“Is Trump To Blame For The Crisis Of American Democracy?” – Watch Today’s Munk Debate

Is Donald Trump precipitating a crisis of American democracy?

For some the answer is an emphatic “yes”. Trump’s disregard for the institutions and political norms of U.S. democracy is imperiling the Republic. The sooner his presidency collapses the sooner the healing can begin and the ship of state righted.

For others Trump is not the villain in this drama. Rather, his young presidency is the conduit, not the cause, of Americans’ deep-seated anger towards a privileged and self-dealing Washington elite. Trump’s disruption of politics as usual is what America needs to start the process of restoring democracy by the people, for the people.

Is Trump the cause or the symptom: that is the topic of today’s semi-annual Munk Debates, which start at 7pm ET in Toronto, and where arguing for the resolution will be senior fellow at the Brookings Institution and syndicated columnist with The Washington Post, E.J. Dionne, Jr. He will be joined by Andrew Sullivan, New York magazine editor and blogger.

Speaking against the resolution will be former Speaker of the United States House of Representatives, Newt Gingrich as well as Kimberley Strassel, senior editorial writer and member of the editorial board for the Wall Street Journal.

Rudyard Griffiths, director and moderator of the Munk Debates, says: “The future and fate of American democracy concerns everyone. This debate promises to bring into sharp contrast the critical issues driving a tumultuous moment in American politics.”

The Autumn 2017 Munk Debate will move the motion: be it resolved, American democracy is in its worst crisis in a generation and Donald J. Trump is to blame

The Munk Debates are Canada’s preeminent forum for leading thinkers to discuss the pressing issues of our time. Two debates are held each year in Toronto, one in the spring and one in the autumn. Previous Munk Debate participants include former British prime minister Tony Blair, Henry Kissinger, Christopher Hitchens, Samantha Power, Paul Krugman, Fareed Zakaria, Dambisa Moyo, Mia Farrow, Malcolm Gladwell, Nigel Farage, Simon Schama, Louse Arbour and Glenn Greenwald.

Watch the debate live below (link).

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What Americans (And Canadians) Should Know About The Mexican Security Crisis

Authored by Will Ellis via Free Market Shooter blog,

Saying the situation in Mexico is bad is a gross understatement.

Since the marine-lead capture of notorious drug lord Joaquin “El Chapo” Guzman in Sinaloa back in 2016 and his subsequent extradition to the US in 2017, drug-related violence has skyrocketed in his native land.

Multiple cartels have risen up to take El Chapo’s place, and the casualties have been out of control. In the first two quarters of 2017 alone, more than 12,500 people have met their demise, either at the hands of the cartels or while caught in their cross-fire. That’s at least 2,000 dead on a monthly basis.

El Chapo’s absence sparked this violence in a number of ways, not least of which is the rivalry among cartels gunning for the number one spot. Everyone wants to be the grande queso of the region. The Sinaloa cartel is the most profitable cartel in Mexico and, as Mel Brooks once said, “It’s good to be the king.”

Consequently, there is a severe Mexican standoff of sorts going on between three groups including Guzman’s past associates and the ruthless former-soldados of the Beltran Levya Cartel and the Jalisco New Generation Cartel.

As anyone who’s ever watched The Sopranos can probably tell, there is rarely an agreeable plan in place for the changing of the guard when it comes to violent organized crime organizations. The Sinaloa Cartel is hardly an exception to that rule.

The part that should alarm Americans the most is the glut of influence that El Chapo and his clan amassed near the end of his reign. At the time of his recapture (El Chapo was originally captured in 1993 but allegedly escaped from prison in a laundry basket), Guzman had taken control of the vast majority of trafficking routes leading into the US.

With all of these factions fighting for control of this multi-billion dollar empire, the violence is only escalating. And it’s going to get worse now that the old cartels El Chapo had undermined are rising back up to reclaim their stronghold.

Members of the Zeta cartel

The scariest part of all is how vicious they have become. Like feral animals cornered, they are striking back with ferocity against any and all that stand in their way, whether it is rival criminals or government security personnel. And as they have proven time and again, they’re not afraid to kill their own.

A simple Google search for “chainsaw execution” returns a long number of horrific videos. Traitors or even suspected traitors end up in ditches alongside adversaries across Mexico City and beyond.

And as with the Islamic terror movement, the splintering is becoming great with more and more criminal organizations fragmenting into independent groups, and the in-fighting is intensifying.

While all of this began to transpire, new kids on the block entered the picture, looking for their piece of the proverbial pie. JNG (Jalisco New Generation) was founded in 2009 by Nemesio Oseguera Cervantes. Cervantes isn’t battling windmills as his last name would suggest, but he’s every bit as much of a menace to the Simaloa Cartel as his first name would.

JNG fronts as if they’re a nationalistic group, even going so far as to try and curry favor with the Mexican government, but they have proven themselves to be every bit as barbaric as the other animals looking to replace El Chapo.

How barbaric? Well, how barbaric is cannibalism? That’s right, JNG force their initiates to dine on the flesh of their victims. Fitting when one considers that members of Jalisco New Generation boast nicknames like “The Vulture.”

They are said to be more brutal than the notoriously brutal Los Zetas, which is really saying something. After all, the leader of the Zetas chopped up a six-year old girl with an axe.

For those familiar with Mexico’s past, this will probably seem like history repeating itself. Which it is. Every time the Mexican government has taken down a big-time drug trafficker, it has resulted in severe bedlam with every blood-lusting drug pusher looking to take the last guy’s throne.

If you remember the US takedown of Pablo Escobar, you probably remember the subsequent splintering of the Colombian drug trade. The current situation is not much different. Except for one vital factor that hasn’t been addressed nearly as much as it should be.

Mexico’s street war is being fought with guns from other countries. Between 2009 and 2014 alone, US guns in excess of 73,000 were seized by the Mexican government. Powerful, off the shelf semi-automatic rifles like the AR-15 are being legally purchased in US border states and are then smuggled into the country, owing to their relatively low cost and lax gun laws in some border states.

Even as legislation is passed in the United States to limit or restrict the availability of firearms, another ongoing conundrum is rearing its ugly head. That is the transportation of unfinished gun parts into Mexico from the US. Taking advantage of a loophole in the US Gun Control Act, members of these sinister cartels are able to purchase all of the components of these rifles and move them into the country for the purpose of firearm assembly.

It’s a move that is ramping up the illegal gun trade and fueling the neverending battle for power among organized crime members.

But the US is not the real problem here. The mainstream media would have us believe that 90% of the firearms used to commit crimes in Mexico come from America when, in actuality, the real figure is closer to 16%.

The real problem is both a local one and a global one. On the local front, Mexicans are severely limited when it comes to legally obtaining weapons on their home turf. Since there are no private sector gun stores in Mexico, citizens must purchase them through the Defense Department’s Arms and Ammunition Marketing Division (UCAM).

The UCAM puts fastidious restrictions on certain calibers, and the laws are quite strict with the average citizen having to get government approval before they can obtain one. As a result, illegal gun sales have gone through the roof, not only among members of organized crime syndicates, but among the wealthier individuals who reside in Mexico, individuals who are dissatisfied with the lack of desired calibers.

Mexico’s booming black market sees rocket launchers coming from places like Spain and AK-47s coming from China. China has become one of the most common suppliers of military grade weapons in the region. These include fully automatic assault rifles and hand grenades.

Hezbollah and Russian organized crime groups have gotten in on the action, supplying firearms to groups in the region such as FARC. Guns are also smuggled in from South America.

Israeli Galil machine guns and European shotguns are among the other hot sellers. In addition to recent evidence suggesting that many among the cartels are doing business with an Israeli dealer or dealers, past trade in Latin America points to Belgium, the Czech Republic and Germany being involved in legal export of small arms and light weapons as well.

Many weapons, such as M60 machine gun and 40 mm grenades, arrive from the military arsenal of Guatemala (which the US government sold and/or furnished to the nation). El Chapo had quite the arsenal in his hideout before his capture; among the items on hand were a Soviet RPG, what appeared to be South Korean hand grenades, and a Barrett M82 .50BMG rifle from the Obama administration’s “Fast and Furious” program.

Weapons recovered from El Chapo’s hideout, including a Barrett M82 .50BMG provided from “Operation Fast and Furious”

Since El Chapo’s departure, things have only ramped up with exported weapons coming in from Italy, Turkey and beyond. Back in 2005, it was reported that the barbaric street gang MS-13 had most likely accrued around 100 M72 Light Antitank Weapons (LAWs) from Honduras and had passed them along to the cartels as a good faith gesture.

These are iron clad facts that aren’t often documented in mainstream news coverage, nor are they acknowledged by people like Attorney General Eric Holder and the Obama administration, who started the whole “ninety percent” myth in an effort to push stricter gun legislation in the US.

What’s even more incredible is how this yarn that Holder and company spun was used to justify the Fast and Furious debacle, a grossly failed operation by the Arizona Field Office of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) which deliberately allowed licensed firearms dealers to sell guns to illegal straw buyers in a botched attempt at tracing them to Mexican cartels.

Ultimately, this operation enabled El Chapo to build up his arsenal, an arsenal he used to attack Border Patrol and Mexican government officials before his recapture. It’s a sad, ugly fact that the weapons that are supposed to be used against the narcos end up being used by the narcos. But it’s an even sadder and uglier fact that the mainstream news would have the general public believe that the US is chiefly responsible for the glut of firearms making their way into Mexico City and other cartel strongholds.

Despite this day-to-day tug of war between various factions of the cartels, the drug trade has continued to thrive with exports to the US reaching grandiose proportions.

Every action has its consequence and the consequence of the growing number of International drug sales is more and more bloodshed. The carnage is now spilling over into other regions of the country including areas that were previously hot spots for tourists.

Places that used to be virtually drug-free are now infested with criminal activity. Acapulco, once a beach resort town, is now the murder capital of Mexico with the casualty rate reaching record highs. American tourists have even found themselves among the victims of the violence in places like Cancun.

But it’s not just America that should be concerned about the Mexican drug war. Canadians should also be alarmed about the trouble that’s facing us all. The Mexican conflict started to spill over into Canada in 2009, posing a substantial security problem, and influenced a rash of British Colombia gang murders.

As far back as 2013, the Mexican cartels were taking the lives of eager Canadian mobsters who visited places like Puerto Vallarta and Mazatlan. At least one Canadian mobster was shot in broad daylight in a Mexican Starbucks.

As evidenced by a March 2017 article in the Huffington Post, written by a Mexican doctoral student at the University of Toronto, officials from Ottawa and Mexico City can no longer depend on American leadership to bridge the gap between Canada and Mexico. Nor can Canada rely on America to set an example in terms of on-going cooperation between our countries.

For the Citizens of the NRA, the situation is no better. In August, the US State Department released updated travel warnings encompassing 23 of Mexico’s 31 states, many of them meccas for tourism.

Fortunately, some of us are stamping out the second front that our country represents to the Simaloa Cartel by keeping it green.

Legal weed is starting to seriously steal the thunder from the Mexican drug trade. While the cocaine trade may still be booming, the pot game is plummeting. As of March of 2016, Southwest border seizures of marijuana had dropped to around 1.5 million lbs compared to almost 4 million lbs in 2009.

Still, change needs to come and we all need to wise up about what we’re actually dealing with. Before you get lost in a cloud of smoke, remember the importance of protecting our borders.

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Swiss Flush $3 Million In Gold And Silver Down The Drain Every Year

When it comes to flushing valuables down the toilet, the Swiss are hardly “Austrians”, and appear to be equity-opportunity dumpers, whether it is fiat or hard money.

Last month we reported that Switzerland was gripped in a mystery, after it was discovered that someone tried to flush $120,000 in €500 bills down the toilet in a bathroom close to a UBS bank vault as well as three nearby restaurants, which in turn clogged the local toilets requiring thousands of francs in plumbing repairs to unclog the pipes.

However, it’s not just paper currency that gets flushed down the toilet in the world’s wealthiest nation, and as it turns out Switzerland’s waste water is far more precious than it smells.

According to Reuters, last year researchers from the National Eawag Water Research Institute detected 3 tonnes of silver and 43 kg of gold in sludge extracted from the country’s waste water treatment plants, totalling roughly 3 million Swiss francs, or just over $3.1 million. However, unlike the cash flushing mystery, the source of the golden effluent is far less exciting: the government study said the tiny particles were likely to be mostly from the watchmaking, pharmaceuticals and chemical industries, which use the metals in their products and processes.

Which makes sense: Switzerland is one of Europe’s biggest commodity trading hubs, as well as one of the world’s biggest gold-processing countries. Government statistics show gold accounted for more than a quarter of all exports in 2016, when Switzerland sold 298 billion francs worth of goods abroad.

“You hear stories about an angry man or woman throwing jewelry down the toilet, but we didn’t find any rings, unfortunately,” report author Bas Vriens said on Thursday. “The levels of gold or silver were very small, in the micrograms, or even nanograms, but when you add them up it’s pretty substantial.”

Higher levels of gold were found in the western Swiss region of Jura, believed to be linked to watchmakers that use the precious metal to decorate their expensive timepieces.

 

There was also a higher concentration in the southern canton of Ticino due to the gold refineries in the area. This was the only region where it might make sense to recover the metals, Vriens said.

 

Other trace elements including rare metals such as gadolinium – used in medical imaging – were also found by the scientists from the government’s institute of aquatic science and technology

So should the government go prospecting for the millions in discarded gold and silver particles floating around among the feces? While researchers have been studying whether it is worthwhile to extract the metals that end up in the sludge before usually being burnt, so far it has not found to be cost effective.

Well, there may be an exception: “In some places in the Ticino region, the gold concentration in the sludge is so high that it might be worth recycling it,” the Eawag institute said in a statement. We just hope whoever is tasked with this delightful job gets paid enough.

As for the rest of the population, which suddenly has the urge to filter the tap water in pursuit of untold riches, the report author had some bad news: the Swiss metal concentrations complied with regulations and were removed before humans drank the water again. “It wouldn’t make sense for people to boil their tap water to recover gold or silver because it has already been filtered out before it re-enters the drinking water supply,” Vriens said.

As for the original cash flushing mystery, while preliminary clues from an investigation suggest that the cash “dump” once belonged to unnamed “Spanish women who had placed the loot in a Geneva vault several years ago.”

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Multiple People Shot After Gunman Opens Fire In Central Trelleborg, Sweden

A gunman opened fire at a market in the town of Trelleborg, Sweden, injuring at least four people, Sweden's Aftonbladet reports. Local media reported that at least four people had been taken to hospital. Some reports suggested that up to seven people might have been seriously injured across several locations.

A police spokesman confirmed to Express that police were investigating reports of a shooting, and that an area around the crime scene has been temporarily closed. At 22:30, the police received several calls about a suspected shooting in central Trelleborg, which has a population of about 40,000, according to local media reports.

"We have received several reports of a shooting in Trelleborg. We were quickly on the spot and found that, within a fairly limited area, we find more people with suspected shot injury. We are blocking certain areas and will conduct an investigation. I do not have any more information at this time. But we are at the scene and investigating."

Police said several people were injured at different locations. The police spokesman, Fredrik Bratt, added that multiple victims suffered “suspected gunshot” wounds and that "a major operation was underway."

“There were many shots. We saw someone running outside,” an eyewitness told the Swedish publication Expressen.

“I was at home at the computer when I heard a loud bang,” Aron Tydén – another person in the area – told the publication, claiming that he heard people running.

Police have cordoned off the area, allowing ambulances through. The victims were reportedly rushed to hospitals in Malmö and Lund. Forensics team and a canine unit have also been dispatched to the scene of the incident.

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Capital Hill’s Personal Pharmacist Admits Alzheimer Drugs Are Being Delivered To Members Of Congress

Authored by Joseph Jankowski via PlanetFreeWill.com,

When it comes time to place your support behind a public representative who will have power in the legislative chambers of Congress, it is safe to say that most people would like to place their support behind an individual who is clear-headed, cognitively healthy, and can withstand the physical necessities needed to fulfill the travel and long work day commitments of a congressman. A healthy democracy surely needs a healthy body of representatives, right?

It turns out that those who represent the public on Capitol Hill are not the most healthy individuals as on any given day hundreds of big pharma drugs are delivered to members of the legislative body, with some drugs being delivered to treat serious illnesses such as Alzheimer’s disease.

STAT News reports:

Nearly every day for at least two decades pharmaceutical drugs have been brought by the carload to the Capitol – an arrangement so under the radar that even pharmacy lobbyists who regularly pitch Congress on their industry aren’t aware of it.

 

The deliveries arrive at the secretive Office of the Attending Physician, an elaborate medical clinic where Navy doctors triage medical emergencies and provide basic health care for lawmakers who pay an annual fee of just over $600. Every one comes from Washington’s oldest community pharmacy, Grubb’s.

 

Mike Kim, the reserved pharmacist-turned-owner of the pharmacy, said he has gotten used to knowing the most sensitive details about some of the most famous people in Washington.

 

“At first it’s cool, and then you realize, I’m filling some drugs that are for some pretty serious health problems as well. And these are the people that are running the country,” Kim said, listing treatments for conditions like diabetes and Alzheimer’s.

 

“It makes you kind of sit back and say, ‘Wow, they’re making the highest laws of the land and they might not even remember what happened yesterday.’”

According to Grubb’s Pharmacy’s Mike Kim, during the busiest time of the year for Congress, his business will deliver carloads of hundreds of prescription drugs to Office of the Attending Physician, providing a service that allows the representatives to bypass normal drug fulfillment procedures.

“The Capitol kind of takes somewhat of a precedence just because of who we’re servicing,” Kim told STAT News.

 

“The member might be calling to say, ‘Hey, I’m about to leave in five minutes, where’s my drug? So [the clinicians at the Capitol] get into panic mode as well. I wouldn’t say they’ve ever gotten frustrated with us, but it’s more of a concern like, ‘Oh my gosh, the member just called us, we need to know where the drug is.’”

The Office of the Attending Physician was formed in 1928, after three members of Congress died in their offices within months of one another, long before Grubb’s Pharmacy serviced the office with pharmaceuticals. While it isn’t totally clear how many drugs the OAP keeps on hand, a former Navy physician who spent several years working for OAP says the office is well stocked with drugs.

“We provided some pretty comprehensive service, to keep the members doing their jobs so they didn’t have to go look for a doctor,” former OAP employee Dr. Lee Mandel told STAT.

 

“As far as all medications, I don’t know — maybe the more exotic ones we didn’t — but probably we did stock [most drugs] on their behalf.”

The idea that some members of Congress are taking medication to treat a very serious illness such as Alzheimer’s disease should ring alarm bells across the country as the illness itself and the pharmaceuticals that treat it can have very damaging effects on a person.

On top of the cognitive degenerative symptoms of Alzheimer’s disease, a suffer who is taking – for example – the FDA approved Alzheimer treatment medication Aricept, side effects ranging from chronic trouble sleeping to aggressive behavior may also occur. Other side effects of Aricept are altered mental status, brain disease or injury causing inability to communicate, becoming easily angered or annoyed, and mood changes.

Other Alzheimer medications such as Razadyne and Exelon also cause concerning side effects such as depression, hallucination, and dyskinesia.

Very dangerous side effects come with taking most big pharma drugs, and those side effects are leading to hundreds of thousands of death worldwide annually. Because of this, the American people should be highly concerned with the mental and physical state of their public representatives in Washington as it has now come to light that big pharma drugs are readily available to them.

While it isn’t clear to the public what representative is taking what drug/s, policymakers making an appearance in Grubb’s pharmacy is no longer a star striking moment for the pharmacists because of the frequency.

After 20 years at Grubb’s, Kim himself isn’t nearly so starstruck by the lawmakers. Even when they stop by the shop in-person, he said they’re just like any other customer.

“I still remember John Kerry – it was literally like the day after he lost [the 2004 presidential election], he came in and he was just standing in line with everybody else,” Kim recalled.

 

“I just remember seeing him standing in line and almost feeling sorry for him — one day he’s a superstar, he’s got his entourage and security detail, and the next day he’s just by himself, he’s picking up his prescription.”

Recently, the health of House Minority Leader Nancy Pelosi came under the media’s radar when she was filmed slurring her statements and uttering unintelligible gibberish during a press conference.

Considering the frequent mass delivery of big pharma drugs to Congress, it isn’t a farfetched idea to assume that this type of behavior may be the result of a drug’s side effect.

Pharmaceutical side effects and politics was also in the media spotlight during the recent presidential election when reports of Hillary Clinton’s publicly available medical records exposed how the former presidential candidate and former Secretary of State has been taking the dangerous blood thinner Lovenox since 1998.

The presence of pharmaceutical drugs in the chambers of Capitol Hill is a topic which needs further investigation. If members of Congress are suffering from the dangerous side effects that come with the big pharma provided drugs, it is possible that the public could consider those suffering from the drugs unfit to serve the publics bests interests.

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US Proposes “Sunset Clause” That Would Kill NAFTA After 5 Years

After President Donald Trump said Wednesday that the US would be open to striking bilateral trade agreements with Mexico and Canada if the three neighbors can’t come to an agreement on Nafta, Bloomberg is reporting the administration's negotiators have proposed a “sunset clause” that would see the North American Free Trade Agreement expire after five years unless the parties agree to extend it.

According to Bloomberg’s sources, the proposal was presented to a small group of negotiators, and is the latest sign that the talks – the fourth round of which began Wednesday – remain at an impasse with the self-imposed soft year-end deadline rapidly approaches.  

To be sure, the Trump administration insists that real progress is being made. US Trade Representative Robert Lighthizer kicked off the fourth round of talks on Wednesday by announcing an agreement on a chapter on competition.

Specifically, Lighthizer said the countries have agreed to increase “procedural fairness in competition law enforcement.” Previously, the parties agreed to revise a chapter on small and medium-sized businesses.

Canada and Mexico rejected the idea of a sunset clause after Commerce Secretary Wilbur Ross floated the idea last month, saying they wouldn’t be able to tolerate the uncertainty it would create for businesses seeking to make long-term investments. Besides, Nafta already has an exit provision allowing members to withdraw after giving six months of notice.

Mexico’s ambassador in Washington Geronimo Gutierrez has said a termination clause would erode business confidence in the region, while his Canadian counterpart has said the Trump administration wouldn't be able to drum up the domestic support.

“If every marriage had a five-year sunset clause on it, I think our divorce rate would be a heck of a lot higher,” Canada’s ambassador to Washington David MacNaughton said last month.

 

“We can have that discussion, but I really do think it won’t be Mexico and Canada that are pushing back against the secretary, it will be a lot of Americans.”

Of course, the sunset isn’t the only controversial proposal being pushed by the administration. A US proposal over so-called rules of origin for vehicles that would raise the threshold for how much of a car must be built within the Nafta countries to receive the pact’s benefits to 62.5% currently, while adding a US-specific content component.

Rules of origin will be discussed by negotiators on Friday, Sunday and Monday, Bloomberg reported.

The negotiations are happening against a backdrop of heightened trade tensions between the US and Canada. The US Commerce Department last week imposed an astonishing 300% tariff on Bombardier’s C-Series jets, making it virtually impossible for the Canadian aerospace company to sell its planes in the US, and potentially scuttling a deal with Delta Air Lines worth $5 billion. In response, Trudeau, who visited the White House on Wednesday, suspended purchases of equipment manufactured by Boeing until the company drops a complaint against Bombardier that led to the tariff.

While experts maintain that there’s no connection between the Bombardier tariffs and Nafta, it’s difficult to imagine how the trade dispute wouldn’t cast a pall over the negotiations – particularly since officials in both the US and UK worry that the sanctions could drive Bombardier, which has struggled to close deals in recent years, to financial ruin.

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Bogle, Buffett, Shiller & Tobin – Valuations Are Expensive

Authored by Lance Roberts via RealInvestmentAdvice.com,

During my morning reading, I ran across a couple of very interesting articles that tied a common theme relating to the current risks in the financial markets.

Via Zerohedge:

88-year-old investing icon John “Jack” Bogle, founder of the Vanguard Group, said:

“The valuations of stocks are, by my standards, rather high, but my standards, however, are high.

 

When considering stock valuations, Bogle’s method differs from Wall Street’s. For his price-to-earnings multiple, Bogle uses the past 12 months of reported earnings by corporations, GAAP earnings, which include ‘all of the bad stuff,’ to get a multiple of about 25 or 26 times earnings.

 

‘Wall Street will have none of that. They look ahead to the earnings for the next 12 months and we don’t really know what they are so it’s a little gamble.’

 

He also noted that Wall Street analysts look at operating earnings, ‘earnings without all that bad stuff,’ and come up with a price-to-earnings multiple of something in the range of 17 or 18.

 

‘If you believe the way we look at it, much more realistically I think, the P/E is relatively high,’

 

‘I believe strongly that [investors] should be realizing valuations are fairly full, and if they are nervous they could easily sell off a portion of their stocks.'”

This, of course, from the father of “buy and hold” investing with whom millions of Americans have pumped roughly $4.7 Trillion into a whole smörgåsbord of indexed based ETF’s provided by Vanguard to meet investor appetites.

Think about that for a moment while you read the following snippet from Bloomberg:

“A buoyant and complacent stock market is worrying Richard H. Thaler, the University of Chicago professor who this week won the Nobel Prize in economics.

 

‘We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping. I admit to not understanding it.

 

I don’t know about you, but I’m nervous, and it seems like when investors are nervous, they’re prone to being spooked. Nothing seems to spook the market, and if the gains are based on tax-reform expectations, surely investors should have lost confidence that tax reform is going to happen.'”

These two points drive to the heart of the recent concerns I have expressed in both how companies continue to use accounting gimmickry to win the beat the estimate game” each quarter and the risk of disappointment surrounding tax reform legislation.

But since markets have continued to advance due to the ongoing flood of liquidity from global Central Banks, no one is really paying attention to such “silly” things. However, while market analysts continue to come up with a variety of rationalizations to justify high valuations, none of them hold up under real scrutiny. The problem is the Central Bank interventions boost asset prices in the short-term, in the long-term, there is an inherently negative impact on economic growth. As such, it leads to the repetitive cycle of monetary policy.

  1. Using monetary policy to drag forward future consumption leaves a larger void in the future that must be continually refilled.
  2. Monetary policy does not create self-sustaining economic growth and therefore requires ever larger amounts of monetary policy to maintain the same level of activity.
  3. The filling of the “gap” between fundamentals and reality leads to consumer contraction and ultimately a recession as economic activity recedes.
  4. Job losses rise, wealth effect diminishes and real wealth is destroyed. 
  5. Middle class shrinks further.
  6. Central banks act to provide more liquidity to offset recessionary drag and restart economic growth by dragging forward future consumption. 
  7. Wash, Rinse, Repeat.

If you don’t believe me, here is the evidence.

The stock market has returned more than 60% since 2007 peak, which is more than three times the growth in corporate sales growth and 30% more than GDP. The all-time highs in the stock market have been driven by the $4.5 trillion increase in the Fed’s balance sheet, hundreds of billions in stock buybacks, PE expansion, and ZIRP.

It is critical to remember the stock market is NOT the economy. The stock market should be reflective of underlying economic growth which drives actual revenue growth. Furthermore, GDP growth and stock returns are not highly correlated. In fact, some analysis suggests that they are negatively correlated and perhaps fairly strongly so (-0.40).

However, in the meantime, the promise of a continued bull market is very enticing as the “fear of missing out” overrides the “fear of loss.”

Valuations Are Expensive

This brings us back to Jack Bogle and the importance of valuations which are often dismissed in the short-term because there is not an immediate impact on price returns. Valuations, by their very nature, are HORRIBLE predictors of 12-month returns should not be used in any strategy that has such a focus. However, in the longer term, valuations are strong predictors of expected returns.

I have adjusted Bogle’s measure of valuations to a 24-month, versus 12-month, measure to smooth out the enormous spike in valuations due to the earnings collapse in 2008. The end valuation result is the same but peaks, and troughs, in valuations are more clearly shown.

At 26.81, Bogle is clearly correct that valuations have reached expensive levels. More importantly, outside of the peak in 1999, stocks are more highly valued today than at any other point in history. (The two points during bear market troughs are excluded as those valuations were due to earnings collapsing faster than prices due to recessionary conditions.)

Bogle’s view is also confirmed by other measures as well. The chart below shows Dr. Robert Shiller’s cyclically adjusted P/E ratio combined with Tobin’s Q-ratio. Again, valuations only appear cheap when compared to the peak in 2000. Outside of that exception, the financial markets are now more expensive than at any other single point in history.

I have also previously modified Shiller’s CAPE to make it more sensitive to current market dynamics.

“The need to smooth earnings volatility is necessary to get a better understanding of what the underlying trend of valuations actually is. For investor’s, periods of ‘valuation expansion’ are where the bulk of the gains in the financial markets have been made over the last 116 years. History shows, that during periods of ‘valuation compression’ returns are more muted and volatile.

Therefore, in order to compensate for the potential ‘duration mismatch’ of a faster moving market environment, I recalculated the CAPE ratio using a 5-year average as shown in the chart below.”

To get a better understanding of where valuations are currently relative to past history, we can look at the deviation between current valuation levels and the long-term average going back to 1900.

With a 63.62% deviation from the long-term mean, a reversion will be quite damaging to investors when it occurs. As you will notice, reversions have NEVER resulted in a “sideways” consolidation but rather much more serious, and sharp, declines. These rapid “maulings” of investors is why declines are aptly named “bear markets.” 

Lastly, even Warren Buffett’s favorite valuation measure is screaming valuation issues. The following measure is the price of the Wilshire 5000 market capitalization level divided by GDP. Again, as noted above, asset prices should be reflective of underlying economic growth rather than the “irrational exuberance” of investors.

Of course, it’s Buffett’s own axiom that best sums up all of the famous valuation measures noted above.

“Price is what you pay, valuation is what you get.” 

Maybe Not Today

Bogle, Buffett, Shiller, and Tobin are right about valuations.

Maybe not today.

Next month.

Or even next year.

But as Vitaliy Katsenelson just recently penned:

Our goal is to win a war, and to do that we may need to lose a few battles in the interim.

 

Yes, we want to make money, but it is even more important not to lose it. If the market continues to mount even higher, we will likely lag behind. The stocks we own will become fully valued, and we’ll sell them. If our cash balances continue to rise, then they will. We are not going to sacrifice our standards and thus let our portfolio be a byproduct of forced or irrational decisions.

 

We are willing to lose a few battles, but those losses will be necessary to win the war. Timing the market is an impossible endeavor. We don’t know anyone who has done it successfully on a consistent and repeated basis. In the short run, stock market movements are completely random – as random as you’re trying to guess the next card at the blackjack table.”

With that point, I clearly agree.

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Kmele Foster Gets Shouted Down by Black Lives Matter Activists After Pointing out That MLK Used Free Speech Protections—Wait, What?

You go to hell, Kmele Foster! ||| The Daily TargumSo the “Unsafe Space” campus speaking tour sponsored by Spiked (and hosted at least once so far in an emergency backup way by Reason) continues to generate interesting collisions between libertarian commentators and the angry campus progressives who seek to shout them down. One recent incident, while not coming close to a Berkeley-style riot, or a “Cocks Not Glocks” dildo-waving protest of gun-right speaker Katie Pavlich, or even the latest Charles Murray kerfuffle, nonetheless caught my attention because it involved old pal Kmele Foster, and my favorite piece of writing by Martin Luther King.

Foster (see video below) had just sat through a series of emotional audience harangues defending identity politics and speech-sensitivity as necessary pushbacks against a racist power structure, when he attempted to make a case familiar to Reason readers—that free-speech protections are crucial precisely for minority populations’ struggles against the majority:

For so many years in this country, and I’m pointing to the 1960s in particular, speech protections were used by minority groups who were fighting for civil rights, and it was essential for them to be able to secure those rights, in order to advocate. The reason why Martin Luther King, for example, wrote his Letter from a Birmingham Jail from a Birmingham jail was because he was imprisoned for effectively violating speech codes—handing out flyers in the wrong spot, all of these various things. I think this is something that we don’t necessarily understand.

It was at that precise moment—the whole speech-codes-hurt-comparatively-powerless-black-people moment—when activists started shouting “Black lives matter! Black lives matter! Black lives matter!” as if, uh, there was any suggestion to the contrary? Thus began several minutes of barky audience non-sequiturs such as “WHO controls the facts? WHO controls the facts? It’s the system!” Eventually Foster was able to complete his point. You can read more about it over at Campus Reform (with a corrective follow-up tweet from Kmele) and watch the exchange below:

The incident also came up during our most recent Fifth Column podcast, beginning at around the 7:40 mark:

I had the weird experience of being part of an event that is being protested, where there are police officers, there ‘s a gauntlet of security guards who are checking bags, who are doing all of these things….Within 15 minutes kids are standing on their chairs screaming “Black lives matter!” They are standing up, disrupting the entire event. They ask for questions from the audience—rather than raise your hand and be called, since no one’s hand rushed up right away, and you would have been either first or second, you just wait until we select someone, hand them a mic, and you run up in front of the room and say, “I’m just gonna stop this right here!” […]

At some point we were able to reel it in, and I suspect that my pigment was helpful in allowing me to calm the storm a little bit….I was a little flustered, because there’s something really unsettling about being in a place like that.

You can listen to the whole episode, which covers a lot of free-speech ground, here:

Listen to Kmele Foster interview DeRay McKesson here, and recount a street run-in he had with BLM activists here.

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Rose McGowan Accuses Amazon, Jeff Bezos Of Weinstein Rape Coverup

Less than a week after it first hit, the Harvey Weinstein sexual harassment scandal fallout has spread across multiple Hollywood circles, and moments ago it appears to have dragged in none other than Amazon CEO, and the world’s 2nd richest man, Jeff Bezos.

In a series of tweets on Thursday afternoon, Rose McGowan, one of the at least 20 women who have accused Weinstein of sexual assault, and who was locked out of twitter overnight after attacking Ben Affleck, accused the Batman star of lying about his knowledge of Weinstein’s alleged sexual assaults of women, dragged Jeff Bezos into the Weinstein scandal, tweeting that “I told the head of your studio that HW raped me. Over & over I said it. He said it hadn’t been proven. I said I was the proof.”

McGowan also accused Amazon of winning “a dirty Oscar” by working with accused rapist Harvey Weinstein, despite being warned of accusations against him. Amazon executives, McGowan claimed, did nothing when McGowan warned them about Weinstein. McGowan is one of several women to have settled with Weinstein. “I forcefully begged studio head to do the right thing. I was ignored,” she wrote. “Deal was done. Amazon won a dirty Oscar.”

Her full tweets:

  • I told the head of your studio that HW raped me. Over & over I said it. He said it hadn’t been proven. I said I was the proof.
  • I had already sold a script I wrote to your studio, it was in development. When I heard a Weinstein bailout was in the works
  • I forcefully begged studio head to do the right thing. I was ignored. Deal was done. Amazon won a dirty Oscar.
  • I called my attorney & said I want to get my script back, but before I could, #2 @amazonstudios called to say my show was dead
  • I am calling on you to stop funding rapists, alleged pedos and sexual harassers. I love @amazon but there is rot in Hollywood
  • Be the change you want to see in the world. Stand with truth. #ROSEARMY #Amazon

Here are her tweets (and a snapshot) just in case @Jack decides to suspend her account again.

Separately, earlier on Thursday, twitter provided an explanation for why it had suspended McGowan’s twitter account:

We have been in touch with Ms. McGowan’s team. We want to explain that her account was temporarily locked because one of her Tweets included a private phone number, which violates our Terms of Service.  The Tweet was removed and her account has been unlocked. We will be clearer about these policies and decisions in the future.  Twitter is proud to empower and support the voices on our platform, especially those that speak truth to power. We stand with the brave women and men who use Twitter to share their stories, and will work hard every day to improve our processes to protect those voices.

We now await Bezos’ response.

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Lousiana Cops Boycott Ford Over Support For Kneeling NFL Players

It appears Jamele Hill gave more Americans than she hope an idea when she urged protesters to – 'hit them in the wallet' – but this time it is a Louisiana sheriff's office that is boycotting Ford over the automaker's decision to support NFL players' right to peacefully protest during the national anthem.

As a reminder, earlier in the week NFL Commissioner Roger Goodell flip-flopped from his original anti-Trump stance, issuing a statement that:

"We believe that everyone should stand for the National Anthem…  We also care deeply about our players and respect their opinions and concerns about critical social issues."

But Ford – ever ready to signal its virtue loud and proud – issued a statement that it:

Ford "respects individuals' rights to express their views, even if they are not ones we share. That's part of what makes America great."

That weasly statement appears to have been the last straw for Sheriff Julian Whittington of the Bossier Parish Sheriff's Office said in a letter to the its dealership, Hixson Ford of Alexandria, that it would no longer buy the company's police vehicles.

As AutoNews.com reports, Whittington wrote…

"Ford has been a part of American history, and has stood for American values."

 

"However, the recent events surrounding the NFL, its players and their audacity to thumb their collective noses at the American Flag, the American military as well as their obvious disdain for the profession of law enforcement in general; forces me to take a stand."

 

Whittington said the sheriff's office would not do business with Ford "as long as Ford sides with these who have no regard for the men and women who protect and serve this great nation."

The sheriff's office has roughly 300 vehicles in its fleet, including personal watercraft and a riot tank, according to a spokesman.

"It is my hope that this letter will cause you to encourage Ford Motor Co. to change their advertising choice and cease to support the NFL with advertising dollars until the NFL leadership demands its players show proper respect for our nation's colors," Whittington wrote.

It's unclear whether other Ford dealers had lost business because of boycotts. A Ford spokeswoman did not immediately respond to a request for comment.

Whittington, in his letter, also encouraged other agencies to take a similar stand against Ford.

"We can no longer stand idly by and allow the fabric of this country to be dismantled," he wrote.

The question is – is this a win for Trump (patriotism) or a loss (manufacturing jobs)?

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