Tuesday, July 25, 2017

My Amazon Review of George Melloan's "Free People, Free Markets: How The Wall Street Journal Opinion Pages Shaped America"

The Making of an Editorial Page

Because I have been reading The Wall Street Journal since I was a kid I looked forward to reading “Free People, Free Markets..” George Melloan did not let me down and as a former reporter, columnist and deputy editor of the editorial page has written a definitive history of The Wall Street Journal’s editorial page. He covers the page’s evolving politics and personalities during it’s over a century history. He is particularly adept at chronicling the roles of Vermont Royster and Robert Bartley in shaping the page from the 1950s to the dawn of the 21st Century. It was those two editors who catapulted the page into a major force in conservative thought and American journalism. And Melloan had a ringside seat in writing those editorials and serving as Bartley’s deputy.

To me the highlight of the book was Melloan’s recounting his commute from New Jersey into Manhattan on 9/11. I made the same commute on a different New Jersey Transit line and witnessed the second plane hitting the World Trade Center. I worked next door to the then WSJ headquarters and immediately went home. Melloan had a paper to put out and by the efforts of their heroic staff the WSJ was put together at their Princeton printing plant. It was journalistic grace under fire.

What perhaps made the editorial page was their walk on the supply-side in the late 1970s where fiscal orthodoxy was abandoned in favor of broad-based tax cuts. The results came a few years later with the Reagan revolution.

I have a few quibbles though. Sometimes the book reads like a very long newspaper article. I would have liked to see full reprints of a dozen or so editorials that Melloan considers to be the most important. Lastly Melloan leaves out the views of the editorial board prior to America’s entry into World War II. My guess he was not proud of them, but they should have been discussed for the sake of history. 

The full amazon URL appears at: https://www.amazon

Tuesday, July 18, 2017

My Amazon Review of Michael S. Neiberg's "The Path to War: How the First World War Created Modern America"

Over There

Military historian Michael Neiberg history of America’s entry into World War I is the mirror image of Michael Kazin’s “The War Against War…” Where Kazin looks America’s entry from the point of view of the anti-war coalition, Neiberg tracks the views of the broad American public and the war proponents, especially former President Theodore Roosevelt who was incensed by Woodrow Wilson’s initial “Too proud to fight” slogan.  He notes that the American public was sympathetic to the Allies from the get go, but he doesn’t really explain why the neutrality sentiment was so strong and why it took so long for the public’s sympathy for the Allies to be realized.  

But when America entered the war the public went all-in and he notes how quickly George M. Cohan’s “Over There” became such a national hit. However to get the public it would take the German resumption of unrestricted submarine warfare, the Zimmermann Telegram and the abdication of the Russian Czar in the early months of 1917 to enter a war that was in the broad strategic interests of the United States.

Neiberg discusses how elite America with their Anglophile sympathies were especially important in bringing America into the war. Unlike today it was the Ivy League college students who were the most hawkish and many volunteered to fight for England and France before America’s formal entry into the war. Many of them would become disillusioned in the 1920's.

Where Neiberg is especially good is his deep sourcing on the changing attitudes of the hyphenated Americans. He discusses how German-Americans, Italian- Americans, Irish Americans, Jewish-Americans and African-Americans moved from initial ambivalence to full throated support for the war. In essence those groups identified more as Americans than their ancestry.  As a result the stature of the four White groups was much improved after the war ended. However African-Americans faced the revival of the Klan in the 1920’s.

Unfortunately Neiberg leaves out the role of the large banks, the munitions suppliers and British propaganda in pushing America towards war. Further his title over promises. He doesn’t say much about how the war created modern America. For insight into that I would recommend Adam Tooze’s “The Deluge…..” Thus for me it is hard to get too excited about the book.

Friday, July 14, 2017

My Amazon Review of William Christie's "A Single Spy"

Double Agent

William Christie has written a fast-paced spy thriller. His protagonist is Alexsi Smirnov, a street and desert smart Azeri teenager who is very handy with a knife. He would ultimately become a well-placed KGB agent inside the Abwehr. Smirnov is a library educated autodidact who is fluent in Russian, Farsi and German. We trace his adventure from being a teenage smuggler in the Trans Caucasus to his capture by Russian authorities that sends him to a prison/orphanage where he spotted as potential spy materiel.

From the orphanage he is transported to KGB headquarters in Lubyanka prison. There under the tutelage of a master spy he is groomed to enter Germany by impersonating the nephew of a senior Nazi diplomat. With the aid of his “uncle” he becomes an intelligence officer in the Abwehr where he discovers Hitler’s plans to invade Russia. Of course Stalin does not believe the report he files.

Later in the book Smirnov becomes involved in the mythical plot (Operation Long Jump) to assassinate the Big 3 at Tehran led by the Germany’s star commando Otto Skorzeny. This plot has been the subject of more than a few spy novels.

Along the way Christie paints a very realistic picture of life in 1930s Russia and wartime Germany. “A Single Spy” is well worth the read!

Wednesday, July 12, 2017

Breaking out the Vodka at the SVR and the GRU

No matter what the outcome of the Trump Jr., Kushner and Manafort meeting with Russian lawyer/intelligence operative? Natalia Veselnitskaya, the Russian security services have won bigtime. Break out the vodka in Moscow. Why? They have succeeded magnificently in creating total chaos in Washington by putting the Trump Administration in complete meltdown mode. And who knows what additional information the SVR (Russian Foreign Intelligence Service) and the GRU (Russian Military Intelligence) has on the Trump Administration. Remember the Russian intelligence services have information on every single contact the Trump people had with them and/or their cutouts. So my guess is there are more shoes here to drop to than in Imelda Marcos’ legendary closet.

Nevertheless there is far more to this story. Why are all of the leaks occurring now just days after Trump’s meeting with Putin? Did “The Donald” give away the store to Putin causing our national security apparatus to start leaking like a sieve or was he surprisingly tough on him causing the Russians to do the leaking? My guess is the former, but either way Putin wins.

Sunday, July 9, 2017

Reinventing REIT Sell-Side Research

I am beginning to think the current sell-side REIT research model is, if not broken, severely challenged. Simply put, the notion that REITs as a whole belong in an industry group is mistaken. Why? A tax code election, which is what makes a REIT, does not an industry make.  Think about it. Today’s REIT analysts not only cover office, retail, apartment, industrial and hotel properties, they also cover companies that own healthcare, timber, data center, and cell tower assets. 

What senior analyst has the bandwidth to credibly cover all of those industries? I am not saying it can’t be done, but rather it is very difficult. That is why analyst coverage at sell-side firms is largely based on clearly defined industry groups. Furthermore we already see that with mortgage REITs which are usually covered by specialty finance analysts, not traditional REIT analysts.

My suggestion is that instead of covering REITs horizontally, analysts should cover them vertically by their true industry groupings. Thus data center REITs should be covered by computer software analysts, cell towers by telecom analysts, healthcare REITs by healthcare analysts and timber REITs by forest products/paper analysts. In the case of data centers and cell towers, two very hot groups today, I wonder how many REIT analysts have seriously thought through the risks of technological disruption. However let me make this clear, it does not mean the REIT analyst disappears, it just means the individual analyst moves from working in a horizontal REIT group to a vertical industry group where the industry expertise lies.

For example, in the case of healthcare, how many REIT analysts are up to speed on the healthcare reforms now working their way through Washington D.C.? Is any REIT really thinking what the impact of putting Medicaid on a budget, which by the way I believe is inevitable, will have on nursing homes and hospitals? Without a doubt there is more regulatory expertise sitting in the healthcare group than the REIT group. As a personal note, because of the regulatory complexities of covering healthcare REITs and the need to understand what is going on in congressional committee rooms, I never covered those stocks. Life was too short for the brain damage required.

Further I would extend this vertical model into the core food groups of real estate. The revolution now going on in retail makes it essential for retail REITs to be covered by retail analysts. Of course the retail analyst will have to know more about real estate, but the drama is now on the operational side, not the real estate side. Remember real estate is a derived demand. Similarly it would make sense to put the industrial REITs under the transportation/logistics umbrella, office REITs in the business services category, and apartment REITs ought to be covered by housing analysts. In the case of hotels there already is integration between the management companies and real estate owners in many shops. That model seems to work well.

A good example of the model I am suggesting is the boutique firm Zelman & Associates which does an excellent job covering the entire housing complex including single family home builders, apartment REITs, single-family REITs, building materials, building products retailers, real estate brokers and title companies. Why can’t this be done for the REIT industry writ large?

My sense is that with the REIT analyst community doing the same old same old there is very little value being added. Don’t you think it is time to break out of the mold? The buy-side is not going to bite you; they may even welcome the change. If not going all of the way, isn’t it time for further integration and coordination of REIT analysts with the primary industry groups I suggested on the research floor?

Wednesday, July 5, 2017

My Amazon Review of Joseph Kanon's "Defectors: A Novel"

Moscow Days, Moscow Lies

I last ran into Joseph Kanon in the Berlin of the late 1940s (“Leaving Berlin”). This time his novel is set in the drab Moscow of 1961 among the community of American and British defectors who have their KGB minders. There are cameos for the British spies, Donald MacLean and Guy Burgess. The notorious Kim Philby will defect two years later.

The novel revolves around the editor Simon Weeks who is seeking to publish the  autobiography of his defector brother, Frank, under the title of “My Secret Life” which is reminiscent of Philby’s autobiography written seven years later. Both brothers served as OSS officers during World War II. However Frank was recruited by the KGB during his time fighting in Spain and he later becomes the CIA’s most prominent defector in 1949. Frank lives in Moscow with his alcoholic wife, but nevertheless, he remains a KGB officer.

The KGB has authorized Frank to publish his autobiography and what better reason for them to bring his brother Simon to finish up the book. Of course Simon doesn’t enter Moscow blind and he is in constant contact with the CIA station chief in Moscow. Thus both brothers are lying to each other and themselves.

The book ends with quite the chase scene across the Russian border into Finland. Kanon tell a good story and he certainly knows how to write. Here is just one example: ”Leningrad at first glance, was a faded beauty that had stopped wearing makeup-all the buildings, the pastel facades, needed paint.”

Saturday, July 1, 2017

My Amazon Review of Richard Florida's "The New Urban Crisis:......"

An Indictment of Urban Liberalism

I know urban planning professor Richard Florida did not intend it, but his new book represents an indictment of urban liberalism. To Florida the motive force in urban America is “The Rise of the Creative Class,” the title of a highly influential book he wrote in 2002. The creative class consists of occupations in the sciences, the arts, music, entertainment, media, management, finance, healthcare and education; in other words the educated elite. Sitting below them is the working class who represents blue collar workers and the service class consisting routine jobs food service, hospitality, maintenance and retail. In other words people like Florida, despite his humble roots, determine the destiny of a city. And to him the defeat of Hillary Clinton and the victory of Donald Trump in last year’s presidential election meant that the barbarians were at the gates. That may be true but the seeds urban liberalism failures were already planted well before the arrival of Trump. As an aside, my guess is that if Hillary won, Florida would now be sitting in a high post at HUD.

As Florida accurately notes the influx of the creative class into the cities of America brought with it rising real estate prices that exacerbated pre-existing income inequality, racial segregation and spatial segregation of the well-off from the  poor. This has been especially true in the super star cities of New York and Los Angeles and the education/tech hubs of Boston, San Francisco and Washington D.C. In those cities the demand-driven house price increases are exacerbated by the planning and zoning controls put in place by the very creative class that Florida champions. If you don’t believe me, just look at the over-the-top real estate ads that appear regularly in The New York Times and The Los Angeles Times. As a result the creative class has been enriched and the middle class is being forced out. Thus in urban America zoning is the engine of economic inequality.

All of this was true from the 1980s on and most, if not all of it, were accomplished under the auspices of urban liberal regimes. Florida’s major error is that he conflates social liberalism with economic liberalism. While his creative class may largely support immigration, gay rights and a high degree of tolerance for different lifestyles; they do not necessarily believe that social liberalism requires them to make personal sacrifices with respect to their tax burden, the schools their children go to and the location of affordable housing in their neighborhoods. For example the liberal voters of Los Angeles just voted to tax themselves to provide housing for the homeless. However there are no neighborhoods volunteering to accommodate such housing.

Now Florida to his credit understands all of this. He offers several commendable proposals to offset the income inequality generated by his creative class. I fully agree with him that urban/suburban densities ought to be substantially increased, additional density bonuses ought to be issued to allow for an affordable housing component in major developments, property taxation should build on the ideas of Henry George by taxing site value alone rather than land and improvements, transportation infrastructure should be expanded to accommodate higher densities, and low income earners need an expanded earned income tax credit. Further he sensibly understands that rent control is not part of the solution.

Where I would disagree with him is that he advocates a substantial increase in the minimum wage on metro-area by metro area basis. The problem here is that substantially higher minimum wages may worsen the problem it seeks to solve and recent research out of the University of Washington on Seattle’s minimum wage tends to support my skepticism. We are also in an age of artificial intelligence and that will work to obliterate routine task jobs in food service and retail.

Where I really differ with Florida is that he thinks that his creative class will support substantially increased urban densities. Here I am very skeptical because it is the legally savvy creative class who has refined protesting new developments to a high art. Listen, I hope he is right, but I am not holding my breath. Three last points, he leaves out a discussion on self-driving vehicles which might work to decrease urban densities by making long distance commuting far easier. He fails to even mention the underbelly of every major city in America, unfunded pension liabilities largely created by that bulwark of urban liberalism, the public employee unions. And third he is silent on the state sponsored child abuse that takes place in all too many urban school systems. I am hopeful he will discuss these three items in a future book.

Despite my critique, Florida’s data driven analysis told us how we got to this place in urban America today and for that he deserves much credit.