About Me

I was a professional money manager for the last 30 years before retiring in 2020. I managed “institutional money”, e.g. pension fund, endowment, and sovereign wealth fund assets. I spent 18 years as a portfolio manager at J.P. Morgan (half of that overseas in London, Singapore, and Tokyo) where I left as a Managing Director. After that I worked for almost ten years as an investment director at the Alfred P. Sloan Foundation in New York City, part of a small team tasked with managing their ~ $1.5 billion endowment. Most recently, I was the Chief Investment Officer, based in New York, of the Lafayette College endowment.

Wednesday, November 18, 2020

What Is Socialism?

The answer is more complicated then you might think. A century ago, socialism was simply a stepping stone, a “transition phase” to communism, which was regarded as the ultimate objective. But nothing ever stays the same in this world. Today, socialist in Canada, Europe, and the US no longer argue for or support state ownership of the economy. Instead, they argue for steps which will “soften” capitalism and provide a decent standard of living for all citizens. Today, the only true communists left in the world are in Cuba, Venezuala, and North Korea. 

This article from the Brookings Institute, a center-left think tank, describes the evolution of modern socialism as reflected in one of the three main political parties in Germany, the Social Democrats.

In Germany, the transformation of democratic socialism was formal and explicit. As late as the mid-1950s, Germany’s Socialist Party (the SPD) continued to espouse classic socialist ideology. A key SPD leader declared that the crucial point of the party’s agenda was “the abolition of capitalist exploitation and the transfer of the means of production from the control of the big proprietors to social ownership.” But after a series of electoral defeats at the hands of a center-right Christian Democratic Union (CDU) that itself supported a significant welfare state, the SPD came to understand that its post-war program had been outrun by events. Rapid economic growth based on private property and regulated markets during the 1950s had sparked the emergence of a new middle class and rendered obsolete an economic program centered on nationalization of key industries. The Soviet Union was a threat to social and political freedom, not an economic model to be emulated.

The SPD’s famous Bad Godesberg Program, adopted in November 1959, represented a fundamental change of course. It castigated Soviet Communism and repudiated Marxism. The proletariat was no longer the sole engine of progress; the SPD had changed from being a “party of the working class” to a “party of the people.” Henceforth, democracy, freedom, equality, and the fullest possible development of each individual would be the guiding principles.

The Program defined the social function of the state as “provid[ing] social security for its citizens to enable everyone to be responsible for shaping his own life freely and to further the development of a free society.” While achieving this aim would require substantial government regulation, it would not necessitate government ownership except in the rare cases in which “sound economic power relationships” could not be guaranteed by any other means.

The new economic vision rested on freedom—“free choice of consumer goods, free choice of working place, freedom for employers to exercise their initiative as well as free competition.” Where excessive concentration restricted competition, government must intervene to restore competition. The task of a freedom-based economic policy was to contain the power of big business, not to replace the private sector. In some instances, they suggested that what we would now call a “public option” could be used to broaden choices for consumers and diminish corporate power. But in a remarkable break with socialist orthodoxy, the Program stressed that “every concentration of economic power, even in the hands of the state, harbors dangers.” Widespread government ownership of the means of production is not always the solution; it may be part of the problem.

 The Program focused, not on government taking control of the economy, but on using government to improve the lives of all citizens. Key planks included full employment, generous wages and shorter working days, a redistributive system of taxation, secure retirement with a state-guaranteed minimum pension, universal access to health care, and decent and affordable housing. These are among the building blocks of the system of “social democracy” that developed and spread throughout the West as the alternative to both socialism and unregulated capitalism. As scholar Sheri Berman puts it, “Capitalism remained, but it was a capitalism of a very different type—one tempered and limited by political power and often made subservient to the needs of society rather than the other way around.”

The bottom line?  Socialists are NOT communists.  When socialist parties have been in power in Europe, they do not attempt to “takeover” the private sector.  Instead, they focus on things like a secure retirement, like Social Security, or basic healthcare for the elderly, like Medicare, or on higher taxation for the wealthiest citizens.  As this makes clear, the United States is not a 100% free market capitalist system.  We Americans are staunch supporters of the free market but we are also staunch supporters of a basic safety net, public schools, a state run retirement system, and other programs which are arguably socialistic.

Monday, November 2, 2020

Trump's Economic Track Record Pre-Covid


I don’t know if it’s true but many people are saying that Wall Street Journal opinion writers wear red MAGA unitards each morning while they do jumping jacks and sing about industrial policy and managed trade. I don’t know if it’s true myself but I heard that many smart people are saying it… 

All the opinion polls show the same thing: the single issue on which Trump is perceived as better than Biden is the economy. Not law and order, not judges, not abortion. Trump’s economic track record before Covid-19 is widely believed to have been miraculous and this may be the sole remaining support post for many otherwise Trump-queasy Republicans. I hear it all the time, a veritable laundry list of noxious Trump stuff that “country club” Republicans hate about Donald Trump. And they all end with, “but the economy!” “He did it before, he can do it again.” This is apparently so powerful an allure for Republicans with chunky brokerage accounts that no matter how many other appalling things he does, their faith in his economic omnipotence offsets them all. That and the fact that they’re dead certain the Dems will hike capital gains taxes and lead a communist revolution (not sure of the order). I can’t help with paranoid fantasies about Chuck Schumer and Karl Marx -- but Trump’s economy was not spectacular. He did not do it before. This is a myth, nothing more. Even before Covid-19, the US economy was not the greatest in history, it was not the greatest in American history, and it wasn’t the greatest in any context whatsoever. 

What explains the durability of this myth? And why is Trump’s ever worsening behavior so easily shrugged off? For many Republicans it would have been impossible without the Editorial Board (EB) of the Wall Street Journal (WSJ). The morning after the latest Trump abomination, there it appears, as predictable as the tides: the Editorial Board’s “explanation”. The Journal advertises itself as “essential reading” and indeed, so it’s become for well-off but morally uneasy conservatives. The EB is the fix which excuses bad behavior, burnishes the myth, and let’s Republicans get back to golf, boating, and speculating on vaccine stocks. The successors of Robert Bartley sell opiates to the business class. 

Their methods are simple. The Journal’s opinion pieces are as formulaic as a North Korean newscast. These “easy bake” editorials all follow the same simple template the day after the latest Trump slander, crime, or imbecility: 

Part 1: Find something else Trump did recently that wasn’t horrible and praise it like the rapture 

Part 2: Pose as aware of reality by saying that [anodyne euphemism for corruption, extortion, etc.] is [anodyne euphemism for bat-shit crazy]. Tut tut, furrowed brow, we’re taking it seriously 

Part 3: “BUT THE DEMOCRATS ARE SO MUCH WORSE BECAUSE [sinister euphemism for politics]” 

Once you see the pattern, you really no longer need to actually read them. Let’s look at an example. On September 23rd Trump said he may not step down if he loses the election and on the 24th we get our tiny paper cup with the pink pills from the EB: 

Part 1: “The rule of law is vital to free and fair elections, and Mr. Trump is right not to forswear his legal options.” He wasn’t subverting democracy, he was saving it! God bless this man! 

Part 2: His comments were “reckless” (tut tut) and he should “clarify his views” (furrowed brow) 

Part 3: But the Democrats are “hysterical”, in “a frenzy”, their concerns are “a fantasy” and “preposterous”, their ideas are “dangerous” and, my favorite, “who’s really plotting a coup?” 

This, of course, is standard-issue gaslighting. Trump’s not the issue, you and your crazy emotional overreactions are the issue. Trump tells four Congresswoman of color to go back to the dirty places they came from. Democrats (and people who know right from wrong) are appalled. The Journal furrows its brow at Trump then proceeds to ridicule any who are appalled.

It's Not the Darn Tweets!


The Problem with Trump is Not “The Tweeting”!

Over the last four years, Trump supporters have developed four different tactics when asked to defend or condemn whatever the most recent disgusting and offensive thing Trump said or tweeted: 

The Boxer: He’s a counterpuncher, he fights for us, he's a disrupter, he tells it like it is! 

Elmer Fudd: What? Huh? Tweets? I didn’t read it so I can’t comment. Not only that but I didn’t hear it. No, not even when you read it to me. OMG look at the time -- I’ve got to run catch that rascally rabbit! 

The Joker: Ha ha, he was just kidding. You took that seriously? That’s funny. He’s funny. You’re funny. It’s all funny. 

Faux Cicero
    Step 1: Express deep concern and say “I’ve expressed my view to the President” and “the tweeting is not helpful”. 
    Step 2: shift quickly to how the Democrats will destroy the American way of life. 

In the White House, they're all Boxers, led by Kayleigh Ukulele. Mike Pence is the Ultimate Fighter using this technique. Having once wrote that cigarettes don’t cause cancer, he’s the gold standard for the GOP when it comes to transforming toxic sludge into MAGA magic. 

Many in Congress started with Elmer Fudd, moved to The Joker, and (because both of those get sillier and more ridiculous over time) have settled on Faux Cicero as the technique most likely to save their seats. The key to this maneuver is the use of cheerful euphemisms for puerile and offensive garbage. The most popular euphemism is “the tweets” but there are many alternatives – unconventional style, brusque manner, not a politician, controversial persona, or “just words” -- but the basic rhetorical device is the same. Take all the disgraceful disgusting comments and tweets and put them it in a little box with a harmless sounding name: “tweets.” What could be so dangerous about a tweet? Little birds tweet. Parakeets tweet. Give them credit, to a large extent they’ve gotten away with it. 

So to any Republican who believes Trump is awesome except for his style or his manner or his tweets – please remove your head from your hindparts. Calling the noxious filth he spouts “those darn tweets” is an exercise in “framing” worthy of Joseph Goebbels. 

Trump's Track Record as a Businessman and Investor


We don’t have enough data to answer that question but we have learned a great deal over the last two years, far more than was known prior to the 2016 election – mostly thanks to the dogged investigative reporting at the New York Times. And what is known at present is the following: 
  • In present value terms, Trump received over $400 million from his father
  • From 1985-1994, he lost $1.2 billion
  • 1995-2000 
    • I am not aware of tax or other financial data from these years
    • He owned the Miss Universe Pageant and started Trump University but neither seem to have generated significant income
  • From 2000-2018, he and his businesses declared ~ $430m in net income which is the result of income from the following sources:
    • Apprentice: 197m
    • Endorsement & Licensing: 230m
    • Minority investments in office buildings: 179m
    • Trump Organization operations: -175m
    • Most of this was invested in golf resorts and the D.C. hotel which are all money losing
  • Total debt is ~ $1B of which about half seems to be personally guaranteed by Trump

The One Thing About Trump I Hate


"The noblest pleasure is the joy of understanding."

- Leonardo da Vinci

Why Are Lies Bad?

Through mid-January, Trump is estimated to have made over 20,000 false or misleading comments during the first year and a half of his term. Yes, I know that’s a silly number – Trump lies so often and frequently does so in half-baked fragments, the exact size and shape of his epic mountain of dishonesty will never be known. And reasonable people can differ about what is a lie, what is an exaggeration, and what is true. But it is my contention that Trump lies more than any other President by a wide margin. If you don’t believe this is true, if you think that I am lying about Trump’s lies, this post and this blog are not for you. Try here.

This post is for those who admit/accept that Trump lies prodigiously but believe that this is acceptable for a US President because of Trump's other "qualities". As I wrote in my post, It’s Not the Tweets!, many Republicans are disgusted with Trump’s lies, racist comments, and grade school taunts but support him anyway because they perceive his policies on the economy (or whatever is most important to them) are superior to what they think Biden’s will be -- and because they minimize the cost of his lies. They manage this intellectual twister move (right hand red, left leg orange) by putting all Trump’s lies and all the other toxic sludge that spews from his mouth into a tidy little breadbasket called, “persona” or “manner” or “personality” or “those darn tweets” where they can be efficiently filed away and hence forgotten. But they are wrong. Deeply, horribly wrong. 

Words matter. Obviously, they matter. They clearly mattered when Churchill spoke of fighting Nazis on British beaches in the early days of WW II -- but they also matter in a million more prosaic ways each and every day for each and every person on planet Earth. They matter when communicating with your boss and with those who call you boss. They matter when we read product reviews and safety warnings. They matter when teachers instruct and advise our children and when your doctor advises you. They matter during pandemics. Words matter. To speak is to act. 

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