Yes, Ukraine Is a Real Country

I’m writing this eight hours after the shocking headlines that left so many of us feeling anguished and helpless. Whatever the eventual scope of Vladimir Putin’s “special military operation” by the time you read this, it’s a good moment to consider the question of what is and isn’t a real country and how worried we should be when parts of one are lopped off by invaders.

In Putin’s view, Ukraine is just part of the same Slavic, Russo-centric motherland. Once upon a time I shared his opinion, though not for the same cynical reasons. While my lifelong interest in the region and certificate from Columbia’s Central and East European (now Harriman) Institute hardly makes me an expert in the region–there are thousands of people with the language skills and specialization you should listen to before me–allow me to share my early impressions of the country now being sliced apart and of its people.

I had been living in Budapest, Hungary in the summer of 1992 between my two years of graduate school and the highlight of my summer was going to be a late August train trip through the former Soviet Union. With Hungary’s rickety telephones and Russia’s even worse ones, it would take 30 attempts to get through on a static-filled line on a call that could cost me half my then-meager weekly pay. But I finally got a visa, a plane ticket and a few hundred dollars and I flew to St. Petersburg on a Tupolev 134, my first of many journeys on scary Soviet passenger jets.

I stayed with Yuri, a Russian man a few years older than me whom I had befriended that year at International House in New York. The city was poor but stunning. Walking through the archway to the Hermitage where the October Revolution had started 75 years earlier, strolling along the canals during the long summer nights, and visiting the Summer Palace were magical experiences.

My friend Caryn and I had some trouble securing sleeper train tickets to Moscow because local mafiosi had bought them all up and were selling them at a 1,000% markup. That made them a whopping $5 or so. After an exciting night of drunken brawls outside the locked door to our compartment (the train had to stop briefly to evacuate an injured passenger by ambulance), we continued to Moscow. It was the first of several trips I would take to Russia’s capital over the next 10 years. The highlight was touring the Kremlin, which felt like (and recently had been) the fading center of an empire spanning 11 time zones. The lowlight was being attacked outside the Lenin Museum by a nationalist demonstrator whom I had photographed because he had the one sign not in Cyrillic: “Death to USA Fascist Israel.” He yelled американский еврейский шпион! (American Jewish spy!) at me as he tried, unsuccessfully, to take my 35 millimeter camera. I still have a snapshot of him somewhere.

After buying more tickets from mafiosi, we departed a couple of days later for Kyiv. Ukraine had only officially been a country for eight months with 92% of its people voting in a referendum to leave the Soviet Union. Functionally, though, it was somewhere in-between. There were no border or passport checks. There wasn’t even a national currency yet. I exchanged a very small number of dollars for “karbovanets” – coupons that looked like Monopoly money and were hardly worth more. I remember paying about a dollar for 600 rides on the Kyiv metro despite the fact that we would be there for just a couple of days. I didn’t have a smaller bill. Despite being rich by local standards, there was hardly anything good to buy. The only proper meal we had was at the home of our hosts, friends of Caryn’s boss in St. Petersburg. She spoke Russian with them and, in typically Russian fashion, their generosity to guests was humbling. As with Yuri and his family in Moscow, we were given the best of what they had to eat and drink when they had very little and allowed to take up the best spot in a tiny, cramped apartment.

Other than being poorer and more chaotic than Russia’s two major cities, I had a hard time feeling that I was in the capital of a different country. Everyone we encountered spoke Russian, and not as a second language–they all spoke Russian to one another as well. A monument to the fort that was the original site of the Kievan Rus, the seed of what would later become Russia, centered around “Muscovy” to the northeast, had a recently-installed plaque in Ukrainian and Russian. I spent a long time comparing the two inscriptions in their own forms of Cyrillic and searching for the handful of differences. It seemed like a stretch to turn what was a dialect into a full-fledged language.

Our next stop after another overnight train, Lviv in western Ukraine, was definitely no longer Russian. Caryn had to use her knowledge of Czech to fill in some of the linguistic blanks. The feel and the architecture were different. But were they Ukrainian? This was once Lvov and before that Lemberg–a Polish and before that a Hapsburg city populated by Jews, Germans, and Poles. The people living there had mostly moved into a depopulated city from the countryside. It was even poorer than Kyiv. We met a young man who spoke good English and asked what the very best place was to eat in the city. Blowing the rest of our soon-to-be-worthless banknotes, we feasted and asked him about life there.

Boarding the train to Hungary, we saw an older man shake the hands of two military officers on the platform still wearing their Soviet uniforms with the peaked caps. He then got into our compartment and it turns out he was a Hungarian doing some kind of business with the locals. He didn’t know English so I spoke Hungarian with him and Caryn spoke Russian with him for the trip to the border. Each of us would translate back to English in the three-way conversation.

When we got to the border, the train had to stop for about two hours because the Soviet Union had a different track gauge than the rest of Europe, ostensibly for security reasons. The train had to be lifted by a crane to have its wheels changed and, while that was happening, two Ukrainian guards got on to shake down the passengers. I had read in a Hungarian paper that summer that anyone not buying a through ticket would be thrown off and forced to bribe their way across the border, potentially waiting for days. The chaotic crowd outside the train window at the station confirmed it. I had sprung most of the rest of my dollars for a far more expensive “international ticket,” but I had lost a small paper customs certificate given to me in St. Petersburg that declared how much “valuta” (foreign currency) I had brought in with me. This was a Soviet form with a hammer and sickle and from what supposedly was a different country, but the guards wanted it and I was afraid that we would be thrown off the train too.

This was happening in the town of Чоп, Ukraine, which is where my father was born. It was Čop when he was born (part of Czechoslovakia) and Csap when my grandfather was born (part of the Austro-Hungarian Empire). All of the Hungarian and Yiddish-speaking local Jewish population had been taken away to Auschwitz almost 50 years earlier and my dad’s family (who by then had moved to nearby Ungvár and then forcibly to its Jewish ghetto) were among the small number of survivors. After the war, the sliver of territory became the Soviet Union and by that time the new nation of Ukraine. So here was another town, like Lviv, populated by “Ukrainians” living in houses built by dead or departed people.

Knowing well that antisemitism remains rife in Ukraine, I was in no mood to delve into family history with the agitated guards, but I wanted to stay on the train. I switched to Hungarian and the two of them did immediately and flawlessly, becoming much more friendly when I told them my father was born in the town. They asked what life was like in America, when he had left, and I kept the details sparse. Then I raised the delicate subject of the missing Soviet form and they looked at each other and told me not to worry about it. I guess I was like a combination hometown boy and celebrity to them. 

As the train started rolling again for the four hour journey to Budapest, I left Ukraine impressed with the warm, resilient people, but not with their claim to being a country with an especially strong historical legacy. First of all, the linguistic and religious differences were more of a spectrum, becoming more Ukrainian (and Polish and Ruthenian) as we headed west, with a little sliver of Hungarian as we reached the Carpathians. The borders of this new country were a Soviet bureaucratic construct.

Thirty years later, my opinion has changed. I’ve been back to the former Soviet Union many times, though never to Ukraine again. What has made the difference has been the bloody, senseless wars and ethnic cleansing I’ve seen in the region and beyond in the name of nationalism and religion. This is the 21st century. We have nuclear weapons and we have weaponized social media that can cause far more harm far more quickly than ethno-religious wars in the past. 

What I’ve heard from friends is that Kyiv, which seemed like such a Russian city back then, is far more Ukrainian today. Even if that weren’t the case, though, it’s a recognized country with borders. If we live in a world where might makes right and maps can be constantly redrawn then we live in a far scarier world. For all of our sakes, we need to stop and say “no more.” A speech in the United Nations by Kenya’s Martin Kimani about Ukraine using the example of his own continent, where borders are even more arbitrary, put it beautifully:

Today, across the border of every single African country, live our countrymen with whom we share deep historical, cultural and linguistic bonds. At independence, had we chosen to pursue states on the basis of ethnic, racial or religious homogeneity, we would still be waging bloody wars these many decades later. Instead, we agreed that we would settle for the borders that we inherited, but we would still pursue continental political, economic and legal integration. Rather than form nations that looked ever backward into history with a dangerous nostalgia, we chose to look forward to a greatness none of our many nations and peoples had ever known.

Martin Kimani

For all of our sakes, let’s forget the historical back-and-forth and just focus on the map. You can see it there in clear black lines–Ukraine is a real country.


Spinoffs: GE, Johnson & Johnson

I wrote this past week about corporate spinoffs, which are all the rage these days. In a spinoff, a company takes a division or two and hands it to its shareholders, creating a brand new public company. The new company usually doesn’t fit in with its new owners, which can be a very good thing for patient investors.

Funds will own, say, a bank, and now they have a small insurer or whatever and sell its shares. But the managers of the new insurer are suddenly even more motivated as they have stock options and a lot more upside if its shares do well. The famous value investor Joel Greenblatt wrote a gem of a book largely about spinoffs, You Can Be a Stock Market Genius.

As with lots of things in investing, though, the magic has faded. Investing in spinoffs used to be a formula for very good returns, but lately they have lagged. The problem might be too many people reading the same statistics and also too many activist funds pushing companies to split apart for no good reason. With both General Electric and Johnson & Johnson announcing split this past week, I asked whether these latest attempts would create more than some initial excitement.

Breaking apart a company can, in theory, unlock value. Corporate spinoffs as an asset class have done well historically. Value investor Joel Greenblatt highlighted the opportunity for the masses in his book “You Can Be a Stock Market Genius.” Several studies using data from the 1990s through the middle of the last decade have shown that a portfolio of spinoffs can beat the market by 10 to 15 percentage points in the year after they go public. Managers of a newly public company are more focused and valuations often rise to reflect those of peers. But there are catches. One is that investors have to hold on to the spinoff to reap the rewards, and many don’t. Initial selling pressure on spinoffs often creates opportunities for even more outperformance once a new shareholder base is established. But the spinoff secret is out. Activist investors now push companies to reshuffle the deck chairs to generate short-term stock-market gains. Trian, the fund that took a stake in GE in 2017 with disastrous timing, applauded Tuesday’s move.


Feeling Lucky?

Remember the DC-10? I’m dating myself by telling you that I recall flying on the widebody jet when I was about nine years old. I couldn’t have been much older than that because all of the ones operating in the U.S. were grounded for a while in June 1979. This came after the deadliest airline crash in U.S. history not related to terrorism, American Airlines Flight 191, which killed 273 people. A much longer grounding, more than a year-and-a-half, resulted from the deaths of 346 people in two crashes of the Boeing 737 MAX. And all U.S. air traffic was shut down for days after the 9/11 terror attacks almost 20 years ago which resulted in almost 3,000 fatalities.

While I’m not arguing that any of these were overreactions, they are a sign of how bad we are at weighing danger. I remember many people saying that, even once cleared to fly, they wouldn’t get on a DC-10 or a 737 MAX. Many skipped flying altogether for months after 9/11. Yet there seems to be virtually no concern today about a threat that killed 1,275 Americans in just the past two days – the Covid-19 pandemic.

Proms are going on unmasked, basketball arenas are full of fans with a few people wearing them draped around their chins, and airplanes are packed. Thank goodness 50% of American adults have now been fully vaccinated, but that leaves half who haven’t been. The people who are most likely to eat in a crowded indoor eatery or other high risk activities are also less-likely to be among the half concerned enough about catching or passing on the coronavirus to ever get a vaccine.

I’m not advocating for a lockdown, but the lack of caution is interesting. Somehow two or three hundred deaths from an air disaster gets us spooked, a few thousand dead from a domestic terror incident has us terrified, but 600 deaths a day with many more hospitalized are an acceptable risk.

Why do we think this way? Is it that a deadly fireball on the evening news seems scarier than the abstract thought of hundreds of people spread all over the country who are probably strangers gasping for breath and dying alone of a respiratory illness? An alternate explanation is that 600 is a whole lot better than the 3,000 plus a day who were dying back in January and that we’ve put the danger in perspective. 

The second explanation might be convincing if it weren’t for the fact that lots of people weren’t being at all careful then either. My family and I drove from New Jersey to Florida for our one and only trip of the pandemic over New Year’s. As soon as we got south of the DC suburbs the level of caution began to evaporate. Pee breaks were filled with anxiety as we walked into rural convenience stores and motel lobbies where patrons and employees seemed blithely unaware of the global pandemic.

But then maybe we were the ones who misunderstood risk. In terms of fatalities per mile traveled, a road trip in non-Covid times is about 750 times as likely to be fatal per mile as a plane journey. Being locked in a pressurized metal tube with a hundred or so mostly-masked strangers for a few hours each way might not have been too much more likely to result in infection than those bathroom breaks. 

All’s well that ends well as we didn’t get sick or crash, but maybe we would have been safer flying — even in a DC-10.


We’re About To Get Schooled

The origin of the phrase “hope is not a strategy” is disputed, but I generally hear it in a business context. I get the feeling that educators are going to become acquainted with it pretty soon.

By this time in August, schools in much of the country are scheduled to be filled with teachers and students. Many universities will start a week or so later. Some will teach remotely, but most are still slated to be in-person or some hybrid thereof. As the dad of kids in both high school and college and the husband of a school employee, I’ve been privy to the plans — if you can call them that — of the superintendents and provosts.

There was a peculiar kind of cognitive dissonance on display early in the Covid-19 pandemic by educators. Of all people, they’ve failed to learn. Back then I contacted the local superintendent and the college provost as cases were spreading about when they planned to send kids and teachers home. The answers were “it’s still rare here” when there was almost no way to get tested and when epidemiologists were warning that it was spreading exponentially. 

That fear of looking dumb or alarmist repeated across thousands of districts and campuses probably cost thousands of lives. It’s somewhat excusable because it was hard back in February or early March to imagine what the world would look like just weeks later. 

But what about now? Decision-makers all certainly know the meaning of “exponential” if they didn’t before. The U.S. has had 145,000 confirmed Covid cases in just the past two days and almost certainly many more unreported ones as people face long waits to get tested in the Sun Belt. What is more, a higher share of those cases is from a young, working-age cohort. Some schools in Florida, which reported over 15,000 cases on Sunday, open in as little as 20 days. I’ve been following private forecasts by Qijun Hong, a postdoc at Brown University, who has been producing remarkably accurate infection models for several weeks. Here’s his latest for Florida.

This is for confirmed cases. Of those tested, very few are children, but this week we learned that an incredible 31% of children tested randomly in Florida were positive. Even if the number of new cases in Florida in August is just half as high as Mr. Hong is projecting, is that low enough to reopen schools? The answer is almost certainly “no,” and here’s why.

In the first month of school alone, about 1 in 60 Floridian adults would be diagnosed with Covid-19. A school with 500 kids will easily have 40 teachers, aides, principals, coaches, secretaries and janitors plus a handful more substitute teachers — all part of that potential pool. And then there are easily 1,000 more adults who live with or regularly see those children who also could be diagnosed. And don’t forget the spouses of those teachers, janitors, principals, and substitutes  — one of them could be diagnosed. Even if we assume that kids can’t spread the illness, the chances that at least one of those 1,100 adults doesn’t face quarantine or receive a diagnosis is tiny.

And if an asymptomatic teacher’s test is positive? With tests taking five or more days to come back, that employee will have had time to infect plenty of other adults and children. Will they all have to quarantine? And if they don’t, who wants to be the substitute teacher for the one who is positive? How many substitute teachers earn enough to take that risk and how many can the school system afford to pay? How sure are they that children can’t pass it on and at what age does it become more likely that they will? Try asking this question and getting a straight answer.

If the substitute starts feeling ill, will the system pay for his or her Covid tests or treatment even though they aren’t on the insurance plan? That substitute may have visited multiple schools, so which school is on the hook and will the teachers or students he or she met at each school then have to quarantine?

What if the first person diagnosed works in a middle school or high school? Well then he or she isn’t in contact with 25 kids daily but more like 125. In the case of a cafeteria worker it would be hundreds. What then? 

The schools tell us they are taking steps, including lots of extra cleaning and social distancing, but how effective will they be? Having half as many kids in a room at a time will help, and so will mandatory masks, but kids aren’t especially careful or sensible. Even 100% compliance with mask-wearing and hand washing only would reduce, not eliminate, contagion. We know that an infected person spending an hour at a party or bar can infect several people. Even if schools are half day, the period of exposure will be longer.

The odds of any given school not being touched by Covid-19 are a bit better in most other states, but not great. One-in-100 or even one-in-500 adults infected in a month still makes an infection at a given school quite likely. With perhaps a third of teachers in higher-risk categories because of age or medical history, it is unfortunately only a matter of time before some of them are on ventilators.

The situation could be even worse for colleges hosting young adults who are most certainly capable of passing on the illness and who generally lack a healthy appreciation of their own mortality. What happens when a student in a dorm of 150 tests positive? He or she will have been contagious for a while. Remember when a single sick person who left the Diamond Princess sparked a lockdown of everyone else in their cabins? Weeks later 691 people on board had it. That was with passengers confined to their rooms and being brought their meals. Will colleges deliver meals to the student? Whose job will that be? And what about shared toilet and shower facilities? How many positive tests in a building before everyone is sent home? Is a dorm being set aside only for those who test positive or will they just be sent home to infect their parents and siblings? And what about international students who can’t go home? Will airlines or Amtrak transport infected students anyway?

I understand why colleges are so eager to have students return in person: money. Empty dorms and students deferring will put even more financial strain on them. I also understand why primary and secondary schools are doing it: pressure from politicians and from parents worried about their children falling behind or about who will watch them while they work. Unfortunately, the plans to keep everyone healthy are vague and ad hoc and we still know too little about this disease.

Instead of hazy, expensive, and unworkable plans, how about doing some serious planning for a better remote learning experience in the fall while the world waits for a vaccine? Online learning in the spring was subpar, but it doesn’t have to be.


I Am a Bad Gym Member

gymSo there were a few new faces at my gym this week. I seem to recall seeing the same thing about a year ago and about a year before that. If you go frequently enough, and particularly if you normally work out at the same time of day, you notice these things.

Although no Charles Atlas, I’m a creature of habit and as regular as rain when it comes to exercise. Other than when I’m traveling, I can count the number of days a year that I fail to show up on the fingers of one hand.

So why is such a loyal customer a bad gym member? Failure to wipe down the equipment? Loud grunting? Hogging the Stairmaster? No, no, and no – it’s precisely because I show up so frequently. I didn’t think much about this before my old gym started facing financial difficulties and finally went out of business. It had been there for 15 years with its main competitors being a fancier but much more expensive gym in town and a similarly-priced but less personal chain in a neighboring town.

During the last year that they were in business a handful of new competitors opened up nearby – a fancy spinning studio, an expensive interval training chain, a cult-like group workout/prison-style gym franchise, and finally my current gym, which is basically a newer, shinier copy of my old one.

Just based on what I could observe, my gym seemed at first to be plodding along despite all the new entrants. My view was limited, though, to two types of members:

  1. My fellow cheapskates who only paid for the “floor” and not the more lucrative group classes or personal training sessions; and
  2. Members who exercise almost every day.

People like me, it turns out, aren’t doing the owner any favors by showing up religiously. Gyms, you see, aren’t very cheap to run. They open early, close late, take up a lot of space and pay high bills for heat, electricity, hot water and janitorial services. Their machines are expensive (several thousand dollars for a new stair climber or elliptical) and break frequently. Even after they raised prices a couple of times, I was paying, by my rough calculation, about $1.03 per hour spent at the gym. How many people like me would a gym have to pack in per hour to cover its overhead? Probably a lot more than it can comfortably hold.

Therein lies the answer to how gyms can stay in business with such daunting economic factors working against them: All those people I’ve seen the last couple of weeks but probably won’t be seeing in a month or two. Author Dan Davies explains in “The Secret Life of Money” that 75% of gym memberships are taken out in January as people attempt to fulfill their New Year’s resolutions but that the vast majority only actually go a handful of times.

In addition to these nearly perfect customers, the other segment of my old gym’s clientele that kept them afloat were those who paid extra for premium services like zumba classes, personal training, or $5.00 protein shakes with an 80% profit margin. It seems, though, that many of the members willing to pay a premium were lured away by the new offerings in town. By last summer, a month or two before my gym said it would close, it offered a month of free spinning sessions for “floor members,” presumably in the hope that we’d step up our subscription. My wife and I went a few times and were shocked to see how few of the bikes were occupied. One time it was just the two of us.

So there you have it – I’m a bad gym member. I shudder to think how crowded the facility might be or how much they would have to charge if everyone were like me. Even if they leave dumbbells lying around or fail to wipe off the elliptical, I won’t complain about the new January people again.

(This post also appeared on LinkedIn and on Cacophonyandcheese.com)

The book · Uncategorized

Heads I Win Voted “Best Read” for Advisers


I’m honored that my book was just listed as one of the best summer reads for advisers by Financial Planning. It’s on the list with some great books such as Michael Lewis’s The Undoing Project,” Daniel Kahneman’s “Thinking Fast and Slow,” and a book called “Great Expectations” by some British guy named Charles Dickens whose name rings a bell.

“There’s great stuff in here to share with clients, particularly when markets head south. Good behavior is handsomely rewarded for investors with long-term time horizons. I quote from it often.” – reviewer Stephanie Genkin.

This was a great one-year “bookiversary” gift. I’ll be speaking this fall at the FPA’s Financial Fitness Workshop in New York and at the annual meeting of the American Association of Individual Investors in Orlando for anyone who wants to see and hear me discuss the book’s lessons in person.



A Bookiversary Gift for You!


Yesterday marked one year of authordom and I’m in the mood to celebrate. The screenshot above was taken exactly a year ago with my book sitting briefly on top of the business book charts on Amazon.

While the sales momentum has slowed down just a wee bit, the topic is as fresh as ever. If you haven’t read my book yet or if you have and would like to give an investor in your life a copy, here’s your chance. All you have to do is answer a question without peeking in the book. Send me the answer at spencerjakabauthor at gmail.com. I will give away three signed copies to three randomly-selected people who get it right. Ready?

Imagine that you and your sibling both receive a large inheritance with the condition that the money be held in trust for 30 years. Your friend is an experienced investor but you aren’t. Your benefactor allows your sibling to invest as he or she sees fit, though only in actively-managed mutual funds and making as many changes as desired, while you have to put the money into a low-cost index fund (60% stocks and 40% bonds, re-balanced annually).

At the end of the 30 years you will almost certainly have more money. According to a 30 year study of investor behavior that I cite in the book, how much more will you have if your sibling is typical?

A. 25% more

B. Twice as much

C. Seven times as much

D. 50 times as much

Good luck!



The book · Uncategorized

Come See Me in Nashville

Neon Lights of Lower Broadway, Nashville, TN

Music, hot chicken, Vanderbilt, my sister and her family, more hot chicken – I love coming to Nashville. My next visit and first-ever speaking engagement in town will be on February 9th at 6:30-8:00 in the evening at University School of Nashville. The $25 fee goes towards an excellent cause: the USN scholarship fund.

The title of my talk is “Beat the Odds and Become a Much Better Investor.” I’ll also be signing and selling copies (at my cost) of my book, Heads I Win Tails I Win: Why Smart Investors Fail and How to Tilt the Odds in Your Favor.

Sign up here.