Been Wrong for Two + Years!

I have predicted a significant stock market pull-back for over two years, with no such result!

I have been short, and missed the Trumpian "Greatest Economy Ever!!!"

The predictions have been based on the Shiller P/E Ratio, which has been signalling "bubble" for years - see here...

http://www.multpl.com/shiller-pe/

It has also been based on the Q Ratio, which has signalled the same thing - see here...

https://www.advisorperspectives.com/dshort/updates/2018/09/05/the-q-ratio-and-market-valuation-august-update

The fact that the USA started raising interest rates about 2.5 years ago was what I thought would be the signal for a market pull back. 

Basically, I agree with some writers who think that we do not really have business cycles anymore. What we have are more like central bank cycles, where the economy is a planned thing, and where rising rates mean bankers have decided that it is time for a slowing economy and market pull back.

I did not think the economy and markets would have been as resilient as they have been. The Trump tax cut which added hundreds of billions of dollars to stock buy backs this year also helped keep the good times going.

And so....what to do?

The indicators above cannot tell you when, they only tell you what. The US Fed will raise rates again this week, and the tax cut cash for buy backs must run out at some point. I think we had a precursor of what is to come in February, when the DOW dropped 1000 points in a single day.

But staying patient is hard when you are on the wrong side of a trade. And, compounding this is the fact that I not only see a pull back, but also significant stagnation after that, which will crush passive investors. I may be the only one out there predicting this!

Please see previous blog here...

https://mewetree.blogspot.com/2018/08/different-this-time.html

Predicting a market pull-back also feels unseemly, as this will hurt tens of millions of people. 

And yet, I see no reason to change course.

Rosenstein's 25th

The NYT has reported that Rosenstein mused about recording the chaos in the White House as a precursor to launching a 25th Amendment impeachment of Trump - basically alleging that he is unfit for office, and unable to carry on his duties.

Rosenstein has issued a public statement to the effect that he denies this report, and he confirms that Trump should not be removed based on the 25th Amendment. There is some discussion in the press that he perhaps joked about this at some point.

No matter who is in the White House, for anyone who works in the administration of justice to even joke about invoking the 25th Amendment is so serious that it warrants immediate dismissal. It speaks of an almost unbelievable level of arrogance, and a basic misunderstanding of who is in charge. Even Trump deserves some level of loyalty - he is the elected President of the United States of America, after all.

And yet...Trump has still not fired Rosenstein, in spite of a situation in which ANY president would be within his or her rights to send him packing!

What will it take for Trump to start to use the tools he has to defend his presidency - firings, pardons, appointing someone to look at the Clintons?!! 

I am not on the man's side, but this is getting embarrassing!

  

In Praise of Trump!!

In Praise of Trump

He is not especially popular with many folks. Here is what the president of the USA has done that I actually agree with. 

1. China. This country got into the WTO and almost immediately started to cheat. Their markets are effectively closed to a competitor's version of anything they produce – people are simply not able to buy competitor’s products for fear of retribution from a tyrannical state. 

Much of this is nationalist – Chinese will naturally support their own where they can, especially against the west, but this is the opposite of why you would join the WTO, which is about expanding trade, not engaging in mercantilism. Trump’s campaign to open up that country to foreign goods should have happened years ago.

As well, China often demands that companies hand over their intellectual property in return for access to the country. This is the eventual death of those companies when a competing Chinese company is set up using heir technology, and again, this not how international trade is supposed to work. Trump’s tariffs against China in retaliation for this practice should have been launched years ago.

2. NAFTA. If the USA and Canada knew that Mexican workers would be making $5.00 an hour to assemble cars in 2018 when we signed the deal in 1994, we never would have signed it in the first place. Mexico was supposed to grow its middle class.  Instead, it grew its industrial base, staffed by the impoverished.  Trump has a deal with them to ensure that 40 – 45% of the production coming out of that country will be paid for at $16 an hour, as well as raising the local North American content rules. This will spread the work more fairly throughout the continent.

3. North Korea. I don’t think Trump has a read deal here, but he did get the North Koreans to the table, where a real deal is at least possible. Previous administrations had essentially punted the North Korean nuclear program issue down the road. Trump faced it head on. Without someone doing something, there would very likely have been a war at some point as the USA cannot let this country get the ability to fire an ICBM with a nuke on it at the USA. He also got a few prisoners released, and the return of the remains of US service people.

4. Comey. The man is a disgrace and was properly fired. Please see this…

http://mewetree.blogspot.com/2018/04/comey-v-trump-redux.html

5. Food Stamps. There are 21 million adults on the US food stamp program, of whom 13 million are able-bodied and ready to work. They have been exempted from the requirement to work 20 hours per week, mostly in lax Democrat run states. Trump is rolling back these exemptions…with the official unemployment rate below 4%, no one can blame him.

6. Illegal Immigration. The crossing of the US border illegally is….illegal. He has cracked down on this, as well as limited entry to the USA, and cracked down on people living illegally in the USA. This looks mean, and some of how it is being down definitely is unusually cruel (i.e. separating children from parents which is illegal and awful…) – this should have been dealt with years ago, and was just punted down the road by previous administrations.

7. Pakistan. Trump suspended billions of dollars’ worth of aid to a country that harboured Osama bin Laden, and whose security establishment conducted a campaign of assassination and murder against US forced in Afghanistan through its support of the Taliban for years. About time.

8. Economy. To the extent that an economy can be bolstered by bluster and hyperbole and tax gifts to wealthy people, he is succeeding like no one has ever succeeded before in the history of “Making America Great Again” success! The official unemployment rate, especially the official Black, unemployment rate is low!!!! Optimism and the stock markets are up!!! USA! USA! USA! Fantastic!!!

9. Fentanyl. Trump declared a national emergency in light of the opioid crisis in the USA.

10. Iran. Trump ended a deal with provided billions of dollars to the Iranians in return for their suspension of a nuclear program that I think we will eventually know was never stopped.

11. ISIS. Trump took the shackles off…ISIS is no longer a state.

12. Oil. USA now produces more oil than any country on the planet, the culmination of the efforts of three presidents, Bush 43, Obama and Trump – bye, bye OPEC.

I could list way more things I do not agree with, but that is not the purpose of this tome.

Hope Hicks?

Hope Hicks must know by now that Trump will not pardon her. Trump is only loyal to Trump.

Expect to watch her walk out of a courtroom after having entered a plea of "Guilty" to "Obstruction of Justice", with a deal in hand to avoid prison by cooperating with Mueller. This should happen...

....right about, now.

Mueller's investigation may be seen by future generations as a high water mark in the history of police investigations in the USA. It is a template for how to conduct this type of investigation - he has done a fantastic job.

What Manafort Knows

Was there collusion with the Russians?

"Collusion" in this situation would mean a tentative agreement to relax sanctions on Russia that were imposed after they annexed Crimea once Trump became president, in return for information against Hillary Clinton that would destroy her, and hand the presidency of the USA to Donald Trump. 

In this situation, "collusion", which many have said is not a crime, would equate to "Conspiracy against the USA" or even "Treason", both of which are very definitely crimes.

Donald Trump Jr. was told that the Russians had dirt on Clinton that would bury her on June 3, 2016, and he responded with an e-mail saying that if this were true,"I love it." The meeting with the Russians occurred on June 9, 2016.

What happened in the six days between the Trump Campaign finding out that the Russians may have been able to hand them the presidency by giving them information that would destroy Clinton, and the meeting itself? This is the time frame in which a deal would have been at least tentatively hashed out between the Russians and the Trump Campaign.

Manafort would have been front and centre in any such discussions. He knows what transpired during this crucial time frame, and he may even have negotiated it on behalf of Trump, obviously with the full knowledge of his son and son-in-law.

"Six days in June" may soon become as important to American political history as the 18 minutes of missing audio tape before it, except that this time someone who knows about what happened during that time frame is willing to talk to the FBI about it.

Deal!!! Manafort Flips Out!

It happened. 

One of the three men at the infamous June, 2016 meeting with what we now know were Russian officials will spill the beans. If there was collusion, we will now find out.  

This is the second last piece of the puzzle, next up...Hope Hicks.

The political effect? 

1. Trump's Teflon should start to peel off as Manafort's evidence is revealed. 

2. This latest flip changes everyone's calculus - I can see Republican rats fleeing the good ship Trump even now!

It seems clear now that Trump has no loyalty to any of the people who worked for him...he will not pardon anyone. 

For all his bluster, he is afraid to use the tools available to him -pardons and firing people. 

He is no Al Capone, who would have made this all go away long ago.

Manafort Deal? Trump Impeachment?

Manafort made a deal to avoid his pending trial in Washington, DC.

It is NOT clear that he will cooperate with the Mueller probe - this may have been a normal deal to admit guilt, and avoid a trial with an agreed-upon sentence.

If Manafort only made a normal plea, and will not cooperate with Mueller, then the pursuit of collusion/conspiracy against the USA charges against Trump Jr., and Kushner, and therefore the impeachment of Trump is likely over.  

Aside - is Mueller talking to Hicks at the same time, hoping to announce that both have flipped at the same time?

The whole point of charging Manafort, other than the fact that he is a crook who should face criminal sanction, is to have one of the three men who was at the June, 2016, meeting with the Russians testify about what they thought they were doing. This direct evidence would be crucial to any charges....

Hope Hicks is watching carefully. She is the link to Trump himself via Cohen, who,with her, advised him as he personally crafted the cover story for the above mentioned meting. If Manafort is not cooperating, it is impossible to imagine a situation in which Hicks will flip.

And Trump? 

He is hardly the tough guy; the ready-to-take-the-hard decisions type of leader that his loud bluster would suggest. He has fired Comey and tried to push around Sessions and Mueller in Tweets - that's it. No pardons, no other firings. He has left these tools unused.  

If Manafort deals with Mueller, he will regret not giving him a pardon and trying to ride out the storm.

Welcome to the stretch run...