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)