Shulmaven Banned from Twitter (X)

Shulmaven was banned from Twitter (X) this morning for posting the comment "Circular firing squad" on Betsy Woodruff Swan's article on the Hunter Biden litigation. (See: In talks with prosecutors, Hunter Biden’s lawyers vowed to put the president on the stand - POLITICO ) Twitter said I violated their rules against "violent speech."  Give me a break. To call me out for this means, that given all of the hate speech and porn now on Twitter, something is really rotten in that organization.

Elon, get a life and fix this before it is too late! Meantime, dear readers,  boycott X.

My Amazon Review of Alan Philps' "The Red Hotel: Moscow 1941, The Metropol Hotel......."

A Failure of Journalism 

We last ran into the Metropol Hotel in Amor Towles’ “A Gentleman in Moscow.” (See:        My Amazon Review of Amor Towles' "A Gentleman in Moscow")  Here we revisit the hotel as the home of foreign journalists covering the Eastern Front during World War II. We meet such stalwarts Quentin Reynolds, Margaret Bourke-White, Walter Kerr, Cyrus Sulzberger, and Edgar Snow among others. They are all there to cover the war under the very strict hands of Soviet censorship. Hence, for the most part, they have become organs of Soviet Propaganda.

 

The journalists are aided by a corps of female interpreters who in addition to there nominal duties are there to spy, influence and sometimes perform sexual services for mostly male reporters. One of those interpreters was Nadya Ulanovskaya who with her husband Alex are the true protagonists of the book. Both Nadya and Alex as teenagers were revolutionaries in 1917 and, in fact, they met Stalin. After the revolution both move up in nomenklatura and by 1926 they are working as GRU agents in China under the legendary master spy, Richard Sorge. (See: Shulmaven: My Amazon Review of Owen Matthews' "An Impeccable Spy: Richard Sorge, Stalin's Master Agent )

 

By 1932 Alex had moved over to the NKVD and worked as its rezident in New York. In that capacity he recruited Whitaker Chambers who years later would blow the whistle on the Soviet spy ring in the United States. (See: Shulmaven: My Amazon Review of Calder Walten's "Spies: The Epic Intelligence War Between East and West" )

However, by the late 1930’s both are disillusioned with communism and are initially saved from the purges by an old friend from the NKVD. Nadya worked for Australian journalist Godfrey Blunden. She travels with the journalistic crew to see what the Soviets want them to see at the front. The journalists live high on the hog while all of Russia is starving. Author Alan Philps gives us a great sense of the fear in Moscow as Hitler’s armies approached as the journalist were evacuated further east.

 

Nadya’s luck runs out in 1948 when she is arrested. It seems the KGB figured out that she was the protagonist in a novel Blunden wrote. She spends time in Lubyanka, Lefortovo and the Gulag and serves eight years. She is released early under Khrushchev's general amnesty. I didn’t realize what a big deal that was. Also released were her husband and daughter.

 

She immediately acts as a rebel by being a leader in “samizdat” movement which published previously forbidden tracts. Ultimately, she and her daughter move to Israel.

 

What we learn from Philp’s book is that journalists working under dictatorships cannot really do an honest job. In this case the journalists in Russia lived on their expense accounts, paid no taxes and eagerly awaited writing books that would bring them a royalty stream. To write out of line would mean having their visas revoked. Thus, in no way could they be considered independent. This is a lesson for a reader of reports emanating from Russia, Iran, China, and Palestine. Take all of them with more than a few grains of salt. Witness what happened to Evan Gershkovich now imprisoned in Russia.

 

Alan Philps has done a great service to the memory of Nadya Ulanovskaya and has written a work of history that today’s journalists should not forget.

For the full Amazon URL see: A Failure of Journalism (amazon.com)

 

My Amazon Review of Calder Walten's "Spies: The Epic Intelligence War Between East and West"

 Intelligence Wars

I normally frown on long books, but Calder Walten’s book weighing in at 688 pages is an exception. In this deeply sourced book Walten covers the 100-year East vs. West spy war starting with the formation of the Cheka in 1918 and its nontrivial influence on history. Like it or not the West has been at war with the Russians from the beginning and if you want a later date for the start of the Cold War you can use 1943 with the emergence of the Cambridge Five occupying high posts in the British security services and the atomic spy ring at Los Alamos.

The initial Soviet target was the British, but with the U.S. recognition of the USSR in 1933 the way was open for the NKVD and the GRU to establish outposts in the U.S. via their embassy and consulates and with the formation of AMTORG, the Soviet trading corporation. From this modest beginning came high placed spies including Alger Hiss, Lawrence Duggan Laughlin Currie and Harry Dexter White. And working with the U.S Communist Party, an error in tradecraft, the Soviets recruited the Rosenberg spy ring. Indeed, had Henry Wallace become President his choices for Secretaries of State and Treasury were Duggan and White, respectively making for a true horror show.

For the most part both the U.S. and Britain were oblivious to the Soviet threat through World War II. A case in point is that the atomic spy, physicist, and German communist Klaus Fuchs was cleared by British intelligence. In fact, the British were prohibited from spying on the Soviets and the U.S. OSS was riddled with Soviet Agents. On the U.S. side the one hero in the piece was FBI chief J. Edgar Hoover who was alert to the spying threat. (See: Shulmaven: My Amazon Review of Howard Blum's "In the Enemy's House: The Secret Saga of the FBI Agent and the Code Breaker who Caught the Russian Spies")  Based on the information coming from his spies, atomic spies, Stalin authorized the start of the Soviet nuclear program while the Battle of Stalingrad was going on. Stalin was thinking ahead to the postwar rivalry.

 

As good as Soviet spying was on Britain and the U.S. it objectively failed with respect to Germany because Stalin refused to believe the warnings coming from his intelligence apparatus. He even ignored the clear warnings from his super spy in Japan, Richard Sorge. (See: Shulmaven: My Amazon Review of Owen Matthews' "An Impeccable Spy: Richard Sorge, Stalin's Master Agent )

 

So successful was the Russian spying, especially through to the efforts of Cambridge Five member Kim Philby as MI6 liaison to the CIA, was that Stalin knew about America’s intelligence efforts before President Harry Truman. Indeed, Kim Philby was best buddies with James Angleton, the head of the CIA’s counterintelligence division.

 

This is not to say that the U.S. and Britain were asleep. The U.S. developed Oleg Penkovsky as an asset in Moscow. He was extraordinarily helpful during the Cuban missile crisis by informing Kennedy about the limited number of missiles that were operational in the Soviet Union. The British had Oleg Gordievsky, a high KGB official, who while in London briefed both Gorbachev and Thatcher on the eve of their first meeting in 1985. ( Shulmaven: My Amazon Review of Ben Macintyre's "The Spy and the Traitor: The Greatest Espionage Story of the Cold )  It was also Gordievsky who alerted the West that Russia truly feared that the U.S. was about to launch a preventive war during the Able Archer exercises in late 1983. Reagan took note of that and cooled his hot rhetoric that came from his “Evil Empire” speech earlier that year.

 

Walten also tells of the CIA’s paranoia in fearing nationalist uprisings as the vanguard of a communist revolution in the global south. Big mistakes were made in Asia, Latin America, and Africa. However, he does not that it was the weak Chilean economy and the army and not the CIA who overthrew Allende in 1973. Both the CIA and the KGB were playing cat and mouse with each other in that country.

 

Walten covers far more than spies. Aside from HUMINT, he discusses signal intelligence (SIGINT), electronic intelligence (ELINT) and image intelligence (IMint). I learned that Dr. Edwin Land, the founder of Polaroid, came up with the idea of using high resolution photography that became the basis of first the U-2 spy plane and later satellite imagery. The U-2 that was shot down over Russia in 1959 was accomplished through the use of a proximity fuse that was obtained from the Rosenberg spy ring.

 

I also learned that the dissolution of the Soviet Union did not turn off Russian spying. The KGB reformed as the FSB and the SVR and used such highly placed agents as Aldrich Ames in the CIA and John Walker in FBI counterintelligence. The damage these two caused was incalculable including the fingering of Gordievsky who escaped Russia by the skin of his teeth.  It seems that Clinton did not care about intelligence, but the new Russia plowed ahead. Walten discusses how the War on Terror diverted resources away from Russia and China to the West’s detriment.  Of course, it goes without saying that the Russian security services played a nontrivial role in the 2016 and 2020 elections. However, he does note the U.S. success in calling attention to Russia’s planned invasion of Ukraine in February 2022 which prevented a Russian false flag operation.

 

Walten ends his book with a discussion on China whose Ministry of State Security represents a far greater threat than the KGB/GRU ever represented. China’s espionage is across the board that involves stealing corporate secrets, cyber warfare, SIGINT, and the use HUMINT, in particular involving Chinese nationals in the U.S.  Remember the Russians were never an economic threat; China is thereby defending against its commercial spying critical.

 

Calder Walten’s well-written book is true public service. He highlights the fact that we live in a dangerous world where, as they say, eternal vigilance is the price of liberty.

For the full Amazon URL see: Intelligence Wars (amazon.com)

My Review* of Seth Klarman's Ed. of "Graham and Dodd's Security Analysis 7th Ed."

Learning from the Masters

 

Star value investor Seth Klarman has edited an updated version of Graham & Dodd’s investing classic with help from such luminaries as James Grant, Howard Marks, and Todd Combs. Klarman uses the 1940 edition as the basis for his and the other editorial commentaries on the text’s very detailed discussion on security analysis. For most readers the original Graham & Dodd discussion will seem like ancient history to today’s investing world, but for a history buff like me, I found much of the discussion fascinating. (Also see my prior review of Graham Shulmaven: My Amazon Review of Benjamin Graham's and Jason Zweig's (Ed) "The Intelligent Investor (Rev. Ed.)" )

 

The core lesson of Graham & Dodd is that when one invests in a common stock, he or she owns a proportionate share in a business and the value of that business is dependent upon its net assets (shareholders’ equity) and its underlying earning power. The idea is to be able to buy a stock sufficiently below its value to create what Graham & Dodd call a margin of safety. Also timeless is Graham & Dodd’s holding suspect the use of appraised values in real estate debt securities that were so prominent in the 1920’s and again today.

 

For Graham & Dodd earnings power is measured by the average of earnings over the last five or ten years. The future does not really enter into the discussion except if there is a strong upward trend which might allow an investor to pay modestly higher earnings multiple. The authors were especially critical of the 1928-29 new-era philosophy of valuing equities solely on the basis of future prospects largely because the future is unpredictable. Thus, they are critical of John Burr Williams’ 1938 view that the value of a stock equals the present value of future dividends, because, again, the future is unknowable. Nevertheless, in today’s world investing is all about capitalizing future earnings.

 

You have to remember that Graham & Dodd were writing against the backdrop of the Great Depression of the 1930’s. The new-era philosophy of 1928-29 crashed and burned and what investors had to deal with was the here and now of net asset values and historical earning power. However, they did note the price-earnings ratios in 1936-38 were much higher than they were in 1923-25, which they attributed to much lower interest rates. They also wisely noted that the low interest rates of the 1930’s were sending a negative message about the future growth in the economy. In retrospect the high multiples could be attributed to the fact that corporations were under-earning due to the depression.

 

They also seemed to be puzzled about the return to growth stock investing in the late 1930’s. They listed seventeen stocks that were characterized as growth issues at that time. Several of the names would puzzle today’s investor, but I would point out that there were five chemical stocks on the list. The advances in chemistry and chemical engineering in the 1930’s made them the technology stocks of that day.

 

I enjoyed the essays introducing the chapters of the book. However, my criticism of the essays is that they do not include detailed examples of how a Graham & Dodd investor, like me, would utilize the wisdom presented in the book today. For that I would recommend Bruce Greenwald’s “Value Investing: From Graham to Buffett and Beyond 2^nd Ed.” (See: Shulmaven: My Amazon Review of Bruce Greenwald's et.al. "Value Investing: From Graham to Buffett and Beyond" 2nd. Ed.)

*-Amazon has yet again failed to post this review. Amazon just posted my review on 8/17, see Learning from the Masters (amazon.com)

Moody's Lowers the Boom on the Bank Stocks

 Moody's finally acknowledged what most of us new last April that the banks were in a world of hurt. ( See: Shulmaven: Winter Comes to the Bank Stocks ) Last night Moody's downgraded 10 banks including Commerce Bancshares and M&T Bank, put 6 under review including BNY-Mellon, Cullen Frost, Truist Financial and U.S. Bancorp  and placed 11 banks with a negative outlook including PNC and Fifth Third. The rationale for the downgrades was based upon high funding costs, asset risk in commercial real estate, underwater securities holdings and potentially  higher capital requirements. The ratings agency neglected to mention higher FDIC premiums. Moody's also neglected to note that the day will soon come when the Federal Reserve introduces a high inflation scenario in its annual stress test. 

The bottom line here is that the banking crisis engendered by the failure of Silicon Valley Bank and First Republic Bank is far from over with that credit standards will continue to tighten. What will ultimately be needed is a re-equitization of the banking system with its concomitant dilution. The one saving grace is that just like the defense industry's "last supper" hosted by Secretary of Defense William Perry in 1993 which signaled a consolidation of that industry, we now have Secretary of the Treasury Janet Yellen urging the regional and community banks to merge. The anti-merger FTC Chair Lina Khan will stay out of the way.