Headlines

Judge strikes down DeVos plan to boost pandemic relief to private schools

Drug makers seek to reassure public about coronavirus vaccine with joint safety

President Trump purges ‘Critical Race Theory’ propaganda from federal agencies

Fmr acting AG: Facebook, Twitter algorithms could be viewed by DOJ as an ‘illegal campaign contribution’

Trump contradicts health officials, says ‘probably’ Covid-19 vaccine in October

The stock market’s shakeout is likely not over yet, even with Friday’s comeback

BLM harasses homeowners and trashes local businesses in Rochester

Oregon gov.: Not deploying National Guard to Portland because they aren’t trained or needed”

Biden: QAnon is ‘bizarre’ and ‘embarrassing,’ supporters should seek mental health treatment

Powell says low interest rates could last for years

President Trump oversees historic Kosovo-Serbia economic deal

Former Turkish PM says Erdogan aggression risks military clash with Greece

STAND UP FOR AMERICA!

Bulls and Bears

Had a conversation with a stock-savvy classmate on Monday. Asked him if he thought our stock markets were hitting record highs because the Wall Street pros thought Trump would win in November? His response was that it was more likely due to the enormous liquidity being pumped into our economy by the Federal Reserve Bank because of Covid. (Money has to be put to work somewhere.)

This is certainly likely ... since we saw this same stock market rise during the Obama administration due to about $10 trillion of liquidity injected during the Fed’s three phases of Quantitative Easing  ... combined with essentially zero interest rates.

Now that we effectively have zero interest rates back again, this is another inflator of stock prices. The prevailing interest rate is what one uses to discount the future corporate earnings stream to establish its stock price ... and forever zero rates thoeortically justify infinite stock prices. Calm down pilgrim ... it’s just theoretically ... we’re living in the real world ... and nothing is forever.

But, somehow I have to believe that if it becomes obvious  the Biden/Harris ticket will be clear winners (and the fake Indian as Treasury Secretary), we would not be hitting new stock market  highs ... more liquidity or not.


STAND UP FOR AMERICA!

Investment Idea

In difficult times, like now, standard investment thinking is to avoid highly-leveraged stocks, like utilities. However, because of our precipitous drop in interest rates, won’t these higher-quality firms be able to roll over some of their debt at lower rates ... meaning higher earnings? Take a look ...

Opportunities

With the yield on our 30-year Treasury bond at a historic low, below 2% ... and likely to go lower, the U.S. has a rare opportunity to refinance its debt coming due into long-term bonds ... a good thing. The result of this would be much less pressure from interest payments in the years ahead.

And, like we did after World War II, if our Federal Reserve Bank eventually (when we have balanced our budget) might allow inflation rates to break back into ... or close to ... double digits, we will have monetized our enormous federal debt and pretty much removed it from our grandchildren’s shoulders ... and placed it back on their grandparents. Of course, I suspect this would be Trump’s longer-term preference ... but I doubt he will be president when and if this were to happen.

Now, if we can match these strategies with a lowering of our current deficit spending? Are you listening Congress?

Looming Recession?

A recession is the Democrats’ wet dream. They know that an economic swoon would help their chances in the presidential election next year. So what might cause a recession? Certainly the U.S.-China trade war could be a significant factor. In fact, it is clear now that the Chinese now are not going to agree to what day of the week it is until after November, 2020 ... hoping that Trump will be bounced and a squishy Democrat will be then sitting across the negotiating table. Trump clearly knows this and is reducing expectations.

Another possibility is the trade deal with Mexico and Canada ... not as big as China, but still important. Nancy Pelosi is sitting on the USMCA like it is a hard-boiled egg. She will not give Trump a win this close to the next election even if it damages our country. How patriotic!

And, of course, the Fed has a potentially huge roll in how well our economy does. It really screwed the pooch last December when it continued raising interest rates when much of the rest of the developed world had negative rates to stimulate their economies. There then was over a three percentage point differential in rates which strengthen the dollar and hurt exports. Trump’s jawboning has caused Powell to reverse himself and start to lower rates once again ... and to halt quantitative tightening (reducing the money supply). Is the Fed doing too little, too late?

And I am sure that there are other schemes being concocted inside the DNC to shoot our economy in the head ... or at least in the leg. Even though many of the poobahs on Wall Street are liberals, they still like money better ... and there have been times where a falling stock market led the economy down. So if they can nudge the economy down by shorting the stock market, they might just do it. However, they also need to worry about a low-probability whiplash caused by a breakthrough in the trade war. There is a limit to this type of economic manipulation.

We’re all in for an exciting 15-month roller coaster ride. Stay buckled in!

Headlines

D.C. mayor slams Trump ‘s Fourth of July celebration

Trump tells Iran threats ‘can come back to bite you’ in nuclear standoff

DOJ ordered to find ways to include citizenship question on census

WSJ: Nike’s ‘patriotic fumble’ a ‘donation to Trimp’s re-election’

Most top military chiefs skip Trump’s Fourth of July fest

Trump’s latest Fed moves are another attempt to take control of interest rates

Ruth Bader Ginsburg praises Kavanaugh ...

Ilhan Omar: ‘I don’t know’ if any2020 Democrat can beat Trump

‘We have a predator living in the White House’: Harris sharpens attack’s on Trump

Federal appeals court says Amazon is libel for third-party sellers’ products

STOCKS ROAR TO RECORD HIGHS ...

CNN death spiral continues with double digit Q2 ratings collapse

Headlines

What Mayor Pete couldn’t fix about the South Bend cops

Trump says US will impose ‘major additional sanctions’ against Iran on Monday

Trump calls off ICE raids

Eric Swalwell tells Hispanics to fight Trump in the streets

‘Excellent content’ North Korea touts new Trump letter to Kim

The Fed could cut rates four times over the next 12 months because of low inflation

Iran executes ‘CIA spy’ ...

George Washington H.S. to erase ‘offensive’ George Washington mural

UK’s Boris Johnson refuses to answer question about police visit

Trump reportedly approved cyber strike to hit Iranian computers that control missile launches

Google ‘Chrome’ new ‘sueveilence software’ ...

AOC: Trump ‘fighting to not give children toothpaste’

Headlines

How Silicon Valley gamed world’s toughest privacy rules

The stock market would be much lower if it weren’t for companies’ buying back their own shares

‘Summer blast’ unrelenting heatwave to break records in Southwest ...

Jon Voigt: Donald Trump greatest president since Abraham Lincoln

In Japan, Trump praises Kim Jong Un, rails against U.S. border wall ruling

Trump claims stock market would be 10,000 point’s higher if Fed didn’t raise interest rates

Fired up, ready to go? Hillary energizes 1,500 Dems in Texas ...

Pope Francis: ‘Abortion is never the answer’

Supreme Court blocks gerrymandering rulings in Michigan and Ohio

Trump takes dig at Japan for ‘substantial ‘ trade advantage and calls for more investment in US

8 mag quake strikes Peru ...

Mike Pence: West Point graduates should expect to see combat

Between a Rock ...

... and a hard place.

It’s not there now, but the US Federal Reserve Bank might be in this predicimant in the not-to-distant future. Let me explain:

If Trump’s new-found infatuation with tariffs produces, as predicted by many “pundits,” higher inflation rates ... then the tool that the Fed uses to keep the lid on this ogre, higher interest rates, can’t be as effective in the sense that it strengthens the dollar which boosts imports ... working against Trump’s trade war ... and also makng the job of financing American deficits more difficult.

However, if the Fed night chose to let inflation rip, it would be effectively monetizing our national debt ... good for our country but bad for those elders on fixed incomes ... and China which would own a lot of this devalued debt.

At least two factors are working counter to inflation spikes — massive illegal immigration which holds down wages on the low end ... and huge increases in energy production which holds back gas price increases. And this is further complicated by the Fed’s desire to reduce its inflated balance sheet, a legacy of the Obama-era quantative easing.

So, in a way, the Fed is boxed in when it tries to set monetary policy ... not a happy place to be. I don’t envy Chairman Powell.

The Path Forward

It is becoming increasingly obvious that we are stuck in an ultra-low interest rate environment and into the foreseeable future. Central banks around the world are keeping rates very low ... even in negative territory ... to keep stimulating their economic growth and foreign trade. This almost universal strategy has forced the American Federal Reserve Bank to stop interest rate hikes ... and its monetary tightening by reducing its balance sheet.

The consequences of this development suggests three things:

1) The United States is losing its ability to lead world-wide economic policy. We started to ‘normalize’ interest rates and, when the rest of the world did not follow suit, we backed off. We thought we were the monetary pied piper ... but we have learned that this is not the case.

2) Being that interest rates should remain so very low, this means that world-wide debt will grow beyond reasonable bounds. This suggests that a debt crisis is baked into our future. And it also suggests that funds holders ... like banks and senior citizens ... will not be advantaged like in past business cycles.

3) When the next economic turndown does occur, the Fed has little or no room to play the dove. If interest rates are still essentially zero, there is not a lot of room to go lower ... even if they are taken into negative territory. And, if the Fed’s balance sheet is still so bloated, there is not a lot of room to inject more money into the economy.

Yes, the current tariff wars complicate these monetary decisions enormously. But, one hopes that today’s lopsided trade balances resolve themselves before the next recession hits ... or the next debt crisis rears it’s ugly head.

I’m holding my breath ...

Debt

Fed Chairman Powell is justifiably concerned by the growing level of debt in the United States ... and this is because, at about 2.70%,  for a 10-year government bond, interest rates throughout the economy are at very low levels. This, of course, encourages borrowing instead of equity financing. Powell sees a debt crisis in the U.S. looming and he is likely right.

However, the rib is ... interest rates in other developed countries are quite a bit lower ... except for the U.K. They are well below 1%. So, if America is n danger, the rest of the developed world is in extremis. This suggests that an almost-certain debt crisis will start elsewhere and then spread to our shores.

Of course there are problems compounding this threat:

- The U.S. national debt, at close to $22 trillion, means that interest payments on this debt can easily consume our annual budget as rates go up. This puts pressure on the Fed to keep rates low ... and also let inflation run to monetize this debt.

- The large differential between American interest rates and the rest of the developed world means that the "carry trade" drives up the dollar and hurts  our balance of payments. This should do nothing but encourage the Fed to keep rates from going up further until others start tightening ... with a nudge from Trump.

Bottom line: Powell is right to be concerned, but this is not just an American problem ... it is worldwide. And Trump should take up this cause too ... not that he doesn't have enough on his plate already.

Headlines

Why Trump has spared Pelosi from his personal vitriol -- so far

Apple's China struggles highlight US companies' trade war vulnerabilities

Romney downloads on Trump ...

Rand [Paul] hits Mitt: 'Big government' Republican who 'never liked Reagan'

How women took over the military-industrial complex

Tesla shares tumble 9% as company misses Wall Street vehicle delivery estimates, cuts prices

Ocasio-Cortez bashes 'bad economics' of Dem's budget rules ...

Mark Zuckerberg's 2019 resolution: More censorship on Facebook

American, arrested in Russia as a spy, was there for a wedding

The Fed is losing its ability to control interest rates, the former Senate banking committee chief says

Former NY Times editor rips Trump coverage as biased ...

TX sheriff blames unsecured border for deaths of 49 migrants in 2019

Headlines

Mick Mulvaney as chief of staff: Let Trump be Trump

Stocks look to be in for more pain after Fed-day rout: 'The market is in no-man's land'

U.S. population growing at slowest pace in 80 years ...

State Department announces $10 billion to aid Central America, Mexico

Republicans rip Trump's surprise Syrian withdrawal in meeting with Pence

Facebook plummets after burst of bad news

Mueller seeks Roger Stone's testimony in front of House Intel ...

Graham;'Obama-like move' for Trump to withdraw troops from Syria

Fed raises rates, defying Trump

Fed hikes rates, lowers 2019 projection to 2 increases

Judge blocks crackdown on asylum seekers ...

Rush Limbaugh on border wall: Trump got 'less than nothing'

Market Deflators

The stock market is in the red for the year ... for a number of reasons ... whose priorities seem to change from day to day. Today, it seems that the following are the reasons, in order of descending importance, for what are depressing the stock market ... or keeping it from going up as fast:

- Fed's stance on raising interest rates and outlook for same

- Status of tariff war with China

- Fed's monthly $50 billion reduction of its balance sheet and economic liquidity

- Slowing worldwide economic growth/US corporate profits and outlook for same

- Strength of the dollar and outlook for same

- Growth of US budget deficit

- Status of trade negotiations with the EU, Britain and Japan

- Brexit morass

- Potential US government shutdown over immigration

- Mueller's investigation and possible political repercussions

- Trump's tweets

Tomorrow all these things could be shuffled ...

Headlines

Pelosi wins first round in speaker fight

Fed Chairman Powell now sees current interest rate 'just below' neutral

[Trump:] Manafort pardon on the table ...

[Sen.] Flake votes 'no' on judges

Republicans block Mueller protection bill from Senate floor vote

Tech stocks soar 3%, but Facebook lags behind

Stormy Daniels: Avenati filed Trump defamation case against my wishes ...

Report: Anto-Trump 'Murphy Brown' [TV] reboot canceled after one season

Trump suggests, without evidence, that Mueller is encouraging witnesses to lie in Russian probe

After Powell comments, traders see just one rate hike next year [instead of four]f

Cops worked to put Epsrein in prison. Prosecutors worked to cut him a deal ...

Trump's strategy to end Afghan war: Reinstate Taliban as a legimate political force 

Punchbowl

"The job of the Federal Reserve Bank is to take away the punch bowl just as the party gets started" -- William McChesney Martin

Translation: The Fed causes recessions just so it can fix them.

It is my contention that the Fed's charter is too narrow -- maintain full employment and  low (2%) inflation. Today, both these goals are being met, yer the Fed seems bent on increasing interest rates (taking away the pinch owl) to prepare for (cause?) the next recession.

However, the interest rate differential between the U.S. and the rest of the world is now so great that the Fed, by strengthening the dollar so much, is impacting foreign trade and working at cross purposes with Trump's tariff agenda. These rate increases are also killing home and auto sales and making our Treasury's job of financing our debt much more difficult ... particularly since it neglected to extend its term during the previous administration.

Conclusion: If the Fed continues to raise interest rates, the party will surely be over for quite some time. Also meaning that the Fed has its thumb on the political scale ... as Trump is implying.

Headlines

Mueller got some answers, but he's not done with Trump

JP Morgan sees a slowdown coming, with economy growing less than 2 percent in 2019

Obama trashes Trump: 'Confused, bling, shrouded in hate,' has 'Mommy issues' ...

Facebook's ad platform crashes ahead of Balack Friday

Lighthizer: China has not corrected actions that led to tariffs

Trump says he would like to see the Federal Reserve lower interest rates

Judge dismisses female genital mutilation charges in historic case ...

Trump's migration policy boosts farm productivity, wages

Trump defiantly refuses to condemn Saudi Crown Prince for Khashoggi's death

Pentagon estimates the troop deployment on Southwest border will cost  $72 million

Stocks erase gains for year, trullion wiped off tech

Stacey Abrams claims poll worker stopped her from voting

Results

But he did call Stormy Daniels "horseface."

Headlines

Right mounts campaign to make Jim Jordan the GOPLeader

Trump tariffs targeted in new campaign by business group

Belongings of missing WIKILEAKS associate found in sea off Norway

[Pelosi:] 'I will be Speeaker of the House'

Trump vs. Trudeau: They could save NAFTA if they stop sniping

Former Trump campaign chief Manafort reportedly in talks for plea seal

World Trade Center struggles to fill office space ...

Support for [London] Mayor Kahn crashes after summer of violence ...

Bernie Samder's son trounced in New Hampshire primary

[Interest] Rates are about to hit key level that could cause problems for stocks

Small business optimism highest ever; tops Reagan ...

50 Toty MPs 'openly plot' Theresa May's downfall ...

Headlines

Yet, Jane Fonda lives on ...

Republicans: Sessions gone after midterms

Fed's James Bullard saus he would 'stand pat' on rates for rest of the year

Buchanan: We're in for a hellish year ...

Liberal South African think tank: Trump is right about land reform

Treasury blocks efforts to get around  blue states' cap on state, local tax deductions

U.S. business equipment orders point to firm investment

Hurricane Hawaii ... Up to 40" of rain

Half million Afghan refugees  leave Iran as economy crumbles

'He's unraveling': Why Cohem's betraya terrifies Trump

Jeff Sessions fires back at Trump, says DOJ will remain independent

Bernie accuses DISNEY of dodging fair pay ... Blasts Bezos ...

Netanyahu welcomes airlines' decision not o fly to Iran