I have just returned from Raleigh and a great art tour experience which I will discuss in a separate memo.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++
While I was gone, I learned about Krauthammer's failing condition. He was on my memo list and about a year ago he asked I delete him which I did. I then learned he was in poor health but did not know the exact reason. Now we know. " A Note To Readers - By Charles Krauthammer
I have been uncharacteristically silent these past ten months. I had thought that silence would soon be coming to an end, but I’m afraid I must tell you now that fate has decided on a different course for me.
In August of last year, I underwent surgery to remove a cancerous tumor in my abdomen. That operation was thought to have been a success, but it caused a cascade of secondary complications — which I have been fighting in hospital ever since. It was a long and hard fight with many setbacks, but I was steadily, if slowly, overcoming each obstacle along the way and gradually making my way back to health.
However, recent tests have revealed that the cancer has returned. There was no sign of it as recently as a month ago, which means it is aggressive and spreading rapidly. My doctors tell me their best estimate is that I have only a few weeks left to live. This is the final verdict. My fight is over.
I wish to thank my doctors and caregivers, whose efforts have been magnificent. My dear friends, who have given me a lifetime of memories and whose support has sustained me through these difficult months. And all of my partners at The Washington Post, Fox News, and Crown Publishing.
Lastly, I thank my colleagues, my readers, and my viewers, who have made my career possible and given consequence to my life’s work. I believe that the pursuit of truth and right ideas through honest debate and rigorous argument is a noble undertaking. I am grateful to have played a small role in the conversations that have helped guide this extraordinary nation’s destiny.
I leave this life with no regrets. It was a wonderful life — full and complete with the great loves and great endeavors that make it worth living. I am sad to leave, but I leave with the knowledge that I lived the life that I intended."
I e mailed him: " Though I have not always agreed with you, I have always admired you. You have been a true inspiration and I will forever appreciate the insights you provided and you will be dearly missed. Me"+++++++++++++++++++++++++++++++++++++++++++++
I was devastated to find out my wife was having an affair, but, by turning to religion, I was soon able
to come to terms with the whole thing. I converted to Islam, and we're stoning her in the morning.
Went to our local bar with my wife last night. Locals started shouting "pedophile!" and other names at me,
just because my wife is 24 and I'm 50. It completely spoiled our 10th anniversary.
The Red Cross just knocked on my door and asked if we could contribute towards the floods in Pakistan.
I said, "We'd love to, but our garden hose only reaches the driveway."
AND:
Modern philosophers
Jean Kerr...
The only reason they say 'Women and children first' is to test the strength of the lifeboats.
Prince Philip...
Jean Rostand...When a man opens a car door for his wife, it's either a new car or a new wife.
WH Auden...Kill one man and you're a murderer, kill a million and you're a conqueror.
Johnny Carson...We are here on earth to do good unto others. What the others are here for, I have no idea.
Jonathan Winters...If life were fair, Elvis would still be alive today and all the impersonators would be dead.
David Letterman...If God had intended us to fly he would have made it easier to get to the airport.
Howard Hughes...America is the only country where a significant proportion of the population believes that professional wrestling is real but the moon landing was faked.
I'm not a paranoid, deranged millionaire. Actually, I'm a billionaire.
In a recent conversation with a friend I presented some of my thoughts about differences between liberals and conservatives . He gave me some food for thought based on his actual experiences.
+++++++++++++++++++++++++++++++
He said liberals lack trust and their policies often lead to behaviour that reflects this. Consequently, they are prone to create bureaucracies to enforce rules for the purpose of corralling behaviour.
He relayed an instant where a consultant was brought in to monitor behaviour and to enforce a new directional change in policy and something happened that never had prior to the consultant's employment. After the occurrence, a need for discipline was created based on the action of a person caused by the new restrictive policies. Stop and think about this. We are talking about the concept of fixing that which was never broken which then created a circumstance that results in aberrant behaviour which produces the need that never before existed.
I mentioned conservatives believe in equality at the start whereas,liberals expect equal outcomes. He added what about the circumstance of equal opportunity. There is much to be said for this proposition but even equal opportunity does not result in equal outcome because of genetic differences in humankind etc.
Are changes progressives seek based on an illusory and flawed basis/premise? If so, are the many changes we are told must occur more destructive and disruptive when measured against benefits they could possibly create? Does our constitution provide enough flexibility to be applicable in providing answers/guidelines to life as we know it today or, as the progressives maintain, is it a dead document that serves no purpose when called upon as a guide for answers to today's pressing issues?
To my mind, it is inconceivable to believe the brilliance of our "Founding Fathers" finds them incapable of drafting a document that allowed for change and that Justices are equally incapable of basing decisions on the genesis of the Founding Father's thinking and arguments so well defined in The Federalist Papers and among other such eloquent documents.
I cannot help believe progressives seek outcomes and then twist, if not torture, the Constitution's intent to achieve them and this is legislating from the bench.
On the other hand, I also acknowledge the argument that if our constitution cannot change outcomes black citizens and others would have no Civil Rights.
Perhaps the approach today's Justices take, in shaping opinions, should presume the constitution allows for change as science and other forms of developments shape and challenge our society and the intent of Our Founders can be applied in ways less radical, more orthodox and interpretive.
I was favored with a thesis written by the young man I am mentoring which discusses the issue of gun control. He makes the case that Our Founders, perhaps, did not envision our personal freedoms restricted by the growth caused by the equal freedom of gun ownership. A plausible assumption but once we go down the path of restricting defined and expressed freedoms, in order to support broader freedoms, we thrust ourselves into some thorny intellectual bushes.
I am not smart enough to have answers to the many questions I am constantly raising and pose. What I do believe is the rapidity of change caused by a fast moving world driven by technological innovation is beginning to reach a point of out-stripping our mental abilities to think in a rational way and to base decisions on logic rather than emotion and hysterical reasoning which is unlikely to produce favorable outcomes.
More dangerously, the emotional approach establishes opportunities for recreant radicalism on the part of malcontents who want to destroy our society and who use America's unresolved blemishes to bring about discord etc. There will always be those in any society who are never satisfied, are always finding fault and under the umbrella of bitterness seek to disrupt and bring about change, their kind of self-anointed/imbued change. They are the false prophets against which we need to gird ourselves but knee jerk resistance to rationale change creates it's own share of problems.
Education, a citizenry capable of reasoning, of listening to the other side is what we must strive for and when it comes to teaching our youth, so they can preserve the beauty of America and its ideals, I submit, we are failing miserably.
This is why I thought the Commencement Address by The President of Wake Forest University, I recently posted, was so special and should be listened to by anyone who considers themselves an American.
+++++++++++++++++++++++++++++
Like with so many failures will we respond after the fact and after we no longer can? (See 1 below.)
++++++++++++++++++++++++++++++
A more logical and realistic approach to thinking about the contrived happenings in Gaza. (See 2 below.)
++++++++++++++++++++++++++++++++++++
A new rant. (See 3 below.)
++++++++++++++++++++++++++++++
Trump went to the G7 and told them America was no longer a piggy bank to be robbed. Yes, a bit in your face but it needed to be said. No one who is advantaged likes being told their candy must now be shared. Many are mad at Trump for shaking the tree. I find it refreshing.
Now he is on his way to talk with the leader of N Korea and to see what we can extract from their leader. Once again, many are complaining he is unprepared, will get us in a war and the list of diatribes goes on and on ad nauseum. We elected Trump to do just what he is doing and most understood his style would be brash, New York Real Estate Mogul type so no one need be surprised. So far, Trump has moved the ball further in 500 days than Obama did in 8 years.
Time will tell how successful he will be in achieving his ultimate pursuits. Meanwhile, he has our adversaries confused, guessing and concerned their business as usual attitude towards America is no longer in vogue and a winning strategy. Hooray for Trump.
++++++++++++++++++++++++++++++++++++++
Dick
++++++++++++++++++++++++++++++
1) Upgrade America’s 19th-Century Electric Grid
The U.S. relies on regional networks vulnerable to terrorism and blackouts.
By Charles Bayless and Thomas Petri
The U.S. electrical system is inefficient and vulnerable to natural and man-made threats—from severe weather and solar storms to cyber and electromagnetic attacks. To stay competitive in the 21st century, the U.S. should upgrade its system before it’s too late.
What is commonly known as “the grid”—consisting mostly of aboveground transmission wires—is actually a patchwork of three regional networks that share few interconnections. Periods of high demand, such as a prolonged heat wave, can trigger regional imbalances in electricity supply and demand, leaving consumers to contend with price spikes and blackouts or brownouts. Insufficient transmission capacity also means that during periods of low local demand, surplus electricity is wasted rather than sold to other regions.
The U.S. grid relies on alternating-current technology, a legacy of its 19th-century creation. But a direct-current system would be far superior. Thanks to technological breakthroughs, direct-current technology can now transmit electricity over longer distances with less power loss than existing alternating-current networks.
The Climate Institute has proposed constructing a new overlay network that balances the generation and consumption of electrical power. The North American Supergrid is a concept for a multinodal, high-voltage direct-current transmission network that would extend across the lower 48 states, eventually linking with Canada and Mexico. The new grid would work as a resilient backbone to the existing electrical grid. Built largely underground alongside highways or railway rights of way, it would also be less vulnerable to attack.
By creating a level, nationwide market, the supergrid would allow energy generators throughout the country to compete directly. Because transmission distance would no longer be a constraint, the grid would promote the easy transfer and trade of energy—from renewable and traditional sources—between power-abundant and power-hungry regions. The increased transmission capacity would turn America’s enormous size into an advantage. It would permit, for example, the transmission of inexpensive energy produced by Mojave Desert solar farms or Great Plains wind farms to East Coast urban centers, supplanting more expensive power derived from fossil fuels. A 2016 study from the National Oceanic and Atmospheric Administration’s Earth System Research
Laboratory estimated that a similar supergrid could achieve roughly an 80% reduction in power-sector carbon emissions, relative to 1990 levels.
Upfront private investment could reduce costs for consumers and taxpayers. The projected cost of as much $500 billion over 30 years to construct the North American Supergrid would be outweighed by eventual savings to U.S. electricity consumers, according to the NOAA study. And construction of the new grid would create between 650,000 and 930,000 jobs yearly across the entire energy sector over the estimated three decades needed to build and maintain its necessary infrastructure, according to a 2017 Climate Institute study. Many of these jobs would come to economically depressed rural areas.
Other nations are embracing advanced direct current transmission. China is moving aggressively to build nationwide high-voltage direct-current lines, investing $88 billion between 2009 and 2020. As a part of its energy-transition strategy, the European Union plans to invest some $1 billion toward 17 new supergrid projects on the Continent.
The Trump administration can propel the U.S. into the supergrid era by expanding upon the president’s infrastructure permitting executive order to cut still more red tape. It should push Congress to streamline the grid-permitting process to promote far-reaching infrastructure proposals. The White House also should direct the Energy Department and other executive agencies to develop plans for interregional transmission, then work with the Federal Energy Regulatory Commission to implement such plans. Congress should allocate federal funds to study the future of U.S. electricity transmission.
The North American Supergrid could transform the country, much like creation of the interstate highway system did in the 1960s and ’70s. In contrast to the localized economic payoffs received from new roads and bridges, it would benefit the entire U.S. economy and produce significant environmental and security improvements. Constructing it will require leadership from the highest levels. It would be fitting if the real-estate developer president paved the way for the U.S. to enter the supergrid era.
Mr. Bayless is a former CEO of Tucson Electric Power. Mr. Petri, a Republican, is a former U.S. representative from Wisconsin. They are board members of the Climate Institute.
+++++++++++++++++++++++++++++++++++++++++++++++++
2) It's Not Gaza's Economy, Stupid
by Efraim Karsh - Jerusalem Post
[Originally published under the headline "It Is Not The Economy, Stupid"]
No cliché has dominated the discourse on the Gaza situation more than the perception of Palestinian violence as a corollary of the Strip’s dire economic condition. No sooner had Hamas and Israel been locked in yet another armed confrontation over the past weeks than the media, foreign policy experts and politicians throughout the world urged the immediate rehabilitation of Gaza as panacea to its endemic propensity for violence. Even senior members of the Israel Defense Forces opined that a “nonmilitary process” of humanitarian aid could produce a major change in the Gaza situation.
While there is no denying the argument’s widespread appeal, there is also no way around the fact that it is not only completely unfounded but the inverse of the truth. For it is not Gaza’s economic malaise that has precipitated Palestinian violence; rather, it is the endemic violence that has caused the Strip’s humanitarian crisis.
While there is no denying the argument’s widespread appeal, there is also no way around the fact that it is not only completely unfounded but the inverse of the truth. For it is not Gaza’s economic malaise that has precipitated Palestinian violence; rather, it is the endemic violence that has caused the Strip’s humanitarian crisis.
For one thing, countless nations and groups in today’s world endure far harsher socioeconomic or political conditions than the Palestinians, yet none have embraced violence and terrorism against their neighbors with such alacrity and on such a massive scale.
For another thing, there is no causal relationship between economic hardship and mass violence. On the contrary, in the modern world it is not the poor and the oppressed who have carried out the worst acts of terrorism and violence but, rather, the militant vanguards from among the better educated and more moneyed circles of society, be they homegrown terrorist groups in the West or their Middle Eastern counterparts.
Yasser Arafat, for instance, was an engineer, and his fellow arch terrorist George Habash – the pioneer of aircraft hijacking – a physician. Hassan al-Banna, founder of the Muslim Brotherhood, was a schoolteacher, while his erstwhile successor, Sayyid Qutb, whose zealous brand of Islam fired generations of terrorists, including the group behind the assassination of Egyptian president Anwar Sadat, was a literary critic and essayist. The 9/11 terrorists, let alone their multimillionaire paymaster, Osama bin Laden, as well as the terrorists who massacred their British compatriots in July 2005 and those slaughtering their coreligionists in Algeria and Iraq, were not impoverished peasants or workers driven by hopelessness and desperation but educated fanatics motivated by hatred and extreme religious and political ideals.
Nor has Hamas been an exception to this rule. Not only has its leadership been highly educated, but it has gone to great lengths to educate its followers, notably through the takeover of the Islamic University in Gaza and its transformation into a hothouse for indoctrinating generations of militants and terrorists. Hamas founder, Sheikh Ahmed Yassin, studied at the al-Azhar University in Cairo, probably the Islamic world’s most prestigious institution of higher religious learning, while his successor, Abdel Aziz Rantisi, was a physician, as is Hamas cofounder Mahmoud Zahar. The group’s current leader, Ismail Haniyeh, and Muhammad Def, head of Hamas’s military wing, are graduates of the Islamic University of Gaza, while Khaled Mashaal studied physics in Kuwait, where he resided until 1990. Hardly the products of deprivation and despair.
This propensity for violence among the educated and moneyed classes of Palestinian society was starkly reflected in the identity of the 156 men and eight women who detonated themselves in Israel’s towns and cities during the first five years of the “al-Aqsa Intifada,” murdering 525 people, the overwhelming majority of them civilians. A mere 9% of the perpetrators had basic education, while 22% were university graduates and 34% were high school graduates. Likewise, a comprehensive study of Hamas and Islamic Jihad suicide terrorists from the late 1980s to 2003 found that only 13% came from a poor background, compared with 32% of the Palestinian population in general. More than half of suicide bombers had entered further education, compared with just 15% of the general population.
By contrast, successive public opinion polls among the Palestinian residents of the West Bank and the Gaza Strip during the 1990s revealed far stronger support for the nascent peace process with Israel, and opposition to terrorism, among the poorer and less educated parts of society – representing the vast majority of the population. Thus, for example, 82% of people with a low education supported the Interim Agreement of September 1995, providing for Israel’s withdrawal from the populated Palestinian areas of the West Bank, and 80% opposed terrorist attacks against Israeli civilians, compared to 55% and 65%, respectively, among university graduates.
In short, it is not socioeconomic despair but the total rejection of Israel’s right to exist, inculcated by the PLO and Hamas in their hapless West Bank and Gaza subjects over the past 25 years, which underlies the relentless anti-Israel violence emanating from these territories and its attendant economic stagnation and decline.
At the time of the September 1993 signing of the Israel-PLO Declaration of Principles, conditions in the territories were far better than in most Arab states – despite the steep economic decline caused by the intifada of 1987-93. But within six months of Arafat’s arrival in Gaza (in July 1994), the standard of living in the Strip fell by 25%, and more than half of the area’s residents claimed to have been happier under Israel. Even so, at the time Arafat launched his war of terrorism in September 2000, Palestinian income per capita was nearly double Syria’s, more than four times Yemen’s, and 10% higher than Jordan’s – one of the better-off Arab states. Only the oilrich Gulf states and Lebanon were more affluent.
By the time of Arafat’s death, in November 2004, his terrorism war had slashed this income to a fraction of its earlier levels, with real GDP per capita some 35% below the pre-September 2000 level, unemployment more than doubling, and numerous Palestinians reduced to poverty and despondency. And while Israel’s suppression of the terrorism war generated a steady recovery, with the years 2007-11 even recording an average yearly growth above 8%, by mid-2014 a fully blown recession had taken hold, especially in the Gaza Strip.
Indeed, apart from reflecting the West Bank’s basic socioeconomic superiority vis-Ã -vis Gaza, the widening gap between the two areas during the Oslo years (the difference in per capita income shot up from 14% to 141%) was a direct corollary of Hamas’s transformation of the Strip into an unreconstructed terrorism entity, in contrast to the West Bank’s relative tranquility in the post-al-Aqsa Intifada years.
This, in turn, means that so long as Gaza continues to be governed by Hamas’s rule of the jungle, no Palestinian civil society, let alone a viable state, can develop. Just as the creation of free and democratic societies in Germany and Japan after World War II necessitated a comprehensive sociopolitical and educational transformation, so, too, it is only when the local population sweeps its oppressive rulers from power, eradicates the endemic violence from political and social life, and teaches the virtues of coexistence with Israel that Gaza can look forward to a better future.
For another thing, there is no causal relationship between economic hardship and mass violence. On the contrary, in the modern world it is not the poor and the oppressed who have carried out the worst acts of terrorism and violence but, rather, the militant vanguards from among the better educated and more moneyed circles of society, be they homegrown terrorist groups in the West or their Middle Eastern counterparts.
Yasser Arafat, for instance, was an engineer, and his fellow arch terrorist George Habash – the pioneer of aircraft hijacking – a physician. Hassan al-Banna, founder of the Muslim Brotherhood, was a schoolteacher, while his erstwhile successor, Sayyid Qutb, whose zealous brand of Islam fired generations of terrorists, including the group behind the assassination of Egyptian president Anwar Sadat, was a literary critic and essayist. The 9/11 terrorists, let alone their multimillionaire paymaster, Osama bin Laden, as well as the terrorists who massacred their British compatriots in July 2005 and those slaughtering their coreligionists in Algeria and Iraq, were not impoverished peasants or workers driven by hopelessness and desperation but educated fanatics motivated by hatred and extreme religious and political ideals.
Nor has Hamas been an exception to this rule. Not only has its leadership been highly educated, but it has gone to great lengths to educate its followers, notably through the takeover of the Islamic University in Gaza and its transformation into a hothouse for indoctrinating generations of militants and terrorists. Hamas founder, Sheikh Ahmed Yassin, studied at the al-Azhar University in Cairo, probably the Islamic world’s most prestigious institution of higher religious learning, while his successor, Abdel Aziz Rantisi, was a physician, as is Hamas cofounder Mahmoud Zahar. The group’s current leader, Ismail Haniyeh, and Muhammad Def, head of Hamas’s military wing, are graduates of the Islamic University of Gaza, while Khaled Mashaal studied physics in Kuwait, where he resided until 1990. Hardly the products of deprivation and despair.
This propensity for violence among the educated and moneyed classes of Palestinian society was starkly reflected in the identity of the 156 men and eight women who detonated themselves in Israel’s towns and cities during the first five years of the “al-Aqsa Intifada,” murdering 525 people, the overwhelming majority of them civilians. A mere 9% of the perpetrators had basic education, while 22% were university graduates and 34% were high school graduates. Likewise, a comprehensive study of Hamas and Islamic Jihad suicide terrorists from the late 1980s to 2003 found that only 13% came from a poor background, compared with 32% of the Palestinian population in general. More than half of suicide bombers had entered further education, compared with just 15% of the general population.
By contrast, successive public opinion polls among the Palestinian residents of the West Bank and the Gaza Strip during the 1990s revealed far stronger support for the nascent peace process with Israel, and opposition to terrorism, among the poorer and less educated parts of society – representing the vast majority of the population. Thus, for example, 82% of people with a low education supported the Interim Agreement of September 1995, providing for Israel’s withdrawal from the populated Palestinian areas of the West Bank, and 80% opposed terrorist attacks against Israeli civilians, compared to 55% and 65%, respectively, among university graduates.
In short, it is not socioeconomic despair but the total rejection of Israel’s right to exist, inculcated by the PLO and Hamas in their hapless West Bank and Gaza subjects over the past 25 years, which underlies the relentless anti-Israel violence emanating from these territories and its attendant economic stagnation and decline.
At the time of the September 1993 signing of the Israel-PLO Declaration of Principles, conditions in the territories were far better than in most Arab states – despite the steep economic decline caused by the intifada of 1987-93. But within six months of Arafat’s arrival in Gaza (in July 1994), the standard of living in the Strip fell by 25%, and more than half of the area’s residents claimed to have been happier under Israel. Even so, at the time Arafat launched his war of terrorism in September 2000, Palestinian income per capita was nearly double Syria’s, more than four times Yemen’s, and 10% higher than Jordan’s – one of the better-off Arab states. Only the oilrich Gulf states and Lebanon were more affluent.
By the time of Arafat’s death, in November 2004, his terrorism war had slashed this income to a fraction of its earlier levels, with real GDP per capita some 35% below the pre-September 2000 level, unemployment more than doubling, and numerous Palestinians reduced to poverty and despondency. And while Israel’s suppression of the terrorism war generated a steady recovery, with the years 2007-11 even recording an average yearly growth above 8%, by mid-2014 a fully blown recession had taken hold, especially in the Gaza Strip.
Indeed, apart from reflecting the West Bank’s basic socioeconomic superiority vis-Ã -vis Gaza, the widening gap between the two areas during the Oslo years (the difference in per capita income shot up from 14% to 141%) was a direct corollary of Hamas’s transformation of the Strip into an unreconstructed terrorism entity, in contrast to the West Bank’s relative tranquility in the post-al-Aqsa Intifada years.
This, in turn, means that so long as Gaza continues to be governed by Hamas’s rule of the jungle, no Palestinian civil society, let alone a viable state, can develop. Just as the creation of free and democratic societies in Germany and Japan after World War II necessitated a comprehensive sociopolitical and educational transformation, so, too, it is only when the local population sweeps its oppressive rulers from power, eradicates the endemic violence from political and social life, and teaches the virtues of coexistence with Israel that Gaza can look forward to a better future.
Efraim Karsh is director of the Begin-Sadat Center for Strategic Studies, emeritus professor of Middle East and Mediterranean studies at King’s College London, and editor of the Middle East Quarterly.
++++++++++++++++++++++++++++++++++++++++++++
3)Moodys has issued a statement that CMBS loans are now almost as risky as
in 2007 because 75% of them are interest only, and the interest only
period is now 6 years, up from 2.2 years just a few years ago. In
addition, they are becoming much more covenant light, and are at higher
leverage. All of this is a red flag since these things create much more
risk of serious problems when the recession hits. There is also a bigger
concentration of single tenant properties, which, as we have seen in
retail, can be deadly in a recession. Asset and sponsor quality is also
deteriorating. There is now so much competition to put out loans by so
many non-bank sources, that borrowers can get lenders to compete, which
always means lower quality underwriting. Far too much capital chasing
too few good deals. Underwriting is not nearly as bad as in 2006-7 yet,
but it appears the trend is what it always has been, when the economy is
strong and there is too much capital, underwriting standards fall down,
and then the stage is set for a bad outcome when the economy goes bad.
It is typically 10-12 years between collapse of the last crash and then
credit quality deterioration and the next credit collapse. We are at 10
years. Dodd Frank had rules to try to avoid a replay of 2008 in CMBS,
but a lot of loans now are made by private equity funds that are not
subject to these regulations. One thing that is immutable is that as
each generation comes into Wall St, they think they know better how to
do it, and they eventually do the same dumb loans in pursuit of profits
and bonuses. It has never been different. We are not about to have a
major crash again, but CMBS loan quality is deteriorating now, and one
day in the next 2-3 years it will be a bad problem. When they start
doing a lot of CDO's and virtual CMBS pools with derivatives, then that
is a sure sign the end is near. That has not happened yet. The rating
agencies have increased credit enhancement levels, but that will not
stop the risk trend. This issue is a long term increasing risk, not one
we need to worry about creating another crash in the near term. The next
one will be more confined because the banks are not going too far out
the risk curve, and residential loans are much more in control for now.
The US economy is entering the sweet spot. Unemployment is near record
low. U6 is 7.2%, not far from the record low of 6.9%. Everything is now
charging ahead after a slower than expected Q1. It just took time for
most average working people to actually see wage increases combined with
tax reductions, and job security, and so real take home pay increases
for the first time in a decade. Now they believe what they see in their
paycheck, and not what Pelosi and the mainstream media tout as just for
the wealthy. Wages are up 2.7%, vs a year ago, and up .3% just in May,
which is well above inflation. Workers who make low pay now realize they
can change jobs to better paying factory, construction, or other jobs.
For hotels this is a brewing nightmare as hotel wages are far below
almost all other jobs in pay, and companies are willing now to train
people for better paying functions, making it a lot easier for unskilled
hotel workers to improve their lives. . Small cities are even paying
workers to come there to fill jobs to keep factories in town. Hotels
like to tout revpar, but the real number is net cash flow which is
getting squeezed more and more as the economy improves. The hotel
industry never wants to talk about profits because that story is not so
good for many hotels, and is about to be getting worse.
Oil is likely to stay in the $60-$70 range as the US ramps up production
to be the first or second largest producer in a year or two. Fracking
works at under $40 per barrel now that the producers in the US went to
new technology to counter the Saudi attempt to force US producers into
bankruptcy. Instead the US drillers went to high tech and lowered costs
dramatically, which stopped the Saudi attempt to put them out of
business. The IMF says at below $40 most other oil producing nations are
not able to cover their financial needs, so US drillers are well
insulated from major price declines below their costs going forward.
That means the US has much cheaper energy than the rest of the world,
and now, under Trump, is becoming a major exporter of LNG and even oil.
That means more exports, more jobs, means more revenue for the US
government, and a dent in the trade deficit.
Q2 is likely to be at least 3.5% GDP and maybe even 4% as consumers are
now ramping up spending, and as companies are now in a position to begin
to undertake new capital spend plans with the tax bill and strong
economy, combined with massive deregulation. We are now in the growth
cycle that will feed on itself. Q3 is likely to be as good as Q2, if Q2
is over 3.5%, and that will strengthen Republicans chances to hold the
House. Try as she may, Pelosi has a hard time convincing voters that
job growth is no good, and workers are in trouble. Inflation is still
under 2% with gas prices declining again as oil prices are no win
decline. Voters will see their bigger paychecks, and the economic
growth, and know what is reality. There is a good chance even blacks
will start to shift Republican as they see black unemployment at record
lows, and getting even better. Even ex felons are getting training now,
and jobs. Low wage workers, mostly minorities, are moving now from part
time to full time (457,000 over the past year), and low wages are now
under pressure to be raised to find any workers. Long term unemployed
has dropped by 476,000 over the past year. People who were unemployed or
working only a few hours a day under Obama, will get full time, much
better paying jobs with benefits, and will see the real difference, and
how the strong economy has improved their lives. Meantime Pelosi says
they are going to raise taxes and impeach Trump. Not a good selling
proposition. As the year goes on toward the election, more and more
people will feel a lot better about their lives, and not want to change
things in DC.
All of this is very good for stocks going forward. As consumers now ramp
up spending, corporate profits will soar, and stock prices will rise on
the earnings, and likely expansion of PE multiples as optimism
increases for better earnings ahead. The slow down in the EU will not
impact stocks for a while, nor will tariffs. The market continues t be
driven by the FANG-tech stocks. If you invest in QQQ, or similar ETFs,
you get to ride the wave without worrying which stocks to own.
If you think Greece is solving its problems-wrong. They are still in
crisis mode, and have a long road before economic stability returns.
Spain now is in political crisis. Italy is a disaster, and will remain
so, even with the new government. US tariffs will just exacerbate these
problems. Slovenia is about to have an election and might have issues
similar to Italy. French unions are increasing protests against Macron's
effort to fix the French economy, which has terrible labor rules and
high taxes. Then there is Brexit slowing economic growth, and Trump.
Everyone is freaking out over tariffs, but it is all a game of chicken
and the EU will lose as will Canada. Neither is in a strong position
for a fight. The US is. The EU has so many other problems, and the shift
away from German control of the bloc, that they have no consensus on
what to do. China is a whole different situation, and far more complex.
I will try to use this bigger font going forward so I can read my own
Rant.
3)Moodys has issued a statement that CMBS loans are now almost as risky as
in 2007 because 75% of them are interest only, and the interest only
period is now 6 years, up from 2.2 years just a few years ago. In
addition, they are becoming much more covenant light, and are at higher
leverage. All of this is a red flag since these things create much more
risk of serious problems when the recession hits. There is also a bigger
concentration of single tenant properties, which, as we have seen in
retail, can be deadly in a recession. Asset and sponsor quality is also
deteriorating. There is now so much competition to put out loans by so
many non-bank sources, that borrowers can get lenders to compete, which
always means lower quality underwriting. Far too much capital chasing
too few good deals. Underwriting is not nearly as bad as in 2006-7 yet,
but it appears the trend is what it always has been, when the economy is
strong and there is too much capital, underwriting standards fall down,
and then the stage is set for a bad outcome when the economy goes bad.
It is typically 10-12 years between collapse of the last crash and then
credit quality deterioration and the next credit collapse. We are at 10
years. Dodd Frank had rules to try to avoid a replay of 2008 in CMBS,
but a lot of loans now are made by private equity funds that are not
subject to these regulations. One thing that is immutable is that as
each generation comes into Wall St, they think they know better how to
do it, and they eventually do the same dumb loans in pursuit of profits
and bonuses. It has never been different. We are not about to have a
major crash again, but CMBS loan quality is deteriorating now, and one
day in the next 2-3 years it will be a bad problem. When they start
doing a lot of CDO's and virtual CMBS pools with derivatives, then that
is a sure sign the end is near. That has not happened yet. The rating
agencies have increased credit enhancement levels, but that will not
stop the risk trend. This issue is a long term increasing risk, not one
we need to worry about creating another crash in the near term. The next
one will be more confined because the banks are not going too far out
the risk curve, and residential loans are much more in control for now.
The US economy is entering the sweet spot. Unemployment is near record
low. U6 is 7.2%, not far from the record low of 6.9%. Everything is now
charging ahead after a slower than expected Q1. It just took time for
most average working people to actually see wage increases combined with
tax reductions, and job security, and so real take home pay increases
for the first time in a decade. Now they believe what they see in their
paycheck, and not what Pelosi and the mainstream media tout as just for
the wealthy. Wages are up 2.7%, vs a year ago, and up .3% just in May,
which is well above inflation. Workers who make low pay now realize they
can change jobs to better paying factory, construction, or other jobs.
For hotels this is a brewing nightmare as hotel wages are far below
almost all other jobs in pay, and companies are willing now to train
people for better paying functions, making it a lot easier for unskilled
hotel workers to improve their lives. . Small cities are even paying
workers to come there to fill jobs to keep factories in town. Hotels
like to tout revpar, but the real number is net cash flow which is
getting squeezed more and more as the economy improves. The hotel
industry never wants to talk about profits because that story is not so
good for many hotels, and is about to be getting worse.
Oil is likely to stay in the $60-$70 range as the US ramps up production
to be the first or second largest producer in a year or two. Fracking
works at under $40 per barrel now that the producers in the US went to
new technology to counter the Saudi attempt to force US producers into
bankruptcy. Instead the US drillers went to high tech and lowered costs
dramatically, which stopped the Saudi attempt to put them out of
business. The IMF says at below $40 most other oil producing nations are
not able to cover their financial needs, so US drillers are well
insulated from major price declines below their costs going forward.
That means the US has much cheaper energy than the rest of the world,
and now, under Trump, is becoming a major exporter of LNG and even oil.
That means more exports, more jobs, means more revenue for the US
government, and a dent in the trade deficit.
Q2 is likely to be at least 3.5% GDP and maybe even 4% as consumers are
now ramping up spending, and as companies are now in a position to begin
to undertake new capital spend plans with the tax bill and strong
economy, combined with massive deregulation. We are now in the growth
cycle that will feed on itself. Q3 is likely to be as good as Q2, if Q2
is over 3.5%, and that will strengthen Republicans chances to hold the
House. Try as she may, Pelosi has a hard time convincing voters that
job growth is no good, and workers are in trouble. Inflation is still
under 2% with gas prices declining again as oil prices are no win
decline. Voters will see their bigger paychecks, and the economic
growth, and know what is reality. There is a good chance even blacks
will start to shift Republican as they see black unemployment at record
lows, and getting even better. Even ex felons are getting training now,
and jobs. Low wage workers, mostly minorities, are moving now from part
time to full time (457,000 over the past year), and low wages are now
under pressure to be raised to find any workers. Long term unemployed
has dropped by 476,000 over the past year. People who were unemployed or
working only a few hours a day under Obama, will get full time, much
better paying jobs with benefits, and will see the real difference, and
how the strong economy has improved their lives. Meantime Pelosi says
they are going to raise taxes and impeach Trump. Not a good selling
proposition. As the year goes on toward the election, more and more
people will feel a lot better about their lives, and not want to change
things in DC.
All of this is very good for stocks going forward. As consumers now ramp
up spending, corporate profits will soar, and stock prices will rise on
the earnings, and likely expansion of PE multiples as optimism
increases for better earnings ahead. The slow down in the EU will not
impact stocks for a while, nor will tariffs. The market continues t be
driven by the FANG-tech stocks. If you invest in QQQ, or similar ETFs,
you get to ride the wave without worrying which stocks to own.
If you think Greece is solving its problems-wrong. They are still in
crisis mode, and have a long road before economic stability returns.
Spain now is in political crisis. Italy is a disaster, and will remain
so, even with the new government. US tariffs will just exacerbate these
problems. Slovenia is about to have an election and might have issues
similar to Italy. French unions are increasing protests against Macron's
effort to fix the French economy, which has terrible labor rules and
high taxes. Then there is Brexit slowing economic growth, and Trump.
Everyone is freaking out over tariffs, but it is all a game of chicken
and the EU will lose as will Canada. Neither is in a strong position
for a fight. The US is. The EU has so many other problems, and the shift
away from German control of the bloc, that they have no consensus on
what to do. China is a whole different situation, and far more complex.
I will try to use this bigger font going forward so I can read my own
Rant.
+++++++++++++++++++++++++++++++++++++++++++++++
No comments:
Post a Comment