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Five Resort Stocks to Buy Despite Russia’s War Causing Civilians to Die

Five resort stocks to buy appear safe from Russia’s war in the Ukraine that keeps causing civilians to die. The five resort stocks to buy are well diversified…

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Five resort stocks to buy appear safe from Russia’s war in the Ukraine that keeps causing civilians to die.

The five resort stocks to buy are well diversified into other regions of the world that are showing signs of economic recovery after the worst ravages of the COVID-19 pandemic seem to have eased. As restrictions on consumers and businesses alike have waned, along with new cases and deaths, travel and leisure have been rebounding, especially among those who financial resources are most robust.

With third-quarter earnings reported, 11 of 16 lodging companies, including resorts, met or beat expectations, with the group’s earnings before interest, taxes, depreciation and amortization (EBITDA) coming in about 4% ahead, despite revenues only up 1%, according to BofA Global Research. Resorts are showing margin recovery, despite slowing compared to prior quarters, as demand is strong to stable with no cracks, while overall revenue per available room (RevPAR) trends seem to be flattening entering the fourth quarter, BofA reported.

Five Resort Stocks to Buy Include Host Hotels & Resorts

Penson fund Chairman Bob Carlson called the world’s largest lodging real estate investment trust (REIT), Bethesda, Maryland-based Host Hotels & Resorts Inc. (NASDAQ: HST), a good, speculative investment. The company recently opted to focus on North American travel by selling most of its European and Asian businesses, he said.

HST focuses on luxury and up-scale hotels and resorts, said Carlson, who also heads the Retirement Watch investment newsletter. Some industry analysts believe this strategy makes the company more resistant to recessions, but its marginal upper-income customer could be likely to reduce leisure travel to HST’s resorts during a recession, Carlson continued.

“The shares sell at a good value, though the company beat expectations recently,” Carlson counseled. “HST should be considered a leveraged play on travel. It is likely to do better than the average lodging company if travel continues to increase but will decline more than average in a recession.

Bob Carlson, head of the Retirement Watch investment newsletter, talks to Paul Dykewicz.

Seasoned Trader Turned Profit from One of Five Resort Stocks to Buy

Bryan Perry, a seasoned Wall Street trader and leader of the Premium Income Pro advisory service, recommended both the stock and call options in Host Hotels & Resorts. Perry, who spotted the trading opportunity in the stock and the options, turned more than a 10% profit in roughly 10 months with those trades, despite the major indexes declining at the same time.

The U.S. government’s release of the Consumer Price Index (CPI) for November showed a smaller-than-forecast 0.1% increase, compared to consensus estimates of 0.3%. The initial reaction by the market was a 700-point move to the upside for the Dow in the opening half-hour on Dec. 13, followed fading price action in the middle of the day, commented Perry, who also leads the high-yield-focused Cash Machine investment newsletter.

“While the headline was seen as quite bullish, the composition of the report showed that inflation is still pretty elevated in a number of areas,” Perry wrote to his subscribers. “But the key takeaway from the report at first glance is that overall inflation is starting to cool. So, the Fed should be convinced to temper the pace of its interest rate hikes and perhaps place a lower ceiling on its terminal rate.”

Paul Dykewicz interviews Bryan Perry, head of Premium Income Pro.

The company announced on Nov. 2 that it acquired the Four Seasons Resort and Residences Jackson Hole, a 125-room luxury resort in Jackson Hole, Wyoming, for approximately $315 million in cash. The acquisition price represents a 13.6x EBITDA multiple, or a cap rate of approximately 6.6%, on the Resort’s 2022 estimated results.

The resort is expected to be one of Host’s top three assets, based on estimated full year 2022 results, further improving the quality of the company’s portfolio.

Five Resort Stocks to Buy Feature Unique Ski in/Ski out Resort

The resort is one of only a handful of luxury ski in and ski out resorts in the United States. It sits on 6.3 acres in Teton Village, just steps from the gondola at the base of the Jackson Hole Mountain Resort, which is regarded as one of the top-rated U.S. ski destinations. Near downtown Jackson and in close proximity to Grand Teton and Yellowstone National Parks, the resort is a year-round destination where future supply is expected to be severely restricted.

Opened in 2003, the resort underwent a major guestroom renovation in 2022. No disruptive capital expenditures are expected in the near term, the company announced. In addition, the Jackson Hole Airport is undergoing a $65 million renovation and expansion, scheduled for completion by year-end, to better accommodate year-round demand, shrinking shoulder seasons and increasing visitor growth.

For those with the money to spend, the resort has 125 oversized rooms and suites that average approximately 650 square feet with gas fireplaces, balconies and dramatic views of the surrounding mountains and valleys. It includes a five-bedroom, 4,700 square foot penthouse, and offers nearly 9,000 square feet of indoor meeting space, three upscale food and beverage outlets with a pool café, two retail outlets and a 16-treatment room alpine spa.

The resort further offers an on-site ski concierge, a private ski club, a kids club and a fitness center. It also features an additional 44 private residences, which are not owned by Host, ranging in size from 1,700 to 3,700 square feet. Of the 44 residences, 30 currently participate in a rental program through the resort.

Host’s President and Chief Executive Officer James F. Risoleo said the Four Seasons Resort and Residences Jackson Hole is an “iconic, irreplaceable asset” in a new market for the company, as well as one of only a handful of luxury ski resorts in the United States. From 2014 through 2019, the resort achieved a revenue per available room compound annual growth rate (CAGR) of 5.8%, significantly outperforming a RevPAR CAGR of 4.3% for its “ultra-luxury” peers during the same time.

With year-round demand generators, no new supply on the horizon and a recent comprehensive guestroom renovation, Host management stated the resort is well positioned to continue outperforming its peers for the long term. Such results would drive value for company shareholders, Host’s management added.

Five Resort Stocks to Buy Vie for Best-in-Class EBITDA Growth

Host management has a goal to generate best-in-class EBITDA growth to drive long-term, risk-adjusted returns for its stockholders. The company’s aim is to create long-term stockholder value by acquiring, selling, renovating and developing luxury and upper upscale hotels, primarily in the United States. The company currently has 78 hotels, 42,200 rooms and holds non-controlling interests in one international and seven domestic joint ventures.

Host management expressed the view that the resort’s 2022 performance is muted due to the guest room renovation during the first half of the year, as well as Jackson Hole Airport’s closure for approximately three months during the year. By growing year-round occupancy to historical levels and repositioning the food and beverage outlets and public spaces, the company expects the resort to stabilize at approximately 11-13x EBITDA in the 2026-2028 timeframe.

Five Resort Stocks to Buy Cater to Luxury Consumers

BofA gave Host a $18 price objective, based on approximately 9x the investment firm’s 2023 estimated adjusted EBITDA, consistent with the group’s multiple range and history. BofA opined the multiple is warranted given Host’s asset quality, “best-in-class management team” and significant equity market liquidity, which helps differentiate the company from its peers.

However, Host has “meaningful” Top 25 U.S. market exposure, particularly in urban cores that are underperforming due to the pandemic, BofA added.

Chart courtesy of www.stockcharts.com

Potential outperformance of the BofA price target for HST could come from better-than-expected RevPAR growth and higher-than-forecast earnings gains from a rise in mergers and acquisitions (M&A) activity. Risks that could cause Host to fall short of the price objective are a weakening in the overall economic environment, leading to lower levels of business travel and depressed leisure spending, higher-than-expected room supply growth and unforeseen circumstances, such as war or acts of terrorism.

 

Hyatt Hotels Rates Among Five Resort Stocks to Buy

Chicago-based Hyatt Hotels Corporation (NYSE: H) recently announced strategic brand growth in the Latin America and Caribbean region with a pipeline of more than 20 planned luxury and lifestyle hotels and resort openings through 2024, including expansion of Hyatt brands into new markets. With elevated amenities, from bike rentals to butler service and endless adventures, patrons may well bask in luxury.

The choices for customers include:

  • Beach resorts: Explore the rainforest at Andaz Mau that can be toured by visitors to the Wailea Resort or go from a villa to a private white-sand beach at Park Hyatt Maldives Hadahaa.
  • Spa resorts: Rejuvenate at a day-long spa visit at Hyatt Regency Indian Wells Resort & Spa or try traditional healing customs to balance body and mind at Grand Hyatt Kauai Resort and Spa.
  • Golf resorts: Tee off amid towering pine trees at Hyatt Regency Lake Tahoe Resort, Spa and Casino, or take advantage of guest-preferred tee times at Hyatt Regency Hill Country Resort and Spa’s 27 holes.
  • All-inclusive resorts: Dine at gourmet à la carte restaurants, and down premium drinks while accessing both day and nighttime activities.

Latin America and the Caribbean are top leisure destinations for global travelers, said Camilo Bolaños, Hyatt’s senior vice president of development, Latin America & the Caribbean. Driven by leisure travel demand, the newly opened and expected hotels and resorts mark significant growth milestones for Hyatt, he added.

Hyatt received a $110 price objective from BofA, based on a valuation below more “asset-light peers” such as Hilton Worldwide (NYSE: HLT), of McLean, Virginia. BofA wrote of Hyatt riding the lodging cycle recovery to reap hefty exposure to fee-based revenue, strong net unit growth (NUG), recovery potential and operating leverage through group and corporate-owned-hotel exposure, incentive management fee recovery and valuation multiple expansion.

BofA’s price target could be surpassed due to possible catalysts that include Hyatt’s asset sales exceeding expectations, acquisition of Apple Leisure Group providing additional upside, group recovery, pent-up demand coming back stronger than expected in second-half 2022 and net unit growth continuing to outperform lodging peers. Key risks to the price goal are maintaining significant exposure to China, which may face headwinds due to COVID policies, cases of COVID delaying a return to office trend and creating a headwind to corporate travel and heavy exposure to the luxury segment that has lagged the rest of the industry, BofA wrote.

Chart courtesy of www.stockcharts.com

Connell Favors Hyatt as One of Five Resort Stocks to Buy

 

At the onset of November, Hyatt reported a strong third-quarter performance. The company’s recent acquisition of the Apple Leisure Group, a luxury resort management service company, made the difference, said Michelle Connell, a former portfolio manager who now heads Dallas-based Portia Capital Management. The purchase allowed Hyatt to double its global resort footprint.

Michelle Connell leads Dallas-based Portia Capital Management.

Now, 70% of Hyatt global portfolio is in the luxury and upscale hospitality segment. This bodes well, since the luxury consumer has not pulled back on travel spending, Connell said.

Business travel is starting to recover from the pandemic, with 2022 near Hyatt’s pre-pandemic mark and 2023 looking bright, Connell said. Group booking revenue for the third quarter of 2022 finished just 3% below 2019 levels.

Playa Hotels Takes the Plunge as One of Five Resort Stocks to Buy

Playa Hotels & Resorts (NASDAQ: PLYA) is an Amsterdam, The Netherlands, owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. The company had amassed a total portfolio consisting of 25 resorts, encompassing 9,352 rooms, in Mexico, Jamaica and the Dominican Republic, as of Sept. 30. BofA is recommending the stock, which is not directly affected by the fallout from Russia’s continuing invasion of Ukraine.

In Mexico, Playa owned and managed Hyatt Zilara Cancún, Hyatt Ziva Cancún, Wyndham Alltra Cancún, Wyndham Alltra Playa del Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns and manages Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Grande Montego Bay Resort & Spa and Jewel Paradise Cove Beach Resort & Spa.

BofA’s $12 price objective for the stock is based on 10x the investment firm’s EBITDA forecast of $230, which remains largely in-line with the company’s average historical 11.4x one-year forward EBITDA. The company should benefit from pent-up leisure demand, recovery in room rates and travel, as well as shift in distribution channel mix which could push rates above pre-pandemic levels.

Risks to attaining BofA’s price objective are new resort supply, particularly in Cancun to challenge current rates, along with an uptick in number of hard-to-underwrite exogenous shocks, such as hurricanes and tropical storms, Zika virus, other tourist safety concerns and increased operational and financial risk. The latter risk includes factors that cause internal control weaknesses, BofA wrote.

Chart courtesy of www.stockcharts.com

Vail Ranks Among Five Resort Stocks to Buy

Vail Resorts (NYSE: MTN), of Broomfield, Colorado, is another BofA recommendation, as well as a holding of New York-based Baron Funds. Vail’s focus includes using data to drive a unique, advanced customer commitment for a recurring business model. MTN is also well positioned to benefit from high-end, pent-up leisure demand in the coming ski season.

Baron Growth Fund (BGRFX) is a prominent shareholder of Vail Resorts. Connell, the chief executive officer of Portia Capital Management, of Dallas, Texas, praised Vail, too. Key reasons Connell calls for investing in MTN include:

  • Strong growing revenues in a softening economy. Despite MTN increasing ticket prices 7.5%, the company’s revenue from ski passes was already up 7% for the year through the end of September 2022.
  • $320 Million Invested for Improved Consumer Experience. Just in time for the 2022-23 ski season, MTN invested $320 million to install 19 new chairlifts across 14 of its resorts.
  • Investment in Data Infrastructure. MTN has also invested heavily so that the online experience of its consumers is smoother and faster.
  • MTN should appeal to the environmentally conscious young investor who also skis. The company is ahead of schedule to meet its target of 2030 to have a zero net (carbon) operating footprint.
  • Estimated 12-month upside for MTN:15-25%.

Chart courtesy of www.StockCharts.com

Chart courtesy of www.StockCharts.com

Wyndham Wraps up List of Five Resort Stocks to Buy

Wyndham Hotels & Resorts, Inc. (NYSE: WH), of Parsippany, New Jersey, netted a $85 price objective and a buy recommendation from BoA. The valuation is based on approximately 15x of BofA’s 2023 estimated EBITDA, a discount to trading peers such as Hilton, Bethesda, Maryland-based Marriott International (NASDAQ: MAR) and Rockville, Maryland-based Choice Hotels International (NYSE: CHH). The value also is in-line with the long-term average of asset-light lodging C-corps, BofA added.

BofA opined the Wyndham multiple is warranted given WH’s competitive advantage in scale and stability in earnings from its pure franchised business. The market is discounting WH to factor in a historically significant number of deletions every year, offset by a business that’s almost all based solely on fees. The price objective is also in-line with a midcycle multiple on recovery earnings discounted back to 2022 estimates.

Outperformance above BofA’s price target for WH could occur due to an accelerating RevPAR environment, aided by better macroeconomic data, greater-than-expected margin expansion and net-unit-growth ahead of expectations. Risks to BofA’s price objective are greater-than-expected economic weakness, bigger-than-forecast dips in travel demand, deepened delays in hotel development that may slow system growth, worse-than-expected business and consumer spending, along with declines in overall travel demand.

Chart courtesy of www.StockCharts.com

COVID-19 Will Not Endanger Five Resort Stocks to Buy

The U.S. Center for Disease Control and Prevention (CDC) urged people to wear masks to deter the spread of COVID-19, a circulating strain of the flu and a serious respiratory virus. CDC Director Dr. Rochelle Walensky said doing so would cut the chance of catching or spreading such virulent viruses.

With flu and respiratory syncytial virus spreading at high levels in the United States as COVID cases recently rose, hospital emergency departments are strained. Walensky said everyone who is eligible to receive a bivalent booster and a flu shot should get them.

China’s economy may gain a short-term boost from relaxing its COVID-19-related lockdowns a bit, but the virus does pose a risk of causing a spike in cases and deaths due to the nation’s less-than-stellar vaccines. Weak global and domestic demand, public protests about the county’s zero-COVID policy and a real estate slump are risks to the world’s second-biggest economy.

COVID-19 cases in the United States totaled 99,562,290 and deaths climbed to 1,085,319, as of Dec. 13, according to Johns Hopkins University. America has the dreaded distinction of incurring the most COVID-19 cases and deaths of any nation. Worldwide COVID-19 deaths hit 6,656,392 people, up 6,000 since Dec. 9, while total cases reached 650,422,621, Johns Hopkins reported on Dec. 13.

The U.S. Centers for Disease Control and Prevention reported that 267,654,789 people, or 80.6% the U.S. population, have received at least one dose of a COVID-19 vaccine, as of Dec. 7. People who have completed the primary COVID-19 doses totaled 228,604,758 of the U.S. population, or 68.9%, according to the CDC. The United States also has given a bivalent COVID-19 booster to 40,007,377 people who are age 18 and up, accounting for 15.5% of the U.S. population in that age group on Dec. 7, compared to 14.7% a week ago.

The five resort stocks to buy are mostly immune from Russia’s invasion of Ukraine that began on Feb. 24 and has escalated lately. Despite Russia’s leaders calling their continuing shelling and missile firing a “special military operation,” the five resort stocks to buy cater to well-healed customers who can afford to splurge on travel even though an estimated 100,000 have been killed on each side of the Russia-Ukraine conflict that is not showing any signs of abating.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Special Holiday Offer: Paul is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great holiday gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for special pricing on multiple-book purchases.

The post Five Resort Stocks to Buy Despite Russia’s War Causing Civilians to Die appeared first on Stock Investor.

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American Prometheus

The tragic story of J. Robert Oppenheimer encompasses far more than science and politics. It is a cautionary tale of human nature that holds timeless …

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In the spring of 1954, a scientist’s loyalty to his country was questioned in a hearing orchestrated by a powerful enemy. Five years later, the tables were turned and the scientist’s enemy was exposed and publicly humiliated in another hearing. The tragic story of J. Robert Oppenheimer encompasses far more than science and politics. It is a cautionary tale of human nature that holds timeless lessons.


Few Americans recall the 1950s which made Christopher Nolan’s task very difficult when he took on the challenge of portraying the life of J. Robert Oppenheimer, a controversial genius who played a key role in the development of atomic weapons during the Second World War. Nolan created a film that generated over $945 million in box-office ticket sales over a three month run in theaters. This is a tremendous achievement in an age of limited attention spans, especially given the subject matter.

When the film was released in July, I was skeptical that I would be able to follow the storyline given my limited knowledge of the Manhattan Project that resulted in the first atomic weapons. I was also unfamiliar with the intricacies of the postwar debate regarding further development of nuclear weapons. It seemed doubtful that a three hour movie could adequately convey what I knew was an extremely complex topic.

I decided to purchase American Prometheus, the definitive Oppenheimer biography that provided much of the source material for the film, and I finally got around to reading it this month. Fortunately, I finished the book just as the movie was about to disappear from theaters. Reading the book prior to going to the theater was definitely the right call. I wonder how those who have seen the film with limited background of the story are able to fully interpret the complex plot and dialog.

It would be impossible to cover a book spanning six hundred pages in a three hour film, at least without being quite dull. Nolan chose to omit Oppenheimer’s childhood and the vast majority of his early years in favor of a focus on his academic life in the 1930s and the Manhattan Project which began in mid-1942. With the Oppenheimer and Strauss hearings as points of departure, the film consists of a series of flashbacks to earlier years. This forms the basis for a very effective narrative arc.

Rather than attempt to summarize the book or the film, I will focus on a few key lessons that I think we can learn from the life of J. Robert Oppenheimer. Since it is likely that more readers of this article have seen the film than read the book, I will try to highlight nuances of the controversy based on events that were covered in more depth in print than on the screen.



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Context Matters

“The items of so-called ‘derogatory information’ set forth in your letter cannot be fairly understood except in the context of my life and my work.”

— J. Robert Oppenheimer

At the age of seven, Robert Oppenheimer was enrolled in a private school run by a group called the Ethical Culture Society. The society was dedicated to social action and humanitarianism. According to American Prometheus, Ethical Culture was a reformist Judaic sect born in an environment in which Jewish businessmen in New York were grappling with anti-Semitism. Unlike members of the early Zionist movement, Ethical Culture members wanted Jews to lead “emancipated” lives within the diaspora. The society was not explicitly socialist but the founder had an affinity with certain elements of Marxism that dealt with the plight of the working class.1

Due to Oppenheimer’s early exposure to the beliefs of the Ethical Culture Society, which aligned closely to the beliefs of his parents, it was natural for him to drift toward the left side of the political spectrum. Although he is not portrayed as very political in his early years, an individual’s political views are often formed early.2 When the Great Depression began, Oppenheimer apparently felt some discomfort with the relative wealth he enjoyed due to his father’s business success and took an interest in advocating for those who fell into poverty.

In the film, we see the first signs of Oppenheimer’s political activity when he was at Berkeley as a young academic in the 1930s. At the time, the labor movement was very active with the Communist Party of the USA (CPUSA) taking a leading role in organized labor. With knowledge of Oppenheimer’s background from the book, it is clear that he fell into social groups at Berkeley primarily because of his family and early educational background in the Ethical Culture Society.

In the years leading up to the outbreak of World War II, the Spanish Civil War raged from 1936 to 1939. This conflict was between fascist forces loyal to General Francisco Franco and the Popular Front government of the Spanish Republic. The Popular Front was a left wing movement of anarchists, socialists, and communists who had allies within the CPUSA. Oppenheimer’s social circle included CPUSA party members determined to assist the Popular Front in the fight against fascism. Since Hitler was assisting Franco, the Spanish Civil War was thought of as an extension of the larger battle against fascism spreading through the rest of prewar Europe.

While Oppenheimer insisted that he never became a member of the CPUSA, he acknowledged funneling financial support to the forces fighting Franco via CPUSA. He also provided resources for the party to print pamphlets for other causes within the United States. Oppenheimer’s brother and sister-in-law were, at least for a period of time, CPUSA members. Jean Tatlock, Oppenheimer’s primary romantic interest during the late 1930s, and later his mistress, was also a dedicated CPUSA member.

Given Oppenheimer’s social circle, it comes as no surprise that he ended up marrying a woman with communist ties. Kitty Puening suffered directly due to the Spanish Civil War when her husband volunteered to fight and was quickly killed in action. Kitty acknowledged being a CPUSA member for a period of time but always insisted that Robert was never an official member.

Without understanding Oppenheimer’s early life and the influence of the Ethical Culture Society, it is difficult to understand his political activities. My impression, primarily from the book, is that most of the communists Oppenheimer associated with during the 1930s were idealists who had little comprehension of the tyranny that inevitably goes hand-in-hand with totalitarian communism. From an ideological perspective, these people seem not too different from current far left progressives.

There is no solid proof that Oppenheimer himself was ever a CPUSA party member, but this seems to be a distinction without a real difference given his close association with party members. Indeed, many of his closest friends thought that he was a party member. The bottom line, however, is that it meant one thing to associate with communists in the 1930s than it did to associate with communists in the 1950s.

Context matters and we should avoid retroactively applying later knowledge to judge the actions of people during another time. It seems that most of Oppenheimer’s social circle thought that they were helping the poor within the United States and assisting forces in Europe opposed to fascism. The Soviet Union was not yet a sworn enemy of the United States and indeed would become a wartime ally instrumental in taking on Hitler’s regime on the eastern front and suffering heavy losses.


Know Who Your Friends Are

Robert Oppenheimer is portrayed as the protagonist in the book and the film, but like all human beings, he was not without flaws. In an effort to protect one of his good friends, Oppenheimer made a grave mistake that directly led to his later troubles. 

Oppenheimer was a brilliant physicist but was also a man of culture with a wide range of intellectual interests including literature. So it comes as no surprise that Oppenheimer found it interesting to talk to Haakon Chevalier, a specialist in French literature. Oppenheimer and Chevalier became close friends after they met at Berkeley in 1937. Chevalier’s membership in the CPUSA was nothing unusual.

At some point during the winter of 1942-43, while the Manhattan Project was underway, Oppenheimer and Chevalier had a brief discussion about a mutual acquaintance, George C. Eltenton, a physicist employed by the Shell Oil Company who offered to pass scientific information to a contact at the Soviet consulate.

Both Oppenheimer and Chevalier were concerned that the United States was not sharing information with allies during the war, including with the Soviet Union. While Chevalier did not know exactly what Oppenheimer was working on, he seemed willing to cross the line to espionage. Oppenheimer was not. He flatly rejected the approach while making martinis, and the men joined their wives for dinner.3

By this point, Oppenheimer was the head of the Los Alamos site and it is clear that he had a duty to report the approach and name Eltenton as a potential spy. However, it would be difficult to do so without implicating Chevalier in the matter. As a result, Oppenheimer waited several months before reporting the incident, and when he did, he invented what he later called a “cock and bull story” to protect his friend.4

In a fateful interview with Army officials in August 1943, Oppenheimer named Eltenton as a potential spy while also expressing his personal opinion that he was “friendly to the idea” of the United States providing the Russians with more information on the project. He stressed that he did not want it to move out “the back door”, meaning through Eltenton. However, apparently in an effort to protect Chevalier, he referred to approaches through multiple people and refused to specify any names unless ordered to do so. Several months later, Oppenheimer did provide Chevalier’s name when ordered to do so. This created an impression of evasion.

During this period of time, Oppenheimer was undergoing a period of rapid personal evolution as he assumed responsibility for a large organization at Los Alamos. Prior to the Manhattan Project, Oppenheimer was not known for his management capabilities and few could see him in an official military role. In the six months after the approach from Chevalier, Oppenheimer’s biographers note that he had become a “changed man”, yet he continued to feel qualified to decide on his own who was a security risk and who was not. In his view, Eltenton was a risk but Chevalier was not.


Understanding Politics

It is natural that Robert Oppenheimer felt a sense of personal responsibility for how atomic weapons would be used. After all, his leadership at Los Alamos was critical. Under Oppenheimer’s direction, the United States successfully built atomic bombs that changed the course of history. However, the terrible nature of nuclear weapons weighed heavily on Oppenheimer for the rest of his life.

Oppenheimer celebrated with his team at Los Alamos when Hiroshima and Nagasaki were bombed in August 1945, but the reality is that he was conflicted about whether the use of nuclear weapons was necessary to end the war. He came to believe that Japan was already defeated and that Truman’s use of the bomb was more related to preventing the Soviet Union from incursions into Japan in the final days of the war.

In a meeting with Truman in late 1945, Oppenheimer told the President that he, Oppenheimer, felt that he had “blood on his hands” due to the use of the bomb on civilian populations. Predictably, this was highly offensive to President Truman and Oppenheimer had no further influence at the White House.

Oppenheimer was shocked that the President did not think that the Soviets would be able to develop their own nuclear weapons and he continued to advocate for a policy of openness and international control of the technology. He correctly foresaw the arms race that commenced immediately after the war and predicted that the Soviets would rapidly develop their own weapons. There is no evidence that Oppenheimer was, at any point, disloyal or tried to provide information to the Soviets “out the back door” but the impression that he disagreed with Truman’s policies hurt him politically.

Oppenheimer was a brilliant scientist but quite tone-deaf when it came to politics. He continued to speak his mind, understanding that he had a unique perspective to share and feeling a sense of responsibility to do so, yet he did not seem to comprehend that he was stepping on some powerful toes in the process.


Identify Your Enemies

The Atomic Energy Commission was created in 1946 to oversee development of atomic energy and technology during peacetime. Oppenheimer chaired the General Advisory Committee of the AEC which was comprised of nuclear scientists. The first Chairman of the AEC was David Lilienthal who saw eye-to-eye with Oppenheimer on the contentious issue of establishing international controls over atomic energy

The most important debate of the early atomic age centered on the degree to which the United States should acknowledge the inevitability of other countries developing nuclear technology and take proactive steps to control proliferation. Oppenheimer was firmly on the side of arms control and opposed development of hydrogen thermonuclear weapons of far greater power than first generation atomic weapons.

Lewis Strauss saw the situation very differently. As a member of the AEC, Strauss was a strong proponent of aggressive development of the H-bomb. As a conservative Republican, Strauss and Oppenheimer were at polar ends of the ideological spectrum. 

Despite these differences, in his capacity as a trustee for The Institute for Advanced Study at Princeton, Strauss recruited Oppenheimer to serve as the Institute’s director in 1947. Throughout the late 1940s and early 1950s, Strauss and Oppenheimer found themselves in disputes both at the Institute and at the AEC. It is not clear whether it was intentional, but Oppenheimer publicly humiliated Strauss on a technical matter and Strauss held on to this grudge which eventually evolved into outright hatred.

Strauss rarely allowed his antipathy toward Oppenheimer to rise to the surface. However, looking past the polite veneer, Strauss worked relentlessly to marginalize Oppenheimer in the debate over the H-bomb and arms control. In July 1953, Strauss was appointed as Chairman of the AEC. At a time when fear of communist infiltration of the government was near its peak, Strauss had a perfect opening to use his power to permanently sideline Oppenheimer. 


Due Process — Theory and Practice

The Oppenheimer security hearing was held in a shabby conference room behind closed doors. Spanning four weeks during the spring of 1954, the purpose was to consider whether Oppenheimer’s security clearance should be renewed. Although Strauss was not in attendance, he was the invisible hand directing the proceedings.

The book and the film both depict the hearings as a kangaroo court that had no respect for basic tenets of due process and fairness. The AEC panel formed to decide the issue had access to Oppenheimer’s massive FBI file, much of which contained evidence that had been collected without proper warrants. Crucially, Oppenheimer’s 1943 interview with Army officials over the Chevalier incident was secretly recorded and Oppenheimer’s attorney was never even furnished with a transcript.

In a trial, evidentiary rules exist to determine admissibility and to guarantee full disclosure, in advance, to both sides in a case. Such rules did not apply to the security hearing. Oppenheimer’s attorneys found themselves playing against a stacked deck week after week, constantly being blindsided by evidence that they did not even know existed. By holding the inquiry behind closed doors, Strauss was able to avoid creating a martyr for the scientific community which overwhelmingly backed Oppenheimer. 

Through the course of the hearing, Oppenheimer’s relationships with CPUSA members during the 1930s were scrutinized, not in the context of the times, but with a Cold War mindset. Obviously, being a CPUSA member in the 1930s meant something very different than being a CPUSA member in the 1950s in the midst of the Cold War. Oppenheimer was not alone in this 1950s version of “cancel culture.” 

It is difficult to point to a single reason for Oppenheimer’s security clearance being revoked, but the Chevalier incident was certainly a factor. By creating an impression of evasiveness during his interview in 1943, not knowing that he was being secretly recorded, Oppenheimer found himself contradicting prior statements eleven years later. 


Hatred Destroys the Hater

The story of Lewis Strauss is yet another example of the futility of hatred. Strauss emerged victorious in 1954 by removing a powerful political opponent from his official role. But despite his attempts, Strauss could not remove Oppenheimer from his position at the Institute. Gradually, Oppenheimer’s reputation was rehabilitated. 

Like many midterm elections, particularly during a president’s second term, the opposition gained seats in November 1958. In the Senate, the Democrats picked up thirteen seats previously held by Republicans and gained two additional seats from the new state of Alaska. When the Senate convened in early 1959, there were sixty-four Democrats and thirty-four Republicans. The election of 1960 was less than two years away and the Democrats were naturally looking for political advantage.

Two weeks before the midterm elections in 1958, President Eisenhower appointed Lewis Strauss as secretary of commerce. No cabinet official had been rejected by the Senate in over four decades, so Strauss felt confident in his chances when the Senate took up his nomination in 1959. However, the tables were about to turn. 

The Strauss confirmation hearings centered on fairness of the Oppenheimer hearings. When Strauss recruited Oppenheimer to join the Institute in 1947, Oppenheimer had volunteered that there was “derogatory information” in his past. Strauss was aware of Oppenheimer’s history in left-wing politics and did not raise objections until the two men clashed over policy matters, with the H-bomb being the most important example. In his testimony during the hearing, Strauss often appeared evasive and disingenuous. He was publicly humiliated in a very close vote rejecting his nomination.


Conclusion

It is clear that J. Robert Oppenheimer was treated very poorly during the 1954 security hearing and that it was primarily driven by personal animus and policy disagreements rather than genuine questions about his patriotism and loyalty to the United States. Oppenheimer’s association with communists during the 1930s and early 1940s took place at a time when geopolitical alignments were far different than in 1954. However, his behavior was judged by the standards of a later period and he was “cancelled.” 

This does not mean that Oppenheimer bears no responsibility for the situation. He clearly should have reported Chevalier’s approach immediately given his crucial role at Los Alamos and it should not have required a direct order to reveal the name. Inventing a “cock and bull” story to protect a friend was inappropriate and justifiably raised suspicions. However, the totality of the man’s record and accomplishments seem to far outweigh his misjudgments, and this should have been clear in 1954.

Although Robert Oppenheimer was partially rehabilitated from a political perspective in the 1960s, his security clearance was never reinstated and he never resumed his role in government. His death in 1967 at the age of sixty-two closed the book on the complex life of a brilliant man. It seems likely that a longer life might have brought greater vindication as the country moved into the 1970s and the United States and Soviet Union entered into arms control agreements. 

Times change but human nature remains constant. The tragedy of J. Robert Oppenheimer should serve as a cautionary tale that we can still learn from today.


Copyright, Disclosures, and Privacy Information

Nothing in this article constitutes investment advice and all content is subject to the copyright and disclaimer policy of The Rational Walk LLC. The Rational Walk is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.


  1. American Prometheus, Chapter One, contains details on the Ethical Culture Society.
  2. Depending on personality, it seems like young people either drift strongly toward the politics of their parents or rebel by going in the opposite direction. In Oppenheimer’s case, his close relationship with his parents appears to have resulted in political alignment.
  3. American Prometheus, Chapter 14, covers the Chevalier incident in 1942-43 in detail.
  4. American Prometheus, Chapter 17.

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CORRECTION: The expiration of pandemic-era public assistance measures fueled poverty increases in the majority of states

Updated October 24, Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response…

Published

on

Updated October 24, 2023

Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response to the pandemic-driven recession reduced poverty rates nationally in 2021 to below pre-pandemic levels. However, because policymakers ended many of these programs—including expanded unemployment insurance, the expanded Child Tax Credit, and economic impact/stimulus payments—poverty rates rose from 7.8% in 2021 to 12.4% in 2022. Child poverty, which had fallen to record lows in 2021, increased from 5.2% to 12.4% in 2022.

In this post, we show poverty rates in each state. Data for the official poverty measure—the one most often quoted in media—are compared with the Supplemental Poverty Measure (SPM), which provides a more complete picture of the well-being of families in the states. When using the more comprehensive measure of poverty, we see that poverty rates increased in the majority of states after programs like the expanded Child Tax Credit were allowed to expire.

The official poverty rate fails to capture the true level of economic hardships faced by families

The official poverty measure classifies a family as being below the poverty line if their pre-tax cash income is lower than the official poverty threshold for their family’s size and the age of family members. The SPM, however, is more reflective of the typical expenses families face. This measure considers family income as well as noncash benefits families receive, including Supplemental Nutrition Assistance Program (SNAP) benefits, housing assistance, and tax credits. This measure further adjusts for taxes that families pay, child care expenses, health care costs, and geographical differences in the cost of housing.

Figure A shows the official and SPM rates for all 50 states and the District of Columbia.1 Southern states make up 13 of the 15 jurisdictions with the highest official rates of poverty.2 Mississippi and Louisiana have the second- and third-highest poverty rates at 17.8% and 16.9%, respectively. They are followed by Arkansas (15.9%), Oklahoma (15.8%), Kentucky (15.8%), and West Virginia (15.6%), all with poverty rates above 15%.

When ranked by the SPM, the District of Columbia (14.8%), California (13.2%), and Florida (12.7%) rise to become the jurisdictions with the highest poverty rates—reflecting high costs of living, particularly the cost of housing. Mississippi (12.5%) falls to the fourth-highest poverty rate, followed by New York (11.9%), Texas (11.3%), and Louisiana (10.9%).

Overall, 17 states have SPM rates higher than the 9.8% national rate and 12 of these are in the South.

Figure A

Poverty increased in states across the country

Figure B focuses exclusively on SPM rates in 2021 and 2022. This data shows that poverty rates increased in 27 states once many of the safety net supports ended in 2021. Eleven of these states are in the South. Some of the states with the largest increases, however, include Nevada, Kansas, Washington, Texas, and New Jersey.

Figure B
Figure B

It is difficult to see any clear regional or political patterns that might explain the varied changes in SPM poverty rates across the states. The published SPM data do not allow us to see how the loss of federal pandemic aid programs affected individual states. Further complicating any analysis, the state-level SPM estimates are calculated using three years of data; the 2021 values reflect average conditions from 2019 through 2021 and the 2022 values reflect average conditions from 2020. This means that both year’s estimates include a period when the federal aid programs were in effect and when they were not.

Nevertheless, it is the case that the states that experienced an increase in their SPM rates also tended to experience an increase in their official poverty rate from 2021 to 2022, and Southern states are overrepresented among the states with larger-than-average increases in SPM poverty.3 Of the 22 states where SPM poverty rose more than the overall national increase, nine are in the South. This suggests that conditions that led to higher poverty rates prior to the pandemic—in some cases, state and local policies that fail to protect families from poverty and higher than average housing costs in others—are likely driving the increase in poverty in the most recent state data. Unfortunately, the data we have here do not allow us to identify to what extent each of these contributes to the rise in poverty in specific states.

State lawmakers can pass policies to expand the safety net for vulnerable Americans

The large increase in poverty as pandemic aid programs ended clearly shows that social policy matters for the well-being of Americans and their families. During the pandemic, the federal government moved to ensure that workers, the unemployed, and families across the nation had the resources they needed to make ends meet. But after policymakers let many of these programs expire, 2022 poverty rates increased nationally and across more than half of U.S. states. Policymakers at the state level should heed the lessons of the economic response to the pandemic and implement policies to lift their residents out of poverty and provide them with a path to prosperity.

Notes

1. Calculating the Supplemental Poverty Measure at the state level requires the use of 3-year averages to ensure adequate sample sizes. Both the official poverty rate and the supplemental poverty rate here use the 3-year average to ensure they are comparable.

2. The District of Columbia is not a state but is referred to as a state in this blog post for simplicity.

3. Exceptions to this are Mississippi, Hawaii, New York, Idaho, North Dakota, Delaware, and New Mexico. In Mississippi, the official poverty rate declined but the SPM increased. In the remaining states, the official poverty rate went up but the SPM declined.

Correction: This post has been updated to include state poverty data comparing 2022 with 2021. The previous post incorrectly compared 2022 data with 2019 data. 

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International

CORRECTION: The expiration of pandemic-era public assistance measures fueled poverty increases in the majority of states

Updated October 24, Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response…

Published

on

Updated October 24, 2023

Poverty in the U.S. is a choice directly reflecting federal, state, and local policies. The expansion of safety net programs in response to the pandemic-driven recession reduced poverty rates nationally in 2021 to below pre-pandemic levels. However, because policymakers ended many of these programs—including expanded unemployment insurance, the expanded Child Tax Credit, and economic impact/stimulus payments—poverty rates rose from 7.8% in 2021 to 12.4% in 2022. Child poverty, which had fallen to record lows in 2021, increased from 5.2% to 12.4% in 2022.

In this post, we show poverty rates in each state. Data for the official poverty measure—the one most often quoted in media—are compared with the Supplemental Poverty Measure (SPM), which provides a more complete picture of the well-being of families in the states. When using the more comprehensive measure of poverty, we see that poverty rates increased in the majority of states after programs like the expanded Child Tax Credit were allowed to expire.

The official poverty rate fails to capture the true level of economic hardships faced by families

The official poverty measure classifies a family as being below the poverty line if their pre-tax cash income is lower than the official poverty threshold for their family’s size and the age of family members. The SPM, however, is more reflective of the typical expenses families face. This measure considers family income as well as noncash benefits families receive, including Supplemental Nutrition Assistance Program (SNAP) benefits, housing assistance, and tax credits. This measure further adjusts for taxes that families pay, child care expenses, health care costs, and geographical differences in the cost of housing.

Figure A shows the official and SPM rates for all 50 states and the District of Columbia.1 Southern states make up 13 of the 15 jurisdictions with the highest official rates of poverty.2 Mississippi and Louisiana have the second- and third-highest poverty rates at 17.8% and 16.9%, respectively. They are followed by Arkansas (15.9%), Oklahoma (15.8%), Kentucky (15.8%), and West Virginia (15.6%), all with poverty rates above 15%.

When ranked by the SPM, the District of Columbia (14.8%), California (13.2%), and Florida (12.7%) rise to become the jurisdictions with the highest poverty rates—reflecting high costs of living, particularly the cost of housing. Mississippi (12.5%) falls to the fourth-highest poverty rate, followed by New York (11.9%), Texas (11.3%), and Louisiana (10.9%).

Overall, 17 states have SPM rates higher than the 9.8% national rate and 12 of these are in the South.

Figure A

Poverty increased in states across the country

Figure B focuses exclusively on SPM rates in 2021 and 2022. This data shows that poverty rates increased in 27 states once many of the safety net supports ended in 2021. Eleven of these states are in the South. Some of the states with the largest increases, however, include Nevada, Kansas, Washington, Texas, and New Jersey.

Figure B
Figure B

It is difficult to see any clear regional or political patterns that might explain the varied changes in SPM poverty rates across the states. The published SPM data do not allow us to see how the loss of federal pandemic aid programs affected individual states. Further complicating any analysis, the state-level SPM estimates are calculated using three years of data; the 2021 values reflect average conditions from 2019 through 2021 and the 2022 values reflect average conditions from 2020. This means that both year’s estimates include a period when the federal aid programs were in effect and when they were not.

Nevertheless, it is the case that the states that experienced an increase in their SPM rates also tended to experience an increase in their official poverty rate from 2021 to 2022, and Southern states are overrepresented among the states with larger-than-average increases in SPM poverty.3 Of the 22 states where SPM poverty rose more than the overall national increase, nine are in the South. This suggests that conditions that led to higher poverty rates prior to the pandemic—in some cases, state and local policies that fail to protect families from poverty and higher than average housing costs in others—are likely driving the increase in poverty in the most recent state data. Unfortunately, the data we have here do not allow us to identify to what extent each of these contributes to the rise in poverty in specific states.

State lawmakers can pass policies to expand the safety net for vulnerable Americans

The large increase in poverty as pandemic aid programs ended clearly shows that social policy matters for the well-being of Americans and their families. During the pandemic, the federal government moved to ensure that workers, the unemployed, and families across the nation had the resources they needed to make ends meet. But after policymakers let many of these programs expire, 2022 poverty rates increased nationally and across more than half of U.S. states. Policymakers at the state level should heed the lessons of the economic response to the pandemic and implement policies to lift their residents out of poverty and provide them with a path to prosperity.

Notes

1. Calculating the Supplemental Poverty Measure at the state level requires the use of 3-year averages to ensure adequate sample sizes. Both the official poverty rate and the supplemental poverty rate here use the 3-year average to ensure they are comparable.

2. The District of Columbia is not a state but is referred to as a state in this blog post for simplicity.

3. Exceptions to this are Mississippi, Hawaii, New York, Idaho, North Dakota, Delaware, and New Mexico. In Mississippi, the official poverty rate declined but the SPM increased. In the remaining states, the official poverty rate went up but the SPM declined.

Correction: This post has been updated to include state poverty data comparing 2022 with 2021. The previous post incorrectly compared 2022 data with 2019 data. 

Read More

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