Month: May 2016

Submitted by Lance Roberts via RealInvestmentAdvice.com,

Commercial bankruptcies are skyrocketing, oil prices have collapsed, profits have declined and Central Banks globally are pushing negative interest rates in hopes of keeping economies afloat. At any other point in history, such a combination of events would have investors scrambling for cover as market prices fell.

Currently, however, the majority of the mainstream analysis continues to ignore past history as stock prices are just within reach of all-time highs. The assumption “this time is different” is based solely on a continued low-interest rate environment promulgated by the Federal Reserve.

However, since I was long ago excised by the media for allowing the “data to speak,” let me clarify why I still believe the “bearish” case will still likely come to fruition.

Economic Hopes To Be Disappointed

Despite ongoing hopes of a resurgence of economic growth over the past six years, each year has only led to disappointment. As I discussed previously:

“If you are expecting an economic recovery, and a continuation of the bull market, then the economic data must begin to improve markedly in the months ahead. The problem has been that each bounce in the economic data has failed within the context of a declining trend. This is not a good thing and is why we continue to witness an erosion in the growth rates of corporate earnings and profitability. Eventually, that erosion combined, with excessive valuations, will weigh on the financial markets which is potentially much of what we are witnessing now.

 

The economy continues to ebb and flow between weak growth and no growth. This puts the Federal Reserve at risk of a policy mistake that could trip the economy into an outright recession. While there have certainly been positive bumps in the data, as pent-up demand is released back into the economy, the inability to sustain growth is most concerning.”

This “ebb and flow” within a weakening trend can be most clearly seen in the Economic Output Composite Index. As shown, recent hopes of a resurgence in economic growth have all but faded as the data has plunged to levels normally more associated with outright recessions.

If we turn the index into a recession indicator by only looking at when the index falls below 35, we see the following.

(The recession indicator uses a 6-month average to smooth out the month-to-month volatility caused by seasonal adjustment anomalies as we are currently witnessing.)

 

Not So Rewarding

Unfortunately, substantially weaker economic growth, both domestically and globally, will continue to weigh on future stock market returns particularly when coupled with already high valuation levels. While the majority of mainstream analysis continues to expect “double-digit” returns in the near term, the realization of near zero returns over the next decade (after including taxes, inflation, and fees) will likely be outright depressing.

Ultimately, stocks are not magical pieces of paper that provide double-digit returns over the long run. In fact, we’ve just had a 15-year period of lousy (less than 5% annualized) returns, and it all has to do with valuation.

While WallStreet, and the financial media, continue to push individuals into the casino to increase revenues, what is ultimately forgotten is that stocks are ownership units of businesses. While that seems banal, future equity returns are simply a function of the value you pay today for a share of future profits.

The chart below shows that rolling 20-year returns from current valuation levels have been substantially less optimistic. After fees, taxes and inflation, it is substantially worse.

 

The Fed Can’t Raise Rates 

The recent rally in the dollar has been primarily been a function of anticipation the Fed would continue hiking interest rates. Of course, further rate hikes would be taken as a sign of a stronger economic backdrop which would be supportive of a stronger dollar.

Well, that is what was hoped. The reality, as I have been discussing for over two years, is the Fed is “caught in a liquidity trap” and can not raise rates for the foreseeable future. To wit:

“The problem for the Federal Reserve is that getting caught in a liquidity trap was not an unforeseen outcome of monetary policy, but rather an inevitable conclusion. As shown in the chart below of GDP, inflation, and interest rates, each time the Fed has intervened with monetary policies it has lead to lower rates of economic growth and lower rates of inflation and interest rates. As stated, the current low levels of inflation, interest rates, and economic growth are the result of more than 30-years of misguided monetary policies that have led to a continued misallocation of capital.

For several years, there have been repetitive screams that inflation was imminent due to deficits, a fiat currency and expanding debt levels. Yet, the opposite has been true. The lack of inflation has been a construct of the underlying structural dynamics of the economy. Home ownership rates have plunged, technological advances and productivity increases have fostered wage suppression, and high levels of uncounted unemployed (54% of the 16-54 aged labor force) drag on economic strength.”

As I predicted the, the Federal Reserve has now become trapped by its own “data-dependent” analysis. Despite ongoing commentary of improving labor markets and economic growth, their own indicators are suggesting something very different. This is why they have now instituted their new “perma-excuse” of global instability as the rational for not hiking rates. 

While I stated previously the Federal Reserve may hike interest rates simply to “save face,” it is now quite apparent they can not do so particularly as we head into a political election. The reality has always been that organic economic growth was far too weak to tighten monetary policy. Of course, the Fed knows this which is why they have remained on hold and even floated the idea of “negative interest rates.” In other words, they already likely realize the trap they are caught in.

 

Staying Bullish

With the current economic cycle already long by historical standards, economic data continuing to remain weak and profit margins on the decline, there is an increasing possibility that “risk” outweighs “reward” in the near term. 

As we now exit the “best 6-months” of the year, any rally from the recently oversold conditions is likely a good opportunity to “de-risk” portfolios particularly as we head into two of the weakest years of the decennial cycle.

In simpler terms, while WallStreet continues to flood the media with “bullish spin” to keep individuals invested in order to collect “fees,” the actual data suggests that “odds are heavily stacked in favor of the house.” 

The inherent problem of “eternal bullishness” is the “willful blindness” to the underlying data in an effort to chase short-term returns. This leads to the unfortunate problem of being “all-in” on every hand which has a devastating consequence when a mean reverting event occurs.

John Hussman once penned an excellent piece on the full-market cycle:

“Regardless of very short-term market direction, it is urgent for investors to understand where the equity markets are positioned in the context of the full market cycle. While the most extreme overvalued, overbought, overbullish, rising-yield syndrome we define has generally appeared only at the most wicked market peaks in history, and investors have ignored those conditions over the past year. We can’t be certain when the deferred consequences will emerge. But a century of market history provides strong reason to believe that any intervening gains will be wiped out in spades.

 

It’s instructive that the 2000-2002 decline wiped out the entire total return of the S&P 500 – in excess of Treasury bills – all the way back to May 1996, while the 2007-2009 decline wiped out the entire excess return of the S&P 500 all the way back to June 1995. Overconfidence and over valuation always extract a terrible payback.”

In the end, it does not matter IF you are “bullish” or “bearish.” The reality is that both “bulls” and “bears” are owned by the “broken clock” syndrome during the full-market cycle. However, what is grossly important in achieving long-term investment success is not necessarily being “right” during the first half of the cycle, but by not being “wrong” during the second half.

That second half of the equation will come as recently stated by Stan Druckenmiller of Duquesne Capital:

“If we have borrowed more from our future than any time in history and markets value the future, we should be selling at a discount, not a premium to historic valuations. It is hard to avoid the comparison with 1982 when the market sold for 7x depressed earnings with dozens of rate cuts and productivity rising going forward vs. 18x inflated earnings, productivity declining and no further ammo on interest rates.

 

The lack of progress and volatility in global equity markets the past year, which often precedes a major trend change, suggests that their risk/reward is negative without substantially lower prices and/or structural reform. Don’t hold your breath for the latter. While policymakers have no end game, markets do.”

The problem of excessive optimism is the inevitable reversion to excessive pessimism. It is just a matter of timing.

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The following brief comment by Morgan Stanley’s chief FX strategist Hans Redeker is one of the best summaries of the sad state the centrally-planned world finds itself in after 7 years of constant central bank manipulation to push risk assets higher no matter the cost.

Global imbalances have stayed strong but these imbalances are no longer expressed by current account differences and worries concerning foreign funding needs. Instead, current account differentials have developed into output gap differentials. Concretely, Asia’s current account surpluses have converged into supply, which within a world of demand deficiency has created overcapacity and falling investment returns.

 

Theoretically, there are three possible outcomes to deal with overcapacity. Austrian School-like destruction, increasing exports and finally providing debt-funded domestic demand. Creative destruction, once the backbone of a functioning capitalist system, is no longer seriously considered as the social costs of this approach appear unacceptably high. What remains are adjustments via exports and increasing local demand against ever-rising balance sheets.

Translation: since politicians are spineless cowards (and would much rather have the Fed do their work for them) and will never agree to kill zombie companies (or capital markets) and be exposed to the ire of their newly unemployed constituents, the only options are currency devaluation (exports) and even recorder debt, which makes the original problem even worse.

Oh, and next time Deutsche Bank laments that “capitalism is in a crisis“, please first read the bolded sentence above.

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A few years ago we asked why anyone would exclude litigation charges from bank EPS. While we are still waiting for someone to explain that to us, we'd like to show an update on just how dilutive to shareholder value these "one-time, non-recurring" litigation charges have been over the past six years.

The top three banks alone have taken $107.7 billion in litigation charges from 2010-2015, with Bank of America head and shoulders above its competition in the race to see just how much legal expense can be incurred before anyone other than Zero Hedge cares.

Chart: Goldman Sachs

Unsurprisingly, Citigroup, JP Morgan, and Bank of America all decided to reward their CEOs for the uncanny ability to erode shareholder value, by giving significant raises in 2015.

Citigroup's Michael Corbat received a 27% raise in 2015, bringing his total compensation to $16.5 million.

JP Morgan gave Jamie Dimon a 35% raise, bringing his total comp to $27 million in 2015.

And for his efforts in helping Bank of America to a stunning $51.6 billion in litigation charges over six years, BAC rewarded Brian Moynihan with a 23% raise in 2015, bringing his total compensation to $16 million.

And so there we have it.

It appears that in order to receive a raise on Wall Street, one of the SMART goals that CEOs receive at the beginning of each year is making sure to add billions in litigation expense and lay off as many lower level employees to offset the charges as possible.

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There really is no difference between the bully and the victim.
-Lady Gaga

 

By all accounts, I was a real smartass as a teenager. 

One favorite and reoccurring smartass remark I remember well is that whenever my parents blamed something on “they” I would inevitably ask, who is they?  The conversations would go something like this.

Mom: “I can’t believe how much we spend on gas.  95 cents a gallon!  Unbelievable.” 

Dad: “Well, you know how they are, they got to make their God-damned money.” 

Mom:  “Yes.  I know.  They just don’t care.  Nothing we can do about it.”

Me:  “Who is they?  And do they make you drive that big yellow 4×4 truck and that Mustang with a 302 V8?” 

Mom:  “Stop being a smart ass.  You know what we mean.”

I never really understood that my parents were behaving like victims.  I just thought that I was a smartass.  However, I now understand that I did adopt some of their victimhood mentality.  Fortunately, not all of my role models as a child played the victim. Somewhere along the line I developed a self-reliance that I believe has allowed me to overcome most of my learned victomhood, and later I developed my sense of gratitude that seems to have enabled me to effectively recognize and overcome the remaining tendencies that still arise in me from time to time. 

Most if not all of this personal growth was unconscious to me as it occurred over the course of about thirty years.  I became aware of it only after frequent observation of the victimhood mentality in others, such as US Foreign Policy, Israeli Foreign Policy, Venezuela’s Presidents, my alcoholic brother, my problem customers, my former business partner, etc.  My desire to understand victimhood behavior recently led me to read a book with a title that would have normally put me off, Real Love and Freedom for the Soul – Eliminating the Chains of Victimhood, by Greg Baer, M.D. 

Here is the description from Amazon:

At the root of all our anger, our feelings of separation from each other, and our problems in relationships is our belief that we have been victimized: we believe we have been hurt, slighted, or treated unfairly in some way. In Real Love and Freedom for the Soul you will learn about this disease of victimhood. As you read Real Love and Freedom for the Soul, you will learn the real reason you often feel angry and resentful toward other people, how you can eliminate the anger that is destroying your individual happiness and your relationships, why businesses often fail, why so many of our children are angry and rebellious, the real cause of racial prejudice in the world, and how you can achieve a level of freedom and peace you never before imagined possible. With Real Love, nothing else matters; without it, nothing else is enough.

 

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In reading this book, I learned that the author was a surgeon for 20 years, not a psychiatrist. His surgical career gave him ample opportunity to observe thousands of actual victims, and many patients just playing the victim.  Subsequent life events seem to have enabled him to then synthesize his observations into a very deep and compelling understanding of victimhood.  Fortunately for the reader, the author is able to clearly communicate this understanding, and his many experiences in addressing victimhood during his second career as a counselor, in this very well written book. 

After reading the book, I am able to better recognize when I and others are playing the victim, and most importantly, I now have more and better tools to effectively address these behaviors in a healthier way, and not just be a smartass. 

Peace,

h_h

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"At the end of the day, negative interest rates are taxes in sheep’s clothing. Few economists would ever claim that raising taxes on households will stimulate spending. So why would they think negative interest rates will?" Those are the shocking words of St.Louis Fed Director of Research Christopher Waller whose brief note today will be required reading for everyone at The Bank of Japan, The ECB and every other central banker on the verge of NIRP…

If you pick up any principles of economics textbook, there will typically be a discussion of taxes and tax incidence. Tax incidence describes who bears the burden of a tax. For example, suppose the government levies a payroll tax on a firm. The burden of the tax may be borne by the firm, the workers or the firm’s customers.

 

How can this be if the firm is responsible for paying the tax? The firm may bear the burden of the tax by accepting lower after-tax profits. However, the firm can pass the tax onto its workers by paying them lower wages or hiring fewer workers. The firm can also pass the tax onto its customers by charging them a higher price for the firm’s output. In general, all parties bear some portion of the tax.

Similarities to Taxes on Banks

This logic also applies to a tax levied on banks. Banks hire inputs (in this case, deposits), which are used to produce output (loans). The bank charges a price for its output (the interest rate on the loan) and pays wages to its inputs (the interest rate on deposits).

 

The spread between the loan rate and the deposit rate determines the profit margin for the firm on a loan (ignoring default costs and other costs for ease of exposition). So any tax imposed on banks will be borne by the bank, the depositors and/or the borrowers. The firm can bear the burden of the tax by accepting lower profits. However, the bank can also pass the tax onto depositors by paying a lower interest rate on deposits and/or pass the tax onto borrowers by charging them a higher interest rate on loans.

 

Negative Interest Rates

This brings us to negative interest rates. Many foreign central banks—such as the European Central Bank, the Bank of Japan and the Swiss National Bank—have implemented negative interest rates on bank reserves as a policy tool to stimulate demand for goods and services. If a bank holds a dollar of reserves, the central bank may take, say, half a cent.

 

The hope is that a negative interest rate will induce firms to lend out the reserves by charging a lower interest rate on loans. In short, “use it or lose it.” More lending would stimulate spending on goods and services, which would lead to higher output and upward pressure on inflation.

 

A Tax on Reserves

But a negative interest rate is just a tax on the banks’ reserves. The tax has to be borne by someone:

• The banks can choose not to pass it on and just have lower after-tax profits. This will depress the share price of banks and weaken their balance sheets by having lower equity values.
• The banks can pass the tax onto depositors by paying a lower interest rate on deposits or charging them fees for holding the deposits. In either case, depositors have less income to spend on goods and services.
• The bank can pass the tax onto borrowers by charging them a higher interest rate on a loan or higher fees for processing the loan. In either case, it is more costly to finance purchases of goods and services by borrowing.

None of this sounds very “stimulative” for consumer spending. But then, no tax ever is.

 

 

 

Negative Interest Rates in Other Countries

What has happened so far in countries that have tried negative interest rates? The figures below provide answers. As seen in the first chart, bank stock prices have definitely taken a hit.

 

After initially continuing their downward trends, interest rates on mortgages have now risen in Germany and Switzerland (the second chart).

 

Banks have been very reluctant to charge negative deposit rates for fear of a backlash from customers (the third chart).

 

At the end of the day, negative interest rates are taxes in sheep’s clothing. Few economists would ever claim that raising taxes on households will stimulate spending. So why would they think negative interest rates will?

With 13 of the world's Developed' nations seeing negative rates at the 2Y maturity…

One has to wonder, if Mr. Waller's research will be the straw that breaks the camel's back of extreme monetary policy. We suspect not of course, but a renewed focus on QE over deeper-NIRP is coming no matter what.

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Submitted by Thad Beversdorf via FirstRebuttal.com,

I’ve been recently tracking the Presidential odds on PaddyPower, an Ireland domiciled online gambling site.  Here are the current odds:

For those not in the world of gambling, you can interpret the odds by saying the first number is the amount of cash you will win given a cash outlay of the second the number.  You can see then that Hillary is a clear favourite.  It requires a $3 cash outlay to win $1 if she takes the Presidency.  A winning bet on Trump, however, brings in $5 for only a $2 cash outlay.  This means people don’t see it as a very probable outcome.

But let me show you why this is almost certainly a true arbitrage scenario.  Have a look at the following chart.

 

So what we have in the above chart are all the states that have had total manufacturing compensation (nominal salaries and wages) declines since 2007 (source: BEA), the last year before the financial crisis which led to the still in play, trickle down economic policies.  Note there are 29 states that have lost manufacturing income (which incidentally continues to decline).

But perhaps more interesting is that of these 29 states, 27 have had primary elections.  Of those 27, 25 voted for Trump outright and 1 state was essentially split with Cruz (i.e. Maine).  Only Kansas bucked this almost perfect predictor and voted heavily for Cruz.  If we look at the 2 remaining negative manufacturing income states that have yet to hold their primaries, namely, NJ and WV, we can conclude that WV will now not go to Hillary, given her attack on coal miners.

So looking at the general election what can we predict?  Well let’s start by looking at the 2012 general election results.

What we find is that of the 29 negative manufacturing income states 19 of them voted democrat in the 2012 general election.  Now to win the general election one needs a total of 270 of the possible 538 electors up for grabs.  In the last election Republicans ended up with 206 electors or 64 short of a win.  Let’s assume it will be very difficult for Hillary to pick up states that went Republican in the last general election.  But there is an extremely high probability that Trump will pick up some of these 19 negative manufacturing income states that voted Democrat in the 2012 election.

If we break it down we find that these 19 states offer up a total of 232 electors.  Now we can pretty much say up front that Trump will take his home away from home (already a swing) state of Florida.  So that’s 29 electors of the 64 needed, meaning Trump at this point only has to take 35 additional electors from these remaining 18 states that have been adamant supporters of his America First policies.  With many of these states already considered ‘swing’ states like Ohio and Pennsylvania having many unions that normally back Democrats now publicly endorsing Trump, there is almost zero probability that Trump doesn’t secure 35 of the remaining 203 electors from these 18 states.

And so if you’re a betting man (or woman) I’d say the 5:2 odds being given by PaddyPower on a Trump Presidency is free money and your arbitrage trade of the day.

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Just as the government did in the lead up to The Scottish Referendum in 2014, it appears David Cameron is already escalating the so-called Project Fear. In a stunning statement of sheer fearmongery, clearly reflecting the establishment's panic at the rise of Brexit votes in the polls, The Telegraph reports UK PM David Cameron warned that Britain will pay a high cost if "we turn our back" on the EU, invoking Sir Winston Churchill and highlighting the battles of Trafalgar, Blenheim, Waterloo and the two World Wars as evidence that Britain cannot pretend to be "immune from the consequences."

As The Daily Mirror reports, David Cameron has pleaded for Britain to stay in the EU to help prevent the Continent being ripped apart by another conflict.

Mr Cameron today highlighted the UK’s role in bringing peace to Europe as he hit the referendum campaign trail – just hours before a rival speech by rival Tory MP Boris Johnson.

 

Introduced by Labour ex-Foreign Secretary David Miliband at the British Museum in London, he said: "Can we be so sure peace and stability on our continent are assured beyond any shadow of doubt? Is that a risk worth taking? "I would never be so rash to make that assumption."

 

Mr Cameron evoked the image of the lines of fallen British soldiers' graves on the continent.

 

He referred to Britain’s role in “pivotal moments in European history: Blenheim, Trafalgar, Waterloo, our country’s heroism in the Great War and, most of all, our lone stand in 1940”.

 

He added: "What happens in our neighbourhood matters to Britain. That was true in 1914, 1940, 1989…. and it is true in 2016."

 

And he recalled how Winston Churchill “argued passionately for Western Europe to come together, to promote free trade and build institutions which would endure so our continent would never again see such bloodshed”.

 

The Prime Minister said many threats to stability still remain – from a "newly belligerent Russia" to the so-called Islamic State and migration crisis.

But he was attacked hours later by Brexit-backing Mr Johnson, who said:

"People should think very hard before they make these kinds of warnings.

 

No, I don't believe that leaving the EU would cause World War Three to break out on the European continent."

And finally, seemingly dampening down the PM's fearmongery rhetoric, the government has made no plans for Brexit – despite David Cameron claiming it could trigger war:

 Mr Cameron's spokesman admitted the government has made no contingency plans for a Leave vote in the June 23 referendum – despite the warning of war.

Perhaps this is why Cameron has gone full scare-tard…

 

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Submitted by Howard Kunstler via Kunstler.com,

For years, it was easy to see the political storm clouds gather over Europe with its fractious coalitions and its ancient babble of conflicts. Marine Le Pen’s Daddy, severe old Jean-Marie, was on the scene in France decades before Donald Trump ascended to glory on the noxious clouds of America’s crapified culture, attended by heavenly hosts of Kardashian angels and the cherub Honey BooBoo.

For all the strains in recent American life, the two-party system had seemed as solid as the granite towers of the Brooklyn Bridge. Not even the estimable Teddy Roosevelt could blow up the system when he tried in 1912 — though his Progressive (“Bull Moose”) Party carried California, Pennsylvania, and Minnesota, and he far out-polled the incumbent Republican President Taft, who garnered a measly 8 electoral votes (Democrat Woodrow Wilson won). Ross Perot made an impact in 1992 — he certainly had a good point about NAFTA and “the giant sucking sound” of jobs draining out of the USA. But his popinjay manner didn’t go over so well, and at the critical moment in the general election he lost his nerve and withdrew, only to foolishly re-enter weeks later. Then there was the Ralph Nader in 2000, whose egoistic crusade arguably put George W. Bush in the White House.

Since then, the country see-sawed between the long tenures of two Deep State errand boys from each major party, putting both parties in such a bad odor that Trump now rises on their mephitic fumes. Which raises the question, of course: what exactly is this Deep State? Answer: A leviathan of symbiotic rackets producing maximum incompetence affecting adversely the majority of citizens. It’s a blood-sucking beast of a hundred-thousand heads draining the USA of its dwindling vitality, lying about its intentions while it advertises the pietistic certainties of the Left and superstitious shibboleths of the Right, leaving a smoking hole in the middle where the practical problems of everyday life used to be worked out by practical means.

The Deep State is also the sum of unintended consequences and diminishing returns of a late-stage, bureaucratic, techno-industrial economy cannibalizing itself to stay alive. One obvious conclusion is that this economy has got to change before there is nothing left to eat, and no political figure on the scene, including Trump and Bernie Sanders, has a plausible vision of where this takes us. Both really just assume that the engine keeps chugging down the track of ever more material wealth that can be distributed differently. The truth is, there will be a lot less material wealth of the kind we’re used to, and a lot less capital representation in the things we call “money.” In fact, the scene at hand today is just a spectacle of the shrewdest and biggest rodents scarfing up the table-scraps of a 200-year-long banquet.

Hillary Clinton, of course, is the Deep State incarnate, which is the real reason so few citizens trust her. Every poor schnook getting shaken down for a $90,000 appendectomy bill looks at Hillary and knows exactly what she represents. Every 25-year-old jobless, couch-surfing millennial carrying fifty-grand in college debt sees the face of the Deep State in her self-satisfied demi-smile. Mainly, she has gulled the diversity pimps — because they are wards of the Deep State — and women, because it’s Mommy’s “turn” to direct the Deep State. Writer, financier, and Deep State rogue operative Jim Rickards keeps insisting that Uncle Joe Biden will end up as the Democratic nominee. (He said so in a Tweet just the other day). You have to wonder what this guy knows. Don’t suppose that Uncle Joe is the knight on a white horse you’ve been waiting for. After all, he’s vice-president of the Deep State.

Voters seem attracted to Trump because he’s so eager to give the finger to the Deep State. It deserves the finger, but it also needs to be carefully disassembled without blowing up what remains of this country. Trump already has a good start on blowing up the Republican Party. Never before have so many party officials dissociated themselves from the (so far) presumptive nominee. I expect to see more extreme measures against Trump to be yet attempted by the party mandarins in the two months before the convention. I doubt you will hear about them before they happen.

In the face of that, Trump’s behavior only gets more childish. His speech after the Indiana primary was a masterpiece of incoherence. Everything that reflected on the magnificence of his victory was “incredible.” Interestingly, that was exactly the right word. He’s tuned in to the national nervous breakdown underway. From time to time, when he’s not speaking emptily about how much he is loved, Trump voices some legitimate concern of the Deep State’s victims. There are few decent jobs outside the Deep State’s own rackets. We’re not obliged to take in a limitless stream of immigrants. Nation-building by military means has been a dismal failure. The national debt is a problem. The country’s infrastructure is decrepit. Trump says he can negotiate a fix to all this: the art of the deal. Blowing smoke up the Deep State’s ass is not a plan.

The tragedy is that no other serious, grown-up figures stepped forward in this dangerous moment of history. The party that Trump purports to represent lost itself in wilderness of grift, jingoism, and supernatural pettifoggery. The rival Democratic Party is high on the fumes of “diversity and inclusion,” kindergarten politics that only corrode what’s left of our tattered common culture. Hillary’s Deep State couldn’t have found a better diversionary subterfuge. Both parties are close to blowing up altogether. I’m not convinced that they’ll survive their own conventionas this summer. Then what?

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