Tag: finance

Authored by Caitlin Johnstone via Medium.com,

A Newsweek journalist has resigned after the publication reportedly suppressed his story about the ever-growing OPCW scandal, the revelation of immensely significant plot holes in the establishment Syria narrative that you can update yourself on by watching this short seven-minute video or this more detailed video here.

“Yesterday I resigned from Newsweek after my attempts to publish newsworthy revelations about the leaked OPCW letter were refused for no valid reason,” journalist Tareq Haddad reported today via Twitter.

“I have collected evidence of how they suppressed the story in addition to evidence from another case where info inconvenient to US government was removed, though it was factually correct,” Haddad said.

Yesterday I resigned from Newsweek after my attempts to publish newsworthy revelations about the leaked OPCW letter were refused for no valid reason.

— Tareq Haddad (@Tareq_Haddad) December 7, 2019

“I plan on publishing these details in full shortly. However, after asking my editors for comment, as is journalistic practice, I received an email reminding me of confidentiality clauses in my contract. I.e. I was threatened with legal action.”

Haddad added that he is now seeking legal advice and looking into the possibility of whistleblower protections for himself, and said at the very least he will publish the information he has while omitting anything that could subject him to legal retaliation from his former employer.

“I could have kept silent and kept my job, but I would not have been able to continue with a clean conscience,” Haddad said.

“I will have some instability now but the truth is more important.”

This is the first direct insider report we’re getting on the mass media’s conspiracy of silence on the OPCW scandal that I wrote about just the other day. In how many other newsrooms is this exact same sort of suppression happening, including threats of legal action, to journalists who don’t have the courage or ability to leave and speak out? There is no logical reason to assume that Haddad is the only one encountering such roadblocks from mass media editors; he’s just the only one going public about it.

Newsweek has long been a reliable guard dog and attack dog for the US-centralized empire, with examples of stories that its editors did permit to go to print including an article by an actual, current military intelligence officer explaining why US prosecution of Julian Assange is a good thing, fawning puff pieces on the White Helmets, and despicable smear jobs on Tulsi Gabbard. The outlet will occasionally print oppositional-looking articles like this one by Ian Wilkie questioning the establishment Syria narrative, but not without immediately turning around and publishing an attack on Wilkie’s piece by Eliot Higgins, a former Atlantic Council Senior Fellow who is the cofounder of the NED-funded imperial narrative management firm Bellingcat. Newsweek also recently published an article attacking Tucker Carlson for publicizing the OPCW scandal, basing its criticisms on a bogus Bellingcat article I debunked shortly after its publication.

Mainstream media doesn’t think the leaks are newsworthy indicating that the US, France and UK bombed Syria last year in retaliation for a chemical weapons attack which according to the official scientists who invested it maybe never occurred. https://t.co/CRnL9Ejatw

— Max Abrahms (@MaxAbrahms) December 6, 2019

The ubiquitous propagandistic tactic of fake news by omission distorts the public’s worldview just as much as it would if mass media outlets were publishing bogus stories whole cloth every day, only if they were doing that it would be much easier to pin them down on their lies, hold them accountable, and discredit them.

A recent FAIR article by Alan MacLeod documents how the Hong Kong demonstrations are pushed front and center in mainstream consciousness despite the fact that to this day not one protester has been killed by security forces, while far more deadly violence is being directed at huge protests in empire-aligned nations like Haiti, Chile and Ecuador which have been almost completely ignored by these same outlets. This deliberate omission causes a distorted worldview in casual and mainstream news media consumers in which protests are only happening in nations that are outside the US-centralized power alliance. We see the same kind of deliberate distortion-by-omission with the way mass media continually pushes the narrative that Donald Trump is “soft on Russia”, while remaining completely silent on the overwhelming mountain of evidence to the contrary.

The time is now for everyone with a platform to start banging the drum about the OPCW scandal, because we’re seeing more and more signs that the deluge of leaks hemorrhaging from that organisation is only going to increase. Mainstream propagandists aren’t going to cover it, so if larger alternative media outlets want to avoid being lumped in with them and discredited in the same sweep it would be wise to start talking about this thing today. It’s only going to get more and more awkward for everyone who chose to remain silent, and more and more validating for those who spoke out.

*  *  *

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Resistance activist and NBC host Chuck Todd lost his cool on Sunday after Sen. Ted Cruz (R-TX) said that Ukraine “blatantly interfered” in the 2016 US election.

Of note, less than three months before Donald Trump was elected, Ukrainian officials working with a DNC operative leaked a “black ledger” containing evidence of off-book payments to Trump campaign manager Paul Manafort – leading to his disruptive ouster, while Ukraine’s ambassador to the UK, Valeriy Chaly wrote in an Op-Ed for The Hill slamming Trump in the same month.

While Democrats have sought to ignore or downplay this as a ‘debunked’ theory, Republicans aren’t letting it go – nor are they giving the Bidens a pass for what looks like textbook corruption while then-Vice President Joe Biden was in charge of the Obama administration’s Ukraine policy.

“Any president, any administration is justified in investigating corruption. There was serious evidence of real corruption concerning Hunter Biden. [He] was on the board of Burisma, the largest natural gas company in Ukraine. Do you know how much he was paid every month? $83,000 — that’s a million dollars a year,” said Cruz – adding “The media ought to care if there is actual corruption … Do you think Hunter Biden with zero experience justifies making ten times as much as the board member of Exxon Mobil?“

Todd then asked Cruz: “Do you believe Ukraine meddled in the American election in 2016?” – to which Cruz replied “I do. And I think there is considerable evidence.”

Todd then suggested that President Trump could have created “a false narrative” in order to hurt Cruz during the 2016 Republican primary – to which Cruz shot back: “Ha, ha, ha. Except that’s not what happened. The president released the transcript of the phone call. You can read what was said in the phone call.”

“On the evidence, Russia clearly interfered in our election, but here’s the game the media is playing because Russia interfered, the media pretends nobody else did. Ukraine blatantly interfered in our election. The sitting ambassador from Ukraine wrote an op-ed blasting Donald Trump during the election season.”

“I understand that you want to dismiss Ukrainian interference because they were trying to get Hillary Clinton elected, which is what the vast majority of the media wanted anyway.“

Ukraine’s campaign meddling led directly to the resignation of Trump’s campaign chairman

We can all see the effects of this

To say this didn’t happen is denying reality

— Ukrainian Meddler Poso🇺🇦 (@JackPosobiec) December 8, 2019

For his insolence, Cruz is of course being labeled a Putin puppet – while Axios showed their true colors with the headline: “Cruz promotes conspiracy that Ukraine “blatantly interfered” in U.S. election.” – Their article, meanwhile, makes no mention of Manafort or the black ledger, which is what Cruz was referring to.

Oh for fuck’s sake https://t.co/B2evKw9gMv

— Caitlin Johnstone ⏳ (@caitoz) December 8, 2019

Meanwhile…

Only Putin stooges would suggest any connection between Ukraine and Hillary Clinton pic.twitter.com/y6IWUOpZBs

— Ukrainian Meddler Poso🇺🇦 (@JackPosobiec) December 8, 2019

Mediate & Chuck Todd, having lied throughout the Russia “collusion” BS, now lie about Ukraine.And if Todd wants to be the mouthpiece for the Dems, then he should have the integrity to resign from the news business &push his propaganda as a paid DNC hack https://t.co/SEvHr57Rfp

— Mark R. Levin (@marklevinshow) December 8, 2019

Authored by Ryan McMaken via The Mises Institute,

Not every square inch of the planet earth is suitable for a housing development. Flood plains are not great places to build homes. A grove of trees adjacent to a tinder-dry national forest is not ideal for a dream home. And California’s chaparral ecosystems are risky places for neighborhoods.

This is nothing new. While people many Americans who live back East may imagine that something must be deeply wrong when they hear about fires out West, the fact is things are different in North America west of the hundredth meridian. The West is more prone to extreme temperatures, hundred-year droughts, and fires in the wilderness. Many of these ecosystems evolved with this fire risk. 

Efforts to blame them primarily on climate change ignore the long standing reality. The Sacramento Bee notes, for example:

It’s also not enough to blame the growing devastation of recent wildfires solely on climate change, researchers said. While drier, warmer conditions have lengthened the fire season and likely increased the severity of the blazes, wildfires are only destroying more homes today than decades before because of rapid growth in rural areas.

It’s not that fires are more devastating in the natural sense. The problem is that human beings insist on putting their property in places where fires have long destroyed the landscape, over and over again.

The Bee continues:

[T]he fires aren’t getting closer to us — we’re getting closer to the fires. “We’re seeing wildfires that have always been a part of the landscape that are now interacting more and more with us…”

Strader studied wildfire history in the western United States going back three decades, then mapped population growth in areas where fire activity had ranged from medium to very high. His research determined there were 600,000 homes in fire prone areas in the West in 1940. Today, that number is around 7 million.

So, why do people keep building homes in these places? Part of it is natural populations growth, of course. But the manner and rapidity with which this development expands out into the fringes of metro areas is also partly due to government policy and infrastructure. 

In an unhampered market, it would be very expensive to extend a new neighborhood out into ever-further-out regions near metro areas. In order to reach these places, housing developers would need to find a way to finance both the new housing construction and the roads that give access to them. Certainly, developers often provide part of the funding through development fees demanded by governments. But these roads are often also subsidized by state and local governments, especially in the form of ongoing maintenance. Once a road to a new semi-rural community is built, governments will often maintain it, while spreading the cost across all the jurisdiction’s taxpayers.

This system of subsidy allows more rapid and more dispersed development. Unsubsidized roads would tend to force more close-in and more dense development.

The federal development also subsidizes the construction of larger and more sprawling residential property through the FHA insurance programs and government-sponsored enterprises like Fannie Mae. By purchasing home loans on the secondary market, the GSEs push more liquidity into the home loan market, making loans cheaper, and pushing up demand for larger, sprawling developments.

Many conservatives often speak of density in residential and commercial development as if it were some kind of left-wing conspiracy. It is assumed that few people would opt for density were there not left-wing urban planners to force it on everyone.

But the reality is that in an unhampered market, density levels would be higher than they are now, because sprawl would be (all else remaining equal) much more costly to consumers than is now the case.

In light of the increasing fire danger to homes, many left-wing advocates favor changing California’s housing development patterns. But they can only point toward more restrictive government regulations. The Los Angeles Times editorial board, for example, complains that “Land-use decisions are made by local elected officials and they’ve proven themselves unwilling to say no to dangerous sprawl development …”

But government prohibitions aren’t necessary. If people insist on building and selling homes in fire-prone areas, let them be the ones to cover all the costs. This includes the cost of fire mitigation and rebuilding after fire. This in itself would limit development in these areas.

And yet, while California pundits are complaining that policymakers aren’t doing enough, California politicians are actively taking steps to keep the market from correcting the excessive building in fire-prone areas.

This week, California regulators prohibited insurance companies from dropping the homeowners’ insurance policies of homeowners in fire prone areas:

The state said its moratorium applies to about 800,000 homes, and more areas are expected to be added.

A state law passed last year allows the California Department of Insurance to require insurers to renew residential policies for one year in ZIP Codes that have been affected by declared wildfire disasters.

Previously, insurers had to renew policies for homeowners who suffered a total loss. The current law extends to all policyholders in an affected area, regardless of whether they experienced a loss.

Not surprisingly, many homeowners in fire-prone areas of the state are having problems finding fire insurance for their homes. And they often pay handsomely when they do find it. That’s too bad for the owners, but this fact doesn’t justify handing down state mandates that insurance companies continue to cover people who have taken on unacceptably high risk.

By stepping in to force insurance companies to cover these homeowners, California politicians are doing two things:

1. They’re continuing the cycle of encouraging homebuyers to buy homes in areas likely to fall victim to wildfires.

2. At the same time, regulators are increasing the costs incurred by insurance companies, and this will likely have the effect of driving up the price of fire insurance for homeowners who more prudently declined to purchase a house in fire-prone areas.

At the macro level, the end result will be something akin to what we’ve seen in flood-prone areas in the United States. Thanks to federal regulations and subsidies, many property owners can avail themselves of flood insurance priced well below what would be available in an unhampered market. Legislation such as the National Flood Insurance Act of 1968 means builders and homeowners have been encouraged to place property where they’re likely to be flooded over and over again.

We’re now seeing a similar type of moral hazard at work in California.

In a more sane political environment, however, those who insist on living in the way of wildfires would have to assume the risk of doing so, rather than demanding politicians force the cost on insurance companies and taxpayers.

If you started watching Martin Scorsese’s “The Irishman” on Netflix last week but didn’t finish it, you’re in good company.

According to Bloomberg, just 18% of the 13.2 million viewers who tuned in actually finished the the 3 1/2-hour gangster epic starting Robert De Niro, Al Pacino, Ray Romano Harvey Keitel and Joe Pesci.

According to the Hollywood Reporter, Netflix bought the rights to the film and spent $200 million to produce it after Paramount stepped aside. In its first five days, it attracted a bigger average audience than “El Camino” – the “Breaking Bad”-inspired film, however it fell short of the 16.9 million viewers that watched the Sandra Bullock thriller “Bird Box,” released at the end of 2018.

Interestingly, around the same number of people finished “Bird Box,” while just 11% made it all the way through “El Camino,” according to Bloomberg.

Authored by Lance Roberts via RealInvestmentAdvice.com,

Here Comes Santa Claus (Rally)

On Friday, the market rallied sharply on the back of a much better than expected employment report and comments from Larry Kudlow that a “trade deal” is near. Given we are now at the last stages of the year where mutual, pension, and hedge funds need to “window dress” for year-end reporting, we removed our small equity hedge from the portfolio for the time being.

A quick word about that employment report.

While the headline number was good, it remained primarily a story of auto workers returning to work and continued increases in lower wage-paying jobs and multiple jobholders. Such has been the story of the bulk of this recovery. However, more importantly, the bump did not change the overall dynamics of the job market cycle, which is clearly deteriorating as shown in the chart below.

The key to trend change is CEO confidence which is extremely negative and coincident with employment cycle turns. Note that the end of employment cycles, when compared to CEO confidence, looks very similar at the end of each decade.

Nonetheless, in the short-term, the market dynamics are positive suggesting the market can indeed rally into the end of the year. As noted above, we have removed our equity hedge for now to allow our long-positions to fully benefit from the expected “Santa Claus” rally.  (Or if you prefer the more PC version then it would be the expected “Jovial Full-Figured Holiday Person” rally.)

With the market back to short-term overbought, and the short-term “sell signal” still in place, it is possible we could see a bit of a correction next week. However, as we head into the last week of the year, a retest of highs is quite likely. 

In the longer-term, as we will discuss more in a moment, the risk remains to the downside. It is highly unlikely there will be a “trade deal” anytime soon, and with the upcoming election, there will likely be increased volatility going into 2020.

From a purely technical perspective, on a monthly basis, the market is exceedingly overbought and at the top of the long-term trend channel. When these two conditions have been filled previously, we have seen fairly sharp corrections within the confines of the bullish trend.

With QE-4 in play, the bias remains to the upside keeping our target of 3300 on the S&P 500 in place. This is particularly the case as we head further into the seasonally strong period combined with an election year cycle.

Currently, we are exploring the energy space in particular where there is value being generated after the long drought of interest in energy-related stocks.

We have just released a research report for our RIAPro Subscribers (30-Day Free Trial)   where we are looking for an opportunity. Here is a snippet:

“A decline in the dividend yield to the norm, assuming the dividend payout is unchanged, would result in a price increase of 13.17% for AMLP. Alternatively, if oil declined about 20% in value, the current AMLP dividend yield would then be fairly priced. We consider this a significant margin of safety should the price of oil fall, as it likely would if the U.S. enters a recession in the near future.”

When Presidential & Decennial Cycle Collide

There have been quite a few articles out lately suggesting that in 2020 the 10-year bull market is set to continue because it is a presidential election year. This sounds great in theory, but Wall Street and the financial media always suggest that next year is going to be another bullish year.

However, there are a lot of things that will need to go “right” next year from:

1. Avoidance of a recession

2. A rebound in global economic growth

3. The consumer will need to expand their current debt-driven consumption

4. A marked improvement in both corporate earnings and corporate profitability

5. A reduction or removal in current tariffs, and;

6. The Fed continues to remain ultra-accommodative to the markets.

These are all certainly possible, but given we are currently into both the longest, and weakest, economic expansion in history, and the longest bull market in history, the risks of something going wrong have certainly risen.

(While most financial media types present bull and bear markets in percentages, which is deceiving because a 100% gain and a 50% loss are the same thing, it worth noting what happens to investors by viewing cumulative point gains and losses. In every case the majority of the previous point gain is lost.)

However, what about the election coming up in less than a year?

Presidential Cycle

With “hope” running high that things can continue going into 2020, the question becomes whether or not the Presidential election cycle can hold its performance precedent.  Since 1871, markets have gained in 35 of those years, with losses in only 11.

Since 1948, there have only been two losses during presidential election years which were 2000 and 2008. In fact, stocks have, on average, put in their second-best performance in the fourth year of a president’s term. (The third year has been best as we are seeing currently.) 

With a “win ratio” of 76%, the media has been quick to assume the bull market will continue unabated. However, there is a 24% chance a bear market will occur which is not entirely insignificant. Furthermore, given the duration, magnitude, and valuation issues associated with the market currently, a “Vegas handicapper” might increase those odds just a bit.

One thing to remember about all of this is that while the odds are weighted in favor of a positive 2020 from an election cycle standpoint – there have been NO cycles in history when the majority of the industrialized world was on the brink of a debt crisis all at the same time.

While the election of the next President will impact the market’s view towards policy stability; it is the world stage that will drive investor sentiment over the coming months and years. The biggest of those drivers is employment which has been weakening as of late. Importantly, there is an important correlation between consumer/investor sentiment, CEO confidence, and employment as noted above.

“Take a closer look at the chart above.

Notice that CEO confidence leads consumer confidence by a wide margin. This lures bullish investors, and the media, into believing that CEO’s really don’t know what they are doing. Unfortunately, consumer confidence tends to crash as it catches up with what CEO’s were already telling them.

What were CEO’s telling consumers that crushed their confidence?

‘I’m sorry, we think you are really great, but I have to let you go.’” 

“It is hard for consumers to remain ‘confident,’ and continue spending, when they have lost their source of income. This is why consumer confidence doesn’t ‘go gently into night,’ but rather ‘screaming into the abyss.’”

But there is another cycle that we need to consider which is colliding with the Presdential election cycle, and that is the 10-year or decennial cycle.

Decennial Cycle

Using the same data set going back to 1833 we find a little different outlook. While the 10th year of the decade (2020) is on average slightly positive, it’s win/loss ratio is only 56%, or not much better than a coin toss.

Furthermore, while presidential election years have a near 10% average annual return profile, the 10th-year of the decennial cycle is markedly weaker at just 1.91% on average.

The best year of the decade is the 5th which has been positive 79% of the time with an average return of 22%. The worst year is the 7th with only a 53% win rate but a negative average annual return. As noted, 2020 comes in as the second place for the worst of the annual returns.

With a win/loss record of 11-7 an investor betting heavily on a positive outcome for 2020 may be left short changed given the current political, economic, fundamental, and financial environment.

I have also overlaid the 1st-year of the new presidential cycle with the “orange boxes” above. You will notice that again, return parameters and win/loss percentages are low. This should suggest some caution for investors over the next 24-months given the length of the current bull market advance.

A Lot Of If’s

All of this analysis is fine but whether the market is positive or negative in 2020 comes down to a laundry list of assumptions:

• If we can avoid a recession in the U.S. 

• If we can avoid a recession in Europe. 

• If corporate earnings can strengthen.

• If the consumer can remain strong.

• Etc.

Those are some pretty broad “if’s” and given the weakness is imports, which suggests a weakening domestic consumer, and struggling manufacturing, the risk of something going wrong is elevated.

As far as corporate earnings go – they peaked this year as the tax cut stimulus ran its course, and forward expectations are being sharply ratcheted lower. As we discussed on Tuesday:

“Since April, forward expectations have fallen by more than $11/share as economic realities continue to impale overly optimistic projections.”

This earnings boom cycle was skewed heavily by accounting rule changes, loan loss provisioning, tax breaks, massive layoffs, extreme cost cutting, suppression of wages and benefits, longer work hours, and massive share buybacks along with extraordinary government stimulus.

But when it comes to actual reported “profits,” which is what companies actually earned, reported, and paid taxes on, it is a vastly different story.

“Many are dismissing currently high valuations under the guise of ‘low interest rates,’ however, the one thing you should not dismiss, and cannot make an excuse for, is the massive deviation between the market and corporate profits after tax. The only other time in history the difference was this great was in 1999.”

The chart below shows the real, inflation-adjusted, profits after-tax versus the cumulative change to the S&P 500. Here is the important point – when markets grow faster than profitability, which it can do for a while; eventually a reversion occurs. This is simply the case that all excesses must eventually be cleared before the next growth cycle can occur. Currently, we are once again trading a fairly substantial premium to corporate profit growth.

So, if, somehow, maybe, possibly, all these things can be sustained we should be just fine.

The problem is, however, all of the pillars that supported the earnings boom are now going away beginning next year, each of them to some degree, which throws into question the sustainability going into 2020-2021.

While doing statistical analysis on the Presidential and Decennial cycles certainly make for interesting articles, it is crucially important to remember what drives the financial markets the short-term which is psychology and sentiment.

In the next 12-18 months, there will be more than enough event risks to skew the potential outcomes of the markets. This doesn’t mean that you should go and hide all in cash or gold. It does suggest you need to actively pay attention to your money.

This idea plays into our allocation theme of higher quality income, hedged investments and precious metals as an alternative to direct market risk. With expectations of lower economic growth in the coming quarters, reduced earnings, and pressure on the consumer, the markets are likely to remain highly volatile with little overall progress.

While we are in the midst of prognostications, it has also been predicted the world will end in 2020, so anything other than that will be a “win.”

Ask any Wall Street analyst why stocks are at all time highs and the immediate answer will be because adjusted corporate profits and income are similarly at or near all time highs, which means that the multiple needed to justify an S&P around 3,150 is not all that egregious (technically it is, as DB’s Binky Chadha noted last week when he pointed out that the S&P 500 is trading at a multiple that’s higher than any time since the dot-com era, except for a few months in late 2017 and early 2018. As Chadha wrote , “the S&P 500 trailing multiple has historically mostly stayed in a range between 10x-20x. So current valuation at 19.1x is clearly at the higher end of the historical range. Indeed, over the last 85 years, outside the late 1990s equity bubble, the multiple remained below current levels around 90% of the time.”)

But is that really the case in a world where virtually everything is fake, pro-forma, non-GAAP or otherwise “adjusted” to fit a given narrative?

To answer this question, ten days ago we showed the one measure of corporate profitability that avoids various non-GAAP adjustments and one-time addbacks. We referred to the data set tracking corporate profitability without the benefits of non-GAAP adjustments, which is reported by the BEA as Corporate profits with inventory valuation (IVA) and Capital Consumption (CCAdj) adjustments. Such operating profits, or profits from current production, are the purest form of corporate earnings since this series puts all firms on the same accounting framework – it avoids non-GAAP adjustments – and the profit numbers are not adjusted for the number of shares outstanding.

And here, something stunning emerged when looking at corporate profits (after tax with IVA and CCAdj) as a % of US GDP: these have not only tumbled to the lowest level this decade, but are in fact lower than where they were when the US was sliding into the 2007-2009 financial crisis and when the US entered the 2007 recession!

Needless to say, this is a problem because as former chief economist for Alliance Bernstein, Joseph Carson, put it in July, “the argument being used by equity analysts and strategists that the equity market is cheap or inexpensive relative to profits appears to be dubious in light of revised data on operating profits, and it suggests that the “actual ” market multiple is a lot higher than what is being reported by analysts.“

Our report appears to have struck a nerve with none other than Goldman’s clients, because in his latest closely read Weekly Kickstart report, Goldman’s chief US equity strategist, David Kostin, who as we noted previously has a 3,400 price target for the S&P in 2020 (specifically, Kostin believes that “the S&P 500 will rise to 3250 during the next three months, trade around that level for most of the year, and climb to 3400 post-election as political uncertainty abates”, unless the Democrats sweep Washington next year, in which case the S&P would tumble to 2,600 as Trump’s corporate tax generosity is unwound)…

… writes that “one common pushback to our [optimistic] forecast is that government data paint a bleak picture of corporate profitability and S&P 500 profits may “catch down.”

In other words, Goldman’s clients are hardly confident in Goldman’s profit and profit margin forecasts – which expect that S&P 500 EPS will grow by 6% in 2020 and 5% in 2021 – and instead are quite concerned by the true profit data, which we pointed out at the end of November, is plunging.

That also explains the title of Kostin’s weekly piece, namely “BEA vs. CPAs: Why the government says margins have been falling while S&P 500 firms say the opposite.”

Without directly referencing our article, Kostin writes that “a duel is taking place between the federal government, represented by the Bureau of Economic Analysis, and publicly-traded firms audited by Certified Public Accountants.”

The BEA publishes the National Income and Profit Accounts (NIPA), which shows that profit margins for US companies fell from 6% in 2012 to 5% in 2017, and rose by only 20 bp in 2018 despite the 14 pp decline in the statutory corporate tax rate. In contrast, S&P 500 margins have increased on an adjusted, operating, and GAAP basis, including growth of more than 100 bp in 2018.”

Visually this unprecedented discrepancy is shown in the chart below:

The issue is that whereas the S&P has been tracking operating earnings to all time highs and profits are just off all-time highs at 11%, corporate profits as reported by the BEA have been declining for the past 5 years, eroding any case for a fairly valued market and continued equity upside.

 

So going back to this “pushback” that Goldman’s clients are offering to Kostin’s rosy take (as “government data paint a bleak picture of corporate profitability and S&P 500 profits may “catch down”), which Goldman explains as “investor concerns stemming from the fact that NIPA profit margin declines have typically preceded S&P 500 margin declines, as in the lead-up to the Tech Bubble“, what is Kostin’s response? Well, obviously, since Goldman expects stocks to keep rising (and rising, and rising), the Goldman chief equity strategist believes that these fears are overdone – or in other words, Goldman claims that corporate profits are set to keep rising despite what the government says – for the following five reasons (we quote from Kostin):

1. Size: The S&P 500 comprises large, profitable companies while NIPA data reflects all companies, large and small and public and private. Aggregate S&P 500 profits represent just 61% of total NIPA profits. As a result, the broader US economy has a far greater exposure to smaller, less profitable companies. Before even considering private companies, the net profit margin for publicly-traded small caps (S&P 600) equals 3%, compared with 11% for large caps (S&P 500). In addition, similar to NIPA data, profit margins for the S&P 600 have been declining since 2013 despite the secular rise in S&P 500 profit margins.

2. Labor: Due in part to their size and efficiency, labor costs represent a much smaller share of S&P 500 sales than of the broader US economy. We previously found that labor costs account for 12% of S&P 500 sales, while compensation as a share of gross output for the US economy equals 27%. In addition, rising concentration and the corresponding bargaining and pricing power have also helped insulate large companies from wage pressures. The share of respondents reporting rising wages in the NABE survey has been steadily climbing since 2013 and wages in the US grew by more than 3% in each of the last 14 months. However, S&P 500 profit margins remain just shy of their record high. In contrast, small companies have less flexibility to offset these margin pressures, reflected in the 130 bp decline in S&P 600 margins since 2013.

3. Sector: The continued divergence between “superstar” firms – with larger weights in the S&P 500 – and smaller firms also helps explain the margin differential with NIPA. Info Tech accounts for 23% of S&P 500 market cap and 19% of S&P 500 earnings. The sector has experienced 12 pp of margin expansion this cycle to the current level of 23% (vs. 11% for S&P 500) and has been the most significant contributor to index-level profitability. While the GICS and NAICS classifications do not match perfectly, these high-margin companies and sectors have smaller weights in NIPA data. Using each company’s NAICS code, we find that “manufacturing,” which includes many large technology and health care firms, represents 36% of S&P 500 sales (vs. 19% for NIPA) and has a 14% margin (vs. 4% for NIPA). NIPA also has a greater exposure to low-margin industries such as Real Estate.

4. Tax: Following the passage of corporate tax reform, the S&P 500 aggregate effective tax rate fell by 8 pp (from 26% to 18%). Based on NIPA data for the entire US economy, the effective tax rate fell by only 5 pp (from 16% to 11%). The S&P 500 therefore received a larger one-time earnings boost from lower tax rates. Much of the gap may be explained by compositional differences, such as greater exposure to small, unprofitable firms that do not pay taxes and the inclusion of S-corporations and nonprofits in NIPA data. Within the S&P 600, 23% of companies have income taxes less than or equal to zero during the last four quarters.

5. Accounting: Many investors question whether accounting discrepancies between S&P 500 firms and NIPA data drive the gap in profit margins. Most equity analysts consider “adjusted” earnings, looking through one-time charges that may add to quarterly earnings noise. While adjusted margins and earnings growth have certainly exceeded GAAP measures, GAAP fundamentals for the S&P 500 nonetheless appear much stronger than the signal sent by NIPA data. GAAP earnings have grown by 21% and GAAP net profit margins have expanded by 65 bp since 2013, below adjusted margin growth of 190 bp but well above NIPA margin declines.

Summarizing what Kostin said, yes, adjusted non-GAAP “numbers” vs GAAP reality is a major “data massaging” issue – just as we said in our original article – but the biggest reason why there is a large and growing profit divergence has to do with how the market-cap weighted S&P accounts for “superstar” and giant tech firm profits, which are given substantially more weight than the rest of the corporate world… which incidentally is what we also noted when we said that “whereas EBITDA margins for tech companies are near or at all time highs, margins for the rest of the US corporate universe is fast approaching its financial crisis level. In other words, just the tech sector has account for all of the EBITDA margin improvement since the financial crisis!“

In other words, for all of his verbosity, all Kostin is saying is trust us, because already supermassive tech companies with record high margins will only get bigger and more supermassive, in the process drowning out the reality of collapsing profits for all other companies.

Only, that’s not true either, as Credit Suisse wrote in its 2020 year ahead outlook, margins within some tech subsectors, such as semis and tech hardware, are now rapidly sagging under trade war pressure and it’s only a matter of time before this solitary margin outlier mean reverts.

Which again brings us to what we said when we wrote the article that prompted all this pushback to Goldman’s cheerful optimism: “Whether or not tech succumbs to gravity and finally catches down with the rest of the economy – something that is virtually assured if some of the biggest tech monopolies are broken up in the coming years – is of secondary importance. What is more relevant is that if one looks at the real profits numbers, stripped of all adjustments, revisions and addbacks, a very ugly picture emerges, one where US corporate profitability is the worst since the financial crisis.“

Incidentally, it’s worth noting that despite his attempts to “explain” the unprecedented “BEA vs CPA” divergence, Kostin had nothing to counter that last, bolded sentence. Which may explain why he concludes his note with a fare more muted vision of the future, to wit:

Looking forward, we nonetheless expect only a slight S&P 500 margin expansion through 2020. S&P 500 net profit margins are on pace to fall by 65 bp in  2019, driven in large part by a 180 bp margin compression in the Energy sector and declines in a few large-cap technology stocks…. [C]ontinued wage and input cost pressures will limit margin expansion to just 13 bp in 2020 and 5 bp in 2021. If realized, S&P 500 profit margins would remain below the record high of 11.3%, set in 2018 following the passage of tax reform.”

Of course, when – not if – S&P margins collapse and catch down to NIPA when the next recession hits and slams tech companies, Kostin will simply say that nobody could have possibly foreseen what is now so obvious even to Goldman’s own clients.

Authored by Nomi Prins via The Daily Reckoning,

Even though it’s on rate-cutting hold, the Fed nonetheless keeps engaging in aggressive oversubscribed repo ops, or as we like to call the process, “QE4R.”

QE4R involves offering money to banks in return for short-term U.S. Treasury and mortgage bonds, in shades of 2009.

The fact that the Fed is expanding its balance sheet through these repo operations allows it to pretend it is merely auctioning “adjustment-based” policy moves, rather than problem-based ones, to keep rates from rising and money becoming too expensive for banks.

This provides the Fed a kind of cover during which it can hold off on rate cuts until it deems that data clearly suggest they do otherwise.

Regardless of the reasons for QE4R, this new flow of dark money has the ability to stimulate the stock and bond markets — along with gold.

Although gold prices have rallied on the back of the Fed’s recent balance sheet growing exercise, gold has been rising less quickly than it did during the initial phases of QE in the post-financial crisis period from 2009 through 2011.

However, the stock market has been rising steadily (with some bumps along the way) since the start of the Fed’s QE4R operations. There are several reasons for this phenomenon.

Computer algorithms, ETF-related trading and asset managers for pensions and other forms of retirement funds seeking yields above those of bonds have pushed the market up. So have corporate stock buybacks. There is also the steadfast (and proven true) belief that the Fed will step in whenever it “has to,” as would other central banks around the world.

There’s a reality behind the dark money-infused market euphoria, though. It’s that U.S. economic growth, as well as that of the global economy, has been slowing down and will likely continue to slow.

Shrinking corporate profits in conjunction with lower rates and increased debt loads is not a classic recipe for a prolonged bull market. The fact that bulls continue to run is a mark of just how much dark money can keep markets elevated.

In the past, slowing profits along with more debt and cheap money has more closely reflected a bear market (consider the U.S. stock market in 2000–02, 2007–09 and the Japanese stock market since 1989). Japan’s stock market would be even lower were it not for various QE and ZIRP moves by the Bank of Japan.

U.S. corporate margins may well have already hit a multiyear peak. As we head toward the 2020 U.S. election, it’s hard to see many corporations diverting their debt loads into R&D or investment programs. This could hold true after the elections regardless of which political party wins.

Another reason that the Fed began QE4R is the global shortage of U.S. dollars in money markets. This also happened at the start of the financial crisis in 2008.

The last thing Fed Chairman Jerome Powell wants under his stewardship is a repeat performance. Repo lending rates spiked in September because of this shortage and liquidity problems at the big banks. This continues to this day, as evidenced by the Fed’s term repo lending facilities being often oversubscribed by the largest Wall Street players.

Since Monday, the Fed has pumped $97.9 billion into the market in two parts. One was through overnight repurchase agreements of $72.9 billion. The other was through 42-day repos. The result is that the Fed’s balance sheet has topped the $4 trillion mark and looks to rise from there.

Also, the Fed again increased the amount of short-term cash loans it plans to offer banks to ensure rates remain stable. It now plans to offer $25 billion in cash loans for the 28-day period ended Jan. 6, up from $15 billion previously.

Last week, it increased the size of its 42-day facility for the period ended Jan. 13 by $10 billion, too. This was also based on its recent bank supervisory findings that 45% of U.S. banks holding more than $100 billion in assets have supervisory ratings that are less than satisfactory.

All of this means that the Fed’s easing this year was very much a defensive maneuver. And it continues to act pre-emptively against the potential for a dollar funding squeeze as derivative-trading banks close their books into year-end 2019 through its repo operations.

Though different from the longer-term QE operations the Fed actioned between 2009–2014 that inflated stock, government and corporate bond prices, the result is the same. An artificial stock market rally. And more debt.

The big difference is all of this money manufacturing is now occurring against a backdrop of economic weakness and trade-war and geopolitical uncertainty.

For now, and heading into 2020, there remain six key economic trouble spots in the U.S. alone:

1. Trade Wars. China trade talks are still going nowhere specific. President Trump has threatened to “raise the tariffs even higher” on Chinese imports if a trade deal cannot be reached by Dec. 15 and went so far as to indicate that he’d be fine if a deal didn’t occur until after the 2020 election. So “phase one,” which was announced over a month ago, has made no real progress…keeping markets knee-jerking on any positive or negative rumors.

2. U.S. household debt at a high of $14 trillion — $1.3 trillion higher than its prior peak in Q3 2008. This could eventually hurt consumer appetites and dampen U.S. GDP.

3. U.S. GDP is growing but decelerating. In this 11th year of expansion and easy monetary policy, the expansion may be longer, but it’s also shallower that past expansions.

4. U.S. $20 trillion national debt is at 104–105% of GDP, having passed 100% in Q3 2012. Though Jerome Powell has stressed to Congress that it must find a way to fix this, the Fed continues to be the largest buyer of U.S. Treasuries, thereby pushing the problem forward of debt growing faster than the economy.

5. Money supply (M2) has grown since the 1980s, but money velocity (VM2) has declined since 1997, particularly since the financial crisis. That means that local businesses aren’t working together enough to stimulate the foundation of the U.S. economy.

6. Ongoing quest for risky assets could backfire. These problems were created by central banks. The longer rates are low, the more risk asset managers — i.e., investment funds, pensions funds and long-term insurance companies — take on to meet liabilities. This is exacerbated by slowing economies and means more global exposure to credit and liquidity risk. This increases the underlying instability in the international markets.

Given all of this backdrop, I believe that markets will continue to rally on the back of dark-money operations with volatile periods. However, gold is increasingly an attractive safe-haven investment.

Thus, it’s only a matter of time before gold has a catch-up rally.

Hedge fund manager Michael Hintze of CQS, based in London, is still a certain type of “old school”.

His firm makes its investment decisions based on daily meetings, where managers pitch their ideas and thoughts about macroeconomic events behind a podium. He also has a “situation room”, where TVs feature news networks like Al Jazeera and China’s CCTV, according to Bloomberg.

But nowadays that is considered archaic and behind the times, especially in the age of algorithms and high frequency trading. 

And so Hintze looks as though he may be ready to embrace a switch, saying in a interview that his firm has now turned to “quantum computing” – a superfast technology that is still in labs, where major corporations like Google and IBM are still trying to figure it out. 

Hintze said: “We’re trying to get a little bit ahead. You need to be mindful of the tools you have, the ground you’re fighting over, and, thirdly, who you’re fighting against.”

But he also dismissed plans to start a fund run by algorithms. Instead, he says that CQS is working with a startup to develop a quantum chip to help the firm optimize portfolios and execute hedging strategies. CQS recently hired Ahmad Deek, formerly of Oppenheimer, to be the firm’s head of data science. 

The firm has about $19 billion under management and so far, has done so just using traditional human analysts and managers. The company is one of the largest firms in Europe and its $3.1 billion multi-strategy CQS Directional Opportunities fund is up more than 550% since launching in August 2005. This is double the gain of the S&P 500 over the same time period and about 7x the average hedge fund return.

Hintze knows he faces upcoming challenges, too. Almost half of his firm’s assets are in long-only strategies and he has recently entertained approaches by at least one PE firm about buying a stake in CQS.

He also has to deal with an investor appetite that is stoked primarily for quant funds and low-cost passive funds. He has previously called this a “paradigm shift” that hurts active money managers. Hintze still says that, to get an edge, managers need to add context and deep analysis of world economics and politics. 

Hintze said: “The reality is you need to have imagination. It is problem-solving. That’s where it is.”

David Morant, who left CQS in 2015 and was the company’s former head of equities, said he saw this approach first hand. Hintze would think about different ways to make bets, including options, credit bets and CDSs. 

Morant said of his old boss: “He makes money in ways that no one else does or can. He effectively thinks in three dimensions.”

Three years ago, the firm brought in Neil Brown as a geopolitical strategist. Brown is a former commodore in the British navy and adviser to the U.K.’s prime minister’s office.

Hintze is focused on surrounding himself with people who make him better at what he does. In 2018, after a slew of executive departures, he brought in Xavier Rolet, the former CEO of London Stock Exchange, to be his CEO. The firm also goes against the herd “often”. 

For example, Hintze loaded up on risk in late 2018 and early 2019 when the market dipped, helping contribute to his 10.6% returns so far in 2019, ahead of the 6.8% index average. 

While Hintze’s firm waits for the quantum revolution, he seems content continuing his old school approach for the time being. And why not: if it isn’t broke, don’t fix it.

“I still have 20 years left in me,” he concluded. 

Authored by Ryan McMaken via The Mises Institute,

It has now become commonplace for politicians and media pundits to casually assert that “everyone” – to use Alexandria Ocasio-Cortez’s term – is now working more and more hours – and perhaps two or three jobs – just to attain the most basic, near-subsistence standard of living.

This is repeated time and time again, usually without context or supporting evidence. Never mind, for example, that the Bureau of Labor Statistics reports only around 5 percent of workers hold more than one job.

And while there is some compelling evidence working time and incomes have moved sideways since 2001 — thanks largely to the effects of endless inflationary government stimulus — the median American is not working more now than in the good ol’ days of post-war America. Moreover, the standard of living is far, far higher now than during the 1950s and 1960s when new houses were on average 1,000 square-feet, most families had at most one car, and we all faced near-certain death if diagnosed with cancer.

Nonetheless, the current narrative is that Americans work all the time. Even worse, we’re told this endless grind has abolished the weekend, and no there’s no longer any common day of rest during which to enjoy time with our families.

Bring Back the Blue Laws?

As noted by Zachary Yost, some conservatives are now pressing for more government mandates — known as “blue laws” — forcing businesses to remain closed on Sundays. Yost writes:

Recently, a great many traditionalists were up in arms over North Dakota’s repeal of its blue laws, which prohibited retail businesses from operating before noon on Sundays. Blue laws were once in place across the country and increasingly have been rolled back. Usually they take the form of bans on alcohol and retail sales, hunting, and certain other recreations.

Perhaps among the most outraged was Fr. Dominic Bouck who argued:

The 24-7 retail culture hurts our poor. Those who suffer most from the loss of blue laws are those conscripted into hourly wage jobs: the young, the impoverished, single mothers, and all those who struggle. Are they not allowed to attend Mass? Worship the God of freedom? Blue laws protected the weakest among us by making sure they could attend church on Sundays.

Aside from the ridiculous likening of retail work to the slavery of conscription, Bouck has a point. The existence of a common day off for most of the population does indeed facilitate the promotion of family life, religious institutions, and social life in general beyond commercial institutions.

It’s a good thing.

However, as is so often the case with social conservatives these days, Bouck immediately rushes to a policy prescription — yet another government mandate — which leaves much to be desired.

Why People Work on Sunday

Before we can go any further on the matter of Sunday work hours, it is important to note the reason people work on Sunday. It’s not because evil cigar-chomping capitalists decided they could force people into their stores if only those stores opened on Sunday.

In reality, shops and stores only open on Sunday when the owners believe there are enough customers who want to shop there on Sunday. Only if the customers show up do Sunday hours justify the extra expense of staffing the shop. Moreover, shop owners are concerned that if they remain closed on Sunday, their potential customers will go somewhere else. And again, this is only an issue if customers want to be out shopping in the first place.

For example, grocery stores are open on Sunday because the stores’ owners predicted — often correctly — that a sufficiently large number of customers wanted the stores open that day. The same is true of any luggage store, gas station, or restaurant. If customers stop showing up to those places, those locations will cease to open on Sunday.

(Some businesses choose to close on Sunday anyway, due to concerns for intangibles. Chick-fil-A, for example, is closed on Sunday partly out of concern for maintaining better worker-management relations. Other concerns include the founder’s religious beliefs.)

Thus, the reason businesses open on Sunday is due to bottom-up pressure from consumers, not top-down conniving on the part of management. As much as some people would prefer otherwise, the fact is we live in a society where most people see no problem at all with going to the movies or shoe shopping on Sunday. Business owners merely respond by attempting to meet this demand.

The Problem with Blue Laws

If we lived in a society where people didn’t want to buy and sell things on Sunday, we wouldn’t “need” blue laws in the first place. But since the Sunday-shopping reality reflects the value systems of average Americans, we know that such laws will bring attempts at circumventing them, while also preventing people from doing what they otherwise would rather do. This means a reduction in many people’s real-world utility.

Moreover, some people more or less need to go shopping on Sunday.

For example, some orthodox Jews actually take their sabbath seriously. For them, that means no shopping between Friday evening and Saturday evening. For many of these people, Sunday offers the only opportunity for shopping or for secular entertainment.

Shall we endorse state laws that prohibit them from shopping on the one day during which they have neither work obligations nor religious obligations?

And, if a Jewish entrepreneur were to open his or her store on Sunday to help provide these needed goods and services, how shall this person be punished by state authorities? Since every law also brings with it the need to enforce those laws, how large of a fine shall be assessed on Jewish shopkeepers who dare violate the blue laws? $5,000 per offense? $50,000? One could claim it would be easy for lawmakers to just carve out an exemption for Jews. But then police must take measures to prevent non-Jews from shopping at the stores. If a non-Jew walks into a Jewish-owned deli on Sunday and buys groceries, we’ll need judges, prosecutors, and police to impose the prescribed sanctions whether those be fines, jail time, probation, or mandatory community service. Repeat offenders, of course, will require harsher penalties.

This need not be a religious issue either. Some workers are very badly needed at odd times. Pipes can burst on any day of the week, and this problem must usually be remedied immediately. Cars break down on all days of the week. Tow-truck drivers will be sorely tempted to provide a much-needed — and surely greatly appreciated — service on Sunday by helping a family clear the roadway and get the family’s car to a repair shop. Police will need to be on hand to cite or arrest these people.

In response, some might say “golly, we’re only asking that non-essential businesses be closed!” But who is to decide what businesses are essential? If the answer involves either politicians or government bureaucrats, count me out.

Economic systems are complex things, as are human societies. Yes, it  would be a good thing if people took more seriously the idea of a common day or rest. But as we’ve seen in our examples, we haven’t even been able to decide on which day shall be that day. Different people come from different cultural and religious backgrounds.

Views also differ on how this day of rest ought to be celebrated. Murray Rothbard writes of how the problem manifested itself in conflicts between liturgical Christians and “Pietist” Christians during the Progressive era.

Rothbard points out liturgical Christians — i.e., Lutherans and Catholics — liked to meet up in taverns and drink and eat together on Sundays. Some other Christian groups, meanwhile, insisted that no alcohol be consumed on Sunday at all. Naturally, efforts by the Pietists to legally proscribe Sunday commerce on this matter was a significant cultural problem for others.

Decentralize the Blue Laws

The more broadly applied these rules are, the most unjust they become. In any political jurisdiction lacking total religious and cultural uniformity, a one-size-fits-all legal regimen is sure to favor one group at the expense of others.

As with so many other laws dealing with controversial “social policy” – i.e., abortion, circumcision, drug and alcohol use – legal mandates are only tolerable or arguably moral when they conform to the cultural views of a near-100-percent majority. When views are mixed within a single jurisdiction, such laws become naturally oppressive to the out-of-power minority.

If we are to insist on blue laws to address issues like Sunday labor, they must be kept local, decentralized, and applied in a manner that respects local demographic realities. Applied at the municipal or county level, such laws are more likely to reflect the specific cultural realities of the local population. We certainly can’t say the same of national or statewide laws. Moreover, at the local level, these laws are easy to circumvent with only moderate effort. Christians living in a Jewish neighborhood — where everything may be closed Saturday morning — can without strenuous effort travel to a neighboring area where it is easy to buy groceries on Saturday. This would be a feature, not a bug.

Hardliners in favor of blue laws will of course denounce this sort of freedom that results from decentralized legal regimes. They’ll claim too much freedom defeats the purpose of the blue laws, which is to force a way of life on certain people.

There is another way. The people who deplore Sunday shopping could work to convince others to voluntarily refrain from shopping. This however, would require a lot of effort and self-discipline on the part of the busybodies. In order to demonstrate any sort of consistent commitment to the ideal of a work-free Sunday, these people would need to give up watching NFL games on Sunday. Football games require a lot of workers to put them on. Consistency would require no more ordering pizzas on Sunday; no more Sundays flying on commercial airlines; no more trips to the hardware store. And so on. So don’t expect to see a wave of our cultural gatekeepers teaching us by example any time soon. It’s much easier to just have some politicians pass some laws. 

President Trump will try to “rig” the 2020 election if he isn’t impeached and removed from office, according to House Judiciary Committee Chairman Jerrold Nadler (D-NY).

In an interview with “Meet the Press,” Nadler said that the Senate will have to decide “In the face of an abundance of uncontested evidence that the president poses a threat to our election, that he put his own interests above the interests of the country, are they going to be patriots or are they going to be partisans?”

Host Chuck Todd then asked: “If he’s acquitted, do you think we’ll have a fair election in 2020?”

To which Nadler replied: “I don’t know. The president based on his past performance will do everything he can to make it not a fair election.’

WATCH: If President Trump is acquitted in the Senate trial, do you think we’ll have a fair election in 2020?@RepJerryNadler: “I don’t know.” #MTP #IfItsSunday pic.twitter.com/s2jBrqOCHp

— Meet the Press (@MeetThePress) December 8, 2019

In a separate interview with CNN‘s “State of the Union,” Nadler said Trump may try to “rig” the 2020 election, adding “We have got to act with dispatch.”

The New York Democrat added “We have a very rock-solid case,” which he said “if presented to a jury, would be a guilty verdict in about three minutes flat.”

Nadler dismissed Republican counterpoints that the evidence against Trump is hearsay, saying there is “considerable direct evidence.”

“And it ill behooves a president or his partisans to say you don’t have enough direct evidence when the reason we don’t have even more direct evidence is the president has ordered everybody in the executive branch not to cooperate with Congress in the impeachment inquiry, something that is unprecedented in American history and is a contempt of Congress by itself,” he added, according to The Hill.

“The only testimony we have are from public spirited, patriotic people in the CIA, the Pentagon, the White House itself who came forward and defied the president’s orders and testified.”

“We have a very rock solid case,” @RepJerryNadler says about the House Democrats’ impeachment case. “The case we have if presented to a jury would be a guilty verdict in about three minutes flat.” https://t.co/TWeC2mhpgk #CNNSOTU pic.twitter.com/QCYqBEcK1G

— State of the Union (@CNNSotu) December 8, 2019

Nadler also said he would reject witnesses requested by the GOP, calling them “not relevant” to the allegations.

For example, he said House Intelligence Committee Chairman Adam Schiff (D-Calif.), whom the Republicans have requested as a witness, did not witness any of the actions and therefore is not relevant to call as a witness.

The Judiciary Committee will hold a hearing Monday to receive presentations of evidence from investigators as it moves forward with the impeachment of Trump.

Nadler said it is “possible” that the House will hold a vote on the articles of impeachment this week. –The Hill

Nadler’s committee will hold a hearing on Monday.