Year: 2016

Jason Zweig, blogging intelligently for the Wall Street Journal:

. . . Measured before inflation, rates have never been so low in so much of the world.

On July 5, the day after the United States’ 240th birthday, the yield on 10-year Treasury debt fell below 1.4% for the first time in the nation’s history.

Worldwide, $13 trillion in debt yields less than zero . . .

However, this is far from the first time that interest rates have gone negative — once you account for inflation to measure what economists call “real” rates. Adjusted for changes in the cost of living, the yield on Treasury bills was negative in 18 out of the 27 years between 1933 and 1959. Over the same period, intermediate-term Treasuries had negative real yields in 15 years. In the 1940s and again in the 1970s, negative real rates were common worldwide.

Nor is this the first time stocks have hit record highs amid negative rates. In 1958, short-term Treasury bills yielded minus 0.2% after inflation. Stocks nevertheless rose 43.4% that year to reach what then were all-time highs.

None of this means there’s nothing to worry about. Returns on stocks and bonds are almost certain to shrink, and investors all around you are likely to take reckless risks as they become increasingly desperate for income. In a world turned upside down, sanity will be your most valuable asset as an investor.

. . .

Rates probably won’t rise until almost no one on earth is expecting them to. When that happens, it will hurt.

Since 1913, U.S. stocks have gained an annual average of 9.3% when interest rates fall, but only 2.3% in periods of rising rates, according to finance researchers Elroy Dimson of Cambridge Judge Business School and Paul Marsh and Mike Staunton of London Business School. Bonds have returned an average of 3.6% annually in periods of falling rates, but only 0.3% when rates rise, the researchers calculate. The results include the effects of inflation.

Nevertheless, even at today’s emaciated yields, bonds remain a powerful hedge against declines in the stock market, says Fran Kinniry, an investment strategist at Vanguard Group. Treasury bonds rose 1% on June 24, when the British vote to exit the European Union knocked U.S. stocks down almost 4%.

With such slim prospective returns on offer, you will have to lower your expectations and raise the amount you save. . . .

Write to Jason Zweig at intelligentinvestor@wsj.com, and follow him on Twitter at @jasonzweigwsj.

Today’s low rates and buoyant stock market are the reason that — blessed with a little money I can truly afford to lose — I look for out-sized returns in speculative situations that will not be much affected by low, and eventually rising, interest rates — many of them not yet public companies.

I actually do have a bridge to sell you. And rectal applicators!* And training for Certified Nursing Assistants! And purpose for your employees! And home energy-efficiency certification!  And a transcription tool! And a clot-removal device. And an aquablast treatment for your prostate!

Lucky you.

And, of course, a system that will allow pilots to back out from the gate without waiting for a tug, cutting five or ten minutes — or eventually in some cases twenty (by allowing boarding and deplaning from both front and rear doors) — off the time passengers are stuck waiting to take off.  Which in turn will unlock billions of dollars of efficiency for airlines and airports (and please passengers).

In that regard, one of you asked me recently whether — its having been such a long time that we’ve waited on Borealis, majority owner of WheelTug — it is not time to sell and look for something else. I continue to believe BOREF is a spectacular lottery ticket. (Bought only with money you can truly afford to lose, and only with “limit” orders, lest your 1000-share order for this currently-$5 stock be executed at $10.  Though even at $10, the entire thing would be valued at $50 million; less than one fifth the value placed on this lovely Cezanne.)

The commitments WheelTug has from 20 airlines to lease the systems — if they can win FAA approval and be successfully produced — suggest the demand is there.  The recent decision by Honeywell/Safran to discontinue their effort confirms what WheelTug believed: that their approach — three times the weight and hugging the main landing gear wheels that house the super-hot brakes — simply wouldn’t fly.

WheelTug may never fly, either. But a lot of smart people are working hard in the belief that it will.

See you in Philadelphia!

*Yech! Though if you suffer from Crohn’s Disease, not so “yech” at all.

If you have $2.99 and a sense of wonder, load the Sky Guide app on your smart phone.  Yes, that’s the moon — you knew that.  And yes — that’s Mars!  You were pretty sure, but now you know. But wait: there’s Saturn!  And Jupiter!  And . . . well, the app knows where on the planet you are, and, as you look around the sky, what you’re looking at — and what else you’d see if only there weren’t so much ambient light (and pollution and clouds).  It’s kinda great.

Have you been watching Stephen Colbert cover the Convention this week? Start with this that opened Monday’s show and then, for sure, these four minutes. If at that point you can resist watching all the other clips YouTube will suggest, you are a busier man than I am.  (And I am busy!  The whole world is at stake!  I need your help!  Click here!!!)

Finally (as we careen wildly from topic to topic, shiny objects everywhere), my Turkish-American pal, Ayse Kenmore, recently posted “A Convenient Coup”:

In my humble opinion, the wannabe Caliph Erdogan seems to have pulled off a bit of black magic on the world stage with a horrific event allowing him to consolidate his power and eliminate the last of his perceived political,  military, and judicial adversaries. Best of all, he’s able adopt the persona of “democratically elected” victim and maintain the support of Turkey’s NATO partners.  He may have been “democratically” elected, but Mr. Erdogan is not interested in being the leader of a secular democracy. His personal goal appears to become the all-powerful head of a pro-Fundamentalist autocracy.

A few very minor observations:

1)  Erdogan, the presumptive primary target of a takeover, was conveniently on holiday.  His major minions and ministers could not be found either.  Thus, arresting Erdogan & Co., which should have been the first step of any self-respecting coup, couldn’t happen.

2)  If the top generals and officers of the huge Turkish Army had been behind  a coup, the rank & file would have followed their orders and the coup would have succeeded. Sadly, hundreds of high-ranking military have been jailed for some time and are not in a position to give orders. Sadder still, because of this “attempted coup,” Erdogan may now  arrest any and all persons who disagree with him.

3)  By 11:30 PM, the streets were filled by flag-waving Erdogan supporters.  International media took this as a sign of his popularity, overlooking the fact that it was Erdogan himself who asked his followers to storm the streets and to ignore the martial law mandate to stay indoors.  In other words, anti-Erdogan citizens weren’t in the streets.  For example,  Trump rallies are filled with enthusiastic Trump supporters.  We know there are  equally enthusiastic folks who do not support him. Their absence at his rallies don’t indicate support for him.

4)  I can’t imagine a circumstance where impromptu citizens take to the streets late at night, all waving identical flags.  No, most Turks do not keep a uniformly sized Turkish flag by their doors, ready for just such an unexpected event.

5)  Mr. Erdogan won the last election by a very small margin.

His desire to assume all the offices of the executive branch (“l’etat cest moi”) will be voted upon in the near future.  With the “help” of this coup, he may get his wish.

Ataturk’s “miracle of democracy” may be unraveling as we watch.

There’s apparently now a 76% chance Hillary will win, which is terrifying because it means there’s a 24% chance Trump will.

(Here are 141 reasons he’s unfit to be president.)

A 24% chance we will lose the Supreme Court for the next 30 years . . . a 24% chance of a possible trade war (Trump says he’ll make China knuckle under, but it’s funny how reluctant countries are to knuckle) . . . leading to a possible global depression (trade wars tend to have that effect) . . . which could even lead to world war (as the last one did).  Only this time, it would be curtains for mankind. (See, nuclear winter.)

I love our candidate — who is SO much better than they relentlessly try to paint her — and 24% is a way higher chance than I want to take that she might lose.

Click here.

“If he were writing The Art of the Deal today,” Schwartz told the New Yorker, “it would be a very different book with a very different title.”

Asked what he would call it, he answered, The Sociopath.

I genuinely believe that if Trump wins and gets the nuclear codes there is an excellent possibility it will lead to the end of civilization.

It sounds beyond shrill to say so.

But look what a huge mess Trump’s rhetorical mentor caused — and that was before the advent of nuclear weapons.

You’ve probably already read this piece, but if not, you must. Here.

This is just fun.  About three minutes. How many English words do you know?

Mike Pence is deeply religious. Wonderful. Nothing in the Democratic platform would interfere with his right to live as he wants.  But his agenda deeply interferes with women’s lives — he would not allow them to control their own bodies — and deeply interferes with my own.  He would deny my right to full equality. He would forbid my marrying the person I love.

He even favored diverting money from HIV/AIDS prevention in order to fund “conversion therapy.”  Better, in his view, to try to change people’s sexual orientation* than try to prevent the spread of AIDS.

Welcome to the Republican ticket.

In the words of Esquire‘s Charles Pierce, “This Isn’t Funny Anymore.  American Democracy Is At Stake.“

Click here.

*Can you imagine changing your sexual orientation?  Or wanting to? Even back when more than a few gays desperately did want to — so great was the stigma and discrimination — it turned out to be basically impossible. There are so many examples of this, but one I remember best (having written it), is the story of Mitchell Adams, who signed up for literally hundreds of therapy sessions, some including electroshock, to no avail. It turned out, all he needed to do to have a happy, productive life was stop trying to change.

Yes, there are some who claim to have “changed.”  But often they wind up changing back. E.g.: “The so-called ex-gay movement was left in shambles when Exodus International announced it was shutting down and the group’s leader, Alan Chambers, publicly apologized for the harm it had caused LGBT people over the years for insisting they could be turned straight.”

Here’s a piece that decries all the “big money” that goes to fund the conventions.  (“Convention Cash More Controversial Than Ever.”)

I share much of the dismay.

But the author might have noted that it was the Republican justices whose 5-4 McCutcheon ruling removed the “aggregate” limit on federal campaign contributions.* The Republican-controlled Congress that killed public funding of the core convention expenses.  The Republican Congress that multiplied 24-fold what donors can give the party committees (10-fold in the case of RNC and DNC plus 7-fold each in the case of the Senate and House campaign committees.)

Just saying.

Click here.

*Uncapping the arguably-already-too-large $123,200 ceiling per individual for the 2015-2016 cycle so that it effectively exceeds $5 million.

In case you missed the President’s remarks in Dallas, they are moving and deeply thoughtful.

Here.

Donald Trump takes a different approach.

The New York Times reports (in small part):

. . . In a country where the wealthiest and most influential citizens are still mostly white, Mr. Trump is voicing the bewilderment and anger of whites who do not feel at all powerful or privileged. . . .

In the months since Mr. Trump began his campaign, the percentage of Americans who say race relations are worsening has increased, reaching nearly half in an April poll by CBS News. The sharpest rise was among Republicans: Sixty percent said race relations were getting worse.

And Mr. Trump’s rise is shifting the country’s racial discourse just as the millennial generation comes fully of age, more and more distant from the horrors of the Holocaust, or the government-sanctioned racism of Jim Crow. Some are elated by the turn. In making the explicit assertion of white identity and grievance more widespread, Mr. Trump has galvanized the otherwise marginal world of avowed white nationalists and self-described “race realists.” They hail him as a fellow traveler who has driven millions of white Americans toward an intuitive embrace of their ideals: that race should matter as much to white people as it does to everyone else. He has freed Americans, those activists say, to say what they really believe.

. . . This year, for the first time in decades, overt white nationalism re-entered national politics. In Iowa, a new “super PAC” paid for pro-Trump robocalls featuring Jared Taylor, a self-described race realist, and William Johnson, a white nationalist and the chairman of the American Freedom Party. (“We don’t need Muslims,” Mr. Taylor urged recipients of the calls. “We need smart, well-educated white people who will assimilate to our culture. Vote Trump.”) David Duke, the Louisiana lawmaker turned anti-Semitic radio host, encouraged listeners to vote for Mr. Trump.

And with many, it’s working.

Click here.

The despicable Roy Cohn — Senator Joseph McCarthy’s chief counsel during the McCarthy hearings — was Donald Trump’s mentor:

. . . They came together by chance one night at Le Club, a hangout for Manhattan’s rich and famous. Trump introduced himself to Cohn and sought advice: How should he and his father respond to Justice Department allegations that their company had systematically discriminated against black people seeking housing?

“My view is tell them to go to hell,” Cohn said, “and fight the thing in court.”

It was October 1973 and the start of one of the most influential relationships of Trump’s career. Cohn soon represented Trump in legal battles, counseled him about his marriage and introduced Trump to New York power brokers, money men and socialites.

Cohn also showed Trump how to exploit power and instill fear through a simple formula: attack, counterattack and never apologize. . . .

☞ So if you’re thinking Trump might be your man, read the whole thing.

But much as I could tell you about Roy, with whom (bizarrely) I shared two close friends and many of the same high school teachers — though I met him only once — I want to tell you about a different Trump icon.

Carl Icahn.

Trump has regularly cited him as the kind of great deal maker he’d recruit (“Donald Trump’s first Cabinet pick is just as controversial as he is, and a lot richer”).  And he owns the Trump Taj Mahal, recently shutdown by a strike. (Four other Atlantic City casinos reached last-minute agreements with the union, but Icahn, like Trump, knows how to be tough on workers.)

To tell you about Carl Icahn, I need to tell you about MaryAnn Smilen.

And to tell you about MaryAnn, I need to tell you about her husband Ken.

Ken Smilen in the Seventies was widely regarded as one of the smartest big-picture analysts on Wall Street.  He had his own firm — Smilen and Safian — and clients paid a ton for his insights, printed on dark blue paper that made them impossible to photocopy and share.

On his office wall — in a super-cheap frame — hung a valuable copy of Rudyard Kipling’s most famous poem — “If “– in Kipling’s own hand.  (“If you can keep your head when all about you / Are losing theirs . . .”  If for some reason you don’t know this poem, you must.)

That was Ken — able to see past the noise on Wall Street.

Wise, gentle, and generous, he used to take me to lunch once or twice a year, back when I was writing for New York, and comped me to his newsletter

In today’s post, I said Britain’s youth turn-out, ages 18-24, was not 36%, as  had been widely reported — and echoed by me — but (amazingly) 64%.

Thanks to Guy Bradley for correcting that.

“No,” he writes, “36% was the percentage of the 18-24 age group who voted . . . but not all eligible voters are registered. Only about 55% of eligible voters between 18-24 were registered. And if you multiply 64% (percentage of those registered who voted) by 55% (percent of eligible voters who were registered), then you get . . . wait for it . . . 36%.  Not really your fault:  the article you linked to (and plenty of others) made the same mistake.”

Young people:  Register!  Vote!  Make a world you’ll want to live in!

So says the Washington Post, here.  (Included: two burgers frying side by side, one beef, the other pea protein.  Can you tell which is which?) It takes 48 times more water to produce beef than veggies; three times as much to produce a calorie of beef as a calorie of chicken.

And according to this, eating beef puts four times as much greenhouse gas into the atmosphere as eating chicken — eight times as much according to this. (The bar chart with farm animals — page 5.)

As human sacrifice goes, I think having to substitute chicken for beef — or even veggie burgers for beef — beats most of what humanity has had to endure.

I know: I am nothing if not annoying.

Look! If she wins, Misty Snow would be the first woman senator Utah has ever elected.  And the first millennial elected to the Senate (she’s just 30). And the first transgender senator.  A long shot — but she beat a much better financed opponent in the primary, so who knows?

Jim Burt: “Re your post over the weekend . . . When I was in the military, the three-tiered classification scheme of ‘Confidential,’ ‘Secret,’ and ‘Top Secret’ was explained to me this way:  Confidential information is information which the other side knows, and we know they know it, and they know we know they know it, but we don’t want to disclose it publicly.  Secret information is information which we know the other side knows, but we’re not sure they know we know it.  Top Secret information is information which we think it’s at least possible the other side doesn’t know yet. The (C) note in the three suspect Hillary Clinton e-mails indicated ‘Confidential’ classification, which is essentially meaningless. As for those e-mails which were retroactively classified as ‘Top Secret – Special Access,’ all except one concerned drone strikes, which are classified in an abuse of the classification system, because the same information is published in the news media and actually released by government agencies on purpose.”

CORRECTION: It was widely reported — and repeated by me — that young Brits, aged 18-24, overwhelmingly favored remaining in the European Union, but that only 36% of them actually turned out to vote.  It now seems — how could this have been reported so inaccurately? — it was more like 64% turnout.