Sunday, December 25, 2022

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 20th Century liberalism lived or visited one time or another at 1727 19th 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)

Sunday, December 18, 2022

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.


Thursday, December 15, 2022

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)


Wednesday, December 7, 2022

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’

Tuesday, December 6, 2022

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.