Some Non-Consensus Thoughts about 2022

 My sense is that 2022 will not be rerun of 2021. Presented below are a few of my non-consensus thoughts about 2022.

* 2022 will be the year of foreign policy crises. The Biden Adminstration will pay the price for its chaotic withdrawal from Afghanistan by having to face down Russia, China, Iran and North Korea. (See Shulmaven: Joe Biden, Hang Down your Head in Shame:  ) It is going to be a real mess. As a result the remnants of the Build Back Better program will likely fail.  This will not be the first time in history  that plans for domestic reform fell victim to the exigencies of foreign policy.

* After Omicron peaks in January, COVID will largely be behind us.

*The economy will boom in 2022 as things get back to normal with real GDP growth on a fourth-to-fourth quarter basis exceeding 4%.

*Inflation will still be running hot as 2022 ends with the Consumer Price Index up over 4% on a year-over-year basis. Housing costs will be up over 6%, in the face of labor shortages medical services will be running above 4% and there will be no relief coming from falling oil prices.

*The stock market will prove both the bulls and bears right during the year with the high and low end of the S&P 500 targets of 5200 and 4400, respectively being achieved. (See:  Shulmaven: Powell and Wall Street's Strategist Divergence ) 

*Sometime during the year a leveraged player in the Bitcoin market will fail triggering a mini-financial crisis.

As they say in poker, read'em and weep.

My Amazon Review of John McWhorter's "Woke Racism: How a New Religion has Betrayed Black America"

 

The True Believers*

 

Columbia University linguistics professor and New York Times columnist John McWhorter has written an important book about the plague of woke racism that is now haunting America. He claims woke racism is a religion, not like a religion. Here I believe he goes too far. To me woke racism is a substitute for religion. He quotes Sigmund Freud, “If you wish to expel religion from our European civilization you can only do that with another system of doctrines….” This is precisely what is happening now.

 

Just as Marxists are obsessed class, woke racists are obsessed with race. To them being born white is the original sin and represents a moral stain that cannot be erased. Similarly, while whites are the oppressors, blacks are the oppressed and wherever black achievement fails to measure up to that of whites, racism is the only cause, making this a truly narrow obsession.

 

To McWhorter the leaders of woke racism are the “Elect,” so privileged as to know the ultimate truth. This is very similar to Lenin’s vanguard of the revolution.  The Elect have superstitions, have clergy (e.g., Kendi, DeAngelo and Coates), are evangelical, are apocalyptic and searches out heresies and heretics, hence the cancel culture.

 

What is wrong with this. To McWhorter it hurts blacks. His examples include looking the other way school discipline problems caused by black teenagers, that black identity is based on not being white and unequal outcomes mean unequal opportunity. This last factor is most damaging because it makes to easy to excuse less than satisfactory individual outcomes. In other words, blacks are permanent victims. To me this devastates the whole notion of a coalition of “people of color.” Why would upwardly mobile Hispanics and Asians want to be in a coalition with African Americans caught up in a victim centered ideology.

 

McWhorter believes that instead of woke racism, the way to better blacks in Americans would be to end the war on drugs, teach reading properly through phonics (remember he is a linguistics professor) and to get past the idea that everybody has to go to college. In case of the last instead of costly four-year colleges that are unappealing to poor people, McWhorter favors two-year programs in vocational education that can quickly lead to high paying jobs.

I know that “The Elect” will not be happy with this review and are beyond convincing, but I believe that fair-minded people will read McWhorter’s book so we can go beyond looking at the world through the very narrow lens of race. People are and always have been multi-dimensional.

 

*With apologies to Eric Hoffer

For the full Amazon URL see: The True Believers* (amazon.com)

An Open Letter to Minority Leaders Mitch McConnell and Kevin McCarthy

Dear Leaders:

 

I want to wish you a Merry Christmas but unfortunately, I do not believe you will have a happy New Year unless you mend your ways. It seems that every day you are working to divide our country and to be sure many Democrats are playing the same game. Nevertheless, you do not have to participate in allowing the “Squad” following Democrats to wreck our country too.

 

Here are a few suggestions:

 

Go all out in supporting COVID vaccinations and get your respective caucuses to make public service announcements in their states(districts) urging vaccinations. You do not have to worry about Trump on this; he already gave you all the cover you need. Afterall do you really want fewer Republican voters come November?

 

You should encourage Mitt Romney to get together with Biden/Schumer/Pelosi to make a deal on the child tax credit. Romney has some very good ideas on this topic.

 

On voting rights, you should sit down with Joe Manchin and produce a reasonable compromise that can get 60 votes in the Senate that you can sell to the Democratic leadership. Let the Democrats turn it down if they chose to do so.

 

Lastly, and perhaps most important, you should censure any one of your members who refuse to testify before the January 6^th Committee. I know this will go against your grain, but history is a stern judge.

 

Yours in the Spirit of the Season

My Amazon Review of Brendan Simms' and Charlie Laderman's "Hitler's American Gamble"

 

Five Days in December

 

Cambridge history professor Brendan Simms and King’s College lecturer Charlie Laderman have offered up a revisionist history on why Hitler declared war on the United States and why it was not self-evident that the United States would enter the war absent Hitler’s declaration. The five days between the Japanese attack on Pearl Harbor on December 7 and Hitler’s declaration of war on December 11, 1941, were truly momentous. Two days before the Soviets launched a massive counterattack on German forces deep inside of Russia and broke through on a broad front throughout the month. In Egypt the British were pushing the Germans out of Libya creating great tension in Vichy France.

 

Meanwhile the Japanese were running riot throughout southeast Asia by occupying Thailand, invading Malaya, and attacking the Philippines. On December 10^th land based Japanese aircraft sunk the prides of the British Navy, the battleships HMS Prince of Wales and the Repulse thereby breaking British sea power in region and paving the way for the taking of Singapore. It also marked the end of the battleship era in naval power. Henceforth aircraft and submarines would rule the waves.

 

After Pearl Harbor America declares war on Japan, but it does nothing with respect to Germany. This is despite the fact that there were ongoing military coordination talks between Britain and the United States. Popular history has it that America left isolationism after Pearl Harbor, not true according to Simms and Laderman. To them the isolationist lobby was still strong enough to cause hesitancy on the part of Roosevelt to delay declaring war on Germany. Further much to Churchill’s consternation lend lease aid to Britain and Russia was suspended to reallocate the supplies to the Pacific war. Thus, it is Germany’s declaration of war that brings America into the European conflict making the war truly global.

 

Strategically Hitler’s move was a disaster. Why did he do it? He did not have to act under Germany’s defensive treaty with Japan. Japan attacked the U.S., not the other way around. According to Simms and Laderman Hitler believe that war with the United States was inevitable, and he would rather have it on his terms than Roosevelt’s. He viewed America as the ultimate “have” power while his Germany was the ultimate “have not” power. He also believed that the United States could not fight a two-front war with the Axis and that, at least initially, lend lease aid to Britain and Russia would wane. It was American and British arms that turned the tide at the Battle of Moscow.

 

With the U.S. in the war Hitler had no need to delay his final solution in western Europe. To him the Jews of western Europe were hostages to keep America out, but with his declaration the roundup of western European Jewry was rapidly accelerated.  In the east Jews were treated as enemy and treated accordingly. The infamous Wannsee Conference to plan the destruction of European Jewry would take place in January.

 

This is a book of microhistory that delves into great detail on the high politics of a few days that changed the world along with a series of (wo)man on the street comments on the fast-moving events which gives the book great texture. Simms and Laderman have written a history at its best.   

For the complete Amazon URL see: Five Days in December (amazon.com)

Powell and Wall Street's Strategist Divergence

Yesterday, Fed Chairman Jay Powell calm bedside manner so soothed the stock market that he ignited a powerful rally. The Fed announced it would dial back its bond buying program and pencilled in three 25 basis point rate hikes for 2022 and another two in 2022 that would put the Fed Funds rate at .9% in December 2022 and 1.5% in December 2023. The market had already priced in the rate hikes and with the Fed forecasting the core PCE increasing 2.7% next year, a negative real funds rate of 1.8% can hardly be consideried restrictive. In fact the policy plan will remain highly stimulative throughout 2022.

To me the fly in the ointment is that the Fed's estimate of core inflation is way too low. Powell hinted at that when for the first time he mentioned the rise in paid rent and owner's equivlaent rent. As I have noted many times, I believe that the rent component of the price indices will be up 6% year-over-year by next December. That and rising wage costs will bake in price increases above 4% for the Core CPI and close to that for the Core PCE. Thus the rate environment will be far more challenging as 2022 unfolds.

This where Wall Street's strategist divergence comes in. The range of strategist forecasts for the 2022 yearend S&P 500 ranges from 5200 -4400, compared to a current level of of around 4700. Credit Suisse is at 5200,while Morgan Stanley is at 4400 with Gooldman Sachs. BofA, and Citi falling in between. My guess is that all of them will turn out to be correct with the market at some points during the year will trade at both high end and the low end of the range.

As readers of this blog know I have been bullish on a Fed fueled stock market since January 2020. (See Shulmaven: A “Rational” Basis for Supporting Today’s Stock Market Valuation and Shulmaven: The Fed Green Lights the Stock Market) Because I am more bearish on inflation and interest rates, I can no longer be as bullish as before. The way I see 2022 playing out is that the highs for the year will be hit early on and lows will be plumbed towards the end of the year as the market begins to price in a tighter Fed. Further my view would be consistent with the history of midterm election years being difficult ones for the stock market.

Trump and Abortion at the Supreme Court

 There were two important court rulings last week and though dealing with separate issues were deeply related. The first was the D.C. Circuit Court of Appeals ruling that the National Archives has to turn over its Trump documents to the January 6th Committee against the executive privilege argument made by Trump. That case is headed for the Supreme Court. In the second case the Supreme Court pretty much ruled in favor of Texas' anti-abortion law that allows for the private enforcement againt abortion providers who perform abortions after the first six weeks of pregancy. Of course standing in the background is the recently argued Mississippi statute that outlaws abortions after the first fifteen weeks of pregnancy. The Supreme Court is expected to rule on that issue in June.

Now how are the abortion rulings related to the National Archives case? It is my guess with the Supreme Court facing intense criticism for its presumed partisanship in favor of conservative causes (e.g. anti-abortion), will rule against Trump in the National Archives case to demonstrate its nonpartisan bona fides. It would happen this way. Trump's lawyers will ask for a hearing at the Supreme Court and Chief Justice John Roberts denies their application and there are not five other justices to grant a hearing. This Supreme Court independence will be hailed as great victory the January 6th Committee and it will give the court the political cover to rule in favor of Mississippi's abortion law, either narrowly or by completely overturning Rowe v. Wade. 

To be perfectly cynical about this, the conservatives on court will throw Trump under the bus. To them Trump was useful in the creation of a conservative majority on court and now that they have achieved their goals, Trump would have outlived his usefulness.

My Amazon Review of Michael Neiberg's "When France Fell…"

 Vichy Water

 

Army War College professor Michael Neiberg has authored an important book on American policy towards Vichy France during World War II, a topic that is usually skimmed over in history books on World War II. He goes into great detail about the failed policies of Secretary of State Cordell Hull who bent over backwards to maintain relations with Vichy and to prevent the recognition of Charles de Gaulle as the true leader of France.

 

The fall of France in May 1940 was a shock to U.S. security. Of a sudden the U.S. appeared vulnerable to Hitler’s armies as the balance of power in Europe collapsed. Immediately the U.S. instituted the draft, began a major arms build-up, and started to search for fifth columnists. Hull wanted to maintain relations with the rump Vichy government to keep the French fleet out German control and to limit German influence in France’s Africa and North American colonies. The problem was that as time passed Vichy became a wholly owned subsidiary of the Reich.

 

Neiberg is particularly good at portraying the rolls of such larger-than-life Americans as OSS Director William Donavan, diplomats William Leahy and Robert Murphy and General Mark Clark. On the Vichy side see the aged World War I hero of Verdun, Henri Petain as president and the crypto Nazi Pierre Laval as prime minister along with Admiral Jean Darland who ran the French Navy and then switched sides, before he was assassinated, by working for the Allies.

 

In essence the Vichy government was a right-wing counter to communism. After the French collapse the French right feared a civil war with the communists as the possibility of a rising similar to the Paris Commune in 1870 loomed. However, because the French Communist party like its counterparts everywhere followed the Soviet line of maintaining friendly relations with Germany until the June 1941 invasion of Russia no uprising took place. Vichy hated the British, especially after Churchill ordered the sinking of several French vessels at Mers-el-Keber.

Through it all U.S. policy until late 1943 could be described as a theme park for policy incoherence. Ultimately the U.S. sided with de Gaulle as plans for the invasion of Europe intensified. To me one of the highlights of the book is that Neiberg uses lines from the movie Casablanca as chapter headings. My main quibble is that the book is way too detailed and too long for the lay reader.

For the full Amazon url see: Vichy Water (amazon.com)

My Amazon Review of Martin Indyk's "Master of the Game: Henry Kissinger and the Art of Middle East Diplomacy"

Metternich in the Middle East

Martin Indyk, two-time ambassador to Israel under President Clinton and special envoy to the middle east under President Obama, has written an homage to Henry Kissinger’s middle eastern diplomacy before and after the October 1973 war. Indyk quotes extensively from Kissinger’s “A World Restored,” a book I read fifty years ago, on the role of Count Metternich at the 1815 Congress of Vienna that established order in Europe for the next 100 years. To Kissinger the role of diplomacy is not so much as to establish peace, but rather to establish a stable order based upon the balance of power and legitimacy.

 

On becoming President Nixon’s national security advisor in 1969 and later Secretary of State, Kissinger’s goal for American foreign policy in the middle east was to get the Russians out of the region and to avoid a return to Israel’s pre-1967 borders. He succeeded in both of those tasks, but it took the 1973 Yom Kippur War and the statesmanship of Egyptian President Anwar Sadat to make those goals a reality. Along the way U.S. forces had to go on a worldwide nuclear alert (Defcon 3) fearing a direct Russian military intervention in the region.

 

Indyk gives us a daily play-by-play of Kissinger’s shuttle diplomacy in the region. First, by disengaging Israeli and Egyptian forces in the Suez Canal area and later the much more difficult negotiation involving the critical passes in the central Sinai. Similarly, Kissinger shuttled back and forth between Israel and Syria dealing with Syrian President Hafez Assad in negotiating a partial disengagement in the Golan area. Further Kissinger was not above being duplicitous by suggesting his ideas as coming directly from the parties involved and vice versa in search of a deal. Further, because Kissinger believed in hierarchy of power both the Jordanians and the Palestinians were largely frozen out of the process.

 

Not only did Kissinger understand the players, but he also understood the geography and the topography of the region to better understand the military situation on the ground. As a result, he created a step-by-step process whose results hold to this day.

 

On the way we meet such key Israeli players as Prime Ministers Golda Meir and Yitzhak Rabin, defense minister Moshe Dayan and he brings out the much unheralded role of Israeli ambassador to the United States, Simcha Dinitz. Indyk relied on recently declassified sources in the United States and Israel and the held numerous interviews with Henry Kissinger.

 

While reading this book one marvels at Kissinger’s stamina shuttling back and forth between Israel, Egypt, and Syria. While all of this was going on Kissinger had to deal with the Russians on nuclear issues, the fall of the Nixon presidency under the strain of Watergate and the collapse of South Vietnam. His plate was more than full.

 

Indyk learned the hard way that potential big deals in the middle east have a way of blowing up. He was directly involved with President Clinton’s proposals with Ehud Barak and Yasser Arafat in 2000 which blew up into the second intifada and further he was involved with President Obama’s efforts in 2013 which went nowhere. His lesson is that a peaceful order in the middle east will come gradually in small steps and the lure of the big deal is pure chimera.

For the full Amazon URL see: Metternich in the Middle East (amazon.com)

 

 

My Amazon Review of Scott Gottlieb's "Uncontrolled Spread"

 

Continuing Ineptitude

 

Former F.D.A. commissioner Scott Gottlieb, MD was one of the few people who served in the Trump Administration and left with an enhanced reputation, no mean feat. Throughout the COVID-19 pandemic Dr. Gottlieb was the go-to source for accurate information which he made available through op-eds and numerous television appearances. He helped us cut through the fog of misleading information that was coming, not only from the Trump Administration, but a host of other sources.

 

To Gottlieb the “villain” of the piece was the Center for Disease Control and Prevention (CDC) The CDC royally messed up in developing test kits and prevented the commercial laboratories and medical device manufacturers from developing their own testing protocols and testing kits. That allowed the pandemic to silently spread throughout the population. Further when the time came to scale up production, the CDC’s facilities were hopelessly inadequate and along the way the CDC gave conflicting advice about the use of masks.

 

Simply put the CDC is a slow-moving risk averse academic agency. In peacetime that is the way it should be, but in the wartime of a pandemic that culture can be devastating. As I learned along time ago it is better to be approximately right early than exactly right late. In contrast the private sector response to developing vaccine in record time was absolutely extraordinary and where Gottlieb’s old F.D.A. moved with unprecedented alacrity.

 

Of course, the stunning incompetence of the Trump Administration played a leading role. The administration went from denial to grudging acceptance and President Trump refused to wear a mask, setting a very poor example. The testing procedures in the White House were woefully inadequate and that led to a super-spreader event in the form of the Amy Comey Barrett Supreme Court announcement, where Trump himself came down with COVID.

 

Gottlieb discusses the perfidy of China in withholding information on the spread of disease there. To this day we do not really know how COVID originated there. Gottlieb believes it was an accident or a lab leak at their Wuhan Labs. The one person in the White House who was blowing the whistle on China was NSC staffer Matt Pottinger.

 

Gottlieb’s policy recommendations for the future include, enhanced surveillance systems, the paying of firms to carry excess capacity in protective equipment, testing equipment and chemical reagents. So instead of stockpiling these items which tend to go stale, excess capacity would be build into the system. He also recommends an international commission similar to the International Atomic Energy Agency to regulate advanced virology labs.

 

Dr. Gottlieb’s offers up an education on viruses, governmental processes, and the public health response to a crisis. At times he gets bogged down in too much detail, but his book is well worth the read.

 

Note: I received this book as a gift.

For the full Amazon URL see: Continuing Ineptitude (amazon.com)

Wake Up Call for the Fed

This morning the BLS reported the biggest increase in year-over-year consumer prices in 30 years. The overall index increased by  a stunning 6.2% and the core index(ex food and energy) increased by 4.6%. The increases were broad based yet the housing component remains substantially understated from what is occurring in the real world. Specifically owners equivalent rent was up 3.1% and tenant paid rent was up 2.7%. Knock, knock the real world increases for both of these housing measures are now running two to three times the official rate of increases. Thus as the official index catches up to the real world measured inflation will continue to run hot. Simply put, the term "transitory" is so last year.

The bond market responded by pushing up still low interest rates by about 10-15 basis points across the yield curve. What this means is that Fed will soon accelerate its tapering process and will start to pencil in rate increase as early as next June. As we noted recently the Fed is behind the curve and the markets will not find it a pleasant experience as the Fed starts to play cach up. (See Shulmaven: The Fed and the High-Pressure Economy  and  Shulmaven: Too Complacent about Inflation ) Further it is making less and less sense for the Biden Administration to push its already expansionist fiscal policy with its $1.75 Trillion Build Back Better social programs.

When Will the Democrats Ever Learn*

 

From Virginia to New Jersey to Long Island to Minneapolis to Seattle the Democrats got shellacked in Tuesday’s voting. They forgot that America is primarily a centrist country and that they only have bare majorities in the House and Senate. Simply put, even as I write this, they are over-reaching in their attempts to pass the Build Back Better reconciliation bill in the House. They do not understand that you cannot rewrite America’s social contract with bare majorities; they need the majorities that FDR and LBJ put together in 1933 and 1964, respectively. Further Biden was elected to stop the craziness of Trump, not to usher in an overarching expansion of the welfare state. (See my Open Letter to President Biden Shulmaven: An Open Letter to President Joe Biden)

 

On a more local level the Democrats have forgotten the role of engaged parents in the education of their children. Although technically Critical Race Theory was not taught in Virginia’s schools, many of the aspects of the theory are being taught. It is obvious if you accuse all white people of being inherently racist, perhaps more than a few would be turned away and that is precisely what happened in Virginia. And it is understood that “defund the police” is an absolute loser.

 

If the Democrats are going to have a chance to hold their slender majorities in Congress next year, they are going to have to abandon the crazy town ideas of the “woke” left. The Squad and their acolytes live in very insular worlds. If they ever ventured out into the real world, they would realize how off-putting their ideas are. As long as Nancy Pelosi and Chuck Schumer cozy up to them, the Democrats will be in a world of hurt in 2022. Better they should heed the words of Senators Joe Manchin and Kyrsten Sinema.

*With apologies to Pete Seeger

 

My Amazon Review of Gregory Zuckerman's "A Shot to Save the World"

 

From Cell Biology to Wall Street

 

Wall Street Journal reporter Greg Zuckerman has written a page turning thriller on the race to develop COVID-19 vaccines in record time. He brings to life the key developers of the COVID vaccines who were previously working on vaccines for cancer and AIDS. He further explains how a group of scientific outsiders who, with the aid of venture capital dollars, bet the ranch on mRNA (messenger RNA) as a method of delivering protection against the deadly COVID virus. The result came in the form of the Moderna and Pfizer/BioNTech vaccines.

 

Also in the race were the more traditional vaccines based on the adenovirus technology that were under development at Johnson & Johnson (JNJ) and the Oxford University/Astra Zeneca joint venture. The Oxford vaccine came out of the gate early, but it was plagued by testing issues and the JNJ vaccine had an issue with a rare side effect that slowed its adoption.

 

Zuckerman’s character sketches draw you into the major personalities. We have French immigrant Stephane Bancel, the highly promotional CEO of Moderna who on many occasions promised more than he could deliver. In fact, Moderna was the most shorted biotech stock as of the end of 2019. Nevertheless, Bancel had the foresight to buy an old Polaroid factory in Massachusetts that enabled Moderna to manufacture vaccines at scale and the shorts got their faces ripped off later. More interesting are the Turkish immigrant husband and wife team Uger Sahin and Ozlem Tureci who run BioNTech from their laboratory in Mainz, Germany. After scrimping for cash, the Swiss billionaire Thomas Strungmann funds them. And they struggled mightily to get off their initial public offering. The lesson here is that there is a symbiotic relationship between biological science and Wall Street, something that Congress should be very reluctant to tamper with.

 

Lacking production capabilities Sahin convinces pharmaceutical giant Pfizer CEO Albert Bourla to go all in on vaccine production. Bourla is so convinced that he turns down federal Warp Speed funding. He rightly believed that government could slow things down. Where Pfizer had nerve and strategic vision, Merck, the leading vaccine producer, chose not to enter the vaccine race. Years earlier Merck failed spectacularly with an experimental AIDS vaccine.

 

The most interesting character is the Hungarian immigrant Katalin Kariko. She is a true believer in mRNA and struggles for years as a postdoctoral student at the University of Pennsylvania. In fact, the authorities at Penn demote her. Nevertheless, she struggles on and develops a key process with Drew Weisman to modify natural mRNA to enable it to evade the body’s immune system. Her process is adopted by both Moderna and BioNTech. She ends up as senior executive at BioNTech and it is my uneducated guess that she and Weisman will soon win the Nobel Prize for Medicine. As an aside, her daughter won gold medals for rowing in the 2008 and 2012 Olympics.

 

Although there is quite a bit of molecular biology in the book, my high school advanced biology course from years ago seemed sufficient to get the gist of what was going on. Thus, the reader should not be deterred. Zuckerman has written a work of history that reads like a novel. My one quibble is that he should have pointed out that Bourla and Sahin are coincidentally grandsons of Salonika. (Now Thessaloniki) As a result of the Treaty of Sevres which called for the removal of Muslims from Greece and Greeks from western Turkey Sahin’s Muslim family was exiled to Turkey in 1920 and Bourla’s Jewish family remained, but just barely survived the Nazi holocaust in Greece. Who knows, perhaps both of their grandparents might have known each other in that very cosmopolitan city where most of the Turkish leadership of the 1920’s came from.

For the full Amazon URL see: From Cell Biology to Wall Street (amazon.com)

An Open Letter to President Joe Biden

 

Mr. President:

 

I voted for you in the Democratic Primary. I did not vote for Bernie Sanders or Elizabeth Warren, but it seems you are trying to implement most of their policies to a T, a wholesale expansion of the welfare state. I guess you visualize yourself as the second coming of either FDR or LBJ. I hate to break it to you, but you do not have their raw political talent, and more importantly you don’t have their huge majorities in Congress to implement your program.  When I voted for you in the general election I had more modest aims, to restore respect for our government and achieve at least a modicum of competency. Given your predecessor that would be a huge accomplishment and you were terrific out of the starting gate.

 

However, with respect to competency, you botched up our withdrawal from Afghanistan, you are presiding over an immigration crisis on the Mexican border, and it appears, at times, that the CDC doesn’t know which end is up. Your climate agenda is a theme park of policy incoherence. You ask OPEC to pump more oil, while at the same time working to shut down domestic production. And you rejected out of hand a carbon tax which your Secretary of the Treasury fully advocated before she entered government. Further it is beyond me why you didn’t push for an immediate vote on the infrastructure bill when you had the chance. Its passage would have been a great confidence building measure all around. Instead, you listened to the shrill voices on the Left.

 

With each passing day I am losing respect for our government with a host of small unforced errors based on the faculty lounge world of political correctness.  Why did your Administration put out documents calling mothers “birthing people?” Your administration uses the term “Latinx,” a term by and large rejected by the Hispanic community. Come on Mr. President, these are not the words of a kid from Scranton.

 

In my view Senators Joe Manchin and Kyrsten Sinema are saving your presidency. The two of them are pushing you into the middle so you can be the candidate I and I believe most of the country voted for. Listen to them and the path will be open to a very successful presidency.

My Amazon Review of Ivy Zelman's "Gimme Shelter........."

 

Housing Maven

 

Ivy Zelman overlapped with me at Salomon Brothers. She has written a short autobiography discussing her improbable rise in male dominated Wall Street and the complications that arose with her being a mom for her three children. In many respects her autobiography has much in common with national security professional Fiona Hill’s, a book that I recently reviewed. (Shulmaven: My Amazon Review of Fiona Hill's "There is Nothing for You Here")

 

Ivy was a scrappy kid from suburban Long Island who after a short stint at New York’s Baruch College, she ended up graduating from northern Virginia’s George Mason University with a degree in accounting. This was and is hardly the profile for a starting analyst on Wall Street, yet Ivy talked her way into Salomon Brothers investment banking. After being harassed in the transportation group at Salomon she ends up in the research department where there was an open position for covering the homebuilding industry. She was an unlikely hire, but with Salomon in the midst of its treasury scandal, internal opportunities opened up.

 

From 1993 to 1997 she rose from being a nonentity to being ranked Number 2 by the all-important Institutional Investor survey. However, with Salamon’s merger with Travelers and its Smith Barney subsidiary she was fired because the Smith Barney homebuilding analyst was ranked Number 1.  I too left Salomon that year for a hedge fund. Ivy quickly found a home at Credit Suisse and was treated like a star and was quickly ranked Number 1 in the survey.

 

While there she understood better than almost everyone that the asbestos litigation was going to destroy such building products companies as U.S. Gypsum and Owens Corning. By then she had picked up coverage of that industry. She later made the biggest call of her life in 2004 turning bearish on the homebuilders accurately foreseeing the debacle to come. However, she was early and was subject much ridicule as the stocks ripped higher in her face. She lost her Number 1 ranking and many in the industry called he “Poison Ivy.” Her conviction was based on the fact that she developed a coterie of private homebuilders who were far more candid than the public homebuilders she covered. 

 

Along the way she married her husband David who was a salesperson at Salomon. David talked her into moving to Cleveland and she received the blessing of Credit Suisse to make the move. In the Cleveland suburbs they quickly had three children. Believe me having three children and a Wall Street travel schedule is no easy task.

 

In late 2006 she breaks with Credit Suisse to form Zelman and Associates to better monetize her contacts and her still very strong franchise value. Remember she does this with three small children under the age of seven. In a way it was perfect timing as the housing boom began to unwind with vengeance. Within the year because of her prescience, her views were thought out by lenders, the entire mortgage securities industry and government.

 

While basking in her new prestige she was stricken with breast cancer that required a double mastectomy and many subsequent surgeries. Nevertheless, she plowed on with the support of family and a host of friends. Her book brings how caring and curious person she is. She has friendships ranging from CEOs to secretaries to drivers.

 

This is a short and easy book to read, but do not mistake it for a work of literature. I may too close to it, but there is much to be learned in her book. I am going to give it to my youngest daughter who works for a major securities firm.

For the full Amazon URL see: 

Amazon.com: Customer reviews: Gimme Shelter: Hard Calls + Soft Skills From A Wall Street Trailblazer

 

My Amazon Review of Fiona Hill's "There is Nothing for You Here"

Coal Miner’s Daughter

 

On November 21, 2019, Fiona Hill, a former National Security Council staffer in charge of European and Russian affairs, made headlines around the world with her explosive testimony at President Donald Trump’s first impeachment trial. I was prescient enough to review her coauthored book, “Mr. Putin: Operative in the Kremlin” on July 19^th.  ( Shulmaven: My Amazon Review of Fiona Hill and Clifford Gaddy's " Mr. Putin: Operative in the Kremlin" ) Although her biography touches on her experiences as a National Security Council staffer, Hill spends most of her time recounting her experiences of growing up in the northeast England coal mining town of Bishop Auckland and her overcoming sexism and classism in both England and the United States.

 

Her life experience in Bishop Auckland gave her great insights into the rise of rightwing populism in the U.S., England, and Russia. She witnessed firsthand in her family and her town the debilitating effects of the collapse of the coal mining industry. It helped her understand why previously Labour voters in England and Democratic voters in the U.S., supported Brexit and Trump, respectively. Further she understood how Putin built his political base among the industrial workers and miners in Russia’s declining cities. She clinically observes that instead of Russia becoming more like the United States, the United States is becoming more like Russia in seeking out authoritarian leadership as our political divisions deepen. The Russian intelligence services successfully exploited those divisions during the 2016 presidential election, but the divisions go so much worse that they didn’t have to lift a finger in 2020.

 

While Hill lived in a depressed community, her family was intellectually curious and encouraged her education.  She took her father’s advice when he told her, “There is nothing for you here.” In order to advance she had to overcome three very English questions (where are from, what does your father do, what school do you go to.) Further her northern England accent was a telltale sign of her lower-class origins. She overcomes it all graduating form Saint Andrews College and then goes on to a Ph.D. program at Harvard. She made her own breaks by meeting influential Americans as an interpreter during a Reagan-Gorbachev summit in Moscow which opens the way to Harvard. She is an almost pure example of baseball executive Branch Rickey’s aphorism, “luck is the residue of design.”

 

At Harvard she shines, but she was aided by an administrator who told her that torn jeans and a sweatshirt were not the appropriate attire for high-end Harvard seminars. She took her to T.J. Maxx and bought her more professional attire which opened the way to seminars with Professors Graham Allison and Richard Pipes.

 

From Harvard she goes onto posts at the National Intelligence Council and the Brookings Institution. At both places and at Harvard for that matter, she was grossly underpaid and that carried over to the National Security Council. At various meetings she was assumed to be either a tea lady, a secretary or while in Russia, a prostitute. Simply put, sexism at work.

 

In discussing Trump, she does not believe that the Russians had something on him. Instead, she views him as a person with a very fragile ego who has a deep admiration for authoritarian leader. Hence his bromance with Putin. She found that Trump had a complete lack of intellectual curiosity about foreign policy with the glaring exception of nuclear arms control.

 

Fiona Hill is a remarkable person who I highly admire. Nevertheless, I have a few quibbles with her book. She places much of the blame for the post-1980 industrial decline and the rise of rightwing populism on Ronald Reagan and Margaret Thatcher. The decline long preceded them. The coal industry has been in secular decline since World War II and the collapse of the great steel mills in Ohio’s Mahoning Valley occurred in 1977 when the Democrats controlled all of the power in Washington D.C. Hill mentions once that there were broad impersonal forces at work that led to deindustrialization, but she goes back to bashing Reagan and Thatcher. She also fails to note that across Europe parties of the right have been strengthened. (e.g., France, Hungary, and Poland)

 

She also believes that the polarization of American politics is due to economics. Although economics has a role to play, it is not surprising to see Americans living in the South and the middle of the country to resent a very haughty cultural elite on both coasts who look down on all too many Americans. I fear that the coal miner’s daughter may have joined that elite.

 

At the end of the book, she presents a host of policy prescriptions that come out of the Brookings think tank. Some are sensible, some are not, but I am especially critical of her support of place-based policies as opposed to people- based policies. Put bluntly some towns and cities deserve to die; it makes little sense to prop them up.

 

With these criticisms aside, Fiona Hill has written a remarkable autobiography. I am so glad we welcomed her into our country and that she has done so well.

For the full Amazon URL see: Coal Miner's Daughter (amazon.com)

My Amazon Review of Rudiger Barth's and Hauke Friederichs' "The Last Winter of the Weimar Republic"

 

Game of Thrones

 

Rudiger Barth and Hauke Friederichs have turned history into a real political thriller. Their version of the fall of Weimar and the rise of Hitler should be made into a television series on the order of Babylon Berlin. The book opens with the resignation of Chancellor Franz von Papen on November 17, 1932, after the November 6^th elections left no clear majority in the Reichstag with the anti-democratic parties of the Left and the Right squeezing out the Center. It ends on January 30, 1933, with Hitler being named Chancellor. Although Papen has been called the gravedigger of the Republic, he had many accomplices and Hitler’s rise to power was by no means certain.

 

The cast of characters include:

·       Adolf Hitler – Fuhrer of the National Socialist German Workers Party. (NDSAP)

·       Kurt von Schleicher – Defense Minister and Chancellor who was caught between a crossfire of the Right and Left. Earlier he was in up to his eyeballs in the secret Russo-German arms agreement.

·       Paul von Hindenburg – German president, World War I general and monarchist. 

·       Alfred Hugenberg – Media baron and leader of the rightist German National Peoples Party. (DNVP)

·       Gregor Strasser – A leader in the NDSAP who breaks with Hitler.

·       Kurt Schumaker- Leader of the Socialist Party of Germany. (SPD)

·       Ernst Thalmann – Leader of the Communist Party of Germany. (KPD)

 

After Papen resigned Hindenburg faced great pressure to appoint Hitler as Chancellor because he represented the largest party in Reichstag although the NSDAP lost seats in the November election.  However, Hindenburg wanted Hitler to form a coalition government, which he refused. With that Strasser broke with Hitler in that he supported a coalition government. There is much maneuvering to get Strasser into a coalition government, but that fails.

 

Into the vacuum comes Kurt von Schleicher who forms a minority government which is constantly under attack by both the NSDAP and the KPD. While Schleicher is in office the army runs a simulation that concludes that it could not maintain order should a civil war breakout. This increases the pressure on Hindenburg to seek a stable governing coalition. However, Schleicher is ultimately not up to the task.

 

The knives come out with Papen scheming to bring Hitler into power with him as Vice Chancellor. To make it work Papen makes a deal with Hugenberg which brings the NSDAP close to a majority; good enough for Hindenburg and Hitler is named chancellor. Hitler, with his will to power, played a bad hand very well because his party was hemorrhaging members and cash. However, there wasn’t much on the other side to stop him.

 

Why? The socialists and the communists were at each other’s throats. Instead of allying against Hitler they fight among themselves. Of course, Thalmann’s KPD is following the strict orders of Moscow. Had the two parties of left united, history would have been different. Further once Hitler was appointed, the KPD went underground and the SPD quietly acquiesced. Thirteen years earlier the SPD responded to the Kapp Putsch with a general strike that broke the back of a fascist coup. Simply put they were exhausted.

 

One of the real beauties of the book is that the authors rely on the diaries of Bella Fromm and Abraham Plotkin. Fromm was a society columnist who was very close to Schleicher, and we get a sense of what high society was thinking that winter. Plotkin was an American labor organizer temporarily in Berlin where he is close to the SPD. From him we get a sense of what was like to be a member of a politicized member of the German working class.

 

If you are into history, intrigue and political thrillers, this book is right up your alley. I do hope the authors make a television series of it. There is much to learn. After reading this book I have become even more convinced that had Gustav Stresemann, Germany leading 1920’s politician, lived he just could have stopped Hitler.

For the full Amazon URL see: Game of Thrones (amazon.com)

 

 

My Amazon Review of Edward Glaeser's and David Cutler's "Survival of the City: Living and Thriving in an Age of Isolation"

 

Sickness and the City

 

Harvard urban economics professor Edward Glaeser and Harvard health economics professor David Cutler have teamed up to write a book about the post-Covid environment for cities. They rightfully note that isolation and social distancing caused by the pandemic are city destroyers in that they break the bonds of agglomeration economies that are so necessary for cities to succeed. In a word they represent an “existential threat” to a city’s viability.

 

There is quite a bit of history here in that they discuss role of cholera, typhus, bubonic plague, and influenza in determining the development or nondevelopment of cities. Early on city leaders understood the need to quarantine sick individuals and travelers from lands where sickness was evident.

 

To deal with future pandemics the authors call for strengthening the public health infrastructure to deal with stockpiling protective equipment and the delivery of healthcare services. They propose a global public health NATO to supplement the World Health Organization which would intervene in health emergencies. This NATO would also help fund vitally needed sanitation infrastructure in less developed countries. Given NATO’s defeat in Afghanistan, it has become far less of a role model.

 

They view urban America largely through the narrow prism of New York and Los Angeles where the struggle is between the insiders and the outsiders. Homeowner insiders control local zoning which restricts housing supply that makes housing unaffordable for all but the wealthy, and the police and teachers’ unions insiders make reform of policing and education difficult. It is these insiders who prevent cities from achieving their natural function of being the engine for intergenerational mobility.

 

Going forward the competitive environment for the so-called super star cites is going to get tougher. The authors believe they will continue to thrive, but the breakthrough of remote work is going to make it more difficult. Simply put, there is too much office space and the businesses that live off dense concentrations of office buildings will suffer.

 

My main criticism of the book is that it is way to New York and Los Angeles focused. It ignores the very exciting urban environments of Houston, Nashville, Austin, and Denver, for example. Those cities are thriving amidst the pandemic and will do far better once it ends.     

For the full Amazon URL see: Sickness and the City (amazon.com)

My Amazon Review of Bob Woodward's and Robert Costa's "Peril"

 

Dangerous Transition

 

Washington Post reporters Bob Woodward and Robert Costa have written a widely quoted book on the last year of Donald Trump’s presidency and the first six months of Biden’s.  When reading about Trump’s last days in office I was expecting the worst and it was far worse than what I imagined. The man is evil. Fortunately, there were a few people in the Trump Administration who put the Constitution over their boss.

 

Now when reading an unsourced book that is Woodward’s style you have to guess who his sources were and what were their motivations. It is obvious that Joint Chiefs Chair Mark Milley was a source and he just today admitted he spoke to the authors and Secretary of Defense Mark Esper was obviously a source. They both come off well. A.G. William Barr was certainly a source and after enabling Trump early on, he refuses to go along with Trump’s “stop the steal.” My guess in talking to the authors he was trying to salvage his reputation. We also have Senator Lindsey Graham singing arias to the authors. He wants to have it both ways by saying Trump lost while remaining his golf buddy.

 

We saw a torn Vice President Mike Pence who finally goes along with Dan Quayle’s advice that he had no discretion in counting the electoral college ballots. How after the January 6^th insurrection, could Pence remain loyal to Trump is beyond me? Indeed, Milley characterized January 6^th as a dress rehearsal for what was to come, alluding to the 1905 uprising in Russia. Further Utah Senator Mike Lee played an important role in keeping Pence on the straight and narrow. Further with all of the subpoenas flying from the January 6^th Committee we will soon find out what exactly happened in the Trump White House on that day. What Woodward and Costa disclose has been widely reported, but I am sure there is much more.

 

The authors also discuss the Biden campaign and the early months of his administration. They portray Biden as very hands on with COVID-19 asking penetrating questions and the same goes double for his questions on Afghanistan. My guess the authors got their information from Mike Donilon and now Chief of Staff Ron Klain. I wish it were true, but my guess is that they were exaggerating.

 

With respect to Afghanistan, we all know that Biden supported withdrawal in the early days of the Obama Administration. Biden believed that the military rolled Obama and that was not going to happen to him. Simply put he was dead set on withdrawal. According to Woodward and Costa Biden asked many questions pertaining to Afghanistan, but not very many about the geo-strategic consequences. Several years ago, I had the good fortune to discuss this issue with former Joint Chiefs Chair Mike Mullen and former Secretary of Defense/CIA Director Bob Gates. My question to them was whether or not the U.S.’s retreat from the broader Middle-East (Morocco to Pakistan) was strategic or tactical? Both answered tactical with the hope it wasn’t strategic. Well, Biden answered that question with disastrous consequences. It is strategic. Further the way too academic Secretary of State Tony Blinken and National Security Advisor Jake Sullivan turned out to be completely clueless about what would happen after the U.S. announced its withdrawal.

 

With respect to domestic policy the authors go into a great deal of detail in examining how the $1.9 Trillion rescue plan passed. Then as now Senator Joe Manchin was a key player. The bottom line is that Manchin did not want Biden to fail on his first major effort and that is why it passed. Biden may not be so lucky with his reconciliation bill now before the Congress.

 

Woodward and Costa have written a very important first draft of history. It is well worth the read. And with Trump still holding sway over the GOP, we are still in peril.

For the full Amazon URL see: Dangerous Transition (amazon.com)

My Amazon Review of William Silber's "The Power of Nothing to Lose: Hail Mary Effects.............."

 

Asymmetric Bets

 

N.Y.U. emeritus professor William Silber has written a book about the influence of asymmetric bets have had on our lives. He is basically writing about the importance of high payoff low risk bets in the sense that the better has nothing to lose and much to gain.  As his title notes the “Hail Mary” pass in football comes into play when a team is losing by less than a touchdown with seconds to go. Thus, the quarterback has no choice but to throw a long pass for a score. If he connects the team wins and if he doesn’t the team loses, but it would have lost anyway. Hence, nothing to lose.

 

In series of vignettes Silber discusses the risks that second term president take when they know they don’t have to face the voters again. His example is Woodrow Wilson going from anti-war in 1916 to all-out war in 1917. Other vignettes, among others, include Rosa Parks refusing to leave a white only section on a Montgomery bus, Hitler’s gambling it all at The Battle of the Bulge, Washington crossing the Delaware and Nick Leeson’s ever larger positions in his failed attempt to cover up his trading losses at Barings’ Singapore office in 1995.

 

This last example is of personal significance to me. I was working at Salomon Brothers at the time and was quoted in a Bill Safire column in The New York Times saying that what Leeson did could not happen in the U.S. securities markets. Everything hit the fan at Salomon’s Singapore office, and I was required to grovel which included writing a letter to Prime Minister Lee Kwan Yew himself.

 

There are real lessons here, one of which is be wary when you are opposed by someone who has nothing to lose. My one wish would have been for Silber to discuss the power of nothing to lose in academic politics. Simply put, there is much merit in the wag that the reason why fights in academia are so fierce is because the stakes are so small. Tenured faculty have nothing to lose.

For the full Amazon URL see: Asymmetric Bets (amazon.com)

My Amazon Review of Carlo Rovelli's "Helgoland: Making Sense of the Quantum Revolution"

 

The Philosophy of Quanta

 

Physicist Carlo Rovelli has offered up his philosophical review of the quantum revolution largely through the eyes of Werner Heisenberg. We see the 23-year-old Heisenberg in 1925 on the barren North Sea Island of Helgoland where he develops probabilistic matrix equations that explains the movement of electrons. Rovelli takes it one step further where in the physics of small particles everything is relational. That harks back to Einstein’s 1905 Theory of Special Relativity.

 

Heisenberg is challenged by a wave theory authored by Erwin Schrodinger which eventually fall by the wayside. His discussion of Schrodinger’s famous cat thought experiment is, to my mind, is marred by him viewing the cat has asleep or awake, when in fact Schrodinger was discussing whether or not his cat was dead or alive.

 

In the book we meet the great physicists of that age, Plank, Bohr, Dirac and Born. Where Rovelli loses me is where veers off into a host of philosophical notion to explain the interdependence of all objects. Nevertheless, you get a sense of the importance of Heisenberg did on Helgoland in 1925 and that underpins much of modern electronics today.

For the full Amazon Review see: The Philosophy of Quanta (amazon.com)

My Amazon Review of Nicholas Wapshott's "Samuelson Friedman: The Battle Over the Free Market"

 

The Clash

 

The theme of Nicholas Wapshott’s book is the clash of ideas between superstar economists Milton Friedman and Paul Samuelson over the role of government in the economy as played out in series of columns in Newsweek magazine starting in 1966 and lasting through the early 1980’s. Although Wapshott quotes from many of the columns, nowhere is there to be found are the full-length columns of the two protagonists. Because I was an avid reader of those columns when they came out, I was looking forward to rereading at least a few of them. I view this a significant failure of the book.

 

You can view this book as a follow-om to Wapshott’s “Keynes Hayek” book of a few years ago where the role of government was debated in the context of the deflationary 1930’s compared the inflationary 1960’s and 70’s. As an aside, it is not as good as his earlier work. Wapshott makes it out as duel, but in fact both Friedman and Samuelson were friends since their college days in the early 1930’s who were very respectful of each other. Wapshott makes Friedman out as an outsider arriviste, when in fact he was president of the American Economic Association in 1968 where his presidential address set the stage for the great debate about economic policy.

As America’s leading Keynesian Samuelson’s neoclassical synthesis was under attack as his paradigm could not explain the stagflation that was occurring in the U.S. and Western Europe. Simply put inflation was existing side by side with high unemployment. Friedman’s answer was monetarism which took the profession by storm in the 1970’s because it accurately explained the inflationary processes that were underway. However, by the early 1980’s it ceased to work and when crises came in 2008 and 2020, it was Samuelson’s Keynesian playbook that was trotted out to save the day.

 

Wapshott rightly characterized Friedman as a politician seeking to get his libertarian views implemented, while Samuelson was far less motivated by politics. Naturally Freidman as a politician rubbed many of Samuelson’s colleagues the wrong way and took his attacks on their views all too personally.  Along the way Wapshott offers up pretty good biographies of both Freidman and Samuelson. The book is a good read for econ geeks, of which I am one.

For the full Amazon URL see: The Clash (amazon.com) 

My Amazon Review of Andy Weir's "Project Hail Mary"

 

Junior High School Teacher Meets Space Alien

 

Software engineer turned sci-fi writer Andy Weir has offered up a novel that space nerds will love. The proof of this is over 31,000 reviews on Amazon. His protagonist is Ryland Grace, a former university professor of molecular biology whose heterodox views force him out of academia, and he ends up teaching junior high school science. Nevertheless, because his heterodox papers caught the attention of the powers that be, he is drafted into a global program to save the earth from being frozen because a mysterious force is draining the sun of its energy. That force is a stream of high energy microbes called astrophage.

 

Grace ends up on up on a mission to a distant star that seems to be unaffected.  The mission is a continuous series of near disasters that overwhelms the reader. The best I can tell, the physics of what is happening seems to be correct. Along the way Grace meets up with a spider-like space alien who breathes ammonia who is also on a similar mission to save his planet. So much for a spoiler alert.

 

I enjoyed the book, but Weir put too many “perils of Pauline” moments in his plot. It became exhausting over time. My guess is that when the motion picture comes out, much, but not all, of that will be edited out.

For the full Amazon URL see: Junior High School Teacher Meets Space Alien (amazon.com)