Week In Brief: Sep 8

September 12, 2017

Sixteen years ago, America was attacked. We watched helplessly as 3,000 countrymen perished at the vile hands of radical Islamic fundamentalists.
That morning, our downtown office building was evacuated, I returned home to find my wife glued to the dramatic scenes unfolding on TV. We were newlyweds. And had no idea how the world would soon change.
The United States responded as expected. We cried. Screamed. Mourned. Loved. Raised money. Rallied. Went to war. All the while, honoring the memory of those we'd lost.

We still do so today. Even as some among us seem to have forgotten the importance of remembering our past. The good. And the bad.
Alan Jackson's song, "Where Were You (When the World Stopped Turning)" (here) still amply sums up the national sentiment during those dark days.
More on 9/11 below.
Stocks dropped slightly last week. As investors digested the escalating tension with North Korea. And wearily eyed the damage in Texas, even as Hurricane Irma bared down on Florida and the Caribbean.
Volatility, as measured by the VIX index, was up. Which does not surprise. Because where stocks are concerned, September tends to be the worst month of the year. Averaging a monthly decline of 0.50 percent since 1950.
And we're due for a pullback. As the S&P 500 index rests just 0.79 percent below its all-time high. And it's been over a year since the last pullback of 10 percent or more.
Here's what those pullbacks have looked like on a more representative logarithmic scale.
Adding to September's dread, Bank of America last week commented on the price of multiple asset classes, stating that "bubbles are more bubbly than ever." Aside from the bank's obvious penchant for hiring Dr. Seuss fans as analysts, we would posit that the B of A's pronouncement surely means that stocks, and all the other asset classes mentioned in their report, will now surely continue to run up for some time.
In the culture wars, protesters continue to call for the razing of historic monuments nationwide. Yet, when you tear down monuments, as Peggy Noonan said, you tear down avenues of communication between generations. Because statues teach us. Remind us of our victories. And our mistakes.
Edmund Burke famously postulated we have a duty to the past, the present and the future. Yet, the tear-em-down crowd believes only the present is important. Not to mention their higher morality Which will surely doom us to repeat the mistakes about which those statues serve to remind us.
Alexis de Tocqueville said, "The greatness of America lies not in being more enlightened than any other nation, but rather in her ability to repair her faults."
We have many faults to repair. Though fewer than most other countries. Instead of tearing down monuments to remind us of bad times past, let's build new monuments to point to inspiration, goodness and a value-system that has taken this nation higher and further than all others.
There are many theories as to how Hurricanes Harvey and Irma may impact the nation's economy. We are not subscribers of the "Broken-Window" economic theory, which holds that a broken window leads to an expenditure for a new window. Creating a capital infusion into the local economy by employing and paying the window manufacturer and installer. As the owner of the broken window must pay for a new one. Denying him the ability to take his family to dinner, replace his car's balding tire, and purchase tickets to the baseball game. Which is to say that this zero-sum expenditure will provide for some while denying others.
The larger question is whether Houston's catastrophe will reveal the inherent weakness in the financial steads of America's lower and middle classes. A topic we've covered before. Our thesis remains: the nation's political class spends its time focused on the spectrum's poles, the wealthiest and poorest. Even as the nation's lifeblood, its cherished middle class has withered. How will Harvey affect those with standard to above-average lifestyles, but living paycheck to paycheck? Could Harvey be the straw that breaks the camel's back? And what might that represent for the larger U.S. economy?
Consequently, we have a hard time believing that the Fed will raise interest rates and begin to clear its balance sheets this month. As damages from Harvey and Irma accumulate, and other hurricanes formulate in the Caribbean, now is hardly the time to normalize Fed policy.
Speaking of the Fed, Vice Chair Stanley Fischer resigned. Stan Fischer opposed deregulation. And as Janet Yellen prepares to vacate the chairmen's post, the administration will seek someone who favors deregulation to fill the post. Fischer did not. So he reached a ceiling. Moreover, as the landscape changes in the coming years - investment, political, economic, environmentally -- there will be value gleaned by having individuals with real-world experience in such matters holding these positions. As opposed to an endless array of academics.
The U.S. Army Corps of Engineers has recommended that states bordering the Great Lakes institute a high-tech sound system to scare away Asian Carp. A voracious fish that has been slowly approaching the Great Lakes. And would certainly be calamitous to that ecosystem.
We applaud their contrarian approach to solving what has been an intractable problem for other bodies of water. Moreover, we can't help but wonder why we don't implement something similar to prevent the expansion of Islamic fundamentalists?
In sports, the Buckeyes lost. The Bengals lost. Though Rafael Nadal managed to claim his third U.S. Open title. Capping a remarkable year in which Nadal and his longtime rival - and off-court friend - Roger Federer took all four Slam titles; Federer winning the Australian and Wimbledon titles and Nadal taking the French and U.S. crowns.
Weekly Results
Major indices finished down last week. DJIA lost 0.86 percent, S&P 500 fell 0.61 percent. The Nasdaq descended 1.17 percent. While small cap stocks lost 1.00 percent. 10-year Treasury bond yields fell 11 basis points to 2.05 percent. While gold rose $21.81 per ounce, or 1.65 percent.

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