Li’l Abner

Author: David R. Kotok, Post Date: May 24, 2017

Garrett Graff’s recent article in Politico magazine offers a telling glimpse into the character and ethics of two key players in the investigation of President Trump’s connections to Russia. Flashback to March 2004:

“When Jim Comey first learned that Andrew Card and Alberto Gonzales were on their way to the George Washington Hospital room of John Ashcroft, his first call for help was to Bob Mueller. Comey knew that the White House chief of staff and the White House counsel would try to push the attorney general to renew the National Security Agency’s Terrorist Surveillance Program, code-named STELLAR WIND. Comey, who was then Ashcroft’s deputy, had spent the preceding weeks leading the charge against the White House and especially Vice President Dick Cheney against the program, which the Justice Department’s lawyers had determined was illegal. For days, Comey had weathered intense pressure to reauthorize STELLAR WIND, the debate escalating as the program’s expiration date neared. Cheney’s office had told Comey in no uncertain terms that if the program wasn’t OK’d, Americans would die—and their blood would be on Comey’s hands.

“That night, though, Comey knew he had an ally to call. He asked Mueller, the ramrod-straight FBI director, to meet him at the hospital, but as his own car raced toward the hospital—its grill lights flashing and siren wailing—Comey realized that Mueller wouldn’t make it before the White House officials, so he asked for help: Don’t let them remove me, he asked Mueller.”

Folks, markets may be ignoring the evolution of the remarkable drama in Washington (or trying to ignore it). We are not sure that is wise.   But we also don’t know any outcomes so investment decisions proceed while the drama unfolds.

The issue for investors is, how nimble can you be? Can you move quickly enough? Can you take small losses if you are wrong? Can you reverse yourself if things change? This is the classic question answered by Keynes.

We have no way to know how this drama plays out. We, the American public, are mostly confirmed in our disdain for politicians of both parties. Q: Is there really any difference between Schumer now and McConnell then? Change the visual and they sound the same.  We recall the famous words of Mammy Yokum of Li’l Abner fame.  She lived in Dogpatch, Kentucky.  That community was represented by Senator Jack S. Phogbound.  Iconic cartoonist Al Capp (September 28, 1909 – November 5, 1979) coined the phrase “There’s no Jack S. like our Jack S.”

Our vigilance is about markets and clients and policy outcomes. That is how we pay the electric bill. We can only observe the politics of Washington.

We are currently nearly fully invested and are overweight banks. We see much higher markets if we get a tax bill, and we believe Republicans will get trounced next year if they don’t deliver a tax bill.

Meanwhile the 4% tax-free, high-grade, well-researched bond is still around as the retail investor reacts to fears concerning long maturity and politics.

In some states with higher taxation, that bond equates to a 7% pretax return under present tax law. Where else do you find it with nearly instant liquidity and AA credit quality?

We’re off to three continents in two weeks. More forthcoming.

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