Trump, the Damaged

Cue the smoke and mirrors...

"Blame the Democrats!" "Blame the Freedom Caucus!" and now..."Blame Ryan!"

Reality - no one will see the political catastrophe that is the failure of the effort to "repeal and replace" Obamacare as anything other than an indictment of President Trump.  

A president who cannot get one of the three main domestic policy planks under which he was elected done (the others are tax reform and the Wall), and who is under investigation for cooperating with America's historic enemy to gain power is now so severely damaged that he is not long with the White House.

The math isn't hard - the Democrats plus the Freedom Caucus = enough votes to impeach Trump in the House of Representatives.  An impeachment vote would have to be 50% + 1 there.  He just proved that he didn't have the votes to pass health care reform, in spite of the fact that this has been the number one Republican policy objective for seven years. I think those same votes will soon be mobilized to impeach him.

The Senate requires a 2/3 majority to impeach, meaning 19 Republicans will have to vote with the Democrats/Independents (48 Democrats/Independents + 19 Republicans= 67) to get rid of Trump. I think those who want to impeach will have the necessary votes.

What will be their respective motivations?

First the Republicans...

The Freedom Caucus would likely love a President Pence who is "their kind of people", especially after Trump's deeply ill-considered ultimatum to pass the American Health Care Act or pay a political price. Tax reform, and the elimination of masses of government programming? They don't need Trump for that.

The non-Freedom Caucus-linked Republicans hate Trump. He stole their party last year when he won the nomination, and even in his Inaugural Address, he just shit all over them while doing it.

The problem is in the Senate, where 19 Republicans have to turn against their party's president. In that august house, it is likely that McCain would sponsor the impeachment resolution, so at least his vote is in the bag!  The 18 others are all career politicians - they are the Establishment; they own Washington; and I think they deeply resent this impolitic interloper who is trying to change their game.  They are no doubt chafing at the bit to get at him. With the announcement of the FBI investigation, and the failure to deal with Obamacare, all they need now is an opportunity to launch some "we need to save America" propaganda lines to be rid of this troublesome man.

Finally, after demonizing this man in their propaganda to a point where he may even rival Hitler now in terms of his assumed inherent evil, and after beating their champion, Hillary Clinton, the Democrats would also love to get rid of Trump...regardless of the fact that the guy who would replace him is WAY more conservative than he is.

In short, Trump has managed to make enemies just about everywhere he has gone in Washington. Vengeance may be a dish best served cold, but I think things are about to get very hot there.

And, ironically enough, cross-party cooperation may finally come to Washington!!...albeit only as these very strange bedfellows look across the aisle and see their opportunity to strike a blow for America's deep and damaging cynicism. The Washington Establishment is about to win again!

Trump is now obviously done.  It is just a matter of time.

Comey v Trump

The Comey Circus continues!

What we know...

There is no evidence that Obama and his White House wiretapped the Trump Campaign, and/or Trump Tower....which, of course, is impossible as this is not how wiretaps come about. In short, the impossible didn't happen.

There is an investigation underway into whether Russia influenced the recent US Presidential election, and with that, whether the Trump Campaign colluded with Russia to influence that campaign. This investigation started last July!

No information will be provided by Comey regarding this investigation, except that he confirmed that Russia was trying to influence the campaign, defeat Clinton and help Trump. He did not say how he knows this, but this repeats past allegations by the US Security Establishment. He also said that the Russians concluded that Trump was hopeless last August. Note! He is not revealing anything about the investigation!!! "Hush hush, nothing to see here".

What we don't know...

Who leaked wiretap information that destroyed Flynn's nomination as National Security Advisor and/or who may have ordered the leak. Doing this is a crime. Comey refused to answer whether or not he discussed Flynn's wiretap information with Obama or the White House...he didn't take the Fifth in so doing. We also do not know if there is an on-going investigation into this and other clearly illegal leaks.

Whether the FBI/CIA/Dept of Justice or anyone in the US Security Establishment tried to obtain a warrant to wiretap the Trump Campaign last Spring and again in October after the first request was denied. It seems clear that these wiretaps actually were sought.

Whether certain Trump Campaign staff were in regular e-mail communications with Russians and Wikileaks throughout the presidential campaign, including BEFORE the leaks began, as alleged by the Democrats. It seems clear that some of them were.

Comments...

1. The investigation into the Trump Campaign's relationship with Russia would not go ahead without a wiretap. I think we can assume that this was successfully obtained in October of last year, and that Trump, his staff, and all significant campaign workers have been wiretapped for the last five months. In short, the allegation that Trump and his staff were wiretapped will be proven true - there is an actual wiretap - not because he was running for office, but because of their links to Russia which makes these wiretaps perfectly legitimate.

2. Comey needs to step aside.

He was a card-carrying Republican and is now leading an investigation into whether or not a Republican president may have won an election, in part, through collusion with a foreign government. He is not a Republican now, but ANY appearance of a possible conflict of interest in what will likely turn out to have a Watergate level of political importance is so serious that he needs to recuse himself so that a prosecutor with no previous political ties can take over.   

More than that, this man is manifestly incompetent. He has noted that it is a standard operating procedure to not comment on ongoing investigations, and if any FBI agent had done what he just did in confirming the investigation into Russia and Trump, they would have been fired - by Comey. He has now gone public about ongoing investigations not once, but four times in the last 9 months, and has personally affected the outcome of a US Presidential election. Far from following the Golden Rule of "no comment", one is left wondering if he ever does anything else? He needs to go. Now.

3. We are on the precipice of a Constitutional Crisis in the USA. This is exceptionally serious.

Comey told Congress that as part of his investigation, he will be looking into whether or not crimes were committed.  Well, duh!  As part of his incompetence, he does not seem to understand the magnitude of either his investigations, or of what the political implications of having confirmed that the investigation is underway may be. Here they are...

Collusion with a foreign government to affect a US presidential election isn't just a possible criminal matter...it is possible treason. This is Article 3 of the US Constitution, "Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort...."  

Is Russia an "enemy" of the US, and is colluding with Russia to take control of the US Government the equivalent to "adhering" to this enemy? In a time when wars are not declared, the USA is in confrontations with Russia in Ukraine and Syria, at least. While there is no on-going traditional war between these two nations, they are clearly "enemies" of a sort.  If any such charges were to be successfully pursued, the possible sentence could be death - especially if promises were made in return for the assistance of the Russians. Obviously, the possibility of this is very remote - but it is also very real. When was the last time you could seriously suggest that a President of the United States or anyone associated with that person may have possibly committed treason?

The revelation that there is an investigation into possible collusion between the Trump Campaign and Russia suggests the possibility that the last US presidential election was not free and fair. There is an argument that this Russian hacking/Wikileaks leaking would not matter if the Clintons were not magnificently corrupt. No matter. While the corruption of these people is a matter of grave concern (see below), the fact that a foreign government may have tried to impact a US election is itself very serious, especially if they got help from one of the candidates, or vice versa. If this is the eventual conclusion, the only political recourse is impeachment. Again, this matter is potentially at the level of at least Watergate in its importance and significance.

Before anything like this happens, the confirmation of this on-going investigation will work to very seriously damage the Trump Presidency, and with that the Office of the President while he is in office (more on this below), and the USA itself.  America's enemies are likely singing Comey's praises today - the USA is much weaker than it would have been had he simply said "No comment...you will know when it is appropriate to tell you, as with any such investigation." With the confirmation of an on-going investigation, Trump looks very impeachable, and anything he will do in office just became much more difficult. At the very least, the ability of Trump to just lead the US Government has been seriously undermined. ISIS and other nasties, including North Korea, will likely try to take advantage of this situation.

4. Trump will be impeached soon - maybe before my prediction for the end of the Summer.

Trump used the POTUS Twitter account to continue his battle against all opponents yesterday. This was an escalation in his unrelenting battle to illustrate just how obviously unfit he is to occupy the Office of the President of the United States. His challenge is to put this office before himself. He is finding that this is simply impossible - his basic temperament will simply not allow him to behave appropriately.

The Republicans are going to use him to try to get some sort health insurance reform through, blaming him for the fact that it is "amendment" not "repeal and replace". After that, they will leave him like that "ship-leaving rats" that they are. I think an impeachment vote will be above 75% in favour. Trump will not resign, and will have to be dragged out of the White House kicking and Tweeting all the way.

5. The Democrats are doomed.

The Democrats need Trump to deflect attention from just how corrupt and disconnected from Americans they have become. The Wikileaks e-mails about the Clintons were devastating.  Once Trump is gone, and President Pence goes ahead and acts like a quasi-normal Republican politician, the Democrats are going to face a new and brutal nomination fight as Hillary Clinton announces she will run for a third time. Her hubris will tear that party apart.

And so....there you go.

PDAC!!!!

The PDAC

I went to the Prospectors and Developers Association Convention in Toronto last weekend. Highlights and reflections follow.

The general mood was the most positive I have seen since before the Great Recession.  Most of the companies that I approached had money in the bank and real exploration or mining plans underway. There was a general sense that this will be a great year for junior exploration and mining companies. I think the confidence is warranted.

There were fewer companies at the PDAC than in past years. I have not been for four years, and it is obvious that many of the companies that were struggling at the time did not survive. I think that the ones that did have a much better appreciation of just how close they are to catastrophe - they are on the margin at all times, and I hope that this knowledge will drive much better management and more thoughtful risk-taking in years to come.

I did notice a few geologists who had rented booths in order to sell prospective claims. I don't recall seeing this before. It may reflect lower rental costs for booths, a stronger sense of the opportunities in the market, or both. One geologist advised that two of her properties were going to be gone by the end if the first day.

There was also a good share of more memorable exchanges with less reputable companies. Some of these follow...same company.

The IR guy was at the booth - no geologists or other managers, who we were told were on holidays. We were shown a group of about 12 prospective properties...

Q - "Are all of these properties in good standing?"

A - "Well...no."

Q - "Do you have any cash?"

A - "Not at the moment, but we are hoping for $70,000 in a private placement from insiders soon."

  

Q - "What does this company need to move ahead successfully?"

A - "We need new management, asap!!!"

Q - "Is there a search underway for new management?"

A - "Yes!  The new guy was supposed to fly in today.  I have no idea where he is."

Q - "Do you know who he is?"

A - "Well...no."

I took a pass on that one.

The quote of the Convention, courtesy of my cousin..."Let your winners run!"

The only difficult aspect was missing my father with whom I had attended all previous PDAC's that I went to. Here he is, about to launch on a tremendously interesting and eventful life. He is missed every day.

Fearless Prediction - Update

Trump impeached within 6 months - certainly before the end of the Summer.  McCain will have his revenge.

Slavery to Keynes Blinding us to Hayek

Quick thought of the day...

The world is Keynesian now - even the "Republican" president of the USA is talking about spending $1 Trillion on infrastructure in order to "prime the pump". Classical economics is dead.

F. Hayek though that this pump priming always leads to bubbles,and that collapsing bubbles were more painful to go through than plowing through a recession,setting up real positive growth when you came out the other side.

The thought - we are now so deep into the mindset of a Keynesian bubble-fest that we do not even think about the alternative. Investors buy when news is bad hoping for more stimulus and intervention. Governments and central bankers spend most of their time inventing new tools to be used to stimulate growth (NB - expect the US Fed to be on to negative interest rates within a few years.) The world blithely stumbles along with mass indebtedness hoping and praying for more borrowing to cure what ails them.  

The alternative is balanced budgets and paying off debt while limiting regulations to mitigating the worst ills of capitalism, while also ensuring that competition is fair and letting interest rates find their own level as a reflection of the risk inherent in debt. No one is talking about this today. The last time we did this was after WW2 - when we saw the greatest economic expansion in human history.

What is the cost in terms of investments forgone and risks not taken from knowing that governments are wildly ignorant of the long term risks from excess debt, while also supporting crony capitalism and distorting markets for everything from milk, to gold, to cars, to stocks, to bonds?

The key psychological hallmark of the post-WW2 era was confidence, which is what follows taking on mass debt and winning.

The key psychological hallmark of today is the unspoken fear that comes with the realization of mass financial indebtedness and an utterly empty policy toolbox, coupled with an unconscious decision to just ignore it hoping all will miraculously work out well.  The "animal spirits" are not released by timidity and fear.

 

Recession Anyone?

Is the USA already in recession?

The US Treasury receipts dropped year over year to Jan 31, 2017.  Look below - every time receipts drop and go negative, a recession is sure to be close.

Central Bank Buying Spree!!

After keeping rates at historically low levels for almost a decade, and after buying bonds and mortgage-backed securities valued  in the trillions of dollars, central banks appear to have have arrived at their last policy option - buy stocks.

 

As early as five years ago, the suggestion that central banks were actively buying equities was considered ridiculous - part of a vast conspiracy theory.

 

See here....

 

http://www.zerohedge.com/news/2017-01-23/80-central-banks-plan-buy-more-stocks

 

The Japanese central bank is a top-ten investor in the majority of companies on the Nikkei, and it owns 2/3 of the ETFs on that exchange outright. The Swiss central bank and the Chinese central bank have also bought hundreds of billions of dollars worth of equities world-wide.

 

The rational for buying equities is varied. The Swiss are buying stocks to earn more than can be earned from buying in bonds. The Japanese are clearly buying in order to prop up their flagging stock market. The Chinese are probably buying for both reasons.

 

The mandate of a normal central bank - including those in Canada and the United States - is to keep inflation low and employment high. They are usually NOT there to make any type of a return on their investments.

 

Larry Summers, economic advisor to Barack Obama, and a former US Treasury Secretary, has explained why central banks may need to buy equities like this...

 

"It is something that economic logic suggests should be considered in other places where the zero lower bound is a potentially important monetary policy issue,” he said, referring to the perceived lower limit for benchmark rates set by central banks.

 

This is the Swiss argument - with rates so low, for central banks top make any money they need to buy equities. 

 

This ignores certain uncomfortable realities...

 

1. Central banks set the rates that the Swiss and Summers think are so low that they should buy equities in order to get a better return. If they have a problem with return, then just raise rates.

 

2. Central banks can print money. It is impossible to predict what a policy of central banks buying equities may lead when the purchaser has no limits in terms of its buying power. It should seem obvious that this will lead to a massive distortion in the price of equities. The "talking heads" claim that Bank of Japan purchases of equities have not distorted the Nikkei, ignoring the fact that it owns 2/3 of the ETFs that are listed there, and propping up the exchange is the whole point of the policy. This is normally called "lying".

 

3. This policy has nothing to do with the mandate of the central banks which is low inflation and high employment.

 

4. In the long run, this policy means that the public sector will own huge swaths of the private sector, effectively undermining our present understanding of capitalism and setting up a situation where the public sector directs major private sector activities, especially if the public sector managers start asking for seats on corporate boards.

 

This blog has warned of an overpriced stock market and looming recession over the past few months. If central banks world-wide start to buy equities, all bets are off....they have unlimited funds, and could drive markets to any level they want.

 

However, Japan is in a decades-long recession as it has never been able to deal with mass borrowing and assets bubbles that accumulated in that country in the late 1980's. If central banks start buying equities, we may see a situation similar to the one in Japan where we have a recession, but with rising stock prices with those prices pumped by fantasy money. If this were to happen, then as soon as the buying stops, one would expect the public markets to essentially collapse.