survive and thrive. But neither surviving nor thriving is easy, nor can we assume we always will. Man is a social animal. He has survived through intuition, and he has thrived through what Adam Smith called the division of labor that increases social and economic dependency. To advance his interests, man created communities, governments, rule of law and markets. Two hundred years ago, no one could have conceived of the social, cultural and technological advances that allow us to live today as we do. No one today can now predict what the world two hundred years hence will be like. Will man blow himself up? Will natural forces cause our extinction? Will warring factions and competing economic systems persist and worsen? Or, will technology and cultural changes continue to improve living standards? Will we live in harmony? No one knows.

What we do know is that classically liberal governments and free markets have allowed unprecedented improvement in living standards and extensions of life. Now, free market capitalism, which goes hand-in-hand with democracy, is under attack by progressives who are ignorant of history and who do not understand basic economics. The question, to paraphrase Benjamin Franklin from 1776, is can we keep our republican government and the capitalist system we have created, which has served us and the world so well? Or will we make a radical turn toward socialism? We cannot take past successes for granted.

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Internationally, the month began with the 75^thAnniversary of the Normandy Invasion and it ended with the G-20 meeting in Osaka. In Normandy, the President spoke eloquently. He praised the British, the French, the “fighting” Poles, the Canadians, and the Americans: “They came from farms of a vast heartland, the streets of glowing cities and the forges of mighty industrial towns. Before the war, many had never ventured beyond their community. Now they had come to offer their lives, half a world from home.” He evoked those traits that have always made Americans a generous and special people. Earlier, he had met with the Queen and with Prime Minister Theresa May, who had just resigned as head of her Party. She will remain PM until elections on July 22. Jeremy Corbyn, the anti-Semitic leader of the opposition Labor Party, boycotted the state dinner but appeared at demonstrations protesting Mr. Trump’s presence. Keep in mind, Mr. Corbyn has laid wreaths on the graves of Arab terrorists and compared Israel to Nazis, but meeting Mr. Trump was a step too far. In Osaka, Mr. Trump met with Vladimir Putin on Friday and Xi Jinping on Saturday. Russia is a country in decline, economically and in population. Nevertheless, it has about forty-five percent of the world’s nuclear weapons. No matter what Democrats like Senator Schumer (D-NY) and Representative Adam Schiff (D-CA) say, it behooves any U.S. President to maintain a dialog with the Russian president. The meeting with Xi Jinping resulted in a truce – at least, temporarily – on trade and in an agreement to ease restrictions on U.S. technology companies’ selling products to Huawei, as long as national security is not compromised. Following Osaka, President Trump met with Kim Jong-un in the DMZ, in an attempt to re-start stalled nuclear talks. He was the first sitting U.S. President to enter North Korea. The Country has the natural resources to become wealthy, if it adopts free-market capitalism.

Tensions with Iran increased, as sanctions are having an effect. The Mullahs want to make worse relationships between the U.S. and the European Union. They want sanctions lifted, so they can resume the sale of oil to the EU. They are unhappy with Mr. Trump’s abandonment of the Iran Nuclear Deal, an agreement that provided funds, opened markets for their oil, but allowed them to continue work on missiles and would have led them to the bomb in fifteen years. Now, striking out, they have vowed to bust the limits on uranium stocks, attacked two tankers in the Strait of Hormuz and shot down a $110 million RQ-4A Global Hawk U.S. drone, flying at 22,000 feet. For a day or so, it looked like the U.S. might react militarily, but, instead, responded by further tightening sanctions. Protests in Hong Kong, against demands from Beijing regarding extradition rights, reached a record two million people, a quarter of the city’s population. The episode has weakened Beijing’s grip on the City. A re-do of the mayoral election in Istanbul, which the opposition candidate, Ekrem Imamoglu of the Republican People’s Party, had initially won by 13,000, saw his mandate increase to 700,000 votes – a set-back for President Recep Tayyip Erdogan, who had demanded the re-count. Mr. Trump’s threat to Mexico, to impose tariffs if the country did not do more to implement “strong measures” to stem the flow of migrants through their country, seems to have worked. Mexico accepted the demands. The number of illegal crossings has declined about twenty-five percent. Asylum seekers can be returned to Mexico and they promised to strengthen their southern border. 

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The circus that is the race for the Democrat Presidential nomination got into high gear, with the first debates. Disillusionment with the state of the nation, as expressed by most of the participants, reminded one of Stephen Sondheim’s song, “Send in the Clowns.” But on reflection, the better comparison was to 1919. The Great War had ravaged the civilized world. On both sides, those embodiments of progress and civil behavior – free-market capitalism, global trade, liberal democracy, traditional religion and their cultural history – were “taken,”, as Joseph Loconte wrote recently in the Wall Street Journal, “to the woodshed.” In the aftermath of the War, Communism, Nazism and Fascism offered an alternative to what was then portrayed as a failed capitalist system. This past week, Democrat candidates decried free-market capitalism and expressed concern that nationalists and populists were destroying multicultural liberalism. They see nationalists and free markets as the villain and government as the savior. No mention was made of the fact that U.S. economic growth has been bolstered by the 2017 tax cut and relaxation of burdensome regulations; or that employment is at record highs, unemployment at record lows and that wages have increased at their fastest rate in a decade, with minority groups having done especially well. A CNN poll found that 71% of Americans see the economy as “very or somewhat good,” with wages for the lowest quartile of workers rising at the highest rate of any group. Instead, their angry focus was on dissension, division and promoting internecine jealousy. They harped on the alleged hatred of conservatives for women, gays, minorities and the foreign born. In 1919 there was some rationale for the behavior of combatants who took to extremes. By war’s end, in November 1918, forty million were dead, about ten percent of Europe’s population. Cities were destroyed and economies ruined. The consequence: World War II, the extermination of Jews and other “undesirables,” and the virtual imprisonment of those who suffered under Communist dictatorships for seventy years. Today, there is no such excuse. We have not been devastated by war or depression. We live blessed lives. Yet, those candidates on stage, last Wednesday and Thursday, would lead us toward cataclysm. Their extremism is concerning, especially as mainstream media has foregone their role as independent arbiters. Nevertheless, the best comment on the debaters – Peggy Noonan on Bill de Blasio: “He has that air of burly, happy aggression that is the special province of idiots.”  Dumbest comment by one of the debaters: Julian Castro, the anatomy-challenged former Secretary of Housing and Urban Development, who said a trans female has the right to a federally-funded abortion.

The candidates appealed to egos. Their proffered policies were little more than attempts to purchase votes – free college, free healthcare and a guaranteed minimum wage, all to be paid for by higher taxes on the “rich,” which common sense tells us would impede economic growth, as the cost of their programs would require tax increases on everyone, regardless of income or wealth. Open borders and free healthcare to illegals were the only solution offered to an immigration crisis that has worsened this year. In a discussion on women’s rights, the rights of the unborn were never mentioned. There was no mention of a shared history, civic responsibility, accountability or the positive role in our lives of religion, tradition, or the long-term negative impact of declining birth rates. The candidates were unified in their unadulterated hatred for President Trump. They used their few minutes to further divide us, so that those on the stage might ascend to power. With the exception of Representative Tulsi Gabbard (D-HI) and Daisy-picking, “here-again there-again” Vice President Joe Biden, the twenty-three Democrats running for their Party’s nomination have all succumbed to the temptation of Socialism, or at least to some version of it, and to the Green New Deal, which would cost tens of thousands of jobs in the energy sector and raise the cost of electricity for all. 

Socialism and hatred for the President are unifying themes among Democrats. Victor Davis Hanson, in an essay this past month, commented: “Trump so unhinged the Left that it finally tore off its occasional veneer of moderation, and showed us what progressives had in store for America.”  One does not have to admire the character of Mr. Trump to appreciate what he has done for the economy and working people. For any individual who knows our history, understands the concepts embedded in our Constitution of natural rights, liberty and rule of law and is a believer in the Golden Rule and the Ten Commandments, the policy prescriptions of Democrats running for President are enough to scare – as New Hampshirites would say – the ‘Bejesus’ out of one. Eleven years ago, on October 30, 2008, Barack Obama said, “We are five days away from fundamentally transforming the United States of America.” He won the election. While taxes were increased, regulations tightened and “new normal” was used to describe the anemic economic recovery coming out of the “Great Recession,” cooler heads prevailed; we changed, but not as fundamentally as Mr. Obama envisioned. Those running today make Mr. Obama seem moderate. 

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Equity markets came roaring back, after a disappointing May. The DJIA was up 7.2%, which offset May’s decline of 6.7 percent. The rise, interestingly, was, like the decline in May, gradual. On only one day did the market move up more than 1.5 percent. In May, there were only two days when the market moved down more than 1.5 percent. Volatility moderated. The VIX began the month at 18.71 and closed at 15.08. Bonds rallied. The inverted yield spread between the 10-Year Treasury Bond and the Three-Month Bill narrowed to twelve basis points from twenty-one basis points at the end of May. Gold rose 8%, while oil was up 9%. The price of a Bitcoin rose 45%, to $12,316.95, the highest price since December 2017. The final numbers on first quarter US GDP came in at 3.1 percent. Second quarter GDP is expected to be around 1.5 percent, but the expansion is now the longest on record. United Technologies and Raytheon announced a merger, which will result in a hundred high-paying jobs moving from Connecticut to Massachusetts. Remembering the tobacco companies’ settlements, activists are targeting oil and gas producers. Senator Sheldon Whitehouse (D-RI) was blunt: “If you…pop out the word tobacco and put in the words fossil fuels; pop out the word health and put in environmental harms, the complaint writes itself.” This is like feeding slop to hogs. Trial lawyers salivate at the mention of such suits. They are strong supporters of Democrat candidates and became rich with tobacco settlements in the 1980s and ‘90s. They are hoping for a repeat. 

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In other news, domestically, a pick-up truck carrying a trailer slammed into a group of motorcyclists in New Hampshire, killing seven. In what has become an all-too-common line of Congressional questioning for those who want to compartmentalize society, Senator Cory Booker (D-NJ) attacked Neomi Rao, who has been nominated by President Trump for a seat on the D.C. U.S. Court of Appeals. He asked her about LGBTQ law clerks. Her response should have provided a teaching moment for the New Jersey Senator: “…to be honest, I don’t know the sexual orientation of my staff. I take people as they come, irrespective of their race, ethnicity or sexual orientation.” Given his performance during the debates the former Rhodes Scholar seemed to have learned little from the exchange with Ms. Rao. A refinery in Philadelphia that produces 30% of the gasoline in the northeast blew up. Fortunately, the effect on gas prices was minimal. Acting Secretary of Defense Patrick Shanahan stepped down – for personal reasons – before his formal nomination went to the Senate.  He was replaced with Mark Esper, currently Secretary of the Army.  Harvard College rescinded an acceptance granted to Kyle Kushov. Mr. Kushov became well-known as a spokesman and advocate for school security after the shooting at the Marjory Stoneman Douglas High School in Parkland, Florida in 2018, where he had been a student. The reason for the rescission was due to comments Mr. Kushov had made on-line, late one night, when he and a friend were seeing you could be the most outrageous. His anti-Black and anti-Semitic (Mr. Kushov is Jewish) comments were repulsive, but he was young, it was late, and he apologized. But he is a conservative who supports the Second Amendment, which I suspect was the real reason his admission to Harvard was revoked. As David Brooks asked: “…wouldn’t Harvard want a kid who is intellectually rigorous and morally humble?”

Facebook introduced a new, virtual currency, the Libra, which has been compared to Bitcoin, but unlike Bitcoin is not based on a pure blockchain technology. Economist Arthur Laffer, the father of supply-side economics, was given the Presidential Medal of Freedom. A hearing by a House Judiciary subcommittee on reparations was held. (More on this in a forthcoming Thought of the Day.) The U.S. Office of Special Counsel accused Kellyanne Conway, political consultant and counselor to the President, of making political comments while working at the White House, a violation of the Hatch Act. But what White House advisor does not engage in political activity? Sarah Huckabee Sanders, the most reviled and ill-treated Press Secretary ever, resigned. She was replaced by Stephanie Grisham, aide to First Lady Melanie Trump. David Ortiz, retired player for the Red Sox, was shot while on vacation in his home country of the Dominican Republic. A team of evolutionary scientists and anatomists reported on the ability of some dogs – but not wolves – to raise their eyebrows. Scientists know that animals communicate by looking at one another, but now they want to know how and why. For example, it has been noted that rescue dogs who can communicate in this fashion are more likely to be adopted. Selah Schneiter, at age ten, became the youngest climber to scale California’s Nose of El Capitan, a 3000-foot climb in Yosemite Park. It is considered the most difficult climb in the U.S. It was proposed by someone that former UN Ambassador Nikki Haley replace Mike Pence on the 2020 ticket with Donald Trump. A good idea, in my opinion.  

Nineteen billionaires (out of 607 in the U.S.), representing eleven families, posted an open letter calling for a “moderate” wealth tax. This is a non-starter, as they well know. Such a letter makes them feel morally superior – a public display of sanctimonious generosity they will never have to honor. If they wanted to help the government, they could have sent a check, without publicity, to “Gifts to the United States,” P.O. Box 1328, Parkersburg, West Virginia. In sports, the St. Louis Blues beat the Bruins to win the Stanley Cup; the Toronto Raptors beat the Golden State Warriors to win the NBA title. Rafael Nadel won the French Open and Sir Winston captured the Belmont Stakes. For the first time in history, the Yankees and the Red Sox played two games in London. The Yankees won both games.

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A Russian destroyer and an American guided-missile cruiser nearly collided in international waters off the Philippines. A US Navy spokesman said the U.S. cruiser was forced to execute “…all engines back full and to maneuver to avoid a collision.” Implied was that the Russians deliberately provoked the incident. Angela Merkel spoke at Harvard’s commencement. She invoked President Reagan’s “tear down this wall” speech, when she told graduates to “…tear down walls of ignorance and narrow-mindedness, for nothing has to stay as it is.” Her speech was also taken as a rebuke of President Trump’s wall along the Mexican border. However, it was her admitting millions of undocumented migrants in 2015 that created conditions existent today in Europe, including the hastening of her departure from public life. Life is always more complicated than politicians would have us believe. A June 10 article in the Financial Timesspoke to the population collapse in eastern Germany, where forty-one of seventy-seven districts are projected to lose thirty percent of their population by 2035. Manfred Grosser, a parish priest in Doberlug-Kirchhain, said that for every baptism he performs, he presides over five funerals. It is alleged by some in Berlin that billions of Euros are spent on refugees, while disadvantaged regions in the rural east are neglected. Berlin, you have a problem, and it is not Donald Trump. Identity politics entered Ottawa schools. A first-grade teacher told her students that girls are not real, and neither are boys, obviously creating confusion among six-year-old Canadians.

Moldova is being torn between the West and Russia. Yet Russia, the EU and the U.S. seem happy with the recent political outcome. Maia Sandu, leader of the pro-EU ACUM bloc, was finally named Prime Minister on June 9. She allied with the pro-Russian Socialist Party, rather than with the allegedly corrupt and nominally pro-EU Democratic Party of Moldova, which is led by Vladimir Plahotniuc, an oligarch. Ms. Sandu, western educated and formerly with the World Bank, is trying to strike a balance between Russia and the West. Greece’s far-left Syriza Party, led by Prime Minister Alexis Tsipras, suffered a defeat in the European Parliament elections. The center-right New Democracy Party topped the polls, 9.5% ahead of Syriza. Mr. Tsipras resigned, and a snap election has been called. The French “yellow-vest” protest movement has begun to shrink, with only 7,000 demonstrators out on June 15 versus 250,000 last November. President Macron has promised to lower taxes on the middle class and loosen labor market rules. Russia was welcomed back into the Council of Europe, after being banned for the invasion of Ukraine and the absorption of Crimea. The Ukrainian delegation walked out. Keep in mind, the mission of the Council of Europe is to defend human rights, the rule of law and democracy. Its mission is not, as the Wall Street Journal put it, “…to appease dictators.”  

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Death appeared. Tony Rodham, younger brother of Hillary Clinton, died at 65. Mohamed Morsi, former Egyptian president, died at 67 in the courthouse where he was on trial. Martin Feldstein, economist and adviser to Republican presidents, died at 79. John Neff, one of America’s most astute investors, died at 87. Everett Raymond Kinstler, portrait painter of presidents, died at 92. Gloria Vanderbilt died at 95. Robert Friend, a decorated fighter pilot who flew 142 missions with the fabled Tuskegee Airmen in World War II, died at 99. And I lost two friends from my days at Salomon: Harvey Katz who died at 74 and Michael Frinquelli at 78. I also lost a recent friend, Tony Sileo, who had served with my father in the 10^thMountain Division during World War II. Like my father, Tony had been a runner. He died at 95.

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I found the rubric that heads this essay to be appropriate. Dr. Seuss’ Cat in the Hat, as one might expect, is a favorite and a nice way to end this series. As we age, time rushes by at ever-increasing rates. July 2013 was the first of these pieces. At that – seemingly long-ago – time, the news was dominated by items like: President Obama’s trip to Africa, George Zimmerman’s acquittal, Edward Snowden’s leaking of classified information, the fatal landing of Asiana Flight 214, the Abu Ghraib prison break, and the escapades of former New York Governor Eliot Spitzer and Representative Anthony Weiner. Still simmering were scandals like Benghazi and the intimidation by the Justice Department of Fox News reporter James Rosen. Will those news items be remembered by historians? Much has changed. The economy and working-class Americans are doing better, but political polarization has worsened. The stock market has risen 70%, but total debt has risen more from about 360% of GDP to 400 percent. Indicative of this trend, U.S. federal debt has increased five trillion dollars, while GDP has grown just over three trillion dollars. Wish us luck!