Senate Democrats To Grill Trump Nominee Over Recalled Ukraine Ambassador
While House Democrats continue to chase a Trump impeachment, Senate Democrats will have a rare opportunity on Wednesday to question a key administration official involved in the controversy. Deputy Secretary of State John Sullivan will reportedly tell the Senate Foreign Relations Committee that President Trump recalled US diplomat to Ukraine, Marie Yovanovitch, after she was singled out by Rudy Giuliani and others as having an anti-Trump agenda, according to Bloomberg.
Sullivan – Trump’s nominee for US ambassador to Russia, won’t dispute Yovanovitch’s testimony that “there had been a concerted campaign against me, and that the Department had been under pressure from the president to remove me since the Summer of 2018,” adding “He [Sullivan] also said that I had done nothing wrong and that this was not like other situations where he had recalled ambassadors for cause,” she told House Democrats earlier this month.
“He will be the first high-level State Department official we’ve had since we’re getting news that there was a concerted effort to fire the ambassador of Ukraine led by Rudy Giuliani,” said Senator Tim Kaine, a Virginia Democrat and a member of the Senate Foreign Relations Committee. “I’m going to ask him a lot about what the hell’s going on at the State Department.”
Democrats on the panel will almost certainly use Sullivan’s confirmation hearing to pursue the allegations at the heart of the House of Representatives impeachment inquiry — that Trump held up U.S. aid and a promised White House meeting to extract a pledge from Ukraine’s new president to investigate Democrat Joe Biden and his son Hunter as well as a conspiracy theory that Ukraine and Democrats, not Russia favoring Trump, interfered in the 2016 election. –Bloomberg
Yovanovitch mentioned Sullivan by name, noting that he was the person who told her she was being recalled from her post several months early, despite having been extended through 2020 shortly before.
Senate Democrats are looking forward to the opportunity to question Sullivan.
“He’s No. 2 at the State Department,” said Sen. Bob Menendez of New Jersey, the top Democrat on the committee. “There’s a lot. From Russia to Ukraine to our ambassadors to political retaliation at the State Department, he has a lot of accounting to do.”
They’ll also get to ask whether Secretary of State Mike Pompeo attempted to rein in efforts by Rudy Giuliani and others to encourage Ukraine to investigate former vice president Joe Biden.
The hearing also offers an opportunity for Senate Democrats to question the administration’s overall Russia policy, which critics say has been warped by Trump’s unusual affinity for Russian President Vladimir Putin.
Earlier this month, the Democrats on the Senate committee wrote to its Republican chairman, James Risch of Idaho, asking him to convene hearings on the Trump-Ukraine issue.
“The Foreign Relations Committee has an obligation to examine the serious questions raised by these events,” the senators stated in the Oct. 9 letter, which was led by the committee’s ranking Democrat, Robert Menendez of New Jersey. –Politico
Sullivan will also likely face questions about allegations of political retaliation within the State Department against career staffers, according to Politico, citing Senate Democratic aides.
US equity market algos panicked briefly this morning, dumping stocks instantly after headlines reported that Chile was canceling the APEC Summit (at which Trump and Xi were supposed to meet and sign a trade “deal”).
After a wave of protests and riots in recent weeks, Chilean President Sebastian Pinera said the country won’t host the APEC summit scheduled for next month or the COP25 environmental conference set for December.
Algos dumped ‘n’ pumped…
This drop extended the early weakness since the US cash market opened…
The market instantly rebounded as we suspect humans realized that this will just be moved and ‘hope’ remains for a trade deal – no matter how many times you’re disappointed.
From Harold Orlans, The politics of minority statistics, Society, May 1989, No. 4, at 24, 24.
In 1956, the Committee on Government Contracts, which monitored compliance with President Eisenhower’s orders barring contractor discrimination, initiated what became a recurrent survey of contractor personnel. The survey form asked contractors for the number of their “total,” “Negro,” and “other minority” employees and, if they had many “other,” how many were
“Spanish Americans, Orientals, Indians, Jews, Puerto Ricans, etc.” The Puerto Rican influx to mainland cities was then receiving much attention.
To count Hispanic employees accurately, Hispanic spokesmen pointed out, a separate line was needed. When some critics said that Jews no longer suffered significant discrimination, three leading Jewish organizations agreed to their deletion. After Hawaii became a state in 1959, members of its congressional delegation called for explicit attention to Oriental employees. Accordingly, the revised 1962 survey form asked for the number of all contractor employees and four separate “minorities”:Negro, Spanish-American, Oriental, and American
Indian.
In time, the definition of each group was modified by an interagency committee representing statistical and civil rights agencies. “Negro” became “black.” “SpanishAmerican” became “Spanish-surnamed” and then (since a Mexican American’s Irish wife had such a surname but an Irishman’s Mexican-American wife did not) “Hispanic origin.” The difficulties of distinguishing “blacks,” “black Hispanics,” and “white Hispanics” and “whites” were addressed, if not eliminated, by a trifurcation into “black (not of Hispanic origin), ” “Hispanic origin,” and “white (not of Hispanic origin).” “Oriental” became “Asian or Pacific Islander,” since Polynesian Hawaiians or the Guamanians in southern California were not “Oriental.” Neither were immigrants from India, Pakistan, and Sri Lanka who in 1977 were reclassified from “white” to “Asian” after requesting inclusion in affirmative action programs.
In the Reagan era, bureaucratic resistance hardened, for Arab Americans who sought a similar re-classification are still “white,” as are Asian Tatars, Kurds, and Iranians. “American Indian” became “American Indian or Alaskan Native” because Eskimos and Aleuts are not Indians. Thus, by 1977 a recurrent government survey of Negro employees had evolved into an odd five-fold
classification of the world’s peoples, or of their emigrants and descendants in this nation.
As survey instructions note, the classification reflects disparate factors: race (“Black racial groups of Africa”-but not of Cuba or Melanesia); language or culture (“Spanish culture.., regardless of race”); above all, geography or country of origin, which has the virtues of identifiability and stability. Although not defined, “origin” is central to the classification. “Blacks” and “Hispanics” are persons with “Black racial” or “Spanish” origin, respectively; “whites,” “Asians,” and “American Indians” are persons “having origins in any of the original peoples” of Europe, Asia, and North America, respectively. The idea of “origin” is clear only if it is not pursued, for the “original peoples” of countless lands (for example, Finland, the
Ukraine, the Indus Valley, Palestine, Sicily) are lost in the mists of history.
The classification is full of contradictions. Thus, a descendant of the “original peoples” north of the Rio Grande is an “American Indian”; but south of the river, such a person is “Hispanic” although of Indian stock. Immigrants from Cuba are “Hispanic,” but from Brazil they are “white,” “black,” or “Hispanic.” A Sephardic Jew is “Hispanic”; a Hasidic Jew is “white”; an Ethiopian Jew is “black”; if they all enter the United States from Israel, what is their country of origin?
from Latest – Reason.com https://ift.tt/31W1DTu
via IFTTT
Maybe the Russians have infiltrated New Hampshire.
A new CNN poll conducted by the University of New Hampshire and released this week shows Rep. Tulsi Gabbard (D–Hawaii) with 5 percent support from likely voters in the state, which is scheduled to hold the nation’s first Democratic primary on February 11. That level of support is good enough to put Gabbard in fifth place, trailing only Sen. Bernie Sanders (21 percent) of Vermont, Sen. Elizabeth Warren (18 percent) of Massachusetts, former vice president Joe Biden (15 percent) and Pete Buttigieg (10 percent), the mayor of South Bend, Indiana. Tied with Gabbard at 5 percent are Sen. Amy Klobuchar of Minnesota and entrepreneur Andrew Yang.
The CNN poll is perhaps the best signal yet that Gabbard—whom Hillary Clinton nonsensically smeared as a “Russian asset” two weeks ago—is experiencing a bit of a polling bounce, especially in New Hampshire. She’s risen by 4 percentage points since the same pollsters’ July survey while Biden has fallen by 6 points and Sen. Kamala Harris of California has fallen by 9 points. Nationally, Gabbard has experienced a small but noticeable bump in her poll numbers in recent weeks too, though she continues to sit in the third tier of Democratic hopefuls.
Importantly, the CNN poll moves Gabbard one step closer to qualifying for the November 20 debate. She needs two more polls showing support above 3 percent in order to make the stage (nine others have already qualified).
But the most interesting thing about the new CNN poll in New Hampshire is not so much the level of Gabbard’s support, but rather who is supporting her.
No, it’s not the Russians—it’s actually mostly Republicans.
When you dig into the crosstabs of the poll, it shows that 59 percent of New Hampshire Republicans have a favorable view of Gabbard, while only 23 percent of the state’s Democrats do. The Hawaiian congresswoman is far more likely to attract support from someone who voted for President Donald Trump in 2016 (55 percent of whom view her favorably) than from someone who backed Clinton (20 percent).
Gabbard’s unorthodox constituency is a significant impediment to her campaign gaining traction in the Democratic field. It’s difficult to become your party’s pick when the other party’s voters like you more.
But in New Hampshire, Gabbard’s crossover appeal could be a boon. The state has open primaries that allow all voters to participate in either the Republican event or the Democratic one (and the GOP primary is probably not going to be very interesting).
Unlike some other states, New Hampshire has not canceled its Republican primary to protect Trump from potential embarrassment, but there is little doubt he will win the contest easily. In the new poll, Trump’s three primary opponents—former Reps. Mark Sanford of South Carolina and Joe Walsh of Illinois, along with former governor Bill Weld—get a mere 7 percent of the vote, combined.
That means plenty of New Hampshire Republicans could see their own contest as a waste of time and decide to vote in the Democratic primary instead. Gabbard is a likely beneficiary if that happens.
But why, you might be wondering, should voters from a different party get to play a role in determining who Democrats nominate for president? That might seem unfair, and the Democratic Party certainly would be right to exclude whomever they want from the party’s private business. But primaries aren’t private affairs; they are paid for by taxpayers and run by state-level election officials. By allowing everyone to participate, New Hampshire is actually doing the right thing—and all those other states with closed primaries should change their rules, or stop asking non-party members to foot the bill.
Politically, too, an open primary seems like the better way to choose a candidate. After all, the winner of the Democratic primary will have to face all voters—even Republicans—in November 2020. Given that reality, open primaries can act as a check on runaway extremism within one political party.
Democrats should think twice before smearing Gabbard as a Republican mole. Trump’s victory in 2016 was largely the result of voters who refused to abide by tribal lines. If the key to a Democratic victory in 2020 is re-swinging the Obama/Trump voters towards Team Blue, nominating a candidate who appeals to some Republicans seems fundamental.
That being said, Gabbard is almost certainly not going to be the Democratic nominee for president in 2020. But, as I’ve written before, that’s not really her goal. She’s trying to resurrect whatever is left of the anti-war left, and to carve out space for an alternative to the bipartisan, largely neoconservative consensus on foreign policy. That is a worthwhile project. The longer Gabbard can stay in the race, the more time she’ll have to make that case. And the better she does in New Hampshire, the longer she’ll stay in the race.
How long until Gabbard has to deal with being labeled a Republican asset? That probably depends on whether she keeps rising in the polls—and whether mainstream Democrats like Clinton are foolish enough to ignore her crossover appeal.
from Latest – Reason.com https://ift.tt/2qXkfFP
via IFTTT
The popular vaping company Juul “shipped at least a million contaminated pods,” according to a Buzzfeed headline yesterday and a new lawsuit from a former employee. The suit—filed by Juul’s former senior vice president of global finance, Siddharth Breja—alleges some pretty damning things.
From Buzzfeed:
Breja alleges that on March 12, 2019, in an executive team meeting, he learned that some batches of mint e-liquid had been found to be contaminated. Approximately 250,000 mint refill kits, the equivalent of one million pods, were manufactured with the contaminated e-liquid, shipped to retailers, and sold to customers.
Breja’s lawsuit claims that Juul’s then-CEO Kevin Burns said: “Half our customers are drunk and vaping like mo-fos, who the fuck is going to notice the quality of our pods.”
Breja alleges that he protested this decision and was quickly fired. Juul said his firing was because Breja had misrepresented his resume when he got hired. Breja’s lawsuit calls Juul’s claim “preposterous.”
So basically, we have no idea what’s going on. Breja could be telling the truth and Juul executives could be horrid sociopaths who don’t care about consumer safety at all. He could be salty over being fired and making this up entirely. Or he could be telling the truth about “contaminated pods” but not the whole truth.
The lawsuit provides little detail about what the pods were supposedly contaminated with and why or how Juul came to the decision to sell them. (Instead, it pads the claim with a lot of unrelated statistics about youth vaping and recent political efforts around it.) The company could have known about some “contamination” but ultimately determined that the mint pods were still safe.
Breja’s lawsuit against Juul was filed (in the U.S. District Court for the Northern District of California) on the same day the company announced it would be cutting around 500 jobs. You can read the whole lawsuit here.
FREE MINDS
Is limiting marriage to two people constitutional? Polyamory is having a bit of a moment, in part due to recent allegations about U.S. Rep. Katie Hill (D–Calif.), who announced her resignation this week. National Reviewwades into the legal situation when it comes to polyamorous relationships and state-sanctioned marriage:
In his Obergefell dissent, Chief Justice John Roberts noted “how much of the majority’s reasoning would apply with equal force to the claim of a fundamental right to plural marriage.”
And while it was verboten to say so at the time, the reasoning of Obergefell‘s majority—that the due-process clause of the 14th Amendment guarantees two adults of either sex the right to enter into state-recognized matrimony—readily lends itself to abolishing other components of the definition of marriage. If sexual difference is not a meaningful feature of marriage, why should the union be restricted to two—and only two—people?
What happened when city officials tried to rid Reno of strip clubs?USA Today takes a look at Reno’s attempts to boot strip clubs in order to woo Tesla and other big tech companies to the area (seems counterproductive?). This included undercover cops sent to pose as strip club patrons, “as part of a crackdown on Reno’s strip clubs that has more to do with local politics—and economic progress—than vice,” says the paper. More here. USA Today plans to unfold the story over the course of season two of its The City podcast.
ELECTION 2020
Some surprising results out of the latest New Hampshire Democratic voter poll:
It seems people like Sen. Cory Booker (D–N.J.) but don’t want to vote for him, while they want to vote for Rep. Tulsi Gabbard (D–Hawaii) but don’t really like her.
Favorable ratings in that CNN poll are especially interesting.
A federal judge in Alabama has blocked a near-total abortion ban passed by state lawmakers earlier this year. The law criminalizes performing abortions, except in the case of serious health conditions. Doctors could face decades in prison. Opinion here: https://t.co/mwnPKjmEa9
Texas’ economy is perhaps the most vulnerable to oil price swings given its leading role in the country’s oil industry. Recently, as prices have remained low, talk has begun about the outlook for the state’s economy.
According to a recent Reuters report, for example, smaller independent oil and gas producers in the Lone Star State are struggling to get loans from banks as the latter become increasingly wary of the ability of the borrowers to return the money when the time comes.
Jobs in the Texas oil and gas industry are falling, too. The Houston Business Journal reported this month that September saw a 1,100 decline in the number of jobs in the mining and logging sector—the category that includes oil and gas jobs. Over the 12 months from September 2018, the state’s oil and gas industry added just 1,700 new jobs, which was the lowest number of new job additions to any Texas industry over the same period, data from the Texas Workforce Commission showed.
Yet not everyone is worried. The University of Houston Energy Fellows, for instance, wrote in an article for Forbes that “the alarm bells are premature.” While the experts that make up the group acknowledge there are plenty of reasons to be worried about the economy of Houston—the article focuses on the city—oil prices are not among them.
The trade war with China and the anticipation of a global economic slowdown caused by it is a top concern for any economy and Houston is no exception. Political economic problems in Europe are also a cause for worry. Yet, according to the University of Houston Energy Fellows, bankruptcies in the Houston oil and gas industry are only slightly higher this year than last, and the credit crunch energy independents are facing now is “far from comparable to 2015-16.”
True as this may be, there is no guarantee things will plateau at this level of problems and not deteriorate further. Reuters reports that banks have marked down the perceived value of U.S. oil and gas not just for next year but for the next five years. This value makes the foundation of reserve-based loans, so the lower it is, the less money the banks would be willing to give businesses.
And then there is the question of exposure.
“Some banks believe they have too much energy exposure and want to reduce some of this risk,” a senior executive from private equity firm Warwick Energy, Ian Rainbolt, told Reuters.
“I expect the biggest issues to be with over-leveraged natural gas producers, especially those without firm transportation in geographically-disadvantaged areas,” said another financial services executive, the managing director of investment bank Carl Marks Advisors. To be fair, this executive said the biggest trouble is for companies in the Appalachia, the Rocky Mountains, and Oklahoma.
Meanwhile Texas has begun exporting pure Permian crude—the light, sweet kind of crude pumped from the most prolific shale play in the U.S. Buyers, especially in Asia, want the so-called ‘neat’ barrels with consistent quality of the Midland grade—the purer, the better. That’s a new market that can grow if producers maintain consistent quality. Any new market would strengthen the resilience of the industry despite problems with banks and benchmark prices.
“Jeffrey Epstein Was Strangulated”, Famous Forensic Expert Says
This morning on Fox and Friends, Dr. Michael Baden, a famous forensic expert and former New York City medical examiner said that at the end of the investigation he did on behalf of Jeffrey Epstein’s brother, its findings are more consistent with homicidal strangulation than suicidal hanging.
Dr. Michael Baden, who was hired by Epstein’s brother and observed the autopsy, told Fox News that the 66-year-old Epstein had two fractures on the left and right sides of his larynx, specifically the thyroid cartilage or Adam’s apple, as well as one fracture on the left hyoid bone above the Adam’s apple, Baden told Fox News.
“Those three fractures are extremely unusual in suicidal hangings and could occur much more commonly in homicidal strangulation,” said Baden.
“The prominent hemorrhage in the soft tissues of the neck next to the fractures is evidence of a fresh neck compression that could have caused the death.”
“I’ve not seen in 50 years where that occurred in a suicidal hanging case,” the 85-year-old medical legend told Fox News.
This disagrees with New York City Medical Examiner Barbara Sampson’s rulling that Epstein’s cause of death was suicide by hanging.
“It appears that this could have been a mistake,” Baden said.
“There’s evidence here of homicide that should be investigated, to see if it is or isn’t homicide.”
The popular vaping company Juul “shipped at least a million contaminated pods,” according to a Buzzfeed headline yesterday and a new lawsuit from a former employee. The suit—filed by Juul’s former senior vice president of global finance, Siddharth Breja—alleges some pretty damning things.
From Buzzfeed:
Breja alleges that on March 12, 2019, in an executive team meeting, he learned that some batches of mint e-liquid had been found to be contaminated. Approximately 250,000 mint refill kits, the equivalent of one million pods, were manufactured with the contaminated e-liquid, shipped to retailers, and sold to customers.
Breja’s lawsuit claims that Juul’s then-CEO Kevin Burns said: “Half our customers are drunk and vaping like mo-fos, who the fuck is going to notice the quality of our pods.”
Breja alleges that he protested this decision and was quickly fired. Juul said his firing was because Breja had misrepresented his resume when he got hired. Breja’s lawsuit calls Juul’s claim “preposterous.”
So basically, we have no idea what’s going on. Breja could be telling the truth and Juul executives could be horrid sociopaths who don’t care about consumer safety at all. He could be salty over being fired and making this up entirely. Or he could be telling the truth about “contaminated pods” but not the whole truth.
The lawsuit provides little detail about what the pods were supposedly contaminated with and why or how Juul came to the decision to sell them. (Instead, it pads the claim with a lot of unrelated statistics about youth vaping and recent political efforts around it.) The company could have known about some “contamination” but ultimately determined that the mint pods were still safe.
Breja’s lawsuit against Juul was filed (in the U.S. District Court for the Northern District of California) on the same day the company announced it would be cutting around 500 jobs. You can read the whole lawsuit here.
FREE MINDS
Is limiting marriage to two people constitutional? Polyamory is having a bit of a moment, in part due to recent allegations about U.S. Rep. Katie Hill (D–Calif.), who announced her resignation this week. National Reviewwades into the legal situation when it comes to polyamorous relationships and state-sanctioned marriage:
In his Obergefell dissent, Chief Justice John Roberts noted “how much of the majority’s reasoning would apply with equal force to the claim of a fundamental right to plural marriage.”
And while it was verboten to say so at the time, the reasoning of Obergefell‘s majority—that the due-process clause of the 14th Amendment guarantees two adults of either sex the right to enter into state-recognized matrimony—readily lends itself to abolishing other components of the definition of marriage. If sexual difference is not a meaningful feature of marriage, why should the union be restricted to two—and only two—people?
What happened when city officials tried to rid Reno of strip clubs?USA Today takes a look at Reno’s attempts to boot strip clubs in order to woo Tesla and other big tech companies to the area (seems counterproductive?). This included undercover cops sent to pose as strip club patrons, “as part of a crackdown on Reno’s strip clubs that has more to do with local politics—and economic progress—than vice,” says the paper. More here. USA Today plans to unfold the story over the course of season two of its The City podcast.
ELECTION 2020
Some surprising results out of the latest New Hampshire Democratic voter poll:
It seems people like Sen. Cory Booker (D–N.J.) but don’t want to vote for him, while they want to vote for Rep. Tulsi Gabbard (D–Hawaii) but don’t really like her.
Favorable ratings in that CNN poll are especially interesting.
A federal judge in Alabama has blocked a near-total abortion ban passed by state lawmakers earlier this year. The law criminalizes performing abortions, except in the case of serious health conditions. Doctors could face decades in prison. Opinion here: https://t.co/mwnPKjmEa9
For The Second Consecutive Quarter, This Is What Americans Spent The Most Money On
As we reported earlier, Q3 GDP printed far stronger than expected, with US households going on an all-out spending spree and at 1.93%, or contributing 100% of the bottom line 1.93% GDP print, personal consumption soared an annualized 2.9%, far stronger than expected.
So, as we always do, we decided to take a look at what Americans supposedly spent the most money on in Q3, to find the source of this unexpected spending splurge. What we first found is that, unlike most quarters when there was a decline in spending in at least one category, in Q3 spending actually increased in every single category across goods and services.
Now, traditionally we would expect healthcare – a legacy of America’s aging demographic and the Obamacare tax – to provide the bulk of the upside, but in Q3 we found only a relatively modest contribution, with a spending increase of only $9.5 billion compared to Q2. Another surprise was that at a time when restaurant sales are starting to sputter, spending on food and drink purchased outside the home somehow increased by $16.5 billion in the quarter.
But what was the main driver of spending in the third quarter? Well, for some inexplicable reason, in Q3 the American consumer was scrambling to buy… recreational vehicles.
Here is the breakdown of all the categories that constituted Personal Consumption in the second quarter
Why is this especially bizarre? Because exactly three months ago when doing the exact same analysis we found that in Q2, Americans spent the most on – are you ready for this – recreational vehicles!
So for two consecutive quarters, US GDP only beat declining expectations because American consumers inexplicably surged to buy RVs? Is everyone cooking meth now?
But wait, there’s more.
As regular readers will recall, the past two quarters are hardly an outlier for this particular segment – RV goods and vehicles – to emerge as a surprise top spending category: both two and three years ago, in Q1 of 2016 and then again in Q1 of 2017, Americans inexplicably again splurged on RVs (both of those times, there was a political prerogative to show GDP growth as strong as possible… just as there is now).
It is also worth noting, that if it wasn’t for the inexplicable splurge on “Recreational goods and vehicles”, GDP would have missed expectations of a 1.6% increase, as spending in the category rose by $23.2 billion, more than a quarter of the entire $93.6 BN increase in consumer spending in Q3. To be sure, the farcical surge in RV purchases certainly would explain why the housing recovery has turned from boom to bust.
Yet what is most perplexing in light of the “data”, is that recently we reported that the RV industry has taken a massive blow from President Trump’s tariffs on steel and aluminum and other retaliatory duties on thousands of Chinese-made RV parts, from electronics to LED lights to vinyl.
Indeed, at the micro, bottom-up level, domestic shipments of RVs to dealers plummeted 22% in the first five months of this year, compared to the same period last year, after dropping 4% in 2018, according to the Recreational Vehicle Industry Association.As we added “the RV industry’s crisis shows how President Trump’s trade war has backfired, hurting the industry he promised to protect.”
Tariff-related price hikes have forced RV manufacturers to pass on costs to dealerships, which in turn the American consumer bears the brunt of the tariff, has slowed sales at dealers who are cutting orders and laying off workers.
But it’s not just us who pointed out the plunge in RV sales: Michael Hicks, a Ball State University economist who tracks the industry, warned that the collapse in RV shipments could indicate a wider economic downturn. Hicks said shipments had fallen sharply just before the last three U.S. recessions.
“The RV industry is a great bellwether of the economy,” said Hicks, because the vehicles are an expensive and discretionary purchase, easily delayed by consumers who start to worry about their financial stability.
Additionally, Reuters suggested that the RV industry is headed for a significant consolidation after several years of expansion, led to new factories, has oversupplied the market.
Managers at RV manufacturers and suppliers said President Trump’s trade war is why the industry is now crashing.
“The tariff price increases are what tipped the RV business — it started the landslide, no question,” said Tom Bond, the materials and purchasing manager at Adnik Manufacturing, an Elkhart-based division of Norco Industries.
Michael Happe, CEO of Winnebago Industries Inc, said tariffs had forced RV manufacturers to increase costs to dealers
Meanwhile, Thor Industries, which controls almost 50% of the North America RV market, reported its sales have dropped 23% in its fiscal third quarter, which ended in April, compared to a year ago. Production cuts and layoffs have been in full swing at some of Thor’s North American plants.
Thor assembler Demiris Jahmal Williams told Reuters his hours were cut, and his factory has been shut down through July.
“This is the worse I’ve seen it,” he said.
So there’s the paradox: while RV sales are crashing according to makers of RVs, the Bureau of Economic Analysis (i.e., the US government), used this very data set to represent that the US consumer is not only alive and well, but spending more than at any time in the past 5 years!
Surely when looking at such grotesque data manipulation, China can only stand in silent awe and watch as the US shows the world how data fudging is truly done, when the president has a political axe to grind and will steamroll any and all data just to prove that America is great again.
In a poll administered by the CFA Institute of America {Link}, readers, many of whom are professional investors, were asked which behavioral biases most affect investment decisions. The results are shown in the chart below.
We are not surprised by the results, but we believe a rational investor would put these in reverse order.
Compounding wealth, which should be the primary objective of every investor, depends first and foremost on avoiding large losses. Based on the poll, loss aversion was the lowest ranked bias. Warren Buffett has commented frequently on the importance of limiting losses. His two most important rules are: “Rule #1 of investing is don’t lose money. Rule #2 is never forget rule #1.”
At Real Investment Advice, we have covered a lot of ground on investor behavioral biases. In 5 Mental Traps Investors are Falling In To Right Now, Lance Roberts lucidly points out, “Cognitive biases are a curse to portfolio management as they impair our ability to remain emotionally disconnected from our money. As history all too clearly shows, investors always do the “opposite” of what they should when it comes to investing their own money.”
Lance’s quote nicely sums up the chart above. These same biases driving markets higher today also drove irrational conduct in the late 1920s and the late 1990s. Currently, valuations are at or near levels reached during those two historical market peaks. Current valuations have long since surpassed all other prior valuation peaks.
One major difference between the late 1920s, the late 1990s, and today is the extent to which the Federal Reserve (Fed) is fostering current market conditions and imprudent investor behavior. To what extent have investors fallen into the overconfidence trap as the herd marches onward?
This “ignorance is bliss” type of behavior raises some serious questions, especially in light of the recent changes in Fed policy.
Not QE
As predicted in QE By Any Other Name, the Fed recently surprised investors with a resumption of quantitative easing (QE). The announcement of $60 billion in monthly Treasury bill purchases to replenish depleted excess reserves and another $20 billion to sustain existing balances was made late in the afternoon on Friday October 11. With a formal FOMC meeting scheduled in less than three weeks, the timing and substance of this announcement occurred under unusual circumstances.
The stated purpose of this new round of QE is to address recent liquidity issues in the short-term funding markets. Up to this point, the Fed added additional liquidity through its repo facility. These are actions not taken since the financial crisis a decade ago. The liquidity problems, though not resolved, certainly have largely subsided.
So why the strange off-cycle announcement? In other words, why did the Fed seemingly scramble over the prior few days to announce a resumption of QE now? Why not wait to make this announcement through the normal FOMC meeting statement and press conference process? The answer to those questions tells us more about current circumstances than the actual policy change itself.
The Drowning Man
As is always the case with human beings, actions speak louder than words. If you observe the physical behavior of someone in distress and know what to look for, you learn far more about their circumstance than you would by listening to their words. As an example, the signs of drowning are typically not what we would expect. A person who is drowning can often appear to be playing in the water. When a person in the water is in distress, their body understands the threat and directs all energy toward staying alive.
People who drown seldom flail and scream for help as is often portrayed on television. If you ask a drowning person if they are okay, you might not receive a response. They are often incapable of producing the energy to speak or scream as all bodily functions are focused on staying afloat.
Since the Financial Crisis, investors, market analysts, and observers are helplessly watching the Fed, a guardian that does not realize the market is drowning. The Fed, the lifeguard of the market, is unaware of the signs of distress and unable to diagnose the problem (see also The Voice of the Market – The Millennial Perspective).
In this case, it is the global banking system that has become so dependent on excess reserves and dollar liquidity that any shortfall, however temporary, causes acute problems. Investor confidence and Fed hubris are blinding many to the source of the turbulence.
Lifeguards
Fortunately, there are a few other “lifeguards” who have not fallen into the behavioral traps that prevent so many investors from properly assessing the situation and potential consequences.
One of the most articulate “lifeguards” on this matter is Jeff Snyder of Alhambra Investments. For years, he has flatly stated that the Fed and their army of PhDs do not understand the global money marketplace. They set domestic policy and expect global participants to adjust to their actions. What is becoming clear is that central bankers, who more than anyone else should understand the nature of money, do not. Therefore, they repeatedly make critical policy errors as a result of hubris and ignorance.
Snyder claims that without an in-depth understanding of the dollar-based global lending market, one cannot grasp the extent to which problems exist and monetary policy is doomed to fail. Like the issues that surfaced around the sub-prime mortgage market in 2007, the funding turmoil that emerged in September was a symptom of that fact. Every “solution” the Fed implements creates another larger problem.
Another “lifeguard” is Daniel Oliver of Myrmikan Capital. In a recently published article entitled QE for the People, Oliver eloquently sums up the Fed’s policy situation this way:
“The new QE will take place near the end of a credit cycle, as overcapacity starts to bite and in a relatively steady interest rate environment. Corporate America is already choked with too much debt. As the economy sours, so too will the appetite for more debt. This coming QE, therefore, will go mostly toward government transfer payments to be used for consumption. This is the “QE for the people” for which leftwing economists and politicians have been clamoring. It is “Milton Friedman’s famous ‘helicopter drop’ of money.” The Fed wants inflation and now it’s going to get it, good and hard.”
We added the emphasis in the quote because we believe that to be a critically important point of consideration. Inflation is the one thing no one is looking for or even considering a possibility.
Summary
Today, similar to the months leading up to the Financial Crisis, irrational behavioral biases are the mindset of the market. As such, there are very few “lifeguards” that know what to look for in terms of distress. Those who do however, are sounding the alarm. Thus far warnings go largely unheeded because blind confidence in the Fed and profits from yesteryear are blinding investors. Similar to the analogy James Grant uses, where he refers to the Fed as an arsonist not a firefighter, here the Fed is not the lifeguard on duty but the invisible undertow.
Investors should frequently evaluate a list of cognitive biases and be aware of their weaknesses. Humility will be an enormous asset as this economic and market expansion ends and the inevitable correction takes shape. We have attached links to our other behavioral investing articles as they may be helpful in that difficult task of self-evaluation.
Finally, we must ask what asset can be a life preserver that is neither being chased higher by the herd nor providing any confirmation bias.
Gold is currently one of the most hated investments by the media and social media influencers. The only herd following gold are thought to be relics of ancient history and doomsday preppers. Maybe, as we saw in the aftermath of the prior valuation peaks, those who were ridiculed for their rigor and discipline will once again come out on top.
Gold provides ballast to a portfolio during troubling times and should definitely be considered today as the distress becomes more pronounced and obvious.
* * *
Please find below links to some of our favorite behavioral investing articles:
