My Review* of Caroline Woods' "The Lunar Housewife"

Cold War Fantasy: Part 2

 

About a year ago I reviewed “The Vixen” a novel about the CIA’s involvement in America’s literary scene in the early 1950’s and with Caroline Woods’ novel, here we go again.( Shulmaven: My Amazon Review of Francine Prose's "The Vixen" ) I guess something is in the water. In this case we have Louise Leithauser, an aspiring novelist from very modest means, circulating among New York’s literary highbrows while working for a new magazine called “Downtown.” Her boss there is also her paramour, and he calls on her to interview Ernest Hemingway.

 

However, because of CIA influence on the publication her interview is edited by eliminating pro-Castro and anti-Batista comments. We also witness the CIA’s fingerprints all over the new magazine. So much so that we find out that the CIA is the key financial backer of the magazine. To be sure the CIA did set up front organizations in the 1950’s, but in the case of this novel, the implied criticism is over the top. Remember this was in the early days of the Cold War and Russia, just as it is today, was evil.

 

Interspersed in the dialogue is Louise’s own novel about a Russian space mission on the moon and much that happens on the moon overlaps with Louise’s life on earth.  Hence the title of the book. To me this makes the entire work disjointed.

 

I started out liking the novel, but as it went on, it grew tiresome. I would also note one anachronism where Louise and her lover take a jet to Rome in 1953. There was no jet service between New York and Rome in 1953.

*-Amazon has yet to post this review. At last here is the Amazon URL: Cold War Fantasy: Part 2 (amazon.com)

Joe Biden and Jimmy Carter: Erie Parallels

In 1979 President Jimmy Carter was faced with rising inflation accompanied by soaring house prices, an oil shock triggered by the Iranian Revolution, the Russian invasion of Afghanistan, and a suddenly hawkish Federal Reserve under its new chair, Paul Volcker. If this sounds all too familiar, it should.

 

Today we find President Joe Biden faced with rising inflation accompanied by soaring house prices, an oil price shock, the Russian invasion of Ukraine and a newly hawkish Federal Reserve. It certainly seems like that history is yet again, if not repeating, certainly rhyming. In early 2021 we wrote about the potential for the 2020’s to be a rerun of “That 70’s Show.” ( See: Shulmaven: Roaring 20's or That 70's Show )  Moreover Biden seems to be copying Carter’s energy policy incoherence by supporting policies that will simultaneously increase demand and reduce supply. Thus, instead of roaring, the 2020’s are looking more and more like the stagflation of the 1970’s.

The Crypto Crash and the Bear Market in Stocks

When historians look back at the post-pandemic performance of stock prices and crypto currencies, they will wonder what we were thinking. After all the excesses were there for all to see as we thought the free money policies of the Federal Reserve would last forever. Along the wild ride we witnessed a more than doubling of stock prices from their March 2020 pandemic low to early January 2022, a flurry of speculation in so-called meme stocks, the Wall Street underwriting machine spitting out blank check SPACs on a daily basis, and the beatification of Cathy Wood in her investing in money losing 50X-100X sales companies. Most of which have crashed and burned.

 

As I wrote last week the stock market entered the “anger” stage of a bear market, now down around 24% as measured by the S&P 500. ( Shulmaven: The Bear Market Enters the Anger Phase ) Nevertheless, the real poster child for the bear market is Bitcoin, the standard bearer of the cryptocurrency market. As I write this Bitcoin is trading at $18,300 73% below its November 2021 high of $67,800. All cryptocurrencies combined have declined by over $2 trillion since November and with the failure of such so-called stable coins TerraUSD and Luna along with the suspension of withdrawals at faux crypto banks Celsius and Babel, the decline continues to accelerate. While it took an almost 20% decline for stocks to enter the anger stage of its bear markets, it took more than a 50% decline in cryptocurrency to enter its anger stage and my guess it is still far from the acceptance stage as margin calls accelerate. Further, it is my guess that we are about to witness a flood of litigation and a big-time Federal investigation similar to what happened after the Dot.com bust of 2000.

 

Why is Bitcoin relevant to the stock market? The answer is that it is first a symbol of the recent mania and second many aggressive stock investors held positions in Bitcoin. With the collapse of Bitcoin those investors effectively faced margin calls on their entire portfolio and in order to meet the margin call they were forced to sell what they could sell thereby selling equities to fund margin requirements on their collapsing Bitcoin positions. I did mention in my yearend review that “Sometime during the year a leveraged player in the Bitcoin market will fail triggering a mini-financial crisis” (Shulmaven: Some Non-Consensus Thoughts about 2022 ) Little did I realize then how leveraged the Bitcoin market was. I guess we are here.

 

What this means to me is that until the Bitcoin unwind is largely complete, stocks will have a difficult time rallying and the bear market will continue.

 

 

The Bear Market Enters the Anger Phase

On Friday with the S&P 500 down 2.9% on the day and off 18.7% from its all-time high on January 3^rd, the bear market entered the anger phase. Similar to the Kuber-Ross stages of grieving, bear markets have three phases: denial, anger, and acceptance. With the release of the May CPI data which disclosed that headline inflation on a year-over-year-basis increased by 8.6% and core inflation rose by 6%, markets could no longer deny the fact that a broad-based inflationary process is now underway. (See: https://shulmaven.blogspot.com/2022/01/way-too-complacent-about-inflation-and.html) Further with the all-important housing component lagging economic reality, the inflation we are now experiencing will have a long tail.

 

In response to the data the yield on the 2-Year note popped to 3.07% and the 10-Year yield hit 3.17%, just shy of its recent high. Put bluntly the bond market is now signaling that the Fed Funds rate is well on the road to, at least, 3.5%. That along with quantitative tightening could very well trigger a recession in 2023. Time will tell whether or not a recession pans out.

 

Nevertheless, in the anger phase of a bear market, the stock market will shoot first and ask questions later. It is my guess that stocks will quickly fall below the intraday low of just above 3800 on the S&P 500 making a bear market official to those who mindlessly invoke the 20% rule to define a bear market. As we have written before, it is obvious that we have been in a bear market for some time. (See: https://shulmaven.blogspot.com/2022/05/we-are-in-bear-market.html)

 

The anger phase of a bear market can either be short or long, but it is usually severe. That will ultimately give way to an acceptance phase which can grind out for years. Again, as we have previously written we are likely to be in a new 13-year cycle that will be characterized by a long and drawn-out trading range. (See: https://shulmaven.blogspot.com/2022/05/the-useconomy-is-entering-new-thirteen.html )

My Amazon Review of Chris Pavone's "Two Nights in Lisbon"

 

Double Lives

 

Chris Pavone has written quite a thriller. Newly married Ariel Pryce wakes up after a passionate night of lovemaking with her husband John Wright, 10 years her junior, to discover he was kidnapped. There begins an adventure that takes her through the streets of Lisbon, meetings with the Portuguese police, U.S. embassy officials and the CIA. We also learn that that Ariel has lived under another name and so too did her husband. Simply put their lives are not what they seem.

 

Ariel is a society girl, who after a divorce, ends up owning a bookstore and a small farm in the outer reaches of Long Island. Her life is a far cry from the society life she led in New York being married to a high level and boorish financier. Through many plot twists we also find out that her new husband the not the business consultant he appears to be.

 

The events take place against the background in Washington D.C. where a major confirmation hearing is taking place and numerous flash backs into the lives of Ariel and John. It is far more than visiting the tourist spots and wild chases in the back alleys of Lisbon in search of the kidnappers.

 

Pavone has written a great summer read, but you have to overcome his writing when he goes off on political tangents. It is one thing to poke fun at the foibles of the very rich, but quite another to make all out attacks on American society and capitalism and to him, it seems that most men are toxic animals.

For the full Amazon URL see: Double Lives (amazon.com)

My Amazon Review of Roger Lowenstein's : "Ways and Means: Lincoln..."

 

The Sinews of War

 

Former Wall Street Journal reporter Roger Lowenstein proves the old wag that the South lost the Civil War because it used Confederate money. Governments are financed by three ways; taxation, borrowing, and printing money. The North funded the Civil War, by and large, through taxation and borrowing. To be sure the North printed up Greenbacks, but nowhere to the extent money printing was used in the South. By the end of the war, prices in the Confederacy had risen by an astounding 9,000%.

 

The problem the South faced is that it did not have the economy to sustain a long war, while the North’s economic advantages increased as the war progressed. The two real heroes in Lowenstein’s book are Secretary of the Treasury Salmon P. Chase and Philadelphia financier Jay Cooke. Chase a strong abolitionist and in many ways a Jeffersonian Democrat, realized that he could not finance the war by money printing alone and he developed a series of long-term bond issues that were ultimately repayable in gold. He also instituted a progressive income tax, and the Congress raised the tariff to nearly extortionate rates. The tariff was paid in gold, not greenbacks.

 

Later in the war Chase gets Congress to pass the National Banking Act which for the first time creates national bank charters. Previously banks were only chartered by the states. A key feature of the new national banks was that part of their reserves had to be held in U.S. government bonds, thereby creating a natural market to help finance the war.

 

He created a national currency with the Legal Tender Act in 1861, which enabled the issuance of greenbacks. They were accepted. In the South there was no national currency, and it was largely issued by local banks. I learned that a popular currency was issued by a Louisiana bank and its $10 bill was called a Dix. It was widely circulated and henceforth the South was to be called Dixie.

 

His second hero was the scheming financier Jay Cooke who can rightly be considered one of the founders of modern Wall Street. He set up an organization to sell Chase’s bonds to the American public far and wide. He used correspondent banks to help sell the bonds and his company became the first wire house on Wall Street. Cooke’s company would fail in 1873 after the collapse of the Northern Pacific Railway.

 

Lowenstein rightly calls the 37^th Congress the most successful in history. That Congress in 1862 passes the Pacific Railway Act, the Morrill Act establishing land grant colleges and the Homestead Act. All three acts represented nation building at its best.

 

A significant result of the Civil War is that it jump-started the industrialization of America. The Great Lakes cities of Buffalo, Cleveland and Milwaukee thrived during the war. Great fortunes were made, and that capital formed the basis of the industrial behemoth the U.S. was to become and the Gilded Age that was part and parcel with it.

 

I was pleased to see that Lowenstein cited Eugene Lerner, my finance professor at Baruch College from many years ago, at length. Lerner was an expert on the financing of the Confederacy. To sum up Lowenstein tells the story of Civil War finance with great verve, and he holds the reader’s interest throughout.

For the full Amazon URL see: The Sinews of War (amazon.com)