May 11, 2020--The Sardine Economy

Every weekday afternoon at 4:00 when the stock market closes, Rona and I look at each other and shrug.

How could it be that millions lost their jobs while the stock market, which is supposed to be the barometer of the economy, went up 300 points?

"Your father had it right," Rona would say, "The economy, the stock market at least, is all about sardines"

"Sardines?"

"You remember his old joke, don't you?"

"About sardines?"

"Yes, sardines."

"I forgot," I confessed. "His jokes, few as they were, were not that funny. But remind me. And you said, it helps explain the economy?" 

Rona nodded. 

"This I need to hear."

"It goes like this"--


All Trescot  calls his friend John Allan and says, “John, do I have a deal for you. I have a warehouse filled with thousands of tins of sardines. Since you’re my friend, I’ll let you have them for only $10,000.”

John agrees to buy them and two weeks later calls his friend Deb Plamondon. He says, “Deb, do I have a deal for you. I have a warehouse filled with cans of sardines and since you're my friend, they're yours for just $15,000.”

Deb buys them and soon after that calls her friend Steve Zwerling (Rona winks at me). Deb says to him, “Since you're my good friend, I have a wonderful deal for you--50 shipping containers filled with tins of sardines which I can let you have for only $25,000.”

Steve sends her a check and a month later goes to the warehouse to check on his sardines. While there, he decides to taste them. He opens a tin and discovers that the sardines have spoiled. So he tries another can. Same result. He thinks maybe these are a bad batch and so he tries sardines from three other containers. All are spoiled.

Upset, Steve calls Deb, who he bought them from and says, “I just learned that all the sardines you sold me are rotten. What’s going on?”

She says to him, “What did you expect? These are not eating sardines; they're buying and selling sardines.”

Chuckling, to Rona I said, "You're right, my father's right we're living in a sardine economy."

March 11, 2020--Germaphobe In Chief

Isn't it ironic that the world's best-known germaphobe, Donald Trump, may be in the process of being brought down by a whopper of a germ, the coronavirus.

I knew Trump was serious about running for president when he mingled in crowds and shook hands with people along the rope line without wearing gloves.

Years before that, occasionally in Manhattan, we would run into him and he always wore gloves, even in the middle of summer.

Even now, he is desperate to pretend everything is normal, claiming without evidence that the virus, like a "miracle" will soon just "disappear," the stock market will come roaring back, and in a romp he will win reelection.

Thinking about this and how Trump is behaving, a number of friends have been saying that the virus doesn't have to disappear to keep his supporters in line because, like his claim that he could shoot someone on Fifth Avenue and get away with it, he could bungle the response to the pandemic (as is currently happening) and none of his people would care.

They would go along with the talking points which assert there is no public health problem. Like Ukraine, like with North Korea, like behaving as an apologist for Vladimir Putin, it's all a media-generated "witch hunt." The coronavirus is a "hoax" intended to bring Trump down.

But what is unfolding is categorically different than "lock her up" or calling the press the "enemy of the people." By comparison they are benign.

What we are seeing now is hitting much, much closer to home. It is literally a matter of life and death. Not some insipid chant at a feel-good Trump rally.

For example, many of his followers have aging parents or are elderly themselves. They have underlying medical issues such as COPD or heart disease and they know if they contract the virus there is a good chance they will die.

This is not an example of a Trump-inspired cost-free political frolic but a deeply feared threat. So lying about this is very different than lying about Benghazi. Deception will not make the virus go away.

In crises like the Bay of Pigs or 9/11presidents are supposed to remain calm and help people get through the trauma, not make matters worse by being flippant or incompetent. They need to feel our fear and pain, not exploit it for their own political benefit.

There is one good thing--Trump has made such an obvious and blatant mess of this existential crisis that people are finally coming to realize he is a fraud and cannot be depended upon to make us feel safe. Even some of his own people. Making citizens feel protected is a president's most important responsibility.

The current situation then represents a huge political disaster for him from which there is no easy recovery. Even members of cults (or Congress) have on occasion broken away from their charismatic leaders. I expect that something similar will soon change the narrative for some of Trump's most fervent acolytes. 

The fun for them is over.

September 16, 2019--Trump's Four-Step Program

Take the tariffs as an example of a political strategy Trump employs with great aplomb and consequence.

During the 2016 campaign he stressed two things more than anything else--the Wall, how he would build it and Mexico would pay for it--and trade with China--how they were taking advantage of American naiveté and as a result surpassing us in economic growth. They were stealing our intellectual property and the Chinese government was unfairly subsidizing the cost of the expansion of their manufacturing sector. We, on the other hand, were experiencing a chronically stalled economy and ballooning trade deficits.

He said that unlike his predecessors he would confront the Chinese directly and fight back by using every trick and tool at his disposal. Among them, first and foremost, tariffs.

As the initial step he talked tough, boasting how he would take on the Chinese and force them to amend their ways or face crippling tariffs on hundreds of billions of dollars of manufactured goods and agricultural products.

The Chinese did not knuckle under. Instead, they announced retaliatory tariffs of their own. In response Trump, as the next step, ramped up the rhetoric, including personal attacks on Xi Jinping, China's president for life.

Still the Chinese did not back down. As a consequence the American stock market plunged, attracting Trump's attention. He had represented the previously soaring market as evidence that his economic policies were working. If the market tanked, not far behind would be Trump's reelection chances.

As a result, as the third step, he began to soften his position. To back off. He ratcheted back his criticism of Xi and began to hint that he would hold off on imposing tariffs until the end of the holiday shopping season. And just last week he announced that perhaps tariffs aren't necessary after all since both the Chinese and he are interested in making a deal. Not so between the lines was the implication that that deal might not require tariffs.

In this final move of the Trumpian four-step, he will soon take credit for getting the Chinese to retreat in the face of a crisis that he himself created and from which he, not they, is doing the backing down. 

The Chinese government's recent announcement that they will resume importing soybeans will be cited as evidence by Trump that they are capitulating, while in truth he is.

So, he begins by initiating a crisis which, when it starts to spin out of control, he "solves" by abandoning his own positions while at the same time taking credit for doing so as if that was the plan all along. 

If I have this right, those who want to depose Trump need to understand how this strategy works and figure out how best in real time to counter it. It's his most powerful tool and we have to expose and resist it, jiu jitsu-style, by turning his own strength against him.

August 27, 2019--Go For It Donald!

When after the El Paso mass murders I heard that Trump was considering support for stricter background checks for people purchasing guns, I was pleased. 

When because the stock market was falling Trump was getting increasingly concerned about how this would effect his claim that his economic policies were working, especially the tariffs on Chinese imports, but now he was having "second thoughts" about his policies, regardless of his political motivation, I was happy.

When Trump also appeared to have second thoughts about "ordering" American companies to withdraw from China, I again was happy. 

But then when I caught myself hoping he would at last begin to act as something like a "normal" president, I had second thoughts of my own.

I too have been party to the patriotic sentiment that though I didn't vote for him, though I disagree with and often am outraged by his policies and behavior, still, as a responsible American, I have wanted him to succeed. 

For the sake of the country I have wanted whomever is our president to do well. To strengthen the economy, to maintain the peace, to enhance our alliances, to improve our social safety net, to reduce unemployment and the deficit.

In Trump's case, if I am honest, I want to see him fail. 

On his watch, until after the 2020 election I want unemployment to worsen, the stock market to continue to weaken, the debt to grow, our global alliances to be strained, international tension to build, and the Trump Supreme Court and the federal judiciary to hand down regressive, unpopular decisions.

In other words, I want to see things continue to worsen so that the political climate between now and the presidential election is so fractured and roiled that huge majorities in the right states are motivated to vote for whoever emerges as Trump's opponent.

I understand that this may sound nihilistic and will cause pain, but the real nihilist is an out-of-control Trump and as such he is responsible for spreading pain in America and much of the rest of the world.

Then when he leaves office I will resume hoping all our presidents succeed. Or at least I will pretend to.

October 30, 2018--October-November Surprises

The big October surprise, which was supposed to leach over into the first week in November, was the fear Trump would instill in midterm voters about the "caravan" of migrants heading from Honduras to the American border.

The fear was further fueled by Fox News sycophants who in a stream of fake news "reported" daily without evidence about how the thousands marching north were infiltrated by "Middle Eastern terrorists." 

Just as that was building into a political wave--poll numbers began to trend in support of Republican candidates--the stock market started to gyrate so that the so-called Trump rally lost all its gains for 2018 (giving the lie to his claim that the economy had never in history been better), a new mad bomber appeared, sending explosive devices to more than a dozen Trump critics from George Soros to the Obamas to of course Hilary and potential 2020 opponents Kamala Harris, Cory Booker, and Joe Biden.

(As an aside, how much like chopped liver do Bernie and Elizabeth Warren feel for not receiving bombs of their own? Just like anyone not on Nixon's "enemies list" expressed disappointment for not being included.) 

Trump harmed himself politically by making light of this, referring to it as "that bomb thing." And didn't do much better when an anti-semitic mass murderer attacked a synagogue in Pittsburgh, killing 11 worshipers. After a few perfunctory comments Trump referred to it as a "bad hair day." Something he should be an expert about, having one 365 days a year.

As a result, the polls appear to be reversing themselves again and it is looking likely that the Democrats will gain control of the House and lose only one or two seats in the Senate.

So much for October-November surprises, though there is still a full week before the election, lots of time for Republican dirty tricksters to pull a few stunts.

On that subject, though I am not prone to believing in conspiracy theories, there's a Pulitzer Prize awaiting a journalist who gets to the bottom of how the migrant caravan was organized to culminate in ugly confrontations at the border the day before Election Day.

I suspect that the political party that gave us Roger Ailes, Lee Atwater, Karl Rove, and Roger Stone might somehow be tugging on the strings. If we can get that story out even Fox News would have to offer some coverage.

February 5, 2018--How Sick Is This?

The Dow Jones Average Friday plunged 666 points. (Note the number.)

Searching for reasons, I found a few--

Since the Devin Nunes memo turned out to be what Bret Stephens in the New York Times called a nothing-burger it is thought that this means it wasn't going to be the get-out-of-jail card Donald Trump's enablers were hoping for. (Talk about a nothing-burger.) If Trump continues to be in peril, it's by definition bad for business.

Then, Alan Greenspan (remember him?) warned that there are currently two bubbles in the financial market--a bond bubble and a stock bubble. That about covers it.

When chairman of the Fed, except when he wasn't, he was considered to be infallible. Partly because of his job but also because, perhaps more important, his words were often intentionally incoherent and thus considered to be as if they were coming directly from the Oracle. As to why incoherent riddles might be considered to be wisdom, it is because the original Oracle's words were in Classic Greek, not Greenspan's metaphoric Greek, as in "It's all Greek to me."

Finally, most put forth as the explanation for the slide in stock values, was the clear evidence that after decades of frustrated waiting, workers are finally seeing an increase in their wages. Up 2.9 percent in January as compared to a year ago.

How sad, how sick is it that what's good for the struggling middle class is bad for business. That's not a nothing-burger. It's a whopper. 

September 4, 2017--Wealth & Democracy

In a 2002 book of this title by Kevin Phillips (my favorite conservative writer), with the subtitle: A Political History of the American Rich, speaking about wealth formation over the course of American history, turning to the early 1980s, Phillips talks about how the technology sector began to contribute to a surge in the American economy--

Technology was gathering force in the eighties, dropping hints of greater things to come. Sector firms were among the stock market high-fliers of 1979-82: Tandy, Teledyne, Wang Labs, Prime Computer, Datapoint, Rolm, MCI, and many more.  

A decade earlier the stock market's "Nifty-Fifty" had also had a high-technology vanguard: Polaroid, Xerox, Electronic Data Systems. Breakdowns of manufacturing spending during the 1979-83 slump and turnaround showed high-tech industries alone performing in a steady upturn.

Not only did various bubbles subsequently burst, but how many of these former high-fliers are still around? Those that are, like Xerox, are greatly diminished.

Lesson--

Proceed very carefully.

February 8, 2017--Over-Under

I have a friend who's a big sports fan. Especially of professional football. So Super Bowl Sunday is his national holiday. Bigger than Thanksgiving (though he can watch at least three NFL games then and ignore the turkey), more important than July 4th, and ditto for New Years (though again there are some games that day which he watches while the rest of us struggle with hangovers).

In truth, he's not really a sports or football fan. He's a sports gambler. He doesn't root for any teams except when he has a bet placed on one of them.

So a few days before last Sunday, when he said, "Can you believe the over-under?" I knew he was talking about the game and betting, but I had no idea what he meant.

"Over-under? I never heard of that. What is it?"

"Fifty-six points."

I continued to be confused, "Enlighten me. I don't know anything about this."

"That's the number of points that oddsmakers say both teams will score." Seeing I was still not following him, he added, "Not each team but the number of points both teams will score. The total of both of their points. Say the game ends with Atlanta scoring 30 points while the Patriots score 26. That would total 56 points." He grinned at his ability to explain this to someone as untutored as me.

"So if you want to do over-under who do you root for?"

"For both of them because if you bet under, you hope that the teams will score fewer than a total of 56 points. And if you bet over, you hope both teams' totals will be more than 56 points."

"Doesn't sound like any fun to me. I like rooting for one team to win and . . ."

"You can do that too by, say, betting on Atlanta and taking the points."

"Now you really have me confused. I just want to watch the game and hope it turns out to be an exciting one."

He waved me off as hopeless.

But it did turn out to be a great game and that made me happy especially since as a half-time-a-year Mainer, I was rooting for New England. They won and scored a total of 34 points. The Falcons scored 28 and so their combined score was 62 points, six points above the 56-point over-under.

You figure it out.

A day or two later, still thinking about over-under, I realized that many stock market investors think in exactly the same way. They too, we too are gambling and frequently on the over-under of a company's earnings. Particularly how actual quarterly earnings either meet, exceed, of miss quarterly income projections. And as with football betting, you win or lose on the over or under. It's not about a company doing well but whether or not it beats (is over) or misses (is under).

So when Amazon reported it's quarterly earnings last week--since we have Amazon stock which over time (the old fashioned way of investing in the market) has done very well by us--I was focused on how well its earnings and profits looked. More important to the majority of investors on the other hand, who see the stock market as a big casino, was its over or under. Would earnings hit, beat, or miss estimates. In other words, what would the over-under look like.

Amazon's earnings were $1.54 per share, beating estimates which foresaw only $1.35 per share, but the company's total quarterly earnings were "only" $43.74 billion, while estimates were looking for more, for $44.66 billion.

To complicate matters, revenue was up a noteworthy 22.4 percent compared to the same quarter last year.

Overall this should have been good news, but missing the earnings estimate, the under, was enough bad news for shares of Amazon stocks to drop nearly 30 points, or dollars, down to about $800 a share. Thus, our portfolio took a hit.

I told my friend about this and he wasn't surprised. "Like I always say, people will turn everything into action. In fact, if you're interested, the odds makers have already established a line for next year's Super Bowl."

"You're kidding."

"I'm not. They are saying that the Cowboys and Patriots will meet in Super Bowl LII. With the Pats favored by 4.75 to 1. If I were you I'd drop a couple of hundred bucks on New England. Use some of your Amazon money."

August 26, 2013--Warp Speed

When I got my first PC, I connected to the Internet via a dial-up telephone line. To me the Net felt like the most amazing innovation since Gutenberg invented movable type. This was in the early days of Google and even then the amount of information readily available by surfing the Net was astonishing.

Over time, "readily available" evolved in meaning.

My connection to the Internet back then took a minute or so to activate. To wait such a short time and then to have access to a seemingly infinite amount of knowledge felt more than worth the wait.

But quickly, Internet connectivity via cable systems and then through various forms of broad-band wirelessness made waiting for a dial-up connection seem endless. Even five seconds felt like eternity.

Now, I am so spoiled that if anything takes more than a second I feel frustrated and deprived. I want everything to be instantaneous.

Speed has its advantages as well as its downside.

When an idea pops into one's head (which often occurs in what feels like a nanosecond--insight, inspiration, creative thought) it is good to be able to record this in the moment so as not to see it evanesce as quickly as it manifested itself; and, if instant further information or elaboration might be helpful, being able to do this quickly often secures and enriches the initial perception. At those moments I want my brain firing at warp speed and my access to Internet-derived information instantaneous.

The downside can be the too-quick codification of a spark of innovative thought that would benefit from rumination and careful elaboration. This very much includes allowing half-baked ideas with little potential to melt away, to clear the space needed for devotion to those ideas with more promising potential.

And then in the economic realm, as we have seen in recent years with the largely-automated stock market, speed itself can add uncertainty and even chaos rather than precision to an already uncertain and chaotic system.

After a number of crashes that paralyzed markets and caused hundreds of billions in loses, retrospectively, it was determined that pushing for more and more speed in executing trades was itself a major cause of the problem.

According to a recent Web posting by the New York Times, it is claimed that the need for speed comes from a market in which high-frequency traders expect to be able to get in and out of positions within a second. "Better," and literally, in less than a second. Any market that cannot offer such speed will be at a competitive disadvantage.

On the surface, assuming speed is actually a benefit, there may also be a self-perpetuating process at work--because competitors' ways of trading may be quicker, this means that to be in play, regardless of other desirable qualities, everyone has to be equally obsessed with speed in and of itself.

Speed for its own sake? Speed for more efficient or effective markets? Speed to allow for more transparency? Speed to be able to provide safeguards?

Actually, little of the above.

Again, according the the NYT, "speed is not compatible with safety features that could cause suspicious orders to be delayed while someone--a slow person, perhaps--checked to see whether something was amiss."

It may be valid to claim that speed in these kinds of transactions is especially and perversely desirable if one wants to obscure what is in fact happening. Speed can be useful to some who are attempting to pull a fast one, to get something accomplished so fast that it cannot be reviewed or regulated. Or before others, who are moving slower, can fairly compete.

There are credible reports which show that some, who want to gain an advantage in certain trading situations, where, for fees in the millions, they purchase privileged information for less than a half-second before it is shared with the wider public. That half-second advantage allows arbitrage-like trades to occur without monitoring or even competition; and as a result can net someone off the mark a split-second faster risk-free billions.

But when these same capacities of otherwise little intrinsic value are created and then spin out of control, as we are frequently seieng, everyone but those on the sheltered inside are left to live with the debris and absorb the costs of the fallout.

April 17, 2013--Gold Bugs at the Green Owl

The gold bugs at the Owl were not happy.

Back in 2011 they were in full ascendancy tinged with a touch of arrogance. Those of us with conventional asset portfolios of stocks, bonds, cash, and real estate were subject to a barrage of their self-congratulations and experienced continuing trepidation as we had not yet fully recovered from the plunges of 2007 and 2008. And, worse, hadn’t had the smarts, or guts, to diversify into gold.

Those who had listened to Peter Schiff on the reasonable economic right or were subject to the rants of lunatics Glenn Beck and Dick Morris to the right of that, seeing the sky falling and runaway inflation inevitable—Weimar Republic style—those, in panic and paranoia, were buying as many Krugerrands as they could afford and were thinking about adding to their stock of dried beans, bottled water, and AK-15s.

Off the per-ounce high of $1,888 in August 2011, they had seen the value of their gold hoard drop 17 percent during the past few months, then quivered as it begin to fall off the cliff last Friday--when the price fell 4.0 percent--and then were at risk of becoming unhinged when it plummeted 9.35 percent on Monday, the steepest one-day decline since 1983. The next day, on Tuesday morning, you could pick up a one-ounce Australian Kangaroo Nugget for a mere $1,366 bucks. 

In the meantime, even after falling 266 points on Monday, the Dow Jones Industrial Average was still at nearly 14,600, more than fully recovered from its low of 7,552 back in November 2008. 

"I think I'll stick to decaf, Traci" Ted said, staring morosely at his empty cup, "I've had about as much excitement as I can handle." For years he has been boasting about his attaché cases bulging with gold coins. "I'm ready for anything," he reminded us back in the days when we were doing the staring into coffee mugs.

When I would challenge him about what he would actually do when Armageddon came--“You’ll fill up your Hummer with gas with one of those coins?"--he would sit there, brimming with smug confidence, nodding and smiling back at me. 

"If that happened," I persisted, "if it really hit the fan, you think they'd have gas?" He'd kept on grinning. "Much less electricity to work the pumps?" 

"Here's what you don't understand," he said, leaning close to me and putting one of his meaty hands gently on my slumping shoulder, "Those of us who are ready, prepared, if you get my full meaning, have our ways. We know who we are and we know where to go to get more of what we need." He would wink at that. "I mean everything we need." To illustrate, he made a gun out of his hand and, in case I missed his meaning, demonstrated by repeatedly pumping his trigger finger.  

And with that he would puff himself up, hoist himself up off his stool, and swagger, cowboy style, out toward Atlantic Avenue, leaving me with not much of a retort and, in truth, with continuing worries about where the country was headed and if we did in fact have enough money. Or enough bullion to buy a loaf of bread. 

But now, with his world slipping out of control, Ted muttered, “I bet you want to talk about that Paul Klingman BS.”

“You mean Paul Krugman’s column in yesterday New York Times?” He grumbled affirmatively. “I’m surprised to learn you read him. I thought you were exclusively devoted to the McKinley Goldbug Newsletter?” 

“Gotta keep up with the enemy,” he growled. 

“As a matter of fact I did see it. The one that also dealt with the Winklevoss twins, who made a pile from suing Facebook. How they are sinking their fortune into a scheme as radical as hoarding gold—bitcoins, I think it’s called, digital currency for on-line transactions. Cyber money that would take the place of tainted conventional money. Tainted because, to the likes of the Winklevii, the Fed is printing so much of it that it will at some point lose all its value.” 

“I’m not into that bitcoin business,” Ted said, “That sounds crazy even to me.” Thankfully, at times Ted does display a sense of humor.

“But of course,” I said, “you’re talking about what Krugman wrote about gold and gold bugs.” He shrugged. “I myself thought he got it right. That gold as currency doesn’t make any more sense than paper money. In fact, less. There isn’t that much of it and it’s hard to lug around. It’s all abstract. Gold itself is good for filling teeth and making wedding rings. Not much more. It has value because it’s relatively rare and hard to mine and refine. By that measure we could go on the diamond standard or hoard plutonium coins.”

“Now you’re sounding like the one who’s crazy.” I caught the faint beginning of a smile.

“I liked that quote from Paul Samuelson. How money—all kinds of money, that I suppose would include wampum and cowry shells—is a ‘social convenience.’ If people will accept it in exchange for goods and services by definition it has value. Including paper money like dollars, which are backed as legal tender through the full faith and credit of the government.” 

At that he eyed me skeptically. Preemptively, I continued, “I know what you’re about to say—you have a problem with the government keeping its promises even when it comes to backing its currency.” 

“Especially when it comes to that—to backing up the formerly-almighty dollar,” he was back to growling. 

“Look, for sure I’m not confident about what will happen in the future. Things could get better or they could get much worse. One thing I do know for certain is that all your gold and your dried beans will get you only so far. And then you’ll be just like the rest of us. Scrambling for scraps.”

At that apocalyptic vision he smiled beatifically. “But all your crying wolf and claiming the sky is falling hasn’t happened. In fact, our economy, with its problems, is stronger than it was five years ago and there is minimal inflation. And as a consequence, your gold is beginning not to look so good.” 

“Wait till tomorrow,” Ted said. “You’ll see. The sky is falling. But to see it you need to get your nose out of your New York Times once in a while.” It was my turn to smile. 

“Traci,” he called out, “let me have some of that high test. That is if the Owl’s still accepting American money.”