Saturday, December 29, 2018


David Catron plans to reverse his decision and vote for Trump in 2020 based on accomplishments. (See 1 below.)

And:

Mollie Hemingway and Russian Collusion:https://imprimis.hillsdale.edu/russian-collusion/?utm_source=facebook&utm_medium=paid&utm_campaign=Russian+Collusion 
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Can New York City learn from Seattle?

Progressive liberals have a lot emotionally invested in their failed ideas so believing it will be easy to change the direction of San Francisco, Chicago, New York City, Seattle etc. will take a long time, patience and a ton of money.

Good ideas are often fragile, vulnerable and often succumb to calls for change that are based on poor reasoning and emotion. (See 2 below.)
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Some things are so bizarre they are hard to believe. (See 3 below.)
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Parting, "edited" 2018 words from Mauldin. He writes we are in a bear market.

I may not be in agreement with his market picturization but I agree with his Fed commentary and have been saying much the same. (See 4 below.)
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Dick
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1)Trump: The Best President I Didn’t Vote For

He has presided over two years of remarkable success.

David Catron is a health care consultant and frequent contributor to The American Spectator


I didn’t vote for Donald Trump. I was afraid his obviously improvised campaign, imprecise explanations concerning how he planned to achieve his policy goals, and unsettling antics presaged a disastrous one-term presidency if he somehow managed to win. Unlike Bill Kristol and his ilk, however, I never considered voting for the execrable Hillary Clinton. So, knowing that Trump would win my deep red state anyway, I voted for what’s-his-name from New Mexico. Predictably, I was surprised when Trump won. But that was nothing compared to the astonishment I experienced when it dawned on me that he’s a remarkably effective President.

After only two years in office, in the face of unprecedented and relentless resistance from the Democrats, the media, and the metastasizing Mueller investigation, President Trump has accomplished more than many presidents accomplish in two terms. He has not, of course, achieved all of his goals. The most obvious disappointments involved Obamacare and the border wall. Yet, even in these areas, his administration has made measureable progress and there is good reason to believe that he will eventually overcome Democratic obstructionism and achieve his ultimate objectives. Meanwhile, Trump’s long list of unalloyed successes keeps growing.

Trump’s most conspicuous successes have involved the economy. Under his predecessor GDP growth was characterized by the kind of malaise that prevailed during the Carter era, and we were told that a growth rate of about 2% and an unemployment rate of about 4.5% was the new normal. Trump rejected that prognosis and took steps to energize the economy. Now, despite the somewhat inexplicable meddling with interest rates by the Fed, GDP growth is at 3.4% and the unemployment rate is 3.7%. As Investor’s Business Daily points out, much of this is directly attributable to the Trump tax cuts so often maligned by the Democrats and the media:

Contrary to Democrats’ claims, workers are clearly sharing in the tax-cut windfall. Not just through tax-cut bonuses and lower withholdings, but through increased opportunities and wage growth.… Average hourly wages are rising at 3.1%, the fastest rate since 1999. Unemployment rates are at lows not seen since 1969, and for minority groups, they’re lower than any time on record. Median household income is at all-time highs.

This means job opportunities for the blue collar “deplorables” who voted for Trump. Of the more than 4 million jobs created during his tenure in the White House, at least 10% have been in the manufacturing sector that the Democrats long ago left for dead.And among the most delicious ironies of the Trump economy is its positive effect on the job prospects of minority voters ostensibly represented by the Democrats. Black and Hispanic unemployment rates are at all-time lows. Female unemployment and youth unemployment are at their lowest points in half a century. Meanwhile, household incomes are rising. Yet Nancy Pelosi insists that all this is bad news:

From day one, the White House and Republicans in Congress have sold out working and middle class families to further enrich the wealthy and big corporations shipping jobs overseas.… At the same time, the President’s reckless policies are exploding gas prices, wiping out the few meager gains that some families should have received from the GOP tax scam, as wages remain stagnant.… Democrats will never stop fighting for the hard-working middle class families.

Every syllable of this is nonsense, of course. Pelosi’s claim that Americans are experiencing “exploding gas prices,” for example, is Orwellian fiction. Either the presumptive Speaker of the House doesn’t read the news or she is just another Democrat fabulist. In reality gas prices are dropping all across the country. U.S. News & World Report advised its readers last week that the average cost of gas has hit its lowest level in six years: “The national average price of gas dropped below $2 Monday morning for the first time since 2009, according to AAA. The average price at the pump was $1.998 per gallon.” If that’s hurting us, beat us harder please.

But Pelosi and the Democrats have no choice but to lie about the positive changes that have occurred on Trump’s watch. This is particularly true of the Tax Cuts and Jobs Act that he signed into law last year. They can’t admit that most of its $5.5 trillion in gross cuts eased the tax burden on families. They must mislead the voters about its dramatic increase in the standard deduction for individuals and families. They can’t admit that it doubled the child tax credit. They can’t tell the truth about the 85% of American workers who saw their paychecks increase as a result of the cuts, or the entrepreneurs who can now deduct 20% of their business income.

Likewise, the Democrats can’t tell the truth about the President’s efforts to free Americans from the Obamacare gulag by expanding short-term, limited-duration health plans and enabling more small businesses to join Association Health Plans. The Democrats can’t talk honestly about the repeal of the law’s “death panel,” the Independent Payment Advisory Board (IPAB), whose sole purpose was the rationing of essential health care to the elderly. They must lie about the effective repeal of Obamacare’s individual insurance mandate when the President and Congress eliminated the law’s “tax-penalty” for failing to purchase exorbitantly priced health plans.

Nor can the Democrats tell the truth about Trump’s progress in reforming the federal judiciary by appointing judges willing to follow the Constitution. They can’t talk about his nomination and the Senate’s confirmation of two Supreme Court Justices — Neil Gorsuch and Brett Kavanaugh. Nor can they discuss the President’s nomination and the Senate’s confirmation of 83 additional federal judges who will sit on United States Courts of Appeals and United States District Courts. And they certainly can’t breathe a word about the very real possibility that he may well have to appoint a third justice to the Supreme Court during the next two years.

The Democrats must also remain mum about the benefits of Trump energy initiatives like the approval of the Keystone XL Pipeline, opening up the Alaska National Wildlife Refuge to energy exploration, withdrawing from the economically unsustainable Paris climate agreement, reforming National Ambient Air Quality Standards, rescinding his predecessor’s deliberately cumbersome hydraulic fracturing rule, expansion of offshore drilling, ad infinitum. They can’t admit that Trump has largely defanged the disastrous Dodd-Frank “reform” legislation that has been strangling credit unions, community banks, and regional financial institutions.

And then there’s foreign policy and defense. The President moved the U.S. Embassy in Israel to Jerusalem. He withdrew from the outrageous Obama Iran deal and re-imposed nuclear-related sanctions. He initiated an historic summit with North Korean President Kim Jong-Un in an effort to denuclearize the Korean Peninsula. Trump changed the rules of engagement with regard to the fight against ISIS resulting in the liberation of virtually all Iraqi territory from the tender mercies of that terrorist group, and announced the withdrawal of U.S. forces from Syria. Finally, Trump dramatically increased military funding to more than $700 billion for FY 2018.

The list of Trump’s accomplishments is far longer than the above, but the point should be obvious. So let’s wrap it up with Criminal Justice Reform, something to which several administrations have devoted earnest lip service. As Wayne Allyn Root put it a few days ago, “If Obama passed criminal justice reform, he’d be hailed as a hero by the media, black leaders, the black community and the ACLU.… Trump did. I hear crickets.” Instead, the Democrats, the media, and Robert Mueller want to take him down. Why? Precisely because he has been so successful. I think he’ll beat them in the end, and I know he’ll get my vote in 2020.
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2)

What NYC must learn from Seattle’s homeless struggle


Seattle is under siege. Over the past five years, the Emerald City has seen an explosion of homelessness, crime and addiction. In its 2017 point-in-time count of the homeless, Washington state’s King County social services agency All Home found 11,643 people sleeping in tents, cars and emergency shelters. Property crime has risen to a rate 2½ times higher than Los Angeles’ and four times higher than New York City’s. Cleanup crews pick up tens of thousands of dirty needles from city streets and parks every year.

At the same time, according to the Puget Sound Business Journal, the Seattle metro area spends more than $1 billion fighting homelessness every year. That’s nearly $100,000 for every homeless man, woman and child in King County, yet the crisis seems only to have deepened, with more addiction, more crime, and more tent encampments in residential neighborhoods. By any measure, the city’s efforts are not working.
Over the past year, I’ve spent time at city council meetings, political rallies, homeless encampments and rehabilitation facilities, trying to understand how the government can spend so much money with so little effect.
While most of the debate has focused on tactical policy questions — build more shelters? open supervised injection sites? — the real battle isn’t being waged in the tents, under the bridges or in the corridors of City Hall, but in the realm of ideas, where, for now, four ideological power centers frame Seattle’s homelessness debate. I’ll identify them as the socialists, the compassion brigades, the homeless-industrial complex and the addiction evangelists.
Together, they have dominated the local policy discussion, diverted hundreds of millions of dollars toward favored projects, and converted many well-intentioned voters to the politics of unlimited compassion. If we want to break through the failed status quo on homelessness in places like Seattle, we must first map the ideological battlefield, identify the flaws in our current policies and rethink our assumptions.

Seattle has long been known as one of America’s most liberal locales, but in recent years, the city has marched even further left as socialists, once relegated to the margins, have declared war on the Democratic establishment. Socialist Alternative City Councilwoman Kshama Sawant claims that the city’s homelessness crisis is the inevitable result of the Amazon boom, greedy landlords and rapidly increasing rents.
The capitalists of Amazon, Starbucks, Microsoft and Boeing, in her Marxian optic, generate enormous wealth for themselves, drive up housing prices, and push the working class toward poverty and despair — and, too often, onto the streets.
On the surface, this argument has its own internal logic. Advocates point to Zillow and McKinsey studies that show a high correlation between rent hikes and homelessness in Seattle, for example. But correlation is not causation, and the survey data paint a remarkably different picture.
According to King County’s point-in-time study, only 6 percent of homeless people surveyed cited “could not afford rent increase” as the precipitating cause of their situation, pointing instead to a wide range of other problems — domestic violence, incarceration, mental illness, family conflict, medical conditions, breakups, eviction, addiction and job loss — as bigger factors.
Further, while the Zillow study did find a correlation between rising rents and homelessness in four major markets — Seattle, Los Angeles, New York and Washington, DC — it also found that homelessness decreased despite rising rents in Houston, Tampa, Chicago, Phoenix, St. Louis, San Diego, Portland, Detroit, Baltimore, Atlanta, Charlotte and Riverside, Calif. Rent increases are a real burden for the working poor, but the evidence suggests that higher rents alone don’t push people onto the streets.
Even in a pricey city like Seattle, most working- and middle-class residents respond to economic incentives in logical ways: relocating to less expensive neighborhoods, downsizing to smaller apartments, taking in roommates, moving in with family or leaving the city altogether. King County is home to more than 1 million residents earning below the median income, and 99 percent of them manage to find a place to live and pay the rent on time. The aggregate-level analyses from Zillow and McKinsey don’t take into account the vast number of options available even to the poorest families; for the socialists, “The rent is too damn high” explains everything.
What the socialists won’t, or can’t, see is that their agenda cannot solve the homelessness crisis. Even if the Sawant-championed “head tax” on big employers had stayed in force — it was repealed in June — the city would have built, at most, only 187 subsidized housing units per year, which means that it would take at least 60 years to provide housing for all those currently homeless.
The compassion brigades are the moral crusaders of homelessness policy. Their Seattle political champion is City Councilman Mike O’Brien, a former chief financial officer for the corporate law firm Stokes Lawrence, who made his name in Seattle politics fighting to ban Yellow Pages deliveries and build a bike lane through a working shipyard in the city’s Ballard neighborhood.
In recent years, O’Brien has become a leader in the campaign to legalize homelessness throughout the city. He has proposed ordinances to legalize street camping on 167 miles of public sidewalks, permit RV camping on city streets, and prevent the city’s homeless-outreach Navigation Teams (made up of cops and other workers) from cleaning up tent cities.
O’Brien and his supporters have constructed an elaborate political vocabulary about the homeless, elevating three key myths to the status of conventional wisdom. The first is that many of the homeless are holding down jobs but can’t get ahead. “I’ve got thousands of homeless people that actually are working and just can’t afford housing,” O’Brien told the Denver Post last year.
But according to King County’s own survey data, only 7.5 percent of the homeless report working full-time, despite record-low unemployment, record job growth and Seattle’s record-high $15 minimum wage. The reality, obvious to anyone who spends any time in tent cities or emergency shelters, is that 80 percent of the homeless suffer from drug and alcohol addiction and 30 percent suffer from serious mental illness, including bipolar disorder and schizophrenia.
The second key myth is that the homeless are “our neighbors,” native to Seattle. Progressive publications like The Stranger insist that “most people experiencing homelessness in Seattle were already here when they became homeless.” This assertion, too, clashes with empirical evidence. More than half of Seattle’s homeless come from outside the city limits, according to the city’s own data. Even this number might be vastly inflated, as the survey asks only “where respondents were living at the time they most recently became homeless” — so, for example, a person could move to Seattle, check into a motel for a week, and then start living on the streets and be considered “from Seattle.”
More rigorous academic studies in San Francisco and Vancouver suggest that 40 percent to 50 percent of the homeless moved to those cities for their permissive culture and generous services. There’s no reason to believe that Seattle is different on this score.

The third myth: O’Brien and his allies argue that the street homeless want help but that there aren’t enough services. Once again, county data contradict their claims: 63 percent of the street homeless refuse shelter when offered it by the city’s Navigation Teams, claiming that “there are too many rules” (39.5 percent) or that “they are too crowded” (32.6 percent).
The recent story about a woman’s “tent mansion” near the city’s Space Needle vividly illustrated how a contingent among the homeless chooses to live on the streets.
“We don’t want to change our lifestyle to fit their requirements,” the woman told newscasters for a CBS Seattle report, explaining how she and her boyfriend moved from West Virginia to Seattle for the “liberal vibe,” repeatedly refusing shelter. “We intend to stay here. This is the solution to the homeless problem. We want autonomy, right here.”
The city’s compassion campaign has devolved into permissiveness, enablement, crime and disorder. Public complaints about homeless encampments from the first three months of this year are an array of horrors: theft, drugs, fighting, rape, murder, explosions, prostitution, assaults, needles and feces. Yet prosecutors have dropped thousands of misdemeanor cases, and police officers are directed not to arrest people for “homelessness-related” offenses, including theft, destruction of property, and drug crimes
As Scott Lindsay, Seattle’s former top crime adviser, reported to former Mayor Ed Murray: “The increase in street disorder is largely a function of the fact that heroin, crack and meth possession has been largely legalized in the city over the past several years. The unintended consequence of that social-policy effort has been to make Seattle a much more attractive place to buy and sell hard-core drugs.”

What I call the addiction evangelists make up the final cohort of the city’s homelessness power center. They don’t want society simply to accept their choices; they want society to pay for them.

They promote harm reduction, including the opening of safe injection sites for drug users — something that New York City is looking to introduce. Whatever help they might offer addicts, public consumption sites do tremendous damage to businesses, residents and cities at large. It also attracts more homeless to a city.
In Seattle, the influx has already begun. According to survey data, approximately 9.5 percent of the city’s homeless say that they came “for legal marijuana,” 15.4 percent came “to access homeless services,” and 15.7 percent were “traveling or visiting” the region and decided that it was a good place to set up camp. As the city builds out its addiction infrastructure and focuses social services in the downtown core, the problem will intensify. Even King County’s former homelessness czar admits that the city’s policies have a “magnet effect.”
The United States generally remains in denial about the reality of homelessness. While ideologues denounce various villains who “cause” homelessness — capitalists, landlords, racists, computer programmers — the reality is that homelessness is a product of disaffiliation.
For the past 70 years, sociologists, political scientists and theologians have documented the slow atomization of society. As family and community bonds weaken, our most vulnerable citizens fall victim to the addiction, mental illness, isolation, poverty and despair that almost always precipitate the final slide into homelessness. The best way to prevent homelessness isn’t to build new apartment complexes or pass new tax levies but to rebuild the family, community, and social bonds that once held communities together. and how do we do that?
In the near term, cities must shift toward a stance of realism, which means acknowledging that compassion without limit is a road to disaster. Homelessness should be seen not as a problem to be solved but one to be contained. Cities must stop ceding their parks, schools and sidewalks to homeless encampments. And Seattle, in particular, must stop spending nearly $1 billion a year to “solve homelessness” without clear accountability and visible results.

In San Diego, for instance, city officials and the private sector worked together to build three barracks-style shelters that house nearly 1,000 people for only $4.5 million. They’ve moved 700 individuals off the streets and into the emergency shelter, allowing the police and city crews to remove and clean up illegal encampments.

In Houston, local leaders have reduced homelessness by 60 percent through a combination of providing services and enforcing a zero-tolerance policy for street camping, panhandling, trespassing and property crimes. There’s nothing compassionate about letting addicts, the mentally ill and the poor die in the streets. The first order of business must be to clean up public spaces, move people into shelters and maintain public order.
Ultimately, the success or failure of local government is a back-to-basics proposition: Are the streets clean? Are the neighborhoods safe? Are people able to live, work and raise their families in a flourishing environment? We have the resources to contain the homelessness crisis, in Seattle and elsewhere. The question is whether political leaders will have the courage to act.
Christopher F. Rufo is executive director for the Documentary Foundation and a research fellow at the Discovery Institute’s Center for Wealth & Poverty. He has directed three documentaries for PBS, and his next film, “America Lost,” tells the story of life in three of America’s forgotten cities. This essay is adapted from City Journal.
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3) Mizzou Official Claims Tall Men Asking Out Short Women Could Constitute Sexual Misconduct 
By Ashe Schow
Getting up the courage to ask someone out on a date can already be nerve-racking, but now that college campuses have completely gone off the deep end, that fear will be intensified.
Today’s crazy comes from — unsurprisingly — the University of Missouri (Mizzou), best known for torpedoing its enrollment rates after campus protests led a professor to threaten a student journalist. An official at Mizzou indicated during a deposition that a male student who was physically larger than the female student he asked out may have violated the school’s Title IX policy because his physical size gave him “power over her.”
For years, we have been told that one must receive “affirmative consent” before anything of a dating or sexual nature takes place. Critics of such policies, such as this reporter, have often wondered what would happen if the mere ask is unwanted, does that also constitute sexual harassment or assault?
Now we appear to have our answer: Yes.
When a Mizzou official was questioned regarding a case where a black male Ph.D. candidate at the school asked out a white female fitness trainer, she bizarrely suggested that the fact that the male student was larger than the female student gave him “power over her” and violated school policy.
The Daily Wire previously reported on the case in July. The male student, whom The Daily Wire will refer to as John Doe, asked out the female fitness instructor, who will be identified as Jane Roe. She said she was busy but discussed with him possibly going out later that month. Two days later, she told him to “stop making romantic advances toward her,” according to John’s lawsuit against Mizzou. Despite not wanting to date him, Jane asked John to keep taking her to dance classes.
John did this, and later asked Jane to recommend some YouTube videos to help him improve his dancing. She suggested private lessons but told him she didn’t teach privately. She then, according to John’s lawsuit, avoided him for the next week.
On October 14, 2016, John wrote Jane a three-page letter “apologizing for being awkward around her, expressing sincere feelings for her, and asking [her] what if anything she wanted from Plaintiff,” his lawsuit said.
Cathy Scroggs, who was Mizzou’s Vice Chancellor for Student Affairs when the incident involving John and Jane occurred, was asked during a recent deposition if the accusation against John satisfied the school’s policy for sexual misconduct regarding one having “power or authority” over another. Scroggs responded, “I think he was perceived as having power over her.”
She was further questioned as to the “nature of [John’s] power over her.” The interviewer asked if it was just John’s “size” that contributed to that “power.”
Scroggs responded: “His physical size.”
The interviewer then said part of the conduct code “doesn’t require him to be a teacher.” And asked, “When it says person of authority, it doesn’t mean, like, a teacher or boss?”
Scroggs responded: “Well, I suppose it could; but in this case, no, I didn’t interpret it that way.”
So while most people would assume “power or authority” refers to a professor or other superior’s relationship with a student, Scroggs indicated that literally being larger than another person and asking them out could be an unfair sexual situation.
Later in the deposition, Andy Hayes, Mizzou’s Assistant Vice Chancellor for Civil Rights & Title IX, suggested that if someone were confused about whether they had “a legitimate purpose” for asking someone out on a date, they could call his office for clarification, but they might not get a definite answer. Here’s what he said in the original exchange:
Q. Is asking someone out on a date a course of conduct on the basis of sex? Let me just ask you that.
A. Yes.
Q. So you could ask someone out on a date with a legitimate purpose and not fall within this rule; is that correct?
A. You could.
Q. Okay. What I'm trying to get at here is, a student reading this policy, how did they know what is a legitimate purpose within the meaning of the rule?
A. Well, I'm going to speculate. But if they wanted it clarified, they could call my office. They could ask someone about it if they needed clarification. I don't know that many students read the rules before they take action.
So, students need to have a “legitimate purpose” for asking someone out on a date, and if they don’t know if they’re legitimately asking someone out, they can call the school’s Title IX office to find out.
But what happens when someone does call the office for clarification? Hayes was asked. The following exchange occurred:
Q. … If someone called the Title IX office and reached Megan Grant or someone else, another person in your office and asked what no legitimate purpose meant, would you assume that they would give the same answer as you?
A. I don't know.
Q. Might they have a different definition?
A. I don't know.
Q. It's possible?
A. I don't know.
Q. You don't know if it's possible?
A. Well, I don't know what someone else would say. I don't know how they would answer that question.
So, a student who seeks clarification about whether they have a “legitimate purpose” in asking someone out may get different answers from different people, any number of which could lead to him being found responsible for sexual misconduct, as John was.
John was suspended for his interactions with Jane and sued, feeling the punishment was far too severe for the situation.
Mizzou has attempted to dismiss the lawsuit, but much of John’s lawsuit was upheld.
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4) Bear Markets, Fed Mistakes, and Quick Shots from John
By John Mauldin

A winters day,
In a deep and dark December…
“Wait, it doesn’t feel like winter. It’s not deep and dark, and it’s actually warm, and the sun is shining. Toto Shane, I don’t think we’re in Kansas Texas anymore.”
Yes, we have actually moved from Texas to a new location. I’ll explain why and where below. But first, we really do have to follow up last week’s letter. Today, we’ll address several things, so think of this as my year-end “Quick Shots from the Frontline.” It will be more like a personal, from the heart, fireside chat. (Trigger warning: I will be taking off my politically correct gloves. Naming names and pointing fingers. Just Uncle John telling it like it is.)
This letter may run a little longer, but next week I promise to get back to the typical 3,000 or so words. Today is just you and I having a conversation. Pick up your favorite beverage (for me, it’s a glass of coffee or tea now), sit back, and let’s chew on the world.

Powell Was Right but the Fed Is Wrong

Last week. I argued Jerome Powell did the right thing by raising rates a mere 25 basis points. He forcefully declared the Fed’s independence from the market and politicians for the first time since Volcker. Greenspan, Bernanke, and, in particular, Yellen all gave the markets a “put” option—basically a third unofficial mandate to make sure that asset prices keep rising. Now, of course, that’s not the way they would express it, but that is, in fact, what they did. They created a series of bubbles, which spectacularly (and predictably) blew up, particularly screwing the little guys who didn’t know better and could least afford losses. We should not be where we are today, and we would not be here today, without their seriously screwing up Federal Reserve policy.
But they had the hubris to take credit for fixing the crises they created. Exactly like the arsonist taking credit for fixing the fire he started. They have no shame. Jay Powell is not the culprit in raising rates. The main problem is that Janet Yellen failed to raise rates before him, and I think she did so out of political bias for a Democratic president and then to help a Democratic candidate (Clinton). She would vigorously deny this, of course, but if it looks like a duck and quacks like a duck…. The Federal Reserve was not independent of either the markets or politicians during her watch. Shame on her. Double shame on her!
Now, having said Chairman Powell did the right thing, let me tell you where he and the current Fed leaders are royally screwing up making a mess. I’ve mentioned it before, but I want to highlight it as we go into the New Year. This is critically important.
No serious scientist would run a two-variable experiment. By that I mean, you run an experiment with one variable to see what happens. If you have two variables in your experiment and something either good or bad happens, you don’t know which variable was the cause. You first run the experiment with one variable, then do it again with the second one. After that, you have the knowledge to run an experiment with both of them.
The Federal Reserve is running a two-variable experiment without the benefit of ever having run a one-variable experiment to determine what the results would be. It is decidedly the stupidest monetary policy mistake in a long line of Fed mistakes.
(Like I said earlier, the gloves are off. This is my opinion. You may disagree.)
What are the two variables? They are raising interest rates (albeit slowly) and aggressively reducing their balance sheet. I think many of the problems we see in the market are results of this combination. They should do one or the other, not both.
Of these two, everybody wants to blame the last rate hike, but let’s look at the other variable.
While the Fed radically reduces its balance sheet, the European Central Bank is also ending its QE (quantitative easing), as are other central banks. They are taking away the market’s crack cocaine. Note also that all of the crack cocaine QE began to disappear worldwide toward the beginning of October. While I realize correlation is not causation, especially with only one data point, I find it suspicious that the markets turned volatile about that same time.
I find it just as plausible that the balance sheet reduction is as responsible for the market volatility as the increased rates. If QE made the markets go up, especially in concert with the ECB, the Bank of England, and the Bank of Japan, then it’s no surprise if ending it makes the markets fall.
Let’s get real. The Fed Funds target is now at 2.25%, barely above inflation. Zero real interest rates mean they are still essentially giving away free money, and free money causes bubbles. If Powell was trying to “lean into the market” and cut off budding inflation (that frankly I don’t see), he would have rates at 4% or 5%. Now that would mean we should blame the Fed for pushing us into recession and other bad things.
But, in fact, rates are still barely over inflation. Janet Yellen should have had them there four $#%%!@#$$ years ago. You want to castigate someone? You want to point fingers? Janet Yellen and the two previous Fed chairs are good places to start.
Warning: I’m next going to insult a bunch of smart, maybe even brilliant, people. This is not polite nor is it politically correct. I will try to be better in 2019, but right now, I am pretty pissed. (Again, this is Uncle John talking and not your normal, humble analyst. Uncle John uses words like that.)
Powell and the Federal Open Market Committee listen to extremely smart PhDs from all the best schools with their fabulous multi-algorithmic models, which prove that you could raise rates and reduce the balance sheet at the same time with no problems.
Bluntly, those smart people (many of whom are actually quite brilliant, and I’m sure they are nice people, and their kids and dogs love them) mistakenly trust models based on past performance, and even worse (much, unbelievably, really badly, worse, which I can’t emphasize enough!) on monetary theory that is clearly, evidently, badly, manifestly wrong.
They have been using these models to forecast future market actions and the economy for decades, and they are about 0 for 300 in being right. It is statistically impossible to be that bad unless your models/assumptions are fundamentally flawed, which they are. Their underlying economic theories manifestly don’t work. Because they have no politically and academically acceptable theories to substitute, they are slaves to their own mal-education. They think this makes them smarter than the markets. I can’t say it any stronger than that. I have actually been in the room when someone was aggressively (I use that word precisely, as it is the correct word for that particular conversation) remonstrating a Federal Reserve economist about said models. He went so far as to say that the best thing that Powell could do would be to fire all those PhDs and ignore their models.
As you might imagine, the Fed economist was not happy with that analysis. The veins in his neck were popping, he was red faced and his voice was raised. Having known him for 10 years, I was rather shocked. He is actually a rather mild-mannered guy. But this clearly got his goat.
Now, here’s the shocking thing… and the lesson that I learned, which was burned into my brain. He asked a very simple question, (neck veins popping): “You can’t take away a model without replacing it with another model. What model will you replace it with?” The interlocutor, who is perhaps the best observer of the bond markets I know, stammered a little bit and then forcefully said, “You can’t actually model the future,” or something to that effect. (This was back when I was drinking, it was later in the evening and more than a few bottles of wine may have been involved. As you might guess, like me, he was not a fan of models. And it was the nature of this gathering to disagree with each other late at night…)
Personal sidebar: my day job for the last almost 30 years has been to look at money managers, who usually have a model that looks at past performance and projects it into the future. Every hypothetical performance model I have ever seen looked absolutely awesome. I can’t say that I’ve seen a thousand of them, but it is not an exaggeration to say that I’ve seen more than a few hundred… well, maybe many hundreds. And then I have observed the performance of those models after I have seen them. Bluntly, it makes me skeptical of all models—including the ones that I build myself.
When I say the words “past performance is not indicative of future results,” I damn skippy mean them. All past performance models were built in a particular macroeconomic environment. Unless you can find a macroeconomic environment that is similar (as in, very closely similar) to where we currently are and where we are currently going, your particular model deserves a tad bit of skepticism. Maybe it will work and maybe it won’t. It is up to the macro analyst (that would be guys like me) to try and figure out which one will work well enough to confidently invest your money (as in, your money and mine).
I can’t tell you how hard and difficult and truly daunting that is. Especially after you have done it for many years and have the scars to prove it. I know, I know, I should write a rather lengthy essay/book on choosing money managers. Let me just leave it at this: If you have a buy-and-hold, 60/40, traditional portfolio, I think you are going to be hammered in the future. It will not serve you or your retirement well. You may not like what happened to your portfolio this month and we’re not even in a recession. Not even close. Well, maybe closer than we would like but it is still in our future. But I digress…
I’ve also looked at a lot of macroeconomic models. You can’t understand the depths of how much I would deeply love to find a macroeconomic forecasting model that was actually reliable. To have such a crystal ball would not only be soul soothing but also extremely profitable for my clients and, admittedly, me. It would be the Holy Grail.
All those PhDs at the Fed still haven’t found the Holy Grail after 40 or 50 years. Hell, they haven’t even found a decent cup of coffee. But they think they have, so their bosses confidently run a two-variable experiment with our economic system.

Just between you and me, I think the Fed has raised rates for the last time this cycle. I think in the first quarter of 2019, the FOMC members will begin to see the data weakening and realize that further hikes would make the situation worse, not better. But in any case, they should use their best judgment and ignore both political pressure and market volatility. If inflation rises and the economy strengthens, then hike another time. I don’t expect either to happen. (My actual forecast is next week. I have to save something for that letter.)
However, they also need to end this two-variable experiment nonsense. It is a major monetary policy mistake. Powell should call an emergency FOMC meeting (as in, next week) at which they suspend the balance sheet unwinding. One thing at a time. That is not responding to the markets. It is correcting a prior policy error.
And with all that said, here are some personal notes.

Living on Island Time

Shane and I have been having long talks for the past year. We’ve both lived in Texas all our lives. Texas is the greatest state in the Union (at least, according to our admittedly biased opinion), but for various personal reasons we both wanted a “reset.” Even though we love our home and Dallas is probably the best place in the world for somebody who travels as much as I do, we needed a change.
Bluntly, life had lost a little bit of its “joie de vivre.” My work, which is absolutely the best in the world, a true dream job, is a gift to me. But over the last year or so, it became, well, work. And it was beginning to show up in my writing style, my attitudes about deadlines, and in my personal life… which Shane gently and kindly pointed out. She also said that, I swear to God, that I needed to get out and swing a golf club to loosen up because I was stiff.
When was the last time a wife said, you need to get a golf club in your hands? So, after 20 years of not golfing, I bought a custom set of golf clubs (when did these things get so expensive?) and actually used them on some course in Georgia for the first time. For the price I paid, I thought they should have magic in them. Turns out, they were merely expensive golf clubs designed for my old-man swing, and there was no magic. I played the worst golf of my life… but walked off the course feeling better than ever. I could see my life changing, at least on a physical level.
So, two parts to the puzzle: We needed this change of location, and I needed somewhere I can golf year-round, or at least go to the driving range as I don’t have time to play two or three games a week. Fortunately, even 30–45 minutes on the driving range helps a lot. And who knows, maybe I’ll even learn to make contact with the ball again and watch it go forward. Maybe not far, but at least straight and in the air.
Shane and I are not cold-weather people. She is a beach lover. So, we needed year-round golf and beaches. And, of course, a good gym and an airport with lots of connections, and someplace we could make new friends. A real community.
I have been to 65 countries and all 50 states and most of the provinces in Canada. So, it’s not like I haven’t looked around. Savannah was a possibility, as was Florida. But once we started looking in that direction, our eyes drifted south and we looked at the Caribbean. There were some real possibilities. But for our personal needs, Puerto Rico stood out like a flashing beacon. We made some exploratory trips, and the more we looked, the more we liked.
And yes, there is a powerful tax break if you live more than 183 days a year in Puerto Rico. Looking at my calendar, I spend an average of 240 days a year in Dallas. So, no problem meeting that residence requirement. And my businesses are well-suited to be moved to Puerto Rico. So, sun and beaches and golf and a great gym, and we have found an amazing community that we are quite comfortable in.
We physically moved December 7. Turns out, it was party season here. (Christmas and all!) We began to meet our neighbors and already have many new friends. Almost everywhere I go, somebody comes up and asks, “Are you John?” We quickly trade phone numbers and set up times for lunch or dinner. Turns out that I have a number of friends here already. Just ones that I hadn’t met yet.
All that to say I am more charged up and excited about life than I have been a very long time. Oddly (for me), I’m waking up early in the morning and getting down to my computer as soon as I can. I can’t wait to begin the day. With this new energy I could probably write two or three letters a week. But I’m not—it would be more than you need to read. I will channel that time into actually writing my book and other things.
My friends and business partners have noted, with no prompting on my part, a new tone in my voice and passion in my writing, all for the better. So, even though we will keep an apartment in Dallas after my condo sells, and it will be our “US base,” as we do have family there, we have found a new home. Getting to the West Coast will certainly take longer, but there are direct flights from San Juan to all over the East Coast, Chicago, and Dallas. And frankly, a nice seat in an airplane is just like a second office to me now. I have even been able to get shorter books completely read on a flight, with highlights and notes—a very good use of time. And Puerto Rico is a US territory, so no customs as we travel on our US passport.
And yes, the 4% total tax rate and 0% capital gains is attractive. I wouldn’t for one moment deny it. But it is not the main reason we moved here. We can get everything we need at the local Costco, Home Depot, Best Buy, and all the other chain stores that you would expect to find on the mainland. Amazon delivers right to our doorstep. And there are amazing restaurants and places to see close to us. It is a pretty small island.
  • You really need to read Jonathan Tepper’s new book, The Myth of Capitalism: Monopolies and the Death of Competition. Admittedly, I may be a little biased, as he co-authored two of my our best sellers, but this book is just out-of-the-ballpark good. He highlights a real problem, the growing monopolies and duopolies all over the developed world and the regulatory systems which favor them and stifle competition, and offers some solutions. You can’t invest today without understanding this. Get this book and read it. I can’t say it any stronger.
  • Let me remind you that I have written multiple times in the past that if bear markets, (which we clearly just entered and may not be through with) are not accompanied by recessions, they generally end in a V-shaped recovery. Admittedly, we were already in an overbought and overvalued market, so I’m not sure what the word “recovery” means in that context. But Wednesday was clearly a short-covering rally. How do we know that? Because all of the stocks which had the most shorts on them recovered the most. Case closed
  • Note to President Trump: stop with the blame game already. Don’t take credit for the markets, whether they go up or down. Yes, of course, you get blamed when the markets go down, but it’s not your fault. If you want to blame anybody, blame Reagan and Bush and Obama for appointing Fed chairs who created serial bubbles. And then move on. You have enough on your plate without taking responsibility for the market as well.
The markets in the future are not going to get any easier to navigate than they have been the last few weeks. In fact, if anything, they are going to become even more difficult. And so is the social environment, not to mention the political environment. We are in the last half of the Fourth Turning (the end of a repeating 80-year cycle). In fact, we are approaching the last half of the last half, and for the last 500 years of Anglo-Saxon history, that has been the most volatile period of history, with wars and worse often accompanying that period. I’ve been having deep and long conversations with Neil Howe and Pat Caddell and other political and social commentators that frankly leave me troubled… indeed, very troubled and worried. It isn’t time for dried food, guns, and gold, but it is also not going to be business as usual.

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