Donald Trump’s ‘Wildcard’ Foreign Policy Bearing Fruit?

“Is Donald Trump a “freewheeling” “madman“? While Trump challenged foreign policy norms on the campaign trail, not holding back on attacking the George W. Bush legacy, he was hardly a non-interventionist—often complaining that the United States was not reimbursed for its security commitments and military actions around the world. Trump wants to make a deal. So far he’s something of a wildcard.

Since becoming president-elect, Trump has made a number of moves that have rattled the foreign policy establishment, although his cabinet picks were not one of them. Rex Tillerson, his secretary of state nominee, was reportedly initially suggested by Bob Gates, the former Bush and Obama administration defense secretary, and backed by Condoleezza Rice, Bush’s former national security advisor and secretary of state, both of whom run a consulting firm that represents ExxonMobil, where Tillerson is CEO. Former President Bush called Sen. Bob Corker (R-Tenn.), the chair of the Senate Foreign Relations Committee, where the nomination hearings will be heard, with “effusive” praise, and former Vice President Dick Cheney also backed Tillerson.

Henry Kissinger, former Richard Nixon and Gerald Ford secretary of state, meanwhile, was cautiously optimistic about Trump in a Face the Nation interview, telling John Dickerson Trump, “a phenomenon that foreign countries haven’t seen,” had the “possibility of going down in history as a very considerable president” because of the perception around the world that Obama “basically withdrew America from international politics” and because Trump was “asking a lot of unfamiliar questions.”

The Washington Post‘s David Ignatius asks whether “Trump’s freewheeling foreign policy could have its benefits,” pointing to the “useful ambiguity and negotiating room” Trump created with the congratulatory phone call he took from the president of Taiwan. China captured an unmanned navy drone in the South China Sea, where China has been building military facilities on artificial structures, which was returned. Trump later tweeted the U.S. should “tell China that we don’t want the drone they stole back.- let them keep it!” On Fox News Sunday last week, he asked why the U.S. ought to defer to China on relations with Taiwan and the One China policy, which Kissinger helped construct.

At the Washington Post, James Hohmann suggests Trump is following Nixon’s “madman theory” on foreign policy, also pointing to Trump’s approach to China as bearing some fruit, calling it “the first vindication of this approach.” Since the election, Trump has re-affirmed U.S. security commitments to NATO and to countries like South Korea. The European Union invited Trump to a summit in Europe at his earliest convenience as soon as he was elected, and a NATO summit early next year in Brussels ought to be one of the first venues for Trump to demonstrate what’s he meant by wanting to cut a deal, and whether he’s ready to de-escalate American security commitments or whether he intends to continue a bipartisan foreign policy that sees America as an indispensable nation that must be involved everywhere.

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44 Years Ago, The Dow Crossed 1,000 For The First Time – Here’s What Happened Next

With all eyes desperately urging The Dow to cross 20,000 and prove that everything in the world of Trumplandia is awesome, we thought some reflection on another major milestone in the omnipresent Stock Index would be worthwhile…

As The New York Times reported 44 years ago… The Dow Jones industrial average closed above the 1,000 mark yesterday for the first time in history.

It finished at 1,003.16 for a gain of 6.09 points in what many Wall Streeters consider the equivalent of the initial breaking of the four-minute mile.

 

"This thing has an obvious psychological effect," declared one brokerage-house partner. "It's a hell of a news item. As for the perminence of it — well, I just don't know."

 

 

The Dow finally put it all together, the peace rally, the re-election of President Nixon, the surging economy, booming corporate profits and lessening fears about inflation and taxes and controls and other uncertainties of 1973.

 

 

With such kingpin issues leading the forward surge, the market fed on its own momentum. The Dow forged past 1,000 at 1:30 P.M. and it kept gaining almost consistently until the final bell.

 

At 3:29 P.M., red light bars flashed on above and below each of the time clocks surrounding the trading floor of the New York Stock Exchange. This was the traditional visual signal to show that one minute of training time remained. At the same moment, a bell began clanging on the speaker's rostrum – the auditory warning.

 

Traders, brokers and clerks on the floor – aware that history was in the making – broke into cheers that lasted about 20 seconds. Some paper was tossed in the air and drifted down like confetti.

 

Several hundred persons on the floor then turned to face newsreel cameras grinding away on the member's gallery, some brokers waving like fans at a football game.

 

 

An office broker, watching the stock tape from his desk downtown, murmured in wonderment: "There's a sort of renewed confidence in the whole economic outlook."

Nine months later, the US entered recession…

h/t @Peter_Atwater

and the stock market plunged over 44% from its post-1k highs…

 

Probably different this time though.

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The Obama ‘Recovery’: Number Of Millennials Living At Home With Mom Reaches 75-Year High

Millennials finally get to claim a trophy for an achievement they actually earned (no participation medals here)…that’s right, Millennials have officially set a 75-year record for highest percentage of young adults living at home with mom.  At just under 40%, Millennials are barely shy of the all-time record of 40.9% set in 1940, after the end of the Great Depression.  For once, we have every confidence that our young snowflakes will excel in crushing this longstanding record.  Per the Wall Street Journal:

Almost 40% of young Americans were living with their parents, siblings or other relatives in 2015, the largest percentage since 1940, according to an analysis of census data by real estate tracker Trulia.

 

Despite a rebounding economy and recent job growth, the share of those between the ages of 18 and 34 doubling up with parents or other family members has been rising since 2005. Back then, before the start of the last recession, roughly one out of three were living with family.

 

The trend runs counter to that of previous economic cycles, when after a recession-related spike, the number of younger Americans living with relatives declined as the economy improved.

Millennials At Home

 

We must admit that we’re somewhat confused by the following data, from the Census Bureau, suggesting that the percentage of the population with college degrees has increased 5x since 1940.  Bernie Sanders and Elizabeth Warren assured us that spending 4-7 years drinking and partying at an institution of higher education, while incurring $100,000’s of dollars worth of debt that will ultimately have to be absorbed by taxpayers, would automatically result in higher incomes which should then translate into higher household formation and economic growth, right?

College

 

Well, we’re sure their is some other fantastic explanation as to why only 200,000 households have been created by the 5 million milliennials that have joined the “young adults under 30” cohort over the past decade…and this is just a guess but we bet it has something to do with Republicans and/or Russia. 

The result is that there is far less demand for housing than would be expected for the millennial generation, now the largest in U.S. history. The number of adults under age 30 has increased by 5 million over the last decade, but the number of households for that age group grew by just 200,000 over the same period, according to the Harvard Joint Center for Housing Studies.

 

Analysts point to rising rents in many cities and tough mortgage-lending standards as the culprit, making it difficult for younger Americans to strike out on their own.

 

“I don’t think those are challenges that are going to keep young households permanently out of the housing market, but it may keep their homeownership rate near historic lows for likely the indefinite future,” said Ralph McLaughlin, Trulia’s chief economist.

 

Household formation is closely correlated with housing affordability and income. Among those aged 25 to 34, 40% of those earning less than $25,000 headed their own household. The share rose to 50% for those earning between $25,000 and $50,000, and 58% for those with incomes above $50,000, according to the Harvard Joint Center.

Perhaps the problem isn’t as complicated as Bernie and Liz think, maybe we should just try this guy’s idea that millennials should stop playing video games in their parents’ basements and get a job…it just might be crazy enough to work.

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House Report: ‘Any measure that weakens encryption works against the national interest’

iPhoneBipartisan members of an Encryption Working Group connected to the House’s Judiciary and Energy and Commerce committees have put out a year-end report pushing for American policies that support and defend strong data encryption.

Sure it’s just a report and not an indicator of where policy might end up, but it’s important in the wake of the United Kingdom passing a new surveillance bill that gives its government the authority to order tech and communication companies to provide back doors or bypasses in order to access encrypted data.

The report was signed by ten members of the House, five from each party. After meeting and discussing issues and concerns with various parties over the past six months, they concluded the year with four observations.

This first observation is exactly what’s up in the headline: Weakening encryption harms our national interest. Even government officials within the national security community agreed:

[S]takeholders from all perspectives acknowledged the importance of encryption to our personal, economic, and national security. Representatives of the national security community told the EWG [Encryption Working Group] that strong encryption is vital to the national defense and to securing vital assets, such as critical infrastructure. Civil society organizations highlighted the importance of encryption for individual privacy, freedom of speech, human rights, and protection against government intrusion at home and abroad. Private sector stakeholders—in particular, their information security officers—and members of the academic community approached the question from an engineering perspective—against a wide array of threats, foreign and domestic, encryption is one of the strongest cybersecurity tools available.

The second observation was simply a reminder that encryption tools are developed internationally and that the government probably can’t actually control access to it anyway. The end result could actually make the law enforcement “going dark” problem even worse:

Encryption technology is free, widely available, and often open source.5 Law enforcement stakeholders acknowledged to the EWG that a Congressional mandate with respect to encryption—requiring companies to maintain exceptional access to data for law enforcement agencies, for example—would apply only to companies within the United States. The consequences for such a policy may be profound, but they are not likely to prevent bad actors from using encryption.

The group’s third observation is to warn that there’s no “one-size fits all” solution to dealing with encryption to the extent that it presents a challenge to law enforcement and anti-terror information gathering. Without directly saying so, it’s a crack at the absurdly vague legislation crafted by Sens. Dianne Feinstein (D-Calif.) and Richard Burr (R-N.C.) that simply ordered tech companies to assist law enforcement in bypassing and compromising their own security whenever a judge told them to.

The final observation is a bland call for cooperation between tech companies and law enforcement. They do notice that part of the problem involves communication. They seem to kind of be diplomatically suggesting that law enforcement agencies think they can just demand tech companies give them information and don’t understand why that doesn’t work:

Stakeholders from all sides were nearly unanimous in describing a significant gap in the technical knowledge and capabilities of the law enforcement community, particularly at the state and local levels. This results in a range of negative consequences that not only hinder law enforcement’s ability to pursue investigations but also contribute to its tension with the technology community. For example, from the perspective of law enforcement, routine requests for data are often challenged by the companies, unnecessarily delayed, or simply go unanswered. From the perspective of the companies, these requests often lack appropriate legal process, are technically deficient, or are directed to the wrong company altogether.

Read the full report here. Keep in mind that incoming President-Elect Donald Trump took an extremely dim view (even careless) toward Apple’s cybersecurity in the fight for access to the iPhone in possession of one of the San Bernardino terrorist’s. He demanded that Apple simply “open” the phone for the FBI (which is actually more than they were even asked to do) and called for a boycott of the company when they resisted. What Congress might establish as law for encryption protections is going to be very important.

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Trump Appoints “Death By China” Author Peter Navarro To Head Trade Office, Hints At Trade War With Beijing

Another day, another shot across the bow from Donald Trump aimed squarely at China.

Having already participated (and in the case of one, precipitated) two mini diplomatic snafus with Beijing, Trump is sending a clear message to Beijing that US-China trade under his administration will be anything but business as usual, by creating a National Trade Council inside the White House to oversee industrial policy and has decided to appoint a hard core China hawk to run it.

According to the FT, which broke the news, Trump has chosen Peter Navarro, a Harvard-trained economist, to head the NTC. The author of books such as “Death by China” and “Crouching Tiger: What China’s Militarism Means for the World” has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance — a message that the president-elect sold to voters across the US during his campaign.

Speaking to the American public, Trump said “I read one of Peter’s books on America’s trade problems years ago and was impressed by the clarity of his arguments and thoroughness of his research,” Trump said. “He has presciently documented the harms inflicted by globalism on American workers, and laid out a path forward to restore our middle class.”

Fast forward to today, when Trump has made it clear that at least when it comes to the Chinese trade relationship, the president elect will engage in a wholesale overhaul of the legacy relationship. More details from the FT:

The Trump transition team described Mr Navarro as a “visionary economist” who would “develop trade policies that shrink our trade deficit, expand our growth, and help stop the exodus of jobs from our shores”. His appointment is the second restructuring of trade policy that will see Mr Trump attempt to follow through on his focus to resurrect manufacturing, and create more industrial jobs, in the American economy.

 

The Trump team said the NTC would lead a “Buy America, Hire America” programme that would boost job creation in areas such as infrastructure and defence. It will work in tandem with three other offices in the White House: the National Security Council, the National Economic Council and the Domestic Policy Council.

 

They added that it would mark the first time there was an office dedicated to manufacturing inside the White House, in a strong signal that Mr Trump plans to follow through on the promises that he made on the campaign trail.

While the Navarro appointment will certainly raise eyebrows, the move to create the new office is also likely to be seen as controversial by mainstream economists, many in the business community and pro-trade Republicans. Targeting the trade deficit is seen by many economists as likely to lead to protectionist trade policies. It may also be complicated by Mr Trump’s plans for an increase in spending and rising interest rates, both of which have already yielded a surge in the dollar that is likely to make US exports less competitive and would normally lead to a bigger trade deficit.

Navarro’s appointment also means that the speculation that Trump may launch a “Border tax proposal” to eliminate the US trade deficit is far more likely than the 30% probability some assign to it. If it indeed passes, then watch out, because as Deutsche Bank calcualted yesterday, it would lead to a 15% surge in the dollar, which would almost certainly lead to a full blown Chinese economic crisis.

 

For those who missed it, here is what a border tax proposal would mean in three paragraphs:

  • A “border tax adjustment” would, roughly speaking, be equivalent to a 15% one-off devaluation of the dollar. Imports would be 20% more expensive, because corporates would have to pay the new 20% corporate tax rate on their value. Exports would be roughly 12% “cheaper”, because for every $33 of earnings earned from $100 of exports (we use the 33% gross margin of the S&P), there would be a 12% tax cost ($33 earnings*35% current tax rate) that would no longer be imposed on corporates. Taking the average impact on the prices of exports and imports is equivalent to a 15% drop in the dollar.
  • A border tax adjustment would be very inflationary. The price of exports doesn’t affect the US consumption basket so would have no impact on CPI. However, the cost of imports would go up by 20%, which based on a simple relationship between import PPI and US inflation would be equivalent to a 5% rise in the CPI. Corporates may of course choose to absorb part of the rise in import costs in their profit margins. But either way, the order of magnitude is large.
  • A border tax adjustment would be very positive for the US trade balance. Similarly to the dollar calculations, a border tax adjustment would be equivalent to an across the board import tariff of 20% and an export subsidy of 12%. Keeping all else constant and applying standard trade elasticity impact parameters to an average of the two estimates results in a more than 2% drop in the trade deficit equivalent to more than 400bn USD, or equivalently, an almost complete closing of the US trade deficit.

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Traders Place Massive Bets That 10Y Yields Tumble To 2% By February

It appears not everyone is convinced that "the 30 year bond bull is dead." A quick glance across US equity options today shows TLT (the long-end Treasury Bond ETF) is the most active with call volumes (bullish bonds, lower rates) more than double their average, with over $1.3 billion notional in February $126 Calls (which will payoff if rates drop to around 2.00% by then).

 

With come big blocks in the Feb $126 today…

As Bloomberg reports, Susquehanna notes that the trader established a low-delta, speculative upside position…

And he is not alone in his bid for those $126 Calls…

 

A $126 TLT implies around a 2.00 to 2.05% 10Y yield…

 

As a reminder, the world and their pet rabbit is short US Treasuries…

 

What could go wrong?

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Trump No Longer Wants To “Drain The Swamp”, Gingrich Admits

While it will hardly come as a surprise to anyone following the ongoing additions to Trump’s cabinet, one can now effectively cross off “draining the swamp” from the list of Trump’s stated intentions.

Speaking in an NPR interview on Wednesday, former Speaker Newt Gingrich said that Trump has taken a different tone as president-elect and may be leaving behind his campaign promise to “drain the swamp.” Gingrich told “Morning Edition” that he was told Trump “now says [the phrase] was cute, but he doesn’t want to use it anymore.”

“I’m told he now just disclaims that. He now says it was cute, but he doesn’t want to use it anymore,” Gingrich said, and also predicted there would be “constant fighting” over Trump’s efforts to reduce the influence of lobbyists and Washington insiders. “But, you know, he is my leader, and if he decides to drop the swamp and the alligator I will drop the swamp and the alligator,” he said.

Gingrich, who has been a close adviser to Trump, said he likes “drain the swamp” because it “vividly illustrates the problem, because all people in this city who are the alligators are going to hate the swamp being drained.” It also vividly illustrates why draining the swamp is virtually impossible when even the candidate who runs on such a promise promptly backs away from it once elected.

Meanwhile, according to AP, Trump’s aides denied and said the president-elect remains committed to his underlying swamp-draining policies, albeit in a lite version, such as banning outgoing Trump transition and administration members from lobbying for five years. Trump also prohibits any lobbyists from joining his transition team or administration unless they de-register.

“President-elect Trump’s ethics reform policies are full speed ahead,” transition spokesman Jason Miller said. “We’re going to change the way business is done in Washington and start putting the American people first.”

To be sure, for some, like Ray Dalio, putting mostly business executives and billionaires “first” is a good sign. Others are yet to be convinced.

“‘Drain the swamp'” became a staple of the final month of Trump’s campaign, with crowds chanting it as loudly as they had been shouting “build the wall” and “lock her up.” The slogan also appeared on T-shirts and signs.

It has remained part of Trump’s post-election “thank you” tour. Whether in Ohio or Florida, the crowd continued to shout along with the president-elect as he vowed to curtail corruption in Washington — even as he revealed that he wasn’t always crazy about the catchphrase.

“Funny how that term caught on, isn’t it?” Trump mused during a rally this month in Des Moines, Iowa. “I tell everyone, I hated it. Somebody said ‘drain the swamp’ and I said, ‘Oh, that is so hokey. That is so terrible.'” “I said, all right, I’ll try it,” Trump continued. “So like a month ago I said ‘drain the swamp’ and the place went crazy. And I said ‘Whoa, what’s this?’ Then I said it again. And then I start saying it like I meant it, right? And then I started to love it, and the place loved it. Drain the swamp. It’s true. It’s true. Drain the swamp.”

A seemingly resigned Gingrich told NPR that as the incoming president, perhaps Trump feels that “he should be marginally more dignified” than leading crowds in “lock her up” and “drain the swamp” chants. Gingrich said he supports Trump’s ethics reform proposals.

* * *

Meanwhile, a far angrier Mike Krieger lashed out, saying “Not that he ever wanted to, but here’s Newt Gingrich admitting what many of us already knew regarding Donald Trump’s fake populism.”

As I highlighted in the recent post, The Election Never Ended: “As Anthony Scaramucci, a hedge fund manager and top adviser to Trump, as well as a former Goldman Sachs banker himself, put it Thursday: “I think the cabal against the bankers is over.”

 

Indeed, as we all know, U.S. government economic policy has been essentially handed over to Goldman Sachs during this transition period. Must be a reward for its most recent settlement for rigging yet another market.

 

Penalties don’t’t change the behavior of white collar criminals. Jail sentences would, but we don’t see any of that when it comes to bank execs. Thanks for playin’ America.

Well, if Krieger is right and Trump has indeed outsourced the management of the US economy to Goldman, the silver lining is that the inevitable systemic reset will simply come that much faster.

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There Was More Than One Christmas Truce

In the famous Christmas Truce of 1914, memorialized in film and song, informal ceasefires were declared along the Western Front of World War I. British, French, and German soldiers met in No Man’s Land, where they traded gifts, sang carols, played soccer, and buried their dead. It is remembered fondly today as a rare moment of humane behavior in one of the worst wars in European history.

But maybe it wasn’t so rare after all. The Scotsman reports:

[H]istorian Thomas Weber, of the University of Aberdeen, has uncovered evidence that festive meetings continued throughout the war, with a significant number in 1916 despite the huge casualties suffered in the Battle of the Somme.

Professor Weber has been given access to a large number of family memories of the war that show that, despite officers recording in official documents that no such friendly exchanges took place, the situation on the front lines was very different.

Weber wrote about some of these truces in his 2010 book Hitler’s First War. In the trenches near Fromelles in 1915, he reports, the authorities actively attempted to prevent a rerun of the previous Christmas by ordering “massive machine-gun fire,” among other measures. Nonetheless, small-scale acts of fraternization took place. If they weren’t as widespread as in 1914, Weber argues, that wasn’t because the men were less willing; it’s because the higher-ups were working harder to stop them.

They kept trying to stop them as the war dragged on, but sometimes peace broke out anyway. The Scotsman story mentions “a truce between German and Canadian troops at Vimy Ridge in 1916”:

The official version of events recorded by the Canadian Regiment, Princess Patricia’s Canadian Light Infantry, stated that the Germans tried to interact but that no one responded to it.

But the historian found that a letter written by Ronald MacKinnon, the son of a Scot from Levenseat, near Fauldhouse in West Lothian, tells a rather different story….”We had a truce on Xmas Day and our German friends were quite friendly. They came over to see us and we traded bully beef for cigars. Xmas was ‘tray bon’ which means very good.”

In Hitler’s First War, Weber notes that when the Canadian soldiers arrived at Vimy Ridge in October, some Germans had greeted the newcomers by holding up a sign that said “Welcome Canadians.” (Another sign said: “Cut out your damned artillery. We, too, were at the Somme.”) As December 25 approached, the authorities again tried to prevent a spontaneous holiday peace. Some officers even cancelled their men’s Christmas rum ration, fearing that it would only encourage fraternization—but they didn’t coordinate this as well as they could have, because some other officers decided to double their men’s rum. In any event, “All attempts to prevent a truce had been futile. The men of the Princess Pats embarked on a truce with their German opponents, conversing with the help of a Canadian soldier who spoke German.”

Bonus reading: I first learned about the 1914 Christmas Truce in Robert Axelrod’s The Evolution of Cooperation, which covers it in a great chapter about the many ways “nonaggression between the troops emerged spontaneously in many places along the front.” The chapter opens with a wonderfully frustrated quote from a British staff officer visiting the trenches, who was

astonished to observe German soldiers walking about within rifle range behind their own line. Our men appeared to take no notice. I privately made up my mind to do away with that sort of thing when we took over; such things should not be allowed. These people evidently did not know there was a war on. Both sides apparently believed in the policy of “live and let live.”

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Meet The NY Pension “Strategist” Who Traded Allocations For “Hookers And Blow”

According to a complaint filed by U.S. prosecutors earlier today, Navnoor Kang, the former Director of Fixed Income and Head Portfolio Strategist at the New York State Common Retirement Fund, steered $2 billion worth of allocations to two “preferred brokers” in exchange for $100,000 worth of bribes in the form of the universal currency of “hookers and blow.”

According to NBC, from 2014 to 2016 Kang received bribes “in the form of entertainment, travel, lavish meals, prostitutes, nightclub bottle service, narcotics, luxury gifts, and cash payments, among other things” from Deborah Kelley, of Sterne Agee, and Gregg Schonhorn.  Kang faces charges of securities fraud and wire fraud. 

In a statement to CNN, the New York State Common Retirement Fund said it has “absolutely no tolerance for self-dealing” and fired Kang in February when it learned of his “misconduct.”

“We are outraged by Mr. Kang’s shocking betrayal of his responsibilities,” the fund said, adding that Kang was dismissed in February and it worked with law enforcement once the misconduct was uncovered by authorities.

Sure enough, a quick search of Kang’s LinkedIn account reveals that he left the NY Pension in February 2016, after spending 2 years and 2 months collecting substantial bribes.  Prior to the NY Pension, Kang spent time at Guggenheim and PIMCO just after spending 2 years as professional tennis player.

Navnoor Bio

 

According to his bio, Kang “outperformed his peers year after year because of his astute investment strategies and sound judgment for value”…while that could be interpreted as a veiled reference to “hookers and blow” we can’t be certain at this juncture.

Navnoor is a seasoned portfolio manager and macroeconomic strategist who has built and managed fixed income portfolios across various investor objectives in both the private and public sectors. He has outperformed his peers year after year because of his astute investment strategies and sound judgment for value.

 

Most recently, Navnoor was the Director of Fixed Income and the Head of Portfolio Strategy for the New York State Common Retirement Fund which is the third largest public plan in the country with over $185bn in assets. He was directly responsible for investing over $55bn in fixed income assets with a focus on credit products and for creating the macroeconomic framework for asset allocation for the entire $185bn fund. Earlier, Navnoor was co-head of investment grade corporate credit at Guggenheim Partners Asset Management and an associate portfolio manager for corporate credit at Pacific Investment Management Company (PIMCO). He began his career as an analyst at Goldman Sachs in the credit default swap trading team.

 

In another avatar, Navnoor spent three years competing on the men’s professional tennis tour. He holds a degree in economics from Columbia University.

And that, folks, is how the brilliant minds of wall street manage to consistently underperform the broader markets year after year. 

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Leaked Memo Reveals List Of Trump’s Top Defense Priorities

A leaked communication between the Trump transition team’s Undersecretary of Defense for policy Brian McKeon, and the Pentagon, has revealed the four biggest defense priorities for the president-elect. Among the top four items listed in the memo from are: 1) developing a strategy to defeat/destroy ISIS; 2) build a strong defense by eliminating budget caps/the sequester, 3) develop a comprehensive cyber strategy, and 4) eliminate wasteful spending by finding greater efficiencies.

The list was communicated to McKeon by Mira Ricardel, one of the leaders of Trump’s Pentagon transition team, according to the memo obtained by Foreign Policy magazine and published Tuesday.

 

A major point of concern among defense pundits is that notably absent from the memo is any mention of US “free and fair election scourge” Russia. Foreign Policy magazine cited the current Chairman of the Joint Chiefs of Staff, General Joseph Dunford, as saying that Russia “could pose an existential threat” to the US – more so than China, North Korea or ISIS, which came in at first spot on the list.

Suggesting that Trump may have a soft spot for the Kremlin, the US “foreign policy establishment – including large swaths of employees at the Pentagon, State Department and CIA – remains deeply skeptical of Moscow,” said the magazine. The article included quotes by former Deputy Assistant Secretary of Defense for Russia, Ukraine and Eurasia Evelyn Farkas and Brookings Institution scholar Steven Pifer, both known for hostility towards Russia.

Foreign Policy also reached out to Lieutenant-General Ben Hodges, commander of US Army forces in Europe. Without quoting him directly, the magazine reported that Hodges saying that the Pentagon and NATO have “revamped some training exercises specifically to replicate fighting Russian armed forces” and that US, British and Canadian troops were training Ukrainian forces who are “seeing daily combat with Russian-trained and equipped separatists.” Hodges reportedly also claimed that many of those units were led by Russian officers.

The Trump’s transition team did not deny the authenticity of the memo, although it added that the list was incomplete.

“For the media to speculate that this list of issues represents all of the president-elect’s priorities is completely erroneous and misleading,” a Trump transition official, who insisted on anonymity, told Foreign Policy.

We, for one, would welcome a defense policy that is less focused on “offensive” measures, including launching and perpetuating proxy, or “fake” wars to benefit the US Military-Industrial complex, instead focusing on truly tangible threats.

Overall, the published list matches what Trump has addressed on the campaign trail, from pledges to defeat the Islamic State, to rebuilding the US military and review expensive but ineffective weapons programs such as the F-35.

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