Feb 14

Today’s News 14th February 2017

  • 5 Stinging Trump Quotes About The Fed

    Fed chief Janet Yellen will testify before the U.S. Senate Banking Committee on Tuesday. She is likely to receive a frosty reception from the Republicans emboldened by President Trump’s stinging remarks about the Federal Reserve and its current chair. Take a look…

    1

    “Janet Yellen is highly political”

    November 3, 2015

    The public feud began in November 2015 when then-Republican nominee Donald Trump accused the Fed of doing President Obama’s bidding by keeping interest rates low. Speaking at a news conference at Trump Tower, he said Obama “wants to be out playing golf in a year from now and he wants to be doing other things and he doesn't want to see a big bubble burst during his administration.”

     

    2

    “When her time is up, I would most likely replace her”

    May 5, 2016

    Trump said he would probably replace Janet Yellen when her four-year term expires (which is in February 2018). In an interview with CNBC, he said “people that I know have high regard for her, but she is not a Republican.” However, there was some common ground. Trump called himself a “low interest rate person,” saying a strong dollar would cause “major problems” for the U.S. economy.

     

    3

    The Fed has created a "very false economy"

    September 5, 2016

    Four months later, Trump does a U-turn and says interest rates “are going to have to change”. Speaking on the campaign trail, he claimed the Fed was “keeping the rates down so that everything else doesn't go down.” The billionaire also called the stock market “artificial.”

     

    4

    “She’s doing what Obama wants her to do”

    September 12, 2016

    Trump again questioned the Fed’s independence, saying the central bank is propping up the stock market to keep Obama happy. In an interview with CNBC, Trump said “any increase [in interest rates] at all will be a very, very small increase because they want to keep the market up so Obama goes out and let the new guy … raise interest rates … and watch what happens in the stock market.”

     

    5

    Yellen should be “ashamed of herself”

    September 12, 2016

    Then it gets super personal! In the same interview, Trump said Yellen should be “ashamed” of what she’s doing to the country. He said American savers are feeling the pain of low interest rates: “they saved their money [and] they cut down on their mortgages, … and now they're practically getting zero interest on the money.”

    Of course, President Trump isn’t the only Republican who has criticised the Fed. Long-time critic Kentucky senator Rand Paul has been calling for an audit of the Federal Reserve for many, many years. Meanwhile, Texas senator Ted Cruz has blamed the central bank for causing the Great Recession.

    Yellen’s testimony begins at 10:00 a.m. ET on February 14, 2017.

    Follow LIVE coverage of FOMC on FinancialJuice.com

  • "What The F**k Is Wrong With You America" – Moby Claims Trump Dossier 100% Real, War With Iran Looms

    After last night's "Agent Orange" debacle at The Grammy's, it appears the music-erati are jealous of their Hollywood peers and ratched amplifier on hysteria up to '11' today. Having asked America "what the fuck is wrong with you" shortly after electing President Trump, veteran electronic music star Moby shared a Facebook post where he claims his "D.C. friends" confirmed the Trump dossier is "100% real"

    By way of background, here is Moby expressing his dis-satisfaction at the deplorables' voting in November…

    "As a life-long progressive i'm supposed to be diplomatic and understanding, but America, what the fuck is wrong with you?" he wrote in the open letter shared with Billboard. "But then I ask myself, very sadly, why am I surprised?"

     

    Moby continued: "This is the America who has now elected a dim-witted, racist, misogynist. A dim-witted, racist, misogynist who has ruined businesses and has no policy proposals other than 'build a wall.' I guess there will be some cold, bitter schadenfreude in spending the next 4 years watching middle america wake up to the fact that donald trump is an incompetent con-man.

     

    "The rust belt jobs won't come back. the wall won't get built. and Hillary won't get locked up. Donald Trump will be impeached, or end his presidency with single digit approval ratings; and hopefully, somehow, america will finally wake up the fact that republicans are, simply, terrible."

    And today as Moby explains (seemingly incapable of using Capital letters)… (bolding added)

    after spending the weekend talking to friends who work in dc i can safely(well, 'accurately'…) post the following things:

     

    1-the russian dossier on trump is real. 100% real. he's being blackmailed by the russian government, not just for being peed on by russian hookers, but for much more nefarious things.

     

    2-the trump administration is in collusion with the russian government, and has been since day one.

     

    3-the trump administration needs a war, most likely with iran. at present they are putting u.s warships off the coast of iran in the hope that iran will attack one of the ships and give the u.s a pretense for invasion.

     

    4-there are right wing plans to get rid of trump. he's a drain on their fundraising and their approval ratings, and the gop and koch brothers and other u.s right wing groups are planning to get rid of trump.

     

    5-intelligence agencies around the world, and here in the u.s, are horrified by the incompetence of the trump administration, and are working to present information that will lead to high level firings and, ultimately, impeachment.

     

    i'm writing these things so that when/if these things happen there will be a public record beforehand.

     

    these are truly baffling and horrifying times, as we have an incompetent president who is essentially owned by a foreign power.

     

    -moby

    "Baffling" indeed Mr. Moby (or is it just Moby?)

    As you can imagine, Facebook 'friends' who followed Mody were a little quizzicial of his evidence…

    Carlos Godinez – "Your friends who work in D.C." Let me guess, Starbucks?

     

    Soren Le Goff – Moby your so ignorant it hurts, stop posting propaganda.

     

    Frankie Lenaghan – You have lost the plot mate.

     

    Eddy G. Munoz – Moby, please get back to the lab and get to work. You are losing your mind. Now you are having delusions of being privy to information that would be considers confidential.

     

    Brady Spenrath – I know you mean well, and I agree with your intent, but just posting unverified rumors with no sources or evidence to back that up is as harmful as the White House staff making stuff up. What happened to "When they go low, we go high"?

    The question we have for Mark Zuckerberg – is this 'fake news'? Should this kind of information be shared on your social network? What if a so-called self-identified, non-progressive celebrity allegedly claimed to have alleged proof that Nancy Pelosi was in fact the alleged Russian hooker pissing all over Trump in an alleged Moscow hotel? (Could be? We have alleged friends in D.C. who said it's possible).

  • Kurt Schlichter Shoves Alinsky's "Rules For Radicals" Right Back In "The Left's Ugly Face"

    Authored by Kurt Schlichter via Townhall.com,

    The Left is getting massively out-Alinsky'd, and the hilarious thing is that this band of withered hippies, unemployable millennial safe-space cases, and unlovable and unshaven libfeminists don’t even know it.

    Oh, their masters sure know it. Soros is bitterly having to ramp up his infusions of blood money to keep his community-organized “grassroots” movements afloat. The less dumb ones among the lying dinosaur media are panicking as their influence fades, and Chuck Schumer is enduring such a non-stop parade of serial humiliations that if the Senate were a penitentiary, he’d be McConnell’s prison Mitch.

    The Leftist mafia godmaleidentifyingparents pulling the strings of the Marxist Muppets know the score – they are losing. And it’s awesome. Because, finally, the Right has taken Saul Alinsky’s Rules for Radicals and shoved it up where #TheResistance don’t shine.

    Thank you, Andrew Breitbart. You yelled “Follow me!” and led a movement that had previously been dominated by doofy wonks and bow-tied geeks over the top in a glorious bayonet charge against the paper tiger liberal elite. The Left hadn’t taken a good, solid gut punch since Ronald Reagan turned the Oval Office keys over to the wimpcons who found fighting Democrats uncouth because conflict made for awkward luncheons down at the club. Bizarrely, the guy who picked up the standard and carried it forward when our beloved commander was felled by fate was a New York billionaire with no identifiable ideological foundation who instinctively understood the one thing that could make up for his other failings: He knows how to fight liberals and win. For Donald Trump and the revitalized conservative movement, Alinsky's book isn’t some dusty old commie tome – it’s a lifestyle.

    Alinsky’s Rules are relatively simple, and they make sense when you are fighting a conventional opponent with an interest in maintaining the status quo. The Rules are terrific for dealing with an old-school conservative guy who drives a Buick, enjoys gardening, and doesn’t want any trouble. They aren’t so effective against conservative brawlers who like to punch, and who aren’t too fussy about whether it’s with tweets or with fists.

    The Rules are not some magic incantation; they are simply some tactical principles that work in certain kinds of fights against certain kinds of opponents – particularly ones willing to unilaterally disarm in the face of an unprincipled enemy. But once the secret is out, it’s relatively easy to turn them around on an enemy that is so stupid it thinks it’s going to gain widespread acceptance among normal Americans by dressing up as genitalia. That’s why the thirteen classic Alinsky Rules are playing out right now in a way the Left did not expect.

    Rule 1: “Power is not only what you have, but what the enemy thinks you have.” Actually, we now have a lot of power. No, we don’t have direct power over liberal bastions like Hollywood, the media and academia, but by threatening to use governmental levers of power to impact their tax breaks, copyright laws, and subsidies, we can pound them into submission. And Trump is clearly willing to use all his powers to beat the living liberalism out of our enemy.

     

    Wait, this is where the Fredocons loosen their bow ties and stutter, “Why…we can’t…Professor Wellington Wimpenheimer IV would not approve…it’s so mean…oh, well I never!”

     

    Wake up. Man up. If you ever want to win (and maybe someday even kiss a girl) you need to get real. They hate us, and we either win or we spend the rest of our miserable lives as Boxer the Horse, slaving away to fund the welfare state under the lash of the Left until it decides it’s time to pack us off to the glue factory.

     

    Rule 2: “Never go outside the expertise of your people” and Rule 3: “Whenever possible, go outside the expertise of the enemy.” Stupid GOP wonkcons want to fight to where the liberals are strong, like on entitlements. Trump is smart enough to fight where liberals are weak, like on the economy. And he’s going to throw down some serious jujitsu by doing a liberal thing – infrastructure spending – in a conservative way. He's a developer – he knows how to build stuff, and he will freak the Left out by delivering concrete results (not the least of them, a wall) where liberals (for whom “infrastructure” means giving our money to their deadbeat constituents) never actually build stuff anymore. As a conservative, I’m not thrilled about “infrastructure” spending. But as a conservative insurgent who wants to see the Left on its collective collectivist back, twitching like a dying roach, I’m thrilled.

     

    Rule 4: “Make the enemy live up to its own book of rules.” This is not so much about pointing out the lies and hypocrisy that constitute Leftist orthodoxy – the vicious racism they deny is racism because it’s anti-white, the racism against non-whites who refuse to serve a liberal master, the sexism against women who think babies should be actually be born, and so on. It’s about not letting them tie us into knots by using our morals and values as bear traps to immobilize and neutralize us. Fortunately, most of us have discovered how losing our superficial “political values” helps us regain our freedom. We have embraced the power of not #caring. And liberals have no idea what to do when they shout “Trump is a meanie,” and we shrug, smile, and bust out with an impromptu interpretive dance to celebrate Neil Gorsuch.

     

    Rule 5: “Ridicule is man’s most potent weapon.” Actually, the AR15 a more potent weapon, but ridicule will do as long as the Left doesn't try to make good on its countless threats of violence and tyranny. Regardless, we finally we have a conservative corps that is willing to mock the members of that motley collection of pompous, inept, lying jerks we call the Democrat Party and its media catamite corps. When they turn around and try to mock us back, well, we aren’t watching their late night hack comics anymore, and frankly they can make all the jokes they want. The punchline is still going to be “And then the Republicans repealed Obamacare.”

     

    Rule 6: “A good tactic is one your people enjoy.” I’m having fun watching the liberals lose. How about you?

     

    Rule 7: “A tactic that drags on too long becomes a drag.” I don’t know – I doubt I am ever going to be tired of so much #winning.

     

    Rule 8: “Keep the pressure on. Never let up.” Remember the Trump outrage du jour a couple days ago when we were supposed to be on the verge of war with Australia? Well, Down Under’s kangaroos and giant scary spiders still wander freely, and we’ve long since moved on. President Trump has been busy owning the news cycle with appointments, executive orders, and the occasional squirrel-sighting tweet that sends the media chasing off on a rodent-seeking tangent. Oh no, Kellyanne Conway said to buy Ivanka’s stuff – if I ever cared (and I never did), I’ve already moved on to giggling about the progressive freak out over ICE being allowed to do its job again.

     

    Rule 9: “The threat is usually more terrifying than the thing itself.” No, Alinsky was wrong. The thing itself is much, much worse – as Democrats will find out when President Trump signs the law mandating national concealed carry reciprocity.

     

    Rule 10: “The major premise for tactics is the development of operations that will maintain a constant pressure upon the opposition.” Democrats are trying to do the massive resistance thing again, and it’s going about as well as when they tried the massive resistance thing against integration. It may arouse libs in blue cities and on soon-to-be-defunded college campuses, but normals are getting tired of the nonstop Leftist nonsense. See Rule 7. Conversely, Trump’s nonstop series of orders, appointments, and policies seems to be helping him – mostly because they are popular.

     

    Rule 11: “If you push a negative hard enough, it will push through and become a positive.” Unhinged Leftist obstruction, including violence, is driving people right. However, leftist harping on Trump’s rough edges seems to be backfiring – instead of “Oh my, what a brute!” people seem to be saying “Good. He fights.”

     

    Rule 12: “The price of a successful attack is a constructive alternative.” Trump has a program and it’s popular. What’s the Democrats’ program? “Give us more of your money so we can buy votes from welfare cheats, and then we’ll lecture you on your privilege?”

     

    The Democrats have no meaningful policies because their entire focus is on them regaining and keeping power – that’s their desired end state, not a country made great again, and that’s why they get no traction anywhere on the map outside of the dysfunctional blue spots. Watch for then to eventually seriously propose secession by the liberal states – after the last few months, I’ve been tempted to move my novel People’s Republic, about California ignoring the admonition to never go full Venezuela, over to the nonfiction section.

     

    Rule 13: “Pick the target, freeze it, personalize it, and polarize it.” Well, they try to. They try to make Trump a demonic chimera composed of bits and pieces of Hitler, Mussolini, and more Hitler, and he just doesn’t care. We don’t care, because we know what they are really saying is that we normals are the monsters, that it’s not Trump governing that is illegitimate but that it is we normals having a voice in governing ourselves that is illegitimate.

    And now we are woke, as the ridiculous Left would put it, to the Left’s tired Alinsky antics. We see it’s all a lie. It’s all a scam. And we aren’t playing the game by their rules anymore.

  • Mike Flynn Resigns As National Security Advisor

    As many had expected, multiple sources have now confirmed that former General Mike Flynn has resigned from his role as President Trump's national security advisor. The White House has confirmed that Lt. General Joseph Keith Kellogg, Jr. has been appointed Acting National Security Advisor.

    President Donald J. Trump Names Lt. General Joseph Keith Kellogg, Jr. as Acting National Security Advisor, Accepts Resignation of Lt. General Michael Flynn

     

    President Donald J. Trump has named Lt. General Joseph Keith Kellogg, Jr. (Ret) as Acting National Security Advisor following the resignation of Lt. General Michael Flynn (Ret).

     

    General Kellogg is a decorated veteran of the United States Army, having served from 1967 to 2003, including two tours during the Vietnam War, where he earned the Silver Star, the Bronze Star with "V" device, and the Air Medal with "V" device.

     

     

    He served as the Commander of the 82nd Airborne Division from 1997 to 1998. Prior to his retirement, General Kellogg was Director of the Command, Control, Communications, and Computers Directorate under the Joint Chiefs of Staff.

    The full text of General Flynn's resignation letter is below:

    February 13, 2017

     

    In the course of my duties as the incoming National Security Advisor, I held numerous phone calls with foreign counterparts, ministers, and ambassadors. These calls were to facilitate a smooth transition and begin to build the necessary relationships between the President, his advisors and foreign leaders. Such calls are standard practice in any transition of this magnitude.

     

    Unfortunately, because of the fast pace of events, I inadvertently briefed the Vice President Elect and others with incomplete information regarding my phone calls with the Russian Ambassador. I have sincerely apologized to the President and the Vice President, and they have accepted my apology.

     

    Throughout my over thirty three years of honorable military service, and my tenure as the National Security Advisor, I have always performed my duties with the utmost of integrity and honesty to those I have served, to include the President of the United States.

     

    I am tendering my resignation, honored to have served our nation and the American people in such a distinguished way.

     

    I am also extremely honored to have served President Trump, who in just three weeks, has reoriented American foreign policy in fundamental ways to restore America's leadership position in the world.

     

    As I step away once again from serving my nation in this current capacity, I wish to thank President Trump for his personal loyalty, the friendship of those who I worked with throughout the hard fought campaign, the challenging period of transition, and during the early days of his presidency.

     

    I know with the strong leadership of President Donald J. Trump and Vice President Mike Pence and the superb team they are assembling, this team will go down in history as one of the greatest presidencies in U.S. history, and I firmly believe the American people will be well served as they all work together to help Make America Great Again.

     

    Michael T. Flynn, LTG (Ret)
    Assistant to the President / National Security Advisor

    *  *  *

    As we detailed previously, after last night's news that Trump (and Steve Bannon) were actively deciding whether to fire National Security Advisor Mike Flynn over the recent scandal involving his [hone calls with Russian ambassador, Sergey Kislyak, discussing the Russian sanction something he denied publicly on several occasions, yet which now appears to have been the case, the ice below Flynn had got thinner this afternoon when the Trump administration for the second consecutive day sent conflicting signals in its support for Flynn amid uncertainty whether Flynn misled Mike Pence about his conversation with Russia’s U.S. ambassador. About an hour after White House counselor Kellyanne Conway said in a television interview that Flynn “does enjoy the full confidence of the president," press secretary Sean Spicer released a statement saying President Donald Trump is “evaluating” the situation involving his top security aide. Trump “is speaking to Vice President Pence relative to the conversation the vice president had with General Flynn and also speaking to various other people about what he considers the single most important subject there is, our national security,” Spicer said in an e-mailed statement. One day earlier, Trump adviser Stephen Miller declined to defend Flynn or say whether his job was safe. Miller, appearing on NBC’s “Meet the Press,” said Flynn had served the country admirably, but that “It’s not for me to tell you what’s in the president’s mind.”

    Now, following the latest report in the WaPo, the young Trump administration may have no choice but to make Flynn the first casualty. According to the Bezos-owned publication, the acting attorney general informed the Trump White House late last month that she believed Michael Flynn had misled senior administration officials about the nature of his communications with the Russian ambassador to the United States, "and warned that the national security adviser was potentially vulnerable to Russian blackmail." The message was delivered by Sally Yates and was prompted by concerns that ­Flynn, when asked about his calls and texts with the Russian diplomat, had told Vice ­President-elect Mike Pence and others that he had not discussed the Obama administration sanctions on Russia for its interference in the 2016 election. It is unclear what the White House counsel, Donald McGahn, did with the information.

    Former Director of National Intelligence James Clapper and former CIA Director John Brennan also reportedly shared Yates’ concerns about Flynn. The pair believed “Flynn had put himself in a compromising position”, thinking that Pence had a right to know that he had been misled, and agreed with Yates’ decision to warn the White House. One official told the Post all three officials believed Pence had a right to know Flynn had possibly misled him about his talks with Kislyak. Furthermore, current and former officials told the Post they believed Flynn deceived the vice president, adding they could not rule out the possibility he acted with the knowledge of other transition officials.  Yates, who was then the deputy attorney general, considered Flynn’s comments during an intercepted phone call with Kislyak last December “highly significant” and “potentially illegal.” The WaPo adds that an official familiar with Yates’ thinking told the Post she suspected Flynn may have violated the Logan Act, which prohibits U.S. citizens from interfering in diplomatic disputes with another nation. Trump fired Yates last month, after she refused to have the DOJ defend his temporary ban on visitors from seven Muslim-majority nations in court. Making matters worse – for Trump – is that a senior Trump administration official said that the White House was aware of the matter, adding that “we’ve been working on this for weeks.”

    The final nail in Flynn's coffin is that according to a report in the NYT, the Army has been investigating whether Mr. Flynn received money from the Russian government during a trip he took to Moscow in 2015, according to two defense officials. Such a payment might violate the Emoluments Clause of the Constitution, which prohibits former military officers from receiving money from a foreign government without consent from Congress. The defense officials said there was no record that Mr. Flynn, a retired three-star Army general, filed the required paperwork for the trip.

    If confirmed, and if Flynn indeed lied, Trump will have no choice but to let him go.

    *  *  *

    And indeed it appears it is confirmed, following his apology to Vice President Pence and other White House officials, CNN, Bloomberg, and NBC News confirm sources that Mike Flynn has officialy resigned…

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    And as AP reports, national security adviser Michael Flynn has resigned after reports he misled Trump administration officials about his contacts with Russia's ambassador to the U.S.

    Flynn's departure less than one month into the Trump administration marks an extraordinarily early shakeup in the president's senior team of advisers. Flynn was a loyal Trump supporter throughout the campaign, but his ties to Russia caused concern among other senior aides.

     

    Flynn initially told Trump advisers that he did not discuss sanctions with the Russian envoy during the transition. Vice President Mike Pence, apparently relying on information from Flynn, publicly vouched for the national security adviser.

     

    Flynn later told White House officials that he may have discussed sanctions with the ambassador.

    Making him the first of Trump's appointees to be let go, just as the odds predicted…

     

    Rather more notably, the dollar index tumbled on the news as perhaps the first cracks start to appear in the potemkin village of hope the markets have built around a Utrumpian future…

  • Random Mar-A-Lago Guest Posts Selfie With "Nuclear Football" Briefcase

    Richard DeAgazio, a 72-year-old Palm Beach businessman, Trump supporter and actor, raised some eyebrows over the weekend after he essentially live blogged Trump’s Mar-A-Lago golf outing with Japanese Prime Minister Shinzo Abe.  Among other misguided posts, DeAgazio thought it would be a really good idea to pose with, and publicly identify, “Rick”, the service man responsible for carrying the “nuclear football.”

    DeAgazio has since deleted his Facebook account, but as parents have been warning their teenagers for nearly a decade now, it’s almost impossible to erase something from the internet once it hits social media.  Unfortunately for Richard, this was no exception:

    Nuke Football

     

    Of course, this type of aloof behavior from Mar-A-Lago guests who pay annual membership dues of $200,000 to Trump’s business interests, will be exploited to the maximum extent possible by outraged Democrats.  We’re awaiting an impeachment motion from Nancy Pelosi which should be forthcoming at any moment.

    While the picture above was likely plenty to get him “Fired” from the club, DeAgazio was far from finished.  Here is a lovely picture with Steve Bannon…

    Nuke Football

     

    …and another with Trump standing in front of a glorious portrait of himself.

    Nuke Football

     

    But he still wasn’t done, at 1:35AM DeAgazio posted the following pics of Prime Minister Abe and Trump reacting after news broke that North Korea had “launched a missile in the direction of Japan”….”HOLY MOLY!!!”

    Nuke Football

    Finally, after the scrambled press conference between Trump and Abe to address the Korean launch, Trump crashed a wedding taking place at Mar-a-Lago, grabbed the mic and spoke to the guests. The groom came from a wealthy Ohio family. His father is co-CEO of American Financial Group and gave $100,000 toward Trump Super PACs last fall, according to New York Magazine.

  • Did The Fed Just Experience A "Margin Call" Moment?

    Authored by Mark St.Cyr,

    For those not familiar, the reference is attributed to a scene from the movie “Margin Call” where John Tuld (Jeremy Irons) makes the sanguinary argument for dumping its portfolio of toxic holdings immediately against contradictory arguments that it’ll be seen as panicking by others with the line, “It’s not panicking if you’re first.”

    That one line in fiction contains volumes as to the reality about how Wall Street, bankers, and more view the world. Which is precisely why when I read the news that Federal Reserve member, and “Regulatory Point Man” Daniel Tarullo resigned unexpectedly I just sat back in my chair thinking, “Of course he did” as that afore-mentioned scene came to mind.

    The reason why this sudden departure (remembering his term expires in 2022 some 5 years away) inspired thoughts as the above  that will surely be met with retorts such as “tinfoil wearing, conspiracy type” nonsense was not just the timing. But his resignation letter. To wit:

    “After more than eight years as a member of the Board of Governors of the Federal Reserve System, I intend to resign my position on or around April 5, 2017. It has been a great privilege to work with former Chairman Bernanke and Chair Yellen during such a challenging period for the nation’s economy and financial system.”

    Yep, that’s it. No alluding “health reasons.” No “need more time with family” qualifiers. Nor, anything else. Just a corporate styled, “Thanks, see Ya!” as to vacate 5 years early one of the most prestigious jobs in banking (Board of Governors) with quite possibly one, if not “the” most powerful agencies in the world, bar none. e.g., The Federal Reserve. Right, “Nothing to see here people, just move along, thanks for stopping by.”

    If this doesn’t ring alarm-bells, than I guess Barron’s™ is right and “Next Stop Dow 30,000” here we come! Or, was that cover-story what signaled Mr. Tarullo to heed what it may portend (i.e., marking market tops) and thought, “Getting outta Dodge” before this thing falls apart first was the next prudent banking and career move? All one can do is speculate.

    That said: It’s a fun thought experiment on one hand. But on the other? All I’ll say is this:

    If you’re into market signals? These aren’t what you want to see emanating from the Fed. if you’re one of those still buying every dip horns-over-hooves. Because the next “dip” just may be a cliff. That is, unless you’re a vaunted investment “guru” on CNBC™ and your mail arrives 2 days late crushing your prior invest advice to then flip, then flip again only 6 days later back to what you argued was wrong to begin with. But I digress.

    So again: Why would a member of the Fed suddenly resign?

    Unless?

    And that one word, much like the one line from the movie speaks volumes. The difference this time? It’s not in a fictional setting – it’s reality. And what it portends doesn’t have anything close to the intention of any movie. e.g., entertainment.

    No, these signals are troubling at their root cause. i.e., The realization that the entire monetary system may in fact be teetering on the verge of chaos. And the finger-pointing has already begun directed squarely at central bankers, and in particular The Fed.

    The abdication, its timing, along with its terse reasoning reinforces the argument that things are not as “great”, or “under-control” as the powers that be (e.g., central bankers) would have one believe. Especially from an institution that is supposedly hell-bent on making sure “signaling” or “policy” interpretations are delivered in a manner as to not be misconstrued.

    From the outside looking in, it would appear either someone didn’t get that memo, or didn’t care.

    The only thing more concerning is, if they did – and still didn’t care.

    Again, there seems to be far more to this resignation by the very manner in which it was brought forth. And that’s not an “interpretation problem” for others to overcome. No: That’s a problem of interpreting at face value anything now emanating from the Fed. Period.

    Why? I’ll propose it’s occurring at precisely the exact wrong time where “believe” and or “trust” that the Fed. knows or understands the implications of its decisions are needed.

    And what is the current Fed. “smoke signals?” Utter shambles for anything resembling coherent, concise messaging.

    Think I’m exaggerating or being hyperbolic? Fair point. Here’s just a few of the prevailing “arguments” one needs to try to decipher when attempting to understand current monetary policy and what it may, or may not, portend for the future.

    One down, (e.g., Mr. Turullo) how many will follow? e.g., Is Fed. Governor Lael Brainard next? After all, Ms, Brainard was not only an ardent supporter of Mrs. Clinton, but she also appears misaligned with current policy messaging. i.e., Not to keen about hiking rates.

    Or how about other arguments, along with statements such as this from Vice Chair Stanley Fischer: “There is quite significant uncertainty about what’s actually going to happen, I don’t think anyone quite knows.” when responding to a question about future fiscal policy which may, or may not, be forth coming in the U.S.

    To me, the real trouble was what followed when he said: “At the moment we are going strictly according to what we see as our responsibility according to law.”

    So, maybe it’s just me. But I’m quite sure that his boss, Chair Yellen, quite confidently alluded to at the last FOMC presser exactly what was needed and forthcoming, regardless of what came out of the current administration. i.e., Three rate hikes (via the Dot Plot) and possibly even more should they (The Fed.) see fit in reaction to anything “fiscal.” Has that changed? Again? And if it hasn’t? Is that still not an even bigger problem for the “markets?”

    If the above referenced conference and articles are any clue? The messaging, and signaling are bordering on incoherent. Again!

    Think there’s no reason to “panic” if you’re on the inside, let alone trying to gain insights from the outside looking in?

    Remember when the scariest notion viewed by Wall Street was the possibility that the Fed. would even consider, let alone float the idea of winding down its balance sheet first, before exhausting all other “tools” or options? How many “think tank” aficionados along with the gaggle of Ivy Leagued Ph.D economists touted such a thing as “crazy talk” when the notion was ever brought up?

    This even caused the former Chair to take to the keyboard on Jan. 26th 2017 and ask (or plead) that it wasn’t so.

    Can you say “Oh, Oh?”

    From St. Louis Fed. President Bullard’s discussion on 2/9/2017 for 2017 Monetary Policy. To wit:

    “Now that the policy rate has been increased, the FOMC may be in a better position to allow reinvestment to end or to otherwise reduce the size of the balance sheet,”

    So, are we to infer that if we are to get only one or two rate hikes, what we might actually see concurrent with that is the only other thing deemed even scarier in the eyes of Wall Street? e.g., Selling by the Fed. rather than buying?

    Again, can you say, “Oh, Oh?” Or is this all “conspiracy”, “tin-foiled” cap wearing crazy talk?

    Could be. Or, it could be fiction transforming into reality straight out of a scene in “Margin Call.” After all, as of November 15, 2016 Mr. Tarullo’s position was to carefully watch market reaction to Trump administration. And his conclusion?

    Hint: Re-read the first paragraph while remembering: When it comes to “bag holders?” That’s not in their job description, that’s yours.

  • Corporate America Setting Up "War Rooms" To Prep For Potential Trump Tweets

    Since November 8th, several public companies have unsuspectingly fallen into the cross hairs of Trump tweets sending their stocks gyrating violently while adding or erasing millions of dollars worth of market cap in a matter of seconds.  Here is just a small sample:

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    As we pointed out back in January, Toyota’s shares, along with the Mexican Peso, tumbled on Trump’s threat to impose a “big border tax” on their Corolla imports as the unprepared and shocked company frantically drafted a response.

    As Mr. Trump posted his message, Toyota’s chief communications officer, Scott Vazin, was packing his suitcase and preparing to leave his hotel room in Las Vegas, where he had been holding meetings around a trade show organized by the Consumer Technology Association. Mr. Vazin’s phone began to buzz as he faced a deluge of text messages and calls from his communications staff and reporters.

     

    Once the tweet was sent, Mr. Vazin called Messrs. Lentz and Nagata to discuss the statement he would craft, as the company’s stock began to inch downward. The auto maker posted its response on Twitter less than two hours later.

     

    “Toyota has been part of the cultural fabric in the U.S. for nearly 60 years,” said its statement, which bolded the name of the Mexican city where its plant will be located—Guanajuato, not Baja. The company touted its “$21.9 billion direct investment in the U.S.” and its number of employees and facilities in the U.S. Mr. Vazin said the company hasn’t been contacted by Mr. Trump since the statement.

    Now, according to the Wall Street Journal, Trump’s Twitter blasts, which often drive ‘yuge’ market reactions and come without warning, are forcing companies across the country to draft plans for “war rooms” to address a surprise presidential tweet.  Moreover, other companies are actively exploring strategically placing ads on MSNBC’s “Morning Joe,” CNN and “The O’Reilly Factor”—programs and networks fro which Trump has often appeared to draw inspiration for his tweets.

    “Every business and association in Washington is thinking about how they would respond to a tweet from Donald Trump,” said Alex Conant, a partner at the communications firm Firehouse Strategies and a longtime Republican strategist.

     

    In one recent simulation to prepare for a public attack by Mr. Trump, says consultant Eric Dezenhall, top executives of a science and technology company spent an afternoon in a room responding to various fallout scenarios, such as a stock-price plunge, congressional hearings or questions from investigative reporters.

     

    Mr. Dezenhall says the company that
    rehearsed the drill is now looking for something it can use as a potential peace offering to the president in the event of a critical tweet or other Trump tirade, “an equivalent to ‘we’re no longer building a plant in Mexico.’”

     

    Lobbying shops are telling their clients to do a thorough review of their business interests, especially as they relate to federal contracts, so they can tell a story about how the firm invests domestically.

    Still others companies have begun aggressively promoting previously announced job creation numbers in an effort to head off any criticism from the White House.  The latest example of such a move came from Intel’s CEO, Brian Krzanich, who recently visited the White House to tout a $7BN investment in a facility in Chandler, Arizona which was already announced under the Obama administration.

    Other companies have taken more proactive steps. Intel Corp. CEO Brian Krzanich last week traveled to the White House to roll out the company’s plans for a $7 billion investment in a major manufacturing plant in Arizona—plans that had been in the works for several years. Mr. Trump said following the announcement: “We’re very happy.”

     

    Other companies, including Wal-Mart Stores Inc. and Amazon.com Inc., have issued press releases touting U.S. job creation numbers from previously planned store openings and expansions. Some are also turning to “social-listening” tools to monitor mentions of their products on social networks, analyze the fallout from Trump tweets about other companies and track what’s said on the accounts that Mr. Trump follows.

     

    General Motors Co.—whose CEO Mary Barra has frequently spoken with Mr. Trump—said last month it would invest at least $1 billion across several U.S. factories, days after the president accused it on Twitter of moving Mexican-made vehicles across the border.

    Guess we can add the cost of establishing these ‘war rooms’ to the list of excuses as to why companies will inevitably miss Q1 2017 earnings…at least they get to blame something other than the “weather” for once.

  • A New Jacksonian Era?

    Submitted by Jim Quinn via The Burning Platform blog,

    “Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!” – Andrew Jackson

    “There is nothing the political establishment will not do, and no lie they will not tell, to hold on to their prestige and power at your expense. The Washington establishment, and the financial and media corporations that fund it, exists for only one reason: to protect and enrich itself. This is a crossroads in the history of our civilization that will determine whether or not We The People reclaim control over our government. The political establishment that is trying everything to stop us, is the same group responsible for our disastrous trade deals, massive illegal immigration, and economic and foreign policies that have bled this country dry.

    The political establishment has brought about the destruction of our factories and our jobs, as they flee to Mexico, China and other countries throughout the world. It’s a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth, and put that money into the pockets of a handful of large corporations and political entities.” – Donald Trump

    Andrew Jackson was a bigger than life figure who lived from the early stages of the American Revolution until the country was on the verge of splitting apart over slavery and states’ rights issues. Born in the Carolinas shortly after his father died in an accident, he acted as a courier during the Revolutionary War. Andrew and his brother Robert were captured by the British and held as prisoners and nearly starved to death in captivity.

    When Andrew refused to clean the boots of a British officer, the officer slashed him with a sword, leaving deep scars on his left hand and head. His brother died of smallpox and his mother from cholera in 1781, leaving him an orphan at the age of 14. He blamed the British for their deaths and held an intense hatred of the British for the rest of his life.

    Jackson was a grudge holder. He was a courageous military hero, nicknamed Old Hickory by his troops because of his toughness. He was combative and vindictive. He was a self-made lawyer, military leader and statesman. He was a wealthy plantation owner and merchant. Over one hundred and fifty slaves worked on his plantation.

    He fought Indians, the British, politicians, and bankers. He was scorned and ridiculed by the press. Establishment politicians cheated him out of a presidential victory, but that loss motivated him to crush his political enemies in the next election. He was a devoted dependable friend to his compatriots and a steadfast adversary to those who crossed him.

    If you think the fake news media and vitriolic political campaigns, personally attacking the families of candidates was a modern day phenomenon, you would be badly mistaken. American politics sinking into the sewer and sensationalistic journalism existed from the earliest days of our country. Jackson’s controversial marriage to Rachel Robards made Jackson resentful towards any attack on her honor. He had mistakenly married her before her divorce was official. An attack on their honor published in a local Nashville newspaper led Jackson to challenge Charles Dickinson to a duel.

    Charles Dickinson was considered an expert shot. Jackson decided to let Dickinson fire first, betting his aim might be off in his haste. Dickinson did fire first striking Jackson just below the heart. The musket ball remained lodged in his lung for the rest of his life. Under the rules of dueling, Dickinson had to remain still as Jackson took aim and killed him. Jackson’s behavior in the duel outraged men of honor in Tennessee, who called it a brutal, cold-blooded killing and saddled Jackson with a reputation as a violent, vengeful man. As a result, he became a social outcast.

    Jackson’s wound didn’t keep him from becoming a national military hero nine years later by leading his outnumbered troops to an overwhelming victory over the British at the Battle of New Orleans during the War of 1812. His hatred for the British going back to the Revolutionary War likely motivated him to defend New Orleans to the death. Jackson took command of the defenses, directing 5,000 militia from various Western states. He was a strict officer but was popular with his troops. Jackson’s soldiers won a crushing victory over 7,500 attacking British soldiers.

    The British had 2,037 casualties: 291 dead (including three senior generals), 1,262 wounded, and 484 captured or missing. The Americans had 71 casualties: 13 dead, 39 wounded, and 19 missing. This victory propelled him to national prominence and spurred his presidential aspirations. The common man saw Jackson as a populist hero. He continued to build his militaristic resume by defeating the Seminole and Creek Indians in Florida, who were secretly supported by the British and Spanish.

    In another example of history rhyming, the 1824 presidential election was far more dysfunctional and corrupt than the most recent election campaign. There was essentially one political party, the Democrat-Republican Party. The states put forth four candidates: Andrew Jackson, William Crawford, John Quincy Adams, and Henry Clay. In a hotly contested campaign, filled with nasty accusations and condemnations, Jackson won the popular vote and a plurality of the electoral votes, but not a majority. Therefore, the decision went to the House of Representatives. As an establishment outsider, Jackson was at a disadvantage.

    In what became known as the “Corrupt Bargain”, Henry Clay, the current Speaker of the House, convinced Congress to elect Adams, who then made Clay his Secretary of State. For the next four years Jackson and his supporters railed against the Adams administration calling it illegitimate and tainted by corruption and an aristocratic governing style. The Jacksonians rightly denounced the Adams administration for its pork barrel spending and rewarding of special interests. Jackson’s defeat burnished his political credentials as many voters believed the “man of the people” had been robbed by the “corrupt aristocrats of the East”.

    “I weep for the liberty of my country when I see at this early day of its successful experiment that corruption has been imputed to many members of the House of Representatives, and the rights of the people have been bartered for promises of office.” – Andrew Jackson

    He learned from his mistakes and built a coalition of support in 1828, with John C. Calhoun as his running mate and Martin Van Buren as a key ally. He created the Democratic Party and when his opponents referred to him as “jackass” he embraced the insult and used it as a symbol for his campaign. The donkey later became the symbol of the Democratic Party. The campaign was mean and personal with insults and accusation flying in the press.  It reached a low point when the press accused Jackson’s wife Rachel of bigamy. Jackson won the election in an electoral landslide. Rachel died suddenly on December 22, 1828, before his inauguration, and was buried on Christmas Eve. The stress of the election led to her heart attack. He blamed Adams and his cronies for her death.

    Jackson’s eight year presidency marked a turning point in American politics. He rode a wave of populism to victory and it marked the first time political power had passed from establishment elites to ordinary voters based in political parties. Jackson’s philosophy as President followed much in the same line as Thomas Jefferson, advocating Republican values held by the Revolutionary War generation. He attempted to conduct his presidency with high moral standards, but ultimately fell short.

    He attempted to limit the Federal government, but when South Carolina opposed the tariff law he took a strong line in favor of nationalism and against secession. He also used the power of the Federal government to forcefully relocate Indian tribes to west of the Mississippi.  He despised the moneyed interests and dismantled the Second Bank of the United States. His actions indirectly led to the Panic of 1837.

    In another occurrence with similarities to Trump’s cabinet selections, Jackson believed the president’s power was derived from the common man. Instead of choosing hand- picked party cronies for his cabinet, he decided choosing businessmen, who would get things done and follow his lead, was the better course. Having headstrong businessmen with huge egos and vicious gossip mongering wives in his administration would have fit in nicely in our present day degraded Kardashian selfie culture.  Salacious rumors and sex scandals led to bitter partisanship between Eaton, Calhoun and Van Buren. Jackson was forced to fire and revamp his entire cabinet in 1830.

    The issue which most reflected Jackson as the president of the common man versus the vested interests was his struggle against Nicholas Biddle and the Second Bank of the United States. It was chartered in 1816 by James Madison in an effort to restore an economy ravaged by the War of 1812. Biddle attempted to renew its charter in 1832 and successfully got the renewal through Congress.

    Jackson, believing that Bank was a corrupt monopoly whose stock was mostly held by foreigners, vetoed the bill. Jackson used the issue to endorse his democratic values, contending the Bank was being run by a den of vipers for the benefit of the wealthy elite. Jackson stated the Bank made “the rich richer and the potent more powerful”. He never stopped fighting for the common man.

    “You are a den of vipers. I intend to rout you out and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning.” – Andrew Jackson

    His veto became the primary issue in the 1832 presidential campaign against Henry Clay, as his opponents rebuked his veto as the work of a demagogue, claiming he was using class warfare as a ploy to get the support of the common man. Proving a populist message brought directly to the people can defeat an establishment machine, Jackson crushed Clay in the election, with 55% of the popular vote and receiving 219 electoral votes to Clay’s 49. He warned the people against allowing central bankers to take control of the government. We didn’t heed his warning. Whether Trump has the courage of Jackson in taking on the Central banker den of vipers is yet to be seen.

    “The bold effort the present (central) bank had made to control the government … are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.” – Andrew Jackson

    Jackson knew powerful banking and corporate interests were the antithesis of how a government by the people, for the people and of the people should function. He also knew debt and fiat paper created a speculative gambling economy, not beneficial to the common man over the long-term. Giving away the power of the people to bankers and corporations created as much havoc and suffering in the 1830s as it has today.

    “The mischief springs from the power which the moneyed interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges which they have succeeded in obtaining, and unless you become more watchful in your states and check this spirit of monopoly and thirst for exclusive privileges you will in the end find that the most important powers of government have been given or bartered away.” – Andrew Jackson

    After disposing of the Bank of the United States in 1833, Jackson removed federal deposits from the bank and the money-lending functions were taken over by the multitude of local and state banks across America. The national economy boomed as the federal government coffers overflowed with revenue from tariffs and the sale of public lands in the west. In January 1835, Jackson paid off the entire national debt, the only time in U.S. history that has been accomplished. He rightfully saw the national debt as a curse, only benefitting the moneyed interests.

    “I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country.” – Andrew Jackson

    I find it amusing historians of a Keynesian persuasion blame Jackson’s dismantling of the central bank in 1833 for the Panic of 1837 and the subsequent four year depression. The true cause of the Panic and depression was reckless land speculation by the rich, financed by state and local bankers who failed to exercise due diligence, risk management or restraint on their lending practices. Does that sound familiar (2008 Financial Crisis)? Bankers have been the perpetual cause of financial crisis since the inception of this country.

    Jackson was forced to rein in the rampant credit bacchanal by issuing the Specie Circular, which required buyers of government land to pay in specie (gold or silver coins). This was another example of when the tide goes out you see who was swimming naked. The credit speculators had no gold or silver and bank losses threw the country into panic and depression. Just as the Fed induced housing boom and the Wall Street mortgage and derivatives control fraud were the cause of the 2008 financial crisis, it was banker fueled land speculation which caused the 1837 Panic. Jackson was just the pin popping the bubble before it got even bigger.

    The non-stop speculation about assassinating Trump as the left wing solution to losing a fair election has reached epic proportions on social media. Of course, cowardly social justice warriors, who don’t believe in free speech, election results, the Constitution, or the rule of law, are good at making hollow threats and causing destruction within their liberal enclaves of hate, but they don’t have the balls to actually attempt an assassination. Back in Jackson’s day of duels and face to face justice, there were no safe spaces and trigger warnings.

    The first assassination attempt on a sitting president occurred in 1835 outside the U.S. Capitol when Richard Lawrence, an unemployed house painter from England, aimed two pistols at President Jackson as he was leaving the East Portico after a funeral. Both pistols misfired. As Lawrence was disarmed and restrained by, among others, Davey Crockett, Jackson attacked him with his cane. Lawrence blamed Jackson for the loss of his job.

    Afterwards, due to public curiosity concerning the double misfires, the pistols were tested and retested. Each time they performed perfectly. Many believed Jackson had been protected by the same Providence they believed also protected their young nation. The incident became a part of the Jacksonian mythos.

    There is no doubt Jackson and Trump have similarities in their confrontational natures, blunt talk and fiery tempers. Historian H.W. Brands noted how opponents were terrified of his temper in his autobiography of the iconic figure:

    “Observers likened him to a volcano, and only the most intrepid or recklessly curious cared to see it erupt…. His close associates all had stories of his blood-curling oaths, his summoning of the Almighty to loose His wrath upon some miscreant, typically followed by his own vow to hang the villain or blow him to perdition. Given his record – in duels, brawls, mutiny trials, and summary hearings – listeners had to take his vows seriously.”

    If twitter had existed in the 1830s, Jackson would have surely been hurling insults at his opponents and the feckless press. Jackson used his reputation for rage and fearsomeness to achieve his policy goals by intimidating his opponents. If you think Trump’s insults hurled at Hillary Clinton, Jeb Bush and Chuck Schumer have been too un-presidential like, consider Jackson’s final thoughts about his two most hated political opponents.

    “After eight years as President I have only two regrets: that I have not shot Henry Clay or hanged John C. Calhoun.” – Andrew Jackson

    It is fascinating how the intellectual elites of Jackson’s time had the same level of contempt for the common man as the arrogant ruling elite have for the “deplorables” inhabiting the towns and hamlets of flyover America today. Alexis de Tocqueville, a pretentious French intellectual, and contemporary of Andrew Jackson, treated Jackson, his presidency, and his supporters disdainfully in his book Democracy in America, written during Jackson’s presidency. The haughty condescension of the rich and powerful elite towards the plebs has spanned the ages, with the NYT, Washington Post and CNN scornfully filling the role of Tocqueville today.

    “Far from wishing to extend the Federal power, the President belongs to the party which is desirous of limiting that power to the clear and precise letter of the Constitution, and which never puts a construction upon that act favorable to the government of the Union; far from standing forth as the champion of centralization, General Jackson is the agent of the state jealousies; and he was placed in his lofty station by the passions that are most opposed to the central government. It is by perpetually flattering these passions that he maintains his station and his popularity. General Jackson is the slave of the majority: he yields to its wishes, its propensities, and its demands–say, rather, anticipates and forestalls them.

    General Jackson stoops to gain the favor of the majority; but when he feels that his popularity is secure, he overthrows all obstacles in the pursuit of the objects which the community approves or of those which it does not regard with jealousy. Supported by a power that his predecessors never had, he tramples on his personal enemies, whenever they cross his path, with a facility without example; he takes upon himself the responsibility of measures that no one before him would have ventured to attempt. He even treats the national representatives with a disdain approaching to insult; he puts his veto on the laws of Congress and frequently neglects even to reply to that powerful body. He is a favorite who sometimes treats his master roughly.” – Alexis de Tocqueville, Democracy in America

    Andrew Jackson was most certainly a flawed human being, with a multitude of personal tragedies coalescing to form his persona and worldview. His hardscrabble upbringing, fighting nature, contempt for republican elitism, and disdain for the greedy acolytes of wealth and privilege, formed his political philosophy and popularity among average citizens. Jackson’s goal was to rid government of class preferences and shred the credit driven advantages of the wealthy minority, whose only concern was their personal wealth.

    He dedicated himself to ridding the government of those who exploited the majority to benefit the few. Equal rights and limited government while ensuring the wealthy establishment cronies could not enrich themselves at the public trough by capturing the governmental levers of power and plundering the nation’s wealth, was the vision espoused by the Jacksonians.

    By demonizing the moneyed aristocracy and supporting the common man, Jackson broadened electoral participation to include an overwhelming majority of white men. Jackson’s success in democratizing the political process works when an educated involved civic minded electorate is active in the process. As time passed and the electorate expanded, our democracy has devolved into a vote buying exercise of who promises the masses the most. Huge portions of the electorate are feeble minded, free shit seeking ideologues, with no concern for the long-term sustainability of the nation. The voice of the people had been silenced by Deep State special interests until Trump’s unlikely victory in November.

    The Jacksonian Era of operating government for the benefit of the people was short lived, as the power of the elites reconstituted among the Northern business interests and Southern planters – ultimately leading to the Civil War resolution and further expansion of Federal government power and control. Jackson’s efforts were noble but ultimately a failure. Will Trump’s rhetoric of taking back government for the people ultimately fail? Can the rich and powerful vested interests be defeated? The odds are heavily against Trump, but we are in for a spectacular fireworks display as history unfolds.

     “It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society—the farmers, mechanics, and laborers—who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government.” –  Andrew Jackson

    In Part Two of this article I will ponder whether the Trumpian Era will see Trump’s populist agenda successfully implemented or whether we experience a spectacular failure.

  • Institutional Investors are Terrified of this Asset

    One of the most important traits that an investor can have is patience. Everyone knows this and it makes perfect sense. Patience allows you to be opportunistic and only choose the best opportunities for your portfolio. Despite this common knowledge nearly all investors ignore the most important asset in their portfolio. The most important asset in every portfolio is Cash. Cash is an asset that gives investors optionality and helps improve returns in the future.

    When we say cash, we don’t specifically mean the U.S. Dollar, Euro, Yen or Treasuries. We’re using it as a general term for anything that can be quickly deployed to purchase an investment. As much as my readers would like to discuss the viability of the U.S. dollar or the implosion of the Euro this isn’t that article. Investors can keep cash or cash equivalents in whatever currency they view as the most stable.

    Cash Misconceptions

    As we have said before, cash gives investors optionality. Optionality allows investors to choose the best opportunities and outperform the market. Seth Klarman’s hedge fund Baupost, one of the most successful hedge funds of all time has used cash to maintain optionality. A letter from former Baupost employee Brian Spector highlights how important cash was to the success of their firm.

    “One of the most common misconceptions regarding Baupost is that most outsiders think we have generated good risk-adjusted returns despite holding cash. Most insiders, on the other hand, believe we have generated those returns BECAUSE of that cash. Without that cash, it would be impossible to deploy capital when we enter a tide market and great opportunities become widespread.”

    Academics and Institutions typically view cash as a drag on the performance of a portfolio. Given our prior experience as institutional investors we have seen the pressure that CIO’s place on portfolio managers to cut their cash allocations. Every month when portfolio managers review their attribution against benchmarks cash and cash equivalents can either be positive or negative. In a rising market no CIO wants to see their funds underperforming benchmarks due to cash allocations.

    Absolute Returns Matter Most

    Unfortunately, this flawed institutional logic typically makes its way to individual investors. Institutions compete against a benchmark. A Fidelity portfolio manager whose portfolio only declines 25% while the market declines 30% is considered extremely successful. For the individual investors, only absolute returns matter. Individuals realize that when a portfolio declines 25% it takes a 33% increase to get back to even. They don’t have the advantage of investing other people’s money and skimming 1 – 2% off the top.

    We even found a ridiculous article that talks about how “dangerous” cash drag can be on performance. This article, What a (Cash) Drag: Institutional Investors and ETF Cash Equitization describes the trend of institutional investors using ETF’s rather than holding cash. Institutional investors do this because they don’t want to lag benchmarks because of cash. The article begins by asking “why aren’t more retail investors using ETFs to equitize their cash?”. The simple answer is because it is a terrible idea. Measuring against benchmarks creates terrible incentives which is an advantage that individual investors have over institutions.

    Cash the Call Option

    Having a significant portion of your portfolio allocated to cash is like having a call option on all available opportunities. If you had even a minimal amount of cash available in 2008 and 2009 you would have had endless opportunities to deploy your cash and earn extremely high returns. The opportunity cost of cash far outweighs the potential drag on performance. Cash is the perfect call option because it costs nothing yet gives you the opportunity to purchase any available asset. This is the view that Warren Buffett has of his cash allocation. According to Buffett biographer Alice Schroeder,

    “He thinks of cash differently than conventional investors. He thinks of cash as a call option with no expiration date, an option on every asset class, with no strike price.”

    Having this type of mindset and ability to hold cash in your portfolio will set you up for success.

    Cash and Financial Repression

    Another reason to allocate more of your portfolio to cash is because of the current macro environment. Investors in Europe and Japan face negative interest rates. Faced with the choice of paying a government to own its debt as opposed to holding cash the choice seems easy. While most short-term debt is easily convertible into cash investors should never pay governments to hold their debts. Our modern age of financial repression means that investors should seriously consider holding larger cash allocations.

    Cash is King

    Financial portfolios and individual investors benefit from holding cash. Cash gives investors optionality to purse every available option. Holding cash will give you more piece of mind because you will be ready when the perfect investment appears. Let the institutions who compete against benchmarks always be invested. As Warren Buffett and Seth Klarman show us, successful investors consider cash one of their most important assets.


    Originally published at BoomBustMarket.com

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