Tag: finance

Via Monty Pelerin’s World,

The status quo is always difficult to alter. Resistance is a normal reaction to change.  The current theatrics in Washington, DC are especially revealing.

Donald Trump is many things to many people. His supporters believe him to be a savior of the American system and way of life. His opponents see him as a threat, Both views are correct. From the beginning, I viewed Mr. Trump as a wrecking ball:

… there has never been an inauguration speech like this one. Contrary to Pogo, Trump defined the enemy and it was not us. This wrecking ball clearly differentiated between the average man and the parasites who inhabit Washington.

The speech was populist all the way. It was anti-establishment all the way.  Clear demarcation lines were drawn. I sense that war was declared on Washington, DC today. There will be no compromise. Either Trump will be destroyed or he will dismantle much of the Washington establishment.

This assessment has been validated by subsequent events. The winner of this existential battle is still in doubt. That itself is rather remarkable. What appeared to be a quixotic crusade now takes on heroic aspects, at least for many outside Washington. What once seemed impossible no longer does.

Don Quixote Trump still may not be favored in his battle against Goliath but the odds have shifted. The American people have been awakened to how the elites have exploited them. Whether Trump wins this battle or not, the Deep State has lost the war. They have been exposed as ruthless, lying exploiters. Don Quixote has suddenly become Goliath.

The peasants have been enlightened. The true nature of current American government has been exposed. No amount of polished rhetoric can undo this knowledge. Attempts to do so will bring out the pitchforks.

Below Jeffrey Lord reviews Kimberly Strassel’s new bestseller Resistance (At All Costs): How Trump Haters Are Breaking America. This book details the resistance against Trump. The organism we know as the Deep State is doing its best to destroy this foreign body. The State knows  its vulnerability to an awakening of the masses and its exposure. As Ms. Strassel says:

For every Resistance leader who daily makes an inflated claim about Trump’s destruction of democracy, there is a more quiet, average American who is deeply alarmed by the legitimate and lasting harm this movement is causing.

What fascinating times we live in. Donald Trump, the unlikeliest of heroes, may singlehandedly have taken down the Deep State. He exposed it. Sunlight and the American people will remedy whatever he cannot.

Here is Mr. Lord’s review of Strassel’s book:

Resistance (At All Costs): Kimberley Strassel’s Home Run – A searing profile of Trump haters and the movement that drives them.

by Jeffrey Lord

“From the FBI’s unprecedented counterintelligence investigation into the Trump campaign, to state defiance of the president’s federal immigration law, to media partisanship, to the drive-by character assassination of Trump Supreme Court nominee Brett Kavanaugh, the president’s foes have thrown aside norms, due process, and the rule of law.”

So begins the cover of Kimberley Strassel’s new bestseller, Resistance (At All Costs): How Trump Haters Are Breaking America.

Strassel, a star Wall Street Journal columnist, zeroes in on the decidedly serious problem that all this insane, foaming hatred of a duly elected president has brought to the country.

There is nothing wrong, Strassel correctly notes, with being a Trump critic. Presidents have always had critics, something that comes with the job. But the spread of a virulent Trump hatred is something quite different, and is, Strassel writes, “proving far more corrosive to our institutions and rule of law than anything of which it has accused the president.”

As she notes, the very term “the Resistance” is associated throughout history with movements designed to fight “occupying powers” as, say, the French Resistance came to life to fight the forces of the occupying Nazi Germany. And once one goes down that road, as has the Trump-hating Resistance, the Resisters “view themselves as justified in taking any action necessary to get rid of the occupier.”

Set loose the Department of Justice and the FBI to spy on a presidential campaign? No problem. Ambush a Supreme Court nominee “with uncorroborated sexual assault allegations”? No problem. Use “the impeachment process for political retribution”? No big deal.

This, says Strassel, “has been the behavior of the Resistance leaders, and it has already caused harm to vital institutions.”

Yes indeed. And none more prominent than the self-inflicted massive damage the Justice Department, the FBI, and the “mainstream media” have done to their own credibility. It is in fact alarming, as Strassel notes,

that huge swaths of the country no longer trust the Justice Department or the FBI to administer equal justice. Or that, according to a 2018 Axios poll, 72% of Americans believe that “traditional major news sources report news they know to be fake, false or purposely misleading” — including 92% of Republicans and 79% of independents.

On and on go the Resistance assaults on the very fabric of the American nation, including a demand to abolish the Electoral College, an institution that lies at the very heart of the democracy that demands all American states have an equal voice in their government.

Nowhere has this assault been more evident than in the Federal Bureau of Investigation. Strassel devotes an entire chapter to the FBI as run by the Trump-hating James Comey. The absolutely perfect title of the chapter is “J. Edgar Comey.”

In that chapter, Strassel absolutely fillets Comey and his band of Trump-hating FBI bureaucrats. She begins by reeling off the list of the disgraced:

Director Jim Comey: fired for insubordination. Deputy Director Andy McCabe: terminated for lying to investigators. Senior Counterintelligence Agent Peter Strzok: dismissed for partisan bias. General Counsel James Baker: reassigned and then out on resignation — part of a federal criminal leak investigation. These were just the highlights among a dozen senior FBI leaders who were fired or faded away. They included chief of staff James Rybicki; lawyer Lisa Page; the assistant director of the Counterintelligence Division, Bill Priestap; the head of the National Security Division, Michael Steinbach; the FBI’s top congressional liaison, Greg Brower; and the assistant director for public affairs (and 33-year FBI veteran), Michael Kortan.

The list of corrupt FBI leaders is as stunning for its length as it is for its depth. The damage they have inflicted on that venerable organization is considerable.

Strassel also delves into the shenanigans behind the Mueller report episode and the Deep State. Of the latter she opens with this serious truth about the performance of various actors in the Trump-hating Resistance that is the Washington bureaucracy:

If hell hath no fury like a woman scorned, Washington has no fury like a civil servant defied. Trump has no need to travel to a Resistance rally to meet his opponents; they work for him.

Bingo. And this will be seen in crystal-clear fashion next week when Congressman Adam Schiff finally gets around to opening his impeachment hearings and using career civil servants who are deeply impressed with the ideas that they, and not the elected president of the United States, run American foreign policy.

Strassel ends with this wisdom:

For every Resistance leader who daily makes an inflated claim about Trump’s destruction of democracy, there is a more quiet, average American who is deeply alarmed by the legitimate and lasting harm this movement is causing.

Exactly right. When I hit the road for speeches I am greeted repeatedly by audiences of Americans absolutely furious at what they are seeing unfold. And make no mistake, they see the attacks on President Trump by the Resistance as thinly disguised attacks on … themselves.

Eventually, the Trump era will pass, as history rolls on. But what is immeasurably important in this era is for the star journalists of the day to write the books that will provide future leaders with an up-close and unerring documentation of the biggest political scandal in American history and the Resistance movement that was its driving force.

Kimberley Strassel’s Resistance (At All Costs): How Trump Haters Are Breaking America is indeed one of those books — a home run and a decidedly instructive one.

Goldman Sachs is under investigation by the New York Department of Financial Services after a tech entrepreneur alleged the company’s algorithms were discriminating against his wife’s gender after comparing their respective credit limits.

David Heinemeier Hansson, creator of web-application framework Ruby on Rails, says that despite his wife’s better credit score she was given a credit limit 20x below his, according to Bloomberg.

I’m surprised that they even let her apply for a card without the signed approval of her spouse? I mean, can you really trust women with a credit card these days??!

— DHH (@dhh) November 7, 2019

The customer service experience is infuriating too. They’re quick to respond, but nobody is authorized to discuss the credit assessment process. No opportunity to present evidence. Just a “sorry, your wife is deemed to be 1/20th the credit worth you are, check again in 6 months!”

— DHH (@dhh) November 7, 2019

(Click the tweets to see the rest of Hansson’s lengthy thread)

Responding to it was Apple co-founder Steve Wozniak, who said the same thing happened to them!

The same thing happened to us. I got 10x the credit limit. We have no separate bank or credit card accounts or any separate assets. Hard to get to a human for a correction though. It’s big tech in 2019.

— Steve Wozniak (@stevewoz) November 10, 2019

“The department will be conducting an investigation to determine whether New York law was violated and ensure all consumers are treated equally regardless of sex,” said NY Dept of Financial Svcs. superintendent Linda Lacewell, adding “Any algorithm, that intentionally or not results in discriminatory treatment of women or any other protected class of people violates New York law.”

Responding to the controversy, Goldman spokesman Andrew Williams said: “Our credit decisions are based on a customer’s creditworthiness and not on factors like gender, race, age, sexual orientation or any other basis prohibited by law,” however Hansson said Goldman’s response doesn’t address what happened after he started posting about it on social media.

“As soon as this became a PR issue, they immediately bumped up her credit limit without asking for any additional documentation,” he told Bloomberg. “My belief isn’t there was some nefarious person wanting to discriminate. But that doesn’t matter. How do you know there isn’t an issue with the machine-learning algo when no one can explain how this decision was made?“

“Goldman and Apple are delegating credit assessment to a black box,” he said. “It’s not a gender-discrimination intent but it is a gender-discrimination outcome.”

Crytpos have taken a leg higher in recent hours, led by a jump in Litecoin…

Source: Bloomberg

With Bitcoin erasing Friday’s plunge, back above $9,000…

Source: Bloomberg

But, as CoinTelegraph’s William Suberg reports, Bitcoin is set to go much higher as well-known industry figure Bobby Lee expects it to surpass the market cap of gold and could ultimately be worth $1 million.

image courtesy of CoinTelegraph

In a series of tweets on Nov. 10, Lee, who co-founded Chinese cryptocurrency exchange BTCC and now runs a Bitcoin wallet startup, became the latest voice in the expanding debate on Bitcoin versus gold. 

Lee: BTC market cap to hit $8 trillion

Gold’s market cap is $8 trillion, while Bitcoin’s is just $160 billion. While around fifty times lower at present, Lee thinks a reversal could come as soon as 2028.

“I predict the #flippening will happen within 9 years and $BTC will shoot up past USD $500,000,” he wrote. 

Like many, Lee based his argument for Bitcoin’s success on its decreasing supply via block reward halvings. He noted that in the next decade, the amount of Bitcoin released to miners each block will halve three times. Lee added:

“By 20th year, daily new output will just be ~255 BTC — yearly inflation of less than 0.5%. More scarce than #gold!” 

Money printing could take BTC to $1 million

His arguments chime with predictions by a well-established model charting the Bitcoin price — Stock-to-Flow. The product of social media analyst PlanB, the instrument likewise uses Bitcoin’s new supply versus its existing stock to forecast its future value. 

As Cointelegraph reported, calculations call for a BTC/USD price of just $8,300 until the next halving in May 2020. After that, however, the situation should change rapidly, with $100,000 coming around two years later. 

Lee also joined PlanB in predicting far higher Bitcoin prices in the latter part of the next decade or beyond. While the former thinks a $1 million price tag is possible in the event of global money printing continuing, PlanB noted that money printing could ultimately stop the Stock-to-Flow model from working.

“I would be happy if the model holds for 1 or 2 or maybe 3 more halvings. Especially since BTC is measured in $ … who knows what happens with $ if the FED keeps doing more QE (money printing),” he said in a Twitter exchange late last month. 

Bitcoiners battle gold believers

The idea of Bitcoin usurping gold as an alternative store of value still has its major detractors. Among the most vocal is Peter Schiff, the gold bug who has become infamous for his social media slighting of both Bitcoin and its proponents. 

Last week, Schiff argued that China potentially backing its state-issued digital currency with gold was a “bearish” sign for Bitcoin. 

Prior to that, he forecast BTC/USD never reaching $50,000, while gold would pass $5,000. 

Equally vocal about Bitcoin meanwhile is Max Keiser, the RT host who continues to argue for the cryptocurrency’s supremacy on mainstream media. 

In an episode of his Keiser Report last week, he said that Bitcoin’s self-settling ability automatically made it more suitable for transactions than either gold or fiat currency.

Authored by Nick Cunningham via OilPrice.com,

Saudi Arabia is gearing up for the Aramco IPO, pulling out all the stops to boost the company’s valuation. But it’s a desperate attempt that is riddled with risk.

Saudi Arabia is reportedly bullying the ultra-rich in the country to invest their money in the offering, a pressure campaign that has echoes in the 2017 Ritz-Carlton shakedown.

Aramco is also dangling the possibility of larger-than-advertised dividend payouts to investors. “Aramco management has stressed the possibility of additional distributions to shareholders above and beyond the minimum dividend pledge,” Bank of America Merrill Lynch said in a report for investors seen by the Financial Times. Higher dividends would be made possible by borrowing, while the notion is also hinged on some optimistic assumptions on higher oil prices and steady increases in free cash flow.

But major banks are still not coming through for Aramco, putting valuation ranges on the company well below the $2 trillion figure that Crown Prince Mohammed bin Salman wants. “This is marketing material,” one banker told the FT, referring to the optimistic assumptions that Aramco is peddling regarding future oil prices.

Bank of America, for instance, says the company may be worth between $1.2 and $2.3 trillion, which, to be fair, would still produce a staggering number, although the range the bank offered is nebulously large.

Some press reports suggest that MbS has come around to the idea of a lower valuation, perhaps in the range of $1.7 trillion. But, again, even that revised number could be overly optimistic. The danger is that the IPO flops and the share price slides, burning investors along the way. China may invest $5 to $10 billion in the company, but from China’s perspective, the investment serves geopolitical goals arguably as much or more than any financial outcome.

Ultimately, there are large questions surrounding the unique nature of Aramco, huge profits notwithstanding. The Abqaiq attack highlighted geopolitical risks to the company’s operations, revealing that a sizable portion of the country’s assets could be knocked out essentially overnight by an unexpected attack. That certainly has to be factored into the valuation of the company.

Meanwhile, Aramco can make promises to investors, but at the end of the day, the company and its shareholders would be entirely at the mercy of the King and his political goals, leaving little to no legal recourse for investors.

“For example, spending big to expand production capacity to maintain Saudi Arabia’s status as the world’s only real swing producer makes sense from a political standpoint; but for shareholders, spending money on spare capacity that may never be used makes little sense,” Torbjorn Soltvedt, principle MENA analysts at Verisk Maplecroft wrote in a recent note.

For the IPO to be successful, MbS may need to lower his sights even further. “A successful IPO is one that makes money for investors, not the one that commands the highest valuation,” Slava Breusov, a senior analyst at AllianceBernstein, told Bloomberg. Breusov added that Aramco is worth “way below $1.5 trillion.”

MbS likely feels intense pressure to pull off an IPO with a high valuation, but pursuing that track is risky. “So far, MBS has very few policy ‘wins’ under his belt. And on the other side of the ledger, there are several clear failures: stalemate in Yemen, a stalled Vision 2030 reform programme, and the September 2019 attacks against the heart of Saudi Arabia’s energy infrastructure,” Torbjorn Soltvedt from Verisk Maplecroft said. “Achieving a nominal USD2 trillion valuation through strong-arm tactics will be a hollow victory if it reinforces existing concerns over governance and the rule of law.”

Meanwhile, Saudi Arabia is offering up Aramco within days of the OPEC+ meeting in Vienna, complicating both events. The valuation of Aramco is influenced by oil prices, and Riyadh’s strategy in Vienna is, at this point, highly influenced by its desire for a successful IPO of Aramco.

Nevertheless, press reports at this stage suggest that OPEC+ is likely to roll over the cuts rather than deepen them, which makes sense to some degree. Aramco may benefit from higher prices stemming from a deeper cut, but it would also highlight the political nature behind the company’s decision-making.

MbS has a lot riding on the IPO and there is no shortage of risks and landmines that stand in the way. But one of the few things that is certain is that the valuation will fall short of his vision. “[D]espite a broad range of measures to boost Aramco’s valuation, the USD $2 trillion target is likely to be beyond reach,” Soltvedt from Verisk Maplecroft concluded.

After Amazon decided not to open a New York City headquarters in February, CEO Jeff Bezos made a phone call to the city’s former mayor.

Bezos wanted to know if Bloomberg would consider running for president in 2020 – which the New York billionaire said ‘no’ to at the time.

Bloomberg, meanwhile, asked Bezos if he would reconsider putting their HQ2 in New York, to which Bezos similarly said ‘no,’ according to Recode.

Now, months later, Bloomberg is in fact on the cusp of entering the race for the Democratic nomination as he’s watched the party’s leading moderate, former Vice President Joe Biden, struggle. On Friday, Bloomberg filed paperwork to qualify for the presidential primary in Alabama, which has the earliest deadline of any state. He has still not announced his candidacy.

It’s unclear what prompted Bezos’ call earlier this year, or what he thinks of Bloomberg’s recent inching toward the race. It’s also not known whether the discussion took place before or after Bloomberg’s March 5 announcement that he wouldn’t run for president.

Bezos, who’s been described as a libertarian, has largely stayed out of the world of big-money political donations, other than a $10 million gift with his then-wife MacKenzie to a super PAC that aims to elect military veterans to Congressional office. –Recode

As Recode notes, it’s understandable that Bezos would endorse an alternative to Elizabeth Warren and Bernie Sanders – both of whom want to separate him from billions of dollars with their new wealth tax proposals.

Both Democratic Senators have also been vocal critics of Amazon – ranging from knocking the company’s notoriously poor working conditions in its warehouses, to its growing power over various industries. Warren has notably proposed a plan to break up Amazon and other tech giants.

According to the report, some believe a Bloomberg run would actually help Warren’s chances by weakening moderate democrat Joe Biden.

Via Greg Hunter’s USAWatchdog.com,

Edward Griffin, author of the wildly popular book about the Federal Reserve “The Creature from Jekyll Island,” is holding a conference this weekend called “Red Pill Expo.”

It is all about waking people up from the illusions they are being told. Griffin explains, “The illusions are in health, in politics and in education. The illusions are in the media, in money and in banking, which is my specialty. So, people are coming, some of whom are informed, but most respond to the slogan we are using for the “Red Pill Expo,” and the slogan is ‘Because you know something is wrong.’ That sort of spells it out for most people, not just in America, but for people all over the world. People everywhere are being fed propaganda, lies and false stimuli of all kinds, but deep in their hearts, deep in their instincts, they know something is wrong.”

What’s wrong in the financial world with the longest expansion in history and the Fed starting QE (money printing) again? Griffin says:

“We are living in a system of the banks, by the banks and for the banks, and that is the reality…

They see that the wheels are coming off… The system of inflation in which we live cannot go on forever…

All systems of exponential growth always collapse. They come to an end at some point, and it’s hard to tell exactly at what point, but you do know there is a breaking point where it just moves beyond reality. The banks know this better than anybody. So, I am assuming that they feel they are at the end. You can smell it. You can see it. You can touch it almost. So, what do you do? …

I think their thinking is, hey, we are at the end and let’s just grab all we can so when the system collapses, we will be okay. That is kind of a crude way of putting it, but I think they are going for broke because they know it is broke, and there is not much they can do about it.”

So, what’s the plan by the bankers? Griffin says, “I think I know…”

“They are waiting for the big collapse to come. They will personally be okay because they will have amassed hard assets. They are trying to hold all the gold, all the silver, all the real estate and all the stuff that has value. They want all the tools, factories and food supplies, but everything else, based on numbers, paper and debt, that will collapse. So, they will be able to pick up everything for pennies on the dollar.”

What does the little guy do? G. Edward Griffin says simply, “Hold hard assets.” Griffin also says,

“This question usually comes in the form of what does the average guy do? …The answer is if you want to do something, stop being average. You’ve got to climb up out of that level. You have to become un-average. You have to start asking questions, and stand up and take it on the chin now and again. You’ve got to get into the fray. Join the battle. Speak up and join with others with like minds, and start becoming active in the political arena.”

Join Greg Hunter as he goes One-on-One with G. Edward Griffin, author of “The Creature from Jekyll Island” and founder of the upcoming “Red Pill Expo.”

To Donate to USAWatchdog.com Click Here) (This video was demonetized–once again. To buy a copy of the book “The Creature from Jekyll Island,” click here.

Though Erdogan has never made a secret of his desire to redraw Syria’s map of Kurds and Arabs via his Turkish military incursion in northern Syria, and in the months prior to his ordering the operation even made statements tantamount to an open policy of ethnic cleansing, it was surprising how easily the White House gave the green light a month ago despite Ankara’s stated aims. 

But now a leaked internal US government memo published by The New York Times spells it out clearly, and underscores the fact that everyone in Washington knows NATO’s second largest military is now engaged in ongoing ethnic cleansing. The internal State Department memo states bluntly the Turks are conducting “an intentioned-laced effort at ethnic cleansing”.

It was authored by William Roebuck, Americas top diplomat in northern Syria, who for years previously served as the Deputy Chief of Mission in Syria. He was also recently the US Ambassador to Bahrain.

The most shocking line among its 3200 total words are as follows: 

“Turkey’s military operation in northern Syria, spearheaded by armed Islamist groups on its payroll, represents an intentioned-laced effort at ethnic cleansing.”

The memo further describes Turkey’s Islamist ground proxies in the so-called ‘Syrian National Army’ (or formerly FSA) as carrying out horrific human rights violations and summary executions of Kurdish fighters and civilians, calling the abuses “what can only be described as war crimes and ethnic cleansing.”

Roebuck’s internally circulated memo, later leaked to the press, is considered the first broad dissent memo decrying President Trump’s policy to dump the Kurds by withdrawing from the border areas. 

The memo urged greater US action in pushing back against invading Turkish forces: “we have a chance to minimize the damage for us and hopefully correct some of the impact of Turkey’s current policies, as we seek to implement the president’s guidance for our presence in northeastern Syria,” it said. Roebuck also called America’s current policy in Syria “a catastrophic sideshow”. 

“One day when the diplomatic history is written,” he said, “people will wonder what happened here and why officials didn’t do more to stop it or at least speak out more forcefully to blame Turkey for its behavior…” in reference to Ankara’s ethnic cleansing campaign which has brought Syrian Kurds and Christians in its cross hairs. 

“President Trump has been clear and consistent about wanting to get our forces out of Syria,” Roebuck concluded. “The residual presence to protect the oil and fight ISIS buys us some time,” he noted. 

Meanwhile, despite intense strain in US-Turkey ties over the past months, also related to Ankara’s S-400 purchase from Russia and the stalled F-35 program, both the Trump administration and Erdogan’s office have confirmed the Turkish president’s Nov. 13 visit to the White House will happen as scheduled. 

Authored by Lance Roberts via RealInvestmentAdvice.com,

The “QE, Not QE” Rally Is On

Just recently, we released a study for our RIAPro Subscribers (30-Day Free Trial) on historical QE programs and what sectors,  markets, and commodities perform best. (If you subscribe for a 30-day Free Trail you can read the entire report “An Investor’s Guide To QE-4.”)

“On October 9, 2019, the Federal Reserve announced a resumption of quantitative easing (QE). Fed Chairman Jerome Powell went to great lengths to make sure he characterized the new operation as something different than QE. Like QE 1, 2, and 3, this new action involves a series of large asset purchases of Treasury securities conducted by the Fed. The action is designed to pump liquidity and reserves into the banking system.

Regardless of the nomenclature, what matters to investors is whether this new action will have an effect on asset prices similar to prior rounds of QE. For the remainder of this article, we refer to the latest action as QE 4.

To quantify what a similar effect may mean, we start by examining the performance of various equity indexes, equity sectors, commodities, and yields during the three prior QE operations. We then normalize the data for the duration and amount of QE to project what QE 4 might hold in store for the assets.”

The following is one of the tables from article.

As you will notice, all major markets increased in value during QE-1, 2, and 3.

Since the market increased each time the Fed engaged in monetary programs, it should not be surprising investors now have a “Pavlovian” response to the Fed “ringing the bell.” 

Over the last month, we have been discussing the end of the year rally which would be supported by both the Fed, and a “trade deal.” 

This past week, as expected, headlines were floated which suggested that tariffs would be reduced in exchange for essentially nothing, This is precisely the case we laid out in September:

“Trump can set aside the last 20%, drop tariffs, and keep market access open, in exchange for China signing off on the 80% of the deal they already agreed to. 

For Trump, he can spin a limited deal as a ‘win’ saying ‘China is caving to his tariffs’ and that he ‘will continue working to get the rest of the deal done.’ He will then quietly move on to another fight, which is the upcoming election, and never mention China again. His base will quickly forget the ‘trade war’ ever existed.

Kind of like that ‘Denuclearization deal’ with North Korea.”

We followed that in early October by laying out the case for the “trade deal” to push the markets to 3300:

“Assuming we are correct, and Trump does indeed ‘cave’ into China in mid-October to get a ‘small deal’ done, what does this mean for the market. 

The most obvious impact, assuming all ‘tariffs’ are removed, would be a psychological ‘pop’ to the markets which, given that markets are already hovering near all-time highs, would suggest a rally into the end of the year.”

Then, just two week’s ago, as the Fed went into action:

“Clearly, the Fed is concerned about something other than the impact of ‘Trump’s Trade War’ on the economy. In the meantime, the injection of liquidity continues to support asset prices as the litany of ‘algo’s’ which drive -80% of the trading on Wall Street, respond to more liquidity.”

That is where we are today.

The questions now are:

1. How do you play it; and,

2. What happens next?

How To Play It

As we have been noting over the last month, with the Fed’s more accommodative positioning, we continue to maintain a long-equity bias in our portfolios currently. We have reduced our hedges, along with some of our more defensive positioning. We are also adding opportunistically, to our equity allocations, even as we carry a slightly higher than normal level of cash along with our fixed income positioning.

Currently, it will likely pay to remain patient as we head into the end of the year. With a big chunk of earnings season now behind us, and economic data looking weak heading into Q4, the market has gotten a bit ahead of itself over the last two weeks.

On a short-term basis, the market is now more than 6% above its 200-dma. These more extreme price extensions tend to denote short-term tops to the market, and waiting for a pull-back to add exposures has been prudent.

Also, the majority of our indicators are back to more extreme overbought readings, which have typically denoted short-term tops at a minimum.

As I noted last week:

“Given the markets tend to pullback just before Thanksgiving, and during the second week of December, we will have a better opportunity increase allocations if we are patient.“

Once we see that pullback, or even a slight consolidation of the recent advance, we can increase allocations in portfolios towards more equity related exposure.

This begs the question of “what to buy,” which brings us back to our recent RIAPRO.NET article:

“If we assume that assets will perform similarly under QE 4, we can easily forecast returns using the normalized data from above. The following three tables show these forecasts. Below the tables are rankings by asset class as well as in aggregate. For purposes of this exercise, we assume, based on the Fed’s guidance, that they will purchase $60 billion a month for six months ($360 billion) of U.S. Treasury Bills.

The expected top five performers during QE4 on a normalized basis from highest to lowest are: Silver, S&P 400, Discretionary stocks, S&P 600, and Crude Oil. 

I would highly suggest reading the whole article.

What Happens Next?

Michael Lebowitz, CFA recently penned:

“A Honus Wagner baseball card from 1909 was recently auctioned for over $3 million. While that may seem like a lot of money, it is not necessarily expensive. A baseball card is nothing more than paper and ink with no real value. Its street value, or price, is based on the whims of collectors. “Whim” is impossible to value.

Stocks are not baseball cards. Stocks represent ownership in a corporation, and therefore, their share prices are based on a future series of expected earnings and cash flows. Further, there are many other types of investments that serve not only as alternatives, but provide a means to assess relative value.

Today, investors are trading stocks on a “whim,” with scant attention to their value. Unlike a baseball card, when a stock’s street value rises much more than its real value, an inevitable correction will occur. The only question is not if but when will investors realize what they are truly buying.”

There is an important distinction to be made here between “investing” vs. “speculating.” 

Benjamin Graham, in his seminal work Security Analysis (1934) defined investing as:

“An operation in which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.” 

The problem is that today, the term “investor” is now being applied ubiquitously to anyone who participates in the stock market. As Graham noted later in “The Intelligent Investor:”

“The newspaper employed the word ‘investor’ in these instances because, in the easy language of Wall Street, everyone who buys or sells a security has become an investor, regardless of what he buys, or for what purpose, or at what price, or whether for cash or on margin.” 

To understand “what happens next,” one must understand the difference between “investment” and “speculation.” 

While QE-4 may be driving stocks higher today based on a “whim,” there are two very important difference between QE-4 and QE-1 or 2; 1) stocks are no longer undervalued or 2) under-owned. 

“With cash levels at the lowest level since 1997, and equity allocations near the highest levels since 1999 and 2007, it suggests investors are now functionally ‘all in.’” 

With investors paying exceptionally high prices for equity ownership, expected forward returns becomes much more problematic. As we addressed on Thursday:

“The detachment of the stock market from underlying profitability guarantees poor future outcomes for investors. But, as has always been the case, the markets can certainly seem to ‘remain irrational longer than logic would predict,’ but it never lasts indefinitely.

‘Profit margins are probably the most mean-reverting series in finance, and if profit margins do not mean-revert, then something has gone badly wrong with capitalism. If high profits do not attract competition, there is something wrong with the system, and it is not functioning properly.’” – Jeremy Grantham

Another way to look at the issue of profits as it relates to the market is shown below. When we measure the cumulative change in the S&P 500 index as compared to the level of profits, we find again that when investors pay more than $1 for a $1 worth of profits there is an eventual mean reversion.

With investors paying more today than at any point in history for each $1 of profit, the next mean reversion will be a humbling event.

That is just math.

However, in the meantime, individuals are “speculating” within the markets based solely on the premise that a “greater fool” will be there when the time comes to sell.

Unfortunately, that is rarely the case.

There are virtually no measures of valuation which suggest making investments today, and holding them for the next 20-30 years, will work to any great degree.

This is the difference between “investing” and “speculation.”

When you think about QE-4, as it relates to your portfolio, you have to consider the premise of valuations, margin of safety, and risk. Yes, the markets are indeed bullish by all measures, and holding risk will likely pay off in the short-term. (speculation) However, over the long-term, the “house will always win.” (investing)

In the least-surprising news item of the day, House Intelligence Chairman Adam Schiff has rejected GOP calls for the so-called whistleblower to testify in the sham impeachment hearings.

Schiff explains in a letter to Rep. Devin Nunes that the whistleblower’s testimony is “redundant and unnecessary,” claiming that the impeachment inquiry has gathered evidence that “not only confirms, but far exceeds” information in the original complaint.

Schiff also made it clear that the impeachment inquiry will not be used to investigate former Vice President Joe Biden and his son, Hunter Biden, or allegations of Ukrainian meddling in the 2016 U.S. presidential elections.

Schiff’s stunningly hypocritical response to Nunes is below:

Dear Ranking Member Nunes:

The Committee is in receipt of your letter, dated today, proposing witnesses for the impeachment inquiry’s open hearings. The Committee is carefully evaluating the witness list you provided, along with the written justifications you included.

Consistent with H. Res. 660 and as noted in my November 6, 2019 letter, the Committee will give due consideration to witnesses within the scope of the impeachment inquiry.

In doing so, the Committee is mindful that this inquiry is a solemn undertaking, enshrined by the Founders in the Constitution, to determine whether the President of the United States warrants impeachment by the House of Representatives.

As we move to open hearings, it is important to underscore that the impeachment inquiry, and the Committee, will not serve as vehicles for any Member to carry out the same sham investigations into the Bidens or debunked conspiracies about 2016 U.S. election interference that President Trump pressed Ukraine to conduct for his personal political benefit.

The Committee also will not facilitate efforts by President Trump and his allies in Congress to threaten, intimidate, and retaliate against the whistleblower who courageously raised the initial alarm. It remains the duty of the Intelligence Committee to protect whistleblowers, and until recently, this was a bipartisan priority. The whistleblower has a right under laws championed by this Committee to remain anonymous and to be protected from harm.

The impeachment inquiry, moreover, has gathered an ever-growing body of evidence – from witnesses and documents, including the President’s own words in his July 25 call record – that not only confirms, but far exceeds, the initial information in the whistleblower’s complaint.

The whistleblower’s testimony is therefore redundant and unnecessary.

In light of the President’s threats, the individual’s appearance before us would only place their personal safety at grave risk.

As a reminder, Schiff initially said the whistleblower would testify to Congress but backed away after the contact between the person and his team was revealed.

This latest decision comes after Nunes complained that Democrats had yet to treat President Trump with “fairness” in the impeachment process, directing witnesses not to answer questions from GOP committee members and withholding transcripts.

In addition to the whistleblower, Republicans also requested the following witnesses:

• Hunter Biden: The son of former Vice President Joe Biden, and a former board member for Burisma Holdings, a Ukrainian gas company that has been plagued for years by corruption concerns. President Donald Trump asked Ukraine’s president in a July 25 phone call to consider investigating whether Joe Biden pressured the Ukrainian government in 2016 to shut down an investigation of Burisma.

• Devon Archer: One of Hunter Biden’s business partners and a former Burisma board member.

• Alexandra Chalupa: A former DNC consultant who met with Ukrainian embassy officials during the 2016 presidential campaign. Chalupa, who is Ukrainian-American, dug up dirt on Trump campaign chairman Paul Manafort.

• David Hale: The undersecretary of state for political affairs. Hale testified in a closed-door deposition Wednesday.

• Tim Morrison: The former senior director for European and Eurasian affairs on the National Security Council. Morrison is one of only two individuals, including National Security Council’s Ukraine director, Lt. Col. Alexander Vindman, to have listened to the July 25 phone call between Trump and Zelensky. Morrison testified that he did not hear anything illegal on the call, while Zelensky, who will be called to testify by Democrats, said that he had serious concerns with what Trump said in the call.

• Nellie Ohr: The wife of Justice Department official Bruce Ohr, and a former contractor for Fusion GPS. Ohr told Congress in an Oct. 19, 2018, interview that Serhiy Leshchenko, a former Ukrainian lawmaker and investigative journalist, was a source of information for Fusion GPS, which peddled the infamous Steele dossier. Leshchenko, who has acknowledged having contact with Chalupa, helped publish information in August 2016 that led to Manafort’s firing as Trump campaign chairman.

• Kurt Volker: The former special envoy to Ukraine. Volker was a liaison between Rudy Giuliani and the Zelensky administration. He testified Oct. 3 that he did not witness a Trump quid pro quo to Ukraine.

What are the odds that any of these people will be allowed by Schiff?

Authored by Mike Shedlock via MishTalk,

With the UK general election less than five weeks away, let’s analyze election chances.

The above chart is from Electoral Calculus. Prediction based on opinion polls from 25 Oct 2019 to 04 Nov 2019, sampling 15,917 people.

Tory Starting Point

Majority Math

• 650 Seats

• Expect Sin Fein to pickup one seat. If Sin Fein does not sit, and it’s likely they don’t sit, Parliament will have 642 MPs.

• The Speaker and 3 deputies do not vote and are considered non-partisan.

• 650-8-4 – 638.

• A majority is over half. Thus 638/2 + 1 = 320

If the speaker and deputies do count, then the majority is 322.

DUP was part of Theresa May’s fragile majority but will not be part of Johnson’s.

Tory Starting Point 270

• Assume the Scottish National Party wipes out 13 Tory seats,

• Assume the Liberal Democrats alliance works and that tips 6 more seats.

• One seat from Plaid Cymru seems headed to the Tories.

The net result of those subtractions is 270. Thus the Tories need to pick up 52 seats just to have a bare majority. How likely is that?

Battle for the Soul of Great Britain

In Battle for the Soul of Great Britain I discussed London and Wales.

Today, YouGov released polls for every region. Let’s go over them all.

Regional Voting Intention Wales

Wales is divided into forty Parliamentary constituencies. After the General Election of June 2017 and a by-election in August 2019, 28 are represented by Labour MPs, 7 by Conservative MPs, 4 by Plaid Cymru MPs, and one by a Liberal Democrat MP.

On a 49-34 percentage lead in votes, Labour held a 28-7 seat advantage over the Tories.

Expect a Tory pickup of 8 seats.

North East – You Gov

Westminster voting intention in the NORTH EAST (17-28 Oct)

Lab – 32% (-23 from GE2017 result)
Con – 26% (-8)
Lib Dem – 15% (+10)
Brexit Party – 19% (+15 on UKIP GE2017)
Green – 7% (+6)https://t.co/0LPtXVCDTX pic.twitter.com/jBfMMB6XWM

— YouGov (@YouGov) November 8, 2019

Regional Voting Intention North East

The region of North East England is divided into 29 parliamentary constituencies which is made up of 19 Borough Constituencies and 10 County Constituencies. Since the General Election of June 2017, 26 are represented by Labour MPs and 3 by Conservative MPs.

The Brexit Party could be a killer here. If they stood aside, I would expect the Tories to win about 16 seats. That’s a pickup of 13.

The latest poll suggests a pickup of about 6-9 seats for the Tory Party. Call it 6.

North West – You Gov

Look at these Tory poll ratings in Brexit heartlands from @YouGov – leading in North West and Yorkshire, after decades lagging behind Labour. And neck and neck in Wales. I’m treating all polling with a pinch of salt, but this is a pretty clear vindication of Tory tactics. #GE2019 pic.twitter.com/bPlwi052Ey

— Paul Brand (@PaulBrandITV) November 8, 2019

Regional Voting Intention North West

The region of North West England is divided into 75 parliamentary constituencies which is made up of 39 Borough Constituencies and 36 County Constituencies. Since the General Election of June 2017, 20 are represented by Conservative MPs, 54 by Labour MPs, and 1 by Liberal Democrat MPs.

With a 55-33 margin in favor of Labour over the Tories, the Tories managed 20 out of 75 seats.

The Tories are now leading 36-30. A pickup of 20 seats (40 Tory, 35 Other), seems reasonable.

The Brexit Party may cost additional pickups, but not as many as in the North East given the Tory majority.

Scotland Current MP Makeup

Regional Voting Intent Scotland

Labour will be wiped out in Scotland. With these numbers it is a bit unreasonable to expect a total blowout where conservatives lose every seat. Let’s assume they hold 4.

Regional Voting Intention Northshire and Humber

The region of Yorkshire and the Humber is divided into 54 parliamentary constituencies which is made up of 25 Borough Constituencies and 29 County Constituencies. As of September 2019 17 are represented by Conservative MPs, 35 by Labour MPs, 1 Liberal Democrat MP and 1 Independent MP.

That makeup was with a 49-34 advantage of Labour over the Tories.

I suggest a Tory pickup of 15 or more. Call it 15.

Regional Voting Intention East Midlands

The region of East Midlands is divided into 46 parliamentary constituencies which is made up of 12 Borough Constituencies and 34 County Constituencies. Since the General Election of June 2017, 31 are represented by Conservative MPs and 15 by Labour MPs.

With a 51-41 (10-point) lead, the Tories had a 31-15 seat advantage. The Tory lead is now 13 points.

Expect a pickup of 5-8 seats. Call it 6.

Regional Voting Intention West Midlands

The ceremonial county of West Midlands, England is divided into 28 parliamentary constituencies, each of which elect one Member of Parliament (MP) to the House of Commons.

Despite a 49-43 lead over Labour in 2017, Labour held 20 seats with the Tories 8.

With a 43-23 lead, expect a reversal. Tories +12.

Regional Voting Intention East of England

The region of East of England is divided into 58 parliamentary constituencies which is made up of 16 Borough Constituencies and 42 County Constituencies. Since the General Election of June 2017, 50 are represented by Conservative MPs, 7 by Labour MPs, and 1 by Liberal Democrat MPs.

On a 55-33 vote in 2017, the Tories held 50 MPs with Labour only 7.

Assume a modest gain of 2 but with Labour losing a handful more to the Liberal Democrats.

Regional Voting Intention South East

The region of South East is divided into 84 parliamentary constituencies which is made up of 23 Borough Constituencies and 61 County Constituencies. 60 are represented by Conservative MPs, 11 by Independent MPs, 8 by Labour MPs, 3 by Liberal Democrat MPs, 1 by Green MPs and the Speaker of the House of Commons.

On a 54-29 vote percentage the Tories held 60 of 81 seats.

They rate to pick up 5-8. Call it +5. Labour rates to get smashed to 0-2 seats.

Regional Voting Intention Greater London

The region of Greater London, including the City of London, is divided into 73 parliamentary constituencies which are sub-classified as borough constituencies, affecting the type of electoral officer and level of expenses permitted. As of September 2019, 46 are represented by Labour MPs, 19 by Conservative MPs, 4 by Liberal Democrat MPs, 2 by The Independent Group for Change, and 2 are held by independents.

On a 55-33 voting lead (22 points) over the Tories, Labour held an edge in seats of 46-19.

The lead is now down to 10 points. Expect a Tory pickup 8 seats.

Regional Voting Intention South West

The region of South West England has, since the 2010 general election, 55 parliamentary constituencies which is made up of 15 Borough Constituencies and 40 County Constituencies. In the 2017 general election, the Conservatives remained, by far, the largest party with 47 seats, though losing three to Labour, who won 7, and one to the Liberal Democrats, who won 1.

On a 51-29 lead in votes (22 points) the Tories held a seat advantage over Labour by a 47-7 margin. The lead is now down to 20 not over Labour, but over the Liberal Democrats.

This is another region in which the Brexit Party might hurt the Tories significantly.

I expect a loss of about 5 seats but also with Labour getting clobbered by the Liberal Democrats.

Expected Gains vs Starting Scenario

• London: +8

• Wales: +8

• North East: +6

• North West: +20

• Scotland: +4

• Yorkshire and Humber: +15

• East Midlands: +6

• West Midlands: +12

• East of England: +2

• South East: +5

• South West: -5

That is a total of +81 seats.

From the starting point of 270, the Tories are up to 351. That’s a majority of 31.

The above charts from the Nov 8 YouGov article Regional voting intentions show both main parties down everywhere, with Labour hit particularly hard.

Two Caveats

1. All of the polls are from one source: You Gov

2. Most of the polls are a bit out of date, but not radically so.

Best Case Scenario

The best case scenario could easily be above 351.

Let’s assume YouGov is way off, possibly even low.

Expected Gains Range vs Starting Scenario

• London: +5 to +10.

• Wales: +6 to +10.

• North East: +3 to +8.

• North West: +15 to +22.

• Scotland: +0 to +6.

• Yorkshire and Humber: +10 to +20.

• East Midlands: +3 to +9.

• West Midlands: +9 to +16.

• East of England: +0 to +4.

• South East: +3 to +7.

• South West: -7 to +0.

Expected Range

1. 37 + 270 = 307.

2. 112 +270 = 382.

The first is a hung parliament.

The second is the mother of all blowouts.

And it is not all that unlikely.

Note that Electoral Calculus expects 373 seats.

Probabilities Based on Current Polls

• Outright Labour Win: 2%

• Hung Parliament: 23%

• Small Majority (by 1-6 seats): 15%

• Medium Majority (by 7-20 seats): 25%

• Big Majority (by 21-40 seats): 20%

• Blowout (over 40 seats): 15%

Divide and Concur

If these polls are remotely close, and I believe they are, Johnson’s strategy of splitting Labour and the Liberal democrats is working precisely as planned.