Predictions, 2019 Edition!

It is that time again!

Fearless Predictions!

  

Sports:

Stanley Cup – Toronto Maple Leafs will lose to the Nashville Predators in 6 games. 

World Series – Red Sox; they are just too strong.

Super Bowl – Patriots, for the last time for 20 years.

Blue Jays – Will go 70 - 92, with the worst ERA in the league. Shapiro and Atkins will be fired.

Montreal – Now that the Rays’ new stadium quest in Florida is at an end, Montreal will be advised that it will get the Rays as the new Expos, contingent on buying out the Rays’ existing lease and building a new stadium. With a federal election pending, Trudeau will backstop the new stadium with federal funds. The stadium will finally cost $2.8 Billion, up from an originally-estimated price of $400 Million - the Montreal Mob will have a new “happy time.” The Expos will “play ball” again in Montreal in 2021 in the new “Trudeau Dome”.

Markets/Stocks:

DOW – Will drop to 12,000 by Spring, 2019.

S&P 500 – Will drop to 1,200 by Spring, 2019.

Pot Stocks – WEED will be at $5 a share by the anniversary of legalization in Canada. Almost all of these stocks will be down dramatically, and there will be a take-over and merger frenzy. Some of the name-brand companies will be bankrupt by end of 2019. A few will be exposed as criminal Ponzi schemes, with links to organized crime and with their managers/operators having milked them for all available cash.

GOLD! – Will be $1,500 by Spring, 2019.

Cdn Banks – Expect a third debt downgrade in just over three years by Moody’s by Spring, 2019.

International Personalities:

Trump – In face of impeachment talk by senior Republicans following final Mueller indictments of his son and son-in-law, will resign for “medical reasons” by Spring, 2019. President Pence will immediately pardon him of any and all crimes he may have ever committed, as well as pardoning all of his relatives.

Hillary Clinton – Will announce a third run at the US Presidency for 2020.

Julian Assange – Will be in a US prison by Spring, 2019.  WikiLeaks will respond with a deluge of exceptionally embarrassing information about the private lives of many world leaders. Expect at least five world leaders to resign in disgrace shortly after his arrest…is Mr. Macron among them?

Theresa May – Will be out office following a devastating electoral defeat for her Conservative Party that sees them reduced to third party status by Spring, 2019.  

Rolling Stones – Will tour again!

International Politics:

North Korea – Will explode another nuclear weapon in 2019.  The USA, Russia and China will set aside differences and agree on an embargo that forces North Korea to actually give up its nuclear program, which it will do when the USA undertakes to never put nukes in South Korea again. 

Nuclear Weapons – The USA, China and Russia tentatively agree to a new short-range nuclear weapons treaty. Pakistan and India enter talks to limit their arsenals and put them under international supervision, partially agreeing to come under the Nuclear Non-Proliferation Treaty. Israel will remain outside.

Iran – Will be convulsed by mass demonstrations – viciously suppressed.

China - Will be convulsed by mass demonstrations – viciously suppressed.

Syria – Will hammer out a peace deal with the help of Russia and Turkey, resulting in the end of the civil war. Over 200,000 people will return home.

Yemen – Will hammer out a peace deal as massive pressure is brought to bear on Saudi Arabia by the UN and that country’s allies. Aid will flow in saving hundreds of thousands of lives.

Brexit – Will be stopped following its mass rejection in a referendum, 61% to 39%, in late March, 2019. The Liberal Democrats will take power in the subsequent election, as Conservative Euro-sceptics move to UKIP following the defeat of Brexit, thereby starving the Conservatives of support; and moderate Labourites stay home in the face of Corbin’s extremism, thereby starving Labour of support. The Lib Dems will run a successful minority government for two years, then will win a majority in 2021 primarily at the expense of the Conservatives, who will not win government again for a generation.

Italy – Will have a referendum on Italexit, which will approve leaving the EU by a wide majority. Italy will remain in the Europe Union, but will get a better budget deal.

Europe – Will see Far Right-Wing parties make significant electoral gains in 2019 (Netherlands and perhaps Belgium.)

Economics: 

Recession – Expect a 3% pull-back in GDP in the Western countries, and an average of over 10% unemployment by the end of the year. Many international banking institutions will be on the brink of failure. Many US multi-national corporations will be on the ropes – especially GE, GM and Ford.

Canadian Housing – Price drop of 15% in Toronto and Vancouver by the end of the year….with prices accelerating down as the year ends.

Oil – Prices will hit $30 a barrel.

China – Expect recession and strikes and local revolts against the Communist government – viciously suppressed.

Bailout – The US Fed will hand $2 Trillion to US Banks to make sure of “liquidity” in the system. Bank CEOs will double their bonuses.

Bail-In – Banks in selected countries – maybe Cyprus again and maybe smaller European countries - will be allowed to convert the deposits of individuals and corporations to their own use as they face financial ruin in the face of recession, as a form of “bail-in”. This will later be tried in Germany and China, and will lead to mass protests and civil unrest.  Bankers and leaders worldwide will stop the practice, and will go back to just printing money to solve economic crises, also known as “Bail-in by Devaluation.”

QE/Buy-Backs – The US Fed will buy $1 trillion in US stocks in order to “support employment” – in spite of the fact that buying equities does not do this. By the end of 2019, the US Fed will be the largest holder of US equities in the world. US markets will still fall about 50%.

Roberts Intervenes!

The Chief Justice of the US Supreme Court has intervened in the Mueller Investigation.

The issue is a subpoena issued last August to a foreign corporation that has been challenged by that corporation as being outside of the jurisdiction of the United States. (Note - I was wrong in a previous blog - the subpoena was not sent to Hope Hicks.)  

The challenge has been making its way through the courts since August, and so far every single US appeals court has said that there is no merit in the appeal - the corporation must obey the subpoena.  

And now, with the only step left in the process being an appeal to the US Supreme Court, the Chief Justice, as the justice responsible for the courts that have heard the appeals so far, has stopped the process, and demanded that the government - a.k.a. Mueller - respond to certain arguments made by the foreign corporation in its challenge to the subpoena.

Why would he do this?

Conspiracy theorists will suggest that he may be corrupt! No he isn't.

I think he is doing his job and being exceptionally careful - making sure that every single argument being made by this foreign corporation to try to defeat the subpoena is thoroughly responded to and vetted prior to sending this appeal to the Supreme Court itself, where it will likely be defeated again.

Roberts would only do this if he thought the foreign company in question was of a higher than normal level of importance - hmmm...perhaps a Russian corporation operating in the USA, perhaps with direct ties to a certain foreign leader who may have engaged in certain nefarious activities?

Spoiler Alert!!!  

Russia is a kleptocracy, where the leader and his minions have been slowly stealing the wealth of that country. To make this work, they needed a stooge to help them launder their ill-gotten gains...as in, someone who has a life history of constant financial difficulties.

Stay tuned.





 

Baby Boomers Are A Drag

The Baby Boomers who were born in 1946 in the USA started retiring at age 65 in 2011. The last Baby Boomers born in 1964 will retire in 2029. They will make up about 20.6% of the US population by 2029.

Average Social Security income of Baby Boomers is $17,500 a year. Median savings for the 70% who have saved for retirement is about $250,000, which would generate an income of just over $10,000 a year. But 30% have no savings at all. If they are averaged in, then the average income from savings for Baby Boomers in the USA will be about $7,500 a year. Put this together with the Social Security payments, and you get to a yearly income for these people of about $25,000 a year.

Now the average income on retirement for Baby Boomers is about $50,000 a year. If they only have $25,000 a year on average in retirement, this means that the average retiree will be forced to live on 50% of their previous income in retirement.

About 25% of Baby Boomers will receive a company pension. But these pensions are mostly broke, as is Social Security. As the pressure on Social Security and these pensions mounts as more and more people retire, expect government to start to means-test applicants for Social Security, with any company pension being deducted from a Social Security entitlement dollar for dollar until it is gone. In short, even including company pensions, I think the assumption that Baby Boomers will have to live on about 50% of their previous income is accurate.

An average of 12.7% of the US population was retired between 1990 and 2011, when the Baby Boomer started hitting age 65. In 2030, when they are all past age 65, the percentage of the population that will be retired will be about 20.6%, for an increase of about 8% overall in 20 years.

Recall that these people will, on average, only have about half the income they previously had when retired. The USA is a services and consumer driven economy, so the overall contribution to economic consumption of these people will be cut in half by 2029.

Because they are the largest demographic cohort in society, the USA will have a larger percentage of retired people by 2029 than at any time in its history, meaning that the drag on consumption that will accompany these retirees will also be larger than ever before.

If we take 1990 – 2010 as a base, then the proportion of retirees in society who will be living on an average of only 50% of their previous income will be rising by about 0.4% of the total population a year, every year from 2010 to 2029.  

By 2029, Baby Boomers will be collectively spending about 4% worth of GDP less each and every year than what retirees have been spent had society continued with a normal demographic spread where retired people only made up 12.7% of society as from 1990 to 2010, not 20.6% by 2030.   

I suspect that the drag on consumption from this unprecedented mass of retirees has not been factored in by most economists when they look at future economic growth. Just to stay even, the economy would have to grow by 0.2% more each year as more and more people retire and start to spend at only 50% of their previous rate. 

The economy will also have to maintain this growth every single year to stay even, as the 0.2% drag is not a one-time thing, but lasts until these people pass away and the percentage of people who are retired in society gets back to normal. 

To stay even since 2010, we would have had to have had, first about 0.2% a year in growth in 2011 when the Baby Boomers started retiring, and now about 2% a year in growth which is the drag on consumption that has accumulated since then, with this continuing to rise by 0.2% every year until 2029.

This Baby Boomer consumption drag is the reason why, in spite of more fiscal and monetary stimulus than at any time since WW2, economic growth has been mostly tepid worldwide since the Great Recession, only taking off in the last few years. Throughout this time, as stimulus has pushed the economy forward, these retirees have been spending less and less and have been pulling it right back again.

Expect that, no matter what governments and central banks do, economic growth may be tepid for at least another decade, at least until all Baby Boomers are finally retired and demographics start to get back to something like normal. 

Beware the PPT!

It’s Plunge Protection Time!!!

The DOW and S&P 500 plunged on Christmas Eve by 3% and 2.7% respectively. This was unprecedented – the S&P 500 had never fallen on Christmas Eve by more than 1% in the entire history of the exchange. This plunge was a continuation of a general pull-back in stocks that started when companies were barred from buying their own shares during the corporate reporting period in October, halting a $1.1 Trillion stock buy-back binge this year, and the plunge has picked up steam from there. Markets are now officially in bear territory having fallen 20% + from their peaks.

It seems that the “powers that be” are getting a tad worried about this.

On December 23^rd, Steve Mnuchin called the heads of the six major US banks to discuss the situation as well as other issues. The government press release following the meeting stressed that there were no liquidity problems that sparked the call. This comment may have spooked stock markets. Many investors may have thought that the only reason that the government would stress that there were no liquidity problems would be if there actually were such problems, as no one had been talking about this before the call! 

The markets plunged on December 24^th, as noted above.

Also on December 24^th, Mnuchin called the “Plunge Protection Team” to discuss the situation. The PPT is formally called the President’s Working Group on Financial Markets, and was established by President Reagan following the market collapse in October of 1987.

On the first day of trading following this call to the PPT from

Mnuchin - that is December 26^th  - the DOW and S&P 500 rose by more in that one day than on any previous day in their history. It is obvious that following the call from Mr. Mnuchin, the PPT took action to “stabilize” the stock markets by triggering a wide range of aggressive buying of equities.

The point of such buying is to restore confidence in the market – to make it look like a bottom has been reached in order to get average buyers back into the market. The problem with this approach is that, absent some reason inherent in news or the economy itself for people to buy equities again, any government-led buying of equities could look amateurish and incompetent. In fact, such buying may even backfire and may even trigger even more concerns about the market the and the underlying economy, because after all, why would the government be intervening if all is well?

Consider this…CNN has a tracker of a range of indicators that are indicators of investor confidence, which it reports on its website here…

https://money.cnn.com/data/fear-and-greed/

The measure is out of 100 possible points, where 100 is maximum possible confidence and 0 is minimum possible confidence. 

Today the measure is at a whopping 5, after being at a stunningly worrisome 4 yesterday!  

Yes, you read that right, this measure of investor confidence is at FIVE out of a possible 100!!

I follow this measure daily – I have never seen this measure of investor confidence at such a low rate.

So, did the PPT save the day? 

As of the mid morning, the S&P 500 is down 44 points, or 1.75%, and the DOW is down 429 points or 1.88%. The markets stayed well down until about 2:30 pm...then, almost on cue, they all started to rise again! The DOW ended the day up 260 points, for almost a 500 point turn around in the last hour and half of trading. The S&P 500 ended up 21 points. 

The point of the PPT is clear. Forget trade wars, massive corporate buy-backs coming to an end, government shut downs, rising interest rates, and economic expansions that are long in the tooth. The powers that be will simply not let markets fall...until they do.

It is conspiracy time again!

What is the next shoe to drop? 

Now that this year’s unprecedented stock buy-backs seem to be over as an artificial support to stock prices, will central banks start printing money to buy equities to support the stock market? Some are already doing so and they have been doing so for years now (i.e. the Swiss and Chinese central banks, at least.) 

On that, “Helicopter” Ben Bernake has previously suggested that having central banks print money to buy equities is one way for those central bankers to fulfil their core mandate to keep inflation low and employment high. On the surface, there seems to be no rationale link between stock market prices and these two measures – what matters to support long term employment is profit, not day to day prices. As well, central banks are over 100 years old, and no central banker has ever expounded on this supposed link before.

But is it possible that Bernake is just so much smarter than everyone else that he has seen something virtuous in supporting equity markets to keep people employed that every other central banker before him was just too stupid to figure out? Or is this just much simpler - are central banks now so utterly corrupt that they will say and do anything to keep their wealthy buddies in the Black?

We may soon find out.   

All together now!....

“One, Two, Three, Four,

Who Are We For!?

PPT, PPT!

Yeah…PPT!!!”

Are British Conservatives Insane?

They hate the EU!  They love the UK!  

There was a referendum a few years ago designed to put Conservative Euro-sceptics in their place - the sceptics won. 

Since then, we have seen one British Conservative PM resign, and another call a disastrous election; called in the hopes of securing an unquestioned mandate to return Britain to her former glory by leaving the EU. She has a minority government now.

If the UK leaves the EU, it may no longer be the UK as Scotland, which voted to stay in the UK a few years ago, does not share the English Conservatives enthusiasm for Britain, circa 1923. Scottish Nationalists are salivating at the prospects. Is Sean Connery too old to be King?!

Northern Ireland would be in a pretty pickle, as it would share a border with Ireland which will stay in the EU. Ah yes, Ireland...have there ever been political problems there?

And Wales? No one knows.

No one thinks the UK economy will do better without unfettered access to Europe. If there is an economic argument, it is based on myth and spin.

Still, they keep calm and carry on! 

Today, the Primer Minister and leader of the Brit Cons, whose leadership is opposed by 1/3 of Conservative MPs, will say that nothing is more dangerous to democracy than a second referendum! For goodness sake, do not ask the people! Then again, she can't ask Parliament, as she would obviously lose!

She has a point about calling referendums - look at the chaos that the first one wrought!

I have to think this is a life or death exercise for these politicians - will the Conservative Party even exist in five years?

Blue Jays

Do the Jays have a plan to be a contender?

With AA, you could almost always discern a plan, and you knew his goal was to get to the top of the game. With this crew, it seems like "chaos in search of a strategy".

I'm happy to give them the benefit of the doubt and to be patient, especially with Boston and the Yankees as good as they are, but this is about more than just filling needs in the lineup.

They need to explain how we go from today's less than mediocre offering to a World Series, specifically, how are they going to get the most out of the excellent young talent they have coming up by matching them to a first rate pitching staff?

Go Jays Go!

From "No Contact" to "No Collusion" to "No Knowledge"!!

Trump is on the ropes.  

His former associates will testify that there were on-going contacts with the Russians while he was running for office, directly contradicting his first line of defence, which was that there was "No Contact" between these two parties. He has not said "No Contact" in at least 18 months now, having moved on to effectively saying, "Yes, there may have been Contact, but there was NO COLLUSION!!"

The sentencing submission filed by Mueller in Cohen's sentencing says that there were on-going attempts to do a deal to build a Trump Tower in Russia during the campaign, and that the Russians were actively seeking to use the business dealings as a spring-board for a political relationship. What they were offering seems crystal clear - "You play ball on US foreign policy toward Russia once you are president, and we will make that Trump Tower you want so badly happen."

As noted here, I think it is likely that there was probably a different deal as well - if the Russians could produce information that would bury Clinton and hand Trump the presidency, he would relax sanctions on them once he was in office.

If Trump and company took this bait and/or made these deals, even tentatively, they would have been a sell-out of America, plain and simple, and also clear and unadulterated "Collusion". 

Expect a third line of defence to emerge very soon, with Trump going from "NO COLLUSION", to "I had NO KNOWLEDGE of what my associates were doing!" Welcome to the second last refuge of a scoundrel, "My underlings did it!"

And after that defence collapses, as it definitely will in the face of Mueller's exhaustive understanding of precisely who knew what, and when...then what???







  

"Perjury Traps!??" Oh, Come On!

Trump's media minions are all atwitter about supposed "perjury traps" being set by Mueller's Men.  

The term has been raised regarding Manafort, Cohen, Flynn, Papadopoulos, and even Trump himself, strongly implying that there is something unfair or even corrupt about how this investigation is being conducted.

This is what we are taking about...

"A perjury trap is a form of prosecutorial misconduct in which a prosecutor calls a witness to testify, typically before a grand jury, with the intent of coercing the witness into perjury  (intentional deceit under oath.)"

This is a serious allegation. Trump's minions are essentially implying that Mueller and his team are attempting to get witnesses to perjure themselves in order to further their case. Doing this is itself criminal offence.

What do we know?

Cohen lied to Congress.

Manafort lied to the US Government about his taxes and status as an agent of a foreign government, then lied to Muller and his team while interviewed as part of a plea deal that fell apart.

Papodopoulos lied to the FBI about when he had his first contacts with Russians as part of his work for the Trump Campaign.

Flynn lied to the FBI and others about his contacts with the Ambassador for Russia after Trump's victory.

Hicks has admitted to telling "little, white lies" for Trump.

You will note that these people were not lying for the FBI, they have been lying to the FBI and others. 

Ladies and gentlemen, this may come as a surprise, but it is a crime to lie to the police. Without a subpoena, you do not have to discuss anything with the police, but if you do and you lie to them, this is known as "obstruction of justice". 

But weren't these people coerced? Are they not about to tell lies in court to enable Mueller and his team to get to other people as well?

Consider the defences that every one of these people had in place to guard against a possible "perjury trap".

Every single person who was interviewed by the FBI, and/or who appeared before Congress had the benefit of a lawyer or even multiple lawyers to advise them regarding their answers. One of them actually is a lawyer. They were therefore free to answer every single question in any way they saw fit, with the benefit of legal advice regarding the possible implications of those same answers. Any possible traps would have been noted by their lawyers in advance of answering, enabling them to carefully measure their answers so as to avoid any legal liability.

Not only that, but in the USA there is something called the Fifth Amendment. It says this...

"No person shall...be compelled in any criminal case to be a witness against himself...."

American citizens are permitted to "plead the fifth" whenever they encounter a situation where they are under a legal obligation to reply to a question posed by a state official, and they think that answering that question may place them in legal jeopardy. 

Every single person noted above would have understood that, if they thought that by giving an answer to a certain question posed by the FBI pursuant to a subpoena they could incriminate themselves, they could have simply declined to answer, noting that answering could put them in legal jeopardy.

The key thing to understand here is that, in spite of having legal counsel to advise them and the benefit of the Fifth Amendment, these people chose to lie anyways!  

And so, there is no mystery here about how these people came to be in legal "hot water". They are known as "liars", who chose to lie to the police, not because they were coerced by anyone, but because they had something to hide from the police and/or from Congress.  

The surprise for them, and I think the real source of much of the upset on the part of Trump's media minions, is that what they did not know when they lied - and what Mr. Manafort has recently found out - was that Mueller knew precisely when they were lying, because as is increasingly becoming obvious, he knows all the background information regarding their activities, in detail. 

On that, if a police officer asks a question where they already know the answer, and they sit back and watch as a witness lies in response to that same question, this is not a perjury trap. There is no coercion in this scenario - the witness is free to lie or not as they see fit.  If the witness chooses to lie, they will pay the price, and it is not a fault of the police that they did some work in advance to assess the true situation before asking any questions.  

What about Trump?

Trump not only had the benefit of reams of lawyers to pour over the questions that were sent by Mueller in order to prepare appropriate answers, but his lawyers actually got to negotiate what questions he would be asked by Mueller.

Given that his own lawyers had a hand in crafting the questions he answered, the only way that Trump could have been set up with a perjury trap is if he was trying to set up himself!

Trump was also not subpoenaed - he did not have to answer any questions at all. How anyone could be hinting at a perjury trap regarding Trump where there wasn't even an obligation to answer questions is beyond me.

If Trump lied in his responses to the questions posed by Mueller, he did so with the benefit of legal counsel, in full knowledge of his rights especially the rights to refuse to answer any question that might incriminate himself.

I would have told him to stay silent, given his very obvious problematic relationship with the truth.

Mystery Witness

See here...

https://www.dailymail.co.uk/news/article-6449265/Mystery-witness-fighting-subpoena-Mueller-probe-gets-closed-door-hearing.html

The mystery witness received a subpoena in August - the same month that Hope Hicks resurfaced and took her ride on Air Force One with President Trump.

This is now flying through the courts - the only judicial recusal is a Trump appointee.

Trump cannot have Hope Hicks turn state's witness, or even testify about what she knows under duress. She knows everything. She apparently kept notes of her every interaction with Trump. She is the smoking gun. 

He likely promised to protect her during their flight, and he got her a job at Fox News so she can continue to pay her legal bills. 

But this subpoena will not be quashed. 

I would expect that Mueller will concentrate on small fry like Stone until her has her testimony. I would also expect her to sing like a canary once she is finally cornered.

Why Cohen Matters

Cohen has maintained that Trump did know about the June, 2016 meeting between Manafort, Trump Jr., Kushner and the Russians.

Trump sent his response to Muller's questions last week. Apparently, they say that "to the best of his knowledge", Trump did not know about this meeting. He has previously been very firm in saying that he did not know about that meeting before it took place, including on Twitter.

And today - only after Trump has provided answers directly to Mueller on this issue - Cohen has entered a plea to providing misleading testimony to Congress.

Thoughts.

Case Management. Mueller is so far ahead of these people that it is scary - his management of this case is a masterpiece. 

I think he waited until Trump may have implicated himself by providing a written lie to the FBI regarding what he knew about the above noted meeting, before moving ahead to convict the person who will provide contrary evidence. 

If he had convicted Cohen sooner, Trump may not have offered the lie. This is not entrapment or baiting someone - Trump chose to answer as he did - he was free to tell the truth at any time, and was not coerced in any way.

It Was Trump's Meeting. It is inconceivable that Trump did not know about a meeting between his son, his son-in-law, and the head of his political campaign for the presidency of the United States - the three most powerful people in his campaign other than Trump himself - with anyone else during the campaign, especially the Russians. He knew.

Six Days in June. Trump Jr., heard about the meeting on June 3, 2016. The meeting was held six days later. What Mueller may actually know, but needs someone to provide evidence to prove, is what transpired during those six days.   

As noted here before, I think it is very likely that a tentative deal was hammered out in those six days. In short, if the Russians actually had evidence that would have destroyed Hillary Clinton and therefore handed the presidency to Trump, in return Trump would have relax sanctions on Russian that were imposed after they annexed Crimea, after he was elected. Such a deal would have been tantamount to treason.  

What happened in those days is the key to this entire sad episode, and it still remains to be revealed - "Six days in June" may soon become as important to US political history as the 18 missing minutes of tape recording was 45 years ago.

Hope. The other person who would know all of this is Hope Hicks. She is no doubt watching very carefully as Trump continues to fail to pardon Manafort, and the fact that as Manafort continued to lie to the FBI, they knew of every single lie as he told them.

Is she going to plead to obstruction to avoid prison and cooperate?  Has she already been cooperating for months? She does not want to spend the rest of her life in prison. 

Seth Rich. If the Russians did provide the leaks regarding Clinton to Wikileaks, as seems obvious now, then Seth Rich did not. Was he killed to throw off any investigation into the source of those leaks - that is, was he killed by the same people who stole the e-mails in the first place? 

And what do we make of Julian Assange's offer of $25 K for information leading to his killers? This offer reinforces the impression that he was the source, and further obscures the matter.

Trace the statements and assertions and their sources here...do you believe Trump, Assange and the Russians; or Mueller and the FBI?

Clinton. She was in Toronto recently with her despicable husband, getting ready to run again in 2020. She needs to go away.  

Canadian Political Ethics and Trump

I'm a Canadian. We have very well-defined ethical standards in my country when it comes to police investigations and politicians.

If an investigation is underway, politicians are expected to say NOTHING regarding the investigation to ensure that there is no chance that they may inadvertently affect its outcome. Politicians who do make such comments typically have to resign.

When the politicians themselves are in any way considered to be the subject of such an investigation, they must step aside for its duration. They may return to office afterward should they be cleared of any wrong-doing, but the rule is clear -  investigations are considered to be more important than any one person's career.

Consider this...

"While the disgusting Fake News is doing everything within their power not to report it that way, at least 3 major players are intimating that the Angry Mueller Gang of Dems is viciously telling witnesses to lie about facts & they will get relief. This is our Joseph McCarthy Era!"

And this...

"The Mueller Witch Hunt is a total disgrace. They are looking at supposedly stolen Crooked Hillary Clinton Emails (even though they don’t want to look at the DNC Server), but have no interest in the Emails that Hillary DELETED & acid washed AFTER getting a Congressional Subpoena!"

It goes on and on.

Trump's deranged Twitter tirades are simply unthinkable in a Canadian context. Anything like this would see demands for the immediate resignation of the author of such Tweets, with support for the person's resignation from across the political spectrum.

This is not a matter of "...vive la difference!" It is a matter of either having ethics, or of not having them at all.

Manafort Unflips!

Manafort has not been cooperating. He has been caught in a cavalcade of lies after promising the FBI that he would fully cooperate in return for a lenient sentence following his conviction before a jury of his peers on eight criminal charges.

What do we make of this?

Manafort obviously didn't know what Mueller knows, and did not know that Mueller was fully aware of when he was lying and when he was not. This is good - Mueller still has a leg up in terms of the evidence base that he has to work with.

Manafort also obviously never intended to cooperate. He was either promised a pardon by Trump, or more disconcerting, he has been the key actor is a filthy charade designed to draw out the investigation as long as possible, to allow its opponents to work to destroy it....or both. 

It seems that Manafort is still Trump's man, and that is very bad for the investigation as it no longer has its key witness.

As noted here repeatedly, Mueller needs one of the insiders to flip in order to fully prosecute any crimes coming out of the meeting between Manafort, Kushner and Trump Jr., and the Russians in June, 2016. Right now, he appears to have no one. 

Other than some charges and convictions of those who obstructed justice and of some Russians who worked to influence the last presidential election, this investigation may be over.

Again - where is Hope Hicks in all this?

This is 100% about Russian influence on this hall of power in the USA. Based on his last meeting with Putin, it is clear that Trump is deeply compromised. Putin is now making some very aggressive moves in Ukraine. Has he been assured that the USA won't lift a finger?

How deep is the rot here? 

I sense a tragedy unfolding.









 

The Great Unravel

How will it all unravel?

We have price bubbles in housing and stocks – at least.  Rising interest rates at the end of a business cycle will cause these bubbles to collapse. In fact, this process has probably already started.

What follows is what happens when these bubbles start to unravel, and this is what is about to happen…again.

Housing Prices:

Falling house prices causes speculators to panic. These people cannot be caught with losing investments because they likely do not live in their investment properties, and they have no intention of paying them off - they will sell/dump, and take whatever profits that have now – or they will get out whatever cash they can, while they are still able to do so. This will drive prices down even more.

Recent buyers will be in the red as prices fall. Most prices of recent buyers will be below the value of their deposit plus the mortgage. Those with variable rate mortgages will be in serious difficulty as their monthly mortgage payments will rise on homes that can only be sold at a loss. Some may even see the value of their homes drop below the value of the mortgage itself, meaning they have no equity in their homes at all.

This will spark even more selling – both on the part of owners who are in the red to avoid even deeper losses, and more so as a result of creditors panicking and foreclosing on mortgages before prices fall so far that they are in the red on the mortgage book as well.

Most homeowners will initially be fine in this scenario – the above situation may only affect a maximum of 5% of homeowners. But home prices reflect most recent sales not historic values, so the price action around these speculative and distress sales by variable mortgage/underwater owners will be enough to collapse the prices of everyone’s home by a significant margin. Prices in Toronto fell 30% from 1990 to 1996.

The biggest issue at this point in the bubble’s collapse will be what is evident in every single very collapsing bubble driven by rising interest rates – prices will be lower, but it does not matter how far prices fall, as there will be very few buyers as almost no one will have any money to buy, especially in Canada where we have never been more in debt. 

Housing Industry:    

The above price drop and drying up sales will devastate the entire housing industry. The unemployment rate rose from 4% to 12% in Toronto in 18 months from mid-1989 to the end of 1990 during the last major real estate collapse. Anyone employed by this sector will be at risk – builders and trades people; building materials producers; lenders and bankers; real estate agents; support staff. It could take years for employment in the sector to recover, and employment recovery will match price recovery – prices did not recover in Toronto after the last collapse for 12 years.

These are very good jobs. The hollowing-out of real estate sector employment will have a similarly devastating impact on the wider economy, affecting everything from clothes retailers, to coffee shop and restaurant owners and workers, to car salesmen and women. In this scenario, the collapse of the real estate sector becomes the driving force behind a general economic slowdown and recession.

But it gets worse. 

As noted, the first round of speculative and distress sales will drive down the value of every single property. This will catch even some people who are not recent buyers with variable rate mortgages or speculators, and will force even more distress sales. 

A key point - The initial price drop is not a one-time, time-limited thing. It sparks a vicious cycle of further price drops as buying dries up as those who still have money stay on the sidelines waiting for ever lower prices, and more and more people go underwater on their mortgages often becoming unemployed at the same time in the more general slow-down, forcing these people into ever more distress sales. With time this cycle subsides, but it could take years to get back to a virtuous cycle of price appreciation. 

Again…house prices in Toronto dropped for SIX STRAIGHT YEARS the last time this happened, and did not recover for 12 years.

The Stock Market:

When the stock market and equities bubble starts to burst, many people who have invested “on margin” face a call to pay up what they have borrowed. Investing on margin allows those who do this to borrow cash from their broker to buy many more times what their initial investment could have bought, searching for gains that are a multiple higher than could have been provided by just buying a given stock. 

But just as their gains could be many multiples higher, so can they suffer a multiple of losses. When prices drop, massive losses by people who invested on margin spark demands to repay their margin loans by their brokers, resulting in borrowers selling at distress prices – they often sell at any price they can get to pay their debt. At times, some brokers actually sell the stocks of those investors at a loss just to recoup their loans from these people.

So as with collapsing real estate bubbles, a collapsing equities bubble also sparks distress sales which drives falling prices even lower because these sales often swamp normal buying and drive prices of all equities down significantly as margin investment occurs throughout the market.

While some people will continue to buy while prices fall, falling stock prices usually freezes most investment. This drying up of buyers usually forces the market even lower as Fear takes over from Greed, and people decide to take profits and sell. As with the real estate vicious cycle, there is such a cycle in equity markets as well drive by the fear of losses, although it does not last as long.

Again, as with the real estate sector, a declining equities market drives increasing unemployment especially in the investment and banking sectors, and in the wider economy.  While not contributing as much to the general economic downturn, the employment effects on this industry are often far more severe than those even on the real estate sector.  Many people who lose their jobs in the investment and banking sector in a general stock market collapse and economic downturn never work in the sector again.

Government:

Governments do not plan for recessions. The above scenario will cause revenue to dry up while demands for government services increases as more and more people become unemployed. 

The result will be a massive increase in deficits, and a turn to austerity financing as governments slow or stop public sector hiring and wage growth, as well as cut program spending. Governments also usually take action to try to "Keynes" their way out of recessions by spending on things like infrastructure, driving deficits even higher, and central banks lower interest rates, reversing one of the primary causes of the recession in the first place.

Eventually, growth returns courtesy of private sector recovery, and public sector efforts, but by dropping rates and spending borrowed cash, governments and central banks inaugurate the start of the next great bubble…

Query – can we borrow and spend our way out of the next recession given how much we owe now?