The Dow took another step up yesterday. Gold held steady.
Are we at the beginning of another bubble in stocks? Maybe.
As Bonner & Partners editor-in-chief Chris Hunter reported yesterday, the total market capitalization of the US stock market now stands at 112% of GDP. This is higher than 96% of readings since World War II.
It’s also significantly higher than the same reading in Germany (44%), in China (41%) and in Japan (62%).
And the inflating of bond prices as a result of the Fed’s QE seems to be having most effect in one place: the stock market.
Since the economy is NOT responding, we expect the Fed to continue… and eventually become more desperate and more aggressive. If this bull market holds together until then, it could easily turn into a real bubble market – like Zimbabwe at the height of its hyperinflation.
This is a subject, incidentally, that we are looking into very closely at Bonner & Partners Family Office. The aim of this family wealth advisory service is to help families preserve wealth over the long term. Clearly, the success or otherwise of global QE will shape how the “long term” looks.
Our best brains are on the subject. We expect what few in the mainstream seem to expect: disaster…
The “All-America City”
We drove up from Baltimore to Burlington over the weekend to visit our youngest son, Edward. As we headed north, the leaves disappeared. They are golden brown and yellow in Maryland; few are left on the trees here in the Green Mountain State.
Albany, we noticed in passing, calls itself the “All-America City.” How could a city be “All-America,” we wondered.
The country is too big… too varied… too much for a single city to represent. American flags festooned barns and flew over trailer parks and shopping malls all the way from Baltimore to Burlington. We were on the road more than 10 hours, cruising in our Ford pickup, and were still on American soil.
But accents changed. The landscape changed. Even the cars that people drove changed. Here, there are more Subarus than F-150s. The people dress differently, too: in flannels, Carhartts and hiking shoes.
And they send Bernie Sanders to the US Senate. What kind of strange people would do that?
Here is the senator, alarmed about the “Tea Party”:
These people want to abolish the concept of the minimum wage, they want to privatize the Veterans Administration, they want to privatize Social Security, end Medicare as we know it, massive cuts in Medicaid, wipe out the EPA, you don’t have an Environmental Protection Agency anymore, Department of Energy gone, Department of Education gone. That is the agenda.
Sounds good to us. What kind of people would elect Bernie Sanders to oppose it?
We don’t know. But they’re not our people.
The Ties That Bind
The trouble with patriotism – besides being a refuge for scoundrels – is that the ties that bind one patriot to another are abstract and largely phony.
What we really appreciate about America, for instance, is not the facts of it – they are too diverse – but the idea.
According to a book we wrote along with Pierre Lemieux in 2003 called The Idea of America, the original concept was that a person in America could do what he wanted without having to ask permission from the government.
That theory made the US different from any other country. That theory still appeals to us. But in practice, the US is now much more like everywhere else than different from them. Detroit could be Lagos. Vermont could be Denmark.
“C’mon… don’t be silly,” protests the better half of the family. “Vermont is a state. Maryland is a state. We all share the same federal government and the same history.”
Certainly, the feds provide more or less the same comic bounty to us all. We all suffer Obamacare, the NSA, Congress, the SEC and other federal impositions more or less in equal measure.
But our histories are different. In the most dramatic episode in American history, for example, the War Between the States, the Green Mountain Boys of Vermont did their level best to kill our ancestors.
South of Baltimore, Maryland was on the side of the Confederacy. To this day, many Marylanders still consider Jefferson Davis to have been the best president America ever produced.
We have a sentimental attachment to our homeland. But who could be fond of all of America? It is too big, too diverse, and too abstract.
It would be as though you were in love with all the women in your ZIP code. Each one may be lovable in her own way. But put them all together, and their fetching particularities blend into generalized mediocrity. The slimness of one is contradicted by the girth of another. The cleverness of a few is offset by the dullness of the many. And the fair smile of a blonde, averaged against the sour frown of so many brunettes, becomes nondescript.
You do not fall in love with all women; you fall in love with a single one. By trying to love them all, you are a good lover to none.
“Love afar is spite at home,” wrote Emerson.
Trying to love Alaska, Florida and other distant parts of the entire United States of America, you are likely to neglect your own real homeland.
The US is full of pleasing places, but each one is attractive in its own way.
One is hot. Another is cold. One is mountainous. Another is flat. The fast-talking people of Manhattan… the slow-moving folk of the bayou: Each may be extraordinary in their own way. But average them together, and you get nothing special.
Our own homeland is the land between the Potomac and the Patapsco, on the West Bank of the Chesapeake. Everything else is foreign. Vermont might as well be in Canada. New Mexico is no different from Old Mexico. And California is a country of its own, as far as we are concerned.
This thought occurred to us as we attended the annual Homecoming Dinner at Christ Church, West River, Maryland. This is the church where our grandparents and great-grandparents were married… and where generations of our forebears lie in the graveyard.
Year after year, for the last hundred years, the family has attended the annual homecoming dinner. The Catholics may throw better spaghetti dinners. The desserts prepared by Methodists may win prizes at the county fair. But when it comes to “ersters” – no people do them better than the low-church Episcopalians of the West River area.
The culture of the Maryland tidewater evolved during the 17th and 18th centuries and remained little changed until the 1960s. It was based on two things: harvesting the fish and fowl of the Chesapeake and growing tobacco on its shores.
Captain John Smith, leader of the Jamestown colony in Virginia, sent some members of his team to live with a local tribe of Powhatan Indians, the Kecoughtan, in 1609. English settlers needed to learn how to live in the area without starving to death. The Kecoughtan showed them how to wade out into the bay, onto an oyster bar, and scoop up the delicious bivalves.
When the envoys returned to Jamestown, Smith reported that they had eaten so many oysters “their skin peeled.”
All You Can Eat
We watched for signs of peeling skin on Sunday. The ladies of the church “packed” (padded in a batter) oysters on Friday night and then fried them for the dinner on Saturday.
Packing oysters is a social gathering. The older women show the newer members of the congregation how to do it… and enjoy a lively conversation as the oysters are prepared.
The dinner is not explicitly an “all you can eat” affair. But a man with a healthy appetite is offered so many that he feels as though his skin could come off.
English settlers took to “oystering” with such gusto that the beds close to shore were soon depleted. They then took to boats and developed a hand tong to reach down to the seabed and “lick up” the oysters.
Back in the 1960s we worked in construction, paying our way through college by driving a truck and helping the carpenters. Oyster season began in September. Since the carpenters were also watermen, they would leave their jobs en masse as soon as the summer heat was over. The company had to prepare for this exodus… scheduling work around it.
Part of the reason the tradesmen returned to the water was just for the joy of being out on the bay. The weather is typically very pleasant in September – not too hot. The skies are usually clear, with a mist rising from the warm water in the morning. And there’s a softness to the air… in the creeks and inlets… and on the land around it… a gentleness, a mellow haze which we’ve never seen elsewhere.
Oystermen stayed out all day, licking up oysters and drinking down cold beer. They came back in the late afternoon, sunburned, their boats and stomachs full, happy with what life had to offer them.
The other reason was financial. Oysters were expensive. On a good day, a man could earn $100 out in the bay. Sometimes $200. Far more than he could get for a day on the construction site. In a week, he could put enough in his pocket to buy a used car.
Then, as the season advanced, the oysters thinned out… earnings fell… and the men drifted back to work, their shoulders and arms bulging with muscles. Hand tonging was incredibly hard work.
Dirty, Exhausted and Hungry
Tobacco farming was hard, too. Scarcely three years after the English settlers had waded out into the Chesapeake to collect oysters, John Rolfe arrived with tobacco seeds. By 1670, half the population of England smoked tobacco. Most of the crop came from Maryland and Virginia.
Tobacco farming does not lend itself to large-scale mechanization. You can till the land with a tractor-drawn plow. You can plant tobacco, too, seated in a tractor-drawn planter. But the hard work must be done by hand.
Each plant is cut, laid down and then picked up again and speared onto a tobacco stick, five or six plants to a stick. Then the sticks are gathered up and hung in an airy barn for drying.
The harvesting is done in late summer – when the heat and the humidity are at their peak. It was the hottest, hardest work we ever did; it was what convinced us to get a desk job. Under the tin roof of the barn, where the tobacco is hung to dry, it is not only far off the ground, the temperature is also off the charts.
Unlike in the Deep South, tobacco farms in Maryland were small. Blacks and whites worked together, shared family names, and were often related by extramarital ties that no one talked about.
The only mark of racial impoliteness we recall was at the water pump. You had to pump the water up by hand and then share out a ladle of cool water. The whites took the ladle first and passed it to the blacks later. Otherwise, we worked side by side, sweating and straining, equally miserable in the August heat.
Work often continued until long after dark. We had to hang the tobacco in the barn before we went home. Electric lights allowed us to keep going – dirty, exhausted and hungry – until 9 or 10 o’clock at night. .
The going wage for a 14-year-old boy in the early 1960s: $5 to $10 a day.