Wednesday, April 3, 2024, Delray Beach, Florida


Notes From My Journal

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A Century of Masterpieces Brought Together by One Passionate Collector 

I’ve always loved reading about wealthy US businessmen who, during the gilded age of American Capitalism, assembled massive collections of art and then bequeathed them for the world to enjoy after their death. I’m thinking of William Vanderbilt, Henry Clay Frick, Andrew Carnegie (all in NYC), and William Walters (in Baltimore). I’m drawn to their stories because each one has two parts: how they amassed such large fortunes, and how they went about building their collections.

Joseph Hirshhorn 

Smithsonian Magazine recently published this piece about Joseph Hirshhorn, who came to America from Latvia, broke and barely speaking English, and became one of the preeminent financiers of his time.

His collection is housed at the Hirshhorn Museum in Washington, DC, and the museum is presenting an exhibition (“Revolutions: Art from the Hirshhorn Collection, 1860 to 1960”) of some of the best of his pieces. It includes 208 artworks in the museum’s permanent collection by 117 artists (Francis Bacon, Jean Dubuffet, Lee Krasner, Wifredo Lam, Jacob Lawrence, Georgia O’Keeffe, Jackson Pollock…) made during 100 turbulent and energetic years.

The show runs until April 20. I’m going to get up there and see it before it closes, even if that means going up there and back on the same day.

The Hirshhorn Museum in Washington, DC 

The Economy & Investing

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New York City: Time to Sell? 

There is reason to believe that the current burden of the migrants taking advantage of New York City’s sanctuary city status may bankrupt it in the next 12 to 24 months.

The city’s current debt is $132 billion. And yet, Mayor Adams and other city officials are planning on spending a lot more between now and the end of 2025 to pay for the housing, feeding, clothing, and other needs of this additional population.

The city already provides undocumented immigrants with Medicaid and the full range of welfare services for the first seven years of their time spent in the city. City officials believe they will spend $12 billion by the end of the 2025 fiscal year on this alone.

And now they are working on the idea of giving the migrants $350 a week via prepaid debit cards that are supposed to be used to purchase food and supplies for babies. It’s a pilot program that will be tested on 460 families and will cost the city $600,000 a month, or $7.2 million in the first year. But as best as I can ascertain, since 2022, NYC’s migrant population has grown from about 560,000 to about 800,000. And if my arithmetic is right, that means the city would eventually have to come up with an extra $3 billion in taxes to expand the program.

On top of all that, they have a serious problem with office buildings being underoccupied since COVID that has been costing the city billions of dollars a year in lost real estate tax income.

Based on everything I’ve read, I’d not be surprised to see the city’s debt top $200 billion within the next few years.

The only way for Mayor Adams and city officials to try to avoid that would be to drastically increase taxes even more than they’ve already been doing – a tactic that has backfired, with wealthy residents and large, tax-paying companies beginning to relocate out of the city and into less costly municipalities.

If I owned property in NYC, I’d be looking to sell it now.

Chart of the Week: Time for Non-US Stocks? 

This week, Sean looks at the US stock market and highlights how expensive US stocks have become. (I’ve had conversations about this with several of the best analysts at The Agora Companies, which publishes dozens of economic, wealth, and financial advisories.)

From a value investing perspective, many US stocks, especially the sort of stocks we hold in the Legacy Portfolio are expensive – at a level that, like Sean, I’d be reluctant to buy more of them.

US stocks represent the majority of my investment in stocks, but stocks represent only about 20% of my wealth portfolio. Much of the rest is comprised of hard assets, real estate, and direct ownership of businesses, some of which are overseas. So, that gives my overall wealth portfolio some “anti-fragility.” If your wealth is primarily in US stocks, you should heed Sean’s warning today.

As US stocks inch ever higher, I find myself less interested in them.

I do not wish to overpay for something that, by any valuation measure, seems so unattractive.

This has led me to seek opportunities in gold and bonds. Now, I am looking at emerging markets.

Global markets excluding the US stock market have outperformed the US in five of the last seven decades.

It raises some questions: Why should this decade be different?

Many other investors are starting to ask the same thing.

According to analysts from Bank of America, the shift into emerging market and eurozone equities has been remarkable, with movement into non-US stocks the highest it’s been in seven years.

The last time we saw US stock valuations this high, in the year 2000, non-US stocks proceeded to outperform US stocks in seven of the following 10 years.

This is cause for concern because, simply, most American investors, especially index investors, believe they have a well-diversified portfolio. Yet most of them do not hold non-US stocks.

Having international assets, like real estate, can help hedge against currency fluctuations. They also allow investors to gain exposure to shifting growth trends.

The most exciting of those growth trends seem, to me, to be in South America, Central America, and Japan. (Though I am keeping an eye on Europe.)

Western Latin countries are benefitting heavily from the trend of nearshoring, where US firms are relocating manufacturing and operations to nearby countries.

And Japan is starting to see growth again after decades of stagnation.

One thing I will be doing in the coming months is looking for a non-US stock to add to the Legacy Portfolio. In July, I will be revealing what I discover on a stage in Tokyo.

But investors should consider shifting about 30% of their portfolio to non-US assets, like international stocks, now.

That might involve taking some gains on US growth stocks and moving them into non-US assets. Or it might simply involve buying non-US assets with your dividends or any new contributions you make to your investment portfolios.

– Sean MacIntyre

Check out Sean’s YouTube channel here.

News & Views

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Conspiracy Watch 

Was the Bridge Collapse Sabotage? 

After a cargo ship took down the Francis Scott Key bridge in Twin Tower fashion last week, I was not entirely surprised to learn that some people wondered if it was a planned event. I even read a few pieces that got me wondering. But then, thanks to GM, I read this take on what happened that was written by a certified master helmsman with lots of port transit time. I found it convincing:

“The ship in question is the MV Dali. The Dali has a fixed pitch prop, meaning the ship cannot go in reverse. She has an electric bow thruster, but that only really works at slow speeds and requires electrical power.

“The videos show the ship losing power and engines as it approaches the bridge. When the power goes out on a ship like that, the hydraulics that control the rudder stop working.

“After losing power, the helmsman likely turned the wheel all the way over to starboard in a futile effort to steer as the ship was drifting out of alignment. The rudders did not respond due to the power-outage. Then suddenly the engine (or auxiliary generator) kicks back on, which is the cause of the black smoke you see. Once the engine kicks back on, the power to the hydraulics is restored and the rudder immediately swings hard to starboard because the wheel is already turned over to that position. It would have taken the helmsman a few seconds to realize what was happening as rudder authority suddenly returns.

“A second ill-timed power-outage seals the fate, leaving the rudders locked hard to starboard just a few seconds too long.

“You can see him try to swing the rudder back over to the port side once he realizes the rudders are working again, but by then it is too late. The rudders on those ships are slow to respond. It can take over 10 seconds for the rudders to swing all the way over from one side to the other.

“I’ve had power-outages like this happen on a warship at sea with far more redundancy than this cargo ship has. Things like this can happen. Even with backup generators running, managing the electrical load on a ship like this is complex. It would have taken the engineers some time to figure out how to address an outage. As you can see from the video, the outages did not last long. They just happened at the worst possible time.

“There is no conspiracy.

“I would need to see some proof of sabotage before I believed this was planned. Killing the power also means killing the ability to steer. If the ship can’t be steered, there’s no way to intentionally aim it at the pier.

“I also see lots of questions about anchors. Anchors need to be manned. They typically can’t just be dropped by the push of a button. Further, it’s unlikely that even if they did have the anchors manned and managed to drop them that it would have managed to stop the ship in time. I doubt the captain even thought about it. I’m sure he was more concerned about keeping the ship on course. This all happens in just seconds. It’s easy to Monday-morning-quarterback this.”

 

Health Watch 

I Was Way Ahead of My Peers…

When I was in my mid-forties and most of my friends and colleagues were wearing glasses, I wasn’t. I felt proud of that and mentioned it to my doctor.

“You are in a very small club,” he said. “More than 90% of people your age are already using glasses.”

“Does that mean I might never need them?” I asked.

“No,” he said smiling. “You’ll be wearing glasses in about 12 to 18 months.”

That shocked me. But this graphic on eyesight (and hearing) made it easier to understand.

Authentic Autism, or Aspirational Asperger’s?

From Steven Tucker, writing in Taki’s Magazine:

“Apparently, the current psychological condition du jour is autism, according to a new report from a pair of London clinicians… which warns that, since 1998, there has been a ninefold increase in autism diagnoses across the UK.

“Do many such new patients genuinely have autism, however, or have they just been groomed to think they have, thereby stealing away scarce medical resources from those genuine sufferers who actually need it?”

Read more here.

 

Trends in Wokeness 

The Trump Camp and the White House Clash Over… Now What?

In 2021, Joe Biden proclaimed March 31 “Transgender Day of Visibility.” Because the date unfortunately overlapped with Easter Sunday in 2024, he is facing criticism from Donald Trump’s campaign and religious conservatives for this “years-long assault on the Christian faith.” Click here.

Worth Reading

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Political Tribes: Group Instinct and the Fate of Nations 

By Amy Chua
304 pages
First edition Feb. 20, 2018

This is the second of two Amy Chua books recommended to me by SL. The first, The Triple Package, which I reviewed here, was about why some immigrants to the US do much better than others in terms of income, education, and even health. As I mentioned in that review, I was interested in her argument because it overlaps with my thesis in a book I’m writing (working title Wealth Culture), which is about the cultural characteristics of immigrant groups that always seem to rise to the highest rungs of wealth and education wherever they go.

I like Political Tribes for a different reason: It presents a very convincing explanation for how the US managed to get itself in so many post-war proxy fights around the world, starting with Vietnam and then with Afghanistan, Pakistan, Iraq, and Venezuela.

Chua’s thesis is that the US’s foreign policy has always been focused on political and/or economic ideas such as dictatorships vs. democracies and Communism vs. Capitalism. Those sorts of notions are fodder for academics and politicians, she points out, but they are not the primary forces in how the rest of the world acts and reacts to economic, political, and social changes. Only by understanding the importance that culture plays in other countries can the US develop a foreign policy that works – both for the countries we get involved in and for ourselves.

Critical Reception 

* “Chua sprints through her international material in a little over 100 pages before returning to the United States – which is where she gets stuck in a quagmire of her own making. What started out… as a shrewd assessment of our fractured political situation turns into a muddled argument about what Americans, mainly liberals, need to do next.” (New York Times)

* “Chua is no stranger to controversy, and her latest book is sure to provoke.” (Foreign Affairs)

* “A punchy book that advances a single idea with admirable clarity.” (The Times)

Worth Watching

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Climate the Movie: The Cold Truth 

A documentary written and directed by Martin Durkin
Released March 23, 2023

Watch Time: 1 hr, 20 min

In addition to providing an impressive fact-based counter-argument to the dominant narrative about this high profile and hotly debated subject, Climate the Movie takes a look behind the politics and the science to reveal a vast and interwoven complex of businesses and special interest groups that together comprise a trillion-dollar industry.

What I Liked About It 

It felt serious and sober – as close to trustworthy as an argument can sound about such a politicized issue.

By providing a longer-term perspective on climate change, the film demonstrates, quite convincingly, that, far from facing extinction from global warming, the globe is very gradually recovering from a multimillion-year cold spell. And while cold spells like this typically mean less life and less growth, warming is generally a good thing in terms of expanding the number of plants and animals on Earth.

There are also lots of interesting little nuggets of information that explain why the basic facts about climate change are in dispute.

The people behind Climate the Movie are asking viewers to share it… and are making it very easy to do. You can watch the entire thing here.

Fun and/or Interesting

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Who Says Fat Guys Can’t Fight!

Roy Nelson is a big guy, but most of his weight is around his waist. When he began his career as an MMA contender, he came to the arena as a fat guy who had a powerful overhand right. But none of the experts thought he had a chance of surviving three five-minute rounds of fighting, let alone become one of the most dominant heavyweight champions in UFC history, knocking out or submitting at least a half-dozen of the all-time greatest UFC champions. Click here.

What Some College Administrators Understand That (a Lot of) Wonks Don’t 

Freddie deBoer (my favorite Communist influencer) on why some of the current thinking by college career advisors is wrong-headed. As always, I agree with 80% of what he says. Click here.

Readers Write

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From JM re “Biden’s Dangerous Game at the UN” in the March 27  issue: 

“Thank you Mark for your clarity. Still, in our lifetime, unless you are Granada,
being an ally of the US is a very iffy proposition.”

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