Reflections of a Relic Investor

I used to think I was a fairly knowledgeable individual investor, watching measures such as the money supply (no one even refers to that anymore), interest rates, and comparing those to the earnings yield on stocks (the reciprocal of the Price/Earnings ratio) to partially determine asset allocation.  Alternatively there was also the tried-and-true asset allocation approach, maintaining a fixed relationship between a percentage of bonds vs. stocks in a portfolio.  March 2009 presented an incredible buying opportunity with the S&P reaching its nadir of some 676 (vs. 1,800 plus today).  If you rebalanced every year thereafter, you would have missed out on some equity appreciation, but, nonetheless, participated in the rise of the S&P with less risk. Buying long term bonds today for balancing now implies taking on more risk because of the artificially low interest rates.  The asset classes would be highly correlated in a period of rising interest rates and declining equity values.  

During that same period, the earnings yield on stocks vs. bonds became more and more divergent as the Fed moved from one stage of "quantitative easing" to the next.  The impact on both markets can be seen with clarity if five years ago you decided to commit half of your investments to the iShares 7-10 Year Treasury Bond (IEF) and the other half to the SPDR S&P 500 (SPY) and, then, took a five year trip to Mars, leaving the market behind.  Returning today, you'd find your 50/50 bond/equity allocation now at 35/65, simply because of equity appreciation.  So, what to do if you don't want so much at risk?

Jason Zweig addresses that question in this past weekend's Wall Street Journal. Bottom line, "know thyself."  He quotes investment adviser David Salem who said that investors holding large stock portfolios or are considering buying more equities, should be "both willing and able to bear the loss," clarifying that "willingness is behavioral and ability is financial, and you can't know for sure in advance which one is going to trump the other."  As the last bear market quickly eroded 50% plus of equity values, a 65% equity weighting puts one's portfolio at higher risk.  What one did as that last bear market gathered momentum is a good indication of what one might end up doing if this market, too, ends badly.  Of course, it can go higher -- in that regard I'm always reminded of John Maynard Keynes' famous comment “the market can stay irrational longer than you can stay solvent."

Today's investment environment is now as foreign to me as the Mars landscape would be.  Hostile too.  While GDP is hardly growing, and unemployment stubbornly stays above 7%, peak profits are being racked up by major corporations.  How can this be?  Zero interest rates translate into profits, borrowing at nearly nothing to reduce corporate higher-rate debt or financing stock buy-backs.  Corporations have squeezed their workers too, many laid off, a reward to shareholders in the form of increasing dividends.  Labor unions are no longer empowered, a major consequence of labor competition from overseas.  We no longer "make things" here and even intellectual labor can be harvested overseas, at lower cost, thanks to the impact of the Internet. So, by some measures, the "market" is "cheap." It certainly is cheap if you look at earnings yields vs. bond yields, a spread that has widened with every nail in the QE coffin. 

At one time I thought the Fed's actions saved the world from a financial meltdown.  Perhaps it did. But sustaining its monthly $85 billion bond buying program ad infinitum, not to mention maintaining zero interest rates, is creating an asymmetrical investment environment with every passing day (I'm avoiding the word "bubble" as the latter I sort of understand).  It gets worse: recent Fed minutes implied lowering the interest it pays on bank reserves, which has led banks to warn that such an action might force them to charge depositors for holding money in savings and checking accounts (a negative interest rate!). 

Perhaps all of this is being engineered to create a feeling of prosperity from the inflated asset prices of 401Ks, real estate, and equities, hoping that some will trickle down to the middle class via increased spending by the main beneficiaries, the wealthy. (Not surprising, Tiffany & Co. "reported a 50% increase in net earnings in its third quarter..., largely resulting from 7% growth in worldwide net sales and a higher operating margin.")   Or, perhaps, there is something more ominous behind the Fed's actions, a fear of deflation outweighing its concern for (or even desire for) inflation.  Deflation would be an investor's clarion call to buy longer term "secure" bonds, even at these low rates, but, then, we will soon see the next round of the shoot out at the O.K. Corral (a.k.a. Congress), when the debt limit debate comes up again in March.  So, even US Government Bonds may not be rated AAA given the crazy political environment.

No, all the old rules of investment are out the window in this investment environment, as understandable to me as Bitcoins, the price of which surpassed $1,000 today vs. $30 earlier this year, resembling the parabolic price rise of Dutch tulip bulbs in the 17th century.

Ending on a more understandable note, a Happy Thanksgiving to all.

November 22, 1963

Fifty years ago.  Can it be?   There are few moments of our lives that are indelibly etched in our memories.  9/11 was such a day .  But there only those of a certain age who can remember that horrid day of Nov. 22, 1963.  Two years ago I briefly wrote about my own recollection and I quote that entry as it is a suitable opening for a more detailed account:

People our age remember certain moments with such clarity they seem like yesterday. Noon, November 22, 1963 was such a moment as I was passing the Student Union building on Flatbush Avenue, hurrying to class. It was a clear, crisp day. Suddenly, a friend came running toward me. "Did you hear, Kennedy was shot?" Incredulous, I rushed to my dorm to listen to the radio. It was true.

We had tickets for a concert at the Brooklyn Academy of Music that night, one of the few cultural events in New York City that was not cancelled. An unrehearsed version of Beethoven's Egmont Overture was performed rather than the regular program. We filed out, silent, stunned, weeping openly. In quick succession Oswald was apprehended, and while we watched it on TV with others, Jack Ruby assassinated him.

It was a horrific weekend of anxiety, bewilderment, and profound sorrow. Such high hopes for our young President, John Fitzgerald Kennedy. These hopes were dashed by what would become the first of other assassinations in the turbulent 1960s, Malcolm X, Martin Luther King, and Bobby Kennedy.

To have borne witness to them all is almost dreamlike, but Friday, November 22, 1963 is emblazoned in my mind's eye.

One would have had to live through the Kennedy era to fully appreciate the anguish of that day, and the subsequent weekend, and ultimately what that day symbolized.  My first real awareness of Jack Kennedy (other than his being a Senator and a war hero), was when he ran for President in 1960.  I was not eligible to vote as an 18 year old (21 was the age then and it was not lowered to 18 until eleven years later), but as a freshman in a predominately Democratic-leaning college, I was caught up in the Kennedy message.  He talked about the future and just did not seem to be content with politics as usual. 

My parents were staunch Republicans.  Nixon all the way.  My father was horrified by my views.  And, as I was in the process of breaking from my parent's home, his reaction only reinforced my support of Kennedy.  The other tripping mechanism was the Congregational church I used to attend (my parents sent me there for religious training and expected me to go to Sunday service, which they rarely attended).  The minister at the time warned his parishioners of the dangers of electing a Catholic, inviting the Pope into American politics.  That was the last time I was in a church other than for a wedding or a funeral or to visit one that had historic significance.  Anti-Catholicism was as big an issue in that election as racial / birthplace issues were in Obama's.

I think if the Kennedy - Nixon election had taken place before television finally established a major role in elections, Kennedy would not have had a chance.  But TV made the difference as Nixon came off looking like a perspiring used car salesman with a cool Kennedy sitting beside him, at home in front of the camera.

And so a new era of politics ensued, but that quickly went downhill as Kennedy had one test after another, first the Bay of Pigs fiasco, which merely foreshadowed the more serious confrontation over Russian missiles placed in Cuba two years later, and then taking on the steel industry over price increases they had promised not to implement.  These were headline topics and both diminished, somewhat, the Kennedy mystique. 

But nothing prepared us for what happened in October, 1962, the Cuban Missile crisis.  This made the Cold War more than a theoretical event, as Kennedy took the calculated risk that a blockade (actually a "quarantine") of Cuba would give Russia an opportunity to back down, probably the most important decision of his Presidency.  We were on the brink of nuclear war and living in a college dormitory in NYC the anxiety ran especially high.  Had such a war broken out, Washington and New York would have been first targets.  Alternatively, there was talk about an invasion of Cuba and we wondered whether we would soon be enlisting in the Army.

But through skillful behind-the-scenes diplomatic negotiating, the crisis was ended and the following year was relatively placid (except for the occasional mention of Vietnam), with improving diplomatic relations with Russia, a veritable Camelot era the Kennedy mystique had so often suggested.  At the end of my Junior year, I was married (June 1963 -- to my first wife, also a Junior at college) and we moved into faculty / married student apartment facilities in the dormitory, working part time and summer jobs to pay for rent, utilities, and food. So, we were married only four months when the momentous day of Kennedy's assassination took place.

We did not own a TV, but we were friends of a Drama professor, Barbara Pasternak, who also lived in the faculty apartments with her husband, Mel.  Barbara treated us almost as colleagues as my wife was acting in the university's theatre department and I was a student in Barbara's Drama-as-literature course.

They had a TV so we spent most of that gloomy aftermath of Kennedy's assassination in her apartment, frequently with other faculty members, watching, stunned, at the turn of events, from Jack Ruby's assassination of Lee Harvey Oswald to sadly watching Kennedy's flag-draped coffin as it moved through Washington on an open carriage.  Little did we know what this horrible event would presage, such as the assassinations of Kennedy's brother Bobby, Martin Luther King, and Malcolm X.  Or, now from the prospective of 50 years later, add the commonplace local shootings, slaughterings in malls, movie theatres, schools, not to mention wars and terrorism.

Many years later, sometime in the late 1980's my current wife, Ann, and I were sitting on our boat in Block Island and a large yacht was approaching Payne's Dock.  The word quickly spread, that it was owned by a friend of Jacqueline Kennedy, and she was aboard (this long after her second husband, Aristotle Onassis, had died).  Naturally, everyone was hoping that she would step off the yacht and perhaps walk on the dock, but she did not.  Instead, I thought I caught a glimpse of her in the salon through thin curtains, almost like a cameo profile.  I'm sure she had wondered, as I have all these years, what could have been.  What kind of alternative history would have been written had Nov 22, 1963 been just another, forgettable, day?

Anniversary of Sorts

I started writing this blog six years ago, having no idea where it might go.  And it's gone all over the place, following, mostly, my personal views.  It's become a journal, a diary, albeit a public one, a place where I've been able to say my piece, unfettered except for some self-imposed censorship to safeguard family and friends and some past history.

Two primary reasons I write this is for accountability and to remember details that get washed away with the years.  Even if I wrote this privately, the latter might be achieved in part; it's so much more constructive to form views, and to remember them by the process of writing.  Probably that's why I've increasingly written "reviews" of plays I've seen and books I've read, although it should be noted that I do not write about everything I read or see.  It's better to forget the more marginal ones.  And as I've said in my disclaimer at times, these are all personal views.  I don't pretend to be a critic.

Accountability is something else.  My opinions are there for all to plainly see, and when I wrote them.  Some I'd like to erase (although I've never removed anything written in the blog), such as a political view I might have expressed, one I might now feel somewhat differently about, but that is where I was at the moment.

Collectively, this blog of, now, 372 entries constitute a significant slice of my life, and as I've been dealing with some health issues, potentially serious ones, I may not be getting to the blog as often.  I've learned that the best medical advocate is not one's Doctor, but oneself.  It takes time.

But looking back over the last six years, I'm basically satisfied by where the blog has gone.  These entries, including the photographs, would fill volumes of printed pages, but it is important (to me) that the search engines bring "visitors" to my "little" blog (that is, small by the number of visitors, typical of a blog that is more personal than professional, or subject focused).  By Google's count, I've had more than 48,000 "page views", with the most popular entries (no surprise) mostly being descriptions of trips we've been on, which include many photographs (and frequently accessed through Google Images).

Then there are the are the emails I receive (I have disabled the comments section of the blog as I have no interest in a debate with strangers) but I have always included this email address and over the years I've received some very interesting notes from people all over the world.  I never fail to respond, even to the few that were not complimentary, but critical of what I wrote.  This one came quite recently, even though I wrote the entry it refers to more than a year ago. I was delighted that my efforts reach out across the globe:

Dear Lacunae,

Thank you for publishing these pictures of Operation Sail Bicentennial they are truly a treasure to me as I was a crew member on the warship in front of the Statue of Liberty.  The ship is the frigate SAS President Kruger (SAS being South African Ship).

We anchored in front of the Statue of Liberty on the afternoon of July 3rd 1976 after sailing up from Norfolk Naval Base in three convoys of warships.  I can still remember the excitement of sailing under the Verrazano Narrows Bridge on our arrival and steaming up the Hudson River to our anchorage.  I still think we had the best anchorage.

On the 4th July 1976  after the sail past of the Tall Ships at approximately  4pm we lifted anchor and sailed to Manhattan and tied up at pier 40 for 5 days.

Whilst berthed in Manhattan I had the privilege of going up to the top of the World Trade3 Centre and walking around on the observation deck and also a trip up the Empire State Building.

What impressed me the most was the friendliness of the people and the helpfulness of the police, this was a trip that I shall never forget!

I live in South Africa in a town called Kommetjie just outside Cape Town.  It is near the Simons Town Naval Base.

Again Thank you for posting these pictures,

Kind Regards

Kjell Hvidsten

Thanks to the Web, we've truly become a world community. 

I'm also pleased that my write-ups of the Dramaworks productions, in the aggregate, would place them among the top entries.  I said that I don't bother "reviewing" productions that have marginal interest to me.  Ever since I began including plays among the topics I cover, I think I've covered every Dramaworks production, as all are relevant and inspired, as professional as one would expect to see on Broadway or the West End.

Rummaging around in my old files I found the "first review" I ever wrote -- it was for my college newspaper -- and for a while I was their "film critic."   I wrote several, but only one survives in my files, so I scanned it and include it here.  It was written when I just turned 20.  Interestingly, to this day I think of This Sporting Life among the best films I've ever seen and no doubt, just writing about it cemented that opinion in my consciousness.

So, from fifty years ago, a little sophomoric, but a beginning....

'Sporting Life' Brings 'True Life' Approach

by Robert Hagelstein

Man's acceptance and rejection of life is the theme of "This Sporting Life," which presents a realistic if not shocking approach to motion pictures. The plot begins violently as Frank Machin, star rugby player, battles his foes in a ball game. He is helped off the field with six broken teeth, blood pouring from his mouth.

The challenge of the rugby game is juxtaposed to the challenge of life. Frank accepts both and deals with them in the only manner he knows how: using brute force.

Although a vigorous, powerful, and relentless symbol of strength throughout the film, he is unable to dominate life entirely. His desire for his young, widowed landlady, Mrs. Hammond, is futile. Though later she accepts him physically, his quest for spiritual love remains unreciprocated.

Mrs. Hammond's husband has died a year before the action of the film. Furthermore, there is an indication that he committed suicide. Unable to accept reality, she remains forever in mourning. However, she continues to clean her husband's boots and place them by the fire, secretly expecting his return.

Spiritually, she has already relinquished life. Thus Mrs. Hammond can't accept Frank, who epitomizes the turbulent and the unpredictable aspects of living. The conflict between these two personalities eventually results in Mrs. Hammond's physical death.

Incredulous of her death, Frank returns to the house to search for her. He is enveloped by the same malady from which Mrs. Hammond once suffered: the refusal to accept reality. However, this is not sustained. Grievously afflicted by her absence, he kneels in the empty house and his thoughts wander. Once again he hears the roar of the crowd and the juxtaposition of the rugby field reappears. The analogy to his present situation is explicit. Knocked down by the opposing team, he is stunned. Weary, but not beaten, he picks himself off the turf and once again plays the game of "this sporting life."

The previous scene demonstrates the superb technique which Lindsay Anderson, a fine new British director, employs throughout the film. Much of the action is revealed in retrospect as Frank lies dazed on the football field or as he sits unconscious in the dentist chair waiting for remnants of broken teeth to be removed. The film is logically constructed, moves rapidly, and the significance of the theme reaches the viewer with tremendous impact.

The acting is especially good. Richard Harris, as Frank Machin, is excellent.  Acclaimed the new Marlon Brando, Mr. Harris surpasses his American predecessor. His portrayal of Frank Machin is sensitive and highly expressive. Rachael Roberts, as Mrs. Hammond, also does an admirable job. She handles the role of an emotionally disturbed woman sensibly and does not carry it to an extreme. Her depiction of a human who runs from life is memorable.

The striking, realistic approach of the film certainly illustrates that motion pictures can be a highly developed art form. It is one of the finest films in years.

And on a final anniversary note, for thirteen years our friends, Ray and Sue have made their way to our home on their boat, departing Connecticut, arriving some 10 to 12 days later at our dock in Florida.  As Ray swings the boat around for docking, with Sue on the bow to handle lines, we customarily exchange a greeting, "It's a miracle!"  And when you think about the challenges of living on a boat year round as they do, making this journey up and down the Intracoastal, with some off shore cruising, docking at our home, and then out to the Abacos in the Bahamas where they spend most of the winter before returning to Connecticut, it truly is a miracle to make these trips safely and with such efficiency.  Of course it is primarily a testimony to their teamwork and boat handling.  We made the trip with them the first time they brought their boat down in 2000, but we took a few weeks to make the journey and to smell the roses along the way.  By Ray's reckoning, they've put about 42,000 miles on the boat since then.  It dawned on me to take a little video of their arrival this year, never knowing what year could be the last.

They left this morning from our dock on their way to the Abacos -- this screen shot from their GPS FindMeSpot system earlier this morning.  Indeed, an anniversary of sorts!

Writing Home from the Front

When my father served in the Army he wrote letters home as often as possible, and from his WW II Scrapbook I found a photo of him writing one such letter.  I post it here in honor of all Veterans who have served overseas, thinking of their loved ones back home.