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JP Morgan Chase & Co. is joining Apple, Bank of America, Wal-Mart, Comcast and a plethora of other US corporate behemoths in rewarding the Trump administration for its success on tax reform with the jobs and bonuses that it covets.

On Tuesday, America’s largest bank by assets said it would increase wages, hire more workers and open new branches as part of a $20 billion investment, following the overhaul of the US tax code, as Reuters reported.

The bank will increase wages for 22,000 employees by an average of 10%, ranging from between $15 and $18 per hour, hire 4,000 employees and open up to 400 Chase branches in new cities, it said.

With the US gross domestic product expanding at its fastest clip years, a fact that has been repeatedly touted by Trump, along with his well-know proclivity for using the Dow Jones Industrial Average as a barometer of his performance.

 

Almost immediately after Trump passed the historic tax cuts last year – cuts that have been derided by critics for being overly generous to corporations and the wealthy – Comcast, Boeing, AT&T and several other companies announced  they would hand out $1,000 holiday bonuses to employees. Like JPM, most of these companies also promised to boost CapEx. For example, AT&T promised to spend $1 billion in the US during 2018. Apple, which has announced possibly the most generous benefits from the tax plan, said it will repatriate most of its offshore cash pile and use some of the money to build a new customer support campus. In addition, it promised to spent $350 billion in the US during the coming five years. The company also awarded non-managerial employees with $2,500 stock bonuses. Meanwhile, Goldman Sachs showered executives with early bonuses.

We now wait to learn which financial institutions will follow JPM’s lead and publicly announce any tax-related additional spending, surely to the delight of the Trump administration.

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In a move that virtually assures another government shutdown on February 8, Politico reports  that Chuck Schumer has taken his offer for a “spending boost” for Donald Trump’s border wall off the table, a bargaining position that would be a non-starter with the president and Congressional Republicans.

The Senate minority leader, through an aide, informed the White House on Monday that he was retracting the offer he made last week to give Trump well north of the $1.6 billion in wall funding Trump had asked for this year, according to two Democrats. And now they say Trump will simply not get a better deal than that on his signature campaign promise.

Schumer “took it off,” said Illinois Sen. Dick Durbin, the No. 2 Senate Democrat. “He called the White House yesterday and said it’s over.”

In the now-infamous cheeseburger summit last Friday with Trump, Schumer offered a large increase in border wall spending as a condition for a broader deal to help Dreamers. But after that offer was rebuffed — prompting the three-day government shutdown — the president has now “missed an opportunity to get the wall,” one Democratic aide said.

Schumer’s pulling of the “offer” comes after a day of angry accusations by progressive democrats and even Nancy Pelosi accusing Schumer of being a “sellout”, and caving to the White House in agreeing to reopen government.

Meanwhile, key Republicans including Sen. Jeff Flake of Arizona – a key GOP immigration negotiator – had already considered using the promise of border wall funding totaling more than $1.6 billion to lure more conservative votes. A Dreamer plan written by a bipartisan group of six senators, including Flake, had included Trump’s $1.6 billion request as part of a broader, $2.7 billion border security package.

“Sen. Schumer’s already indicated that he would go for more. Republicans will go for more,” Flake said. “It’s just how much more we can get from the Democrats.”

Now, they won’t be able to get anything, which means that the Dreamer negotiations go back to square one.

Politico confirms as much, reporting that “Republicans aligned with Trump are unlikely to go for any bill that does not offer a major boost in border wall funding, given the president’s strong feelings about the issue. Moreover, Sen. Tom Cotton (R-Ark.) said he was skeptical of Schumer’s recollection of the meeting and the border wall offer anyway.”

“They claim that some crazy deal was made,” Cotton said of Democrats. “And then when we say no deal was made, they accuse Republicans and the president of reneging.”

Schumer’s gambit appears to be an attempt to get back in the good graces of the progressive wing as “providing border wall money could also push away more liberal Democrats, who prefer to completely restart negotiations rather than start from any existing bill, even a bipartisan one like the proposal written by Durbin and Sen. Lindsey Graham (R-S.C.)”

“Discussions were had coming up to Friday night are interesting for context,” said Sen. Brian Schatz (D-Hawaii). But now, he said, “we start from a blank sheet of paper.”

Should Schumer refuse to budge, not only does it raise the odds of another government shutdown in 2 weeks, but it also increases the chances of a technical default as Goldman explained earlier today:

the [government reopening] agreement does not resolve the underlying issues that led to the shutdown and therefore simply postpones the uncertainty for a few weeks. A further temporary extension is likely to be necessary after February 8, since it is unlikely in our view that Congress will be able to pass an immigration bill by then and we do not expect congressional Democrats to agree to a long-term spending bill without an immigration agreement.

This raises the probability that an upcoming spending deadline overlaps with the debt limit, which we estimate will need to be raised at some point between late February and late March. While financial markets mostly ignored the shutdown, a disruptive debt limit debate could have a more negative impact.

As expect, there has been no reaction in the market.

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Authored by Chris Hamilton via Econimica blog,

I recently wrote an article explaining why a 30% to 50% decline in household net worth is imminent (HERE).  No shocker that the primary asset for most in figuring household net worth is real estate, particularly primary residences.  This article details why US housing starts and job creation are set to decelerate and a recession will almost surely follow… sending home prices tumbling (and likely equity and bond prices, to boot) severely negatively impacting US households net worth’s.

First, the year over year change in housing starts (one unit variety) is highly indicative of the subsequent change (in 12 to 18 months) of full time employees (chart below…year over year change in full time employees blue shaded area) vs. YoY change in housing starts(red line)). As goes housing, so goes subsequent jobs creation.

 

So then, what impacts housing creation?

The chart below shows three variables on a quarterly basis:

• The federal funds rate (…black line)
• Federal Debt (year over year % change…red line)
• Housing Starts, 1 unit private houses (year over year % change…blue columns)

What is so noteworthy is the interplay of the changing debt creation and federal funds rate on new house creation.  As debt spending accelerates, interest rates are cut…and housing creation is prolific.

Conversely, when rates rise, typically federal debt creation decelerates…and housing creation declines.

The charts below show housing starts and federal debt on a year over year percentage changes (on a quarterly basis).  Federal funds rate is actual quarterly rate.

1968–>2017

 

The chart below highlights these variables from 1968 to 1996.  Spikes in debt creation, declines in interest rates, and housing creation soars…and vice versa.

 

Below, 1997 through 2017.

 

Finally, from 2009 through 2017.  The implications of the current rate hikes and deceleration of federal debt creation should be pretty clear for new starts and subsequently job creation.

 

Rising rates and decelerating federal deficits should mean decelerating or declining new starts and shortly thereafter declining full time jobs.  A recession will likely be concurrent to the job losses.

To round out the picture, the chart below shows:

• Annual total US population growth (black line)
• Annual 0-65yr/old US population growth (blue line)
• Annual housing starts, 1-unit (red line)
• Federal funds rate (dashed black line)

 

BTW – If you think interest rate changes and housing creation look interdependent…you’re right (chart below).

 

Again, total annual total population growth, 0-65yr/old population growth, housing starts (1-unit)…but this time including annual change in full time employees.

 

I believe the interest rate hikes and decelerating deficits will slow housing and jobs creation...but even if I’m wrong, there is still trouble dead ahead as the US is simply running out of employable persons as the percentage of employed 15-64yr/olds is nearing all time highs (also known as potential homebuyers).

 

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Fed Governor nominee Marvin Goodfriend – the negative-rate-loving, QE-hating, Carnegie Mellon professor and former Richmond Fed economist – is testifying at his Senate Banking Committee confirmation hearing this morning.

“I intend to draw on my academic and professional experience to promote policies that would further increase transparency and accountability at the Federal Reserve,” Goodfriend said in prepared testimony for his hearing that was released on Monday by the Senate Banking Committee.

“Marvin is going to be a counterweight to the more conventional thinking coming out of the Federal Reserve establishment,” said Vincent Reinhart, chief economist at Standish Mellon Asset Management and a longtime colleague from years when Reinhart worked as an economist at the Fed board and Goodfriend at the Federal Reserve Bank of Richmond.

“He is coming from a different perspective. It will not exactly be seamless.”

And it did not take long for his “different perspective” to peek out…

Goodfriend, peppered by questions from Senate Banking Committee Democrats about his earlier warnings that low interest rates risked a breakout of inflation, said that:

…he now feels the Fed “is more or less on the right path going forward….We should get to 2 percent (inflation) in a year or so.”

However, after that initially supportive comment, Goodfriend seemed to go a little off-narrative:

He agreed that the Fed should be “aiming to get back to all Treasurys” in its holdings. He said the of first two asset purchase programs, “I think it was okay to do that to save the system”, but that the third round “was not called for” as a routine tool for stabilization.

Seemingly agreeing with President Trump and not The Fed, Goodfriend said that

“low growth is more corrosive than low inflation…”

And perhaps most notably, Goodfriend warned:

“can’t be certain that there are no asset bubbles forming…

worrying about financial stability is an equally complementary part of the Fed’s mandate…”

Perhaps hinting at the Plunge Protection Team?

Additionally, as SMRA notes, Goodfriend said steps should be taken to increase transparency and accountability of the Fed, and specifically in transparency on regulation and supervision. He agreed on the need and value for cost/benefit analysis of regulation.

He affirmed that he “completely believes in Fed independence.”

Finally, as a reminder, Goodfriend is relatively infamous for his belief in a ‘tax on cash’…as WSJ notes, normally, banks pay interest to their customers on their deposits. With negative interest rates, the customers pay the banks to hold their deposits.

When central banks impose negative rates, they hope private-sector banks will lend more and their customers will spend more rather than pay the interest charges. But the customers—consumers, businesses and other account holders—could opt to hold their savings in cash rather than in banks to avoid the charges.

To counter that, Mr. Goodfriend has suggested the Fed could either abolish paper currency outright or charge people for taking cash out of banks.

He has proposed several mechanisms to implement the idea, including inserting a magnetic strip on bank notes to track when they enter into circulation.

So far there has been no comment on Goodfriend’s war on cash.

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And the hits just keep on coming.

Just hours after we reported that according to the latest batch of text messages between anti-Trump FBI investigators, a “secret society of folks” within the DOJ and the FBI may have come together in the “immediate aftermath” of the 2016 election to undermine President Trump, another blockbuster text message appears to have emerged.

Wisconsin Sen. Ron Johnson, the chairman of the Senate Homeland Security and Governmental Affairs Committee, said in a radio interview that the FBI’s top agent on the Trump-Russia investigation, Peter Strzok, sent what Johnson called a “jaw-dropping” text message last year that suggests he saw no evidence of Trump campaign collusion.

As first reported by the Daily Caller’s Chuck Ross, in an interview with WISN-Milwaukee radio host Jay Weber, Johnson read aloud a May 19, 2017 text that Strzok sent to Lisa Page, an FBI lawyer and his mistress.

Here is the “jawdropping” text message that Strzok wrote just two days after Mueller was named special counsel for the Russia Investigation: “You and I both know the odds are nothing. If I thought it was likely, I’d be there no question. I hesitate in part because of my gut sense and concern that there’s no big there there.“

The Strozk text verbatim on joining the Mueller investigation: May 19th, 2017- ‘You and I both know the odds are nothing. If I thought it was likely, I’d be there no question. I hesitate in part because of my gut sense and concern that there’s no big there there.’

— Jay Weber (@JayWeber3) January 23, 2018

Johnson said that the text referred to the Mueller investigation, which had kicked off two days earlier. Strzok joined that team, but was removed in July after the Justice Department’s inspector general discovered his anti-Trump text exchanges with Page.

As the FBI’s deputy counterintelligence chief, Strzok had been picked in July 2016 to oversee the investigation into possible Trump campaign collusion with the Russian government; in other words the text message came almost one year after the anti-Trump FBI agent had already done preliminary work on whether there was any Trump collusion. Prior to that, he was a top investigator on the Clinton email inquiry.

“I think that’s kind of jaw-dropping,” said Johnson, a Republican, said of the Strzok text.

“In other words, Peter Strzok, who was the FBI deputy assistant director of the counterintelligence division, the man who had a plan to do something because he just couldn’t abide Donald Trump being president, is saying that his gut sense is that there’s no big there there when it comes to the Mueller special counsel investigation,” Johnson explained.

* * *

This particular text message was included in 400 pages of text messages exchanged between Strzok and Page. Lawmakers have started reviewing the trove of documents for evidence of anti-Trump and pro-Clinton bias as part of an ongoing investigation. Yesterday AG Jeff Sessions announced that the DOJ was also beginning an investigation into the months of missing text message that the FBI had failed to preserve.

Johnson also addressed the revelation last Friday that the FBI “failed to preserve” five months worth of text messages exchanged between Strzok and Page. A Justice Department official told Johnson’s committee and five other congressional panels that a “misconfiguration” issue caused “many” FBI-issued mobile devices to not back up to the bureau’s servers.

In a shocking disclosure late last week the FBI said it did not have text messages for Strzok and Page for the period between Dec. 14, 2016 and May 17, 2017 — the day that Mueller was appointed.

Johnson said that Congress needs to see the missing text messages because Strzok and Page were “completely unguarded in their communication.”

“So we’re getting insight into exactly what is happening inside the FBI at the highest levels. And who knows who else they might implicate in terms of corruption,” he said.

Meanwhile the question of just who was obstructing justice – Trump or the FBI and the DOJ – is becoming increasingly more pressing with each passing day.

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Desperate proponent of the #TrumpShutdown hashtag, Senate Democratic Leader Chuck Schumer is coming under fire from his own party in the aftermath of a fight that shut down the government for three days and left Democrats with nothing to show for it.

 

As The Hill reports, liberal groups were enraged by that decision, arguing Schumer didn’t get enough to back down.

“It’s official: Chuck Schumer is the worst negotiator in Washington – even worse than Trump,” said Murshed Zaheed, political director at Credo, a progressive advocacy group.

“We went in with a very weak set of cards, with [25] people up for re-election,” said one Democratic senator, one of several lawmakers who requested anonymity to assess Schumer’s performance frankly.

Another Democratic senator said almost every local news channel he spoke to over the weekend began its interview with the same question, “Why did Democrats shut down the government?”

Frank Sharry, executive director of the liberal immigration advocacy organization, America’s Voice, added in a scathing statement:

“Last week, I was moved to tears of joy when Democrats stood up and fought for progressive values and for Dreamers. Today, I am moved to tears of disappointment and anger that Democrats blinked.”

Republicans reveled in what they saw as a definite political win.

Sen. Tom Cotton (R-Ark.) called the shutdown a “massive political blunder” for Democrats,” adding that McConnell had not changed his position on bringing an immigration bill to the floor “at the right time.”

Sen. Shelley Moore Capito (R-W.Va.), a moderate, called it a “no-win” situation for the other side.

Several Senate Democrats felt the same way, pronouncing themselves disappointed with the deal Schumer accepted to end the shutdown.

“It’s a great disappointment to me and it’s a great disappointment to the more than 300,000 DACA young people in the state of California,” said Sen. Dianne Feinstein (D-Calif.).

“The strategy was to keep it fixed to a must-pass vehicle because there was great worry that the House was not going to pass it,” she said of any immigration legislation that might pass the Senate.

“I’m just very disappointed,” she said.

House Democratic Leader Nancy Pelosi (Calif.) who had been in lockstep with Schumer throughout the shutdown, panned the deal.

“I don’t see that there’s any reason — I’m speaking personally and hearing from my members — to support what was put forth,” she told reporters.

A fourth Democratic senator, who requested anonymity, said his colleagues didn’t want to prolong the standoff because they saw it as getting worse and worse.

“There was inexorable trajectory toward, ‘Now my anxiety is officially high, it’s a week later and what are we doing here?’” the lawmaker said.

However, despite all the naysayers, there was one Democrat willing to defend Schumer… 

Florida Rep. Debbie Wasserman Schultz who went on CNN Monday afternoon to try to spin the Democrats’ loss over the government shutdown.

Daily Caller’s Benny Johnson reports that when Schultz was asked point-blank what the point of the government shutdown was her response left Baldwin’s jaw on the floor.

“What one thing did [Schumer] get, you know, from Republicans, to justify shutting down the government in the first place?” Baldwin asked. 

DWS replied:

“The one thing, I would say, that [Schumer] did get is the potential for momentum.”

Baldwin looked stunned and asked if the “potential for momentum” was “really worth it to shut down the government?”

Wasserman Schultz responded, “Republicans should be asking that question because they shut it down. This is Trump’s shutdown.”

Baldwin just looked shocked.

Finally, as The Washington Examiner reports, a Democratic operative in Washington with ties to Senate leadership said on condition of anonymity, seemed to sum things up perfectly…

“It’s the stupidest damn thing I’ve ever seen,”

“This is what happens when the caucus gets ginned up and ready to go into battle without thinking through the repercussions.”

 

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Since CME unleashed its Bitcoin Futures, cryptocurrencies have been on an almost one-way path lower…

2018 has been an ugly year so far for cryptos… With only Ethereum holding gains among the bigger cap coins (Bitcoin down another 5% today after dropping 10% yesterday, amid chatter about South Korean taxation and more crackdowns and regulatory headlines)

But note this is not that unusual a tendency…

Bitcoin spot is testing $10,000 once again this morning, having faded again at its 100DMA…

But, while headlines continue of worldwide ‘crackdowns’ and ‘regulation’, as SovereignMan’s Simon Black asks “is there any new information that didn’t exist two weeks” to justify this drop?

The year was 1720. And one of the smartest people to have ever lived had just made one of the dumbest financial mistakes imaginable.

Sir Isaac Newton was a genius in every sense of the word.

He practically invented the science and mathematics that is at the foundation of nearly every bit of modern technology that we enjoy today.

Newton was such an intellectual superhero that even Albert Einstein idolized him.

In fact Einstein wrote in a 1919 paper that “[Newton’s] clear and wide ideas will forever retain their significance as the foundation on which our modern conceptions of physics have been built.”

Yet Newton was a complete moron when it came to investing.

During his lifetime, the British Empire was becoming a major superpower and had colonies all over the world.

With so much new international trade under its control, Britain’s prosperity soared.

A handful of companies like the East India Company provided opportunities for investors to share in that prosperity. But the public was always clamoring for more.

So in the early 1700s, the British government chartered a new company– the South Sea Company– and awarded it a total monopoly on British trade in South America.

It seemed like a veritable goldmine, and investors clamored to buy shares.

Isaac Newton was one of those investors.

And initially it was a fantastic investment; Newton bought in early 1720, and within a few months he’d doubled his money. So he sold his entire stake.

Then something interesting happened.

The South Sea Company’s share price kept climbing… higher and higher.

In fact, almost right after Newton sold out, the South Sea Company’s share price climbed exponentially, reaching a peak of nearly GBP 1,000 by mid-1720.

(That would be worth nearly $300,000 today.)

Newton felt like a total buffoon for sitting on the sidelines while all of his colleagues were still makings tons of money in the stock.

So he got back in.

And, anxious to make back the profits he’d missed out on, Newton doubled down, investing an even bigger amount in the shares.

You know what happens next–

The South Sea Company turned out to be a complete bust. It turns out that Britain never really developed much trade with South America.

Yet the company had blown through most of the money, and there was nothing left for the shareholders. So the stock price quickly crashed.

Newton was broke. He lost his life savings, just seven years before his death.

Now, I’ve told this story a few times in this letter… because it’s so powerful.

Even one of the smartest people who ever lived made a terrible and completely avoidable mistake because he was driven by emotion instead of reason.

This has very much the case with cryptocurrencies over the past several months.

The prices of nearly every token and cryptocurrency have soared, and investors have clamored to chase their share of the easy profits.

Our advice in this column has always been to stay rational. Understand what you’re buying. And why.

Conduct your own independent supply and demand analysis, determining for yourself whether you think there will be MORE demand, or LESS demand, for that particular cryptocurrency in the future.

Think about the risks. Invest only what you can afford to lose.

It’s all simple but important advice.

(I recently prepared a free report that explains how I think about crypto’s value. It’s a great place to start if you want a different perspective on cryptocurrencies.)

But what I really wanted to talk about today was SELLING.

Over the past two weeks, Bitcoin has dropped from $17,700 a coin to as low as $9,600 (a 45% loss). It’s now recovered to around $10,200 as I write this letter.

Within the last three weeks, the price of Ripple collapsed 63% from nearly $3 to just over $1; it’s now around $1.25.

No doubt a lot of people are panicking. And when investors panic, they sell.

Just like people tend to buy assets that are rising in price, we tend to sell assets that are falling in price.

What I wanted to stress today is that the same lessons should apply, i.e. don’t sell because of an emotional panic.

Sell because you have a rational reason.

If you purchased cryptocurrency because you studied the market and formed a long-term view, ask yourself a question – has anything changed?

Sure, the price of Bitcoin (or Ether, etc.) has fallen. A lot.

But does that mean your analysis was wrong? Is there any new information today that didn’t exist two weeks ago about the future of cryptocurrency?

Maybe. Maybe not. But it’s worth asking yourself those questions before selling.

Sometimes the price of an asset collapses because there really is new information.

In September 2008, for example, the stock price of investment bank Lehman Brothers collapsed… because the market learned that the Lehman was insolvent.

This was critical new information, and a great reason to sell.

But often times investors hit the sell button simply because other people are selling.

So, once again, consider– if your cryptocurrency purchase was based on a sound analysis, is there any new information that suggests your analysis was wrong?

Or are you itching to sell simply because other people are panicking?

Again– I’m not suggesting you hold. Or sell. Or buy.

I’m suggesting that you be sure in your reasons for taking any action. After all, it’s your savings at stake.

*  *  *

If you are interested in speculating in Cryptocurrencies, I encourage you to download our free Crypto Currency Report – A Different Perspective on Crypto. More and more people want to dive into crypto currencies and everyone’s focus is on Bitcoin’s price. But, the price is not what matters… I see so many people make the same wrong assumptions and mistakes that could be fatal to their capital. That’s why my team and I have written this special report where I share a different perspective on cryptocurrencies.

 

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