Fact Checking

We have an inflation crisis that is making life unaffordable, ravaging the incomes of working and low-income families, and crushing, just simply crushing, our people like never before.

- Donald Trump

The monthly inflation rate as measured by the consumer price index (CPI) soared to a high of 9 percent in June of 2022.  The annualized rate has dropped considerably since then  with the year-over-year rate last month of 3 percent.

Former president Trump would lead you to believe that President Biden is solely responsible for the recent rise in prices.  Of course I'm old enough to to have lived with inflation and have even blogged about it from time-to-time.  I purchased my first house in the early 1980s when inflation was roaring-along at double digits and a 30-year fixed-rate mortgage would set you back 14.5 %.  But I digress.  

As a recovering financial guy I know a few things about this subject.  First, inflation usually (but not always) rises quickly and falls slowly.  Second, we live in a market economy and therefore inflation rises and falls as a consequence of market forces and not by a president flipping a switch.

The recent bout of inflation has its roots in the COVID pandemic.  Lock downs caused pent-up consumer demand to spike as the economy eventually recovered from the Trump recession of his last year in office.  This was further aggravated by global supply chains disrupted by the pandemic.  Add-in the the government largess (expansion of the money supply or M-2) that began with stimulus spending under Trump that continued in the early years of Biden's term of office. 

Excess liquidity (money supply) + ravenous consumers (demand) + busted supply chain (product supply)  = increased prices (inflation).  

A simple supply and demand equation.  Economics 101.

It was a perfect storm of events the likes of which we haven't seen before; with responsibility shared by both presidents.  Corporate greed is the cherry on top.

Because this was a global phenomenon I would submit that Old Uncle Joe is incapable of influencing global economics on this scale.

I won't bore you any further; if you'd like to learn more on the subject simply type 'inflation' in the search box in the upper-left corner of the blog and a bunch of posts on the subject will pop-up for your late night reading pleasure.

Meanwhile, Donald Trump is playing fast and loose with the facts.

The Great Hornswoggle

I recently returned from a perfectly enjoyable family vacation in the United Kingdom 
And I brought these curious polling statistics back with me to share:

• 55% of Americans believe the economy is in recession; when factually Gross Domestic Product (GDP) is growing and our economic reality is the envy of the rest of the world.

• 49% believe that unemployment is at record levels; when factually it is at a 50-year record low.

• 49% think the stock market is down; when factually it is (as of the publication date of this post) at record highs.

This is real world stuff.  And if this polling is believable who knew that this thinking is so pervasive and Americans so persuadable to believe otherwise. 

When an individual is susceptible and acquiescent to embrace fallacious disinformation; 19th century American showman PT Barnum had a useful descriptor for the phenomena.  Follow this link at The Guardian to learn more.

Start Your Weekend

Jon Stewart tackles the media's obsession with Trump's hush money trial, while the GOP freaks out over Biden's new energy efficiency standards and a name change for the Boy Scouts. Meanwhile, Biden slows the flow of weapons to Israel, and after Trump shames Jewish Biden supporters, the Best F**kin' News Team stops by to give Jon a guilt trip.

Have a terrific weekend people.....

Economics 101

Am I better off today than I was four years ago?  How about you?

Over the course of the administration under the former guy the rise of the stock market was frequently trotted-out as a personal barometer of the success of his presidency.  Until it wasn't.  Let's look at the stock market; which crashed in 2020 the last year of the Trump presidency.  

In what became known as Black Monday II, this was one of three days March of 2020 that the sell-offs were so extreme that the New York Stock Exchange temporarily suspended trading.  The Dow Jones Industrial Average plummeted nearly 3,000 points, wiping out 13 percent of its value.

The cratering stock market presaged the coming economic calamity including a unemployment rate that would more than triple to a high of 13 percent. 

To be clear, I think presidents get too much blame for bad economies and take too much credit for strong economies.  Truthfully, it is a heavy lift for a president to move something as complex as the US economy.  Nevertheless, as of the publication of this post the broad market indices have doubled since their nadir in 2020.

Since I no longer have a day job I have to rely on my savings and investments for income.  So, yes, I am better off today than I was four years ago.

Of course I'm smart enough to know markets periodically correct.  And investing in a single index does not constitute a diversified portfolio or appropriate investment policy.  I am also smart enough to understand you should not solely conflate the rise of a stock market as a barometer of economic success.  That can lead to a bad case of schadenfreude. 

Pro Tip - Significant market corrections can present opportunity for savvy investors.  Another reason I prospered as a consequence of all four years of the Trump presidency.  Same for Biden.

The Undecided

At this particular moment in time and place the candidates of the two major parties are Joe Biden and Donald Trump - a rematch that is universally despised.  Thinking about this recently i wondered if there is anybody left that hasn't already made-up their mind.  As divided along partisan lines as this nation has become are there any undecided voters left standing?  And if so, where might we find them?

Citizen Trump is staring-down something on the order of 90 felony counts in four criminal cases.  A trial begins at the end of this month - March 25.  Never in our nation's history has a former president faced even one criminal indictment.  While unlikely to impact diehard MAGA support; might a felony conviction result in the loss of some otherwise reliable GOP votes? 

There's also that thing called the Big Fat Middle; non-affiliated, independent, traditional conservative and right-leaning independent voters.  This group is growing by the day.  How big will it be come November?

And don't forget the disaffected outcasts wandering in the wilderness.  MAGA world will tell you they are not REAL Americans.  They are RINOs.  They may be marginalized pariahs, but they haven't allowed their political allegiances to take-on a messianic identity.  Their playbook doesn't include sowing divisions among family or breaking friendships.  If they hold spiritual beliefs, they are just that; they don't worship mortals.  Might they decide a close election?

Finally, there is that population that dislikes both major-party candidates. They are the Double Haters.  As a consequence of Clinton fatigue they leaned towards Trump in 2016.  Fatigued by four years of Trump drama, they leaned towards Biden in 2020.  Ask yourself, has the drama stopped?  Or has it grown over the past four years?  In 2024 who are the haters going to hold their nose and vote for?

What if one or both of the presumptive candidates withdraw?  Which may be a reason for Nikki Haley hanging-in the GOP primary when she hasn't otherwise got a clear path to a nomination.  Perhaps she thinks something untoward might happen to Trump?  Or maybe she just wants to say I told you so if Trump loses to a Democrat.  It's a long road to election day...

Election Economics

It should come as no surprise that for many individuals and households their standard of living improved during the time Donald Trump was in the White House.  That's not to say that things ended badly with the COVID pandemic and recession at the close of his term of office; people tend to remember the positive and discount the negative.

It is textbook economics that massive stimulus spending and supply chain disruptions during both the Trump and Biden administrations are the causal contributors to the recent spike in inflation.   The impact of inflation materialized during Biden's occupation of the White House.  Consequently, many individuals associate inflation as something Biden is solely responsible-for.  Surprised?  Voters aren't economists. Economics is complicated stuff for anybody who drinks from the Face Book cesspool of lazy economic thought.  Excess liquidity and stimulus largess was the primary cause and interventionist action by the federal reserve is the prescribed cure.  Sure, I get the politics of gaslighting the inflation issue.  But I digress.

Under Biden many individuals and families have struggled with inflation.  And while conditions have improved this may not be enough for some voters.  For Biden that is a burdensome problem.

Trump has any manner of personal flaws, admires bad guys like Vladimir Putin, tried to steal an election, fomented a riot and continues to deny his 2020 election loss.  For Trump that is a burdensome problem.

For both Trump and Biden their administrations enjoyed the benefit of economic success and the challenges of economic headwinds.  Nothing new under the sun there.

There are voters that loathe Donald Trump and there are voters who loathe Joe Biden.  Voters frequently judge their presidents based upon their personal economic gains or losses coincident with a given administration.  Confirmation bias too.  Because I go out of my way to not allow politics to infect financial decisions I've prospered during the reign of both of these presidents.  Actually every president for as long as it mattered.

As a recovering financial guy it's easy for me to view the current economic condition with a rational eye.  What I see is an American economy that grew at a healthy clip in 2023.  Unemployment remained low, inflation continued to drop, job growth is holding steady, real wages (adjusted for inflation) exceed pre-COVID levels.  And exceeding forecasts, GDP growth climbed by 3.3 percent in the last quarter.  Speaking of forecasts, a year ago expectations were for a recession.  Today it is expected that while growth may slow in 2024; in the absence of an unexpected outside event (read: wider middle east war), no major downturn.  Consumer sentiment should continue to rebound.

If you want to throw your support to Biden because you believe you'll prosper knock yourself out.  If you're a Trump backer because you're convinced the current economy is a hell hole; hey, knock yourself out.  Know this:  election outcomes are more frequently determined by rational individuals found in the middle.  Namely independent and disaffected voters.

Just last month, polling by Gallup highlighted that more voters now identify as independent - forty-three percent - tying the previous high not seen since 2014.  Ponder the implications of this shift in light of the 2024 election.

The impact of a single president over something as huge and complicated as our economy is frequently overstated.

A platform of grievance and retribution doesn't cut it for me.

That's my nuance.

P.S. - At the time this is published the markets have also set record highs. Nevertheless, I acquired shares of BA at a significant discount recently.  An assembly mistake is not the same as a design defect.

Independents Day

A Gallup Poll published only a few weeks ago served as evidence that those who identify politically as independents  make up the largest contingent of voters in the country.  A whopping 43%, tying a record previously set in 2014.

The number of individuals who identify as Democrats set a new record low of 27% - coincidentally the same as the number of respondents who identify as Republicans.  

The decline in Democratic identification has been dropping a point for each of the last three years.  The people at Gallup surmise that this decline is a consequence of President Biden's low job approval rating.

The rise in number of those identifying as independents can be traced to 1991.  Having previously been the largest political group this rise has largely been at the expense of Democrats.  

This trend has given Republicans a small bump as Gallup learned from survey respondents that when asked, independents in 2023 indicated they were slightly more likely to lean Republican.

When asked to describe their views on a spectrum ranging from liberal to conservative - last year 25% described their political views as liberal, 36% as moderate and 36% as conservative.  These findings have largely remained unchanged for a decade.   

Taking a longer view, those who describe their views as conservative and moderate have shrunk over the last two decades; while those with self-described liberal views have risen from a low of 20% over the same time period.  

You're probably scratching your head and wondering if this has any impact on how things will play-out in the 2024 primaries and general election.  I know I'm curious.  However, not being a pollster I suppose I'm going to have to wait and see.  Exiled from the GOP to wander in the desert with my brethren it likely has to have some implications; exactly how this will manifest is not known.  Again, the Gallup folks suggest that this might not be a positive for Democrats and that independents who lean Republican may give the GOP a slight edge.  Personally, I think (wild-ass guess) Donald Trump is going to be the X Factor.  The ultimate trump card (pun intended).

You can perform a deep dive into the data over here at Gallup.  Meanwhile, I'm certainly not feeling any love from anybody.  Funny that.

Let The Games Begin

Apologies, in-advance, for the brain dump.

The primary games are upon us and the Iowa caucuses are in the rear view mirror.  My takeaway?  110,000+ voters participated in the 2024 state caucuses - the smallest turnout ever.  This represents less than 15% of the state's 752,000 registered Republican voters.

The 2016 turnout was 187,000 - about 70 percent higher.  It is reasonable to conclude that the nasty cold weather conditions resulted in some voters staying home.  Or is it possible something else is in play?  Enthusiasm maybe? 

Without a doubt, Donald Trump, with his power of incumbency and to my eyes at least, the most loyal and motivated base of supporters ever.  His name recognition is off the charts.  His trajectory is that of the inevitable.  Yet he earned only half the votes of only a small number of the most committed GOP voters - roughly eight percent.

Consider this.

There is a population of Republican, Republican-leaning, conservative and independent voters who are unlikely to vote for Trump in the general election.  Nearly half of Nikki Haley's Iowa supporters claim they'd vote for Biden over Trump.  That is not to suggest they like or support Biden's policies - it is the suggestive of the strength of the Never Trump movement in conservative circles.  Polling suggests that twenty-five percent of GOP caucus-goers won't vote for Trump in November.  

I'm not making trouble or picking a fight over any of this; yet some of this polling data has implications for the general election in November.  

A Trump - Biden match-up in November is presently in the margin of error and promises to be a close and fraught election.  A couple of octogenarians going head to head.

A Haley - Biden match-up in November presently has Biden trailing by ten points.  A younger, brighter, aspirational UN Ambassador mops the floor with Biden going head to head.

Sure, I understand polls can get it wrong.  Yet a party platform of retribution, grievance and pay-back is, in my opinion, thin soup.  If the GOP is desirous of taking back the White House, retaining control of the House or taking-back the Senate; or any combination of the foregoing, then something needs to happen to capture the enthusiasm of Republican, Republican-leaning, conservative and independent voters who continue to be indifferent to Trump.  This will be a challenge.

As a recovering financial guy here are a couple of closing thoughts and an admonition to not commit an unforced financial error in 2024. 

• During an election year first quarter volatility in the markets is common as we approach Super Tuesday.  Expect first half weakness. 
  

• Reelection years tend to be predictably solid for investors.  Since 1944 the market has been up almost every year an incumbent president has run for reelection.  Expect second half strength. 
  

• In the absence of a recession the incumbent president wins. 

• If there has been a recession in the prior two years leading up to the reelection campaign the incumbent loses.  
  

Past performance does not guarantee future results; nevertheless, historic patterns share some predictive qualities.  I remain rationally optimistic about the art and science of basic economics and history.

Ponder this:

Where does Nikki Haley go after New Hampshire?

Is the next real race the one for for Donald Trump's VP?

Let The Games Begin

Get a load of this graph!

I've said for awhile that Donald Trump will be the GOP candidate for president this year.  For any of you doubters this dynamic will become patently clear once the 2024 Iowa Republican presidential caucuses are held in only a few days.

If Trump cleans-up in Iowa there is a high probability he'll expand his lead in New Hampshire.  My sense is at that point it's game over for everyone else; including Nikki Haley.  Trump may actually thump her in South Carolina.  Or maybe not.  Either way, he will have all the needed delegates to sew-up the GOP nomination by the end of March.

Which is interesting; to me, anyway.  If the latest WSJ polling is to be believed Ambassador Haley clobbers Biden in a head-to-head match-up by 17 points.  Trump wins by 4 percent.  Margin of error anyone?  Haley has plenty of appeal to moderates, independents, traditional conservatives and even some Democrats.  Drama and controversy doesn't hang over her like an angry storm cloud.

It is going to be an interesting primary season.

Let the games begin....

__________________________________________________________________________

There is a population of conservatives, Republicans, center-right individuals and independent-minded voters who place a high value on facts and the truth. Marginalized because they refuse to embrace baseless conspiracy theories nor demonstrate sufficient fealty and obeisance to the former guy - exile is their cross to bear. 

It's The Economy, Stupid - New Year Edition

By any traditional measures our economy is firing on all eight cylinders.  Unemployment is at a fifty year low, wages (adjusted for inflation) are higher than they were before the pandemic, job satisfaction is up  and last month the Federal Reserve left interest rates unchanged and signaled that with inflation subsiding we may see three rate cuts in 2024.  It looks like there is little if any chance of a recession, with an economic soft landing instead.

So why is public opinion on the economy not reflecting all of this wonderful news? 

Conventional wisdom would suggest that people are grumpy about the economy even with the economic winds at their backs.

The best guess is that consumer sentiment over the economy has soured mostly as a consequence of high prices.  While inflation has slowed prices have not come down significantly.  We've seen a wee bit of a drop yet all you have to do is look at the tape total following a trip to the grocery store and it all makes perfect sense.  I also think there is some psychology in play as a consequence of social media trolls and garden-variety confirmation bias.  There is an election looming after all.

Consider this.  Only a couple short years ago, when inflation reared its ugly head and prices began to spike, consumer sentiment plunged in the opposite direction.  In 2022 the mood of the people, as measured by the University of Michigan Surveys of Consumers, was as bad as it could possibly be.  The Consumer Sentiment Index set a record  fifty year low!  That is a big deal.

With a drop of that magnitude it's difficult to gauge if folks were shell-shocked, confused or just plain pissed-off.  As with the case of the bogus $20 Big Mac was misinformation causing perception to replace reality?  Had people lost their minds?

Ordinarily, a strong economy bodes well for an incumbent president.  In this case consumers may be recovering from the sentiment hangover.  If economic grumpiness is the new normal this does not bode well for Biden's reelection prospects.

Maybe as we've embraced post-pandemic life our world has fundamentally changed somehow.  Maybe it is the cumulative impact of many things - supply chain interruptions, labor shortages leading to hiring disruptions, longer waits for a contractor, higher mortgage rates, increased cost of diesel, fertilizer, used cars, new cars, real estate and construction has put large numbers of people into a mind-numbing economic funk?   I cannot put my finger on it.

Nevertheless, gasoline prices have come down considerably ($2.34 Friday at the new Kwik Trip in Sturgeon Bay), the stock and bond markets have out-performed, my real estate taxes are affordable and have barely increased, interest rates are forecast to fall, the prospects of a recession seem to have been a mirage, my personal consumer confidence is strong and for everyone else is likely improving every month since hitting rock bottom.  The previously worrisome Consumer Sentiment Index is steadily rising. The economy is strong.  I have no major grievances.  If Joe Biden is reelected not much will change for me.  If Donald Trump is elected it is highly likely I'll continue to prosper and have beaucoup blog material.  Besides, any president's immediate influence on an economy as large as ours is overstated.  

So, we'll have to see how 2024 unfolds.  For this blogger the glass is half-full.

It's The Economy, Stupid

A strategist in Bill Clinton's successful 1992 presidential campaign against incumbent George H. W. Bush; the title of this post was coined by James Carville as a missive to campaign workers. 

By traditional measures our economy is strong.  Unemployment is near a fifty year low.  Inflation-adjusted wages are higher today than before the pandemic, job satisfaction is up and inflation has slowed significantly.  For the period July thru September the economy expanded at an annual rate of 4.9% 5.2% (revised) - the largest rise since the last three months of 2021.  

The record low unemployment has translated into consumers spending more on travel and entertainment this past summer.  Accounting for two-thirds of all economic activity, it is consumer spending that fuels the US economy. 

Inflation has moderated considerably to 3.7 percent from last summer's peak of 9.1 percent.  Benefiting from the strength of stock, bond and real estate markets, household net worth is up too. 

But don't take my word for it, you can read the report card yourself here. 

Nevertheless, Americans don't necessarily see things through rose-colored lenses.  Polling of swing state residents reveals that eight in ten voters said the economy was fair to poor.  Only two percent suggested the economy was excellent.  The vast majority of all Americans, across race, age, gender, education, income, politics, geography, held a negative view of the economy.

Making this apparent disconnect even more confounding, consumer behavior is nowhere near what we might expect to witness if the economy was performing poorly.  Actual consumer behavior is typical of what would be seen when the economy is performing like it has been.

Consumer optimism is down, yet Americans are spending more.

What gives?  As a recovering financial guy this is causing me no small amount of cognitive dissonance.

Domestic oil production and refining is at an all time high and gasoline is relatively cheap.  So is it higher prices for groceries, diesel and dining out?  That certainly doesn't explain why folks haven't cut back on their spending.  Why are all of these people spending  and buying?  Consumer behavior is out of whack with consumer sentiment. 

A generally reliable economic insight is revealed preference theory.  The assertion is that the most certain way to measure consumer preferences is to measure their purchasing behavior.  Theoretically, the assumption is that in the end, consumers are rational.  Any devotee of behavioral finance is likely having a field day with this stuff. 

Sure, economics can be exceedingly complex and difficult for a layperson to understand.  Moreover, I think the media in general does a poor job of explaining phenomena such as price gouging, the correlation between global oil supply and the price at the pump or how massive stimulus spending commencing with Trump and continuing under Biden fuels inflation.

Policy most certainly plays a role in economics; but market forces exert a greater influence than any single governor, president or prime minister.  Inflation is global in scale; is old uncle Joe singularly responsible?  A more likely explanation is combined stimulus spending by multiple economies in response to the COVID emergency generated sufficient excess liquidity to spike inflation.  

It should come as no great surprise that our country's Chief Executive routinely takes the credit for a strong economy and is blamed when things turn south.  What I'm witnessing is a perception versus reality dichotomy.

Polling reveals that of registered voters, 59 percent have more confidence in Donald Trump's handling of the economy compared to 37 percent expressing confidence in Joe Biden.

If Trump wins the election in 2024 will my cost of unleaded gasoline fall from $2.84 to $1.84 the day following his inauguration?  Or is that a perception?

I grapple with this incongruous economic perception versus reality.  Spending behavior doesn't square with a vast swath of the population struggling to get by.  That doesn't mean some folks are struggling.  I can appreciate someone's life difficulties.  If you are 21 years old and fresh out of college or just trying to make it on your own life can be a struggle.  It was for me.  Unless you come from money the first decade of independent adult life is a contest to find your way and build economic stability.  When I went into business I was poor enough to qualify for surplus government cheese.  True story.

Nevertheless, persistence, hard work, long hours, no small amount of risk-taking eventually led to a reasonable lifestyle and comfortable retirement.  Emphasis on reasonable and comfortable.  Not extravagant and ostentatious. 

I'm also going to go out on a limb and play my old guy who's seen a lot of things in his life card.  The last several decades have been witness to the dot com crash, 9/11, the housing crash and Great Recession and COVID.  These are the practical memory for many people younger than me.  They're ingrained in my life experience too.  I've also had the life experience of witnessing an oil embargo, gasoline rationing, the draft during an unpopular war, raging double digit inflation, followed by double digit interest rates.  My first home was a duplex financed at the bargain fixed rate of 14.5%.  True story.

I have lived the reality of economic restructuring, downsizing, offshoring, the dismantling of family-supporting manufacturing jobs and recessions.  I was laid-off from my first real job out of college as a consequence of being low man on the totem pole.  Lack of seniority.  All generations struggle yet it seems that on balance each generation advances economically over the previous.  Not always - but generally-speaking.  

What is interesting to me are the confounding perceptions versus reality in an environment where the economy is about as good as it gets.  Strong economic growth, very low unemployment, rising real wages, rising median net worth and moderating levels of inflation.  How are these people gonna feel when we inevitably tip into a recession?

More about perceptions and bad information tomorrow.

Stay-tuned.....

The Big Fat Middle

So, it would appear to this blogger's eyes that Donald Trump will be the presumptive GOP candidate for president in 2024.  His polling is strong, his base of support solid, there is not another candidate even close and with each and every indictment his base is further energized and he reaps buckets of cash fundraising off the news.

Trump is inevitable.  And there is a chance he could win.  (I'll get to that at the end.)

Which, for the record, doesn't scare me.  When I became aware of Mr. Trump 35 or more years ago I figured him for something of a con-man from Queens.  You could say I was a Never Trumper before it was a thing.  

As much as I considered him a shady person it never rose to the level of hate.  Let there be no misunderstanding; I thrived under his presidency.  Of course I considered Bill Clinton a misogynist pig; and I thrived under his administration.  So humor me while I lay out the the case for the reelection or defeat of Donald Trump.  I'll do my best to cover the good, the bad and the ugly.

After-all, the former guy has a record to run on.

We have a porous border.  In an official 2018 report, Immigration and Customs Enforcement (ICE) reported to the administration that they had an insufficient pipeline of candidates to fill existing vacancies. Trump did nothing.  Separating children (as young as five months old) from their mothers turned the border into a flashpoint.  Trump's public support took a hit. Trump did succeed in restricting asylum applications and refugee entrants.  Comprehensive immigration reform was never pursued or signed into law.  

Only about 80 miles of new barrier was constructed during Trump's term of office.  This included 47 miles of primary fencing and 33 miles of secondary fence.  Mexico did not contribute a single peso to build it.  It is estimated that it would require an investment of $25 billion for a Great Wall. The problem wasn't fixed and it persists to today. 

It should come as no surprise that following his 2016 campaign Trump wanted to come down hard on illegal immigration on our southern border.  (See border wall failure above.)  Curiously, he also imposed tighter restrictions on the legal immigration of highly skilled and desirable workers needed to perform useful stuff like contributing to domestic corporate growth and profitability, our general economic health and strengthen Social Security and Medicare.  

Trump's DHS imposed restrictions on the H-1B visa program insisting that these workers were taking jobs from Americans.  The administration did everything it could to meddle with the need of American business to fill positions that could not be met with applicants from our domestic workforce.  As with ICE's recruiting challenges so it was with corporate America.  Under Trump, H-1B visas were reduced by a third.  Not only were engineers, doctors, technical and other skilled workers denied entry but important seasonal labor that feeds the local tourism engine where I live was restricted as well.  As with tariffs, this was big government picking winners and losers.

Trump promised that he would repeal the Affordable Care Act and replace it with something Beautiful.  Nope.  More than seven million Americans lost their Health insurance during his term of office.  He even had the temerity to request the SCOTUS to strike down the ACA in the midst of a pandemic with no plan for a replacement. 

 Our trade deficit ballooned to its largest level in history under Trump.  When Biden took office we were purchasing more goods and services from other countries than we sold to the rest of the world.  One of Trump's signature policy actions was the imposition of tariffs - a blunt instrument which caused significant harm to our economy. 

Trump boasted about all the money China contributed to our coffers from tariffs on imported goods.  The truth is his trade war cost domestic consumers $34 billion annually in increased prices.  Tariff are almost universally paid by consumers; it is an indirect tax.  Taxpayers also paid an additional $22 billion annually in agriculture subsidies to farmers hurt by tariffs.  And  an estimated 300,000 domestic jobs were lost.  Anecdotally, I paid an estimated $800 markup for a new Kawasaki Mule as a consequence of Trump steel tariffs.  Telling me China is paying the tariffs is a lie.  No truth in advertising.

Donald Trump declared that he would eliminate the federal deficit.  The truth is that it grew by 60% under his watch ballooning to a record new level.  More than a whopping $8 trillion accounting for 20% of the total debt by the time he left office.   

Trump promised me and you and everyone else that our tax burden would be reduced.  In-fact he made the claim that:  Only wealthy people like me can afford to pay more.  Alas, by the time 2027 rolls-around, 83% of his tax cuts will go to the top 1% of individual taxpayers.  Yeah, we can argue that if you pay more you get a larger cut.  Nevertheless, just like half of all Americans my income taxes rose under his watch.  Don't believe it?  Talk to my CPA.  The good news is that corporations spent their tax cut savings to repurchase and retire massive amounts of stock.  Stock buybacks boost share prices.  So if you're a retired guy like me your retirement savings get a positive bump.  On balance, I chalk this up to a success as my invested net worth grew as a result.  And I scored a ginormous bonus buying opportunity under COVID turning my income tax loss into a capital gains tax gain.

Speaking of COVID, if there ever was a case to be made for willful blindness this was it.

Created following the Ebola Virus outbreak, and part of the National Security Council, Trump's first misstep was disbanding the Global Health Security Team in May of 2018.  Trump seriously believed we'd never have a pandemic.  Back when I had a day job, large loss avoidance was always at the top of the list of objectives but nobody asked me about this. During his final year in office hundreds of thousands of our countrymen died from a pandemic that Donald Trump deliberately downplayed to the public.  As a consequence, the US has accounted for more than 25% of the global COVID deaths with only 4% of the population.  

Take a moment to reflect upon this grim figure.  

When the President spoke, many times chaos followed.  He declared that the pandemic was under control or it was not serious.  He promised everyone would be tested when factually there were few tests available.  He claimed a vaccine was just around the corner when it was still 12-18 months away.  There was hydroxychloquine, bleach, light treatments and magical wishful thinking. It was a cluster.

The bottom line is China is to blame for the outbreak and spread of coronavirus.  Trump gets credit for Operation Warp Speed and fast-tracking vaccine development.  He should have talked it-up in his reelection campaign.  (But nobody listens to me).  Nevertheless, the buck stops with the White House for dithering and finally responding with a delayed and disjointed federal response.  Inept messaging resulted in a needless loss of lives, record small business bankruptcies and millions of students falling behind.  A steady hand counts for a lot.

Donald Trump also had an endearing quality that always puzzled me.  He almost always confused the investment markets with the general economy and conflated his influence on the stock market.  I fondly recall that he stated at one point:  If you do not reelect me you will all become poor.  The implication being that, as with magic, his Midas Touch was responsible for rising equity prices and portfolio returns.  Never confuse markets and policy with magic.  

I always figured that this conflation would get him in trouble at some point so I gave my team at the former day job a heads-up.  I asked them to prepare a short list of stocks with solid earnings and good prospects that might be temporarily damaged by Trump's glib and loose talk.  And wouldn't you know it; as the COVID storm gathered strength Trump now has the unique distinction of giving a national address meant to calm a worried nation that ended-up tanking the markets.  I saw that one coming and I thank DJT for the buying opportunity.

Loose lips sink both ships and markets.

In my opinion Trump's largest failure was the culmination of events on January 6, 2021 when a mob of his supporters rioted, stormed and occupied the US Capitol.  This can be laid at the feet of a president who demonized the media, promoted lies, questioned the authority of the courts and rejected the results of a free and fair election.  

I don't care if you're breaking the glass of a neighborhood pawn shop or the windows and doors of the US Capitol.  Inciting violence under any and all circumstances is wrong.  For me the President's incitement and instigation of lawlessness and violence was a Bridge Too Far.

For many this was the straw that broke the camel's back.

Summation.

Donald Trump was a consequential US President; a change agent.  His successes included cutting the corporate tax rate and reducing burdensome regulations; all good for the economy.  He can be credited with pushing back against a brutally repressive China and providing defensive arms to Ukraine.  He negotiated a new trade pact with our friendly neighbors to the north and south and pushed Congress to approve it.  He played a valuable role in facilitating the normalization of ties between Israel and several Arab neighbors.

Trump deserves credit for reform of the criminal justice system following passage of the First Step Act as a mechanism to end mass incarcerations.  He set-back the ISIS caliphate and rubbed-out Abu Bakr al-Baghdadi.  He also created the Space Force; the first new military service branch since 1947 when the Air Force was formed

Trump's most lasting impact will be his reshaping of the federal judiciary.  Three supreme court justices, 226 judges on the federal bench including 54 judges on the 13 US circuit courts.  It is the courts that always have the final say in our political system setting policy and precedent for decades to come.

In closing, I am convinced that of all the potential match-ups there are for the 2024 White House Joe Biden is the sole Democrat capable of defeating Donald Trump.  There is little popular support for this octogenarian choice; but unless I am famously wrong again it is what it is.

To my Trump friends, take heed.  If you run on a campaign platform solely on retribution and revenge you do so at your own peril.  To win a general election you need to get beyond the angry base of support and win-over the Big Fat Middle.  This coalition of independents, Reagan Republicans,  fiscal conservatives, right-leaning moderate voters are not going to get behind Trump.  They might even vote for Biden.  Not because they embrace his liberal policies; but because they will cast a vote against Trump.

The aspirational GOP candidates, including some exceedingly capable governors, would bury Joe Biden.  That's a fact.  Learn more on this topic here.

Of course nobody listens to me.

NATO

The North Atlantic Treaty Organization, or NATO, was created in 1949 by 12 countries to provide collective security against the Soviet Union.  

Commonly recognized as deterrance.

To this day NATO's stated purpose is to guarantee the freedom and security of its members through political and military means.

The Secretary General concluded the NATO Summit held in Vilnius, Lithuania on Wednesday of last week.  And following the requisite amount of drama President Erdogan of Turkey relented and agreed to Sweden's application for membership to proceed.  Holdout nation Hungary also followed.

This is interesting on several levels.  First, since the fall of the Soviet Union, NATO has more than doubled in size to include 28 European countries, Canada and the U.S.  Finland came on board in April of this year with Sweden now to follow.  

Second, it is possible that Vladimir Putin calculated his unprovoked invasion of neighboring Ukraine would lead to the fracturing of NATO.  Nope.  Previously non-aligned and neutral Finland and Sweden requested, hand-in-hand, membership in the alliance.  As a consequence, NATO has expanded and strengthened as an outcome of Putin's (not the Russian people's) aggression.  

And since the last presidential election we've learned that the former guy was going to unilaterally withdraw the U.S. from the NATO alliance in his second term of office.  Inasmuch as he may win the 2024 election there is bipartisan legislation that will likely come to a floor vote before then which would nullify executive action of this nature; instead, requiring an act of Congress or the Senate to exit the alliance.

War and elections have consequences.

Anyway, Article 5, which stands at the heart of NATO's founding says that an attack on any member of the alliance would be viewed as an attack on all.  If such an attack does occur, each member will take measures necessary to restore and maintain international peace and security.  Article 5 has been invoked only once; following the terrorist attacks of September 11, 2001.  NATO came to America's aid.

It's good to have friends.

NATO is not a monolithic organization and its membership doesn't always agree.  Such is the nature of a diverse membership of democracies, nonaligned nations and tolerance for differing points of view.  

On balance I believe that NATO has been good for Europe and good for Canada and the U.S.  It has been good for our economies and good for our defense forces.  It has been good for the world.

For sure there is a minority that will take issue with my view; nevertheless, in a world with dangerously bad actors, in my opinion for more than 70 years NATO has been a force for good and it's better to be aligned with the good guys instead of the bad guys.

 

Hillary, Bill, Mike, Joe and Donald Walk Into a Bar

Thursday afternoon I learned that Jack Teixeira, a Massachusetts Air National Guardsman was indicted on charges of mishandling secrets.  The filing of criminal charges comes only two months after FBI agents arrested him at home on April 23.  The circumstances of this case are far different from the circumstances of former President Trump's handling of secret documents but I am reminded about the whataboutism that has overwhelmed the news space and interweb recently and sucked all of the oxygen from my living space. 

The former president has reminded anybody willing to listen that he is the target of witch hunt by the Department of Injustice and that Joe Biden is personally criminalizing his behavior while others are given a Get Out Of Jail Free Card. 

For myriad reasons I do not believe that Donald Trump will ever see the inside of a prison; nor to I believe he should.  But that is a different discussion for a different day.

What is the crux of today's post is that the Trump case differs from that of other politicians who have retained documents without suffering significant legal consequences.

Hillary and Bill Clinton, Mike Pence and Joe Biden have all been scrutinized for records-keeping related to their public service.  Trump suggests that the only reason he's been indicted is that he has been singled-out for persecution by an out-of-control FBI and Biden's Department of Justice.  

He is a victim.

This narrative is perfectly understandable for the politics and appeal to his supporters; yet it is a false equivalency as none of these individuals defied a federal subpoena and sought to conceal documents from law enforcement and their own attorneys.  To be fair, if Trump had complied with the subpoena in August of 2022 this entire matter might have blown over as a misunderstanding and avoided in its entirety.   

Karma.

The Trump case is all about the retention of documents that he was not entitled to keep; and that he did so willfully and defiantly thereby putting our national security interests at risk.

The Clinton private email server case was reviewed multiple times by the Trump DOJ in 2016, 2017, 2018 and, again, in 2019.  The conclusion was that while she may have been recklessly negligent she cooperated fully with the the investigation and it was determined that there was no intent to commit a crime.  Then FBI-Director James Comey reopened the investigation in October of 2016, weeks before the election, likely upending the election outcome.

Karma.

Trump has groused about secret documents that Bill Clinton retained.  This is a falsehood - not a double standard.  Clinton had interview tapes of his discussions with historian Taylor Branch which formed the basis of her 2009 book:  The Clinton Tapes - Wrestling History With The President.  Judicial Watch sought a court order requiring Clinton to turn the tapes over to  the National Archives.  The archives had already concluded that documents related to a president's official duties are Presidential Records and thus property of the National Archives.  Diaries, journals and book material are personal property.  A federal judge during the Obama era agreed.  I do not know if the tapes are still in Bill's socks drawer as Trump has claimed.

We have learned that both Biden and Pence had small numbers of classified documents in their possession.  They invited, and voluntarily complied with a search by FBI and turned everything over.  AG Garland has appointed a Special Counsel to conduct an investigation of Biden and the Republican House is investigating as well.  As there has been no obstruction no warrants have been issued.  Pence is not going to be prosecuted - he's a Boy Scout for God's sake!

The bottom line is that while all of the foregoing plays well in political and social media absolutely none of it is relevant in a court of law.  

Whataboutism is inadmissible as evidence in the Trump case as neither Biden, Pence or the Clintons are targets in this case.

Will we ever know why Donald Trump has, again, turned out to be his own worst enemy?  I dunno.  Part of me thinks he's a hoarder and his recklessness predictably got the best of him. My attorney has reminded me that a bad deal is always better than a good trial.  WTF - listen to your lawyers.

If you have nothing better to do, take some time to read the unsealed Trump indictment.  I did.  It's only 44 pages long.

Sunday Morning Migration

Last weekend Sid and Braumeister and I had an opportunity to chat it up about the immigration, asylum and migration conundrum we face.  (I deliberately list these as three separate issues because they as similar but not one and the same.)  Looking at this chart the operative questions that come to mind:

• Are the increased apprehensions under Biden evidence of progress?

• Are the smaller number of apprehensions under Trump lack of progress?  Or the inverse?
  

• Apprehensions + detention = deportation?  Or catch and release?

• Are our borders open, closed or porous?  

• Is it deliberate or a broken system?
  

There's a lot of data here to unpack in this chart.  

Here's a stab.

It is obvious that the number of apprehensions at the border is evidence of a surge.  Immigration activists oftentimes emphasize the events in other countries (gang crime, political oppression, war) as having an outside influence on migration.  

Think:  PUSH.

Factors such as the strength of our economy also play a role.  We enjoy a plethora of job opportunities.  Door, Kewaunee, Brown and Outagamie Counties are relevant examples of this. 

Think:  PULL

Nevertheless, when we make it difficult for people to enter the country fewer individuals make an attempt.  Donald Trump was out-front in his opposition to immigrants and immigration.  A likely cause of a smaller number of apprehensions under his watch.  Joe Biden did not manifest that level of hostility and that might explain a surge in apprehensions under his watch.

Think:  SIGNALING

Border policy is complicated stuff.  More so because I believe that both parties use it as a device to keep their respective base constituents in a near-constant state of agitation and turgid arousal.  As a consequence the nuance and complexities of the subject matter get lost in the tumult of emotional misinformation

Democrats seem to avoid the difficult questions.  And a lax (or seemingly welcoming) immigration attitude/policy brings with it all manner of problems. Including, but not limited to:  dangerous and life-threatening travel, exploitation by smugglers all resulting in the overwhelming of social services and shelters creating dangerous conditions on both sides of the Mexican/American border. 

Simultaneously, immigrants and their families have ascended the economic ladder and thrived in the US.  In their book Streets of Gold: America's Untold Story of Immigrant Success by economists Abramitsky (Stanford) and Boustan (Princeton) have defused much of the fearmongering. 

The bottom line is no country in its right mind should have open borders.  Nevertheless, refugees with a legitimate asylum claim should have a resolution in less than an eight to fourteen year wait time  Those who wish to come to this country for a job should have a legal opportunity to do so.  Dreamers, born here of undocumented immigrants are already birthright citizens.  (Yes, it is in the Constitution).  They should have a legal path to permanence.

According to US Immigration and Customs Enforcement arrests and deportation of undocumented immigrants increased in the second year of the Biden administration. Although numbers remained below Trump and Obama averages this crackdown has had its intended effect with apprehensions dropping.  Alas, Title 42, with its pandemic restrictions, expired last Thursday and appears to have had the unintended effect of migrants interpreting this as an opportunity.  Joe Biden has sent additional troops to the border for purposes of logistical support.  Nevertheless, he's facing some humongous challenges with the migration influx and surge of border crossings.

It's a shit show for sure.

Like I said, this is hard stuff and requires commitment to solutions and successful outcomes from serious leaders on both sides of the aisle.  

I do not believe there is sufficient critical mass to roll that boulder up hill.  Yet.  All of which explains the current fixation over bullshit subjects like  gender dysphoria, election denial and wokeness over Bud Light.

Sheesh.

The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary

― H.L. Mencken

Dewey Decimal System

Last week we learned that classified documents were found in President Biden's garage.  This, following the revelation of classified documents found at Biden's office at the Penn Biden Center for Diplomacy and Global Engagement.  Unsurprisingly, supporters of former President Trump pounced with comparisons of the investigation by the Justice Department of Trump's possession of hundreds of classified documents at his home in Mar-a-Lago.

I have no personal knowledge about how these classified documents landed were they were found.  Although I have some speculative theories about carelessness and a desire for holding onto ephemera.  But those would be theories only.  Inasmuch as a Special Counsel has been appointed for both the former guy and the current guy the facts will eventually be revealed.

There appears - for now anyway - to be some differences between Trump and Biden; but that may change depending on what is uncovered. 

In the case of the former guy the National Archives initially contacted Trump in May of 2021 about missing documents.  Trump initially pushed-back on returning them.  When he relented we learned that some of them were highly classified.  When it was discovered that not all of the documents were accounted-for a subpoena for their return was issued.  Trump's records custodian falsely certified that the former president had returned all the government records.  A court authorized search warrant led to the FBI discovering even more highly classified documents.

In the case of the current guy as soon as the documents were discovered officials at the Archives were notified and the documents immediately turned over.

But like I said, these narratives may change as the investigations play-out and the facts are revealed.  Heck, Congress can (and possibly should) add both to their list of matters that they want to investigate and hold hearings about.

What has been on my mind is how does any document with a security classification end-up in someones basement, office or garage?  What I know is when I had a day job if it was found that I removed a confidential (secure) document to my home I would have been summarily dismissed (or most seriously disciplined).  Is the National Archives so sloppy that it takes significant passage of time to note that classified material has gone missing?  Or in the case of Biden that possibly it went unnoticed?

If my library book becomes overdue I get an email reminder to ask for an extension.  And if it is a wait-listed publication a demand for immediate return.  Of course, the library uses the Universal Decimal Classification (UDC) system so that users can locate material and for the library to keep track of who has a particular item in their possession.  It is quite efficient.

Maybe the Archives should take a page out of that playbook.....

Trump Gas

A curious thing happened on the way to the gas pump recently.  A friend of mine messaged me this:

Still missing my Trump gas!  I'm sure Biden gas gets better mileage. 

This is not the first time my pal has voiced this lamentation and fondness for low-price Trump Gas.  Between you and me I think he's twisting my tail.  Giving me a friendly poke and trying to get a rise out of me.  I'm not a Biden guy.  And I was never a Trumper so I'm not gonna take the bait.  But I understand my buddy's sentiment.  We went on a marathon road trip a couple of months ago.  In this order, lodging and gas were the principle expenditures.  We burn only non-ethanol premium grade gasoline in all of our small engines and a trip to town to refill four gas cans set me back $80.  Heck.  Even I like Trump Gas.  But I digress.  

As a recovering financial guy I am both bemused and chagrined from time-to-time by magical wishful economic thinking that seems to find a home on social media; particularly as it relates to the subject of rising gasoline prices. I have FB friends, a minority of which, believe that If only Donald Trump were in the White House a gallon of gasoline would set you back $2.25, give or take.  I'm not making this up.  It is like an article of faith.

If we go back only a few years the price of crude oil and gasoline tanked in early spring of 2020 as the impact of the pandemic laid waste to the global economy AND PEOPLE STOPPED TRAVELING.  Before the Covid crisis 100 million barrels of oil each day fueled global commerce.  As demand fell off of a cliff that dropped by more than 35 percent. Price followed.

Leading up to this was the Saudi-Russian crude oil price war that began a month earlier on March 6, 2020.  Without knowing it in the moment the decision of these OPEC members to blow the lid-off production levels couldn't have come at a worse time.  It was ominously prescient as a novel virus from Wuhan Province had already quietly infiltrated the world population.

Meanwhile, never one to shrink from taking credit where he didn't earn it, Donald Trump had been boasting that he was giving all Americans a tax break with lower oil prices.  In fairness, this is what Trump does.  Cheap Trump Gas = more money in your pocket!  No disagreement from me but sometimes you need to beware of getting ahead of your skis.

For the energy sector all of the elements for a perfect storm were now in place.

In April 2020 the oversupply of oil led to an unprecedented collapse of oil prices forcing the contract futures price for West Texas Intermediate crude (WTI) to plummet from $18 a barrel to around -$37 a barrel.  

Yes, minus $37.  Prices went negative for a brief period of time.

As the coronavirus recession took hold the oil markets imploded from the Saudi-Russian surge on the supply side and the bottom falling-out of the demand side.  American oil companies were furloughing petroleum engineers at a record pace and thousands of additional jobs were being eliminated.  Facing the worse economic downturn in more than a generation even wells were abandoned.  

While consumers were enjoying savings at the pump with Trump Gas - oil patch states like Texas, North Dakota, New Mexico, Oklahoma, Colorado and Alaska  were staring down a calamity of ginormous job losses along with associated tax revenues.  Faced with a re-election campaign, a teetering economy and a perfectly nasty collapse of the domestic oil industry President Trump made the decision to enter the fray and pull his bacon out of the fire with some sort of deal. 

Trump's deal was for OPEC to scale-back their production that year.  This afforded domestic oil producers some welcome breathing space preventing a wholesale collapse of the industry. 

Here we are today. 

It seems like forever (to me at least) since the shit hit the fan.  A pandemic, a deep self-inflicted recession, bad decisions, an election, vaccines, a recovery, hindsight and a population's desire for a return to normalcy while learning to coexist with viral variants.  Not so surprisingly, US crude production has largely returned to pre-pandemic levels.  We remain a net exporter of crude oil to the world.  What has not changed is OPEC production.    

You don't have to take my word for any of this as there is a terrific summary here at Fortune .com that lays it all out for you. 

Donald Trump's deal got OPEC to slash production.  And for the present, that deal remains in place insofar as OPEC production of crude.  A recovering world economy has brought demand back to pre-Covid levels.  And as a consequence of rising demand; absent a growth in supply, prices have risen.  That is what happens in supply demand markets.  OPEC members are reaping record profits.  Can you blame them?

The war in Ukraine has rattled the world oil market causing global prices for crude to soar further complicating and compounding the situation.

I can appreciate consumer frustrations over soaring energy prices and the desire for simple explanations.  If you are a die-hard Trumper Biden is responsible for this.  Inexplicably, he did it deliberately.  The reality is more nuanced.   

Increased Demand + Restricted Supply = Increased Prices 

Some of you aren't going to like reading this but OPEC continues to hold-up their end of the  Trump-negotiated deal. 

There's probably a wee bit of price gouging going-on.  You read it here first you say?  Ha Ha.  It happens.  Although you'd be hard-pressed to locate an oil company executive willing to admit to it.  Domestic energy producers and refiners are reaping record profits.  Can you blame them?  

Given the market conditions in the spring of 2020 my advice would have been to buy on the dip and in particular to increase positions in struggling energy sector shares.  But what do I know?  I'm just a recovering financial guy.

In current news, on Thursday of last week, following furious lobbying on the part of the administration, the group of oil-producing states known as OPEC+ (13 countries that are members of the Organization of the Petroleum Exporting Countries plus 10 non-OPEC countries) agreed to boost production by 648,000 barrels a day beginning in July and again in August.  This may seem like a big deal but I'm here to tell you it's lip service.  I could be wrong but I don't believe it will have any meaningful impact on the retail price of gasoline.

During the election campaign Candidate Biden vowed to turn Saudi Arabia into a "pariah state" as a consequence of the grisly murder of Jamal Khashoggi.  Of course, this was long before rising fuel prices became a contributing factor to soaring inflation and Democratic chances in the midterm elections.

The Saudis are not our friends; nevertheless, President Biden will be paying Mohammed bin Salman a call to smooth things-over.  I wonder if anyone is going to say "pariah" out loud.

In conclusion, we can debate government policy and the impact it has on energy markets all day long.  Everything in the paragraphs above covers a period only slightly longer than a couple of years.  That is very short term in the economic world thereby amplifying the roller coaster effect.  In the financial world I learned that most consumers focus only on the roller coaster ride and sometimes you have to talk them off the ledge.  For the more thoughtful of my readers we need to bridge the over-simplified notion of magic Trump Gas.  A more impactful debate might be the veracity of government intervention in the markets, how loose monetary policy is a primary contributor to inflation, shutdowns, bailouts, handouts, politicizing public health, stimulus and other crazy-ass meddling.  That could take all month long.

Stay-tuned......