- The outfit that tells D.C. insiders to “own the day” frets about the debt ceiling
- Team Trump’s first hundred days hits a massive speed bump on Day 55
- What happens when all the reasons for the market’s “Trump bump” fizzle?
- The devaluation that wasn’t: A false flag in the currency wars?
- Pentagon waste more than Russia’s entire military budget
- The Washington Post’s nonresponse to PropOrNot critics… the tax burden of high-income retirees… we address a “disappointed” reader’s concerns… and more!
“Republicans on Capitol Hill are already beginning to fret over how they’ll lift the debt ceiling in the age of Donald Trump,” says yesterday’s “Playbook” column at Politico.
“Playbook” touts itself as the “must-read briefing on what’s driving the day in Washington.” Its Twitter page has the tag line “Win the morning. Own the day.” Maybe if you spend all day lobbying for a share of the spoils confiscated from taxpayers, that’s an inspiring message. To us, it’s just obnoxious. But because it’s what the insiders read, we ignore it at our peril.
“GOP leadership,” says the column, “will spend much of the first part of 2017 passing an infrastructure bill, working on tax reform and repealing the health care law — and that will take a lot of political capital. There has been some discussion about lifting the debt ceiling — which has to be done by late summer — as part of a larger deal, but there are mixed feelings about going down that path. Rank-and-file Republicans have relished fights over the debt ceiling, so with the White House in GOP hands, they might not be so eager to get in line.
“That Republicans are already thinking — and strategizing — about this shows how big of a deal it will be.”
Politico is affirming what David Stockman said here last week, borne of his own experience in Washington: The juggernaut of the Trump presidency’s first hundred days will smack into a massive speed bump on Day 55.
The debt ceiling has been suspended for more than a year. It comes back into force on March 15. Congress will have to raise the ceiling or extend the suspension.
“There is virtually no chance that will happen smoothly,” says David, “or avoid a protracted scene of brinksmanship, government shutdowns and Trumpian bargaining threats and faints like the Imperial City has never seen before. This will not be a replay of August 2011 when so-called responsible establishment politicians — led by President Obama and Speaker Boehner — conspired behind the scenes to sell out their own troops.
“The Donald just plain doesn’t function that way, yet has no clue about the immense difficulty of lining-up 218 votes for a multitrillion debt ceiling increase and what will be a sure ticket to a primary challenge for any House Republican who walks the plank.”
The Treasury can perform some accounting tricks to stay under the ceiling after March 15 — as happened during much of last year — but those tricks work for only so long. That’s why Politico says a deal has to be done by late summer.
No debt ceiling deal means no advancement of the Trump agenda — especially that $1 trillion public works program.
As David explains it, “the planned GOP attempt during the first weeks of the new Congress to repeal Obamacare with a two-year fuse is certain to create an intense partisan firestorm that will drastically curtail any inclination among the wounded Democratic minorities on either side of the Hill to engage in bipartisan compromise on the Trump stimulus.
“Even what should be a congressional porkers’ delight — the Trump infrastructure bill — will get bogged down. That’s because the devil is in the detail, and the potpourri of mechanics that are likely to be structured into any infrastructure program — such as business tax credits, user fees, federal loan guarantees and much more — will not be prone to easy resolution.”
In other words, the whole rationale for the “Trump bump” in the stock market will fizzle early on in 2017. And the air will come out of the “big, fat, ugly bubble” Trump warned about in the first debate.
“At the end of the day,” says David, “all the excitement in the stock market about Trumponomics was based on a blatant contradiction in terms regarding the meaning of Nov. 8. To wit, it was presumed that GOP control of the White House and both houses of Congress was a good thing because it implied an end to the legislative deadlock of the Obama era.”
Instead, the Republican Party will be badly split over whether deficits really matter… while Democrats will grab the popcorn to watch the GOP’s circular firing squad.
But the first popping of the “big, fat, ugly bubble” begins before the calendar turns to 2017. In fact, it starts a week from tomorrow.
That’s when the Federal Reserve will raise its benchmark fed funds rate for the first time since December of last year. Back then, that one move tanked the S&P 500 by 11%. Yes, it recovered and hit new all-time highs. But for reasons we just showed you, that feat won’t be repeated.
David sees genuine peril for the market… but he also sees opportunity for the nimble and farsighted. That’s why he’s organizing a live training session this coming Thursday at 7:00 p.m. EST — laying out a trading strategy to profit from the end of the “big, fat, ugly bubble.”
He organized a similar event at this time a year ago, likewise anticipating a Fed rate increase. In the year since, he’s shown readers how to collect gains of 54% in 27 days… 63% in 30 days… even 148% in 74 days.
It won’t cost you a thing to take part in this session. But we do have a daily cap on the number of people who can sign up — 5,000 and that’s it. Click here to see if space is still available today.
The major U.S. stock indexes are treading water on this Tuesday morning. The Dow is nearly steady compared with yesterday’s close at 19,216. Treasury yields are inching down, the 10-year at 2.38%. Gold is up a touch at $1,172.
If it’s excitement you want, it’s in crude, down nearly 2.5% at $50.56. Looks as if it’s dawning on traders that there might be less to this OPEC production cut than meets the eye.
The big currency move of the last 24 hours was not Chinese retaliation for Trump’s outreach to Taiwan. And it wasn’t even a real currency move.
Over the weekend, Trump broke with decades of precedent by talking with Taiwan’s leader on the phone. The U.S. government doesn’t recognize Taiwan’s government diplomatically — although that doesn’t stop Washington from routinely sending Taiwan boatloads of weaponry. Mainland Chinese leaders took umbrage at the phone call; they still consider Taiwan a renegade province.
Yesterday around 1:00 p.m. EST, the Chinese yuan started crashing against the U.S. dollar. The rumor mill cranked into action: It was a retaliatory strike, a deliberate devaluation.
In reality, it was erroneous data that showed up on Google Finance and the currency website XE. The yuan doesn’t even trade at that hour, which is the middle of the night in China. Exactly what caused the boo-boo, no one’s saying. But it wasn’t a shot fired in the currency wars.
This morning, we see Henry Kissinger — Nixon’s secretary of state who did much to open doors with mainland China — is paying a call on the president-elect at Trump Tower in New York. He just got back from a trip to China.
No, we don’t have any brilliant insight about the timing of the visit. It’s just interesting…
Your government in action: The Pentagon reckons 22 cents of every dollar it spends is the proverbial “waste, fraud and abuse.”
The Defense Department commissioned a study a while back in a quest for efficiency. “But after the project documented far more wasteful spending than expected, senior defense officials moved swiftly to kill it by discrediting and suppressing the results,” reports today’s Washington Post.
[Yeah, we know. The newspaper that’s the purveyor of the PropOrNot garbage. Gotta read establishment media selectively. More about PropOrNot momentarily…]
The bureaucratic bloat amounts to $125 billion out of a $580 billion budget. Another way of looking at it is that the waste in the U.S. military budget is more than Russia’s entire military budget… and half of China’s military spending.
The Washington Post has finally gotten around answering critics of its sloppy smear against 200-some websites accused of “echoing Russian propaganda” — including Contra Corner, the site of our own David Stockman.
More than 12,000 people signed a petition at the activist website RootsAction demanding a retraction and apology. Instead, they got a dodge and weave from the paper’s VP for public relations, Kristine Coratti Kelly: “The Post did not name any of the sites on PropOrNot’s list of organizations that it said had – wittingly or unwittingly – published or echoed Russian propaganda. The Post reviewed PropOrNot’s findings and our questions about them were answered satisfactorily during the course of multiple interviews.”
Two of the sites named on PropOrNot’s blacklist — Truthdig and the venerable lefty financial blog Naked Capitalism — have had lawyers send letters to the Post demanding a retraction. To be continued…
“Before anyone ridicules those who lament the fact they have to pay higher taxes in the form of higher Medicare premiums,” a reader writes, “they need to truly understand the overall costs borne by those ‘lucky enough to be in that category.’
“If a married couple earns a gross of $500,000 without any deductions, and the only one available at that income level is mortgage interest, the tax bill for those living in the state of Maryland would be approximately $194,763, and this does not include the mandatory Medicare and Part D health insurance payments if you are over 65.
“Just the income tax burden alone requires the married couple to work 142 days each to pay their taxes before they can spend money on anything else they need. But there are more taxes to pay, including property taxes, Medicare and Part D health insurance and sales tax, which require additional days of work to pay.
“These people could simply retire and then start drawing down on their Social Security payment and not have to pay for Medicare, or a very small amount, if any. Sometimes I wonder why these people bother to keep working. Financially, it doesn’t make sense.”
“Hey Dave — Going to start calling Rickards ‘Chicken Little,’” a reader chides.
“The sky was supposed to fall when the Italians voted NO! But today [Monday], the Dow’s up almost 100, the S&P is up over 15 and the VIX is down 1.28 at about 10:45 a.m.
“When the hell is Armageddon coming and these asymmetric trades going to pay off? I got fooled after Trump got elected and now today too. Getting tired of it.”
The 5: Jim never said the fallout from the referendum would be an instantaneous thing. As he said here in The 5 last Wednesday, “The situation in Italy is far less precarious than Greece in the 2010–15 European sovereign debt crisis.”
But the events that could lead to a panic in Deutsche Bank are already starting to unfold: With the failure of the referendum, investors in Qatar are dialing back their plans to inject fresh capital for the sickly Italian bank Monte dei Paschi. The Financial Times says the bank’s executives have been told to prepare for a government bailout this weekend. It probably won’t be the first bank to need a rescue, and Deutsche Bank has heavy exposure to troubled Italian banks.
It’ll take up to a year for the panic to unfold. That’s why Jim and his team recommended put options that don’t expire for another 13 months. But they’re confident patience will pay off, so stay tuned…
“I purchased Jim Rickards’ newsletter, but what I seem to get is information on purchasing yet more stuff,” a reader complains.
“I’m disappointed. I paid $79 just to be hit with ‘Buy more if you really want to know how to win big’ with more free books that require a trial subscription to yet another newsletter. Sounds like a scam rather than really wanting to help people.
“I would appreciate a reply, thank you.”
The 5: Rickards’ Strategic Intelligence is Jim’s entry-level newsletter. You’re getting no shortage of investment recommendations; in the most recent issue, you learned about both a gold miner and an ETF that stands to profit from a Trump presidency.
In addition to Strategic Intelligence, Jim has three high-end advisories. They cost a lot more, but they also show you how to unlock investing and trading strategies that can deliver substantial gains in a shorter time frame…
- Currency Wars Alert uses Jim’s proprietary IMPACT system to anticipate the moves of governments and central bankers in the currency wars
- Rickards’ Intelligence Triggers and its unique “Kissinger Cross” indicator takes the same techniques Jim’s used in his work with the U.S. intelligence community and applies them to the markets
- Rickards’ Gold Speculator shows how to leverage Jim’s long-term forecast of $10,000 gold into shorter-term gains in carefully selected junior gold stocks.
Hope that clears up any confusion. Your Strategic Intelligence subscription stands on its own to help you preserve and grow your wealth. But if you already like Jim, we invite you to explore the more “high octane” strategies he’s developed.
The 5 Min. Forecast
P.S. We direct your attention to a chart we’ve never shown before.
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Right now, there are 117 million “lost money” listings… so while not everyone has “lost money” to collect, that’s enough for one in every three Americans.
If you’d be OK getting back $646… $1,388… $14,876 or more of YOUR MONEY from the government, you’ll want to go here ASAP.