I agree with the editors of the Washington Post that Saudi Arabia under Mohammed Bin Salman is a strategic liability to the United States:

The larger truth is that, with Mohammed bin Salman as its de facto ruler, the kingdom has become a strategic liability to the United States. The crown prince has destabilized the region with his reckless adventurism, including the abduction of the pro-American Lebanese prime minister and a boycott of neighboring Qatar, which hosts the largest U.S. air base in the Middle East. His disastrous intervention in Yemen has strengthened Iran while triggering what the United Nations calls the world’s worst humanitarian crisis. His boasts to White House counselor Jared Kushner that he would help resolve the Israeli-Palestinian conflict while forming an “Arab NATO” have proved empty.

When the Saudi government tried to push up oil prices this month in contravention of Mr. Trump’s public lobbying, it was a reminder that it will pursue its own interests in producing and marketing oil, not those of any U.S. president. At the same time, Mr. Trump’s vintage-1980s view of the kingdom is contradicted by the 2018 fact that the United States, as the world’s largest crude oil producer, is less dependent than ever on the Middle East for energy. Saudi Arabia has so far failed to move the oil price and cannot seriously threaten U.S. supplies.

I disagree with them in several particulars:

1. It isn’t new. Saudi Arabia has been a strategic liability to the United States for decades. They are the home and nurturing place for Al Qaeda. Most of those who participated in the attacks on the U. S. in 2001 were Saudis. The Saudis have dispersed Islamist Saudi imams who preach hatred for liberal values on a daily basis throughout the world. They are not our friends.
2. It isn’t just Saudi Arabia. Turkey is a strategic liability. The Gulf States are strategic liabilities.
3. The Iranians aren’t our friends, either, but the Iranian people are much more favorably disposed to us than the Saudis are.
4. Jamal Khashoggi wasn’t a liberal democrat, either. He was a supporter of a different faction of the Saud family than that of MBS. He was murdered as part of a dynastic struggle in Saudi Arabia with which we should have no truck.
5. Despite how awful the Syrian and Saudi governments are there are no better alternatives at hand.
6. Many people in the Middle East genuinely want a different sort of world than we do. They consider it a religious imperative. For them democracy doesn’t foster liberal values but provides a vehicle for them to promote their illiberal values.

Other countries really are foreign to us. I don’t know why the editors of the Washington Post think otherwise.

The Logan, Utah Herald Journal reports a major step in the development of nuclear energy:

BOISE, Idaho (AP) — The U.S. Department of Energy, a Utah-based energy cooperative and a contractor that operates an eastern Idaho nuclear research facility announced an agreement Friday involving what would be the nation’s first small modular nuclear reactors in eastern Idaho.

The Energy Department’s Office of Nuclear Energy announced the agreement with Utah Associated Municipal Power Systems and Battelle Energy Alliance, the Energy Department contractor that operates the Idaho National Laboratory.

The energy cooperative has been working for several years toward building a dozen small commercial nuclear reactors at the Energy Department’s 890-square-mile site about 50 miles west of Idaho Falls in high desert, sagebrush steppe.

At 30 megawatts of power, Logan is the city with the largest commitment in the UAMPS project, but during a Nov. 6 Municipal Council meeting, Mayor Holly Daines expressed her desire for the city to at least scale back participation. Several council members countered at the meeting that they would like to see the city continue participation.

The reactors in question are being produced by NuScale Power. 2026 is eight years away. The barriers are more regulatory and legal than technological.

Contrary to what many people seem to believe at the present state of technology solar and wind power require standby power generation using some other means, generally fossil fuels. If you genuinely want to reduce the amount of carbon being released into the atmosphere, you should support nuclear energy, particularly small module nuclear reactors.

Inspired by this post I thought I’d reflect a bit on the influences that went into making the way we celebrate Christmas. I think they can be summed up as two English queens and three 19th century New Yorkers.

What do you think of when you think of Christmas? If you’re like most Americans, you think of a largely secularized holiday, decorating houses with lights, gifts, Christmas trees, Santa Claus, and reindeer. Christmas trees are a German custom, going back at least 400 years, and introduced to Britain by George III’s German wife, Charlotte of Mecklenburg-Strelitz. In 1832 a young Victoria, soon to become Queen Victoria wrote in her journal:

After dinner… we then went into the drawing-room near the dining-room… There were two large round tables on which were placed two trees hung with lights and sugar ornaments. All the presents being placed round the trees…

The custom began to spread beyond the royal family in England after Victoria’s marriage to the German Albert and her decision to have a Christmas tree in every room of her palace in the late 1840s.

It is said that Hessian troops put up Christmas tree during the War of the American Revolution but I doubt that had much effect on the colonials. I think it far more likely that Germans emigrating to the young United States brought their customs with them and as their numbers grew the Christmas tree began to catch on. Much later I also suspect their adoption was given a boost by fashionable wealthy and upper middle class Americans aping their English cousins.

By the 1830s there were depictions of Christmas tree in the American press, long before their adoption in the United Kingdom.

Lights, whether on trees or houses, were derived from the candles traditionally hung on Christmas trees.

But in my opinoin we owe most of our Christmas iconography to three New Yorkers in the first decades of the 19th century. In 1809 Washington Irving, writing under the pseudonym of “Dietrich Knickerbocker”, published A History of New York which contained the following passage:

And the sage Oloffe dreamed a dream,‍—‌and lo, the good St. Nicholas came riding over the tops of the trees, in that self-same wagon wherein he brings his yearly presents to children, and he descended hard by where the heroes of Communipaw had made their late repast. And he lit his pipe by the fire, and sat himself down and smoked; and as he smoked, the smoke from his pipe ascended into the air and spread like a cloud overhead. And Oloffe bethought him, and he hastened and climbed up to the top of one of the tallest trees, and saw that the smoke spread over a great extent of country; and as he considered it more attentively, he fancied that the great volume of smoke assumed a variety of marvelous forms, where in dim obscurity he saw shadowed out palaces and domes and lofty spires, all of which lasted but a moment, and then faded away, until the whole rolled off, and nothing but the green woods were left. And when St. Nicholas had smoked his pipe, he twisted it in his hatband, and laying his finger beside his nose, gave the astonished Van Kortlandt a very significant look; then, mounting his wagon, he returned over the tree-tops and disappeared.

In it you can see the seeds of what was to become Santa Claus. Then in 1821 an anonymous children’s poem was published, “Old Santeclaus with Much Delight”. Here is its first stanza:

Old SANTECLAUS with much delight
His reindeer drives this frosty night,
O’r chimney tops, and tracts of snow,
To bring his yearly gifts to you.

Finally, in 1823 “A Visit from St. Nicholas”, originally published anonymously but later claimed by Clement Clarke Moore, cemented our image of Santa Claus. Note how Dutch he was. That is something that could only have been produced in Knickerbocker New York.

I think some context is in order. In colonial America the great winter holiday was New Year’s. In the years following the revolution, the generation that came to maturity were eager to establish a uniquely American iconography for the young country, distinct from the English customs that colonial America had practiced. During that federal period most immigration to the United States was from Germany rather than from the United Kingdom. Protestant America became concerned about the influx of Catholics, first Germans and then later Irish, and the papist customs they brought with them. Consequently, they sought to secularize Christmas which had been a primarily religious holiday.

So, with all respect to Charles Dickens, I do not think that A Christmas Carol or his several other portrayals of Christmas customs among his works are particularly influential in forming our Christmas customs or imagery. He’s a latecomer. Most of our customs and iconography had already been formed by the time he came around.

I do not believe that the evolution in our Christmas customs and iconography has ended. IMO it’s inevitable that we increasingly adopt Mexican customs and imagery in our practicing or Christmas. I don’t expect Santa and his reindeer to disappear but I expect them to be increasingly accompanied by making tamales, posadas, and giant nacimientos.

And I expect these customs to be adopted by the Hindu, Buddhist, and Muslim immigrants we will increasingly see here in the United States. One of the most highly decorated houses in my neighborhood at Christmas time is that of my Muslim South Asian neighbors.

Consider this statement from Jacquelyn Corley at RealClearHealth:

Roughly 5 billion people worldwide do not have access to timely, safe, and affordable surgical, anesthesia, and obstetric (SAO) care. Public health officials must shift more resources and attention toward treatment of NCDs, especially those that require surgery.

That is the context of a world in which the United States, the United Kingdom, France, and Germany are importing as many physicians and nurses as they can from countries in which physicians nurses are desperately needed. In many cases these health care professionals are educated on the public dime of desperately poor countries.

We need to be an exporter of care not an importer.

James Montier of GMO delivers a sobering assessment of the stock market:

In order to believe that U.S. equities are going to generate a “normal” return from these levels, you have to believe some quite extraordinary things. Perhaps you believe that P/Es are going to soar to levels not even seen at the height of the TMT bubble; or perhaps you believe that profitability is going to rise (from already extended levels) so that every firm in the U.S. looks like a FAANG stock; or perhaps you believe that growth is simply going to reach unprecedented levels. We, however, are not so prone to flights of fancy that require multi standard deviation outcomes. Unless you believe one of these extreme scenarios, you should be skeptical about the ability of the U.S. market to continue its outstanding performance. Ask yourself how much exposure you have to the U.S. stock market. Then ask yourself what is the minimum amount you could own. We at GMO own essentially zero in our unconstrained portfolios, but then again we are used to career risk and would rather run it than allocate to such an expensive and risky asset.

It’s full of interesting and thought-provoking insights, not the least of which is that over the years there has been a dramatic transition from institutions being the primary purchasers of equities to households (including mutual funds) to the present situation in which non-financial companies are the primary purchasers of stocks.

That’s an example of what I’ve have complained about from time to time around here. Who’s minding the store? I understand the motives behind large companies transforming themselves into stock-trading companies. But it’s no foundation for an economy.

Read this article at the Washington Post by Aaron David Miller and Richard Sokolsky:

But it should have been clear by now to Graham, Rubio and anyone else that Moscow and Tehran had long ago won the strategic fight for Syria. Russian military intervention in 2015 saved Assad and secured long-term military basing rights for the Russian military. As Steven Cook observed in July, Syria is “the centerpiece and pivot of Russia’s strategy to reassert itself as a global power.” Iran, in its long-term effort to gain regional power and further its proxy war against, among others, rival Saudi Arabia, has lent Assad the assistance of the Iranian military and Iran-backed Shiite militias. Though a predominantly Sunni country like Saudi Arabia, Turkey shares Shiite-dominated Iran’s goal of thwarting anything that bolsters Kurdish autonomy, including close military cooperation between the U.S. military and Kurdish forces in Syria and Iraq.

To achieve their ends, Russia and Iran have been more willing to devote resources toward keeping Assad afloat than the U.S. has been prepared to either remove him from power or stand behind the assorted elements in Syria who’ve tried and so far failed to overthrow him. There are valid reasons for U.S. reticence, but Americans should let go of the idea that we were ever trying very hard to win.

and explain to me why we should be building up our forces in Syria let alone keeping them there.

There is also an interesting article at New Scientist, from which the graph above was sampled, on inequality:

The dislike of economic inequality supposedly runs deep in human psychology. The trait we call “inequality aversion” emerges early in development and is found across many cultures, from city dwellers in the US to villagers in Peru and Uganda.

Laboratory studies confirm that inequality aversion is a strong motivator of behaviour. For example, when people are asked to divide money among themselves and fellow subjects in experiments, they have a clear preference for equal distribution. This desire for equality is so powerful that people often choose to receive smaller but more equal rewards over larger but more unequal ones, and in other cases prefer surplus resources to be thrown away rather than distributed unequally.

There is, however, a paradox. A separate body of research finds something quite different. When people are asked about the ideal distribution of wealth in their country rather than among a small group of individuals in the lab, they are actually quite relaxed about inequality.

What I think people are forgetting is that the considerable inequality of today is something that hasn’t been seen within living memory. When I was a kid things were much more like those “what they’d like to see” bars than they are like what they thinks things are or what they really are.

Here’s a significant observation:

In 1960, a chief executive in the US typically earned 20 times as much as an average worker. Today it is more like 354 times.

I refuse to believe that is due to the workings of the market or justified by productivity. I have no problem with the boss making 20 times as much as I do but I refuse to believe that he’s 15 times as productive as the bosses of 60 years ago.

I think that competition, barriers to entry, and subsidies mark the difference not any great superiority of today’s managers compared to those of long ago.

I found Carmen Reinhardt’s most recent piece in Project Syndicate thought-provoking. In it she makes a number of interesting points. First, that the spread between yields in the emerging market asset class and high-yield U. S. corporate debt is the highest in history:

Historically, there has been a tight positive relationship between high-yield US corporate debt instruments and high-yield EM sovereigns. In effect, high-yield US corporate debt is the emerging market that exists within the US economy (let’s call it USEM debt). In the course of this year, however, their paths have diverged (see Figure 1). Notably, US corporate yields have failed to rise in tandem with their EM counterparts.

What’s driving this divergence? Are financial markets overestimating the risks in EM fixed income (EM yields are “too high”)? Or are they underestimating risks in lower-grade US corporates (USEM yields are too low)?

Taking together the current trends and cycles in global factors (US interest rates, the US dollar’s strength, and world commodity prices) plus a variety of adverse country-specific economic and political developments that have recently plagued some of the larger EMs, I am inclined to the second interpretation.

The second is that a considerable volume of these U. S. corporate instruments are collateralized loan obligations:

In what is still a low-interest-rate environment globally, the perpetual search for yield has found a comparatively new and attractive source in the guise of collateralized loan obligations (CLOs) within the USEM world. According to the Securities Industry and Financial Markets Association, new issues of “conventional” high-yield corporate bonds peaked in 2017 and are off significantly this year (about 35% through November). New issuance activity has shifted to the CLO market, where the amounts outstanding have soared, hitting new peaks almost daily. The S&P/LSTA US Leveraged Loan 100 Index shows an increase of about 70% in early December from its 2012 lows (see Figure 2), with issuance hitting record highs in 2018. In the language of emerging markets, the USEM is attracting large capital inflows.

It should be needless to say that this is terrible news for emerging economies and what is terrible news for emerging economies has a way of provoking real world events. It may not be pretty to see.

I have made no secret of the fact that I am suspicious of, as she puts it, a world economy “geared toward increasing the supply of financial assets” without also expanding real production or even at its expense. I have explained why previously. Such an economy presents no problems as long as it does not impinge on the real world but it inevitably does.

At Atlantic James Hamblin touches and expands on the question I asked yesterday:

A nodule is, by definition, fewer than 3 centimeters (around an inch) in diameter. These two nodules are now gone, and there are apparently no others remaining.

But the word that makes the statement more complicated and concerning is two.

Pulmonary nodules are indeed extremely common, and most are benign. To find two malignant nodules in a person who smokes would not be especially surprising. However, if you have two separate malignant nodules in your lung and you do not smoke, doctors worry that this means they represent metastatic disease from a cancer somewhere else.

This is especially true if the patient has a history of cancer, as Ginsburg does. She had early-stage colon and pancreatic cancers removed in 1999 and 2009, respectively.

Lung nodules are generally removed when they are deemed suspicious for malignancy, meaning they either showed signs of growth or were not seen on prior oncologic screening. “Growing pulmonary nodules can be primary lung cancers, and synchronous ones do appear,” says Howard Forman, a radiologist and professor at Yale. “But in a patient with two primary known malignancies, we would need to know the pathology of the nodules before believing she is cured.”

The pathology report can tell us if the malignant cells are lung cancer—meaning a rare case of two simultaneous new lung cancers in a nonsmoker—or if they represent a recurrence of metastatic colon or pancreatic cancer, or if they are of some other origin. If this is the case, it would raise concern that although current scans showed no evidence of metastatic disease elsewhere, there could be yet-undetectable cancer cells already seeded in Ginsburg’s body.

The fact that the statement says the nodules are indeed malignant means that at least a preliminary pathology report has been done, but this crucial detail—what type of malignancy?—was either unclear or withheld from the statement. It reads only: “According to the thoracic surgeon, Valerie W. Rusch, MD, FACS, both nodules removed during surgery were found to be malignant on initial pathology evaluation.” (I emailed Rusch, who told me, “We have no additional information on the pathology at the present time.”)

Read the whole thing. This story is ongoing and will be for some time to come.

Why am I dwelling on this? If Justice Ginsburg were to die or become incapacitated, it could occasion the toughest, meanest, most divisive political battle of my lifetime. Think the last two years have been disruptive and violated norms? You ain’t heard nothin’ yet.