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With a new administration coming into office in 2017, it might be useful to examine what potential policies will be enacted that may have an impact on housing.  The market responded to the election results as if it were a Black Swan event.  Most of the comments preceding the election almost assumed it was a foregone conclusion that Hillary Clinton was going to be the next President.  Clearly that was not the case.  The bond markets had an immediate sizable reaction.  We still don’t have the full details on how things will change but there are some changes planned that may have an impact on housing.  It is hard to see how rental Armageddon changes because of this.  The overall challenges for housing will continue to persist and the Taco Tuesday crowd will continue to imagine that any move is good for housing.  So what does a Trump administration mean for housing?

The impact on deductions

One major benefits of buying a home that is championed by the entire house humping crowd is in regards to the deduction you can take.  In particular, the focus is usually around the mortgage interest deduction.  While this does help, it is usually oversold since the standard deduction is already $12,600 for married couples.  The typical US home is valued at around $189,400:

So assume someone bought the typical home with a 20 percent down payment.  That means they can write off roughly $5,732 in mortgage interest for the first year (well below the standard deduction).  This benefit dwindles as each year passes as more money goes to pay off principal.   The mortgage interest deduction rarely helps the middle class but definitely helps wealthier buyers.  However, the Trump tax plan will cut into this benefit:

 

The tax proposal seeks to raise the standard deduction for married couples up to $30,000 and $15,000 for singles.  Many that are buying in more expensive areas are couples, at least based on sales data.  Even if you buy a $700,000 crap shack with 20 percent down, the annual mortgage interest comes nowhere close to the new standard deduction whereas today, it does make an impact.

If the tax plan takes effect, this will largely negate the mortgage interest benefit in many overpriced metro areas that is usually pitched by housing cheer leaders.  As we noted, the typical US home costs around $200,000 so what you have currently is lower priced states basically subsidizing the mortgage interest deduction for wealthier coastal regions.  That may change.

Mortgage rates

Mortgages rates are reacting to the big change in the bond market recently:

“(WSJ) The ultimate problem is the impact of rising rates on home values,” said Stu Feldstein, president at SMR Research Corp., a mortgage-research firm. “We’re back into a bubble condition in part because of low rates that have enabled people to buy houses much more expensive than their incomes could afford.”

He said his firm expects that by the end of 2017 rising rates will have contributed to home values declining in about one-third of the U.S.”

The market reacted quickly here pushing mortgage interest rates up.  This reaction comes from the expectation of inflation (not necessarily in housing) but also the new administration’s view of the Fed:

September 26, 2016

“(WSJ) Mr. Trump has taken aim at the Fed on several occasions recently, accusing Ms. Yellen of creating a “false economy” by keeping interest rates low to help President Barack Obama.

He also has praised Ms. Yellen, saying just four months ago that he had “great respect” for her and he warned that raising rates “would be a disaster.”

So we’re in a bubble because of low interest rates and raising rates would be a disaster.  A Catch 22.  The markets are reacting assuming that rates are going to rise one way or another.

“(Forbes) More than $1 trillion was wiped off the value of bonds around the world this week as U.S. President-elect Donald Trump’s policies are seen boosting spending and quickening inflation.

“We do view the election of Donald Trump as a game changer,” said Adam Donaldson, head of debt research at Sydney-based Commonwealth Bank of Australia. “The strong bias toward fiscal expansion and inflationary policy represents a stark change to the malaise of recent years. This opens the door for the Fed to hike in December, but also more quickly in 2017 and 2018 than previously expected.”

Much of this reaction is based on big spending plans on infrastructure and tax breaks.  While this can be viewed as good for the overall economy, this actually stops the fuel going into the current housing run, that of low interest rates and a Fed that won’t “rock the boat” – if this election taught us anything is that things are going to get shaken up.

Many comments before the election assumed Clinton was going to win and were saying that nothing would change since the policies would simply be an extension of the Obama administration.  And this was spun as good for inflated housing values.  Yet now, they are spinning higher inflation as good for housing assuming the new incoming administration is highly focused on keeping crap shack values inflated.

What is clear is that you should gear up to expect the unexpected.  And most people expect housing values will only continue to go up.

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Sales and traffic at U.S. brick-and-mortar stores on Thanksgiving Day and Black Friday declined from last year, as Reuters reports that stores offered discounts well beyond the weekend and more customers shopped online.

The National Retail Federation reports that spending per person over Thanksgiving Weekend this year was $289.19, down 3.4% from $299.60 in the same period last year.

Internet sales rose in the double digits on both days, surpassing $3 billion for the first time on Black Friday, according to data released on Saturday.

 

Data from analytics firm RetailNext showed net sales at brick-and-mortar stores fell 5.0% over the two days, while the number of transactions fell 7.9%.

Reuters report that ShopperTrak data highlights the waning importance of Black Friday, which until a few years ago kicked off the holiday shopping season, as more retailers start discounting earlier in the month and opened their doors on Thanksgiving Day.

"We knew it (holiday season) was going to be off to a slow start," Shelley Kohan, vice president of retail consulting at RetailNext, said.

 

"The first couple of weeks with the election were a complete distracter from the normal course of business and…a warmer climate in November may have made the sales more stubborn," she said, adding that she saw sales picking up in December.

 

Net sales on Black Friday slid 10.4 percent for brick-and-mortar chains, according to RetailNext.

 

"Stores that opened on Thursday were not very busy on Black Friday,… and while the Thanksgiving Day opt-outs were busier on Black Friday, they didn't see the crowds they saw in previous years," NPD group's Chief Industry analyst Marshal Cohen said.

It seems everyone is after a deal…

“Over one-third of shoppers said 100 percent of their purchases were on sale,” NRF Chief Executive Officer Matthew Shay said in a statement.

 

 

That increased more than threefold from last year.

While mainstream economists will tout unemployment rates hitting their lowest in eight years in October and hourly wages this year saw their biggest increase since 2009, boosting consumers' confidence and spending; it appears the reality is – once again – that these aggregate data do not reflect reality across a divided America, as Gallup reports overall holiday spending plans have plunged in 2016…

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Submitted by Jeff Deist via The Mises Institute,

Coverage of central banks and monetary policy in popular financial media outlets like Bloomberg, Financial Times, Forbes, Wall Street Journal, and The Economist is almost uniformly bad. The reporting and analysis are superficial, and the writers tend to assume facts not in evidence. The same myths repeat themselves ad nauseam: the Fed's vaunted "independence" must be kept sacrosanct; the obvious and proper purpose of monetary policy is monetary stimulus; Ph.D central bankers hold special technical knowledge which us average folks should not question; and central bank decisions are wholly unpolitical.

These myths are used to prop up trite and superficial conclusions, always with the implication that "everyone knows" X, Y, and Z are true about central banking. But many times those conclusions are not true, or at least not widely agreed upon. And when they are reported as gospel truth, the financial press effectively become cheerleaders for the Fed. While they may call for tinkering with interest rates or replacing one Governor with another, the presumption that central banks are ever and always benevolent goes unchallenged.  

For example, consider this recent article from Bloomberg fretting about "Austrians" taking over the Fed under a Trump administration:

Trump's characterization of the current economy as "false" suggests a sympathy for the Austrian school of economics, in which short-term monetary benefits are believed to come with longer-run costs. The "false" economy fosters asset price bubbles that pop and end in an even deeper recession than would otherwise be the case.

 

A Fed packed with Austrian economists would likely react slowly to a recession and resist extraordinary policies such as quantitative easing. They would also likely attempt to tighten policy soon after the recession ended. They would, in other words, tend toward a liquidationist approach that risks turning the Great Recession into another Great Depression.

I hate to break it to Bloomberg, but thanks to central bankers, liquidation and contraction are in fact the solutions to our economic issues, not problems to be avoided. And the economy is indeed a house of cards, starting at ground zero with the Fed's balance sheet and the Fed Funds Rate. But is the Fed really about to be packed with Austrians? Who knew that Trump's election means the Ivy League economists at the Eccles Building have been busy cramming Mises and Rothbard, or at least looking up Paul Volcker's wikipedia page? 

First of all, there is no indication whatsoever that Donald Trump employs or intends to employ economists who are sympathetic to the Austrian school. Even the appointment of Dr. Judy Shelton to his economic advisory team, which raised eyebrows simply because she advocates some level of gold backing for the US dollar, hardly portends a hard-money Fed. Dr. Shelton may be a breath of fresh air relative to the Greg Mankiws and Glenn Hubbards, but she is also a "King Dollar" Larry Kudlow type who thinks an international monetary system should stabilize currency exchange rates. She is hardly an Austrian. But in the strangely unquestioning world of monetary policy journalism, any suggested deviation from the Fed's current role as a Keynesian stimulus machine is alarming. Any measure towards tighter monetary policy is portrayed as Austrian– even when nominal Fed hawks promoting it plainly are not.

Second, it's hard to imagine what a "real" Austrian could do as Fed Chair or Governor. First and foremost, economics is descriptive rather than prescriptive. But even if a Joe Salerno or a Jeffrey Herbener magically were appointed as Fed board members, the mechanics of the Open Market Committee require manipulation of the monetary base and interest rates. At most, an Austrian at the Fed could serve as an uber-hawk and urge the Committee to mimic a gold standard (as Alan Greenspan once claimed it did) to the extent possible. If there is such thing as an Austrian policy on money, it is this: money is a market commodity, it derives its initial value from some use independent of any exchange value, and the price of borrowing it– interest rates– should be determined by the relative time preferences of borrowers and lenders. That's it. But all of these views are conceptually at odds with central banking altogether, much less as it is practiced today.   

If monetary policy is misunderstood in the West, it is in some part because financial journalist have let us down. The world needs a new kind of financial reporting, one that dispenses with political agendas (Krugman, Sorkin) and resists hosting glorified infomercials for financial markets (Kudlow, Cramer). One that requires journalists to wear out shoe leather and actually talk to people in the financial world. One that hires journalists with actual knowledge of the areas they cover (especially when it comes to money and banking), not just a journalism degree.In fact, the greatest economics journalist of the 20th century– Henry Hazlitt– had no college degree at all.

This is not to say there are not good financial journalists out there. John Tamny (Forbes, RealClearMarkets) is one example of someone who understands various schools of thought and writes in a layman-friendly style. But most are not good, and in fact are wedded to a pro-Fed, pro-state ideology that subconsciously permeates everything they write. They are hopelessly unobjective, the naive products of their education and training The world needs real diversity of thought and opinion, not the fake kind being discussed at the Fed. Such diversity necessarily includes the view that money is something better left to markets altogether, rather than governments and their bankers.

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In what is either Trump’s latest trolling of the already neurotic media, or just his conversion to “conspiracy theorism” much to the delight of Russian propaganda, “fake news”-spotting anonymous groups everywhere, moments ago the President-elect tweeted that he would have won the popular vote if “millions of illegal votes” were discounted. 

“In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally,” Trump wrote on Twitter.

In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally

— Donald J. Trump (@realDonaldTrump) November 27, 2016

The statement, the latest in a series of 12 consecutive tweets provoked by Jill Stein’s campaign for a recount in Wisconsin, Michigan and Pennsylvania may ironically help Stein’s cause should Trump’s tweet be seen as “confirmation” of illegal voting during the presidential election, albeit in the other direction…  although by now the entire narrative is so absurd and surreal, not even Salvador Dali would dare touch it.

Trump – who won the one vote that mattered – also tweeted that he would have won more easily if he had based his campaign strategy on winning the popular vote, instead of visiting states with a larger number of Electoral College votes.

It would have been much easier for me to win the so-called popular vote than the Electoral College in that I would only campaign in 3 or 4–

— Donald J. Trump (@realDonaldTrump) November 27, 2016

states instead of the 15 states that I visited. I would have won even more easily and convincingly (but smaller states are forgotten)!

— Donald J. Trump (@realDonaldTrump) November 27, 2016

Earlier on Sunday, Trump predicted that the recount effort in three states will not change the results of the election.

“Hillary Clinton conceded the election when she called me just prior to the victory speech and after the results were in. Nothing will change,” he tweeted. As reported yesterday morning, Clinton’s campaign announced it would participate in the Wisconsin recount, which is already set to begin this week, despite admitting there is no actual evidence of vote rigging. 

Clinton is currently leading Trump by more than 2 million in the popular vote. Politicians including Bernie Sanders, have called for an examination of using the Electoral College to decide who wins the presidency, rather than the popular vote.

Trump warned during his campaign that the election could be rigged, though election officials scoffed at the claims, noting the country’s use of a decentralized system in which ballots are counted by thousands of Democratic and Republican officials across the country.

In retrospect, it is Hillary who is now taking advantage of recount hopes resulting from an allegely rigged vote, while the latest twist to come from Trump himself is that the vote was indeed rigged with “millions of people who voted illegally” despite Trump’s victory.

The recount push started one week ago after a group of election lawyers and computer scientists claimed the election results in the three states could have been manipulated or hacked by Russians. 

However, there is no evidence of millions of people voting illegally, as Trump suggested on Twitter, an allegation which ironically would benefit Clinton should other states follow suit with similar recount efforts.

In short, a total mess, which probably is bullish for stocks. 

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Submitted by Salil Mehta via Statistical Ideas blog,

President-elect Trump won 306 electoral votes versus Hillary Clinton's 232 (24% less electoral votes).  Similar to 2000, the surrendering party then reversed course and put the nation through a recount, just for the sake of it.  What are the odds that such an exercise here would yield successful for Ms. Clinton?  Based on statistical randomness of re-assessing voter intent, the chance of Hillary emerging as the victor is far less than 10%. 

Anything can happen, but these lean odds do not rise to the level of putting our peaceful democracy into the hands of a temptuous recount scheme every time a stung party loses (let alone misleadingly blame it on something else from Russia's Putin, to sexism, to "in hindsight the popular vote would be reasonable", to FBI Director Comey).  All Americans should instead focus on how the 6 states that flipped this election, were all economically ignored and all flipped to Donald Trump. 

The only viable path for a Hillary Clinton victory at this stage is to astoundingly uncover a wide-spread (across three states) fraud.  And that's equally unlikely, since the basis for the voting aberrations occurred in less populated counties and anyway the three states employ three different voting mechanisms, so the fraud would have had to somehow occur through different transmission vehicles (paper voting, and electronic voting) and we would require a speedy judicial resolution for states such as Pennsylvania that sidestepped back-up recordings from their direct voting equipment.

We should note the following statistical facts about the electoral vote in the three recount states:

• 10 votes, Wisconsin (Trump leads by 0.9 percentage points)
• 20 votes, Pennsylvania (Trump leads by 1.1 percentage points)
• 16 votes, Michigan (Trump leads by 0.2 percentage points)

Given that Mr. Trump won by 74 electoral votes, Ms. Clinton would need to flip all three states noted above, in order to liquidate this deficit (i.e., >74/2 = >37 votes).  The leads described above however, among 4.4 million voters from these three states, is highly statistically significant on a state-level (and certainly when all three states are combined).  It would be remarkably unlikely (>5? event) that we would arbitrarily second-guess every one of these millions of voters' intents and, convert any (certainly let alone all) of these three states.

Hillary must be cognizant of this improbability, and so is piggy-backing off of the second most reasonable recount rationale: not that errors in intent occurred, but rather straight-fraud on such a scale that would flip most of these states.  While tempting for true Democrat supporters, this fraud scenario is of course dubious.  Because for it to work, we would need to suppose that such fraud occurred in three different ways at once:

• Michigan is a paper-ballot state (no electronic voter equipment hacking) so fraud is virtually unlikely to show at all
• Wisconsin does have paper back-ups recorded though the counties that are most heterogeneous, are lesser-populated and not so wildly-off probabilistically
• Pennsylvania has similar issues to Wisconsin, except they haven't recorded all of their votes in an auditable back-up so judicial hurdles must be overcome

The bottom line is everything must go right here, in all three state recounts (between proving fraud and getting mathematical help from wide-spread voter intent errors), in order to better align towards a Donald Trump downfall.  And even if this all occurred, accounting for all of these statistical adjustments, the probability of a Hillary Clinton triumph is still quite low. 

Lower than the odds that comic Nate Silver and all of the other "pollsters" gave to Mr. Trump throughout this election season.  It is these same pollsters and juvenile campaign "scientists" who completely mis-forecasted Ms. Clinton's path, who are now gasping for a recount phenomenon.  This was nicely articulated in a recent Bloomberg article here:

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BASED.

If you thought Trump was going to take it easy on Twitter, after becoming President of the United States, think again. He’s been going apeshit on Twitter over the Jill Stein recount scheme and is now trying to trigger Hillary Clinton and her supporters by suggesting he actually won the popular vote (latest data shows Clinton with a 2 million vote lead in the popular vote), when taking into account all of the illegal voters that participated in the elections — most of which voted for her.

In addition to winning the Electoral College in a landslide, I won the popular vote if you deduct the millions of people who voted illegally

— Donald J. Trump (@realDonaldTrump) November 27, 2016

The whole popular vote narrative the Clinton supporters are pushing is extremely flawed, since the rules of the game dictate an electoral college win. If the contest called for a popular vote win, Trump would’ve spent all of his time in Texas and other red states, ginning up votes for the win. The whole point of the electoral college is to ensure the states have a say in who the next President of the United States will be.

Here are some other tweets that are sure to infuriate the real news reading left.

It would have been much easier for me to win the so-called popular vote than the Electoral College in that I would only campaign in 3 or 4–

— Donald J. Trump (@realDonaldTrump) November 27, 2016

states instead of the 15 states that I visited. I would have won even more easily and convincingly (but smaller states are forgotten)!

— Donald J. Trump (@realDonaldTrump) November 27, 2016

The Democrats, when they incorrectly thought they were going to win, asked that the election night tabulation be accepted. Not so anymore!

— Donald J. Trump (@realDonaldTrump) November 27, 2016

The Green Party scam to fill up their coffers by asking for impossible recounts is now being joined by the badly defeated & demoralized Dems

— Donald J. Trump (@realDonaldTrump) November 27, 2016

Hillary Clinton conceded the election when she called me just prior to the victory speech and after the results were in. Nothing will change

— Donald J. Trump (@realDonaldTrump) November 27, 2016

And here’s Trump going in on Hillary’s hypocrisy.

Lastly, instead of praising the late Fidel Castro as a romantic figure, like the NY Times, Trump coldly tweeted “CASTRO IS DEAD.” OMG

Fidel Castro is dead!

— Donald J. Trump (@realDonaldTrump) November 26, 2016

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While rising treasury yields may be music to the ears of savers who have been crushed by low interest rates over the past 7 years, they’re a bit of downer for the overwhelming majority of Americans that have been funding their lavish lifestyles with cheap debt.  Yes, sadly the days of upgrading to the $65,000 luxury car despite a $40,000 annual salary, because you can “afford it” so long as you can cover the low monthly payments courtesy of 7-year terms and low interest rates, may finally be coming to an end. 

But auto OEM’s aren’t the only ones about to get crushed by the “normalization” of interest rate policies in the U.S.  As the Wall Street Journal points out, according to the Mortgage Bankers Association, mortgage refinancings are set to drop 46% in 2017.  And with many American’s funding their daily expenses with “cash-out” mortgage refi’s, pretty much everyone selling goods to consumers, which happens to represent about two-thirds of the economy, has reason for concern.

The fast rise in rates has spurred homeowners to pull back from refinancing their mortgages. Applications dropped 3% in the week ended Nov. 18 from the prior one, the seventh consecutive weekly decline, and the second since Election Day, according to data released Wednesday by the Mortgage Bankers Association.

 

The MBA estimates refinances will fall 46% next year, to $484 billion, which will hurt Americans’ ability to free up cash by reducing the cost of their monthly mortgages. The fall in refinances also will hit an important area of consumer-loan growth for banks. To slow the possible damage, banks already are pitching riskier loans that come with adjustable interest rates or allow borrowers to pull more equity out of their homes.

 

“The increase in rate has shocked consumers…I didn’t expect it either,” said Dave Norris, chief revenue officer at LoanDepot, the 10th largest mortgage lender in the U.S. by loan volume.

 

This month’s rate increase has eliminated a large share of borrowers for whom refinancing would make financial sense. Before the election, 70% of all borrowers with a 30-year fixed-rate conforming mortgage stood to incur at least a half a percentage point in savings by refinancing. Now only 35% of borrowers are eligible for such savings, said Walter Schmidt, who tracks mortgage-backed securities at FTN Financial.

 

While mortgage applications have risen in recent weeks as people have rushed to lock-in rates, eventually the MBA expects rising rates will take their toll on new mortgage originations as well with estimates calling for a 16% drop in volume in 2017.  Of course, with American’s linking “affordability” solely to monthly mortgage payments, it would stand to reason that rising rates would put pressure on home prices over the coming months/quarters.

The impact on home buying may be less clear-cut, but some buyers have rushed to lock in terms before rates rise further. In the week ended Nov. 18, applications for mortgages to purchase homes jumped 13% from a week earlier and were up 11% from a year ago, the MBA data showed.

 

Eventually, though, rising rates make houses less affordable, and that could lead to slowing sales, price growth and mortgage activity. Some analysts are now projecting home values will decline by the end of next year in many U.S. housing markets.

 

The MBA lowered its projections for next year’s new mortgage loans by 3% last week, to $1.58 trillion. That would represent a 16% drop from the nearly $1.9 trillion in mortgages that lenders are on pace to originate this year, with refinancing accounting for all of the drop.

Meanwhile, as the MBA points out, as refinancings sink, volume levels of the good ole “adjustable-rate mortgage” have surged in recent weeks as lenders/buyers scramble to salvage existing purchase contracts by maintaining monthly mortgage payments despite higher rates.

“Refinance volume dropped further over the week, particularly for refinances of FHA and VA loans. Purchase volume increased sharply for the week compared to both last week, which included the Veteran’s Day holiday, and last year, with purchase volume up more than 11 percent on a year over year basis. The increase in purchase activity was driven by borrowers seeking larger loans and that drove up the average loan amount on home purchase applications to $310 thousand, the highest in the survey, which dates back to 1990.”

 

The refinance share of mortgage activity decreased to 58.2 percent of total applications from 61.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.2 percent of total applications.

As a reminder, on Friday, housing market expert Mark Hanson pointed out something similar when he calcualted that to buyers who are in need of a mortgage, “houses have never been more expensive.”

Houses have NEVER BEEN MORE EXPENSIVE to end-user, mortgage-needing shelter buyers. The recent rate surge crushed what little affordability remained in US housing. It now it requires 45% more income to buy the average-priced house than just four years ago, as incomes have not kept pace it goes without saying.

 

The spike in rates has taken “UNAFFORDABILITY” to such extremes that prices, rates, and/or credit are now radically out of scope.

 

At these interest rate levels house prices are simply not sustainable even in the lower-end price bands, which were far more stable than the middle-to-higher end bands (have been under significant pressure since spring).

 

Hanson then showed the following “bonus chart” revealing in which metro areas the second housing bubble can be found:

 

Should rising rates finally put a lid on demand for real estate, it will be so long to the “Obama recovery” – at least there’s a new regime that can take the blame for the unwind of the largest financial asset bubble in history.

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Via Jesse's Cafe Americain blog,

 "Listening to the leading figures of the Democratic party establishment, however, you’d never know it. Cool contentment is the governing emotion in these circles. What they have in mind for 2016 is what we might call a campaign of militant complacency. They are dissociated from the mood of the nation, and they do not care… What our modernized liberal leaders offer is not confrontation [with corporate corruption] but a kind of therapy for those flattened by the free-market hurricane: they counsel us to accept the inevitability of the situation."

-Thomas Frank

 

"Too many of America's elites-among the super-rich, the CEOs, and many of my colleagues in academia-have abandoned a commitment to social responsibility.  They chase wealth and power, the rest of society be damned."

-Jeffrey Sachs

 

"This elite-generated social control maintains the status quo because the status quo benefits and validates those who created and sit atop it.  People rise to prominence when they parrot the orthodoxy rather than critically analyze it. Intellectual regurgitation is prized over independent thought. Real change in politics or society cannot occur under the orthodoxy because if it did, it would threaten the legitimacy of the professional class and all of the systems that helped them achieve their status.

-Kristine Mattis, The Cult of the Professional Class

The continuing reaction of the liberal elite to the repudiation of the Democratic establishment by their traditional constituencies of the young and working people is a wonder to behold.  They thrash back and forth between a denial of their failure, and disgust at everyone else they can blame for it. cf Paul Krugman, The Populism Perplex.

It could not possibly be because of anything they might have done or failed to do.   And so they are caught in a credibility trap.

It is frustrating because they do not know how to extract themselves from it, admit their errors and reform the system, without undermining the very assumptions that entitle them, in their own minds at least, to rule as the highly honored insiders, the elect of professional accomplishment.  

Mark Blyth, who accurately predicted Brexit and Trump, explains in clear language how globalization and capitalism are failing people throughout the world and why that means more Brexits and Trumps are on the way…

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As previewed earlier today, in the biggest political event on Sunday, the runoff round in the French Republican primary, moments ago the first results have started trickling in, and it is shaping up as a monumental victory for Francois Fillon, who served as French prime minister from 2007-2012, and who according to the provisional count has 69.5% of the primary vote, in a move that may once again prove beneficial for Marine Le Pen as the more moderate, and former favorite, Alain Juppe is now almost certainly eliminated.

• FILLON HAS ABOUT 69.5% OF PRIMARY VOTE, PROVISIONAL COUNT SHOWS
• JUPPE HAS ABOUT 30.5% OF VOTE, PROVISIONAL COUNT SHOWS

The vote’s outcome means that it will be up to Fillon to prevent the collapse of the French establishment, as it will be up to him to prevent Le Pen from winning in next May’s presidential election. It remains to be seen how successful he is in unifying the anti-protest vote.

As a reminder, the 62-year-old racing car enthusiast who lives in a Loire valley chateau, Fillon promises radical reforms to France’s regulation-encumbered economy, vowing to roll back the state and slash government’s bloated costs.

Some policy highlights:

• On foreign policy: Fillon has a positive outlook on Paris’ relations with Moscow. Unlike Juppe, who sees Russia as more of a threat to be contained, the 62-year-old has called Moscow a “crucial partner” for Europe and has supported calls for the lifting of sanctions against Russia.
• Fillon is the author of a book called, “Beating Islamic Totalitarianism,” and advocates a hard line against Islamist terrorism at home. He wants to bar French jihadists from returning to France after fighting in Syria or Iraq by stripping them of their citizenship. Juppe has a somewhat softer approach to terrorism and supports the arrest of jihadists returning from Iraq or Syria. He has also made calls to place suspected Islamist radicals who pose a threat under house arrest
• On the economic front, Fillon advocates tough free-market positions. His economic proposals include cutting 500,000 to 600,000 civil servant jobs and cutting public spending by €110 billion ($117bn). He also wants to raise the retirement age from the current 62 years to 65 years and VAT rates by 3.5 percent. The Republican also advocates for ending the 35-hour work week, allowing unions to negotiate up to 48-hour working weeks.
• On social policy, Fillon, for instance, opposes same-sex partners adopting children. Such a conservative agenda has allowed him to secure votes among anti-gay marriage groups. He also advocates making it harder for children born to foreign surrogate mothers to obtain French citizenship.

In a curious twist, as explained earlier, the now virtually assured win for Fillon could give the highly unpopular current president Francois Hollande a potential “in” to attempt another run at the presidency himself, giving him a target to attack and could convince him to make a bid for a second five-year mandate against the odds. His Prime Minister, Manuel Valls, is also gearing up to stand. The Socialist primaries are due to take place in January.

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