FEBRUARY 2018 THE MONTH THAT WAS: SYDNEY WILLIAMS
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The month was one of extremes, reminding me of Jim McKay’s signature words about the dozen Olympics he covered: “The thrill of victory. And the agony of defeat.” The month’s news swung between the glory of the Olympics, the tragedy in Parkland, Florida and the return of volatility to Wall Street.
The Olympics showed us at our best, whether in victory or in defeat. For the first time in twenty years, the women’s hockey team won gold. We saw compassion when Brita Sigourney embraced her teammate Annalisa Drew, when the former beat the latter for the bronze in the freestyle skiing halfpipe. The worst of America was seen in Nikolas Cruz, as he shot seventeen people at the Marjory Stoneman Douglas high School in Parkland, Florida. The horrific incident also brought out heroes, like 15-year-old Anthony Borges who took five bullets, while saving 20 classmates and football coach Aaron Feis who died saving students and teacher Scott Beigel who died opening the door of his classroom to let in students. There were others. (See my TOTD, “Another School Shooting,” February 22). I hope we resolve this, without naiveté as to causes and without imposing police-state-like conditions. No one should live in fear, least of all children.
The dog-bites-man story of the month is the continuing saga of Russia meddling in our election. The hypocrisy and hyperventilation by the liberal press reminds one of Claude Rains in “Casablanca” – they were “shocked, shocked” that Russia would meddle in our elections. Of course Russians do. They have for decades. It is what propagandists do. The Kremlin is less interested in outcomes, than in making our democracy appear weak and ineffectual – to sow discord. They have succeeded. Exhibit A, B and C are the front pages of the New York Times and the Washington Post, TV news shows like CNN, MSNBC and Fox News, and late-night comedians like Jimmy Kimmel and Stephen Colbert. Meddling served Russia’s purpose: an ineffectual Congress and a polarized people. We have been guilty of the same. Think of Thomas Jefferson’s support for the French Revolution, or the CIA disrupting/influencing elections from South America to South East Asia, or the role of Radio Free Europe during the Cold War. President Obama campaigned against the re-election of Benjamin Netanyahu in 2015 and for Brexit in 2016. Nevertheless, meddling in others’ elections is a violation of international and U.S. law, something we must guard against. If not doing so already, we should deploy our best crypto-security specialists to counter Russian activity.
Overseas, China announced, through state-owned media, a proposal to abolish presidential term limits, paving the way for the indefinite presidency of Xi Jinping. Like the attack on Aleppo two years ago, the Syrian government (with Russian support) attacked rebel-held Eastern Ghouta, a suburb of Damascus, using artillery, bombs and chemical weapons. The Syrians (and Russians) were aided with weapons and material procured from Iran and North Korea. Thus far, over 500 are dead, with thousands wounded. A botched Russian attack in Syria, on U.S. forces, brought retaliation in the form of air and artillery strikes that killed or wounded an estimated 300 Russian military contractors. South Africa, with unemployment at 27%, tossed out the corrupt Jacob Zuma, replacing him with Cyril Ramaphosa. Israel’s President Benjamin Netanyahu, in his fourth term, is under charges of alleged corruption – creating schadenfreude among progressives around the world. Five months after elections were held last September, Angela Merkel’s Christian Democrats backed a “Grand Coalition” with left-of-center Social Democrats. Despite her role as director of propaganda and agitation for North Korea, Kim Yo Yong was fawned over by an adoring press in PyeongChang; however, the Olympics may have provided the opening for talks between the U.S. and the two Koreas. Regardless, the U.S. proposed further pressures on North Korea by increasing the number of ship interceptions suspected of violating existing sanctions. The European Union, with immigration lessening, resumed attempts to expand its territorial reach eastward, into the Balkans.
At home, the school shooting in Parkland, Florida raised the stakes in the battle over gun legislation. By one count, there are already 20,000 federal and state laws on the books dealing with the use and ownership of guns. Their lack of effectiveness is obvious. Surviving students have ably used social media to raise awareness. Despicable and incomprehensible as the shooting was, it became more so with revelations that social workers and law enforcement did not take preventive measures prior to the shootings, nor did the armed deputy in place move inside to confront the shooter. Early in the month the Republican “memo,” regarding the dossier prepared for the FISA court was made public, which suggested collusion between the Clinton campaign, former British agent Christopher Steele, the FBI and the Justice Department. (See my TOTD, “The Memo,” February 12, 2018). The Democrat’s rebuttal was released as the month ended, a heavily redacted statement that was pathetic in its failure to counter Republican assertions.
Mr. Mueller indicted thirteen Russian individuals and three Russian companies for interfering in the 2016 election – a charge without consequences, as all those indicted are in Russia. The Special Counsel also charged Paul Manafort and Rick Gates, both formerly of the Trump campaign, with fraud. This was on top of earlier charges of money laundering. Before anyone gets too excited about those charges, it is worth remembering that U.S. laws consume fifty volumes and 23,000 pages. All of us could be charged with breaking some law, if a prosecutor felt it was in his or her interest. What is important is that, to date, no American has been charged with colluding with Russians during the election. Any Russian communication with the Trump campaign was with “unwitting” Americans, to use Deputy Attorney General Rob Rosenstein’s word. A second government shut-down ended after a few hours, when President Trump signed a two-year budget authorization. Before the budget bill passed, House Minority Leader, 77-year-old Nancy Pelosi spoke against the budget for eight hours, setting a modern record but accomplishing nothing.
As for finance and economic news, after a period of eight months, during which the DJIA never rose or fell by more than one and a half percent from market open to close, complacency gave way to concern. By February 8, the DJIA had fallen by 10.4% from their January 26 highs. The seven days in which the market closed up or down more than one and a half percent were the most since January 2016, which had eight such days. Anyone who has spent time with markets understands that volatility is normal. Anyone who tells you that they know what the market will do over the next few months is lying. What is important are fundamentals – the economy, valuations, prospects for individual companies and confidence. The DJIA ended the month at 25029.20, down 4.3%. The Conference Board’s measure of consumer confidence rose in February to its highest level since 2000. The first revision for fourth quarter US GDP showed growth of 2.5% versus an earlier reported 2.6%. S&P 500 companies have increased dividends 14.7% so far this year Jerome Powell took the reins at the Federal Reserve, as the Fed is moving toward ‘normalizing’ rates, a euphemism for raising rates. On February 9, Grant’s Interest Rate Observer noted, “The government [U.S.] will borrow more in relation to GDP next fiscal year than it has borrowed in any fiscal year since 1945.” In 1945 defense spending accounted for 88% of total federal spending but shrank rapidly when the war ended. In 2017, transfer payments plus interest expense accounted for 70% of total spending. That will continue to grow. In a vicious circle, increased spending requires higher taxes, which inhibits economic growth. The yield on the Ten-Year rose about ten basis points, with spreads between the Two and Ten-year remaining roughly flat. In Germany, the country’s largest trade union won a 28-hour work week.
In the world of sports, the month began with the Super Bowl and ended with the Olympics. The Philadelphia Eagles defeated the New England Patriots 41-33, the Eagles first win since 1960. The XXIII Winter Olympics dominated the last two weeks of the month. The big winner was Norway. With a population of five million, they took home 38 medals. At 23 the U.S.’s medal count was the lowest since the 1998 Winter Games in Nagano. But 13 were won by women! The women’s hockey team, as mentioned, won gold. Chloe Kim became the youngest woman to win a gold medal in a snowboarding event, and Shaun White added a third gold to ones he won in Turin and Vancouver. Jessica Diggins won America’s first gold medal in cross country skiing, and Mikaela Shiffrin won a gold and a silver in alpine skiing. Lindsay Vonn was gracious, when she slipped to third in the Women’s Downhill. The agony of defeat could be seen when ice dancers Madison Chock and Evan Bartes fell during their program, and when Maddie Bowman fell during her final run in freestyle skiing. However, their sportsmanship and character made America proud.
The Vatican granted Beijing the right to name seven Bishops, and it severed relations with Taiwan, with its roughly 500,000 Catholics. 110 girls were kidnapped by the Islamist group Boko Haram in Nigeria, echoing memories of 2014 when 276 school girls were abducted. The little country of the Republic of Maldives – 110,000 people on 26 atolls in the Indian Ocean – declared a state of emergency, after the arrest of the nation’s chief justice. The origin of sonic-induced brain injuries suffered by U.S. diplomats in Cuba last September remains a mystery. Symptoms resemble concussions. Space Exploration Technologies, a company run by Elon Musk, successfully launched a 230-foot-long rocket toward Mars. They used 27 engines, with the thrust of 18 Boeing 747 jumbo jets. The rocket carried a Tesla roadster. Mitt Romney announced his candidacy for U.S. Senate from Utah, receiving the endorsement of President Trump. An Amtrak train collided with a CSX freight train in South Carolina, killing two and injuring 116.
The budget bill, which passed this month, included a provision to defuse a financial time bomb for 1.5 million retirees in the Midwest and south. Future retirement and healthcare payments, whether for private or public plans, present a growing problem for the health of our economy. Perhaps Congress can help, but, keep in mind, these are the folks that have increased federal debt and have been unable to balance the budget for seventeen years. Incidents of anti-Semitism in the U.S. rose 57% in 2017, according to the Anti-Defamation League. The Supreme Court will hear Janus v. AFSCME. At issue are the Constitutionality of laws in 22 states that force unionized public employees to pay dues to support candidates they would rather not. Pennsylvania re-drew its electoral map, to the benefit of Democrats. Research from a University of California neurologist showed that drinking alcohol (in moderation) is key to living past ninety. And Jimmy Kimmel, in his arrogance-infested ignorance, was allegedly quoted as having said: “It just so happens that almost every talk-show host is a liberal, and that’s because it requires a level of intelligence.” Where were you, Jimmy, when they were doling out wisdom and graciousness?
The grim reaper appeared and took away Billy Graham at age 99. While I never heard him speak, he preached to an estimated 220 million people around the world, and saved the lives of thousands, including George W. Bush, according to a beautiful, heart-felt op-ed he wrote for Monday’s Wall Street Journal. Crooner Vic Damone died at 90, “the best pipes in the business,” said Frank Sinatra. And Jeffrey Bell, a seminal Republican thinker who had challenged and defeated New Jersey Senator Clifford Case in a 1978 Republican primary, died at age 74. Mr. Bell lost the general election to Bill Bradley.
March is arriving in its typical fashion of wind and rain, but the month brings spring, the first buds, the return of birds that wintered in the south, and the re-awakening of those who hibernated the winter away. It also gave us, sixteen and seventeen years ago, two of our grandsons. Happy birthday, Jack and Alex!
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