While I was out of town, I was alerted by a dear friend and fellow memo reader that one of my oldest friends, Dr. Marshall Goldman, had passed away. Marshall was my fraternity brother. We met in 1950 and remained in touch ever since. He was an expert on Russia and was taking Russian when there were only a handful of students in the class. Marshall fell in love with his wife, Merle who, at that time, was enrolled in taking Chinese. Merle is an expert on China, Marshall on Russia.
Marshall wrote a book, among his many published writings, entitled:" Russia The Petrostate," many years ago and came to Savannah, at my request, to talk about the impact Russian oil was having and would continue to have.
Marshall was one of the founder's of The Harvard Institute on Russian Studies and was a chaired professor at Wellesley. He was also a constant advisor to The State Department.
In recent years, Marshall's health began to fail. Lamentably, this brilliant, gentle and beloved soul suffered from severe dementia.
RIP!
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Why are Sen's. Gillibrand and Booker backing away from their historical support of Jewish interests?(See 1 below.)
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When our institutions fail us from Congress all the way to the mass media and political corruption and media bias explode a rise in populism is one of the consequences. Public disgust is not the sole reason Trump won but it goes a long way explaining his victory.
Resistance by those who are blind to this reality, who have much to lose if populism spreads and the swamp is drained (read the establishment,) could also become a dangerous stimuli because it could force the public's mood to reach a boiling point.
Our Republic, like any other government, rests on a fragile base of trust and can stand only so much skulduggery and contentiousness.(See 2 below.)
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I have been a value investor virtually all my business life and, for the last year or so, I have been out of step with what has been a narrow momentum market. Trends come and go, some last longer than they have in the past and I understand the desire to own the future but at what price?
In measuring value/momentum, metrics have changed and more emphasis is being placed on free cash flow because of the impact of technology on consumer trends and business development/competition.
Change is in the air in virtually every sector of society. Drug pricing has exploded and even the cost of education has risen beyond the value of an economic return. Amazon is threatening to change our way of life, our culture. Real estate prices have soared because, in part, government restrictions and dictates make "affordable housing" un-affordable. Where is all of this taking society and stock valuations is the unanswered question and how long will/can it continue?
Also, we cannot dismiss the impact of technology on trading and the rapidity with which hedge fund traders get in and out seeking profits from fractional moves.
Time will tell. (See 3 and 3a below.)
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Off to Athens returning late Tuesday.
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Dick
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1) Gillibrand and Booker Know Something We Don't
The Previously Reliable Pro-Israel Senators Have Changed Course, and its worth asking why.
By Liel Libovitsa
On Monday, Senator Kristin Gillibrand attended a
town hall meeting in Queens, and announced that she was withdrawing her support from an anti-BDS bill. The move came after the senator met with the ACLU, which argues that the bill will stifle the First Amendment. It won’t: as its co-sponsors, Senators Cardin and Portman, explained in a letter to the civil liberties organization last month, the new legislative initiative merely amends a 1977 act that prohibits Americans from complying with unauthorized foreign boycotts—think the Arab League’s long-standing anti-Israel drive—and expands it to include boycotts sanctioned not only by foreign governments but by international governmental organizations as well. In other words, the bill is an important but relatively minor addition to a law that has been on the books for four decades and was consistently upheld by the courts. Why, then, did Gillibrand change her mind?
I’ve placed a call to her press representatives, who directed me to her town hall comments. There, the senator said that while she did not agree with the ACLU interpretation, she believed that the group came by it honestly, and was concerned that others may have the same interpretation and erroneously believe that the new bill applies to individuals as well as companies, which it clearly does not.
Stop and think about this one: here’s a United States senator saying that because she’s concerned that some people might perceive a bill in pretty much the opposite way than its language clearly states, she will not be supporting it. Bills, of course, are open to debate and subject to interpretation, but this is why we have the courts, and the Constitution, the former entrusted with upholding the latter. To walk away from a bill because some people somewhere may at some point misunderstand it is not only politically opportunistic, but an invitation to future mob rule.
Not to be outdone by the Democratic senator from New York, the Democratic senator from New Jersey, Cory Booker, voted, on Thursday, against the Taylor Force Act, a bill that would cut off American financial aid to the Palestinian Authority so long as Mahmoud Abbas and his goons continue to pay big bucks to terrorists and their families. The bill eventually passed the Senate’s Foreign Relations Committee with a 16-5 vote, which means enough Democrats were convinced by the simple moral proposition that it’s probably a very bad idea to send taxpayer dollars to people who then use them to incentivize the murder of Jews.
Why did the senator vote nay? Again, blame the “unintended hypothetical consequences” defense: “While Senator Booker supports the stated goal of this bill,” wrote his spokeswoman, “the legislation as written could have drastic unintended consequences in a volatile region, and actually make the security situation even worse.” It’s a shame that the senator didn’t apply the same logic before endorsing the Iran deal; a bit of skepticism about whether handing hundreds of millions of dollars to the world’s premiere exporter of terrorism, anti-Semitism, and Holocaust-denial would’ve gone a long way.
So what’s going on here? Nothing good. As Seth Mandel, an editor with The New York Post, noted on Twitter the other day, these recent developments should be particularly worrisome to Jews because Booker isn’t an ideologue but a weathervane adept at determining which way the political winds are blowing. And for the Democrats, they’re blowing away from the Jews.
You can hardly blame the senators for thinking this way. When the largest progressive grassroots movement in years is led by a proud anti-Jewish bigot; when marches waving the flags of civil rights and equality ban the Star of David; when the media, academia, and human rights organizations are quick to single out Israel for opprobrium—in short, when the whole political bloc drifts leftward, a politician would have to be either very courageous or very foolish not to follow it.
Especially when so many Jewish institutions, lamentably, drift right along. AIPAC, for example, having failed miserably to stop the Iran deal, invests millions of dollars in reaching out to progressives, thereby violating the first principle of effective lobbying, namely the edict to always embrace your friends and fight your enemies. The ADL, which is busy churning out warnings against members of the alt-right, the alt-light and others right-wing operators, bothered commenting on the Taylor Force Act in passing, the organization’s first public mention of the legislation. And the Forward, until some years ago a respectable mainstream Jewish publication, just published a list of people who are a threat to the Jews, which includes, side by side, President Trump and the leaders of Hamas and Hezbollah.
This is what ideological madness looks like, and, sadly, its infecting even politicians who used to be reliable and reasonable representatives of American Jewish interests. Given the way things are going, it’s hard to see the Democratic party being the natural political home of American Jews for much longer.
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2) Time Magazine Demonstrates
Why Americans Hate the Media
By Peter Heck
Just a few days ago CBS News celebrated the 56th birthday of former President Barack Obama by drooling over their compilation video demonstrating how:
“Barack Obama wasn’t just the “president,” he was the “crooner-in-chief.” Take a trip down memory lane as he celebrates his 56th birthday.”
Not to be outdone, and desperate to keep pace in the ongoing challenge amongst mainstream American media to prove afresh each day why people loathe and despise mainstream American media, Time Magazine got into the act.
No, Time wasn’t praising the former president’s singing, or even putting him on their cover for the 81st time in a row. Instead, they were deceptively editing the words of one of the left’s great boogeymen, Charles Koch. The headline of their piece, which anyone in the news business knows is the only thing the vast majority of people will read, screamed:
The truth is that Koch was actually remarking how despicable of a mentality this would be. While it’s true that building bombs can cause the GDP of a nation to go up, Koch argued that was obviously an irresponsible and reprehensible way to measure prosperity. Here’s the full Koch quote from which Time took their headline:
“I think we can have growth rates in excess of 4%. When I’m talking about growth rates, I’m not talking about GDP, which counts poison gas the same as it counts penicillin. What a monstrous measure this is. If we make more bombs, the GDP goes up – particularly if we explode them.”
Time tweeted out the story with this as the quote they pulled to attach to the story: “If we make more bombs, the GDP goes up – particularly if we explode them.”
The very principle that Koch called “monstrous” is what Time purposefully promotes as Koch’s preference. It’s horrendous journalism. In fact, it’s not even journalism; it’s left-wing propaganda.
Anyone who remains baffled as to why the American people hate their media just isn’t paying any attention. The question is answered almost every day.
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3) College Is Trade School for the Elite
Even education in the humanities has become vocationalized, though the transformation is subtle
By Allen Guelzo
If ever an issue seemed assured of bipartisan support, you’d think it would be an initiative that helps connect workers with work. But up went the howls of injury anyway. “I’m worried that the idea of vocational education has become so popular,” wrote David Leonhardt of the New York Times . “We shouldn’t be promoting vocational education at the expense of general education.” Instead, “expanding the number of four-year college graduates also deserves to be a national priority.”
Maybe. Mr. Leonhardt is pitting vocational education against the ideals of higher education—independence of thought, breadth of knowledge and understanding. It’s not hard to see how important these ideals are to a democracy, in which political sovereignty lies with the people at large. If the people are ignorant or fixed only on grubbing for a living, they may make awful—and irreversible—mistakes.
The problem is that so little of those ideals really operate in most of American higher education.
Judged by the catalogs, curricula and websites of American colleges and universities, American higher education already is vocational. The number of degrees in nursing, social work, education and the holy quartet of STEM—science, technology, engineering and mathematics—vastly outweighs those awarded in the humanities, which is where we’re supposed to find the pure arts of thinking. One out of every five bachelor-level degrees is in business—which is to say, accounting, marketing, management and real estate—while one in 10 is in a health-related field.
Business and education lead the parade among master’s-level degrees; the bulk of doctoral degrees are in medicine, law, biology and engineering. The highest-growth fields since 2008 have been homeland security, law enforcement, firefighting, parks, recreation, leisure and fitness studies.
Even education in the humanities has become vocationalized, although the transformation is subtle. Take almost any college or university literature department at random, and its faculty will be composed of people who have been trained in other college and university literature programs to be literature professors. History majors are, in department after department, seen—and taught—as future history professionals, whether in museums or colleges. Even in schools that still valiantly defend the virtue of a liberal arts education, much of it tends ineluctably toward professional formation, not breadth or understanding. Vocational training is what higher education has been doing without even realizing it.
I wonder if the real complaint about Mr. Trump’s praise of vocational education is that his interest in the “wrong” vocations—“trade, manufacturing, technology”—and in the wrong places.
College-based vocationalism is still vocationalism; there’s no intrinsic difference between peeling a spud and popping a vein. But it is a vocationalism of merit, defined by testing, credentials and cultural signaling. In this version of vocationalism, the four-year college experience becomes a path by which the talented and brainy are induced to abandon their neighborhoods, churches and families to become the next generation of staffers for multinational corporations and nonprofits. Either you arrive already equipped with merit (through your meritocratic parents and your meritocratic college-prep program) or you are cherry-picked to receive it, and thereafter spurn the base rungs by which you do ascend.
Why the meritocracy’s college-based vocationalism should be considered superior to Mr. Trump’s vocationalism has little to do with dollars and cents and a lot to do with the cultural imperialism of the meritocracy. Mike Rowe, creator of “Dirty Jobs” and “Somebody’s Gotta Do It,” was perplexed to find that even in the depths of the Great Recession small-business owners hung out “Help Wanted” signs in all 50 states, but couldn’t find people to hire. Why? Because of “the stigmas and stereotypes that dissuaded people from exploring a career in the trades.”
Everywhere, Mr. Rowe met with the blank convictions that “opportunity is dead” and “success can only occur if you purchase a four-year college degree.” Tell that, he says, to the employers who have 5.6 million job openings that aren’t in danger of being filled by robots.
Mr. Trump’s determination to revive vocational education is a validation of varieties of work the meritocracy disdains. But meritocracy, as the cultural critic Christopher Lasch wrote, “is a parody of democracy.” It promises advancement, but only for a few, and only at the expense of a common culture. By validating a real vocationalism, we might also arrive at a new revival of democracy, and even—who knows?—a true rediscovery of the humanities.
Mr. Guelzo is director of the Civil War Era Studies Program at Gettysburg College and a senior fellow of the Claremont Institute.
3a)
Hot-Stock Rally Tests the Patience of a Choosy Lot: Value Investors
Value funds around the globe are on track to post their worst performance since before the financial crisis
Value investing is mired in one of its worst stretches on record, prompting concerns that
the investment style favored by generations of fund managers is losing its effectiveness.
Value stocks, those that are cheaper than many peers relative to earnings or reported net
worth and are typically purchased by fund managers anticipating long-term appreciation,
have significantly lagged behind their growth stock counterparts this year, compounding
a gap that has persisted since the end of the financial crisis.
Instead, investors have gravitated toward companies with fast earnings or price growth,
ratio has continued to rise—a trend that many value investors contend cannot continue
forever.
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- MoneyBeat: Analysts Have Never Been This Bullish on Value Stocks…And That’s Bad (March 13)
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- Value Investing Regains Favor in Europe (Nov. 18)
Stocks that look cheap relative to
traditional fundamental metrics such
as profit or cash flow have fallen so
far out of favor thatGoldman Sachs
in June questioned whether the
markets are witnessing the death of
value investing. With value
investments in Europe and Asia also struggling, value funds globally are
on track to post their worst performance this year relative to growth funds since before
the financial crisis.
The struggle for value stocks over such a prolonged period contradicts the popular
investment approach coined by financial analyst Benjamin Graham, known as the father
of value investing, and since popularized by Warren Buffett. The billionaire investor and Berkshire Hathaway Inc. chairman has attracted a legion of followers who remain
confident that value investing will never go out of style.
From the Great Depression to the U.S. tech bubble to the global financial crisis, the
notion that a new paradigm would replace value investing has repeatedly occurred.
Those predictions have almost always ended poorly.
While value investing appears to have lost some luster now as the so-called FAANG
have surged in value, the most steadfast devotees to value-style investing are often the ones
that benefit most in market downturns.
The market’s attraction to highflying stocks punished value investors in a similar fashion
in the late 1990s during the dot-com bubble. Growth stocks beat their value peers toward
the end of two major bull markets that peaked in 2000 and 2007, before large market
selloffs reversed the trend, putting value stocks ahead.
Investors have gravitated toward companies with fast earnings or price growth, such as Amazon.com and Netflix. PHOTO: ELISE AMENDOLA/ASSOCIATED PRESS
Some investors today worry that the
longer growth stocks are viewed as
nearly invincible, the worse the likely
pullback will ultimately be.
“The super-stocks that lead a bull
market inevitably become priced for perfection,” said Howard Marks, the
co-founder of Oaktree Capital
Management who correctly predicted in January 2000 that tech and internet stocks were overheated and about to fall—two months before the dot-com bubble burst. “And in
many cases, the companies’ perfection turns out eventually to be either illusory or
ephemeral.”
The attraction to growth stocks, investors and analysts say, stems from the low interest
rates, slow economic growth and mild inflation that have gripped the world. Central
banks have been accommodative for so long that they have skewed conventional
investor wisdom, analysts say, benefiting companies that can generate growth.
In the U.S., the Russell 1000 Growth Index outperformed its value stock counterpart by
10 percentage points in the first half, the widest spread over that period since 2009. Over
the past decade, the performance of U.S. growth stocks has been almost three times
better than that of value stocks, contributing to what index fund giant State Street Global
Advisors calls “the longest period of underperformance for value since the late 1940s.”L
Investors have pulled $116 billion from U.S. large-cap value funds over the past 10
years, according to Morningstar, with more than one-fourth of that outflow occurring
over the past 12 months.
In Europe, the MSCI Europe Value index, which includes stocks with low valuations on
metrics such as price-to-earnings and price-to-book ratios, gained 3% in the first six
months of the year. The MSCI Europe Growth index gained 9% over the same period.
The trend also holds true in Asia, where an MSCI regional value index under-performed
its growth counterpart by 10 percentage points in the first half.
“In this low-inflation, low-growth world we’ve become accustomed to, investors are
chasing anything that has growth tied to it,” says Kelman Li, an analyst at Bernstein
Research in Hong Kong. “When that happens, value suffers.”
Many of the largest stocks in Asia with low price-to-earnings ratios have been among
the worst performers this year, he said. Yet since 1990, value stocks have actually
outperformed growth. Mr. Li calls this phenomenon a “historical paradox” for investors
in Asia and emerging markets, who typically search for growth.
For now, “every market in Asia screens as overvalued,” Mr. Li said. “The bias toward
growth continues.”L
Value fund managers have felt the pinch. The median value fund around the world lagged
behind the median growth fund by 7 percentage points in the first half of the year, on
pace for the worst underperformance since 2007, according to eVestment. The data and
analytics firm measured actively managed value and growth funds in the U.S., Europe
and Asia—which collectively have $8.8 trillion in assets under management—and found
that so far this year value funds have lagged behind growth in all three regions for the
first time since 2010.
To be sure, much of value’s underperformance could still be cyclical. Historically,
calling the end of value investing has been a fraught exercise.
“Sometimes value investing strategies will probably cease to work as investors flock to
exploit them, yet it certainly does not follow that value investing as a whole will ever be
out for good,” Nobel Prize-winning economist Robert Shiller wrote in his book
“Irrational Exuberance.”
But for some who have practiced value investing throughout their careers, value stocks’
time in the wilderness is starting to seem awfully long.
“This time seems very, very different,” longtime value investor Jeremy Grantham, the
co-founder and chief investment strategist at Boston money manager GMO, wrote in a
recent quarterly letter. In a follow-up note, he added that valuations have stayed richer
for far longer than historical cycles have previously dictated. “As a value manager, I
wish it were not so.”
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