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10Y Treasury yields just topped 2.75% for the first time since April 2014, gold is sinking, and stocks are lower as the hawkish Fed statement sparked some modest dollar bids…
Moves are modest for now (aside from in Gold)…
10Y Treasury yields back above 2.75%
And the dollar is bouncing…but is still red on the day.
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Yellen’s last FOMC meeting has come and gone and Morgan Stanley suggested “where’s the snooze button?” in their preview post.
Perhaps the most notable development since the December meeting has been the sharp re-pricing of yields, notably inflation breakevens. The year breakeven is 20 bps higher, and the 5y/5y breakeven is nearly 30 bps higher. As such, an acknowledgement that “market-based measures of inflation compensation have risen” seems likely.
The Fed was hawkish:
The Fed changed the language of its inflation outlook quite notably…
“Inflation on a 12 ‑month basis is expected to move up this year” – no longer “remain somewhat below 2 percent in the near term“
Additionally, The Fed noted the market’s inflation outllok has come their way…
Market-based measures of inflation compensation “have increased in recent months.”
Notably, Wells Fargo’s Chris Harvey and Anna Han pointed out that:
“While many market participants don’t expect a major change in Fed policy with the handoff, we think the improving growth environment and anyone not named Janet Yellen [a policy dove] means more hawkishness, at the margin,” said
The committee could be slightly more hawkish, or inclined to raise rates, with this year’s changes in the voting rotation. The heads of the Cleveland, Richmond, Atlanta and San Francisco Feds rotate on, replacing Chicago, Dallas, Minneapolis and Philadelphia Fed leaders. The Chicago and Minneapolis leaders, Charles Evans and Neel Kashkari, dissented from higher rates in December.
Changes in Fed governors could do the same. Randal Quarles, vice chairman for regulation, joined the committee in October. Nominee Marvin Goodfriend is awaiting confirmation.
* * *
Ahead of today’s FOMC statement, the market was pricing in 2.75 rate hikes (of 25bps each)… and a 93% probability of a March rate-hike.
The March rate-hike odds are now at 99.1% after The FOMC.
Since The Fed hiked rates in December, Gold is up 7.6% outperforming The Dow (+6.8%) and The Dollar and Treasury Bond prices have tumbled…
“Mission Accomplished Janet” – Since Yellen took the reins of The Fed – Feb 3rd 2014 – the S&P is up 61%, gold and the dollar are up around 7%, and bonds down 4%…
However, Janet is leaving The Fed with a big problem… Financial Conditions are collapsing easier and easier despite The Fed’s tightening…
And so, what to expect for the rest of the day? Tough to say – with no press conference…
* * *
Here is Goldman’s Preview of the Redline…
Expected Changes to January FOMC Statement
Information received since the Federal Open Market Committee met in
NovemberDecember indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.Averaging through hurricane-related fluctuations, jobJob gains have been solid, and the unemployment ratedeclined furtherremained low. Household spending hasbeen expanding at a moderate ratestrengthened, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energyhave declined this year andare running below 2 percent. Market-based measures of inflation compensation have risen recently but remain somewhat low; survey-based measures of longer-term inflation expectations are little changed, on balance.Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear
roughlybalanced, but the Committee is monitoring inflation developments closely.In view of realized and expected labor market conditions and inflation, the Committee decided to
raisemaintain the target range for the federal funds ratetoat 1-1/4 to 1‑1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard;
Patrick Harker; Robert S. Kaplan;Loretta J. Mester; Jerome H. Powell;andRandal K. Quarles; and John C. Williams.Voting against the action were Charles L. Evans and Neel Kashkari, who preferred at this meeting to maintain the existing target range for the federal funds rate.
Let’s see how close it comes…
Full FOMC Statement Redline below…
Considerably more hawkish than Goldman’s take.
* * *
And finally, in a humorous nod to her dress-code, The NY Fed’s trading room (otherwise known as The Plunge Protection Team), had their own way of bidding Yellen farewell…
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Over-the-counter medicine frees Americans to treat minor health issues without first consulting an expert. For no ailment is this freedom more of a godsend than a pesky case of the runs. You can grab a box of Imodium A-D (or the store brand of the active ingredient, loperamide), walk to the checkout counter, and pay, all without breathing a word about your messy butt to anyone.
But now the opioid crisis drove regulators into absurd fits of caution. The Food and Drug Administration (FDA) wants to make loperamide less accessible because opioid addicts might abuse it. Some in the health industry argue that you should have to ask a pharmacist and present a government-issued ID to buy the drug, as is currently the case with pseudoephedrine.
In a statement published Tuesday, the FDA announced that it “continues to receive reports of serious heart problems and deaths with much higher than the recommended doses of loperamide, primarily among people who are intentionally misusing or abusing the product.” In response to these reports, the agency wants loperamide manufacturers to limit the number of doses per package to a few days’ worth and to make the bills available only in blister packs rather than bottles.
Loperamide is a very, very mild opioid, and like all opioids, it slows down the muscles that send poop through your pipes. But unlike most other opioids, it’s doesn’t affect other parts of the body unless you take a shit-ton. The maximum therapeutic dose is 16 milligrams in the course of a day; people using it either to get high or to chase away withdrawal symptoms will take more than 100 mg. Doses that high can (but don’t often) cause “adverse cardiac events.”
That’s just a mild inconvenience, you might object, if the changes will protect people’s hearts. But this week’s FDA notice does not say how many people have died or been seriously injured from loperamide overdoses, how many adverse events might be avoided by changing to blister packs, or how much retooling loperamide production facilities will cost manufacturers (and ultimately consumers). These are not small asks. The answer to the first question tells us whether the second two are even worth considering; the second question helps us understand whether the imposition implied by the third is reasonable.
Since the FDA isn’t being forthcoming, how might we determine how many people are abusing loperamide? A good start would be to look at toxicology and mortality data. Here’s the research I found on loperamide abuse published in the last two years:
Let’s assume that the last report is the most comprehensive. So from 2009 and 2015, 2,872 Americans over the age of 12 intentionally misused or abused loperamide—for reasons ranging from attempted suicide to opioid withdrawal—by taking a dosage of at least twice the daily recommended amount, and 17 people died as a result.
Or, we can use the North Carolina number of 21 deaths in which loperamide may have played a role, multiply that number by 50, and divide by the number of years (four) the study covered. That would give us an annual loperamide death toll of 262.5. I think that number is laughably wrong, but if we’re going to say that it demands a policy response of either changing the packaging of antidiarrheal drugs or making them available only at the discretion of a pharmacist, then we should probably also do something about Tylenol and other products containing acetaminophen: America’s most common pain reliever kills somewhere between 150 and 500 people each year, and annually sends 55,000 to 80,000 people to emergency rooms across the country.
What’s that? You don’t want to pay $10 for a 10-count of blister-packaged Tylenol? Well, you must not care about the acetominophen crisis.
This is not to say that intentional loperamide misuse/abuse is not a trend. Due to the unavailability of drugs that treat opioid withdrawal, coupled with the reduced availability of prescription opioids, it’s almost certainly true that opioid addicts have turned to over-the-counter diarrhea medicine either to get high or to avoid the physical and psychological pain of withdrawal. But the data we have says there is no loperamide crisis, and the sheer amount of loperamide necessary to mimic the effects of even a small amount of heroin suggests that even if we do nothing, there likely never will be.
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In the latest “Mostly Weekly,” Andrew Heaton explains why libertarians should be against the next government shutdown.
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When it comes to Apple, it has become almost apocryphal to suggest that the world’s most valuable company whose (offshore but not for long) cash hoard is bigger than the GDPs of most countries, owes its nearly $1 trillion market cap to anything less than the stellar success of its products, by which we of course mean the iPhone. And yet, as one bank after another has cautioned in recent weeks – Deutsche Bank most recently – Apple’s magic goose may no longer be laying “supercycle” eggs, now that the iPhone X is officially a dud, with Cupertino quietly ordering production to be slashed as much as 50% following a historic gamble: the price of its latest gadget was just too high, leading to a plunge in interest.
Now, as Deutsche observed, Apple’s shares were up 46% in 2017, significantly outperforming the markets. This outperformance came from the iPhone X/8 anticipation trade, with much of this upside coming early in the year as investors got excited about the new iPhone X. The problem is that in light of the mediocre demand for the iPhone X – whether due to price or some other reason – investors clearly got ahead of themselves, and while virtually everyone id HODLing AAPL for now, once Tim Cook is forced to guide down, things may get ugly.
There is another problem, and this goes beyond the company’s business and operational decisions.
As the German bank shows, the other key driver of Apple’s strong performance in 2017 was the overall market’s strong performance. The S&P 500 was up 19% in 2017, while the NASDAQ was up 28%. Apple accounts for 4% of the S&P 500, which means that passive investors need to own a decent-sized portion of Apple shares in order to perform in line with the market.
But the real punchline is ETFs, and specifically how greatly the inflow into passive strategies has boosted Apple’s stock price, for no other reason than simply because retail investors wanted equity exposure via market ETFs!
As seen below, passive funds continue to account for a larger share of mutual funds and ETFs, which means that more funds are buying Apple when the markets go up. In addition to this growth in passive funds, the performance of many active funds is judged based on an index like the S&P 500 or the NASDAQ, which means these funds will try to match these indexes to some extend.
And the punchline: according to German bank’s calculations, it was nothing more than the market’s blistering performance last year, coupled with the stocks’ reliance on ETF flows, that helped drive roughly half of the upside in Apple’s shares in 2017! Or, as Deutsche says: “we believe the fact that markets saw strong performance in 2017 helped drive roughly half of the upside in Apple’s shares in 2017.“
Finally, in addition to the benefit of strong market performance, DB believes that Apple’s shares are also benefiting from the shift to ETFs. Many managed funds have limits on how much they can own of any one stock, which means that some passive funds, even ones that track the markets, can’t hold Apple at its full market weighting.
However, ETFs don’t make this distinction, and ETFs that track certain indexes are fully weighted to the stocks in that index. As seen in the figure below, ETFs now account for 23% of passive investments, up 2ppts Y/Y and up 13ppts over the past 10 years. Given ETFs hold stocks at their market weight, this shift to ETF trading strategies has been a positive for Apple’s shares.
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Authored by Bill Blain via MINT Partners,
“There is no dark side of the moon. As a matter of fact, its all dark… ”
Regular readers will know I have an abiding interest in the stars – half-a-dozen apps on my phones, binoculars and telescopes in the London Bunker and Blain Manor down south. It’s a rational and fascinating topic. However, I am approaching tonight’s Super-Blue-Blood-Moon with some trepidation. I’ve an aunt who is a wiccan priestess, and I often wonder if there is something in mythology linking the affairs of men to the moon. Science has found many cases where lunar cycles influence life. Lunacy abounds around full moons.. Should we be going long pitchforks and torches?
Tonight’s conjunction of Lunar events is rare but predictable – but what if there is something in it? Astrology was a whole science based upon the moon and starts. Lunar eclipses are common, but seldom in conjunction with the Moon’s closest approach to earth and two full Moons in a month. Life on Earth would not exist without the Moon’s gravity driving tectonics and tides. Just saying….
What if the minor wobbles across stock markets this week are driven by some deep-rooted genetic ancestral fear of the skies? Absolute nonsense of course.. but stranger things abound…
Perhaps its better to remember that old stock market truth: there are 27 doors leading on to the floor of the New York Stock Exchange, but only one exit.
Last night I was fortunate enough to attend a Livery Dinner in the city as guest of a marvelous young lady who, in a few years, will become Master of the Worshipful Company of Actuaries. While the Actuaries might not be the oldest of the City Guilds – they embrace all the traditions with gusto! They also tend to be smarter than the average accountant. Despite what you might have heard, there are few good jokes about Actuaries – and they’ve heard them too many times.
Neither are they just statisticians working out mortality rates. Julie is Chief Risk Officer of a major UK institutional Investor – managing and quantifying risk across the book. Talking to other members and guests, it became clear the actuaries realize just how risk vs returns are massively out of synch… time to wonder about valuations in general! However, I was a tad concerned when one risk manager told me his solution was to switch into liquid instruments – Whoa! When/if the solids hit the fan, then the liquidity myth is very quickly exposed!
What about the stock markets? My Stock Watcher Steve Previs thinks Bull Confidence has been bruised, but not broken. The last few sessions are an indication of what might happen – and stock’s parabolic upside was getting a tad weird!
Last two days we’ve seen selling in ETFs triggering blue chip sales – an important issue to consider in terms of indexed plays investing in stocks on a passive basis. And Vix now in the mid-teens has got folk thinking. The oil slide added an element of sector flavour to the micro-crash. Sentiment indicators swung for greed to neutral and now cautious. Meanwhile, the “sell-off” was hardly the End of the World. We’re not even down 2%!
Its more likely this flip down isn’t the end of the Bull Cycle. But caution is advised..
What else to think about this morning? Trump’s State of the Union? It was what is was… Get over it. Yellen? Likely to bless us all with no surprises.
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The number of parallels between the Steinhoff’s “accounting-irregularities” scandal and the collapse of Enron just keep growing.
As the Financial Times reported today, the global retail conglomerate, which is embroiled in one of South Africa’s largest-ever accounting scandals, and even ensnared the ECB which bought Steinhoff bonds only to liquidate them a few months later when the company was downgraded to deep junk, has referred its former chief executive to the police.
Former Steinhoff CEO Markus Jooste
Steinhoff acting chairwoman Heather Sonn told South Africa’s MPs on Wednesday that Markus Jooste – who resigned late last year after the company’s auditor refused to sign off on its 2017 earnings, bringing the accounting “irregularities” to light – has been referred to the Hawks, the country’s elite anti-corruption unit.
“The matter is now in the hands of the Hawks for further investigation and prosecution,” Sonn said, adding that the company acted after finding evidence of transgressions” by Mr Jooste.
Per Bloomberg, Steinhoff still doesn’t know – or at least, has not publicly disclosed – the origin of its faulty accounting practices, and is conducting its probe as quickly as possible, Sonn said.
Sonn is appearing at a hearing called by three parliamentary sub-committees to learn more about the crisis and the company’s investigation. Ex-chairman and biggest shareholder Christo Wiese also gave evidence, the billionaire’s first public outing since the start of the crisis. He described news of the wrongdoing as a “bolt from the blue.”
After the company revealed late last year that years of financial results could potentially be invalidated – and that, at least, it could not guarantee the accuracy of its 2016 and 2017 reports – most of its creditors pulled their funding, creating a liquidity crisis. This has been a major problem for the company’s shareholders and lenders – a group which formerly included the ECB.
The stock of scandal-plagued Steinhoff plunged to near worthlessness in December after news of the scandal broke. The selloff hammered Wiese, the company’s largest shareholder and (formerly) South Africa’s fourth-richest man. During the selloff, Wiese was forced to sell Steinhoff shares and some of his other holdings during a painful margin call.
As we pointed out, Weise was caught in a “margin call death spiral”, where he was forced to liquidate increasingly more assets to meet liabilities following the plunge in value of his Steinhoff holdings: and the more he sold, the more he had to sell.
Meanwhile, the suspicion that some investors may have had foreknowledge of the scandal was raised by a Bloomberg report last year that a unit of Barclays Africa separately applied for liquidation of a company called Mayfair Speculators Pty Ltd., which owns racehorses, property and Steinhoff shares and is linked to former CEO Jooste.
Mayfair is being probed by the bank for moving 1.5 billion rand of assets to its holding company in August ahead of information about Steinhoff’s accounting irregularities being released.
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Reason is now accepting applicants for the Burton C. Gray Memorial Internship program. Interns work 12 weeks in our D.C. office and receive a $7,200 stipend.
Journalism interns have the opportunity to report and write, as well as help with research, proofreading, and other tasks. Previous interns have gone on to work at the The Wall Street Journal, Forbes, ABC News, and Reason itself.
To apply, send your résumé, as many as five writing samples (preferably published clips), and a cover letter by March 1 to intern@reason.com. Please include “Gray Internship Application – Summer” in the subject line.
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Summer internships begin in June; exact dates are flexible.
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Risk-Parity funds have had the worst two days since the election (giving up YTD gains) as bond prices dropped, stock prices dropped, and volatility spiked…
And it’s not just equity market risk, volatility expectations across all asset classes is on the rise…
But, as Dana Lyons details below, relative to the moderate drawdown in the stock market this week, short-term volatility expectations are screaming higher.
Yesterday’s down day (gasp!) in the stock market certainly was nothing extraordinary based on the magnitude of losses. However, given the market’s recent interminable ascent, it did send some interesting shockwaves throughout the markets and various metrics that we track. We mentioned one noteworthy development earlier today in the abundant number of new highs and new lows on the NYSE yesterday. Another interesting reaction was seen in the volatility market.
Volatility indices based on the stock market, e.g., the VIX, generally move opposite stock prices. That is, when stocks rise, volatility expectations typically drop as complacency reigns and when stocks drop, volatility expectations generally rise as fear rises. Typically, a significant jump in volatility requires a relatively deep or sharp decline in stocks. However, the recent stock market climate has been so benign that yesterday’s relatively mild losses seemed to have really spooked volatility traders.
One example can be seen in the short-term, i.e., 9-day, S&P 500 Volatility Index, aka, the VXST, which jumped 42.5% yesterday. That is the 23rd biggest jump in the index since its inception in 2011. The odd thing is that the S&P 500 (SPX) was down “just” 2/3 of a percent.
For context, that is the smallest drop (and only 4th less than 1%) in the SPX of all 26 days that have seen the VXST jump more than 40%. Furthermore, the average drop in the SPX on those days was -2.4% (For those of you who object to using % based measures on volatility instruments, yesterday’s 4.45 point jump was still the 49th largest in VXST history. And historically, the SPX has averaged a loss of more than 2% on days the VXST jumps over 4 points).
Another angle of the relatively large jump in the VXST is seen in its proximity to its 3-month low. Specifically, as of yesterday, it is over 100% above its 3-month low. The odd thing about that is that, historically, on the 160-plus days when the VXST has been more than 100% above its 3-month low, the S&P 500 has been an average of 8.4% below its 52-week high. Yesterday, the SPX closed just 0.67% off of its 52-week high of the day before. That is the only day besides the day before the Brexit scare (6/23/2016) that found the VXST 100% off is 3-month low when the SPX was within 1% of its 52-week high.
From another angle, in today’s Chart Of The Day, we display the proximity of the VXST versus its 3-month low on every day since 2011 when the S&P 500 closed within 1% of its 52-week high. Yesterday’s data point certainly stands out.
So are volatility traders going overboard here bidding up vol expectations given the relatively shallow decline so far? Or are they on to something? After all, the day after the pre-Brexit episode, the SPX did drop over 3.5%. And we are obviously getting some follow-through selling today after yesterday’s developments. The SPX did bounce back quickly after the Brexit affair, though. So who does the current odd spike in volatility expectations favor, the bulls or the bears?
* * *
If you are interested in the Premium version of our charts and research, check out “all-access” service, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!
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GOP adviser Juleanna Glover writes in The New York Times that more and more “disaffected Republicans are wondering whether, if they came up with a truly great candidate, they could jump-start a new party, just as the original Republicans did in the 1850s.”
If they did, they would also be delivering something that a majority of all Americans (and a super-majority of younger voters) say they want: a viable third choice in politics.
A September Gallup poll found 61 percent of American the idea of a third major political party, the highest level of support Gallup had ever recorded. Young voters seem especially eager to junk the two-party system; NBC reported in November that 71 percent of millennials want another choice.
In a world in which Alabama voters elected a Democratic senator, all kinds of previously unimaginable possibilities make a new kind of sense. A third-party presidency in 2020 is no less likely today than the prospect of Donald Trump’s election appeared to be two years ago.
Of we want more choices! We can get any goddamned coffee drink we can dream up at the shittiest convenience store we walk into, we can choose among 50-plus gender identities on Facebook, we can instantly stream virtually any movie or TV show we hanker after. This is the golden age of personalization! Politics and the parts of our world that politics command (such as medical care and K-12 education) are the only places left where monopoly and duopoly rule. As political scientist Morris P. Fiorina notes in Unstable Majorities: Polarization, Party Sorting, and Political Stalemate, the Republicans and Democrats have become ideologically pure with virtually no overlap between them. Republicans are conservatives, which means they are anti-abortion, pro-defense and surveillance, anti-immigration, and yet ostensibly for small government. Democrats are the liberal party: pro-choice on abortion (and nothing else) and in favor of a more-expansive safety net, against gun rights, for heightened business regulations, and ostensibly against war and the surveillance state (as with the Republicans, the operative word here is ostensibly).
Fiorina finds that as the two major parties have moved to the ends of the spectrum, American voters have mostly remained centrist; independents are the single-largest bloc of voters. Most of us are OK with current levels of immigration, for instance, or want more; OK with current abortion laws that give unfettered access for the first trimester and less as a pregnancy develops; are suspicious of war and defense spending; and on and on. But we don’t get to express those beliefs in the choices either party offers up. As a result, says Fiorina, we’re in a new “Era of No-Decision,” like the one that characterized national politics between 1874 and 1894. Not even two decades into the 21st century, we’ve seen as many switches in control of the White House, the House of Representatives, and the Senate as we saw in the last 50 years of the 20th century. Each party starts each national election with about 30 percent of the vote in its pocket and then fights over the 40 percent of voters who are up for grabs.
So yes yes yes to a third choice, if not necessarily the ones the Glover skylarks in the Times:
Ask your neighbor whether the idea of a Joe Biden-Ben Sasse independent ticket is appealing — with Mr. Biden pledging to serve only four years (to address concerns about his age). Jeff Flake or Bob Corker could be a contender.
Another possibility: a business executive with a record of sound leadership, moral authority and a quick wit: the financier David Rubenstein, Ginni Rometty of IBM or Jamie Dimon of JPMorgan Chase, perhaps? How about a centrist Republican governor like Larry Hogan of Maryland, John Kasich of Ohio or Charlie Baker of Massachusetts? And then, of course, there’s Oprah.
None of these people is particularly exciting or interesting because they don’t actually represent anything particularly new or different from what the parties already offer. It took eight years of serving as Barack Obama’s vice-president to transform Joe Biden from a laff riot to an elder statesman and the transformation was never convincing (watch this). John Kasich was in the last Republican primary season and didn’t do particularly well, partly because he represents the worst tendencies of both parties. He’s an unapologetic big spender and social conservative who just signed a ban on abortion after 20 weeks, hates pot legalization, and continues to defend Medicare expansion and Common Core. Even Oprah isn’t buying into her campaign these days; one two-minute speech at an awards show is a slender reed to hang a future on.
More meaningfully, in 2016, the Libertarian Party put together a presidential ticket with as much administrative experience as the GOP and Democratic tickets combined. Johnson/Weld set vote records for the LP but still never made it out of the pits and on to the racetrack itself.
The third-party dream is mostly that, a dream of a savior who will reboot the political machine. In a sense, this is what Trump pulled off in 2016, running less as a Republican and more as an independent who bent the GOP to his base desires. The Republicans have been mostly anti-immigrant for a long time (nativists sank George W. Bush’s original DREAM Act in the mid-aughts) but the Donald added protectionism to the stew, along with a certain winking tolerance for what Ted Cruz denounced as “New York values” (when’s the last time you heard Trump rail against the gays? Or support Jeff Sessions’ new war on pot?). Bernie Sanders pushed Hillary Clinton so hard in the primaries she started face-planting into her getaway cars; more influentially, he’s pushed the Democrats much farther to the progressive left. Like the Roman Empire in Edward Gibbon’s telling, the parties will be torn down from internal strife, not a dashing pirate swinging in to the presidential debates on an sparkly new ideological chandelier.
That’s simply a reality check, though, and not cause for depression. If the Trump presidency proves anything, it’s that the near-future is non-linear and anything is possible (though not predictable). The trick is for the 40 percent of us who decide every election to bend either party to our wills the way that Trump has done with Republicans. Or, as Matt Welch and I wrote in The Declaration of Independents, create ad hoc alliances that coalesce over specific issues and policies rather than fixating on hostile takeovers of the last remaining duopoly in American life.
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