Our Bully Pulpit Is Still Pretty Impressive

Donald Trump controls an incredibly powerful global force… and that’s just his Twitter account. Wait until he takes the oath on January 20, 2017, and becomes commander in chief of U.S. military forces.

The Chinese seized U.S. military assets in the South China Sea.

Russia interfered in the most recent U.S. presidential election.

The Middle East-North Africa and Central Asia are still a mess.

Brexit demonstrated Britons’ disgust with the status quo.

Donald Trump’s win over Hillary Clinton signaled a similar unease among Americans.

This bundle of circumstances suggests the neoliberal order that’s dominated the post-World War II era has come undone.

In many quarters of the world — including vast parts of the United States — this is a net positive.

Trump, as Joseph S. Nye suggests in the January/February 2017 issue of that weightiest of establishment organs Foreign Affairs, is the very embodiment of revulsion against the Washington Consensus.

Writes Nye, University Distinguished Service Professor at the Harvard Kennedy School of Government:

Americans have had bitter debates and partisan differences over military interventions and other foreign policy issues over the years, and they have often grumbled about paying for the defense of other rich countries. Still, the demonstrable success of the order in helping secure and stabilize the world over the past seven decades has led to a strong consensus that defending, deepening, and extending this system has been and continues to be the central task of U.S. foreign policy.

Until now, that is — for recently, the desirability and sustainability of the order have been called into question as never before. Some critics, such as U.S. President-elect Donald Trump, have argued that the costs of maintaining the order outweigh its benefits and that Washington would be better off handling its interactions with other countries on a case-by-case transactional basis, making sure it “wins” rather than “loses” on each deal or commitment. Others claim that the foundations of the order are eroding because of a long-term global power transition involving the dramatic rise of Asian economies such as China and India. And still others see it as threatened by a broader diffusion of power from governments to nonstate actors thanks to ongoing changes in politics, society, and technology. The order, in short, is facing its greatest challenges in generations. Can it survive, and will it?

So China swiped an unmanned drone submarine that’s probably the equivalent of oceanographic weather balloon, reportedly in response to President-elect Donald Trump’s provocative engagement with Taiwan that undermines the Middle Kingdom’s “One China” policy.

And Russia hacked into servers to scope out emails of Democratic as well as Republican political types, reportedly to the benefit of the real estate developer/reality TV star.

This bundle of circumstances suggests the neoliberal order that’s dominated the post-World War II era has come undone.

This is, in the grand scheme of things, (pardon my French) a bunch of bullsh*t.

Putin’s alleged cunning and Xi’s apparent pique — even as we blunder along in the second half of the second decade of an increasingly fraught global war on terror — don’t change the fact that the United States of America remains, far and away, the most formidable power in the history of the world and will remain so many, many years to come.

We remain China’s most important geostrategic ally, while Russia and Putin continue to throw blows to validate regional hegemony and bolster domestic support amid a faltering economy.

If there is an existential threat to the U.S., it will come from within, in the form of “political fragmentation and demagoguery,” as Nye phrases it. There is a very real alienation of the American people from their government, however, which leads to the former and makes us susceptible to the latter.

Economic inequality that’s sprung from the domestic variant of neoliberalism is the source of much of this discontent.

Trump’s ascension provides a perfect opportunity to evaluate the way we exert our unprecedented power. There’s no question we have to be smarter about when and where we deploy ground troops.

That’s easy to write, of course, but much harder to practice. Trump is already experiencing this complexity, though it remains to be seen if his casual tweets about Taiwan, for example, and the storm they kicked up will have a sobering or an emboldening effect come January 20, 2017, and beyond.

The hard-and-fast reality is that U.S. military power will endure.

And despite its reputation for budgetary atrocities, including literally billions of lost or unaccounted-for money, $640 toilet seats, and the F-35, the Pentagon can do some innovative stuff.

Consider this particular brainchild of outgoing Secretary of Defense Ash Carter: DIUx, the Defense Innovation Unit Experimental.

It’s less than two years old, and its budget is $30 million, “barely the size of a counting error in the Pentagon’s ledgers,” writes Fred Kaplan in describing the in-house technology incubator for MIT Technology Review.

It’s a Pentagon “outpost in Silicon Valley,” as Carter, a theoretical physicist who previously taught at Harvard and MIT, described it in a 2000 paper titled Keeping the Technological Edge.

Trump’s ascension provides a perfect opportunity to evaluate the way we exert our unprecedented power.

The small DIUx group has already managed to craft a workaround that will get its tech funded and built without having to suffer the Pentagon’s “byzantize procurement process.”

Modeled on the pretty successful Defense Advanced Research Projects Agency (DARPA, one of whose projects was a little something you may have heard of called the internet), DIUx will go beyond and actually take research and development into production.

That is, of course, if it survives into the Trump era.

There are encouraging signs, though, as Kaplan writes: “Trump’s pick for secretary of defense, retired Marine general James Mattis… has a strategic mind and a penchant for innovation, and he really cares about the needs of those in the field. He might embrace DIUx.”

The defense sector — provided the stocks you own steer clear of inciting Trump’s Twitter ID (see Boeing Co. (BA) and Lockheed Martin Corp. (LMT).) — can still be a lucrative one for investors.

One of our favorites, Orbital ATK Inc. (OA), has recovered most of what it gave up in early August, after management announced it would restate fiscal 2015 financial and operating results and delay release of fiscal 2016 second-quarter numbers.

That announcement triggered a steep sell-off, as the stock fell from a close of $88.77 on August 9 to a close of $70.79 on August 10.

The small-cap aerospace-defense contractor is now trading at $87.

We first wrote about Orbital on August 15. We followed up a week later, on August 22, noting the stock represented good value as well as a solid opportunity in the aftermath of that 20%-plus sell-off.

The stock is up 19% since August 22 versus 3.4% for the S&P 500 index and 10.3% for the Russell 2000 Index.

This Week In…


Click through to read about the $85 “leather wrapped stone” you could have bought from Nordstrom for some special someone this giving season.

Here’s more, courtesy of Gizmodo: “Welcome to Nordstrom, Can I Interest You in This Fancy Rock?

And here’s CNNMoney, with the Really Sad News:” Nordstrom’s $85 Leather-Wrapped Rock Sold out Online.”

But see also this cheeky turn on charity: “U.S. Doctor Sells Stones for $85 Each — but for a Good Cause.”

You can’t have one without the other.

Smart Investing,

David Dittman
Editorial Director, Wall Street Daily

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