Drama!

The Drama continues!

Manafort went down on 8 counts the day Cohen pleaded to 10. One is in the bag, the other faces a probable re-trial on the ten charges that resulted in a mistrial, as well as the other charges in Washington. Mueller gets to show that this guy is a criminal two more times instead of one. Manafort faces life in prison. 

I have opined on why he has not made a deal yet – was he thinking his old boss would fire Sessions and Mueller, and make it all go away with a pardon?  I don’t see a pardon anywhere – Trump is letting him fry in the cooker. I have to think Manafort now gets this, and that he is actively negotiating with Mueller.  No doubt Hicks is watching this all very intently.

The Trumpsters are crafting a memo to respond to the report that Mueller has not even written yet, based on the idiotic and seditious allegations that the investigation is tainted and illegal. Trump is now openly calling it an “illegal investigation.”

Yes, one of the agents involved had obvious Clinton leanings. Mueller fired him. There is NO EVIDENCE that this man perverted the investigation in any way prejudicial to Trump.

Yes, the investigation into possible ties between Trump’s campaign and the Russians began during the election. The suggestion, now being circulated by Trump’s media whores, that the FBI should have just approached Trump during the election so that he could deal with it is borderline insane.

It is inconceivable that the outreach to the Russians that clearly occurred to and from the Trump camp was a matter of “lone wolves” acting with no direction from the campaign itself. To have asked Trump to deal with it would have been like asking Mr. Wolf to please check on the Chicken Coup to make sure all the birds were OK. The inevitable answer would have been “They are fine…and they were delicious!”

Fact – the Trump Campaign was under investigation by the FBI stemming from VERY disturbing links to Russians that members of that campaign initiated and fostered, where we now all know that the Russians were actually trying to subvert democracy in the USA. How could the FBI have possibly not responded?

Trump’s constant commentary about Mueller and the investigation (“illegal”, “17 angry Democrats”…etc.) is seditious and represents an ongoing case of attempted obstruction of justice. Trump is the number one law enforcement officer in the USA, and not only is he commenting on it, he is openly subverting an on-going criminal investigation!

On its own, and in any other era in American history, this justifies impeachment.

Through his bombardment of idiocy and vitriol by way of his Tweets, and through his minions in the press, he has lulled us all into a sense of stupefaction, whereby we no longer understand what we are actually watching and hearing. He has worn us all down! We need to apply the pre-Trumpian ethical standards expected of elected officials and the executive branch in the USA.

The standards? 

No elected official can be permitted to shamelessly denigrate and attempt to influence the on-going workings of an active police investigation, especially one potentially related to the official himself! In fact, in order to preserve the sanctity of the investigative process and the appearance of legitimacy, elected officials who may possibly be touched by criminal investigations are supposed to step aside until the investigations are over.

How far below this simple and historic ethical standard regarding the administration of justice does this man fall? Far from protecting the integrity of the investigative process, his entire purpose is clearly to subvert it! In any other era, he would already be gone.

Prediction – the second his lawyer McGahn is gone and the mid-terms are over, Sessions will be fired and replaced by Rudy Giuliani.

Over to you, Republican patriots.

Fake Economic News!!!

Here is the New York Times on the state of the economy...

https://www.nytimes.com/interactive/2018/08/12/opinion/editorials/trump-tax-cuts.html

America!!!

America the Beautiful!

I had an opportunity to travel through Northern Vermont, New Hampshire and Rhode Island over the last week.  

The Americans do know how to build highways! The ones we travelled, especially the ones in Vermont, cut through gorgeous scenery and were very well-maintained. Everywhere there were stunning tree-lined mountain vistas that were uninterrupted by any development whatsoever. Bravo America!

What of America itself?

We stayed in Rhode Island for a week. The weather was awesome. The beaches were not overcrowded and they were very clean. 

Americans post warnings of massive fines for anyone who pollutes. We used to do the same thing. I went on a number of very long walks, and there is no question that the city where we stayed in Rhode Island is very substantially cleaner than Ottawa. We need to post some signs!

The food was BIG! We went to IHOP, and I had blueberry pancakes – four of them in the normal order!  Wherever we dined, the food was big. We cooked and ate mostly at our rented house.

Many of the people were big too. The average American male weighs 196 pounds. The average Canadian male weighs about 177 pounds. They are the same height. Some of the men I saw would have topped out at 400 pounds, easily.

For many Americans, “Life, Liberty and the Pursuit of Happiness” has come to mean the consumption of everything imaginable as a path to those ends. “To eat is to be free!!” - of all the things Americans consume, food appears to stand at the top of the list as the great provider of pleasure, and therefore happiness. But many of them look so sad and sick….

The USA has full employment! 

Every single Dunkin Donuts that we went to had help wanted campaign on. It looked like most employees were students – not unusual. One is left to ask…”what about the 40 million Americans who are on food stamps?!” Surely they would qualify for a job at a donut shop!

What’s going on?

Well sir, they don’t have to work! These people are supposed to work 20 hours a week to receive food stamps. Millions of them have been granted exemptions by various states – the only basic exemption for able-bodied persons is supposed to be for people over age 50.

How many people is this? 

Incredibly, 62% of the 21 million able bodied Americans who are on food stamps are exempted from the requirement to work 20 hours per week in order to receive this benefit. That is about 13 million people – twice the number of people who are officially unemployed in the USA.

The math follows. 

The official unemployment rate in the USA is 3.9%, representing 6.3 million people. This is what is called U3 – one of six measures of unemployment used by the US Bureau of Labor Statistics. It measures  the percentage of people in the work force who are unemployed, and who looked for work in the last four weeks. If an unemployed person did not look for work during that time, they are not considered for the purposes of U3.

The U6 measure of unemployment considers all people who are unemployed or underemployed in the USA in a given year.  That rate is 7.9%, and this is considered to be a much truer representation of the actual unemployment situation in the USA. This would be about 12 million people.

But U6 does not go beyond one year. This measure would not pick up the people who are living on food stamps, who have been unemployed and/or underemployed for more than 12 months. The number of people in this category could be upwards of 13 million people unemployed and another 8 million working 20 hours a week, and therefore underemployed. 

Of course, there would be some overlap as some of these people would be captured by U6 as they would be in this situation during the year long period covered by U6.  Nonetheless, it is probably not a stretch to posit that perhaps another 13 million people are either underemployed or unemployed in the USA, beyond the year cut off of U6, and they are therefore not captured by that measure. This would be another 8% of the workforce.  Added to U6, this represents a possible real unemployment rate of perhaps 16 - 17%.

Trump wants to revise the food stamp program to reduce the number of exemptions so as to get people back to work. Requiring that someone work or that they go to school in return for social assistance is absolutely normal. There will be a great hue and cry when he “attacks the poor!”, but from what I saw, there are many, many jobs available for anyone who wants to work. 

Back to Rhode Island!

The people were very friendly. I like Americans – many of them treat you like you are a long lost family member with whom they cannot wait to get reacquainted! It can be quite charming.

But RI was a tad odd. I know that there are Black people in the USA, but we may have seen no more than ten in all of our time there. There were no Black people on one of the beaches that we went to…by that I mean absolutely zero non-White people. Coming from Ottawa, which is a highly integrated and multicultural society, the absence of anyone other than White people was a tad odd.

I liked the ocean. It was warm and surprisingly salty! I crashed into waves with my kids for upwards of five hours in total. They had a blast, and have life-long memories to cherish. I did not get sand in my butt, which is always my great fear.

The Americans do war memorials better than we do. 

I went to the local war memorial, and it commemorated all American wars back to WW1. Unlike us, they remember the women who died in the wars, as well as the men – often nurses killed near the scene of various battles, or who died of disease while in service or after being captured. We could learn from them regarding this aspect of our collective national memory.

Americans do ice cream right! Enough said.

The news was odd. I watched the Great American Divide unfold right before my eyes on the tv every night after the kids went to bed.  On the one side we have CNN…on the other we have FOX. It was bizarre, with the same stories spun so completely by both networks as to be unrecognizable.

Conclusion - the US news networks do not report news. The reporting of facts is very limited compared to what is a massive, almost non-stop editorial commentary. These networks are bought and paid for – are Hannity’s guests actually paid to wear their fake, smug know-it-all smiles when they appear on his show to spew their lies and distortions?  Some of them are renowned legal scholars who have accomplished great things. How sad that they are reduced to shameless shills.

“Money is the great leveller, and Greed is its handmaiden.”  

I would go back, but maybe next time to a desert place like, for example, Las Vegas.

Different This Time???

If you worry about a frothy stock market, please read this...

https://www.businessinsider.com/stock-market-double-tech-bubble-valuation-one-measure-shows-2018-8

The difference will come from the sheer breadth of the pull back this time...unlike in 2000-2001, there will be nowhere, other than maybe Gold, to hide.

The NYT also reported that stock buy-backs will hit a record $1.1 Trillion this year. It is a market propped up by the greed of the wealthy, about to consume the dreams of tens of millions of average investors.

 

Hicks and Manafort

Many happenings this week...

Manafort's trial has started, without a plea.  

Hicks has been sighted, deplaning from Air Force One.  

Trump has admitted that the June, 2016 meeting was about getting information on Clinton from the Russians. Although he has admitted that this was the purpose of the meeting, he still claims that he had no knowledge of it.

Trump has voiced concerns that his son, who attended this meeting that Trump knew nothing about, may be a target of Mueller's investigation. Trump Jr. has testified that he did not tell his father about the meeting. Cohen will testify that Trump knew about the meeting in advance.

Trump's lackeys in the press have stated a campaign asserting that meeting Russians and collusion are not crimes.

Finally, Trump called for Sessions to close the investigation now - after it has netted 5 charges, a few convictions, and now a trial against his former associates, and indictments against 25 Russians and three Russian companies for trying to subvert the last presidential election. 

This is all coming to a head.

First Manafort. 

The fact that he has not rolled could mean many things. 

He may not yet be convinced that he will lose and that he faces years in jail, and he is waiting until this is confirmed before seeking a deal. 

He may not want to flip, as this may entail confirming that he was involved in a conspiracy against America - even if he escapes jail time, this would end his public, and maybe even his social life in his country. 

He and his family may have been threatened with the "Putin Flu" should he turn on Trump. 

Lastly, he may have nothing to give in a deal, because thee was no collusion, meaning no deal to trade relaxed sanctions in return for evidence against Clinton that would hand the election to Trump. 

We will soon know which of these scenarios is real.

Hicks lives!

The fact that she would take a ride on a plane with Trump for what must have been lots of face time suggests that he is seeking her assurances that she will not flip on him. 

Recall - she very likely lied to the FBI and Congress when she was questioned about her time with Trump, and possible Russian influences on the election and her role. She has admitted that she lied for Trump. She likely faces multiple obstruction of justice charges. 

Trump needs her loyalty as she was at the centre of everything he did and knew regarding the outreach to Russia, especially the June 2016 meeting, when she worked directly with Trump to craft Trump Jr.'s cover story that the meeting was about adoptions, not treason. 

Get it? Trump helped write a cover story for his son regarding a meeting he still maintains he knew nothing about.

Regarding Hicks, I think Trump may be about to experience the betrayal of his life. He is a sucker for beautiful young women, and they cause him to let his guard down. 

I suspect that Hicks is already in the bag. This lady does not strike me as someone who has any time for losers, and any sober view of this situation says that Trump is in deep trouble. Her lawyers may even have approached the FBI before they called her. 

Again - get ready because you will be hearing about Hope Hicks for years to come.

The argument of Trump's lackeys (are they paid to wear their smug, arrogant smiles when appearing on Hannity?) that meeting Russians and collusion are not crimes is a piece of sophistry that rivals the best in the history of "misleads, misrepresentation and misdirection". It is desperation born of the realization that the jig is almost up.

The point is not that anyone talked to Russians. The point is that, in return for information that the Russians had which may have handed Trump the election, he may have promised them something once he became president; something like relaxed sanctions. 

That would not be "collusion". That would be "treason".

Different this time?

If you read this blog, you are no doubt aware that the author of these many tomes thinks that stock markets worldwide are primed to fall very significantly at some point, just like they did in 1981-82, 1987, 1990, 1998, 2000-01, 2007-08 - you get the picture. This will happen again, it is only a matter of time. 

With the stock markets having reached new heights in January, but not having yet recovered above those heights after their pull-backs in February - in spite of massive buy-backs fueled by Trump’s tax cuts - this inevitable drop may be very close indeed.

So what? 

I have been through a number of very serious, and somewhat less serious downturns in the past 35 years. Every single time, the markets have roared back to new highs. If markets drop, history suggest that they will recover, and just continue their march to new heights. Stay in, and all will be well. For the last 100 + years, this formula has worked.

Unless you live in Japan. In 1989, the Nikkei 225 Stock Index, Japan’s primary stock market, topped out at over 38,000. In late 1989 and 1990, it started to drop, and then plummeted to under 20,000 – about a 50% decline. Today, it is flirting with 22,500.

Unlike what happened with the DOW and S&P 500 over the past 100 years, after the Nikkei 225 Stock Index dropped in 1990, IT NEVER RECOVERED!  It is still down over 40% from its 1989 highs. Here is a chart that well illustrates the drop.

 

Why has the Nikkei never recovered? Are there any similarities between the situation Japan faced in 1989 and since, and what we face today that suggests that a similar fate could befall our markets after the next inevitable drop? Let’s look at what happened and at what is still happening in Japan.

Japan was massively over-leveraged in 1989, after having experienced one of the most historically significant real estate bubbles in human history. In the 1980’s, the Japanese real estate bubble became so crazed that borrowers were able to purchase three-generation mortgages, and the value of the land surrounding the Imperial Palace was higher than that of all of the real estate in the State of California.

Japan had also started to age significantly about that time, as its birth rate plummeted well below the rate needed to replace the population. The birth rate has never recovered, and Japan now has the second oldest population on Earth.

Japan, after a fantastic decade in the 1980’s, which saw it grow to an export-based economic power-house, faced significant pressure from its export partners in the USA and Europe to restrict its exports, and to locate production in those countries, especially production of automobiles.  

Finally, the Japanese government, in an attempt to stimulate the economy started borrowing and spending massive amounts of money. Today, on a debt to GDP basis Japan is the most indebted industrialized country on Earth, with the government owing more than 250% of the country’s GDP in debt.  

Why does any of this matter, and how may it have impacted Japan’s stock market?

A stock market is an almost direct representation of the economy. The stronger a given economy, the more robust will be any associated stock market.

The Japanese were hit with a number of very serious economic impacts at about the same time, especially the drying-up of leverage that drove a collapsing real estate bubble; new export restrictions; and an associated stock market pull-back. 

These, in and of themselves, would not normally have been fatal to a stock market recovery. Although the Japanese were very slow to deal with the mass of bad debt following the collapse of the real estate bubble, they did eventually sort much of this out. So why has their market never recovered?

What I think has limited the Japanese stock market recovery has been demographics. Retired people earn, borrow and spend far less than working people. An ageing and aged population has meant the slow strangulation of domestic demand in Japan, and while productivity and technological change no doubt drives some new growth in the Japanese economy, this has not been enough to off-set the drop in demand. 

The fact that the Japanese do not accept immigrants like, for example, Canada or the USA, has meant that they have not been able to import new domestic demand to replace the demand that has been lost owing to their ageing population. 

In short, retirees are killing that economy. As the economy has stagnated, so has the stock market in Japan reflecting the basic reality that a stock market is not going to go up if economic demand is moving down.

What about us?

We have a series of bubbles occasioned by the lowest interest rates in history, including a real estate bubble and a bubble in the stock market. We having looming and active trade wars that may hit our exports hard. We have very little room left to borrow so as to spark new demand. And, we have an ageing population, with the number of retired people set to double as a proportion of the population over the next 20 years or so.

In many respects, we are the Japan of 1989. This is serious.

I have previously highlighted Keynes v Hayek on this blog. Both the “prime the pump” theory of Keynes and the “let the recovery happen” theory of Hayek in response to economic downturns assume economies have increasing economic demand via expanding populations and increased innovation.

But what if the opposite is true?

The great economic policy crisis of our time may be that we don’t actually have an economic theory that addresses a situation of long-run flat or even negative economic demand – a naturally retracting economy, as opposed to a naturally expanding one.

The next serious stock market pull back is coming – there is always another one. 

No one knows when it will hit, but one may want to start to to question whether the logic of old – “stay in and all will be well” will apply this time. At the very least, if we experience a Japan-light scenario, the market will recover, but only very, very slowly.

What does Mueller know?

Mueller is MILES ahead of his opponents, both political opponents and all present and future defendants. 

W-I-R-E-D magazine has been consistently providing some of the best coverage of the investigation.

Here is what they had to say about what Muelle knows..

"The sheer volume of what Robert Mueller knows is staggering. Perusing his various court filings since last September makes clear he knew the individual changes Paul Manafort made in a specific Microsoft Word document; he knew that Dutch lawyer Alex van der Zwaan was lyingabout what he did on behalf of Manafort and Gates; he knew the specific times Russia military intelligence officers were searching specific wordsway back in 2016; he knew the specific cryptocurrency transactions used to register the Russian intelligence agency accounts; he knows what the hired trolls at the Internet Research Agency were writing in emails to their family members in 2017; he knew the messages Manafort was sending on encrypted messaging services."

and...

"...the signature lesson of Mueller’s inquiry at every turn has been that his investigators knows far, far, far more than anyone in the public expected. Just ask the GRU military intelligence officers who are sitting in their office wondering how Mueller knew that on June 15, 2016, between 4:19 pm and 4:56 pm Moscow local time, they searched the web for the English phrase “company’s competence” hours before it appeared in the inaugural blog post by “Guccifer 2.0”?"

See here...

https://www.wired.com/story/what-robert-mueller-knowsand-9-areas-hell-pursue-next/

It is very well worth a read.