Tag: finance

Authored by Aaron Maté via The Nation,

When liberals start rallying around John Bolton, you know something is off…

Donald Trump’s far-right administration is one of the most dangerous in US history, which makes the disappointment over the imminent failure of his impeachment case understandable. But the impeachment proceedings never challenged what actually makes the Trump White House so fraught. In adopting hawkish Cold War chauvinism toward Russia, Democratic House impeachment managers embraced rather than opposed a perilous right-wing agenda. They did this while presenting a weak, overblown, and hypocritical case that posed no threat to Trump.

The holes in the Democrats’ impeachment case were apparent from the start, and the House proceedings and Senate trial brought them to the fore. The lone witness who communicated with Trump about the frozen military funding to Ukraine—and, even more crucially, the only Trump official thought to have relayed a quid pro quo to the Ukrainian side—is EU Ambassador Gordon Sondland. But Sondland testified that the link between aid and the opening of investigations was only his “presumption” and that he had communicated this presumption only in passing. Ukrainian officials, including President Volodymyr Zelensky, Foreign Minister Vadym Prystaiko, and Zelensky aide Andriy Yermak, have all said that they saw no ties between the frozen funding and pressure to open investigations.

In the face of rejections by top Ukrainian officials of his core allegation, Schiff has mischaracterized the available evidence and engaged in supposition. Sondland, according to Schiff’s account, told Yermak, “You ain’t getting the money until you do the investigations.” But both Sondland and Yermak offer a radically different account. According to Sondland, he told Yermak in “a very, very brief pull-aside conversation,” that he “didn’t know exactly why” the military funding was held up, and that its linkage to opening an investigation was only his “personal presumption” in the absence of an explanation from Trump. Yermak does not even recall the issue of the frozen aid being mentioned.

To overcome that, Schiff has gone to the extraordinary step of arguing that it’s not just Sondland who is lying but the Ukrainians as well. “Like they’re going to admit they were being shaken down by the president of the United States,” Schiff told the proceedings.

Sure, that’s one possibility, but it is also wildly speculative.

Ukrainian officials say they did not learn about the weapons freeze until it was publicly reported more than one month after the Trump-Zelensky call. And even after they did find out, and even voiced concerns to their US counterparts, there is no record of any complaints about the alleged linkage. As Democratic Senator Chris Murphy recalled of a meeting with Zelensky in early September—after the funding freeze became known—the Ukrainian president “did not make any connection between the aid that had been cut off and the requests that he was getting from [Trump attorney Rudy] Giuliani.”

House impeachment managers have not overcome this evidentiary flaw. They have tried to claim that the White House effectively admitted to their allegation in an October 2019 news conference by acting White House Chief of Staff Mick Mulvaney. But as I detailed back when Mulvaney’s comments initially caused a stir, Democrats and media outlets pundits rendered them as damning by isolating one fragment and ignoring the bulk of what Mulvaney said.

The absence of concrete evidence explains the last-minute excitement over compelling the potential testimony of another Trump administration official, former national security adviser John Bolton. A New York Times report about Bolton’s forthcoming memoir led to declarations that Bolton confirmed the quid pro quo allegation at the heart of the impeachment trial. As in other cases, that is based on a mistaken and maximalist interpretation of the available facts. The Times did not quote from Bolton’s manuscript. In its characterization of what Bolton wrote, the Times reports that Bolton said Trump “preferred sending no assistance to Ukraine until officials had turned over all materials they had about the Russia investigation that related to Mr. Biden and supporters of Mrs. Clinton in Ukraine” (emphasis mine).

If this account is accurate, then Bolton is not confirming that Trump conditioned military assistance to Ukraine’s announcement of an investigation into Joe Biden and his son. Instead, Bolton is relaying that Trump “preferred” that Ukraine assist efforts to uncover the extent of Ukrainian meddling to hurt Trump’s campaign and help Democrats in 2016 – meddling that did in fact happen. Recall that Trump is not on trial for preferring that Ukraine hand “over all materials they had about the Russia investigation,” but for pressuring Ukraine to announce an investigation of Trump’s political rival.

The faulty interpretation of available evidence has been accompanied by hyperbole, fearmongering, and militaristic chauvinism.

“The president’s misconduct cannot be decided at the ballot box,” Schiff declared in his opening arguments.

“For we cannot be assured that the vote will be fairly won.”

Even if every allegation against Trump were proven correct, this is a ridiculous statement. Suppose Ukraine had announced an investigation of Burisma, the gas company where Hunter Biden obtained his lucrative board seat, as well as of Ukrainian meddling in 2016. Does anyone believe that such an announcement from Kiev would somehow undermine the fairness of the 2020 US election?

We already have precedents to test Schiff’s scenario. In December 2018, a Ukrainian court ruled that Ukrainian officials had illegally interfered in the 2016 US election when they leaked documents purporting to show illegal payments to Paul Manafort. The ruling made headlines in several US outlets, but beyond that, the response was null. If Ukraine were to now announce a follow-up investigation of Burisma and 2016, it is reasonable to expect that some outlets would report on it, but absurd to suggest it would mean that the 2020 election could not “be fairly won.”

In 2016, the Clinton campaign paid a former British spy to dig up dirt on Trump from foreign sources, including Russians. That solicitation of foreign interference was massively consequential, fueling three years of all-consuming innuendo and serving as the basis for an FBI surveillance warrant on a member of Trump’s campaign. Had Clinton won, would that have undermined the legitimacy of her victory or been impeachable?

The Democrats have delivered an underwhelming answer. On Thursday night, House impeachment manager Hakeem Jeffries said that the two incidents are not analogous, because in Clinton’s case the Steele dossier “was purchased.”

Far more worrying rhetoric comes in Schiff and company’s repeated invocations of Russia. They have argued throughout the trial that Trump’s pause on military funding for Ukraine “put our national security at risk,” because “the United States aids Ukraine and her people so that we can fight Russia over there so we don’t have to fight Russia here.” US hawks from the Johnson administration in Vietnam to the Bush administration in Iraq have used the same language. It’s not a serious argument: Trump’s predecessor, Barack Obama, refused to send that same military funding at all. By Schiff’s logic, Obama is guilty of an even more egregious offense.

The very fact that such militarist chauvinism is being adopted by the leadership of the Democratic Party is far more dangerous than anything they have accused Trump of in this impeachment trial. Rather than alleging that Trump has been insufficiently confrontational toward Russia, Democrats should be working to stop Trump policies that have increased tensions with the world’s other top nuclear power.

The dangers of warmongering toward Russia were underscored on the second day of the Democrats’ arguments. Just blocks away from the Capitol, the Bulletin of Atomic Scientists announced that it had moved its Doomsday Clock t0 100 seconds before midnight, the closest it’s been since 1953. The Trump administration’s nixing of the INF treaty and its signaling that it won’t renew the last treaty limiting nuclear weapons, New START, were cited as major reasons. Under Trump, the Bulletin noted, “the United States has adopted a bullying and derisive tone toward its Chinese and Russian competitors.” There is no hope of reversing this existential threat so long as Trump’s political opposition is adopting a tone toward Russia that is just as bullying and derisive.

We might also consider what hopes Democrats have of defeating Trump so long as their prevailing tone through Trump’s entire first term continues unchanged. The self-reflection that should have resulted from losing to him in 2016 has been replaced by an obsession with blaming Russia and demonizing it in the process. Democrats have also chosen to prioritize two scandals that highlight corruption and elitism in their top ranks. The stolen Democratic Party e-mails at the heart of Russiagate exposed a bias against Bernie Sanders and a preference for the neoliberal, militarist policies he opposes; and the allegedly sought-after investigation at the heart of Ukrainegate centered on an unqualified son receiving a lucrative gas company board seat in Ukraine while his vice president father was supposedly battling corruption there.

In the process, voters have seen a party that fights harder for the pride and privilege of its establishment candidates than it does for working people. The devotion to centering intra-elite drama has gotten so extreme that it has meant bigger liberal rallies to save Jeff Sessions’s job than to save the Iran nuclear deal. Now, liberal energy is being poured into an even more reactionary, right-wing figure who has been deemed a potential savior: John Bolton. If that is not a wake-up call, it is hard to think of what is. Rather than mourn the loss of a drawn-out impeachment trial, Democrats might wish to recall the failed results of their last drawn-out fixation, Russiagate, and break their Cold War–addled impeachment fever.

It’s been a tough few months for China…

First, they faced food shortages (and soaring food costs) as African Swine Fever swept across the nation cutting China’s pork production in half and slaughtering hundreds of millions of their porcine pals.

Then, they faced total economic shutdown and social lockdown as the deadly Wuhan Coronavirus spread across the nation faster than a Buzzfeed ‘which cat suits your social justice needs best’ article, killing hundreds and leaving 10s of thousands sick.

And now, as if things weren’t bad enough, according to the website of the Ministry of Agriculture and Rural Affairs, the Information Office of the Ministry of Agriculture and Rural Affairs, bird flu is back!

As Reuters reports, the highly pathogenic avian influenza outbreak of H5N1 subtype of poultry occurred in Shuangqing District, Shaoyang City, Hunan Province.

The case reportedly occurred on a farm with 7,850 chickens, 4,500 of which have died of the bird flu.

Authorities have culled 17,828 poultry following the outbreak.

As a reminder, Avian influenza is deadly to most birds, and it’s deadly to humans and to other mammals that catch the virus from birds. Since the first human case in 1997, H5N1 has killed nearly 60% of the people who have been infected.

But unlike human flu bugs, H5N1 bird flu does not spread easily from person to person. The very few cases of human-to-human transmission have been among people with exceptionally close contact, such as a mother who caught the virus while caring for her sick infant.

What next?

Authored by Chris Hamliton via Econimica blog,

2019 saw US population growth at its lowest percentage level in US history aside from the pandemic years of 1918/1919 (when the Spanish flu took the lives of nearly 700,000 Americans). The 0.5% annual growth meant US population grew by approx. 1.55 million persons in 2019.

Today, I just wanted to focus on the implications of low population growth on US employment.  To set-up this article, I think it’s important you see the raw population and employment data, by age groups.  No highly gamed unemployment percentages or in labor force or out of labor force.  Just raw population data and employment data.

25 to 54 Year-Old Population, 25 to 54 Year-Old Employees

First, the population and those employed among the largest and most influential segment of the US population, the 25 to 54 year old’s.  They make up about 60% of the 15 to 64 year old population and 70 percent of those employed among the same group.  They are the engine that drives US consumption.  Their population added 59 million from 1966 through 2007 but since 2007, this segment has added just a half million.  Employment among them rose 54 million from 1966 through 2000…but has essentially stalled since 2000, adding just 3 million employees over the last two decades.

Below, the 25 to 54 year-old population (red line) and employees (blue columns) both on a year over year basis.  The growth of the population has always been a governor on the potential for employment growth.

15 to 24 Year-Old Population, 15 to 24 Year-Old Employees

To understand America, the chart below is so important.  You reap what you sow, and if your young adult population ceased growing four decades ago, you can only fake economic growth for so long.  The population of young adults has risen less than one million persons over four decades and those employed among them has declined by three million.  This population is busy attending university, at record proportions, and is once again likely at peak employment.

Below, the 15 to 24 year-old population (red line) and employees (blue columns) both on a year over year basis.  Note the current period of declining population versus rising employment.

55 to 64 Year-Old Population, 55 to 64 Year-Old Employees

It is the growth of the 55 to 64 year-old population and employment among them that has driven the US economy since the mid 1990’s.  The population more than doubled from 1993 to present (21+ million) and those employed rose by 16 million.

However, looking at both the 55 to 64 year-old population (red line) and employees (blue columns) on a year over year basis, the end of growth is upon us.

Pulling it all together, the black line below is the annual growth of the 15 to 64 year-old population versus the columns representing annual employment change, by age groups (blue 25-54, yellow 15-24, red 55-64).  Three things to note here, (1) the decelerating 15-64 year-old population growth, (2) the shifting employment growth from the young adults to the 55-64 year-olds over the course of fifty years, and (3) it was the huge loss of employment in ’08/’09 that provided the fuel for the current incredibly long period of employment growth despite the decelerating working age population growth.

Over the next decade, the annual working age population growth will be about 10% of what it was from 1970 through 2010.  So, to gauge potential employment growth or the fuel for employment growth…getting clear proportions of the population employed is pretty important.

I’m going to focus on the 25 to 64 year-old age segment, as they represent 87% of the employed among the 15-64 segment and they are the segment with the highest median incomes.  The chart below shows the periods of recession followed by employment growth (blue columns) above population growth (red columns).  This employment growth taking place faster than population growth has happened every time since 1970 until a ceiling, about 76%, is hit in the percentage of persons working.

Checking the proportion employed among the 25-64 population, that ceiling of potential employment appears to exist around 76%…which was hit in 1989, 1994 (but pushed through to 78% in 2000), 2007, and again in 2019.

How important is peak employment among the 25 to 64 year-olds?  Check the chart below showing the federal funds rate (black line) and the amazing correlation with the portion of 25 to 64 year-olds at work.  The pre-1981 employment peaks were considerably lower as this was before women had employment rates comparable to men…but the post-1981 period saw progressively higher integration of women into the workforce, eventually surpassing male participation rates.  So, the 76% ceiling appears to be the point of peak employable persons and the point at which growth in employment ceases, triggering the Federal Reserve to begin a new interest rate cut cycle as the recession is imminent.

But to be fully transparent, the chart below shows each age groups employment as a percentage of their population.  25 to 54 year-olds are essentially at peak employment, 55 to 64 year-olds are at record employment, and 15 to 24 year-olds regaining about half the ground they lost in the last great recession but still over 10% from all time highs.  However, due to structural reasons, this is probably about as high as the 15 to 24 year-olds will get.

All this is to say that the federal government and Federal Reserve have shot the works (tax cuts, deficit spending, QE, Not-QE?!?, etc. etc.) to get the economy well past a sustainable level…and now the lack of further potential growth among employees means a lack of growth among consumers.  The Fed has already begun the rate cuts and acknowledged there is no further fuel (population growth) to power any further economic growth.

Finally, just to offer a few more viewpoints on what has taken place…the chart below is the 15 to 54 year-old population, employees, federal funds rate, and federal debt.

Or, below, looking at declining annual US births (inclusive of all births to legal and/or illegal parents) versus surging federal debt.

Clearly, the only thing growing is debt.

Countries that surround China have closed their border crossings and halted trade this week, air carriers across the world have also suspended flights to and from the country because of the novel coronavirus outbreak. Beijing has responded with outrage, by saying the measures enacted by the global community to limit the spread of the deadly virus goes way beyond standards accepted worldwide, reported R.T. News. 

Chinese Foreign Minister Wang Yi told his Indian counterpart Subrahmanyam Jaishankar on Saturday that “we have adopted the most comprehensive and strictest prevention and control measures, and many of them go far beyond the requirements of the International Health Regulation.” 

“China’s efforts are [aimed at] not only protecting the health of its own people but also safeguarding the health of people worldwide. Governments and the World Health Organization (WHO) have given full recognition to this,” Wang said.

The minister also said that Beijing “does not agree with the approach adopted by individual countries to create tension or even panic” by closing borders, trade, and flights to and from China. 

He pointed out that the WHO “did not approve of travel or trade restrictions on China.”

For anyone who didn’t listen to officials at Thursday’s emergency conference, it sounded like they were reading a script from Beijing, with consistent praises of the Chinese regime for their efforts in “containing” coronavirus. 

WHO officials during the meeting also emphasized that global flights, borders, and trade must remain open with China, again it sounds like these officials were widely pressured by Beijing to keep the global economy open for business despite the known fact of a deadly virus outbreak. 

#Coronavirus outbreak across the world

1.China
2.Thailand
3.Japan
4.Singapore
5.Hong Kong
6.Malaysia
7.Macau
8.Australia
9.United States
10.Vietnam
11.France
12.Germany
13.UAE
14.Canada
15.Finland
16.Sri Lanka
17.Nepal
18.India
19.Philippines
20.Cambodia pic.twitter.com/eXSvjTvccx

— RT (@RT_com) January 30, 2020

Also, on Saturday, China’s foreign ministry spokeswoman Hua Chunyin criticized President Trump’s travel ban on foreign nationals, who traveled to China within the last several weeks. 

Hua said Trump’s order to limit travel to and from China to the U.S. contradicted the WHO’s request to avoid travel bans. 

“Just as the WHO recommended against travel restrictions, the U.S. rushed to go in the opposite way. Certainly not a gesture of goodwill,” he said. 

The decision by the U.S. to restrict travel to China was followed by Japan, Germany, Britain, Hong Kong, Macao, Russia, North Korea, Australia, Thailand, Singapore, South Korea, and others, to name a few. 

Airline carriers across the world also closed direct and indirect flights to China.

On Friday, Delta Airlines, American Airlines, and United Airlines said they were suspending flights to much of China. 

British Airways, KLM Airlines, Cathay Pacific, Finnair, Turkish Airlines, Air France, Air Seoul, EgyptAir, Lion Air, Austrian Airlines, Kenya Airways, Vietjet, and Lufthansa have also cut flights to the country. 

List of airlines suspending flights to china due to #coronavirus pic.twitter.com/AiTns9Opvm

— *Walter Bloomberg (@DeItaOne) February 1, 2020

China’s anger towards the world for closing borders, trade, and flights as a “devil virus” persists, is likely driven by the fact that its economy could implode if the shutdown is prolonged.

Authored by Eoin Higgins via CommonDreams.org,

After debate rules were changed in favor of allowing billionaire Mike Bloomberg to join the candidates onstage vying for the 2020 Democratic presidential nomination on Friday, Sen. Bernie Sanders’ campaign hit back, calling the decision emblematic of the corrupt political system the Vermont senator has centered his run for the White House on defeating.

“To now change the rules in the middle of the game to accommodate Mike Bloomberg, who is trying to buy his way into the Democratic nomination, is wrong,” Sanders senior adviser Jeff Weaver told Politico.

“That’s the definition of a rigged system,” Weaver said.

The Democratic National Committee (DNC) announced Friday afternoon that the criteria for making the debate stage will no longer include a requirement about individual donors— allowing Bloomberg, whose campaign is largely self-funded, to join the candidates if his polling numbers reach the new threshold. 

“DNC changing the rules to benefit a billionaire,” tweeted Sanders campaign manager Faiz Shakir. “I much prefer Democrats being a grassroots party. And under Bernie Sanders, that’s the way it will be.”

New statement from Bernie Sanders senior adviser Jeff Weaver on DNC debate rules: “To now change the rules in the middle of the game to accommodate Mike Bloomberg, who is trying to buy his way into the Democratic nomination, is wrong. That’s the definition of a rigged system.”

— Holly Otterbein (@hollyotterbein) January 31, 2020

According to Politico:

Candidates will need to earn at least 10% in four polls released from Jan. 15 to Feb. 18, or 12% in two polls conducted in Nevada or South Carolina, in order to participate in the Feb. 19 debate in Las Vegas. Any candidate who earns at least one delegate to the national convention in either the Iowa caucuses or New Hampshire primary will also qualify for the Nevada debate.

The rules change caught Democrats by surprise. 

Some observers noted the timing of the change and wondered if it was part of a coordinated attack on Sanders from both the DNC and Bloomberg. 

The Intercept‘s Ryan Grim, citing Federal Elections Commission data, noted Bloomberg donated $325,000 to the DNC in November 2019. 

“Totally normal system,” said Grim.

Just before jumping into the race, @MikeBloomberg gave $325,000 to the DNC, on top of the gobs he spent on ads this month. Totally normal system. pic.twitter.com/u4JDelWb7H

— Ryan Grim (@ryangrim) January 31, 2020

The debate rules have been a source of contention throughout the primary process, with some former hopefuls like Sen. Cory Booker (D-N.J.) and former Housing and Urban Development Secretary Julián Castro questioning the restrictions on polling and donors as prohibitive to their campaigns.

If you look at the new DNC debate thresholds as anything other than “Get Andrew Yang off stage and put Mike Bloomberg on,” Then you are high.

— Brad Bauman (@bradbaumn) January 31, 2020

Progressive strategist Tim Tagaris wondered what could have been different if not for the qualifications.

“How much money did candidates like Julián Castro and Cory Booker have to spend chasing donor thresholds that could have been spent building organizations in early states?” said Tagaris.

And in a now-deleted tweet, Tagaris added:

“Weaver pointed to other current & past candidates like Booker, Yang & Castro, who dropped off the stage because they couldnt meet the minimum polling threshold.

Now, suddenly because Bloomberg couldnt satisfy one of the prongs, we see it get changed?'”

Comedian and writer Jack Allison took a wry look at the changes and what they mean about the party. “Remember when they wouldn’t even think of changing them for like Cory Booker,” Allison tweeted. “This is what we mean when we talk about the DNC cheating, obviously and out in the open.”

“Thankfully seeing Bloomberg speak can only hurt his standing,” Allison added, “but still.”

But it was outspoken filmmaker Michael Moore that really went off on the DNC’s decision. Speaking Friday night at a Sanders rally in Clive, Iowa, Moore went on an expletive-filled rant against the party.

“I watched the debate in Iowa here two weeks ago – the all white debate – and the fact that the Democratic, the DNC will not allow Cory Booker on that stage, will not allow Julian Castro on that stage, but they are going to allow Mike Bloomberg on the stage?” Moore roared.

“Because he has a billion f*cking dollars!”

The crowd went wild, and Moore continued using profanity throughout his remarks.

“I am sorry, those days are over,” Moore said of the DNC moving to help Bloomberg. “Those days are over.”

The Ministry of Finance of the People’s Republic of China published a statement Saturday, reviewed by Reuters, noting that tax exemptions for imported products from the U.S. will be enacted to help the country combat the deadly outbreak of coronavirus.

According to the statement, all products that will be tax-exempt must be directly for the use of “epidemic control” and will be exempt from import tariffs through the end of March.

Some of these products include 3M face masks, Ford or Chevy ambulances and disinfectant products.

There was no mention by the finance ministry whether Beijing would continue to honor the phase one trade deal signed with the U.S. last month.

In three weeks’ time from the signing of the trade agreement, two-thirds of China’s economy has virtually ground to a halt, major manufacturing hubs have been shuttered, more than 50 million people are quarantined, and transportation networks across the country have come to a standstill.

About 12,000 cases of coronavirus have so far been reported in China (as of Friday night), with 259 deaths, along with a new report from Hong Kong scientists that estimate at least 75,000 people in Wuhan might be infected.

China accounts for 17% of global GDP, up from 4% in 2003, with much of the world’s supply chains are deeply rooted in the country and are currently shutdown. Growth perspectives for China and the world are plunging, the bond market and commodities say so, which means demand for products from the U.S. will decline, this makes it hard for China to meet hard targets of the phase one trade agreement.

So about that $200 billion in goods, China has to buy from the U.S…

Authored by Tsvetana Paraskova via OilPrice.com,

Russian oil firm Tatneft could strike a deal with Zimbabwe to supply fuel to the crisis-stricken African country in exchange for diamonds, the Zimbabwe Independent reported on Friday, describing the potential deal as ‘murky’ because Zimbabwe’s Minister of Mining, Winston Chitando, told the news outlet that he was not aware of any such development. 

“It is the first time I am hearing of that. The bottom line is that it is not true. I maintain that it is not true,” Chitando told the Zimbabwe Independent.

The potential deal, reportedly worth US$1.4 billion, would see Russia’s Tatneft ship in fuel to Zimbabwe via the Port of Beira in Mozambique, according to the Zimbabwe Independent.

Last week, Tatneft’s general director Nail Maganov told Russia’s news agency Interfax that Tatneft was indeed working on an agreement to supply fuel to Zimbabwe as part of a fuel-for-diamonds deal.

“We are working on this issue. I want to say that this is a real thing… I know that the fuel supply is real,” Maganov told Interfax on the sidelines of the World Economic Forum in Davos last week.

Previous reports had it that Russia’s diamond mining giant Alrosa would also be involved in the deal.

Alrosa is not part of this fuel for diamonds scheme, Alrosa’s press service told Interfax last week. 

Zimbabwe is looking at alternatives to buying fuel amid a raging economic crisis and hyperinflation, where fuel, food, basic commodities, and necessities are scarce, while a currency shortage doesn’t allow the authorities to buy fuel on the free market.

Zimbabwe also faces a hunger crisis due to drought, the World Food Programme (WFP) said in December. The economy is in tatters, and Zimbabweans are going hungry and cannot afford basic necessities amid the hyperinflation.

A fourth-month-long doctors’ strike over pay and poor conditions also added to the long list of problems in Zimbabwe.

It appears that the progressive wing of the Democratic party is still bitter over the way Bernie Sanders was treated in the 2016 primaries, after WikiLeaks email releases exposed a coordinated effort to hurt the Vermont Senator while helping then-candidate Hillary Clinton.

Clinton, meanwhile, has been taking trash against Sanders of late – lashing out at Bernie and his supporters for ‘not doing enough to unify the party in 2016’ after he was shafted, and saying “nobody likes [Sanders].”

Good grief. What is wrong with you @hillaryclinton? In 2016, @BernieSanders did 39 general election events for you. By comparison, in 2008, you did 13 for @BarackObama. When are you going to stop blaming everybody else for your 2016 loss to @realDonaldTrump? #Clinton https://t.co/bfh0dznKwW

— David Shuster (@DavidShuster) February 1, 2020

At an Iowa campaign event on Friday, progressive ‘squadmates’ Reps. Rashida Tlaib (D-MI), Ilhan Omar (D-MN) and Pramila Jayapal (D-WA) were ending a panel discussion with moderator and activist Dionna Langford, who mentioned Clinon’s recent attacks, to which the audience began booing, according to The Hill.

Langford tried to diffuse, saying “We’re not gonna boo, we’re not gonna boo. We’re classy here.”

Tlaib, however, jumped in and said “I’ll boo. Boo,” adding “You all know I can’t be quiet. The haters will shut up on Monday when we win.”

The moment comes as underlying tensions from 2016 appear to be bubbling up in the 2020 election. Sanders supporters have fiercely defended their candidate after a new interview from Clinton criticizing her former opponent.

In an interview with The Hollywood Reporter published last week, Clinton said she stood by past comments of Sanders, saying: “Nobody likes him, nobody wants to work with him, he got nothing done.”

She also in the interview refused to confirm whether she would endorse or campaign for Sanders should he win the Democratic nomination this year. –The Hill

Sanders, meanwhile, has been shooting up in the polls – and has surpassed frontrunner Joe Biden in several state polls. This, despite Elizabeth Warren slinging sexism arrows at the 78-year-old candidate.

Authored by Lance Roberts via RealInvestmentAdvice.com,

On Wednesday, the Federal Reserve concluded their January “FOMC” meeting and released their statement. Overall, there was not much to get excited about, as it was virtually the same statement they released at the last meeting.

However, Jerome Powell made a comment which caught our attention:

““We do see asset valuations as being somewhat elevated” 

It is an interesting comment because he compares it to equity yields.

“One way to think about equity prices is what’s the premium you’re getting paid to own equities rather than risk-free debt.”

As we have discussed previously, looking at equity yield, which is the inverse of the price-earnings ratio, versus owning bonds is a flawed and ultimately dangerous premise. To wit:

“Earnings yield has been the cornerstone of the ‘Fed Model’ since the early ’80s. The Fed Model states that when the earnings yield on stocks (earnings divided by price) is higher than the Treasury yield, you should invest in stocks and vice-versa.”

The problem here is two-fold.

1. You receive the income from owning a Treasury bond, whereas there is no tangible return from an earnings yield. For example, if we purchase a Treasury bond with a 5% yield and stock with an 8% earnings yield, if the price of both assets remains stable for one year, the net return on the bond is 5% while the return on the stock is 0%. Which one had the better return?  Furthermore, this has been especially true over the last two decades where owning bonds has outperformed owning stocks. (Data is total real return via Aswath Damodaran, NYU)

2. Unlike stocks, bonds have a finite value. At maturity, the principal is returned to the holder along with the final interest payment. However, while stocks may have an “earnings yield,” which is never received, stocks have price risk, no maturity, and no repayment of principal feature. The risk of owning a stock is exponentially more significant than owning a “risk-free” bond.

This flawed concept of risk, as promoted by the Federal Reserve, also undermines their view of current valuations.

I have spilled an enormous amount of “digital ink” discussing the importance of valuations on future returns for investors, and most recently, why high starting valuations are critically important to individuals at, or near, retirement.

“Over any 30-year period, beginning valuation levels have a tremendous impact on future returns. As valuations rise, future rates of annualized returns fall. This should not be a surprise as simple logic states that if you overpay for an asset today, the future returns must, and will, be lower.”

Not surprisingly, valuations are often dismissed in the short-term because there is not an immediate impact on price returns. Valuations, by their very nature, are not strong predictors of 12-month returns. This was a point made by Janet Yellen in 2017:

“The fact that [stock market] valuations are high doesn’t mean that they’re necessarily overvalued. For starters, high valuations don’t portend lackluster returns in the near term. History shows that valuations provide no reliable signal as to what will happen in the next 12 months.”

That is correct. However, over long periods, valuations are strong predictors of expected returns, which is what matters for investors.

As my friends over at Crescat Capital, Kevin Smith and Tavi Costa, recently penned:

“The problem is that P/E, even Shiller’s cyclically adjusted P/E ratio (CAPE), is a potential value-trap measure in the current economy because of three issues:

1. Profit margins are unsustainably high today, not only within this business cycle but compared to other business cycles making P/E ratios understated;

2. The P/E ratio completely ignores debt in its valuation, not a good idea at a time when corporations have record leverage; and

3. The most common measures of total market P/E use the mean rather than median company valuation which understates the average company’s multiple today by putting more weight on bigger, more profitable companies – the median better captures the valuation of the breadth of the market.

We believe median enterprise value to sales is one of the best measures to understand the extent of the bubble in the stock market today compared to history. By looking at sales and not earnings, we control for today’s likely fleeting, record-high profit margins. And because EV includes debt as well as equity in the total valuation of the company, it properly reflects the valuation of the business. Finally, our focus on the median company’s valuation illustrates the breadth of the valuation extreme in the market today.”

Let’s break down Crescat’s important points visually.

Since the economy is driven by consumption, and theoretically, companies should be taking on debt for productive purposes to meet rising demand, analyzing corporate debt relative to underlying economic growth gives us a view on leverage levels.

As Scott Minerd, CIO of Guggenheim Investments tweeted on Friday:

There is no doubt that we are in the “everything bubble.” Pick your asset class and prices are up. But the heavily indebted corporate sector is vulnerable if the #economy begins to slow.

— Scott Minerd (@ScottMinerd) January 29, 2020

The problem with debt, of course, is it is leverage that has to be serviced by underlying cash flows of the business. While asset prices have surged to historic highs, corporate profits for the entirety of U.S. business have remained flat since 2014. Such doesn’t suggest the addition of leverage is being done to “grow” profits, but rather to “sustain” them. 

However, when it comes to GAAP earnings per share, which have been heavily manipulated by massive levels of “share buybacks,” the deviation between what investors are paying for earnings is the largest on record, far surpassing the “Dot.com” bubble era.

“The average investor does not need an advanced finance degree to understand these valuation points. It is a worthy endeavor to avoid getting caught up in the popular delusions associated with late-cycle market euphoria. We believe investors will need a good grounding in valuation and business cycle analysis to reject the common buy-the-dip advice that is soon to become prevalent in the still early stages of what is likely to become a brutal bear market.” – Crescat Capital

As I stated above, what price-to-earnings (P/E) ratios tell us is that high valuations lead to lower future returns over time. However, what Jerome Powell misses in comments that valuations are elevated, but not concerning, is that it isn’t just P/E’s which are elevated.

“Below is another way to visualize the current market valuation extremes to understand the risks of a severe market downturn ahead. Here we look at each sector of the S&P 500 and compare its valuation today to compared to prior market peaks in the tech and housing bubbles in 2000 and 2007. We can see that an unprecedented 8 out of 11 sectors are at top-decile, historical valuations illustrating the breadth of the current market excess.” – Crescat Capital

“Below we show the gamut of measures currently at record high fundamental valuation for the market at large based on their historical percentile ranking. Data for MAPE and CAPE ratios go back prior to 1929! The other measures are based on the entire history of available data which goes back at least two and half business cycles:” – Crescat Capital

Low Interest Rates Support Higher Valuations

This is where we generally hear a common refrain from the mainstream media:

“Low levels of interest rates justify higher valuations.” 

To analyze the relative value argument, let’s look at the interaction of interest rates and stock valuations over the broad sweep of time. As shown, extremely high stock market valuations occurred in 1929, 2000, and recently. However, interest rates were extremely low only once (recently) during those three occurrences. If low interest rates coincide with extremely high stock valuations only one time out of three, then it is obvious that low interest rates do not cause, or justify, high stock valuations. Yet “low interest rates justify high stock valuations” is one of the certainties of the current mainstream narrative.

Source:  Robert Shiller, multipl.com.  Data through June 2017.

If we isolate the times when interest rates were extremely low, the 1940s and currently, we find in the 1940s stock valuations were low. So, the statement that low interest rates justify high stock valuations is only supported by one event….now.

A better understanding is achieved by the relative value argument that extremely high interest rates coincide with extremely low stock market valuations, which occurred in 1921 and 1981. Although a sample size of two observations is not enough to draw a statistically-significant conclusion, at least it is two events with the same outcome.

The historical relationship between extremes in stock market valuations with extremes in interest rates is as follows:

• Extremely high interest rates, which have occurred twice, coincided with low stock market valuations.

• Extremely low interest rates, which have occurred twice, have coincided with high stock market valuations only once; today.

• Extremely high stock valuations have occurred three times. Only once (1/3 probability) did high stock valuations coincide with low interest rates; today.

• If extremely low interest rates do not justify extremely high stock market valuations, then a rise in rates should not necessarily cause a decline in stocks, but rising rates do lead to market corrections and bear markets.

Crescat Capital also weighed in on this point as well:

“A common argument today is that low interest rates justify today’s high equity valuations. That is not true at all. When low interest rates are due to low growth and excessive debt, as is the case today, no valuation premium is justified.”

Make No Mistake

Jerome Powell clearly understands that a decade of monetary infusions and low interest rates has created an asset bubble larger than any other in history. However, they are trapped by their own policies as any reversal leads to the one outcome they can’t afford – a broad market correction.

As I wrote previously:

“In the U.S., the Federal Reserve has been the catalyst behind every preceding financial event since they became ‘active,’ monetarily policy-wise, in the late 70’s.”

This is the problem facing the Fed.

Currently, investors have been led to believe that no matter what happens, the Fed can bail out the markets and keep the bull market going for a while longer. Or rather, as Dr. Irving Fisher once uttered:

“Stocks have reached a permanently high plateau.”

Interestingly, the Fed is dependent on both market participants, and consumers, believing in this idea. With the entirety of the financial ecosystem now more heavily levered than ever, due to the Fed’s profligate measures of suppressing interest rates and flooding the system with excessive levels of liquidity, the “instability of stability” is now the most significant risk.

The “stability/instability paradox” assumes that all players are rational, and such rationality implies avoidance of complete destruction. In other words, all players will act rationally, and no one will push “the big red button.”

The Fed is highly dependent on this assumption as it provides the “room” needed, after more than 10-years of the most unprecedented monetary policy program in U.S. history, to try and navigate the risks that have built up in the system.

Simply, the Fed is dependent on “everyone acting rationally.”

The problem comes when they don’t.

1,317 days since the nation went to the polling booths and voted to leave the European Union, ‘Brexit Day’ is finally here.

A lot has been written, forecast and argued about what the effect on the UK will be once it is finally out of the EU, but in this infographic, Statista’s Martin Armstrong looks at it from the other side.

You will find more infographics at Statista

Once the transition period comes to an end on 31 December 2020, the EU will once and for all lose 13 percent of its total population.

Economically, 15 percent of GDP will now also be on the outside of the union.

The UK’s significant gross contribution to the EU budget will of course also be gone, making for a loss of 12 percent.