Democracy is structured to be messy and difficult but the current display by both parties has gone beyond common sense.
That Schumer wants to shut down the government in order to blame Trump because of DACCA should backfire because it places political strategy above the the nation's interest, security and the welfare of our military.
Trump is accused of attacking the press and mass media and that is dangerous. A free press is critical but it is implied that it will also be a responsible press. American's no longer trust the mass media and this was long before Trimp became president. Why? Because the mass media have demonstrated they are biased and have been particularly so against this president because they obviously have egg on their face from having missed the last election. and being handmaidens of Democrats can't get past their personal pique..
Schumer also accuses Trump for being Jello but Trump is willing to resolve the DACA issue and said he would take the heat if both parties brought him something he could sign. By that he meant funding for preventing the sink to rise again with illegal immigration, eliminate chained immigration and focus on immigration that brings in those with talents our nation most needs.
When he was stiffed by Durbin and Graham claiming they had a deal which all supported he , correctly, felt he was being lied to and he burst out in some colorful language which Durbin immediately went public with implying Trump was a racist.
Now the Democrats are trying to hold Trump hostage by blaming him for the government shutdown by insisting DACA must be part of a deal. (See 1 below.)
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When will The Justice Department act against Hezbollah and rectify another Obama action to undermine Project Cassandra? (See 2 below.)
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About time to get tough and mean it. (See 3 and 3a below.)
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Long Rant. (See 4 below.)
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1) A Tale of Two Shutdowns
That Schumer wants to shut down the government in order to blame Trump because of DACCA should backfire because it places political strategy above the the nation's interest, security and the welfare of our military.
Trump is accused of attacking the press and mass media and that is dangerous. A free press is critical but it is implied that it will also be a responsible press. American's no longer trust the mass media and this was long before Trimp became president. Why? Because the mass media have demonstrated they are biased and have been particularly so against this president because they obviously have egg on their face from having missed the last election. and being handmaidens of Democrats can't get past their personal pique..
Schumer also accuses Trump for being Jello but Trump is willing to resolve the DACA issue and said he would take the heat if both parties brought him something he could sign. By that he meant funding for preventing the sink to rise again with illegal immigration, eliminate chained immigration and focus on immigration that brings in those with talents our nation most needs.
When he was stiffed by Durbin and Graham claiming they had a deal which all supported he , correctly, felt he was being lied to and he burst out in some colorful language which Durbin immediately went public with implying Trump was a racist.
Now the Democrats are trying to hold Trump hostage by blaming him for the government shutdown by insisting DACA must be part of a deal. (See 1 below.)
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When will The Justice Department act against Hezbollah and rectify another Obama action to undermine Project Cassandra? (See 2 below.)
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About time to get tough and mean it. (See 3 and 3a below.)
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Long Rant. (See 4 below.)
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1) A Tale of Two Shutdowns
Interior tries to limit harm to the public, unlike in 2013.
By The Editorial Board
The government shutdown continued on Sunday as Senate Democrats imitate Republican Ted Cruz’s 2013 strategy of using government funding to force a President’s hand on an unrelated issue. Mr. Cruz wanted ObamaCare repeal while Democrats want to coerce the GOP on immigration, but the budget blackmail strategy deserves to fail again. The important difference this time is that the Trump Administration is trying to limit the shutdown damage while President Obama tried to make it as painful as possible.
White House budget director Mick Mulvaney vowed on Friday that this shutdown “will look very different than it did under the previous Administration” and “we are not going to weaponize it.” The White House is being true to its word as it scrambles to minimize the inconvenience to the public and government workers to the extent it can under the law.
This includes letting agencies use money that has been appropriated but unspent to be used for urgent purposes. Most of the Environmental Protection Agency will stay open, trade negotiations will continue, and about half of all mine inspectors will stay on the job compared to only 25% or so in 2013.
A specific case in contrast is the Interior Department, which runs the national park system that the Trump Administration is trying to keep “as accessible as possible while still following all applicable laws and procedures,” spokeswoman Heather Swift said Friday. Tourists can still visit Washington, D.C.’s parks and war memorials, and visitors won’t be blocked from hiking many national park trails. The National Park Service will close areas only if there’s a safety risk or to protect cultural artifacts.
By contrast, the Obama Administration acted fast to block and lock down parks and public lands. On the eve of the 2013 shutdown, Park Service spokeswoman Jennifer Mummart emailed colleagues about a scheduled World War II memorial visit by aging or terminally ill veterans. She asked whether “we are physically preventing people through use of some barrier to gaining access? (jersey barriers, fence, tape, saw horses or something)?”
Deputy Superintendent of Operations Karen Cucurullo replied, “Yes, signs and barricades.” The next day Park Service spokeswoman Carol Johnson was at the memorial and ready to make a political point as the 91 veterans arrived. “This is so meaningful to the vets,” she told the press. “The main thing is we’d like to get back to work and welcome visitors again.” The veterans were able to visit the memorial only after Mississippi Rep. Steven Palazzo and others moved the barriers, defying signs announcing the site’s closure.
Other correspondence shows Ms. Cucurullo handling her own team with much more leniency. When a staffer asked to enter the offices during the shutdown to retrieve personal items, she responded, “No problem, just put barricades back.”
On Sept. 30, 2013, South Dakota Governor Dennis Daugaard wrote to National Park Service director Jonathan Jarvis, offering to keep Mount Rushmore open using state personnel and resources. Mr. Jarvis shut down Mr. Daugaard and the monument. “Beyond the legal constraints involved, it would not be feasible or appropriate to open some parks or some parts of parks while other parts of the National Park System remain closed to the public,” the director replied on Oct. 3.
Unlike in 2013, this time Interior is looking into how state funding or private donations can be used to keep parks and sites open despite the shutdown. Privately operated gift shops, concession booths and gas stations on public lands will be allowed to open. In 2013 Xanterra Parks & Resorts, a private company that operates hotels, restaurants and other services in 21 national parks, lost about $1 million each day of the shutdown.
Shutdowns usually end when one side or the other begins to fear the political damage, but Democrats seem to think they can’t lose a blame game. One way for the public to judge is to look at who is trying to exploit it for political advantage, and this time it isn’t the Trump Administration.
2) It’s Time for the Justice Department to Hold Hezbollah Accountable
The U.S. government must answer tough questions about its efforts to stop the group’s drug trafficking activities.
BY DEREK MALTZ, EMANUELE OTTOLENGHI
Last month, a Politico investigation ignited a firestorm by charging that the Obama administration deliberately undermined Project Cassandra, an ambitious effort by the U.S. Drug Enforcement Administration to stop Hezbollah from trafficking drugs into the United States and Europe. Veterans of the Obama administration fired back, saying the charges were categorically false and politically motivated.
Attorney General Jeff Sessions has now seized on the Politico report to order a review of decisions made by the Obama Department of Justice. On Jan. 11, he announced the establishment of an interagency task force entrusted with combating Hezbollah’s terrorism finance. Likewise, multiple Republican congressmen have demanded a probe of how the department handled Project Cassandra.
The Politico piece asserts that these investigations, which started in 2008, uncovered an inconvenient truth: Hezbollah’s highest authorities approved and coordinated large-scale criminal activities in which their operatives were involved, including the facilitation of drug cartels’ shipments of large quantities of cocaine around the globe and the laundering of revenues from cocaine sales. But as investigators exposed more details of Hezbollah’s involvement in these global criminal activities, the political implications of their findings increasingly inconvenienced the Obama administration.
At the time, President Barack Obama and his administration were not only seeking a nuclear deal with Hezbollah’s main patron, Iran; they also believed a nuclear detente with Tehran could be a prelude to transforming Iran into a stabilizing factor in the region. Exposing Hezbollah, and by extension, its Iranian patron, as a transnational criminal enterprise intent on helping narcotraffickers sell cocaine and launder money, including escalating indictments against Hezbollah’s higher-ups, was bound to undermine the administration’s political efforts to chart a new course with Tehran.
That’s why, according to Politico, Project Cassandra investigators encountered an “increasingly insurmountable series of roadblocks” as they sought to prosecute higher-ups in the Hezbollah hierarchy. According to a former CIA officer quoted by Politico, Iranian negotiators were pleading on Hezbollah’s behalf, and the Obama administration would not let DEA investigations derail its grand vision for a new Middle East.
It is not that investigations were shut down. Instead, according to Politico, numerous roadblocks were put in the way of the project, which ultimately may have caused its demise. These included the removal of references to Hezbollah from criminal indictments, lack of administration backing for prosecutors’ requests to extradite arrested suspects from allied countries to the United States to stand trial, a refusal to target Hezbollah through anti-mob racketeering laws, slashed budgets for Hezbollah investigations, and the reassignment of key personnel. Moreover, even in the wake of the arrest of senior Hezbollah agents who could potentially be turned into cooperating witnesses against their superiors and the amassing of damning financial and communications evidence supporting criminal indictments, no serious effort was made to press charges against the highest echelons of Hezbollah’s leadership.
Given the gravity of these complaints, we firmly agree that a probe is necessary but are concerned that it will become a political circus rather than revive the government’s faltering efforts to pursue Hezbollah. The best way to prevent the Justice Department and congressional reviews from becoming partisan exercises is to ensure that they focus on five key decisions that handcuffed Project Cassandra.
Both parties recognize the exceptional threat that Hezbollah poses to both the United States and its allies. Reviews that focus on rebuilding Project Cassandra by learning the lessons of the past can command bipartisan support.
Our first two questions concern botched extraditions that would have given U.S. investigators access to a treasure trove of information. First, no senior figure at the State Department, Justice Department, or the White House fought for the extradition of the Syrian-Venezuelan national and U.S.-designated drug kingpin Walid Makled García. Why? Makled was the repository of privileged information about the Venezuela-Hezbollah relationship, as well as Venezuelan government corruption and cooperation with the drug cartels. Makled was arrested in 2010 in Colombia, a close ally of the United States. Yet Obama declined to use his prestige, influence, and leverage to bring him to the United States, instead letting Makled be shipped back to Venezuela in 2011, thereby putting the secrets he could have revealed out of the reach of U.S. law enforcement.
Second, why did the U.S. government fail to extradite the Hezbollah operatives Ali Fayad and Khaled Merebi from the Czech Republic? Fayad, a key weapons procurement agent, was arrested by DEA agents in 2014, along with Merebi and their colleague, Faouzi Jaber, during a DEA sting that closely resembled the capture of arms dealer Viktor Bout, in 2008, in Thailand.
Bout — a Russian national who inspired Nicolas Cage’s character in the 2005 film Lord of War and sold weapons to the Taliban, African warlords, and Hezbollah — had friends in high places in Moscow. Russia strenuously opposed his extradition and slammed his conviction. But the Obama administration was willing to spend considerable political capital to extradite him for trial in the United States. Yet when, in July 2015, Hezbollah engineered the kidnapping of five Czech nationals in Lebanon, the United States did little to secure the two men’s extradition before
Prague succumbed to Hezbollah’s extortion. Jaber was eventually extradited in late February 2016 and is awaiting sentencing in New York, but not before, earlier that month, the Czechs had released Fayad and Merebi, who promptly returned to Lebanon.
Prague succumbed to Hezbollah’s extortion. Jaber was eventually extradited in late February 2016 and is awaiting sentencing in New York, but not before, earlier that month, the Czechs had released Fayad and Merebi, who promptly returned to Lebanon.
The third decision to review is the one that prevented charges from being brought against one of Hezbollah’s senior leaders, Abdullah Safieddine. Safieddine is Hezbollah’s envoy to Iran, as well as the maternal cousin of Hezbollah’s leader, Hassan Nasrallah. A 2009 Eastern District of Pennsylvania indictment against four Hezbollah operatives involved in the sale of counterfeit currency and the attempted procurement of thousands of assault rifles for Hezbollah obliquely mentioned Safieddine. A 2009 affidavit referred to him as a high-ranking, Iran-based Hezbollah official named “Individual B.” Clearly, investigators did not have sufficient evidence to indict him at the time and were using this case as a platform to build one against Safieddine.
The Treasury Department eventually named Safieddine in conjunction with its 2011 action against the Lebanese Canadian Bank, which had helped Hezbollah launder hundreds of millions of dollars in drug proceeds on behalf of Colombian and Mexican cartels. But he was never charged, despite the fact that, according to investigators, he oversees Hezbollah’s most significant criminal activities, including drug trafficking and the purchase of weapons to support the Syrian war effort.
Bringing drug trafficking charges against Hezbollah’s most senior leaders, such as Safieddine, would lay bare the toxic ties linking Hezbollah and drug cartels across Latin America. While no country in Latin America recognizes Hezbollah as a terrorist organization, many feel pressure to take action against narcotraffickers. Public revelations of criminality and drug trafficking would also damage Hezbollah’s supposed Islamic principles.
Why, then, wouldn’t the Justice Department agree to bring charges against a top Hezbollah criminal? It’s as if, in the 1930s, the department had told the FBI it could prosecute the mob but should leave Al Capone alone.
A fourth and related question to ask is why, when the Justice Department did bring charges against other Hezbollah operatives, none of the indictments identified the group. How can we fight an organization if we cannot even call it by its own name?
The fifth question to ask about Project Cassandra concerns unfinished business from the Lebanese Canadian Bank case, which is deservedly known as one of the greatest successes in the history of prosecuting terrorist finance networks. Yet it was not an unmitigated success: Hezbollah leveraged 300 U.S.-based used car dealerships to launder the drug revenues by exporting vehicles to West Africa. But the actions taken against the bank’s network affected only 30 businesses due to lack of interagency cooperation. That was 2011. Fast forward to 2018. Most of the remaining 270 businesses are still operating. Satellite imagery shows that the same West African parking lots used by Hezbollah in 2011 are still overflowing with cars. Why hasn’t the Justice Department pursued a network of criminal enterprises of which it is clearly aware?
Answering the five questions laid out above will take some time. While that effort is underway, there are other steps the U.S. government can take against Hezbollah. One is to offer substantial rewards for information leading to the arrest or conviction of numerous senior Hezbollah leaders. The State Department recently put a multimillion-dollar price on the heads of two figures with blood on their hands, but many more names need to be added to the roster.
The U.S. government can also designate Hezbollah as a transnational criminal organization even before it brings indictments against specific individuals. Doing so would help mobilize a stronger response in the Western Hemisphere, where Hezbollah does so much of its trafficking.
The fact of the matter is that Hezbollah is both a terrorist organization and a transnational criminal group. Its various activities — including charitable, social, and educational ones — all depend on funding derived from criminal endeavors. Its leadership, likewise, is both knowledgeable of and complicit in the efforts by its global networks to profit from crime. Collecting intelligence to expose, disrupt, and prosecute this phenomenon should be a top priority, not an afterthought that can be sacrificed to other geopolitical ends.
Ultimately, the success of the law enforcement campaign against Hezbollah will depend on understanding what went wrong in the case of Project Cassandra. Whether by design or negligence, the most effective tool the U.S. government had at its disposal was severely debilitated. It’s time to learn why and to make Project Cassandra work again.
Derek Maltz was the director of the Drug Enforcement Administration’s Special Operations Division from May 2005 through July 2014.
Emanuele Ottolenghi is a senior fellow at the Foundation for Defense of Democracies.
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3) Exclusive: the House Republican plan to toughen the Iran deal
By Jonathan Swan
This is the first time a high-ranking US official has visited Israel since President Donald Trump declared Jerusalem as Israel's capital in December 2017, and Pence's first visit as vice president.
Police started preparations for the operation several weeks ago. Policemen will be deployed around the area of Jerusalem and the main routes leading to the capital.
“There will be a wide-range of police units, including Border Police units, special patrol units, motorcycle units and undercover personnel, which will be in one of the different areas,” he added.
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3) Exclusive: the House Republican plan to toughen the Iran deal
By Jonathan Swan
I've got my hands on a copy of the bill that House Republicans will drop Thursday to amend the Iran deal. Conservative Iran hawks tell me they are going to rally around this bill — spearheaded by Reps. Peter Roskam, Liz Cheney and others — because they don't like what they're hearing about the Senate version being drafted by Republican Bob Corker and Democrat Ben Cardin.
Why this matters: Last Friday, President Trump waived sanctions on Iran for what he said was the last time. He said it was a "last chance" for Congress and the Europeans to fix the deal. Trump wants a tougher international inspection regime, an end to Iranian ballistic missile research and development and a permanent nuclear ban to replace the current temporary deal that expires within a decade.
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- If Trump follows through on his threat to reimpose sanctions on Iran in four months— and many close to him believe he will — he'll blow up Obama's nuclear deal.
- A senior administration official told Iran experts on a call last week that there is "no wiggle room."
Highlights of the "Iran Freedom Policy and Sanctions Act", per the bill summary and text:
- Indefinite zero tolerance for Iranian ballistic missiles: U.S. sanctions would immediately "snap back" against Iran if they take any action "related to ballistic missiles designed to be capable of delivering nuclear weapons, including launches using ballistic missile technology."
- Indefinite zero tolerance for Iran even approaching a nuclear weapon: U.S. sanctions would immediately "snap back" against Iran if the regime does anything "to enable Iran to produce sufficient weapons-grade uranium or plutonium for a nuclear weapon in under 12 months."
- Anytime, anywhere inspections: U.S. sanctions would immediately "snap back" against Iran if they do anything "to deny the international community unfettered, unannounced, and indefinite access to Iran’s nuclear program, including 'anywhere, anytime’ access and inspections of military sites."
The bill also goes further, to whack Iran for its support for terrorism and human rights abuses:
- New sanctions: "To combat Iran’s support for human rights abuses and support for terrorism, this bill expands sanctions upon responsible regime entities such as the IRGC, and the Basij Force, by imposing sanctions on entities in which they own, directly or indirectly, a 20% or greater interest, lowering the threshold from 50% to encapture more entities."
Bottom line: This is Congress’ last chance to stop Trump from blowing up the Iran deal. The four-month clock is ticking, and people who've heard Trump share his feelings about Iran don't think he's bluffing. Democrats and Republican moderates — especially in the Senate — are going to hate this Roskam bill. But Iran hawks are already telling me it's their baby — far preferable to what they're hearing about the Corker-Cardin draft, which they believe will be too weak to be worth supporting.
Richard Goldberg, a senior advisor at the Foundation for Defense of Democracies who was a chief architect of previous sanctions against Iran, on why hawks support this bill:
“The Roskam legislation is the gold standard for how to fix the Iran deal when it comes to ballistic missiles. The UN Security Council called on Iran to halt any activity related to nuclear capable ballistic missiles — and this legislation mandates a snapback of all our toughest sanctions if Iran violates that Security Council directive. It’s a stark contrast to the draft circulating in the Senate, which legitimizes Iranian ballistic missiles that could wipe out US bases and allies in the region.”
3a)
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| US Vice President Mike Pence arrived in Israel Sunday evening, in the third stop of his Middle East visit, after having met with Egyptian President Abdel Fattah al-Sisi and Jordan's King Abdullah. Pence’s visit to Israel is planned to last less than 48 hours, starting on Sunday night and ending on Tuesday evening, in which he will address the Knesset, meet with Prime Minister Benjamin Netanyahu and visit Yad Vashem and the Western Wall. Minister of Tourism Yariv Levin received Pence on behalf of the Israeli government. "I congratulate you on your arrival in Israel and thank you for your important part in the president's declaration and in the recognition of Jerusalem as our capital," he said. "We greatly appreciate the strong friendship between the two countries and I am convinced that your wife, Karen, and you will feel at home here." Knesset Speaker Yuli Edelstein welcomed Pence on Twitter.
Prime Minister Benjamin Netanyahu also welcomed the vice president in a statement, in which he included a message for Palestinian Authority President Mahmoud Abbas, who has rebuked Trump's peace efforts ever since his embassy move. Earlier Sunday, a senior Fatah official told The Jerusalem Post that Abbas plans to turn to the European Union to help establish an alternative to Trump's peace initiative. "There is no substitute for American leadership in the peace process.Those who are not willing to discuss peace with the Americans do not want peace," Netanyahu said. |
"With regard to security, I have a message to European countries: I suggest they take President Trump's words seriously," he added.
This is the first time a high-ranking US official has visited Israel since President Donald Trump declared Jerusalem as Israel's capital in December 2017, and Pence's first visit as vice president.
Police started preparations for the operation several weeks ago. Policemen will be deployed around the area of Jerusalem and the main routes leading to the capital.
“There will be a wide-range of police units, including Border Police units, special patrol units, motorcycle units and undercover personnel, which will be in one of the different areas,” he added.
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4)This is very long because there is so much going on it is hard to keep up. Hopefully it will not bore you.
I have an idea. Tow the capital building out to sea with all of them in it and sink it. This one is clearly on the Dems playing games on immigration and funding for the wall. They played chicken and we all lost. Really disgraceful and stupid. Do they wonder why drain the swamp had such appeal.
If the Republicans are right that the “memo” about collusion by Hilary and the Obama administration, and FBI is true, and if Grassley and Graham are right about the memo that there may be criminal charges, then what I have been saying about the Dems being sorry for starting this collusion story will be correct. I assume the memo will get out next week, and then all hell will break loose. If it is what people who read it say it is, then we have another Watergate, only much worse. All just as the Dems shut down the government. We will see what the memo says and if it is true, but the mainstream media has been deathly silent about it. Standby, this could be all the black swans landing at the same time, and my liberal friends who accused me of drinking the Kool Aid will have to reconsider.
Having asked top economists about 2018, it seems 3.5% is a very possible GDP growth number, but the unknowns, like the shutdown, are so many that the economists are giving their clients scenarios instead of a single forecast. The models cannot keep up with the changes in tax law, shut down, politics, German politics and the myriad of other major things going on. There is major risk up and down. Nobody really knows yet how the tax reform will really play out. Nobody can say if an infrastructure program can get passed by Congress. Nobody knows what this “memo” says and how that will play. The assumption is the economy is on a very good trend for 2018 and should do very well, but nobody knows. One real risk the markets are not pricing in is the possibility the economy does better than many think, and we have 4 rate increases by the Fed instead of 2 or 3 as is now the expected case. 4 increases is possible if GDP were to grow at over 3.5%. Then what does the stock market do. The good news is Powell is a very solid Chairman. He is a dove generally so he is very unlikely to raise rates aggressively unless there is a real need due to inflation becoming an issue, and that right now is a big unknown.
The whole money laundering issue may be real. I know from a very senior banker friend who negotiated the Trump collapse many years ago, that they did a workout, and then Trump defaulted on that, and they had to negotiate a new one. The banks got badly burned, so Trump could not get any bank in the US to finance a sandwich for lunch. He might have used Felix Sater, who I met, to find him money as has been suggested. When I met Sater I came away feeling I had just met slime. He is a really bad guy, and it was obvious to me from just one meeting. He told me at the time (many years ago) that he was officed on the floor below Trump and he could take my deal directly upstairs. I had also separately been shown Sater’s Trump Soho condo hotel deal which is the subject of much inquiry now. It made no sense. I knew a lot about condo hotels because I knew a guy named Falor and his father who were the ones who were doing condo hotels at the time. Falor went to jail. His father fled the country. The whole condo hotel business was a scam, but the Soho Grand was a condo hotel which is why it also failed. Maybe Trump has real exposure on this deal and the Sater connection. The whole Deutche Bank connection might be where the truth lies. I have no knowledge of that.
There is an enormous amount of capital available for investment right now, so that it is not the capital markets that impede a deal, but it is the deal itself or the sponsors. Between the corporate profits flood, stock market superb performance, tax cuts, and the free flow of foreign money seeking a safe place to hide or better yields, there are trillions moving around the globe. Investors are no longer hiding their cash, and the pro business attitude of the Trump administration with deregulation and massive tax cuts, the US is now a very attractive place to put capital. This is one of the reasons I believe the stock market has a lot more room to go higher. Debt capital is plentiful, but for now loans are still most times reasonably well underwritten. The banks and Wall St, for the most part, do not need regulators to tell them to be careful. They are all still seared by the crash consequences and are not going to repeat the mistakes for several more years. That will happen when the current generation of managers retires and the new kids take over believing they are smarter and know how to manage risk better. That will be when the trouble starts again, as it always eventually does. So for now, and several more years, we will be fine so long as more governments shut down crypto currencies. Most loans today are still in the 60% to 70% range on real estate deals, with mezz lenders willing to go to 80% in some cases. The agencies do go to 80%. There are many new lenders available with all types of funds who are competing for loans and who are often easier than banks or insurance companies to borrow from as they are not regulated the same way. CMBS is back in action now that the 5% retention rule has become accepted, and as the flood of 2006-07 loans has been dealt with successfully. There will likely be around $80-90 billion of CMBS issuance this year at 70% LTV or LTC in many cases. Lots of capital looking for places to invest makes economic growth much more likely.
Rates should remain relatively low as the Fed under Powell is not going to deviate much, if at all, from the past several years monetary policies. The unwinding of QE will proceed very slowly for now, and in a very transparent way, so the markets will be able to easily adjust. Rates will move higher as the economy grows at 3.5% or maybe 4%, but higher rates means the economy is doing well. The issue nobody knows is how inflation will act, with higher commodity prices due to China eating up so much material, and the growing labor shortage in the US. The tax bill created room for wage increases and bonuses, so the normal inflation pressures are not there since in many cases, that cost is being absorbed by lower taxes to corporations instead of by higher prices. By paying bonuses instead of across the board wage increases, companies keep the employees happy for this year, but do not lock in wage increases for the future. That is not the way it has worked in the past, so the regular rules may not apply here. In addition, it is a global labor market and AI is coming fast, so again, the old rules of labor shortages causing inflation may not follow as it always has. These are new factors that never existed all in the same time, so nobody really knows what will happen. As rates do rise, banks can make a bigger spread on loans, and can move the spread up faster than the spread on deposits, so profits rise. That is why Wall St is now in strong favor of bank stocks. Fixed income and annuity holders owners will again be the losers this year by again missing the opportunity to make major capital gains, and incurring losses in value on bonds.
Valuing real estate and its cash flows are now impacted by the tax bill in various ways. The tax deductibility of interest is limited, but may, or may not impact the deal depending on each loan leverage and rate. Terminal value is dicey depending on how long the model goes. Parts of the tax bill sunset over the next ten years, so it is a guess as to what gets renewed or at what terms. Since I have never considered appraisal income methodology using 10 years of pure guesses to have any validity, it depends on how you do your valuation. The correct discount rate is affected because the risk of receiving the after tax cash flows has now changed as has the timing possibly. The deductibility of interest also changes the leverage level potentially, and so the risk. There are also deducts for year one cap ex which may impact returns materially if you are doing a reno. Details on this are not yet fully clear. There is the 3 year hold for cap gains for carried interests i.e. promotes. If held less than 3 years you do not get cap gains on carried interests. It is essential to get ownership of the carried interest at the beginning now, and to get K-1s along the way even if they allocate 0. Otherwise you could pay an added 12% in taxes on exit. I have this in one of my deals. Get advice from your tax advisors. The degree of leverage and the cost of capital and the discount rate all need to be modified now. Financial models need to change, or you will get bad answers. The rules are not yet fleshed out fully, so it is still a little uncertain how these things will be applied. If you are an investor in real estate deals, make sure to talk to your tax advisor before committing to invest in the next deal, and make sure you know what assumptions the sponsor is using in the model. Don’t just take the sponsor’s assurance he has modified his models for all aspects of the tax changes. It may not be a model that fully reflects the good or bad of the tax bill, so check this. The use of NOL’s is changed now as is how foreign tax are treated. Lastly, it is yet unclear that LLC is the best structure in all cases where it has been used up to now. Mostly the tax bill is good for real estate, but you need real expert advice both as a developer or owner or investor. I do not have the expertise to know the answers, but I know there are some major changes you need to take into account. It is probably best to wait a short while for the tax impacts to be fully fleshed out and the models changed, and valuations modified, before you invest in a new deal. Values may go up or down depending on the specifics of the deal.
If an infrastructure program can get approved, and it is a real infrastructure program, not the teachers union payoff and entitlement boost for $800 billion called stimulus that Obama lied about, then the economy will get another major boost. The Dems have a real dilemma. If they stop an infrastructure program with demands for new entitlements, or other wasteful spending, or if they try to tie it to unions and earmarks, then they will have to explain why they voted against tax cuts and infrastructure improvements, and why they tried to stop defense spending in order to try to allow chain migration. I stick by my prediction, the Republicans will do better than the polls or talking heads predict, as the economy grows and as the Dems become the roadblock to growth and defense.
If you are concerned about cyber theft and hacking, you have not seen anything yet. According to top experts in that field, hackers are now beginning to use AI to create new ways to hack and to overwhelm security systems. All of the devices like Alexa and Echo, and security cameras, now coming to market, are tied to the internet, and that makes them all potentially vulnerable to attack. It is a constant race between the black hats and white hats to see who can beat the other side. Usually the problem is some companies, and governments do not maintain their systems to the extent required, and do not upgrade security constantly. People still fall for phishing emails and let in the hackers. These AI driven hacking programs can launch constant mass attacks until they find a way in somewhere, and then we get a massive breach. N Korea is getting very good at this and we will likely see more of it. Russia is also very good as is China. What we do not know is what the US and Israel are doing in return. You can be sure it is a lot that will never be known. Make sure to keep up your upgrades, especially on Windows 7 which requires you to take action constantly. Windows 10 does it automatically. Just assume some emails you receive are hackers and that your credit card will get hit at some point. Be careful what emails you open even if they seem to be from known parties. Look at the whole email address of the sender before opening to be sure, if you are suspicious it may be spam.
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