My Amazon Review of Brad Snyder's "Democratic Justice: Felix Frankfurter..........."

Talent Scout for the Administrative State

 

You can view Brad Snyder’s “Democratic Justice” as the sequel to his “The House of Truth” where the leading lights of early 20^th Century liberalism lived or visited one time or another at 1727 19^th Street in Washington D.C. from 1912-1919. (Shulmaven: My Amazon Review of Brad Snyder's "The House of Truth: A Washington Political Salon and the Foundations of American Liberalism")   One of those occupants was Felix Frankfurter who was to become a confidant of Franklin Roosevelt and the leading talent scout for the New Deal.

 

Arriving in 1894 at age 12 from Austria, a mere fourteen year later Felix Frankfurter would find himself with a Harvard law degree and working as an assistant U.S. attorney for the Southern District of New York under the leadership of Henry Stimson. Stimson would go on to become Secretary of War under both Howard Taft and Franklin Roosevelt and Secretary of State under Hoover.  Stimson would be Frankfurter’s mentor and instill in him the importance of public service.

 

After leaving the War Department, Frankfurter returned to Harvard Law School as a professor, but would soon find himself involved with the House of Truth. He would help found The New Republic in 1914 and the ACLU in 1920. Along the way he ran Wilson’s War Labor Board, attended the Versailles Conference and under the wing of Louis D. Brandeis became an ardent Zionist. It was in the Wilson Administration where Frankfurter met Franklin Roosevelt and formed a bond that last until Roosevelt’s death in 1945.

 

Frankfurter’s judicial idols were justices Oliver Wendell Holmes and Brandeis, both of The House of Truth and later Benjamin Cardozo. All three supported minority rights and importantly were reluctant to overturn economic regulations passed by the elected branches of government. In their view and Frankfurter’s as well they did not see the Supreme Court as a super-legislature. Hence Snyder’s title “Democratic Justice.” To me a major inconsistency with that view, while Frankfurter and his brethren were unwilling to give authority to unelected judges, they were more than willing to give authority to unelected regulatory agencies of the administrative state. Snyder is clearly a proponent of the administrative state.

 

Frankfurter comes into his own with the arrival of the new deal. He has near complete access to the White House, and he was able to place his former students across a vast swath of the ever-growing bureaucracy. They would include Dean Acheson (Treasury and later Secretary of State under Truman), Alger Hiss (State Department and Soviet spy), James Landis (S.E.C.) Ben Cohen and Tom Corcoran who wrote the securities laws and the Public Utility Holding Company Act.

 

Roosevelt ultimately appoints to Frankfurter to the Supreme Court.  His was the first of the modern confirmation hearings where the nominee actually testified before Congress. His clerks would go onto become prominent law professors (Anthony Amsterdam, Alexander Bickel, and Paul Freund), Washington Post owner Phil Graham, Appellate Judge Henry Friendly, FCC Chairman Newton Minow, civil rights lawyer Joseph Rauh and Attorney General Elliot Richardson.

 

When Frankfurter was appointed to the Supreme Court the betting was that he would vote as a traditional liberal. That would not be the case because his philosophy of judicial restraint which was completely in accord with upholding much of the New Deal, would now be supportive of governmental actions supportive of national defense (Japanese internment), mandating the reciting of the Pledge of Allegiance in public schools and reapportionment. In case of the last he did not want the Supreme Court to get involved in the “political thicket.’’ (Baker v. Carr). To me given how political the Supreme Court has become in recent years, it would be a breath of fresh air to have the court pull back from what are essentially political controversies that should rightfully be settled by the political branches of government.

 

In the famous Brown vs. Board of Education we witness Frankfurter playing a critical roll in bringing the court to a unanimous decision which was absolutely critical to the legitimacy of the decision. He also was responsible for the words “with all deliberate speed” taken from a much earlier Holmes decision. Frankfurter and Justice Black for that matter believed that integration could not be accomplished in one fell swoop.

 

Snyder also writes of Frankfurter’s long marriage to Marion and how he cared for her as a nurse in her later years. Though childless the couple took in three children from a friend in England at the start of World War II. Parenthood was a new and loving experience for them.

 

I learned from Snyder that the famous “switch in time that saved nine” in 1938 by Justice Owen Roberts was not in response to Roosevelt’s court packing scheme. The decision was made several months before but was not read until one of the justices had recovered from an illness. I also learned that internal arguments within the Supreme Court among the justices take on some of the aspects of a middle-school cafeteria and that Frankfurter and William O. Douglas hated each other. Brad Snyder has written the definitive biography of Felix Frankfurter. However, I do warn the reader it is 992 pages long in the print edition. 

For the full Amazon URL see: Talent Scout for the Administrative State (amazon.com)

Equity Strategy for 2023 and Beyond

After posting my outlook for 2023 ( Shulmaven: 2023: Another Year of Living Dangerously) several friends asked me what are my thoughts on how to implement my view. Simply, they asked what do you do Monday morning? Because I do not want to give specific stock advice I will outline below what industries I think will do relatively well next year and beyond. Remember I think the stock market will be flat next year and be forewarned, I am talking my book.

I would focus on the following themes:

* Energy Transition: Independent power and electric utilities that emphasize alternative energy, hydrogen, carbon capture, copper mining, energy conservation.

* Labor shortage: Automation equipment.

* Deglobalization/Onshoring: Automation equipment, semiconductor capital equipment.

* Resilience: Infrastructure, electricity transmission, water.

* Dangerous World: Aerospace/Defense

I would deemphasize consumer discretionary, consumer staples, housing, real estate, big tech (at least for now) and anything to do with crypto.

There you have it. We will review how this turns out in a year.

2023: Another Year of Living Dangerously

After getting somethings right and somethings wrong last year, I am going to try my hand at making a forecast for the coming year. As Mike Evans used to say "often wrong, never in doubt." First, to review the rights and wrongs of last year (Shulmaven: Some Non-Consensus Thoughts about 2022 ).

What I got right:

* The Biden Administration would face a year of foreign policy crises.

* Omicron peaks in January and the economy returns to a semblance of normal.

* Inflation will still be running hot with inflation running above 4% and housing CPI above 6% by yearend.

* A leveraged player in Bitcoin will collapse triggering a mini-financial crisis. (NASDAQ in the Spring)

What I got wrong:

* The economy will grow at 4% on a Q4-Q4 basis.

* The S&P 500 will trade in a broad 5200-4400 range.

* The remnants of Biden's Build Back Better Plan will likely fail. (Clean energy bill passed)

Now here goes for 2023:

* The Fed remains on the warpath as wage gains rightfully stay solid. Don't fight the Fed.

* The economy enters a consumer/housing recession early in the year.

* Despite the recession 10-year Treasury yields go over 4% as the bond market recognizes that the Fed's 2% inflation target is a chimera.

* Stocks will trade in a broad range of 4200-3300 ending up at 4000 plus or minus with S&P earnings declining 5-10%.

* The market will realize that ongoing labor shortages, deglobalization, onshoring of production, energy transition and investments in resilience are inherently inflationary.

* The Ukraine War will enter its second year and feature Ukranian missile strikes and acts of sabotage deep into Russia. That along along with tensions with Iran, China and North Korea will amp up U.S. defense spending.

* Deep winter will descend on crypto currency with Bitcoin falling below $10,000.

*Trump will be a spent force by yearend making for a wide open Republican primary in 2024.

* By yearend the markets will come to recognize that we are well into a new economic cycle. ( Shulmaven: The U.S. Economy is Entering a New Thirteen Year Cycle)

Shulmaven Scoops Financial Times on Ukraine Deterrence

 Yesterday we posted "Ukraine's Developing Deterrence" (Shulmaven: Ukraine's Developing Strategic Deterrence). Today the Financial Times published:

"Military briefing: Ukraine drone strikes show Russia it has ‘no safe zones’"

"Kyiv has for months urged its western allies to supply long-range missiles so it can hit Russian military bases far behind the front lines and puncture what Ukrainian military chief General Valeriy Zaluzhnyi has called the “sense of impunity that [Russia’s] physical remoteness provides”. This week Kyiv showed it could conduct long-range strikes without western equipment after it launched locally made drones that hit three military bases deep inside Russia — one only 160km from Moscow."

Military briefing: Ukraine drone strikes show Russia it has ‘no safe zones’ | Financial Times (ft.com) (paywall)

The article provided new information on the abilty of Ukraine to increase the previously noted 1000 kilometer range of its drones to cover parts of Siberia. This means the critical Russian oil fields of Western Siberia are now in range making them vulnerable to incendiary attacks. The FT also noted the the Ukrainian drones are guided by older inertial navigation systems, though not as accurate as GPS, they are impervious to jamming. Moreover, RANE reported yesterday that Putin ordered the beefing up of air defenses for Russia's energy infrastructure.

Military briefing: Ukraine drone strikes show Russia it has ‘no safe zones’

Ukraine's Developing Strategic Deterrence

Earlier this week Ukrainian drones struck deep inside Russia with attacks on the Ryazan and Engels air bases. It apears that Ukraine has converted 1970's era Russian drones into what effectively is a long range cruise missile with a range of up to 1000 kilometers with the capabilty of carrying a 75kg warhead. Although far from being a ballistic missile program, Ukraine now has the makings of a strategic deterrence capability against Russia.

Thus far Ukraine has hit purely military targets, including one today, but with Moscow and Saint Petersburg in range the dynamics of the war have changed. Simply put Ukraine now has the ability to deter Russia from using tactical nuclear weapons. How so? Simply put, the new Ukranian missiles can readily be refitted to carry non-conventional payloads thereby making Moscow vulnerable to very deadly attacks. Trust me, this is a big deal.

My Review* of Benny Morris' "Sidney Reilly: Master Spy"

 Ace of Spies**

 

Israeli historian Benny Morris searched the official files of Britain’s MI-6 and Russia’s KGB (now FSB) and numerous other sources to produce a credible biography of Sidney Reilly, perhaps the foremost spy of the early 20^th Century. Born Sigmund Rosenblum in the early 1870’s either in Ukraine or Poland and by 1899 Rosenblum, under the auspices of Scotland Yard, becomes Sidney Reilly. From there he becomes the stuff of legends admired by James Bond’s Ian Flemming and the subject of a 1983 Thames TV (and shown on PBS) series starring Sam Neill.

 

Reilly turns up in Port Arthur at the time of the Japanese attack on the Russian navy in 1905 and in 1911 he is in Persia to facilitate the British takeover of their oil fields giving Britain control of the Anglo-Persian Oil Company, later British Petroleum.

 

His most famous escapade was being the key instigator of the Lockhart plot, where he and the British representative Robert Lockhart in the pay of MI-6 attempt to overthrow the Bolshevik government of Lenin and Trotsky. Their plot is foiled by the Cheka and both of them escape by the skin of their teeth. Thereafter we see Reilly at the Paris Peace Conference. Reilly returns to Russia to provide intelligence on the southern front where he accurately predicts the fall of the White armies. Unable to stay away from Russia Reilly is lured back to Russia in 1925 by the Cheka and it is there where he meets his ultimate demise.

 

Along the way we see Reilly as a successful businessman, arms dealer and bon vivant around town. He spends money as fast as he makes it and has numerous and sometimes simultaneous affairs. If a anything he makes the fictional James Bond look celibate.

 

Reilly is in the middle of world-shaking events, and he was for many years under the control of MI-6’s Mansfield Cumming, known as “C” and the model for Flemming’s “M”. He meets Churchill and works with the infamous arms dealer Basil Zaharoff.

 

Because this book is part of Yale’s Jewish Lives series Morris notes Reilly’s near complete withdrawal from the Judaism of his family and also how he suffers from the antisemitism of upper-class Britain. Despite his new name, most understood him to be Jewish. My one real criticism of the book is that it bogs down at times, and it becomes too academic. Nevertheless, it encouraged me to rewatch the “Ace of Spies” series on demand.

* Amazon has yet to post this review. It finally posted on Amazon.

Ace of Spies* (amazon.com)

**With apologies to Robin Bruce Lockhart

Will the Russian Army Mutiny in Ukraine?

Winter has come to Ukraine; it snowed in Kyiv last week. Although it hasn't happened in a long time the Russian army mutinied in 1905-06 and again in 1917 in what were revolutionary situations. I was at a dinner party last week with people far more knowledgeable than me where I threw out the idea that the Russian army will soon mutiny. The interesting thing is that my idea was not dismissed out of hand and we had a short, but serious discussion.

My logic is that with the Russian army taking a beating, the newly arrived draftees are not going be happy campers freezing in the mud of eastern Ukraine. Their situation is a far cry from the comforts of Moscow and even that of the Russian hinterlands to the east. More important, they do not know what they are fighting for and many of them don't see any logic in fighting their former countrymen. Thus, to me, the Russian army is tinderbox ready to explode. All it needs is a spark.

My Amazon Review of Jon Hilsenrath's "Yellen: The Trailblazing Economist....."

Always Prepared

Wall Street Journal economics reporter Jon Hilsenrath has written a deservedly hagiographic biography of Janet Yellen, perhaps the most consequential economic policy official of the past twenty-five years. Yellen is the only person in history to have served in all three top economic policy posts of our Nation, Chair of the Council of Economic Advisors (under Clinton), Chair of the Federal Reserve Board (Under Obama) and Secretary of the Treasury (under Biden). Along the way she was President of the San Francisco Fed. Hilsenrath’s book is written along three strands: a biography of Yellen, a love story between her and her fully supportive husband Nobel Laureate economist George Akerlof, and a history of the macroeconomic policy debates from the 1960’s to the present.

 

Born into a 1946 Jewish middle class family in Brooklyn where education was the highest priority, Yellen excelled in school. She was always well prepared and from the vantage point of this less than stellar kid from adjacent Queens you might say she was a “goody two shoes.” She went on Brown University and then on to an economic Ph.D. from Yale under the very distinguished Keynesian economist, James Tobin. Harvard hired her, but ultimately did not give her tenure. Too bad for Harvard.

 

Yellen then goes on to work for the Fed in Washington, D.C. There she meets her husband to be in that well known singles meet-up place, the Fed cafeteria. It was almost love at first site and they were very sympatico with their soon to become New Keynesian outlook. You could call title it, “nerds in love.”

 

After leaving Washington, D.C. the couple ends up teaching at UC Berkeley in the 1980’s. Before too long with her growing acclaim as a labor economist, Yellen is appointed to the Federal Reserve Board in 1994. It was there where I met her at the infamous Fed consultants meeting in late 1996 on the roaring bull market in stock prices. Although our conversation was brief, I found her to be a kind, friendly and caring person. Those three attributes come though in Hilsenrath’s writing. 

 

In 2004 she was named President of the San Francisco Fed and from that vantage point she warned of the growing housing bubble that would soon almost take down the entire economy. From there she moved back to the Federal Reserve Board and in 2013 became its Chair where she became a strong advocate of bringing down unemployment. To her the unemployment rate was not a statistic, but rather represents real people struggling in life. However, with the arrival of Trump, unlike Greenspan and Bernanke, she was not reappointed. I guess a five-foot grey-haired woman was not what Trump had in mind to be Fed chair.

 

Biden, on the other hand, leaped at the chance to appoint her as his Secretary of the Treasury. Just as in her role as CEA chair Yellen was uncomfortable be in a political role as Secretary of the Treasury. She went along with the $1.7 trillion rescue plan, despite misgivings, but still she underestimated the inflationary fires that were being kindled underneath the economy. Thus, part of her legacy will be the path of inflation over the next few years.

 

There is far more to Hilsenrath’s wonderful tribute to Yellen. Indeed, Yellen has paved the way for female economists in the 21^st Century, a notable accomplishment.  One more thing, I commented on Yellen on several occasions in my Shulmaven blog including one where I noted that she was not the fairy godmother for the stock market.(See:Shulmaven: Yellen, Yellen You Got Tapering on Your Mind*, Shulmaven: Two History Lessons for Janet Yellen, Shulmaven: Memo to the Stock Market: Janet Yellen is not Your Fairy Godmother ) When I presented it, I pictured her with in a fairy godmother outfit with a magic wand in her hand. In her own way Janet Yellen always had a magic wand in her hand.

For the full Amazon URL see: Always Prepared (amazon.com)

Shulmaven Quoted in Nick Sargen article in "The Hill" on the Midterms

 " 2022 midterm message: Voters want normal, not crazy"

"According to economist David Shulman, the Democrats remembered the lessons of 2009, when the $800 billion fiscal package enacted was woefully lacking in dealing with the Global Financial Crisis (GFC). However, they failed to recognize that the pandemic was a completely different type of shock: While the economy plummeted when businesses were shuttered, it rebounded quickly when businesses re-opened. Consequently, they wound up fighting the last fiscal war by enacting programs that were four times larger. Together with a highly expansionary monetary policy, the seeds for a resurgence of inflation were sown."

The 2022 midterm message: Voters want normal, not crazy | The Hill

After Action Report on the 2022 Elections

Although all of the results are not in, it now seems obvious that it was a good night for the Democrats, Ron DeSantis, Liz Cheney, and New York State nonpartisan reapportionment (four Republican pick-ups from prior gerrymandered map), and it was a bad night for Donald Trump, election deniers and Shulmaven. Frankly we blew it in over-estimating Republican gains. We were looking for a gain of 25 seats, while as of this five minutes it looks more like a gain of 10 seats or so. The abortion and election denial issues swamped the economy has an issue. I also missed that both Oklahoma and Oregon governorships would stay true their Red and Blue forms. Nevertheless, save for Fetterman in Pennsylvania, I got all of the called Senate races correct, but I can still be wrong in both Arizona and Nevada, but I was correct in calling for a run-off in Georgia

Liz Cheney had a very good night with the two Democratic candidates she endorsed winning. Our country will benefit  from the presense of both Elisa Slotkin and Abigail Spanberger in the House. It remains to be seen whether her endorsement of  Katie Hobbs comes through in Arizona against Kari Lake.  Speaking of Lake, thus far election deniers have yet to be seen in this cycle.

Florida Governor Ron DeSantis beat his opponent by a nearly 3-2 margin. In my opinion that makes hm a favorite to dethrone Trump from leadership in the Republican Party. Further the Nation and especially California, Nevada and Arizona can learn a lesson from Forida in that the state counted seven million votes in three hours.

With Kentucky turning down an anti-abortion ammendment to its constitution it now appears that future outright bans on the proceedure will fail and that many states will follow DeSantis' lead with a 15 week ban with exceptions. 

As far as governing goes, GOP leader Kevin McCarthy will have his hands full in running his presumed narrow majority in the House. It isn't even clear that his caucus will now pick him to be Speaker and if he is picked, whether or not he will last two years. 

2022 Elections: A Reversal of Fortune (Republicans Retake the House and Senate)

I have been writing up my election predictions every two years since 2014 and for the most part I have been pretty accurate. (See for example: Shulmaven: 2020 Elections: A Good Night for Biden and the Democrats, a Bad Night for Trump) My best guess is that this year will bring with it a reversal of fortune with the Republicans, deservedly or not, taking back both the House and  the Senate. Simply put, the Democrats are running against the headwind of a 40-year high in inflation that has crushed real incomes with no real remedies. They seem to spend more time cowtowing to the woke Left, than talking about kitchen table issues. Moreover, the Democrats have not been discussing growing public fears about rising violent crime rates. By forgetting that public safety is a civil liberties issue, they will pay a severe price at the polls. 

 

Further they over-played the abortion issue. Most Americans believe in reproductive choice, but by emphasizing abortion over and over the Democrats turned the party away from choice and towards abortion. I know this is a semantic issue, but many Americans find abortion, though necessary in many cases, repugnant. Thus, high inflation, rising crime and over-playing the abortion issue will likely overcome how authoritarian and batshit crazy most of the Republican Party has become. Sad, but true.

 

Although most public polls find the race for the House close, both parties are acting by where they are spending money as if the Republicans have a much wider lead than indicated. Thus, it now looks like the Republicans will pick up about 25 seats and end up with a 237-198 majority.

 

The Senate races are even closer, again according to the public polls. My sense is that the Republicans will retake the Senate with 51 or 52 seats. I would also point out we won’t know the results of the Warnock-Walker race in Georgia until December because of a likely run-off. I have the Republicans holding on in Wisconsin, Ohio, Oz beating Fetterman in Pennsylvania and flipping Nevada as Latino voters leave the Democratic Party with Lexalt beating Cortez Masto. Although surprisingly close I have the Democrats holding on to their seats in New Hampshire, Arizona, Washington, and Colorado. If Senator Maggie Hassan in New Hampshire loses to Trumpy Don Bolduc, it will be very long night for the Democrats and rebuke to Chuck Schumer’s cynicism in backing the Maga-Republican in the primary. One more thing, given President Biden’s comments on coal last night, I think Democrat Joe Manchin will switch parties if the Republicans end up controlling the Senate.

 

In hotly contested Georgia Brian Kemp will beat Stacey Abrams by a far bigger majority than four years ago. In what I consider two special governor’s races I see Republican-turned-Democrat Joy Hofmeister beating incumbent Republican Kevin Sitt in ruby red Oklahoma and Republican Christine Drazan beating Democrat Tina Kotek in true-blue Oregon. If this comes to pass it would be a healthy development in American politics. What won’t be a healthy development will be super-Maga Kari Lake winning the Arizona governor’s race.

 

Although I am not predicting, if I received reasonable odds or points, I would bet on Republican Lee Zeldin upsetting Democrat Kathy Hochul in New York, Republican Mark Ronchetti beating incumbent Lujan-Grisham in New Mexico, Rick Caruso beating Karen Bass in the non-partisan Los Angeles mayor’s race and independent Evan McMullin beating incumbent Republican Mike Lee in Utah. As they say in poker, read’em and weep.

 

 

My Amazon Review of J. Bradford DeLong's "Slouching Toward Utopia: An Economic History of the Twentieth Century"

The Long Twentieth Century 

U.C. Berkeley economics professor and former Clinton treasury official Brad DeLong has written a narrative economic history of the long twentieth century which he argues began in 1870 and ended in 2010 with the great financial crisis. It was during this time that economic growth exploded and humanity, for the most part, escaped the Malthusian trap. Along with rising living standards the long twentieth century brought with it industrial strength destruction and environmental degradation. He attributes this to the rise of the giant corporation, the industrial research laboratory and globalization. However this book differs from Robert Gordon’s “The Rise and Fall of American Growth” (Shulmaven: My Amazon Review of Robert J. Gordon's "The Rise and Fall of American Growth") in that DeLong covers far more than technological developments.

 

DeLong frames his argument over the differences between the views of Friedrich von Hayek and Karl Polanyi. DeLong characterizes Hayek as believing “the market giveth and the market taketh away, blessed be the name of the market” and Polanyi’s view that the market is made for man, not the other way around. A long time ago I had an economics professor who would open each class by invoking the blessing of the market and he was a liberal Democrat.  DeLong’s utopia represents a merger between Hayek and Polanyi that ends up with a social democratic version of Keynesian economics.  What he is vague about is that when he discusses the notion of Polanyian rights, which amount to the belief that citizens are entitled to a host of economic benefits, earned and unearned with no real limiting factors. DeLong is a fan the European entitlement state, but he fails to mention that most of the entitlements are funded by regressive payroll and value added taxes that would be a very rough sale in America.

 

Where the book is good, he has excellent vignettes on the lives of real people who were making history such as Nikola Tesla and Leon Trotsky. He also goes into the horrors of “really existing socialism” in both its Russian and Chinese forms. In that sense DeLong is a true social democrat. He is also very good in discussing how the 1970’s inflation undid the Keynesian consensus and led to the neo-liberal order which then collapses as deregulated financial markets were consumed by a fire of their own making.

 

What DeLong leaves out is that much scientific progress came outside of the organized industrial laboratories. He gives no credit to governmental and university labs, and he leaves out the garage work of Bill Hewlett and David Packard, Bill Gates, and Steve Jobs. These folks were tinkerers in the tradition of the early Thomas Edison. Further for some reason he leaves out of his discussion the role of the oil industry whose products fueled the mobility of his long twentieth century. Without the oil industry little of what he discussed would have occurred.

 

DeLong has written an excellent narrative history of our era; just take his politics with a few grains of salt.

For the full Amazon URL see: The Long Twentieth Century (amazon.com)

NASDAQ and the Sacking of the Vestal Virgins*

Despite the strong rally in the stock market last week, the collapse of the so-called FANG and FANG-like stocks, save for Apple, continued with a vengeance. In response to very disappointing earnings Alphabet and Amazon sold off big time. In May we wrote referring to the FANG stocks, “the worst of the declines are behind us.” (See: Shulmaven: The Defanging of the Stock Market) Boy were we wrong!

 

The carnage of the FANG stocks has been nothing short of extraordinary with Meta, NVDIA and Tesla as of October 28^th down 74%, 58% and 57%, respectively from their all-time highs. (See Table 1) Even such stalwarts as Alphabet and Microsoft were off 35% and 31%, respectively. Only Apple, whose earnings did not disappoint, is down a modest 13%, far better than the S&P 500.

 

Table 1.

Stock            All-Time High    Oct. 31     % Change

 

Alphabet          150                    97               -35%

Amazon            186                  103               -45%

Meta Plat.        379                    99                 -74%

Microsoft         343                  236                 -31%

Netflix              690                 296                  -57%

NVDIA             330                 138                  -58%

Tesla                 407                  229                 -44%

 

Apple                179                 156                 -13%

          

What all of this is reminiscent of is the 2000 Dotcom crash and the collapse of the Nifty 50 of 1972. In 1997, while working for Salomon Brothers, I wrote of the “Four Horseman of the NASDAQ.” Those stocks consisted of Cisco, Intel, Microsoft, and Oracle. I would just note that only Microsoft has stood the test of time and the stock spent well over a decade wandering in the desert. Nevertheless, those four stocks did far better than such favorites of that era as WorldCom and Enron which went bankrupt

 

Perhaps more than the Dotcom crash, this era is more evocative of the Nifty 50, the so-called one decision stocks held by the trust department at JP Morgan. They were thought to be invincible, and an investor could pay any price for them, sound familiar. However, when the inflation bell rang, they were, in the vernacular of that era, sacked like the vestal virgins of ancient Rome. Many of those 50 stocks have either disappeared or are now shadows of their former selves. Those names would include Eatman Kodak, Xerox, Burroughs, Polaroid, IBM, MGIC, Emery Air Freight, Digital Equipment, Simplicity Pattern, Kresge (Kmart), JC Penny and First National City (Citigroup). It is a reminder that "all glory is fleeting."

 

How many of today’s names will find a similar fates fifty years from now. Of course, there were great successes among the fifty. They would include, McDonalds, Coca-Cola, Disney, Johnson & Johnson, Lilly, Texas Instruments, Merck and American Express. Moreover, the collapse of the Nifty 50 signaled the presence of new 13-year economic cycle. As I have noted previously, I think we are now in such a cycle today. (See: Shulmaven: The U.S. Economy is Entering a New Thirteen Year Cycle)

*For information on the Vestal Virgins of Ancient Rome see: https://www.througheternity.com/en/blog/history/vestal-virgins-in-ancient-rome.html

My Amazon Review of Maggie Haberman's "Confidence Man: The Making of Donald Trump and the Breaking of America"

Sleazeball

Perhaps like no other reporter, Maggie Haberman knows Donald Trump. In fact, Trump calls her his psychiatrist. Although Haberman now writes for the “hoity toity" New York Times, she cut her journalistic teeth writing for the two “peoples dailies” of New York, the Post, and the Daily News. It was in the tabloid hothouse of the 1980’s and 90’s that Trump found his way to great fame and Haberman was there to chronicle it. This was the world of Ed Koch, Rudy Giuliani, Roy Cohn Al Sharpton, heightened racial antagonisms, and the Central Park 5. It was also the world of Trump’s tabloid divorce from Ivanna and his affair and later marriage to Marla “the best sex I ever had” Maples.

 

Into this world came this very narcissistic and resentful kid from Queens. Although born with a silver spoon in his mouth from his very successful outer-borough developer father, Trump felt like an outsider in the very clubby world of New York real estate, a male Eva Peron if you will. Later, as a presidential candidate, he would channel and enlarge his resentment of the Manhattan elites into a broader criticism of the bi-coastal elites to gain the support of a large swath of Americans who felt condescended to by those very same elites.

 

I too am a kid from Queens. Maybe it takes one to know one. I met Trump only once in business meeting in January 1992 when Trump was in the middle of his divorce and effectively bankrupt. His early real estate empire was built on debts that came crashing down on him in the 1990 real estate recession. I came away from the meeting thinking Trump was a sleazeball not worthy of doing business with. That was true of all but one of the major banks. Unfortunately, what was so obvious to me wasn’t so obvious to the millions of Americans who later voted for him.

 

Haberman’s book is much more than Trump in New York. She covers his Apprentice TV show and White House years. Throughout all of that time a consistent pattern of his being a congenital liar rings true and his tenure in the White House was consistent with his life in Manhattan in the 1980’s.  Haberman is correct that there is a straight line from Trump’s life in Queens to the White House. Her book is therefore an important addition to our understanding of the 45^th president of the United States.

For the full Amazon URL see: Sleazeball (amazon.com) It appears that Amazon has taken down this review.(11/3/22) I am looking into it. Review restored under new URL:Sleaze (amazon.com)

"People of Color:" A False Political Construct

Ever since Jesse Jackson coined the term “rainbow coalition in the 1980’s, Democratic Party strategists have been trying to put together a coalition, to varying degrees of success, of African Americans, Latinos, and Asian Americans to form the heart of Democratic majority. That notion blew up a few weeks ago when three Latino council members along with a Latino labor leader were caught on tape making overtly racist remarks against African Americans and Oaxacan immigrants from Mexico. Simply put underneath professions of solidarity there has been a turf war in Los Angeles pitting African Americans against Latinos as the Latin share of the population rose to 48%. At the same time the African American share of Los Angeles’ population decline from 15% in 1970 to 8% in 2020.

 

What is happening in Los Angeles is being mimicked across the country where the Latino population is rising, and the African American population is stagnating. Into this cauldron there have been knock down drag out fights pitting Asian Americans against Blacks and Latinos in San Francisco, Northern Virginia, and New York City where meritocratic admissions policies to elite high schools are under attack to the detriment of Asian American students.

 

Adding to this volatile mix is the current Supreme Court case attacking Harvard University’s anti-Asian admission policies. (Students for Fair Admissions v. Harvard University) It is likely that the whole edifice of affirmative action will fall once the case is decided.

 

As a result, it now looks that African Americans, Latinos and Asian Americans have far less in common than what was once thought. Thus, it will not be a surprise to see, at least, working, and middle class “people of color” moving away from their roots in the Democratic Party. A major tell would be developer Rick Caruso winning, or coming surprisingly close, in his underdog race for mayor of Los Angeles against Karen Bass.

The Economist Joins Shulmaven in Forecasting Regime Change

The October 8^th Economist titles its lead article “Regime Change” where it forecasts a pivotal moment for global economic policy that calls for a much tighter monetary policy combined with a much looser fiscal policy. (See: Regime change | Oct8th 2022 | The Economist, Paywall.)  The article notes that the monetary authorities will have a difficult time bringing down inflation to their 2% target and, as a result, a more relaxed 4% target would be in order. The author also believes that the savings glut of the past two decades will return in the post-Covid environment.

 

Although we completely agree that a regime change is coming which is being signaled by the global bear market in stocks and bonds, our regime is far different from theirs. (See: Shulmaven:The U.S. Economy is Entering a New Thirteen Year Cycle and Shulmaven:Higher Inflation and Higher Interest Rates: Get Used to it )  In our regime, far from having excess savings, we envision a capital spending boom based on deglobalization, energy transition, and climate resilience. Economists have under-estimated the deflationary effects of the globalization of the economy over the past three decades. Those effects are now going into reverse thereby undoing the salutary effects of the international division of labor.

 

Further inflationary pressure will come from a demographically based shortage of labor and real wages catching up from the 3+% decline in the U.S. that occurred this past year. Throw in rising defense spending and you have a formula for higher inflation and with that a structural rise in interest rates. Although we and The Economist end up with higher inflation, we get there in a far different way.

 

 

My Amazon Review of Peter Baker's and Susan Glasser's "The Divider: Trump in the White House, 2017-2021"

The Mad King

 

Peter Baker and Susan Glasser, the husband-and-wife reporter team, have written a highly detailed chronicle of the four-year reign of the mad king, Donald Trump. In reading the book we become day to day witnesses of how some ostensibly smart people in the administration got caught up in the vortex of the Trump Administration on its roller coaster of lies down into the depths of hell. Instead of having the so-called adult supervision of Trump’s early cabinet with such luminaries as Rex Tillerson and General James Mattis, we ended up with a team of middle school rivals.

 

We see a totally unprepared Trump enter the White House with a host of resentments that are readily manipulated by the likes of a Steve Bannon and a Steven Miller. It begins with his inaugural address focusing on “American carnage” in 2017 and ends with the insurrection on January 6^th. Along the way we witness Trump sucking up to Vladimir Putin at the Helsinki summit.

 

Much of what is written we saw play out on television. This is especially true of the Covid epidemic which was grossly mishandled by Trump. Where Trump could have rightly taken credit for Operation Warp Speed which in record time developed live saving vaccines against Covid, Trump politicized the issue and thereby condemned thousands of vaccine-denying Americans to death.

 

None of this is a pretty picture. Baker and Glasser are short on Trump’s successes such as the 2017 tax cut, the booming economy of 2019, and the dramatic shift in our China policy. Where they are very good is that they describe the tick-tock that brought the Abraham Accords into being which established a settlement between Israel and several Arab states.

 

The book ends with the lead up to January 6^th where the authors, in my opinion, make a prima facie case that Trump is guilty of seditious conspiracy. As soon as the election was over Trump and is clown car of co-conspirators that include Rudy Giuliani, lawyer John Eastman, General Michael Flynn, and former Overstock CEO John Bryan, go all out in trying to overturn the election of Joe Biden with a web of lies and phony lawsuits. Thankfully, there were a few people still around in the administration to thwart them. First and foremost was the chairman of the joint chiefs of staff, General Mark Milley and the better late than never conversion of Attorney General William Barr.

 

What Baker and Glasser leave unanswered is how this congenital liar got into the White House in the first place, how Trump managed to retain power through the end, and why do so many Americans still support him. My question is it support for Trump or tribal hatred of the coastal elites where Baker and Glasser are full members?

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

My Amazon Review of Andrea Wulf's "The Invention of Nature: Alexander von Humboldt's New World"

 Ecological Explorer

 

Although I have been to Humboldt County in California and heard of Saul Bellow’s Humboldt’s Gift, I had never heard of Alexander von Humboldt until I read Andrea Wulf’s book. Shame on me! As Wulf recounts our entire concept of nature in the 21^st Century is derived from the works of this very extraordinary 19^th Century polymath. Well before science became siloed up, Humboldt was involved at the cutting edge of botany, biology, evolution, geography, and meteorology. His works inspired Darwin, Thoreau and Muir and coined the term “cosmos” to describe the universe.

 

There must have been something in the water in the nearby cities of Jena and Weimar, Germany in the 1790’s where Humboldt attended the University of Jena. He frequently conversed with great author Goethe and the playwright Friedrich Schiller. A few years later Hegel would witness the “end of history” with Napoleon’s victory over the Prussian army at the Battle of Jena. It was at Jena that Humboldt solidified his interest in the natural world.

 

He then embarks on his first great adventure to South America. Braving swamps, crocodiles, snakes, disease, tropical heat, and the extreme cold of the heights of Mount Chimborazo in Ecuador bringing back samples of flora and fauna.  If you thought the Lewis and Clark expedition up the Missouri River at around the same time was one of “undaunted courage,” Humboldt’s expedition takes that to the power of ten. The writeup of his journey along the Orinoco River in Venezuela makes him famous. He would soon meet Thomas Jefferson James Madison, many of the crowned heads of Europe, and the revolutionary Simon Bolivar, who would ultimately disappoint him.

 

Humboldt was and “1848er” fifty years ahead of his time. He was a republican through and through despising Spanish colonialism, slavery, and the treatment of Indigenous people in the Americas.  Despite his strong republican beliefs his status as scientist was so high that the monarchies of Europe accepted him, including the Czar who financed his trip to Siberia when he was in his late fifties.

 

By viewing nature as an integrated whole, Humboldt could be characterized as the world’s first ecologist. He understood how small changes in the environment could have very serious long-term consequences and saw before most the problems caused by deforestation. I owe a debt of gratitude to Andrea Wulf for bringing the life of this very important man to me. It is a shame that we lost the heritage of this great German scientist as a consequence of anti-German feelings brought about by World War I.

For the full Amazon URL see: Ecological Explorer (amazon.com)

Higher Inflation and Higher Interest Rates: Get Used to it

Last May I wrote that our economy is entering a new thirteen year cycle that would be characterized by higher inflation and higher interest rates. (See:Shulmaven: The U.S. Economy is Entering a New Thirteen Year Cycle ) In that post we noted that the forces of deglobalization and decarbonization were inherently inflationary which would increase the demand for capital, and hence real interest rates. Whether or not there was a global savings glut, the demand for capital would mop up whatever excess savings there is.

In this post we add a third factor. Real wages have collapsed as inflation of 8% has swamped wage gains of 5%. Trust me, there is going to be a catch up which will put pressure and corporate margins and pricing. This will hardly make for a good environment for both interest rates and stock prices. 

Further although money growth has slowed dramatically over the past year, the 25% annual rate of increase in M2 over 2020 and 2021 will provide more than enough fuel to ratify the price increases that are coming.  As a result instead of having the wind at its back, the Fed will find it increasingly difficult to bring inflation down to its 2% target.

My Amazon Review of Greg Steinmetz's "American Rascal: How Jay Gould............"

Robber Baron

 

Greg Steinmetz has written a biography of one of Matthew Josephson’s robber barons. I must confess I read Josephson’s “The Robber Barons” in junior high and to me they were heroes in the sense that these mostly self-made men built America in the latter half of the 1800’s. We cannot look at the life of Jay Gould through 21^st Century eyes, but rather we have to look at his life in the context of America being an emerging market with all of the corruption that entails.

 

To be sure much of what Gould did in markets would be illegal today, but was not in the 1860’s. Nevertheless, his collusion with New York City Boss Tweed was illegal then and Gould got away with it.

 

We see Gould rising from humble beginning to running a tannery operation to becoming a major factor on the New York Stock and Gold exchanges. We see him puling off a corner in the gold market in 1869 that unfairly implicated President Grant. To me the most interesting factoid in that development was that the young Thomas Edison was the telegraph operator who telegraphed the changing price of gold throughout the Nation.

 

We next see Gould becoming a railroad baron where he ended up controlling 16% of the nation’s track mileage through strategic stock purchases. Far from being only a stock jobber, Gould was responsible for laying 4,000 miles of new track throughout the country. Too many of his contemporaries, Gould was the smartest person in the room.

 

Steinmetz highlights the role of reformer and Adams family scion Charles Francis Adams in pushing for railroad regulation, yet we see him later running the Union Pacific Railroad for a decade. He too wanted to make a buck. We also learn contrary to the populist myth American railroads suffered from too much competition, rather than too little.

 

Through it all Gould was a family man who loved his wife and six children who died to young in his mid-fifties. In this brief biography Steinmetz tells a riveting story about Jay Gould and his times.

For the full amazon URL see: Robber Baron (amazon.com)

My Review* of Jerome Charyn's "Big Red: A Novel Starring Rita Hayworth and Orson Welles"

A Hollywood Tale

 

Jerome Charyn has given us a novelized biography of Rita Hayworth and her tempestuous marriage to Orson Welles. The novel is narrated by Rusty Redburn a sexually fluid tomboy from the Midwest newly arrived in Hollywood in 1943. Redburn gets a job in the bowels of Columbia Pictures and soon she hired by Harry Cohn, the big boss himself, to spy on Rita Hayworth his prize property. Hayworth is, of course, a sex goddess of 1940’s Hollywood who heats up the screen with her starring role in Gilda. Her “Put the Blame on Mame” number is a Hollywood classic. (See: https://www.youtube.com/watch?v=NY2IpSCV-Nk)

 

We learn that Hayworth was sexually abused by her father and her first husband made her available to more than a few producers. She meets Welles and falls in love with the “boy wonder” who co-wrote and directed the classic, “Citizen Kane.” There marriage is a stormy one of opposites, Welles “the genius” and Hayworth being minimally educated. As a result, when both were invited to the Roosevelt White House, Hayworth begs off out fear of being intellectually intimidated by Eleanor Roosevelt. Further Welles is on the way down, while Hayworth is on the way up. This being Hollywood, Welles cheats on Hayworth and Hayworth, as a consequence drinks to excess thereby cratering the marriage.

 

Nevertheless, the two do the surrealistic “The Lady from Shanghai” movie together and Welles goes on to play Harry Lime in “The Third Man.” The novel has lots of vignettes on the Hollywood of the 1940’s and shows the power of the studio bosses and the gossip columnists. As the 1940’s fade into the 1950’s the once proud Hollywood Boulevard scene turns seedy under the pressure from television and as the glitterati move further west out of Hollywood.

 

Charyn has authored an enjoyable book that puts you into the mindset of 1940’s Hollywood. My one small quibble is that he used the term “women of color, a phrase that would never have been used in the 1940’s.

* Amazon has yet again been late in posting my review.  Amazon just posted at URL:

A Hollywood Tale (amazon.com)

My Amazon Review of Edward Chancellor's "The Price of Time: The Real Story of Interest"

 

Easy Money: The Root of all Evil

 

Longtime financial commentator Edward Chancellor has written a sweeping socio-economic history of interest rates going back to the ancient Sumerian civilization of over 4000 years ago and the Code of Hammurabi up to the present. Chancellor correctly notes that interest rates represent the “universal price of time” that links the present to the future and is essential in valuing any asset.

 

His concern is that when politicians and central bankers underprice the cost of money all kinds of bad things happen. Those bad things would include asset bubbles, commodity price inflation, income inequality, uneconomic investment, the monopolization of the economy and food riots leading to political destabilization. But what is the correct price? Chancellor relies on the work of Eugen von Bohm-Bawerk, Irving Fisher, Friedrich Hayek, and Knut Wicksell. He leaves out the work of my late and great economics professor Jack Hirshleifer with his “Investment, Interest and Capital.”

 

Simply put on a micro foundation basis the interest rate is determined by society’s rate of time preference and its ability to increase output overtime. Thus, from the point of view of output growth the real interest rate should equate to the real growth in GDP.  However, when money, credit and central banking are introduced you dramatically increase the likelihood of overshooting and undershooting the neutral rate of interest.

 

Chancellor criticizes central bankers for their seeking economic stability via inflation targeting. Low inflation in product markets usually makes sense, but sometimes it masks inflation is asset markets giving rise to bubbles. It here where Chancellor brings in Hyman Minsky’s work on stability leading to instability. Thus, it was the Great Moderation of 1982-2007 that led to the crash of 2008.

 

He is especially critical of Fed chairs, Bernanke, Yellen, and Powell for them violating Bagehot’s rules for acting in a crisis and for all of them keeping interest rates way to low for way to long which gave rise to the maladies listed above. With respect to Walter Bagehot, in a banking crisis the central bank should lend aggressively on good collateral at a penalty rate. To be sure our central bankers lent aggressively, but not all on good collateral and certainly not at a penalty rate which opened the gates to a populist rebellion against the bankers.

 

By keeping interest rates too low for too long, the Fed totally distorted the relationship between the present and the future which made hitherto unprofitable investments lucrative. Thus, instead of investing in new assets businesses and individuals bid up the price of existing assets to the detriment of long run productivity. And remember who owns existing assets, the already wealthy.

 

What Chancellor gets wrong is that he focuses too much on the policy rate. The relevant interest rate is the long-term rate which is tied to the long-term growth in the economy and the long-term rate via the term premium is usually higher than the policy rate. Further, necessary short-term reductions in the policy rate to manage a crisis and/or a recession should not affect long term rates all that much. However, when central banks promise to keep rates low forever, the long-term rate will converge on the short-term rate. Thus, the error of the Fed was not to lower the rates in a crisis but keeping them low well past the crisis.

 

Edward Chancellor has written an important book that reflects Austrian economics over Keynesian economics, but I suspect it will gain popularity overtime as the credibility of our central bankers continues to erode.

For the full amazon URL see: Easy Money: The Root of all Evil (amazon.com)

Biden Throws Gasoline on the Inflation Fire

With today's announcement cancelling up to $20,000 of student loan debt for couples making less than $250,000 ($125,000 for individuals), President Joe Biden gives lie to his stated concern about the Federal deficit. The ceiling is roughly four times the median houshold income in the United States. This program is likely to cost about $500 billion, well above the recently enacted $300 billion tax increase on corporations. Somehow in the eyes of the Biden Adminstration student loan debt is more sacrosanct than other debts contracted by middle-class Americans.Put simply, Biden's actions is a payoff to a noisy Left who doesn't care about the uncredentialed workers who do the day-to-day work of keeping our country running.

As a result the extinguisment of student debt, will likely let loose a torrent of spending just at the very time the Fed is trying to dampen demand to fight the inflation cycle we are now in. Chair Powell's job has been made more difficult.

What is worse is that this is yet another sop to the higher education racket's privileged faculties and its ever growing beauracracy. The reason why student debt is so high, are the rents extracted by those elite groups. By foregiving student loans there is a wink and a nod to incoming students saying don't sweat borrowing the money; it will be forgiven down the line.  The solution to the student debt problem is not debt extinguishment, but rather a fundamental reform of higher education.

A Change in the Weather: Is the Summer Rally Over?

 After advancing four straight weeks taking the S&P 500 up 17% of its June low, socks retreated 1.3% in the past week. However, beneath the surface the damage was far greater with the leading edges of the bear market and the recent rally falling by a far greater amount. For example, Cathy Wood’s Ark Innovation ETF is now off 13.5% from its recent high and Bitcoin, the poster child of the bull and bear market, is down a similar 12.5%. As we noted previously crypto currency has been deeply embedded in both the bull and bear cycles. (See:  Shulmaven: The Crypto Crash and the Bear Market in Stocks)

 

When we wrote two months ago, we thought the bear market was entering its “anger phase.” (See: Shulmaven: The Bear Market Enters the Anger Phase ) It seems that lasted for only about a week as stocks embarked on the previously discussed 17% rally. For awhile it seemed that all anger had left the market as high valuation money losing companies led the charge and the “meme” stock mania returned in near full force.

 

Nevertheless, under the surface all is not well. The great bond rally that took 10-year yield down from 3.48% in June to 2.60% in early August has reversed with the yield closing at 2.99% on Friday. Further the market seems blind to the fact that inflation is not quiescent. As of July, the CPI is up 5.4% from the start of the year and by December, using some very modest assumptions, it will still be up 6.5% on a year-over-year basis. Similarly, with the core CPI is up 3.7% thus far this year, it more than likely than not, it will close out the up around 6.3%. 

Further you have to remember that if the CPI were calculated on the same basis as it was in the 1970’s, inflation would have peaked in the 12%-13% range, not the 9.1% reported. With data like this, the Fed will continue to tighten policy making it more likely than not, the terminal funds rate will exceed 4% and we have yet to see the full force of its quantitative tightening program which will start in a few weeks. That action will double its balance sheet shrinkage from $45 billion/month to $90 billion/month. We will learn much from the Fed this week when Chair Jay Powell delivers his remarks at the annual Jackson Hole Conference.

 

So just as summer turns to fall, the recent rally is likely over, and the anger phase of the bear market will resume. My guess is that we are heading for a retest of the June lows. Only then will we move to the final acceptance stage of the bear market.

My Amazon Review of Matthew Continetti's : The Hundred Year War for American Conservatism"

 

Triumph and Tragedy

 

As I write this Liz Cheney, the scion of Reagan Republicanism and what used to be the heartbeat of American conservatism, lost her primary battle to a Trump acolyte in Wyoming. Simply out, the Republican Party is no longer a conservative party, but rather a cult of personality populist party. This is the end point of Matthew Continetti’s hundred-year history of American conservatism. Continetti, now a fellow at the American Enterprise Institute, has been a writer/activist on the conservative scene for two decades and is the son-in-law of William Kristol, a leading neoconservative and one of the foremost anti-Trumpers on the Right.

 

Continetti begins his history in the 1920’s when the conservative Republican Party stood for protectionism, anti-immigration and more or less and isolationist foreign policy. Sounds familiar, doesn’t it. However, there is a major difference from today that Continetti doesn’t mention. That is in the 1920’s conservatives were an optimistic bunch believing in the new technologies of automobiles, electrification, radio, aircraft, and talking pictures that was underpinning an economic boom. Thus, when the Great Depression came, it was truly a shock turning optimism into pessimism about the future of the country under the New Deal.  

 

As a result, conservatives stayed in the political wilderness for years as the Democratic Party and liberal Republicans dominated the scene. However, beneath the surface a disparate group of conservatives rallied around anticommunism and the leadership of William Buckley and his National Review. Elitist to the core Buckley and crew became the backbone of conservative revival, but beneath the surface their remained vestiges of racism, antisemitism, and authoritarianism. Those would resurface many years later.

 

When liberalism cracked up under the strains of the Vietnam War and the stagflation of the 1970’s, conservatives were ready to seize the mantle of power. Instead of the dour conservatism of say, 1940’s Bob Taft, conservatives were led by the sunny optimism of Ronald Reagan who offered economic growth at home and the defeat of communism abroad. Reagan united social, economic, and foreign policy conservatives under one banner. However, the Soviet Union collapsed in 1991 and with that the unity of the conservative movement fell.

 

In fact, one year later, in a forerunner to Trump, Pat Buchanan mounted a populist challenge to President George H.W. Bush and soon Ruch Limbaugh would dominate the airwaves of talk radio.  For a time, the conservative establishment held these forces in check, but failures in the Iraq War and the Great Financial Crisis destroyed its legitimacy. All the while a populist revolt was brewing against trade, immigration, and foreign wars that Continetti and his intellectual buddies in the think tanks and K-Street were oblivious to. They were too busy talking to each other rather than going out into the country to visit the dive bars and fast-food joints of the Midwest and the South. They soon would have discovered that there was a revolt brewing against the know-it-all coastal elites of both parties who in the words of Hillary Clinton, called them “deplorables.”  I hate to break it to Continetti, but all too many conservatives felt the same way.

 

Continetti’s goal is to blend historical conservatism to the new populism. My guess is that train has passed the station, at least for now. When CPAC features Hungarian autocrat Victor Orban as a speaker, you know the world has changed. Thus, it looks like that conservatives will once again be spending long years in the wilderness. If it is to recover it will have to come with an optimistic vision similar to what happened in the 1920’s and the 1980’s.

For the full Amazon URL see: Triumph and Tragedy (amazon.com)

 

My Amazon Review of Michael Benson's "Gangsters vs. Nazis"

 

The Jewish Gangster Army

 

In the late 1930’s Nazism was on the rise, even in America. There were two very active Nazi groups, the German American Bund and the Silver Legion who spewed out Hitler’s hateful rhetoric. Alarmed by the growing Nazi menace New York Judge and former congressman Nathan Perlman calls the gangster Meyer Lansky to ask for help. As evil as the Mob was, sometimes the Lord works in mysterious ways. This is where Michael Benson’s story begins.

 

Yes, Perlman was a judge, and it seems that he had every major Jewish gangster in America on speed dial, to use an anachronism. How a sitting judge had such access one can only speculate, but given his closeness to the Mob, it wouldn’t be surprising if he were on their payroll. Benson is silent on this issue.

 

What Perlman asks of his literal murderers’ row of gangsters is to directly take on the Nazis and break up their rallies. These would include the aforementioned Meyer Lansky, Bugsy Siegel, Leo “Lepke” Buchhalter, Longy Zwillman, Moe Dalitz, and Mickey Cohen. He was indifferent to the fact that most of their rallies were lawful. Nevertheless in New York, Newark, Chicago, Minneapolis, Cleveland, and Los Angeles the mob breaks up Nazi rallies with brass knuckles, baseball bats, pipes, stink bombs, and sawed-off pool cues. Also in the mix was the famed Jewish boxer, Barney Ross. Although quite illegal and certainly offensive to civil liberties sensitivities, it showed the world that Jews were no longer the cowering masses of the shtetl, but they actually could fight. This would be proven out in the resistance to the Nazis in occupied Europe and the in the nascent Jewish army in Palestine.

 

One interesting sidelight that Benson points out is that one of the Chicago mobsters was a man named Sparky Rubinstein. He would later turn up 25 years later as the Jack Ruby who assassinated Lee Harvey Oswald. Part of the antisemitic milieu of the 1930’s the radio priest Charles Coughlan. His publication was called “Social Justice.” This is a real irony for me in that social justice has become the new religion in much of America’s Jewish community.

 

With antisemitism on the rise today on both the Left and the Right, Benson asks who will defend the Jewish community today?  My criticism of the book is that sometimes it gets too detailed and is too pedantic, but it is still a great story.

For the full Amazon URL see: The Jewish Gangster Army (amazon.com)