Isolationists

Speaking as a guy who is looking forward to chaos, i.e. – market chaos, political chaos, etc., this video warms my heart:

President Trump, who I still refer to as “Drumpf” thanks to my Google Chrome Browser extension provided by John Oliver (see link) is setting the world on fire with isolationist thoughts and actions.

The last time we had an overvalued stock market peak simultaneously mixed with protectionist/isolationist actions was 1930. The stock market had just peaked and began a slide into losing greater than 89% off that peak, and while the stock market was making its way into the abyss two senators sponsored a bill that would ensure economic destruction, the Smoot-Hawley Tariff Act. Without asking you to take an economics lesson, here is the first line of that webpage:

The act raised U.S. tariffs on over 20,000 imported goods.

Sound or look familiar to you? It should. President Trump wants to impose tariffs on imported goods, to “protect” American jobs.

I haven’t seen this movie before because it happened way, way before I was born, but I’ve read about it several times over my adult lifetime. I remember discussing the impending real estate collapse with my Dad (circa 2006), who cut his teeth in the real estate business in the 1960s, and at that time he had this to say:

I’ve never seen real estate prices collapse on a nationwide basis, therefore neither have you. But when I got into the business I worked with people who had seen real estate prices collapse nationwide; it was during the depression. It will happen again.

Credit to my Dad; it did happen again.

I never thought I would see protectionism/isolationism in my lifetime. I thought we had advanced well beyond that failed economic policy several decades ago. I can hardly wait to see how this plays out.

Good luck with your protectionism.

Clinton Lost

It has begun. Donald Trump has accumulated enough electoral votes to secure the victory and already I have seen videos of people marching through various streets of America chanting, “not my president!” Therein lies the difference between a spoiled expectancy and coming to grips with reality. Hillary Clinton lost this election more than Donald Trump won it. However, Trump is a lifelong salesman who is accustomed to asking for and closing a sale. Clinton expected the win and so did everyone who sided with her against Trump, never really asking for the sale but expecting it because the alternative was so reviled.

I am old enough now to have experienced more than a few of these Presidential elections. I was unhappy with the result in 1992 when Bill Clinton won with significantly less than a majority, and also when he repeated the feat in 1996. At no point in time immediately after those elections or subsequently did I ever mutter the words, “not my president.” I sincerely wish that the people (mostly celebrities) who threaten to leave the country, like spoiled little crybabies who stamp their feet when they don’t get their way, would actually follow up with their threats and hit the road, Jack!

A lot of blame has already fallen on the wrong shoulders. The emails did not do her in. Protectionism did not drive him to victory. I think the populous, and most of the unemployed and underemployed who have yet to recover from the Great Recession, were and still are angry that no one from Wall Street has suffered at all following a mortgage and debt catastrophe that was created inside those investment banks. To make matters worse, Hillary Clinton received several $225,000 speaking fees from those very investment banks that created the housing disaster. In the eyes of the lower middle class in this country, those speaking fees look very much like advanced bribes to continue to create more “financial innovation” while Hillary potentially looked the other way; but that’s conjecture on my part.

The “rednecks” who drove Trump to victory in their dirt covered elevated trucks and jeeps wanted a genuine outsider to go to the White House. Hillary was and still is anything but an outsider, and she downright sucks at closing the sale.

How Much Better Can it Get?

That’s what market participants and election pundits needed to be asking themselves at two significant points in this fiasco otherwise known as this summer’s election cycle. I borrowed a couple of screenshots from Nate Silver’s website, 538.com. Have a look:

augusthillarylead

octoberhillarylead

I put two arrows on the chart of the S&P500 to show exactly when Hillary Clinton enjoyed her biggest lead(s) over Donald Drumpf.

screen-shot-2016-11-04-at-11-05-14-am

As I write this today my prediction is that Hillary will win. However, I dislike the both of them.

Two Wrongs

Two Wrongs

Anyway, the time to hedge against a perceived worst case scenario was when Hillary had her largest lead(s). If Drumpf pulls an upset on Tuesday, I have no idea what to expect from the market, but my perception is that all of the hedging and/or selling has already been done.

Stay safe out there.

Two Dates That Will Live in Infamy

May 7, 1997
November 12, 1999

Do you recognize those dates? Why should you? Chances are that you have bought and sold a home after those dates, and in a very rare case bought a home before the first date and still own it so its relevance is lost on you.

The first date is the Taxpayer Relief Act of 1997, and in that act was a very big bonus for home flippers. Here’s the summary from BankRate.com:

Before May 7, 1997, the only way you could avoid paying taxes on your home-sale profit was to use the money to buy another, more-expensive house within 2 years. Sellers age 55 or older had one other option. They could take a once-in-a-lifetime tax exemption of up to $125,000 in profits. And in all instances, there was Form 2119 to fill out to show that you followed the rules.

Nice bonus, eh? Middle class America gets a break for once. Did this change to the tax law encourage house flipping? It certainly made it easier and less costly. Did the change to this tax law encourage more transactions? You bet.

Now the second date, which is a lot more obscure to the common voter, November 12, 1999. Here’s the picture at the scene of the crime:

clintonsignsglasssteagallrepeal

That is President Bill Clinton enjoying a good chuckle after signing the Gramm-Leach-Bliley Act, which was a partial repeal of the Glass-Steagall Act from 1933. On that Wikipedia page is a nice description of the changes that that Act caused to the banking and investment banking industry along with (at the bottom of the page) criticisms of the Act. Go read that, and as you do consider how much more creative banks were allowed to be after the repeal of Glass-Steagall than before.

Still with me? Good. So why do I bring those up now?

Because this is an election year. While many people are of a mind to hate one candidate or another, and we are forced to choose a lessor of two evils, I think it is important for people to consider finally letting go of the hatred many people have for President George W. Bush. He was not in office in 1997 or 1999. This also means people have to let go of those nostalgic feelings attached to Bill Clinton and the ridiculous belief that our economy was so much better with him in office. Unintended consequences are real. They lurk behind every decision you and I make as voters. The potential causes of the housing bubble go way beyond the two things that I have listed here. More, and probably most of the blame can be laid at the doorstep of Federal Reserve Chairman Alan Greenspan, but that’s a discussion for another day.

assholes

We do not get to choose the Fed Chairman or any of the other central planners who pull the strings and turn the dials on our economy. We do get to choose who chooses those people, unless of course we choose not to play, and decide instead to just adapt, improvise and overcome.

on a personal note:

STFU about George Bush. The financial collapse in 2008 was not his fault.