Tuesday, November 7, 2017

Summer Reading: Unvisited Tombs and Trouble

Our tan is hard won, but we know it will soon fade as the days grow shorter and the words of that curmudgeonly scold Jeremiah pierce us once again: “The harvest is past, the summer is ended, and we are not saved.”
Yet college football returns and the metrosexual in us wonders if pleated khakis are making a comeback, given the overpaid coaches we see spouting jeremiads of their own about “execution”  and “we need to make adjustments” to attractive lady reporters on the sidelines at halftime.  Perhaps all is not lost. It is little things that keep us looking forward to the autumn sunshine and 20-foot putts drained.
But we have been touched by our summer reading beyond the Holy Bible, so we’ve got that going for us (see “Caddyshack”).  George Eliot’s “Middlemarch” is one of those books we should have read many years ago, but we just found her this year, and have trembled.  Gotta tell you, dear reader, we love this gal.  OK, we’re a sensitive guy. The heroine dreams of accomplishing great things, but a lot of other things happen on the way; yet she remains authentic through a misguided marriage, widowhood and eventual union with the man she loves and who loves her.  Eliot says this about her:
“…for the growing good of the world is partly dependent on unhistoric acts; and that things are not so ill with you and me as they might have been is half owing to the number who lived faithfully a hidden life, and rest in unvisited tombs.”
We expect our tomb, and probably yours, gentle reader, will remain unvisited as well.
The plot of “Daniel Deronda,” another Eliot masterpiece, is flawed by unlikely coincidences, but the portrait of the heroine Gwendolen is so affecting that it reminded us of our struggle to be “good” when our first instinct is to think of our superior selves:
Those who have been indulged by fortune and have always thought of calamity as what happens to others, feel a blinding credulous rage at the reversal of their lot and half believe that their wild cries will alter the course of the storm.”  If only Donald Trump could learn to read.
We have long been a Civil War buff, having visited battlegrounds from Pea Ridge in the west to Gettysburg in the east, so we were inspired by the events in Charlottesville and Confederate monument brouhaha to take a stab at Jefferson Davis’ ‘Rise and Fall of the Confederate Government.”  We recommend it for those interested in arcane legal arguments over the legitimacy of secession, but a page turner it is not.  We all know how it ends.
Far more illuminating is James M. McPherson’s “Embattled Rebel,” a surprisingly sympathetic view of Davis from this generation’s foremost Civil War historian.  Not really germane to the subject itself, it struck us that the lost art of letter-writing, yea, even writing in thoughtful complete sentences, is probably forever lost in the age of instant telecommunication. Sad, as a Trump tweet might conclude.
We performed our annual re-reading of “Hamlet,” and discovered that we are more like the gas bag Polonius than we would like to admit.  We are very good at tut-tutting.  We have an opinion on everything and are convinced we are wise, despite our track record.

Our favorite read was a collection of Scott Fitzgerald stories that somehow have remained buried, “I’d Die for You and Other Lost Stories.”  Some are weak, but the tales of love won and lost have a special attraction for us.  Our favorite was “Trouble,” the nickname of a heroine who reminded us of an old girlfriend.  Which was nice.

Thursday, January 26, 2017

Saving Par Will Take Some Doing in the Age of Trump

In defiance of the will of the people, our slogan for the year just begun must be “Make Kev (the middle part of him, anyway) Small Again.” We’re not talking the fakery of cosmetic makeovers or the desperation of fad diets, gentle reader. The mirror may show a man of a certain age, but the inner man says 25, so we pause to drop and give you 50.
WHOA!  Give us a moment. Catching our breath. There, we’ve managed to light a Marlboro. “Curse Sir Walter Raleigh, he was such a stupid get!”  (Thanks, John Lennon).  Much better. The heart rate is steady enough to type again, and the fine Virginia tobacco curling in our lungs is allowing us to think great thoughts and deliver them, as Athena sprang from the brow of Zeus, fully formed to a waiting world.
We have to begin with Time’s Person of the Year. Like any blowhard or child, Donald Trump won’t sense a bit of irony when he rails against the Federal Reserve for raising rates in the coming months. We can only imagine the new president dueling with Janet Yellen and brethren via Twitter. It’ll probably go something like this:
Mr. Trump: “She kept ’em low for Hillary & now disses the people.  Big Mistake #FEDUP”
Ms. Yellen: “Data tell different story. Drink up. Punch bowl coming away #PARTYPOOPER”
Mr. Trump: “Waterford? Nice.  It’ll make a beautiful chandelier in White House visitors’ men’s room, and Fed’s gonna pay for it!”
Ms. Yellen: “The reverse repo is in the mail!”
Mr. Trump, the Wharton School graduate, will declare victory, knowing nobody on his side knows the Fed is draining reserves. Working men and women everywhere will hail the chief’s latest triumph over the elites.
Trumpians will hardly be able to catch their breath, though, before the repeal of Obamacare restores the delivery of healthcare to its former glory before the socialists ruined things. The irony (there’s that word again) is that, despite all the fulmination against the Affordable Care Act, the tacit acknowledgement in its replacement is that the “market” was a failure. It’s our opinion that whatever replacement is fashioned will be just another step toward an eventual single-payer system. Again, no one will notice.
As for investing in the stock market – we’re reluctant.  It’s too expensive at 127% of gross domestic product.  It seems to us, the growing share of corporate profits at the expense of wages in the national income and profit accounts has been a significant factor in the stock market’s higher valuation. According to the St. Louis Fed, profits were 5.8% of GDP in 1990, compared with 9.3% in 2015, while wages and salaries slipped from 46.6% to 43% in the same periods.
Ironically, though, the election of Mr. Trump (and the strong showing by Bernie Sanders in the Democratic Party tussle for that matter) was in large part driven by a sense that the billionaire real estate developer could reverse that trend. If he delivers, and the scale starts to tip toward labor, it seems fair to conclude that market participants would consider current valuations too high.
All that is rather long-term, though. In the shorter run, the biggest risk to equities is likely to be the unforeseen shock. Of course, that fatuous observation is always a shadow on the investment horizon, but we think the probability is greater in the age of Trump. There is something strange about a man (or the speechwriter channeling him) who sees “American carnage” when he looks out his window or believes Hillary Clinton’s 2.9 million popular vote advantage was the result of fraudulently cast ballots.
We are no head shrinker, but we’re willing to bet Republican mainstreamers are grasping at whatever psychological strategies available to keep the president on the rails. They may well succeed, but a geopolitical or domestic political crisis is probably a greater risk than usual.
We also think the market is just beginning to consider the fallout from protectionism and the risk of diminished global trade implicit in Mr. Trump’s walls and border tax threats.
Still, all could go well. The path in 2017 could very well resemble the magical golf hole we traversed recently. We approached the narrow, 175-yard par three lined on both sides with towering old pines. Our first shot was well-struck, but alas, it hooked square into the trunk of one of them, the ball landing in the short fairway. We then smacked a wedge into a pine on the right side, the ball caroming further back on the fairway. Chagrined but unbowed, we wielded the wedge once more.  A delicious collision of blade, ball and turf sent a shiver of pleasure through our athletic pose. The dimpled sphere bounced once on the green. Then, just as we feared it would bounce off, it miraculously hit the stick and dropped into the hole. The greatest par save of our career – successful but a harrowing ride.  Investing in 2017 could be something like that.