Dear Janet Yellen...

The following originally appeared on Capital Watch

Dear Mrs. Soon-to-be-Treasury Secretary,

We have never met. Not a surprise: We travel in different circles. 

Nevertheless, I want you to know that I am deeply infatuated with you. Is it the soothing sound of your Bay Ridge-borne accent? Or that shimmering silver bob?

I’m not the only one to fawn over that hair. In 2013, after your nomination to Chair of the Federal Reserve—the first woman to be nominated, as you well know—Sue Horton of the Los Angeles Times wrote this: “In recent days her face has been everywhere. It’s a pleasant face, with a half-smile and kind eyes. And it’s framed by a silver bob.”

Indeed, it is. And now, as you break yet another barrier, becoming the first woman to be chosen as Treasury Secretary, we are once again reminded of that kind face and that razor-sharp wit.

In truth, to many, there is as much to love about who you are not, as there is to love about who you are.

Elizabeth Warren may have praised you for the asset-capping, share-scuttling penalties you inflicted on Wells Fargo WFC and the colorful language you used to excoriate them for their macabre account-creating deviousness, but you are no Elizabeth Warren. You are a capitalist, a free-market champion of open trade.

But you are no corporatist shill either. Who can forget your calm and collected evisceration of your conservative Senate rivals? Not me. For the day that you courageously framed income and wealth inequality in economic, rather than political terms, was the day that I fell in love.

“Sticking your nose in places where you have no business to be?” What was Mick Mulvaney thinking? In his defense, you were the first Fed Chair to publicly discuss these issues. Prescient, it turns out, as you paved the way for your Republican successor Jerome Powell to do the same—just as you were prescient when you were one of the first to sound the alarm about a housing bubble.

Where was Mulvaney when his fellow Republicans so publicly did likewise? Oh, that’s right, he was cutting taxes for the wealthy, adding deficits, undermining the very bureau to which he was assigned, playing a pivotal role in the Ukraine scandal for which President Trump was impeached, “resigning” from White House Chief of Staff, and subsequently being banished to Northern Ireland. Rumor was that he was also considering forgiving that billion-dollar penalty to Wells Fargo for the very fraudulent abuses you so skillfully shined a light on. Rumor also has it that Trump considered keeping you on as Fed Chair. Is that true? Ugh, men are the worst. And men named “Mick” are even worse than that. He doesn’t get you, Janet, but I do.

And so do bankers outside of Wells Fargo’s boardroom.

“Bankers know Yellen and seem to have a good working relationship with her, so there is probably some relief among management teams that candidates who are openly hostile to the industry (Warren) were passed over,” Brian Gardner, Stifel's chief Washington policy analyst, wrote in a note to clients this week.

You are viewed as fair-minded and moderate (in disposition as much as in your views). You are known for succeeding in every big job you have ever had. You are known as the candidate that both right and left can embrace. But this is no ordinary time, as you know, and how you will fare in your most political job in such tribalized times during the height of a pandemic is yet to be known.

So, what should we, the investor, expect?

Should we expect a push for more stimulus, more coordination of monetary and fiscal policy in the context of a much closer relationship between the Fed and the Treasury in light of your background? Word is we should expect you to intervene when markets are “disorderly,” but we should not expect a heavy-handed effort to push the dollar one way or another. Is that true?

What is less clear—and yet of critical importance—is how you, whose expertise is more in domestic economic affairs than international trade and diplomacy, will approach U.S.-China relations.

As you know, trade policy—particularly in how it relates to trade with China—will be of the biggest challenges you will face.

We don’t know everything you think about China. We do know that you have called the nation out for some practices but do not seem to think that tariffs are the way to go. For what it’s worth, I agree.

While Trump’s tariffs were well-intentioned, they were ultimately fruitless. If “America first” means scrapping or ignoring the very international institutions and the very multilateral rules that the United States had the heaviest hand in creating, then America first we should not be. Trump rightfully called out Chinese malfeasance. The question of how best to deal with it—and how best to benefit from this unavoidable relationship—has yet to be answered.

We sincerely hope that you, however, will help do just that.

On the need for multilateralism, I remember you said this at a Credit Suisse event:

“We’re seeing a huge retreat from the principles the US has espoused and all the institutions that we built in the postwar period.”

You added, “Resisting protectionism and strongly supporting a rules-based multi-lateral system are what the US stood for and promoted as a global system with great success.”

You then went on to say, in that lovely, accented way you have, that U.S. has turned its back on said principles—and that that is a mistake. If indeed the WTO is broken as Trump said it was, working to fix what is broken—rather than just threatening to abandon it—must be part of the solution.

But I know you will be patient on this score, Janet. 

Before any progress with China can be made, both the left and the right have to double down on being tough with Beijing. The Georgia January runoffs will decide the Senate; appearing weak on China is a surefire way to lose. To wit, the House just approved the much-discussed legislation that China-based company investors like me have tried to wish away for months. The bill which now awaits Trump’s imminent signature bans Chinese companies from trading in New York if they refuse U.S. PCAOB auditing or have ties to Beijing.

But you know all this, Janet. You know that the bill in question is a harsher measure, unlike the Securities and Exchange Commission (SEC) proposal also under consideration, one that will not allow non-compliant companies to trade over the counter. This means that we may have to say goodbye to so many OTC China stocks. I am telling my readers to stay away, sell, or short these stocks with almost wild abandon to capitalize on what will be an exodus of many, many China-based companies.

But what about the big ones, Janet? What about the Alibaba's and Baidu's of the world? While big exchange-listed companies like Alibaba Holding Corp BABA are going to—and have already—taken a hit on fears of this bill’s passage, unless these companies are fraught with fraud, they should remain and even continue to thrive on U.S. markets, right? Do we really want $2 trillion in market cap vanish from our bourses?

This, Janet Yellen, will be dependent on, among other things, the general tone and tenor the Biden Administration sets after the cacophonous battle for control of the Senate fades. It will be, in large part, up to you to set the tone—and the policy—that will make or break the relationship between U.S. markets and the Chinese behemoths so many U.S. retail investors like me are betting on. Point is, I do not think I should I sell Alibaba if I bought at $300 or more per share just yet. Or should I?

Ah, Janet, if you only knew how much faith we all have in you. Yes, helping to fix the relationship with Xi’s China will be tough. Issues like Chinese competition in technology, Chinese state subsidies for state-owned companies, and national security concerns are, as you said at the Asian Financial Forum in Hong Kong in January, “… quite difficult to deal with.”

Indeed. But if anyone can cut through the noise to make real progress on Sino-U.S. trade and economic relations, it will be you, Janet Yellen.

No pressure, Mrs. Secretary.

P.S. Do you Snapchat?